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Triple Point Social Housing REIT to cap rental uplifts at 7%

Triple Point Social Housing REIT (SOHO) has said that it will implement a 7% cap on rental uplifts this year.

The temporary one-year cap (which will end on 31 December 2023) is consistent with both the UK government’s 7% cap on social housing rent increases (Specialised Supported Housing that SOHO and Civitas Social Housing provide is excluded from the cap) and the group’s highest historical weighted average annual rental growth rate (being 6.7% for the year 2022).

The group said the cap applied to the portfolio’s leases for 2023 will allow for material rental growth whilst ensuring that the group’s rent increases remain sustainable and in line with wider social housing sector policy.

Rent collection

SOHO has collected 91.7% of rent due in 2022 (2021: 99.8%), with two of its 27 tenants struggling. 

My Space Housing (7.9% of rent roll) received an Enforcement Notice on 16 January 2023 by the Regulator of Social Housing noting concerns around its solvency. SOHO’s manager said it was actively looking to move properties away from My Space to alternative housing providers but added that the regulator’s request that My Space consider, among other things, the option of a business combination or merger might negate the need to move properties. Lease terms may be amended as part of any transfer.

If My Space was to go into administration, SOHO’s valuer JLL has determined that the value of the properties leased to the company will fall by 38% or 2.4% of the group’s total portfolio valuation as at 30 September 2022.

Parasol Homes Limited (9.6% of rent roll) suffered “operational issues” in 2022 and failed to pay all rent due to the group in the second half of the year. SOHO said that Parasol was working to address these issues and expects to agree a rent repayment plan with Parasol, including for rent arrears, which it hopes will see rent payments return to historical levels.

Dividend

The board has committed to its stated annual dividend target of 5.46 pence per share in respect of the financial year ended 31 December 2022. It made no comment on the dividend for 2023.

Debt position

The group’s debt of £263.5m is fixed with a weighted average interest rate of 2.74% and a weighted average maturity of 10.6 years. The earliest debt maturity occurs in mid-2028.

The group said that it had significant covenant headroom within its credit facilities alongside additional liquidity in the form of £26.9m of cash, and unencumbered properties with an aggregate valuation of £70.8m as at 30 September 2022.

New risk sharing clause

The company said it would seek to introduce a new “risk sharing clause” into its existing leases during the second quarter of 2023 following ongoing consultation with stakeholders, including the Regulator of Social Housing. The implementation of the clause is intended to enhance the group’s housing association lessees’ compliance with the Regulator of Social Housing’s standards.

Addressing its discount to NAV

To address its current discount to NAV (which was 54% on 2 February 2023), the company said that it was exploring making accretive share buybacks and/or the potential sale of a portfolio of the group’s properties, with the capital returned to shareholders. If the group sold a portfolio of properties it would be on the condition of such a transaction not having a material adverse impact on the group’s leverage position.

SOHO : Triple Point Social Housing REIT to cap rental uplifts at 7%

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