TIDMSOHO
RNS Number : 8596Y
Triple Point Social Housing REIT
09 September 2022
9 September 2022
Triple Point Social Housing REIT plc
(the "Company" or, together with its subsidiaries, the
"Group")
RESULTS FOR THE SIX MONTHSED 30 JUNE 2022
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 22 .
1 January 1 January
20 22 to 20 21 to Year ended
30 June 20 30 June 20 31 December
22 21 20 21
EPRA Net Tangible Assets per 111.80 p 10 6.42 p 108.27p
share
(equal to IFRS NAV per share
)
EPRA Net Initial Yield (NIY) 5.28% 5.21% 5.20%
Loan to Value 36.8% 31.5% 37.6%
Earnings per share (basic and
diluted) 6.19 p 2.60 p 7.05p
* IFRS basis 1.94 p 2.30 p 4.82p
* EPRA basis
Total annualised rental income GBP 37.4 GBP 33.4 GBP35.8m
(1) m m
Portfolio value
* IFRS basis GBP 669.6 GBP 596.3 GBP642.0m
m m
Weighted average unexpired 25.9 yrs 2 5.8 yrs 26.2 yrs
lease term
Dividend paid or declared per
Ordinary Share 2.73 p 2. 60 p 5.20p
Financial highlights
-- EPRA Net Tangible Assets per share (equal to IFRS net asset
value per share ) of 111.80 pence at 30 June 2022 (31 December 2021
: 108.27 pence).
-- Portfolio independently valued as at 30 June 2022 at GBP
669.6 million on an IFRS basis (31 December 2021 : GBP 642.0
million), reflecting a valuation uplift of 12.7 % against total
invested funds of GBP 594.0 million. The properties have been
valued on an individual basis.
-- The portfolio's total annualised rental income was GBP 37.4
million (1) as at 30 June 2022 (31 December 2021 : GBP 35.8
million).
-- The fair value gain on investment properties for the period
ended 30 June 2022 amounted to GBP17.1 million (30 June 2021:
GBP0.7 million).
-- Net profit for the period ended 30 June 2022 was GBP 24.9
million (30 June 2021 : GBP 10.5 million).
-- Dividend cover on an EPRA earnings run-rate basis at 30 June 2022 was 1.0x.
-- Ongoing Charges Ratio of 1. 57% as at 30 June 2022 (31
December 2021 : 1.54 %; 30 June 2021 : 1. 53 %).
-- 100% fixed-rate debt - a ll of the Group's drawn debt
(amounting to GBP263.5 million) is now fixed-price (with a weighted
average coupon of 2.74%) and long-term (11.1 years), offering
strong protection against increasing interest rates and rising
inflation .
-- During the period, the Group cancelled a portion of its
existing undrawn GBP 160 million revolving credit facility agree
ment (" RCF "), reducing it to GBP50 million, in order to reduce
commitment fees payable. At the period end, the remaining GBP50
million of the RCF remained undrawn. The cancellation resulted in
arrangement fees of GBP2.0 million which were incurred in
association with securing the original facility being expensed.
-- Maintained an Investment Grade Issuer Default Rating from
Fitch of ' A- ' (Stable Outlook) with a senior secured rating of '
A '.
Operational highlights
-- Acquired ten properties during the period for an aggregate
purchase price of GBP 12.0 million (including acquisition costs )
.
-- EPRA blended net initial yield of 5. 28 % based on the value
of the portfolio on an IFRS basis as at 30 June 2022 , against the
portfolio's blended net initial yield on purchase of 5.9 0 % .
-- D iversified portfolio:
o 11 regions
o 151 local authorities
o 391 leases
o 26 Approved Providers
o 121 care providers
-- As at 30 June 2022 , the weighted average unexpired lease
term (" WAULT ") was 2 5.9 years.
-- 100% of contracted rental income was either CPI (92.4%) or RPI (7.6%) linked.
Post Balance Sheet Activity
-- The dividend to be paid on 30 September 2022 brings the total
dividend per Ordinary Share paid or declared by the Company in
respect of the six month period to 30 June 2022 to 2.73 pence per
share, in line with the Company's stated target for the year to 31
December 2022 of 5. 46 pence per share. The dividend target
represents an increase of 5.0 per cent on the 5.20 pence per share
paid in respect of the financial year ended 31 December 2021
(2)
-- Acquired a further two Supported Housing properties ( 16
units in total) for an aggregate purchase price of approximately
GBP 3.4 million (including acquisition costs).
Notes:
1 Excluding ongoing forward funded schemes that are under an agreement for lease
2 These are targets only and not a profit forecast and there can
be no assurance that they will be met
Chris Phillips, Chair of Triple Point Social Housing REIT plc,
commented:
" When we launched the Company five years ago, our desire to do
so was driven by demand, social impact and the offer of resilient
inflation-linked income. These fundamental pillars are mutually
reinforcing and remain the bedrock of the Company's investment
strategy today .
Whilst it is important to prioritise managing the risks posed by
the current economic environment, we remain convinced that the
investment strategy remains well placed to prove its relative
resistance to concerns around rising inflation and interest rates.
This belief is underpinned by the growing demand for more
specialised supported housing throughout the UK. "
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 Limited (Joint Financial Tel: 020 7493 3631
Adviser)
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 .
IMPORTANT INFORMATION:
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014, as it
forms part of UK Domestic Law by virtue of the European Union
(Withdrawal) Act 2018, as amended and supplemented ("UK MAR") and
is disclosed in accordance with the Company's obligations under UK
MAR. Upon the publication of this announcement, this inside
information will be considered to be in the public domain.
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 8 : 30 am
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 the Company Secretary at Hanway Advisory on +44 (0) 20 3909
3519 or cosec@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 16 September 2022 .
CHAIR'S STATEMENT
Introduction
We marked the five - year anniversary of the Company's IPO in
August. Sitting down to write my remarks, I looked back across
those five years to draw inspiration for this statement from the
milestones that we have achieved.
We have grown the Group 's portfolio to over GBP650 million in
value with the continued support of our shareholders , and deployed
our equity and debt capital into over 490 properties . We now
provide over 3,400 homes working alongside our Approved Provider
and care provider partners , and we have collected 99.3% of rent
due since our IPO. Through achieving these milestones we have
ensured that we have delivered consistent, inflation-linked
financial returns to our investors - delivering a total return of
over 35% over the last 5 years.
When we launched the Company in August 2017 , our desire to do
so was driven by demand, social impact and the offer of resilient
inflation-linked income. These fundamental pillars are mutually
reinforcing and remain the bedrock of the Company's investment
strategy today:
-- Demand: There has been a growing public awareness of the
housing crisis since we launched the Company in 2017, both in terms
of the acute need for more specialised supported housing and the
need for more homes across the broader social housing sector, but
there is still much more that needs to be done. Ten years on from
the implementation of the Transforming Care Programme we are still
witnessing critical demand for Supported Housing and the homes that
we deliver. Estimates predict that at least 1.7 million more adults
will require social care over the next 15 years , (1) and across
the wider social housing sector, year - on - year, the Government's
delivery targets are not being met.
-- Social impact: Our properties provide specialist adapted
homes with appropriate care for our residents. This continues to be
recognised as contributing to improving resident outcomes by
providing greater independence and placing residents within their
communities, close to friends and families.
-- Resilient inflation-linked income: Our properties also
continue to generate long-term inflation linked income for the
Group , underpinned by central G overnment support for the rents of
our residents. In May, in line with our progressive dividend
policy, we announced our target dividend guidance for the year,
targeting an aggregate dividend of 5.46 pence per Ordinary Share,
an increase of 5% on the 5.20 pence per Ordinary Share paid during
2021.
Over these five years our performance has remained resilient
despite the unforeseen challenge of the COVID-19 pandemic which
sent shockwaves through the global economy and posed operational,
and health and safety challenges to the continued operation of our
homes.
Looking ahead, just as we emerged from the worst of the COVID-19
pandemic, geopolitical conflicts and instability began to threaten
economic growth and markets around the world. The war in Ukraine
has further fuelled concerning inflationary headwinds and posed new
challenges to supply chains, energy prices and energy security.
Central banks have been forced to re-evaluate their monetary
policies and are forecast to continue increasing interest rates in
response to rising inflation.
The Group is not immune to these challenges. Our Approved
Provider lessees are reporting that significant pressure is being
put on their cost base due to rising inflation. Furthermore, in
August the Government launched a consultation on a proposed cap on
social housing rent increases, likely to be implemented from April
2023 to 31 March 2024. If actioned this could have a negative
impact on the margins generated by Registered Providers.
However, we are also fortunate that we are investing into a
sector which has strong fundamentals and so is relatively well
placed to withstand broader challenging market conditions. Demand
for specialised social housing remains unmet. Our rents are
underpinned by central Government support for the rents of our
residents and, whilst there might be a cap in the short term,
social housing rents have historically proven to have a strong
correlation with inflation. Finally, by completing our refinancing
in 2021, the Group has insulated itself from the cost of interest
rate increases by securing all of its debt on a fixed price and
long term basis.
Financial performance is just one of the ways in which we
measure our success. We know that if we deliver good homes to our
residents then this impact, more than anything else is what will
underpin the income we strive to deliver to our investors. We have
witnessed a lot of progress across the sector since we made our
first investments . S imultaneously we have iterated and refined
how we report, measure and monitor the impact that the properties
we own generate. W e are audited by The Good Economy who have
produced an interim report on our most recent social impact
performance for the period to 30 June 2022 in the Investment
Manager's report.
We are pleased to report another set of solid financial results
for the Group, as summarised in our Key Highlights. This
demonstrates not only the Group's performance to date, but also the
resilience of the sector in spite of the broader economic market
conditions. You can read more about the detail of these key
highlights, along with a more in-depth review of our financial
performance during the period in the Investment Manager's
report.
Outlook
As has been the case since the Company's IPO, we are focused on
deploying our remaining capital in order to provide additional
homes for people with care and support needs. As described in the
Investment Manager's report, rent collection in the period slipped
below 100%, and we are committed to working with two of our
Approved Providers to help them address the underlying reasons for
this slight dip with a view to bringing rent collection back up to
historic levels. In addition , we will closely monitor the
performance of our Approved Providers as they navigate the issue
preoccupying so many businesses at the moment, namely the impact of
rising inflation on their operating costs, as well as the likely
social housing rent cap.
Whilst it is important to prioritise managing the risks posed by
the current economic environment, we remain convinced that the
strategy remains well placed to prove its relative resistance to
concerns around rising inflation and interest rates. This belief is
underpinned by the growing demand for more specialised supported
housing throughout the UK.
I would like to thank all our advisers, and the Investment
Manager, for their continued hard work and dedication to our
investment strategy. Our corporate broker and joint financial
adviser, Stifel Nicolaus Europe Limited, and our joint financial
adviser, Akur Limited, as always have provided valuable and
high-quality advice during the period. Alongside the Investment
Manager, they have been instrumental in enabling the Group to
continue to build upon its success so far and helping us to
navigate it's future trajectory.
Finally, I would like to thank our shareholders for their
continued support, as well as my fellow Board members for their
ongoing commitment and assistance during the period.
Chris Phillips
Chair
8 September 2022
Notes:
1 Centre for Workforce Intelligence (2011). Report. The Adult
Social Care Workforce in England: Key facts
INVESTMENT MANAGER'S REPORT
Introduction
The last five years, the lifetime of the Group, has delivered a
unique sequence of unforeseen macro events. When the Group was
launched, the nature of Brexit was the unpredictable risk that we
had to account for. For the last two years, no company report has
been complete without a reference to the impact of COVID-19. Today,
we find ourselves worrying about the knock-on effects of interwoven
growing geopolitical instability, food scarcity, a cost of living
crisis and rising inflation. We will come on to discuss the impact
that the risks emerging from these latest macro economic events are
likely to have on the Group's strategy, but before we do it is
worth pointing out that, against this backdrop, the Group has
delivered consistent resilient performance from both a valuation
and income point of view. Most recently, the Group raised its
dividend target by 5% in the period and the portfolio's value has
grown by 4.3%.
The majority of this performance is driven by the fact that year
on year, demand for specialised supported housing has grown. The
Personal Services Research unit has predicted growth of 30% in the
demand for specialised supported housing in England by 2030. This
is reinforced by data published in 2021 from the National Audit
Office in its report on the adult social care market in England,
which forecasted a 29% increase in adults aged 18 to 64 requiring
some form of care by 2038, compared to 2018, with faster increases
in demand projected for adults with learning disabilities (49%).
(1)
These latest statistics sit against the backdrop of the need for
more adapted homes in communities which was enshrined in both the
Care Act 2014, the Transforming Care Programme 2015 and more
recently, the Department of Health's White Paper, "People at the
Heart of Care" issued in 2021.
On the ground , we experience this every day through
conversations with local authorities, commissioners, Approved
Providers and care providers.
The Group has been investing into s pecialised s upported h
ousing for just over five years now. During that time we have
continually evolved. The Investment Manager ha s grown the team to
well over 20 people, bringing together expertise from a range of
disciplines and backgrounds including finance, surveying, local
authorities, Registered Providers, lawyers and accountants. During
the period we welcomed two new specialist hires within our asset
management team which further enhances our portfolio monitoring
capabilities.
We are also constantly evolving how best we can help provide
more good homes for people with care and support needs so that they
can live independently in their communities. We are continually
iterating and improving our due diligence and asset management
process, expanding our relationships with local authorities, care
providers and Approved Providers throughout the UK , and exploring
new and innovative investment structures to facilitate more
investment in the sector and keep us at the forefront of an
evolving market.
During the period the Group bought ten new properties for a
total investment cost of GBP12.0 million (including acquisition
costs) funded from existing cash and debt balances. These
properties provided 71 new units of accommodation to the Group's
portfolio in the period.
In May, shareholders approved changes to the Group's investment
policy and restrictions removing the Group's minimum lease term,
allowing the Group to selectively take on the cost of funding
planned maintenance and giving the Group the ability to enter
leases which are subject to upward only adjustment, tracking either
inflation or central housing benefit policy. These changes will
allow the Group to offer greater alignment and proportionate risk
and benefit allocation with its Approved Providers. This has proven
particularly relevant in the current macroeconomic environment as
organi sations look to ensure they are well insulated against the
challenges resulting from the current high levels of inflation. You
can read more about the Group's pipeline at the end of this
report.
Social Impact remains at the core of the Group's strategy. The
independent Impact Report prepared by The Good Economy for the six
- month period ended 30 June 2022 for the first time incorporates
an assessment of the Group's performance against the Equity Impact
Project which recently issued its first set of metrics. We have
been a member of the Equity Impact working group for over three
years and we are pleased that the Group is one of the first
investors in the sector to publicly report its performance against
the metrics. We look forward to continuing our work with the Good
Economy, Big Society Capital and our fellow working group equity
investors to drive forward standardised reporting for equity
investors in the sector. The Impact Report prepared by the Good
Economy is available separately on the Group's website.
The environmental performance of our properties remains at the
forefront of our minds. Last year we announced our eco-retrofit
programme. This programme will see the Group fund the upgrade, to a
minimum Energy Performance Certificate ("EPC") rating of "C", of
all properties in the Group's portfolio which currently do not meet
this standard. Our initial pilot programme, focuses on 12
properties in the South East and is progressing well. This initial
phase of the project has seen us evaluate the scope of works
required to maximise the energy efficient upgrades to the
properties. It has been a process designed with the needs of our
residents at the forefront, not only during the works phase, but in
selecting the materials and future technologies we utilise to
ensure they are compatible and user friendly both now and in the
long-run.
We are also focused on to making our leases "green", which sees
us commit, along with our Approved Provider tenants to maximise the
energy efficiency and sustainability of our homes by, for example,
installing smart meters and energy efficient white goods a nd
commit to using local labour and sustainable materials for repairs
and maintenance. The Group hopes to sign more "green" leases over
the coming months with its Approved Providers .
While the Group itself is not regulated by the Regulator of
Social Housing, it does operate in a regulated sector . The Group
is aligned with, and supportive of the Regulator's mandate to
promote a viable, efficient and well-governed social housing sector
that is able to deliver and maintain quality homes for a range of
needs. During the period, the Regulator placed Highstone Housing
Association (3.7% of the Group's rent roll as at 30 June 2022)
under review. The Group remains in regular contact with Highstone
Housi ng Association during this regulatory review process, as well
as its nine other Approved Providers who are deemed non-compliant
by the Regulator .
Financial Review
We are pleased to present resilient financial results for the
period as highlighted earlier. The Group's continued financial
performance is underpinned by an increase in annualised rental
income leading to a dividend cover o f 1.0x on an EPRA earnings
run-rate basis at the period end.
Touching on some of the key highlights:
-- The annualised rental income of the Group was GBP37.4 million
as at 30 June 2022, compared to GBP35.8 million at 31 December
2021.
-- A fair value gain of GBP17.1 million was recognised during
the period on the revaluation of the Group's properties compared to
GBP0.7 million in the comparative period to 30 June 2021.
-- The EPRA NIY has increased from 5.20% at 31 December 2021 to 5.28% at 30 June 2022 .
-- IFRS Earnings per share was 6.19 pence for the period to 30
June 2022, compared to 2.60 pence for the in the comparative period
to 30 June 2021.
-- The EPRA Earnings Per Share (" EPRA EPS ") excludes the fair
value gain on investment property and is measured on the weighted
average number of shares in issue during the period.
-- The EPRA NTA per share at 30 June 2022 was 111.80 pence per
share, the same as the IFRS NAV per share.
-- At the period end, the portfolio was independently valued at
GBP669.6 million on an IFRS basis compared to 642.0 million at 31
December 2021 , reflecting a valuation uplift of 12.7% against the
portfolio's aggregate purchase price of GBP594.0 million (including
acquisition costs). This reflects an EPRA net yield of 5.28%,
against the portfolio's blended net initial yield of 5.90% at the
point of acquisition.
-- The Group held cash and cash equivalents of GBP41.6 million
at 30 June 2022, compared to GBP52.5 million at 31 December 2021.
Cash generated from operating activities was GBP13.4 million for
the period, compared to GBP12.8 million for the period ended 30
June 2021.
-- The EPRA ongoing charges ratio is calculated as a percentage
of the average net asset value for the period. The ongoing charges
ratio for the period was 1.57% compared to 1.53% for the six months
ended 30 June 2021.
Debt Financing
During 2021 , the Group secured and fully drew GBP195.0 million
of long-term, fixed-rate, interest only, sustainability linked loan
notes through a private placement with MetLife Investment
Management and Barings. In addition, the Group has a GBP68.5
million long-term, fixed rate facility with MetLife Investment
Management. The Group has further access to liquidity through its
GBP50 million revolving credit facility with Lloyds and NatWest
.
This brings the value of the Group's total debt facilities to
GBP313.5 million of which GBP50.0 million is undrawn at 30 June
2022 . All of the Group's drawn debt is now fixed-price (with a
weighted average coupon of 2.74%) and long term. This offers the
Group strong protection in the current macroeconomic environment of
increasing interest rates and rising inflation.
During the period, the Group cancelled a portion of its existing
revolving credit facility, reducing it from GBP160.0 million to
GBP50.0 million in order to reduce commitment fees . The reduction
resulted in the writing of f of arrangement fees of GBP 2 . 0
million which were incurred in association with securing the
original facility. See the Bank and Other Borrowings note of the
Financial Statements for further details. This facility remained
undrawn during the period.
Last year , the Group obtained a first-time Investment Grade
Long-Term Issuer Default Rating (IDR) of 'A-' with a Stable Outlook
and a senior secured rating of 'A' from Fitch Ratings in respect of
the loan notes held with MetLife Investment Management and Barings
. The Group has recently completed its first annual review with
Fitch and was delighted to have re-affirmed its existing rating of
'A-' with a Stable Outlook and a senior secured rating of 'A' from
Fitch Ratings in respect of the loan notes held with MetLife
Investment Management and Barings facility again this ye ar. This
is a reflection of not only the Group's continued financial
resilience, but also the resilience of the sector in spite of the
broader economic and market conditions.
Further information on the Group's debt facilities is set out in
note 15 of the financial statements.
Strategic Alignment and Asset Selection
During the period the Group bought 10 properties for a total
investment cost of GBP12.0 million (including acquisition costs).
These properties provide 71 new units of accommodation and saw the
Group enter into lease s with two new Approved Provider s .
Property Portfolio
As at 30 June 2022, the portfolio comprised 493 properties with
3,421 units and showed a broad geographic diversification across
the UK. The four largest concentrated areas by market value were
the North West (20.0%), West Midlands (16.7%), Yorkshire (14.9%)
and East Midlands (11.4%). The IFRS value of the portfolio at 30
June 2022 was GBP669.6 million, growth of 4.3% during the period.
The table below sets out the Group's portfolio at the period
end:
31 December Change in
30 June 2022 2021 2022
Number of Assets 493 488 +5
------------- ------------ ----------
Number of Leases 391 382 +9
------------- ------------ ----------
Number of Units 3,421 3,424 -3
------------- ------------ ----------
Number of Approved Providers 26 24 +2
------------- ------------ ----------
Number of completed
Forward Funding Agreements 22 22 0
------------- ------------ ----------
WAULT (years) 25.9 26.2 -0.3
------------- ------------ ----------
The Group disposed of four properties during the period and
exchanged on the sale of two further properties, which had been
held for sale since June 2022, following the period end. The
decision to sell these properties was taken due to changes in the
underlying investment cases and, therefore, we believe this to have
been in the best interests of shareholders. Where occupied
properties have been sold, the Group's priority has been ensuring
that the sale proceeded in a way that ensured the continuous
provision of the services at the property. Since IPO, the Group has
sold a total of seven properties and its focus remains on securing
long-term, inflation - linked income to generate sustainable
financial returns . T he proceeds from these sales will be
reinvested into future Supported Housing property acquisitions.
Rental Income
In total, the Group had 391 leases which at the period end,
generated total annualised rental income of GBP37.4 million.
During the period, the Group entered into leases with another
two Approved Providers, increasing the number of Approved Providers
it has leases with to 26. This enhanced the Group's counterparty
diversification. The Group's three largest Approved Providers by
rental income and units were Inclusion (GBP11.6 million and 956
units), Parasol Homes (GBP3.4 million and 246 units) and Falcon
(GBP3.3 million and 301 units).
At the period end, the portfolio had a WAULT of 25.9 years in
line with 2021, with 90.5% of the portfolio's rental income showing
an unexpired lease term above 20 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. Notwithstanding the Group's recent change to its
investment policy to remove the minimum lease term, at present the
Group's WAULT is anticipated to remain above 20 years.
100% of the Group's contracted income is generated under leases
which are indexed against either CPI (92.4%) or RPI (7.6%). 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 8.4% of
the Group's leases. A small portion of the Group's leases (4.3% of
rental income) contain a cap and collar on rental increases. For
the purposes of the portfolio valuation, JLL assumed CPI and RPI to
increase at 2% per annum and 2.5% per annum respectively over the
term of the relevant leases. Despite the high levels of inflation
currently experienced, and projected in the short term in the UK,
JLL's inflation assumptions remain unchanged from previous periods
given the Group's long - term contracted income and outlook, with a
WAULT of 25.9 years.
Rent collection during the period was 96.13 %. During the period
two of the Group's Approved Providers fell behind with their rental
payments in a way that is not consistent with the Group's
historical rent collection rates . An expected credit loss has been
recognised in the Statement of Comprehensive Income on as a result
of these rent arrears. The Group has been actively working wi th
both of these Approved Providers to understand the reasons behind
the recent drop in rental payments and where possible offer them
support to address the underlying causes. The lower rent payments
have principally been caused by inflationary pressure on costs, a
requirement for additional maintenance work and in some instances
an under-collection of housing benefit from the relevant Local
Authority. We will continue to work with both of these Approved
Providers to address the root causes of the issues with the aim of
restoring rent levels to historical levels and, where possible,
agree a repayment schedule to recover a significant portion of the
outstanding rent.
Looking forward, and as mentioned in the Chair's statement, the
Department of Levelling Up, Housing and Communities is consulting
on a possible social housing rent cap in order to support
individuals and families with the cost of living increases. Any cap
would apply to rent increases effective in the year April 2023 and
options of a cap at 3%, 5% or 7% are being considered. At the
moment, it is uncertain whether the cap will be applied to
specialised social housing. We await the outcome of the
consultation but are conscious that it could impact on the margins
generated by Registered Providers, and therefore the Group's
lessees, which are already under pressure due to rising costs.
Outlook and Pipeline
The global economic climate is posing challenges in a manner not
experienced in recent times. Despite the Group's inflation-linked,
contracted income streams and long-term fixed - price debt, it too
is not immune from being adversely impacted by these issues.
Inflationary cost increases in every day goods and services and
utilities will have to be carefully managed by our Approved
Providers and care providers, increasing energy prices will impact
the cost of living for our residents . T hese are just two examples
of the real time impacts already being faced.
Despite this, as the Chair has remarked, we believe the Group is
in a strong position to weather these challenges. Our income
streams are resilient and have remained so throughout the COVID-19
pandemic. We recently refinanced the Group's debt facilities, and
all drawn debt is now on a fixed - price basis, insulating the
Group from the risk of interest rate increases. The fundamental
supply and demand imbalance in the sector remains the status quo.
This has meant valuations in the social housing sector as a whole
have held firm, especially when compared to other sectors within
the property market .
Our focus will remain on deploying our remaining capital into
much needed homes throughout the UK. The Group's pipeline stands at
over GBP 80 m illion of live investment opportunities . This
pipeline will enable the Group to deploy its remaining uncommitted
cash of GBP26 .0 million in the near term. And, of course as always
, we will remain focused on ensuring that our partners deliver good
homes to our residents throughout the UK.
Max Shenkman
Head of Investment
8 September 2022
Notes:
1
https://www.nao.org.uk/wp-content/uploads/2021/03/The-adult-social-care-market-in-England.pdf
PORTFOLIO SUMMARY
Region Properties % of Funds Invested*
------------------------------------ ----------- ---------------------
North West 99 20.1
West Midlands 83 16.2
Yorkshire 63 14.8
East Midlands 56 11.3
South East 62 9.6
North East 50 9.1
London 27 8.6
South West 29 4.8
East 20 4.1
Scotland 2 1.0
Wales 2 0.4
------------------------------------ ----------- ---------------------
Total 493 100.0
------------------------------------ ----------- ---------------------
* 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
-------------------------------------------------------- ----------------------------- ---------------------------
Dividends paid to The dividend reflects the Total dividends of 2.73 The Company has declared a
shareholders and declared Company's ability to pence per share were paid or dividend of 1.365 pence
during the year. deliver a low risk but declared in respect of the per Ordinary share in
growing income stream period 1 January respect of the period
Further information is set from the portfolio. 2022 to 30 June 2022. 1 April 2022 to 30 June
out in note 17 2022, which will be
(30 June 2021:2.60 pence) payable on or around 30
September 2022. Total
dividends paid and
declared for the period
are in line with the
Company's target.
--------------------------- ----------------------------- ---------------------------
2 . Loan to Value (LTV)
A proportion of our The Company uses gearing 36.8% LTV as at 30 June Borrowings comprise two
portfolio is funded to enhance equity returns. 2022. private placements of loan
through borrowings. Our notes totalling GBP263.5
medium to long-term target (31 December 2021: 37.6% million provided
LTV is 35% to 40% with a LTV) by MetLife Investment
maximum of 50%. Management and Barings.
The GBP50.0 million
revolving credit facility
with Lloyds and NatWest
was undrawn as at 30 June
2022.
3 . Weighted Average Unexpired Lease Term (WAULT)
-------------------------------------------------------- ----------------------------- ---------------------------
The average unexpired The WAULT is a key measure 25.9 years as at 30 June As at 30 June 2022, the
lease term of the of the quality of our 2022 (includes put and call portfolio's WAULT stood at
investment portfolio, portfolio. Long lease options). 25.9 years.
weighted by annual passing terms underpin the
rents. security of our income (31 December 2021: 26.2
stream. years)
--------------------------- ----------------------------- ---------------------------
4 . Exposure to Largest Approved Provider
--------------------------------------------------------------------------------------------------------------------
The percentage of the The exposure to the 29.5 % of Gross Asset Value Our maximum exposure limit
Group's gross assets that largest Approved Provider as at 30 June 2022. is 30% of GAV.
are leased to the single must be monitored to
largest Approved ensure that we are not (31 December 2021: 28.3%)
Provider. overly exposed to one
Approved Provider in the
event of a default
scenario.
--------------------------- ----------------------------- ---------------------------
5 . Total Return
--------------------------------------------------------------------------------------------------------------------
Change in EPRA NTA plus The Total Return measure EPRA NTA per share was The EPRA NTA per share at
total dividends paid highlights the gross 111.80 pence as at 30 June 30 June 2022 was 111.80
during the period. return to investors 2022. pence.
including dividends paid Total dividends paid during
since the prior year. the period ended 30 June
2022 were 2.665 pence per The Total Return since the
share. IPO is 37.39% at 30 June
2022.
Total return was 5.71 % for
the period ended 30 June
2022.
(30 June 2021: 2.44%)
--------------------------- ----------------------------- ---------------------------
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 22 and 23 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 the Group's underlying 1.94 pence per share for the period
gains from fair value adjustment on operating results and an indication ended 30 June 2022.
investment properties of the extent to which
that are included in the IFRS current dividend payments are (30 June 2021: 2.30 pence)
calculation for Earnings per share. supported by earnings. Full dividend cover on a look-through
EPRA earnings run-rate basis
including committed funds
was 1.0x as at 30 June 2022.
-------------------------------------- --------------------------------------
2. EPRA Net Reinstatement Value (NRV) per share
----------------------------------------------------------------------------------------------------------------------
The EPRA NRV adds back the A measure that highlights the value GBP491.7 million/122.07 pence per
purchasers' costs deducted from the of net assets on a long-term basis. share as at 30 June 2022.
IFRS valuation.
GBP475.6 million/118.07 pence per
share as at 31 December 2021.
-------------------------------------- --------------------------------------
3. EPRA Net Tangible Assets (NTA) per share
----------------------------------------------------------------------------------------------------------------------
The EPRA NTA is equal to IFRS NAV as A measure that assumes entities buy GBP450.3 million/111.80 pence per
there are no deferred tax liabilities and sell assets, thereby share as at 30 June 2022.
or other adjustments crystallising certain levels
applicable to the Group under the of deferred tax liability. GBP436.1 million/108.27 pence per
REIT regime. share as at 31 December 2021.
-------------------------------------- --------------------------------------
4. EPRA Net Disposal Value (NDV)
----------------------------------------------------------------------------------------------------------------------
The EPRA NDV provides a scenario A measure that shows the shareholder GBP489.5 million/121.53 pence per
where deferred tax, financial value if assets and liabilities are share as at 30 June 2022.
instruments, and certain other not held until maturity.
adjustments are calculated as to the GBP434.0 million/107.76 pence per
full extent of their liability. share as at 31 December 2021.
-------------------------------------- --------------------------------------
5. EPRA Net Initial Yield (NIY)
----------------------------------------------------------------------------------------------------------------------
Annualised rental income based on the A comparable measure for portfolio 5.28% at 30 June 2022.
cash rents passing at the balance valuations. This measure should make
sheet date, less non-recoverable it easier for investors 5.20% at 31 December 2021.
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 5.29% at 30 June 2022.
adjustment to the EPRA NIY in respect useful in that it allows investors to
of the expiration of rent-free see the yield based 5.27% at 31 December 2021.
periods (or other unexpired lease on the full rent that is contracted
incentives such as discounted rent at 31 June 2022.
periods and step rents).
-------------------------------------- --------------------------------------
7. EPRA Vacancy Rate
----------------------------------------------------------------------------------------------------------------------
Estimated Market Rental Value (ERV) A "pure" percentage measure of 0.25% at 30 June 2022.
of vacant space divided by ERV of the investment property space that is
whole portfolio. vacant, based on ERV. 0.26% at 31 December 2021.
-------------------------------------- --------------------------------------
8. EPRA Cost Ratio
----------------------------------------------------------------------------------------------------------------------
Administrative and operating costs A key measure to enable meaningful 21.27% at 30 June 2022.
(including and excluding costs of measurement of the changes in the
direct vacancy) divided Group's operating costs. 20.91% at 31 December 2021.
by gross rental income.
-------------------------------------- --------------------------------------
PRINCIPAL RISKS AND UNCERTAINTIES
The Audit Committee, which assists the Board with its
responsibilities for managing risk, considers that the majority of
principal risks and uncertainties as presented on pages 63 to 67 of
our 2021 Annual Report were unchanged during the period and will
remain unchanged for the remaining six months of the financial
year. The Audit Committee would like to draw attention to the
following principal risks in the 2021 Annual Report that could be
adversely impacted by events that have emerged over the first half
of the year:
-- Risk of changes to the social housing regulatory regime
-- Higher than projected levels of inflation may impact Approved Providers
-- Default of one or more Approved Provider lessees
As described in both the Chair's Statement and the Investment
Manager's Report, the government is currently consulting on a
possible rent cap to be applied to increases to social housing
rents for the year starting in April 2023. There is a likelihood
that a cap of either 3%, 5% or 7% will be implemented following the
review and that this cap could be applied to specialised supported
housing properties (albeit this has not yet been confirmed).
This emerging risk, coupled with the inflationary pressure on
the cost base of the Group's Approved Provider lessees, has
increased the risk of default of one or more Approved Providers,
and could lead to a mismatch between the annual rent increases in
leases and the corresponding increases that tenants can claim
through housing benefit. A rent cap would reflect a change to the
social housing regulatory and policy regime. We will continue to
monitor the impact of these emerging risks and will provide a full
update of the key risks in the Annual Report.
The Board undertakes a formal risk review, with the assistance
of the audit committee twice a year to assess the principal risks
and uncertainties. The Investment Manager on an ongoing basis has
responsibility for identifying potential risks and escalating these
in accordance with the risk management procedures.
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 UK-adopted IAS 34 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 n ote 18 and any material
changes in the related party transactions disclosed in the 2021
Annual 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
Chai r
8 September 2022
GROUP FINANCIAL STATEMENTS
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2022
Period from Period from
1 January 1 January Year ended
2022 to 30 2021 to 30 31 December
June 2022 June 2021 2021
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
-------------------------------- ----- ------------------------ ------------------------ -------------
Income
Rental income 4 18,208 15,931 33,117
Expected credit loss 4 (474) - -
Other income 110 - -
------------------------ ------------------------ -------------
Total income 17,844 15,931 33,117
Expenses
Directors' remuneration (151) (151) (307)
General and administrative
expenses (1,361) (1,012) (2,067)
Management fees 5 (2,362) (2,266) (4,552)
------------------------ ------------------------ -------------
Total expenses (3,874) (3,429) (6,926)
Gain from fair value
adjustment on investment
propert ies 9 17,120 747 8,998
------------------------
Operating profit 31,090 13,249 35,189
------------------------ ------------------------ -------------
Finance income 6 16 15 44
Finance costs 7 (6,178) (2,776) (6,823)
------------------------
Profit before tax 24,928 10,488 28,410
------------------------ ------------------------ -------------
Taxation 8 - - -
Profit and total comprehensive
income 24,928 10,488 28,410
======================== ======================== =============
IFRS Earnings per share
- basic and diluted 2 2 6.19p 2.60p 7.05p
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
As at 30 June 2022
30 June 30 June 31 December
2022 2021 2021
(unaudited) (unaudited) (audited)
------------------------------- -----
Note GBP'000 GBP'000 GBP'000
------------------------------- ----- ------------ ------------ ------------
Assets
Non-current assets
Investment properties 9 668,348 596,155 641,293
Trade and other receivables 10 2,607 - 2,311
------------ ------------ ------------
Total non-current assets 670,955 596,155 643,604
Current assets
Assets held for sale 640 500 480
Trade and other receivables 1 1 3,589 6,076 3,435
Cash, cash equivalents
and restricted cash 1 2 41,636 28,175 52,470
------------ ------------ ------------
Total current assets 45,865 34,751 56,385
Total assets 716,820 630,906 699,989
============ ============ ============
Liabilities
Current liabilities
Trade and other payables 1 3 (3,944) (5,315) (3,651)
------------
Total current liabilities (3,944) (5,315) (3,651)
Non-current liabilities
Other payables 1 4 (1,518) (1,513) (1,523)
Bank and other borrowings 1 5 (261,051) (195,414) (258,702)
------------ ------------ ------------
Total non-current liabilities (262,569) (196,927) (260,225)
Total liabilities (266,513) (202,242) (263,876)
============ ============ ============
Total net assets 450,307 428,664 436,113
============ ============ ============
Equity
Share capital 4,033 4,033 4,033
Share premium reserve 203,753 203,753 203,753
Treasury shares reserve (378) (378) (378)
Capital reduction reserve 1 6 160,394 166,154 160,394
Retained earnings 82,505 55,102 68,311
------------ ------------ ------------
Total Equity 450,307 428,664 436,113
============ ============ ============
IFRS Net asset value
per share - basic and
diluted 2 3 111.80p 106.42p 108.27p
The Condensed Group Financial Statements were approved and
authorised for issue by the Board on 8 September 2022 and signed on
its behalf by:
Chris Phillips
Chair
8 September 2022
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
For the six months ended 30 June 2022
Share Treasury Capital
Period from 1 January Share premium shares reduction Retained Total
2022 to 30 June 2022 capital reserve reserve reserve earnings equity
(unaudited) Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ----- --------- --------- --------- ----------- ---------- ---------
Balance at 1 January
2022 4,033 203,753 (378) 160,394 68,311 436,113
Profit and total
comprehensive income
for the period - - - - 24,928 24,928
Transactions with
owners
Dividends paid 17 - - - - (10,734) (10,734)
Balance at 30 June
2022 (unaudited) 4,033 203,753 (378) 160,394 82,505 450,307
========= ========= ========= =========== ========== =========
Share Treasury Capital
Period from 1 January Share premium shares reduction Retained Total
2021 to 30 June 2021 capital reserve reserve reserve earnings equity
(unaudited) Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ----- --------- --------- --------- ----------- ---------- ---------
Balance at 1 January
2021 4,033 203,776 (378) 166,154 55,066 428,651
Profit and total
comprehensive income
for the period - - - - 10,488 10,488
Transactions with
owners
Dividends paid 1 7 - - - - (10,452) (10,452)
Remaining 2020 share
issue costs capitalised - (23) - - - (23)
Balance at 30 June
2021 (unaudited) 4,033 203,753 (378) 166,154 55,102 428,664
========= ========= ========= =========== ========== =========
Share Treasury Capital
Year ended Share premium shares reduction Retained Total
31 December 2021 capital reserve reserve reserve earnings equity
(audited) Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ----- --------- --------- --------- ----------- ---------- ---------
Balance at 1 January
2021 4,033 203,776 (378) 166,154 55,066 428,651
Profit and total
comprehensive income
for the year - - - - 28,410 28,410
Transactions with
owners
Share issue costs
capitalised - (23) - - - (23)
Dividends paid 1 7 - - - (5,760) (15,165) (20,925)
Balance at 31 December
2021 (audited) 4,033 203,753 (378) 160,394 68,311 436,113
========= ========= ========= =========== ========== =========
CONDENSED GROUP STATEMENT OF CASH FLOWS
For the six months ended 30 June 2022
From 1 From 1
January January
2022 to 2021 to Year ended
30 June 30 June 31 December
2022 2021 2021
(unaudited) (unaudited) (audited)
-------------------------------------- ----- -------------- --- -------------- -------------
Note GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Profit before income tax 24,928 10,488 28,410
Adjustments for:
Expected Credit Loss 474 - -
Gain from fair value adjustment
on investment propert ies 9 (17,120) (747) (8,998)
Finance income 6 (16) (15) (44)
Finance costs 7 6,178 2,776 6,823
--------------
Operating results before working
capital changes 14,444 12,502 26,191
(Increase) / d ecrease in trade
and other receivables (710) 613 (1,237)
Decrease in trade and other
payables (294) (329) (242)
-------------- -------------- -------------
Net cash flow generated from
operating activities 13,440 12,786 24,712
-------------- -------------- -------------
Cash flows from investing
activities
Purchase of investment properties (10,962) (23,126) (61,350)
Disposal proceeds from sale
of assets 1,480 125 125
Prepaid acquisition costs paid - (1,968) (18)
Restricted cash - released - 89 279
Restricted cash - paid - - (410)
Net cash flow used in investing
activities (9,482) (24,880) (61,374)
-------------- -------------- -------------
Cash flows from financing
activities
Ordinary Share issue costs
capitalised - (23) (23)
Bank borrowings drawn - - 195,000
Bank borrowings repaid - - (130,000)
Loan arrangement fees paid (444) (567) (2,728)
Dividends paid 1 7 (10,734) (10,452) (20,925)
Interest paid (3,614) (2,275) (5,615)
-------------- -------------- -------------
Net cash flow (used in) /
generated from financing activities (14,792) (13,317) 35,709
-------------- -------------- -------------
Net decrease in cash and cash
equivalents (10,834) (25,411) (953)
Unrestricted cash and cash
equivalents at the beginning
of the period 51,899 52,852 52,852
--------------
Unrestricted cash and cash
equivalents at the end of the
period 1 2 41,065 27,441 51,899
============== ============== =============
NOTES TO THE GROUP CONDENSED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
For the six months ended 30 June 2022
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
These condensed Group interim financial statements for the six
months ended 30 June 2022 have been prepared in accordance with IAS
34 "Interim Financial Reporting" and also in accordance with the
measurement and recognition principles of UK-adopted international
accounting standards. They do not include all of the disclosures
that would otherwise be required in a complete set of financial
statements and should be read in conjunction with the 2021 Annual
Report.
The comparative figures for the financial year ended 31 December
2021 are not the Group's statutory accounts for that financial
year. Those accounts have been reported on by the Group's auditors
and delivered to the registrar of companies. The report of the
auditor (i) was unqualified, (ii) did not include a reference to
any matters to which the auditor drew attention by way of emphasis
without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
The condensed Group interim financial statements for the six
months ended 30 June 2022 have been reviewed by the Company's
Auditor, BDO LLP, in accordance with International Standard on
Review Engagements 2410, Review of Interim Financial Information
Performed by the Independent Auditor of the Entity. The condensed
Group interim financial statements are unaudited and do not
constitute statutory accounts for the purposes of the Companies Act
2006.
The condensed Group interim 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 and method of
computation in these condensed Group interim financial statements
as in its 2021 annual financial statements and are expected to be
consistently applied during the year ending 31 December 2022.At the
date of authorisation of these financial statements, there were a
number of standards and interpretations which were in issue but not
yet effective. The Group has assessed the impact of these
amendments and has determined that the application of these
amendments and interpretations in current and future periods will
not have a significant impact on the financial statements.
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.
Covid-19 has not impacted the Group's ability to continue as a
going concern for reasons discussed below. The Directors are also
aware of the global economic uncertainty caused by the war in
Ukraine and the current cost of living crisis. The Group is
fortunate that the investment strategy is resilient due to
compelling fundamentals and has no direct exposure to Russia.
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.
The Directors have performed an assessment of the ability of the
Group and Parent Company to continue as a going concern, for a
period of at least 12 months from the date of signing these
condensed Group interim financial statements. The Directors have
considered the expected obligations of the Group 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 Approved 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. 96.1% of rental income due and payable for the six
months ended 30 June 2022 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 Investment Management and MetLife
Investment Management and Barings respectively. TP REIT Propco 5
Limited has a Revolving Credit Facility (RCF) with Lloyds and
NatWest however, this was undrawn at the year end and remains so at
date of signing.
The loans secured by Norland Estates Limited and TP REIT Propco
2 Limited are subject to asset cover ratio covenants and interest
cover ratio covenants which can be found in the table below. The
Directors have considered reverse stress testing and the
circumstances that would lead to a covenant breach. Given the level
of headroom, the Directors are of the view that the risk of
scenarios materialising that would lead to a breach of the
covenants is remote.
Norland Estates TP REIT Propco
Limited 2 Limited
Asset Cover
---------------- ---------------
Asset Cover Ratio Covenant x2.00 x1.67
---------------- ---------------
Asset Cover Ratio 30 June x2.84 x2.10
2022
---------------- ---------------
Blended Net initial yield 5.24% 5.34%
---------------- ---------------
Headroom (yield movement) 267bps 175bps
---------------- ---------------
Interest Cover
---------------- ---------------
Interest Cover Ratio Covenant 1.75x 1.75x
---------------- ---------------
Interest Cover Ratio 30 June
2022 5.00x 4.33x
---------------- ---------------
Headroom (rental income movement) 35% 41%
---------------- ---------------
The loan secured by Norland Estates Limited asset cover ratio
was amended from previous covenant of x2.25 in August 2021 to bring
it more in line with the ACR covenant in the new Note Purchase
Agreement with MetLife Investment Management and Barings.
Under the downside model the forecasts have been stressed to
show the effect of Care Providers ceasing to pay their voids
liability, and as a result lessees being unable to pay rent on void
units. It assumes that the Approved 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
condensed Group interim financial statements.
As a result of the above, the Directors are of the opinion that
the going concern basis adopted in the preparation of these
condensed Group interim financial statements is appropriate.
2.2 Reporting period
The financial statements have been prepared for the period ended
30 June 2022. The comparative periods are the six-month period
ended 30 June 2021 and the year ended 31 December 2021.
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 2021. In the Directors' 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 the current macroeconomic
environment. Further details can be found in note 9.
4. RENTAL INCOME
1 January 1 January Year ended
2022 to 30 2021 to 30 31 December
June 2022 June 2021 2021
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Rental income - freehold
assets 17,131 14,949 31,071
Rental income - leasehold
assets 1,077 982 2,046
------------ ------------ -------------
18,208 15,931 33,117
------------ ------------ -------------
Expected credit loss (474) - -
============ ============ =============
The lease agreements between the Group and the Approved
Providers are fully repairing and insuring leases. The Approved
Providers are responsible for the settlement of all present and
future rates, taxes, costs and other impositions payable in respect
of the properties.
All rental income arose within the United Kingdom.
The expected loss rates are based on the Group's credit losses
experienced which occurred this period for the first time since
IPO. The loss rates are then adjusted for current and
forward-looking information affecting the Group's tenants.
5. MANAGEMENT FEES
1 January 1 January Year ended
2022 to 30 2021 to 30 31 December
June 2022 June 2021 2021
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Management fees 2,362 2,266 4,552
------------ -------------
2,362 2,266 4,552
============ ============ =============
On 20 July 2017 Triple Point Investment Management LLP 'TPIM'
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 GBP2,362,000 were chargeable by TPIM during
the six months ended 30 June 2022 (30 June 2021 - GBP2,266,000, 31
December 2021 - GBP4,552,000). At the period end, GBP1,187,000 was
due to TPIM (30 June 2021 - GBP1,132,000, 31 December 2021 -
GBP1,146,000).
By two agreements dated 30 June 2020, the Company appointed TPIM
as its Alternative Investment Fund Manager by entering into an
Alternative Investment Fund Management Agreement and (separately)
documented TPIM's continued appointment as the provider of
portfolio and property management services by entering into an
Investment Management Agreement.
6. FINANCE INCOME
1 January 1 January Year ended
2022 to 30 2021 to 30 31 December
June 2022 June 2021 2021
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Head lease interest income 15 15 44
Interest on liquidity funds 1 - -
------------ ------------ -------------
16 15 44
============ ============ =============
7. FINANCE COSTS
1 January 1 January Year ended
2022 to 30 2021 to 30 31 December
June 2022 June 2021 2021
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Interest payable on bank
borrowings 3,609 2,270 5,492
Amortisation loan arrangement
fees 562 487 1,279
Written off loan arrangement
fees 1,986 - -
Head lease interest expense 15 15 44
Bank charges 6 4 8
------------ ------------ -------------
6,178 2,776 6,823
Total finance cost for
financial liabilities not
held at fair value through
profit or loss 6,172 2,772 6,815
============ ============ =============
The loan arrangement fees written off during the period relate
to previously capitalised arrangement fees following the reduction
in the RCF which was considered to be a substantial modification
under IFRS 9. See note 15 for further details.
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 six months ended 30 June 2022, 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 PROPERTIES
Operational Properties
assets under development Total
GBP'000 GBP'000 GBP'000
------------ ------------------- -----------------------
As at 1 January 2022 641,293 - 641,293
Acquisitions and additions* 11,543 - 11,543
Fair value adjustment** 24,085 - 24,085
Movement in head lease ground
rent liability (4) - (4)
Disposals (7,075) - - (7,075)
Reclassified to assets held
for sale (1,494) - (1,494)
------------ ------------------- -----------------------
As at 30 June 2022 (unaudited) 668,348 - 668,348
------------ ------------------- -----------------------
As at 1 January 2021 565,533 6,568 572,101
Acquisitions and additions 22,259 1,567 23,826
Fair value adjustment** 1,240 - 1,240
Movement in head lease ground
rent liability (4) - (4)
Transfer of completed properties 8,135 (8,135) -
Reclassified to assets held
for sale (1,008) - (1,008)
------------ ------------------- -----------------------
As at 30 June 2021 (unaudited) 596,155 - 596,155
------------ ------------------- -----------------------
As at 1 January 2021 565,533 6,568 572,101
Acquisitions and additions 59,114 1,568 60,682
Fair value adjustment** 9,513 - 9,513
Movement in head lease ground
rent liability 5 - 5
Transfer of completed properties 8,136 (8,136) -
Reclassified to assets held
for sale (1,008) - (1,008)
------------ ------------------- -----------------------
As at 31 December 2021
(audited) 641,293 - 641,293
------------ ------------------- -----------------------
*Additions in the table above differs to the total investment
cost of new properties in the period in the front end due to
retentions no longer payable which were credited to Investment
Property additions.
**Gain from fair value adjustment on investment properties in
the condensed Group statement of comprehensive income is net of the
loss from fair value adjustments on assets held for sale of GBP0.87
million (30 June 2021- GBP0.49 million, 31 December 2021 - GBP0.51
million) and loss on disposal of three assets of GBP6.1m (30 June
2021- GBP0.515, 31 December 2021 - GBPnil).
Reconciliation to independent valuation:
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
Investment property valuation 669,574 596,336 642,018
Fair value adjustment -
headlease ground rent 1,458 1,453 1,462
Fair value adjustment -
lease incentive debtor (2,684) (1,634) (2,187)
-------- ----------------- ------------
668,348 596,155 641,293
-------- ----------------- ------------
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 2022 was
GBP36.00 million (30 June 2021 - GBP36.70 million, 31 December 2021
- GBP39.36 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.
JLL provide their fair value of the Group's investment property
portfolio every three months.
JLL were appointed as external valuer by the Board on 11
December 2017. 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 seven years.
% Key Statistics
The metrics below are in relation to the total investment
property portfolio held as at 30 June 2022.
30 June 30 June 31 December
Portfolio Metrics 2022 2021 2021
Capital Deployed (GBP'000)* 593,996 553,561 569,991
Number of Properties 493 458 488
Number of Tenancies*** 391 355 382
Number of Approved Providers*** 26 22 24
Number of Local Authorities*** 151 157 156
Number of Care Providers*** 121 109 114
Average NIY** 5.28% 5.28% 5.25%
* calculated excluding acquisition costs
**calculated using IAS 40 valuations (excluding forward funding
acquisitions)
*** calculated excluding forward funding acquisitions
Regional exposure
30 June 2022 30 June 2021 31 December 2021
% of % of
*Cost funds *Cost % of funds *Cost funds
Region GBP'000 invested GBP'000 invested GBP'000 invested
--------------- --------- ---------- --------- ----------- --------- ----------
North West 115,042 20.1 118,985 22.3 122,622 21.5
West Midlands 92,794 16.2 88,593 16.6 92,794 16.3
East Midlands 64,589 11.3 64,595 12.1 64,595 11.3
Yorkshire 85,021 14.8 58,077 10.9 49,526 8.7
South East 54,799 9.6 50,308 9.4 47,061 8.3
London 49,555 8.6 49,213 9.2 81,034 14.2
North East 51,988 9.1 47,061 8.8 52,196 9.2
South West 27,466 4.8 27,900 5.2 27,900 4.9
East 23,703 4.1 21,204 4.0 23,703 4.2
Scotland 5,900 1.0 5,900 1.1 5,900 1.0
Wales 2,660 0.4 2,660 0.4 2,660 0.4
Total 573,517 100.0 534,496 100 569,991 100
--------- ---------- --------- ----------- --------- ----------
*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:
Investment properties 30 June 2022 668,348 - - 668,348
------------------------ -------------- -------- ----------- ------------ --------------
Investment properties 30 June 2021 596,155 - - 596,155
------------------------ -------------- -------- ----------- ------------ --------------
31 December
Investment properties 2021 641,293 - - 641,293
------------------------ -------------- -------- ----------- ------------ --------------
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 properties 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 specialised supported housing
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 assets 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 properties, taking into
account the expected rental growth rate and lease incentive costs
such as rent-free periods. The expected net cash flows are then
discounted using risk-adjusted discount rates.
There are two main unobservable inputs that determine the fair
value of the Group's investment properties:
1. The rate of inflation as measured by CPI; it should be noted
that all leases benefit from either CPI or RPI indexation; and
2. The discount rate applied to the rental flows.
Key factors in determining the discount rates applied include
the performance of the regulated social housing sector and demand
for each specialist supported housing property owned by the Group,
costs of acquisition and refurbishment of each property, the
anticipated future underlying cash flows for each property,
benchmarking of each underlying rent for each property (passing
rent), and the fact that all of the Group's properties have the
benefit of full repairing and insuring leases entered into by a
Housing Association.
All of the properties within the Group's portfolio benefit from
leases with annual indexation based upon CPI or RPI. The fair value
measurement is based on the above items, highest and best use,
which does not differ from their actual use.
Sensitivities of measurement of significant unobservable
inputs
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 6.63% (30 June 2021 - 6.58%, 31 December 2021 -
6.63%).
The range of discount rates used in the Group's property
portfolio valuation is from 6.21% to 8.10%. (30 June 2021 -
6.2%-7.6%, 31 December 2021 - 6.21%-8%).
-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 2022 42,290 (38,417) 21,597 (20,635)
Changes in the IFRS
fair value of investment
properties as at 30
June 2021 37,654 (34,246) 19,249 (18,406)
Changes in the IFRS
fair value of investment
properties as at 31
December 2021 26,922 (24,663) 21,190 (20,238)
Given that the factors on which the valuations are based have
not been adversely affected by the macroeconomic environment, there
has been no direct impact to the investment property valuation at
30 June 2022. The valuations have also not been influenced by
climate related factors due to there being little measurable impact
on inputs at present.
10. TRADE AND OTHER RECEIVABLES (non current)
30 June 2022 30 June 31 December
(unaudited) 2021 (unaudited) 2021 (audited)
GBP'000 GBP'000 GBP'000
Lease incentive debtor 2,430 - 2,128
Other receivables 177 - 183
----------------
2,607 - 2,311
============= ================== ================
The Directors consider that the carrying value of trade and
other receivables approximate their fair value. All amounts are due
to be received in more than one year from the reporting date.
11. TRADE AND OTHER RECEIVABLES (current)
30 June 2022 30 June 31 December
(unaudited) 2021 (unaudited) 2021 (audited)
GBP'000 GBP'000 GBP'000
Rent receivable 2,808 1,498 1,971
Expected credit loss (474) - -
Prepayments 831 2,859 796
Lease incentive debtor 254 - -
Other receivables 170 1,719 668
----------------
3,589 6,076 3,435
============= ================== ================
Included in Prepayments are prepaid acquisition costs which
include the cost of acquiring assets not completed at the period
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 general approach to providing for expected
credit losses under IFRS 9 for other receivables. Where the credit
loss relates to revenue already recognised in the Income Statement,
the expected credit loss allowance is recognised in the Statement
of Comprehensive Income. Expected credit losses totalling GBP0.47m
(2021: nil) were charged to the Statement of Comprehensive Income
in the period.
12. CASH, CASH EQUIVALENTS AND RESTRICTED CASH
30 June 31 December
30 June 2022 2021 2021
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Cash held by lawyers 43 3,513 8,459
Restricted cash 571 734 571
Ring-fenced cash 1,095 - 4,451
Cash at bank 39,927 23,928 38,989
------------- ------------ ------------
41,636 28,175 52,470
============= ============ ============
Cash held by lawyers is money held in escrow for expenses
expected to be incurred in relation to investment properties
pending completion. These funds are available immediately on
demand.
Restricted cash represents retention money (held by lawyers
only) 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. It also includes funds held in an
escrow account in relation to the lease transferred in 2020.
Ring-fenced cash includes retention monies held by Coutts in a
"charged" account which requires lender's permission to release,
and funds held in a separate bank account for upcoming commitment
fees on the Lloyds RCF.
30 June 31 December
30 June 2022 2021 2021
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Total cash, cash equivalents
and restricted cash 41,636 28,175 52,470
Restricted cash (571) (734) (571)
------------- ------------ ------------
Cash reported on Statement
of Cash Flows 41,065 27,441 51,899
============= ============ ============
13. TRADE AND OTHER PAYABLES
30 June 2022 30 June 31 December
(unaudited) 2021 (unaudited) 2021 (audited)
GBP'000 GBP'000 GBP'000
Trade payables 25 80 48
Accruals 1,930 2,697 2,373
Head lease ground rent 40 40 39
Other creditors 1,949 2,498 1,191
------------- ------------------ ----------------
3,944 5,315 3,651
============= ================== ================
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.
14. OTHER PAYABLES
30 June 2022 30 June 31 December
(unaudited) 2021 (unaudited) 2021 (audited)
GBP'000 GBP'000 GBP'000
Head lease ground rent 1,418 1,413 1,423
Rent deposit 100 100 100
------------------
1,518 1,513 1,523
============= ================== ================
15. BANK AND OTHER BORROWINGS
30 June 30 June 31 December
2022 (unaudited) 2021 (unaudited) 2021 (audited)
GBP'000 GBP'000 GBP'000
Bank and other borrowings
drawn at period end 263,500 198,500 263,500
------------------ ------------------ ----------------
Unamortised costs at beginning
of period (4,798) (3,573) (3,573)
Less: loan issue costs incurred (30) - (2,390)
Add: loan issue costs written
off 2,085 - -
Add: loan issue costs amortised 294 487 1,165
------------------ ------------------ ----------------
Unamortised costs at period
end (2,449) (3,086) (4,798)
------------------ ------------------ ----------------
Balance at period end 261,051 195,414 258,702
================== ================== ================
The amount of loan arrangement fees written off and amortised in
note 7 differs to the amounts in the table above as this excludes
amounts in relation to the undrawn RCF which are included within
Prepayments.
At 30 June 2022 there were undrawn bank borrowings of GBP50
million. (30 June 2021 - GBP30 million, 31 December 2021 - GBP160
million).
As at 30 June 2022, the Group's borrowings comprised two debt
facilities:
-- 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 Investment Management (and affiliated
funds).
-- GBP195 million long-dated, fixed-rate, interest-only
sustainability-linked loan notes through a private placement with
MetLife Investment Management clients and Barings.
The Group also have access to GBP50 million RCF with Lloyds and
NatWest which was undrawn at the reporting date.
Loan Notes
The Loan Notes of GBP68.5 million are secured against a
portfolio of specialist supported living assets throughout the UK,
worth approximately GBP193 million (30 June 2021 - GBP185million,
31 December 2021 - GBP188 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
GBP27.0 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 3.04% pa. At 30 June 2022, the Loan Notes have
been independently valued at GBP63 million which has been used to
calculate the Group's EPRA Net Disposal Value in note 4 of the
Unaudited Performance Measures. The fair value is determined by
comparing the discounted future cash flows using the contracted
yields with the reference gilts plus the margin implied. The
reference gilts used were the Treasury 0.569% 2028 Gilt (Tranche A)
and Treasury 0.838% 2033 Gilt (Tranche B), with an implied margin
that is unchanged since the date of fixing.
In August 2021, the Group put in place Loan Notes of GBP195
million which enabled the Group to refinance the full GBP130
million previously drawn under its GBP160 million RCF with Lloyds
and NatWest. The Loan Notes are secured against a portfolio of
specialist supported living assets throughout the UK, worth
approximately GBP410 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 GBP77.5
million, has a term of 10 years from utilisation and is priced at
an all-in coupon of 2.403% pa; and Tranche-B, is an amount of
GBP117.5 million, has a term of 15 years from utilisation and is
priced at an all-in coupon of 2.786% pa. On a blended basis, the
weighted average term is 13 years carrying a weighted average fixed
rate coupon of 2.634% pa. At 30 June 2022, the Loan Notes have been
independently valued at GBP154 million which has been used to
calculate the Group's EPRA Net Disposal Value in note 4 of the
Unaudited Performance Measures. The fair value is determined by
comparing the discounted future cash flows using the contracted
yields with the reference gilts plus the margin implied. The
reference gilts used were the Treasury 0.560% 2031 Gilt (Tranche A)
and Treasury 0.846% 2036 Gilt (Tranche B), with an implied margin
that is unchanged since the date of fixing. The loans are
considered to be a Level 2 fair value measurement.
RCF
The RCF was fully refinanced on 26 August 2021 and as a result,
was novated from TP REIT Propco 2 Limited to TP REIT Propco 5
Limited. This was not considered to be a substantial modification
under IFRS 9 in the Group accounts, as there is no change to the
borrower at Group level. On 21 February 2022, the facility was
reduced from GBP160 million to GBP50 million, this led to the
writing off of GBP2.0 million arrangement fees. Otherwise, the
terms remain unchanged and at 30 June 2022 the facility remained
undrawn. The originally agreed four-year term was previously
extended in 2020 by one further year expiring on 20 December 2023.
This may be extended by a further year, to 20 December 2024
(subject to the consent of the lenders). Originally, the interest
rate for drawn amounts was 1.85% per annum over three-month
LIBOR.
Under the amended and restated facility agreement in place pre
the refinance, the Group negotiated and agreed provisions setting
pre-agreed terms for the transition of LIBOR to the new benchmark
rate SONIA from 1 July 2021. For undrawn loan amounts the Group
pays a commitment fee in the amount of 40% of the margin. When
fully drawn, the RCF will represent a loan-to-value of 40% secured
against a defined portfolio of the Group's specialist supported
housing assets located throughout the UK and held in a wholly-owned
Group subsidiary. For the RCF there is considered no other
difference between fair value and carrying value.
The Group has met all compliance with its financial covenants on
the above loans throughout the year.
1 to 3 to
2 5 > 5
Total < 1 year years years years
--------------------- -------- --------- -------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 30 June 2022 50,000 - 50,000 - -
-------- --------- -------- -------- --------
At 30 June 2021 30,000 - - 30,000 -
-------- --------- -------- -------- --------
At 31 December 2021 160,000 - 160,000 - -
-------- --------- -------- -------- --------
Undrawn committed bank facilities - maturity profile
16. CAPITAL REDUCTION RESERVE
30 June 30 June 31 December
2022 (unaudited) 2021 (unaudited) 2021 (audited)
GBP'000 GBP'000 GBP'000
Balance at beginning of period 160,394 166,154 166,154
Dividends paid - - (5,760)
------------------
Balance at end of period 160,394 166,154 160,394
================== ================== ================
The capital reduction reserve relates to the distributable
reserve established on cancellation of the share premium reserve.
Dividends have been distributed out of Retained Earnings in the
current period and out of Retained Earnings and the Capital
Reduction Reserve in the year ended 31 December 2021 .
17. DIVIDS
1 January
2022 to 1 January Year ended
30 June to 30 June 31 December
2022 (unaudited) 2021 (unaudited) 2021 (audited)
GBP'000 GBP'000 GBP'000
1.295p for the 3 months to 31
December 2020 paid on 26 March
2021 - 5,217 5,217
1.3p for the 3 months to 31
March 2021 paid on 25 June 2021 - 5,236 5,236
1.3p for the 3 months to 30
June 2021 paid on 30 September
2021 - - 5,236
1.3p for the 3 months to 30
September 2021 paid on 17 December
2021 - - 5,236
1.3p for the 3 months to 31
December 2021 paid on 11 March
2022 5,236 - -
1.365p for the 3 months to 31
March 2022 paid on 24 June 2022 5,498 - -
------------------
10,734 10,453 20,925
================== ================== ================
On 8 September 2022 the Company declared an interim dividend of
GBP1.365 pence per Ordinary Share for the period 1 April 2022 to 30
June 2022. The total dividend of GBP5.5 million will be paid on 30
September 2022 to Ordinary shareholders on the register on 16
September 2022.
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.
18. 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 Investment Manager, 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 493 (30 June 2021 -
458, 31 December 2021 - 488) Social Housing properties as at 30
June 2022 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.
19. RELATED PARTY DISCLOSURE
Directors
Directors are remunerated for their services at such rate as the
Directors shall from time to time determine. The Chair receives a
director's fee of GBP75,000 per annum (30 June 2021 - GBP75,000, 31
December 2021 - GBP75,000), and the other Directors of the Board
receive a fee of GBP50,000 (30 June 2021 - GBP50,000, 31 December
2021 - GBP50,000) per annum. The Directors are also entitled to an
additional fee of GBP7,500 in connection with the production of
every prospectus by the Company. This was received by the Directors
in 2020 but not in 2021 or the current year as no prospectus was
produced.
Dividends of the following amounts were paid to the Directors
during the period:
Chris Phillips: GBP1,462 (30 June 2021- GBP1,423, 31 December 2021
-GBP2,850)
Peter Coward: GBP2,103 (30 June 2021- GBP1,984, 31 December 2021
-GBP4,031)
Paul Oliver: GBP2,078 (30 June 2021 - GBP2,023, 31 December
2021 -GBP4,050)
Tracey Fletcher-Ray: GBP1,006 (30 June 2021- GBP979, 31 December 2021
-GBP1,960)
No shares were held by Ian Reeves as at 30 June 2022 (31
December 2021 and 30 June 2021: nil).
20. POST BALANCE SHEET EVENTS
Property acquisitions
Subsequent to the end of the period, the Group has acquired
portfolios of 2 supported Social Housing properties deploying
GBP3.4 million (including acquisition costs).
Dividends
On 8 September 2022, the Company declared an interim dividend of
GBP1.365 pence per Ordinary Share for the period 1 April 2022 to 30
June 2022. The total dividend of GBP5.5 million will be paid on 30
September 2022 to Ordinary shareholders on the register on 16
September 2022.
21. CAPITAL COMMITMENTS
The Group has capital commitments of GBPnil (30 June 2021 -
GBP1.0 million, 31 December 2021 - GBP4.2 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 2022.
22. 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 2022 2021 Year ended
to 30 June to 30 June 31 December
2022 2021 2021
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Calculation of Basic
Earnings per share
Net profit attributable
to ordinary shareholders
(GBP'000) 24,928 10,488 28,410
Weighted average number
of ordinary shares (including
treasury shares) 402,789,002 402,789,002 402,789,002
IFRS Earnings per share
- basic and diluted 6.19p 2.60p 7.05p
--------------- ------------ ------------
EPRA Earnings per share
1 January 1 January
2022 to 30 2021 to 30 Year ended
June 2022 June 2021 31 December
(unaudited) (unaudited) 2021 (audited)
GBP'000 GBP'000 GBP'000
Net profit attributable
to ordinary shareholders
(GBP'000) 24,928 10,488 28,410
Changes in value of
fair value of investment
property (GBP'000) (17,120) (1,240) (8,998)
EPRA earnings (GBP'000) 7,808 9,248 19,412
Non cash adjustments
to include:
Amortisation of loan
arrangement fees (GBP'000) 562 487 1,279
Written off loan arrangement
fees (GBP'000) 1,986 - -
------------- ------------- ----------------
Adjusted EPRA earnings
(GBP'000) 10,356 9,735 20,691
------------- ------------- ----------------
Weighted average number
of ordinary shares (including
treasury shares) 402,789,002 402,789,002 402,789,002
------------- ------------- ----------------
Earnings per share
- EPRA 1.94p 2.30p 4.82p
------------- ------------- ----------------
Adjusted EPRA earnings
per share 2.57p 2.42p 5.14p
------------- ------------- ----------------
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.
For this EPRA measure and preceding EPRA measures, please refer
to explanations and definitions of the EPRA performance measures
that can be found below.
23. 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 Company 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
2022 2021 2021
(unaudited) (unaudited) (audited)
Net assets at end of period
(GBP'000) 450,307 428,664 436,113
Shares in issue at end of
period (excluding shares held
in treasury) 402,789,002 402,789,002 402,789,002
IFRS NAV per share - basic
and dilutive 111.80p 106.42p 108.27p
------------ ------------ ------------
24. UNAUDITED 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; and
ii. The hypothetical sale will take place in the form of a single portfolio disposal.
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
Net asset value per the consolidated
financial statements 450,307 428,664 436,113
Value of asset pools 450,307 428,664 436,113
Effects of the adoption to the
assumed, hypothetical sale of
properties as a portfolio and
on the basis of sale of a corporate
vehicle 57,829 43,639 49,974
-------- -------- ------------
Portfolio NAV 508,136 472,303 486,087
======== ======== ============
After reflecting these amendments, the movement in net assets is
as follows:
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
Opening reserves 486,088 468,788 468,788
Remaining share issue costs - (23) (23)
Operating profits 13,970 12,502 26,191
Capital appreciation 25,847 4,741 19,350
Loss on fair value adjustment
on assets held for sale (873) (493) (515)
Finance income 16 15 44
Finance costs (6,178) (2,776) (6,823)
Dividends paid (10,734) (10,452) (20,925)
------------ ------------ ------------
Portfolio Net Assets 508,136 472,302 486,087
============ ============ ============
Number of shares in issue at
the period end 402,789,002 402,789,002 402,789,002
Portfolio NAV per share 126.16p 117.26p 120.68p
2. ADJUSTED EARNINGS PER SHARE - PORTFOLIO NAV BASIS
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
Net rental income 17,734 15,931 33,117
Other income 110 - -
Expenses (3,874) (3,429) (6,926)
Fair value gains on investment
properties 75,822 44,879 58,973
Loss on fair value adjustment
on assets held for sale (873) (493) (515)
Finance income 16 15 44
Finance costs (6,178) (2,776) (6,823)
------------ ------------ ------------
Value of each pool 82,757 54,127 77,870
============ ============ ============
Weighted average number of
shares 402,789,002 402,789,002 402,789,002
Adjusted earnings per share
- basic 20.55p 13.44p 19.46p
3. EPRA Net Reinstatement Value
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
IFRS NAV/EPRA NAV (GBP'000) 450,307 428,664 436,113
Include:
Real Estate Transfer Tax*
(GBP'000) 41,361 36,672 39,492
EPRA Net Reinstatement
Value (GBP'000) 491,668 465,336 475,605
Fully diluted number of
shares 402,789,002 402,789,002 402,789,002
EPRA Net Reinstatement
value per share 122.07p 115.53p 118.07p
* Purchaser's costs
4. EPRA Net Disposal Value
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
IFRS NAV/EPRA NAV (GBP'000) 450,307 428,664 436,113
Include:
Fair value of debt* (GBP'000) 39,192 (4,978) (2,059)
EPRA Net Disposal Value
(GBP'000) 489,499 423,686 434,054
Fully diluted number of
shares 402,789,002 402,789,002 402,789,002
EPRA Net Disposal Value** 121.53p 105.19p 107.76p
* 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
2022 2021 2021
GBP'000 GBP'000 GBP'000
IFRS NAV/EPRA NAV (GBP'000) 450,307 428,664 436,113
EPRA Net Tangible Assets
(GBP'000) 450,307 428,664 436,113
Fully diluted number of
shares 402,789,002 402,789,002 402,789,002
EPRA Net Tangible Assets
* 111.80p 106.42p 108.27p
*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
2022 2021 2021
GBP'000 GBP'000 GBP'000
Investment Property - wholly
owned 666,890 594,702 639,831
Less: development properties - - -
Completed property portfolio 666,890 594,702 639,831
Allowance for estimated
purchasers' costs 41,361 36,672 39,492
Gross up completed property
portfolio valuation 708,251 631,374 679,323
Annualised passing rental
income 37,416 32,901 35,343
Property outgoings - - -
Annualised net rents 37,416 32,901 35,343
Contractual increases for
lease incentives 79 523 443
Topped up annualised net
rents 37,495 33,424 35,786
EPRA NIY 5.28% 5.21% 5.20%
EPRA Topped Up NIY 5.29% 5.29% 5.27%
7. ONGOING CHARGES RATIO
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
Annualised ongoing charges 6,960 6,542 6,671
Average undiluted net assets 443,210 428,657 432,382
Ongoing charges 1.57% 1.53% 1.54%
8. EPRA VACANCY RATE
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
Estimated Market Rental
Value (ERV) of vacant spaces 93 92 93
Estimated Market Rental
Value (ERV) of whole portfolio 37,416 33,424 35,785
EPRA Vacancy Rate 0.25% 0.28% 0.26%
9. EPRA COST RATIO
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
Total administrative and
operating costs 3,874 3,429 6,926
Gross rental income 18,208 15,931 33,117
EPRA cost ratio 21.27% 21.52% 20.91%
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IR LVLLBLKLEBBK
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