The Lemon Fool

Hi everyone,

Just wondering if I could ask anyone who has been following this one to share their two pence with me please.

I arrived here after reading of the difficulties both Civitas and Triple Point social housing funds are experiencing on Investment Trust Insider. I looked into the area and stumbled upon RESI REIT. While I wish to avoid significant exposure to specialist care provision a few things peeked my interested:

1. No exposure to specialist support living - released a statement post recent regulatory announcement affecting Civitas and Triple Point.
2. Almost fully invested after most recent investments and I would be surprised if they raised additional funds at such a steep discount to NAV. We're at as a big a discount as when they announced their share buyback programme last year.
3. On track for 5p annual dividend in 2019 (5.2% yield)
4. 10.2% discount to end of Q1 NAV, 95p against 105.9p.
5. Relatively diversified - approximately a third each of a) shared ownership; b) Local authority & c) independent retirement living
6. Retirement and Local authority assets at purchase all achieved 8%+ total return once leveraged according to their company announcements with purchases. The assets have now been leveraged; shared ownership is RPI+0.5%.
7. Schroders are selling - down from 15%+ last summer to most recent report they were down to 9.7% (7th of May i think)

While it's not unusual for investment trusts to trade discounted - the 10.2% discount strikes me as a bit steep for a trust which largely appears to be performing in line with their strategy. 7 quarters in and total NAV return since inception is 14p, target total return of 8% annually. Although they did aim to deploy funds within 9 months and the last funds were used in Q1 this year so it took more than double that amount of time.

Maybe I'm looking for negatives which are not here - and it's just a boring (I often like boring) REIT with a large holder exiting. Either way, I am considering buying for my REIT and/or Income holdings.

Any comments and thoughts appreciated,

All the best

Really good half year for RESI today in my view.

5.1% yield, fully deployed, leveraged between 2.5-3.5% for 35% of assets. Contracts long term and nearly all linked to annual uplifts in line with inflation. Altogether I think it’s very difficult to see this not generating 8-10% annual returns. Especially when you could buy at a 10% discount to NAV recently.

If Schroders continue to sell down their holding i’ll Be happily taking more shares to top up my holding from them.

All the best