Resi Investment Group
RESI invests in residential properties located in desirable nodes with financially stable tenants for both rental income and long-term capital growth. The bulk of RESI’s units are held for rental but there is also a trading component to the business which enables us to optimise returns.
RESI was a net seller of stock for the second consecutive financial year which has been driven by market conditions. Rentals have been under pressure and vacancies have increased, especially during lockdown. In contrast, the market for the sale of units in the price range from R0.5 million to R1.5 million has been very buoyant so management has taken advantage of the opportunity to sell some of our more mature stock. The buoyancy in residential sales can be attributed to lower interest rates on housing loans and an increased willingness by banks to extend such loans. The corollary of this is that the availability of well-priced stock has dried up, so RESI has been unable to source stock at prices which fit our model.
During the year 31 residential units were sold, resulting in proceeds of R16 million against a cost of R12.9 million. All these sales were achieved at prices in excess of carrying value. No purchases were made during the year.
RESI’s contribution to intrinsic net asset value decreased as a result of the above-mentioned sales with the proceeds being used to reduce bank debt and the balance included in group cash on hand. RESI made a loss before tax of R0.8 million for the year (2019: profit of R4.4 million). This is mainly due to an equity accounted loss in The Woodstock Hub joint venture, which holds properties in the Woodstock area of Cape Town, where our intention is to develop the properties into mixed-use schemes when the property market and general economy recovers.
The Balwin Rentals joint venture which consists of 252 units is fully let and is achieving the projected yields.
We recognise residential housing units as a large and potentially exciting market and will be alert to opportunities to refresh and expand our portfolio, particularly in the Western Cape where we have a very capable and experienced property management team.