Investment trust insider on Triple Point Social Housing – Richard Williams: SOHO’s attractive 9% yield hangs on board decision
Shares in Triple Point Social Housing trade at half the value of its assets. That looks harsh, but they could start to rerate once the board gives dividend guidance for this year on Thursday.
Annual rent growing, capital values rising, long-term market fundamentals strong and low cost, long-dated debt in place. It sounds too good to be true for a UK real estate investment trust in this current climate, but these are the key attributes of social housing landlord Triple Point Social Housing Reit (SOHO).
It seems odd, then, that the company’s share price has been languishing at a materially wide discount to net asset value (NAV) for an extended period of time – even more so than the rest of the real estate sector, which has been hamstrung by high interest rates. Last week SOHO’s discount was nearly 53% to its estimated NAV, while the average discount in the UK property sector was 33%.
SOHO’s rental income is indirectly backed by the government. It pays housing benefit to registered social housing providers to cover rent for an individual tenant who may have some form of disability or long-term care need. SOHO owns the specially adapted property and rents it under a long-term lease to the registered provider.
The model is tried and tested, despite concerns about the financial strength of some of the registered providers, and was effective in attracting crucial private investment into the sector to grow the number of much-needed beds.
It seems unlikely that a potential change in government later this year would bring about significant change to the current model, or even bring social housing back under public control, due to the sheer financial resources required to fund this… read more here