Annual Report
2023
Company Overview
At a Glance
4
The Year in Brief
6
Key Highlights
8
Ragan’s Story Case Study
10
Strategic Report
Chair’s Statement
17
Strategy and Business Model
22
Key Performance Indicators
26
EPRA Performance Measures
28
The Investment Manager
31
Investment Manager’s Report
33
Portfolio Summary
42
Sustainability Report
50
Stakeholder Engagement
70
Risk Management
74
Going Concern and Viability
80
Board Approval of the
Strategic Report
82
Governance
Chair’s Letter
86
Board of Directors
88
Corporate Governance
90
Audit Committee Report
97
Management Engagement
Committee Report
101
Nomination Committee Report
103
Sustainability & Impact
Committee Report
106
Directors’ Remuneration Report
108
Directors’ Remuneration Policy
109
Annual Report on Directors’
Remuneration
111
Directors’ Report
114
Directors’ Responsibilities
Statement
118
Independent Auditor’s Report
120
Financial Statements
Group Statement of
Comprehensive Income
132
Group Statement of Financial
Position
133
Group Statement of Changes
in Equity
134
Group Statement of Cash Flows
135
Notes to the Group Financial
Statements
136
Company Statement of
Financial Position
155
Company Statement of
Changes in Equity
156
Notes to the Company
Accounts
157
Other Information
Unaudited Performance
Measures
161
Glossary and
Definitions
163
Shareholder Information
165
2023 Annual Report
|
1
Company
Overview
At a
Glance
/
WHO WE ARE
Triple Point Social Housing REIT plc
invests in social housing properties
in the UK, focusing on homes in
the Specialised Supported Housing
sector which have been adapted for
people with mental and physical care
and support needs.
We believe our residents
deserve a home in a
community setting
that offers greater
independence than
traditional institutional
accommodation whilst
meeting their specialist
care needs.
We are one of the leading, and the
only publicly quoted, Specialised
Supported Housing investors in the
UK, helping provide a secure future
for people in need across the country
whilst ensuring that our shareholders
have an attractive, long-term income
source.
Company Overview
4
|
Triple Point Social Housing REIT plc
/
WHAT WE DO
We seek to optimise the opportunities available to
vulnerable people across the UK by offering tenancies
in properties for people with specific care and support
requirements. These needs often result from mental
health problems, learning disabilities, or physical and
sensory impairment.
Our accommodation differentiates itself by serving as a
home within a community rather than the care facilities
that have historically been the mainstay for vulnerable
people whose care needs are similar to our residents’.
We also seek to provide value for money to local
authorities by offering housing that is more suitable and
cost-effective than institutional alternatives.
Our portfolio benefits from leases to Approved
Providers, bodies that receive payment from central
or local government to provide homes for people
in need of housing. Through these leases, we offer
our shareholders an attractive level of income that is
correlated with inflation
1
.
Company Overview
2023 Annual Report
|
5
1
4.9% of the Group’s leases are capped. In addition, in 2023 the Group voluntarily capped rent increases temporarily for the year at 7%.
The Year in Brief – 2023
During 2023, the Group did
not deploy any capital into
new acquisitions. The Group
expects to shortly complete on
a forward funding project with
Golden Lane, one of the leading
Registered Providers in the
Specialised Supported Housing
sector. A portfolio of properties
was sold principally in line with
their book value, and a £5 million
share buyback programme was
successfully completed. In addition,
the Group launched the pilot phase
of its Eco-Retrofit project which
focuses on upgrading the energy
efficiency of the Group’s properties.
The Group received 90.2% of rent
due and payable during the year,
with material rent arrears attributable
to only two Approved Providers.
As described in the Investment
Manager’s report, the Group is
taking active steps to address the
issues that have led to these rent
arrears with a view to increasing
rent collection and ensuring the
sustainability of the underlying
rental income generated from the
properties currently leased to these
two Approved Providers.
2 MARCH
The Company declared an interim dividend
of 1.365 pence per Ordinary Share for the
period from 1 October to 31 December
2022, resulting in an aggregate total
dividend of 5.46 pence per Ordinary Share
for the full year ended 31 December 2022.
20 MARCH
The Company announced the appointment
of Cecily Davis to the Board as an
Independent Non-Executive Director with
effect from 23 May 2023.
The Company also announced the
resignation of Paul Oliver, an Independent
Non-Executive Director, with effect from
30 June 2023.
24 MAY
The Company announced changes to
the Board’s Committees, including the
establishment of a Sustainability & Impact
Committee in order to reflect the Board’s
commitment to and focus on its ESG
strategy.
The Company declared an interim dividend
of 1.365 pence per Ordinary Share for the
period from 1 January to 31 March 2023.
The Board announced the target dividend
for 2023 would be kept flat at 5.46 pence
per Ordinary Share in order to preserve
dividend cover for the year ended
31 December 2023 whilst the Investment
Manager focused on addressing the rent
arrears in respect of two of the Group’s
lessees.
MARCH
APRIL
JUNE
AUGUST
SEPTEMBER
13 NOVEMBER
The Company declared an interim dividend
of 1.365 pence per Ordinary Share for the
period from 1 July to 30 September 2023.
MAY
NOVEMBER
JANUARY
Company Overview
6
|
Triple Point Social Housing REIT plc
POST PERIOD
EVENTS
In February 2024, the Company extended
the existing creditor agreement with Parasol
for a further six months whilst a longer-term
agreement, that should see rent paid to
the Group by Parasol increase over time, is
finalised.
On 7 March 2024, the Company declared an
interim dividend of 1.365 pence per Ordinary
Share for the period from 1 October to
31 December 2023, resulting in an aggregate
total dividend of 5.46 pence per Ordinary
Share for the full year ended 31 December
2023.
18 APRIL
The Company announced its intention to commence a share buyback
programme, with a maximum aggregate consideration of £5 million.
The Company also provided an update on the sale of a portfolio of
properties, subject to market conditions and pricing, noting that CBRE had
been appointed to market the portfolio.
13 JUNE
The Company announced the completion of the initial share buyback
programme of £5 million, managed by Stifel, in accordance with the terms
announced on 18 April 2023. In aggregate, between 19 April and
12 June 2023, the Company repurchased 9,322,512 ordinary shares at an
average purchase price of 52.61 pence per share.
7 AUGUST
Fitch Ratings reaffirmed the Group’s existing Investment Grade, long-term
Issuer Default Rating of “A-” with a stable outlook and a senior secured
rating of “A” for the Group’s existing loan notes.
1 SEPTEMBER
The Company announced the completion of the sale of four Specialised
Supported Housing properties for an aggregate consideration of
£7,586,600 to a private UK real estate investment firm, reflecting a gain
of £663,136 (or 9.6%) against the aggregate purchase price (excluding
transaction costs) and a price that was principally in line with the book
value of c.£7,870,000 as at 30 June 2023.
6 SEPTEMBER
The Company declared an interim dividend of 1.365 pence per Ordinary
Share for the period from 1 April to 30 June 2023.
Following the announcement of a Government cap of 7% on social and
affordable rent increases from April 2023, irrespective of the fact that the
cap does not apply to Specialised Supported Housing, the Company
voluntarily chose to implement this cap for rent reviews applicable to its
Registered Provider lessees in 2023.
Company Overview
2023 Annual Report
|
7
Key Highlights
£678.4
million
PORTFOLIO VALUATION
(December 2022: £669.1 million)
As at 31 December 2023, the portfolio was
independently valued at £678.4 million
on an IFRS basis, representing an uplift
of 14.0% against total invested funds of
£594.9 million.
3,417
UNITS
(December 2022: 3,456)
As at 31 December 2023, the portfolio
comprised 3,417 units.
9.3%
TOTAL ANNUAL RETURN
(December 2022: 5.7%)
Total annual return, including dividends to
31 December 2023, was 9.3% measured
against the prior year’s closing NAV.
Total return since IPO including dividends
to 31 December was 47.7% (December
2022 37.4%) measured against the NAV
immediately following the Company’s IPO.
1.63%
ONGOING CHARGES RATIO
(December 2022: 1.60%)
The ongoing charges ratio was 1.63% as
at 31 December 2023 and is a ratio of
annualised ongoing charges expressed as
a percentage of average net asset value
throughout the year. This has increased
year on year due to the impact of inflation
on expenses and increases in fees charged
against the NAV.
£41.0
million/
£39.8 million
CONTRACTED RENTAL
INCOME /
IFRS GROSS REVENUE FOR
THE YEAR
(December 2022: Contracted Rental
Income £39.0 million/IFRS Gross Revenue
£37.3 million)
A
s at 31 December 2023, the contracted
rental income was £41.0 million per annum.
The IFRS Gross Revenue for the year ended
31 December 2023 was £39.8 million.
5.57%
EPRA NET INITIAL YIELD (NIY)
(December 2022: 5.46%)
The EPRA NIY was 5.57% as at
31 December 2023.
EPRA NIY is equal to an annualised rental
income based on the cash rents passing
at the statement of financial position date,
less non-recoverable property operating
expenses, divided by the market value of
the property, increased with (estimated)
purchasers’ costs.
493
properties
TOTAL INVESTMENT
PORTFOLIO
(December 2022: 497)
T
he Group did not purchase any properties
during the year ended 31 December 2023.
This year, the Company completed the
sale of four properties for an aggregate
consideration of £7.6 million.
5.46p
DIVIDEND PER
ORDINARY SHARE
(December 2022: 5.46 pence)
Dividends paid or declared in respect of
the year ended 31 December 2023 totalled
5.46 pence per share.
Company Overview
8
|
Triple Point Social Housing REIT plc
100%
RENTAL UPLIFTS
Linked to either CPI or RPI, or prevailing
government policy if lower
2
.
(December 2022: 100%)
As at 31 December 2023, 100% of contracted
rental income was linked to either the
Consumer Price Index (“CPI”) or Retail Price
Index (“RPI”), or prevailing government policy
if lower.
113.76p
IFRS NET ASSET VALUE AND
EPRA NET TANGIBLE ASSETS
PER ORDINARY SHARE
(December 2022: 109.06 pence per share)
The EPRA Net Tangible Assets was equal
to the IFRS NAV and was 113.76 pence per
share as at 31 December 2023, an increase
of 4.3% from 31 December 2022.
24.3
years
WAULT
(December 2022: 25.3 years)
As at 31 December 2023, the WAULT was
24.3 years (including put/call options and
reversionary leases).
0.85x
DIVIDEND COVER
(December 2022: 0.89x
3
)
Dividend cover, based on adjusted
earnings
4
for the year ended 31 December
2023 was 0.85x.
390
LEASES
(December 2022: 395)
As at 31 December 2023, the portfolio
had 390 leases.
£35.0
million
equal to 8.81p per share
NET PROFIT AND IFRS
EARNINGS PER SHARE
(December 2022: £24.9 million equal to
6.18p per share)
Net Profit for the year ended 31 December
2023 was £35.0 million which is equal to
IFRS earnings per share of 8.81 pence.
2.74%
and 9.6 years
FIXED PRICE, RATED DEBT
(December 2022: 2.74% and
10.6 years)
At 31 December 2023, the weighted
average cost of debt was 2.74% which is
entirely fixed, and the weighted average
term to maturity was 9.6 years.
£248.7
million
MARKET CAPITALISATION
(December 2022: £246.9 million)
As at 31 December 2023, the market
capitalisation of the Group was
£248.7 million.
2.
4.9% of our leases are capped (excluding the voluntary rent cap at 7% temporarily applied to the Group’s rent increases for the year of 2023).
3.
Restated to account for movement in the lease incentive debtor. In prior years the movement in the lease incentive debtor was not reflected in
the adjusted earnings figure used to calculate dividend cover as it was not material, the comparative has been restated for consistency.
4.
Adjusted earnings is EPRA earnings adjusted for non-cash items such as ongoing amortisation of loan arrangement fees and the increase in lease incentive
debtor for the year.
27
APPROVED PROVIDERS
(December 2022: 27)
As at 31 December 2023, the Group had
leases with 27 Approved Providers.
37.0%
LTV
(December 2022: 37.4%)
As at 31 December 2023, the Group’s
LTV was 37.0%
Company Overview
2023 Annual Report
|
9
Kirkdale House
Ragan’s story
/
KIRKDALE HOUSE IS A SPECIALISED SUPPORTED HOUSING
SERVICE IN THORNABY, STOCKTON-ON-TEES, WHICH OPENED
IN 2021 AFTER A TRANSFORMATIONAL REDEVELOPMENT.
The property was designed to support people with a range of care needs, including mental health
conditions and learning disabilities, to live independently in their own homes. There are 23 self-
contained apartments and support is provided by Community Integrated Care, a national social
care charity that encourages people to live fulfilling, happy and independent lives in their local
communities.
The Kirkdale House team were proud to take home the ‘Housing with Care Award’ at the Great
British Care Awards National Finals
5
, recognising them as amongst the best in the UK for their
delivery of high-quality care and support.
The judges said: “It is very evident that the Kirkdale House team support people on an individual
basis with a person-centred approach. They ensure they are part of the community, giving people
structure and purpose to ensure they live the best life. They also highlight the importance of
looking to the future to see how they can support the sector as a whole.”
5.
Meet Ragan and watch
her full story:
Company Overview
10
|
Triple Point Social Housing REIT plc
“Living here has made me feel safe and
cared about. It’s lovely and the staff
here are lovely too, I’ve never met a
team quite like it”
Company Overview
2023 Annual Report
|
11
We spoke to Ragan about what her life has been like
since moving into Kirkdale House.
There are many things that help to make a house feel
like a home and for Ragan, having her cats with her at
Kirkdale House has been crucial.
“I don’t think I would have moved in if I wasn’t allowed
my cats” she says. Ragan was able to bring her beloved
five-year-old cat, Roxy, with her and has since adopted
another, six-month-old Nala.
Lauren Fisher, Service Leader at Kirkdale House, said:
“The people that we support are allowed to bring their
pets or have new pets. We can see how uplifting it is for
people.”
The expansive garden space at Kirkdale House is also
a bonus: “There’s a lot of outdoor space and we can
do whatever we want with it - the cats love climbing
the trees! Everyone loves them and treats them like
Kirkdale’s cats now!” Ragan smiles.
Kirkdale House is the first time Ragan has lived in a
supported living environment. Before moving, she lived
in her own home with visits from a support worker, but
found that it wasn’t working for her.
Ragan explains: “I can leave my door open here, but
when I was in my own house, I was constantly checking
and didn’t sleep well - so it’s improving my mental
health”.
“Living here has made me feel safe and cared about. It’s
lovely and the staff here are lovely too, I’ve never met a
team quite like it,” she adds.
The team at Community Integrated Care work to deliver
the best lives possible for the people they support,
whether that be assisting them with their daily lives,
such as shopping or socialising in their communities, to
accessing life-changing services, such as mental health
support and initiatives to improve skills, confidence and
independence.
As well as the comfort and emotional support she
receives from her team, Ragan has found a nurturing
environment within Kirkdale House: “There’s always
someone around if you’re feeling low and just need
someone to talk to, we’re sort of like a big family really.
If you want friends, they’re here, but if you want to be by
yourself that’s okay, too. That’s what family is all about.”
Ragan has also been encouraged to develop new
hobbies, supporting her to be more independent, and
has become involved with activities organised by the
team, such as soap-making classes, bowling day trips
and even creating a daily newspaper for residents.
“The newspaper makes me feel involved and helps me
get to know people better. The last edition even had a
Pets Corner, so we had images of the residents and their
animals!” adds Ragan.
It’s all proof of just how much progress Ragan has
made since moving to Kirkdale House, with Lauren
saying: “From when I first met Ragan there’s a massive
difference. Both because of the support she’s had from
the team, but down to her too, because she pushes
herself every day.”
“We know there’s a really confident Ragan in there
and that’s what we want to bring out again. And we’re
getting there!”
“From when I first met Ragan there’s
a massive difference. Both because of
the support she’s had from the team,
but down to her too, because she
pushes herself every day.”
Company Overview
12
|
Triple Point Social Housing REIT plc
Company Overview
2023 Annual Report | 13
Strategic
Report
CHRIS PHILLIPS, Chair
Strategic Report
16
|
Triple Point Social Housing REIT plc
/ INTRODUCTION
Whilst 2023 was a challenging year for UK real estate, the Specialised Supported Housing
sector continued to demonstrate its strong underlying fundamentals and we were able to
deliver resilient returns to our shareholders.
We continued to see challenging macro-economic conditions during the year, with
concerns over US banking and commercial property together with the expectation that
interest rates would remain higher for longer putting sustained pressure on property
valuations. Nonetheless, the decline in inflation in October and November provided some
relief towards the end of the year.
2023, like the two years before it, has proved that we should not take anything for
granted. Most notably, with the tragic events unfolding in the Middle East and the
ongoing war in Ukraine, there remains the risk that increased geopolitical tensions cause
inflation to remain elevated.
Against this backdrop, we take considerable comfort from the robust fundamentals of the
sector in which the Group invests. Demand for Specialised Supported Housing continues
to grow, and central and local Government continue to provide financial support for
individuals who need housing and care. These two factors, combined with strong rental
growth, have helped preserve the value of the Group’s property portfolio over the last
12 months. As we report a resilient set of results, we remain focused on the Group’s
objective of providing good homes to people with care and support needs throughout
the UK.
Chair’s
Statement
Strategic Report
2023 Annual Report
|
17
/
FINANCIAL PERFORMANCE
The Group has continued to perform well operationally,
delivering rental growth in 2023 of 6.8%. The Group
is in a strong position financially, 100% of our debt is
long
term and fixed priced with a weighted average
term of 9.6
years and at a weighted average fixed rate
of 2.74%. In August 2023, for the second consecutive
time, Fitch Ratings Ltd reaffirmed the Company’s existing
Investment Grade long-term Issuer Default Rating (IDR)
of ‘A-’, with a stable outlook and a senior secured rating
of ‘A’ for the Group’s existing loan notes.
The Group’s Net Asset Value has increased over the
course of the year to £447.6 million, or by 1.9%.
This represents resilient performance by the Group’s
portfolio, especially when compared to the wider
commercial property sector which has continued to
face pressure on property valuations. The Group met
its full year 2023 dividend target of 5.46p, having held
the target flat relative to 2022.
The dividend was 0.85x
covered on an adjusted earnings basis. Dividend cover
increased in the latter half of the year and the dividend
is now covered on a run rate basis. The Group delivered
a total return including dividends of 9.3% during the
financial year, which reflects strong performance
in what
was a challenging year for the real estate sector given
the persistence of high inflation and interest rates.
/
MANAGING THE DISCOUNT
The Group’s share price has been a principal focus of
the Board in 2023, and in its 3 February 2023 Trading
Update, the Board set out how the Group could best
deliver value to shareholders over the following months.
This included, amongst other things, selling a portfolio
of properties to provide a data point that was supportive
of the Group’s portfolio valuation, returning capital to
shareholders through a share buyback programme, and
working with two of the Group’s Registered Provider
lessees to increase rent collection. We are glad to report
that we have broadly delivered on each of these actions.
In August 2023, we completed the sale of a portfolio
of properties at a valuation principally in line with their
book value. In July 2023, we completed a £5 million
share buyback programme. Between 19 April 2023 and
12 June 2023, the Group bought back 9,322,512 shares
for £5 million at an average price representing a discount
to the prevailing published EPRA NTA of 52.8%. Finally,
we have made good progress with the two lessees with
material arrears (My Space and Parasol), rent collection
Strategic Report
18
|
Triple Point Social Housing REIT plc
18
|
Triple Point Social Housing REIT plc
Any larger return of capital to shareholders would be
dependent on significant additional liquidity being
delivered through property sales. Given market
conditions remain challenging, and the Group’s strong
capital structure, the Board is not actively considering
selling more properties in the short term. The Board
remains committed to shareholder engagement and
will continue to consult with shareholders following the
publication of these results.
increased in the latter half of the year due to a creditor
agreement with Parasol and an increase in rent payments
from My Space. Further details regarding these actions
and their outcomes can be found in the Investment
Manager’s Report.
As at 6 March 2024 the Group’s share price had
increased by 37.0% from its 2023 low in March and
the Board remains focused on seeking to improve the
share price and delivering shareholder value in 2024.
As at 31 December 2023 the Group had a total cash
balance of £29.5 million of which £10.7 million is either
restricted or allocated with a further £8 million held
back for working capital purposes, leaving net available
cash of £10.8 million. Therefore, were the Company
to undertake a further return of capital with an equal
corresponding paydown of the Group’s debt (to offset
any resultant increase in Group leverage), any such
distribution to shareholders would be limited to around
£5 million.
Strategic Report
2023 Annual Report
|
19
2023 Annual Report
|
19
/
NEW PARTNERSHIPS WITH
LEADING REGISTERED
PROVIDERS CREATING IMPACT
The higher interest rates and inflationary environment
alongside the requirement to invest into existing
housing stock (to ensure compliance with the latest
safety and sustainability standards) continue to erode
the development budgets of Registered Providers. In
turn, this promotes a growing reliance on private funding
to deliver new homes. Therefore, in this environment,
we are uniquely positioned to form partnerships with
the leading Registered Providers in the Specialised
Supported Housing sector, as demonstrated by our
recent partnership with Golden Lane. We have allocated
£2.8 million to a 12 apartment project in Chorley which
we have developed in conjunction with Golden Lane,
one of the best and largest Specialised Supported
Housing focused Registered Providers. This is a market-
leading project and will provide further evidence of the
positive impact that private capital can deliver to the
Specialised Supported Housing sector.
/
LEADING POSITION IN
THE SECTOR
Whilst focusing on financial performance and delivering
shareholder value, the Board is also keen to ensure that
the Group, as an institutional investor, continues to take
a leading position in moving the Specialised Supported
Housing sector forward.
We are the first institutional landlord to roll out a new
risk sharing clause in its existing portfolio of leases to
help improve the governance and risk management
of our Registered Provider partners. The clause has
been agreed with the Boards of the Group’s Registered
Provider lessees and shared with the Regulator of Social
Housing and has been included in 28.3% of the Group’s
leases to date. As previously disclosed JLL, the Group’s
valuers, have reviewed the clause and confirmed that
they do not expect it to negatively impact the value of
any leases it is included in.
We are investing in the energy efficiency of the Group’s
existing portfolio through the pilot phase of our Eco-
Retrofit programme to preserve the long-term value of
the Group’s portfolio whilst enabling the Group to roll
out a sector-leading initiative to reduce carbon emissions
and provide residents with more efficient homes and
lower utility bills.
Following the Government’s introduction of a 7% cap
on social housing rent increases in 2023, we voluntarily
capped all of the Group’s rent increases with Registered
Provider lessees at 7% not withstanding that the cap
did not apply to the Specialised Supported Housing
Sector. This enabled our Registered Provider partners
to manage risk better in a high inflationary environment
and to limit rent increases during a cost-of-living crisis,
whilst still allowing investors to benefit from a healthy
rental uplift. In line with government policy, the cap has
been discontinued in 2024 meaning that rents will revert
back to tracking inflation.
Further information on these three initiatives can be
found in the Investment Manager’s Report.
/ GOVERNANCE
Recognising the link between value creation and
the quality of the homes we deliver, the Board has
established a Sustainability & Impact Committee
(announced on 24 May 2023) to ensure due
consideration of a range of sustainability activities
and outcomes. To date, the Sustainability & Impact
Committee, led by Ian Reeves, has met three times
since its establishment and has reviewed a range of
ESG matters including considering and approving the
roll-out of the pilot phase of the Group’s Eco-Retrofit
programme and the Group’s Net Zero plan (more detail
on which can be found in the Sustainability Report).
The performance evaluation of the Board and its
Committees for 2023 was conducted externally by
Advanced Boardroom Excellence, an independent
consultancy. The review confirmed that the Board and
its Committees continued to operate effectively in 2023,
with some areas identified for further enhancement,
which are set out on pages 94-95.
/
SOCIAL IMPACT
Social Impact continues to be of central importance
to the Board when making decisions and is integral
to our business model. This set of results once again
demonstrates our conviction that financial performance
and social impact are mutually reinforcing. The
independent Impact Report prepared by The Good
Economy identifies that our properties have delivered
£3.08 of Total Social Value for every £1.00 invested in
the year to 31 December 2023. You can read more on
the social value and impact that our properties create
in the Impact Report prepared by the Good Economy,
available separately on our website.
Strategic Report
20
|
Triple Point Social Housing REIT plc
/ OUTLOOK
We expect ongoing resilience in financial and
operational performance. The majority of the Group’s
lessees continue to operate in line with expectations
with only two (My Space and Parasol) out of 27 lessees in
material arrears. We anticipate making further progress
with My Space and Parasol and for the wider portfolio to
continue to perform well.
With 64.6% of the Group’s 2024 annual rent increases
linked to the September 2023 Consumer Price Index
figure of 6.7%, we expect the strong rental growth of
2023 to continue in 2024.
The Group has a secure
financial position and does
not need to raise capital to refinance debt, or to
meet investor return targets. Our focus can therefore
remain on ensuring the continued performance of the
property portfolio from which stable, long-term financial
performance should follow. These factors, combined
with the ongoing resilience of the portfolio valuation,
ensure that the Group remains well positioned to deliver
sustainable shareholder returns over the long-term.
Given current macro-economic conditions, and the
limited amount of capital that the Group has available,
the Board has decided not to commit to any further
development projects, other than the Chorley scheme,
at this time. We expect the progress made with My
Space and Parasol in 2023 to deliver an increase in
rent collection during 2024 which should in turn help
to ensure that the dividend is covered. The dividend is
now covered on a run rate basis and we are focused on
putting the Group in a position to resume its progressive
dividend policy whilst maintaining a high degree of
sustainable dividend cover over the medium to long-
term. This is supported by the long-term, fixed priced
debt the Group benefits from, and the recent strong
rental growth delivered through the Group’s inflation-
linked leases.
The Board remains committed to addressing the
performance of the Group’s share price, and to working
to narrow the share price discount to EPRA NTA whilst
preserving the long-term performance and fundamentals
of the Group. The Board will continue to engage with
shareholders in 2024 around actions for the benefit of
the Group overall.
The Board and the Investment Manager will continue
to support the performance of the Group’s portfolio by
working closely with the Group’s Registered Provider
and Care Provider partners to roll out strategic initiatives
such as the Eco Retrofit programme and new risk-sharing
lease clause, closely monitor the granular performance
of the Group’s properties, and address any issues in the
portfolio quickly as and when they arise. This granular
approach to risk management supports the long-term
value of the Group’s portfolio and helps to ensure long-
term operational and financial resilience.
/ CONCLUSION
On behalf of the Board, I would like to thank the
Investment Manager and advisers for their continued
hard work and dedication. Most importantly, I would
like to thank our shareholders and other stakeholders
for their continued support as we work to evolve and
execute our strategy to deliver good homes and long-
term sustainable returns.
Chris Phillips
Chair
7 March 2024
Strategic Report
2023 Annual Report
|
21
Strategy and
Business Model
The Board is responsible for the Company’s investment objective and investment
policy and has overall responsibility for ensuring the Group’s activities are in line
with such overall strategy. As noted in the Chair’s Statement and the Investment
Manager’s report, in 2023, most of the Group’s leases were subject to a one-off
rental increase cap of 7%.
The Group has commenced the roll out of a new risk
sharing clause throughout the Group’s portfolio of
Registered Provider leases. The inclusion of the clause
in our existing leases will enable the Boards of the
Registered Providers that the Group has leases with to
demonstrate an improved risk management strategy to
the Regulator of Social Housing. As part of this clause,
annual rent increase will be linked to the lower of
inflation or government social housing rent policy (in so
much as it applies to Specialised Supported Housing).
In addition, when applicable, annual rental uplifts in
the Group’s leases (that contain this new clause) will be
linked to September inflation figures to align with wider
central housing benefit policy.
/
INVESTMENT OBJECTIVE
The Company’s investment objective is to provide
shareholders with stable, long-term, inflation-linked
income from a portfolio of social housing assets in the
United Kingdom with a focus on Supported Housing
assets. The portfolio comprises investments in operating
assets and the forward funding of pre-let development
assets, the Group seeks to optimise the mix of these
assets to enable it to pay a covered dividend increasing
in line with inflation and so generate an attractive risk-
adjusted total return.
/
INVESTMENT POLICY
To achieve its investment objective, the Group invests
in a diversified portfolio of freehold or long leasehold
social housing assets in the UK. Supported Housing
assets account for at least 80% of the Group’s gross asset
value. The Group acquires portfolios of social housing
assets and single social housing assets, either directly or
via SPVs. Each asset is subject to a lease or occupancy
agreement with an Approved Provider. The rent
payable thereunder is, or is expected to be, subject to
adjustment in line with inflation (generally CPI) or central
housing benefit policy. Title to the assets remains with
the Group under the terms of the relevant lease. The
Group is not primarily responsible for any management
or maintenance obligations under the terms of the lease
or occupancy agreement, which typically are serviced
by the Approved Provider lessee, save that the Group
may take responsibility for funding the cost of planned
maintenance. The Group is not responsible for the
provision of care to residents of Supported Housing
assets.
The social housing assets are sourced in the market by
the Investment Manager.
The Group intends to hold its portfolio over the long-
term, benefitting from generally long-term upward-
only leases which are, or are expected to be, linked to
inflation or central housing benefit policy. The Group
will not be actively seeking to dispose any of its assets,
although it may sell investments should an opportunity
arise, that would enhance the value of the Group as a
whole.
The Group may forward fund the development of new
social housing assets when the Investment Manager
believes that to do so would enhance returns for
shareholders and/or secure an asset for the Group’s
portfolio at an attractive yield. Forward funding will only
be provided in circumstances in which:
(a)
there is an agreement to lease the relevant property
upon completion in place with an Approved
Provider;
(b)
planning permission has been granted in respect of
the site; and
Strategic Report
22
|
Triple Point Social Housing REIT plc
(c)
the Group receives a return on its investment (at
least equivalent to the projected income return for
the completed asset) during the construction phase
and before the start of the lease.
For the avoidance of doubt, the Group will not acquire
land for speculative development of social housing assets.
In addition, the Group may engage third party contractors
to renovate or customise existing social housing assets as
necessary.
GEARING
The Group uses gearing to enhance equity returns. The
Directors will employ a level of borrowing that they
consider prudent for the asset class and will seek to
achieve a low cost of funds while maintaining flexibility in
the underlying security requirements and the structure of
both the Company’s portfolio and the Group.
The Directors intend that the Group will target a level
of aggregate borrowings over the medium-term equal
to approximately 40% of the Group’s gross asset value.
The aggregate borrowings will always be subject to an
absolute maximum, calculated at the time of drawdown,
of 50% of the Group’s gross asset value.
Debt will typically be secured at the asset level, whether
over a particular property or a holding entity for a
particular property (or series of properties), without
recourse to the Group and having consideration for key
metrics including lender diversity, cost of debt, debt type
and maturity profiles.
USE OF DERIVATIVES
The Group may use derivatives for efficient portfolio
management. In particular, the Group may engage in
full or partial interest rate hedging or otherwise seek to
mitigate the risk of interest rate increases on borrowings
incurred in accordance with the Investment Policy as
part of the Group’s portfolio management. The Group
will not enter into derivative transactions for speculative
purposes.
INVESTMENT RESTRICTIONS
The following investment restrictions apply:
•
the Group will only invest in social housing assets
located in the United Kingdom;
•
the Group will only invest in social housing
assets where the counterparty to the lease or
occupancy agreement is an Approved Provider.
Notwithstanding that, the Group may acquire a
portfolio consisting predominantly of social housing
assets where a small minority of such assets are
leased to third parties who are not Approved
Providers. The acquisition of such a portfolio will
remain within the Investment Policy provided that
at least 90% (by value) of the assets are leased to
Approved Providers and, in aggregate, all such
assets within the Group’s total portfolio represent
less than 5% of the Group’s gross asset value at the
time of acquisition;
•
at least 80% of the Group’s gross asset value will be
invested in Supported Housing assets;
•
the maximum exposure to any one asset (which, for
the avoidance of doubt, will include houses and/or
apartment blocks located on a contiguous basis) will
not exceed 20% of the Group’s gross asset value;
•
the maximum exposure to any one Approved
Provider will not exceed 30% of the Group’s gross
asset value, other than in exceptional circumstances
for a period not to exceed three months;
•
the Group may forward fund social housing units in
circumstances where there is an agreement to lease
in place and where the Group receives a coupon (or
equivalent reduction in the purchase price) on its
investment (generally slightly above or equal to the
projected income return for the completed asset)
during the construction phase and before entry into
the lease. Forward funding equity commitments
will be restricted to an aggregate value of not more
than 20% of the Group’s net asset value, calculated
at the time of entering into any new forward funding
arrangement;
•
the Group will not invest in other alternative
investment funds or closed-ended investment
companies (which, for the avoidance of doubt,
does not prohibit the acquisition of SPVs which own
individual, or portfolios of, social housing assets);
•
the Group will not set itself up as an Approved
Provider; and
•
the Group will not engage in short selling.
The investment limits detailed above apply at the time of
the acquisition of the relevant asset in the portfolio. The
Group will not be required to dispose of any investment
or to rebalance its portfolio as a result of a change in
the respective valuations of its assets or a merger of
Approved Providers.
Strategic Report
2023 Annual Report
|
23
/
INVESTMENT STRATEGY
The Group specialises in investing in UK social housing,
with a focus on Supported Housing. The strategy is
underpinned by strong local authority demand for more
social housing, which is reflected in the focus on acquiring
recently developed and refurbished properties across
the United Kingdom. The assets within the portfolio have
typically been developed for pre-identified residents and
in response to demand specified by local authorities or
NHS commissioners. The existing portfolio comprises
investments made into properties already subject
to a fully repairing and insuring lease with specialist
Approved Providers in receipt of direct payment from
local government (usually Registered Providers regulated
by the Regulator), as well as forward funding of pre-let
developments. The portfolio will not include any direct
development or speculative development investments.
Following the amendments to the Company’s investment
policy in May 2022, the Group expects to enter into
more flexible lease structures in the future. These more
flexible lease structures may include entering into
leases for shorter terms and, in certain cases, the Group
may selectively take on the cost of funding planned
maintenance on some properties.
In addition, as noted in the Chair’s Statement and the
Investment Manager’s report, we have commenced the
roll out of a new risk sharing clause in the Group’s existing
Registered Provider leases. The aim of this clause is
to protect Registered Providers if factors beyond their
control, such as a change in government policy in relation
to Specialised Supported Housing rents, reduce the
amount of rent they are able to generate from a property
or properties that they lease from the Group. In some
such circumstances the clause allows for the Registered
Provider to agree a new rent level which is reflective of
the revised circumstances. Should the new rent level not
be acceptable to the Group, the Group has the ability to
re-assign or terminate the lease.
/
BUSINESS MODEL
The Group owns and manages social housing properties
that are leased to experienced housing managers
(typically Registered Providers, which are often referred to
as housing associations). The vast majority of the portfolio
and future deal pipeline is made up of Supported Housing
homes which are residential properties that have been
adapted or built such that care and support can easily be
provided to vulnerable residents who may have mental
health issues, learning difficulties or physical disabilities.
Whilst we have acquired operational properties, we have
tended to focus more on acquiring recently developed
or adapted properties in order to help local authorities
meet increasing demand for suitable accommodation
for vulnerable residents (the drivers of this demand are
discussed in the Investment Manager’s report on pages 33
to 49). Local authorities are responsible for housing these
residents and for the provision of all care and support
services that are required.
The Supported Housing properties owned by the Group
are leased to Approved Providers which are usually not-
for-profit organisations focused on developing, tenanting
and maintaining housing assets in the public (and
private) sectors. Approved Providers are approved and
regulated by the Government with the majority through
the Regulator (or in some instances, where the Group
contracts with care providers and charitable entities, the
Care Quality Commission and the Charity Commission,
respectively). The majority of the Group’s existing leases
with Approved Providers are linked to inflation, have a
duration of 20 years or longer, and are fully repairing and
insuring – meaning that the obligations for management,
repair and maintenance of the property are passed to the
Approved Provider. The Group may take responsibility
for funding the cost of planned maintenance and
improvements to the property in order to improve a
property’s energy efficiency rating under the Eco-Retrofit
programme. Typically, the Government funds both the
rent of the individuals housed in Supported Housing
and the maintenance costs associated with managing
the property. In addition, because of the vulnerable
nature of the residents, the rent and maintenance costs
are typically paid directly from the local authority to the
Approved Provider on behalf of the individuals living in
the property. The rent paid by the local authority to the
Approved Provider on behalf of the residents is then paid
to the Group via the lease. Ultimate funding for the rent
of the individuals living in the properties owned by the
Group typically comes from the Department for Work and
Pensions in the form of housing benefits.
The majority of residents housed in Supported Housing
properties require support and/or care. This is typically
provided by a separate care provider regulated by
the Care Quality Commission. The agreement for the
provision of care for the residents is between the local
authority and the care provider. The care provider is paid
directly by the local authority. Usually, the Group has no
direct financial or legal relationship with the care provider
and the Group never has any responsibility for the
provision of care to the residents in properties the Group
owns. The care provider will often be responsible for
nominating residents into the properties and, as a result,
will normally provide some voids cover to the Approved
Strategic Report
24
|
Triple Point Social Housing REIT plc
Provider should they not be able to fill the asset (i.e. if
occupancy is not 100%, it is often the care provider rather
than the Approved Provider that will cover the cost of
the rent due on void units). Under the terms of its lease,
the Group is owed full rent regardless of underlying
occupancy, but monitors occupancy levels and the
payment of voids cover by care providers, to ensure that
Approved Providers are appropriately protected.
Many assets that the Investment Manager sources for
the Group have been recently developed and are either
specifically designed new build properties or renovated
existing houses or apartment blocks that have been
adapted for Supported Housing. The benefit of buying
recently developed or adapted stock is that it has been
planned in response to local authority demand and
is designed to meet the specific requirements of the
intended residents. In addition, it enables the Group to
work with a select stable of high-quality developers on
pipelines of deals rather than being reliant on acquiring
portfolios of already-built assets on the open market.
This has two advantages: firstly, it enables the Group to
source the majority of its deals off-market through trusted
developer partners and, secondly, it ensures the Group
has greater certainty over its pipeline with visibility over
the long-term deal flow of the developers it works with
and knows it will not have to compete with other funders.
As well as acquiring recently developed properties, the
Group can provide forward funding to developers of new
Supported Housing properties. Being able to provide
forward funding gives the Group a competitive advantage
over other acquirers of Supported Housing assets as it
enables the Group to offer developers a single funding
partner for both construction and the acquisition of the
completed property. This is often more appealing to
developers than having to work with two separate funders
during the build of a new property as it reduces practical
and relationship complexity. As well as strengthening
developer relationships, forward funding enables the
Group to have a greater portion of new build properties
in its portfolio which typically attract higher valuations,
are modern and have been custom-built to meet the
needs of the residents they house, helping to achieve
higher occupancy levels. The Group benefits from the
Investment Manager’s long track record of successfully
forward funding a range of property and infrastructure
assets and is uniquely positioned to partner on projects
with the most respected organisations in the sector.
The Group will only provide forward funding when the
property has been pre-let to an Approved Provider and
other protections, such as fixed-priced build contracts
and deferred developer profits, have been put in place to
mitigate construction risk.
Since the Company’s IPO, the Group has set out to build a
diversified portfolio that contains assets leased to a variety
of Approved Providers, in a range of different counties,
and serviced by a number of care providers. This has been
possible due to the Investment Manager’s track record
of over 15 years of asset-backed investments, its active
investment in the Supported Housing sector since 2014,
and the strong relationships it has enjoyed with local
authorities for over a decade. These relationships have
enabled the Group, in a relatively short space of time, to
work with numerous Approved Providers, care providers
and local authorities to help deliver Supported Housing
that provide homes to some of the most vulnerable
members of society.
APPROVED PROVIDER
CARE PROVIDER
Inflation-correlated
Rent Passed to Landlord
( £ )
Typically
20+ years
FRI Lease
LOCAL AUTHORITY
Care
Service
Contractual
Agreement
Care
Rent
Service Charge
Rent
Service Charge
Care
Fees (£)
Care Fees
(£)
Rent (£)
Service Charge (£)
approved by the
RESIDENTS
Tenancy
Agreement
Housing
Benefit (£)
Care
Contract
Voids
Agreement
Department for
Levelling Up, Housing
& Communities
Strategic Report
2023 Annual Report
|
25
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
COMMENT
1. DIVIDEND
Dividends paid to shareholders
and declared during the year.
Further information is set out
in Note 27
The dividend reflects the
Company’s ability to deliver a
low risk income stream from
the portfolio.
Total dividends of 5.46 pence
per share were paid or
declared in respect of the year
ended 31 December 2023.
(31 December 2022:
5.46 pence)
The Company has declared a
dividend of 1.365 pence per
Ordinary share in respect of
the period 1 October 2023 to
31 December 2023, which will
be paid on or around
29 March 2024. Total
dividends paid and declared
for the year are in line with the
Company’s target.
2. EPRA NET TANGIBLE ASSETS (NTA)
The EPRA NTA is equal to
IFRS NAV as there are no
deferred tax liabilities or other
adjustments applicable to the
Group under the REIT regime.
Further information is set out
in Note 3 of the Unaudited
Performance Measures.
EPRA NTA measure that
assumes entities buy and sell
assets, thereby crystallising
certain levels of deferred tax
liability.
113.76 pence as at
31 December 2023.
(31 December 2022:
109.06 pence)
The IFRS NAV (equivalent to
EPRA NTA) per share at IPO
was 98 pence.
The EPRA NTA of
113.76 pence represents
an increase of 16.1% since
IPO, driven primarily by yield
compression at acquisition
and subsequent annual rental
uplifts.
3. LOAN TO VALUE (LTV)
A proportion of our portfolio
is funded through borrowings.
Our medium to long-term
target LTV is 35% to 40% with
a maximum of 50%.
Further information is set out
in Note 20.
The Group uses gearing to
enhance equity returns.
37.0% LTV as at 31 December
2023.
(31 December 2022: 37.4%
LTV)
Borrowings comprise two
private placements of loan
notes totalling £263.5
million provided by MetLife
Investment Management and
Barings.
The undrawn £160.0 million
revolving credit facility with
Lloyds and NatWest was
cancelled in the prior year.
4. EPRA EARNINGS PER SHARE
EPRA Earnings per share
(EPRA EPS) excludes gains
from fair value adjustment on
investment property that are
included in the IFRS calculation
for Earnings per share.
Further information is set out
in Note 36.
A measure of a Group’s
underlying operating results
and an indication of the extent
to which current dividend
payments are supported by
earnings.
4.92 pence per share for the
year ended 31 December
2023, based on earnings
excluding the fair value gain
on properties, calculated on
the weighted average number
of shares in issue during the
year.
(31 December 2022:
4.78 pence)
EPRA EPS has slightly
increased despite the
expected credit loss (relating
to two Approved Providers
not paying full rent) due to the
increased rental income for
the year which was driven by
annual rent increases capped
at 7%.
Strategic Report
26
|
Triple Point Social Housing REIT plc
KPI AND DEFINITION
RELEVANCE TO STRATEGY
PERFORMANCE
COMMENT
5. ADJUSTED EARNINGS PER SHARE
Adjusted earnings per share
includes adjustments for non-
cash items. The calculation is
shown in Note 36.
A key measure which reflects
actual cash flows supporting
dividend payments.
4.61 pence per share for the
year ended 31 December
2023, based on earnings after
deducting the fair value gain
on properties, amortisation
and write-off of loan
arrangement fees, and the
movement in lease incentive
debtor; calculated on the
weighted average number of
shares in issue during the year.
In prior years the movement in
the lease incentive debtor has
not been adjusted for in the
adjusted earnings as it was not
material. The comparative has
been restated for consistency.
(31 December 2022:
4.87 pence restated)
This demonstrates the
Company’s ability to meet
dividend payments from net
cash inflows. It represents a
dividend cover for the year to
31 December 2023 of 0.85x.
6. WEIGHTED AVERAGE UNEXPIRED LEASE TERM (WAULT)
The average unexpired
lease term of the investment
portfolio, weighted by annual
passing rents.
Further information is set out
in the Investment Manager’s
Report.
The WAULT is a key measure
of the quality of our portfolio.
Long lease terms underpin the
security of our income stream.
24.3 years as at 31 December
2023 (includes put and call
options).
(31 December 2022:
25.3 years)
As at 31 December 2023, the
portfolio’s WAULT stood at
24.3 years.
7. EXPOSURE TO LARGEST APPROVED PROVIDER
The percentage of the Group’s
gross assets that are leased to
the single largest Approved
Provider.
The exposure to the largest
Approved Provider must be
monitored to ensure that we
are not overly exposed to
one Approved Provider in the
event of a default scenario.
29.5% as at 31 December
2023.
(31 December 2022: 29.5%)
Our maximum exposure limit
is 30%.
8. TOTAL RETURN
Change in EPRA NTA plus
total dividends paid during the
period.
The Total Return measure
highlights the gross return to
investors including dividends
paid since the prior year.
EPRA NTA per share
was 113.76 pence as at
31 December 2023.
(31 December 2022: 109.06)
Total dividends paid during
the year ended 31 December
2023 were 5.46 pence per
share.
Total return was 9.32% for
the year ended 31 December
2023.
(31 December 2022: 5.7%)
The EPRA NTA per share
at 31 December 2023 was
113.76 pence. Adding back
dividends paid during the year
of 5.46 pence per Ordinary
Share to the EPRA NTA at
31 December 2023 results in
an increase of 9.3%.
The Total Return since IPO is
47.7% at 31 December 2023.
Strategic Report
2023 Annual Report
|
27
EPRA Performance
Measures
The table 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 Note 36 of the consolidated
financial statements and
Notes 1 and 3 of the Unaudited Performance Measures, respectively. A full reconciliation of
the other EPRA performance measures are included in the Unaudited Performance Measures section.
Strategic Report
28
|
Triple Point Social Housing REIT plc
KPI AND DEFINITION
PURPOSE
PERFORMANCE
1. EPRA EARNINGS PER SHARE
EPRA Earnings per share excludes gains from
fair value adjustment on investment properties
that are included in the IFRS calculation for
Earnings per share.
A measure of a Group’s underlying operating
results and an indication of the extent to which
current dividend payments are supported by
earnings.
4.92 pence per share for the year to
31 December 2023.
(4.78 pence per share as at 31 December 2022)
2. EPRA NET REINSTATEMENT VALUE (NRV) PER SHARE
The EPRA NRV adds back the purchasers’ costs
deducted from the IFRS valuation.
A measure that highlights the value of net
assets on a long-term basis.
£489.6 million/124.43 pence per share as at
31 December 2023.
£480.7 million/119.31 pence per share as at
31 December 2022.
3. EPRA NET TANGIBLE ASSETS (NTA) PER SHARE
The EPRA NTA is equal to IFRS NAV as
there are no deferred tax liabilities or other
adjustments applicable to the Group under the
REIT regime.
A measure that assumes entities buy and sell
assets, thereby crystallising certain levels of
deferred tax liability.
£447.6 million/113.76 pence per share as at
31 December 2023.
£439.3 million/109.06 pence per share as at
31 December 2022.
4. EPRA NET DISPOSAL VALUE (NDV)
The EPRA NDV provides a scenario where
deferred tax, financial instruments, and certain
other adjustments are calculated as to the full
extent of their liability.
A measure that shows the shareholder value if
assets and liabilities are not held until maturity.
£503.7 million /128.02 pence per share as at
31 December 2023.
£510.1 million /126.63 pence per share as at
31 December 2022.
5. EPRA NET INITIAL YIELD (NIY)
Annualised rental income based on the cash
rents passing at the balance sheet date, less
non-recoverable property operating expenses,
divided by the market value of the property,
increased with (estimated) purchasers’ costs.
A comparable measure for portfolio valuations.
This measure should make it easier for
investors to judge for themselves how the
valuation of a portfolio compares with others.
5.57% at 31 December 2023.
5.46% at 31 December 2022.
6. EPRA “TOPPED-UP” NIY
This measure incorporates an adjustment to
the EPRA NIY in respect of the expiration of
rent-free periods (or other unexpired lease
incentives such as discounted rent periods and
step rents).
The topped-up net initial yield is useful in that
it allows investors to see the yield based on
the full rent that is contracted at 31 December
2023.
5.72% at 31 December 2023.
5.51% at 31 December 2022.
7. EPRA VACANCY RATE
Estimated Market Rental Value (ERV) of vacant
space divided by ERV of the whole portfolio.
A “pure” percentage measure of investment
property space that is vacant, based on ERV.
0.33% at 31 December 2023.
0.00% at 31 December 2022.
8. EPRA COST RATIO
Administrative and operating costs (including
and excluding costs of direct vacancy) divided
by gross rental income.
A key measure to enable meaningful
measurement of the changes in a Group’s
operating costs.
20.60% at 31 December 2023.
21.09% at 31 December 2022.
Strategic Report
2023 Annual Report
|
29
PICTURED ABOVE: JAMES CRANMER, MAX SHENKMAN,
ISOBEL GUNN-BROWN, RALPH WEICHELT, MEGAN SWEENEY,
GREGORY BANNER, ALI PRECIOUS
Strategic Report
30 | Triple Point
Social Housing REIT plc
Strategic Report
2023 Annual Report
|
31
The Investment Manager
/
JAMES CRANMER,
MANAGING PARTNER
James Cranmer joined the Investment Manager in
2006 to establish its flagship leasing business, Triple
Point Lease Partners, which has grown to be one of the
UK’s most active providers of operating lease finance
into local authorities and NHS Trust Hospitals. James
has over 20 years’ experience in structured, asset and
vendor finance, and has been responsible for in excess
of £1 billion of funding into UK local authorities, NHS
Hospital Trusts, FTSE 100 and small and medium-sized
companies. James is a graduate of St. Andrews University.
He became Co-Managing Partner in 2016.
/
MAX SHENKMAN,
PARTNER & HEAD OF INVESTMENT
Max Shenkman joined the Investment Manager in 2011
and has led investments across the product range. He
has arranged both debt and equity funding for a number
of property-backed transactions in the social housing,
infrastructure and agricultural sectors. Max has led over
£500 million of investment into Supported Housing assets
for the Group. Prior to joining the Investment Manager,
Max was an Associate in the Debt Capital Markets team
at Lazard where he advised private equity clients on both
the buy and sell side. Max graduated from the University of
Edinburgh.
/
ISOBEL GUNN-BROWN,
PARTNER & REIT CFO
Isobel Gunn-Brown joined the Investment Manager in 2010,
acts as Finance Director to the Group and leads the financial
reporting responsibilities. Isobel is head of the Investment
Manager’s Fund Finance department. Isobel is ACCA
qualified with over 30 years’ experience in the financial
services sector. Her experience is wide-ranging and includes
managing the financial reporting for three listed Investment
Trusts and one listed venture capital trusts.
/
RALPH WEICHELT,
HEAD OF DEBT CAPITAL MARKETS
Ralph Weichelt joined the Investment Manager in
November 2017 and is Head of Debt Capital Markets
responsible for the debt strategies for all Triple Point
managed private and listed funds. Prior to joining Triple
Point, Ralph was a Partner in a pan-European debt advisory
and fixed income firm focusing on debt origination via
the debt capital markets for commercial real estate and
infrastructure. Prior to this, he held a number of senior
positions in pan-European real estate spanning from fund
management, transactional work to advisory. Ralph is also a
member of the Investment Committee.
/
MEGAN SWEENEY
INVESTMENT DIRECTOR
Megan Sweeney joined the Investment Manager in
2020 and is an Investment Director in the Housing
Team, with responsibility for general fund and portfolio
management as well as the execution of transactions
for the Group. Prior to joining Triple Point, Megan spent
c.10 years working in private equity M&A as a lawyer,
principally at Kirkland & Ellis where she focused on
advising investment funds on acquisitions, disposals and
general corporate matters with a particular focus across
the real estate sector.
/
GREGORY BANNER
INVESTMENT DIRECTOR
Gregory Banner joined the Investment Manager in 2017
and is an Investment Director in the Housing Team,
responsible for the debt financing, equity fundraising
and property valuations of the Group, as well as leading
over £100 million of direct investments into Supported
Housing. Prior to this, Gregory worked in corporate
development at AIM listed Marlowe plc and was a Senior
Analyst at Catalyst Corporate Finance, advising private
equity funds and corporates within the Business Services
sector.
/
ALI PRECIOUS
HEAD OF ORIGINATION AND EXECUTION
Ali Precious joined the Investment Manager in March
2014 and is Head of Origination and Execution for
the Housing Team, responsible for overseeing the
deployment of funds into new properties across a range
of social and affordable housing sub sectors. Ali has led
on the acquisition of over £250 million into Supported
Housing assets for the Group, including the deployment
of £75 million into forward funding projects. Ali graduated
from the University of Leeds and is FCA approved, having
obtained the Investment Management Certificate in 2015
and Level 1 of the CFA in 2016.
/
CLAIRE STARMER-WATERS
HOUSING OPERATIONS DIRECTOR
Claire Starmer-Waters joined Triple Point in February
2020 and is the Housing Operations Director within
the Housing Team. Claire is responsible for leading the
day-to-day asset management of Triple Point’s housing
portfolio. Claire has over sixteen years’ experience in
the housing sector and prior to joining Triple Point held
various housing roles within the local authority, ALMO,
and housing association sectors.
MAX SHENKMAN, Head of Investment
Strategic Report
32 | Triple Point Social Housing REIT plc
Investment
Manager’s Report
/
SPECIALISED SUPPORTED HOUSING MARKET
Whilst operating conditions have been volatile during this recent period of high
inflation, as they were throughout the COVID pandemic, one constant of the sector is
the structural excess demand for more Specialised Supported Housing. We see this on
a daily basis through a requirement for funding for new developments brought to us by
Local Authorities, and our Registered Provider and Care Provider partners. Similarly, the
Government estimates that demand for more Specialised Supported Housing homes
is set to increase by over 100,000 by 2030, or almost double relative to the number
of Specialised Supported Homes occupied today.
6
A growing prevalence of disability,
combined with the requirement to move people out of institutional care settings and
provide independent community homes, is driving this increase in demand.
Demand for more Specialised Supported Housing properties underpins the performance
of our Registered Provider and Care Provider partners and, in turn, the performance
of the Group. Demand drives high levels of occupancy at the Registered Providers the
Group works with and has helped ensure that the occupancy of the Group’s portfolio
has continued to increase as it matures. In addition, it supports our ability to address any
issues within the Group’s portfolio, such as if a new care provider needs to be brought
into a property or an alternative Specialised Supported Housing use needs to be sought,
thereby adding resilience to the portfolio’s performance.
This year, the Group’s Registered Provider and Care Provider operating partners have
had to navigate the risks posed by persistent high interest rates and inflation, which have
impacted a wide range of costs including maintenance and repairs and heating communal
spaces. In addition, over the last 12 months a small number of Local Authorities have
issued Section 114 notices requiring expenditure limits, which have served as a test for
how the Specialised Supported Housing sector performs in times of market stress.
7
6.
care-adult-social-care-reform
7.
A Section 114 notice indicates that the relevant council’s forecast income is insufficient to meet its forecast expenditure for the next
year. No new expenditure is permitted, with the exception of the funding of statutory services, including safeguarding vulnerable
people. Existing commitments and contracts will continue to be honoured.
Strategic Report
2023 Annual Report
|
33
As expected, the financial strains of Local Authorities,
such as those in Woking and Nottingham, have not
impacted their ability to meet their statutory requirement
to fund the accommodation and care of the vulnerable
people they are responsible for. Indeed Section 114
notices specifically allow for the continued funding of
statutory services, and it has been reassuring to see
this delivered in practice with services maintained
irrespective of the financial position of the relevant Local
Authority.
Similarly, our Registered Provider and Care Provider
partners have generally managed the persistent
increase in operating costs well. Typically, this is a case
of ensuring they receive sufficient Housing Benefit
to cover any increase in their operating cost base.
Most Registered Providers were in a better position
to understand and allow for their increased cost base
in 2023 after the rapid rise in gas prices and other
operating costs experienced in 2022. This performance,
while reassuring as we progressed through challenging
operating conditions, was not unexpected for the
operational side of our Housing Team as they work
closely with our Registered Provider partners.
Over the course of 2023, we have seen a growing desire
amongst a wide range of Registered Providers to work
in partnership with long-term private capital to deliver
much needed, high-quality new homes and to help
fund their development pipelines, a trend we expect to
continue. The catalyst is the growing need for Registered
Providers to find alternative sources of funding to
deliver on their social mission to provide additional
homes. Inflationary pressures, higher interest rates and a
requirement to invest into their existing portfolios have
eroded their ability to fund their development pipelines
from their own reserves.
Strategic Report
34 | Triple Point Social Housing REIT plc
Recent research
8
has indicated that Registered Provider
expected investment budgets have been cut by 9%
for 2024, and by 15% over the next 10 years. Similarly,
the number of homes that English Registered Providers
expect to build over the next five years has dropped by
64,000 since 2022, with a total of 40,000 new homes
completed by Registered Providers in the 12 months
ending 31 March 2023.
In the next section we have provided a case study of
the Chorley development that we will fund alongside
Golden Lane, one of the sector’s leading Specialised
Supported Housing Registered Providers. The project
demonstrates the positive impact that long-term
capital can have when working in close partnership with
Registered Providers.
Over the course of 2023, we have
seen a growing desire amongst a wide
range of Registered Providers to work
in partnership with long-term private
capital to deliver much needed, high-
quality new homes and to help fund
their development pipelines, a trend we
expect to continue.
/
GOLDEN LANE HOUSING
We expect to shortly complete on a new forward funding
project, our first with Golden Lane Housing.
This development, located in Chorley, Lancashire, will
support residents who have learning disabilities, autism
requirements, and/or mental health needs, all of which
will require a high level of support per week. Residents
will come from a range of previous care environments
including care homes, hospitals, and family homes. Staff
will be on site 24 hours a day with bespoke one-to-one
care packages in place for all residents.
The project has received commissioner support from
the Head of Service for Learning Disabilities, Autism
and Mental Health at Lancashire County Council. It was
noted that the location of the site, close to the centre of
Chorley, is ideal for enabling residents to integrate into
the community.
8.
Spending on affordable housing in England to be slashed in 2024; FT.com;
Strategic Report
2023 Annual Report | 35
The property will be managed by Golden Lane Housing.
Golden Lane Housing was established in 1998 in order
to provide supported housing and housing for elderly
people. The organisation has over 2,500 tenants in
over 1,200 properties located across England, Wales
and Northern Ireland. Through the direct provision of
Specialised Supported Housing and enhanced housing
services, Golden Lane Housing offers solutions to people
with a Learning Disability or Autism, so that they can
live independent lives. Golden Lane received a G1 / V2
rating from the Regulator of Social Housing, which was
confirmed most recently in November 2023.
Care and support will be provided by Glenelg which
was founded in 2002 and has since grown to provide
person-centred support for over 80 individuals in over
40 services across the Merseyside and Lancashire areas.
Glenelg provides high-quality support for individuals
with a learning disability, physical disability and/or
mental health needs in the community. They work closely
with individuals and their families in the planning and
development of support tailored for each individual.
The property will provide high specification
accommodation, and residents will benefit from
personalised care packages to meet their individual
needs. Integrated air source heat technology within each
apartment will be utilised with individual thermostats
allowing each apartment to act as an independent zone.
Items such as electrical vehicle charging points for each
parking space are incorporated into the design as we
endeavour to future proof the project.
Strategic Report
36
|
Triple Point Social Housing REIT plc
The property will provide 12 individual one-bedroom
flats that have been designed to be easy to navigate,
avoiding all institutional cues, whilst utilising interior
design and colour to promote mindfulness.
Further adaptations
to the property, which reflect
resident care and support needs, include windows fitted
with restrictors and double or triple glazing determined
by acoustic performance requirements and the need for
a low-sensory environment, specialist bathrooms that
allow for assisted bathing if required, widened doors,
and specialist warden, fire alarm and CCTV systems.
The project recognises the significance of integrating
biodiversity considerations into the development
process and will be the Group’s first project to target
a 10% biodiversity net gain. A Biodiversity Net Gain
Report has been commissioned to provide suggestions
that will help to meet this target. This will include an
assessment of problematic species, onsite enhancement
outlines and a landscape masterplan.
/
FINANCIAL REVIEW
The financial performance of the Group has been
underpinned by the Group’s long-term fixed priced debt.
Strong rental growth, and excess demand for Specialised
Supported Housing have helped ensure that the Group’s
property portfolio has increased in value over the course
of the year.
With a 7.0% cap on annual rent increases voluntarily
applied to the Group’s inflation-linked leases over the
year, mirroring the Government’s cap on the social
housing sector, the Group achieved weighted average
rental growth of 6.9%
in the period, reflecting the
Group’s provision of inflation-correlated, long-term
sustainable income. The Group paid dividends in line
with its stated 5.46 pence per share target and delivered
a total return of 9.3% to shareholders. Rent collection
increased over the course of the year and we expect
this trend to continue as the work undertaken during
2023 with Parasol (including putting in place a creditor
agreement) and My Space results in increased collection
from these two Registered Providers in 2024. This, in
turn, should ensure that the trend of increased dividend
cover in the latter half of 2023 continues into the new
financial year.
/
DEBT FINANCING
All of the Group’s debt is fixed-price and long-term
with the earliest debt maturity occurring in mid-2028,
providing strong protection from higher interest rates.
As at 31 December 2023, the Group’s debt structure
comprised two facilities with a combined value of
£263.5 million. Both facilities are fixed-priced (with a
weighted average coupon of 2.74%), long-term (with a
weighted average maturity of 9.6 years) and fully drawn.
The Group continues to maintain significant covenant
headroom across both facilities while also having
additional liquidity in the form of cash and £75.1 million
of unencumbered properties.
DRAWN DEBT MATURITY PROFILE
£110.0m
£0m
£50m
£100m
£150m
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
£41.5m
£77.5m
£117.5m
£27.0m
Strategic Report
2023 Annual Report
|
37
In August 2021, the Group secured £195.0 million of
long-term, fixed-rate, interest-only, sustainability-linked
loan notes through a private placement with Barings
and MetLife Investment Management clients against a
defined portfolio of the Group’s properties at a loan-
to-value of 50% at the point at which the debt was put
in place. The loan notes are divided into two tranches
of £77.5 million and £117.5 million, with maturities in
2031 and 2036, respectively. Across both tranches the
weighted average coupon is 2.634%.
In addition, the Group has a long-term, fixed-rate
facility with MetLife Investment Management providing
£68.5 million of debt secured against a defined
portfolio of the Group’s properties at a loan-to-value
of 40% at the point at which the debt was put in place.
The facility comprises two tranches of £41.5 million
and £27.0 million, with maturities in 2028 and 2033,
respectively. Across both tranches the weighted average
coupon is 3.039%.
In August 2023, the Group completed its annual review
with Fitch Ratings, and we were pleased that the Group’s
existing rating of ‘A-’ with a Stable Outlook and senior
secured ratings of ‘A’ were re-affirmed by Fitch Ratings
in respect of both debt facilities. This reflects not only
the Group’s continued financial resilience, but also the
resilience of the wider sector in spite of the broader
economic and market conditions.
Further information on the Group’s debt facilities is set
out in Note 20 of the
Group financial statements
.
/
UPDATE ON STRATEGIC
INITIATIVES
The Group’s financial performance is supported by
the progressive and sector-leading approach we take
to investing in the Specialised Supported Housing
market. As well as focusing on delivering best in class
new projects with leading Registered Providers, as
demonstrated by the Chorley project, this also means
ensuring that the Group’s existing portfolio continues to
progress as the sector evolves.
Strategic Report
38
|
Triple Point Social Housing REIT plc
Financial Review
We are pleased to present another stable set of financial results as highlighted earlier on pages
8 to 9.
The Group’s financial performance is underpinned by the resilience of the value of its property portfolio
and strong rental growth.
/
TOUCHING ON SOME OF THE KEY HIGHLIGHTS:
The EPRA NIY has
increased from 5.46%
at 31 December 2022
to 5.57% at
31 December 2023.
The EPRA Earnings Per
Share (“EPRA EPS”) of
4.92 pence, compared
to 4.78 pence at
31 December 2022,
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 was
113.76 pence per share
at 31 December 2023,
the same as the IFRS NAV
pence per share, compared
to 109.06 pence at
31 December 2022.
EPRA NIY
EPRA ONGOING
CHARGES RATIO
EPRA EPS
EPRA NTA
RENTAL
INCOME
The annualised contracted rental
income of the Group was £41.0 million
as at 31 December 2023, compared to
£39.0 million on 31 December 2022.
IFRS Gross Revenue for the year was
£39.8 million (£37.3 million for year
ended 31 December 2022).
£41.0m
5.57%
4.92 pence
per share
113.76 pence
per share
CASH
AND CASH
EQUIVALENTS
The Group held cash and cash equivalents
of £29.5 million at 31 December 2023,
compared to £30.1 million at 31 December
2022. £10.8 million of cash was available for
further investment as at 31 December 2023,
compared to £13.1 million at 31 December
2022. Cash generated from operating
activities was £25.9 million for the year,
compared to £25.7 million for the year ended
31 December 2022.
£29.5m
A fair value gain of £15.5 million was recognised during the year on the
revaluation of the Group’s properties compared to £8.3 million in the
comparative year to 31 December 2022.
IFRS Earnings per share
was 8.81 pence for the
year to 31 December 2023,
compared to 6.18 pence for
the comparative year to
31 December 2022.
At the year end, the portfolio was independently
valued at £678.4 million on an IFRS basis compared to
£669.1 million at 31 December 2022, reflecting a valuation
increase of 14% against the portfolio’s aggregate purchase
price (including acquisitions costs). This reflects an EPRA
net initial yield of 5.57%.
FAIR VALUE GAIN
£15.5M
IFRS
EARNINGS
PORTFOLIO
VALUATION – IFRS
8.81
pence
per
share
£678.4m
The ongoing charges ratio for the year was
1.63% compared to 1.60% for the year
ended 31 December 2022.
1.63%
Strategic Report
2023 Annual Report
|
39
/
NEW LEASE CLAUSE UPDATE
We are in the process of rolling out a new risk sharing
clause throughout the Group’s portfolio of Registered
Provider leases. This will address some of the historical
concerns raised by the Regulator of Social Housing
around the balance of risk between landlords and tenants.
The inclusion of the lease clause in our existing leases
will enable the Boards of the Registered Providers we
work with to demonstrate an improved risk management
strategy, by clearly mitigating some of the historical risk
associated with long leases. Our proactive introduction
of the lease clause demonstrates our commitment to
actively partnering with Registered Providers around
managing their risk.
As a reminder, the key terms of the new lease clause are
detailed below:
•
Triggering of the clause is subject to a materiality
threshold measured against the aggregate value
of the rental income generated from the portfolio
of leases that the Group has with the relevant
Registered Provider
•
Subject to the above trigger threshold being met,
the Registered Provider can approach the Group in
relation to amending the lease rent to allow for the
occurrence of either of the circumstances below:
–
A change in central Government policy that
negatively impacts the level of rent that is
applicable to Specialised Supported Housing
or the exempt rent status of Specialised
Supported Housing; or
–
A change in local Government policy that
impacts the commissioning of the relevant
property or properties
•
In addition, the new clause provides for an increase
in the annual rent payable to the Group amounting
to the lower of UK CPI (or RPI where applicable), or
the maximum rent increase allowed under prevailing
policy to the extent that it applies to Specialised
Supported Housing rents.
The new clause is already included in 28.3% of the
Group’s existing Registered Provider leases and we hope
to have it included in all of the Group’s leases in the near
future. Details of the Group’s Registered Providers and
the percentage of leases in which the new clause has
now been included are shown in the table on pages 44
to 45.
The clause has been shared with the Regulator of Social
Housing. It has also been reviewed by the Group’s
valuers and the valuers of the Group’s lenders both
of whom have confirmed that they do not expect the
clause to have a detrimental impact on the valuation of
the Group’s properties.
In addition to the new lease clause, it is worth noting
that this year, in response to the Government’s cap of
7% on social housing rent increases, we rolled out a
corresponding temporary one-year cap into all of the
Group’s existing uncapped Registered Provider leases.
This successfully ensured that none of our Registered
Provider partners were in a position whereby they were
having to try to achieve rent increases of higher than
7% and which would have been out of line with sector
averages and therefore potentially hard to achieve
and challenging to justify. As the government cap has
now been removed and its policy has reverted back to
following CPI, there will be no temporary cap on rent
increases applied in 2024.
Strategic Report
40
|
Triple Point Social Housing REIT plc
At the time of writing, four properties have been
upgraded from an EPC of D to either a B or a C. New
technologies such as solar PV, mechanical ventilation,
heating controls alongside improved insulation and
draught proofing have improved energy efficiency whilst
reducing utility bills and increasing thermal comfort for
residents.
The principal objective of the pilot project is to enable
us to learn from these first eleven properties and thereby
inform and finalise our plans for the roll-out of the wider
Eco-Retrofit project, which will see all of the Group’s
properties compliant with the required EPC standards.
With the pilot project due to be completed before the
end of 2024, we expect to be in a position to provide an
update on the cost and timings of the wider project when
we report our 2024 interim results.
/
ECO-RETROFIT PILOT PROJECT
As previously noted, by 2030 all socially rented
properties need to have an Energy Performance
Certificate (“EPC”) rating of C or above. Currently,
71.0% of the Group’s properties already meet the target
with only 29.0% of the Group’s properties having an
EPC rating lower than C which compares favourably
to the Social Housing sector average of 43.1%. We
are committed to protecting the value of the Group’s
properties, reducing carbon emissions, and supporting
our lessees and the individuals living in the Group’s
properties.
In the Group’s latest Interim Report, we reported that
we had just started work on the pilot phase of an
energy efficiency improvement initiative which involved
undertaking works on eleven of the Group’s properties
with EPC ratings ranging from D to E in order to upgrade
these to C or above. We are pleased to report that the
pilot project is now well underway and that all works
have so far been completed on time and within budget.
Most importantly, the pilot project has enabled us to
see the positive impact that these works are having on
the lives of the residents in the properties. It has also
enabled us to learn about which technologies work
best, how to conduct the works efficiently and in a way
that minimises disruption to residents, and form strong
relationships with our contracting partners.
Strategic Report
2023 Annual Report
|
41
* calculated excluding acquisition costs
/
PORTFOLIO SUMMARY BY LOCATION
Scotland
Properties: 2
% of Funds Invested
*
: 1.0
Wales
Properties: 2
% of Funds Invested
*
: 0.5
East Midlands
Properties: 55
% of Funds Invested
*
: 11.1
Yorkshire
Properties: 66
% of Funds Invested
*
: 15.2
East
Properties: 21
% of Funds Invested
*
: 4.2
London
Properties: 27
% of Funds Invested
*
: 8.6
South East
Properties: 61
% of Funds Invested
*
: 9.3
South West
Properties: 29
% of Funds Invested
*
: 4.8
West Midlands
Properties: 82
% of Funds Invested
*
: 16.3
North West
Properties: 97
% of Funds Invested
*
: 19.1
North East
Properties: 51
% of Funds Invested
*
:9.9
Strategic Report
42
|
Triple Point Social Housing REIT plc
/
PORTFOLIO SALE
Alongside these strategic initiatives focused on preserving the long-term value of the Group’s portfolio, in August
2023 we completed the sale of a portfolio of the Group’s properties. The rationale behind the sale was to provide a
data point that was supportive of the properties’ book value and therefore the Group’s Net Asset Value, whilst also
demonstrating ongoing liquidity in the Specialised Supported Housing market.
In the Group’s latest Interim Report, we noted that we had sold a portfolio of four properties post the interim period
end, for £7.6 million, which was in line with the book value of the properties of £7.9 million as at 30 June 2023. The
sale price was reflective of a £0.7 million gain against the aggregate purchase price the Group paid for the properties
(excluding transaction costs). The properties were located across four Local Authorities, and leased to Inclusion
Housing CIC and Chrysalis Supported Association Ltd, with care provided by four separate providers. The portfolio
contained a mixture of adapted and new build properties as well as individual and shared homes.
Included below is a table which compares some of the key metrics of the portfolio of properties sold to those of the
Group’s wider portfolio:
SALE PORTFOLIO
GROUP PORTFOLIO
Properties
4
497
Residents
38
3,455
Average residents per property
9.5
7.0
Fair Market Value
£7.9 million
£675.1 million
Blended valuation yield
5.75%
5.69%
WAULT
19.3 years
24.8 years
The successful portfolio sale was helpful in supporting the Group’s Net Asset Value and evidencing the continued
investor demand for Specialised Supported Housing properties.
/
ASSET MANAGEMENT
Effective monitoring of the granular performance of the Group’s portfolio is at the core of what we do and our asset
management team aims to visit 200 of the Group’s properties each year. Since the publication of our Interim Report
in September 2023, we have made three new hires into the asset management side of the Housing Team. These
hires have focused on adding additional experience and resources to our data management, property inspection and
operational support functions. All three have previously worked for Registered Providers and/or Local Authorities. This
is in line with our philosophy of having a diversified Housing Team where people with direct experience of delivering
social housing work alongside and complement the experience of individuals from fund management, legal and finance
backgrounds. This allows us to deliver good homes to our residents and optimise operational performance of the
Group’s portfolio to ensure sustainable long-term returns for the Group’s shareholders.
Strategic Report
2023 Annual Report
|
43
/
REGISTERED PROVIDER UPDATE
As described in the market section of this report, most of the Group’s Registered Providers have weathered well the
challenges posed by the high interest rates and inflation. As such, there have been no material rent arrears in the
period in the Group’s portfolio other than those that relate to My Space and Parasol, as previously reported, and we are
working to increase rental income from the properties currently let to both My Space and Parasol.
Please see below a table that provides commentary on the performance of the Group’s top 10 lessees.
INCLUSION
HOUSING
PARASOL HOMES
FALCON
HILLDALE
MY SPACE
% OF SOHO
TOTAL RENT
28.9%
9.70%
8.50%
8.50%
8.10%
# OF SOHO
PROPERTIES
124
38
62
30
34
DATE OF START
OF SOHO
RELATIONSHIP
August 2017
December 2018
September 2017
November 2017
October 2017
NEW LEASE
CLAUSE STATUS
Implemented Q4 2023
New risk clause has
been shared.
Substantially agreed,
expected to be signed
in Q1 2024
Substantially agreed,
expected to be signed
in Q1 2024
Risk clause will be
shared as part of
creditors agreement.
LESSEE TYPE
Registered Provider
Registered Provider
Registered Provider
Registered Provider
Registered Provider
YEAR FOUNDED
2007
2006
2008
2009
2012
# OF UNITS
UNDER
MANAGEMENT
4,341
975
960
1,086
1,812
REGULATORY
STATUS*
G3 / V3 (February
2019)
Non-compliant Notice
(December 2021)
Non-compliant Notice
(November 2021)
Non-compliant Notice
(March 2021)
G4 / V4 (December
2022)
Enforcement Notice
(January 2023)
COMMENTS
:
Leading RP in the
Specialised Supported
Housing sector. Led
development of
risk sharing clause.
Financial position
has materially
strengthened since
Regulatory Judgement
in 2019.
New Chair and senior
management team.
One of two RPs with
material arrears. The
Group is working
towards agreeing an
equitable long-term
agreement, if not
achieved leases will
be moved away to an
alternative RP.
Continual progress
made following
non-compliant
regulatory notice
in 2021. Board has
been strengthened.
Recent improvements
in operational
performance following
maintenance being
taken in-house.
Continual progress
made following non-
compliant regulatory
notice in 2021
including strengthened
Board and senior
management team.
Led development of
risk sharing clause.
Following January
2023 enforcement
notice new senior
management team
in place who have
already delivered
material operational
improvements. One of
two RPs with material
arrears. Rent payments
have increased and a
creditors agreement is
expected to be agreed
in the first half of 2024.
* The Specialised Supported Housing sector is regulated by the Regulator who carries out assessments on registered providers either through a scheduled In-depth assessment
(“IDA”) or reactive engagement. When a registered provider passes the 1,000-unit threshold, it automatically becomes subject to a detailed IDA by the Regulator. The IDA assesses
compliance with the requirements of the Governance and Financial Viability Standard. The outcome of an IDA results in the Regulator publishing a formal grading (V 1-4 for
Viability and G 1-4 for Governance, where V1-2 and G1-2 are considered “compliant” ratings, and V3-4 and G3-4 are considered “non-compliant” ratings), known as a regulatory
judgement.
Strategic Report
44
|
Triple Point Social Housing REIT plc
CHRYSALIS
BEST
AUCKLAND
BLUE SQUARE
CARE HOUSING
ASSOCIATION
% OF SOHO
TOTAL RENT
5.40%
5.20%
4.70%
3.90%
3.60%
# OF
PROPERTIES
27
41
30
12
11
DATE OF START
OF SOHO
RELATIONSHIP
November 2017
October 2017
October 2017
May 2020
April 2018
NEW LEASE
CLAUSE STATUS
Substantially agreed,
expected to be signed
in Q1 2024
Substantially agreed,
expected to be signed
in Q1 2024
Discussions ongoing,
expected to be signed
in Q1 2024
Discussions ongoing,
expected to be signed
in Q1 2024
Substantially agreed,
expected to be signed
in Q1 2024
LESSEE TYPE
Registered Provider
Registered Provider
Registered Provider
Registered Provider
Registered Provider
YEAR FOUNDED
2004
2010
2010
2012
2003
# OF TOTAL
UNITS UNDER
MANAGEMENT
335
1,720
951
540
437
REGULATORY
STATUS
No judgement or
notice received
Non-compliant Notice
(May 2019)
Non-compliant Notice
(August 2021)
Enforcement Notice
(April 2023)
No judgement or
notice received
No judgement or
notice received
COMMENTS
:
Relatively small RP.
Highly responsive
management
team and Board.
Consistent operational
performance.
New CEO in position
since the start of
2024. Decision taken
to pursue a merger
with Westmoreland
which, if successful
will complete in early
2025 and will create
a stronger combined
entity.
New management
team and additional
Board members in
place following April
2023 enforcement
notice. Improved
performance and
engagement has
followed.
Relatively small
RP. Consistent
management
team and Board,
consistent operational
performance.
Relatively small RP
with tight regional
focus. Consistent
management
team and Board,
consistent operational
performance.
Strategic Report
2023 Annual Report
|
45
As noted in the Group’s update published on the
13 November 2023, we are working towards finalising
a creditor’s agreement with My Space which we
expect to be put in place during the first half of 2024.
Simultaneously we are working with My Space to move
a small number of properties to alternative Registered
Providers.
Our decision to keep leases with My Space reflects a
significant strengthening of the Registered Provider’s
senior management team and Board. In particular, the
new CEO, who joined My Space in September 2023,
has driven material operational change, improved
dialogue and engagement with the Regulator of Social
Housing and increased rent payments to Landlords. We
are supportive of his plans for the organisation and are
of the view that the Group’s rental income generated
from the properties leased to My Space can best be
improved and sustained over the long-term if the
majority of the Group’s leases remain with My Space.
We are nonetheless considering moving a small number
of the Group’s properties currently leased to My Space
to alternative Registered Providers. Principally, this
relates to the selected alternative Registered Provider’s
superior geographical coverage in the area relevant to
the properties and their ability to deliver better housing
management services, as well as to constructively
engage with the relevant Local Authority commissioners.
As noted in the interim report, in August 2023 we put
in place a creditors’ agreement with Parasol which was
effective from 1 July 2023
and was reflective of the level
of rent being received by Parasol at the time. Parasol
have consistently met the terms of the agreement and
we have extended it for a further six months whilst we
finalise a longer-term agreement with Parasol that should
see rent paid to the Group by Parasol increase over time.
In the event that we are not able to reach an equitable
long-term agreement with Parasol we have identified
and agreed terms with an alternative Registered Provider
who we would look to move the Group’s Parasol leased
properties to. Any transfer of properties would be
undertaken with the interests of the residents at the
forefront of the transfer process.
The Regulator of Social Housing remains active in this
sector and continues to engage closely with a number
of the Group’s Registered Provider partners. We view
this positively as it promotes greater accountability
and transparency, and higher financial and governance
standards. In the Group’s latest Interim Report, we
noted that in the first six months of the year ended
31 December 2023, the Regulator of Social Housing
issued Enforcement Notices in relation to My Space and
Auckland Home Solutions, accounting for 7.7% and 4.7%
of the Group’s rent roll, respectively. We are pleased to
note that since then no further notices or judgements
have been issued by the Regulator of Social Housing in
relation to any of the Group’s lessees. For the Group’s
Registered Providers about whom the Regulator of
Social Housing had previously issued judgements or
notices, this is testament to their willingness to engage
constructively with the Regulator of Social Housing to
address their historical observations, and the progress
made in this regard.
/
PROPERTY PORTFOLIO
As at 31 December 2023, the portfolio comprised 493
properties with 3,417 units and represented a broad
geographic diversification across the UK. The four largest
concentrated areas by market value were the North West
(19.1%), West Midlands (17.1%), Yorkshire (15.1%) and
East Midlands (11.1%). The IFRS value of the portfolio
at 31 December 2023 was £678.4 million compared to
£669.1 million at 31 December 2022, growth of 1.4%
during the period.
Strategic Report
46
|
Triple Point Social Housing REIT plc
/
RENTAL INCOME
In total, the Group had 390 leases which generated total
annualised contracted rental income of £41.0 million as
at 31 December 2023. During the year IFRS Revenue
was £39.8 million compared to £37.3 million in 2022.
At the year end, the Group’s three largest Approved
Providers by annualised contracted rental income and
units were Inclusion Housing (£11.8 million and 911
units), Parasol Homes (£4.0 million and 246 units) and
Hilldale (£3.5 million and 317 units).
As at 31 December 2023, the portfolio had a WAULT of
24.3 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.
100% of the Group’s contracted income is generated
under leases which are indexed against either CPI
(92.5%) or RPI (7.5%). For 2023 all Registered Provider
leases temporarily had rent increases capped at 7.0%.
The new lease clause that is being introduced into
all existing Registered Provider leases provides for
an increase in the annual rent payable to the Group
amounting to the lower of CPI (or RPI where applicable),
or the maximum rent increase allowed under prevailing
policy to the extent that it applies to Specialised
Supported Housing rents. A full update on the roll out
of the new lease clause is included in the New Lease
Clause Update section above.
Strategic Report
2023 Annual Report
|
47
ANNUALISED CONTRACTED RENTAL INCOME BY APPROVED PROVIDER
ANNUALISED CONTRACTED RENTAL INCOME BY LEASE LENGTH
Inclusion
29.3%
Parasol Homes
9.7%
Hilldale
8.5%
Falcon
8.5%
My Space
8.1%
Chrysalis
5.4%
BeST
5.2%
AHS
4.7%
Blue Square
3.9%
Care Housing Association
3.6%
Highstone
3.5%
Sunnyvale
1.5%
Bespoke Care and Support
0.8%
IKE
0.7%
Pivotal
0.6%
YMCA Derbyshire
0.5%
Encircle Housing
0.5%
Partners Foundation
0.4%
Forge House Care Ltd
0.3%
YMCA North Tyneside
0.3%
Courtyard Care
0.3%
Prime Calibre Care
0.2%
Keys
0.2%
IHL
1.2%
Sandwell
1.2%
Wings Care
0.9%
50+ yrs
10.1%
40-50 yrs
0.0%
0-20 yrs
45.7%
20-30 yrs
41.5%
30-40 yrs
2.7%
-
-
+
+
*
*
+
+
3
3
+
+
+
+
A
A
Strategic Report
48
|
Triple Point Social Housing REIT plc
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 7.5% of the Group’s leases.
A small portion of the Group’s leases (4.9% 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 2.0% per annum and 2.5% per
annum, respectively, over the term of the relevant leases.
Despite the high levels of inflation that are currently
being experienced and are projected in the short term
in the UK, JLL’s inflation assumptions remain unchanged
from previous periods given the Group’s long-term
outlook, with a WAULT and contracted income streams
of 24.3 years.
Rent collection during the year was 90.2%
(31 December 2022: 91.8%) and a full update on rent
arrears is included in the Registered Provider Update
section above.
/ OUTLOOK
Looking forward to a year in which there will likely
be a General Election, we are reassured that our
business model is unlikely to be impacted by the result.
Specialised Supported Housing continues to enjoy cross-
party support due to its ability to provide independent
homes to individuals with care needs whilst ensuring
they can remain within their local community receiving
the care and support on which they rely. Whatever form
the next Government takes, we expect them to preserve
the level of benefits available to some of the most
vulnerable members of society. Similarly, due to a cross-
party focus on fiscal responsibility, we expect any new
Government to continue to rely on private funding to
help build the new homes required to make meaningful
inroads i
nto the UK’s housing crisis. All of this reaffirms
the strong fundamentals on which the Group’s strategy is
predicated.
This favourable outlook, combined with the Group’s
strong protection from higher interest rates (due to its
attractively priced long-term debt) and inflation (through
its inflation-linked leases) allows us as the Investment
Manager to focus on the things we can control, namely
preserving the long-term performance of the Group’s
portfolio through active asset management.
We remain focused on delivering key strategic initiatives
such as the Eco-Retrofit programme and the roll-out of
the risk sharing clause, whilst simultaneously continuing
to monitor and react to the granular performance of
the Group’s property portfolio. A major focus will be on
ensuring that the time spent in 2023 working on long-
term plans in relation to the Group’s properties leased to
My Space and Parasol deliver a material increase in rent
collection during 2024.
The dividend is now covered on a run rate basis and
we expect this approach to be supportive of increased
dividend cover over the next 12 months as rent receipts
increase. Over the longer term, the Group’s compelling
capital structure, combined with the strong rental growth
of the last 24 months, which is expected to continue
this year, is supportive of a progressive dividend policy
and a covered dividend. As Investment Manager, we are
focused on ensuring that we move to a period of long-
term dividend cover over the next 12 months.
Finally, we aim to continue to deliver good homes to
people with care and support needs throughout the
UK. Our ability to deploy capital into additional homes
is currently limited but we remain focused on ensuring
that our existing portfolio best meets the needs of the
individuals we provide homes to. In this regard, there is
no substitute for the active approach we take to asset
and property management, and the relationship-driven
partnership approach we employ with the Registered
Providers and Care Providers responsible for servicing
the needs of our residents.
From the provision of good homes comes resilient long-
term investor returns, so we expect that by maintaining
our focus on these areas we can ensure the continued
resilience of the Group’s portfolio and deliver value to
the Group’s shareholders.
Max Shenkman
Head of Investment
7 March 2024
Strategic Report
2023 Annual Report
|
49
Sustainability
Report
We aim to be one of the leading investors in UK Specialised Supported Housing
and this is reflected in our constantly evolving and committed approach to
embedding social outcomes through the homes we create, alongside an
understanding of the need to ensure wider environmental, social and governance
(ESG) factors in decisions taken by the Group and our counterparties.
Our business model (pages 22 to 25) seeks to ensure
that our properties are suitable to meet residents’
needs and assist local authorities in responding to local
demand for the benefit of the wider community. Social
impact is therefore at the heart of what we do, and we
focus on investing where there is clear long-term social
need. How we do this is summarised below and set
out in further detail in the independent Impact Report
available separately on the website.
9
We maintain
a robust corporate governance framework, and this
is described in further detail within our corporate
governance report on pages 85 to 119. We also
recognise the importance of a wide range of other social
factors alongside environmental considerations and in
particular environmental efficiency, which is becoming
increasingly integral to our investment strategy.
/
THE GROUP’S SUSTAINABILITY
The Group continues to provide homes to individuals who
need housing and support. These are some of the most
vulnerable members of society, with a range of learning
disabilities, physical disabilities, and mental health
diagnoses. Conversations with housing providers, care
providers and local authority commissioners confirm that
there is a high level of underlying demand for Specialised
Supported Housing. We also have a responsibility to
consider the wider risk, opportunities and impacts of
sustainability issues if the Group is to succeed in providing
high quality social housing for vulnerable people over the
long term.
We understand the importance of transparent reporting
as a requisite to accountability for strong sustainability
performance. We have identified key environmental,
social and governance data points that play a role in
influencing the strategy’s sustainable future. These data
points incorporate areas where the Group has the ability
to drive positive change across its portfolio and the
wider sector.
To demonstrate our commitment to sustainability
progress, the Group has opted to track and report on
the ESG data points noted in table 1 below. In addition
to reporting data for FY 2023, where relevant, we have
included data from 2022 to demonstrate year-on-year
change. For the first time, targets have now been set on
the carbon emissions of properties. Prior to this, data was
being tracked with explicit action only relating to the EPC
profile of the portfolio.
Strategic Report
50
|
Triple Point Social Housing REIT plc
SUSTAINABILITY TABLE 1.
PORTFOLIO SUSTAINABILITY PERFORMANCE FOR THE REPORTING YEAR ENDED
31 DECEMBER 2023
METRIC
FY23
FY22 (IF APPLICABLE)
Portfolio EPC ratings
A-C: 71.04%
10
A: 0.41%
B: 30.80%
C: 39.83%
D: 21.99%
E: 6.81%
F: 0.12%
A-C: 70.87%
10
A: 0.40%
B: 31.15%
C: 39.31%
D: 22.02%
E: 6.95%
F: 0.12%
Scope 3 property
emissions (Tonnes)
11
4,763 tonnes
(Location-based emissions)
3,464 tonnes
(Market-based emissions)
3,610 tonnes
(estimated)
Property emissions intensity
12
30.9 tCO2e /m
2
(location-based)
22.4 tCO2e /m
2
(market-based)
1.4 tonnes per property
(estimated)
METRIC
FY23
FY22 (IF APPLICABLE)
Number of properties and location
13
REGION
ASSETS
UNITS
East
21
128
East Midlands
55
412
London
27
191
North East
51
400
North West
97
705
Scotland
2
29
South East
61
272
South West
29
167
Wales
2
20
West Midlands
82
545
Yorkshire
66
548
493
3,417
REGION
ASSETS
UNITS
East
20
125
East Midlands
58
442
London
27
192
North East
50
377
North West
99
732
Scotland
2
29
South East
62
276
South West
29
167
Wales
2
20
West Midlands
84
554
Yorkshire
64
542
497
3,456
Percentage of residents satisfied with
the quality of their home
14
91%
91%
Quality rating of care providers (Care
Quality Commission) % at outstanding
/ good
83%
85%
10.
During FY23, 42 individual units with EPC ratings left the portfolio (due to the sale of four properties), the majority of which were rated either EPC B or C, while
five
were rated D
and E. In the same period, nine properties received improved EPC ratings, moving from either E to C, D to B, D or C, while other EPCs were
re-affirmed
. Overall, there has been
a very minor increase in the portfolio wide EPC A-C rating (70.87% to 71.04%).
11.
The emission data is calculated using property gas and electricity consumption only, and therefore is not a complete Scope 3 figure.
Property carbon emissions for 2023
use actual electricity and gas consumption for the portfolio. The 2023 annual report is the first reporting period using actual consumption data, compared to previous years
estimates from the ECP register. It is the change in methodology that has led to the increase in reported emissions, and we commit to use a comparable methodology for
emissions reporting moving forward. The 2023 emissions data incorporates over 90% of the Group’s electricity and gas meters, with work ongoing to match the remaining
portfolio meters. Consumption is calculated using the latest meter reads collected by smart meters or provided by tenants, to create annual consumption values for electricity,
and annual quantities for gas. This is the same data used for billing. The aggregate consumption values used in the calculation are the sum of all the annual values per meter.
These values are submitted by the suppliers to Electralink and the Data Transfer Network for market settlement purposes. The location-based emissions use the standard 2023
DEFRA GHG emission factor for CO
2
e per KhW for all properties, while the market-based emission figure is calculated by multiplying the fuel mix disclosed by the individual
supplier (for electricity only) with the consumption value, to calculate the overall footprint. The Group commits to continue to report actual property emission data using both
methods and to improve the quality of data.
12.
The Group have opted to report GHG emission intensity per square metre in 2023, rather than per property as used in the 2022 report. The Group’s net zero target is set on
an emission per square metre basis and the Group has committed to reporting this data on an annual basis to demonstrate progress towards the near-term target. Additional
details of the near-term net zero target can be found on (page 54). Our near-term net zero target was set using estimations, and therefore, following SBTi guidance, we have
included the location-based emissions. We will continue to track market-based emissions and the individual suppliers and tariffs.
13. The variations between FY22-FY23 are caused by the disposal of 4 properties in addition to, as part of planned data reviews, a few amendments made to properties for
consistency across the portfolio.
14. Based on Resident Outcomes Surveys conducted for each year’s Impact Report. For Dec 2022 this is based on a sample of 60 residents and for Dec 2023 this is based on a
sample of 117 residents. Full methodology can be found in The Good Economy independent impact report.
Strategic Report
2023 Annual Report
|
51
/
SUSTAINABILITY APPROACHES: IMPACT AND ESG INTEGRATION
The Group’s approach to sustainability is to create social impact by delivering homes for vulnerable individuals
supported through the additional management of wider risks and opportunities which may impact the quality of
those homes or the long-term value of the assets through the integration of ESG factors in the investment decision
making process.
Impact creation
: The Government estimates that demand for Specialised Supported Housing is set to increase by
125,000 by 2030.
15
A growing prevalence of disability, combined with the requirement to move people out of institutional
care settings and provide independent community homes, is driving this increase in demand. Through the Group’s
investments and partnerships with Registered Providers, our social impact goal is to increase the provision of Specialised
Supported Housing that delivers positive outcomes for people with care and support needs. Under this overall impact
goal, the Group has established the following set of impact objectives and identified the target outcomes to which the
Fund aims to contribute:
IMPACT OBJECTIVES
The areas under the Group’s direct control or influence:
Social Need;
Fund sustainable developments;
Increase supply;
Quality services and partnerships
CONTRIBUTE
TOWARDS
TARGET OUTCOMES
16
The outcomes for people and planet; these depend
on many factors, one of which may be the Group’s
activities
Improve wellbeing
Value for money
METRIC
FY23
FY22 (IF APPLICABLE)
Investment Trust Governance
Average age:
67
Gender split ratio:
Please see the Governance report
(page 105)
Ethnicity split: list of %s:
Please see the Governance report
(page 105)
Non-executives vs. directors ratio:
100% Non-executive Directors
Experience:
Please see all board members biographies in the governance report
(pages 88 to 89)
Board engagement with ESG
ESG Training
The Board receives
specific sustainability training from the Investment Manager’s Head of Sustainability
at a minimum of every 2 years. The Board last undertook training in 2022, with a further session due to
take place in 2024. In addition, the Board has established a Sustainability & Impact Committee during
the period, which is kept informed by the Investment Manager’s Sustainability team of regulatory
changes which do, or are likely to, impact the Company’s ESG strategy.
Environment
The Sustainability & Impact Committee considered, and recommended to the Board for approval, the
commencement of an Eco-Retrofit Pilot Project. Specifically, this is a sector-first programme to fund the
upgrade of 11 properties within the Group’s portfolio to a minimum EPC of “C”.
In addition, the Sustainability & Impact Committee considered, and recommended to the Board for
approval, the proposal to commit the Company to reduce portfolio emissions by 75% per m2 by 2035
from a baseline year of 2021.
The Board subsequently approved both recommendations. Further information can be found in the
Sustainability & Impact Committee report on pages 106 to 107
Social
In order to address Regulator concerns regarding risks that long leases can pose to Registered Providers
(such as risk of changes to Government policy impacting the amount of housing benefit available to
individuals living in Specialised Supported Housing and therefore Registered Providers’ ability to pay
lease rent), the Board considered and approved the roll out of a new risk sharing clause throughout
the Group’s portfolio of Registered Provider leases. This clause will enable the Boards of Registered
Providers to demonstrate an improved risk management strategy, by mitigating some of the historical
risk associated with long leases. Further information can be found in the Investment Manager’s Report
on pages 33 to 49
Governance
During the period, the Board decided to change the membership and structure of the Board’s
Committees, as announced on 24 May 2023. The key changes included implementing smaller
Committees, to ensure better management of the Board’s duties, as well as the establishment of a
Sustainability & Impact Committee, to ensure there is appropriate oversight and focus on the Group’s
ESG strategy.
16. Full details of our impact goals and outcomes can be found in The Good Economy independent impact report on the Group’s website.
Strategic Report
52
|
Triple Point Social Housing REIT plc
The Good Economy conduct an independent assessment of the impact objectives and target outcomes. Full details
regarding the impact results can be found at The Good Economy’s website.
17
ESG integration:
In conjunction with the Board’s endorsement, and in line with the Principles of Responsible
Investment (PRI), the Investment Manager has an ESG integration policy in place, directly relating to the Group’s
investments with the aim of ensuring value for investors, coupled with respecting society and the environment.
Within this integration policy, the Investment Manager has set out principles which it incorporates throughout its
business, for example, to consider the impact of operations on local communities and to uphold high standards of
business integrity and honesty.
An overview of how ESG is integrated throughout the investment process is outlined in table 2, whilst further details
of this process, including examples, can be found within the ESG integration policy (available on the Group’s
website
18
).
SUSTAINABILITY TABLE 2.
THE GROUP INTEGRATES ESG THROUGHOUT ALL STAGES OF THE INVESTMENT PROCESS.
INVESTMENT STAGE
SUSTAINABILITY ACTIVITIES
Origination and initial due
diligence
Key ESG and impact factors are summarised within the team’s internal pipeline tracker. An opportunity will only
progress to incurring costs once the senior investment team members believe that ESG conditions are being met
or managed and the opportunity does not present a material ESG risk.
Cost incurring due diligence
Key ESG considerations are assessed on a deal-by-deal basis within the ESG due diligence questionnaire. A new
due diligence tracker is completed for new transactions and the tracker also assesses transactions against six
impact objectives.
The ESG due diligence questionnaire is designed to capture all the ESG metrics collated throughout the
origination and due diligence phase and ensures compliance with minimum standards set for properties entering
the portfolio.
Property Investment
Committee
ESG factors are presented and considered by members of the investment committee within a paper which is
accompanied by the due diligence tracker for all supporting ESG data.
The meeting minutes will record any ESG issues raised, with confirmation that ESG factors have been considered,
and the committee believes that once any ESG conditions are met, the deal does not present a material ESG risk.
The final due diligence tracker will record any investment committee comments or actions on ESG.
Ownership and asset
management
On going conversations with partners to discuss and gather insight and share good practice as well as identifying
any early future challenges. Property performance is monitored to ensure that social needs continue to be met.
The governance of existing counterparties is monitored through regular meetings and inspections.
We consider how to optimise ESG performance across the portfolio – for example, upgrading the EPC ratings of
existing properties through retrofit activities.
We engage in sector-wide discussions about ESG performance and best practices.
Exit
If properties are sold, we will disclose ESG improvements during the period of ownership and share information
regarding our responsible investment approach.
When considering ESG within the investment process, a materiality approach is taken to ensure focus is given to
those issues most likely to negatively impact or positively strengthen the homes we are investing in. These factors
are under continual review as we recognise the non-static nature of ESG. Our approach is to track and improve
behaviours across this range of factors using our ESG due diligence questionnaire and ESG metrics.
In 2023, we developed an updated ESG due diligence questionnaire which includes certain minimum standards for a
project to be accepted. This refined due diligence process represents our commitment to improve the standards of
all developments entering the portfolio. Further details on our new build sustainability expectations can be found on
page 55. The new due diligence requirements supplement existing minimum standards in place for retrofit projects.
The details below summarise the specific areas of ESG interrogation.
Strategic Report
2023 Annual Report
|
53
/ ENVIRONMENT
When acquiring assets, we look closely at their
environmental impact, and encourage a sustainable
approach for new development. We also look to ensure
the environmental impact is considered in relation to the
maintenance and upgrading of existing properties; the
retrofit project is designed to enhance the properties in
the existing portfolio.
We require every property we acquire to have a
minimum energy performance rating of at least a ‘C’ on
an EPC for renovated properties and at least a ‘B’ on
an EPC for new-build properties, notwithstanding the
legal requirement for any privately rented properties
to have a minimum energy performance rating of E
on an EPC. Furthermore, due to ongoing uncertainty
surrounding The Environment Act’s Biodiversity Net
Gain rules for infrastructure projects, the Group has
proactively embraced the requirement ahead of its
legislative implementation. The Group encourages all
newly constructed developments to achieve a minimum
Biodiversity Net Gain of 10%, emphasising a preference
for on-site gains. This evaluation takes place during
the due diligence stage, and assistance is offered, as
needed, to ensure the target for biodiversity net gain
is met.
Through our rigorous and evolving due diligence
process, the high standards we expect from developers
and significant investment in the Specialised Supported
Housing sector, we have been able to provide capital
and expertise that has enabled our counterparties to
progress alongside us. We focus on offering residents
resource-efficient and adapted living areas which
help ensure our investments are fit-for-purpose and
sustain their value over the long-term. As a landlord,
we consider the opportunities we have to help reduce
running costs for our lessees and occupiers and increase
resident well being.
/
THE GROUP’S COMMITMENT
TO NET ZERO
The Group is committed to reducing carbon emissions
across its property portfolio. Our climate change
strategy is informed by scientific perspective, long-term
protection of assets and regulatory requirements. We
seek to contribute towards the transition to a low-
carbon economy. In January 2024, the Board adopted
the following near-term science aligned
19
net zero
pathway for the Company:
The Group commits to reduce its social housing
portfolio emissions by 75% per m2 by 2035 from a
baseline year of 2021.
The establishment of this target represents a significant
milestone for the fund, demonstrating commitment
to upholding our fiduciary duty through the long-term
protection of assets and value creation. Our strategy
places paramount importance on collaboration with
all stakeholders, actively fostering engagement with
Registered Providers, Care Providers, and Tenants. This
collaborative approach is integral to ensuring concerted
action and favourable outcomes for all involved parties.
Each year we will report emissions across the portfolio,
in addition to reporting progress with regards to the
carbon intensity of the portfolio per m2 and progress
against this target.
This near-term target has been recently set, and the
Board will hold the Investment Manager accountable
for its implementation. Progress updates will be
communicated through the Sustainability Committee.
An external data provider is being utilised to
enhance the quality of the energy and carbon data.
The Investment Manager engages external carbon
specialists to support their annual carbon footprint
process and the Group’s footprint will be incorporated
within this. The goal itself was set as a result of a
year-long project with The Carbon Trust to ensure it is
science aligned. Further audit plans have not yet been
opined on.
Further details on climate action are provided in
the Company’s TCFD disclosure. While not in scope
of this requirement yet, the Company continues to
produce a TCFD report ahead of FCA expectations to
demonstrate its support for the disclosures.
The Fund seeks to demonstrate best practice in
transparency and has included its second disclosure
within this report. Further details are found in the
Climate Risk analysis section, and the full report begins
on page 60
.
19.
Science-aligned pathways are globally aligned goals, rooted in climate science, to reduce carbon emissions and limit the world’s temperature in line with the Paris Agreement.
The recommended target for SOHO follows a specific pathway for Real Estate assets using the required Sectoral Decarbonisation Approach (SDA). The SDA approach specifies
how much and how quickly a company needs to reduce its GHG emissions in order to limit global warming to 1.5°C, as per the Paris Agreement.
Strategic Report
54
|
Triple Point Social Housing REIT plc
/
RETROFIT PILOT PROJECT
The Property Asset Management team of the Investment
Manager has devised an extensive retrofit pilot
programme
aimed at enhancing the energy efficiency
of properties. The primary objectives include aligning
with EPC regulation changes, reducing tenant costs,
and minimising portfolio-wide emissions. Commencing
in 2023, the retrofit pilot has successfully implemented
upgrades in four out of the eleven designated
properties. The current retrofit actions have focused on
improving insulation (a fabric first approach) in addition
to the installation of solar PV systems.
The pilot phase is strategically designed to gain a
deeper understanding of the practicalities associated
with retrofitting Specialised Supported Housing.
The execution of these works requires careful and
considerate planning, especially with regard to the
impact on residents whilst works are carried out, and
the ease of functionality for all technology that is used,
including heating controls and ventilation systems.
The pilot phase targets completion by end of FY24.
/
ENHANCED SUSTAINABILITY
DUE DILIGENCE FOR NEW BUILDS
In 2023, the Group introduced an extensive sustainability
due diligence process for all newly constructed
properties, leveraging internationally recognised
frameworks to underpin its development initiatives.
20
The implementation of these expectations demonstrates
our commitment to upholding elevated environmental
and social standards for all new properties entering the
portfolio.
The new framework places particular emphasis on key
areas of development, including location and transport,
construction practices, environment, workforce well-
being, supply chain integrity, and governance. With
the rollout of the enhanced due diligence process, we
have actively collaborated with prospective developers,
providing support to refine their plans and surpass the
established standards.
For further details, refer to the Chorley case study on
page 35.
/
SOCIAL AND SOCIAL IMPACT
Our properties aim to provide multiple benefits to local
communities. We want to provide residents with safe
and secure accommodation, which meet their individual
care needs. We work with Approved Provider lessees
to enable them to grow the portfolio of properties they
are responsible for managing, allowing them to expand
the number of individuals they support whilst providing
employment for local carers, housing managers and
builders. While development and refurbishment can
cause some minor short-term disruption to an area,
these activities help create employment and, at the same
time, help alleviate the UK’s housing crisis.
The Company is committed to elevating resident
satisfaction and well-being across our properties where
feasible and practical. On behalf of the Company, the
Investment Manager seeks out initiatives aimed at
enhancing outcomes for residents, as exemplified in the
Hazelbank Garden case study provided below. Although
replicating the investment seen at Hazelbank will be
uncommon and is not achievable for every property,
there was a favourable opportunity to enhance the
garden space and enrich the overall resident experience
which was identified and executed. We continue to seek
such opportunities and investment will be reviewed on a
case-by-case basis.
Recognising the pivotal link between the built
environment and resident well-being, any further such
investment will prioritise the creation of living spaces
that positively impact physical and mental health.
20.
Frameworks used to guide development include: Principles for Responsible Investment, BREAM, GREESB, OECD 3, CDP, S&P CSA, Future Homes standard, Building for Life
standard, Code of Considerate Constructors, TCFD and TNFD.
Strategic Report
2023 Annual Report
|
55
Hazelbank
Young people
The Hazelbank property had an existing large garden, however
the majority of the garden space was only accessible via steps.
The objective of the project was to increase and improve the
space at ground floor level to provide a more inclusive and
enjoyable environment.
We carried out several visits to the property speaking to the
children and the staff to gather ideas for the improved space
prior to commencement. Through thoughtful planning the
children now have an enhanced space, featuring a pergola
area which can be used as a relaxing space in all weathers,
increased seating and the garden is now home to vibrant
all year round sensory planting to stimulate senses and
provide a variety of fruits, vegetables and herbs for the
children to pick and enjoy.
The registered manager for the service commented
“The young people are appreciating the new seating
areas on the lower level, which offer them an outdoor
environment to manage their emotions. They have
voiced their liking for the new plants, and it’s been
observed that they are spending more time outdoors,
both as a group and individually.”
The garden has received positive feedback from the
young people, with one of them commenting
“I like the space because …now you can sit down
under the pergola.” Another young person
particularly enjoys using the pergola during rain
to experience the sound of raindrops while
staying dry.
Furthermore, staff members are finding the
expanded space beneficial for their breaks,
offering a pleasant area to have lunch during
shifts.
“The addition of extra seating has enhanced
the use of the existing green grass area,
now accommodating more activities such as
trampoline and ball games”
Strategic Report
56
|
Triple Point Social Housing REIT plc
THE INVESTMENT MANAGER: TRIPLE POINT
An important aspect of the Investment Manager’s approach to ESG is the adoption of the Principles for Responsible
Investment (‘PRI’), which they signed up to in 2019. The PRI are designed to guide and demonstrate best practice
ESG integration, and to promote alignment between the objectives of investors and wider society. The principles,
which are voluntary, are intended to be actionable and measurable are detailed in the table below.
PRINCIPLE
SUMMARY OF INVESTMENT MANAGER ACTION
1
We will incorporate ESG issues into investment analysis and decision-
making processes.
As evidenced through our detailed approach to ESG due diligence
and laid out in our ESG Integration Policy.
2
We will be active owners and incorporate ESG issues into our
ownership policies and practices.
As evidenced through engagement with RPs and developers on
processes that would benefit from improved ESG performance.
For example, when investing in construction seeking developers to
become signatories of the Considerate Code of Constructors.
3
We will seek appropriate disclosure on ESG issues by the entities in
which we invest.
As evidenced through our increasing expectations on those we work
with, for example requesting developers to become signatories to
the Considerate Contractors Code.
4
We will promote acceptance and implementation of the Principles
within the investment industry.
As evidenced through our involvement in the Sustainability Reporting
Standard for Social Housing and the Equity Impact Project, and
participation in the Green Lease Working Group for the Green
Finance Institute initiatives which seek to drive industry best practice
in ESG and impact.
5
We will work together to enhance our effectiveness in implementing
the Principles.
As evidenced by the ongoing participation of the Investment
Manager in collaborative initiatives, and in ESG innovation, such as
our work towards improved energy efficiency.
6
We will each report on our activities and progress towards
implementing the Principles.
As evidenced through the detail we publish in our Annual Report,
our ESG Integration Policy, our Impact Report and the Investment
Manager’s Group Sustainable Business Objectives report.
/ GOVERNANCE
The Group looks to encourage best practice governance
among all counterparties in order to minimise
operational risks and encourage them to continually
assess how they can contribute more to employees,
residents, wider society, and the environment, through
compliance with legislation and regulations, and the
adoption and implementation of issue-specific policies.
Details on the Group’s corporate governance practices
are set out on pages 85 to 119.
/
CLIMATE RISK ANALYSIS
Climate-related risks and appropriate mitigation is a
growing area of focus for the Group. The team is seeking
to roll out comprehensive climate analysis initiatives to
support risk mitigation and forward planning. This will
encompass both existing portfolio properties as well as
becoming incorporated into the selection process for
new properties.
The Group considers the climate change strategy of
its portfolio including a review of its climate risks and
opportunities. The fund reports disclosures in line with
the recommendations of the Taskforce on Climate-
related Financial Disclosures (TCFD). These are designed
to provide a framework to take account of climate-
related risks and opportunities and ensure that corporate
reporting is consistent and comparable.
The Group is pleased to report its progress to date in
line with the eleven disclosures set out in the TCFD
recommendations.
Please refer to pages 60 to 68 to read the Group’s TCFD
disclosure.
Strategic Report
2023 Annual Report
|
57
/
WIDER GOVERNANCE AND
SUSTAINABLE BUSINESS
BEHAVIOURS OF THE GROUP AND
INVESTMENT MANAGER
B CORPORATION
21
As a B Corporation, the Investment Manager is
committed to meeting high standards of verified
performance, accountability, and transparency on factors
from employee benefits and charitable giving to supply
chain practices and input materials. The Investment
Manager published their first sustainability report in
2023
22
, fulfilling the B Corp reporting requirements.
BUSINESS RELATIONSHIPS
The Group has a set of corporate providers that ensure
the smooth running of the Group’s activities. The Group’s
key service providers are listed on page 165, and the
Management Engagement Committee annually reviews
the effectiveness and performance of these service
providers, taking into account any feedback received.
The Group also benefits from the commitment and
flexibility of its corporate lenders for its debt facilities.
Each of these relationships is important to the long-term
success of the business. The Group and the Investment
Manager maintain high standards of business conduct by
acting in a collaborative and responsible manner with all
its business partners that protects the reputation of the
Group as a whole.
EMPLOYEES
The Group has no employees and accordingly no
requirement to separately report on this area.
The Investment Manager is an equal opportunities
employer who respects and seeks to empower each
individual and the diverse cultures, perspectives, skills
and experiences within its workforce. The Investment
Manager places great importance on company culture
and the wellbeing of its employees and considers
various initiatives and events to ensure a positive
working environment.
HEALTH AND SAFETY
The Group is committed to fostering the highest
standards in health and safety. Day-to-day responsibility
for health and safety in our properties is shared by the
Approved Providers and care providers who manage
the housing and provide care. Our Investment Manager
requests confirmation from Approved Providers that
all properties remain compliant and visits properties,
following an agreed visiting schedule, to verify this.
Every quarter the Board is provided with updates on the
health and safety of our residents.
DIVERSITY
We are an externally managed business and do not
have any employees or office space. As such the Group
does not operate a diversity policy with regards to any
administrative, management and supervisory functions.
A description of the Board’s policy on diversity can be
found on page 105.
The Investment Manager has an Inclusion and Diversity
Policy which outlines commitments including compulsory
training for all employees on equality and diversity in
the workplace and unconscious bias training. All staff are
expected to conduct themselves to help the organisation
provide equal opportunities in employment, and prevent
bullying, harassment, victimisation, and discrimination.
Behaviours contrary to those outlined in the policy result
in disciplinary procedures.
The Investment Manager is a member of the Diversity
Project, an initiative championing a more inclusive
culture within the Savings and Investment profession
and this further informs our approach to Inclusion and
Diversity. Some of the initiatives used by the Investment
Manager to support Diversity are the 100 Black Interns
Programme, Investment 2020 and Girls are Investors
Programme.
21.
Certified B Corporations, or B Corps, are companies verified by B Lab to meet high standards of social and environmental performance, transparency, and accountability. Further
information can be found: https://bcorporation.uk/b-corp-certification/what-is-a-b-corp/
Strategic Report
58
|
Triple Point Social Housing REIT plc
The Investment Manager is committed to transparency
around diversity reporting and has voluntarily opted to
report against the following metrics:
TRIPLE POINT HOUSING TEAM
(THE INVESTMENT
MANAGEMENT TEAM)
TRIPLE POINT LLP
52% women
45% women
20% women in leadership roles
(partners/directors)
23% women in leadership roles
(partners)
25% women in leadership roles
(directors)
0% ethnic minority
17% ethnic minority
0 ethnic minority in leadership
roles (partners/directors)
0% ethnic minority in leadership
roles (partners)
13% ethnic minority in leadership
roles (directors)
HUMAN RIGHTS
The Group is within the scope of the Modern Slavery
Act 2015 and is therefore obliged to make a slavery and
human trafficking statement. The Modern Slavery Act
statement can be found on the Group’s website.
23
The Board are satisfied that, to the best of their
knowledge, the Company’s principal advisers, which
are listed in the Shareholder Information section on
page 165 comply with the provisions of the UK Modern
Slavery Act 2015.
The Investment Manager takes the risk of Modern
Slavery extremely seriously. The Investment Manager’s
responsibilities as both an employer and investor are laid
out in the public Modern Slavery Act Statement.
INVESTMENT MANAGER’S GOVERNANCE OF
SUSTAINABILITY APPROACH
The Investment Manager’s overall commitment and
approach to sustainability is overseen by the Head
of Sustainability and the supporting sustainability
governance structure. The Investment Manager’s
sustainability is governed through three core elements.
Firstly, all investments must be approved by the
Investment Manager’s Investment Committee. All of the
Investment Manager’s Investment Committee members
receive ESG training, to ensure they fully understand
the ESG integration approach in place and can assess
investment opportunities in the correct context. This
review process ensures investment decisions are
aligned with the strategy’s ESG commitments and the
organisation’s ethos on corporate responsibility and
responsible investment more generally.
Secondly, the Investment Manager has a Sustainability
Group which meets quarterly and is chaired by Ben
Beaton, co-Managing Partner of the Investment
Manager. This Group reviews sustainability activities
across the business, with members consisting of partners
and business heads from across all functions and
minutes of the Group’s meetings are provided by the
Company Secretarial team. Reporting into this Group is
the Sustainable Investment Subgroup. The Subgroup is
responsible for discussing deals which present complex
ethical, responsible, or sustainable investment issues,
and meet when deals are referred to the Subgroup,
either through self-referral from the investment team, at
the request of a member of the sustainability team, or at
the request of a member of the investment committee.
Thirdly, the Investment Manager’s Sustainability Team
are responsible for running an annual ESG performance
review of ESG integration by each strategy, to ensure
teams are implementing the ESG activity committed
to within the associated integration policy. The results
and follow-up action of this review are shared with the
Sustainability Group and with the Sustainable Investment
Subgroup. The Investment Manager’s activities in
relation to the Group’s sustainability commitments are
assessed in this process.
Strategic Report
2023 Annual Report
|
59
/
TRIPLE POINT SOCIAL HOUSING REIT’S APPROACH TO
TCFD DISCLOSURE
The Task Force for Climate-Related Financial Disclosures (TCFD) recommendations are designed to provide a
framework for the financial sector to take account of climate-related risks and opportunities and ensure that such
reporting is consistent and comparable.
The report has been prepared with reference to TCFD All Sector Guidance and Supplemental Guidance for the
Financial Sector. In addition to UK government requirements, the FCA has made it a requirement for many regulated
firms to publish TCFD-aligned climate disclosures on their website, with effect from 1 January 2023 and with the
first reports due by 30 June 2024, under ESG 2.1 in the FCA Rules. While not in scope of this requirement yet, the
Company has decided to produce this TCFD report ahead of FCA expectations to demonstrate its support for
the disclosures. We consider our disclosure to be consistent with all of the Task Force on Climate-related Financial
Disclosures (TCFD) Recommendations and Recommended Disclosures as detailed in “Recommendations of the
Task Force on Climate-Related Financial Disclosures”, 2017, with use of additional guidance from “Implementing
the Recommendations of the Task Force on Climate-related Financial Disclosures”, 2021. The Company has not
implemented assurance of the disclosure. The net zero target referred to has been set as the result of a project taking
over 12 months with guidance from external carbon specialists, the Carbon Trust, to identify science aligned near
term targets. Carbon emissions have been estimated using an external data provider. A new data provider, Perse, has
been used for the estimation of 2023 emissions data and is believed to be of significantly greater accuracy than the
data estimation software applied in 2022. On behalf of the Company, the Investment Manager continues to review
data solutions to seek the most accurate, cost effective, and practical options available.
The Company also acknowledge the recent release of guidance relating to biodiversity disclosure, via the Task Force
on Nature-related Financial Disclosure (TNFD) and are working with the Investment Manager to explore how this
might best be responded to for the portfolio in a timely and appropriate manner.
RECOMMENDATION
RECOMMENDED DISCLOSURES
PAGES
Governance
Disclose the organisation’s governance around climate-
related risks and opportunities.
a. Describe the board’s oversight of climate-related risks and
opportunities.
61
b. Describe management’s role in assessing and managing climate-
related risks and opportunities.
61-63
Risk Management
Disclose how the organisation identifies, assesses, and
manages climate-related risks.
a. Describe the organisation’s processes for identifying and assessing
climate-related risks.
61-63
b. Describe the organisation’s processes for managing climate-related
risks.
61-63
c. Describe how processes for identifying, assessing, and managing
climate-related risks are integrated into the organisation’s overall risk
management.
61-63
Strategy
Disclose the actual and potential impacts of climate-
related risks and opportunities on the organisation’s
businesses, strategy, and financial planning where such
information is material.
a. Describe the climate-related risks and opportunities the organisation
has identified over the short, medium, and long term.
63-68
b. Describe the impact of climate-related risks and opportunities on the
organisation’s businesses, strategy, and financial planning.
63-68
c. Describe the resilience of the organisation’s strategy, taking into
consideration different climate-related scenarios, including a 2°C or
lower scenario.
63-68
Metrics and Targets
Disclose the metrics and targets used to assess
and manage relevant climate-related risks and
opportunities where such information is material.
a. Disclose the metrics used by the organisation to assess climate-
related risks and opportunities in line with its strategy and risk
management process.
67-68
b. Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse
gas (GHG) emissions and the related risks.
67-68
c. Describe the targets used by the organisation to manage climate-
related risks and opportunities and performance against targets.
67-68
Strategic Report
60
|
Triple Point Social Housing REIT plc
GOVERNANCE
•
Describe the board’s oversight of climate-related
risks and opportunities.
•
Describe management’s role in assessing and
managing climate-related risks and opportunities.
Risks to the Company, including climate risks, are
formally captured in the Company’s Risk Register which
is owned by the Board, which has ultimate responsibility
for managing the climate risks faced by the Company.
The Investment Manager shares the Risk Register on
a quarterly basis, and provides additional updates
on material climate risks on an ad hoc basis. The
Sustainability Committee provides the forum through
which the Investment Manager provides ad hoc updates
on climate risk for the Board and through which progress
against the net zero target is to be tracked. Triple Point’s
Head of Sustainability and the Risk team are responsible
for ensuring coverage of climate-related risks within the
risk register.
SOHO BOARD
RISK COMMITTEE
RISK TEAM
SUSTAINABILITY
TEAM
INVESTMENT
TEAM
SUSTAINABLE
INVESTMENT
SUBGROUP
APPROVED
PROVIDERS
TRIPLE POINT
SOCIAL HOUSING
REIT
TRIPLE POINT
INVESTMENT
MANAGEMENT
APPROVED
PROVIDERS
At the Investment Manager level, assessment and
management of climate-related risks and opportunities
is shared across the Housing Teams and the wider Triple
Point business including the Investment Team meetings.
Triple Point’s Sustainability Team and Risk Team co-
ordinate these processes.
Climate-related risks are increasingly assessed as part of
the standard due diligence process when acquiring or
funding the development of new properties. Identified
climate risks are presented in the materials provided
to the Investment Committee and, where relevant, will
be discussed during committee meetings to assess
the potential impact of these risks on the property or
development and to determine the time frame over
which they might materialise.
Where investments are made into properties that
are in construction, Triple Point’s investment team
can have more of a direct influence over the design
and development of a property and can ensure that
any relevant mitigation measures are included in the
specification, such as additional drainage measures for
properties with increasing flood risk. The Investment
Team determine what action will contribute to efficiency
of a property and resilience to climate change and
progress against net zero targets and determine the
most appropriate action in the context of these two
needs.
During the current period of low deployment by
the Company, the Investment Manager has focused on
the existing portfolio and its resilience to physical and
transitional impacts of climate change and ensuring the
Board are presented with options for action.
The activities of the Investment Team are supported by
further expertise and Governance within the Investment
Manager. Triple Point’s Sustainable Investment Subgroup
meets quarterly for market updates and on an ad
hoc basis to discuss specific deals of sustainability
interest. This Group serves as an extra platform for the
examination of ESG issues that could impact potential
investments, including the impact of climate change.
The insights from this Group can be used to help inform
the actions of the Investment Team and also act as a
further sounding board should a topic require additional
discussion before action. This Group is comprised of
senior members of Triple Point’s investment team from
all investment strategies, bringing together a range of
expertise and viewpoints for productive discussions.
Megan Sweeney is currently the representative from
the Company in this subgroup.
RISK MANAGEMENT
•
Describe the organisation’s processes for identifying
and assessing climate-related risks.
•
Describe the organisation’s processes for managing
climate-related risks.
•
Describe how processes for identifying, assessing,
and managing climate-related risks are integrated
into the organisation’s overall risk management.
Strategic Report
2023 Annual Report
|
61
Climate-related risks to the portfolio are identified during
an annual workshop between the Housing Team and the
sustainability team within the asset manager. During this
workshop, the subject-matter expertise of the Housing
Team and asset management teams is utilised to map
climate risks onto the assets held by the Company.
A particular emphasis is placed on how identified risks
interact with the residents of the Company’s properties
and how these can be mitigated to ensure safety and
comfort, as well as providing financial resilience to the
Company.
The method used to evaluate the importance of each
climate risk that the Company is exposed to is aligned
to the Company’s general risk management structure. It
involves a matrix with a 5-point rating system for both
the likelihood and consequence of each risk.
•
Likelihood: low, moderate, high.
•
Impact: low, moderate, high.
This alignment allows for the climate-related risks to
be incorporated into broader risk management and
mitigation procedures. These risks are added to the risk
register of the strategy, which is reviewed during the
quarterly Portfolio Risk Review meeting. This meeting
brings together the Housing Team, and the sustainability,
and risk teams, with the resulting risk register being
approved by the Board and evaluated and approved by
the Risk Committee.
The period over which each risk first becomes material is
defined as:
•
Short-term: 0-2 years
•
Medium-term: 2-5 years
•
Long-term: over 5 years
These time scales are aligned to the Company’s overall
risk management framework, considering the nature of
the Group’s assets and liabilities (see page 61).
The Company uses the suggested policies of the UK
Climate Change Committee’s Sixth Carbon Budget
as a starting point for identifying transition risks to
the property sector. Key suggested policies from
the Balanced Pathway, such as minimum efficiency
standards, are considered. In addition, key physical risk
outputs such as changes in temperature, precipitation
and storm frequency, are used to qualitatively assess
the physical risks to the assets. Outputs from a variety of
scenarios are utilised, which are outlined in the Strategy
section below.
In addition to the risk-identification workshops, the
Company uses an external provider, Climate X, to
analyse and quantify the physical risk to its assets
resulting from climate change. Climate X maintains
a realistic digital twin of the earth, utilising data from
remote sensing. This digital twin is combined with the
latest, high-resolution climate modelling, to determine
the future risks from a wide range of hazards, under a
range of climate scenarios:
HAZARDS ASSESSED BY THE CLIMATE X MODEL:
River Flooding
Subsidence
Heat Stress
Coastal Flooding
Landslides
Storm
Surface Flooding
Coastal Erosion
Droughts & Wildfires
Climate X simulate the effect of future chronic and
acute weather events at the asset level, to model the
vulnerability of the asset itself, which is then used to
calculate the asset-specific risk from each individual
hazard, and estimate future value-at-risk, expressed as
expected losses per annum, as a percentage of the total
building reinstatement cost for each property.
Strategic Report
62
|
Triple Point Social Housing REIT plc
An example of the metrics given for a property is shown
below:
RISK DASHBOARD
HAZARD
RATING
SEVERITY
PROBABILITY
ACCURACY
ACUTE
River flooding
A
0.00m Depth
3%
79%
Surface flooding
A
0.00m Depth
1%
66%
Landslide
D
1 Shallow
27%
99%
CHRONIC
Subsidence
A
0.35cm/year
90%
90%
Coastal flooding
F
1.40m Depth
95%
95%
Heat stress
C
7 No of days > 30°C
99%
99%
Figure 1
:
Example output from Climate X for a property.
The probability (e.g. 95%) of a risk of a certain severity
(e.g. a flood depth of 1.4 metres) is calculated and
summarised in an overall risk rating scope from A-F.
A transparent methodology is available for each risk
rating and an accuracy is calculated, based on model
agreement.
STRATEGY
•
Describe the climate-related risks and opportunities
the organisation has identified over the short,
medium and long term.
•
Describe the impact of climate-related risks and
opportunities on the organisation’s businesses,
strategy and financial planning.
•
Describe the resilience of the organisation’s strategy,
taking into consideration different climate-related
scenarios, including a 2°C or lower scenario.
Investing in real assets exposes the Company to
both the physical and transition risks associated with
climate change. The Company’s properties may require
additional work to bolster their resiliency against
increasingly extreme weather, or require efficiency
upgrades to meet ever-stricter efficiency standards, as
the government seeks to mitigate emissions from the
building sector, one of the largest sources of emissions
in the UK. With a greater than average efficiency, the
Company’s building stock of properties provide some
resilience against this risk, but it is recognised that risks
and opportunities will arise across a range of timeframes,
which are considered here. The main risks to the fund are
shown below:
Financial impact if risk happens
1
2
3
4
5
Likelihood of risk happening
5
1
2
4
6
3
3
4
2
3
2
1
1
PHYSICAL
1
Water Stress
2
Increased frequency of heatwaves
3
Increased surface flooding during more frequent storms
TRANSITION
1
Access to materials and skills to amend property specifications
2
Efficiency Regulations
3
Market expectation to report accurate emissions information
4
Cost of capital linked to efficiency performance
5
Carbon pricing in the value chain
6
Changing resident requirements
5
Strategic Report
2023 Annual Report
|
63
PHYSICAL RISKS
RISK
1. WATER STRESS
2. INCREASED FREQUENCY OF
HEATWAVES
3. INCREASED SURFACE FLOODING
DURING MORE FREQUENT STORMS
DESCRIPTION
Particularly for properties in the South
East of England, an increased frequency
of droughts may cause water shortages
and also lead to subsidence issues in
certain properties.
Given the vulnerable nature of many of
the Group’s tenants, overheating of the
Company’s properties is an undesirable
risk. We note, during the hottest
summer on record (2023) the properties
responded robustly with no heat stress
incidents and no known spike in energy
use.
Increasing frequency of storms may lead
to an increased frequency of surface
flooding, if current drainage options
prove to be insufficient. We note, that
incidents of flooding in the UK during
2023 did not have any impact on any
properties in the portfolio.
POTENTIAL
FINANCIAL
IMPACTS
Increased utility bills for registered
providers.
May require installation of more water-
efficient appliances.
Subsidence may affect property values
and require repair work.
Capex may be required to add
additional insulation and ventilation
to properties to prevent overheating.
Frequent overheating of buildings can
cause wear and tear and potentially
lower building values.
Potential damage to properties as a
result of flooding, requiring repairs and
affecting property value.
Properties may need to be upgraded to
include more comprehensive drainage
systems.
LIKELIHOOD
Low to Moderate
Moderate
Moderate
IMPACT
Moderate
Low to Moderate
Low
TIME HORIZON
Medium term
Short term
Short – Medium term
MITIGATION
AND
RESILIENCY
Utility bills are paid by the lessee and
residents.
Where a significant risk of subsidence
is identified, properties would not be
acquired.
Any future biodiversity improvements
will take drought risk into consideration,
noting that tree planting in particular
can exacerbate subsidence.
Repairs and restoration are the
responsibility of the lessee, under the
terms of the lease, which limits the
Company’s exposure.
The ongoing EPC retrofit programme
will provide additional insulation,
higher-quality glass, and other measures
to limit overheating. This risk will be
considered when planning efficiency
upgrades to provide synergies wherever
possible.
Consideration of risk factors such as roof
windows, glass types, and shading are
made during due diligence, considering
resident comfort and the ease of use of
windows and blinds.
Surface flooding risk is assessed for the
portfolio by the Company’s Climate X
analysis, in addition to assessments from
insurers and the Environment Agency.
The Geographic diversity of the
Company’s properties means that this
risk is unlikely to be material at the
portfolio level.
The Company is currently exploring the
potential for increasing biodiversity at
its properties. The potential for natural
drainage options will be assessed as
part of this work.
Insurance protection will be increased if
necessary.
Strategic Report
64
|
Triple Point Social Housing REIT plc
TRANSITION RISKS
RISK
1. ACCESS TO
MATERIALS
AND SKILLS TO
AMEND PROPERTY
SPECIFICATIONS
2. EFFICIENCY
REGULATIONS
3. MARKET
EXPECTATION
TO REPORT
ACCURATE
EMISSIONS
INFORMATION
4. COST OF
CAPITAL LINKED
TO EFFICIENCY
PERFORMANCE
5. CARBON
PRICING IN THE
VALUE CHAIN
6. CHANGING
RESIDENT
REQUIREMENTS
DESCRIPTION
Properties will
require intervention
to protect from
the impacts of
climate change and
to reduce energy
consumption.
Such work requires
high quality and
knowledgeable
contractors. Activity
to date has found
sourcing and
securing quality
contractors with
access to resources
at reasonable prices
presents difficulties.
Government may
introduce legislation
to mandate all
social housing
properties to a
certain level of
energy efficiency
and this will require
upgrade works to
be undertaken. The
design specification
of properties are
agreed well ahead
of completion.
If regulations
develop particularly
quickly, even
newly completed
properties may
have to be
retrofitted.
Currently, the
Group follows
market practice in
reporting estimated
emissions for its
portfolio due
to difficulties
in accessing
actual energy
consumption data
for its properties.
In future, market
expectations may
shift to collecting
real data. Without
this data, the
fund may be less
competitive in the
market-place, as
investors are less
able to gauge the
risk.
Increasing
expectations and
requirements
linked to housing
efficiency
performance.
Running and
maintaining high
quality and efficient
homes is becoming
more expensive.
Construction
activities and
manufacturing of
materials is carbon
intensive, causing
high exposure to
any potential future
carbon pricing
measures.
As part of the
energy transition,
home requirements
may change,
and will need to
be factored into
planning and
design standards.
Facilities such as
secure bicycle
parking, electric
vehicle charging
points and
public transport
accessibility will
become more
important.
POTENTIAL
FINANCIAL
IMPACTS
To implement
required works
at a point in time
required may incur
unexpectedly high
costs if the ability to
secure contractors
is limited.
Properties that do
not meet standards
may become
stranded assets,
require retrofitting,
or face a 'brown
tax', with a lower
valuation and less
liquidity.
Without
transparency on
necessary asset
data there may
be an increased
difficulty accessing
funding, resulting
in a higher cost of
capital.
Failure to manage
this challenge
may result in the
reduction of value
in the property
portfolio.
Carbon pricing in
the supply chain
of materials may
be passed on to
the developers,
increasing property
prices.
Including these
features in property
designs may
increase costs.
LIKELIHOOD
High
High
Moderate
Moderate
Moderate
Moderate to High
IMPACT
Moderate
Moderate
Low to Moderate
Low
Low to Moderate
Low
TIME HORIZON
Short term
Medium term
Medium term
Short term
Long term
Short term
MITIGATION
AND
RESILIENCY
The Investment
Manager’s asset
management team
are developing a
network of quality
constructors.
The team are
proactive in working
with constructors
to create a two-
way relationship
offering support
and learning where
innovation may be
required.
The Company’s
portfolio is more
energy efficient
than the national
average, with only
29% of properties
rated below EPC
C, compared with
56%. The ongoing
EPC retrofit
programme aims
to further improve
efficiency, to stay
ahead of emerging
regulation. Making
progress relative
to the newly
implemented net
zero target creates
further resiliency
against increasing
energy regulation.
The Investment
Manager has
identified and
secured the services
of a data solution
which provides
access to real
consumption data.
This progress in
data quality allows
for improved
tracking, modelling
and decision
making in relation
to energy efficiency
and carbon use.
Future building
standards
may include
requirements for
smart metering, and
provisioning of data
to Triple Point.
The existing
relatively high
efficiency
performance of the
portfolio provides
resilience.
The Board’s support
for a net zero target
and appropriate
action to upgrade
properties to meet
this target will
contribute to future
proofing property
value.
The 2023 Code
of Considerate
Constructors is
recommended
to developers
and includes
guidance on
tracking embodied
emissions.
Standards have
been raised for
the construction of
future properties
including
integrating
requirements for
reporting embodied
emissions.
Public transport
accessibility
assessments have
been conducted for
eligible properties.
Fast vehicle
charging and
bicycle points
are included
in developer
requirements.
The Company has
begun to track the
number of electric
vehicle charging
points.
Strategic Report
2023 Annual Report
|
65
OPPORTUNITIES
OPPORTUNITY
1. INCREASED VALUE OF ENERGY
EFFICIENT HOMES
2. OPPORTUNITIES FOR ON-SITE
RENEWABLE ENERGY GENERATION
3. IMPROVING PROPERTY
QUALITY, EFFICIENCY AND VALUE
TYPE
Markets
Energy Source
Resource Efficiency
DESCRIPTION
As efficiency regulations increase,
the value of existing efficient homes
will increase, with a ‘green premium’
attached to housing stock with good
efficiency credentials.
Although not formally assessed, the
geographical spread of the Company’s
properties means that opportunities
are likely to exist for on-site renewable
energy generation. Energy generated
could be provided to tenants in the first
instance, to reduce energy bills, with
the excess being sold to the grid by the
Company.
In improving the energy efficiency and
resiliency of a property it should serve
residents more effectively, making
them more desirable residencies and
increasing willingness for stakeholder
engagement.
Costs to run should be improved.
The property should be more
comfortable as it will respond more
effectively to temperature and weather
changes.
FINANCIAL
IMPACT
• Increased Net Asset Value for the
Company.
• Additional income stream for the
Company, through selling excess
electricity.
• Increased value of properties.
• Increased property value.
LIKELIHOOD
High
High
High
MAGNITUDE
High
Low
Medium
TIME HORIZON
Medium term
Long term
Mid – long term
/
SCENARIO ANALYSIS
The Company acknowledges the uncertainty around future climate scenarios and has performed partial, qualitative
scenario analysis to understand the impact of each of the most significant risks to its portfolio under different climate
outcomes. The most prominent risks to the Company were assessed under two scenarios, and the overall resiliency of
the strategy was assessed under each:
•
Net Zero:
in which warming is limited to 1.5°C by 2050, limiting physical risks but creating high transitional risk
due to the introduction of strict climate policies and rapid technology change.
•
Hot House World:
in which warming reaches 4°C, as no new climate policies are introduced and technological
progress is slow, limiting transitional risks but presenting significant physical risks.
1.5°C
4°C
Transition risk
Physical risk
1.5-DEGREE WORLD – WHERE WE ASSUME HIGH LEVEL OF
REGULATION AND TRANSITIONAL RISK
4-DEGREE WORLD – WHERE WE ASSUME A LIMITED REGULATORY
RESPONSE AND GREATER PHYSICAL RISKS
Most prominent risks:
• Quicker implementation of stringent efficiency requirements for
properties affecting property values and requiring retrofit.
• Carbon pricing and net zero building requirements increasing
building costs.
• Subsidence induced by water stress.
• Increased frequency of heatwaves necessitating building upgrades.
Mitigants to ensure resilience:
• The Company’s assets are currently above market-standard for
efficiency and a retrofit program
me is underway to bring up the
standard of the properties in advance of any legislation.
• Assessment through Climate X to quantify worst-case risks, shows limited
damage to buildings, even under the Hot House World scenario.
• EPC retrofit programme is likely to provide mitigations to overheating
risks.
Strategic Report
66
|
Triple Point Social Housing REIT plc
Quantitative scenario analysis was conducted for the
portfolio utilising climate modelling from Climate X
(described in the Risk Management section). Scenarios
used here are from the International Panel on Climate
Change (IPCC)’s Representative Concentration Pathways
(RCPs) 2.6 and 8.5. These scenarios align to the Net
Zero (RCP 2.6) and Hot House World (RCP 8.5) scenarios
used in the qualitative analysis. Under each scenario,
potential losses per annum and a physical risk score were
determined, see metrics and targets for outputs.
Overall, the Manager believes the Company to be
resilient to climate risks under a wide range of climate
scenarios. The Company’s assets have a low vulnerability
to physical climate risks and the portfolio is more efficient
than average, with an ongoing retrofit programme to
further increase performance, limiting transition risk.
METRICS AND TARGETS
•
Disclose the metrics used by the organisation to
assess climate-related risks and opportunities in line
with its strategy and risk management process.
•
Disclose Scope 1, Scope 2, and, if appropriate,
Scope 3 greenhouse gas (GHG) emissions, and the
related risks.
•
Describe the targets used by the organisation to
manage climate-related risks and opportunities and
performance against targets.
The Company recognises the need for continuous
improvement of data collection to accurately assess
exposure to climate risks and opportunities that may
be present under future climate scenarios. Four main
indicators are tracked: Climate Value-at-Risk, EPC
ratings, energy consumption, and emissions.
Climate Value-at-Risk, given by the Climate X assessment
of the portfolio.
24
RCP 2.6
RCP 8.5
LOSSES PER ANNUM
25
1.0%
1.5%
RISK SCORE
26
A
A
The EPC ratings of each property are monitored on an
ongoing basis, to assess exposure to future efficiency
regulations, and as a starting point for the EPC retrofit
programme. Currently, 71% of the portfolio is rated at C
or above.
B
30.80%
D
21.99%
E
6.81%
C
39.83%
G
0.00%
F
0.12%
A
0.41%
The chart shows the EPC breakdown of properties as at
31 December 2023.
The Company made a commitment to continue to
improve energy consumption and associated emissions
data quality. Our preference is for onsite data sources,
but this is uncommon and difficult to gain access to.
EPC-linked emissions data is useful but flawed. Following
ongoing research and market evaluation, The Company
have selected a new provider of energy consumption
data.
24.
Losses per annum and the risk scores have seen minor changes since last reported in 2022, (there has been a small increase in losses per annum; and a small reduction in risk
score in the RCP 8.5 scenario). These changes have been caused by updates to data sets and model methodologies used by Climate X to generate the report, rather than
changes to the portfolio. For this reason, the Group have opted not to include a year-on-year comparison.
25.
All losses are provided per annum. This is not a prediction of the actual damage to be expected for a specific year, but what damage will likely occur each year averaged over
several years or decades. All physical loss results are provided as a percentage of the total asset replacement cost. Loss data is calculated at an asset level and then aggregated
across the entire portfolio. The chosen scenario does not incorporate any defence measures.
26.
The risk score is defined by assigning the combined likelihood and severity of each hazard a rating. These ratings consider the potential physical and financial impact that would
be associated with the severity of a climate related event, combined with the likelihood of that event happening. As different types of events will have different levels of impact,
each hazard type has its own rating definition. For all hazards the risk ratings go from A to F, with A representing the lowest risk and F representing the highest risk.
Total Number of
EPCs: 2,438
Strategic Report
2023 Annual Report
|
67
Perse enable access to actual energy consumption and
emissions data through direct APIs to every property’s
meter. This improved data quality not only improves
the accuracy of the Company’s carbon footprint, but
also enables the increased complexity and accuracy of
modelling to improve decision making in relation to
actions which can reduce carbon emissions across the
portfolio. Energy consumption and carbon emission data
are provided in the table below.
27
2023
2022
ENERGY CONSUMPTION (GWH)
[HOUSEHOLD ENERGY ONLY]
24.9
30.15
(estimate)
TOTAL SCOPE 3
28
PROPERTY
EMISSIONS (TCO2E) [LOCATION-
BASED]
4,762.7
3,610
(estimate)
TOTAL SCOPE 3
28
PROPERTY
EMISSIONS (TCO2E) [MARKET-BASED]
3,463.9
N/A
PROPERTY EMISSIONS PER M2
(TCO2E/M2) [LOCATION-BASED]
30.9
N/A
PROPERTY EMISSIONS PER M2
(TCO2E/M2) [MARKET-BASED]
22.4
N/A
The Group has set a near term net zero target:
The Group commits to reduce its social housing
portfolio emissions by 75% per m2 by 2035 from a
baseline year of 2021.
This target follows a specific science-aligned pathway
for Real Estate assets using the required Sectoral
Decarbonisation Approach (SDA). The SDA approach
specifies how much and how quickly a company needs
to reduce its GHG emissions to limit global warming
to 1.5°C, as per the Paris Agreement. We note that the
Group’s target has been calculated according to Science
Based Target requirements, but at this time will not
be submitted to SBTi for ratification. The Investment
Manager has worked with carbon specialists, The Carbon
Trust, to develop this target.
The Board believes that adopting this near-term science-
aligned net zero target will contribute to protecting the
Group’s market position and reputation, and the value of
its portfolio, in an environment of increased carbon and
climate scrutiny and regulation.
In setting this target, the Board recognises that
determined and measured action will be required
to achieve the target. In setting this target, the
Investment Manager have run a range of scenarios
to understand how this target might be met and the
Board has acknowledged and supported the possible
need for proactive intervention and cost implications.
The modelled scenarios leverage crucial UK market
assumptions, and forecasts, that can contribute to the
reduction of carbon emissions, with a primary focus
on grid decarbonisation across the country. The Board
has committed to proactive intervention; however,
the primary target is firmly rooted in the national
decarbonisation of the residential real estate sector, with
market factors playing an important role in the Company
achieving the near-term targets. All actions in relation to
meeting this target will be carried out in the context of
ensuring contribution towards the multi-faceted needs
of energy efficiency, carbon reduction and climate
resilience. Any related actions will also always put the
needs and best interests of the residents as paramount.
27.
The Group has significantly enhanced the quality and accuracy of the energy consumption and carbon emission data, subsequently updating the metrics included in the TCFD
report. As indicated on page 60, the 2023 data now comprises actual consumption data rather than estimates from EPC data. The Group is dedicated to continuing the tracking
of these data points in future reports and is committed to maintaining or increasing the level of accuracy. For full disclosure, the additional estimated metrics that were included
in the 2022 reporting are as follows: (a) Emissions per property (tCO2e): 1.4.
28. The emission data is calculated using property gas and electricity consumption only, and therefore is not a complete scope 3 figure
Strategic Report
68
|
Triple Point Social Housing REIT plc
2023 Annual Report
|
69
Strategic Report
This section describes how the Board engages with its key stakeholders, how it considers their interests and the
outcome of the engagement when making its decisions, the likely consequences of any decision in the long-term,
and further ensures that it maintains a reputation for high standards of business conduct. The Group is committed
to continual stakeholder engagement and implements a cycle of constant engagement at all stages of the Group’s
investment lifecycle.
/
SECTION 172(1) STATEMENT
Stakeholder Engagement
STAKEHOLDER
WHY IS IT IMPORTANT TO ENGAGE?
HOW HAVE THE INVESTMENT MANAGER/
DIRECTORS ENGAGED?
Shareholders
Investment from our shareholders plays an important role by
providing capital to ensure we can deliver additional housing
into the Specialised Supported Housing sector.
Through the investment of private capital into an under-funded
sector, we can achieve a positive social impact whilst ensuring
our shareholders receive a long-term inflation-linked return.
The way in which we engage with our shareholders is set out
on page 96 in our Corporate Governance Report.
Residents
Our strategy is centred on providing Specialised Supported
Housing for our residents. We remain focused on providing
homes to our residents which offer them greater independence
than institutional accommodation, as well as meeting their
specialist care needs.
The Investment Manager monitors resident welfare through
engagement with Approved Providers. The Investment
Manager receives quarterly reports from Approved Providers
to ensure compliance with health and safety standards. We
do not generally engage with residents directly. Instead, day-
to-day engagement is done by care providers and, to a lesser
extent, Approved Providers.
Investment
Manager
The Investment Manager is responsible for executing the
Investment Objective within the Investment Policy of the
Company.
The Board maintains regular and open dialogue with the
Investment Manager at Board meetings and has regular
contact on operational and investment matters outside of
meetings.
Approved
Providers
Our relationship with Approved Providers is integral to
ensuring rent is paid to the Group and that properties are
managed appropriately.
The Group’s leases with Approved Providers are fully
repairing and insuring – meaning that Approved Providers
are responsible for management, repair and maintenance, in
addition to tenanting the properties.
The Investment Manager looks to maintain good relationships
with Approved Providers, having formal meetings with senior
management at least every six months as well as engaging
more frequently on an ad hoc basis on a variety of matters.
Quarterly operational surveys and biannual compliance surveys
are provided to the Investment Manager.
Care Providers
Our residents receive care from care providers. It is important
to ensure that our vulnerable residents receive the best
possible care. In addition, the care providers share the cost
of voids with Approved Providers so we engage with care
providers to ensure our Approved Providers are able to pay our
rent in the event of empty units.
Therefore, care providers play an essential role in the
occupancy levels of our properties and strong engagement
with the Group ensures the best possible care for our residents.
The Investment Manager engages with care providers as part
of its due diligence process and regularly meets and engages
with our provider representatives when inspecting the Group’s
portfolio, when reviewing quarterly data and on an ad hoc
basis.
Strategic Report
70
|
Triple Point Social Housing REIT plc
WHAT WERE THE KEY TOPICS OF ENGAGEMENT?
WHAT WAS THE FEEDBACK OBTAINED AND THE OUTCOME OF THE
ENGAGEMENT?
Financial and operational performance.
Share price discount to NAV and potential rectification action.
The share price, share buybacks and the sale of a portfolio.
The regulatory environment of the Supported Housing sector.
Environmental, social and governance considerations.
The Company’s key service provider appointments, including
the AIFM and broker arrangements.
Understanding the underlying concerns of shareholders that
resulted in 17.48% and 22.62% votes against resolutions 3
and 13 respectively, at the Company’s 2023 Annual General
Meeting.
The Board and the Investment Manager considered and undertook a share
buyback programme and a portfolio sale to address investor feedback regarding
the Company’s share price. An extension of the share buyback programme was
also considered, as well as the impact that further share buybacks would have
on the Company’s liquidity.
The Board and Investment Manager consider shareholder concerns when
speaking to the Regulator and agreed to keep shareholders updated of any
developments. We understand the importance of, and are committed to,
working with Registered Providers to address the concerns of the Regulator.
Refer to the Market review in the Investment Manager’s Report on
pages 33 to 35.
The Investment Manager has enhanced environmental, social and governance
considerations within its investment process, and within its own business. Refer
to Investment Manager’s Report on page 33, and the Sustainability Report on
pages 50 to 68.
The Board and Manager consulted with a number of the Company’s
shareholders in accordance with Provision 5.2.4 AIC Code of Corporate
Governance, following which it was acknowledged that active consideration is
required regarding alleviation of the persistent discount to EPRA NTA.
We provide oversight of resident welfare by undertaking
due diligence on properties before residents move in. We
then monitor compliance with health and safety standards
to best ensure that residents are looked after by the Group’s
counterparties; we request updates on any health and safety
issues every quarter.
Resident issues raised as a result of engagement through care providers were
addressed.
Any compliance issues are remedied with any associated works undertaken.
The Group’s investment decisions are informed by the long-term needs of our
residents.
In addition to all matters related to the execution of the
Company’s Investment Objective, the Board engaged with
the Investment Manager on developments in the market and
updates from the Regulator.
As a result of the engagement between the Board and the Investment Manager
the Group has been able to execute its investment strategy and has considered
what adjustments can be made to the Group’s model that will uphold financial
and governance standards while attracting further private investment.
Additionally, the Investment Manager produces reports to the Board every
quarter on various governance and operational matters at the Board’s request.
Capital allocation is also considered with regard to the views of the Board.
The Investment Manager discussed a number of topics with
Approved Providers including that properties are managed
in accordance with their leases; financial reporting and
governance; and specific property-related issues such as
occupancy, health and safety issues, rent levels, management
accounts and governance.
Refer to the Investment Manager’s Report on pages 33 to 49.
The Investment Manager engages with care providers on: the
specific care and support requirements of residents including
health and safety compliance (refer to Investment Manager’s
Report on pages 33 to 49); property management by Approved
Providers; financial and operational capacity for new schemes;
occupancy levels; and financial performance.
The Investment Manager rejected deals where care providers did not meet the
care or governance standards expected or where care providers were unable
to demonstrate the financial strength to meet their obligations under a service
level agreement.
Following engagement, the scope of works was agreed with care providers to
produce properties that meet the specific care needs of residents.
Whilst done at the relevant local authorities’ discretion, care providers have
been changed where expectations around the standard of care were not met or
where engagement identified care providers in financial difficulties.
Strategic Report
2023 Annual Report
|
71
STAKEHOLDER
WHY IS IT IMPORTANT TO ENGAGE?
HOW HAVE THE INVESTMENT MANAGER/
DIRECTORS ENGAGED?
Local
authorities
Local authorities are responsible for identifying appropriate
housing and care for the individuals who live in the Group’s
properties.
New acquisitions are assessed to ensure that they meet the
expectations of the relevant Local Authority in order to ensure
that referrals are made as efficiently and safely as possible.
When looking at a new acquisition, the Investment Manager
engages with, or receives feedback from, various departments
within local authorities including Commissioners and Housing
Benefit officers. The Investment Manager will look to engage
with a local authority in relation to an existing scheme if
required (for example, if a new care provider is needed).
The Regulator
The Regulator regulates Registered Providers of social
housing to ensure providers are financially viable and properly
governed. It is important to ensure that, as much as possible,
the Group reflects observations made by the Regulator in its
investment structures and its engagement with its Registered
Provider lessees.
The Investment Manager is in contact with the Regulator in
order to understand the key concerns and priorities of the
Regulator in the Specialised Supported Housing Sector.
Lenders
The Group’s investments in social housing assets are partly
funded by debt. Prudent debt financing is required to achieve
the Group’s return targets.
All of our debt is long-term and so it is important for the Group
and the Investment Manager to form a good relationship
with our debt provider partners and provide them with all
information and commentary required.
The Investment Manager engages with its lenders mainly via
the reporting of financial and information covenants under the
existing loan agreements on a quarterly basis.
In addition, there are regular ad-hoc engagements in relation
to general topics relating to the social housing sector as well
as specific topics arising from the financial and operational
performance of the Group’s activities and future opportunities,
and any other general matters affecting the relationship
between the Group and the lenders.
/
SECTION 172(1) STATEMENT
PRINCIPAL DECISIONS
Principal decisions have been defined as those that have a material impact on the Group and its key stakeholders. In
taking these decisions, the Directors considered their duties under section 172 of the Act.
COMMENCEMENT OF A SHARE BUYBACK PROGRAMME OF £5 MILLION
During the year, the Board made the decision to undertake a share buyback programme of £5 million, managed by
Stifel. The Company bought back 9,322,512 ordinary shares between 19 April 2023 and 12 June 2023, at an average
purchase price of 52.61 pence per share. Further detail can be found in the Directors’ Report on page 114. The
Board believed that the share buyback programme was accretive to NAV and would benefit dividend cover, and was
deemed to be made in the best interests of the Company’s shareholders.
PORTFOLIO SALE
The Board decided to market and sell a portfolio of properties, subject to market conditions and pricing. The
decision resulted in the sale of four Specialised Supported Housing properties for an aggregate consideration of
£7,586,600 to a private UK real estate investment firm, reflecting a gain of 9.6% against the aggregate purchase
price (excluding transaction costs).
The Board believed that the decision was in the best interests of the shareholders, Approved Providers, Care
Providers and the Specialised Supported Housing sector, as the sale demonstrated continued liquidity and the
resilience of valuations in the sector. The sale comprised of properties located across four Local Authorities and a
range of property types, lessees and Care Providers.
Strategic Report
72
|
Triple Point Social Housing REIT plc
WHAT WERE THE KEY TOPICS OF ENGAGEMENT?
WHAT WAS THE FEEDBACK OBTAINED AND THE OUTCOME OF THE
ENGAGEMENT?
The aim of the engagement is, as much as possible, to ensure
that the properties acquired by the Group are consistent with
the requirements of the relevant local authority.
Where necessary, local authorities will be engaged directly post
acquisition of a property to access ongoing demand levels and
any changes in commissioning strategy.
The Investment Manager will listen to feedback from local authorities and,
where possible, will work with Approved Providers to improve and upgrade
properties to ensure that they meet ongoing commissioning requirements.
An initial pilot programme to implement energy efficiency upgrades across 11
initial properties is ongoing. Refer to the Investment Manager’s Report on page
41 for more detail.
Discussions with the Regulator are focused on ensuring the
market evolves in line with its observations, and Registered
Providers can best focus on addressing the Regulator’s
observations.
The Investment Manager continues to work with the Boards of its Registered
Provider lessees to understand how best we can help them meet the standards
of the Regulator. Refer to the Investment Manager’s Report on pages 33 to 49
for more detail.
The Group engaged on the following topics: financial and
information covenant reporting and; active asset management
activities undertaken by the Group e.g. any other asset
management activity that requires lenders’ consent.
The Group is fully compliant with its debt covenants.
The Investment Manager’s pro-active engagement with the Group’s lenders is
welcomed by its lenders and to date no concerns in relation to the performance
of its loans have been raised by the lenders.
The Board continues to monitor compliance with debt covenants and keeps
liquidity under constant review to make certain the Group has sufficient
headroom in its debt facilities.
In August 2023, Fitch Ratings reaffirmed the Group’s existing Investment Grade,
long-term Issuer Default Rating (IDR) of ‘A-‘ with a stable outlook and a senior
secured rating of ‘A’ for the Group’s existing loan notes.
DIVIDEND TARGET TO REMAIN FLAT
During the year, the Board decided to keep the target dividend flat.
The Board believed that the decision was in the best interests of the Company’s shareholders, in order to preserve
dividend cover for the current financial year, whilst the Investment Manager focused on addressing the significant
rental arrears of two of its Approved Providers. Further detail can be found in the Investment Manager’s Report on
page 46.
CHANGE OF DIRECTORS
During the year, the Company undertook a formal recruitment process led by the Nomination Committee, with the
support of an independent search consultancy, for the appointment of a new Board member. This process actively
encouraged a diverse pool of candidates who could contribute specific skills and experience identified by the Board
and would support the Board’s commitment to diversity, in line with the FCA’s targets under the Listing Rules. The
Board were pleased to announce the appointment of Cecily Davis as an Independent Non-Executive Director with
effect from 23 May 2023.
During the financial year, Paul Oliver stepped down from his role as an Independent Non-Executive Director with
effect from 30 June 2023.
COMMITTEE CHANGES
The Board decided to change the membership and structure of the Board’s Committees, as announced on 24 May
2023. The key changes included implementing smaller Committees to ensure better management of the Board’s
duties, as well as the establishment of a Sustainability & Impact Committee to ensure there is appropriate oversight
and focus on the Group’s ESG strategy. Further information of the Sustainability & Impact Committee can be found
on pages 106 to 107.
Strategic Report
2023 Annual Report
|
73
Risk Management
The Board recognises that effective risk management is key to the Group’s success
and that a proactive approach is critical to ensuring the sustainable growth and
resilience of the Group.
In the Group’s 2023 Interim Report, we noted that
principal risks and uncertainties remained unchanged
during the period.
By way of background, the Group focuses on a single
sub-sector of the UK real estate market with the aim of
delivering an attractive, growing and secure income for
shareholders. The Company has a specific investment
policy, as outlined on pages 22 to 23, which is adhered
to and for which the Board has overall responsibility. The
Group does not undertake speculative development.
Furthermore, the Group looks to work with experienced
lessees and has assembled a granular portfolio with a
relatively high WAULT.
As an externally managed investment company, the
Company outsources key services to the Investment
Manager and other service providers and relies on their
systems and controls. The Board undertakes a formal
risk review, with the assistance of the audit committee,
twice a year to assess and challenge the effectiveness
of the Company’s risk management and internal control
systems. The Board regularly reviews the control reports
of the key service providers and the external auditors note
any deficiencies in internal controls and processes that
have been identified during the course of the audit. A
description of the key internal controls of the Group can
be found on page 98.
The Investment Manager has responsibility for
identifying potential risks at an early stage, escalating
risks or changes to risk, and relevant considerations and
implementing appropriate mitigations which are recorded
in the Group’s risk register. Where relevant the financial
model is stress tested to assess the potential impact
of certain risks against the likelihood of occurrence.
The Board regularly reviews the risk register to ensure
gradings and mitigating actions remain appropriate.
The Group’s risk management process is designed to
identify, evaluate and mitigate (rather than eliminate)
the significant and emerging risks the Group faces and
continues to evolve to reflect changes in the Group’s
business and operating environment. The process can
therefore only provide reasonable, and not absolute,
assurance. It does however ensure a defined approach to
decision making that decreases uncertainty surrounding
anticipated outcomes, balanced against the objective of
creating value for shareholders.
During the year, the Board has not identified or been
advised of any failings or weaknesses in the Group’s risk
management and internal control systems.
Going forward, the Board has reviewed and approved
some enhancements to the current risk management
framework, which will become effective from April 2024.
These enhancements will underpin the approach to
the identification and categorisation of risks, together
with changes to the assessment approach – being more
reflective of the individual nature of the risks being
considered. These enhancements will enable the Board to
view the risks through the lens of Strategic risks, Financial
risks (Investment, Capital & Liquidity) and Non-Financial
risks (Operational, Legal & Regulatory). In turn, the Board
will be setting appropriate risk appetites for its most
material risks.
Strategic Report
74
|
Triple Point Social Housing REIT plc
/
RISK HEAT MATRIX
Risk Impact
High
9,10
Moderate
to High
Moderate
3,8
4,5,6,7
1,2
Low to
Moderate
Low
Low
Low to
Moderate
Moderate
Moderate
to High
High
Likelihood
Risk
1
Default of one or more Approved Provider lessees
2.
Risk of an Approved Provider being deemed non-compliant with the Governance and
Viability Standard by the Regulator
3.
Risk of changes to the social housing regulatory regime and changes to government policy
in relation to social housing and housing benefit
4.
Non-payment of voids cover by care providers
5.
Property valuations may be subject to change over time
6.
Risk of poor or inadequate housing management (including compliance) or poor provision of
care services by the Group’s Approved Providers lessees and care providers respectively
7.
Higher than projected levels of inflation may impact Approved Providers’ ability to pay rent
due under the Group’s leases
8.
The potential impact of climate change on the valuation of the Group’s properties
9.
Unable to operate within debt covenants
10.
Reliance on the Investment Manager
/
PRINCIPAL RISKS AND UNCERTAINTIES
The table below sets out what we, the Board, believe to be the principal risks and uncertainties facing the Group.
The table does not cover all of the risks that the Group may face. Additional risks and uncertainties not presently
known to management or deemed to be less material at the date of this report may also have an adverse effect on
the Group.
1. RISK CATEGORY – PROPERTY
DEFAULT OF ONE OR MORE APPROVED PROVIDER LESSEES
RISK IMPACT
RISK MITIGATION
POTENTIAL IMPACT
The default of one or more of the Group’s lessees could
impact the rental income received from the relevant assets.
If the lessee cannot remedy the default, the Group may
have to terminate, re-assign or re-negotiate the relevant
lease. This could lead to a sustained reduction in rental
income.
Additionally, where a care provider does not renew the
service level agreement with a lessee, this may result in a
lessee having to cover rental payment on void units without
receiving the corresponding housing benefit payment from
the care provider.
Under the terms of the Company’s investment policy and
restrictions, no more than 30% of the Group’s Gross Asset
Value may be exposed to one lessee. This restriction is in
place to mitigate against the risk of significant rent loss in
the event of an Approved Provider default.
When a lessee defaults or when the Group believes it likely
that a lessee would default, the Group could look to move
the affected properties to another Approved Provider with
whom the Group has a good relationship. The intention
would be to ensure both the ongoing provision of housing
to the residents, and, as much as possible, the preservation
of the income stream associated with the relevant
properties.
Moderate
LIKELIHOOD
Moderate to High
CHANGE IN YEAR
Stable
Strategic Report
2023 Annual Report
|
75
2. RISK CATEGORY – REGULATORY
RISK OF AN APPROVED PROVIDER BEING DEEMED NON-COMPLIANT WITH THE GOVERNANCE AND VIABILITY STANDARD BY
THE REGULATOR
RISK IMPACT
RISK MITIGATION
POTENTIAL IMPACT
Should an Approved Provider with which the Group has
one or more leases in place be deemed non-compliant
by the Regulator, in particular in relation to viability,
depending on the further actions of the Regulator, it is
possible that there may be a negative impact on the
market value of the relevant properties which are the
subject of such lease(s). Depending on the exposure of the
Group to such Approved Provider, this in turn may have
a material adverse effect on the Group’s Net Asset Value
unless the matter is resolved through an improvement in
the relevant Approved Provider’s rating or the transfer of
leases to an alternative Approved Provider.
The Investment Manager has established relationships with
the Approved Providers with whom it works. The Approved
Providers keep the Investment Manager informed of
developments surrounding regulatory notices.
As at 31 December 2023, the Group has assembled a
diversified portfolio with leases to 27 Approved Providers.
The Group has leases in place with 10 Registered Providers
that have been deemed non-compliant by the Regulator.
Where Registered Providers have been deemed non-
compliant the Group has looked to work with them in order
to help address the issues identified by the Regulator. The
Group’s commitment to this approach can be seen through
the Group’s proposed new lease clause described in both
the Chair’s Statement and the Investment
Manager’s Report.
Moderate
LIKELIHOOD
Moderate to High
CHANGE IN YEAR
Stable
3. RISK CATEGORY – REGULATORY
RISK OF CHANGES TO THE SOCIAL HOUSING REGULATORY REGIME AND CHANGES TO GOVERNMENT POLICY IN RELATION TO SOCIAL
HOUSING AND HOUSING BENEFIT.
RISK IMPACT
RISK MITIGATION
POTENTIAL IMPACT
Future governments may take a different approach to the
social housing regulatory regime, resulting in significant
changes to the law and other regulation or practices of the
Government with regard to social housing.
It is important that the Group works with the Group’s
Approved Provider lessees to help ensure that they
respond proactively to any changes in regulation or policy
and the Group understands what, if any, impact it will have
on their organisation and the properties that the Group
leases to them.
As demand for social housing remains high relative
to supply, the Board and the Investment Manager are
confident there will continue to be a viable market within
which to operate and a need for private investment to
deliver more homes.
In addition, the social housing regulatory regime in which
most of the Group’s lessees operate provides a high
degree of accountability and transparency.
Moderate
LIKELIHOOD
Low to Moderate
CHANGE IN YEAR
Decreased
Strategic Report
76
|
Triple Point Social Housing REIT plc
6. RISK CATEGORY – PROPERTY
RISK OF POOR OR INADEQUATE HOUSING MANAGEMENT (INCLUDING COMPLIANCE) OR POOR PROVISION OF CARE SERVICES BY THE
GROUP’S APPROVED PROVIDERS LESSEES AND CARE PROVIDERS RESPECTIVELY.
RISK IMPACT
RISK MITIGATION
POTENTIAL IMPACT
Approved Providers and care providers face a number
of operational challenges (e.g. rising costs and labour
shortages) which have heightened the risk of poor or
inadequate housing management or poor care being
provided in relation to the Group’s properties.
Poor services being provided to the individuals in the
Group’s properties could undermine the benefits of
Specialised Supported Housing and cause reputational
damage to the Group which could negatively impact the
Group’s performance and/or the price of the Company’s
shares.
The Investment Manager undertakes strategic property
inspections in order to review the physical condition of the
Group’s properties as well as the quality of services being
provided to the Group’s residents. In addition, there is
frequent engagement with the Group’s Approved Providers
and care providers as well as quarterly operational and
compliance surveys which provide data on the performance
of the Group’s properties.
Moderate
LIKELIHOOD
Moderate
CHANGE IN YEAR
Stable
4. RISK CATEGORY – FINANCIAL RISK
NON-PAYMENT OF VOIDS COVER BY CARE PROVIDERS
RISK IMPACT
RISK MITIGATION
POTENTIAL IMPACT
If a care provider gets into financial difficulty and is unable
to pay contracted voids cover to an Approved Provider, this
could have a negative impact on the financial performance
of the Approved Provider which ultimately could impact its
ability to pay the Group its rent. This risk is compounded if
there is low occupancy in a property.
The Investment Manager closely monitors the performance
of the care providers to ensure, so far as reasonably
possible, that they are financially viable and performing
well. Should a care provider get into financial difficulty, the
Group works with a wide range of alternative care providers
who could step in to provide care services and therefore
cover the voids payment.
Occupancy is also closely monitored and the Investment
Manager works with Approved Providers and care
providers to optimise occupancy.
Moderate
LIKELIHOOD
Moderate
CHANGE IN YEAR
Stable
5. RISK CATEGORY – FINANCIAL
PROPERTY VALUATIONS MAY BE SUBJECT TO CHANGE OVER TIME
RISK IMPACT
RISK MITIGATION
POTENTIAL IMPACT
Property valuations are inherently subjective and uncertain.
Market conditions, which may impact the creditworthiness
of lessees, may adversely affect valuations. This is
particularly relevant at the moment given rising interest
rates and the resultant negative impact on property
valuations.
The portfolio is valued on a Market Value basis, which
takes into account the expected rental income to be
received under the leases in the future. This valuation
methodology provides a significantly higher valuation than
the Vacant Possession value of a property. In the event of
an unremedied default of an Approved Provider lessee,
the value of those assets in the portfolio may be negatively
affected.
Any changes could affect the Group’s net asset value and
the share price of the Group.
All of the Group’s property assets are independently valued
quarterly by Jones Lang LaSalle, a specialist property
valuation firm, who are provided with regular updates
on portfolio activity by the Investment Manager. The
Investment Manager and Audit Committee meet with the
external valuers to discuss the basis of their valuations and
their quality control processes. Default risk of lessees is
mitigated in accordance with the lessee default principal
risk explanation provided above. In order to protect
against loss in value, the Investment Manager’s property
management team seeks routinely to visit each property
in the portfolio, and works closely with the Group’s lessees
to ensure, to the extent reasonably possible, their ongoing
financial strength viability, and that governance procedures
remain robust through the duration of the relevant lease.
Moderate
LIKELIHOOD
Moderate
CHANGE IN YEAR
Stable
Strategic Report
2023 Annual Report
|
77
8. RISK CATEGORY – CLIMATE RISK
THE POTENTIAL IMPACT OF CLIMATE CHANGE ON THE VALUATION OF THE GROUP’S PROPERTIES
RISK IMPACT
RISK MITIGATION
POTENTIAL IMPACT
Changing weather patterns under projected
climate change scenarios could physically
damage the Group’s properties and reduce
their value. New minimum efficiency
standards could require retrofitting of
efficiency measures, or result in a reduction
in valuations. The impact of the most
prominent climate-related risks to the
portfolio is assessed in detail in the Group’s
TCFD reporting on page 60.
The Investment Manager’s sustainability team has been working with the
housing team to assess the risk that climate change poses to the Group’s
properties. The key transition risks to the portfolio have been identified
and qualitatively assessed. Physical risks to the portfolio have been
assessed using a new piece of analytical software and the outputs of this
analysis are demonstrated in the Group’s TCFD reporting on page 60. The
Investment Manager will work to ensure protections are put in place for
any properties that are deemed to be at high risk to the negative impact
of climate change. The Group believes that the Group’s reporting on
climate change is ahead of regulatory requirements.
Moderate
LIKELIHOOD
Low to Moderate
CHANGE IN YEAR
Stable
7. RISK CATEGORY – FINANCIAL RISK
HIGHER THAN PROJECTED LEVELS OF INFLATION MAY IMPACT APPROVED PROVIDERS’ ABILITY TO PAY RENT DUE UNDER THE
GROUP’S LEASES.
RISK IMPACT
RISK MITIGATION
POTENTIAL IMPACT
Most of the Group’s leases contain upward
only rent reviews, generally linked to
inflation (typically CPI), with the majority
being uncapped.
Annual rental uplifts have been, and will
continue to be, higher than projected as a
result of increased inflation.
Having temporarily capped annual rent increases at 7% in 2023, the
Group is currently in the process of rolling out a new risk sharing clause
that will link rent increase in its leases with Registered Providers to the
lower of CPI or prevailing government policy in relation to Specialised
Supported Housing rent increases. This should mitigate the risk of the
Group’s lessees having to accommodate rent increases that they are not
able to fully recoup through housing benefit.
Moderate
LIKELIHOOD
Moderate
CHANGE IN YEAR
Stable
Strategic Report
78
|
Triple Point Social Housing REIT plc
9. RISK CATEGORY – FINANCIAL
UNABLE TO OPERATE WITHIN DEBT COVENANTS
RISK IMPACT
RISK MITIGATION
POTENTIAL IMPACT
The borrowings the Group currently has and which the
Group uses in the future may contain loan to value and
interest covenants ratios. If property valuations and rental
income significantly decrease, such covenants could be
breached. The impact of such an event could include
(among other things): an increase in borrowing costs; a
requirement for additional cash or property collateral;
payment of a fee to the lender; a sale of an asset or assets,
or a forfeit of an asset or any assets to a lender.
Any of the above could result in a material decrease to the
Group’s Net Asset Value.
The Investment Manager monitors loan to value and
interest covenants ratios on an ongoing basis. In the
unlikely event that an event of default occurs under these
covenants the Group has a remedy period during which it
can potentially cure the covenant breach by either injecting
cash collateral or unencumbered property assets in order
to restore covenant compliance.
During the year ended 31 December 2023, no debt
covenants have been breached.
High
LIKELIHOOD
Low
CHANGE IN YEAR
Stable
10. RISK CATEGORY – CORPORATE
RELIANCE ON THE INVESTMENT MANAGER
RISK IMPACT
RISK MITIGATION
POTENTIAL IMPACT
The Company continues to rely on the Investment
Manager’s services and its reputation in the social housing
market. As a result, the Group’s performance will, to a
large extent, depend on the Investment Manager’s asset
management abilities in the property market. Termination
of the Investment Management Agreement would severely
affect the Investment Manager’s ability to effectively
manage the Group’s operations and may have a negative
impact on the Group’s performance and/or the price of the
Company’s shares.
Unless there is a default, either party may terminate the
Investment Management Agreement by giving not less
than 12 months’ written notice. The Board regularly reviews
and monitors the Investment Manager’s performance. In
addition, the Board meets regularly with the Investment
Manager to ensure that the Company and the Investment
Manager maintain a positive working relationship.
High
LIKELIHOOD
Low
CHANGE IN YEAR
Stable
Strategic Report
2023 Annual Report
|
79
/
GOING CONCERN
The Strategic Report and financial statements have set
out the current financial position of the Group and Parent
Company. The Board has regularly reviewed the position
of the Company and its ability to continue as a going
concern in Board meetings throughout the year. The
Group has targeted high-quality properties in line with
yield expectations and will continue to analyse investment
opportunities to ensure that they are the right fit for the
Group.
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 shows the
expected annualised rental income exceeds the expected
operating costs of the Group. 90% of rental income
due and payable for the period ended 31 December
2023 has been collected, rent arrears are predominantly
attributable to two Approved Providers, My Space
Housing Solutions and Parasol Homes.
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. During the year, Fitch Ratings
Limited assigned the Company an investment Long-Term
Issuer Default Rating of ‘A-’ with a stable outlook.
The Directors have performed an assessment of the ability
of the Group to continue as a going concern, for a period
of at least 12 months from the date of signing these
financial statements. The Directors have considered the
expected obligations of the Group for the next 12 months
and are confident that all will be met.
The Directors have also considered the financing provided
to the Group. Norland Estates Limited and TP REIT
Propco 2 Limited have bank facilities with MetLife and
MetLife and Barings respectively.
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 also
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
LIMITED
TP REIT PROPCO 2
LIMITED
Asset Cover (ACR)
Asset Cover Ratio Covenant
x2.00
x1.67
Asset Cover Ratio
31 December 2023
x2.81
x2.01
Blended Net initial yield
5.75%
5.86%
Headroom (yield movement)
214bps
112bps
Interest Cover (ICR)
Interest Cover Ratio Covenant
1.75x
1.75x
Interest Cover Ratio
31 December 2023
4.63x
4.26x
Headroom
(rental income movement)
62%
53%
Under the downside model the forecasts have been
stressed to show the effect of some Care Providers
ceasing to pay their voids liability, and as a result this
causes Approved Providers to default under some of the
Group leases. Under the downside model the Group
will be able to settle its liabilities for a period of at least
12 months from the date of signing these financial
statements. As a result of the above, the Directors are of
the opinion that the going concern basis adopted in the
preparation of the financial statements is appropriate.
The Group has no short or medium-
term refinancing
risk given the 9.6 year average maturity of its long-term
debt facilities with MetLife and Barings, the first of which
expires in June 2028, and which are fully fixed at an all-in
weighted average rate of 2.74%.
Based on the forecasts prepared and the intentions of
the parent company, the Directors consider that the
Group will be able to settle its liabilities for a period of at
least 12 months from the date of signing these financial
statements and therefore has prepared these financial
statements on the going concern basis.
Strategic Report
80
|
Triple Point Social Housing REIT plc
The business model was subject to a sensitivity analysis,
which involved flexing a number of key assumptions
underlying the forecasts. The sensitivities performed were
designed to provide the Directors with an understanding
of the Group’s performance in the event of a severe
but plausible downturn scenario, taking full account of
mitigating actions that could be taken to avoid or reduce
the impact or occurrence of the underlying risks outlined
below:
•
Rental income
: It is assumed that some care
providers do not meet their void payment
obligations, and this causes Approved Providers to
default under some of the Group’s leases; and rental
receipts from one Approved Provider that has built
up arrears are lower than expected.
•
Property valuations
: It is assumed that where
there are void units Approved Providers will default
on their leases, and those units will be valued
significantly below their vacant possession value. We
believe this represents a severe reduction in value.
•
Inflation
: No inflation uplift on rental income but
costs increase in line with inflation.
The outcome in the downturn scenario on the Group’s
covenant testing is that there are no breaches, and the
Group can maintain a covenant headroom on existing
facilities.
In the downturn scenario mitigating actions to reduce
variable costs would be required to enable the Group to
meet its future liabilities.
The remaining principal risks and uncertainties, whilst
having an impact on the Group’s business, are not
considered by the Directors to have a reasonable
likelihood of impacting the Group’s viability over the five-
year period.
Based on the results of this analysis, the Directors have a
reasonable expectation that the Group and Company will
be able to continue in operation and meet its liabilities as
they fall due for the next five years.
/
VIABILITY STATEMENT
In accordance with Principle 21 of the AIC Code, the
Board has assessed the prospects of the Group over a
period longer than 12 months required by the relevant
’Going Concern’ provisions. The Board has considered
the nature of the Group’s assets and liabilities, and
associated cash flows, and has determined that five years,
up to 31 December 2028, is the maximum timescale over
which the performance of the Group can be forecast
with a material degree of accuracy and therefore is the
appropriate period over which to consider the viability.
In determining this timescale, the Board has considered
the following:
•
That the business model of the Group assumes the
future growth in its investment portfolio through the
acquisition of Supported Housing assets which are
intended to be held for the duration of the viability
period.
•
The length of the service level agreements between
Approved Providers and care providers.
•
The future growth of its investment portfolio of
properties is achieved through long-term, inflation
linked, fully repairing and insuring leases.
•
The Group’s property portfolio has a WAULT of 24.3
years to expiry, representing a secure income stream
for the period under consideration.
•
The Group’s Loan Notes have a weighted average
term of 9.6 years.
In assessing the Company’s viability, the Board has
carried out a robust assessment of the emerging risks
and principal risks facing the Group, including those that
would threaten its business model, future performance,
solvency, liquidity and dividend cover for a five-year
period.
The Directors’ assessment has been made with reference
to the principal risks and uncertainties and emerging
risks summarised on pages 74 to 79 and how they could
impact the prospects of the Group and Company both
individually and in aggregate. The following risks in
particular have been addressed in the assessment:
1.
Default of one or more Approved Provider lessees
(taking into account that two of the Group’s lessees
have built up arrears during 2022 and 2023).
2.
Risk of changes to the social housing regulatory
regime.
3.
Non-payment of voids cover by care providers.
Strategic Report
2023 Annual Report
|
81
/
BOARD APPROVAL OF THE STRATEGIC REPORT
The Strategic Report has been approved by the Board of Directors and signed on its behalf by:
Chris Phillips
Chair
7 March 2024
Strategic Report
82
|
Triple Point Social Housing REIT plc
Strategic Report
2023 Annual Report
|
83
Governance
CHRIS PHILLIPS, Chair
Chair’s Letter
/
DEAR SHAREHOLDER,
I am pleased to introduce the Corporate Governance
Report for the year ended 31 December 2023. The
Board recognises that a strong governance framework
contributes to the development and implementation of
our strategy. It ensures that we, as the Board, are provided
with the right support, to ensure that we can effectively
oversee progress in the delivery of our strategy and
challenge the Investment Manager where appropriate.
/
STAKEHOLDER ENGAGEMENT
The Board’s engagement with the Group’s key
stakeholders has been of primary focus during the
period. Our investors are of vital consideration for
Board decisions. This year, in accordance with Provision
5.2.4 of the AIC Code of Corporate Governance (the
“AIC Code”), the Board consulted with a number of
shareholders, representing c.21% of the share register,
in order to fully understand and discuss their concerns,
following significant votes against Resolutions 3
29
and 13
30
at the 2023 Annual General Meeting (“AGM”). Following
this consultation, it was acknowledged that the Board
and Investment Manager must remain committed to
addressing the Company’s persistent discount to EPRA
NTA, as well as ensuring that we continue to demonstrate
strong operational performance.
At our quarterly Board meetings, stakeholder views are
considered through Board reports and updates provided
by the Investment Manager, particularly their engagement
and ongoing relationship with the Approved Providers.
The Investment Manager ensures us that it maintains
regular dialogue to encourage Approved Providers to
continually improve their operations.
A full overview of our engagement with all stakeholders is
set out in more detail on pages 70 to 73. We will continue
to engage openly with all our stakeholders to understand
their views on governance and performance.
/
BOARD & GOVERNANCE
CHANGES
During 2023, the Board continued to focus on our key
priorities, and made important progress with Board
succession planning, with the support of the Nomination
Committee. As a result, there have been a number of
changes to Board composition during the year. In May
2023, we welcomed Cecily Davis as a Non-Executive
Director, following a succession process led by the
Nomination Committee, facilitated by an independent
search consultancy. This appointment has further
ensured that the Board is equipped to carry out its duties
effectively and Cecily brings a wealth of knowledge
and experience in the legal, property and infrastructure
sectors. In June 2023, Paul Oliver retired from the Board.
We are grateful to him for his outstanding contribution
and commitment to the Board and Committees.
In addition, the Board reviewed the membership and
structure of the Board Committees, to better ensure
that our dedicated Committees are able to consider key
matters in depth. Following this review, the Board also
29. To re-elect Christopher Phillips as a Director of the Company.
30
. To dis-apply pre-emption rights up to a further 5% in connection with an acquisition or specified capital investments.
86
|
Triple Point Social Housing REIT plc
Governance
decided to establish a Sustainability & Impact Committee,
to reflect the Board’s commitment to and focus on its ESG
strategy, and to strengthen governance with regards to
sustainability matters. More detail on the Sustainability &
Impact Committee can be found in the Sustainability &
Impact Committee Report on pages 106 to 107.
Finally, the Board made the decision to appoint Tracey
Fletcher-Ray as Senior Independent Director, succeeding
Ian Reeves, with effect from 7 March 2024. In taking this
decision, the Board considered that Tracey’s skills and
experience were suitable for the role and would ensure
an additional and effective means of good governance,
as well as providing key stakeholders with an additional
contact to discuss any issues or concerns. On behalf
of the Board, I’d like to thank Ian for his expertise and
contribution during his time as Senior Independent
Director.
/
EXTERNAL BOARD
PERFORMANCE REVIEW
As I mention in my Chair’s Statement on pages 17 to 21, a
performance review of the Board and its Committees for
2023 was conducted externally by Advanced Boardroom
Excellence, an independent consultancy. The review
confirmed that the Board and its Committees continued
to operate effectively in 2023, with some areas identified
for further enhancement, which are set out on page 94.
/
ANNUAL GENERAL MEETING
We are planning to hold our AGM on 16 May 2024, and I
look forward to the opportunity this provides to meet with
shareholders in person. The detailed arrangements will be
communicated in our Notice of AGM published in March
2024.
/
COMPLIANCE STATEMENT
Throughout the year ended 31 December 2023, the
Board has considered the Principles and Provisions of the
AIC Code of Corporate Governance (AIC Code). The AIC
Code addresses the Principles and Provisions set out in
the UK Corporate Governance Code (the UK Code), as
well as setting out additional Provisions on issues that are
of specific relevance to Triple Point Social Housing REIT
plc.
The Board considers that reporting against the Principles
and Provisions of the AIC Code, which has been endorsed
by the Financial Reporting Council, provides more
relevant information to shareholders.
The Company has complied with the Principles and
Provisions of the AIC Code. The AIC Code is available on
the AIC website (www.theaic.co.uk).
/
LOOKING AHEAD TO 2024
The Board remains focused on developing our high
standards of governance, to support the strategic
direction of the Group and deliver sustainable long-term
value for shareholders and all stakeholders. In this section
of the Annual Report, we report on our compliance with
the principles of corporate governance and highlight the
key governance events which have taken place in the year.
Chris Phillips
Chair
7 March 2024
2023 Annual Report
|
87
Governance
Left to right: Chris Phillips, Ian Reeves CBE, Cecily Davis, Peter Coward and Tracey Fletcher-Ray
Board of Directors
CHAIR
CHRIS PHILLIPS (73)
Appointed
17 July 2017
Committee memberships
Management Engagement Committee
Nomination Committee (Chair)
Skills and experience
Chris has extensive experience of real estate and listed companies. He was Managing Director of PB Securities, the UK
subsidiary of Prudential Bache, for three years, before joining Lombard Odier as the Managing Director of its London
broking business. He then joined Colliers International and after heading its residential consultancy business, became the
first Managing Director of Colliers Capital UK Limited (Colliers commercial real estate property fund). Having served on
the Board of Places for People for 14 years, ten of them as Chair, Chris stood down from the role in January 2021.
Principal external appointments
London & Newcastle 2010 Holdings Limited (Chair)
Shetland Space Centre (Director)
Nova Innovations Ltd (Chair)
SENIOR INDEPENDENT DIRECTOR
(EFFECTIVE 7 MARCH 2024)
TRACEY FLETCHER-RAY (59)
Appointed
1 November 2018
Committee memberships
Audit Committee
Management Engagement Committee (Chair)
Sustainability & Impact Committee (appointed as a member on 23 May 2023)
Skills and experience
Tracey has considerable expertise as an executive and non-executive director in the care and support sectors. Tracey
previously was a non-executive director to L&Q Group, one of the UK’s largest Housing Associations and developers,
and was Managing Director of Caring Homes, a leading provider of care homes for the elderly. She is currently CEO of
Witherslack Group, a leading provider of specialist education and care for young people with special educational needs.
She spent nearly two years as Managing Director at Berendsen PLC developing the company’s healthcare business,
strategy and growth and eight years at Bupa UK, holding Managing Director roles in the Care Home business which
involved contracting with and providing services on behalf of local authorities and the NHS, and Bupa Health Clinics.
Principal external appointments
Witherslack Group (CEO)
88
|
Triple Point Social Housing REIT plc
Governance
NON-EXECUTIVE DIRECTOR
PETER COWARD (67)
Appointed
17 July 2017
Committee memberships
Audit Committee (Chair)
Management Engagement Committee
Skills and experience
Peter is a chartered accountant with international commercial and corporate finance experience. He has over 25 years’
experience as a Senior Tax Partner at PricewaterhouseCoopers specialising in property, and has worked with a wide
range of firms to develop a knowledge and understanding of tax regimes worldwide and of organisational and project
structuring to optimise the tax position.
Principal external appointments
True Potential Wealth Management LLP (Member)
ChanceryGate Limited (Director)
Matfen Hall Ltd (Director)
The Heat Vault Company Ltd (Director)
SENIOR INDEPENDENT DIRECTOR
(UP TO 7 MARCH 2024)
IAN REEVES CBE (79)
Appointed
17 July 2017
Committee memberships
Audit Committee
Sustainability & Impact Committee (appointed as Chair on 23 May 2023)
Nomination Committee
Skills and experience
Ian is co-founder and CEO of Synaps International Limited. He is visiting Professor of Infrastructure Investment and
Construction at The Alliance Manchester Business School, Chair of The Estates and Infrastructure Exchange (EIX)
and a Director of Xinous Inc. He was appointed as a Non-executive Director and Chair of Geiger Counter Limited on
13 December 2021 and 9 March 2022 respectively.
Ian was founder and Chair of High-Point Rendel Group, a pioneering management and engineering consultancy company
with a global network of offices. He has been president and CEO of Cleveland Bridge, Chairman of McGee Group,
Chairman of Constructing Excellence and Chair of the London regional council of the CBI.
Ian was awarded his CBE in 2003 for services to business and charity.
Principal external appointments
Synaps International Limited (co-founder and CEO)
The Estates and Infrastructure Exchange (Chair)
Geiger Counter Limited (Chair)
Xinous Inc (Director)
NON-EXECUTIVE DIRECTOR
CECILY DAVIS (57)
Appointed
23 May 2023
Committee memberships
Sustainability & Impact Committee
Nomination Committee
Skills and experience
Cecily has significant legal, construction and infrastructure experience gained from 30 years as a construction and
projects lawyer. Cecily is currently an Engineering, Procurement and Construction Partner at Fieldfisher and Co-Head of
Fieldfisher’s Africa Group. She was formerly a Partner at DLA Piper until 2014 and Shadbolt & Co until 2005. Cecily has an
extensive understanding of the residential and affordable housing sectors, having acted as non-executive director of both
L&Q Group and Places for People. Cecily sits on the board of 3M Homes Ltd and is a Trustee of the Southwark Charities,
which provides almshouses to local residents.
Cecily is a registered solicitor under the Solicitors Regulation Authority, and holds a degree in construction law and
arbitration from King’s College London and a master’s degree in commercial law from the University of Exeter.
Principal external appointments
Fieldfisher LLP (Partner)
3M Homes Ltd (Director)
Southwark Charities (Trustee)
CHANGES TO THE BOARD
•
On 23 May 2023, immediately following the conclusion of the AGM, Cecily Davis joined the Board as an Independent Non-Executive Director.
•
Paul Oliver retired from the Board with effect from 30 June 2023.
•
On 7 March 2024, Tracey Fletcher-Ray succeeded Ian Reeves as Senior Independent Director.
CHANGES TO BOARD COMMITTEE MEMBERSHIP AND THE STRUCTURE OF THE BOARD’S COMMITTEES
The following changes were made, effective 23 May 2023:
•
The establishment of a Sustainability & Impact Committee.
o
Ian Reeves was appointed Chair of the Sustainability & Impact Committee and stepped down as Chair of the Nomination Committee and as a member of
the Management Engagement Committee.
o
Cecily Davis and Tracey Fletcher-Ray joined the Sustainability & Impact Committee.
•
Chris Phillips was appointed Chair of the Nomination Committee.
o
Cecily Davis joined the Nomination Committee and Peter Coward stepped down from the Nomination Committee.
Governance
2023 Annual Report
|
89
Corporate Governance
/
GOVERNANCE FRAMEWORK
Our Governance Framework demonstrates how we operate, representing the key governance arrangements through
which the Board and its Committees can implement the highest standards of challenge and oversight. It is not an
exhaustive list of every organisation or service provider that the Group has engaged with on governance matters.
ALTERNATIVE INVESTMENT
FUND MANAGER
Triple Point Investment Management LLP is the Company’s
AIFM, and as such is responsible for portfolio management
and risk management of the Group pursuant to AIFMD.
The Investment Manager also provides certain property
management services to the Group, including the
preparation of budgets for the properties and co-ordinating
with third parties providing services to the Group. Further
information on the AIFM arrangements can be found on
page 102.
COMPANY
SECRETARIAT
Hanway Advisory Limited is the Company Secretary. They
ensure that Board procedures are complied with, advise the
Board on all governance matters, and support the Chair, the
Board and its Committees to function effectively.
AUDIT
COMMITTEE
Assists the Board with
reviewing the effectiveness
of the Group’s financial
reporting, maintaining an
appropriate relationship
with the Group’s auditor
and monitoring the internal
control systems. See pages
97 to 100 for more detail.
MANAGEMENT
ENGAGEMENT
COMMITTEE
Assists the Board with
reviewing the contractual
relationships of the
Investment Manager
and third-party service
providers, and holding their
performance to account. See
pages 101 to 102 for more
detail.
NOMINATION
COMMITTEE
Assists the Board by leading
the recruitment process for
candidates for the Board,
ensuring plans are in place
for orderly succession to the
Board and overseeing the
development of a diverse
pipeline. See pages 103 to
105 for more detail.
SUSTAINABILITY &
IMPACT COMMITTEE
Assists the Board with
overseeing the development
and implementation of the
Group’s ESG strategy. See
pages 106 to 107 for more
detail.
SHAREHOLDERS
THE BOARD
The Board is collectively responsible for promoting the long-term sustainable success of the Group and generating value for
shareholders, whilst also remaining cognisant of its duties to its other stakeholders and its contribution to wider society. It does this
by providing effective oversight over the management and conduct of the Group’s business, strategy and development. The Board
determines the Company’s Investment Objective and Investment Policy, and reviews investment activity and performance.
The Board maintains effective oversight of the Investment Manager and compliance with the principles and provisions of the
AIC Code. The Board ensures the maintenance of a sound system of internal controls and risk management (including financial,
operational and compliance controls) and reviews the overall effectiveness of systems in place. Further, the Board is responsible for
approval of any changes to the capital, corporate and/or management structure of the Group.
The Board delegates day-to-day management of the business to the Investment Manager, save for such matters reserved for the
Board’s approval. To assist in carrying out its responsibilities, the Board has established four Committees. The Terms of Reference
for each of the Board’s Committee are available to view on the Company’s website https://www.triplepointreit.com/corporate-
governance/131/.
Governance
90
|
Triple Point Social Housing REIT plc
Governance
2023 Annual Report
|
91
/
KEY MATTERS RESERVED FOR THE BOARD
Board membership and powers including the
appointment and removal of Board members.
Establishing the overall control framework, Stock
Exchange related matters, including the approval
of communications to the Stock Exchange, and
communications with shareholders, other than
announcements of a routine nature.
Key commercial matters, including review of all
investments and divestments, and any significant
changes in lease terms.
The appointment, termination, and regular
assessment of the performance of the principal
advisers, including the AIFM, the Investment
Manager, Tax Advisers, Legal Advisers, Financial
Adviser, Administrator and Company Secretary,
Broker, Registrar, PR Adviser and Auditor.
The approval of the budget and financial models.
The approval of annual and half yearly
financial reports, to 31 December and 30 June
respectively, dividends, accounting policies and
significant changes in accounting practices.
The approval of the net asset value calculation
prepared by the Administrator on a quarterly
basis at 31 March, 30 June, 30 September and
31 December each year.
The review of the adequacy of corporate
governance procedures.
The review of significant estimates and
judgements of the Group.
The review of the risk inventory and the
effectiveness of internal controls.
Approval of changes to the Group’s capital
structure, dividend policy, treasury policy,
borrowing facilities and any banking relationships,
hedging strategy, cash management, the Group’s
business strategy, acquisitions and disposals and
capital expenditure.
Approval of any related party transactions subject
to further regulatory requirements.
Oversight of the Group’s operations ensuring
compliance with statutory and regulatory
obligations.
/
BOARD MEMBERSHIP AND
MEETING ATTENDANCE
Individual Directors’ attendance during the year to
31 December 2023 is set out below:
DIRECTOR
BOARD MEETINGS
ATTENDED /
REQUIRING
ATTENDANCE
GENERAL
MEETINGS
ATTENDED /
REQUIRING
ATTENDANCE
Chris Phillips (Chair)
6/6
1/1
Ian Reeves CBE
6/6
1/1
Peter Coward
6/6
1/1
Cecily Davis*
4/4
1/1
Tracey Fletcher-Ray
6/6
1/1
Former Director
Paul Oliver**
3/3
1/1
* Cecily Davis was appointed to the Board with effect from the conclusion of the Annual
General Meeting on 23 May 2023.
** Paul Oliver retired from the Board with effect from 30 June 2023.
/ COMPOSITION
The Group has a non-executive Chair and four other
non-executive Directors, including a Senior Independent
Director, all of whom are considered independent
on and since their appointment. All Directors are
independent of the Investment Manager.
Chris Phillips is the Chair of the Board. The Chair leads
the Board and is responsible for the Board’s overall
effectiveness in directing the Group. The Chair, in
conjunction with the Company Secretary, ensures that
accurate, timely and clear information is circulated to
the Directors, and sufficient time is given in meetings
to review all agenda items thoroughly. The Chair also
ensures that any issues arising in the Board meetings
are followed up on in a timely manner. He promotes a
culture of openness and constructive debate to ensure
the effective contribution of all Directors, facilitating
a co-operative environment between the Investment
Manager and the Directors, and encourages Directors
to critically examine information and reports, to
constructively challenge the Investment Manager and
to hold third-party service providers to account, where
appropriate.
The Chair has put mechanisms in place to facilitate
effective communication between shareholders and the
Board, to ensure that their views, issues and concerns
are considered as part of the decision-making process.
Ian Reeves was the Senior Independent Director during
the year, and was succeeded by Tracey Fletcher-Ray
with effect from 7 March 2024. If required, the Senior
Independent Director will act as a sounding board and
intermediary for the other Directors and shareholders. In
addition to the Chair, the Senior Independent Director
engages with shareholders or Directors if they have any
issues or concerns, or if there are any unresolved matters
that shareholders or other Directors believe should be
brought to her attention.
The Directors hold or have held senior positions in
industry and commerce and contribute a wide range of
skills, experience and objective perspective to the Board.
The Board Committees allow the Directors to focus in
greater detail and depth on key matters such as strategy,
governance, internal controls and risk management.
/
TIME COMMITMENT
Non-executive Directors are expected to devote sufficient
time to carry out their duties effectively. The expectation
regarding time commitment is set out in the Directors’
letters of appointment. Directors are required to disclose
any potential external role and ensure it is approved by the
Board prior to the acceptance of any such appointment.
During the year ended 31 December 2023, the Board was
satisfied that all Directors were and remain able to commit
sufficient time to discharge their responsibilities effectively
having given due consideration to their other significant
commitments.
There were no external appointments accepted during
the year which were considered to be significant for the
relevant directors, taking into account the expected time
commitment and nature of these roles.
The Directors’ other principal commitments are listed on
pages 88 to 89.
Governance
92
|
Triple Point Social Housing REIT plc
/
BOARD COMMITTEES
The Board has established a Management Engagement
Committee, an Audit Committee, a Nomination
Committee and a Sustainability & Impact Committee.
Given that the Company has no executive Directors
or other employees, the Board does not consider
it necessary to establish a separate remuneration
committee. The functions and activities of each of the
Committees are described in their respective reports.
/
BOARD MEETINGS
The Board meets formally at least on a quarterly basis
with additional meetings as they may decide are
required from time to time. During 2023, the Board held
four scheduled meetings and two extra Board meetings
including one strategy meeting.
The Chair sets the agenda for the meetings and ensures,
in conjunction with the Company Secretary, prior to each
meeting, that the Directors receive accurate, clear and
timely information to help them to discharge their duties.
For this purpose, the Board receives periodic reports
from the Investment Manager detailing the performance
of the Group. The meetings focus on a review of
portfolio performance and associated matters such
as pipeline, gearing, asset management, occupancy,
marketing/investor relations, peer group comparisons,
regulatory matters, environmental and social matters and
the impact of macro-economic issues.
/
KEY DECISIONS OF THE BOARD
IN 2023
During the year, the Board considered the following
matters:
•
the Group’s longer-term strategy;
•
analysis of the Group’s current and future lease
terms;
•
the appointment of Cecily Davis to the Board
as a Non-Executive Director, following a
recommendation from the Nomination Committee;
•
the launch of a share buyback programme, with
a maximum aggregate consideration of up to
£5 million;
•
changes to the membership and structure of the
Board’s Committees including the establishment of
a Sustainability & Impact Committee;
•
the sale of four specialised supported housing
properties for an aggregate consideration of
£7,586,600;
•
a proposed new lease clause, having sought
shareholder feedback ahead of implementation.
The lease clause addresses the Regulator’s concerns
regarding the long-lease model and ensures that
where there are risks that are beyond the control of
the Group’s lessees, then, subject to a materiality
threshold being breached, the risks will sit with the
Group;
•
a decision to keep the target dividend flat in order
to preserve dividend cover for the year ended
31 December 2023, whilst the Investment Manager
focuses on addressing material rent arrears with two
Approved Providers;
•
the valuation methodology of the Group’s portfolio;
•
the risks and related mitigations of the Group’s lease
counterparties;
•
engagement with two of the Group’s Approved
Providers regarding material rental arrears during
the year, and the consideration of creditor
agreements;
•
the standards of Registered Providers that had
received a non-compliant rating by the Regulator
and updates on regulatory developments within the
social housing sector;
•
the declaration of the Company’s interim dividends;
•
the Group’s due diligence process;
•
the risk profile of the Group and its counterparties;
•
the budget for general, administrative and
marketing expenses;
•
the Group’s compliance with the REIT regime;
•
the Group’s financial public relations and
communication strategy, and the appointment of
Brunswick Group as the Company’s Financial PR
Adviser;
•
the Group’s property insurance;
•
the key performance indicators by which the Group
measures success;
•
review of quarterly management accounts;
•
half yearly broker report regarding the Company’s
share price rating, performance and trading and
NAV performance;
•
analysis of the Company’s shareholder register;
Governance
2023 Annual Report
|
93
•
the recommendations of its Nomination Committee
with respect to Board diversity, succession planning
and the current balance of skills, experience and
knowledge;
•
the recommendations of its Sustainability & Impact
Committee with respect to the implementation of an
eco-retrofit pilot programme; and
•
a quarterly review of corporate governance
compliance, Group subsidiary activity and
depositary report.
/
PERFORMANCE EVALUATION
The Directors recognise that the evaluation process is
a significant opportunity to review the practices and
performance of the Board, its Committees, and its
individual Directors and to implement actions to improve
the Board’s effectiveness and contribute to the Group’s
success.
For the year ended 31 December 2023, the Board
undertook an external evaluation using an independent
third-party evaluator, Advanced Boardroom Excellence
(“ABE”). ABE does not have any other connection with
the Company or individual Directors.
RESULTS
PROCESS
The review was designed to assess the strengths of the
Board and to raise any opportunities for improvement.
ABE observed the Board and Committee meetings
in November and December 2023, and reviewed
Board and Committee documentation. Interviews
were held with each of the Board members, as well as
key representatives of the Investment Manager and
Company Secretary. Key topics under review included:
•
the Board’s approach to strategy setting;
•
the Board dynamics;
•
the information and quality of Board and Committee
papers;
•
Board composition and succession planning; and
•
engagement with stakeholders.
Following the review, ABE provided the Board with a
discussion document, outlining the current strengths
and key challenges facing the Board, as well as the
recommendations identified.
ABE’s independent review concluded that the Board, its Committees and each of its Directors continue to be
effective. The Chair facilitates inclusive, open dialogue and draws upon the diverse range of experience and skills
within the Boardroom. The Board and Investment Manager interact constructively, and the Directors demonstrate a
high degree of independence, integrity and passion for the Company and its sector.
ABE’s review identified some key opportunities for the Board to further strengthen and prioritise for 2024:
CHALLENGES
RECOMMENDATIONS OF
NEXT STEPS
To continue to ensure awareness of
stakeholder views
The Board to continue to consider the views of wider stakeholders across the political, social and financial
communities, and to leverage the appointment of the Company’s Financial PR Adviser, Brunswick, to
ensure stakeholder engagement is a regular focus at Board meetings.
To review succession planning of Non-
executive Director roles
The Board and the Nomination Committee to implement a phased succession plan, beginning in 2024,
to reflect the tenures of the Senior Independent Director, Audit Chair and Chair, and to ensure enough
time is provided for a comprehensive recruitment process, induction and handover period.
To continue to improve oversight of
Risk
The Board to receive enhanced risk reporting to support with the prioritisation of key risks and facilitate
more in-depth discussion when reviewing risks.
To ensure the culture of openness and
constructive debate within the Board is
maintained
The Board to consider processes for regular Non-executive Director-only sessions, to ensure that Board
members benefit from the opportunity to discuss issues independently of the Investment Manager.
To review and refresh key governance
documents
The Board to regularly review the Committee terms of reference, to ensure that these are refreshed and
reflective of current best practice.
Governance
94
|
Triple Point Social Housing REIT plc
The Board evaluation for the year ended 31 December 2022 was undertaken internally by way of a written
questionnaire. The Board has made good progress on the recommendations arising from the evaluation, as set
out below:
CHALLENGES
RECOMMENDATIONS OF
NEXT STEPS
ACTION TAKEN TO
ADDRESS CHALLENGES
Diversity
There has been significant emphasis placed
upon gender and ethnic diversity as a result of
the changes to the Listing Rules, amongst other
things. The Board is encouraged to ensure that
diversity of all kinds, including social diversity,
is given due consideration in the constitution of
the Board.
The Board, with the support of the Nomination Committee, undertook
a formal recruitment process, with the assistance of an independent
search consultancy, for the appointment of a new Board member. This
process actively encouraged a diverse pool of candidates who could
contribute specific skills and experience identified by the Board. The
Board was pleased to announce the appointment of Cecily Davis as an
Independent Non-Executive Director with effect from 23 May 2023.
Director Training
The Board is encouraged to dedicate more time
to enhance the professional development of the
Directors, to ensure continuous improvement of
knowledge and skills. With a new Director due
to join the Board, the existing Directors should
be conscious of ensuring that they receive a
comprehensive induction and are integrated
well within the Board.
Training was provided at the Strategy Day in March 2023 on Share
Buybacks and regular Director briefings are held on topics such as
valuations, compliance with the REIT regime, wider REIT market
conditions and external market events and the resulting impact on the
Company’s performance.
An induction programme was held for the newly appointed Director,
including meetings with key advisers.
Strategy
A core focus for the Board over the coming year
will be the strategy for the Company moving
forward. The Board should ensure that sufficient
time is given to discussing this.
A dedicated Strategy Day was held in March 2023. In addition, bi-
monthly Board meetings have been arranged to ensure that the Board
and the Investment Manager have a dedicated and regular meeting to
focus on the key, strategic issues.
KPIs
The Board acknowledges that the KPIs and
performance monitoring have improved during
the year however the process is still evolving.
It is therefore recommended that the Board
continue to critically evaluate the KPIs to ensure
that they support the strategy and allow the
Board to effectively assess the performance of
the Company and portfolio.
During the year, the Board has critically assessed KPIs when making
key strategic decisions. In particular, the Board has reviewed the
Group’s LTV and Adjusted Earnings Per Share, when deciding how to
utilise the proceeds from the portfolio sale and whether to proceed
with another Share Buyback programme.
In addition, the Board reviews the dividend every quarter ahead of
payment and sets the dividend target at the start of the year.
A full performance evaluation of the Board, its Committees and the individual Directors will continue to be
conducted annually. The Chair will regularly consider an externally facilitated Board evaluation.
/
CONFLICTS OF INTERESTS
The Group operates a conflicts of interest policy that has
been approved by the Board and sets out the approach
to be adopted and procedures to be followed where a
Director, or such other persons to whom the Board has
determined the policy applies, has an interest which
conflicts, or potentially may conflict, with the interests of
the Group. Under the policy and the Company’s Articles
of Association, the Board may authorise potential
matters of conflict that may arise, subject to imposing
limits or conditions when giving authorisation, if this is
appropriate.
The Group reserves the right to withhold information
relating to or relevant to a conflict matter from the
Director concerned and/or to exclude the Director from
any Board information, discussions or decisions which
may or will relate to that matter of conflict or where
the Chair considers that it would be inappropriate for
such Director to take part in the discussion or decision
or to receive such information. Procedures have been
established to monitor actual and potential conflicts of
interest on a regular basis and the Board is satisfied that
these procedures are working effectively.
The Investment Manager maintains conflicts of interest
policies to avoid and manage any conflicts of interest
that may arise between themselves and the Group. The
Investment Manager has established a clear and robust
framework to ensure that any conflicts of interest are
appropriately governed that includes:
•
potential conflicts where the Investment Manager is
a party to the transaction;
•
the Investment Manager’s obligation to, as far
as reasonably practical, exclusively offer all new
investment opportunities to the Group; and
•
other conflict matters regarding the value, quality
or other terms relating to the acquisition or disposal
of assets from or to the Group or provision of debt
funding by the Investment Manager to the Group.
Governance
2023 Annual Report
|
95
/
PROFESSIONAL DEVELOPMENT
The Directors received a comprehensive induction
programme on joining the Board that covered
the Group’s investment activities, the role and
responsibilities of a Director and guidance on corporate
governance and applicable regulatory and legislative
landscape. The Directors’ training and development was
assessed as part of the annual effectiveness evaluation
and, in any event, the Chair regularly reviews and
discusses the development needs with each Director.
Each Director is fully aware that they should take
responsibility for their own individual development
needs and take the necessary steps to ensure they
are wholly informed of regulatory and business
developments.
During the year, the Directors received periodic
guidance on technical, regulatory and compliance
changes at quarterly Board meetings, and on an ad hoc
basis where necessary.
/
SHAREHOLDER ENGAGEMENT
The Group encourages active interest and contribution
from both its shareholders and responds promptly to all
queries received by the Group. The Board recognises
the importance of maintaining strong relationships with
shareholders and the Directors place a great deal of
importance on understanding shareholder sentiment.
The Investment Manager and the Group’s Joint Financial
Advisers regularly meet to discuss, amongst other things,
the views of the Company’s shareholders. The Group’s
Corporate Broker speaks to shareholders regularly and
ensures shareholder views are clearly communicated to
the Board. The Board takes responsibility for, and has
a direct involvement in, the content of communications
regarding major corporate matters.
The Board encourages shareholders to attend and vote
on the resolutions at the Annual General Meeting, and
to ask the Board any questions that they may have.
The Chair makes himself available, as necessary, to speak
to shareholders. In addition, the Chairs of the Board’s
Committees make themselves available, as necessary, on
significant matters related to their areas of responsibility
when required.
The Board is committed to providing investors with
regular announcements of events affecting the Group.
The Group publishes quarterly factsheets that are
available to download, along with all other investor
documentation, from the Group’s website
During the year, the Group regularly engaged with
shareholders. Of particular note this year, the Board
and Investment Manager consulted with shareholders
in accordance with Provision 5.2.4 of the AIC Code of
Corporate Governance, following notable votes against
two resolutions proposed at the 2023 Annual General
Meeting.
Governance
96
|
Triple Point Social Housing REIT plc
Audit Committee
Report
/ RESPONSIBILITIES
The Audit Committee has the primary responsibility of
reviewing the financial statements and the accounting
principles and practices underlying them, liaising with the
external auditors and reviewing the effectiveness of the
Group’s internal controls.
The main role of the Audit Committee is to:
•
provide formal and transparent arrangements for
considering how to apply the financial reporting and
internal control principles set out in the AIC Code
and to maintain an appropriate relationship with the
external auditors;
•
where requested, provide advice to the Board on
whether the annual report and accounts, taken as
a whole, is fair, balanced and understandable and
provides the information necessary for shareholders
to assess the Group’s position and performance,
business model and strategy;
•
monitor the integrity of the financial statements of
the Group and any formal announcements relating
to the Group’s financial performance and reviewing
significant financial reporting judgements contained
in them;
•
review the Group’s internal financial controls and
the Group’s internal control and risk management
systems;
•
make recommendations to the Board to put to the
shareholders for their approval in general meetings
in relation to the appointment, re-appointment and
removal of the external auditor and to approve
the remuneration and terms of engagement of the
external auditor;
•
review and monitor the external auditor’s
independence and objectivity and the effectiveness of
the audit process, taking into consideration relevant
UK professional and regulatory requirements;
•
liaise with the Group’s Tax Adviser in relation to
ensuring continuing compliance with the REIT regime;
•
liaise with the Group’s external Valuer in relation to
the valuation of the Group’s portfolio and the process
undertaken in determining the valuation;
•
develop and implement a policy on the engagement
of the external auditor to supply non-audit services,
taking into account relevant ethical guidance
regarding the provision of non-audit services by the
external audit firm;
PETER COWARD,
Audit Committee Chair
AUDIT COMMITTEE MEMBERS
AUDIT COMMITTEE
MEETINGS ATTENDED /
REQUIRING ATTENDANCE
Peter Coward (Chair)
4/4
Ian Reeves CBE
4/4
Tracey Fletcher-Ray
4/4
Former Member
Paul Oliver*
2/2
* Paul Oliver retired from the Board and stepped down as a member of the Audit
Committee with effect from 30 June 2023.
Governance
2023 Annual Report
|
97
•
report to the Board, identifying any matters in respect
of which it considers that action or improvement is
needed and make recommendations as to the steps
to be taken; and
•
report to the Board on how it has discharged its
responsibilities.
The Audit Committee’s Terms of Reference can be found
on the Group’s website at https://www.triplepointreit.com/
corporate-governance/131/.
/
COMMITTEE MEMBERSHIP
The Audit Committee is chaired by Peter Coward and
comprises of three members.
The Board is satisfied that at least one member of the
Audit Committee has recent and relevant financial
experience. Peter Coward is a qualified Chartered
Accountant and was, until the end of June 2016, a Senior
Tax Partner at PricewaterhouseCoopers LLP specialising in
property. The Board is also satisfied that the Committee,
collectively, has competence relevant to the sector in
which the Group operates.
/ ACTIVITIES
The Audit Committee meets at least three times a year
to consider the annual report, interim report, any other
formal financial performance announcements, and
any other matters as specified under the Committee’s
Terms of Reference. The Committee regularly reports
to the Board on how it discharged its responsibilities.
During the year, the Audit Committee discussed and
considered the external audit performance, objectivity
and independence, the external auditor re-appointment,
accounting policies and alternative accounting treatments,
significant accounting judgements and estimates, and the
risk register.
/
PERFORMANCE EVALUATION
Refer to the Corporate Governance section on pages 94
to 95 for further details on the performance evaluation.
/
INTERNAL CONTROL AND RISK
MANAGEMENT
The Group has an ongoing process in place for
identifying, evaluating and managing the principal and
emerging risks faced by the Group.
During the year, the Board carried out a robust
assessment of the Group’s emerging and principal risks,
which was further reviewed by the Audit Committee,
and satisfied itself that the procedures for identifying the
information needed to monitor and manage these risks
were robust. The Group has in place the following key
internal controls:
•
a risk register identifying risks and controls to
mitigate their potential impact and/or likelihood
and this is maintained by the Investment Manager
subject to the supervision and oversight of the
Committee;
•
a procedure to ensure that the Group can continue
to operate as a REIT;
•
internal control reports of the Investment Manager,
Administrator and Depositary, which are reviewed
by the Board;
•
forecasts and management accounts prepared by
the Investment Manager and Administrator, which
allow the Board to assess performance; and
•
there is an agreed and defined Investment Policy,
specified levels of authority and exposure limits in
relation to investments, leverage and payments.
The Board also receives a quarterly depositary report.
INDOS Financial Limited are responsible for cash
monitoring, asset verification and oversight of the Group
and the Investment Manager in performing its function
under the AIFMD. The Depositary reports its findings on
a quarterly basis during which it monitors and verifies all
new acquisitions, share issues, loan facilities, shareholder
distributions and other key events. In addition, on
an ongoing basis, the Depositary tests the quarterly
management accounts, bank reconciliations and performs
a quarterly review of the Group when discharging its
duties.
Taking into account the review of the reports provided
and its knowledge of the business, the Audit Committee
has reviewed and approved any statements included in
the annual report concerning internal controls and risk
management and has determined that the effectiveness
of the internal controls was satisfactory. The principal risks
and uncertainties identified from the risk register and a
description of the Group’s risk management procedures
can be found on pages 74 to 79.
Governance
98
|
Triple Point Social Housing REIT plc
/
SIGNIFICANT ISSUES
CONSIDERED BY THE AUDIT
COMMITTEE
The Audit Committee considered the key accounting
judgements underlying the preparation of the financial
statements, focusing specifically on:
VIABILITY AND GOING CONCERN
The Board is required to consider and report on the
longer-term viability of the business as well as assess
the appropriateness of applying the going concern
assumption.
The Audit Committee has taken account of the
solvency and liquidity position of the Group from the
financial statements and the forecasted Group cash
flow information provided by the Investment Manager,
expected pipeline and expected fund raising plans
through a fundraise or debt finance over the period
to December 2028. As a result, the Audit Committee
considers that it is appropriate to adopt the going
concern basis of preparation of the financial statements.
VALUATION OF PROPERTY PORTFOLIO
The valuation of the Group’s property portfolio is
fundamental to the Group’s statement of financial position
and reported results.
The valuations of the properties at the end of the financial
period were performed by Jones Lang LaSalle, whom
the Audit Committee considers to have sufficient local
and national knowledge of social housing and Supported
Housing and the skills and knowledge to undertake the
valuations competently. The Audit Committee met with
the Group’s Valuer to discuss the valuation methodology
of the Group’s portfolio and examine the suitability of the
value of assets leased to Registered Providers that had
received non-compliant ratings.
The Audit Committee considered the underlying
assumptions of IFRS valuation basis and portfolio
valuation and gains comfort from the valuer’s
methodology and other supporting market information.
The Audit Committee has considered the subjectivity of
the property valuations which could affect the NAV and
share price of the Group, and these were discussed with
the Investment Manager and the external auditor.
EXPECTED CREDIT LOSS
The Board has considered the appropriateness of the
ECL provision, which relates to rental arrears for two
of the Group’s Approved Providers. The ECL provision
represents a default probability for two Approved
Providers, on outstanding rent due at 31 December
2023, which was determined based on their latest known
financial position and any repayment plans that had
been agreed or discussed. Please refer to the Investment
Manager’s Report on page 46 for further details regarding
the creditor agreement in place with Parasol.
REVENUE RECOGNITION
The Group’s revenue solely comprises rental income
from investment properties, and therefore, it is integral
that the underlying assumptions for determining rental
income are appropriate. Rental income is recognised on
a straight-line basis over the lease term, thereby relying
on the Investment Manager’s determination of the lease
term based on whether they are reasonably certain the
option to extend the lease term will be exercised. The
Audit Committee gained comfort of these assumptions by
reviewing the external auditor’s analysis including a review
of the lease documentation, investigation of differences
to actual revenue recognised in the year compared to
expectations and how they challenged any significant
assumptions made by the Investment Manager.
/
INTERNAL AUDIT
The Board has considered the appropriateness of
establishing an internal audit function and, having regard
to the structure and nature of the Group’s activities, has
concluded that the function is unnecessary. The Audit
Committee will review on an annual basis the need for this
function and make appropriate recommendations to the
Board.
/
EXTERNAL AUDITOR, AUDIT
FEES AND NON-AUDIT SERVICES
An important responsibility of the Audit Committee
each year is to monitor the performance, objectivity and
independence of the Group’s external auditor, currently
BDO LLP (“BDO”). In evaluating BDO’s performance, the
Audit Committee examine the effectiveness of the audit
process, independence and objectivity of the auditor,
taking into consideration the length of tenure of the
external auditor, the non-audit services undertaken during
the year and relevant UK professional and regulatory
requirements, and the quality of delivery of its services.
Governance
2023 Annual Report
|
99
BDO were appointed as the external auditor of
the Group on 18 July 2017, and a formal external
audit tender process was undertaken in 2019. BDO
were recommended by the Audit Committee for re-
appointment at the 2023 AGM and the resolution was
duly passed. We transitioned our lead BDO partner for
the 2022 audit following completion of the previous audit
partner’s five-year term.
The auditors attend the majority of the Audit Committee
meetings and I, as Audit Committee Chair, have a number
of meetings with the lead audit partner as required. The
auditor works with the Investment Manager and discuss
their findings and recommendations with the Audit
Committee.
The Audit Committee has approved a non-audit services
policy that determines the services that BDO can provide
and the maximum fee that may be raised for non-audit
services in comparison to the statutory audit fee, in line
with the FRC Ethical Standards for Auditors.
In accordance with the policy, and to ensure that
independence and objectivity is satisfactorily safeguarded,
the approval of the Audit Committee must be obtained
before the external auditor is engaged to provide any
permitted non-audit services above a fee threshold of
£5,000. The Audit Committee has also agreed that the
role of reporting accountant although a permitted service,
where necessary, would be undertaken by a firm other
than BDO to ensure best practice compliance with the
non-audit service policy.
BDO are prohibited from providing services to the
Group that would be considered to jeopardise their
independence, such as tax services, bookkeeping and
preparation of accounting records, financial systems
design and implementation, valuation services, internal
audit outsourcing and services linked to the financing,
capital structure and asset allocation. The Group’s non-
audit services policy is reviewed annually to ensure it
continues to be in line with best practice.
The Committee annually reviews the level of non-audit
fees to ensure that the provision of non-audit services
does not impair the auditor’s independence or objectivity,
taking into account the relevant regulations and the FRC’s
Ethical Standard. The policy provides that total fees for
non-audit services provided by the auditor to the Group
shall be limited to no more than 70% of the average of
the statutory audit fee for the Group paid to the auditor in
the last three consecutive financial years.
The total audit fee in relation to the 31 December
2023 year end audit of the Group and subsidiaries was
£292
,000 (net of VAT). The total non-audit fees for the
year ended 31 December 2023 were £40,000 (net of VAT)
in relation to the interim review. The ratio of non-audit
services fees to audit fees in the year was 14%.
Peter Coward
Audit Committee Chair
Governance
100
|
Triple Point Social Housing REIT plc
Management Engagement
Committee Report
/ RESPONSIBILITIES
The main function of the Management Engagement
Committee is to review and make recommendations on
any proposed amendment to the Investment Management
Agreement and keep under review the performance of
the Investment Manager. The Committee will regularly
review the composition of the key executives performing
the services on behalf of the Investment Manager and
monitor and evaluate the performance of other key service
providers to the Group.
The Management Engagement Committee’s Terms of
Reference can be found on the Group’s website at https://
/
COMMITTEE MEMBERSHIP
The Management Engagement Committee is chaired by
Tracey Fletcher-Ray and comprises of three members.
/ ACTIVITIES
During the year, the Management Engagement
Committee conducted a comprehensive review of the key
agreements with its service providers, a detailed review of
the performance, composition, personnel, processes and
internal control systems of the Investment Manager, and
a review of the Group’s other corporate advisers and key
service providers. The discussion included an assessment
of performance and suitability of the services provided in
the context of the fees paid to each provider, and a review
of the termination period of each agreement.
The Management Engagement Committee considered
the terms of the Investment Management Agreement
to ensure it continues to reflect properly the commercial
arrangements agreed between the Company and the
Investment Manager and were satisfied that this was the
case.
/
PERFORMANCE EVALUATION
Refer to the Corporate Governance section on pages 94
to 95 for further details on the performance evaluation.
MANAGEMENT ENGAGEMENT
COMMITTEE MEMBERS
MANAGEMENT ENGAGEMENT
COMMITTEE MEETINGS
ATTENDED / REQUIRING
ATTENDANCE
Tracey Fletcher-Ray (Chair)
2/2
Chris Phillips
2/2
Peter Coward
2/2
Former Members
Paul Oliver*
0/1
Ian Reeves CBE**
0/1
*
Paul Oliver retired from the Board and stepped down as a member of the
Management Engagement Committee with effect from 30 June 2023.
**
Ian Reeves stepped down as a member of the Management Engagement
Committee with effect from 23 May 2023.
CHRIS PHILLIPS, Chair
TRACEY FLETCHER-RAY,
Management Engagement
Committee Chair
Governance
2023 Annual Report
|
101
/
MANAGEMENT ARRANGEMENTS
AIFM AGREEMENT
The Company operates as an externally managed
alternative investment fund for the purposes of the AIFMD.
In its role as AIFM, the Investment Manager is responsible
for portfolio management and risk management of the
Group pursuant to the AIFMD.
The Company’s AIFM is Triple Point Investment
Management LLP.
For the performance of the risk management function,
which is set out within the AIFM Agreement and excludes
the portfolio management aspect of the role, the
Investment Manager receives an annual fee which equates
to 3.5 basis points on net assets of up to £300 million, and
3.0 basis points for net assets above £300 million.
The AIFM Agreement is terminable by the Investment
Manager on giving the Group not less than 12 months’
written notice and using its reasonable endeavours to
assist with the appointment of a successor alternative
investment fund manager of the Company or the
Company giving to the Investment Manager not less than
12 months’ written notice. The AIFM Agreement may be
terminated earlier by either party with immediate effect in
certain circumstances, including, if an order or resolution
for liquidation is passed for the other party or the other
party has committed a breach of its obligations under
the AIFM Agreement that is material in the context of the
AIFM Agreement.
The Group has given certain market standard indemnities
in favour of the Investment Manager in respect of the
Investment Manager’s potential losses in carrying on its
responsibilities under the AIFM Agreement.
The annual fee paid under the AIFM Agreement for the
year ended 31 December 2023 was £216,000 (£192,000 as
at 31 December 2022). No performance fee is payable to
the Investment Manager.
INVESTMENT MANAGEMENT AGREEMENT
Under the Investment Management Agreement, which
governs the portfolio management aspects of the AIFM
role, the Investment Manager is entitled to receive an
annual management fee which is calculated quarterly in
arrears based upon a percentage of the NAV of the Group
(not taking into account uncommitted cash balances
excluding debt) as at 31 March, 30 June, 30 September
and 31 December in each year on the following basis:
COMPANY BASIC NAV
(EXCLUDING CASH BALANCES)
ANNUAL MANAGEMENT FEE
(PERCENTAGE OF BASIC NAV)
Up to and including £250 million
1.0%
Above £250 million and up to
and including £500 million
0.9%
Above £500 million and up to
and including £1 billion
0.8%
Above £1 billion
0.7%
The annual fee paid to the Investment Manager under the
Investment Management Agreement for the year ended
31 December 2023 was £4.65 million (£4.70 million as at
31 December 2022).
On a semi-annual basis, once the Group’s half year or year-
end NAV has been announced, the Investment Manager
shall procure that 25% of the management fee (net of any
applicable tax) for the relevant six-month period immediately
preceding the date of that NAV shall be applied by
subscribing for, or acquiring, Ordinary Shares (’Management
Shares’). The Investment Manager subscribes for or acquires
Management Shares on a semi-annual basis as anticipated
under the Investment Management Agreement.
The Investment Manager is also entitled to be reimbursed
for all disbursements, fees and costs payable to third parties
properly incurred by the Investment Manager on behalf of
the Group pursuant to provision of the services under the
Investment Management Agreement.
There are no performance, acquisition, exit or property
management fees.
The Investment Management Agreement may be terminated
by the Investment Manager or the Group by not less than 12
months’ written notice. In the event of termination, fees will
be calculated to the date of expiry or termination payable
pro rata on the day of such expiry or termination.
/
CONTINUING APPOINTMENT OF
THE INVESTMENT MANAGER
The Management Engagement Committee has reviewed
the continuing appointment of the Investment Manager
and based on the Group’s strong investment performance,
deep sector expertise and counterparty relationships, the
Committee is satisfied that their appointment remains in
the best interests of shareholders as a whole.
Tracey Fletcher-Ray
Management Engagement Committee Chair
Governance
102
|
Triple Point Social Housing REIT plc
Nomination
Committee Report
/ RESPONSIBILITIES
The Nomination Committee’s main function is to lead
the process for appointments, ensuring plans are in
place for orderly succession to the Board, overseeing the
development of a diverse pipeline for succession and any
other matters as specified under the Committee’s Terms of
Reference. This includes ensuring that any appointments
and succession plans are based on merit and objective
criteria, and, within this context, promoting diversity of
gender, social and ethnic backgrounds, cognitive and
personal strengths.
The Nomination Committee’s Terms of Reference
can be found on the Group’s website at https://www.
triplepointreit.com/corporate-governance/131/.
/
COMMITTEE MEMBERSHIP
The Nomination Committee is chaired by Chris Phillips and
comprises of three members. During the year, Chris Phillips
took over as Chair of the Nomination Committee from Ian
Reeves, who stepped down to become the Chair of the
newly established Sustainability & Impact Committee.
/ ACTIVITIES
The Committee met twice during the year ended
31 December 2023 to review the balance of skills and
experience, the size and structure of the Board, and
succession planning.
The Committee led the recruitment process for a new
Non-Executive Director, working with an independent
external search consultant.
The Committee identified
and nominated Cecily Davis as a Non-executive Director,
for the approval of the Board. This is discussed in further
detail below.
In addition, the Committee considered proposals
submitted by external, independent consultants to lead
the external Board performance review. The Committee
opted to recommend Advanced Boardroom Excellence for
approval to the Board. Further information on the external
Board performance review process is included on page 94.
NOMINATION COMMITTEE
MEMBERS
NOMINATION COMMITTEE
MEETINGS ATTENDED /
REQUIRING ATTENDANCE
Chris Phillips (Chair)
2/2
Ian Reeves CBE
2/2
Cecily Davis*
1/1
Former Members
Paul Oliver**
1/1
Peter Coward***
1/1
*
Cecily Davis was appointed to the Board and the Nomination Committee with effect
from the conclusion of the Annual General Meeting on 23 May 2023.
**
Paul Oliver retired from the Board and stepped down as a member of the
Nomination Committee with effect from 30 June 2023.
***
Peter Coward stepped down as a member of the Nomination Committee with effect
from 23 May 2023.
CHRIS PHILLIPS, Nomination
Committee Chair
Governance
2023 Annual Report
|
103
The Committee also reviewed the time and significant
commitments of the Board and satisfied itself that the
Directors were able to commit sufficient time to discharge
their responsibilities effectively having given due
consideration of external appointments.
/
SUCCESSION PLANNING AND
RECRUITMENT
A key focus of the Nomination Committee during the
year was the continued implementation of a long-term
succession plan for the Board. Once a decision is made to
recruit an additional Director, under its Terms of Reference,
the Nomination Committee has the responsibility of
identifying and leading that process on behalf of the
Board. A formal role description is created, which is based
upon requirements identified from a review of the current
balance of experience and skills, as well as having due
regard to the benefits of diversity of gender, social and
ethnic backgrounds, cognitive and personal strengths.
The Committee is then responsible for engaging with
an independent external search consultant in order to
facilitate the search. In accordance with the Group’s
Diversity Policy, the Committee must engage with an
external search consultant that can commit to undertaking
an open and transparent process that includes potential
candidates from different social and ethnic backgrounds.
The Committee engaged with Nurole Ltd (“Nurole”) to
support in its recruitment process for the year ended
31 December 2023. Nurole provided a longlist of
candidates which was reviewed by the Committee to
create a shortlist. Interviews then took place with short-
listed candidates and selected Committee members, and
feedback was provided to the Committee. Following this
process, the Nomination Committee recommended Cecily
Davis to the Board for appointment as a Non-executive
Director. Cecily joined the Board with effect from the
conclusion of the Annual General Meeting on 23 May
2023 and following a handover period to allow Cecily to
settle into her role, Paul Oliver stepped down from the
Board with effect from 30 June 2023.
/
PERFORMANCE EVALUATION
Refer to the Corporate Governance section on pages 94
to 95 for further details on the performance evaluation.
/
RE-ELECTION OF DIRECTORS
The Board considers that the performance of each
Director continues to be effective and demonstrates
the commitment required to continue in their present
roles, and that each Director’s contribution continues to
be important to the Company’s long-term sustainable
success. This consideration is based on, amongst other
things, the business skills and industry experience of each
of the Directors (refer to the biographical details of each
Director as set out below), as well as their knowledge and
understanding of the Company’s business model.
The Board has also considered the other contributions
which individual Directors may make to the work of the
Board, with a view to ensuring that:
(i)
the Board maintains a diverse balance of skills,
knowledge, backgrounds and capabilities leading to
effective decision-making;
(ii)
each Director is able to commit the appropriate time
necessary to fulfilling their roles; and
(iii)
each Director provides constructive challenge,
strategic guidance, offers specialist advice and holds
third-party service providers to account.
All Directors will submit themselves for re-election on an
annual basis.
/
TENURE POLICY
The Board considers that the length of time each Director,
including the Chair, serves on the Board should not be
limited and has not set a finite tenure policy. Continuity,
self-examination and ability to do the job are the
relevant criteria on which the Board assesses a Director’s
independence. Length of service of current Directors and
future succession planning will be reviewed each year as
part of the Board evaluation process.
Governance
104
|
Triple Point Social Housing REIT plc
/ DIVERSITY
DIVERSITY AND INCLUSION POLICY
The Board has established and maintains a formal written diversity policy.
The Board’s objective is to maintain effective decision-making, including the impact of succession planning. The Board
recognises the benefits of all types of diversity and supports the recommendations of the Hampton-Alexander Review
and the Parker Review. All Board appointments will be made on merit, and promote diversity of gender, social and ethnic
backgrounds, cognitive and personal strengths, ensuring that such appointment will develop and enhance the operation
of the Board to best serve the Group’s strategy.
The Board recognises the importance of diversity in the boardroom which introduces different perspectives to the Board
debate and considers it to be in the interests of the Group and its shareholders to take into consideration diversity
criteria when appointing a new individual to the Board. In line with the Company’s succession plan, when undertaking the
appointment of a new Director, the Nomination Committee will instruct an external search consultancy to undertake an
open and transparent process that includes potential candidates from different social and ethnic backgrounds.
Members of the Board should collectively possess a diverse range of skills, expertise, industry knowledge and business.
The Board will continue to monitor diversity, taking such steps as it considers appropriate to maintain its position as a
meritocratic and diverse business.
FCA LISTING RULE DIVERSITY TARGETS
In accordance with the Listing Rules of the FCA, the Group is required to report on whether the following targets on board
diversity have been met, as at 31 December 2023: at least 40% of individuals on the board are women; at least one of the
senior board positions is held by a woman; and at least one individual on its board is from a minority ethnic background.
The following table sets out the gender and ethnic diversity of the Board as at 31 December 2023 in accordance with the
FCA’s Listing Rules, the disclosure of which in this Report having been approved by the Directors:
GENDER DIVERSITY
NUMBER OF BOARD
MEMBERS
PERCENTAGE OF THE
BOARD
NUMBER OF SENIOR
POSITIONS ON THE BOARD
31
Men
3
60
2
Women
2
40
–
Not specified/prefer not to say
–
–
–
ETHNIC DIVERSITY
White British or other White (including minority white groups)
4
80
2
Mixed/Multiple Ethnic Groups
–
–
–
Asian/Asian British
–
–
–
Black/African/Caribbean/Black British
1
20
–
Other ethnic group, including Arab
–
–
–
Not specified/prefer not to say
–
–
–
As at 31 December 2023, the Board had met two of the FCA’s targets with respect to diversity. In addition, following
the year end, Tracey Fletcher-Ray was appointed as the Senior Independent Director and succeeded Ian Reeves. The
appointment took effect from 7 March 2024 and means that the Board now meets all the FCA’s targets on board diversity.
We remain committed to pursuing the benefits of a diverse Board and will continue to make improvements in this regard.
As an investment company with solely independent, Non-executive Directors, the Group does not have a Chief Executive
or a Chief Financial Officer and has no employees. Accordingly, no disclosures regarding executive management
positions have been included.
Chris Phillips
Nomination Committee Chair
31. Senior positions include Chair and Senior Independent Director.
Governance
2023 Annual Report
|
105
Sustainability & Impact
Committee Report
/ RESPONSIBILITIES
The Sustainability & Impact Committee’s main function is
to oversee the development and implementation of the
Company’s ESG strategy, and the resultant impact on the
social value that the Company provides to the UK housing
market. The ESG strategy forms a key component of
our wider strategic initiatives and is central to delivering
sustainable value for our shareholders and providing good
homes to people with care and support needs throughout
the UK.
Our commitment to transparency can be seen through our
sustainability-related targets and ongoing disclosure of our
performance.
The Sustainability & Impact Committee’s Terms of
Reference can be found on the Group’s website at https://
/
COMMITTEE MEMBERSHIP
The Sustainability & Impact Committee is chaired by Ian
Reeves and comprises of three members.
/ ACTIVITIES
The Sustainability & Impact Committee was established
with effect from 23 May 2023, to reflect the Board’s
ongoing commitment to and focus on the Company’s ESG
strategy.
The Committee met twice during the period from
23 May 2023 to 31 December 2023, to review a proposal
to commence an eco-retrofit pilot project and to review a
proposed net-zero target.
ECO-RETROFIT PILOT PROJECT
As previously reported, by 2030 all socially rented
properties will require an Energy Performance Certificate
(“EPC”) rating of C or above. The Company is committed
to protecting the value of the Group’s properties, reducing
carbon emissions and supporting our lessees and the
individuals living in the properties within our portfolio. This
led the Committee to consider a proposal to commence a
pilot phase of an energy efficiency improvement initiative,
which would involve undertaking works on eleven of
the Group’s properties with EPC ratings ranging from D
to E, to upgrade these to C or above. The pilot project
will provide us with an invaluable learning opportunity
before we consider how to move forward with the wider
portfolio. The Committee therefore recommended its
commencement to the Board. Further information can be
found in the Investment Manager’s Report on page 41.
SUSTAINABILITY & IMPACT
COMMITTEE MEMBERS
SUSTAINABILITY & IMPACT
COMMITTEE MEETINGS
ATTENDED / REQUIRING
ATTENDANCE
Ian Reeves CBE (Chair)
2/2
Tracey Fletcher-Ray
2/2
Cecily Davis
2/2
IAN REEVES, Sustainability &
Impact Committee Chair
Governance
106
|
Triple Point Social Housing REIT plc
NET ZERO TARGET
The Committee considered and recommended to the
Board the proposal to commit the Company to reduce
portfolio emissions by 75% per m2 by 2035 from a
baseline year of 2021. This commitment reflects a science-
based target, which is rooted in climate science and
has been ratified by the Science Based Target Initiative
(SBTi) and follows a specific science-aligned pathway
for real estate assets. The Committee’s oversight will be
crucial to ensuring that the Company remains on track
to successfully meeting this target, and therefore future-
proofing the Group’s portfolio of properties. Further
information can be found in the Sustainability Report on
pages 50 to 68.
/
PERFORMANCE EVALUATION
Refer to the Corporate Governance section on pages 94
to 95 for further details on the performance evaluation.
/
KEY AREAS OF FOCUS FOR 2024
Looking ahead to 2024, the Sustainability & Impact
Committee will:
•
continue to oversee the development and
embedding of the ESG strategy with regular reviews
of sustainability targets and performance against
sustainability-related objectives;
•
oversee the ongoing commitment to reduce
portfolio emissions by 75% per m2 by 2035 from a
baseline year of 2021;
•
r
eview progress with the eco-retrofit pilot
programme and any learnings following its
completion; and
•
oversee and develop our reporting against TCFD
requirements, to ensure our disclosures are
transparent and clearly demonstrate sustainability
outcomes for the Company.
Ian Reeves CBE
Sustainability & Impact Committee Chair
Governance
2023 Annual Report
|
107
/
ANNUAL STATEMENT
Dear Shareholder,
I am pleased to present the Directors’ Remuneration
Report on behalf of the Board for the year ended
31 December 2023. It is set out in two sections in line
with legislative reporting regulations:
•
Directors’ Remuneration Policy (on pages 109 to
110) – This sets out our Remuneration Policy for
Directors of the Company and will be subject to a
binding shareholder vote at the Company’s 2024
AGM.
•
Annual Report on Directors’ Remuneration (on
pages 111 to 113) – This sets out how the Directors
were paid for the year ended 31 December 2023.
There will be an advisory shareholder vote on this
section of the report at our 2024 AGM.
Prior to our IPO in August 2017, the Group introduced
a remuneration framework to ensure that remuneration
was aligned with best market practice whilst attracting
and securing the right non-executive Directors to deliver
our investment objectives.
The scale and structure of the Directors’ remuneration
was determined by the Company in consultation with
the Group’s Financial Adviser, having been benchmarked
against companies of a similar size in the sector and
having regard to the time commitment and expected
contribution to the role.
The Group does not have any executive Directors or
employees, and, as a result, operates a simple and
transparent remuneration policy with no variable
element that reflects the non-executive Directors’ duties,
responsibilities and time spent.
DIRECTORS’ REMUNERATION POLICY
The current remuneration policy was approved by
shareholders at the Company’s AGM held on 14 May
2021 with such approval expiring at the upcoming AGM.
In accordance with section 439A of the Companies Act
2006, the Board will seek shareholder approval for the
Directors’ Remuneration Policy at the AGM scheduled
for 16 May 2024. If approved, the Remuneration Policy
will take effect from the conclusion of the AGM for a
three-year period.
The policy is set out on pages 109 to 110 and remains
unchanged from the policy that was approved at the
2021 AGM.
DISCRETION EXERCISED UNDER THE
DIRECTORS’ REMUNERATION POLICY
At the date of this report, no discretion is intended to be
exercised under the Directors’ Remuneration Policy.
We value engagement with our shareholders and
appreciate the constructive feedback we receive and we
look forward to your support at the forthcoming AGM.
Chris Phillips
Chair
Directors’
Remuneration Report
Governance
108
|
Triple Point Social Housing REIT plc
/
APPROVAL OF REMUNERATION POLICY
Our Directors’ Remuneration Policy was last approved by shareholders at the Annual General Meeting of the Group
held on 14 May 2021 and became effective from the conclusion of that Annual General Meeting. In accordance
with section 439A of the Companies Act 2006, a resolution to approve this Directors’ Remuneration Policy will be
proposed at the Annual General Meeting of the Group to be held on 16 May 2024. If the resolution is passed, the
provisions of the policy will apply until they are next put to shareholders for renewal of that approval, which must be
at intervals of not more than three years, or if the Remuneration Policy is varied, in which event shareholder approval
for the new Remuneration Policy will be sought.
The policy applies to the non-executive Directors; the Company has no executive Directors or employees.
/
REMUNERATION POLICY OVERVIEW
The Group’s objective is to have a simple and transparent remuneration structure, aligned with the Group’s strategy.
The Group aims to provide remuneration packages with no variable element which will retain non-executive Directors
with the skills and experience necessary to maximise shareholder value on a long-term basis. The remuneration
packages for the recruitment of non-executive Directors will be set with reference to the remuneration packages of
comparable businesses.
/
POLICY TABLE
The Directors are entitled only to the fees as set out in the table below from the date of their appointment. No
element of Directors’ remuneration is subject to performance factors.
COMPONENT
OPERATION
LINK TO STRATEGY
Annual Fee
Each Director receives a basic fee which is paid on a monthly
basis.
The total aggregate fees that can be paid to the Directors in
any given financial year will be calculated in accordance with the
Company’s Articles of Association.
The level of the annual fee has been set to attract and
retain high calibre Directors with the skills and experience
necessary for the role.
The fee has been benchmarked against companies of
a similar size in the sector, having regard to the time
commitment and expected contribution to the role.
Additional Fees
The Directors are each entitled to an additional fee of £7,500
in connection with the production of every prospectus by the
Group.
A Director who performs services, which in the opinion of the
Board are outside the scope of the ordinary duties of a non-
executive director, may also be paid such extra remuneration or
may receive such other benefits as the Board may determine.
The additional fee in connection with the production of
every prospectus has been included in recognition of the
additional time commitment and contribution required in the
preparation of a prospectus by the Company.
The additional fee for services outside of the scope of
ordinary duties offers flexibilities for a Director to be awarded
additional remuneration to adequately compensate a
Director where this is considered appropriate for the effective
functioning of, or in furtherance of, the Company’s aims.
Directors’
Remuneration Policy
Governance
2023 Annual Report
|
109
COMPONENT
OPERATION
LINK TO STRATEGY
Other benefits
Article 18.5 of the Company’s Articles of Association permits
for any Director to be repaid expenses incurred in attending
or returning from meetings of the Board, Board Committee
meetings or shareholder meetings or otherwise in connection
with the performance of their duties as Directors of the
Company.
The Board has the power to pay and agree to pay gratuities,
pensions or other retirement, superannuation, death or disability
benefits to (or to any person in respect of) any Director or ex-
Director and for the purpose of providing any such gratuities,
pensions or other benefits to contribute to any scheme or fund
or to pay premiums.
In line with market practice, the Company will reimburse the
Directors for expenses to ensure that they are able to carry
out their duties effectively.
The Directors do not currently receive any additional
benefits; however the Board has included the power to offer
the additional benefits as specified to create flexibility in the
approach to retain or attract high calibre Board members.
/
SERVICE CONTRACTS
The Directors are engaged under letters of appointment and do not have service contracts with the Company.
/
DIRECTORS’ TERM OF OFFICE
Under the terms of the Directors’ letters of appointment, each directorship is for an initial period of 12 months and
thereafter terminable on three months’ written notice by either the Director or the Company. Each Director will be
subject to annual re-election by shareholders at the Company’s Annual General Meeting in each financial year.
/
POLICY ON PAYMENT FOR LOSS OF OFFICE
The Directors are entitled to payment of the fees as specified above, notwithstanding termination of their
appointment, for the initial period of 12 months from the date of their appointment. Thereafter, there is no
compensation payable upon termination of office as a Director of the Company.
/
CONSIDERATION OF SHAREHOLDER VIEWS
The Company is committed to ongoing shareholder dialogue and takes an active interest in voting outcomes. Where
there are substantial votes against resolutions in relation to Directors’ remuneration, the Company will seek the
reasons for any such vote and will detail any resulting actions in the Directors’ Remuneration Report.
Governance
110
|
Triple Point Social Housing REIT plc
/
CONSIDERATION OF REMUNERATION MATTERS
The Board does not consider it necessary to establish a separate remuneration committee as it has no executive
Directors. The Board as a whole considers the remuneration of the Directors.
/
SINGLE TOTAL FIGURE (AUDITED TABLE)
NON-EXECUTIVE
DIRECTORS
ANNUAL
FEE
*
ADDITIONAL
FEE
†
OTHER
TAXABLE
BENEFITS
‡
TOTAL
2023
2022
2021
2020
2019
TOTAL
% ANNUAL
CHANGE
TOTAL
%
ANNUAL
CHANGE
TOTAL
%
ANNUAL
CHANGE
#
TOTAL
%
ANNUAL
CHANGE
Chris Phillips
£75,000
–
–
£75,000
£75,000
0%
£75,000
0%
£82,500
10%
£75,000
0%
Ian Reeves CBE
£50,000
–
–
£50,000
£50,000
0%
£50,000
0%
£57,500
15%
£50,000
0%
Peter Coward
£50,000
–
–
£50,000
£50,000
0%
£50,000
0%
£57,500
15%
£50,000
0%
Cecily Davis
§
£30,513
–
–
£30,513
–
N/A
–
N/A
–
N/A
–
N/A
Tracey Fletcher-Ray
£50,000
–
–
£50,000
£50,000
0%
£50,000
0%
£57,500
0%
£50,000
0%
Former Non-Executive Directors
Paul Oliver
¶
£25,000
–
–
£25,000
£50,000
0%
£50,000
0%
£57,500
15%
£50,000
0%
*
The Directors are paid a fixed annual fee. The fees do not have any variable or performance related elements; however, the Directors are entitled to an additional fee of £7,500
in connection with the production of every prospectus prepared with a fundraising by the Group. Refer to Directors’ Fees section below.
†
The Directors received no additional fees for the year ended 31 December 2023.
‡
The Company does not provide a pension, retirement or similar benefits.
§
Cecily Davis was appointed to the Board with effect from the conclusion of the Annual General Meeting on 23 May 2023.
¶
Paul Oliver retired from the Board with effect from 30 June 2023.
#
% Change in fee is in relation to additional fees for the prospectus in 2020 at £7,500 per Director.
/
DIRECTORS’ FEES
The Directors are each paid an annual fee of £50,000 other than the Chair who is entitled to receive an annual fee
of £75,000. In addition to the annual fee, each Director is entitled to an additional fee of £7,500 in connection with
the production of every prospectus prepared with a fundraising by the Group in recognition of the additional time
contribution and commitment required. Any Director who performs services, which in the opinion of the Board are
outside the scope of the ordinary duties of a non-executive director, may also be paid such extra remuneration or
may receive such other benefits as the Board may determine. The additional fees are treated as a cost of issue not
included as an expense through the Statement of Comprehensive Income. Directors are further entitled to recover all
reasonable expenses properly incurred in connection with performing their duties as a Director. Directors’ expenses
for the year ended 31 December 2023 totalled £2,960 (31 December 2022: £3,238). No other remuneration was paid
or payable during the year to any Director.
Annual Report on
Directors’ Remuneration
Governance
2023 Annual Report
|
111
/
STATEMENT OF DIRECTORS’ SHAREHOLDING AND SHARE INTERESTS
(AUDITED TABLE)
Outlined are details of the Directors’ shareholdings as at 31 December 2023.
The Directors are not required to hold any shares of the Company by way of qualification. A Director who is not a
shareholder of the Company shall nevertheless be entitled to attend and speak at shareholders’ meetings.
DIRECTOR
NUMBER OF SHARES HELD AS
AT 31 DECEMBER 2022
NUMBER OF SHARES HELD AS
AT 31 DECEMBER 2023
PERCENTAGE OF ISSUED
SHARE CAPITAL AS AT
31 DECEMBER 2023
Chris Phillips
54,854*
54,854*
0.01%
Ian Reeves CBE
–
–
–
Peter Coward
79,263**
80,076**
0.02%
Cecily Davis
–
–
–
Tracey Fletcher-Ray
37,735
37,735
0.01%
Former Director
Paul Oliver***
77,967
77,967
0.02%
*
25,000 Ordinary Shares were subscribed through Chris Phillip’s self-invested personal pension with the balance subscribed by Centaurea Investments Limited.
** 55,076 Ordinary Shares were subscribed through Peter Coward’s self-invested personal pension.
*** Paul Oliver retired from the Board with effect from 30 June 2023.
/
TOTAL SHAREHOLDER RETURN
The graph below illustrates the total shareholder return of the Company’s Ordinary Shares over the period relative to
a return on a hypothetical holding over the same period in the FTSE All-Share Index and the FTSE EPRA/NAREIT UK
Index. These indices have been chosen as they are considered to be the most appropriate benchmarks against which
to assess the relative performance of the Company as the FTSE All Share represents companies of a similar capital
size, and the constituents of the FTSE EPRA/NAREIT UK Index are UK based real estate companies.
-50.0%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
07/08/2017
07/10/2017
07/12/2017
07/02/2018
07/04/2018
07/06/2018
07/08/2018
07/10/2018
07/12/2018
07/02/2019
07/04/2019
07/06/2019
07/08/2019
07/10/2019
07/12/2019
07/02/2020
07/04/2020
07/06/2020
07/08/2020
07/10/2020
07/12/2020
07/02/2021
07/04/2021
07/06/2021
07/08/2021
07/10/2021
07/12/2021
07/02/2022
07/04/2022
07/06/2022
07/08/2022
07/10/2022
07/12/2022
07/02/2023
07/04/2023
07/06/2023
07/08/2023
07/10/2023
07/12/2023
SOHO Total Shareholder Return
FTSE EPRA Nareit UK - TOTAL RETURN
FTSE ALL SHARE - TOTAL RETURN
Governance
112
|
Triple Point Social Housing REIT plc
/
RELATIVE IMPORTANCE OF SPEND ON PAY
The table below shows the total spend on remuneration compared to the distributions to shareholders by way of
dividends, share buybacks and the management fees incurred by the Company. As the Group has no employees the
total spend on remuneration comprises only the Directors’ fees.
2023
2022
Directors’ fees
£280,513
£275,000
Dividends paid
£21,622,131
£21,730,467
Share buybacks
£5,010,038
–
Management fee
£4,650,566
£4,704,319
/
CONSIDERATION OF SHAREHOLDER VIEWS
During the year, the Company did not receive any communications from shareholders specifically regarding
Directors’ pay.
The resolution to approve the Directors’ Remuneration Report (excluding the Directors’ Remuneration Policy) was
passed at the Annual General Meeting on 23 May 2023. The resolution to approve the Directors’ Remuneration
Policy was passed on a poll at the Annual General Meeting on 14 May 2021.
DIRECTOR
VOTING FOR
VOTING AGAINST
VOTES WITHHELD
Remuneration Report (approved at
AGM on 23 May 2023)
95.62%
4.38%
94,031
Remuneration Policy (approved at
AGM on 14 May 2021)
97.87%
2.13%
504,233
On behalf of the Board:
Chris Phillips
Chair
7 March 2024
Governance
2023 Annual Report
|
113
The Directors are pleased to present the annual report,
including the Group’s and Company’s audited financial
statements as at, and for the year ended 31 December
2023.
The information that fulfils the requirements of the
Corporate Governance statement in accordance with
rule 7.2 of the DTR can be found in this Directors’ report
and in the Governance section on pages 86 to 119 all
of which is incorporated into this Directors’ report by
reference.
/
PRINCIPAL ACTIVITY
The Company is a closed-ended investment company
and is a Real Estate Investment Trust which was
incorporated in England and Wales on 12 June 2017.
The Company is a holding company of a number
of subsidiaries. The Group invests in properties in
accordance with the investment policy and Investment
Objective.
/ DIRECTORS
The names of the current serving Directors are set out
in the Board of Directors section on pages 88 to 89,
together with their biographical details and principal
external appointments. Paul Oliver also served as a
director during the year and retired from the Board with
effect from 30 June 2023.
The Articles govern the appointment and replacements
of Directors.
/
AIFM AND INVESTMENT
MANAGER
The names of the partners and employees of the Group’s
AIFM and Investment Manager are set out on page 31
and a summary of the principal contents of the AIFM
agreement and the Investment Management Agreement
are set out in the management engagement committee
report on page 102.
/
FINANCIAL RESULTS AND DIVIDENDS
The financial results for the year can be found in the Group Statement of Comprehensive Income which can be found
on page 132. In line with the target for the financial year, the Company declared the following interim dividends in
respect of the year to 31 December 2023, amounting to 5.46 pence per share.
RELEVANT PERIOD
DIVIDEND
PER SHARE (P)
EX DIVIDEND
DATE
RECORD
DATE
PAYMENT
DATE
1 January to 31 March 2023
1.365
8 June 2023
9 June 2023
30 June 2023
1 April to 30 June 2023
1.365
14 September 2023
15 September 2023
29 September 2023
1 July to 30 September 2023
1.365
30 November 2023
1 December 2023
15 December 2023
1 October to 31 December 2023
1.365
14 March 2024
15 March 2024
On or around
29 March 2024
Directors’
Report
Governance
114
|
Triple Point Social Housing REIT plc
/
POWERS OF THE DIRECTORS
The powers given to the Directors are contained within
the current articles of association of the Company (the
’Articles’), are subject to relevant legislation and, in
certain circumstances (including in relation to the issuing
or buying back by the Company of its shares), are
subject to the authority being given to the Directors by
shareholders in general meetings.
The Articles govern the appointment and replacements
of Directors.
/
DIRECTORS’ INDEMNITY
The Group has indemnified the Directors against certain
liabilities which may be incurred in the course of their
duties. This indemnity remains in force as at the date of
this report and will also indemnify any new directors that
join the Board. The Company maintains directors’ and
officers’ liability insurance which gives appropriate cover
for legal action brought against the Directors.
/
FINANCIAL RISK MANAGEMENT
The information relating to the Group’s financial risk
management and policies can be found in Note 33 of
the financial statements.
/
POST-BALANCE SHEET EVENTS
Important events that have occurred since the end of the
financial year can be found in Note 34 of the financial
statements.
/
AMENDMENT TO THE ARTICLES
The Articles may only be amended with shareholders’
approval in accordance with relevant legislation.
/
SHARE CAPITAL
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 migrated to
trading on the premium segment of the Main Market on
27 March 2018.
As at 31 December 2023, the Company had 393,916,490
Ordinary Shares in issue, 450,000 of which were held
in treasury, as can be found in Notes 22 and 24 of the
financial statements. The shares held in treasury do not
carry any voting rights and therefore the total number
of voting rights in the Company is 393,466,490. There
are no restrictions on voting rights of securities in the
Company.
There are no restrictions on the transfer of securities in
the Company other than certain restrictions which may
be impaired by law, for example, the Market Abuse
Regulations, and the Group’s Share Dealing Code.
The Company is not aware of any agreements between
holders of securities that may result in restrictions on
transferring securities in the Company. There are no
securities of the Company carrying special rights with
regards to the control of the Company in issue.
As a REIT, the Company’s Ordinary Shares will be
’excluded securities’ under the FCA’s rules on non-
mainstream pooled investments. Accordingly, the
promotion of the Ordinary Shares will not be subject
to the FCA’s restriction on the promotion of non-
mainstream pooled investments.
/
PURCHASE OF OWN ORDINARY
SHARES
At the Company’s Annual General Meeting on 23 May
2023, the Company was granted authority to make
market purchases up to a maximum of 40,278,900
Ordinary Shares.
As at the date of this report, 450,000 Ordinary Shares
were purchased during 2019 in the market and held in
treasury and 9,322,512 Ordinary Shares were purchased
during 2023 in the market and cancelled. A resolution
to renew the Company’s authority to purchase shares
in accordance with the Notice of AGM will be put to
the shareholders at the Annual General Meeting on
16 May 2024.
Governance
2023 Annual Report
|
115
/
CHANGE OF CONTROL
Under the Group’s financing facilities, any change of
control at the borrower or immediate parent company
level may trigger a repayment of the outstanding
amounts to the lending banks. In certain facilities, the
change of control provisions also include a change of
control at the ultimate parent company level.
The Directors do not receive compensation for loss of
office occurring due to a change of control.
/
GREENHOUSE GAS EMISSIONS,
ENERGY CONSUMPTION AND
ENERGY EFFICIENCY
The Board is cognisant of the impact of the Group’s
operations on emissions. In supporting the construction
of new build properties, we hope to encourage best
practice to help reduce the industry’s impact on
emissions and the consumption of depleting resources.
The Group voluntarily discloses Scope 3 property
emissions within the sustainability report, further
information on page 51.
In relation to the Streamlined Energy and Carbon
Reporting (SECR), implemented by The Companies
(Directors’ Report) and Limited Liability Partnerships
(Energy and Carbon Report) Regulations 2018, for the
year ended 31 December 2023 the Group is considered
to be a low energy user, (<40,000kWh) and therefore
falls below the threshold to produce an energy and
carbon report.
/
MAJOR SHAREHOLDINGS
In accordance with DTR 5, the Company was advised of the following significant direct and indirect interests in the
issued ordinary share capital of the Company as at 31 December 2023.
SHAREHOLDER
INTERESTS IN ORDINARY SHARES
% HOLDING DISCLOSED
East Riding of Yorkshire Council
32,879,797
9.36%
Investec Wealth & Investment Limited
28,892,160
8.22%
Nottinghamshire County Council Pension Fund
19,417,475
5.53%
Close Asset Management Limited
9,987,644
4.99%
Evelyn Partners Group Limited
19,892,781
4.93%
Brewin Dolphin Limited
16,032,858
4.56%
Evelyn Partners Investment Management
Services Limited
14,054,009
3.99%
South Yorkshire Pensions Authority
11,955,713
3.40%
Legal & General Group Plc (Group)
12,227,217
3.03%
Information provided to the Company pursuant to DTR 5 is available via the Regulatory News section on the Group’s
website.
Governance
116
|
Triple Point Social Housing REIT plc
/
CONTRACTS OF SIGNIFICANCE
There are no contracts of significance of the Company
or a subsidiary in which a Director is or was materially
interested or to which a controlling shareholder was a
party.
/
DISCLOSURE OF INFORMATION
TO THE AUDITORS
So far as the Directors are aware, there is no relevant
audit information of which the auditor is unaware.
The Directors have taken all the steps that they ought
to have taken as Directors to make themselves aware of
any relevant audit information and to establish that the
auditor is aware of that information.
/
RELATED PARTY TRANSACTIONS
Related Party transactions during the year ended
31 December 2023 can be found in Note 31 of the
financial statements.
/
RESEARCH AND DEVELOPMENT
No expenditure on research and development was made
during the year (2022: Nil).
/
DONATIONS AND
CONTRIBUTIONS
No political or charitable donations were made during
the year (2022: Nil).
/
BRANCHES OUTSIDE THE UK
There are no branches of the business located outside
the UK.
/
ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will
be held on 16 May 2024 at 10.00am at Hill House,
1 Little New Street, London, EC4A 3TR.
/
INFORMATION INCLUDED IN
THE STRATEGIC REPORT
The information that fulfils the reporting requirements
relating to the following matters can be found on the
pages identified.
SUBJECT MATTER
PAGE REFERENCE
Likely future developments
17 to 21
Employee engagement
58 to 59
Employment of disabled persons
58 to 59
Business relationships
58 to 59
On behalf of the Board:
Chris Phillips
Chair
7 March 2024
Governance
2023 Annual Report
|
117
The Directors are responsible for preparing the annual
report and the financial statements in accordance with
UK adopted international accounting standards and
applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year.
Under that law the
Directors are required to prepare the Group financial
statements in accordance with UK adopted international
accounting standards and have elected to prepare the
Company financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards and applicable
law). Under company law the directors must not approve
the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of
the Group and Company and of the profit or loss for the
Group for that period.
In preparing these financial statements, the directors are
required to:
•
select suitable accounting policies and then apply
them consistently;
•
make judgements and accounting estimates that are
reasonable and prudent;
•
state whether they have been prepared in
accordance with UK adopted international
accounting standards, subject to any material
departures disclosed and explained in the financial
statements;
•
prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the Group and the Company will continue in
business; and
•
prepare a Directors’ report, a strategic report and
Directors’ remuneration report which comply with
the requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position
of the Company and enable them to ensure that the
financial statements comply with the Companies
Act 2006.
They are also responsible for safeguarding the assets
of the Company and hence for taking reasonable steps
for the prevention and detection of fraud and other
irregularities. The Directors are responsible for ensuring
that the annual report and accounts, taken as a whole,
are fair, balanced, and understandable and provides
the information necessary for shareholders to assess the
Group’s performance, business model and strategy.
/
WEBSITE PUBLICATION
The Directors are responsible for ensuring the annual
report and the financial statements are made available
on a website. Financial statements are published on
the Company’s website in accordance with legislation
in the United Kingdom governing the preparation
and dissemination of financial statements, which
may vary from legislation in other jurisdictions. The
maintenance and integrity of the Company’s website
is the responsibility of the Directors. The Directors’
responsibility also extends to the ongoing integrity of
the financial statements contained therein.
/
DIRECTORS’ RESPONSIBILITIES
PURSUANT TO DTR4
The Directors confirm to the best of their knowledge:
•
The financial statements have been prepared in
accordance with the applicable set of accounting
standards, give a true and fair view of the assets,
liabilities, financial position and profit and loss of
the Group.
•
The Annual Report includes a fair review of the
development and performance of the business and
the financial position of the Group and Company,
together with a description of the principal risks and
uncertainties that they face.
The Directors also confirm, to the best of their
knowledge, that the Annual Report and Accounts, taken
as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to
assess the Group’s performance, business model and
strategy.
Directors’
Responsibilities Statement
Governance
118
|
Triple Point Social Housing REIT plc
/ APPROVAL
This Directors’ responsibilities statement was approved by the Board of Directors and signed on its behalf by:
Chris Phillips
Chair
7 March 2024
Governance
2023 Annual Report
|
119
/
OPINION ON THE FINANCIAL STATEMENTS
In our opinion:
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs
as at 31 December 2023 and of the Group’s profit for the year then ended;
•
the Group financial statements have been properly prepared in accordance with UK adopted international
accounting standards;
•
the Parent Company financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Triple Point Social Housing REIT plc (the ‘Parent Company’) and
its subsidiaries (the ‘Group’) for the year ended 31 December 2023 which comprise the Group Statement of
Comprehensive Income, the Group and Company Statements of Financial Position, the Group and Company
Statements of Changes in Equity, the Group Statement of Cash Flows and notes to the financial statements,
including a summary of material accounting policies. The financial reporting framework that has been applied in the
preparation of the Group financial statements is applicable law and UK adopted international accounting standards.
The financial reporting framework that has been applied in the preparation of the Parent Company financial
statements is United Kingdom Accounting Standards including Financial Reporting Standard 101 Reduced Disclosure
Framework (United Kingdom Generally Accepted Accounting Practice).
/
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion. Our audit opinion is consistent with the additional report to the Audit Committee.
INDEPENDENCE
Following the recommendation of the Audit Committee, we were appointed by the Directors on 18 July 2017 to
audit the financial statements for the year ended 31 December 2017 and subsequent financial periods. Following
a competitive re-tender in May 2019 we were reappointed to audit the financial statements for the year ended
31 December 2019 and subsequent financial periods. The period of total uninterrupted engagement including
retenders and reappointments is seven years, covering the years ended 31 December 2017 to 31 December 2023.
We remain independent of the Group and the Parent Company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed
public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by that standard were not provided to the Group or the Parent Company.
Independent
Auditor’s Report
/
TO THE MEMBERS OF TRIPLE POINT SOCIAL HOUSING REIT PLC
Governance
120
|
Triple Point Social Housing REIT plc
/
CONCLUSIONS RELATING TO GOING CONCERN
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment
of the Group and the Parent Company’s ability to continue to adopt the going concern basis of accounting included:
•
Using our knowledge of the Group and its relevant market sector together with current general economic
environment to assess the Directors’ identification of the inherent risks to the Group’s and the Parent Company’s
business and how these might impact the Group’s and the Parent Company’s ability to remain a going concern
during the going concern period which is at least 12 months from when the financial statements are authorised
for issue.
•
Obtaining the going concern model from the Directors, and challenging the assumptions used by the Directors
in the going concern forecast. This included assumptions around expected capital expenditures, the movements
in investment property valuations, movements in the Group’s level of borrowings and the associated interest,
rental income increases and the level of cash collections. We obtained evidence, where available, to support
inputs into the model.
•
Testing the arithmetical accuracy of the going concern model.
•
Challenging the sensitivities applied by the Directors to the model, including a fall in revenue in the event
lessees are unable to meet rent payments in relation to vacant units, as well as a corresponding fall in property
valuations. We challenged assumptions made by the Directors on these stress-tested models, specifically with
regards to:
i.
The
expected impact on investment property valuations;
ii.
The expected impact on rental income;
iii. The expected void period before suitable alternative tenants could be found;
iv. The impact on the Group’s covenant compliance; and
v. The reasonab
leness of the assumptions used in the stress test.
•
Performing an analysis of the headroom of the Group’s ability to meet their day to day operational costs in the
stress tested forecasts.
•
Performing an analysis of the covenant compliance and the headroom and considered these in light of our own
further stress tests.
•
Considering board minutes, and evidence obtained through the audit and challenging the Directors on the
identification of any contradictory information in the forecasts and the resultant impact to the going concern
assessment.
•
Reviewing the post year end rent receipts for trade debtors as at 31 December 2023 to assess the financial
position of tenants.
Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the Group and the Parent Company’s
ability to continue as a going concern for a period of at least twelve months from when the financial statements are
authorised for issue.
In relation to the Parent Company’s reporting on how it has applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to the Directors’ statement in the financial statements about
whether the Directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the
relevant sections of this report.
Governance
2023 Annual Report
|
121
*These are areas which have been subject to a full scope audit by the Group engagement team.
/ OVERVIEW
COVERAGE*
100% (2022: 100%) of Group revenue
100% (2022: 100%) of Group investment property
99.9% (2022: 99.9%) of Group total assets
100% (2022: 99.8%) of Group profit before tax
KEY AUDIT MATTERS
2023
2022
Investment property valuations
MATERIALITY
Group financial statements as a whole
£7,130,000 (2022: £7,060,000) based on 1% (2022: 1%) of total assets.
/
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s
system of internal control, and assessing the risks of material misstatement in the financial statements. We also
addressed the risk of management override of internal controls, including assessing whether there was evidence of
bias by the Directors that may have represented a risk of material misstatement.
The Group operates solely in the United Kingdom, and all audit procedures were performed by the Group audit
team.
We identified four significant components, in addition to the Parent Company:
•
Norland Estates Limited
•
TP REIT Propco 2 Limited
•
TP REIT Propco 3 Limited
•
TP REIT Propco 4 Limited
All
significant components were subject to full scope audits. Audit work on the remaining components in the Group
were undertaken subject to Group materiality. Material balances and significant risk areas were tested substantively
and through analytical procedures.
Governance
122
|
Triple Point Social Housing REIT plc
KEY AUDIT MATTERS
Key
audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
KEY AUDIT MATTER
HOW THE SCOPE OF OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
Investment
property valuations
Refer to notes 3.1
and 4.1 in relation to
significant estimates
and accounting
policies.
Refer to note
14 in relation
to investment
properties.
The Group’s investment property portfolio
is made up of standing assets that are
existing properties currently let. They are
valued using the income capitalisation
method. This method is applied to income
producing assets and discounts the future
value of rents by an appropriate discount
rate.
The Directors use an independent valuer
to assist them with the valuation of the
property portfolio. The valuation of
investment property requires significant
judgement and estimates by the Directors
and the independent valuer and is
therefore considered a significant risk
due to the subjective nature of certain
assumptions inherent in each valuation.
Any input inaccuracies or unreasonable
bases used in the valuation judgements
(such as in respect of yield profile applied)
could result in a material misstatement of
the financial statements.
There is also a risk that the Directors may
influence the significant judgements and
estimates in respect of property valuations
in order to achieve property valuation and
other performance targets to meet market
expectations. This could be achieved
through manipulation of information
provided to the valuer.
For these reasons we considered the
investment property valuations to be a key
audit matter.
We obtained the valuation report prepared for the Directors by the
independent valuer and discussed the basis of the valuations with the
independent valuer. We checked that the basis of the valuations was in
accordance with the requirements of the relevant accounting standards.
We assessed the external valuer’s qualifications, independence and objectivity.
We obtained a copy of the instructions provided by the Investment Manager
to the independent valuer and reviewed for any limitations in scope or for
evidence of management bias.
We checked the underlying data provided by the Investment Manager to the
independent valuer. This data included inputs such as current rent and lease
term, which we agreed to the executed lease agreements as part of our audit
work.
We developed yield expectations on all properties in the Group’s portfolio
using available independent industry data and reports around the year end.
This was undertaken with the assistance of our internal valuation experts.
Alongside our internal valuation experts we discussed the assumptions used
and the valuation movement in the year with both the Investment Manager
and the independent valuer. Where the assumptions used or valuation
movement was outside of our expected range we discussed with the
independent valuer specific assumptions and reasoning for the yields applied
and corroborated their explanations where relevant. We also discussed
with the independent valuer their views on the impact on the valuations
of all Approved Providers having received non-compliant ratings from the
regulators. We compared their responses against our own expectations based
on our sector knowledge and through inspection of comparable market data.
We reviewed the appropriateness of the Group’s disclosures within the
financial statements in relation to the valuation methodology, key valuation
assumptions and valuation sensitivity analysis.
Key observations:
Our testing indicated that the estimates and assumptions used in the
investment property valuations were appropriate in the context of the Group’s
property portfolio.
Governance
2023 Annual Report
|
123
/
OUR APPLICATION OF MATERIALITY
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could
influence the economic decisions of reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we
use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly,
misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the
nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect
on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and
performance materiality as follows:
GROUP FINANCIAL STATEMENTS
PARENT COMPANY FINANCIAL
STATEMENTS
2023
£M
2022
£M
2023
£M
2022
£M
MATERIALITY
7.13
7.06
4.09
4.14
BASIS FOR DETERMINING MATERIALITY
1.0% of total assets
1.0% of total assets
0.9% of total assets
1.0% of total assets
RATIONALE FOR THE BENCHMARK APPLIED
We determined that total assets would be the most appropriate basis for determining overall
materiality as we consider it to be one of the principal considerations for the users of the
financial statements in assessing the financial performance of the Group and Parent Company.
Parent Company materiality was based on total assets at year end before consideration of the
reversal of investment impairment.
PERFORMANCE MATERIALITY
5.35
4.94
3.07
2.90
BASIS FOR DETERMINING PERFORMANCE
MATERIALITY
On the basis of our risk assessment, together with our assessment of the Group’s and Parent
Company’s overall control environment, our judgement was that performance materiality should
be 75% (2022: 70%) of materiality.
RATIONALE FOR THE PERCENTAGE APPLIED
FOR PERFORMANCE MATERIALITY
We determined performance materiality based on our risk assessment, together with our
assessment of the Group’s and Parent Company’s overall control environment, the small number
of components, the low level of brought forward adjustments impacting the current year, low
value of expected misstatements and the Investment Manager’s open consideration to adjusting
for misstatements raised.
SPECIFIC MATERIALITY
We also determined that for other account balances, classes of transactions and disclosures not related to investment
properties, that specifically impact the measurement of EPRA earnings, a misstatement of less than materiality for
the financial statements as a whole, specific materiality, could influence the economic decisions of users. As a result,
we determined that specific materiality for these areas should be £975,000 (2022: £962,000). This was set at 5%
(2022: 5%) of European Public Real Estate Association (“EPRA”) earnings. EPRA earnings excludes the impact of
the net surplus on revaluation of investment properties. Those items which may affect EPRA earnings include rental
income, expected credit loss, directors’ remuneration, general and administrative expenses, management fees,
finance income and finance costs. We further applied a performance materiality level of 75% (2022: 70%) of specific
materiality to ensure that the risk of errors exceeding specific materiality was appropriately mitigated. The specific
materiality for the Parent Company was capped at 65% (2022: 65%) of Group specific materiality being £634,000
(2022: £625,000).
Governance
124
|
Triple Point Social Housing REIT plc
COMPONENT MATERIALITY
For the purposes of our Group audit opinion, we set materiality for each significant component of the Group, apart
from the Parent Company whose materiality is set out above, based on a percentage of 1% (2022: 1%) of total assets of
each component after considering the size and our assessment of the risk of material misstatement of that component.
Component materiality ranged from £1,520,000 to £4,860,000 (2022: £1,600,000 to £4,810,000). Consistent with the
Group, we also used specific materiality set at 5% (2022: 5%) of EPRA earnings to test other account balances, classes
of transactions and disclosures not related to investment properties, that specifically impact the measurement of EPRA
earnings. Component specific materiality ranged from £265,000 to £634,000 (2022: £180,000 to £716,000). In the audit
of each component, we further applied performance materiality levels of 75% (2022: 70%) of the component materiality
to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.
REPORTING THRESHOLD
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of
£356,000 (2022: £353,000) for items audited to financial statement materiality, and £48,000 (2022: £48,000) for
items audited to specific materiality. We also agreed to report differences below these thresholds that, in our view,
warranted reporting on qualitative grounds.
We agreed that the reporting threshold for the Parent Company would be £204,000 (2022: £207,000) for items
audited to financial statement materiality, and £31,000 (2022: £31,200) for items audited to specific materiality.
/
OTHER INFORMATION
The Directors are responsible for the other information. The other information comprises the information included in
the Annual Report other than the financial statements and our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report,
we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a
material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Governance
2023 Annual Report
|
125
/
CORPORATE GOVERNANCE STATEMENT
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and
that part of the Corporate Governance Statement relating to the Parent Company’s compliance with the provisions of
the UK Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained
during the audit.
GOING CONCERN
AND LONGER-TERM
VIABILITY
• The Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and
any material uncertainties identified set out on pages
80 to 81; and
• The Directors’ explanation as to their assessment of the Group’s prospects, the period this assessment covers and why
the period is appropriate set out on page 81.
OTHER CODE
PROVISIONS
• Directors’ statement on fair, balanced and understandable set out on page 118;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages
74
to 79;
• The section of the Group Financial Statements that describes the review of effectiveness of risk management and
internal control systems set out on page 98; and
• The section describing the work of the Audit Committee set out on page 97.
/
OTHER COMPANIES ACT 2006 REPORTING
Based on the responsibilities described below and our work performed during the course of the audit, we are
required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
STRATEGIC REPORT
AND DIRECTORS’
REPORT
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic report and the Directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
• the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and Parent Company and its environment obtained in the
course of the audit, we have not identified material misstatements in the Strategic report or the Directors’ report.
DIRECTORS’
REMUNERATION
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance
with the Companies Act 2006.
MATTERS ON WHICH
WE ARE REQUIRED
TO REPORT BY
EXCEPTION
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
• the Parent Company financial statements and the part of the Directors’ remuneration report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Governance
126
|
Triple Point Social Housing REIT plc
/
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view, and for such internal control
as the Directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent
Company or to cease operations, or have no realistic alternative but to do so.
/
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL
STATEMENTS
Our
objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements
.
EXTENT TO WHICH THE AUDIT WAS CAPABLE OF DETECTING IRREGULARITIES,
INCLUDING FRAUD
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in
line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
NON-COMPLIANCE WITH LAWS AND REGULATIONS
Based on:
•
Our understanding of the Group and the industry in which it operates;
•
Discussion with the Investment Manager, Audit Committee and those charged with governance; and
•
Obtaining and understanding of the Group’s policies and procedures regarding compliance with laws and
regulations;
we considered the significant laws and regulations to be the applicable accounting frameworks, Companies Act
2006, Listing Rules and the UK Real Estate Investment Trust regime.
Governance
2023 Annual Report
|
127
The Group is also subject to laws and regulations where the consequence of non-compliance could have a material
effect on the amount or disclosures in the financial statements, for example through the imposition of fines or
litigations. We identified such laws and regulations to be the housing association regulations and health and safety
legislation.
Our procedures in respect of the above included:
•
Review of minutes of meetings of those charged with governance for any instances of non-compliance with laws
and regulations;
•
Review of correspondence with regulatory authorities for any instances of non-compliance with laws and
regulations;
•
Review of financial statement disclosures and agreeing to supporting documentation;
•
Involvement of tax experts in the audit; and
•
Review of legal expenditure accounts to understand the nature of expenditure incurred.
FRAUD
We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk
assessment procedures included:
•
Enquiry with Investment Manager, the Audit Committee and those charged with governance regarding any
known or suspected instances of fraud;
•
Obtaining an understanding of the Group’s policies and procedures relating to:
–
Detecting and responding to the risks of fraud; and
–
Internal controls established to mitigate risks related to fraud.
•
Review of minutes of meeting of those charged with governance for any known or suspected instances of fraud;
•
Discussion amongst the engagement team as to how and where fraud might occur in the financial statements;
•
Involvement of forensic specialists in the audit to assist in fraud risk assessment; and
•
Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of
material misstatement due to fraud.
Based on our risk assessment, we considered the areas most susceptible to fraud to be investment property
valuations and management override of controls.
Our procedures in respect of the above included:
•
Testing a sample of journal entries throughout the year, which met a defined risk criteria, by agreeing to
supporting documentation;
•
Assessing significant estimates made by the Investment Manager for bias (refer to key audit matters section of
this report); and
•
We also addressed the risk of management override of controls by evaluating whether there was evidence of
bias by the Investment Manager and Directors that represented a risk of material misstatement due to fraud.
Governance
128
|
Triple Point Social Housing REIT plc
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team
members who were all deemed to have appropriate competence and capabilities and remained alert to any
indications of fraud or non-compliance with laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements,
recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting
one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or
through collusion. There are inherent limitations in the audit procedures performed and the further removed non-
compliance with laws and regulations is from the events and transactions reflected in the financial statements, the
less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.
uk/auditorsresponsibilities. This description forms part of our auditor’s report.
/
USE OF OUR REPORT
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Parent Company’s
members those matters we are required to state to them in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Parent Company
and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Charles Ellis (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
United Kingdom
7 March 2024
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Governance
2023 Annual Report
|
129
Financials
Group Statement of Comprehensive Income
for the year ended 31 December 2023
Financial Statements
132
|
Triple Point Social Housing REIT plc
Note
Year ended
Year ended
31 December 2023
31 December 2023
£’000
£’000
Year ended
31 December 2022
£’000
Income
Rental income
5
Expected credit loss
5
(4,593 )
(2,073 )
Other income
Total income
Expenses
Directors’ remuneration
6
(312 )
(308 )
General and administrative expenses
9
(3,245 )
(2,854 )
Management fees
8
(4,651 )
(4,704 )
Total expenses
(8,208 )
(7,866 )
Gain from fair value adjustment on investment properties
14
Operating profit
Finance income
11
Finance costs
12
(7,578 )
(10,889 )
Profit for the year before tax
Taxation
13
Profit and total comprehensive income for the year
IFRS Earnings per share – basic and diluted
36
The accompanying notes on pages 136 to 154 form an integral part of these Group Financial Statements.
Financial Statements
2023 Annual Report
|
133
Group Statement of Financial Position
as at 31 December 2023
31 December 2023
31 December 2023
31 December 2022
Note
£’000
£’000
£’000
Assets
Non-current assets
Investment properties
14
Trade and other receivables
15
Total non-current assets
Current assets
Trade and other receivables
16
Cash, cash equivalents and restricted cash
17
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
18
Total current liabilities
Non-current liabilities
Other payables
19
Bank and other borrowings
20
Total non-current liabilities
Total liabilities
Total net assets
Equity
Share capital
22
Share premium reserve
23
Treasury shares reserve
24
(378 )
(378 )
Capital redemption reserve
25
Capital reduction reserve
25
Retained earnings
26
Total Equity
IFRS net asset value per share – basic and diluted
37
The Group Financial Statements were approved and authorised for issue by the Board on 7 March 2024 and signed on its behalf by:
Chris Phillips
Chair
7 March 2024
The accompanying notes on pages 136 to 154 form an integral part of these Group Financial Statements.
Group Statement of Changes in Equity
as at 31 December 2023
Financial Statements
134
|
Triple Point Social Housing REIT plc
Share
Share
capital
capital
£’000
£’000
Share
Share
premium
premium
reserve
reserve
£’000
£’000
Treasury
Treasury
shares
shares
reserve
reserve
£’000
£’000
Capital
Capital
redemption
redemption
reserve
reserve
£’000
£’000
Capital
Capital
reduction
reduction
reserve
reserve
£’000
£’000
Retained
Retained
earnings
earnings
£’000
£’000
Total
Total
equity
equity
£’000
£’000
Year ended 31 December 2023
Note
Note
Balance at 1 January 2023
(378 )
Profit and total comprehensive
income for the year
Transactions with owners
Dividends paid
27
(21,622 )
(21,622 )
Shares repurchased
25
(93 )
(5,035 )
(5,035 )
Balance at 31 December 2023
(378 )
Share
Share
capital
capital
£’000
£’000
Share
Share
premium
premium
reserve
reserve
£’000
£’000
Treasury
Treasury
shares
shares
reserve
reserve
£’000
£’000
Capital
Capital
redemption
redemption
reserve
reserve
£’000
£’000
Capital
Capital
reduction
reduction
reserve
reserve
£’000
£’000
Retained
Retained
earnings
earnings
£’000
£’000
Total
Total
equity
equity
£’000
£’000
Year ended 31 December 2022
Note
Note
Balance at 1 January 2022
(378 )
Profit and total comprehensive
income for the year
Transactions with owners
Dividends paid
27
(21,730 )
(21,730 )
Balance at 31 December 2022
(378 )
The accompanying notes on pages 136 to 154 form an integral part of these Group Financial Statements.
Financial Statements
2023 Annual Report
|
135
Group Statement of Cash Flows
for the year ended 31 December 2023
Year ended
Year ended
31 December 2023
31 December 2023
Year ended
31 December 2022
Note
£’000
£’000
£’000
Cash flows from operating activities
Profit before income tax
Adjustments for:
Expected credit loss
Gain from fair value adjustment on investment properties
(15,477 )
(8,264 )
Finance income
(52 )
(56 )
Finance costs
Operating results before working capital changes
Increase in trade and other receivables
(5,528 )
(4,127 )
(Decrease)/increase in trade and other payables
(240 )
Net cash generated from operating activities
Cash flows from investing activities
Purchase of/capital expenditures on investment properties
(20,611 )
Disposal proceeds from sale of assets (net of transaction costs)
Restricted cash – paid
(5 )
Restricted cash – released
Interest received
Net cash generated from/(used in) investing activities
(18,345 )
Cash flows from financing activities
Interest paid
(7,228 )
(7,226 )
Shares repurchased (including transaction costs)
25
(5,035 )
Loan arrangement fees paid
21
(212 )
(599 )
Dividends paid
27
(21,622 )
(21,730 )
Net cash used in financing activities
(34,097 )
(29,555 )
Net decrease in cash and cash equivalents
(682 )
(22,203 )
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
17
The accompanying notes on pages 136 to 154 form an integral part of these Group Financial Statements.
Notes to the Group Financial Statements
for the year ended 31 December 2023
Financial Statements
136
|
Triple Point Social Housing REIT plc
1. CORPORATE INFORMATION
Estate Investment Trust (“REIT”) incorporated in England and
limited by shares on 12 June 2017. The address of the registered
office is 1 King William Street, 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
The principal activity of the Company is to act as the ultimate
parent company of Triple Point Social Housing REIT plc
subsidiaries (the “Group”) and to provide shareholders with an
attractive level of income, together with the potential for capital
growth from investing in a portfolio of social homes.
2. BASIS OF PREPARATION
The financial statements of the Group have been prepared in
accordance with UK-adopted International Accounting Standards
and with the requirements of the Companies Act 2006 as applicable
to companies reporting under those standards. All accounting
policies have been applied consistently.
The Group’s Financial Statements have been prepared on a
historical cost basis, as modified for the Group’s investment
properties, which have been measured at fair value. Gains or losses
arising from changes in fair values are included in profit or loss.
The preparation of financial statements in compliance with
UK-adopted International Accounting Standards
requires the use
of certain critical accounting estimates. It also requires management
to exercise judgement in applying the Group’s accounting policies.
The areas where significant judgments and estimates have been
made in preparing these financial statements and their effect are
disclosed in note 3.
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 shows the expected annualised rental income exceeds the
expected operating costs of the Group. 90.2% of rental income
due and payable for the year ended 31 December 2023 has been
collected, rent arrears are predominantly attributable to two
Approved Providers, My Space Housing Solutions and Parasol
Homes.
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. During the year, Fitch Ratings Limited assigned the
Company an investment ‘C Long-Term Issuer Default Rating ‘A-‘
with a stable outlook and a senior secured rating of ‘A’ for the
Group’s existing loan notes.
The Directors have performed an assessment of the ability of the
Group to continue as a going concern, for a period of at least 12
months from the date of signing these financial statements. The
Directors have considered the expected obligations of the Group
for the next 12 months and are confident that all will be met.
The Directors have also considered the financing provided to the
Group. Norland Estates Limited and TP REIT Propco 2 Limited
have bank facilities with MetLife and Barings respectively.
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 also 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
Norland
Estates
Estates
Limited
Limited
TP REIT
Propco 2
Limited
Asset Cover
(ACR)
Asset Cover Ratio Covenant
x2.00
x1.67
Asset Cover Ratio 31 December 2023
x2.81
x2.01
Blended Net initial yield
5.75%
5.86%
Headroom (yield movement)
214bps
112bps
Interest Cover (ICR)
Interest Cover Ratio Covenant
1.75x
1.75x
Interest Cover Ratio 31 December 2023
4.63x
4.26x
Headroom (rental income movement)
62%
53%
Financial Statements
2023 Annual Report
|
137
Under the downside model the forecasts have been stressed to
show the effect of some Care Providers ceasing to pay their voids
liability, and as a result this causes Approved Providers to default
under some of the Group leases; and the assumptions for the
amount of rent paid by one Approved Provider that has built up
arrears have been sensitised. Under the downside model the
Group will be able to settle its liabilities for a period of at least 12
months from the date of signing these financial statements. As a
result of the above, the Directors are of the opinion that the going
concern basis adopted in the preparation of the financial
statements is appropriate.
The Group has no short or medium
-term refinancing risk given
the 9.6 year average maturity of its long
-
term debt facilities with
MetLife and Barings, the first of which expires in June 2028, and
which are fully fixed at an all-in weighted average rate of 2.74%.
Based on the forecasts prepared and the intentions of the Parent
Company, the Directors consider that the Group will be able to
settle its liabilities for a period of at least 12 months from the date
of signing these financial statements and therefore has prepared
these financial statements on the going concern basis.
2.2. CURRENCY
The Group financial information is presented in Sterling which is
also the Group’s functional currency.
3. SIGNIFICANT ACCOUNTING
JUDGEMENTS, ESTIMATES AND
ASSUMPTIONS
In the application of the Group’s accounting policies, which are
described in note 4, 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 related assets and liabilities within the next
financial year are outlined below:
ESTIMATES:
3.1. INVESTMENT PROPERTIES
The Group uses the valuation carried out by its independent
valuers as the fair value of its property portfolio. The valuation is
based upon assumptions including future rental income and the
appropriate discount rate. The valuers also refer to market
evidence of transaction prices for similar properties. Further
information is provided in note 14.
The Group’s properties have been independently valued by
Jones Lang LaSalle Limited (“JLL” or the “Valuer”) in accordance
with the definitions published by the Royal Institute of Chartered
Surveyors’ (“RICS”) Valuation – Professional Standards, Global
and UK Editions (commonly known as the “Red Book”). JLL is one
of the most recognised professional firms within social housing
valuation and has sufficient current local and national knowledge
of both social housing in general and Specialist Supported
Housing and has the skills and understanding to undertake the
valuations competently.
With respect to the Group’s Financial Statements, investment
properties are valued at their fair value at each Statement of
Financial Position date in accordance with IFRS 13 which
recognises a variety of fair value inputs depending upon the
nature of the investment. Given the bespoke nature of each of the
Group’s investments, all of the Group’s investment properties are
included in Level 3 with the inputs included in note 14.
Level 1 – Unadjusted, quoted prices for identical assets and
liabilities in active (typically quoted) markets;
Level 2 – Quoted prices for similar assets and liabilities in active
markets; and
Level 3 – External inputs are “unobservable”. Value is the
Director’s best estimate, based on advice from relevant
knowledgeable experts, use of recognised valuation techniques
and a determination of which assumptions should be applied in
valuing such assets and with particular focus on the specific
attributes of the investments themselves.
3.2. EXPECTED CREDIT LOSSES (ECL)
The Group recognised an additional ECL provision of £4.6 million
in the current year (31 December
2022 - £2.1 million) resulting in
a total ECL provision of £6.7 million as at 31 December 2023
(31 December
2022 - £2.1 million) which entirely relates to rental
arrears for two of the Group’s Approved Providers. A default
probability for each of the two Approved Providers, representing
the estimated percentage likelihood of them paying outstanding
rent due at 31 December 2023, was determined based on their
latest known financial position and any repayment plans that had
been agreed or discussed. For each provider the estimated
percentage probability of receiving unpaid rent has been
multiplied by the rental arrears as at the statement of financial
position date. These two figures have been aggregated to arrive
at the ECL provision.
Notes to the Group Financial Statements
for the year ended 31 December 2023
Financial Statements
138
|
Triple Point Social Housing REIT plc
JUDGEMENTS:
3.3. LEASES INCENTIVE DEBTOR
The lease incentive debtor recognised from rent smoothing
adjustments are not considered to be financial assets as the
amounts are not yet contractually due. As such, the requirements
of IFRS 9 (including the expected credit loss method) are not
applied to those balances. The credit risk associated with the
tenant is considered in the determination of the fair value of the
related property. In the current year, the income recognised in
respect of such rent smoothing amounted to £1,500,000
(2022: £636,000).
4. SUMMARY OF MATERIAL
ACCOUNTING POLICIES
4.1. INVESTMENT PROPERTY
Investment property, which is property held to earn rentals and/or
for capital appreciation, is initially measured at cost, being the fair
value of the consideration given, including expenditure that is
directly attributable to the acquisition of the investment property.
The Group recognises asset acquisitions on completion. After
initial recognition, investment property is stated at its fair value at
the Statement of Financial Position date. Gains and losses arising
from changes in the fair value of investment property are included
in profit or loss for the period in which they arise in the Statement
of Comprehensive Income. Subsequent expenditure is capitalised
only when it is probable that future economic benefits are
associated with the expenditure.
An investment property is derecognised upon disposal or when
the investment property is permanently withdrawn from use and
no future economic benefits are expected to be obtained from
the disposal. Any gain or loss arising on de-recognition of the
property (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is recorded in
profit or loss in the period in which the property is derecognised.
Significant accounting judgements, estimates and assumptions
made for the valuation of investment properties are discussed in
note 3.
4.2. LEASES
LESSOR
Leases are classified as finance leases whenever the terms of the
lease transfer substantially all the risks and rewards of ownership
to the lessee. All other leases are classified as operating leases.
The Group has determined that it retains all the significant risks
and rewards of ownership of the properties it has acquired to date
and accounts for the contracts as operating leases.
Properties leased out under operating leases are included in
investment properties in the Statement of Financial Position.
Rental income from operating leases is recognised on a straight-
line basis over the term of the relevant leases. Tenant lease
incentives are not subject to expected credit loss provision under
IFRS 9 as the Group does not have unconditional right to collect
cash flows relating to these assets but do impact the carrying
amounts of the related investment properties as at the statement
of financial position date. Therefore a lease incentive debtor is
recognised based on the smoothing of rent free periods granted
such that the rental income from operating leases is recognised
on a straight-line basis over the lease term.
The lease incentive
debtor recognised from such rent smoothing adjustments are not
considered to be financial assets as the amounts are not yet
contractually due. As such, the requirements of IFRS 9 (including
the expected credit loss method) are not applied to those
balances, although the credit risk is considered in the determination
of the fair value of the related property.
LESSEE
As a lessee the Group recognises a right-of-use asset within
investment properties and a lease liability for all leases, which is
included within trade and other payables (notes 18 and 19). The
lease liabilities are measured at the present value of the remaining
lease payments, discounted using an appropriate discount rate at
inception of the lease or on initial recognition. The discount rate
applied by the Group is the incremental borrowing rate at which
a similar borrowing could be obtained from an independent
creditor under comparable terms and conditions. Subsequent to
initial measurement lease liabilities increase as a result of interest
charged at a constant rate on the balance outstanding and are
reduced for lease payments made.
As leasehold properties meet the definition of investment
property, the right-of-use assets are presented within investment
properties (note 14), and after initial recognition are subsequently
measured at fair value.
SUB-LEASES
Leases are classified as finance leases whenever the terms of the
lease transfer substantially all the risks and rewards of ownership
of the underlying property asset to the lessee. Sub-leases of
leasehold properties are classified with reference to the right-of-
use asset arising from the head lease. All other leases are classified
as operating leases.
4.3. RENT AND OTHER RECEIVABLES
Rent and other receivables are amounts due in the ordinary
course of business. If collection is expected in one year or less,
they are classified as current assets.
Financial Statements
2023 Annual Report
|
139
Rent receivables are initially recognised at fair value plus
transaction costs and are subsequently carried at amortised cost,
less provision for impairment.
Impairment provisions for current and non-current rent receivables
are recognised based on the simplified approach within IFRS 9
using a provision matrix in the determination of the lifetime
expected credit losses. During this process the probability of the
non-payment of the rent receivables is assessed. This probability
is then multiplied by the amount of the expected loss arising from
default to determine the lifetime expected credit loss for the rent
receivables. Rent receivables are reported net of the ECL provision
and the movement in the provision is recognised in the Group
statement of comprehensive income. On confirmation that the
rent receivable will not be collectable, the gross carrying value of
the asset is written off against the associated provision.
Impairment provisions for all other receivables are recognised
based on a forward-looking expected credit loss model using the
general approach. The methodology used to determine the
amount of the provision is based on whether there has been a
significant increase in credit risk since initial recognition of the
financial asset. For those where the credit risk has not increased
significantly since initial recognition of the financial asset, twelve
month expected credit losses along with gross interest income
are recognised. For those for which credit risk has increased
significantly, lifetime expected credit losses along with the gross
interest income are recognised. For those that are determined to
be credit impaired, lifetime expected credit losses along with
interest income on a net basis are recognised.
4.4. BANK AND OTHER BORROWINGS
Bank borrowings and the Group’s loan notes are initially
recognised at fair value net of any transaction costs directly
attributable to the issue of the instrument. Such interest-bearing
liabilities are subsequently measured at amortised cost using the
effective interest rate method, which ensure that any interest
expense over the period to repayment is at a constant rate on the
balance of the liability carried in the Group Statement of Financial
Position. For the purposes of each financial liability, interest
expense includes initial transaction costs and any premium
payable on redemption, as well as any interest or coupon payment
while the liability is outstanding.
4.5. TAXATION
Taxation on the element of the profit or loss for the period that is
not exempt under UK REIT regulations would be comprised of
current and deferred tax. Tax is recognised in the Statement of
Comprehensive Income except to the extent that it relates to
items recognised as direct movement in equity, in which case it is
recognised as a direct movement in equity. Current tax is the
expected tax payable on any non-REIT taxable income for the
period, using tax rates enacted or substantively enacted at the
Statement of Financial Position date, and any adjustment to tax
payable in respect of previous periods.
4.6. DIVIDENDS PAYABLE TO
SHAREHOLDERS
Dividends are recognised when they become legally payable.
Interim dividends are recognised when paid. In the case of final
dividends, this is when approved by the shareholders at the
Annual General Meeting.
4.7. RENTAL INCOME
Rental income from investment property is recognised on a
straight-line basis over the term of ongoing leases and is shown
gross of any UK income tax. A rental adjustment is recognised
from the rent review date in relation to unsettled rent reviews,
where the Directors are reasonably certain that the rental uplift
will be agreed.
Tenant lease incentives are recognised as a reduction of rental
revenue on a straight-line basis over the term of the lease and are
not subjected to an expected credit loss provision under IFRS 9.
These are recognised within trade and other receivables on the
Statement of Financial Position.
When the Group enters into a forward funded transaction, the
future tenant signs an agreement for lease. No rental income is
recognised under the agreement for lease, but once the practical
completion has taken place the formal lease is signed at which
point rental income commences to be recognised in the Statement
of Comprehensive Income.
4.8. FINANCE INCOME AND FINANCE
COSTS
Finance income is recognised as interest accrues on cash balances
held by the Group. Finance costs consist of interest and other
costs that the Group incurs in connection with bank and other
borrowings. These costs are expensed in the period in which they
occur. Borrowing costs are capitalised, net of interest received on
cash drawn down yet to be expended when they are directly
attributable to the acquisition, contribution or production of an
asset that necessarily takes a substantial period of time to get
ready for its intended use.
4.9. INVESTMENT MANAGEMENT FEES
Investment management fees are recognised in the Statement of
Comprehensive Income on an accruals basis.
4.10. TREASURY SHARES
Consideration paid or received for the purchase or sale of treasury
shares is recognised directly in equity. The cost of treasury shares
held is presented as a separate reserve (the “treasury share
reserve”). Any excess of the consideration received on the sale of
treasury shares over the weighted average cost of the shares sold
is credited to retained earnings.
Notes to the Group Financial Statements
for the year ended 31 December 2023
Financial Statements
140
|
Triple Point Social Housing REIT plc
5. RENTAL INCOME
Year ended
Year ended
31 December
31 December
2023
2023
Year ended
31 December
2022
£’000
£’000
£’000
Rental income – freehold assets
37,473
35,087
Rental income – leasehold assets
2,366
2,213
39,839
37,300
Expected credit loss
4,593
2,073
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. As a result, no direct property expenses were incurred.
All rental income arose within the United Kingdom.
The expected loss rates are based on the Group’s credit losses
which started to occur during the year ended 31 December 2022
for the first time since IPO. The expected loss rates are then adjusted
for current and forward-looking information affecting the Group’s
tenants. The ECL provision during the year of £4.6 million includes
£1.0 million relating to unpaid rent for the year ended 31 December
2022 reflecting the increase in the expected credit loss from the
continued partial non-payment of rent due by two of the Group’s
tenants.
6. DIRECTORS’ REMUNERATION
Year ended
Year ended
31 December
31 December
2023
2023
Year ended
31 December
2022
£’000
£’000
£’000
Directors’ fees
280
275
Employer’s National Insurance
Contributions
32
33
312
308
The Directors are remunerated for their services at such rate as
the Directors shall from time to time determine. The Chairman
receives a Director’s fee of £75,000 per annum (2022: £75,000),
and the other Directors of the Board receive a fee of £50,000 per
annum (2022: £50,000). The Directors are also entitled to an
additional fee of £7,500 in connection with the production of
every prospectus by the Company. Each Director was paid this
additional fee in 2020 following the publication of the prospectus,
but no additional fees were paid during 2023 or 2022. A summary
of the Directors’ emoluments, including the disclosures required
by the Companies Act 2006, is set out in the Directors’
Remuneration Report within the Corporate Governance Report.
None of the Directors received any advances or credits from any
group entity during the year.
7. PARTICULARS OF EMPLOYEES
The Group and Company had no employees during the year
other than the Directors (2022: none).
8. MANAGEMENT FEES
Year ended
Year ended
31 December
31 December
2023
2023
Year ended
31 December
2022
£’000
£’000
£’000
Management fees
4,651
4,704
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 described above) as at 31 March, 30 June, 30 September and
31 December in each year on the following basis with effect from
Admission:
•
on that part of the Net Asset Value up to and including £250
million, an amount equal to 1% of such part of the Net Asset
Value;
•
on that part of the Net Asset Value over £250 million and up to
and including £500 million, an amount equal to 0.9% of such
part of the Net Asset Value;
•
on that part of the Net Asset Value over £500 million and up to
and including £1 billion, an amount equal to 0.8% of such part
of the Net Asset Value; and
•
on that part of the Net Asset Value over £1 billion, an amount
equal to 0.7% of such part of the Net Asset Value.
Management fees of £4,651,000 (2022: £4,704,000) were
chargeable by TPIM during the year. At the year end £1,180,000
(2022: £1,159,000) was due to TPIM.
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.
Financial Statements
2023 Annual Report
|
141
9. GENERAL AND
ADMINISTRATIVE EXPENSES
Year ended
Year ended
31 December
31 December
2023
2023
Year ended
31 December
2022
£’000
£’000
£’000
Legal and professional fees
972
829
Property costs
579
404
Marketing costs
466
341
Audit fees
400
371
Administration and Secretarial Fees
318
324
AIFM fees
216
192
Lease transfer costs
11
151
Other administrative expenses
283
242
3,245
2,854
On 1 October 2019 Hanway Advisory Limited, who are associated
with Triple Point Investment Management LLP the delegated
investment manager, were appointed to provide Administration
and Company Secretarial Services to the Group. Within
Administration Fees is an amount of £318,000 (2022: £324,000)
for Administration and Company Secretarial Services chargeable
by Hanway Advisory Limited.
The audit fees in the table above are inclusive of VAT, and
therefore differ to the fees in note 10 which are reported net of
VAT.
On 30 June 2020 Triple Point Investment Management LLP was
appointed as the fund’s Alternative Investment Fund Manager
(AIFM) to perform certain functions for the Group. During the year
AIFM services of £216,000 (2022: £192,000) were chargeable by
TPIM. At the year end £53,000 (2022: £48,000) was due to TPIM.
Lease transfer costs represent repairs costs incurred in relation to
the transfer of 12 leases from Westmoreland and amortisation
costs in relation to the original transfer costs.
10. AUDIT FEES
Year ended
Year ended
31 December
31 December
2023
2023
Year ended
31 December
2022
£’000
£’000
£’000
Group audit fees – current year
259
242
Subsidiary audit fees
33
31
292
273
Non audit fees paid to BDO LLP included £40,000 (2022: £36,000)
in relation to the half year interim review.
The audit fee for the following subsidiaries has been borne by the
Company:
>
TP REIT Super Holdco Limited
>
Norland Estates Limited
>
TP REIT Holdco 1 Limited
>
TP REIT Propco 2 Limited
>
TP REIT Holdco 2 Limited
>
TP REIT Propco 3 Limited
>
TP REIT Holdco 3 Limited
>
TP REIT Propco 4 Limited
>
TP REIT Holdco 4 Limited
>
TP REIT Propco 5 Limited
>
TP REIT Holdco 5 Limited
11. FINANCE INCOME
Year ended
Year ended
31 December
31 December
2023
2023
Year ended
31 December
2022
£’000
£’000
£’000
Other interest income
52
56
12. FINANCE COSTS
Year ended
Year ended
31 December
31 December
2023
2023
Year ended
31 December
2022
£’000
£’000
£’000
Interest payable on bank borrowings
7,217
7,217
Amortisation of loan arrangement fees
307
1,006
Written off loan arrangement fees
–
2,619
Head lease interest expense
44
37
Bank charges
10
9
7,578
10,889
Total finance cost for financial liabilities
not measured at fair value through
profit or loss
7,568
10,880
Written off loan arrangement fees in the year ended 31 December
2022 relate to the Lloyds and NatWest loan facility that was
reduced and subsequently cancelled during that year. All
remaining unamortised loan arrangement fees in respect of this
facility were written off.
Notes to the Group Financial Statements
for the year ended 31 December 2023
Financial Statements
142
|
Triple Point Social Housing REIT plc
13. 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 year ended 31 December 2023, 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.
Year ended
Year ended
31 December
31 December
2023
2023
Year ended
31 December
2022
£’000
£’000
£’000
Current tax
Corporation tax charge for the year
–
–
Total current income tax charge in the
profit or loss
–
–
The tax charge for the period is less than the standard rate of
corporation tax in the UK of 25% (2022: 19%). The differences are
explained below.
Year ended
Year ended
31 December
31 December
2023
2023
Year ended
31 December
2022
£’000
£’000
£’000
Profit for the year before tax
34,989
24,902
Tax at UK corporation tax standard rate
of 25/19%
8,747
4,731
Change in fair value of investment
properties
(3,969)
(2,727)
Disposal of investment property
100
1,157
Exempt REIT income
(5,707)
(3,768)
Amounts not deductible for tax purposes
49
27
Unutilised residual current period tax
losses
780
580
–
–
UK REIT exempt income includes property rental income that is
exempt from UK Corporation Tax in accordance with Part 12 of
CTA 2010.
14. INVESTMENT PROPERTY
Operational
assets
£’000
As at 1 January 2023
667,713
Acquisitions and additions*
(224)
Fair value adjustment**
15,875
Movement in head lease ground rent liability
4
Transferred to Assets Held for Sale before disposal***
(7,871)
As at 31 December 2023
675,497
Operational
assets
£’000
As at 1 January 2022
641,293
Acquisitions and additions*
19,752
Fair value adjustment**
15,239
Movement in head lease ground rent liability
(2)
Transferred to Assets Held for Sale before disposal***
(1,494)
Disposals
(7,075)
As at 31 December
2022
667,713
* 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 Group
Statement of Comprehensive Income is net of the loss from fair value
adjustments on assets held for sale of £0.28 million (31 December 2022 –
£0.88 million) and loss on disposal of four properties of £0.11 million
(31 December 2022 - £6.1 million).
*** Assets transferred to assets held for sale before disposal were presented as
assets held for sale during the interim period ended 30 June 2023 (30 June 2022)
and were eventually disposed on 31 August 2023 (28 July 2022 & 29 July 2022).
Reconciliation to independent valuation:
31 December
31 December
2023
2023
31 December
2022
£’000
£’000
£’000
Investment property valuation
678,358
669,077
Fair value adjustment – head lease
ground rent
1,463
1,460
Fair value adjustment – lease incentive debtor
(4,324)
(2,824)
675,497
667,713
Financial Statements
2023 Annual Report
|
143
The carrying value of leasehold properties at 31 December 2023
was £41.1 million (2022: £40.1 million).
In accordance with “IAS 40: Investment Property”, the Group’s
investment properties have been independently valued at fair
value by Jones Lang LaSalle Limited (“JLL”), an accredited
external valuer with recognised and relevant professional
qualifications. The independent valuers provide their fair value of
the Group’s investment property portfolio every three months.
JLL were appointed as external valuers by the Board on
11 December 2017. JLL has provided valuations services to the
Group. The proportion of the total fees payable by the Company
to JLL’s total fee income is minimal. Additionally, JLL has a rotation
policy in place whereby the signatories on the valuations rotate
after seven years.
% KEY STATISTIC
The metrics below are in relation to the total investment property
portfolio held as at 31 December 2023.
Portfolio metrics
Portfolio metrics
31 December 2023
31 December 2023
31 December 2022
Capital Deployed (£’000)
*
574,827
581,647
Number of Properties
493
497
Number of Tenancies
***
390
395
Number of Approved Providers
***
27
27
Number of Local Authorities
***
153
153
Number of Care Providers
***
116
123
Valuation Net Initial Yield (NIY)
**
5.71%
5.49%
* calculated excluding acquisition costs.
** calculated using IAS 40 valuations (excluding forward funding acquisitions).
*** calculated excluding forward funding acquisitions.
REGIONAL EXPOSURE
31 December 2023
31 December 2023
31 December 2022
Region
Region
*Cost
*Cost
£’000
£’000
% of funds
% of funds
invested
invested
*Cost
£’000
% of funds
invested
North West
109,880
19.1
115,042
19.8
West Midlands
93,635
16.3
94,790
16.3
Yorkshire
87,148
15.2
86,293
14.8
East Midlands
63,979
11.1
69,429
11.9
North East
56,653
9.9
51,986
8.9
South East
53,674
9.3
54,799
9.4
London
49,626
8.6
49,579
8.5
South West
27,466
4.8
27,466
4.7
East
24,206
4.2
23,703
4.1
Scotland
5,900
1.0
5,900
1.0
Wales
2,660
0.5
2,660
0.6
Total
574,827
100
581,647
100
* excluding acquisition costs.
FAIR VALUE HIERARCHY
Date of
Date of
valuation
valuation
Total
Total
£’000
£’000
Quoted
Quoted
prices in
prices in
active
active
markets
markets
(Level 1)
(Level 1)
£’000
£’000
Significant
Significant
observable
observable
inputs
inputs
(Level 2)
(Level 2)
£’000
£’000
Significant
Significant
unobservable
unobservable
inputs
inputs
(Level 3)
(Level 3)
£’000
£’000
Assets measured at
fair value:
Investment
properties
31 December
2023
675,497
–
–
675,497
Investment
properties
31 December
2022
667,713
–
–
667,713
There have been no transfers between Level 1 and Level 2 during
the year, nor have there been any transfers between Level 2 and
Level 3 during the year.
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 an investment
property requires an examination of the specific merits of each
property that are in turn considered pertinent to the valuation.
Notes to the Group Financial Statements
for the year ended 31 December 2023
Financial Statements
144
|
Triple Point Social Housing REIT plc
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
Registered Provider itself regulated by the Regulator of Social
Housing.
Descriptions and definitions relating to valuation techniques and
key unobservable inputs made in determining fair values are as
follows:
VALUATION TECHNIQUES: DISCOUNTED
CASH FLOWS
The discounted cash flows model considers the present value of
net cash flows to be generated from the property, taking into
account the expected rental growth rate and lease incentive costs
such as rent-free periods. The expected net cash flows are then
discounted using risk-adjusted discount rates.
There are two main unobservable inputs that determine the fair
value of the Group’s investment property:
1.
the rate of inflation as measured by CPI; it should be noted
that all leases benefit from either CPI or RPI indexation; and
2.
the discount rate applied to the rental flows.
Key factors in determining the discount rates to assess the level of
uncertainty applied include: the performance of the regulated
social housing sector and demand for each Specialised 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 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. The valuer also
considers the resulting net initial yield for each property for
appropriateness.
SENSITIVITIES OF MEASUREMENT OF
SIGNIFICANT UNOBSERVABLE INPUTS
As set out within the significant accounting estimates and
judgements in note 3, the Group’s property portfolio valuation is
open to judgements and is inherently subjective by nature.
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 7.3% (2022: 6.82%).
The range of discount rates used in the Group’s property portfolio
valuation is from 6.5% to 10.0% (2022: 6.2% to 8.6%).
For the purposes of the valuation, CPI and RPI is assumed to
increase by 2% per annum and 2.5% per annum respectively over
the term of the relevant leases.
-0.5%
-0.5%
change in
change in
Discount
Discount
Rate
Rate
£’000
£’000
+0.5%
+0.5%
change in
change in
Discount
Discount
Rate
Rate
£’000
£’000
+0.25%
+0.25%
change
change
in CPI
in CPI
£’000
£’000
-0.25%
-0.25%
change
change
in CPI
in CPI
£’000
£’000
Changes in the
IFRS fair value
of investment
properties as at
31 December
2023
38,653
(35,403)
19,143
(18,377)
Changes as at
31 December
2022
40,552
(36,941)
21,037
(20,207)
The valuations have not been influenced by climate related
factors due to there being little measurable impact on inputs at
present.
15. TRADE AND OTHER
RECEIVABLES (NON-CURRENT)
31 December
31 December
2023
2023
31 December
2022
£’000
£’000
£’000
Lease incentive debtor
4,072
2,717
Other receivables
161
172
4,233
2,889
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.
Financial Statements
2023 Annual Report
|
145
16. TRADE AND OTHER
RECEIVABLES (CURRENT)
31 December
31 December
2023
2023
31 December
2022
£’000
£’000
£’000
Rent receivable
2,436
3,209
Prepayments
252
107
Other receivables
189
174
Lease incentive debtor
987
782
3,864
4,272
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 rent and other receivables.
Where the credit loss relates to revenue already recognised in the
Statement of Comprehensive Income, the expected credit loss
allowance is recognised in the Statement of Comprehensive
Income.
The
Expected
credit
losses
included
in
rent
receivables is £6,666,000 (2022: £2,073,000) of which £4,593,000
(2022:
£2,073,000)
were
charged
to
the
Statement
of
Comprehensive Income in the year.
17. CASH, CASH EQUIVALENTS
AND RESTRICTED CASH
31 December
31 December
2023
2023
31 December
2022
£’000
£’000
£’000
Cash at bank
29,014
29,152
Restricted cash
438
443
Cash held by lawyers
–
544
29,452
30,139
Cash held by lawyers is money held in escrow for retention
releases and SDLT reclaimed from HMRC. These funds are
available immediately on demand.
Restricted cash represents monies held in escrow in relation to the
transfer of leases during 2020.
31 December
31 December
2023
2023
31 December
2022
£’000
£’000
£’000
Total Cash, cash equivalents and
restricted cash
29,452
30,139
Restricted cash
(438)
(443)
Cash reported on Group Statement of
Cash Flows
29,014
29,696
18. TRADE AND OTHER PAYABLES
31 December
31 December
202
202
3
3
31 December
2022
Current liabilities
£’000
£’000
£’000
Trade payables
–
37
Accruals
2,270
2,014
Head lease ground rent (note 28)
40
40
Other creditors
412
1,029
2,722
3,120
The Other Creditors balance consists of retentions due on
completion of outstanding works and on the rebate of stamp duty
refunds. 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.
19. OTHER PAYABLES
31 December
31 December
2023
2023
31 December
2022
Non-current liabilities
£’000
£’000
£’000
Head lease ground rent (note 28)
1,424
1,420
Rent deposit
100
100
1,524
1,520
Notes to the Group Financial Statements
for the year ended 31 December 2023
Financial Statements
146
|
Triple Point Social Housing REIT plc
20. BANK AND OTHER
BORROWINGS
31 December
31 December
2023
2023
£’000
£’000
31 December
2022
£’000
Bank and other borrowings drawn at year end
263,500
263,500
Unamortised costs at beginning
of the
year
(2,412)
(4,798)
Less: loan issue costs incurred
(212)
(131)
Add: loan issue costs amortised
307
433
Add: loan issue costs written off
–
2,085
Unamortised costs at end of the year
(2,317)
(2,412)
Balance at year end
261,183
261,088
The amount of loan arrangement fees written off and amortised in
2022 as per note 12, and loan arrangement fees paid in the Group
statement of cash flows for the year ended 31 December
2022
differ to the amounts in the table above as the amounts in the
table above exclude amounts related to the undrawn Revolving
Credit Facility (“RCF”) which was cancelled in the prior year.
At 31 December 2023 there were undrawn bank borrowings of
£NIL (2022: £NIL).
As at 31 December 2023, 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
£68.5 million with MetLife Investment Management (and
affiliated funds); and
•
£195 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 had access to £160 million RCF with Lloyds and
NatWest which was cancelled in December 2022. Prior to being
cancelled, the facility was undrawn.
LOAN NOTES
The Loan Notes of £68.5 million are secured against a portfolio of
Specialised Supported Housing assets throughout the UK, worth
approximately £192 million (31 December 2022 - £189 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 £41.5 million, has a term of 10 years
from utilisation and is priced at an all-in coupon of 2.94% pa; and
Tranche-B, is an amount of £27 million, has a term of 15 years
from utilisation and is priced at an all-in coupon of 3.215% pa. On
a blended basis, the weighted average term is 12 years carrying a
weighted average fixed rate coupon of 3.039% pa. At
31 December 2023, the Loan Notes have been independently
valued at £59.3 million which has been used to calculate the
Group’s EPRA Net Disposal Value in note 2
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 3.357% 2028 Gilt (Tranche A) and Treasury
3.439% 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 £195 million
which enabled the Group to refinance the full £130 million
previously drawn under its £160 million RCF with Lloyds and
NatWest. The Loan Notes are secured against a portfolio of
Specialised Supported Housing assets throughout the UK, worth
approximately £392 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 £77.5 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 £117.5
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 31 December 2023, the Loan Notes
have been independently valued at £145.7 million which has
been used to calculate the Group’s EPRA Net Disposal Value in
note 2
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 3.398% 2031
Gilt (Tranche A) and Treasury 3.716% 2036 Gilt (Tranche B), with
an implied margin that is unchanged since the date of fixing.
The Group’s loan to value at the year end was 37.0%
(2022: 37.4%).
The loans are considered a Level 2 fair value measurement.
The Group has met all compliance with its financial covenants on
the above loans throughout the year.
Financial Statements
2023 Annual Report
|
147
21. NOTES SUPPORTING
STATEMENT OF CASH FLOWS
Reconciliation of liabilities to cash flows from financing activities:
Bank
Bank
borrowings
borrowings
£’000
£’000
(note 20)
(note 20)
Head lease
Head lease
£’000
£’000
(note 18,19)
(note 18,19)
Total
Total
£’000
£’000
At 1 January 2023
261,088
1,460
262,548
Cash flows:
Loan arrangement fees paid
(212)
–
(212)
Non-cash flows:
–
Amortisation of principal on
head lease liabilities
–
(40)
(40)
– Amortisation of loan
arrangement fees
307
–
307
– Accrued interest on head
lease liabilities
–
44
44
At 31 December 2023
261,183
1,464
262,647
Bank
borrowings
£’000
(note 20)
Head lease
£’000
(note 18,19)
Total
£’000
At 1 January 2022
258,702
1,463
260,165
Cash flows:
Loan arrangement fees paid
(131)
–
(131)
Non-cash flows:
– Amortisation of principal on
head lease liabilities
–
(40)
(40)
– Amortisation of loan
arrangement fees
433
–
433
–
Loan arrangement fees written
off
2,084
–
2,084
– Accrued interest on head
lease liabilities
–
37
37
At 31 December 2022
261,088
1,460
262,548
22. SHARE CAPITAL
Issued and
fully paid
Issued and
fully paid
Number
£’000
At 1 January 2023
403,239,002
4,033
Shares cancelled in the year
(9,322,512)
(93)
At 31 December 2023
393,916,490
3,940
Issued and
Issued and
fully paid
fully paid
Issued and
Issued and
fully paid
fully paid
Number
Number
£’000
£’000
At 1 January 2022
403,239,002
4,033
At 31 December 2022
403,239,002
4,033
The Company achieved admission to the specialist fund segment
of the main market of the London Stock Exchange on 8 August
2017, raising £200 million. As a result of the IPO, at 8 August
2017, 200,000,000 shares at one pence each were issued and
fully paid. The Company 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.
Since then there were three public offers up to 21 October 2020
and a further 193,916,490 Ordinary Shares of one pence each
were issued and fully paid.
Rights, preferences and restrictions on shares: All Ordinary Shares
carry equal rights, and no privileges are attached to any shares in
the Company. All the shares are freely transferable, except as
otherwise provided by law. The holders of Ordinary Shares are
entitled to receive dividends as declared from time to time and
are entitled to one vote per share at meetings of the Company. All
shares rank equally with regard to the Company’s residual assets.
The table above includes 450,000 treasury shares (note 24).
Treasury shares do not hold any voting rights.
Between 19 April 2023 and 12 June 2023 the Company
repurchased 9,322,512 shares at an average price of 52.6 pence
per share, the shares were subsequently cancelled.
Notes to the Group Financial Statements
for the year ended 31 December 2023
Financial Statements
148
|
Triple Point Social Housing REIT plc
23. SHARE PREMIUM RESERVE
The share premium relates to amounts subscribed for share
capital in excess of nominal value.
31 December
31 December
2023
2023
£’000
£’000
31 December
2022
£’000
Balance at beginning of year
203,753
203,753
Balance at end of year
203,753
203,753
24. TREASURY SHARES RESERVE
31 December
31 December
2023
2023
£’000
£’000
31 December
2022
£’000
Balance at beginning of year
(378)
(378)
Balance at end of year
(378)
(378)
The treasury shares reserve relates to the value of shares purchased
by the Company in excess of nominal value. No treasury shares
were purchased during the current or prior year. During the year
ended 31 December 2019, the Company purchased 450,000 of
its own 1p Ordinary Shares at a total gross cost of £377,706
(£374,668 cost of shares and £3,038 associated costs). As at
31 December 2023 and 31 December 2022, 450,000 1p Ordinary
Shares were held by the Company.
25. CAPITAL REDUCTION
RESERVE
31 December
31 December
2023
2023
£’000
£’000
31 December
2022
£’000
Balance at beginning of year
160,394
160,394
Share buybacks and cancellation
(5,035)
–
Balance at end of year
155,359
160,394
The capital reduction reserve is a distributable reserve that was
created on the cancellation of share premium.
Between 19 April 2023 and 12 June 2023 the Company
repurchased 9,322,512 shares at an average price of 52.6 pence
per share. The shares were subsequently cancelled.
CAPITAL REDEMPTION RESERVE
31 December
31 December
2023
2023
£’000
£’000
31 December
2022
£’000
Balance at beginning of year
–
–
Original shares repurchased & cancelled
93
–
Balance at end of year
93
–
The Capital Redemption Reserve is the nominal value of the
shares cancelled from the share buybacks.
26. RETAINED EARNINGS
31 December
31 December
2023
2023
£’000
£’000
31 December
2022
£’000
Balance at beginning of year
71,483
68,311
Total comprehensive income for the year
34,989
24,902
Dividends paid
(21,622)
(21,730)
Balance at end of year
84,850
71,483
27. DIVIDENDS
Year ended
Year ended
31 December
31 December
2023
2023
£’000
£’000
Year ended
31 December
2022
£’000
1.3p for the 3 months to 31 December 2021
paid on 25 March 2022
–
5,236
1.365p for the 3 months to 31 March 2022
paid on 24 June 2022
–
5,498
1.365p for the 3 months to 30 June 2022
paid on 30 September 2022
–
5,498
1.365p for the 3 months to 30 September
2022 paid on 16 December 2022
–
5,498
1.365p for the 3 months to 31 December 2022
paid on 29 March 2023
5,498
–
1.365p for the 3 months to 31 March 2023
paid on 28 June 2023
5,382
–
1.365p for the 3 months to 30 June 2023
paid on 29 September 2023
5,371
–
1.365p for the 3 months to 30 September
2023 paid on 15 December 2023
5,371
-–
21,622
21,730
On 7 March 2024, the Company declared an interim dividend of
31 December 2023. The total dividend of £5,370,818 will be paid
on or around 29 March 2024 to Ordinary shareholders on the
register on 15 March 2024.
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 the Treasury shares held
by the Company.
Financial Statements
2023 Annual Report
|
149
28. LEASES
A. LEASES AS LESSEE
The following table sets out a maturity analysis of lease payments,
showing the undiscounted lease payments to be paid after the
reporting date:
< 1 year
< 1 year
£’000
£’000
1
1
-
-
2
2
years
years
£’000
£’000
2-3
2-3
years
years
£’000
£’000
Lease payables
31 December 2023
40
40
40
31 December 2022
40
40
40
3-4
3-4
years
years
£’000
£’000
4-5
4-5
years
years
£’000
£’000
> 5 years
> 5 years
£’000
£’000
Total
Total
£’000
£’000
Lease payables
31 December 2023
40
40
7,197
7,397
31 December 2022
40
40
7,242
7,442
31 December
31 December
2023
2023
£’000
£’000
31 December
2022
£’000
Current liabilities (note 18)
40
40
Non-current liabilities (note 19)
1,424
1,420
Balance at end of year
1,464
1,460
The above is in respect of properties held by the Group under
leasehold. There are 23 properties (2022: 23) held under leasehold
with lease terms which range from 125 years to 985 years. The
Group’s leasing arrangements with lessors are headlease
arrangements on land and buildings that have been sub-let under
the Group’s normal leasing arrangements (see above) to tenants.
The Group carries its interest in these headlease arrangements as
long leasehold investment property (note 14).
B. LEASES AS LESSOR
The Group leases out its investment properties (see note 14).
The future undiscounted minimum lease payments receivable by
the Group under non-cancellable operating leases are as follows:
< 1 year
< 1 year
£’000
£’000
1-2
1-2
years
years
£’000
£’000
2-3
2-3
years
years
£’000
£’000
Lease receivables
31 December 2023
40,971
40,971
40,971
31 December 2022
38,975
38,975
38,975
3-4
3-4
years
years
£’000
£’000
4-5
4-5
years
years
£’000
£’000
> 5 years
> 5 years
£’000
£’000
Total
Total
£’000
£’000
Lease receivables
31 December 2023
40,971
40,971
451,354
656,209
31 December 2022
38,975
38,975
462,374
657,249
Leases are direct-let agreements with Registered Providers for a
term of at least 15 years and usually between 20 to 25 years with
rental uplifts linked to CPI or RPI. All leases are full repairing and
insuring (FRI) leases, the tenants are therefore obliged to repair,
maintain and renew the properties back to the original conditions.
The following table gives details of the percentage of annual
rental income per Registered Provider with 10% or more than
10% share in any year presented:
Registered Provider
Registered Provider
31 December
31 December
2023
2023
% of total
% of total
annual rent
annual rent
31 December
2022
% of total
annual rent
Inclusion Housing CIC
29
29
Parasol Homes (previously 28A
Supported Living)
10
10
Other disclosures about leases are provided in notes 5, 14, 16, 19
and 33.
29. CONTROLLING PARTIES
As at 31 December 2023 there is no ultimate controlling party of
the Company.
Notes to the Group Financial Statements
for the year ended 31 December 2023
Financial Statements
150
|
Triple Point Social Housing REIT plc
30. SEGMENTAL INFORMATION
IFRS 8 Operating Segments requires operating segments to be identified based on internal financial reports about components of the
Group that are regularly reviewed by the Chief Operating Decision Maker (which in the Group’s case is delegated to the Delegated
Investment Adviser 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 (2022: 497) Social Housing properties as at 31 December 2023 in England, Wales and
Scotland. 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 the Group’s properties are engaged in a single segment
business with all revenue, assets and liabilities arising in the UK, therefore, no geographical segmental analysis is required by IFRS 8.
31. RELATED PARTY DISCLOSURE
DIRECTORS
Directors are remunerated for their services at such rate as the Directors shall from time to time determine. The Chairman receives a
Director’s fee of £75,000 per annum (2022: £75,000), and the other directors of the Board receive a fee of £50,000 per annum (2022:
£50,000). The Directors are also entitled to an additional fee of £7,500 in connection with the production of every prospectus by the
Company (including the Issue). This was received by the Directors in 2020 but not in the current year as no prospectus was produced.
Dividends of the following amounts were paid to the Directors during the year:
Chris Phillips: £2,995 (2022: £2,960)
Peter Coward: £4,372 (2022: £4,266)
Tracey Fletcher-Ray: £2,060 (2022 £2,036)
Paul Oliver: dividends received in the year until resignation £2,128 (2022: £4,206)
No shares were held by Ian Reeves & Cecily Davis as at 31 December 2023 (31 December 2022: nil).
INVESTMENT MANAGER
The Company considers Triple Point Investment Management LLP (the ‘Investment Manager’) as a key management personnel and
therefore a related party. Further details of the investment management contract and transactions with the Investment Manager are
disclosed in note 8 and 9.
32. CONSOLIDATED ENTITIES
The Group consists of a parent Company, Triple Point Social Housing REIT plc
, incorporated in the UK and a number of subsidiaries
held directly by the Company, which operate and are incorporated in the UK. The principal place of business of each subsidiary is the
same as their place of incorporation.
The Group owns 100% of the equity shares of all subsidiaries listed below and has the power to appoint and remove the majority of
the Board of those subsidiaries. The relevant activities of the below subsidiaries are determined by the Board based on simple majority
Financial Statements
2023 Annual Report
|
151
votes. Therefore, the Directors of the Company concluded that the Company has control over all these entities and all these entities
have been consolidated within these financial statements. The principal activity of all the subsidiaries relates to property investment.
The subsidiaries listed below were held as at 31 December 2023:
Name of Entity
Name of Entity
Registered Office
Registered Office
Country of
Country of
Incorporation
Incorporation
Ownership %
Ownership %
TP REIT Super Holdco Limited*
1 King William Street, London, EC4N 7AF
UK
100%
TP REIT Holdco 1 Limited
1 King William Street, London, EC4N 7AF
UK
100%
TP REIT Holdco 2 Limited
1 King William Street, London, EC4N 7AF
UK
100%
TP REIT Holdco 3 Limited
1 King William Street, London, EC4N 7AF
UK
100%
TP REIT Holdco 4 Limited
1 King William Street, London, EC4N 7AF
UK
100%
TP REIT Holdco 5 Limited
1 King William Street, London, EC4N 7AF
UK
100%
TP REIT Propco 2 Limited
1 King William Street, London, EC4N 7AF
UK
100%
TP REIT Propco 3 Limited
1 King William Street, London, EC4N 7AF
UK
100%
TP REIT Propco 4 Limited
1 King William Street, London, EC4N 7AF
UK
100%
TP REIT Propco 5 Limited
1 King William Street, London, EC4N 7AF
UK
100%
Norland Estates Limited
1 King William Street, London, EC4N 7AF
UK
100%
*
indicates entity is a direct subsidiary of Triple Point Social Housing REIT plc.
33. FINANCIAL RISK MANAGEMENT
The Group is exposed to market risk, interest rate risk, credit risk and liquidity risk in the current and future periods. The Board oversees
the management of these risks. The Board’s policies for managing each of these risks are summarised below.
33.1. MARKET RISK
The Group’s activities will expose it primarily to the market risks associated with changes in property values.
RISK RELATING TO INVESTMENT IN PROPERTY
Investment in property is subject to varying degrees of risk. Some factors that affect the value of the investment in property include:
•
changes in the general economic climate;
•
competition for available properties;
•
obsolescence; and
•
Government regulations, including planning, environmental and tax laws.
Variations in the above factors can affect the valuation of assets held by the Group and as a result can influence the financial performance
of the Group.
The factors mentioned above have not had a material impact on the valuations of the investment properties as at 31 December 2023,
and are not expected to in the immediate future, but will continue to be monitored closely.
Please refer to the Corporate Social Responsibility Report on pages 54 to 55 for further information on Environmental Policy which may
affect the investment property valuations going forward. There was no impact on the valuations in the year ended 31 December 2023
from climate change factors, given that there is little measurable impact on inputs at present.
33.2. INTEREST RATE RISK
The Group’s debt at 31 December 2023 does not have any exposure to interest rate risk.
33.3. CREDIT RISK
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a
financial loss. The Group is exposed to credit risk from both its leasing activities and financing activities, including deposits with banks
and other institutions as detailed in notes 17 and 20.
Notes to the Group Financial Statements
for the year ended 31 December 2023
Financial Statements
152
|
Triple Point Social Housing REIT plc
CREDIT RISK RELATED TO FINANCIAL
INSTRUMENTS AND CASH DEPOSITS
One of the principal credit risks the Group faces arises with the
funds it holds with banks and other institutions. At 31 December
2023 the Group has £29.5 million in current accounts held at
banks, see note 17. The Board believes that the credit risk on
short-term deposits and current account cash balances is limited
because the counterparties are banks and institutions with high
credit ratings.
In August 2023, Fitch has assigned the Company an Investment
Grade Long-Term Issuer Default Rating of ‘A-’ with a stable
outlook, and a senior secured rating of ‘A’ for the Group’s new
Loan Notes, see note 20.
All financial assets are regularly monitored. The maximum
exposure to credit risk at the reporting date is the carrying value
of financial assets disclosed in notes 15 and 16.
CREDIT RISK RELATED TO LEASING
ACTIVITIES
In respect of property investments, in the event of a default by a
tenant, the Group will suffer a rental shortfall and additional costs
concerning re-letting the property to another Social Housing
Registered Provider. Credit risk is primarily managed by testing
the strength of covenant of a tenant prior to acquisition and on an
ongoing basis. The Investment Manager also monitors the rent
collection in order to anticipate and minimise the impact of
defaults by occupational tenants. Outstanding rent receivables
are regularly monitored, the balance of outstanding rent at
31 December 2023 was £2.4 million after a provision for the
expected credit loss.
The Group has leases in place with ten Registered Providers that
have been deemed non-compliant by the Regulator of Social
Housing (RSH) as at 31 December 2023 (2022: 10). We continue
to conduct ongoing due diligence on all Registered Providers and
all rents payable under these leases have been paid. We continue
to monitor and maintain a dialogue with the Registered Providers
as they work with advisers and the RSH to implement a financial
and governance improvement action plan in order to address the
RHS’s concerns. The Board believes that the credit risk associated
with the non-compliant rating is limited.
Rent receivable is the Group’s only financial asset that is subjected
to the expected credit loss model. While the Group has other
financial assets that are also subject to the impairment
requirements of IFRS 9, the identified impairment loss was
immaterial.
33.4. LIQUIDITY RISK
The Group manages its liquidity and funding risks by considering
cash flow forecasts and ensuring sufficient cash balances are held
within the Group to meet future needs. Prudent liquidity risk
management implies maintaining sufficient cash and marketable
securities, the availability of financing through appropriate and
adequate credit lines, and the ability of customers to settle
obligations within normal terms of credit. The Group ensures,
through forecasting of capital requirements, that adequate cash is
available to fund the Group’s operating activities on a weekly
basis.
Upcoming cash requirements are compared to existing
cash reserves available, followed by discussions around optimal
cash management opportunities in order to best manage liquidity
risk.
The following table details the Group’s liquidity analysis:
31 December 2023
31 December 2023
< 3
< 3
months
months
£’000
£’000
3-12
3-12
months
months
£’000
£’000
1-5
1-5
years
years
£’000
£’000
> 5
> 5
years
years
£’000
£’000
Total
Total
£’000
£’000
Headleases (note 28)
10
30
160
7,197
7,397
Trade and other
payables
2,487
195
–
–
2,682
Bank and other
borrowings (note 20):
– Fixed interest rate
–
–
41,500 222,000 263,500
– Variable interest rate
–
–
–
–
–
Interest payable on
bank and other
borrowings:
– Fixed interest rate
1,804
5,413
28,263
33,913
69,393
– Variable interest rate
–
–
–
–
–
4,301
5,638
69,923 263,110 342,972
31 December 2022
31 December 2022
< 3
< 3
months
months
£’000
£’000
3-12
3-12
months
months
£’000
£’000
1-5
1-5
years
years
£’000
£’000
> 5
> 5
years
years
£’000
£’000
Total
Total
£’000
£’000
Headleases (note 28)
10
30
160
7,242
7,442
Trade and other
payables
2,880
105
95
–
3,080
Bank and other
borrowings (note 20):
– Fixed interest rate
–
–
–
263,500 263,500
– Variable interest rate
–
–
–
–
–
Interest payable on
bank and other
borrowings:
– Fixed interest rate
1,804
5,413
28,869
40,523
76,609
– Variable interest rate
–
–
–
–
–
4,694
5,548
29,124 311,265 350,631
Financial Statements
2023 Annual Report
|
153
33.5. FINANCIAL INSTRUMENTS
The Group’s principal financial assets and liabilities, which are all
held at amortised cost, are those that arise directly from its
operation: trade and other receivables, trade and other payables,
headleases, borrowings and cash, cash equivalents and restricted
cash.
Set out below is a comparison by class of the carrying amounts
and fair value of the Group’s financial instruments that are included
in the financial statements:
Book value
Book value
31 December
31 December
2023
2023
£’000
£’000
Fair value
Fair value
31 December
31 December
2023
2023
£’000
£’000
Book value
31 December
2022
£’000
Fair value
31 December
2022
£’000
Financial liabilities:
Borrowings
261,183
205,078
261,088
190,314
34. POST BALANCE SHEET EVENTS
In February 2024, the Company agreed to extend a creditor
agreement with Parasol (9.7% of our Company revenues) on
similar terms for
a further six months whilst we finalise a longer-
term agreement with Parasol that should see rent paid to the
Group by Parasol increase over time. The original agreement was
effective from the 1 July 2023 and was reflective of the level of
rent being received by Parasol at the time. Parasol have
consistently met the terms of the agreement.
On 7 March 2024, the Company declared an interim dividend of
1.365 pence per Ordinary share for the period 1 October 2023 to
31 December 2023. The total dividend of £5,370,818 will be paid
on or around 29 March 2024 to Ordinary shareholders on the
register on 15 March 2024.
35. CAPITAL COMMITMENTS
The Group does not have capital commitments in both the prior
year and the current year.
36. EARNINGS PER SHARE
Earnings per share (“EPS”) amounts are calculated by dividing
profit for the year attributable to ordinary shareholders 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 and diluted earnings per share is based
on the following:
Year ended
Year ended
31 December
31 December
2023
2023
Year ended
31 December
2022
Calculation of Basic Earnings per share
Net profit attributable to Ordinary
Shareholders (£’000)
34,989
24,902
Weighted average number of Ordinary
Shares (excluding treasury shares)
397,007,975
402,789,002
IFRS Earnings per share – basic and diluted
8.81p
6.18p
Calculation of EPRA Earnings per share
Net profit attributable to Ordinary
Shareholders (£’000)
34,989
24,902
Gain from fair value adjustment on
investment properties (£’000)
(15,477)
(8,264)
One-off write-off
of arrangement fees on
the cancelled RCF
–
2,619
EPRA earnings (£’000)
19,512
19,257
Non cash adjustments to include:
Amortisation of loan arrangement fees
307
1,006
Movement in Lease Incentive Debtor
(1,500)
(636)
Adjusted earnings (£’000)
18,319
19,627
Weighted average number of Ordinary
Shares (excluding treasury shares)
397,007,975
402,789,002
EPRA earnings per share
– basic and diluted
4.92p
4.78p
Adjusted earnings per share
– basic and diluted
4.61p
4.87p
Adjusted earnings is a performance measure used by the Board
to assess the Group’s dividend payments. The metric adjusts
EPRA earnings for non cash items, including amortisation of
ongoing loan arrangement fees and the movement in the lease
incentive debtor. In prior years the movement in lease incentive
debtor has not been reflected in the calculation of adjusted
earnings as it was not material. The comparative has been restated
for consistency. 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.
Notes to the Group Financial Statements
for the year ended 31 December 2023
Financial Statements
154
|
Triple Point Social Housing REIT plc
37. NET ASSET VALUE PER SHARE
Basic Net Asset Value (“NAV”) per share is calculated by dividing
net assets in the Group Statement of Financial Position attributable
to Ordinary Shareholders 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:
31 December
31 December
2023
2023
£’000
£’000
31 December
2022
£’000
Net assets at end of the year (£’000)
447,617
439,285
Shares in issue at end of the year
(excluding treasury shares)
393,466,490
402,789,002
Dilutive shares in issue
–
–
IFRS NAV per share – basic and dilutive
113.76p
109.06p
38. CAPITAL MANAGEMENT
The Group’s objectives when managing capital are to safeguard
the Group’s ability to continue as a going concern in order to
provide returns for shareholders and to maintain an optimal capital
structure to minimise the cost of capital.
The Group considers proceeds from share issuance, bank and
other borrowings and retained earnings as capital.
Until the Group is fully invested and pending re-investment or
distribution of cash receipts, the Group will invest in cash
equivalents, near cash instruments and money market instruments.
The level of borrowing will be on a prudent basis for the asset class
and will seek to achieve a low cost of funds, whilst maintaining the
flexibility in the underlying security requirements and the structure
of both the investment property portfolio and the Group
.
The Directors currently intend that the Group should target a level
of aggregate borrowings over the medium term equal to
approximately 40% of the Group’s Gross Asset Value. The
aggregate borrowings will always be subject to an absolute
maximum, calculated at the time of drawdown, of 50% of the
Gross Asset Value.
The initial fixed rate facility with MetLife requires an asset cover
ratio of x2.00 (amended from previous covenant of x2.25 in August
2021 to bring more in line with the ACR covenant in the new Note
Purchase Agreement with MetLife and Barings) and an interest
cover ratio of x1.75. At 31 December 2023, the Group was fully
compliant with both covenants with an asset cover ratio of x2.81
(2022:
x2.77)
and
an
interest
cover
ratio
of
x4.63
(2022: x5.02).
The subsequent facility with MetLife and Barings requires an asset
cover ratio of x1.67 and an interest cover ratio of x1.75. At
31 December 2023, the Group was fully compliant with both
covenants with an asset cover ratio of x2.01 (2022: x2.10) and an
interest cover ratio of x4.26 (2022: x4.41).
Financial Statements
2023 Annual Report
|
155
Company Statement of Financial Position
as at 31 December 2023
31 December
2023
31 December 2022
Note
£’000
£’000
Assets
Non-current assets
Investment in subsidiaries
4
432,498
395,213
Total non-current assets
432,498
395,213
Current assets
Trade and other receivables
5
1,291
1,149
Cash, cash equivalents and restricted cash
6
15,919
14,209
Total current assets
17,210
15,358
Total assets
449,708
410,571
Liabilities
Current liabilities
Trade and other payables
7
2,091
2,036
Total current liabilities
2,091
2,036
Total liabilities
2,091
2,036
Total net assets
447,617
408,535
Equity
Share capital
8
3,940
4,033
Share premium reserve
9
203,753
203,753
Treasury shares reserve
10
(378)
(378)
Capital reduction reserve
11
155,359
160,394
Capital redemption reserve
11
93
–
Retained earnings
13
84,850
40,733
Total Equity
447,617
408,535
Net asset value per share – basic and diluted
14
113.76p
101.43p
The Company has taken advantage of the exemption allowed under Section 408 of the Companies Act 2006 and has not presented its
own Statement of Comprehensive Income in these financial statements. The profit of the Company for the year was
£65,739,000
(2022: £33,517,000).
The Company Financial Statements were approved and authorised for issue by the Board on 7 March 2024 and signed on its behalf by:
Chris Phillips
Chair
7 March 2024
The accompanying notes on pages 157 to 160 form an integral part of these Company Financial Statements.
Company Registration Number: 10814022
Company Statement of Changes in Equity
for the year ended 31 December 2023
Financial Statements
156
|
Triple Point Social Housing REIT plc
Share
capital
£’000
Share
premium
reserve
£’000
Treasury
shares
reserve
£’000
Capital
redemption
reserve
£’000
Capital
reduction
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
Note
Balance at 1 January 202
3
4,033
203,753
(378)
–
160,394
40,733
408,535
Total comprehensive income for the year
–
–
–
–
–
65,739
65,739
Transaction with Owners
Dividends paid
12
–
–
–
–
–
(21,622)
(21,622)
Shares repurchased
(93)
–
–
93
(5,035)
–
(5,035)
Balance at 31 December 202
3
3,940
203,753
(378)
93
155,359
84,850
447,617
Share
capital
£’000
Share
premium
reserve
£’000
Treasury
shares
reserve
£’000
Capital
redemption
reserve
£’000
Capital
reduction
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
Note
Balance at 1 January 2022
4,033
203,753
(378)
–
160,394
28,946
396,748
Total comprehensive income for the year
–
–
–
–
–
33,517
33,517
Transaction with Owners
Dividends paid
12
–
–
–
–
–
(21,730)
(21,730)
Balance at 31 December 2022
4,033
203,753
(378)
–
160,394
40,733
408,535
The accompanying notes on pages 157 to 160 form an integral part of these Company Financial Statements.
Financial Statements
2023 Annual Report
|
157
Notes to the Company Accounts
for the year ended 31 December 2023
1. BASIS OF PREPARATION
The financial statements have been prepared in accordance with
Financial Reporting Standard 100 Application of Financial
Reporting Requirements (“FRS 100”) and Financial Reporting
Standard 101 Reduced Disclosure Framework (“FRS 101”) and in
accordance with the Companies Act 2006.
1.1. DISCLOSURE EXEMPTIONS ADOPTED
In preparing these financial statements the Company has taken
advantage of all disclosure exemptions conferred by FRS 101.
Therefore, these financial statements do not include:
•
certain disclosures regarding the Company’s capital;
•
a statement of cash flows;
•
the effect of future accounting standards not yet adopted;
•
the disclosure of the remuneration of key management
personnel; and
•
disclosure of related party transactions with other wholly-
owned members of the Group.
In addition, and in accordance with FRS 101 further disclosure
exemptions have been adopted because equivalent disclosures
are included in the Group Financial Statements. These financial
statements do not include certain disclosures in respect of:
•
financial instruments; and
•
fair value measurement other than certain disclosures required
as a result of recording financial instruments at fair value.
The principal accounting policies applied in the preparation of
the financial statements are set out below.
2. MATERIAL ACCOUNTING
POLICIES
2.1. CURRENCY
The Company financial information is presented in Sterling which
is also the Company’s functional currency.
2.2. INVESTMENT IN SUBSIDIARIES
Investment in subsidiaries is included in the Company’s Statement of
Financial Position at cost less provision for impairment. Investments
are subject to impairment tests whenever events or changes in
circumstances indicate that their carrying amount may not be
recoverable. Where the carrying value of an asset exceeds its
recoverable amount, the asset is written down accordingly.
Impairment charges are included in profit or loss, except to the extent
they reverse gains previously recognised in other comprehensive
income. Where assets have been transferred within the Group, a
capital reduction in the originating company is performed, and a
dividend is declared to Triple Point Social Housing REIT plc. This
results in an impairment to investments in subsidiaries.
2.3. TRADE AND OTHER RECEIVABLES
Trade and other receivables are amounts due in the ordinary
course of business. If collection is expected in one year or less
from the end of the reporting period, they are classified as current
assets.
Rent receivables are initially recognised at fair value plus
transaction costs and are subsequently carried at amortised cost,
less provision for impairment.
Impairment provisions for amounts due from subsidiaries are
recognised based on a forward-looking expected credit loss
model using the general approach. The methodology used to
determine the amount of the provision is based on whether there
has been a significant increase in credit risk since initial recognition
of the financial asset. For those where the credit risk has not
increased significantly since initial recognition of the financial
asset, twelve month expected credit losses along with gross
interest income are recognised. For those for which credit risk has
increased significantly, lifetime expected credit losses along with
the gross interest income are recognised. For those that are
determined to be credit impaired, lifetime expected credit losses
along with interest income on a net basis are recognised.
2.4. DIVIDEND PAYABLE TO SHAREHOLDERS
Dividends to the Company’s shareholders are recognised as a
liability in the Company’s financial statements in the period in
which the dividends are approved. Interim dividends are
recognised when paid. In the case of final dividends, this is when
approved by the shareholders at the Annual General Meeting.
2.5. INVESTMENT MANAGEMENT FEES
Investment management fees are recognised in the profit or loss
on an accruals basis.
2.6 TREASURY SHARES
Consideration paid or received for the purchase or sale of treasury
shares is recognised directly in equity. The cost of treasury shares
held is presented as a separate reserve (the “treasury share
reserve”). Any excess of the consideration received on the sale of
treasury shares over the weighted average cost of the shares sold
is credited to retained earnings.
Notes of the Company Accounts
for the year ended 31 December 2023
Financial Statements
158
|
Triple Point Social Housing REIT plc
3. SIGNIFICANT ACCOUNTING
JUDGEMENTS, ESTIMATES AND
ASSUMPTIONS
The preparation of the Company’s Financial Statements requires
the Directors to make judgements, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets
and liabilities and the disclosure of contingent liabilities at the
reporting date. However, uncertainty about these assumptions
and estimates could result in outcomes that require a material
adjustment to the carrying amount of the asset or liability affected
in future periods. The estimate and associated assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial
year is as follows:
INVESTMENTS
Investments held as fixed assets are stated at cost less any
provision for impairment. The Directors assess the recoverability
of investments made and economic benefit of the investments
based on market conditions, economic forecasts and cash flow
estimates.
4. INVESTMENT IN
SUBSIDIARIES
31 December
2023
31 December
2022
£’000
£’000
Balance at beginning of year
395,213
382,318
Reversal of impairment
37,285
2,334
Acquisitions
–
10,561
Balance at end of year
432,498
395,213
Investment in subsidiaries are included in the Company’s
Statement of Financial Position at cost less provision for
impairment.
The reversal of impairment in the year is due to the underlying net
asset value of the subsidiary increasing due to the valuations of
the underlying property, requiring a reversal of the original
impairment.
Given that the underlying investments are supported by a
valuation of the properties, the Company has considered the
carrying value by reference to the net asset value of the Group
entities. If discount rates used in property valuations were 0.5%
higher/lower,
the
carrying
value
would
£38,653,000
higher/£35,403,000 (2022: £40,552,000 higher/£36,941,000
lower) respectively.
A list of the Company’s subsidiary undertakings as at 31 December
2023 is included in note 32 of the Group Financial Statements.
5. TRADE AND OTHER
RECEIVABLES
31 December
2023
31 December
2022
£’000
£’000
Amounts due from subsidiaries
1,140
1,003
Prepayments
150
144
Other receivables
1
2
1,291
1,149
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 and
amounts due from subsidiaries. Both the expected credit loss and
the incurred loss provision in the current and prior year are
immaterial.
6. CASH, CASH EQUIVALENTS
AND RESTRICTED CASH
31 December
2023
31 December
2022
£’000
£’000
Restricted cash
438
438
Cash at Bank
15,481
13,771
15,919
14,209
Restricted cash represents monies held in escrow in relation to the
transfer of leases during 2020.
7. TRADE AND OTHER PAYABLES
CURRENT LIABILITIES
31 December
2023
31 December
2022
£’000
£’000
Trade payables
1
37
Accruals
2,070
1,979
Other creditors
20
20
2,091
2,036
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.
Financial Statements
2023 Annual Report
|
159
8. SHARE CAPITAL
Issued and
fully paid
Issued and
fully paid
Number
£’000
At 1 January 2023
403,239,002
4,033
Shares cancelled in the year
(9,322,512)
(93)
At 31 December 2023
393,916,490
3,940
Issued and
fully paid
Issued and
fully paid
Number
£’000
At 1 January 2022
403,239,002
4,033
At 31 December 2022
403,239,002
4,033
The Company achieved admission to the specialist fund segment
of the main market of the London Stock Exchange on 8 August
2017, raising £200 million. As a result of the IPO, at 8 August
2017, 200,000,000 shares at one pence per share have been
issued and fully paid. The Company 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.
Since then there were three public offers up to 21 October 2020
and a further 193,916,490 Ordinary Shares of one pence each
were issued and fully paid.
The Company 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 table above includes 450,000 treasury shares (note 10).
Treasury shares do not hold any voting rights.
Between 19 April 2023 and 12 June 2023 the Company
repurchased 9,322,512 shares at an average price of 52.6 pence
per share, the shares were subsequently cancelled.
9. SHARE PREMIUM RESERVE
The share premium reserve relates to amounts subscribed for
share capital in excess of nominal value.
31 December
2023
31 December
2022
£’000
£’000
Balance at beginning of year
203,753
203,753
Balance at end of year
203,753
203,753
10. TREASURY SHARES RESERVE
31 December
2023
31 December
2022
£’000
£’000
Balance at beginning of year
(378)
(378)
Balance at end of year
(378)
(378)
The treasury shares reserve relates to the value of shares purchased
by the Company in excess of nominal value. During the year
ended 31 December 2019, the Company purchased 450,000 of
its own 1p Ordinary Shares at a total gross cost of £377,706
(£374,668 cost of shares and £3,038 associated costs). As at
31 December 2023, 450,000 1p Ordinary Shares are held by the
Company (31 December 2022: 450,000 1p Ordinary Shares).
11. CAPITAL REDUCTION RESERVE
31 December
2023
31 December
2022
£’000
£’000
Balance at beginning of year
160,394
160,394
Share buybacks and cancellation
(5,035)
–
Balance at end of year
155,359
160,394
The capital reduction reserve relates to the distributable reserve
established on cancellation of the share premium reserve. Between
19 April 2023 and 12 June 2023 the Company repurchased
9,322,512 shares at an average price of 52.6 pence per share.
During the Board meeting on 3 August 2017 a resolution was
passed authorising the cancellation of the share premium account.
The amount standing to the credit of the share premium account
of the Company following completion of the Issue (less any issue
expenses set off against the share premium reserve) was, as a
result, credited as a distributable reserve to be established in the
Company’s books of account which shall be capable of being
applied in any manner in which the Company’s profits available for
distribution (as determined in accordance with the Companies Act
2006) are able to be applied.
In order to cancel the share premium reserve the Company
needed to obtain a court order, which was received on
15 November 2017. An SH19 form was filed at Companies House
with a copy of the court order and the certificate of cancellation
was issued by Companies House on 15 November 2017.
Notes of the Company Accounts
for the year ended 31 December 2023
Financial Statements
160
|
Triple Point Social Housing REIT plc
CAPITAL REDEMPTION RESERVE
31 December
2023
31 December
2022
£’000
£’000
Balance at beginning of year
–
–
Original shares repurchased & cancelled
93
–
Balance at end of year
93
–
The Capital Redemption Reserve is the nominal value of the shares
cancelled from the share buybacks.
12. DIVIDENDS
Year ended
31
December
2023
Year ended
31 December
2022
£’000
£’000
1.3p for the 3 months to 31 December 2021
paid on 25 March 2022
–
5,236
1.365p for the 3 months to 31 March 2022
paid on 24 June 2022
–
5,498
1.365p for the 3 months to 30 June 2022
paid on 30 September 2022
–
5,498
1.365p for the 3 months to 30 September
2022 paid on 16 December 2022
–
5,498
1.365p for the 3 months to 31 December
2022 paid on 29 March 2023
5,498
–
1.365p for the 3 months to 31 March 2023
paid on 28 June 2023
5,382
–
1.365p for the 3 months to 30 June 2023
paid on 29 September 2023
5,371
–
1.365p for the 3 months to 30 September
2023 paid on 15 December 2023
5,371
–
21,622
21,730
On 7 March 2024, the Company declared an interim dividend of
1.365 pence per Ordinary share for the period 1 October 2023 to
31 December 2023. The total dividend of £5,370,818 will be paid
on or around 29 March 2024 to Ordinary shareholders on the
register on 15 March 2024.
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 the treasury shares held by
the Company.
13. RETAINED EARNINGS
31 December
2023
31 December
2022
£’000
£’000
Balance at beginning of year
40,733
28,946
Total comprehensive profit for the year
65,739
33,517
Dividends paid
(21,622)
(21,730)
Balance at end of year
84,850
40,733
14. NET ASSET VALUE PER SHARE
Net Asset Value per share is calculated by dividing net assets in
the Company Statement of Financial Position attributable to
ordinary equity holders of the Company by the number of
Ordinary Shares outstanding at the end of the year. 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:
31 December
2023
31 December
2022
Net assets at end of period (£’000)
447,617
408,535
Shares in issue at end of period
(excluding treasury shares)
393,466,490
402,789,002
Dilutive shares in issue
–
–
Basic and dilutive per share
113.76p
101.43p
15. RELATED PARTY TRANSACTIONS
The Company has taken advantage of the exemption not to disclose
transactions with other members of the Group as the Company
Financial Statements are presented together with the Group Financial
Statements.
Note 31 of the Notes to the Group Financial Statements includes
details of other related party transactions undertaken by the
Company and its subsidiaries.
16. POST BALANCE SHEET EVENTS
On 7 March 2024, the Company declared an interim dividend of
1.365 pence per Ordinary share for the period 1 October 2023 to
31 December 2023. The total dividend of £5,370,818 will be paid
on or around 29 March 2024 to Ordinary shareholders on the
register on 15 March 2024.
2023 Annual Report
|
161
Other Information
Unaudited Performance Measures
for the year ended 31 December 2023
1. EPRA NET REINSTATEMENT
VALUE
31 December
31 December
2023
2023
31 December
2022
IFRS NAV/EPRA NAV (£’000)
447,617
439,285
Include:
Real Estate Transfer Tax* (£’000)
41,962
41,283
EPRA Net Reinstatement Value (£’000)
489,579
480,568
Fully diluted number of shares
393,446,490
402,789,002
EPRA Net Reinstatement value per
share
124.43p
119.31p
* Purchaser’s costs
2. EPRA NET DISPOSAL VALUE
31 December
31 December
2023
2023
31 December
2022
IFRS NAV/EPRA NAV (£’000)
447,617
439,285
Include:
Fair value of debt* (£’000)
56,106
70,774
EPRA Net Disposal Value (£’000)
503,723
510,059
Fully diluted number of shares
393,446,490
402,789,002
EPRA Net Disposal Value**
128.02p
126.63p
*
Difference between interest-bearing loans and borrowings included in Group
Statement of Financial Position at amortised cost, and the fair value of interest-
bearing loans and borrowings.
**Equal to the EPRA NNNAV disclosed in previous reporting periods.
3. EPRA NET TANGIBLE ASSETS
31 December
31 December
202
202
3
3
31 December
2022
IFRS NAV/EPRA NAV (£’000)
447,617
439,285
EPRA Net Tangible Assets (£’000)
447,617
439,285
Fully diluted number of shares
393,446,490
402,789,002
EPRA Net Tangible Assets*
113.76p
109.06p
* Equal to IFRS NAV and previous EPRA NAV metric as none of the EPRA Net
Tangible Asset adjustments are applicable as at 31 December 2023 or
31 December 2022.
4.
EPRA NET INITIAL YIELD
(NIY) AND EPRA
“TOPPED UP” NIY
31 December
31 December
2023
2023
31 December
2022
£’000
£’000
£’000
Investment Property – wholly-owned
(excluding head lease ground rents)
674,033
666,253
Less: development properties
–
–
Completed property portfolio
674,033
666,253
Allowance for estimated purchasers’
costs
41,962
41,283
Gross up completed property portfolio
valuation
715,995
707,536
Annualised passing rental income
39,912
38,626
Property outgoings
–
–
Annualised net rents
39,912
38,626
Contractual increases for lease incentives
1,059
349
Topped up annualised net rents
40,971
38,975
EPRA NIY
5.57%
5.46%
EPRA Topped Up NIY
5.72%
5.51%
5. ONGOING CHARGES RATIO
31 December
31 December
2023
2023
31 December
2022
£’000
£’000
£’000
Annualised ongoing charges
7,242
7,018
Average undiluted net assets
443,451
437,699
Ongoing charges
1.63%
1.60%
162
|
Triple Point Social Housing REIT plc
Other Information
Unaudited Performance Measures
for the year ended 31 December 2023
6. EPRA VACANCY RATE
31 December
31 December
2023
2023
31 December
2022
£’000
£’000
£’000
Estimated Market Rental Value (ERV) of
vacant spaces
138
–
Estimated Market Rental Value (ERV) of
whole portfolio
40,971
38,975
EPRA Vacancy Rate
0.33%
–
7. EPRA COST RATIO
31 December
31 December
2023
2023
31 December
2022
£’000
£’000
£’000
Total administrative and operating costs
8,208
7,866
Gross rental income
39,839
37,300
EPRA cost ratio
20.60%
21.09%
2023 Annual Report
|
163
Other Information
Glossary and Definitions
“AIC CODE”
AIC Code of Corporate Governance produced by the Association of Investment Companies.
“AIC GUIDE”
AIC Corporate Governance Guide for Investment Companies produced by the Association of
Investment Companies.
“AIFM”
the alternative investment fund manager of the Company being Triple Point Investment
Management LLP.
“AIFMD”
the EU Alternative Investment Fund Managers Directive 2011/61/EU
.
“APPROVED
PROVIDER”
a housing association, Local Authority or other regulated organisation in receipt of direct payment
from local government including a care provider.
“BASIC NAV”
the value, as at any date, of the assets of the Company after deduction of all liabilities determined
in accordance with the accounting policies adopted by the Company from time to time.
“BOARD”
the Directors of the Company from time to time.
“COMPANY”
Triple Point Social Housing REIT plc (company number 10814022).
“DTR”
the Disclosure Guidance and Transparency Rules sourcebook containing the Disclosure Guidance,
Transparency Rules, corporate governance rules and the rules relating to primary information
providers.
“EPRA”
the European Public Real Estate Association.
“GAV”
the gross assets of the Company in accordance with applicable accounting rules from time to time.
“GROUP”
the Company and any subsidiary undertakings from time to time.
“INVESTMENT
MANAGER”
Triple Point Investment Management LLP (partnership number OC321250).
“IPO”
the admission by the Company of 200 million Ordinary Shares to trading on the Specialist Fund
Segment of the Main Market, which were the subject of the Company's initial public offering on
8 August 2017.
“NAV”
the net assets of the Company in accordance with applicable accounting rules from time to time.
“NIY”
net initial yield, being the annual rent generated under a lease in respect of a
property divided by the combined total of that property’s acquisition price and acquisition costs.
“ORDINARY
SHARES”
ordinary shares of £0.01 each in the capital of the Company.
164
|
Triple Point Social Housing REIT plc
Other Information
“REGISTERED
PROVIDER”
a housing association or Local Authority.
“REGULATOR OF
SOCIAL HOUSING”
The Regulator of Social Housing is an executive non-departmental public body, sponsored by the
Department for Levelling Up, Housing and Communities responsible for promoting a viable,
efficient and well-governed social housing sector.
“REIT”
means
a
qualifying
real
estate
investment
trust
in
accordance
with
the
UK
REIT
Regime introduced by the UK Finance Act 2006 and subsequently re-written into Part 12 of the
Corporation Tax Act 2010.
“SUPPORTED
HOUSING”
accommodation that is suitable, or adapted, for residents with special needs, which may (but does
not necessarily): (a) include some form of personal care provided by a supported
housing care provider; and/or (b) that enable those tenants to live independently in the
community.
“SPECIALISED
SUPPORTED
HOUSING”
accommodation which is designed, structurally altered, refurbished or designated for occupation
by, and made available to, residents who require specialised services or support in order to enable
them to live, or to adjust to living, independently within the community.
“TOTAL RETURN”
the percentage increase in net asset value plus dividends paid since IPO.
“WAULT”
the weighted average unexpired lease term certain across the portfolio, weighted by
contracted
rental
income.
We
have
included
all
parts
of
the
term
certain,
including additional leases which are triggered by landlords’ put options, but not those triggered
by lessees’ call options unless the options were mutual.
Glossary and Definitions
2023 Annual Report
|
165
Other Information
Shareholder Information
NON-EXECUTIVE DIRECTORS
REGISTERED OFFICE
Chris Phillips
Ian Reeves CBE
Peter Coward
Tracey Fletcher-Ray
Cecily Davis
1 King William Street
London
EC4N 7AF
ALTERNATIVE INVESTMENT FUND MANAGER
(“INVESTMENT MANAGER”)
JOINT FINANCIAL ADVISER
Akur Limited
66 St James’s Street
London
SW1A 1NE
Triple Point Investment Management LLP
1 King William Street
London
EC4N 7AF
JOINT FINANCIAL ADVISER AND CORPORATE
BROKER
LEGAL ADVISER
Taylor Wessing LLP
5 New Street Square
London
EC4A 3TW
Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
TAX ADVISER
DEPOSITARY
Deloitte LLP
1 New Street Square
London
EC4A 3BZ
INDOS Financial Limited
The Scalpel
52 Lime Street
London
EC3M 7AF
ADMINISTRATOR AND COMPANY SECRETARY
REGISTRAR
Hanway Advisory Limited
1 King William Street
London
EC4N 7AF
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
AUDITOR
VALUER
BDO LLP
55 Baker Street
London
W1U 7EU
Jones Lang LaSalle Limited
30 Warwick Street
London
W1B 5NH
FINANCIAL PUBLIC RELATIONS ADVISER
Brunswick Group Partnership Limited
16 Lincoln’s Inn Fields
London
WC2A 3ED
1 King William Street | London | EC4N 7AF
For further information about Triple Point Group
please call
020 7201 8990
or send an email to
Triple Point is the trading name for the Triple Point Group which includes the following companies and associated entities: Triple
Point Investment Management LLP registered in England & Wales no. OC321250, authorised and regulated by the Financial
Conduct Authority no. 456597, Triple Point Administration LLP registered in England & Wales no. OC391352 and authorised and
regulated by the Financial Conduct Authority no. 618187, and TP Nominees Limited registered in England & Wales no.07839571,
all of 1 King William Street, London, EC4N 7AF, UK.
We will process any personal data of yours received in connection with the business we carry on with you in accordance with our
privacy policy, which can be found on our website or provided to you upon request.