TIDMSOHO
RNS Number : 9409D
Triple Point Social Housing REIT
08 March 2022
8 March 2022
Triple Point Social Housing REIT plc
(the "Company" or, together with its subsidiaries, the
"Group")
Consultation on change to Investment Policy
The Board of Triple Point Social Housing REIT plc (ticker: SOHO)
announces that, following the Company's consultation with a number
of shareholders, the Board and Triple Point Investment Management
LLP (the "Investment Manager") believe that making certain changes
to the Company's investment policy and investment restrictions
would be in the best interests of the Company.
In summary, the Company proposes to make the following changes
to its investment policy and investment restrictions:
-- Removing the Company's minimum lease term restriction
-- Allowing the Company to selectively take on the cost of funding planned maintenance
-- Giving the Company the ability to enter into leases which are
subject to upward only adjustments, tracking either inflation or
central housing benefit policy
The proposed changes to the investment policy and investment
restrictions are detailed in the Appendix to this announcement.
Background to and rationale for the proposed Investment Policy
amendments
The Company was one of the first listed investment trusts to
invest equity directly into Specialised Supported Housing. Since
its IPO in 2017, it has deployed over GBP590 million into over 450
properties and delivered cumulative total shareholder returns of
over 25 per cent.
During that time, the sector has evolved, and as a responsible
investor the Company has moved forward alongside it. The Company
has developed the Leases it enters into to reflect the collective
learnings of the sector and to maximise their effectiveness.
In 2019, the Company introduced a change in law clause into new
Leases which facilitated proportionate risk sharing with Approved
Providers if there was to be a material future change in housing
benefit policy. The Company has also consistently increased the
reporting obligations of Approved Providers, strengthened the
Company's right to assign Leases if an Approved Provider is
underperforming, and introduced 'Green Lease' provisions.
Collectively, these changes have helped ensure that the Company's
investments generate stable and sustainable financial returns for
investors and deliver social impact.
The Company operates in a regulated sector and the Investment
Manager maintains an ongoing dialogue with the Regulator of Social
Housing (the "Regulator") alongside its Approved Providers. The
Regulator has publicly commented on the risks associated with
leases in the specialised supported housing sector. Increasingly
Approved Providers are looking to evolve the terms of the leases
they enter into going forward, in part to address the observations
made by the Regulator. Simultaneously, over the last six months the
Investment Manager has seen an increasing prevalence of new lease
structures in the sector and the endorsement of those new lease
structures by other investors.
The Company remains determined to deploy capital into good
quality homes leased to the best Approved Providers in the sector.
The Company is proposing to change its investment policy and
investment restrictions at this time, to ensure it has the
requisite flexibility to continue to be at the forefront of this
evolving sector, allow Approved Providers to accommodate points
raised by the Regulator, and thereby remain an attractive
partner.
The Company has carefully considered the impact that
implementing these changes will have on its performance, income and
capital return targets going forward. The Investment Manager has
identified a pipeline of attractive opportunities which incorporate
lease terms compatible with the proposed changes to the investment
policy. These opportunities are consistent with the Company's
income and capital return targets, and will be supported by formal
valuation advice from the Company's independent valuer, Jones Lang
LaSalle Limited.
Shareholder and regulatory approval
The proposed amendments are considered, in aggregate, to
constitute a material change to the Company's published investment
policy. Therefore, pursuant to LR 15.4.8, the Company is required
to first obtain approval of these changes from the Financial
Conduct Authority and subsequently from its shareholders.
Shareholder approval will be sought by way of an ordinary
resolution which will be proposed at the Company's Annual General
Meeting to be held on 27 May 2022.
Details of the proposed amendments to the investment policy and
investment restrictions will be set out in the Notice of AGM
contained in the circular to be sent to shareholders in due course.
This document will be available on the Company's website
www.triplepointreit.com .
FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:
Triple Point Investment Management Tel: 020 7201 8989
LLP
(Investment Manager)
Max Shenkman
Isobel Gunn-Brown
Akur Capital (Joint Financial Adviser) Tel: 020 7493 3631
Tom Frost
Anthony Richardson
Siobhan Sergeant
Stifel (Joint Financial Adviser Tel: 020 7710 7600
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 .
APPIX
Proposed Amended Investment Objective and Investment Policy:
Investment Objective
The Company's investment objective is to provide Shareholders
with stable, long-term, inflation-linked income from a portfolio of
Social Housing assets in the United Kingdom, with a particular
focus on Supported Housing assets. The portfolio comprises
investments into operating assets and the forward funding of
pre-let development assets, the mix of which the Company seeks to
optimise to enable it to pay a covered dividend increasing in line
with inflation and generate an attractive risk-adjusted total
return.
Investment Policy
In order to achieve its Investment Objective, the Company
invests in a diversified portfolio of freehold or long leasehold
Social Housing assets in the UK. Supported Housing assets to be
acquired and/or held account for at least 80 per cent. of Gross
Asset Value. The Company acquires portfolios of Social Housing
assets and single Social Housing assets, either directly (in the
case of property-holding SPVs) or via intermediate holding
companies (in the case of direct property assets). Assets are then
held over the long term by the Company in an intermediate holding
company structure. Each asset is subject to a Lease or occupancy
agreement with an Approved Provider. for terms primarily ranging
from 20 years to 30 years, with the The rent payable thereunder is,
or is expected to be, subject to adjustment in line with inflation
(generally CPI) or central housing benefit policy. Title to the
assets remains with the Group under the terms of the relevant
Lease. The Group is not primarily responsible for any management or
maintenance obligations under the terms of the Lease or occupancy
agreement, all of which typically are serviced by the Approved
Provider lessee; save that the Group may take responsibility for
funding the cost of planned maintenance. The Group is not
responsible for the provision of care to occupants of Supported
Housing assets.
The Social Housing assets are sourced in the market by the
Investment Manager and from the Triple Point Group.
The Group intends to hold the Portfolio over the long term,
taking advantage of generally long term, upward only Leases which
are, or are expected to be, inflation -linked to inflation or
central housing benefit policy. The Group will not be actively
seeking to dispose of any of its assets, although it may dispose of
investments should an opportunity arise that would enhance the
value of the Group as a whole.
The Group may forward finance the development of new Social
Housing assets when the Investment Manager believes that to do so
would enhance returns for Shareholders and/or secure an asset for
the Group's Portfolio at an attractive yield. Forward funding will
only be provided in circumstances in which:
-- there is an agreement to lease the relevant property upon
completion in place with an Approved Provider;
-- planning permission has been granted in respect of the site; and
-- the Group receives a coupon on its investment or equivalent
reduction in the purchase price (generally slightly above or at
least equivalent to the projected income return for the completed
asset) during the construction phase and prior to the commencement
of the relevant Lease.
For the avoidance of doubt, the Group will not acquire land for
speculative development of Social Housing assets.
In addition, the Group may engage third party contractors to
renovate or customise existing Social Housing assets, as
necessary.
Gearing
The Company seeks to use gearing to enhance equity returns. The
Directors will employ a level of borrowing that they consider to be
prudent for the asset class and will seek to achieve a low cost of
funds, whilst maintaining flexibility in the underlying security
requirements and the structure of both the Portfolio and the
Group.
The Directors intend that the Group will target a level of
aggregate borrowings over the medium term equal to between 35 to 40
per cent. of the Group's Gross Asset Value. The aggregate
borrowings will always be subject to an absolute maximum,
calculated at the time of drawdown, of 50 per cent. of the Gross
Asset Value.
Debt will typically be secured at the asset level, whether over
a particular property or a holding entity for a particular property
(or series of properties), without recourse to the Company and also
potentially at the Company or SPV level with or without a charge
over some or all of the assets, depending on the optimal structure
for the Group and having consideration for key metrics including
lender diversity, cost of debt, debt type and maturity
profiles.
Use of derivatives
The Company may utilise derivatives for efficient portfolio
management. In particular, the Company may engage in full or
partial interest rate hedging or otherwise seek to mitigate the
risk of interest rate increases on borrowings incurred in
accordance with the Investment Policy as part of the Company's
portfolio management. The Group will not enter into derivative
transactions for speculative purposes.
Investment restrictions
The following investment restrictions apply:
-- the Group will only invest in Social Housing assets located in the United Kingdom;
-- the Group will only invest in Social Housing assets where the
counterparty to the Lease or occupancy agreement is an Approved
Provider. Notwithstanding that, the Group may acquire a portfolio
consisting predominantly of Social Housing assets where a small
minority of such assets are leased to third parties who are not
Approved Providers. Provided that the assets leased to third
parties who are not Approved Providers are acquired as part of a
portfolio acquisition where no less than 90 per cent. (by value) of
the assets are leased to Approved Providers and, in aggregate, all
such assets within the Group's total portfolio represent less than
5 per cent. of the Gross Asset Value at the time of acquisition,
this will remain within the Investment Policy;
-- at least 80 per cent. of the Gross Asset Value will be
invested in Supported Housing assets;
-- the unexpired term of any Lease or occupancy agreement
entered into (or in the case of an acquisition of a portfolio of
assets, the average unexpired term of such Leases or occupancy
agreements) shall not be less than 15 years, unless the Investment
Manager reasonably expects the term of such shorter Lease or
occupancy agreement (or in the case of an acquisition of a
portfolio of assets, the average term of such Leases or occupancy
agreements) to be extended to at least 15 years;
-- the maximum exposure to any one asset which, for the
avoidance of doubt, will include houses and/or apartment blocks
located on a Contiguous basis, will not exceed 20 per cent. of the
Gross Asset Value of the Group;
-- the maximum exposure to any one Approved Provider will not
exceed 30 per cent. of Gross Asset Value, other than in exceptional
circumstances for a period not to exceed three months;
-- the Group may forward finance Social Housing units in
circumstances where there is an agreement to lease in place and
where the Group receives a coupon on its investment or equivalent
reduction in the purchase price (generally slightly above or equal
to the projected income return for the completed asset) during the
construction phase and prior to the entry into the Lease. The sum
of the total forward financing commitments will be restricted to an
aggregate value of not more than 20 per cent. of the Net Asset
Value of the Group, calculated at the time of entering into any new
forward funding arrangement;
-- the Group will not invest in other alternative investment
funds or closed-ended investment companies (which, for the
avoidance of doubt, does not prohibit the acquisition of SPVs which
own individual, or portfolios of, Social Housing assets);
-- the Group will not set itself up as an Approved Provider; and
-- the Group will not engage in short selling.
The investment limits detailed above apply at the time of the
acquisition of the relevant asset in the Portfolio. The Group will
not be required to dispose of any investment or to rebalance its
Portfolio as a result of a change in the respective valuations of
its assets or a merger of Approved Providers.
Changes to the Investment Policy or Investment Objective
Any material removal, amendment or other modification of the
Company's stated Investment Objective or Investment Policy, or
additional investment restrictions, will only take place with the
approval of Shareholders in a general meeting.
Cash management policy
Cash held for working capital purposes or received by the Group
pending reinvestment or distribution will be held in Sterling only
and invested in cash, cash equivalents, near cash instruments and
money market instruments. The Board determines the cash management
policy in consultation with the Investment Manager.
REIT status
The Directors will at all times conduct the affairs of the
Company so as to enable it to the extent possible to remain
qualified as a REIT for the purposes of Part 12 of the CTA 2010
(and any regulations made thereunder).
Other
In the event of a breach of the Investment Policy and
restrictions set out above, the Investment Manager shall inform the
Directors upon becoming aware of the same and, if the Directors
consider the breach to be material, notification will be made to a
Regulatory Information Service.
Application of the Investment Policy to Ordinary Shares
The Investment Policy applies to the Group in its entirety and
the restrictions set out above will be assessed across the share
pool.
Defined Terms
"ALMO" an arm's length management organisation, a
not-for-profit company that provides housing
services on behalf of a Local Authority;
"Approved Provider" a Housing Association, Local Authority, ALMO
or other regulated organisation including a
care provider in receipt of direct payment
from local government;
"Contiguous" adjacent or adjoining in the sense of sharing
a common boundary;
"CTA 2010" the Corporation Tax Act 2010 and any statutory
modification or re-enactment thereof for the
time being in force;
"Gross Asset Value" the aggregate value of the total assets of
the Company as determined in accordance with
the accounting principles adopted by the Company
from time-to time;
"Group" the Company and any subsidiary undertakings
from time to time;
"Housing Association" an independent society, body of trustees or
company established for the purpose of providing
low-cost social housing for people in housing
need, generally on a non-profit- making basis.
Any trading surplus is typically used to maintain
existing homes and to help finance new ones.
Housing Associations are regulated by the Regulator
for Social Housing;
"Investment Manager" Triple Point Investment Management LLP;
"Lease" a lease including, in limited circumstances,
a management agreement substantially with the
same purpose and effect as a lease;
"Local Authority" the administrative bodies for the local government
in England comprising of 326 authorities (including
32 London boroughs);
"Net Asset Value" the net asset value of the Company, as at the
relevant date, determined in accordance with
the accounting policies adopted by the Company
from time to time;
"Portfolio" the portfolio of assets held by the Group from
time to time;
"Registered Provider" an independent, typically not-for-profit provider
of social housing in receipt of direct payment
from local government and regulated by the
Regulator;
"Regulator" the Regulator of Social Housing, an executive
non-departmental public body, sponsored by
the Ministry of Housing, Communities & Local
Government;
"Social Housing" homes which are social rented, affordable rented
and intermediate housing provided to specified
eligible households whose needs are not met
by the market (including, for the avoidance
of doubt, Supported Housing homes);
"SPV" special purpose vehicle;
"Supported Housing" accommodation that is suitable, or adapted,
for residents with special needs, which may
(but does not necessarily): (a) include some
form of personal care provided by a Care Provider;
and/or (b) enable those tenants to live independently
in the community; and
"Triple Point Group" the group of entities trading under the Triple
Point name which includes the following companies
and associated entities: Triple Point Investment
Management LLP (registered in England & Wales
no. OC321250), authorised and regulated by
the Financial Conduct Authority no. 456597;
Triple Point Administration LLP (registered
in England & Wales no. OC391352) and authorised
and regulated by the Financial Conduct Authority
no. 618187; and TP Nominees Limited (registered
in England & Wales no.07839571).
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