TIDMSOHO
RNS Number : 7545A
Triple Point Social Housing REIT
14 September 2018
THIS ANNOUNCEMENT HAS BEEN DETERMINED TO CONTAIN INSIDE
INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU)
NO. 596/2014.
14 September 2018
Triple Point Social Housing REIT plc
(the "Company" or, together with its subsidiaries, the
"Group")
INTERIM RESULTS FOR THE SIX MONTHSED 30 JUNE 2018
The Board of Triple Point Social Housing REIT plc (ticker:
SOHO), the specialist REIT that invests in primarily newly
developed social housing assets in the UK (let or pre-let to
Approved Providers), with a particular focus on supported housing,
today announced the Company's half year results for the six months
ended 30 June 2018.
This is the Group's first full six month period to 30 June. Our
first audited results related to trading from incorporation on 12
June 2017 to 31 December 2017.
Financial highlights
-- The IFRS Net Asset Value ("NAV") and EPRA NAV per share of
101.61 pence at 30 June 2018 (at 31 December 2017: 100.84 pence),
an increase of 0.76% in the period. The IFRS NAV per share at IPO
was 98.00 pence, an increase of 3.68% to 30 June 2018.
-- At the half year end, the portfolio was independently valued
at GBP190.0 million on an IFRS basis, reflecting a valuation uplift
of 8.53% against the portfolio's aggregate purchase price
(excluding transaction costs).
o The valuation reflects a portfolio yield of 5.32%, against the
portfolio's net initial yield at purchase of 5.91% (excluding
forward funding transactions).
-- The Group's assets were valued at GBP203.4 million on a
portfolio valuation basis, reflecting a portfolio premium of
GBP13.4 million against the IFRS valuation.
o A portfolio valuation basis assumes the portfolio of
properties is held in a single Special Purpose Vehicle ("SPV")
holding structure, is sold to a third party on arm's length terms
and attracts purchaser's costs of 2.3%.
-- 3.5 pence per ordinary share: dividends paid or declared to date since IPO.
-- The Company is on track to pay an initial total dividend of
5.0 pence per Ordinary Share (in respect of the Company's first
full financial year to 31 December 2018) in line with the Company's
stated target at launch*.
-- The Company intends to increase this target dividend
thereafter in line with inflation, at a rate reflecting the
CPI-based rent reviews typically contained in the Leases of the
assets within the Portfolio*.
-- Earnings per share was 3.02 pence for the period.
-- The Company raised GBP47.5 million (GBP46.5 million net of
proceeds) at an issue price of 100 pence per share through a
Placing, Open Offer and Offer for Subscription of C shares in March
2018.
-- Ongoing Charges ratio of 1.85%.
o Increase largely attributable to the C Shares being treated as
a financial liability, not increasing the Net Asset Value, but
incurring costs which are included in the ongoing charges
calculation. If the Ordinary Shares arising on conversion of the C
Shares had been in issue on 30 June 2018, the ongoing charges ratio
at 30 June 2018 would be 1.50%.
Operational highlights
-- The Group has made further commitments totalling GBP51.5
million (excluding transaction costs) in relation to the
acquisition and development of UK social housing assets as at 30
June 2018.
-- During the period to 30 June 2018, the Group acquired 51 new assets.
o Since IPO, the Company has purchased 167 properties with an
aggregate net purchase price of GBP175 million (including
costs).
-- The majority of the Group's assets are still located in the
Midlands and the North of England, however, in the first six months
of this year we increased our percentage of assets acquired in the
South of England, which has given the portfolio a stronger
geographical balance, and we expect this trend to continue for the
remainder of 2018.
-- As at 30 June 2018, the contracted rental income was GBP10.4 million per annum.
-- 100% of the Group's portfolio was fully let or pre-let and
income producing during the period.
-- As at 30 June 2018, the Investment Portfolio comprised 1,158
self-contained units, 100 leases with 12 Approved Providers with
the weighted average unexpired lease term of 29 years (including
put and call options).
-- 100% of the contracted rental income is either CPI or RPI linked.
-- In March 2018, the Company gained entrance to the FTSE
All-Share index and in June we were included in the FTSE
EPRA/NAREIT Global Real Estate Index Series.
Post Period Balance Sheet Activity
-- An interim dividend in respect of the period 1 April to 30
June 2018 of 1.25 pence per Ordinary Share was declared on 16
August 2018. The Board also declared dividends payable to holders
of C Shares comprising a fixed dividend of 3% per annum pro rated
for the period from admission to trading on 27 March to 30 August
2018. The dividends will be payable on or around 28 September 2018
to shareholders on the register on 24 August 2018.
-- On 30 August 2018, the C Shares converted into Ordinary
Shares on the basis of their respective NAV per share on 30 June
2018, adjusted for the dividends payable on 28 September 2018 and
the fair value gain on an acquisition by the C Share class that had
exchanged by 30 June 2018 but not completed. The effect of these
transactions has diluted the NAV after conversion to 101.44
pence.
-- The Company has announced the acquisition of 41 supported
housing properties, comprising 306 units in total, for an aggregate
purchase price of approximately GBP46.9 million (excluding costs)
as at 13 September 2018(1).
-- The Company has entered into a long dated, fixed rate,
interest only financing arrangement for an amount of GBP68.5
million with a US life insurance company. The loan notes represent
a loan-to-value of 40% of the value of the secured pool of assets
and have a weighted duration of 12 years and a blended coupon of
3.039%.
o This is in line with the Company's investment policy and debt
strategy of securing low loan-to-value, long-dated debt to
capitalise on the low interest rate environment in order to enhance
shareholders' returns.
o The debt facility is the first of a planned debt funding
programme designed to support the Group's continued growth. The
Group intends to utilise the debt proceeds to fund an extensive
pipeline of further acquisitions in the second half of 2018.
-- The Investment Manager has access to a significant pipeline
of potential investments and is currently engaged in discussions
with various parties (including Approved Providers and developers)
in relation to a number of assets that meet the Company's
investment criteria and on terms the Investment Manager considers
attractive to the Company.
-- The Company expects to have substantially invested or
committed the proceeds of its recent debt raise (announced on 23
July 2018) by the end of October and therefore intends to undertake
a further issue of equity by way of a placing, open offer and offer
for subscription shortly. The Company expects to publish a
prospectus in connection with the issue in September.
(1) This includes the completion of the acquisition of TPHSIL
for a total commitment of GBP24.1 million.
* These are targets only and not a profit forecast and there can
be no assurance that they will be met.
Christopher Phillips, Chairman of Triple Point Social Housing
REIT plc, commented:
"The outlook is positive and we expect the strong performance of
the first half of 2018 to continue into the next six months of this
year. We have identified, predominantly through our existing
developer relationships, a strong pipeline of properties in line
with our investment strategy. While a number of assets will be
turned down as a result of our established due diligence process,
which focuses on asset and lessee quality, we are confident our
pipeline and deal flow will be sufficient to meet or exceed our
deployment targets.
The market fundamentals remain strong and are demonstrated by
stark undersupply and strong central and local government support
for Supported Housing. We are therefore optimistic about the
performance of our existing portfolio and our ability to deliver on
the pipeline of assets that have already been identified for
2018."
FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:
Triple Point Investment Management (via Newgate below)
LLP
(Delegated Investment Manager)
James Cranmer
Ben Beaton
Max Shenkman
Justin Hubble
Akur Limited (Joint Financial Adviser) Tel: 020 7493 3631
Tom Frost
Anthony Richardson
Siobhan Sergeant
Canaccord Genuity Limited (Joint Tel: 020 7523 8000
Financial Adviser and Corporate
Broker)
Lucy Lewis
Denis Flanagan
Andrew Zychowski
Newgate (PR Adviser) Tel: 020 7680 6550
James Benjamin Em: triplepoint@newgatecomms.com
Anna Geffert
The Company's LEI is 213800BERVBS2HFTBC58.
Further information on the Company can be found on its website
at www.triplepointreit.com.
NOTES:
The Company invests in primarily newly developed social housing
assets in the UK, with a particular focus on supported housing. The
assets within the portfolio are subject to inflation-adjusted,
long-term (typically from 20 years to 30 years), Fully Repairing
and Insuring ("FRI") leases with Approved Providers (being Housing
Associations, Local Authorities or other regulated organisations in
receipt of direct payment from local government). The portfolio
comprises investments into properties which are already subject to
an FRI lease with an Approved Provider, as well as forward funding
of pre-let developments but does not include any direct development
or speculative development.
There is increasing political and financial pressure on Housing
Associations to increase their housing delivery and this is
creating opportunities for private sector investors to participate
in the market. The Group's ability to provide forward financing for
new developments not only enables the Company to secure fit for
purpose, modern assets for its portfolio but also addresses the
chronic undersupply of suitable supported housing properties in the
UK at sustainable rents as well as delivering returns to
investors.
Triple Point Investment Management LLP (part of the Triple Point
Group) is responsible for management of the Group's portfolio (with
such functions having been delegated to it by Langham Hall Fund
Management LLP, the Company's alternative investment fund
manager).
The Company was admitted to trading on the Specialist Fund
Segment of the Main Market of the London Stock Exchange on 8 August
2017 and was admitted to the premium segment of the Official List
of the Financial Conduct Authority and migrated to trading on the
premium segment of the Main Market on 27 March 2018. The Company
operates as a UK Real Estate Investment Trust ("REIT") and is a
constituent of the FTSE EPRA/NAREIT index.
A Company presentation to analysts and investors will be held at
9.00am today at:
Newgate Communications
Sky Light City Tower
50 Basinghall Street
London, EC2V 5DE
The presentation will also be accessible via a live conference
call and on-demand via the Company website:
https://www.triplepointreit.com/investors/72/
Those wishing to attend the presentation or access the live
conference call are kindly asked to contact Newgate at
triplepoint@newgatecomms.com or by telephone on +44 (0) 20 7680
6550.
CHAIRMAN'S STATEMENT
The Group made good progress in the first half of 2018. The
strong relationships that we have established with a number of
developers has, up to 30 June 2018, enabled us to acquire a total
of GBP46.4 million(1) of recently developed properties and
development sites across the UK. We continue to benefit from strong
local authority demand for Supported Housing which is driven by the
cost savings and enhanced living opportunities that our homes can
offer tenants relative to traditional alternatives such as
residential or inpatient care.
In addition to deploying GBP46.4 million in the period, as at 30
June 2018 the Group had made further commitments totalling GBP51.5
million in relation to the acquisition and development of UK social
housing assets. These commitments include GBP24.1 million resulting
from the exchange of contracts on the acquisition of TPSHIL and
GBP27.4 million of other exchanges and forward funding
transactions.
In March 2018 the Company moved up from the Specialist Fund
Segment to the Premium Segment of the Main Market of the London
Stock Exchange and was admitted to the Official List. At the same
time, the Company raised GBP47.5 million (GBP46.5 million net
proceeds) of additional capital through a C Share issue.
By the end of June 2018, we had successfully invested or
committed over 90% of the net proceeds of the C Share placing
triggering the calculation date for the purposes of conversion of
the C Shares. Commitments included, for these purposes, an amount
of GBP24.1 million in relation to the acquisition of TPSHIL, a
portfolio of 18 Supported Housing assets, which we acquired from
the Triple Point Group and exchanged contracts on 22 June 2018,
subject to shareholder approval as a related party transaction.
Approval was received and the transaction completed on 13 July
2018. The C Shares converted on 30 August 2018.
Over the past six months, we have focused on our relationships
with developers of high quality supported living properties. These
relationships give us access to allocated future pipelines of newly
developed and renovated Supported Housing properties. Our developer
relationships have ensured that we can successfully deploy funds
into a pool of high-quality, diversified assets and developers
continue to provide us with strong deployment prospects for the
future. Predominantly we have acquired newly constructed, recently
renovated properties that were subject to a lease with an Approved
Provider counterparty who has been subject to our due diligence
process. In this way, we acquired Meadowhurst Gardens which is
leased to Inclusion Housing and which helps individuals with
learning disabilities live more independently, and Bold Street,
which is leased to My Space Housing Solutions and which assisted in
alleviating the undersupply of housing for people with complex
mental health needs in Warrington.
We also entered into our first forward funding transactions in
the period. We have acquired and commenced work on our first site
in Bradford in January and since then have acquired a further seven
forward funding sites, totalling eight forward funding transactions
completed by the Group in the period. Forward funding is an
integral part of the Company's investment strategy providing the
Group access to high quality assets at attractive yields.
Being able to provide forward funding enables us to acquire new
build assets that have been designed in conjunction with Approved
Providers and local authorities to meet specified local demand.
This gives us access to high quality assets while strengthening our
relationships with local authorities, Approved Providers and
developers - providing a competitive advantage over our peer
group.
Deployment
In the first half of 2018, we acquired 51 assets at a total
investment cost of GBP46.4 million(2) adding 1 new Approved
Provider. Our portfolio is well diversified by geography and
Approved Provider.
Since the half year end, we continued to acquire high quality
social housing properties and at 13 September 2018 had deployed a
further GBP49.3 million which included GBP23.9 million of committed
funds as at 30 June 2018. Consequently, we have made good progress
with deploying the proceeds of our recent debt raise, which I
discuss further below.
The 167 assets we had acquired by 30 June 2018 have the capacity
to house 1,158 tenants, are leased to 12 Approved Providers, are
located in 69 different local authorities and are serviced by 34
care providers. The portfolio at 30 June 2018 benefited from a
weighted average unexpired lease term of 29.0 years. Since 30 June
2018, the 41 assets the Group has acquired house 306 tenants.
After deploying our capital, we continue to maintain a close
relationship with our Approved Provider lessees. This relationship
involves regular meetings, site visits and the receipt of key
management information.
Investment Performance
We continue to benefit from the Investment Manager's strong
network of counterparties, from developers to local authorities and
Approved Providers. Through its network, we have been able to
source the majority of our properties off-market and at attractive
yields. The Investment Manager's capital discipline manifests
itself through its diligence process. Before completing an
acquisition, it scrutinises properties and developers in a
comprehensive and timely manner, ensuring that the assets we
acquire are of high build quality and enjoy robust occupant demand.
This means, now and in the longer term, the Group will possess a
high quality portfolio of attractive, occupied assets.
In the current market environment, investors have demonstrated
that there is appetite for companies that offer reduced risk and
secure inflation-linked income. Since IPO, we have deployed funds
into property investments that are subject to long leases with
upwards-only, inflation-linked rent reviews. The lessees are
Approved Providers who receive funding for the rent due directly
from local government.
Share Price
In March, the Company became eligible for inclusion in the FTSE
Indices as it moved up to the Premium Segment of the Main Market.
It became a constituent of the FTSE All-Share Index in March and in
June we were included in the FTSE EPRA/NAREIT Global Real Estate
Index Series. We have enjoyed strong share price performance, with
our shares trading at a sustained premium to IFRS NAV.
Financial Results
At the half year end, the portfolio was independently valued at
GBP190.0 million on an IFRS basis, reflecting a valuation uplift of
8.53% against the portfolio's aggregate purchase price (excluding
transaction costs). The valuation reflects a portfolio yield of
5.32%, against the portfolio's blended net initial yield at
purchase of 5.91% (excluding forward funding transactions).
The Group's assets were valued at GBP203.4 million on a
portfolio valuation basis, reflecting a portfolio premium of
GBP13.4 million against the IFRS valuation. A portfolio valuation
basis assumes the portfolio of properties is held in a single SPV
holding structure, is sold to a third party on arm's length terms
and attracts purchaser's costs of 2.30%.
The audited IFRS NAV per Ordinary Share was 101.61 pence, which
has increased since IPO by 3.68%.
Dividends
The Group has paid dividends totalling 2.25 pence per Ordinary
Share since IPO. An interim dividend of 1.25 pence per Ordinary
Share in respect of the period 1 April to 30 June 2018 was declared
on 16 August 2018. The Board also declared dividends payable to
holders of C Shares comprising a fixed dividend of 3% per annum
prorated for the period from admission to trading on 27 March to 30
August 2018. The Ordinary Share and C Share dividends will be
payable on 28 September 2018 to shareholders on the register on 30
August 2018 (being the date on which the C Shares were converted
into Ordinary Shares). The Group intends to continue paying four
equally weighted interim dividends in respect of the preceding
quarter in each of June, September, December and March for future
years. The target dividend for the year to 31 December 2018 is 5
pence per Ordinary Share.
Loan Financing
Shortly after the end of the half year, in July 2018, the
Company successfully completed its first debt financing,
undertaking a private placement of GBP68.5 million of loan notes
with a major US life insurance company. The Company raised GBP68.5
million of debt, secured against a specific pool of Supported
Housing assets acquired by the Group in the period from August 2017
to the end of March 2018. The loan notes are split into two
tranches, a 10 and a 15-year tranche. The fixed rate coupon of the
10 and 15-year tranches are 2.924% and 3.215%, respectively. On a
blended basis, the weighted average term is 12 years with an
average fixed rate coupon of 3.039%.
The debt arrangement represents a loan-to-value of 40% of the
reported GBP172.0 million market value of the secured assets. This
is in line with the Company's investment policy and debt strategy
of securing low loan-to-value, long-dated debt to capitalise on the
low interest rate environment in order to enhance shareholder
returns.
The fixed rate loan note issuance is the first of a planned debt
funding programme designed to support the Group's continued growth.
The Group intends to utilise the debt proceeds to fund an extensive
pipeline of further acquisitions in the second half of 2018.
Further Capital Raising
The Investment Manager has access to a significant pipeline of
potential investments and is currently engaged in discussions with
various parties (including Approved Providers and developers) in
relation to a number of assets that meet the Company's investment
criteria and on terms the Investment Manager considers attractive
to the Company.
The Company expects to have substantially invested or committed
the proceeds of its recent debt raise (announced on 23 July 2018)
by the end of October and therefore intends to undertake a further
issue of equity by way of a placing, open offer and offer for
subscription shortly. The Company expects to publish a prospectus
in connection with the issue in September.
Investment Manager
The Board and the Investment Manager, Triple Point Investment
Management LLP, work closely together, meeting regularly to discuss
developments in the Group and the market. We will continue this
approach going forward to help maintain the efficient and effective
management of the Group. During the period the Investment Manager
further deepened the long-standing relationships with developers
from whom we have previously purchased and continued to implement a
disciplined policy focused on quality opportunities and rejecting
those that failed to meet our rigorous criteria. The Board is
grateful for the continued hard work and support of the Investment
Manager.
Social Impact
By working with developers to bring new Supported Housing
properties to market, the Group is helping to resolve the chronic
social housing shortage currently prevalent across the UK. The
types of tenants that are housed in properties owned by the Group
include people with mental health problems, autism, learning
disabilities and physical and sensory impairments. The Supported
Housing homes provided to these tenants typically provide
individuals with the opportunity for a better quality of life
whilst coming at a lower cost to local authorities than
alternatives such as residential care.
The Group is committed to the important social aim of helping to
provide more and appropriate accommodation to some of the most
vulnerable in society such that they can aspire to live more
autonomously in local communities. At the same time, our
consistent, high-quality approach to due diligence and development,
combined with significant investment in the sector, is helping to
drive quality in constructors and developers in the Supported
Housing space.
Outlook
The outlook is positive and we expect the strong performance of
the first half of 2018 to continue into the next six months of this
year. We have identified, predominantly through our existing
developer relationships, a strong pipeline of properties in line
with our investment strategy. While a number of assets will be
turned down as a result of our established due diligence process,
which focuses on asset and lessee quality, we are confident our
pipeline and deal flow will be sufficient to meet or exceed our
deployment targets.
The market fundamentals remain strong and are demonstrated by
stark undersupply and strong central and local government support
for Supported Housing. We are therefore optimistic about the
performance of our existing portfolio and our ability to deliver on
the pipeline of assets that have already been identified for
2018.
I would like to take this opportunity to thank my fellow board
members for their support and commitment in the first half of the
year, and to all shareholders for your continued support.
Chris Phillips
Chairman
13 September 2018
(1) (Excluding acquisition costs)
(2) (.) (Excluding acquisition costs)
INVESTMENT MANAGER'S REPORT
In 2018, we continued to implement the Group's strategy of
focusing on investing in good quality Supported Housing properties.
In the first quarter of 2018, we completed the deployment of the
IPO proceeds within the target deployment period of nine months
from listing. By the end of June, we had successfully invested or
committed 90% of the net proceeds of the C Share issue which
triggered the process for conversion of the C Shares to Ordinary
Shares on 30 August 2018. We are pleased that the Company was able
to report an IFRS NAV per share of 101.61 pence at 30 June 2018, a
3.68% increase since IPO.
During the period to 30 June 2018, the Group acquired 51 assets.
All assets are fit for purpose, sustainable and benefit from strong
local authority support. We have also rejected a number of deals
that fell within the Company's investment strategy but were not
deemed to be of sufficiently high quality to warrant investment.
The assets acquired by the Group all benefit from inflation-linked,
fully repairing and insuring long term leases (typically 20 to 30
years) to expert housing managers (usually Registered Providers).
The properties are leased to a diversified range of 12 Approved
Providers, who have different areas of geographical focus and
expertise.
In addition to the strong pipeline of assets acquired over the
period, we are pleased that the Group secured its first long-term
debt financing. This loan financing, at a competitive all-in fixed
interest rate of 3.039%, a 40% loan-to-value and an average term of
12 years, is a demonstration of the quality of the Group's
portfolio and the Group's ability to attract high-quality,
long-term lenders to the market.
The majority of the Group's assets are located in the Midlands
and the North of England, however, in the first six months of this
year we have increased our percentage of assets acquired in the
South of England, which has given the portfolio a stronger
geographical balance, and we expect this trend to continue for the
remainder of 2018. Most of the assets we have acquired in 2018 have
been purchased from developers with whom we have a long-standing
relationship. By working closely with a stable of high calibre
developers, we have been able to build up a strong pipeline of
deals that, subject to the completion of satisfactory due diligence
and agreement on pricing and terms, we expect to be able to acquire
for the Group. Currently, we have visibility of a pipeline of deal
flow with an aggregate value of over GBP400 million, which we
expect to be able to close in the next 12 months. All potential
acquisitions remain subject to our exacting due diligence process
and pricing analysis to ensure that the Group only acquires high
quality assets that will provide robust, sustainable returns for
shareholders in the longer term.
Market Review
Over the period, the well-documented mismatch between supply and
demand in the UK social housing market has continued to persist. In
the Supported Housing sector, this mismatch is particularly acute,
with the National Housing Federation predicting the shortfall in
Supported Housing assets to increase 86% from 2015 to 2020. On top
of this, an increasing number of people in the UK are finding
themselves priced out of both the private rental and property
ownership markets which, combined with a growing population, is
creating considerable demand for social housing assets.
The UK's "housing crisis" continues to be fuelled by the
inability to meet national (private and public) new house building
targets. In the Supported Housing sector, demand for new homes is
expected to increase by 30% by 2030 and, in particular, demand for
housing from those with learning disabilities is expected to
increase 55% over the same period. Against this backdrop, the
Group's aim of funding high quality Supported Housing assets is
well-placed.
Although there is now an upward trend in new house completions
in the UK and the government has recently announced that additional
funding will be made available to fund new social housing
developments, as of April 2017 there were 1.16 million households
on social housing waiting lists and, in 2016 - 2017, few more than
160,000 new homes were built against an estimated requirement of
300,000.
The impact of insufficient social housing supply is exacerbated
by demand in the Supported Housing market. Demand for assets is
two-fold. Firstly, improvements in healthcare are increasing the
number of people requiring long-term accommodation adapted to
provide care services. Secondly, following the 2012 Winterborne
View care home scandal, the UK Government introduced the Care Act
2014. This placed a statutory obligation on local authorities to
house people needing care in independent living situations based in
communities where possible (as opposed to providing in-patient or
institutional care). In light of these developments, not only do
local authorities have more people needing care, but they also have
a responsibility to rehouse people already receiving care in more
suitable accommodation of the sort provided by the Group's
Supported Housing assets.
Alongside the supply and demand issues, local authorities are
facing widely reported regulatory and downward cost pressures.
These are incentivising local authorities to find creative,
high-quality and cost-effective housing solutions for those for
whom they are responsible. Supported Housing assets provide part of
this solution.
Supported Housing is compelling not only due to the quality of
life it can afford occupants, but also because of the potential
cost savings for local authorities. Research recently commissioned
by Mencap (a leading UK charity for people with learning
disabilities) showed that demand for new Supported Housing
properties is expected to grow over the next ten years. The report
found that it costs on average GBP1,596 per week to house and care
for a person with learning disabilities living in Supported
Housing, compared with GBP1,760 per week for a residential care
placement and GBP3,500 per week for inpatient care. This is further
substantiated by a 2017 government report showing that, in that
year, local authorities received 135,950 requests for community
care support - which consists of home care, supported living and
other long-term care. Such demand meant that the area in which
local authorities saw the largest increase in expenditure was "Long
Term" support, which increased by GBP539.0 million to GBP13.6
billion in 2016-17. Community care accounted for 46% of this
total.
The Group works closely with specialist Supported Housing
Approved Providers who are seeking to meet housing demand in the
Supported Housing sector. These Approved Providers are increasing
their assets under management in order to achieve scale, to better
leverage expertise and efficiencies in order to help vulnerable
people who cannot meet their housing needs in the private market.
These Approved Providers look to the Group to fund the development
of new social housing assets, given insufficient or inaccessible
grant funding. After funding an asset, an Approved Provider enters
into a long lease with the Group in respect of that property, the
income of which contributes to shareholders' long-term index-linked
returns.
Regulatory Oversight
The Investment Manager undertakes thorough due diligence on any
Registered Provider before the Group enters into a lease, with the
intention of contracting only with counterparties of a sufficiently
high quality. All of the Registered Providers with whom the Group
has leases are regulated by the Regulator of Social Housing ("the
Regulator").
Registered Providers are subject to a detailed in-depth
assessment ("IDA") by the Regulator within three years of passing
through the 1,000 units under management barrier. The IDA assesses
the Registered Provider's compliance with the requirements of the
Governance and Financial Viability Standard. Each IDA is a bespoke
piece of work and will consider in detail a provider's viability
(its ability to meet financial obligations), its approach to value
for money and its governance. The IDA is likely to encompass
assessment of risk profiles, exposures, financial strengths and
weaknesses, governance and the delivery of value for money in the
broadest sense. The outcome of an IDA results in the Regulator
publishing a formal grading (V 1-4 for Viability and G 1-4 for
Governance), known as a regulatory judgement.
Most of the Registered Providers with whom the Group has leases
specialise in providing Supported Housing accommodation and
currently have less than 1,000 units under management, which means
that they have historically been subject to a lower level of
regulation than the IDA regime applicable to larger Registered
Providers. However, the Group has leases with a number of
Registered Providers who are close to progressing through the
threshold of 1,000 units under management and who the Group
therefore expects to be the subject of an IDA in due course. The
Group and the Investment Manager see this as a positive for these
Registered Providers due to the increased accountability and higher
degree of transparency which it will bring.
The Regulator seeks to work closely with a Registered Provider
that is failing to meet any aspect of the Governance and Financial
Viability Standard, with a view to remedying the issue as soon as
possible in a manner which protects the integrity of the Social
Housing regime. The recent case of First Priority Housing
Association Limited ("FPHA"), a Registered Provider with whom the
Group has no leases, offers an example of this collaborative
approach to regulation. In February 2018, the Regulator issued a
Regulatory Notice stating that it had been approached by FPHA and
that, following a review, it appeared that FPHA did not have the
financial capacity to meet its debts as they fell due. As FPHA had
fewer than 1,000 units at its last regulatory submission, the
Regulator had not yet published a regulatory judgement on FPHA, so
published the Regulatory Notice instead. The Regulator worked with
FPHA to understand its financial position, to strengthen its board
and to secure the long-term future of the 227 individual properties
leased and managed by FPHA. On 9 May 2018, one of FPHA's landlords,
Civitas Social Housing Plc, announced that all of its leases with
FPHA had been assigned on the same terms to another Registered
Provider and, over the course of the following two months, a large
portion of the remaining leases were transferred away from FPHA to
other Registered Providers. Finally, on 17 July 2018, FPHA entered
into a Company Voluntary Arrangement with its remaining creditors.
Whilst the Group did not have any exposure to FPHA this provides a
recent example of the Regulator facilitating the management of
Approved Providers entering into financial difficulties.
Financial Review
As at 30 June 2018, the annualised rental income of the Group
was GBP10.4 million (excluding forward funding transactions). The
Group is a UK REIT for tax purposes and is exempt from corporation
tax on its property rental business.
The fair value gain of GBP3.3 million was recognised during the
period on the revaluation of the Group's properties.
Earnings per share was 3.02 pence for the period(3) , compared
to 3.94 pence for the period ending 31 December 2017(4) calculated
on the weighted average number of shares in issue during the
period. Adjusted earnings per share were 9.38 pence for the period,
where post-tax earnings were adjusted for a valuation on a
portfolio basis (as opposed to individual asset) IFRS basis.
The IFRS NAV per share was 101.61 pence, which has increased
since IPO by 3.68%. The EPRA NAV per share and the IFRS NAV per
share were equivalent for the period. The IFRS NAV adjusted for the
portfolio valuation (including portfolio premium) was GBP215.9
million, which equates to a Portfolio NAV of 107.97 pence per
share.
The ongoing charges ratio is calculated as a percentage of the
average net asset value for the period under review. The ongoing
charges ratio for the period is 1.85%. This increase is in large
part attributable to the fact that the C Shares issued during the
period are not deemed to have increased the average net asset value
as they are treated as a financial liability prior to conversion.
However, the costs associated with the C Shares are included in the
ongoing charges calculation. If the Ordinary Shares arising on
conversion of the C Shares had been in issue on 30 June 2018, the
ongoing charges ratio at 30 June 2018 would be 1.50%.
At the period end, the portfolio was independently valued at
GBP190.0 million on an IFRS basis, reflecting a valuation uplift of
8.53% against the portfolio's aggregate purchase price (excluding
transaction costs). The valuation reflects a portfolio yield of
5.32%, against the portfolio's blended net initial yield of 5.91%.
This yield arbitrage of 59 basis points implies a
purchase-to-valuation margin of 11.1%, underpinning the quality of
the Group's asset selection and acquisition process.
The Group's properties were valued at GBP203.4 million on a
portfolio valuation basis, reflecting a portfolio premium of
GBP13.4 million against the IFRS valuation. A portfolio valuation
basis assumes the portfolio of properties is held in a single SPV
holding structure, is sold to a third party on arm's length terms
and attracts purchaser's costs of 2.3%.
Continued Strategic Alignment and Asset Selection
In the first half of 2018, the Group has continued to execute
its investment strategy, delivering inflation-protected income
underpinned by a careful asset selection of secure, long-let and
index-linked properties. During this period, the Group purchased 51
assets which included its first series of forward funding
transactions. For the standing investments, the aggregate net
purchase prices were GBP46.4 million.
2017 Q4 2018 Q2 CHANGE
# of Assets 116 167 +51
------------ ---------- ---------- ----------
# of Leases 65 100 +35
------------ ---------- ---------- ----------
# of Units 828 1,158 +330
------------ ---------- ---------- ----------
# of APs 11 12 +1
------------ ---------- ---------- ----------
# of FFAs 0 8 +8
------------ ---------- ---------- ----------
WAULT 30.6 years 29.0 years -1.6 years
In addition, the Group has made further commitments totalling
GBP51.5 million (excluding transaction costs) in relation to the
acquisition and development of UK social housing assets as at 30
June 2018. These commitments include GBP24.1 million resulting from
the exchange of contracts on the acquisition of TPSHIL and GBP27.4
million of other exchanges and forward funding transactions.
COMMITTED CAPITAL TOTAL FUNDS
AS AT 30 JUNE 2018 GBPM
Total Deployed GBP180.5
Exchanges GBP43.4
Forward Funding Commitments GBP8.1
---------------------------- ------------
Total Capital Committed GBP232.0
---------------------------- ------------
Property Portfolio
As at 30 June 2018, the property portfolio comprised 167 assets
with 1,158 units and showed a broad geographic diversification
across the UK. The 3 largest concentrated areas were the North West
(31.2%), West Midlands (16.6%) and the North East (16.5%). The fair
value of the property portfolio is GBP190.0 million (an average of
GBP1.1 million per property).
During the first half of 2018, the Group committed to its first
series of forward funding transactions. Forward funding forms an
integral part of the Group's investment strategy, adding
significant value-add to the property portfolio. A total of 8
forward funding transactions have been signed with various lease
start dates following build programmes of up to 12 months and with
an aggregate funding commitment of GBP8.1 million.
Rental Income
As at 30 June 2018, the property portfolio is fully let with the
assets either being let or pre-let on completion, comprising 100
fully repairing and insuring leases which includes the current
forward funding transactions. The total annualised rental income of
GBP10.4 million solely accounts for the aggregate rental income of
the standing investments.
In the first half 2018, the Group has further diversified its
tenant base by adding one additional Approved Provider to the
portfolio; Encircle Housing. Another Approved Provider, Care
Housing Association, has entered into an Agreement for Lease on a
Forward Funding acquisition which is expected to be producing
rental income in early 2019. With the Group having entered into
active leases with 12 Approved Providers, the Group's tenant base
is well diversified across the sector with some of the most desired
UK housing associations. Our three largest Approved Providers by
rental income were Inclusion Housing (24.7%), My Space Housing
Solutions (19.4%) and Falcon Housing Association (16.0%).
Our three largest Approved Providers by units were My Space
Housing Solutions (259), Inclusion Housing (226) and Falcon Housing
Association (190).
As at 30 June 2018, the property portfolio had a WAULT of 29.0
years, with 81.3% of the portfolio's rental income showing an
unexpired lease term of between 21-30 years. Compared with Q4 2017,
the WAULT has shortened slightly by 1.6 years as the majority of
additions in the reporting period showed a lease term certain of 25
years. The WAULT includes the initial lease term upon completion as
well as any reversionary leases and/or put and call options
available to the Group at expiry.
Income by Lease Length
Rents under the leases are indexed against either CPI (82.3% of
the 30 June 2018 portfolio) or RPI (17.7% of the 30 June 2018
portfolio), which provides investors the security that the rental
income is in line with inflation. For the purposes of the portfolio
valuation, Jones Lang LaSalle assumed CPI and RPI to increase at
2.0% per annum and 2.5% per annum respectively over the term of the
relevant leases.
As at 30 June 2018, the total rent passing was GBP10.4 million
(excluding forward funding transactions)(5) . In this reporting
period, there were 28 leases which benefited from a rental uplift
linked to CPI/RPI, equating to a total rental value increase of
approximately GBP91,000 more than the initially contracted
rent.
Pipeline and Outlook
Since IPO, the Group has benefited from demand for new Supported
Housing assets and the reliance of specialist Supported Housing
Approved Providers on private funders such as the Company to help
fund new developments. This has enabled the Group to build up a
strong pipeline over the next 12 months. The pipeline has
principally been developed through our relationships with a number
of high quality developers of Supported Housing assets. The
developers, in conjunction with local authorities, care providers
and Approved Providers, have identified where the need for more
Supported Housing assets is most acute and have continued to
develop new Supported Housing assets in these areas. It is these
assets that make up the majority of the pipeline.
The properties in the pipeline are at various stages of
development. For example, some may require planning permission,
some are still at the design stage and some are nearly ready to be
acquired by the Group. It is important to note that the Group will
only acquire an asset when a lease with an Approved Provider is in
place or, in the case of forward funding, when the assets are
pre-let to an Approved Provider. Nearly all of the properties that
the Group intends to acquire from developers in 2018 and 2019 are
off market, as they are expected to be sold directly to the Group
without being marketed to other funds.
While the focus has been on working with developers, the Group
has also acquired portfolios of assets. Some of these portfolios
were off market and some were marketed to a limited number of
funders. The Group does not tend to participate in large auction
processes. We will continue to look at portfolios of assets
opportunistically although we do not generally include portfolios
in pipeline calculations.
Portfolio acquisitions tend to be more opportunistic (and
therefore harder to predict) and if they become competitive
processes the probability of successfully completing the
acquisition is considerably lower than for deals that come through
our developer pipelines.
The Group's future pipeline, like its current portfolio, has a
good geographical spread. As such, the Group should maintain a
balanced, diverse portfolio into the future. In addition, the
pipeline should enable the Group to broaden the range of Approved
Providers that it works with. This, in turn, should lead to
additional opportunities to fund Supported Housing assets in 2018,
2019 and beyond.
(3.) (EPRA Earnings per share was 1.39 pence for the period to
30 June 2018.)
(4.) (The period to 31 December 2017 ran from the Company's
incorporation on 12 June 2017. The Company's Ordinary Shares were
admitt) (ed to trading on the Specialist) (Fund Segment of the Main
Market of the London Stock Exchange on 8 August 2017.)
(5) (The passing rent value of GBP10.4 million excludes all
Forward Funding) (transactions that are yet to be rental income
producing.)
KEY PERFORMANCE INDICATORS
In order to track the Group's progress the following key
performance indicators are monitored:
1. ORDINARY SHARE DIVID
KPI AND DEFINITION RELEVANCE TO STRATEGY PERFORMANCE COMMENT
Dividends paid The dividend reflects Dividends paid The Company declared
to shareholders the Company's ability or declared for a dividend of 1.25
and declared in to deliver a low the period 1 January pence per Ordinary
relation to the risk but growing 2018 to 30 June Share in respect
period. income stream from 2018 were 2.5 pence of the period 1
the portfolio. per Ordinary Share. April 2018 to 30
June 2018, payable
on 28 September
2018, which is in
line with the Company's
target.
---------------------------
2. IFRS NAV PER SHARE
KPI AND DEFINITION RELEVANCE TO STRATEGY PERFORMANCE COMMENT
The value of our The IFRS NAV reflects 101.61 pence at The IFRS NAV per
assets (based on our ability to grow 30 June 2018. share at
an independent the portfolio and 31 December 2017
valuation) less to add value to was 100.84 pence.
the book value it throughout the This is an increase
of our liabilities, life cycle of our of 0.76% since 31
attributable to assets. December 2017 driven
shareholders. by growth in the
underlying asset
value of the investment
properties.
---------------------- ------------------------ ---------------------------
3. LOAN TO GAV
KPI AND DEFINITION RELEVANCE TO STRATEGY PERFORMANCE COMMENT
It is envisaged The Company will 0.0% at 30 June Although no gearing
that a proportion seek to use gearing 2018. is in place as of
of our investment to enhance equity 30 June 2018, appropriate
portfolio is funded returns. gearing has been
by borrowings. introduced since
Our medium to long the period end.
term target. Loan
to GAV is 40% with
a hard cap of 50%.
----------------------
4. EARNINGS PER SHARE
KPI AND DEFINITION RELEVANCE TO STRATEGY PERFORMANCE COMMENT
The post-tax earnings The EPS reflects 3.02 pence per The outlook remains
generated that our ability to generate share for the six positive and we
are attributable earnings from our month period to continue to invest
to shareholders. portfolio including 30 June 2018. to generate an attractive
valuation increases. total return.
---------------------- --------------------------- -------------------- -----------------------------
5. ADJUSTED EARNINGS PER SHARE
KPI AND DEFINITION RELEVANCE TO STRATEGY PERFORMANCE COMMENT
The post-tax earnings The Adjusted EPS 9.38 pence per The Adjusted EPS
adjusted for the reflects the application share for the period shows the value
market portfolio of using the portfolio to 30 June 2018. per share on a long-term
valuation including value. basis.
portfolio premium.
----------------------- ---------------------------- ----------------------- ---------------------------
6. WEIGHTED AVERAGE UNEXPIRED LEASE TERM (WAULT)
KPI AND DEFINITION RELEVANCE TO STRATEGY PERFORMANCE COMMENT
The average unexpired The WAULT is a key 29 years at 30 As at 30 June 2018,
lease term of the measure of the quality June 2018 (includes the portfolio's WAULT
investment portfolio, of our portfolio. put and call options). stood at 29 years
weighted by annual Long lease terms and remains ahead
passing rents. underpin the security of the Group's minimum
Our target is a of our income stream. term of 15 years.
WAULT of at least
15 years.
------------------------ -------------------------- ------------------------ --------------------------
7. PORTFOLIO NET ASSET VALUE
KPI AND DEFINITION RELEVANCE TO STRATEGY PERFORMANCE COMMENT
The IFRS NAV adjusted The Portfolio NAV The Portfolio Net The Portfolio NAV
for the market measure is to highlight Assets of GBP215.9 per share shows a
portfolio valuation the fair value of million equates good market growth
including portfolio net assets on an to a Portfolio in the underlying
premium. ongoing, longterm NAV of 107.97 pence asset value of the
basis. per Ordinary Share. investment properties.
----------------------- --------------------------- --------------------- --------------------------
8. EXPOSURE TO LARGEST APPROVED PROVIDER
KPI AND DEFINITION RELEVANCE TO STRATEGY PERFORMANCE COMMENT
The percentage The exposure to the 19.40%. Our target is lower
of the Group's largest Approved Provider than 25%. We are
gross assets that must be monitored materially below
are leased to the to ensure that we our maximum exposure
single largest are not overly exposed target with our
Approved Provider. to one Approved Provider largest Approved
in Provider, Inclusion
the event of a default Housing.
scenario.
--------------------- ----------------------------- ------------------------
EPRA PERFORMANCE MEASURES
The table below shows additional performance measures,
calculated in accordance with the Best Practices
Recommendations of the European Public Real Estate Association
("EPRA"). We provide these measures to aid comparison with other
European real estate businesses.
1. EPRA EARNINGS PER SHARE
KPI AND DEFINITION PURPOSE PERFORMANCE
EPRA Earnings per share excludes A measure of a Group's underlying 1.39 pence per
gains from fair value adjustment operating results and an share for the
on investment property that indication of the extent period to 30
are included in the IFRS calculation to which current dividend June 2018.
for Earnings per share. payments are supported by 0.02 pence per
earnings. share for the
period to 31
December 2017.
As the Company
is currently
in ramp up phase
to full investment
(including debt
at 40%) and undertaking
forward fundings
there will be
a lag in the
Company's ability
to fully cover
dividends. Our
priority remains
to achieve a
fully covered
dividend from
operations.
---------------------------------------- ------------------------------------ --------------------------
2. EPRA NAV PER SHARE
KPI AND DEFINITION PURPOSE PERFORMANCE
EPRA NAV makes certain adjustments Provides stakeholders with GBP249.9 million/
to IFRS NAV to exclude items the most relevant information 101.61 pence
not expected to crystallise on the fair value of the per share. GBP201.7
in a long-term investment assets and liabilities within million/ 100.84
property business model. As a true real estate investment pence per share
at 30 June 2018 both the EPRA company with a long-term as at 31 December
NAV and the IFRS NAV are equivalent. investment strategy. 2017.
---------------------------------------- --------------------------------- ----------------------
3. EPRA NET INITIAL YIELD (NIY)
KPI AND DEFINITION PURPOSE PERFORMANCE
Annualised rental income based A comparable measure for 5.14% at 30 June
on the cash rents passing portfolio valuations. This 2018. 4.26% at
at the balance sheet date, measure should make it easier 31 December 2017.
less non-recoverable property for investors to judge for
operating expenses, divided themselves how the valuation
by the market value of the of a portfolio compares with
property, increased with (estimated) others.
purchasers' costs.
---------------------------------------- --------------------------------- --------------------
4. EPRA "TOPPED-UP" NIY
KPI AND DEFINITION PURPOSE PERFORMANCE
This measure incorporates The topped-up net initial 5.32% at 30 June
an adjustment to the EPRA yield is useful in that it 2018. 5.32% at
NIY in respect of the expiration allows investors to see the 31 December 2017.
of rent-free periods (or other yield based on the full rent
unexpired lease incentives that is contracted at 30
such as discounted rent periods June 2018.
and step rents).
------------------------------------ -------------------------------- --------------------
5. EPRA VACANCY RATE
KPI AND DEFINITION PURPOSE PERFORMANCE
Estimated Market Rental Value A 'pure' percentage measure 0.00% at 30 June
(ERV) of vacant space divided of investment property space 2018. 0.00% as
by ERV of the whole portfolio. that is vacant, based on at 31 December
ERV 0.00% at 30 June 2018. 2017.
---------------------------------- -------------------------------- ------------------
PRINCIPAL RISKS AND UNCERTAINTIES
The Board has overall responsibility for the Group's risk
management and internal controls, with the audit committee
reviewing the effectiveness of the Group's risk management process
on its behalf.
The principal risks and uncertainties we face are described in
detail in our Annual Report for the period ended 31 December
2017.
The identified risks have the potential to materially affect our
business, either favourably or unfavourably. Some risks may
currently be unknown, while others that we currently regard as
immaterial, and have therefore not been included here, may turn out
to be material in the future.
RISK CATEGORY: FINANCIAL
Expensive or lack of debt finance may limit our ability to
grow
RISK IMPACT RISK MITIGATION IMPACT LIKELIHOOD
-----------
Without sufficient debt When raising debt finance the Moderate Low
funding at sustainable Investment Manager adopts a
rates, we will be unable flexible approach involving
to pursue suitable investments speaking to multiple funders
in line with our Investment offering various rates, structures
Policy. This would significantly and tenors. Doing this allows
impair our ability to the Investment Manager to maintain
pay dividends to shareholders maximum competitive tension
at the targeted rate. between funders. After proceeding
with a funder, the Investment
Manager agrees heads of terms
early in the process to ensure
a streamlined, transparent
fund-raising process. The Board
also keeps our liquidity under
constant review and we will
always aim to have headroom
in our debt facilities ensuring
that we have a level of protection
in the event of adverse fund-raising
conditions.
---------------------------------- -------------------------------------- --------- -----------
RISK CATEGORY: PROPERTY
Default of one or more Approved Provider lessees
RISK IMPACT RISK MITIGATION IMPACT LIKELIHOOD
-----------
The default of one or Under the terms of our Investment Low to Low
more of our lessees Policy and restrictions, no Moderate
could impact the revenue more than 30% of the Group's
gained from relevant gross asset value may be exposed
assets. If the lessee to one lessee, meaning the
cannot remedy the default risk of significant rent loss
or no support is offered is low. The lessees are predominantly
to the lessee by the regulated by the Regulator
Regulator of Social of Social Housing, meaning
Housing, we may have that, if a lessee was to suffer
to terminate or negotiate financial difficulty, it is
the lease, meaning a likely that the Regulator of
sustained reduction Social Housing would assist
in revenues while a in making alternative arrangements
replacement is found. to ensure continuity for residents
who are vulnerable members
of the community.
--------------------------- --------------------------------------- ---------- -----------
RISK CATEGORY: PROPERTY
Forward-funding properties involves a higher degree of risk than
that associated with completed investments
RISK IMPACT RISK MITIGATION IMPACT LIKELIHOOD
-----------
Our forward funded developments Before entering into any forward Low to Low to
are likely to involve funding arrangements, the Investment Moderate Moderate
a higher degree of risk Manager undertakes substantial
than is associated with due diligence on developers
standing investments. and their main subcontractors,
This could include general ensuring they have a strong
construction risks, track record. We enter into
delays in the development contracts on a fixed price
or the development not basis and then, during the
being completed, cost development work, we defer
overruns or developer/ development profit until work
contractor default. has been completed and audited
If any of the risks by a chartered surveyor. Further,
associated with our less than 10% of our portfolio
forward funded developments is forward-funded at present
materialised, this could and we are limited by our Investment
reduce the value of Policy which restricts us to
these assets and our forward funding a maximum of
portfolio. 20% of the Group's net asset
value at any one time. Ultimately,
with these mitigating factors
in place, the flexibility to
forward fund allows us to acquire
assets and opportunities which
will provide prime revenues
in future years.
-------------------------------- -------------------------------------- ---------- -----------
RISK CATEGORY: REGULATORY
Risk of an Approved Provider receiving a non-compliant financial
viability or governance rating by the Regulator
RISK IMPACT RISK MITIGATION IMPACT LIKELIHOOD
-----------
Should an Approved Provider As part of the Company's acquisition Moderate Low to
with which the Group process, the Investment Manager to High Moderate
has one or more leases conducts a thorough due diligence
in place receive a non-compliant process on all Registered Providers
rating by the Regulator, with which the Company enters
in particular in relation into lease agreements that
to viability, depending takes account of their financial
on the further actions strength and governance procedures.
of the Regulator, it The Investment Manager has
is possible that there established relationships with
may be a negative impact the Approved Provider with
on the market value whom it works. The Approved
of the relevant properties Providers keep them informed
which are the subject of developments surrounding
of such lease(s). Depending the regulatory notices.
on the exposure of the
Group to such Approved
Provider, this in turn
may have a material
adverse effect on Group's
Net Asset Value until
such time as the matter
is resolved through
an improvement in the
relevant Approved Provider's
rating or a change in
Approved Provider.
---------------------------------- ------------------------------------- --------- -----------
RISK CATEGORY: REGULATORY
Risk of changes to the Social Housing regulatory regime
RISK IMPACT RISK MITIGATION IMPACT LIKELIHOOD
-----------
Future Governments may As demand for social housing High Low to
take a different approach remains high relative to supply, Moderate
to the Social Housing the Group is confident there
regulatory regime, resulting will continue to be a viable
in changes to the law market within which to operate,
and other regulation notwithstanding any future
or practices of the change of government. Even
Government with regard if government funding was to
to Social Housing. reduce, the nature of the rental
agreements the Group has in
place means that the Group
will enjoy continued lessee
rent commitment for the term
of the agreed leases.
------------------------------ ---------------------------------- ------- -----------
RISK CATEGORY: REGULATORY
Risk of not being qualified as REIT
RISK IMPACT RISK MITIGATION IMPACT LIKELIHOOD
-----------
If the Group fails to The Group intends to stay as High Low
remain in compliance a REIT and work within its
with the REIT conditions, investment objective and policy.
the members of the Group The Investment Manager will
will be subject to UK retain legal and regulatory
corporation tax on some advisers and consult with them
or all of their property on a regular basis to ensure
rental income and chargeable it understands and complies
gains on the sale of with the requirements. In addition,
properties which would the Board oversees adherence
reduce the funds available to the REIT regime, maintaining
to distribute to investors. close dialogue with the Investment
Manager to ensure we remain
compliant with legislation.
------------------------------ ------------------------------------- ------- -----------
RISK CATEGORY: CORPORATE
Reliance on the Investment Manager
RISK IMPACT RISK MITIGATION IMPACT LIKELIHOOD
-----------
We continue to rely Unless there is a default, High Low
on the Investment Manager's either party may terminate
services and its reputation the Investment Management Agreement
in the social housing by giving not less than 12
market. As a result, months' written notice, which
our performance will, may expire before August 2020.
to a large extent, depend The Board regularly reviews
on the Investment Manager's and monitors the Investment
abilities in the property Manager's performance. In addition,
market. Termination the Board meets regularly with
of the Investment Management the Manager to ensure that
Agreement would severely we maintain a positive working
affect our ability to relationship.
effectively manage our
operations and may have
a negative impact on
the share price of the
Company.
------------------------------ ------------------------------------- ------- -----------
RISK CATEGORY: FINANCIAL
Property valuations may be subject to change over time
RISK IMPACT RISK MITIGATION IMPACT LIKELIHOOD
-----------
Property valuations All of the Group's property Moderate Moderate
are inherently subjective assets are independently valued
and uncertain. Market quarterly by Jones Lang LaSalle,
conditions, which may a specialist property valuation
impact the creditworthiness firm who are provided with
of lessees, may adversely regular updates on portfolio
affect valuations. The activity by the Investment
portfolio is valued Manager. The Investment Manager
on a Market Value basis, meets with the external valuers
which takes into account to discuss the basis of their
the expected rental valuations and their quality
income to be received control processes. Default
under the leases in risk of lessees is mitigated
future. This valuation in accordance with the lessee
methodology provides default principal risk explanation
a significantly higher provided above. In order to
valuation than the Vacant protect against loss in value,
Possession value of the Investment Manager's property
a property. In the event management team seeks to visit
of an unremedied default each property in the portfolio
of an Approved Provider once a year, and works closely
lessee, the value of with lease counterparties to
the assets in the portfolio ensure, to the extent reasonably
may be negatively affected. possible, their financial strength
and governance procedures remain
Any changes could affect robust through the duration
the Group's net asset of the relevant lease.
value and the share
price of the Group.
The borrowings the Company
currently has and which
the Group uses in the
future may contain loan
to value and interest
covenants. If property
valuations decrease,
such covenants could
be breached, and the
impact of such an event
could include: an increase
in borrowing costs;
a call for additional
capital from the lender;
payment of a fee to
the lender; a sale of
an asset; or a forfeit
of any asset to a lender.
----------------------------- ------------------------------------ --------- -----------
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge this
condensed set of financial statements has been prepared in
accordance with IAS 34 as adopted by the European Union and that
the operating and financial review includes a fair review of the
information required by DTR 4.2.7 and DTR 4.2.8 of the Disclosure
and Transparency rules of the United Kingdom's Financial Conduct
Authority namely:
-- an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed financial statements and a description of the principal
risks and uncertainties for the remaining six months of the
financial year; and
-- material related party transactions in the first six months
of the financial year as disclosed in note 22.
Shareholder information is as disclosed on the Triple Point
Social Housing REIT plc website.
Approval
This Directors' responsibilities statement was approved by the
Board of Directors and signed on its behalf by
Chris Phillips
Chairman
13 September 2018
Independent Review Report to the members of Triple Point Social
Housing REIT plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2018 which comprises the Condensed Group
Statement of Comprehensive Income, the Condensed Group Statement of
Financial Position, the Condensed Group Statement of Changes in
Equity, the Condensed Group Statement of Cash Flows and the Notes
to the Group Condensed Interim Financial Statements.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and
has been approved by the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. The
condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting", as adopted
by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2018 is not prepared, in all material respects, in accordance
with International Accounting Standard 34, as adopted by the
European Union, and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Thomas Edward Goodworth
BDO LLP
Chartered Accountants
London, United Kingdom
13 September 2018
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
For the period from 1 January 2018 to 30 June 2018
Period from Period from
1 January 2018 12 June 2017
to 30 June to 31 December
2018 2017
(unaudited) (audited)
Note GBP'000 GBP'000
----------------------------------------- ----- ------------------------- -------------------------
Income
Rental income 5 4,744 1,027
Total income 4,744 1,027
Expenses
Directors' remuneration 6 (127) (147)
Management fees 7 (868) (472)
General and administrative expenses (878) (446)
Total expenses (1,873) (1,065)
Gain from fair value adjustment
on investment property 11 3,257 5,639
Operating profit 6,128 5,601
Finance income 8 70 79
Finance expense 9 (24) (8)
Finance expense - C Shares amortisation 9 (134) -
Profit for the period before
tax 6,040 5,672
------------------------- -------------------------
Taxation 10 - -
Profit and total comprehensive
income 6,040 5,672
========================= =========================
attributable to shareholders
for the period
========================= =========================
Earnings per share - basic 26 3.02p 3.94p
Earnings per share - diluted 26 2.75p 3.94p
All amounts reported in the Condensed Group Statement of
Comprehensive Income for the period ended 30 June 2018 relate to
continuing operations.
The accompanying notes below form an integral part of these
Group Financial Statements.
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
As at 30 June 2018
30 June 2018 31 December
2017
Note (unaudited) (audited)
------------------------------------- -----
GBP'000 GBP'000
------------------------------------- ----- ------------- ------------
Assets
Non-current assets
Investment properties 11 190,581 138,512
Total non-current assets 190,581 138,512
Current assets
Trade and other receivables 12 2,411 12,002
Cash and cash equivalents 13 63,346 58,185
------------- ------------
Total current assets 65,757 70,187
Total assets 256,338 208,699
============= ============
Liabilities
Current liabilities
Trade and other payables 14 5,288 5,876
C shares 15 46,684 -
------------- ------------
Total current liabilities 51,972 5,876
Non-current liabilities
Other payables 16 1,154 1,151
------------- ------------
Total non-current liabilities 1,154 1,151
Total liabilities 53,126 7,027
============= ============
Total net assets 203,212 201,672
============= ============
Equity
Share capital 17 2,000 2,000
Share premium reserve 18 - -
Capital reduction reserve 19 189,533 194,000
Retained earnings 11,679 5,672
------------- ------------
Total Equity 203,212 201,672
============= ============
Net asset value per share - basic 27 101.61p 100.84p
Net asset value per share - diluted 27 101.61p 100.84p
The Condensed Group Financial Statements were approved and
authorised for issue by the Board on 13 September 2018 and signed
on its behalf by:
Chris Phillips
Chairman
13 September 2018
The accompanying notes below form an integral part of these
Condensed Group Financial Statements.
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
For the period from 1 January 2018 to 30 June 2018
Capital
Share Share premium reduction Retained
capital reserve reserve earnings Total equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ------ --------- -------------- ----------- ---------- -------------
Balance at 1 January
2018 2,000 - 194,000 5,672 201,672
Total comprehensive
income for the period - - - 6,040 6,040
Transactions with
owners
Dividends paid 20 - (4,467) (33) (4,500)
Balance at 30 June
2018 (unaudited) 2,000 - 189,533 11,679 203,212
========= ============== =========== ========== =============
Capital
Share Share premium reduction Retained
capital reserve reserve earnings Total equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ------ --------- -------------- ----------- ---------- -------------
Balance at 12 June - - - - -
2017
Total comprehensive
income for the period - - - 5,672 5,672
Transactions with
owners
Ordinary Shares issued
in the period at
a premium 17,18 2,000 198,000 - - 200,000
Share issue costs
capitalised 18 - (4,000) - - (4,000)
Cancellation of share
premium 18,19 - (194,000) 194,000 - -
Balance at 31 December
2017 (audited) 2,000 - 194,000 5,672 201,672
========= ============== =========== ========== =============
CONDENSED GROUP STATEMENT OF CASH FLOWS
For the period from 1 January 2018 to 30 June 2018
From 1 January From 12 June
2018 to 30 June 2017 to 31 December
2018 2017
(unaudited) (audited)
Note GBP'000 GBP'000
----------------------------------------- ----- ----------------- --- ---------------------
Cash flows from operating activities
Profit before income tax 6,040 5,672
Adjustments for:
Gain from fair value adjustment
on investment property 11 (3,257) (5,639)
Finance income 8 (70) (79)
Finance costs 9 24 8
Finance costs - C share amortisation 9 134 -
Operating results before working
capital changes 2,871 (38)
Increase in trade and other receivables (499) (722)
Increase in trade and other payables 710 1,555
----------------- ---------------------
Net cash flow generated from operating
activities 3,082 795
----------------- ---------------------
Cash flows from investing activities
Purchase of investment properties (46,077) (127,401)
Prepaid acquisition costs refunded
/ (paid) 12 6,060 (11,280)
Restricted cash - released 2,920 (3,427)
Restricted cash - (paid) (2,373) -
----------------- ---------------------
Net cash flow used in investing
activities (39,470) (142,108)
----------------- ---------------------
Cash flows from financing activities
Proceeds from issue of Ordinary
Shares - 200,000
Ordinary Share issue costs capitalised - (4,000)
Proceeds from issue of C Shares 15 47,500 -
C share issue costs capitalised 15 (950) -
Dividends paid 20 (4,500) -
Interest received 56 73
Interest paid (10) (2)
----------------- ---------------------
Net cash flow generated from financing
activities 42,096 196,071
----------------- ---------------------
Net increase in cash and cash
equivalents 5,708 54,758
Cash and cash equivalents at the 54,758 -
beginning of the period
Cash and cash equivalents at the
end of the period 13 60,466 54,758
================= =====================
NOTES TO THE GROUP CONDENSED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
For the period from 1 January 2018 to 30 June 2018
1. CORPORATE INFORMATION
Triple Point Social Housing REIT plc (the "Company") is a Real
Estate Investment Trust ("REIT") incorporated in England and Wales
under the Companies Act 2006 as a public company limited by shares
on 12 June 2017. The address of the registered office is 18 St.
Swithin's Lane, London, United Kingdom, EC4N 8AD. The Company is
registered as an investment company under section 833 of the
Companies Act 2006 and is domiciled in the United Kingdom.
The principal activity of the Company is to act as the ultimate
parent company of Triple Point Social Housing REIT plc and its
subsidiaries (the "Group") and to provide shareholders with an
attractive level of income, together with the potential for capital
growth from investing in a portfolio of social homes.
2. BASIS OF PREPARATION
The Condensed Group Financial Statements for the six months
ended 30 June 2018 have been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Conduct
Authority (previously the Financial Services Authority) and with
IAS 34, Interim Financial Reporting, as adopted by the European
Union.
Comparatives, as required by IAS34 for the comparable interim
period, are not provided as this is the Group's first interim
report since incorporation.
The Condensed Group Financial Statements for the six months
ended 30 June 2018 have been reviewed by the Company's Auditor, BDO
LLP in accordance with International Standard of Review Engagements
2410, Review of Interim of Financial Information Performed by the
Independent Auditor of the Entity and were approved for issue on 13
September 2018. The Condensed Group Financial Statements are
unaudited and do not constitute statutory accounts for the purposes
of the Companies Act 2006.
The comparative financial information for the period ended 31
December 2017 in this interim report does not constitute statutory
accounts for that year. The Company's annual report and accounts
for the period to 31 December 2017 have been delivered to the
Registrar of Companies. The independent auditor's report on those
accounts was unqualified, did not include reference to any matters
to which the auditors drew attention by way of emphasis without
qualifying their report and did not contain a statement under
section 498(2) or 498(3) of the Companies Act 2006.
The Group's Financial Statements have been prepared on a
historical cost basis, as modified for the Group's investment
properties, which have been measured at fair value. Gains or losses
arising from changes in fair values are included in profit or
loss.
The Group has applied the same accounting policies in these
Condensed Group Financial Statements as in its 2017 annual
financial statements, except for those that relate to new standards
and interpretations effective for the first time for periods
beginning on or after 1 January 2018. New standards impacting the
Group that will be adopted in the annual financial statements for
the year ended 31 December 2018 are:
-- IFRS 9 Financial Instruments; and
-- IFRS 15 Revenue from Contracts with Customers
IFRS 9 Financial Instruments
IFRS 9 replaces IAS 39 Financial Instrument: Recognition and
Measurement and introduces a single model that has initially only
two classification categories rather than the multiple
classification and measurement models in the previous standard. The
new models are amortised cost and fair value.
Due to the nature of the Group's financial instruments, the
adoption of IFRS 9 does not have a material impact on the Group's
consolidated results or financial position and does not require
there be a restatement of comparative figures.
The fair value of each category of the Group's financial
instruments approximates to their carrying value. Where financial
assets and liabilities are measured at fair value the measurement
hierarchy, valuation techniques and inputs used are consistent with
those used at 31 December 2017. There were no movements between
different levels of the fair value hierarchy in the period.
Having considered the requirements of IFRS 9, under section
5.5.15(b), the Directors are required to apply the simplified
approach when considering the Expected Credit Loss (ECL) model when
determining the expectations of impairment. Under the simplified
approach the Company is always required to measure lifetime
expected losses.
Given the nature to the Group's receivables, the Directors do
not consider any to be impaired. They believe that all are fully
recoverable and therefore there is no ECL to recognise. This view
is because all rent receivables are fully insured and each tenant
receives their cash inflows from local and central government.
These factors combine to ensure the probability of credit loss is
immeasurably small.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 has replaced IAS 11 Construction Contracts and IAS 18
Revenue. The standard introduces a new revenue recognition model
that recognises revenue either at a point in time or over time
(effective for annual periods beginning on or after 1 January
2018.
The Directors are satisfied the standard has no material impact
on the financial statements as rental income is outside the scope
of the standard and the Group's only revenue is currently generated
from rental income from leases that do not contain any service
components.
IFRS 16 becomes effective on 1 January 2019 for annual periods
beginning on or after 1 January 2019 and the Directors are
currently assessing the impact on the financial statements.
However, it is not expected that this standard will have a material
impact on the Group's financial statements as the Group has no
operating leases as a lessee.
2.1. Going concern
The Group benefits from a secure income stream from long leases
which are not overly reliant on any one tenant and present a
well-diversified risk. The directors have reviewed the Group's
forecast which shows rental income exceeds the expected operating
costs of the Group for at least the next 12 months.
As a result, the directors believe that the Group is well placed
to manage its financing and other business risks and that the Group
will remain viable, continuing to operate and meets its liabilities
as they fall due.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
In the application of the Group's accounting policies, which are
described in note 4, the directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year are outlined
below:
Estimates:
3.1. Investment properties
The Group uses the valuation carried out by its independent
valuers as the fair value of its property portfolio. The valuation
is based upon assumptions including future rental income and the
appropriate discount rate. The valuers also make reference to
market evidence of transaction prices for similar properties.
Further information is provided in note 11.
The Group's properties have been independently valued by Jones
Lang LaSalle Limited ("JLL" or the "Valuer") in accordance with the
definitions published by the Royal Institute of Chartered
Surveyors' ("RICS") Valuation - Professional Standards, July 2017,
Global and UK Editions (commonly known as the "Red Book"). JLL is
one of the most recognised professional firms within social housing
valuation and has sufficient current local and national knowledge
of both social housing generally and specialist supported housing
("SSH") and has the skills and understanding to undertake the
valuations competently.
With respect to the Group's Financial Statements, investment
properties are valued at their fair value at each Statement of
Financial Position date in accordance with IFRS 13 which recognises
a variety of fair value inputs depending upon the nature of the
investment. Specifically:
Level 1 - Unadjusted, quoted prices for identical assets and
liabilities in active (typically quoted) markets;
Level 2 - Quoted prices for similar assets and liabilities in
active markets
Level 3 - External inputs are "unobservable". Value is the
Director's best estimate, based on advice from relevant
knowledgeable experts, use of recognised valuation techniques and a
determination of which assumptions should be applied in valuing
such assets and with particular focus on the specific attributes of
the investments themselves.
Given the bespoke nature of each of the Group's investments, all
of the Group's investment properties are included in Level 3.
Judgements:
3.2. Asset acquisitions
The Group acquires subsidiaries that own investment properties.
At the time of acquisition, the Group considers whether each
acquisition represents the acquisition of a business or the
acquisition of an asset. The directors consider the substance of
the assets and activities of the acquired entity in determining
whether the acquisition represents the acquisition of a business.
The Group accounts for an acquisition as a business combination
where an integrated set of activities is acquired in addition to
the property.
Where such acquisitions are not judged to be the acquisition of
a business, they are not treated as business combinations. Rather,
the cost to acquire the corporate entity is allocated between the
identifiable assets and liabilities of the entity based upon their
relative fair values at the acquisition date. Accordingly, no
goodwill or deferred tax arises.
All corporate acquisitions during the period have been treated
as asset purchases rather than business combinations because no
integrated set of activities were acquired.
3.3. the Group as lessor
The Group has acquired investment properties that are subject to
commercial property leases with Registered Providers. The Group has
determined, based on an evaluation of the terms and conditions of
the arrangements, particularly the duration of the lease terms and
minimum lease payments, that it retains all the significant risks
and rewards of ownership of these properties and so accounts for
the leases as operating leases.
3.4. the Group as lessee
Leases where substantially all of the risks and rewards
incidental to ownership of a leased asset have been transferred to
the Group are accounted for as finance leases. The asset is treated
as if it had been purchased outright and held within the Group's
investment properties. The amount initially recognised as an asset
is the lower of the fair value of the leased property and the
present value of the minimum lease payments payable over the term
of the lease. The corresponding lease commitment is shown as a
liability. Lease payments are analysed between capital and
interest. The interest element is charged to the Statement of
Comprehensive Income over the period of the lease. The capital
element reduces the balance owed to the lessor.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in this report are
consistent with those applied in the Group's statutory accounts for
the period ended 31 December 2017. The principal accounting
policies of the financial statements are set out below.
4.1. Basis of consolidation
The Condensed Group Financial Statements comprise the financial
information of the Group as at the interim period end date.
Subsidiaries are all entities over which the Group has control.
The Group controls an entity when the group is exposed to, or has
rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power to
direct the activities of the entity. All intra-group transactions,
balances, income and expenses are eliminated on consolidation. The
financial information of the subsidiaries is included in the
financial statements from the date that control commences until the
date that control ceases.
If an equity interest in a subsidiary is transferred but a
controlling interest continues to be held after the transfer then
the change in ownership interest is accounted for as an equity
transaction.
Accounting policies of the subsidiaries are consistent with the
policies adopted by the Company.
4.2. Investment property
Investment property, which is property held to earn rentals
and/or for capital appreciation, is initially measured at cost,
being the fair value of the consideration given, including
expenditure that is directly attributable to the acquisition of the
investment property. After initial recognition, investment property
is stated at its fair value at the Statement of Financial Position
date. Gains and losses arising from changes in the fair value of
investment property are included in profit or loss for the period
in which they arise in the Statement of Comprehensive Income.
Subsequent expenditure is capitalised only when it is probable
that future economic benefits are associated with the
expenditure.
An investment property is derecognised upon disposal or when the
investment property is permanently withdrawn from use and no future
economic benefits are expected to be obtained from the disposal.
Any gain or loss arising on de-recognition of the property
(calculated as the difference between the net disposal proceeds and
the carrying amount of the asset) is recorded in profit or loss in
the period in which the property is derecognised.
Investment properties under construction are financed by the
Group where the Group enters into contracts for the development of
a pre-let property under a forward funding agreement. The Group
does not expose itself to any speculative development risk as the
proposed property is pre-let to a tenant under an agreement for
lease and the Group enters into a fixed price development agreement
with the Developer. Investment properties under construction are
initially recognised at gross development costs (including any
associated costs), which reflects the Group's maximum commitment in
relation to the forward funding of the pre-let property.
Subsequently, the properties are revalued at fair value at each
reporting date in form of a work-in-progress value. The
work-in-progress value of investment properties under construction
is estimated as fair value of the completed asset less any costs
still payable in order to complete, which includes the Developer's
margin.
During the period between initial investment and the lease
commencement date (practical completion of the works) a coupon
interest due on the funds paid in the range of 6.5-6.75% per annum
is payable by the Developer. On lease commencement date, the
aggregate amount of coupon interest accrued during the construction
period is deducted from the gross development cost, reducing the
outstanding balance payable to the Developer on practical
completion. When practical completion is reached the Completed
Investment property is transferred to operational Assets of the
fair value on the date of completion.
Significant accounting judgements, estimates and assumptions
made for the valuation of investment properties are discussed in
note 3.
4.3. Leases-Lessor
Leases are classified as finance leases where the terms of the
lease transfer substantially all the risks and rewards of ownership
to the lessee. All other leases are classified as operating
leases.
The Group has determined that it retains all the significant
risks and rewards of ownership of the properties it has acquired to
date and accounts for the contracts as operating leases as
discussed in note 3. No leases granted in the period exceed 30
years, the economic life of the assets is deemed to be considerably
longer than this. The portfolio consists of purpose built, high
specification assets which by their nature can last indefinitely if
maintenance and replacement works are carried out, or could be
modified and used for alternative uses if necessary.
Properties leased out under operating leases are included in
investment property in the Statement of Financial Position. Rental
income from operating leases is recognised on a straight line basis
over the term of the relevant leases.
4.4. Trade and other receivables
Trade and other receivables are amounts due in the ordinary
course of business. If collection is expected in one year or less,
they are classified as current assets. If not, they are presented
as non-current assets.
Trade and other receivables are initially recognised at fair
value, and subsequently where necessary re-measured at amortised
cost less provision for impairment. A provision for impairment of
trade receivables is established when there is objective evidence
that the Group will not be able to collect all amounts due in
accordance with the original terms of the receivables.
4.5. Cash and cash equivalents
Cash and cash equivalents include cash in hand, cash held by
lawyers and liquidity funds with a term of no more than three
months that are readily convertible to a known amount of cash and
which are subject to an insignificant risk of changes in value.
Cash held by lawyers is money held in escrow for expenses
expected to be incurred in relation to investment properties
pending completion. These funds are available immediately on
demand.
4.6. Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that the Group will be required to settle that
obligation and a reliable estimate can be made of the amount of the
obligation.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the
Statement of Financial Position date, taking into account the risks
and uncertainties surrounding the obligation.
4.7. Trade and other payables
Trade and other payables are classified as current liabilities
if payment is due within one year or less from the end of the
current accounting period. If not, they are presented as
non-current liabilities. Trade and other payables are recognised
initially at their fair value and subsequently measured at
amortised cost until settled.
4.8. C Shares financial liability
C shares are convertible non-voting preference shares and under
IAS 32 Financial Instruments: Presentation, meet the definition of
a financial liability. C shares are recognised on issue at fair
value less directly attributable transaction costs. After initial
recognition, C shares are subsequently measured at amortised cost
using the effective interest rate method. Amortisation is credited
to or charged to finance income or finance costs in the
Consolidated Statement of Comprehensive Income. Transaction costs
are deducted from proceeds at the time of issue. C shares will
convert into Ordinary shares on the conversion date on the basis of
their respective NAV per share at the calculation date.
4.9. Taxation
Taxation on the profit or loss for the period not exempt under
UK REIT regulations is comprised of current and deferred tax. Tax
is recognised in the consolidated statement of comprehensive income
except to the extent that it relates to items recognised as direct
movement in equity, in which case it is recognised as a direct
movement in equity. Current tax is expected tax payable on any non
REIT taxable income for the period, using tax rates enacted or
substantively enacted at the balance sheet date, and any adjustment
to tax payable in respect of previous periods.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The amount of
deferred tax that is provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at
the balance sheet date.
4.10. Dividend payable to shareholders
Dividends to the Company's shareholders are recognised as a
liability in the Group's Financial Statements in the period in
which the dividends are approved. In the UK, interim dividends are
recognised when paid.
4.11. Rental income
Rental income from investment property is recognised on a
straight-line basis over the term of ongoing leases and is shown
gross of any UK income tax. A rental adjustment is recognised from
the rent review date in relation to unsettled rent reviews, where
the directors are reasonably certain that the rental uplift will be
agreed.
Rental income is invoiced in advance and any rental income that
relates to a future period is deferred and appears within current
liabilities on the Statement of Financial Position.
Tenant lease incentives are recognised as a reduction of rental
revenue on a straight-line basis over the term of the lease.
When the Group enters into a forward funded transaction, the
future tenant signs an agreement for lease. No rental income is
recognised under the agreement for lease, but once the practical
completion has taken place the formal lease is signed at which
point rental income commences to be recognised in the Statement of
Comprehensive Income.
4.12. Finance income and finance costs
Finance income is recognised as interest accrues on cash
balances held by the Group. Finance costs consist of interest and
other costs that the Group incurs in connection with bank and other
borrowings. These costs are expensed in the period in which they
occur.
4.13. Expenses
All expenses are recognised in the Statement of Comprehensive
Income on an accruals basis.
4.14. Investment management fees
Investment advisory fees are recognised in the Statement of
Comprehensive Income on an accruals basis.
4.15. Share issue costs
The costs of issuing or reacquiring equity instruments (other
than in a business combination) are accounted for as a deduction
from equity.
4.16. Impairment of financial assets
Having considered the requirements of IFRS 9, under section
5.5.15(b), the simplified approach has been applied when
considering the Expected Credit Loss (ECL) model in determining the
expectations of impairment. Under the simplified approach the
Company is always required to measure lifetime expected losses.
5. RENTAL INCOME
The lease agreements between the Group and the Registered
Providers are full repairing and insuring leases. The Registered
Providers are responsible for the settlement of all present and
future rates, taxes, costs and other impositions payable in respect
of the property. As a result, no direct property expenses were
incurred.
1 January 2018 12 June 2017
to 30 June 2018 to 31 December
2017
(unaudited) (audited)
GBP'000 GBP'000
Rental income 4,744 1,027
4,744 1,027
================= ===============
6. DIRECTORS' REMUNERATION
The Directors are remunerated for their services at such rate as
the directors shall from time to time determine. The Chairman
receives a director's fee of GBP75,000 per annum, and the other
directors of the Board receive a fee of GBP50,000 per annum. The
Directors are also entitled to an additional fee of GBP7,500 in
connection with the production of every prospectus by the Company
(including the initial Issue).
None of the directors received any advances or credits from any
group entity during the period.
1 January 2018 12 June 2017
to 30 June 2018 to 31 December
2017
(unaudited) (audited)
GBP'000 GBP'000
Directors' fees 112 132
Employer's National Insurance
Contributions 15 15
127 147
================ ===============
7. MANAGEMENT FEES
On 20 July 2017 Triple Point Investment Management LLP was
appointed as the delegated investment manager of the Company by
entering into the property management services and delegated
portfolio management agreement. Under this agreement the delegated
investment manager will advise the Company and provide certain
management services in respect of the property portfolio.
The management fee is an annual management fee which is
calculated quarterly in arrears based upon a percentage of the last
published Net Asset Value of the Group (not taking into account
cash balances) as at 31 March, 30 June, 30 September and 31
December in each year on the following basis with effect from
Admission:
(a) on that part of the Net Asset Value up to and including
GBP250 million, an amount equal to 1% of such part of the Net Asset
Value;
(b) on that part of the Net Asset Value over GBP250 million and
up to and including GBP500 million, an amount equal to 0.9% of such
part of the Net Asset Value;
(c) on that part of the Net Asset Value over GBP500 million and
up to and including GBP1billion, an amount equal to 0.8% of such
part of the Net Asset Value;
(d) on that part of the Net Asset Value over GBP1 billion, an
amount equal to 0.7% of such part of the Net Asset Value.
Fees of GBP867,926 were chargeable by TPIM during the period to
30 June 2018. At the period end, GBP1,313,755 was due to TPIM.
1 January 2018 12 June 2017
to 30 June 2018 to 31 December
2017
(unaudited) (audited)
GBP'000 GBP'000
Management fees 868 472
868 472
================ ===============
8. FINANCE INCOME
1 January 12 June 2017
2018
to 30 June to 31 December
2018 2017
(unaudited) (audited)
GBP'000 GBP'000
Head lease interest income 14 6
Bank interest income 56 73
70 79
============ ===============
9. FINANCE COSTS
1 January 12 June 2017
2018
to 30 June to 31 December
2018 2017
(unaudited) (audited)
GBP'000 GBP'000
Head lease interest expense 14 6
Bank charges 10 2
------------ ---------------
24 8
Amortisation of C share liability 134 -
158 8
============ ===============
10. TAXATION
As a UK REIT, the Group is exempt from corporation tax on the
profits and gains from its property investment business, provided
it meets certain conditions as set out in the UK REIT regulations.
For the interim period from 1 January to 30 June 2018, the Group
did not have any non-qualifying profits and accordingly there is no
tax charge in the period. If there were any non-qualifying profits
and gains, these would be subject to corporation tax.
It is assumed that the Group will continue to be a group UK REIT
for the foreseeable future, such that deferred tax has not been
recognised on temporary differences relating to the property rental
business.
1 January 12 June 2017
2018
to 30 June to 31 December
2018 2017
(unaudited) (audited)
GBP'000 GBP'000
Current tax
Corporation tax charge for the year - -
Total current income tax charge in - -
the profit or loss
============ =================
The tax charge for the period is less than the standard rate of
corporation tax in the UK of 19%. The differences are explained
below.
1 January 2018 12 June 2017
to 30 June to 31 December
2018 2017
(unaudited) (audited)
GBP'000 GBP'000
Profit before tax 6,040 5,672
--------------- ---------------
Tax at UK corporation tax standard
rate of 19% 1,148 1,078
Change in value of investment properties (619) (1,071)
Exempt REIT income (625) (50)
Amounts not deductible for tax purposes - 4
Unutilised residual current period
tax losses 96 39
--------------- ---------------
- -
=============== ===============
The Government has announced that the corporation tax standard
rate is to be reduced from 19% to 17% with effective date from 1
April 2020. UK REIT exempt income includes property rental income
that is exempt from UK Corporation Tax in accordance with Part 12
of CTA 2010.
11. INVESTMENT PROPERTY
30 June 2018 31 December
2017 (audited)
(unaudited)
Operational Properties Total Total
assets under development
GBP'000 GBP'000 GBP'000 GBP'000
Investment property
valuation brought forward 137,546 - 137,546 -
Acquisitions 42,466 6,229 48,695 131,793
Fair value adjustment 3,547 (290) 3,257 5,639
Head lease ground rent 1,083 - 1,083 1,080
Total investment property 184,642 5,939 190,581 138,512
------------- ------------------- -------- ---------------------
Reconciliation to independent
valuation:
Investment property
valuation at 30 June
2018 156,057 33,935 189,992 137,546
Fair value adjustment-
head lease ground rent 1,083 - 1,083 1,080
Fair value adjustment-lease
incentive debtor (494) - (494) (114)
------------- ------------------- -------- ---------------------
156,646 33,935 190,581 138,512
------------- ------------------- -------- ---------------------
Properties under development represents contracts for the
development of a pre-let property under a forward funding
agreement.
The carrying value of leasehold properties at 30 June 2018 was
GBP24.4 million (2017 - GBP24.1 million).
In accordance with "IAS 40: Investment Property", the Group's
investment properties have been independently valued at fair value
by Jones Lang LaSalle Limited ("JLL"), an accredited external
valuer with recognised and relevant professional qualifications.
The independent valuers provide their fair value of the Group's
investment property portfolio every six months.
JLL were appointed as external valuers by the Board on 11
December 2017. JLL has provided valuations services to the Group.
The proportion of the total fees payable by the Company to JLL's
total fee income is minimal. Additionally, JLL has a rotation
policy in place whereby the signatories on the valuations rotate
after 7 years.
In order to achieve its Investment Objective, the Company will
invest in a diversified portfolio of freehold or long leasehold
Social Housing assets in the UK. Supported Housing assets will
account for at least 80 per cent of Gross Asset Value (once fully
invested). The Company will acquire portfolios of Social Housing
assets and single Social Housing assets to be acquired and/or held,
either directly or via SPVs. Each asset will be subject to a Lease
or occupancy agreement with an Approved Provider for terms
primarily ranging from 20 years to 25 years, with the rent payable
thereunder subject to adjustment in line with inflation (generally
CPI). Title to the assets will remain with the Group under the
terms of the relevant Lease. The Group will not be responsible for
any management or maintenance obligations under the terms of the
lease or occupancy agreement, all of which will be serviced by the
Approved Provider lessee. The Group will not be responsible for the
provision of care to occupants of Supported Housing assets.
The Group intends to hold its investment property portfolio over
the long term, taking advantage of long-term upward only inflation
linked leases. The Group will not be actively seeking to dispose of
any of its assets, although it may dispose of investments should an
opportunity arise that would enhance the value of the Group as a
whole.
% Key Statistics
The metrics below are in relation to the total investment
property portfolio held as at 30 June 2018.
Portfolio Metrics 30 June 2018 31 Dec 2017
Capital Deployed* GBP175,056 GBP128,525
Number of Properties 167 116
Number of Tenancies*** 100 65
Number of Registered Providers*** 12 11
Number of Local Authorities*** 69 51
Number of Care Providers*** 34 25
Average NIY** 5.32% 5.32%
* calculated excluding acquisition costs
** calculated using IAS 40 valuations (excluding forward funding acquisitions)
*** calculated excluding forward funding acquisitions
Regional exposure
30 June 2018 31 Dec 2017
Region *Cost GBP'000 % of portfolio *Cost GBP'000 % of portfolio
North West 56,979 32.5% 49,664 38.6%
North East 28,786 16.4% 24,037 18.7
West Midlands 27,657 15.8% 18,912 14.7
East Midlands 21,018 12.0% 11,374 8.8
South East 13,832 7.9% 4,732 3.7
Yorkshire 12,580 7.2% 10,140 7.9
South 8,031 4.6% 6,245 4.9
London 4,676 2.7% 3,421 2.7
East 1,234 0.7% - -
South West 263 0.2% - -
-------------- --------------- -------------- ---------------
Total 175,056 100.0% 128,525 100.0%
-------------- --------------- -------------- ---------------
* excluding acquisition costs
Fair value hierarchy
Quoted
prices Significant
in active observable Significant
markets inputs unobservable
(Level (Level inputs
Date of valuation Total 1) 2) (Level 3)
GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ------------------- -------- ----------- ------------ --------------
Assets measured
at fair value:
Investment properties 30 June 2018 190,581 - - 190,581
------------------------ ------------------- -------- ----------- ------------ --------------
31 December
Investment properties 2017 138,512 - - 138,512
------------------------ ------------------- -------- ----------- ------------ --------------
There have been no transfers between Level 1 and Level 2 during
the period, nor have there been any transfers between Level 2 and
Level 3 during the period.
The valuations have been prepared in accordance with the RICS
Valuation - Professional Standards (incorporating the International
Valuation Standards) by JLL, one of the leading professional firms
engaged in the social housing sector.
As noted previously all of the Group's investment properties are
reported as Level 3 in accordance with IFRS 13 where external
inputs are "unobservable" and value is the Directors' best
estimate, based upon advice from relevant knowledgeable
experts.
In this instance, the determination of the fair value of
investment property requires an examination of the specific merits
of each property that are in turn considered pertinent to the
valuation.
These include i) the regulated social housing sector and demand
for the facilities offered by each SSH property owned by the Group;
ii) the particular structure of the Group's transactions where
vendors, at their own expense, meet the majority of the
refurbishment costs of each property and certain purchase costs;
iii) detailed financial analysis with discount rates supporting the
carrying value of each property; iv) underlying rents for each
property being subject to independent benchmarking and adjustment
where the Group considers them too high (resulting in a price
reduction for the purchase or withdrawal from the transaction); and
v) a full repairing and insuring lease with annual indexation based
on CPI or CPI+1% and effectively 25 years outstanding, in most
cases with a Housing Association itself regulated by the Homes and
Communities Agency.
Descriptions and definitions relating to valuation techniques
and key unobservable inputs made in determining fair values are as
follows:
The valuer treats the fair value for forward funded asset as
work-in-progress value whereby the Company forward funds a
development by committing a total sum, the Gross Development Value
("GDV") over the development period in order to receive the
completed development at practical completion. The work-in-progress
value of the asset increases during the construction period
accordingly as payments are made by the Company which leads, in
turn, to a pro-rata increase in the valuation in each quarter
valuation assuming there are no material events affecting the GDV
adversely. Interest accrued during construction as well as an
estimation of future interest accrual prior to lease commencement
will be deducted from the balancing payment which is the final
payment to be drawn by the developer prior to the Company receiving
the completed building.
Valuation techniques: Discounted cash flows
The discounted cash flows model considers the present value of
net cash flows to be generated from the property, taking into
account the expected rental growth rate and lease incentive costs
such as rent-free periods. The expected net cash flows are then
discounted using risk-adjusted discount rates.
There are two main unobservable inputs that determine the fair
value of the Group's investment property:
1. The rate of inflation as measured by CPI; it should be noted
that all leases benefit from either CPI or RPI indexation.
2. The discount rate applied to the rental flows.
Key factors in determining the discount rates applied include
the performance of the regulated social housing sector and demand
for each specialist supported housing property owned by the Group,
costs of acquisition and refurbishment of each property, the
anticipated future underlying cash flows for each property,
benchmarking of each underlying rent for each property (passing
rent), and the fact that all of the Group's properties have the
benefit of full repairing and insuring leases entered into by a
Housing Association.
All of the properties within the Group's portfolio benefit from
leases with annual indexation based upon CPI or RPI. The fair value
measurement is based on the above items highest and best use, which
does not differ from their actual use.
Sensitivities of measurement of significant unobservable
inputs
As set out within the significant accounting estimates and
judgements in Note 3, the Group's property portfolio valuation is
open to judgements and is inherently subjective by nature.
As a result, the following sensitivity analysis has been
prepared:
Average discount rate and range:
The average discount rate used in the Group's property portfolio
valuation is 6.9%.
The range of discount rates used in the Group's property
portfolio valuation is from 6.4% to 7.5%.
-0.5% change +0.5% change +0.25% change -0.25% change
in in in in
Discount Discount CPI CPI
Rate Rate
GBP'000 GBP'000 GBP'000 GBP'000
Changes in the IFRS
fair value of investment
properties as at 30
June 2018 13,190 (11,891) 6,705 (6,388)
Changes in the IFRS
fair value of investment
properties as at 31
December 2017 9,360 (8,415) 4,796 (4,561)
12. TRADE AND OTHER RECEIVABLES
31 December
30 June 2018 2017
(unaudited) (audited)
GBP'000 GBP'000
Prepayments and other receivables 1,895 11,530
Rent receivable 516 472
2,411 12,002
============= ============
Prepaid acquisition costs include the cost of acquiring FPI Co
211 Limited of GBPNil (2017 - GBP4,030,000) and a PUMA pipeline
deposit of GBP885,824 (2017 - GBP7,213,552).
The Directors consider that the carrying value of trade and
other receivables approximate their fair value. All amounts are due
to be received within one year from the reporting date.
13. CASH AND CASH EQUIVALENTS
31 December
30 June 2018 2017
(unaudited) (audited)
GBP'000 GBP'000
Cash held by lawyers 3,312 38,496
Liquidity funds 2,868 15,872
Restricted cash 2,880 3,427
Cash at bank 54,286 390
-------------
63,346 58,185
============= ============
Liquidity funds refer to money placed in money market funds.
These are highly liquid funds with accessibility within 24 hours
and subject to insignificant risk of changes in value. Interest at
market rate of 0.01% per annum is earned on these deposits.
Cash held by lawyers is money held in escrow for expenses
expected to be incurred in relation to investment properties
pending completion. These funds are available immediately on
demand.
Restricted cash represents retention money held by lawyers in
relation to repair, maintenance and improvement works by the
vendors to bring the properties up to satisfactory standards for
the Group and the tenants. Currently that amount of cash is held in
escrow by the lawyers. The cash is committed on the acquisition of
the properties.
Cash and cash equivalent reported in the Statement of Cash Flows
totalled GBP60.47 million (2017 - GBP54.76 million) as at the
period end, which excludes restricted cash totalling GBP2.9 million
(2017 - GBP3.4 million).
14. TRADE AND OTHER PAYABLES
Current liabilities
31 December
30 June 2018 2017
(unaudited) (audited)
GBP'000 GBP'000
Other creditors 2,880 3,427
Accruals 2,030 2,031
Trade payables 229 380
Head lease ground rent 28 29
Deferred consideration 121 -
Deferred income - 9
-------------
5,288 5,876
============= ============
The directors consider that the carrying value of trade and
other payables approximate their fair value. All amounts are due
for payment within one year from the reporting date.
15. C SHARES
31 December
30 June 2018 2017
(unaudited) (audited)
GBP'000 GBP'000
At beginning of period - -
Proceeds from issue of shares 47,500 -
C share issue costs (950) -
Amortisation of C share liability 134 -
At end of period 46,684 -
============= ============
On 23 March 2018 the Company announced the issue of 47,500,000 C
shares, issued at 100 pence per share. The C shares are convertible
preference shares. The shares are listed on the London Stock
Exchange and dealing commenced on 27 March 2018.
Holders of C shares are not entitled to receive notice of,
attend, speak or vote at general meetings of the Company.
The C shares have the right to participate in a fixed rate
dividend of 3% per C share per annum pro-rated up to the conversion
date paid in cash (based on a C share price of 100 pence). The
pro-rated dividend will be paid on 28 September 2018.
The funds were raised in order to finance a number of property
acquisitions and C shares were issued rather than Ordinary shares
so that the issue costs associated with the fund raise and the
costs associated with the property acquisitions did not dilute the
Ordinary share NAV.
In order to calculate the net assets attributable to each share
class, the results, assets and liabilities attributable to the C
shares are identified in a separate pool to the results, assets and
liabilities of the Ordinary shares. A share of fund level expenses
for the period is allocated to the C shares based on the net assets
of each share class pool at 31 March 2018. In arriving at the
finance charge for C Share liability the Group has amortised issue
costs of GBP584,000 and coupon interest of GBP375,000 during the
period.
On 30 June 2018 90% of the C share funds had been invested or
committed and the C shares converted into Ordinary Shares on 30
August 2018 (conversion date). The conversion is on the basis of
their respective NAV per share as at 29 June 2018 (calculation
date), adjusted for dividends payable to both share classes and the
fair value gain on assets acquired on which the Company had
exchanged contracts but not completed until 13 July 2018. On 30
August 2018 46,352,220 Ordinary shares were issued on conversion of
the C shares.
It should be noted that these financial statements include all
results, assets and liabilities of both share class pools however
as the C shares are classified as a liability, net assets are
reduced by the value of the C shares liability which is also
equivalent to the net assets of the C share pool.
The value of the C shares liability at 30 June 2018 is
GBP46,683,799 representing 98.28p per share.
The table below gives a summary of the movement in net assets of
the C share pool and Group results for the period from 1 January
2018 to 30 June 2018.
C Share Group
GBP'000 GBP'000
Opening reserves - 201,672
Proceeds from issue of shares 47,500 47,500
Share issue costs (950) (950)
Net rental income 15 4,744
Expenses (132) (1,873)
Fair value gains on investment
properties 249 3,257
Finance income 2 70
Finance costs - (24)
Dividends paid - (4,500)
-------- ---------
46,684 249,896
Less C share liability - (46,684)
-------- ---------
Net assets 46,684 203,212
-------- ---------
Net assets are represented by:
C Share Group
GBP'000 GBP'000
Investment property 10,277 190,581
Trade and other receivables 206 2,411
Cash at bank 38,012 63,346
Trade and other payables (1,811) (6,442)
46,684 249,896
Less C share liability - (46,684)
-------- ---------
Net assets 46,684 203,212
-------- ---------
The fair value of the C Share liability at 30 June 2018 is
GBP48,925,000 representing a quoted price of 1.03 pence per
share.
16. OTHER PAYABLES
Non-current liabilities
31 December
30 June 2018 2017
(unaudited) (audited)
GBP'000 GBP'000
Head lease ground rent 1,054 1,051
Rent deposit 100 100
1,154 1,151
============= ============
The Directors consider that the carrying value of trade and
other payables approximate their fair value.
17. SHARE CAPITAL
30 June 2018 31 December 2017
(unaudited) (audited)
GBP'000 GBP'000
Authorised:
200 million Ordinary shares of
GBP0.01 each 2,000 2,000
============= =================
Issued and fully paid:
200 million Ordinary shares of
GBP0.01 each 2,000 2,000
============= =================
18. SHARE PREMIUM RESERVE
The share premium relates to amounts subscribed for share
capital in excess of nominal value.
30 June 2018 31 December 2017
(unaudited) (audited)
GBP'000 GBP'000
Balance at beginning of period - -
Share premium arising on Ordinary
Shares issued in the period - 198,000
Share issue costs capitalised - (4,000)
Transfer to capital reduction reserve - (194,000)
--------------- -----------------
Balance at end of period - -
=============== =================
19. CAPITAL REDUCTION RESERVE
30 June 2018 31 December
2017
(unaudited) (audited)
GBP'000 GBP'000
Balance at beginning of period 194,000 -
Transfer from share premium reserve - 194,000
Dividends paid (4,467) -
Balance at end of period 189,533 194,000
============= ============
The capital reduction reserve relates to the distributable
reserve established on cancellation of the share premium
reserve.
20. DIVIDS
1 January 12 June 2017
2018
to 30 June to 31 December
2018 2017
(unaudited) (audited)
GBP'000 GBP'000
Dividend of 1p for the period 12 2,000 -
June to 31 December 2017
Dividend of 1.25p for the 3 months 2,500 -
to 31 March 2018
4,500 -
============ ===============
On 6 March 2018, the Company declared its maiden interim
dividends of 1 pence per Ordinary share for the initial period from
12 June to 31 December 2017.
On 14 May 2018, the Company declared an interim dividend of 1.25
pence per Ordinary share for the period 1 January 2018 to 31 March
2018.
On 16 August 2018, the Company declared an interim dividend of
1.25 pence per Ordinary share for the period 1 April 2018 to 30
June 2018. The total dividend of GBP2,500,000 will be paid on 28
September 2018 to Ordinary shareholders on the register on 24
August 2018.
The Company is targeting to pay dividends of at least 5 pence
per Ordinary share for the financial year ended 31 December
2018.
The Company intends to pay dividends to shareholders on a
quarterly basis and in accordance with the REIT regime.
On 16 August 2018, the Company declared a dividend of an
aggregate of 1.29 pence per C share comprising of 0.789 pence per C
share for the period from admission to trading on 27 March 2018 to
30 June 2018; and 0.501 pence per C share for the period from 1
July 2018 to the date of conversion into Ordinary shares on 30
August 2018. The total dividend of GBP612,946 will be paid on 28
September 2018 to holders of C shares on the register on 24 August
2018.
21. SEGMENTAL INFORMATION
IFRS 8 Operating Segments requires operating segments to be
identified on the basis of internal financial reports about
components of the Group that are regularly reviewed by the Chief
Operating Decision Maker (which in the Group's case is delegated to
the Delegated Investment Advisor TPIM).
The internal financial reports received by TPIM contain
financial information at a Group level as a whole and there are no
reconciling items between the results contained in these reports
and the amounts reported in the financial statements.
The Group's property portfolio comprised 167 Social Housing
properties as at 30 June 2018 in England and Wales. The directors
consider that these properties represent a coherent and diversified
portfolio with similar economic characteristics and, as a result,
these individual properties have been aggregated into a single
operating segment. In the view of the directors there is
accordingly one reportable segment under the provisions of IFRS
8.
All of the Group's properties are engaged in a single segment
business with all revenue, assets and liabilities arose in the UK,
therefore, no geographical segmental analysis is required by IFRS
8.
22. RELATED PARTY DISCLOSURE
Directors
Directors are remunerated for their services at such rate as the
directors shall from time to time determine. The Chairman receives
a director's fee of GBP75,000 per annum, and the other directors of
the Board receive a fee of GBP50,000 per annum. The directors are
also entitled to an additional fee of GBP7,500 in connection with
the production of every prospectus by the Company.
23. CONSOLIDATED ENTITIES
The Group consists of a parent company, Triple Point Social
Housing REIT plc, incorporated in the UK and a number of
subsidiaries ultimately held by the Company, which operate and are
incorporated in the UK and Guernsey. The principal place of
business of each subsidiary is the same as their place of
incorporation.
The Group owns 100% of the equity shares of all subsidiaries and
has the power to appoint and remove the majority of The Board of
those subsidiaries. The relevant activities of the below
subsidiaries are determined by The Board based on simple majority
votes. Therefore the directors of the Company concluded that the
Company has control over all these entities and all these entities
have been consolidated within the financial statements.
The principal activity of all the subsidiaries relates to
property investment.
Name of Entity Registered Office Country Ownership
of Incorporation %
Bloxwich Developments 18 St. Swithin's Lane,
Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
Court Developments Ltd London, EC4N 8AD UK 100%
Rushden Developments 18 St. Swithin's Lane,
Ltd London, EC4N 8AD UK 100%
Supported Developments 18 St. Swithin's Lane,
Ltd London, EC4N 8AD UK 100%
Stoke Central Developments 18 St. Swithin's Lane,
Ltd London, EC4N 8AD UK 100%
5 Old Bailey, London,
Soho SPV 1 Ltd EC4M 7BA UK 100%
18 St. Swithin's Lane,
Soho SPV 2 Ltd** London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
Soho SPV 3 Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
Soho SPV 4 Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
Soho SPV 5 Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
Soho SPV 6 Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
Soho SPV 8 Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
MSL (21) Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
MSL (25) Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
MSL (26) Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
MSL (28) Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
MSL (30) Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
MSL (37) Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
MSL (39) Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
MSL (40) Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
MSL (42) Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
MSL (43) Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
MSL (44) Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
MSL (45) Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
MSL (51) Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
FPI Co 22 Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
FPI Co 110 Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
FPI Co 150 Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
FPI Co 153 Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
FPI Co 159 Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
FPI Co 160 Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
FPI Co 170 Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
FPI Co 173 Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
FPI Co 174 Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
FPI Co 175 Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
FPI Co 188 Ltd London, EC4N 8AD UK 100%
TP REIT Super HoldCo 18 St. Swithin's Lane,
Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
TP REIT HoldCo 1 Ltd* London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
TP REIT HoldCo 2 Ltd* London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
TP REIT PropCo 2 Ltd* London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
Norland Estates Ltd* London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
Allerton SPV 1 Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
Allerton SPV 2 Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
Sorogold Street Ltd London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
Sorogold Property Limited* London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
PSCI Holdings II Limited London, EC4N 8AD UK 100%
Puma Social Care (Holdings) 1 Le Truchot St Peter
Limited Port, GY1 1WD Guernsey 100%
Puma Property Investments 1 Le Truchot St Peter
Limited* Port, GY1 1WD Guernsey 100%
Puma Properties (Springside) 1 Le Truchot St Peter
Ltd* Port, GY1 1WD Guernsey 100%
Puma Properties (Holdings) 1 Le Truchot St Peter
Limited* Port, GY1 1WD Guernsey 100%
Puma Properties UK (Eskdale) 1 Le Truchot St Peter
Ltd* Port, GY1 1WD Guernsey 100%
Puma Properties (Workington) 1 Le Truchot St Peter
Ltd* Port, GY1 1WD Guernsey 100%
Puma Properties (HDSL) 1 Le Truchot St Peter
Limited* Port, GY1 1WD Guernsey 100%
Puma Properties UK (CTP 1 Le Truchot St Peter
1) Ltd* Port, GY1 1WD Guernsey 100%
Puma Properties UK (CTP 1 Le Truchot St Peter
2) Ltd* Port, GY1 1WD Guernsey 100%
Puma Properties UK (Elm Bond Street House, London,
Place) Ltd* W1S 4JU UK 100%
Puma Properties UK (Barnsley) Bond Street House, London,
Ltd* W1S 4JU UK 100%
Puma Properties UK (Baskerville Bond Street House, London,
Hall) Ltd* W1S 4JU UK 100%
Puma Properties UK (Prescott Bond Street House, London,
Court) Ltd* W1S 4JU UK 100%
HB Villages St Helens Bond Street House, London,
Ltd* W1S 4JU UK 100%
Burleigh Manor, Peel Road,
SIPP Holdings Limited Douglas, IM1 5EP Isle of Man 100%
18 St. Swithin's Lane,
SL Boathouse Ltd* London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
SL Workington Limited* London, EC4N 8AD UK 100%
1 Le Truchot St Peter
PSCI Holdings Limited Port, GY1 1WD Guernsey 100%
18 St. Swithin's Lane,
PSCI Holdings III Limited London, EC4N 8AD UK 100%
18 St. Swithin's Lane,
TP REIT Maple Limited London, EC4N 8AD UK 100%
* Indirectly owned
** Dissolved 10 July 2018
24. SUBSEQUENT EVENTS
Property acquisitions
Subsequent to the end of the period, the Group has acquired
portfolios of 41 supported Social Housing properties deploying
GBP49.3 million (including acquisition costs).
Forward Funding Arrangements
Since 30 June 2018 the Group has entered into one forward
funding agreement at a total project cost of GBP1.9 million. The
land has been acquired by the Group and a developer has been
contracted to carry out the construction. Jones Lang LaSalle
Limited has been appointed as the fund monitor for both sites and
will be overseeing the projects on behalf of the Group.
Debt financing
On 20 July 2018, the Company has entered into a long dated,
fixed rate, interest only financing arrangement in the form of a
private placement of loan notes in an amount of GBP68.5 million
with MetLife and affiliated funds. The Loan Notes are secured
against a portfolio of specialist supported living assets
throughout the UK, worth approximately GBP172m, acquired in the
period from admission in August 2017 to the end of March 2018. The
amounts which have been drawn down under the Loan Notes are
segregated and non-recourse to the Company.
The Loan Notes represent a loan-to-value of 40% of the value of
the secured pool of assets and are split into two tranches:
Tranche-A, in an amount of GBP41.5 million, has a term of 10 years
from utilisation and is priced at an all-in coupon of 2.924%; and
Tranche-B, in an amount of GBP27 million, has a term of 15 years
from utilisation and is priced at an all-in coupon of 3.215%. On a
blended basis, the weighted average term is 12 years carrying a
weighted average fixed rate coupon of 3.039%.
Dividends
On 16 August 2018, the Company declared a quarterly dividend in
respect of the Ordinary shares for the three months to 30 June 2018
of 1.25 pence per Ordinary share. The dividend will be paid on 28
September 2018 to holders of Ordinary shares on the register as at
24 August 2018.
On 16 August 2018, the Company declared an aggregate dividend of
1.29 pence in respect of the C shares. This comprises of 0.789
pence for the period from admission to trading on 27 March 2018 to
30 June 2018; and 0.501 pence for the period from 1 July 2018 to
the date of conversion into Ordinary shares on 30 August 2018. Both
dividends will be paid on 28 September 2018 to holders of C shares
on the register as at 24 August 2018.
Conversion of C Shares
On 30 August 2018 the C Shares were converted into Ordinary
shares in accordance with the terms for the C shares as set out in
the Company's Articles of Association. For every one C Share held,
0.975836 new Ordinary Share was issued.
Acquisition
On 13th July, the Company acquired TP Social Housing Investments
Limited and its subsidiaries for a total purchase price of GBP22.3
million, as part of a single transaction, from Pantechnicon Capital
Limited (total commitment GBP24.1 million). Ben Beaton, James
Cranmer and Claire Ainsworth are all directors of Pantechnicon
Capital Limited and they are also all partners of TPIM, the
delegated investment advisor. This is a related party
transaction.
The transaction has been treated as an asset acquisition.
25. CAPITAL COMMITMENTS
The Group has capital commitments of GBP51.5 million in relation
to the cost to complete its forward funded pre-let development
assets and on properties exchanged but not completed at 30 June
2018.
26. EARNINGS PER SHARE
Earnings per share ("EPS") amounts are calculated by dividing
profit for the period attributable to Ordinary equity holders of
the Company by the weighted average number of Ordinary Shares in
issue during the period. Diluted EPS are calculated by dividing
profit for the period attributable to both Ordinary equity holders
and C preference shareholders by the weighted average number of
Ordinary shares and C shares in issue during the period. The
weighted average number of shares, for the purposes of calculating
diluted earnings per share, has been calculated based on the actual
number of shares issued on conversion of the C shares in accordance
with IAS 33.
The calculation of basic, diluted and EPRA earnings per share is
based on the following:
1 January 12 June 2017
2018 to
to 30 June 31 December
2018 2017
(unaudited) (audited)
Calculation of Basic Earnings per share
Net profit attributable to Ordinary
Shareholders (GBP'000) 6,040 5,672
Weighted average number of Ordinary
Shares 200,000,000 143,842,365
Earnings per share - basic 3.02p 3.94p
---------------------------------- ------------------------------------
Calculation of Diluted Earnings per
share
Net profit attributable to Ordinary
Shareholders (GBP'000) 6,040 5,672
Add back finance costs associated with
the C share liability (GBP'000) 134 -
Total (GBP'000) 6,174 5,672
---------------------------------- ------------------------------------
Weighted average number of Ordinary
shares 200,000,000 143,842,365
Effects of dilution from C shares 24,584,603 -
---------------------------------- ------------------------------------
224,584,603 143,842,365
---------------------------------- ------------------------------------
Earnings per share - diluted 2.75p 3.94p
EPRA Earnings per share
Net profit attributable to Ordinary
Shareholders
(GBP'000) 6,040 5,672
Changes in value of fair value of
investment
property (GBP'000) (3,257) (5,639)
Total (GBP'000) 2,783 33
Weighted average number of Ordinary
Shares 200,000,000 143,842,365
Earnings per share - EPRA 1.39p 0.02p
---------------------------------- ----------------------------------
27. NET ASSET VALUE PER SHARE
Basic Net Asset Value ("NAV") per share is calculated by
dividing net assets in the Condensed Group Statement of Financial
Position attributable to ordinary equity holders of the parent by
the number of Ordinary Shares outstanding at the end of the period.
Diluted NAV per share is calculated by adjusting net assets for the
conversion of C Shares.
Net asset values have been calculated as follows:
30 June 2018 31 December
2017
(unaudited) (audited)
Net assets (GBP'000) 203,212 201,672
Number of Ordinary shares in issue
at end of period 200,000,000 200,000,000
NAV basic 101.61p 100.84p
------------- ------------
Net assets (GBP'000) 203,212 201,672
Adjust for the effect of the C 46,684 -
shares converting (GBP'000)
------------- ------------
Adjusted net assets (GBP'000) 249,896 201,672
------------- ------------
Number of Ordinary shares in issue
at end of period 200,000,000 200,000,000
Number of Ordinary shares that 45,945,807 -
would be issued on the conversion
of C shares
------------- ------------
Total 245,945,807 200,000,000
------------- ------------
NAV - diluted (EPRA NAV) 101.61p 100.84p
For the purpose of calculating the diluted NAV the number of
shares equal the shares that would have been issued if conversion
of the C shares had happened on 30 June 2018, based on the NAV of
the C share pool at that date rather than taking into account any
impact on the C share pool NAV up to the point of conversion.
28. UNAUDITED PERFORMANCE MEASURE - PORTFOLIO NET ASSET VALUE
The objective of the Portfolio Net Asset Value "Portfolio NAV"
measure is to highlight the fair value of the net assets on an
ongoing, long term basis, which aligns with the Group's business
strategy as an ongoing REIT with a long-term investment outlook.
This Portfolio NAV is made available on a quarterly basis on the
Company's website and announced via RNS.
On 27 March 2018 the Company issued 47,500,000 of C shares. The
results, assets and liabilities attributable to the C shares are
accounted for in a separate pool to those of the Ordinary shares
and thus the Company announces a quarterly Portfolio NAV for both
share classes.
The C shares have been recognised in the financial statements as
a liability valued at amortised cost which represents the value of
the assets and liabilities attributable to the C share pool (see
note 15). Thus, the net assets of the Company disclosed in the
financial statements are equal to the net assets attributable to
the Ordinary shareholders.
In order to arrive at Portfolio NAV, two adjustments are made to
the IFRS Net Asset Value ("IFRS NAV") reported in the consolidated
financial statements such that;
i. The C share liability, equivalent to the net assets
attributable to the C shareholders is added back to net assets,
because under IFRS accounting rules the C shares are recognised as
a liability. (Please refer to note 15 for more details).
ii. The hypothetical sale of properties will take place on the
basis of a sale of a corporate vehicle rather than a sale of
underlying property assets. This assumption reflects the basis upon
which the Company's assets have been assembled within specific
SPVs.
iii. The hypothetical sale will take place in the form of a single portfolio disposal.
30 June 30 June 30 June 31 December
2018 2018 2018 2017
Ordinary C Ordinary
Share Share Total Share
GBP'000 GBP'000 GBP'000 GBP'000
Net asset value per the
consolidated financial
statements 203,212 - 203,212 201,672
Add back C Share liability - 46,684 46,684 -
--------- -------- -------- ------------
Value of Asset pools 203,212 46,684 249,896 201,672
Effects of the adoption
to the assumed, hypothetical
sale of properties as a
portfolio and on the basis
of sale of a corporate
vehicle 12,722 728 13,450 9,400
Portfolio Net Asset Value 215,934 47,412 263,346 211,072
--------- -------- -------- ------------
After reflecting these amendments, the movement in net assets is
as follows:
30 June 30 June 30 June 31 December
2018 2018 2018 2017
Ordinary C Ordinary
share
share share Total Total
GBP'000 GBP'000 GBP'000 GBP'000
Opening reserves at 201,672 - 201,672 -
Net issue proceeds - 46,550 46,550 196,000
Operating profits/(losses) 2,988 (117) 2,871 33
Capital appreciation 15,729 978 16,707 15,039
Finance income 68 2 70 -
Finance costs (24) - (24) -
Dividends paid (4,500) - (4,500) -
------------ ----------- -------- ------------
Portfolio Net Assets 215,933 47,413 263,346 211,072
Number of shares in
issue at the period
end 200,000,000 47,500,000 200,000,000
Portfolio net asset
value per share 107.97p 99.82p 105.5p
Summary Consolidated Statement of Comprehensive Income -
Portfolio NAV Basis
30 June 30 June 30 June 31 December
2018 2018 2018 2017
Ordinary C Ordinary
share
share share Total Total
GBP'000 GBP'000 GBP'000 GBP'000
Net rental income 4,729 15 4,744 1,027
Expenses (1,741) (132) (1,873) (1,065)
Fair value gains on investment
property 15,729 978 16,707 15,039
Finance income 68 2 70 71
Finance costs (24) - (24) -
Value of each pool 18,761 863 19,624 15,072
------------ ----------- -------- ------------
Weighted average number
of shares 200,000,000 24,584,603 143,842,365
Adjusted earnings per
share - basic 9.38p 3.51p 10.48p
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR GGUBUBUPRPGW
(END) Dow Jones Newswires
September 14, 2018 02:00 ET (06:00 GMT)
Triple Point Social Hous... (LSE:SOHO)
Historical Stock Chart
From Jun 2024 to Jul 2024
Triple Point Social Hous... (LSE:SOHO)
Historical Stock Chart
From Jul 2023 to Jul 2024
