TIDMSOHO
RNS Number : 5111A
Triple Point Social Housing REIT
30 September 2020
THIS ANNOUNCEMENT HAS BEEN DETERMINED TO CONTAIN INSIDE
INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU)
NO. 596/2014.
30 September 2020
Triple Point Social Housing REIT plc
(the "Company" or, together with its subsidiaries, the
"Group")
RESULTS FOR THE SIX MONTHSED 30 JUNE 2020
The Board of Triple Point Social Housing REIT plc (ticker: SOHO)
is pleased to announce its unaudited results for the six months
ended 30 June 20 20 .
1 January
20 20 to 1 January Year ended
30 June 20 2019 to 30 31 December
20 June 2019 20 19
---------------------------------- ------------ -------------- -------------
IFRS NAV per share 105.34 p 103.96p 105.37p
Earnings per share (basic and
diluted) 2.55 p 2.82p 6.75p
* IFRS basis 2.12 p 1.53p 3.39p
* EPRA basis
Total annualised rental income GBP 28.0 GBP21.1m GBP25.4m
(1) m
Value of the portfolio
* IFRS basis GBP 510.3 GBP3 9 5.9m GBP471.6m
m GBP423.2m GBP503.8m
GBP 548.5
* Portfolio valuation basis m
Weighted average unexpired 25.4 yrs 26.2 yrs 25.7 yrs
lease term
Dividend paid or declared per
Ordinary Share 2.59 p 2.54p 5.095p
Financial highlights
-- IFRS net asset value per share of 10 5.34 pence at 30 June 20
20 (31 December 2019 : 10 5.37 pence).
-- Portfolio independently valued as at 30 June 2020 at GBP
510.3 million on an IFRS basis (31 December 2019 : GBP 471.6
million), reflecting a valuation uplift of 7.2 % against total
invested funds of GBP 476.1 million (2) . The properties have been
valued on an individual basis.
-- The Group's assets were valued at GBP 548.5 million on a
portfolio valuation basis (31 December 2019 : GBP 503.8 million),
reflecting a portfolio premium of 7.5 % or a GBP3 8.2 million
uplift against the IFRS valuation. A portfolio valuation basis
assumes the portfolio of properties is held in a single company
holding structure, is sold to a third party on arms-length terms,
and attracts lower purchaser's costs of 2.30%.
-- The portfolio's total annualised rental income was GBP2 8.0
million (1) as at 30 June 2020 (31 December 2019 : GBP 25 .4
million).
-- Operating profit for the period ended 30 June 2020 was GBP11.
8 million (30 June 2019 : GBP1 1.0 million).
-- Ongoing Charges Ratio of 1. 61 % as at 30 June 2020 (31
December 2019 : 1. 63 %; 30 June 2019 : 1. 59 %).
-- During the p eriod, the Group d rew down a further GBP 16.0
million of the GBP 130 million revolving credit facility agree ment
("RCF") resulting in GBP117 million of the RCF being drawn as at 30
June 2020.
-- Market capitalisation of GBP 343.9 million as at 30 June 2020
(31 December 2019 : GBP 315.8 million).
Operational highlights
-- Acquired 1 6 properties during the period for an aggregate
purchase price of GBP 29.9 million (including acquisition costs )
bringing the total investment portfolio to 404 properties.
-- The Group has undertaken a total of 22 forward funding
arrangements since IPO (an aggregate commitment of GBP5 6. 2
million), of which 15 had reached practical completion by the
period end and seven were on-going.
-- IFRS blended net initial yield of 5. 30 % based on the value
of the portfolio on an IFRS basis as at 30 June 2020 , against the
portfolio's blended net initial yield on purchase of 5.9 1 %, equal
to a yield compression of 61 bps .
-- D iversified the portfolio:
o 11 regions
o 153 local authorities
o 316 leases
o 1 8 Approved Providers
o 93 care providers
-- As at 30 June 2020 , the weighted average unexpired lease
term (" WAULT ") was 2 5.4 years.
-- 100% of contracted rental income was either CPI or RPI linked.
Post Balance Sheet Activity
-- The dividend paid on 2 5 September 2020 brings the total
dividend per Ordinary Share paid by the Company in respect of the
six month period to 30 June 2020 to 2.5 9 pence per share, in line
with the Company's stated target for the year to 31 December 2020
of 5. 18 pence per share. Thi s represents an increase of 1. 7 %
over the dividend paid for the year ended 31 December 2019 , in
line with inflation, reflecting the CPI-based rent reviews
typically contained in the leases of the assets within portfolio.
(3)
-- Acquired a further 30 Supported Housing properties (122 units
in total) for an aggregate purchase
price of approximately GBP19.8 million (including acquisition costs).
-- Currently, the Group has drawn down GBP117 million of its
existing revolving credit facility and is actively exploring
further fundraising options.
Notes:
1 Excluding ongoing forward funded schemes that are under an agreement for lease
2 Including acquisition costs
3 These are targets only and not a profit forecast and there can
be no assurance that they will be met
Chris Phillips, Chairman of Triple Point Social Housing REIT
plc, commented:
" This year has been one of the most extraordinary years in
recent history. Our world has changed forever. Across society,
Covid-19 has affected almost every person and every business.
F or all the disruption caused by Covid-19, the fundamentals of
this sector remain strong. Despite some short-term delays in
deployment and construction, the damage caused by Covid-19 appears
to be elevating the relevance of our socially-focused investments,
while the fundamental need for this type of housing continues to
grow. Commissioners continue to call for new schemes, and our
existing schemes continue to operate well. Despite the challenges
that lie ahead , both for our economy and our business , our
performance in the first half of this year allows us to look to the
future with optimism. "
FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:
Triple Point Investment Management Tel: 020 7201 8989
LLP
(Investment Manager)
Ben Beaton
Max Shenkman
Isobel Gunn-Brown
Justin Hubble
Akur Limited (Joint Financial Adviser) Tel: 020 7493 3631
Tom Frost
Anthony Richardson
Siobhan Sergeant
Stifel Nicolaus Europe Limited Tel: 020 7710 7600
(Joint Financial Adviser and Corporate
Broker)
Mark Young
Mark Bloomfield
Rajpal Padam
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-linked,
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 pressure and social need to
increase housing supply across the UK which is creating
opportunities for private sector investors to help deliver this
housing. The Group's ability to provide forward funding 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.
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.
Meeting for analysts and audio recording of results
available
T he Company presentation for analysts will be held at 9:30am
today via live webcast . The presentation will also be accessible
on-demand later in the day via the Company website:
www.triplepointreit.com .
Those wishing to access the live webcast are kindly asked to
contact Luke Cheshire at Hanway Advisory on +44 (0) 20 3909 3519 or
luke.cheshire@hanwayadvisory.com .
The Interim Results will also be available to view and download
on the Company's website at www.triplepointreit.com and hard copy
will be posted to shareholders on or around 5 September 2020 .
CHAIRMAN'S STATEMENT
Introduction
This year has been one of the most extraordinary years in recent
history. Our world has changed forever. Across society, Covid-19
has affected almost every person and every business. But the impact
has been uneven. As with all crises, some have benefited from the
upheaval, though, sadly, most have seen their fortunes reverse. The
property market has been no different. The impact of the virus on
human behaviour has caused unprecedented, and possibly long-term,
disruption to our world of physical assets. Some property sectors -
notably hospitality, retail and commercial offices - have been hit
particularly hard. But other sectors, and often those with a
positive social impact, have fared better. The purpose of this
report is to update our stakeholders and show that, despite this
backdrop, we have continued to enjoy strong performance in the
first half of 2020.
Covid-19 has highlighted the resilience of our investment
strategy and our company. During the first half of 2020, we
received 100% of rent due, and paid all dividends in full. We
continued to receive all rent due despite our economy receiving
arguably the greatest shock in at least a generation - a shock
which affected large swathes of the wider property market. In this
context, our success needs explaining. We believe our success is
down to the fundamentals of our investment strategy, which we have
stuck to rigorously since we launched just over three years
ago.
By investing in desperately needed new housing across the
country, we are ensuring that our properties remain in need,
irrespective of the state of the economy. Indeed, investments that
meet a social need are often the most resilient precisely because
they provide the services that our society cannot live without.
Central government is unlikely to stop funding the housing and care
of the most vulnerable people in society simply because there has
been a reversal in economic circumstances. In this way, the
financial success of our investments is intrinsically linked to the
value we add to society, both through improving the welfare of
people with long-term health needs, and through saving the
government money in caring for them. Our high-quality properties
generate sustainable, long-term rental incomes because they meet
the social and financial needs identified by local health
Commissioners across the length and breadth of the country.
Covid-19 has also brought about changes that could benefit our
investment model in both the short-term and the longer-term. As we
will see below, Covid-19 did cause some delays in our deployment of
funds and our construction projects. But, politically, the
importance of social care seems to have emerged from under the
shadow of the NHS. Our investments are almost exclusively in
specialised supported housing rather than care homes, which means
we have fortunately avoided the tragically high rates of infections
in care homes widely reported in the press. But our investments are
nonetheless part of the same social care system which has seen
renewed political support amid greater calls to strengthen the
social care system as a way of easing the burden on the NHS. In
fact, during the crisis, many Commissioners around the country
sought to accelerate the transfer of hospital patients to supported
housing schemes precisely because the crisis brought into greater
focus the way that the social care system can relieve pressure on
hospitals. We hope that post-Covid-19, better integration of the
two great components of our country's healthcare system will
continue for the benefit of all stakeholders.
A discussion of Covid-19 cannot ignore the human impact that the
crisis has had on our country. The general horrors and personal
tragedies are sadly all too familiar. As a socially-aware property
owner we continue to monitor the well-being of our residents. We
have tried to help where we can by remaining in regular contact
with our Approved Providers and care providers to understand the
operational challenges that they have been facing and assist where
possible, with much-needed personal protective equipment and
hand-creams donated to front-line care workers. More generally, we
believe we can best contribute to society by continuing to invest
in much-needed new housing and ensuring that a high level of
housing provision is maintained for the vulnerable residents living
in the properties that we own.
Turning to our general operational performance, during the first
half of 2020 we finished deploying the first GBP38.3 million
tranche of debt that we drew from the extended revolving credit
facility in November 2019. We then drew a second GBP16.0 million
tranche in May 2020, which has been fully deployed since the period
end. The security pool for the final draw has now been filled, with
the final tranche expected to be drawn at the beginning of October.
Using these funds, in the six-month period we bought 16 new
properties at a total cost of GBP29.9 million. All acquisitions
were subjected to our continually-evolving due diligence process,
and further diversified our portfolio's geographic and counterparty
exposure. Two new Approved Providers joined our portfolio during
the period. Of our 22 forward funding schemes, four more completed,
bringing the total to 15 successfully completed projects. Since 31
December 2019, our IFRS NAV stayed more or less flat, with a very
small decrease of 0.03%. Since IPO, and while we have been
deploying the proceeds of equity and debt raises, a portion of the
dividend paid to investors has not been covered by income.
Historically, the resultant negative impact on NAV has been more
than offset by increases in the value of the Group's property
portfolio. In this period, a fair value gain of GBP1.5 million was
recognised on the revaluation of the Group's properties. Relatively
this is less than in previous periods which in part reflects slower
than usual deployment resulting from the national lockdown, and a
reduction in the CPI and RPI assumptions in the valuation models of
our valuer, JLL. The Group now has look-through dividend cover of
over 100%, as measured on an EPRA earnings run-rate basis.
I want to finish my introduction by noting that in May we
appointed Stifel Nicolaus Europe Limited as our new sole corporate
broker and joint financial adviser, alongside Akur Limited. We are
delighted to be able to draw upon the expertise of such a
highly-regarded broker, and have already started working with them
to publicise the nature and success of our business to our existing
investor base as well as more widely. I have included below further
detail on what we have been doing together already.
Deployment
The national lockdown that began in March 2020 presented an
unprecedented challenge to our ability to deploy funds. Approved
Providers hesitated before signing leases without certainty that
Commissioners would refer residents into properties at a time of
social distancing. Commissioners, distracted by events, could be
difficult to contact to confirm their support for new schemes. Care
providers were busy protecting the health of residents and
frontline carers while surveyors and valuers were unable to visit
properties for fear of spreading infection. The cumulative impact
was to delay schemes and, in turn, our ability to deploy our funds
to generate income.
Despite all these challenges, we did not stop deploying funds
during lockdown. In the first half of this year, we acquired 16
properties, comprising 144 units, for a total investment cost of
GBP29.9 million. Of these, we acquired seven properties, comprising
40 units, since lockdown began in March, at a total investment cost
of GBP7.9 million. This enabled us to put our capital to work and
generate further income from the portfolio.
Our ability to keep deploying capital was possible in part
because of the resourcefulness of the various stakeholders involved
in launching a new scheme. But, as mentioned above, it was also the
result of the continuing need for this type of housing, which
remains as urgent as ever despite the disruptions of the virus.
Indeed, in some ways the need for our housing has been enhanced by
the effects of Covid-19. In areas with significant numbers of
people kept inappropriately in hospitals, Commissioners reached out
to care providers and Approved Providers to find homes to house
people who should not be living in hospitals - thereby enabling the
NHS to free up space for Covid-19 patients. In this way, the virus
has accelerated moving people out of hospitals into more
appropriate community-based settings, a trend which we hope and
believe will continue even after the virus recedes.
Covid-19 also affected the timing of some of our construction
projects. Social distancing stopped or slowed a number of projects
because of staff absences. Similarly, disrupted supply chains
created shortages of materials. But due to the due diligence
undertaken on our developers and building contractors, we have not
suffered from any major construction issues. Contractually, the
risk of cost overruns and delays are placed with our developers and
contractors, and so the repercussions of these delays on us have
been minimal. In the first half of 2020, four projects (with a
maximum commitment of GBP10.6 million) reached practical
completion. Three of these (maximum commitment: GBP8.0 million)
completed since lockdown began. Seven projects (maximum commitment:
GBP24.0m) are still in progress, all but one of which are due to
complete during 2020. As at 30 June 2020, we had only three
exchanged properties (total commitments: GBP4.6 million), all of
which completed in July shortly after the end of the period.
As a result of all this activity, at the period end we owned 404
properties (31 December 2019: 388), providing accommodation for
2,872 residents (31 December 2019: 2,728), having deployed since
IPO an aggregate GBP476.1 million. As illustrated in the Investment
Manager's report below, this deployment has further enhanced our
geographic and counterparty diversification. In the period, we
started leasing to two new Approved Providers (bringing the total
to 18), one new care provider (bringing the total to 93) and
working in four new local authorities (bringing the total to 153).
The portfolio's weighted average unexpired lease term (including
put/call options and reversionary leases) is 25.4 years (31
December 2019: 25.7 years).
Share Price
In the early weeks of 2020, our share price sat between 90 pence
and 100 pence. It remained in this range until Covid-19 caused
markets around the world to decline markedly. Our share price
dropped sharply from around 12 March onwards, reaching a floor of
68 pence on 18 March, but recovered back up above 90 pence by the
end of that month. Since then, the share price has been on an
upwards trajectory, ending the period at close to 100 pence per
share and consistently rising to a level above 100 pence after the
period-end. The Company's net asset value on 30 June 2020 was
105.34 pence per share.
Overall, our share price rose during the period despite the
backdrop of economic turbulence. During the period and into Q3, we
continued to engage proactively with shareholders and the wider
investment community. We believe that, following a knee jerk
reaction in early March, investors were able to distinguish the
resilience of our income-streams and therefore the value of the
Group's properties, noting that the rent paid to our residents is
ultimately funded by central government, as reflected in our full
rent receipt and dividends and as described in a number of our
trading updates. We hope that the share price will continue to rise
sustainably, stabilising above the net asset value.
Debt
Our last debt agreement was signed in October 2019 when we
extended our existing GBP70 million revolving credit facility with
Lloyds by a further GBP60 million through including NatWest in the
facility. We drew the first GBP38.3 million from this enlarged
GBP130 million facility in November 2019, before drawing another
GBP16.0 million in May 2020, in the midst of the lockdown, to meet
continuing demand for our property class. As mentioned, we have now
acquired enough properties to fill the security pool required to
draw the entire GBP130 million facility. Once the lenders complete
their due diligence on the properties to be added to the security
pool, we expect to draw the final portion of debt at the beginning
of October 2020. We then expect to deploy those proceeds by the end
of 2020, helping us achieve full dividend cover by the end of 2020.
Our group-wide LTV will be in the region of 3 5 % once the facility
is fully drawn.
Financial Results
As at 30 June 2020, our property portfolio was independently
valued at GBP510.3 million on an IFRS basis. This reflects a
valuation uplift of GBP34.2 million, or 7.2%, over our total
investment cost (including acquisition costs). The valuation of
GBP510.3 million equates to a blended valuation yield of 5.30%, an
improvement over the portfolio's blended net initial yield of
5.91%. This yield compression of 61 basis points reflects our
ability to buy high-quality properties at discounted prices
off-market by taking advantage of our network of trusted contacts
in the sector, as well as our ability to select the best-value
properties through rigorous due diligence.
As at 30 June 2020, our portfolio was valued at GBP548.5 million
on a portfolio valuation basis. This assumes a single sale of the
property-holding SPVs to a third-party on an arm's length basis,
with purchasers' costs of 2.3%. The portfolio valuation reflects a
portfolio premium of GBP38.2 million, or 7.5%, against the IFRS
valuation.
On 2 June 2020, the RICS published revised guidance for the use
of material uncertainty clauses for valuations of specialised
supported housing. The Group's independent valuer, Jones Lang
LaSalle Limited, no longer considers that there is material
uncertainty when valuing specialised supported housing of any type
on the basis of Market Value. The removal of the material
uncertainty clause reflects the continued timely receipt of rents
in line with pre-Covid-19 levels and the level of activity within
the sector which remains consistent.
IFRS earnings per share in the year was 2.55 pence and EPRA
earnings per share was 2.12 pence. The audited IFRS NAV per share
was 105.34 pence, a decrease since 31 December 2019 of 0.02%.
Dividends
On 14 May2020, we declared our first dividend for the 2020
financial year of 1.295 pence per share for the period from 1
January 2020 to 31 March 2020. This dividend was paid on 26 June
2020. A second dividend, of 1.295 pence per share for the period
from 1 April 2020 to 30 June 2020, was declared on 26 August 2020
and was paid on 25 September 2020. We are targeting an aggregate
dividend of 5.18 pence per share in respect of the financial year
ending 31 December 2020 (1) . This is an increase of 1.7% over
2019's aggregate dividend, reflecting the CPI-based rent reviews
typically contained in our leases.
Full dividend cover on a look-through EPRA earnings run run-rate
basis was achieved in August 2020 and is now 102%. Full dividend
cover by EPRA earnings, on a non-look-through basis, is expected by
the end of 2020 once debt funds are fully deployed. The slight
delay in full dividend cover results from slow deployment caused by
lockdown measures, as I have described above.
Outlook
As I hope I have made clear above, for all the disruption caused
by Covid-19, the fundamentals of this sector remain as strong as
ever - perhaps stronger than ever before. Despite some short-term
delays in deployment and construction, the damage caused by
Covid-19 appears to be elevating the relevance of our
socially-focused investments, while the fundamental need for this
type of housing continues to grow. Commissioners continue to call
for new schemes, and our existing schemes continue to operate well.
For all the challenges that lie ahead - both for our economy and
our business - our performance in the first half of this year
allows us to look to the future with optimism.
Much of our continued success is thanks to the Investment
Manager's hard work and strong relationships in the market. Through
its work, we have been able to withstand an unprecedented economic
shock without endangering our residents or cutting our dividends,
and are now well placed to move forward into the future.
I would like to take this opportunity to thank our shareholders
for their continued support, and our Investment Manager and my
fellow Board members for their ongoing support and commitment in
the first half of the year.
Chris Phillips
Chairman
29 September 2020
Notes:
1 The target dividend is a target only and not a forecast. There
can be no assurance that the target will be met and it should not
be taken as an indication of the Company's expected or actual
future results
INVESTMENT MANAGER'S REPORT
Review of the Business
When 2020 began, our goal was simple: to keep doing more of the
same, building on our success in 2019 and each year before that. We
wanted to continue to deliver strong, consistent financial
performance from a portfolio of critically needed specialised
supported housing properties and invest in new projects that
respond to identified local demand and address the current housing
crisis. Above all, we wanted to continue to provide high quality
accommodation to vulnerable individuals, offering them a safe,
secure place to call home for as long as they need it.
But, like everyone else, soon after 2020 began, we had to adapt
our plans. 2020 has not been a normal year. As the national
significance of Covid-19 became undisputable, it became clear that
making sure that the most vulnerable members of society were well
housed and cared for would be integral to the UK's response. Slowly
but surely the social care sector emerged out of the shadow of the
NHS and began to receive the political and public recognition that
the work of those involved so deserve. Our main priority was
ensuring a good level of housing provision and care was maintained
for the individuals living in our properties. We moved quickly to
speak to all our Approved Providers, understanding how the virus
was affecting them, what policies they had place, and to see what,
if any, help we could offer. We reached out to our care providers,
talking to them about the effect of the virus and the
implementation of their infectious disease policies. We wanted to
make certain that our counterparties had access to PPE and
continued to receive the government funding that allows them to
perform their services to their usual high standards.
We have been impressed by how well everyone adapted to the
unprecedented circumstances we found ourselves in. Approved
Providers focused on essential maintenance and repairs as a way of
ensuring residents remained safe and secure without unnecessarily
risking the transmission of the virus. Care providers, well-versed
in managing complex staffing schedules and dealing with infectious
diseases, swiftly adopted measures to keep staff levels high
(despite self-isolating) and residents free from infection.
Throughout, the government has remained supportive, with routine
regulatory obligations postponed, rents remaining in payment, and
continual engagement from social workers. As lockdown has eased,
Approved Providers have started to catch up on non-essential
repairs while care providers have made sure that residents whose
social contact has been limited receive the full engagement they
need.
Despite these unprecedented challenges, the business has been
resilient. The Group received 100% of rent due in the first half of
2020 and all dividends have been paid in full. In fact, within a
relatively short time it became clear that valuations had not been
impacted by the pandemic and the Group's schemes and counterparties
were coping with the virus sufficiently well that the Group could
continue investing funds into the sector to the benefit of all
stakeholders. In May, the Group drew another GBP16.0 million from
the extended revolving credit facility and continued to invest
funds into new schemes - schemes which, in some ways, were needed
more than ever before to ease pressure on a healthcare system
straining under the weight of the pandemic.
As investment manager for the Group, we will never be
complacent, and will always keep a careful eye on unfolding events
and the delayed effects of the virus. But, so far, we are pleased
by how our stakeholders rose to the challenge of Covid-19. This, in
turn, has allowed us to remain focused on our original goal for the
year: continued, steady operational success, buying the best
properties possible and optimising the performance of the Group's
existing portfolio. Below are some of the Group's operational
highlights from 2020.
As mentioned in our Chairman's Statement above, over the course
of 2020 the Group bought 16 new schemes for a total investment cost
(i.e. including acquisition costs) of GBP29.9 million. These
schemes provide 144 new units of accommodation for the most
vulnerable people in society in areas of proven demand. These
purchases were funded by the GBP70 million extension of the
revolving credit facility that we agreed in October last year,
specifically the GBP38.3 million draw in November 2019, and the
GBP16.0 million draw in May 2020. With deployment continuing since
then, we expect to draw the final portion of the facility at the
beginning of October 2020. At the end of June, the Group had 404
properties, containing 2,872 units of accommodation, leased to 18
Approved Providers, operating in 153 Local Authorities, with care
provided by 93 different care providers.
Since inception, the Group has started or completed 22 forward
funding projects. These provide the Group with some of the
highest-quality and best valued properties in its portfolio. The
specifications are agreed in close coordination with local
Commissioners to provide safe and secure housing in the community
for the long-term. By the end of the period, 15 of the projects had
completed, with another six due to complete by the end of 2020 and
a further scheme expected to complete by the end of April 2021.
Some were delayed by Covid-19, which led to staff shortages and a
lack of building materials. But all projects are forecast to
complete within the allowable time-periods, adding new housing
stock to the country and high-quality schemes to the Group's
portfolio.
Our operational performance is built on due diligence processes,
and our due diligence processes are built on the principle that
they can always be better. We learn from every transaction. The
market is always changing. We continue to evolve our market-leading
due diligence processes to ensure that each and every opportunity
is analysed as forensically as possible. We think it says something
that, since inception, more opportunities have been rejected than
acquired. In fact, in our view good due diligence drives a virtuous
circle of investment. If the Group buys a high-quality,
environmentally-efficient property that is close to amenities and
is in an area of identified local need, that property is likely to
be in demand and occupied. Good levels of occupancy in turn achieve
positive health outcomes for our residents, and save the government
significant amounts of money. That in turn secures the rental
income of the Group, which drives the Group's financial
performance, and allows further investment.
Our ability to complete good diligence stems from our set-up as
an investment manager. Triple Point Investment Management LLP was
founded in 2004 to invest in long-term, high-impact infrastructure
and property-related investments with high-quality counterparties.
Its investments succeed financially only where they meet a social
need, whether it is leasing an ambulance to the NHS, or funding the
roll-out of carbon-efficient heat networks around the UK. We
forward fund new schemes precisely because of our focus on social
impact. Triple Point's long history has provided it with the
network to source high-quality schemes at off-market prices. To
improve controls and ensure high-standards of governance, many of
Triple Point's business functions are kept in-house, including
finance, marketing, asset management and company secretarial. These
controls have been vital in enabling us to develop our
sector-leading due diligence processes and are reflected in 25% of
our fees being paid in shares in the Company, creating alignment of
interests. Triple Point Investment Management LLP has also recently
been authorised by the Financial Conduct Authority as a full scope
Alternative Investment Fund Manager ("AIFM") and was appointed as
the Company's AIFM, taking over the Group's risk and portfolio
management from 1 July 2020, with the Board continuing to provide
oversight and ensure the Group acts within the Company's Investment
Policy.
Since the start of 2020, we have pro-actively taken steps to
optimise the Group's portfolio. It is important to us that the
right properties are being looked after by the right Approved
Providers, taking into account location and operational capacity.
To that end, we have been working to transfer the Group's leases
with Westmoreland to alternative Approved Provider as part of
Westmoreland's stock rationalisation programme. 12 of the Group's
15 leases to Westmoreland transferred shortly after the period end,
and the Group hopes to lease a further two properties managed by
Westmoreland to the same Approved Provider shortly. As part of the
transfer process one two-bedroom property with a value of less than
GBP200,000 is in the process of being sold. As a responsible
landlord with a long-term interest in the sector, we will continue
to engage in a fair, pro-active manner to optimise the portfolio
for the benefit of all stakeholders.
Market Review
During the first half of this year, the market was dominated by
responses to Covid-19, as described above. There are, nonetheless,
other aspects of the market that deserve comment. During the
period, the Regulator of Social Housing did not publish regulatory
judgements or notices on Approved Providers that the Group leases
to. We believe that, in part, this reflects the general growth and
performance of the Group's lessees. However, the Regulator stated
that it would pause its usual regulatory engagement during the
worst of the lockdown to allow focus on day-today operations, and
has in fact since stated that it intends to re-start engagement
with lease-based providers of specialised supported housing as the
lockdown eases. In September the Regulator announced that it was
placing My Space under review. To date, the Regulator has issued
judgements or notices in respect of four Registered Providers with
which the Group has one or more leases in place.
We welcome the continued engagement of the Regulator with
Registered Providers that use leases to grow their housing stock.
While increased Regulatory oversight has tempered the growth of
some Registered Providers, governance and viability standards
continue to rise. There are always further improvements that
Registered Providers can make and legacy issues to work through,
both of which Regulatory engagement helps towards. Although the
Group is not regulated by the Regulator, as a long-term investor in
the sector we have continued to speak to the Regulator to
understand its evolving view of the model and how any concerns the
Regulator has can best be accommodated. To that end, there are
continuing discussions on what further changes can be made to the
structure and balance of the leases that we enter into with
Registered Providers.
More generally, the market for specialised supported housing
remains buoyant. Demand remains strong. Commissioners continue to
push for new schemes. The shortfall of units is forecast to be
46,771 in the next four to five years. (1) The scale of this demand
is reflected in our pipeline of over GBP150 million. In fact, as
the Chairman's letter makes clear, demand for specialised supported
housing seems to be increasing as a result of the pandemic. The
benefits of proper integration between the NHS and the social care
system have been highlighted by the strain that the NHS was placed
under. Meanwhile, the high incidence of the virus in care homes
(which are not the focus of the Group's investments) energised
political support for a system that is sometimes under-appreciated
compared to the NHS.
Demand for this type of housing continues to be driven by its
real-world impact. According to the most recent evidence, every
person living in specialised supported housing saves the government
about GBP200 per week compared to them being in a care home, and
about GBP2,000 per week compared to them being in a hospital. (2)
At the same time, the independence that comes with living in a
community improves the health and well-being of our residents.
(3)
A related theme in the market is the rise and rise of
Environmental, Social and Governance considerations for investors.
This is a sea-change we wholeheartedly endorse, and we remain
committed to driving up standards of ESG investing. From inception,
the Group's investment strategy has pursued ESG objectives. This is
because the financial performance of the Group's investments are
inherently linked to the extent to which they meet ESG objectives.
The Group's rental income is secured by its properties being in
areas of identified social need which in turn leads to properties
becoming occupied, and housing benefit paid to Approved Providers.
The Group's schemes are more likely to be leased by Approved
Providers, and more likely to be in demand by local Commissioners,
where they meet the ever-increasing environmental efficiency
standards which reduce running costs and, to that end, we are
actively seeking ways to improve the energy efficiency of buildings
within our portfolio. Finally, the Group's schemes are more likely
to be well-maintained and to receive high-quality care where the
governance standards of its counterparties are high and keep
getting better. Every pound of private capital invested by the
Group in social housing is invested in pursuit of the ESG
objectives that are vital for improving our society.
Financial Review
The annualised rental income of the Group was GBP28.0 million as
at 30 June 2020. Excluding forward funding transactions, the rental
income of the Group for the first half of 2020 was GBP13.4 million,
compared to GBP9.3 million in the same six months in 2019. The
Group is a UK REIT for tax purposes and is exempt from corporation
tax on its property rental business.
A fair value gain of GBP1.5 million was recognised during the
period on the revaluation of the Group's properties.
Earnings per share was 2.55 pence for the period, compared to
6.75 pence for the year ending 31 December 2019 and 2.82 pence for
the period to 30 June 2019. EPS includes the fair value gain on
investment property which was lower this year compared to last year
due to slower deployment and a reduction in the inflation rate from
2% to 1.7% assumed by the valuers.
The EPRA earnings per share excludes the fair value gain on
investment property and was 2.12 pence for the period, compared to
3.39 pence for the year ending 31 December 2019 and 1.53 pence for
the period to 30 June 2019. Adjusted earnings per share were 13.42
pence for the period, where post-tax earnings were adjusted for a
valuation on a portfolio basis (as opposed to individual property
IFRS basis).
The audited IFRS NAV per share was 105.34 pence, a 0.03% drop
from 105.37 pence as at 31 December 2019. As described in the
Chairman's statement, this small reduction reflects the fact that
the Group is still deploying the proceeds of its latest debt raise
and so the dividend payments made during the quarter were partially
uncovered. In previous quarters, any negative impact on the Group's
NAV has been more than offset by increases in the value of the
Group's property portfolio. In this period, and as reported above,
the Group recognised a fair value gain but this was smaller than in
previous periods (in part due to deployment being slowed due to the
national lockdown). Full dividend cover on a look-through EPRA
earnings run-rate basis was achieved in August 2020. With
deployment and construction projects slowed by Covid-19, the Group
expects to achieve full dividend cover in the fourth quarter of
2020.
For reporting periods starting on 1 January 2020 the EPRA NAV
has been replaced by three EPRA NAV metrics which are shown in the
Financial Statements. The one most comparable to the previously
reported EPRA NAV measure is EPRA Net Tangible Asset (NTA), which,
therefore, the Company has adopted as its primary reporting metric.
The EPRA NTA per share as at the period end is the same as the IFRS
NAV per share. The IFRS NAV adjusted for the portfolio valuation
(including portfolio premium) was GBP407.8 million, which equates
to a Portfolio NAV of 116.2 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 was 1.61% compared to 1.63% at 31
December 2019.
At the period end, the portfolio was independently valued at
GBP510.3million on an IFRS basis, reflecting a valuation uplift of
7.20% against the portfolio's aggregate purchase price (including
acquisition costs). The valuation reflects a portfolio yield of
5.30%, against the portfolio's blended net initial yield of 5.91%
at the point of acquisition. This equates to a yield compression of
61 basis points, reflecting the quality of the Group's asset
selection and off-market acquisition process.
The Group's properties were valued at GBP548.5 million on a
portfolio valuation basis, reflecting a portfolio premium of 7.51%,
or GBP38.2 million, against the IFRS valuation. The portfolio
valuation assumes a single sale of the property-holding SPVs to a
third-party on an arm's length basis with purchaser's costs of
2.30%.
Debt Financing
In October 2019, the Group agreed a GBP60 million extension to
the revolving credit facility of GBP70 million agreed with Lloyds
Bank in December 2018. The new GBP130 million facility is a joint
facility with Natwest Bank. The combined facility has an initial
term of four years expiring on 20 December 2022 which may be
extended by a further year to 20 December 2023. The interest rate
for drawn funds is 1.85% per annum over 3-month LIBOR. For undrawn
funds, the Group pays a commitment fee of 40% of the margin.
In November 2019, the Group drew GBP38.3 million from the
extended facility. Th is meant that 77% of the overall facility had
been drawn. Based on continued demand in the market, in May 2020
the Group drew another GBP16.0 million from the facility, meaning
that 90% of the facility had been drawn. We expect to draw the
final GBP13.4 million at the beginning of October now that the
security pool has been filled. As at 30 June 2020, the Lloyds
facility remained unhedged. The Board regularly reviews potential
hedging arrangements which can be put in place at any time during
the duration of the facility.
The revolving credit facility followed the long-dated,
fixed-rate, interest-only private placement of loan notes signed
with MetLife in July 2018 for GBP68.5 million, whose proceeds were
fully deployed during 2018. Once all funds under the Lloyds/Natwest
facility have been drawn, both facilities combined will represent a
n initial loan-to-value of 40% of the value of secured assets in
the defined portfolios and the aggregate value of the Group's
borrowings will be in the region of 35% of its gross asset value
and below the target of 40% set in the Group's investment
policy.
The MetLife facility requires the Group to maintain an asset
cover ratio of 2.25x and an interest cover ratio of 1.75x. The
Lloyds facility requires the Group to maintain on drawn funds a
loan-to-value ratio of lower than 50% and an interest cover ratio
in excess of 2.75x. At all times, the Group has complied with the
debt covenants on both credit facilities.
The Group will continue to monitor capital requirements and is
actively exploring further credit facilities to ensure we take
advantage of developments in the market and achieve dividend
cover.
Strategic Alignment and Asset Selection
Despite the challenges presented by Covid-19, in the first half
of 2020 the Group continued to execute its investment strategy,
delivering inflation-protected income underpinned by a careful
selection of secure, long-let and index-linked properties. During
this period, the Group bought 16 properties for a total investment
cost of GBP29.9 million (including acquisition costs).
30 June 2020 30 June 2019 31 Dec 2019
Number of Assets 404 318 388
Number of Leases 316 229 300
Number of Units 2,872 2,306 2,728
Number of Approved Providers 18 16 16
Number of Forward Funding
Agreements 22 21 22
WAULT (years) 25.4 26.2 25.7
In addition, as at 30 June 2020 the Group had outstanding
commitments of GBP13.9 million (including acquisition costs),
comprising GBP4.6 million for contracts exchanged on three
properties, and GBP9.3 million for undrawn forward funding
commitments.
Total Funds
Committed Capital (GBPm)
----------------------------- ------------
Total Invested since IPO GBP476.1
Exchanges GBP4.6
Forward Funding Commitments GBP9.3
Total Invested and Committed GBP490.0
Capital
Property Portfolio
As at 30 June 2020, the portfolio comprised 404 properties with
2,872 units and showed a broad geographic diversification across
the UK. The four largest concentrated areas by market value were
the North West (21.0%), West Midlands (16.8%), East Midlands
(13.6%) and the London (10.5%). The IFRS value of the portfolio at
30 June 2020 was GBP510.3 million.
During the first half of 2020, the Group did not enter into any
new forward funding transactions, but construction on its existing
projects continued despite some Covid-19-related delays. As at 30
June 2020, the Group had entered a total of 22 forward funding
projects with 15 schemes having reached practical completion and
seven schemes still under construction.
Rental Income
In total, the Group had 316 fully repairing and insuring leases
(excluding agreement for leases on forward funding transactions).
The Group had a total annualised rental income of GBP28.0 million
on its standing investments.
During the first half of 2020, the Group entered into leases
with another two Approved Providers, increasing its total to 18.
This enhanced the Group's counterparty diversification. The Group's
three largest Approved Providers by rental income were Inclusion
Housing (24.8%), Falcon (12.4%) and Parasol Homes (12.3%).
The Group's three largest Approved Providers by units were
Inclusion Housing (713), Falcon (366) and Hilldale (328).
As at 30 June 2020, the portfolio had a WAULT of 25.4 years
(well in excess of the Group's minimum term of at least 15 years),
with 99.5% of the portfolio's rental income showing an unexpired
lease term above 21 years. Compared with 31 December 2019, the
WAULT has shortened slightly by 0.3 years as most additions in the
last six months have had a lease term of c.25 years (compared to
some of the Group's first investments which had lease terms of up
to 60 years). The WAULT includes the initial lease term upon
completion as well as any reversionary leases and put/call options
available to the Group at expiry of the initial term.
Rents under the leases are indexed against either CPI (94.6%) or
RPI (5.4%), which provides investors with the security that the
rental income will increase in line with inflation. Some leases
have an index 'premium' under which the standard rental increase is
based upon CPI or RPI plus a further percentage point, reflecting
top-ups by Local Authorities. These account for 5.7% of the Group's
leases. For the purposes of the portfolio valuation, JLL assumed
CPI and RPI to increase at 1.7% per annum and 2.2% per annum
respectively over the term of the relevant leases.
Pipeline and Outlook
Covid-19 presented unique challenges to the Group's business,
its counterparties and, above all, its residents, but across the
board the response has exemplified resilience. Essential repairs
continued to be provided. Care continued to be delivered. Funding
continued to flow. As a result of this, market activity soon
resumed, in many cases encouraged by Commissioners looking to ease
the burden on the NHS. The specialised supported housing sector was
in fact one of the first sectors to have its 'material uncertainty'
clause removed by JLL from valuations. In light of all this, it is
not surprising that our pipeline remains strong, with over GBP150
million of high-quality deals available to complete.
As the second half of 2020 progresses, we will continue to
monitor the performance of our counterparties, particularly in the
event of a second wave, but remain comforted by the sector's
performance so far and its strong fundamentals. High-quality
properties which house residents whose rent is ultimately paid by
central government are likely to remain resilient in the face of
future challenges. As we deploy the Group's remaining funds, we
will explore the possibility of raising further funds that can be
invested to the benefit of residents, taxpayers and investors.
Max Shenkman
Head of Investment
29 September 2020
Notes:
1 National Housing Federation, Supported housing: Understanding
need and supply (2015)
2 Mencap, Funding supported housing for all (2018)
3 Mencap, Funding supported housing for all (2018)
PORTFOLIO SUMMARY
Region Properties % of Funds Invested*
------------------------------------ ----------- ---------------------
North West 91 21.1
West Midlands 60 16.3
East Midlands 53 13.5
London 26 10.9
North East 44 9.9
South East 51 9.7
Yorkshire 32 8.9
South West 27 5.1
East 16 3.3
Scotland 2 0.7
Wales 2 0.6
Total 404 100.0
------------------------------------ ----------- ---------------------
* calculated excluding acquisition
costs
KEY PERFORMANCE INDICATORS
In order to track the Group's progress the following key
performance indicators are monitored:
KPI AND DEFINITION RELEVANCE TO STRATEGY PERFORMANCE EXPLANATION
1. Dividend - Ordinary Shares
-------------------------------------------------------- ----------------------------- ---------------------------
Dividends paid to The dividend reflects the Total dividends of 2.59 The Company paid a
shareholders and declared Company's ability to pence per share were paid or dividend of 1.295 pence
in relation to the period. deliver a low risk but declared in respect of the per Ordinary share in
growing income stream period 1 January respect of the period 1
from the portfolio. 2020 to 30 June 2020. March
2020 to 30 June 2020 on 25
(30 June 2019: 2.54 pence) September 2020. Total
dividends paid and
declared for the period
are in line with the
Company's target.
--------------------------- ----------------------------- ---------------------------
2. IFRS NAV per share
--------------------------- --------------------------- ----------------------------- ---------------------------
The value of our assets The IFRS NAV reflects our 105.34 pence at 30 June 2020 The IFRS NAV per share at
(based on an independent ability to grow the IPO was 98.0 pence.
valuation) less the book portfolio and to add value (31 December 2019: 105.37 This is an increase of
value of our liabilities, to it throughout pence) 7.5% since IPO driven by
attributable to the life cycle of our growth in the underlying
shareholders. assets. asset value of the
investment properties.
--------------------------- ----------------------------- ---------------------------
3. Loan to GAV
A proportion of our The Company uses gearing 33.1% Loan to GAV at 30 June As at 30 June 2020:
investment portfolio is to enhance equity returns. 2020. GBP68.5 million private
funded by borrowings. Our placement of loan notes
medium to long-term (31 December 2019: 31.1%) with MetLife; and a GBP130
target Loan to GAV is 40% million secured revolving
with a hard cap of 50%. credit facility with
Lloyds/NatWest of which
GBP117 million was
drawn at 30 June 2020.
4. Earnings per Share
--------------------------- --------------------------- ----------------------------- ---------------------------
The post-tax earnings The EPS reflects our 2.55 pence per share EPS decreased by 9.5% due
generated that are ability to generate for the period ended 30 June to the Group recognising a
attributable to earnings from our 2020, based on earnings smaller fair value gain on
Shareholders. portfolio including including the fair value the revaluation
valuation increases. gain on properties, of the Group's properties
calculated on the weighted relative to the previous
average number of shares in period. This was as a
issue during the year. result of slower
than usual deployment
(30 June 2019: 2.82 pence) resulting from the
national lockdown and a
reduction in the CPI and
RPI assumptions in the
valuation models of the
Group's Valuer.
The outlook remains
positive and we continue
to invest to generate an
attractive total return.
--------------------------- ----------------------------- ---------------------------
5 . Adjusted Earnings per Share
-------------------------------------------------------- ----------------------------- ---------------------------
The post-tax earnings The Adjusted EPS reflects 2.25 pence per share This demonstrates the
adjusted for the market the application of using for the period ended 30 June Group's ability to meet
portfolio valuation the portfolio premium 2020, based on earnings dividend payments from net
including portfolio value and reflects excluding the fair value cash inflows. It
premium. the potential increase in gain on properties, represents a dividend
value the Group could amortisation of loan cover for the period to 30
realise if assets are sold arrangement fees; calculated June 2020 of 86.9%.
on a portfolio on the weighted average
basis. number of shares
in issue during the year.
(30 June 2019: 1.55 pence)
--------------------------- ----------------------------- ---------------------------
6 . Weighted Average Unexpired Lease Term (WAULT)
-------------------------------------------------------- ----------------------------- ---------------------------
The average unexpired The WAULT is a key measure 25.4 years at 30 June 2020 As at 30 June 2020, the
lease term of the of the quality of our (includes put and call portfolio's WAULT stood at
investment portfolio, portfolio. Long lease options). 25.4 years and remains
weighted by annual passing terms underpin the well ahead of the
rents. security of our income (31 December 2019: 25.7 Group's minimum term of 15
Our target is a WAULT of stream. years) years.
at least 15 years.
--------------------------- ----------------------------- ---------------------------
7 . Adjusted Portfolio Earnings per Share
-------------------------------------------------------- ----------------------------- ---------------------------
The post-tax earnings The Adjusted Portfolio EPS 13.42 pence per share The Adjusted Portfolio EPS
adjusted for the market reflects the application for the period ended 30 June shows the value per share
portfolio valuation of using the portfolio 2020. on a long-term basis. The
including portfolio value and reflects increase in
premium. the potential increase in (30 June 2019: 9.29 pence) the Adjusted Portfolio EPS
value the Group could from the previous period
realise if assets are sold is reflective of the
on a portfolio larger portfolio
basis. size.
--------------------------- ----------------------------- ---------------------------
8 . Portfolio NAV
-------------------------------------------------------- ----------------------------- ---------------------------
The IFRS NAV adjusted for The Portfolio NAV measure The Portfolio NAV of The Portfolio NAV per
the market portfolio is to highlight the fair GBP407.8 million equates to share shows a good market
valuation including value of net assets on an a Portfolio NAV of 116.21 growth in the underlying
portfolio premium. ongoing, long-term pence per Ordinary asset value of the
basis and reflects the Share. investment properties.
potential increase in
value the Group could (31 December 2019: Portfolio
realise if assets are sold NAV GBP401.9 million equated
on a portfolio basis. to 114.53 pence per ordinary
share)
--------------------------- ----------------------------- ---------------------------
9 . Exposure to Largest Approved Provider
--------------------------------------------------------------------------------------------------------------------
The percentage of the The exposure to the 24.6% at 30 June 2020 Our maximum exposure limit
Group's gross assets that largest Approved Provider is 30%. We are below our
are leased to the single must be monitored to (31 December 2019: 20.6%) maximum exposure limit
largest Approved ensure that we are not with our largest
Provider. overly exposed to one Approved Provider,
Approved Provider in the Inclusion Housing.
event of a default
scenario.
--------------------------- ----------------------------- ---------------------------
10 . Total Return
--------------------------------------------------------------------------------------------------------------------
IFRS NAV plus total The total return measure IFRS NAV 105.34 pence at 30 The IFRS NAV per share at
dividends paid during the highlights the gross June 2020. 30 June 2020 was 105.34
year. return to investors Total dividends paid during pence. Adding back
including dividends paid the period ended 30 June dividends paid during
since the prior year. 2020 were pence 2.59 pence. the period of 2.58 pence
per Ordinary Share to the
Total return was 2.4 2 % for IFRS NAV at 30 June 2020
the period to 30 June 2020. results in an
increase of 2.42%.
(30 June 2019: 2.73%)
--------------------------- ----------------------------- ---------------------------
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.
Full reconciliations of EPRA Earnings and NAV performance
measures are included in Notes 21 and 22 of the consolidated
financial statements respectively. A full reconciliation of the
other EPRA performance measures are included in the Unaudited
Performance Measures section.
KPI AND DEFINITION PURPOSE PERFORMANCE
1. EPRA Earnings per share
----------------------------------------------------------------------------------------------------------------------
EPRA Earnings per share excludes A measure of a Group's underlying 2.12 pence per share for the period
gains from fair value adjustment on operating results and an indication to 30 June 2020.
investment property that of the extent to which current
are included in the IFRS calculation dividend payments are (30 June 2019: 1.53 pence)
for Earnings per share. supported by earnings.
The Group is currently in ramp up
phase and undertaking forward funding
developments resulting
in a lag in the Company's ability to
fully cover dividends. Our priority
remains to achieve
a fully covered dividend from
operations. We expect this to be
achieved by Q4 2020.
-------------------------------------- --------------------------------------
2. EPRA Net Reinstatement Value (NRV) per share
----------------------------------------------------------------------------------------------------------------------
The EPRA NRV adds back the A measure that highlights the value GBP399.7 million/113.91 pence per
purchasers' costs deducted from the of net assets on a long-term basis. share as at 30 June 2020
IFRS valuation.
GBP397.2 million/113.20 pence per
share as at 31 December 2019
-------------------------------------- --------------------------------------
3. EPRA Net Tangible Assets (NTA) per share
----------------------------------------------------------------------------------------------------------------------
The EPRA NTA is equal to IFRS NAV as A measure that assumes entities buy GBP369.6 million/105.34 pence per
there are no deferred tax liabilities and sell assets, thereby crystalising share as at 30 June 2020
or other adjustments certain levels of
applicable to the Group under the deferred tax liability. GBP369.7 million/105.37 pence per
REIT regime. share as at 31 December 2019
-------------------------------------- --------------------------------------
4. EPRA Net Disposal Value (NDV)
----------------------------------------------------------------------------------------------------------------------
The EPRA NDV provides a scenario A measure that shows the shareholder GBP365.2 million/104.07 pence per
where deferred tax, financial value if assets and liabilities are share as at 30 June 2020
instruments, and certain other not held until maturity.
adjustments are calculated as to the GBP364.7 million/103.93 pence per
full extent of their liability. share as at 31 December 2019
-------------------------------------- --------------------------------------
5. EPRA Net Initial Yield (NIY)
----------------------------------------------------------------------------------------------------------------------
Annualised rental income based on the A comparable measure for portfolio 5.33% at 30 June 2020
cash rents passing at the balance valuations. This measure should make
sheet date, less non-recoverable it easier for investors 5.29% at 31 December 2019
property operating expenses, divided to judge for themselves how the
by the market value of the property, valuation of a portfolio compares
increased with (estimated) with others.
purchasers' costs.
-------------------------------------- --------------------------------------
6. EPRA "Topped-Up" NIY
----------------------------------------------------------------------------------------------------------------------
This measure incorporates an The topped-up net initial yield is 5.34% at 30 June 2020
adjustment to the EPRA NIY in respect useful in that it allows investors to
of the expiration of rent-free see the yield based 5.29% at 31 December 2019
periods (or other unexpired lease on the full rent that is contracted
incentives at 30 June 2020.
such as discounted rent periods and
step rents).
-------------------------------------- --------------------------------------
7. EPRA Vacancy Rate
----------------------------------------------------------------------------------------------------------------------
Estimated Market Rental Value (ERV) A "pure" percentage measure of 0.00% as at 30 June 2020
of vacant space divided by ERV of the investment property space that is
w hole portfolio. vacant, based on ERV. 0.00% as at 31 December 2019
-------------------------------------- --------------------------------------
8. EPRA Cost Ratio
----------------------------------------------------------------------------------------------------------------------
Administrative & operating costs A key measure to enable meaningful 23.22% as at 30 June 2020
(including & excluding costs of measurement of the changes in a
direct vacancy) divided by Group's operating costs. 28.35% as at 31 December 2019
gross rental income.
-------------------------------------- --------------------------------------
PRINCIPAL RISKS AND UNCERTAINTIES
The table below sets out what we believe to be the principal
risks and uncertainties facing the Group. The table does not cover
all of the risks that the Group may face. Additional risks and
uncertainties not presently known to management or deemed to be
less material at the date of this report may also have an adverse
effect on the Group.
The Board considers that the principal risks and uncertainties
as outlined below will remain unchanged for the remaining six
months of the financial year.
Risk Category Risk Description Risk Impact Risk Mitigation Impact Likelihood
Financial Expensive or lack Without sufficient When raising debt Moderate Low
of debt finance may debt funding at finance the
limit our ability sustainable rates, Investment Manager
to grow and achieve we will be unable to adopts a flexible
a fully covered pursue suitable approach involving
dividend investments in line speaking
with our Investment to multiple funders
Policy. This would offering various
significantly impair rates, structures
our ability and tenors. Doing
to pay dividends to this allows the
shareholders at the Investment
targeted rate. Manager to maintain
maximum competitive
tension 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
liquidity under
constant review to
ensure that we have
a level of
protection in the
event of adverse
fund-raising
conditions.
-------------------- --------------------- -------------------- ---------------- -----------------
Financial Floating rate debt The Group's The Group considers Moderate Low to Moderate
exposes the Revolving Credit cash flow forecasts
business to Facility is and ensures
underlying interest currently non-hedged sufficient cash
rate movements and therefore balances are held
interest is payable within
based on a margin the Group to meet
over 3M Libor. Any future needs.
adverse movements in Prudent liquidity
the 3M Libor forward risk management
curve could implies maintaining
significantly impair sufficient
our profitability cash and marketable
and ability to pay securities, the
dividends. availability of
financing through
appropriate and
adequate
credit lines, and
the ability of
customers to settle
obligations within
normal terms of
credit.
The Group ensures,
through forecasting
of capital
requirements, that
adequate cash is
available
to fund the Group's
operating
activities. In
addition the Board
regularly reviews
potential
hedging
arrangements which
can be put in place
at any time during
the duration of the
Revolving
Credit Facility.
The Group's 10-year
and 15-year MetLife
tranches have a
fixed rate coupon.
-------------------- --------------------- -------------------- ---------------- -----------------
Financial Unable to operate The borrowings the The Investment High Low
within debt Group currently has Manager monitors
covenants and which the Group loan to value and
uses in the future interest covenants
may contain ratios on an
loan to value and ongoing
interest covenants basis. In the
ratios. If property unlikely event that
valuations and an event of default
rental income occurs under these
decrease, covenants the Group
such covenants could has a remedy period
be breached, and the during which it can
impact of such an to cure the
event could include: covenant breach by
an increase either injecting
in borrowing costs; cash
a requirement for collateral or
additional cash equity funded
collateral; payment assets in order to
of a fee to the restore covenant
lender; a sale of an compliance.
asset or assets or a
forfeit of any asset
to a lender.
This may result in
the Group selling
assets to repay
drawn loan amounts
resulting in a
decrease
on Group's Net Asset
Value.
-------------------- --------------------- -------------------- ---------------- -----------------
Property Default of one or The default of one Under the terms of Low to Moderate Moderate
more Approved or more of our our Investment
Provider lessees lessees could impact Policy and
the revenue gained restrictions, no
from relevant more than 30% of
assets. the Group's
If the lessee cannot gross asset value
remedy the default may be exposed to
or no support is one lessee, meaning
offered to the the risk of
lessee by the significant rent
Regulator loss
of Social Housing, is low. Were a
we may have to lessee to default
terminate or or were the Group
negotiate the lease, believe it likely
meaning a sustained that a lessee would
reduction default
in revenues while a the Group would
replacement is look to move the
found. affected properties
to another Approved
Provider with whom
the Group have a
good relationship
to ensure that both
the provision of
housing to
vulnerable
individuals and the
income stream
associated with the
properties were
preserved. In
addition,
the lessees are
predominantly
regulated by the
Regulator of Social
Housing, meaning
that,
if a lessee was to
suffer financial
difficulty, it is
likely that the
Regulator of Social
Housing would look
to ensure that the
vulnerable
residents did not
have to be
rehoused.
The Investment
Manager has
continued to
monitor the
implications of the
pandemic and
maintains
a specific Covid-19
related risk
register with
regards to the
Group's Registered
Providers
and Care Providers.
The Investment
Manager has
remained in regular
communication with
counterparties
and monitored
occupancy and
referrals closely.
Details regarding
the extent of the
impact
of Covid-19 on the
Group's
counterparties is
detailed above .
-------------------- --------------------- -------------------- ---------------- -----------------
Property Forward funding Our forward funded Before entering Low to Moderate Low to moderate
properties involves developments are into any forward
a higher degree of likely to involve a funding
risk than that higher degree of arrangements, the
associated with risk than is Investment Manager
completed associated undertakes
investments with standing substantial
investments. This due diligence on
could include developers and
general construction their main
risks, delays in the subcontractors,
development ensuring they have
or the development a strong track
not being completed, record. We enter
cost overruns or into contracts on a
developer/contractor fixed price basis
default. If and then, during
any of the risks the development
associated with our work,
forward funded we typically defer
developments development profit
materialised, this until work has been
could completed and
reduce the value of audited by a
these assets and our chartered
portfolio. surveyor. Further,
less than 2.5% of
our portfolio is
forward-funded at
present and we are
limited by our
Investment Policy
which restricts us
to forward funding
a maximum of 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.
-------------------- --------------------- -------------------- ---------------- -----------------
Regulatory Risk of an Approved Should an Approved As part of the Low Moderate to High
Provider receiving Provider with which Group's acquisition
a non-compliant the Group has one or process, the
financial viability more leases in place Investment Manager
or governance receive a conducts a thorough
rating non-compliant rating due
by the Regulator by the Regulator, in diligence process
particular in on all Registered
relation to Providers with
viability, depending which the Company
on enters into lease
the further actions agreements
of the Regulator, it that takes account
is possible that of their financial
there may be a strength and
negative impact on governance
the market value of procedures.
the relevant
properties which are The Investment
the subject of such Manager has
lease(s). Depending established
on the exposure of relationships with
the Group to such the Approved
Approved Provider, Providers with whom
this in turn may it works. The
have a material Approved Providers
adverse keep the Investment
effect on Group's Manager informed of
Net Asset Value developments
until such time as surrounding
the matter is the regulatory
resolved through an notices.
improvement
in the relevant The Group has
Approved Provider's leases in place
rating or a change with four Approved
in Approved Providers that have
Provider. been deemed
non-compliant
by the Regulator.
These assets did
not suffer from an
impairment in value
as part of the Q2
valuation by the
Group's independent
Valuer.
More detail on this
risk can be found
above .
-------------------- --------------------- -------------------- ---------------- -----------------
Regulatory Risk of changes to Future governments As demand for High Low to Moderate
the social housing may take a different social housing
regulatory regime approach to the remains high
social housing relative to supply,
regulatory regime, the Board and the
resulting in changes Investment
to the law and other Manager is
regulation or confident there
practices of the will continue to be
Government with a viable market
regard within which to
to social housing. operate,
notwithstanding
any future change
of Government. Even
if Government
funding was to
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.
-------------------- --------------------- -------------------- ---------------- -----------------
Regulatory Risk of not being If the Group fails The Group intends High Low
qualified as REIT to remain in to continue to
compliance with the operate as a REIT
REIT conditions, the and work within its
members of the Group investment
will be subject to objective
UK corporation tax and policy. The
on some or all of Group will retain
their property legal and
rental income and regulatory advisers
chargeable and consult with
gains on the sale of them on a
properties which regular basis to
would reduce the ensure it
funds available to understands and
distribute to complies with the
investors. requirements. In
addition, the
Board oversees
adherence to the
REIT regime,
maintaining close
dialogue with the
Investment
Manager to ensure
we remain compliant
with legislation.
-------------------- --------------------- -------------------- ---------------- -----------------
Corporate Reliance on the We continue to rely Unless there is a High Low
Investment Manager on the Investment default, either
Manager's services party may terminate
and its reputation the Investment
in the social Management
housing market. As a Agreement
result, our by giving not less
performance will, to than 12 months'
a large extent, written notice. The
depend on the Board regularly
Investment reviews and
Manager's abilities monitors
in the property the Investment
market. Termination Manager's
of the Investment performance. In
Management Agreement addition, the Board
would severely meets regularly
affect our ability with the Manager
to effectively to ensure that we
manage our maintain a positive
operations and may working
have a negative relationship.
impact on the share
price of the
Company.
-------------------- --------------------- -------------------- ---------------- -----------------
Financial Property valuations Property valuations All of the Group's Moderate Moderate
may be subject to are inherently property assets are
change over time subjective and independently
uncertain. Market valued quarterly by
conditions, which Jones Lang LaSalle,
may a specialist
impact the property valuation
creditworthiness of firm, who are
lessees, may provided with
adversely affect regular updates on
valuations. The portfolio activity
portfolio is by the Investment
valued on a Market Manager. The
Value basis, which Investment Manager
takes into account meets with the
the expected rental external valuers to
income to be discuss
received under the the basis of their
leases in future. valuations and
This valuation their quality
methodology provides control processes.
a significantly Default risk of
higher lessees
valuation than the is mitigated in
Vacant Possession accordance with the
value of a property. lessee default
In the event of an principal risk
unremedied default explanation
of an Approved provided above.
Provider lessee, the In order to protect
value of the assets against loss in
in the portfolio may value, the
be negatively Investment
affected. Manager's property
Any changes could management team
affect the Group's seeks to visit each
net asset value and property in the
the share price of portfolio once a
the Group. year, and works
closely with lease
counterparties
to ensure, to the
extent reasonably
possible, their
financial strength
and governance
procedures
remain robust
through the
duration of the
relevant lease.
Details of the
impact of Covid-19
are described above
.
-------------------- --------------------- -------------------- ---------------- -----------------
Emerging Risks
The United Kingdom's Withdrawal from the European Union
The Board has continued to monitor the potential risks
associated with Brexit. As discussions continue to develop with the
UK's trading relationship with the EU, it still remains unclear as
to the extent or precise nature of the impact of Brexit on the
Company and its stakeholder base. Nevertheless, the strong
Conservative majority achieved in December 2019 is likely to lead
to a period of greater political stability, and with care, housing
and social care, being UK based, the Group remains relatively
insulated from the impact of Brexit.
The Board will continue to monitor the developing relationship
between the UK and the EU and the wider potential impact of Brexit
on the Group and its stakeholder base.
Covid-19 Pandemic
The outbreak of Covid-19 in early 2020 has negatively impacted
economic conditions globally and is having an adverse and
disruptive effect on the UK economy (triggering a technical
recession after the second quarter of 2020). The Group's financial
performance has proven to be resilient to the effects of Covid-19
thus far, however, its way of operating has adapted and is likely
to need to continue to adapt in the near term in response to the
developments relating to the Covid-19 outbreak. The Board have
considered the potential significant and wide-ranging adverse
effect on the Group, including a reduction in portfolio valuations,
an increase in bad debts, void rates and costs, an adverse impact
on existing banking covenants and health risks to the Group's
employees and residents. The directors have performed an assessment
of the ability of the Company to continue as a going concern, which
includes the impact of Covid-19 further details of which can be
found in Note 2.1.
The Board will continue to monitor economic conditions and
implement appropriate controls and processes in order to mitigate
the potential impact of the pandemic on the Group.
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
Guidance 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 18 and any material
changes in the related party transactions disclosed in the 201 9
Annual Report.
A list of the Directors is set out in the Interim Report .
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
29 September 2020
GROUP FINANCIAL STATEMENTS
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
For the period from 1 January 2020 to 30 June 2020
Period from Period from
1 January 1 January Year ended
2020 to 30 2019 to 30 31 December
June 2020 June 2019 2019
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
-------------------------------- ----- ------------ ------------ -------------
Income
Rental income 4 13,372 9,348 21,112
------------ ------------ -------------
Total income 13,372 9,348 21,112
Expenses
Directors' remuneration (151) (151) (307)
General and administrative
expenses (979) (891) (1,809)
Management fees 5 (1,975) (1,859) (3,869)
------------ ------------ -------------
Total expenses (3,105) (2,901) (5,985)
Gain from fair value
adjustment on investment
property 9 1,533 4,551 11,809
Loss from fair value
adjustment on assets
held for sale (43) - -
------------ ------------ -------------
Operating profit 11,757 10,998 26,936
------------ ------------ -------------
Finance income 6 74 149 229
Finance expense 7 (2,866) (1,232) (3,448)
Profit before tax 8,965 9,915 23,717
------------ ------------ -------------
Taxation 8 - - -
Profit and total comprehensive
income attributable to
shareholders 8,965 9,915 23,717
============ ============ =============
IFRS Earnings per share
- basic and diluted 21 2.55p 2.82p 6.75p
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
As at 30 June 2020
30 June 31 December
30 June 2020 2019 2019
(unaudited) (unaudited) (audited)
------------------------------- -----
Note GBP'000 GBP'000 GBP'000
------------------------------- ----- ------------- ------------ ------------
Assets
Non-current assets
Investment properties 9 511,016 396,567 472,349
------------- ------------ ------------
Total non-current assets 511,016 396,567 472,349
Current assets
Assets held for sale 130 - -
Trade and other receivables 10 4,158 2,271 4,287
Cash, cash equivalents
and restricted cash 11 43,527 74,824 67,711
------------- ------------ ------------
Total current assets 47,815 77,095 71,998
Total assets 558,831 473,662 544,347
============= ============ ============
Liabilities
Current liabilities
Trade and other payables 12 (6,435) (10,021) (8,145)
Total current liabilities (6,435) (10,021) (8,145)
Non-current liabilities
Other payables 13 (1,509) (1,505) (1,514)
Bank and other borrowings 14 (181,242) (97,082) (164,955)
------------- ------------ ------------
Total non-current liabilities (182,751) (98,587) (166,469)
Total liabilities (189,186) (108,608) (174,614)
============= ============ ============
Total net assets 369,645 365,054 369,733
============= ============ ============
Equity
Share capital 3,514 3,514 3,514
Share premium reserve 151,157 151,157 151,157
Treasury shares reserve (378) (167) (378)
Capital reduction reserve 15 166,154 175,066 166,154
Retained earnings 49,198 35,484 49,286
------------- ------------ ------------
Total Equity 369,645 365,054 369,733
============= ============ ============
IFRS Net asset value
per share - basic and
diluted 22 105.34p 103.96p 105.37p
The Condensed Group Financial Statements were approved and
authorised for issue by the Board on 29 September 2020 and signed
on its behalf by:
Chris Phillips
Chairman
29 September 2020
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
For the period from 1 January 2020 to 30 June 2020
Share Treasury Capital
Period from 1 January Share premium shares reduction Retained Total
2020 to 30 June 2020 capital reserve reserve reserve earnings equity
(unaudited) Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ----- --------- --------- --------- ----------- ---------- ---------
Balance at 1 January
2020 3,514 151,157 (378) 166,154 49,286 369,733
Profit and total comprehensive
income for the period - - - - 8,965 8,965
Transactions with
owners
Dividends paid 16 - - - - (9,053) (9,053)
Balance at 30 June
2020 (unaudited) 3,514 151,157 (378) 166,154 49,198 369,645
Share Treasury Capital
Period from 1 January Share premium shares reduction Retained Total
2019 to 30 June 2019 capital reserve reserve reserve earnings equity
(unaudited) Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ----- --------- --------- --------- ----------- ---------- ---------
Balance at 1 January
2019 3,514 151,157 - 183,921 25,569 364,161
Profit and total comprehensive
income for the period - - - - 9,915 9,915
Transactions with
owners
Own shares repurchased - - (167) - (167)
Dividends paid 16 - - - (8,855) - (8,855)
Balance at 30 June
2019 (unaudited) 3,514 151,157 (167) 175,066 35,484 365,054
========= ========= ========= =========== ========== =========
Share Treasury Capital
Share premium shares reduction Retained Total
Year ended capital reserve reserve reserve earnings equity
31 December 2019 (audited) Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ----- --------- --------- --------- ----------- ---------- ---------
Balance at 1 January
2019 3,514 151,157 - 183,921 25,569 364,161
Profit and total comprehensive
income for the year - - - - 23,717 23,717
Transactions with
owners
Own shares repurchased - - (378) - - (378)
Dividends paid 16 - - - (17,767) - (17,767)
Balance at 31 December
2019 (audited) 3,514 151,157 (378) 166,154 49,286 369,733
========= ========= ========= =========== ========== =========
CONDENSED GROUP STATEMENT OF CASH FLOWS
For the period from 1 January 2020 to 30 June 2020
From 1 January From 1 January
2020 to 2019 to Year ended
30 June 30 June 31 December
2020 2019 2019
(unaudited) (unaudited) (audited)
------------------------------------------- ----- --------------- --------------- -------------
Note GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Profit before income tax 8,965 9,915 23,717
Adjustments for:
Gain from fair value adjustment
on investment property 9 (1,533) (4,551) (11,809)
Loss on fair value adjustment
on assets held for sale 43 - -
Finance income 6 (74) (149) (229)
Finance costs 7 2,866 1,232 3,448
Operating results before working
capital changes 10,267 6,447 15,127
Decrease/ (increase) in trade
and other receivables 104 935 (11)
Increase/ (decrease) in trade
and other payables 74 (244) 1,188
--------------- --------------- -------------
Net cash flow generated from
operating activities 10,445 7,138 16,304
--------------- --------------- -------------
Cash flows from investing activities
Purchase of investment properties (39,108) (66,805) (137,724)
Prepaid acquisition costs refunded/(paid) 25 208 (884)
Restricted cash - released 2,825 4,119 11,348
Restricted cash - paid (239) (4,992) (8,375)
Interest received 58 120 163
--------------- --------------- -------------
Net cash flow used in investing
activities (36,439) (67,350) (135,472)
--------------- --------------- -------------
Cash flows from financing activities
Own shares repurchased - (167) (378)
Bank borrowings drawn 14 16,034 31,264 100,592
Restricted bank borrowings 14 - 10,460 10,460
Loan arrangement fees paid 14 (254) (1,623) (3,455)
Dividends paid 16 (9,053) (8,855) (17,767)
Interest paid (2,308) (1,041) (2,898)
--------------- --------------- -------------
Net cash flow generated from
financing activities 4,419 30,038 86,554
--------------- --------------- -------------
Net decrease in cash and cash
equivalents (21,575) (30,174) (32,614)
Unrestricted cash and cash
equivalents at the beginning
of the period 64,732 97,346 97,346
Unrestricted cash and cash
equivalents at the end of the
period 11 43,157 67,172 64,732
=============== =============== =============
NOTES TO THE GROUP CONDENSED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
For the period from 1 January 2020 to 30 June 2020
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 1 King
William Street, London, United Kingdom, EC4N 7AF. 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 2020 have been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Conduct
Authority and with IAS 34, Interim Financial Reporting, as adopted
by the European Union. The Condensed Group Financial Statements for
the six months ended 30 June 2020 have been reviewed by the
Company's Auditor, BDO LLP in accordance with International
Standard of Review Engagements 2410, Review of Interim Financial
Information Performed by the Independent Auditor of the Entity and
were approved for issue on 29 September 2020. 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 year ended 31
December 2019 in this interim report does not constitute statutory
accounts for that year. The Group's annual report and accounts for
the year to 31 December 2019 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 2019 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 2020. The new standards and
amendments impacting the Group are:
-- Definition of a Business (Amendments to IFRS 3);
-- Definitions of material (Amendments to IAS 1 and IAS 8); and
-- Amendments to references to the Conceptual Framework in IFRS Standards.
The Directors have given due consideration to the impact on the
financial statements of the amendments as follows:
Definition of a Business (Amendments to IFRS 3)
Under these amendments, to be considered a business, an acquired
set of activities and assets must include, at a minimum, an input
and a substantive process that together significantly contribute to
the ability to create outputs. An optional concentration test has
also been added. This allows the acquirer to assess whether
substantially all of the fair value of the gross assets acquired is
concentrated in a single asset or group of similar assets. If such
a concentration exists, the transaction is not viewed as an
acquisition of a business and no further assessment of the business
combination guidance is required. The optional concentration test
has been performed and the Directors have concluded that at
present, the adoption of the amendment and interpretation does not
have a material impact on the financial statements in the period of
initial application. In previous reporting periods, subsidiaries
acquired by the Group were all treated as the acquisition of a
group of assets rather than a business as there was not an
integrated set of activities acquired in addition to the property.
In the current reporting period, the optional concentration test
has been performed which has determined that the fair value of the
gross asset acquired is concentrated into a single asset,
investment property and therefore is not a business combination.
The Group has not purchased and does not intend to purchase any
subsidiaries which incorporate any assets other than investment
property.
Definitions of material amendments to IAS 1 and IAS 8
'Definition of Material (Amendments to IAS 1 and IAS 8)' has
been issued to clarify the definition of 'material' and to align
the definition used in the Conceptual Framework and the standards
themselves. The changes all relate to a revised definition of
'material' which is quoted as follows:
"Information is material if omitting, misstating or obscuring it
could reasonably be expected to influence decisions that the
primary users of general purpose financial statements make on the
basis of those financial statements, which provide financial
information about a specific reporting entity."
The Directors are satisfied this amendment will not have a
significant impact on the Group due to sufficient controls already
well established which prevent omission, misstatement and
obscuration.
Amendments to references to the Conceptual Framework in IFRS
Standards
The above provides amendments to various standards, however,
some revisions are only with regards to references and quotes so
that they refer to the revised Conceptual Framework. The standards
that have had proper updates that will affect the Group are IFRS 3,
IAS 1 and IAS 8 which have all been discussed above.
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 show the expected annualised rental income exceeds
the expected operating costs of the Group.
To date, Covid-19 has not impacted the Group's ability to
continue as a going concern for reasons discussed below. As a
result, the directors believe that the Group is still well placed
to manage its financing and other business risks and that the Group
will remain viable, continuing to operate and meet its liabilities
as they fall due despite the risk of Covid-19.
The directors have performed an assessment of the ability of the
Company to continue as a going concern, which includes the impact
of COVID-19, for a period of at least 12 months from the date of
signing these financial statements. The directors have considered
the expected obligations of the Company and its subsidiaries for
the next 12 months and are confident that all will be met.
In considering the ability of the Group to continue as a going
concern, the Directors also considered the impact of COVID-19 on
their tenants. Tenants of the Group are Registered Providers who
receive their housing benefit from Local Authorities, before it is
passed to subsidiaries in the form of rental income. Local
Authorities have confirmed they will not stop helping vulnerable
people or paying for essential services during this time, and
therefore the Directors do not foresee any issues in rent
collection, however in the event of a downturn in revenue, variable
costs would be reduced to enable the Group to meet its future
liabilities. 100% of rental income due and payable for the period
ended 30 June 2020 has been collected. 100% of all rent due and
payable at the 31 August 2020 has been collected.
The Directors have also considered the financing provided to the
Group. Norland Estates Limited and TP REIT Propco 2 Limited have
bank facilities with MetLife and Lloyds Bank respectively. The loan
secured by Norland Estates Limited with MetLife is subject to an
asset cover ratio covenant of x2.25. The latest external valuation
was carried out at 30 June 2020 and at that point the asset cover
ratio was x2.68. The loan is also subject to an interest cover
ratio. The covenant ratio is not less than x1.75 and at 30 June
2020 the interest cover ratio was x4.99.
The loan secured by TP REIT Propco 2 Limited with Lloyds Bank is
subject to a loan to value covenant of <50%. As at the 30 June
2020, the loan to value was 40%. The loan is also subject to an
interest cover ratio. The covenant ratio is not less than x2.75 and
at 30 June 2020 the interest cover ratio was x5.57. The loan has an
initial term of four years expiring on 20 December 2022. This may
be extended by a further two years to 20 December 2024 if requested
but is at the sole discretion of Lloyds Bank.
The Directors have also considered the circumstances that would
lead to a covenant breach. For Norland Estates Limited, the
property portfolio valuation at 30 June 2020 is based on a blended
net initial yield of 5.25%. Yields would have to move by 139 bps
before valuations fell to a level at which the asset cover ratio
covenant was breached.
The interest cover ratio would need rental income collection to
fall from its current level of 100% to 49% before the covenant is
breached.
And for TP REIT Propco 2 Limited, as at 30 June 2020, its
property portfolio valuation would need to fall by 25.6% before
valuations fell to a level at which the loan to value covenant was
breached. The interest cover ratio would need rental income
collection to fall from its current level of 100% to 35% before the
covenant is breached.
The Group has no short or medium term refinancing risk given the
10-year average maturity of its long term debt facilities with
MetLife, the first of which expires in June 2028, and which are
fully fixed at an all-in weighted average rate of 3.04%.
Based on the forecasts prepared and the intentions of the parent
company, the Directors consider that the Company and its
subsidiaries will be able to settle its liabilities for a period of
at least 12 months from the date of signing these financial
statements and therefore has prepared these financial statements on
the going concern basis.
Under the downside model the forecasts have been stressed to
show the effect if Care Providers were unable to cover the voids
and the time taken to fill voids is 2 years. It assumes that the
Registered Provider (the tenant) will not be able to pay the voids.
Under the downside model the Company and its subsidiaries will be
able to settle its liabilities for a period of at least 12 months
from the date of signing these financial statements.
The directors believe there are currently no material
uncertainties in relation to the Group's ability to continue in
operation for the period of at least 12 months from the date of
approval of the Group's Financial Statements. The Board is,
therefore, of the opinion that the going concern basis adopted in
the preparation of the financial statements is appropriate.
2.2 Reporting period
The financial statements have been prepared for the period ended
30 June 2020. The comparative periods are the six-month period
ended 30 June 2019 and the year ended 31 December 2019.
2.3 Currency
The Group and Company financial information is presented in
Sterling which is also the Company's functional currency.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
In the application of the Group's accounting policies, 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 are unchanged from the annual report for the year to 31
December 2019. In the director's view, there have been no
significant changes to the extent of estimation uncertainty, key
assumptions or valuation techniques relating to investment
properties arising as a result of Covid-19.
4. RENTAL INCOME
1 January 1 January
2020 to 30 2019 to 30 Year ended31
June 2020 June 2019 December 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Rental income - freehold
assets 12,368 8,432 19,205
Rental income - leasehold
assets 1,004 916 1,907
------------ ------------ ---------------
13,372 9,348 21,112
============ ============ ===============
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.
All rental income arose within the United Kingdom.
5. MANAGEMENT FEES
1 January 2020 1 January
to 30 June 2019 to 30 Year ended31
2020 June 2019 December 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Management fees 1,975 1,859 3,869
------------ ---------------
1,975 1,859 3,869
=============== ============ ===============
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. A Deed of
Variation was signed on 23 August 2018. This defined cash balances
in the Net Asset Value calculation in respect of the management fee
as "positive uncommitted cash balances after deducting any
borrowings".
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
uncommitted cash balances after deducting borrowings) 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; and
(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.
Management fees of GBP1,974,945 were chargeable by TPIM during
the period to 30 June 2020 (30 June 2019 - GBP1,858,883, 31
December 2019 - GBP3,869,000). At the period end, GBP986,062 was
due to TPIM (30 June 2019 - GBP979,880 31 December 2019 -
GBP986,000).
6. FINANCE INCOME
1 January 1 January Year ended
2020 to 30 2019 to 30 31 December
June 2020 June 2019 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Head lease interest income 16 20 50
Interest on liquidity funds 58 129 179
------------ ------------ -------------
74 149 229
============ ============ =============
7. FINANCE COSTS
1 January 1 January Year ended
2020 to 30 2019 to 30 31 December
June 2020 June 2019 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Interest payable on bank
borrowings 2,375 1,127 2,992
Borrowing costs capitalised
(note 9) (81) - (60)
Amortisation loan arrangement
fees 542 80 457
Head lease interest expense 16 21 50
Bank charges 14 4 9
------------ ------------ -------------
2,866 1,232 3,448
Total finance cost for
financial liabilities held
at amortised cost 2,852 1,228 3,439
============ ============ =============
8. 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 2020, 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.
9. INVESTMENT PROPERTY
Operational Properties
assets under development Total
GBP'000 GBP'000 GBP'000
--------------------- ----------------------- ------------------------
As at 1 January 2020 454,400 17,949 472,349
Acquisitions and additions 29,479 7,751 37,230
Fair value adjustment 1,225 308 1,533
Changes to head lease
right-of-use
assets (4) - (4)
Borrowing costs capitalised
(note 7) - 81 81
Transfer of completed properties 10,111 (10,111) -
Reclassified to assets held
for sale (173) - (173)
--------------------- ----------------------- ------------------------
As at 30 June 2020 (unaudited) 495,038 15,978 511,016
--------------------- ----------------------- ------------------------
As at 1 January 2019 316,117 7,952 324,069
Acquisitions and additions 56,413 11,394 67,807
Fair value adjustment 4,420 131 4,551
Changes to head lease
right-of-use
assets 140 - 140
Transfer of completed properties 1,780 (1,780) -
--------------------- ----------------------- ------------------------
As at 30 June 2019 (unaudited) 378,870 17,697 396,567
--------------------- ----------------------- ------------------------
As at 1 January 2019 316,117 7,952 324,069
Acquisitions and additions 114,835 21,428 136,263
Fair value adjustment 11,134 675 11,809
Changes to head lease
right-of-use
assets 148 - 148
Borrowing costs capitalised
(note 7) - 60 60
Transfer of completed properties 12,166 (12,166) -
--------------------- ----------------------- ------------------------
As at 31 December 2019
(audited) 454,400 17,949 472,349
--------------------- ----------------------- ------------------------
Reconciliation to independent valuation:
31 December
30 June 2020 30 June 2019 2019
GBP'000 GBP'000 GBP'000
Investment property valuation 510,329 395,870 471,635
Fair value adjustment -
headlease ground rent 1,449 1,445 1,453
Fair value adjustment -
lease incentive debtor (762) (748) (739)
------------------------- ------------------------ -------------------------
511,016 396,567 472,349
------------------------- ------------------------ -------------------------
Properties under development represent contracts for the
development of a pre-let property under a forward funding
agreement. Where the development period is expected to be a
substantial period, the borrowing costs that can be directly
attributed to getting the asset ready for use are capitalised as
part of the investment property value.
The carrying value of leasehold properties at 30 June 2020 was
GBP34.9 million (30 June 2019 - GBP34.8 million, 31 December 2019 -
GBP35.3 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 three 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.
% Key Statistics
The metrics below are in relation to the total investment
property portfolio held as at 30 June 2020.
30 June 31 December
Portfolio Metrics 2020 30 June 2019 2019
Capital Deployed (GBP'000)* 459,858 359,272 424,266
Number of Properties 404 318 388
Number of Tenancies*** 316 229 300
Number of Registered Providers*** 18 16 16
Number of Local Authorities*** 153 127 149
Number of Care Providers*** 93 73 88
Average NIY** 5.30% 5.28% 5.27%
* calculated excluding acquisition costs
**calculated using IAS 40 valuations (excluding forward funding
acquisitions)
*** calculated excluding forward funding acquisitions
Regional exposure
30 June 2020 30 June 2019 31 December 2019
*Cost % of funds *Cost % of funds % of funds
Region GBP'000 invested GBP'000 invested *Cost GBP'000 invested
--------------- --------- ----------- --------- ----------------------- -------------- -----------
North West 97,516 21.2 86,099 24.0 93,451 22.0
West Midlands 75,253 16.4 47,073 13.1 65,189 15.4
East Midlands 61,896 13.5 54,156 15.1 59,929 14.1
London 49,906 10.9 50,347 14.0 49,906 11.8
North East 45,450 9.9 40,009 11.1 43,691 10.3
South East 44,646 9.7 37,245 10.4 43,697 10.3
Yorkshire 40,799 8.9 20,164 5.6 30,245 7.1
South West 23,528 5.0 16,867 4.7 21,547 5.1
East 15,049 3.3 3,562 1.0 11,514 2.7
Scotland 3,155 0.7 887 0.2 2,437 0.6
South Wales 2,660 0.6 2,863 0.8 2,660 0.6
Total 459,858 100 359,272 100 424,266 100
--------- ----------- --------- ----------------------- -------------- -----------
*excluding acquisition costs
Fair value hierarchy
Quoted
prices Significant
in active observable Significant
markets inputs unobservable
Date of (Level (Level inputs
valuation Total 1) 2) (Level 3)
GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ------------- -------- ----------- ------------ --------------
Assets measured
at fair value: 30 June
Investment properties 2020 511,016 - - 511,016
------------------------ ------------- -------- ----------- ------------ --------------
30 June
Investment properties 2019 396,567 - - 396,567
------------------------ ------------- -------- ----------- ------------ --------------
31 December
Investment properties 2019 472,349 - - 472,349
------------------------ ------------- -------- ----------- ------------ --------------
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.
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.
Descriptions and definitions relating to valuation techniques
and key unobservable inputs made in determining fair values are as
follows:
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 three 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; and
3. Underlying passing rents.
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
The Group's property portfolio valuation is open to judgements
and is inherently subjective by nature. The estimates and
associated assumptions have a significant risk of causing a
material adjustment to the carrying amounts of investment
properties. The valuation is based upon assumptions including
future rental income (with growth in relation to inflation) and the
appropriate discount rate.
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 6.61% (30 June 2019 - 6.62%, 31 December 2019 -
6.60%).
The range of discount rates used in the Group's property
portfolio valuation is from 6.3% to 7.2%. (30 June 2019 - 6.3-7.1%,
31 December 2019 - 6.3-7.1%).
-0.5% change +0.5% change +0.25% change -0.25% change
in in in in
Discount Discount
Rate Rate CPI CPI
GBP'000 GBP'000 GBP'000 GBP'000
Changes in the IFRS
fair value of investment
properties as at 30
June 2020 31,135 (28,355) 15,974 (15,287)
Changes in the IFRS
fair value of investment
properties as at 30
June 2019 24,466 (22,316) 12,470 (12,010)
Changes in the IFRS
fair value of investment
properties as at 31
December 2019 28,803 (26,203) 14,911 (14,257)
Given that the factors on which the valuations are based have
not been adversely affected by Covid-19, there has been no direct
impact to the investment property valuation as a result of
Covid-19.
10. TRADE AND OTHER RECEIVABLES
30 June 2020 30 June 2019 31 December
(unaudited) (unaudited) 2019 (audited)
GBP'000 GBP'000 GBP'000
Prepayments 1,957 414 1,528
Other receivables 782 792 1,282
Rent receivable 1,419 1,065 1,477
----------------
4,158 2,271 4,287
============= ============= ================
Included in Prepayments are prepaid acquisition costs which
include the cost of acquiring assets not completed at the year
end.
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.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses using a lifetime expected credit loss
provision for rent receivables. To measure expected credit losses
on a collective basis, rent receivables are grouped based on
similar credit risk and ageing.
The expected loss rates are based on the Group's historical
credit losses experienced since incorporation in 2017. The
historical loss rates are then adjusted for the current and
forward-looking information on macroeconomic factors affecting the
Group's tenants. Both the expected credit loss provision and the
incurred loss provision in the current and prior period are
immaterial. The Group does not hold any collateral as security.
The Group applies the general approach to providing for expected
credit losses under IFRS 9 for other receivables. Both the expected
credit loss and the incurred loss provision in the current and
prior year are immaterial.
11. CASH, CASH EQUIVALENTS AND RESTRICTED CASH
31 December
30 June 2020 30 June 2019 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Cash held by lawyers 3,390 1,182 771
Liquidity funds - 20,000 50,000
Restricted cash 370 7,652 2,979
Cash at bank 39,767 45,990 13,961
------------- ------------- ------------
43,527 74,824 67,711
============= ============= ============
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.
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 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. The cash is committed on the acquisition of the
properties. The restricted cash is either held with the solicitors
or ring fenced by the Group.
31 December
30 June 2020 30 June 2019 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Total cash and cash equivalents 43,527 74,824 67,711
Restricted cash (370) (7,652) (2,979)
------------- ------------- ------------
Cash reported on Statement
of Cash Flows 43,157 67,172 64,732
============= ============= ============
12. TRADE AND OTHER PAYABLES
Current liabilities
30 June 2020 30 June 2019 31 December
(unaudited) (unaudited) 2019 (audited)
GBP'000 GBP'000 GBP'000
Other creditors 3,824 7,653 5,521
Accruals 2,513 2,210 1,913
Trade payables 39 118 672
Head lease ground rent 40 40 39
Deferred income 19 - -
6,435 10,021 8,145
============= ============= ================
The Other Creditors balance consists of retentions due on
completion of outstanding works. 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.
13. OTHER PAYABLES
Non-current liabilities
30 June 2020 30 June 2019 31 December
(unaudited) (unaudited) 2019 (audited)
GBP'000 GBP'000 GBP'000
Head lease ground rent 1,409 1,405 1,414
Rent deposit 100 100 100
-------------
1,509 1,505 1,514
============= ============= ================
14. BANK AND OTHER BORROWINGS
30 June 2020 30 June 2019 31 December
(unaudited) (unaudited) 2019 (audited)
GBP'000 GBP'000 GBP'000
Bank and other borrowings
drawn at year end 185,126 99,764 169,092
------------- ------------- ----------------
Less: loan issue costs
incurred (4,426) (2,763) (4,594)
Add: loan issue costs
amortised 542 81 457
------------- ------------- ----------------
Unamortised costs at end
of the year (3,884) (2,682) (4,137)
------------- ------------- ----------------
Balance at year end 181,242 97,082 164,955
============= ============= ================
At 30 June 2020 there were undrawn bank borrowings of GBP13.4
million. (30 June 2019 - GBP38.7 million, 31 December 2019 -
GBP29.4 million).
On 20 July 2018, the Group 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 GBP183 million (30 June 2019 - GBP172 million,
31 December 2019 - GBP181 million). As at 30 June 2020, GBP68.5
million was utilised (30 June 2019 - GBP68.5 million, 31 December
2019 - GBP68.5 million). 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, is 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% pa; and Tranche-B, is an amount of GBP27 million,
has a term of 15 years from utilisation and is priced at an all-in
coupon of 3.215% pa. On a blended basis, the weighted average term
is 12 years carrying a weighted average fixed rate coupon of 3.039%
pa.
On 21 December 2018 the Group signed a secured GBP70 million
Revolving Credit Facility with Lloyds Bank. The floating rate
Revolving Credit Facility has an initial term of four years
expiring on 20 December 2022. This may be extended by a further two
years to 20 December 2024 if requested but is at the sole
discretion of Lloyds Bank. The interest rate for amounts drawn is
1.85% per annum over 3 months LIBOR. For undrawn loan amounts the
Company pays a commitment fee in the amount of 40% of the
margin.
On 29 October 2019 the Group secured a GBP60 million extension
to the existing Revolving Credit Facility. As part of the
extension, National Westminster Bank plc provide debt alongside
Lloyds Bank plc and on identical terms. The Group now has the
ability to draw a total of up to GBP130 million under the RCF. The
initial four-year term of the RCF remains unchanged and expires on
20 December 2022 and, subject to lender approval, may be extended
by a further two years to 20 December 2024. The interest rate in
respect of drawn amounts under the RCF is 1.85 per cent per annum
over 3-month LIBOR and for undrawn loan amounts the Company pays a
commitment fee in the amount of 40% of the margin.
As at 30 June 2020 GBP116.6 million had been drawn under the
revolving credit facility and, when fully drawn, the revolving
credit facility will represent a loan-to-value of 40% secured
against a defined portfolio of the Group's specialist supported
housing assets.
All financing arrangements are on a non-recourse basis to the
Group.
The Group has met all compliance with its financial covenants on
the above loans throughout the year.
3 to
1 to 2 5 > 5
Total < 1 year years years years
--------------------- -------- --------- -------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 30 June 2020 13,374 - - 13,374 -
-------- --------- -------- -------- --------
At 30 June 2019 38,736 - - 38,736 -
-------- --------- -------- -------- --------
At 31 December 2019 29,408 - - 29,408 -
-------- --------- -------- -------- --------
Undrawn committed bank facilities - maturity profile
15. CAPITAL REDUCTION RESERVE
30 June 30 June 31 December
2020 (unaudited) 2019 (unaudited) 2019 (audited)
GBP'000 GBP'000 GBP'000
Balance at beginning of period 166,154 183,921 183,921
Transfer from share premium
reserve - - -
Dividends paid - (8,855) (17,767)
------------------
Balance at end of period 166,154 175,066 166,154
================== ================== ================
The capital reduction reserve relates to the distributable
reserve established on cancellation of the share premium reserve.
Dividends were paid through retained earnings in the period to 30
June 2020.
16. DIVIDS
1 January
2020 to 1 January Year ended
30 June to 30 June 31 December
2020 (unaudited) 2019 (unaudited) 2019 (audited)
GBP'000 GBP'000 GBP'000
1.25p for the 3 months to 31
December 2018 paid on 29 March
2019 - 4,392 4,392
1.27p for the 3 months to 31
March 2019 paid on 28 June 2019 - 4,463 4,463
1.27p for the 3 months to 30
June 2019 paid on 27 September
2019 - - 4,456
1.27p for the 3 months to 30
September 2019 paid on 20 December
2019 - - 4,456
1.285p for the 3 months to 31
December 2019 paid on 27 March
2020 4,509 - -
1.295p for the 3 months to 31
March 2020 paid on 26 June 2020 4,544 - -
------------------
9,053 8,855 17,767
================== ================== ================
On 26 August 2020, the Company declared an interim dividend of
1.295 pence per Ordinary Share for the period 1 April 2020 to 30
June 2020. The total dividend of GBP4.54 million was paid on 25
September 2020 to Ordinary shareholders on the register on 4
September 2020.
The Company intends to pay dividends to shareholders on a
quarterly basis and in accordance with the REIT regime.
Dividends are not payable in respect of its Treasury shares
held.
17. 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 404 (30 June 2019 -
318, 31 December 2019 - 388) Social Housing properties as at 30
June 2020 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.
18. 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 (30 June 2019 - GBP75,000,
31 December 2019 - GBP75,000), and the other directors of the Board
receive a fee of GBP50,000 (30 June 2019 - GBP50,000, 31 December
2019 - GBP50,000) per annum. The directors are also entitled to an
additional fee of GBP7,500 (30 June 2019 - GBP7,500, 31 December
2019 - GBP7,500) in connection with the production of every
prospectus by the Company.
Dividends of the following amounts were paid to the directors
during the period:
Chris Philips: GBP1,415 (30 June 2019 - GBP1,382, 31 December 2019 -GBP2,776)
Peter Coward: GBP1,965 (30 June 2019 - GBP1,896, 31 December
2019 -GBP3,823)
Paul Oliver: GBP2,012 (30 June 2019 - GBP1,965, 31 December 2019 -GBP3,945)
No shares were held by Ian Reeves or Tracey Fletcher-Ray as at
30 June 2020. (30 June 2019: nil, 31 December 2019: nil).
19. POST BALANCE SHEET EVENTS
Property acquisitions
Subsequent to the end of the period, the Group has acquired
portfolios of 30 supported Social Housing properties deploying
GBP19.8 million (including acquisition costs).
Debt financing
On 21 December 2018 the Group signed a secured GBP70 million
Revolving Credit Facility with Lloyds Bank. On 29 October 2019 the
Group secured a GBP60 million extension to the existing Revolving
Credit Facility. As at 30 June 2020 GBP116.6 million had been drawn
under the revolving credit facility.
Dividends
On 26 August 2020, the Company declared an interim dividend of
1.295 pence per Ordinary Share for the period 1 April 2020 to 30
June 2020. The total dividend of GBP4.54 million was paid on 25
September 2020 to Ordinary shareholders on the register on 4
September 2020.
20. CAPITAL COMMITMENTS
The Group has capital commitments of GBP13.9 million (30 June 19
- GBP37 million, 31 December 19 - GBP24.3 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 2020.
21. 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. As there are no dilutive instruments
outstanding, both basic and diluted earnings per share are the
same.
The calculation of basic, diluted and EPRA earnings per share is
based on the following:
1 January
1 January 2020 2019 Year ended
to 30 June 31 December
to 30 June 2020 2019 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Calculation of Basic
Earnings per share
Net profit attributable
to ordinary shareholders
(GBP'000) 8,965 9,915 23,717
Weighted average number
of ordinary shares (including
treasury shares) 350,902,210 351,348,895 351,124,401
IFRS Earnings per share
- basic and diluted 2.55p 2.82p 6.75p
---------------- ------------ ------------
EPRA Earnings per share
1 January 2020 1 January
to 30 June 2019 to 30 Year ended
2020 June 2019 31 December
(unaudited) (unaudited) 2019 (audited)
GBP'000 GBP'000 GBP'000
Net profit attributable
to ordinary shareholders
(GBP'000) 8,965 9,915 23,717
Changes in value of
fair value of investment
property (GBP'000) (1,533) (4,551) (11,809)
EPRA earnings (GBP'000) 7,432 5,364 11,908
Non cash adjustments
to include:
Interest capitalised
on forward funded developments (81) - (60)
Amortisation of loan
arrangement fees 542 80 457
--------------- ------------- ----------------
Adjusted EPRA earnings
(GBP'000) 7,893 5,444 12,305
--------------- ------------- ----------------
Weighted average number
of ordinary shares (including
treasury shares) 350,902,210 351,348,895 351,124,401
--------------- ------------- ----------------
Earnings per share -
EPRA 2.12p 1.53p 3.39p
--------------- ------------- ----------------
Adjusted EPRA earnings
per share 2.25p 1.55p 3.50p
--------------- ------------- ----------------
Adjusted earnings is a performance measure used by the Board to
assess the Group's dividend payments. The metric adjusts EPRA
earnings for interest paid to service debt that was capitalised,
and the amortisation of loan arrangement fees. The Board sees these
adjustments as a reflection of actual cashflows which are
supportive of dividend payments. The Board compares the adjusted
earnings to the available distributable reserves when considering
the level of dividend to pay.
22. NET ASSET VALUE PER SHARE
Net Asset Value 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. Although there are no
dilutive instruments outstanding, both basic and diluted NAV per
share are disclosed below.
Net asset values have been calculated as follows:
30 June 30 June 31 December
2020 2019 2019
(unaudited) (unaudited) (audited)
Net assets at end of period
(GBP'000) 369,645 365,054 369,733
------------ ------------ ------------
Shares in issue at end of
period (excluding shares held
in treasury) 350,902,210 351,152,210 350,902,210
Dilutive shares in issue - - -
------------ ------------ ------------
Total 350,902,210 351,152,210 350,902,210
------------ ------------ ------------
IFRS NAV per share - basic
and dilutive 105.34p 103.96p 105.37p
------------ ------------ ------------
23. OTHER PERFORMANCE MEASURES
1. 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.
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 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.
ii. The hypothetical sale will take place in the form of a single portfolio disposal.
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
Net asset value per the consolidated
financial statements 369,645 365,054 369,733
Value of Asset pools 369,645 365,054 369,733
Effects of the adoption to the
assumed, hypothetical sale of
properties as a portfolio and
on the basis of sale of a corporate
vehicle 38,138 27,290 32,165
-------- -------- ------------
Portfolio Net Asset Value 407,783 392,344 401,898
======== ======== ============
After reflecting these amendments, the movement in net assets is
as follows:
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
Opening reserves 401,898 384,342 384,342
Own shares repurchased - (167) (378)
Operating profits 10,267 6,447 15,127
Capital appreciation 7,506 11,660 23,793
Loss on fair value adjustment
on assets held for sale (43) - -
Finance income 74 149 229
Finance costs (2,866) (1,232) (3,448)
Dividends paid (9,053) (8,855) (17,767)
------------ ------------ ------------
Portfolio Net Assets 407,783 392,344 401,898
============ ============ ============
Number of shares in issue at
the period end 350,902,210 351,152,210 350,902,210
Portfolio net asset value per
share 116.21p 111.73p 114.53p
2. ADJUSTED EARNINGS PER SHARE - PORTFOLIO NAV BASIS
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
Net rental income 13,372 9,348 21,112
Expenses (3,104) (2,901) (5,985)
Fair value gains on investment
property 39,671 27,289 43,974
Loss on fair value adjustment
on assets held for sale (43) - -
Finance income 74 149 229
Finance costs (2,866) (1,232) (3,448)
-----------
Value of each pool 47,104 32,653 55,882
Weighted average number of shares 350,902,210 351,348,895 351,124,401
Adjusted earnings per share
- basic 13.42p 9.29p 15.92p
3. EPRA Net Reinstatement Value
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
IFRS NAV/EPRA NAV (GBP'000) 369,645 365,054 369,733
Include:
Real Estate Transfer Tax*
(GBP'000) 30,069 23,461 27,493
EPRA Net Reinstatement Value
(GBP'000) 399,714 388,515 397,226
Fully diluted number of
shares 350,902,210 351,152,210 350,902,210
EPRA Net Reinstatement value
per share 113.91p 110.64p 113.20p
* Purchaser's costs
4. EPRA Net Disposal Value
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
IFRS NAV/EPRA NAV (GBP'000) 369,645 365,054 369,733
Include:
Fair value of debt* (GBP'000) (4,478) (2,858) (5,030)
EPRA Net Disposal Value
(GBP'000) 365,167 362,196 364,703
Fully diluted number of
shares 350,902,210 351,152,210 350,902,210
EPRA Net Disposal Value** 104.07p 103.15p 103.93p
* Difference between interest-bearing loans and borrowings
included in balance sheet at amortised cost, and the fair value of
interest-bearing loans and borrowings.
**equal to the EPRA NNNAV disclosed in previous reporting
periods
5. EPRA Net Tangible Assets
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
IFRS NAV/EPRA NAV (GBP'000) 369,645 365,054 369,733
EPRA Net Tangible Assets
(GBP'000) 369,645 365,054 369,733
Fully diluted number of
shares 350,902,210 351,152,210 350,902,210
EPRA Net Tangible Assets
* 105.34p 103.96p 105.37p
*equal to IFRS NAV and previous EPRA NAV metric
6. EPRA net initial yield (NIY) and EPRA "topped up" NIY
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
Investment Property - wholly
owned 509,567 395,871 470,895
Less: development properties (15,918) (17,697) (17,949)
Completed property portfolio 493,649 378,174 452,946
Allowance for estimated
purchasers' costs 30,069 23,461 27,493
Gross up completed property
portfolio valuation 523,718 401,635 480,439
Annualised passing rental
income 27,900 21,066 25,431
Property outgoings - - -
Annualised net rents 27,900 21,066 25,431
Contractual increases for
lease incentives 76 - -
Topped up annualised net
rents 27,976 21,066 25,431
EPRA NIY 5.33% 5.25% 5.29%
EPRA Topped Up NIY 5.34% 5.25% 5.29%
7. ONGOING CHARGES RATIO
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
Annualised ongoing charges 5,953 5,802 5,985
Average undiluted net assets 369,689 364,608 366,947
Ongoing charges 1.61% 1.59% 1.63%
8. EPRA VACANCY RATE
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
Estimated Market Rental
Value (ERV) of vacant spaces - - -
Estimated Market Rental
Value (ERV) of whole portfolio 27,976 21,066 25,460
EPRA Vacancy Rate 0% 0% 0%
9. EPRA COST RATIO
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
Total administrative and
operating costs 3,105 2,901 5,985
Gross rental income 13,372 9,348 21,112
EPRA cost ratio 23.22% 31.03% 28.35%
This information is provided by RNS, the news service of the
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Authority to act as a Primary Information Provider in the United
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END
IR BKLLLBKLZBBQ
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