Triple Pnt Soc Regulatory News (SOHO)

7 September 2023

Triple Point Social Housing REIT plc

(the "Company" or, together with its subsidiaries, the "Group")

RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2023

The Board of Triple Point Social Housing REIT plc (ticker: SOHO) is pleased to announce its unaudited results for the six months ended 30 June 2023.

Chris Phillips, Chair of Triple Point Social Housing REIT plc, commented:

"The Company has continued to demonstrate strong rental growth and valuation resilience during the first half of 2023, despite the uncertain macro-economic backdrop. We were pleased to announce the recent portfolio sale of properties principally in line with book value, demonstrating continued liquidity and the resilience of valuations in the sector. 

The Investment Grade rating of our long-term fully fixed priced debt was reaffirmed last month and our focus remains on the operating performance of our portfolio. Our proactive approach to asset management, paired with the inflation protection offered through our rental income, and the growing demand for specialised supported housing, means that we are well positioned to ensure the sustainability of our investments over the long-term."

Financial highlights

· EPRA NTA per share up 2.1% to 111.31 pence at 30 June 2023 (31 December 2022: 109.06 pence), reflecting an increase in the value of the Group's property portfolio and the accretive impact of the £5 million share buyback programme over the period.

· Portfolio valued as at 30 June 2023 at £675.1 million on an IFRS basis, up from £669.1 million as at 31 December 2022 and reflecting a valuation uplift of 12.2% against total invested funds of £601.9 million1. The positive impact of strong rental growth on valuations was partially offset by an outward movement in yields reflecting wider market conditions.

· The fair value gain on investment properties for the six months ended 30 June 2023 amounted to £5.9 million (30 June 2022: £17.1 million). Net profit for the six months ended 30 June 2023 was £14.6 million (30 June 2022: £24.9 million). The reduction relative to the comparable period in 2022 was principally reflective of the impact of a lower fair value gain on investment properties being recognised during the period. The Expected Credit Loss adjustment made (relating to unpaid rent) also had a negative impact on net profit.

· The portfolio's total annualised contracted rental income was £40.5 million as at 30 June 2023 (31 December 2022: £39.0 million).  IFRS Gross Revenue for the period was £19.6 million (£18.2 million for the six months ended 30 June 2022).

· 100% of contracted rental income was either CPI (92.4%) or RPI (7.6%) linked. 4.9% of the Group's leases are capped (excluding the temporary rent cap of 7% applied to the Group's rent increases for the year of 2023).

· Ongoing Charges Ratio of 1.63% as at 30 June 2023 (31 December 2022: 1.60%; 30 June 2022: 1.57%), with the marginal increase primarily due the impact of inflation on the Group's cost base.

· All drawn debt is fixed (weighted average coupon of 2.74%) and long-term (10.1 years), which continues to offer strong protection against increasing interest rates.

· Maintained an Investment Grade Issuer Default Rating from Fitch of 'A-' (Stable Outlook) with a senior secured rating of 'A'.

Successful portfolio sale demonstrating the value of the Group's assets and dividend in line with target

· Portfolio of four properties sold for £7.6 million, in line with book value of £7.9 million and representing an increase of £0.7 million (9.6%) compared to the aggregate purchase price paid by the Group for the properties.

· The dividend to be paid on 30 September 2023 brings the total dividend per share paid or declared by the Company in respect of the six month period to 30 June 2023 to 2.73 pence per share, in line with the Company's stated target for the year to 31 December 2023 of 5.46 pence per share.2

· Dividend cover on an adjusted earnings basis at 30 June 2023 was 0.81x (31 December 2022: 0.92x). If an adjustment is made for the portion of the Expected Credit Loss recognised in the six months ended 30 June 2023 that relates to unpaid rent due in 2022, dividend cover for the six months ended 30 June 2023 was 0.90x.

Operational highlights

· 88.1% of rent due was collected during the period, and 25 out of the Group's 27 lessees recorded no material rent arrears. Post the period end, the Investment Manager has made progress in respect of both Approved Providers which have material rent arrears.

o  There is now a creditor agreement in place with Parasol in respect of future rental payments.

o  Similarly, a creditor agreement is being negotiated with My Space in respect of future rental payments together with a payment plan for arrears. Simultaneoulsy a transfer of properties to alternative Registered Providers is being considered.

· EPRA blended NIY of 5.65% based on the value of the portfolio on an IFRS basis as at 30 June 2023, against the portfolio's blended net initial yield on purchase of 5.91%, equating to yield compression of 26bps.

· Diversified portfolio of 497 properties3:

o  11 regions

o  153 local authorities

o  394 leases

o  27 Approved Providers

o  123 care providers

· As at 30 June 2023, the weighted average unexpired lease term ("WAULT") was 24.8 years.

· Agreed a new lease clause, with support from stakeholders, which seeks to address general risks raised by the Regulator of Social Housing in relation to long leases, to be implemented in the Group's existing Registered Provider leases in the second half of 2023.

· Commenced the pilot phase of an energy efficiency improvement initiative which entails upgrading all of the Group's properties to an Energy Performance Certificate ("EPC") rating of C or above. Over 70% of the Group's properties already meet this standard (compared to a social housing sector average of c. 57%).

· Partnership with Golden Lane, a Registered Provider with a regulatory compliance rating of G1 V2 and one of the leading providers in the Specialised Supported Housing sector, on a pipeline of projects.

Notes:

1 Including acquisition costs

2 These are targets only and not a profit forecast and there can be no assurance that they will be met

3 Four out of these 497 properties are classified as assets held for sale at 30 June 2023

FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:

The Company's LEI is 213800BERVBS2HFTBC58.

Further information on the Company can be found on its website at www.triplepointreit.com.

IMPORTANT INFORMATION:

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014, as it forms part of UK Domestic Law by virtue of the European Union (Withdrawal) Act 2018, as amended and supplemented ("UK MAR") and is disclosed in accordance with the Company's obligations under UK MAR. Upon the publication of this announcement, this inside information will be considered to be in the public domain.

NOTES:

The Company invests in primarily newly developed social housing assets in the UK, with a particular focus on supported housing. The assets within the portfolio are subject to inflation-linked, long-term (typically from 20 years to 30 years), Fully Repairing and Insuring ("FRI") leases with Approved Providers (being Housing Associations, Local Authorities or other regulated organisations in receipt of direct payment from local government). The portfolio comprises investments into properties which are already subject to an FRI lease with an Approved Provider, as well as forward funding of pre-let developments but does not include any direct development or speculative development.

The Company was admitted to trading on the Specialist Fund Segment of the Main Market of the London Stock Exchange on 8 August 2017 and was admitted to the premium segment of the Official List of the Financial Conduct Authority and migrated to trading on the premium segment of the Main Market on 27 March 2018. The Company operates as a UK Real Estate Investment Trust ("REIT") and is a constituent of the FTSE EPRA/NAREIT index.

Meeting for analysts and audio recording of results available

The Company presentation for analysts will be held at 8.00am today via live webcast. The presentation will also be accessible on-demand later in the day via the Company website: www.triplepointreit.com.

Those wishing to access the live webcast are kindly asked to contact the Company Secretary  at Hanway Advisory on +44 (0) 20 3909 3519 or cosec@hanwayadvisory.com.

The Interim Results will also be available to view and download on the Company's website at www.triplepointreit.com and hard copy will be posted to shareholders on or around 15 September 2023.

CHAIR'S STATEMENT

Introduction

The macroeconomic backdrop during the first half of 2023 has remained uncertain. High interest rates and gilt yields have impacted the wider property sector. Despite these challenges, the Specialised Supported Housing sector has continued to demonstrate strong rental growth and valuation resilience.

Last year, we took the decision to cap the Group's 2023 rent increases at 7%, in line with the government's cap on social housing rent increases, even though Specialised Supported Housing was excluded from this cap. Given UK CPI has remained elevated, rents have been increased in line with the cap. This rental growth has offset general market wide yield compression and helped us to deliver growth in the Group's portfolio value and EPRA NTA per share in the first half of the year despite the very challenging economic environment, differentiating us from other UK property sectors that have suffered material reductions in value.

The relatively strong performance of the Specialised Supported Housing sector is reassuring and in line with the sector's fundamentals. There remains a lack of supply and all forecasts point to growing excess demand for more independent community-based homes for people with care and support needs. This, combined with government financial support for the individuals that live in Specialised Supported Housing, means that the sector is well placed to withstand periods of economic uncertainty.

Capital Allocation

We aim to supplement our existing portfolio of properties with forward funding projects and acquisitions over the medium term, however all deployment is considered in the context of delivering shareholder value and the broader market conditions. During the six months ended 30 June 2023, the Board has viewed share buybacks as a more attractive and appropriate use of the Group's capital, buying back £5 million (9,322,512 shares) between 19 April 2023 and 12 June 2023 at an average discount to the prevailing published EPRA NTA of 52.8%, which has been accretive to dividend cover. The Group does intend to invest into a competitively priced forward funding project in conjunction with Golden Lane, a Registered Provider with a regulatory compliance rating of G1 V2 and one of the leading providers in the Specialised Supported Housing sector. Further detail on this new partnership can be found in the Investment Manager's Report.

As indicated in the Group's 2022 Annual Report, it has been a priority of the Board to demonstrate the value of the Group's assets through a sale of a portfolio of properties. Since the period end, we have successfully concluded a portfolio disposal of four properties for an aggregate consideration of £7.6 million which is principally in line with the book value of £7.9 million as at 30 June 2023 and reflects a £0.7 million gain (9.6%) against the aggregate purchase price that the Group paid for the properties. The portfolio of properties sold contained a mix of property types, lessees and care providers. Following consultation with shareholders over the coming weeks, and with consideration given to the Group's leverage position, the Board will consider whether some of the proceeds from the sale should be used for an additional share buyback programme. More details on the sale and capital allocation are included in the Investment Manager's Report.

Portfolio Performance

Consolidating and optimising the performance of the Group's portfolio has been a principal focus of the Board and the Investment Manager.

Since early 2020, the operating environment has been difficult for all our Approved Providers. As the numerous challenges posed by COVID-19 eased, they were replaced with the financial headwinds of rising inflation and increased regulatory costs. Despite challenging economic conditions, the majority of the Group's Approved Providers are performing in line with expectations, and have managed to navigate these issues successfully. Reassuringly we are seeing signs of improvement, with a recent reduction in gas prices, a less challenging labour market and an overall improvement in the operational backdrop for our partners which allows us to look forward with renewed confidence. 

We believe the strength of our relationships with our partners sets us apart in the Specialised Supported Housing sector. This ensures that we have both the operational data and anecdotal feedback required for a granular understanding of the performance of the Group's portfolio of properties. All aspects of portfolio management, including compliance, care provider performance and local authority nominations, are monitored and assessed on an ongoing basis. This enables us to intervene quickly if issues arise and to help our lessees move forward through initiatives such as the roll out of our new lease clause as described in the Investment Manager's Report.

As previously reported, rent receipts were lower than expected for two of the Group's lessees, My Space and Parasol. We are pleased to report that a creditor agreement has been put in place with Parasol which reflects the current level of rents being received and allows for rents to increase over time. Similarly, we hope to agree a creditor agreement with My Space shortly, and continue to engage with alternative Registered Providers so that the Group's properties can be moved should we deem this to be in the best interests of residents and the sustainability of the Group's income. The Group's Board and the Investment Manager are focused on ensuring that My Space and Parasol perform in line with expectations. A full update on the performance of these lessees is included in the Investment Manager's Report.

Alongside maintaining the performance of our portfolio, we have evolved our investment structure to provide appropriate support to our Registered Provider lessee partners as they look to progress from a risk management and regulatory perspective. We have led the sector on managing risk by rolling out a new risk sharing clause across all our Registered Provider leases which can help boards of Registered Providers demonstrate material progress on risk management to the Regulator of Social Housing.

Recognising the link between value creation and the quality of the homes we deliver, the Board is taking increased measures to oversee the broader sustainability credentials of the Group. A separate Sustainability Committee has been established to ensure due consideration of a range of sustainability activities and outcomes, which will be detailed further in the 2023 Annual Report.

Financial Results

The Group has continued to demonstrate strong financial resilience in challenging conditions. The EPRA NTA per share as at 30 June 2023 was 111.31 pence per share, an increase of 2.25 pence compared to the NTA of 109.06 pence per share as at 31 December 2022. This increase was driven by growth in the value of the Group's property portfolio and the accretive impact of the share buybacks undertaken by the Group in the period.

In August, 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, for the second consecutive time.

I am pleased to report that we continue to pay dividends in line with our annual targets, as we have done consistently since IPO. For the six months ended 30 June 2023, dividend cover, based on adjusted earnings, was 0.81x. Dividend cover was lower than in previous periods due to an additional provision of £1.0 million recognised in the period, relating to the My Space and Parasol rent arrears for the year ended 31 December 2022. Without this additional provision, adjusted dividend cover for the six months ended 30 June 2023 was 0.90x1. Through our focus on addressing the current level of rent payments from My Space and Parasol (details on which are provided in the Investment Manager's Report) we will look to improve dividend cover over the course of this year and preserve it over the longer-term.

Overall, we are proud of another set of resilient financial results which build on our performance to date and the encouraging operational progress made during the period. This would not have been possible without the support of our stakeholders, all of whom played an important role in helping deliver on our investment strategy. You can read more about our financial performance during the period in our Key Highlights, along with a more in-depth review in the Investment Manager's Report.

Social Impact

Social Impact continues to be at the forefront of our decision-making processes and is central to our business model. The independent Impact Report prepared by The Good Economy for the six months ended 30 June 2023 provides an independent assessment of our impact performance, based on an analysis of quantitative data and evidence, as well as in-depth interviews with a range of stakeholders. 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.

Outlook

Whilst capital markets remain challenging, our focus remains on the operating performance of our portfolio which we expect to demonstrate continued operational and valuation resilience. As a responsible investor, we are proactive in managing the portfolio, working alongside housing providers to identify and address risks in order to ensure the sustainability of our investments over the long term.

We are well placed to continue to deliver on our return targets to investors. We expect further strong rental growth, which helps to underpin the Group's property valuations and increases income. This, combined with our long-term, fixed-price debt means that we do not need to raise additional capital or refinance to meet return expectations in the near term. By focusing on our operational performance, we can ensure that over time, net assets and distributions to investors increase whilst our gearing levels naturally decline.

We are committed to addressing the performance of the Company's share price, and to work to narrow the discount to prevailing Net Asset Value. The Group continues to report strong operational and financial performance and we are increasing our efforts to ensure our shareholders and the wider investment community understand our compelling fundamentals. Further, we critically consider capital allocation, recycling capital into what we evaluate to be accretive investments.

On behalf of the Board, I would like to thank the Investment Manager and advisers for their continued hard work and dedication to our investment strategy. 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

6 September 2023

Notes:

1 See Notes 3 and 4 for further explanation.

INVESTMENT MANAGER'S REPORT

Specialised Supported Housing Market

Since the inception of the Company, there has never been a greater need for private capital to help deliver Specialised Supported Housing. The government estimates that demand for Supported Housing is expected to increase by 125,000 by 2030.1 Demand continues to grow whilst Registered Providers face challenges of high inflation and interest rates, at a time when there is growing pressure to invest into their existing housing stock to meet the latest energy efficiency and fire safety standards. There is growing recognition by Registered Providers that private capital that takes a long-term view of ownership and that can invest on flexible terms, has a vital role to play in the delivery of Specialised Supported Housing. Registered Providers working with experienced and pragmatic investors can form effective partnerships and help deliver additional homes to individuals throughout the UK.

We are seeing an unprecedented level of demand from Registered Providers looking for funding partners to help them deliver development pipelines over the coming months and years. This partnership approach is critical to addressing the undersupply of Specialised Supported Housing, and is the primary driver behind our partnership with Golden Lane with whom we are working on a pipeline of projects, with the first one being in Chorley.

Leasing, Asset and Property Management

The six months ended 30 June 2023 have seen the Group deliver on a set of initiatives that distinguish it from peers and demonstrate its commitment to the sector. We were amongst the first within the sector to cap 2023 rent increases in our leases at 7.0%, irrespective of the Specialised Supported Housing rents' exclusion from the government's rent cap. This aims to ensure that our Registered Provider tenants and the individuals living in our properties are not put under undue financial pressure. In June, we commenced the roll out of our new lease clause, which will help our Registered Provider partners demonstrate to the Regulator of Social Housing that they have accommodated concerns with regards to risk sharing in long leases. Finally, we have recently commissioned the initial works in the roll-out of our Eco-Retrofit programme, which will demonstrate a tenant-first approach in ensuring that the Group's properties are compliant with energy efficiency requirements, and that carbon emissions and utility bills of both our lessees, and the individuals living in our properties, are minimised.

As well as benefiting the sector, our lessees and the residents, we believe that taking a long-term approach to asset management decisions supports and enhances shareholder value. Investing in energy efficiency will help to preserve the value of the Group's portfolio. Rebalancing risk in existing leases should promote the Regulatory compliance of the Group's lessees and support the Group's portfolio performance and valuation. Capping rents helps to ensure the long-term sustainability of the Group's rental income.

The benefit of this long-term approach is evidenced by a resilient set of interim results. Against a backdrop of very challenging market conditions the EPRA NTA has increased by 2.25 pence per share. Similarly, annualised contracted rental income has increased from £39.0 million in the prior year to £40.5 million in the current period.

Whilst the operating environment remains challenging, the majority of our lessee partners continue to perform in line with expectations and we expect the performance of the Group's lessees to demonstrate resilience in times of economic uncertainty. Our lessees provide homes to individuals whom local authorities have a statutory obligation to house and typically the relevant local authority will meet the entirety of the cost of this housing. Combined with the systemic undersupply of Specialised Supported Housing, this underpins the income generated by our Registered Provider partners.

Our lessees' income is resilient, however, their costs have increased significantly over the last two years. Whilst gas prices have calmed, our lessees remain mindful of other cost pressures including repairs and maintenance costs which continue to increase. It is important that the Group's lessees manage this increase in their cost base whilst continuing to comply with their maintenance obligations under the Group's leases.

New Lease Clause

As noted in our 2022 Annual Report, and having since received supportive feedback from shareholders, our intention is to include a new clause in all the Group's existing leases with Registered Providers. The aim of this clause is to address some of the general risks raised by the Regulator in relation to long leases and in so doing protect Registered Providers in the event policy changes (i.e. factors beyond their control) reduce the amount of rent that they are able to generate from a property or properties that they lease from the Group.

The key terms of the clause are summarised 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:

o  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

o  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. Using this year's rent increases as an example of how this part of the clause would apply in practice, under the terms of the lease, the Group would have been able to increase its leases by CPI because the rent cap did not apply to Specialised Supported Housing.

The clause has been approved by the Investment Manager's Investment Committee and the Group's Board. It has 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. The clause has also been shared with the Regulator of Social Housing. The Group's lenders are also supportive of the inclusion of the clause, understanding the benefit it should unlock for the Group's Registered Providers.

We feel that the clause strikes the right balance between allowing Registered Providers to mitigate risks over which they have limited or no control in a way that should assist with their regulatory compliance, whilst not fundamentally undermining the value of the Group's leases.

Eco-Retrofit

By 2030 all socially rented properties need to have an Energy Performance Certificate ("EPC") rating of C or above. Currently 28.8% of the Group's properties have an EPC rating of 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.

We have started the pilot phase of an energy efficiency improvement initiative which entails upgrading all of the Group's properties. Over the next 12 months we will undertake works on 11 of the Group's properties that previously had EPC ratings ranging from D to E and look to upgrade these to C or above. The pilot project will enable us to learn how to conduct the works efficiently, cost-effectively and in a way that causes minimum disruption to tenants. It will enable us to form strong relationships with our key contractors and help ensure the successful rollout of the wider project.

Housing creates a large carbon footprint when not managed and homes are at increasing risk of impacts from climate change. Taking steps to manage these challenges is a strategic commitment for the Group. We will continue to publish our approach to managing climate risk and opportunity through the framework of the Taskforce on Climate-related Financial Disclosure (TCFD), as first provided in our 2022 Annual Report.

Portfolio Sale

As well as investing in the long-term value of the Group's portfolio, we have also sought to evidence the portfolio's current valuation by selling a portfolio of properties. Our objectives were to achieve a sale price that is supportive of the Group's Net Asset Value, and demonstrate that there is liquidity in the Specialised Supported Housing market. To achieve these aims, we believed it was important not only to attain a good price, but that the portfolio of properties sold was representative of the Group's wider portfolio.

We are pleased to report that we have sold four properties post the period end, for £7.6 million which is in line with the book value of the properties of £7.9 million as at 30 June 2023. The sale price is reflective of a £0.7 million gain against the aggregate purchase price the Group paid for the properties (excluding transaction costs). The portfolio properties were located across four Local Authorities, leased to Inclusion Housing CIC and Chrysalis Supported Association Ltd, and care was provided by four separate care providers. The portfolio contained a mixture of adapted and new build properties as well as individual and shared homes. Below, we have provided a table comparing some of the key metrics of the portfolio of properties sold to the Group's wider portfolio:

We feel that the successful portfolio sale is supportive of the Group's Net Asset Value, whilst also evidencing the continued investor demand for Specialised Supported Housing properties. As noted in the Chair's Statement, following consultation with shareholders over the coming weeks and with consideration given to the Group's leverage position, the Board will determine whether to return to shareholders a portion of these proceeds by way of further share buybacks.

Registered Provider Update

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. Progress has been made with both organisations since our last update.

In August we agreed a creditor agreement with Parasol (9.2% of our Group revenues) which sets a minimum level for monthly rent payments over the next six months post the current interim period, with the stated intention that payments will increase above this minimum level over time. At the end of the six-month agreement, full rent becomes due again. If rent payments are not in line with the terms of the creditor agreement, we have the ability to move leases to a different Registered Provider and we have had constructive discussions with potential alternative partners. We have informed the Group's valuer, JLL, of the nature of this agreement and they have confirmed that it will not have a material impact on the value of the Group's properties leased to Parasol. We have a constructive relationship with the Chair and the CEO of Parasol and will continue to engage with them and support them as they move the organisation forward.

Similarly, we hope to agree a creditor agreement with My Space (7.7% of our Group revenues) shortly. This agreement is required to enable My Space to address its solvency position, and we expect it to cover both rent due going forward and arrears. My Space has recently hired a new CEO and CFO and is in the process of recruiting a COO. Simultaneously, new trustees are in the process of being identified for the board, with a view to bolstering the level of audit, financial and legal expertise. We are working with the new management team as they look to put in place the creditor agreement and consider options for the organisation including a possible business combination or merger. Concurrently, we continue to engage with alternative Registered Providers so that the Group's properties can be moved to an alternative lessee should we be of the view that this is in the best interests of residents and the sustainability of the Group's rental income. My Space continues to engage with the Regulator of Social Housing in relation to the Enforcement Notice issued earlier this year. My Space has undertaken a range of actions as prescribed by the Regulator of Social Housing and provided an initial response to all points raised in the notice.

The Regulator of Social Housing remains active in the sector. It continues to monitor the Group's Registered Provider partners and in the first six months of this year they issued Enforcement Notices in relation to My Space and Auckland Home Solutions who account for 7.7% and 4.7% of the Group's rent roll, respectively. Both notices were noted and commented on by the Group. With regards to Auckland Home Solutions, the Regulator of Social Housing's Enforcement Notice stated that three board members had been appointed to Auckland's board and that Auckland must commission an independent review focused on appraising governance, business planning, risk management and compliance with the Rent Standard. Through our ongoing engagement with Auckland Home Solutions we understand that the new board members have already delivered improvements in governance and that the independent review has been commissioned and is underway.

Financial Review

We are pleased to present resilient financial results for the six months ended 30 June 2023 as highlighted earlier. The Group's financial performance is underpinned by increases in annualised rental income from its CPI and RPI-linked leases.2 We expect dividend cover to increase during the second half of the year now that a creditor agreement is in place with Parasol, and we similarly hope to agree a creditor agreement with My Space shortly.

Key highlights:

• The annualised contracted rental income of the Group was £40.5 million as at 30 June 2023, compared to £39.0 million on 31 December 2022. IFRS Gross Revenue for the period was £19.6 million compared to £18.2 million for the six months ended 30 June 2022.

• A fair value gain of £5.9 million was recognised during the period on the revaluation of the Group's properties compared to £17.1 million for the same period in 2022.

• The EPRA NIY has increased from 5.46% at 31 December 2022 to 5.65% at 30 June 2023 following the rental uplifts in the period.

• IFRS Earnings per Share was 3.65 pence for the period, compared to 6.19 pence for the same period in 2022. The reduction was largely driven by a lower gain from fair value adjustment on investment properties being recognised than in the prior year. The ECL adjustment in the six months ended 30 June 2023 also had a negative impact on net profit.

• The EPRA Earnings per Share ("EPRA EPS") excludes the fair value gain on investment properties and is measured on the weighted average number of shares in issue during the period. EPRA EPS was 2.18 pence for the period compared to 2.43 pence for the same period in 2022. 

• The Adjusted Earnings per Share ("Adjusted EPS") includes adjustment for non-cash items and is measured on the weighted average number of shares in issue during the year. Adjusted EPS was 2.21 pence per share for the six months to 30 June 2023, compared to 2.57 pence for the same period in 2022.

• The EPRA NTA per share at 30 June 2023 was 111.31 pence per share, the same as the IFRS NAV per share, compared to 109.06 pence as at 31 December 2022.

• At the period end, the portfolio was valued at £675.1 million on an IFRS basis compared to £669.1 million at 31 December 2022, reflecting a valuation uplift of 12.2% against the portfolio's aggregate purchase price (including acquisition costs). This reflects an EPRA net initial yield of 5.65%, against the portfolio's blended net initial yield of 5.91% at the point of acquisition. This equates to a yield compression of 26 basis points, reflecting the quality of the Group's asset selection and off-market acquisition process.

• The EPRA ongoing charges ratio is calculated as a percentage of the average net asset value for the period under review. The ongoing charges ratio for the period was 1.63% compared to 1.60% for the year ended 31 December 2022. The increase is primarily due to the impact of inflation on the Group's cost base.

• The Group held cash and cash equivalents of £23.8 million as at 30 June 2023, of which £0.4 million was restricted or ring-fenced, compared to £30.1 million as at 31 December 2022, of which £0.4 million was restricted or ring fenced, leaving available cash of £23.4 million as at 30 June 2023.

Property Portfolio

As at 30 June 2023, the portfolio comprised 497 properties with 3,455 units and represented a broad geographic diversification across the UK. The four largest concentrated areas by market value were the North West (19.8%), West Midlands (16.9%), Yorkshire (14.6%) and East Midlands (12.0%). The IFRS value of the portfolio at 30 June 2023 was £675.1 million compared to £669.1 million at 31 December 2022, growth of 0.9% during the period.

Rental Income

In total, the Group had 394 leases which at the period end, generated total annualised contracted rental income of £40.5 million. During the period IFRS Revenue was £19.6 million compared to £18.2 million for the same period in 2022.

At the period end, the Group's three largest Approved Providers by rental income and units were Inclusion (£12.2 million and 944 units), Parasol Homes (£3.7 million and 246 units) and Falcon (£3.5 million and 304 units).

As at 30 June 2023, the portfolio had a WAULT of 24.8 years. The WAULT includes the initial lease term upon completion as well as any reversionary leases and put/call options available to the Group at expiry of the initial term. Notwithstanding the Group's recent change to its investment policy to remove the minimum lease term, at present the Group's WAULT is anticipated to remain above 20 years.

100% of the Group's contracted income is generated under leases which are indexed against either CPI (92.4%) or RPI (7.6%). These inflation linkages provide the Group and its investors with the comfort that the rental income will generally increase in line with inflation.

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 7.9% 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 24.8 years.

Rent collection during the period was 88.1% and a full update on rent arrears is included in the Registered Provider Update section above.

Outlook

We expect to commence our first forward funding project since the completion of our last development in March 2021. This should see the Group fund the development of 12 adapted flats for people with learning disabilities in Chorley. The property will be leased on flexible lease terms to Golden Lane, a Registered Provider with a regulatory compliance rating of G1 V2 and one of the leading providers in the Specialised Supported Housing sector. We are pleased to have been chosen by Golden Lane as their partner on this project which is testament to the approach we take to investment in the Specialised Supported Housing sector.

We expect the majority of our lessees to continue to operate in line with historical performance. Our Housing Team takes a granular and proactive approach to asset management, focused on the underlying operational performance of the Group's 493 properties. In addition, at an organisational level, our team will support our Approved Provider management teams as they continue to tackle the challenges posed by inflation. We will actively monitor performance at My Space and Parasol to support progress on rent collection and planned organisational improvements.

Whilst dividend cover was lower than historical levels in the first six months of the year, we expect cover to improve in the latter half of the year given the plan that is now in place with Parasol and the plan we hope to shortly agree with My Space, and as annual rent increases partially offset previously reported reductions in rent collection. Over the medium to long-term we expect there to be a high level of dividend cover due to the inflation-linked nature of the Group's income streams and advantageous capital structure which includes £263.5 million of long-term, fixed-price debt with a blended cost of 2.74%. 

By the end of the year, we plan to have included our new lease clause in all the Group's existing Registered Provider leases, thereby enabling the Boards of our lessees to demonstrate to the Regulator of Social Housing that they have made tangible progress in terms of addressing some of the Regulator's stated concerns around the balance of risk sharing in long-term leases. Similarly, we expect to have made good progress on our Eco-Retrofit pilot programme, with a view to gaining invaluable learnings in relation to the wider project whilst beginning to improve the energy efficiency of the Group's portfolio.

Through these initiatives the Group is well positioned for resilient operational and financial performance, whilst demonstrating how, as a landlord, the Group can help to move the sector forward by addressing historic regulatory concerns, getting ahead of future requirements around energy efficiency and delivering new, much needed homes to people with care and support needs in partnership with leading Registered Providers.

Max Shenkman

Head of Investment

6 September 2023

Notes:

1 Department of Health and Social Care policy paper, People at the Heart of Care: adult social care reform, March 2022.

2 4.9% of our leases are capped (excluding the temporary rent cap at 7% applied to the Group's rent increases for the year of 2023).

PORTFOLIO SUMMARY

By Location

KEY PERFORMANCE INDICATORS

In order to track the Group's progress the following key performance indicators are monitored:

EPRA PERFORMANCE MEASURES

The table below shows additional performance measures, calculated in accordance with the Best Practices Recommendations of the European Public Real Estate Association (EPRA). We provide these measures to aid comparison with other European real estate businesses.

Full reconciliations of EPRA Earnings and NAV performance measures are included in Note 21 of the condensed Group interim 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.

PRINCIPAL RISKS AND UNCERTAINTIES

The Audit Committee, which assists the Board with its responsibilities for managing risk, considers that the principal risks and uncertainties as presented on pages 67 to 71 of our 2022 Annual Report were unchanged during the period and will remain unchanged for the remaining six months of the financial year.

The Board undertakes a formal risk review, with the assistance of the Audit Committee twice a year to assess the principal risks and uncertainties. The Investment Manager on an ongoing basis has responsibility for identifying potential risks and escalating these in accordance with the risk management procedures.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors confirm that to the best of their knowledge this condensed set of financial statements has been prepared in accordance with UK-adopted International Accounting Standard (IAS) 34 and that the operating and financial review includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8 of the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority namely:

• an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

• material related party transactions in the first six months of the financial year as disclosed in Note 18 and any material changes in the related party transactions disclosed in the 2022 Annual Report.

Shareholder information is as disclosed on the Triple Point Social Housing REIT plc website.

Approval

This Directors' responsibilities statement was approved by the Board of Directors and signed on its behalf by:

Chris Phillips

Chair

6 September 2023

GROUP FINANCIAL STATEMENTS

CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2023

CONDENSED GROUP STATEMENT OF FINANCIAL POSITION

As at 30 June 2023

The Condensed Group Financial Statements were approved and authorised for issue by the Board on 6 September 2023 and signed on its behalf by:

Chris Phillips

Chair

6 September 2023

CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2023

CONDENSED GROUP STATEMENT OF CASH FLOWS

For the six months ended 30 June 2023

NOTES TO THE CONDENSED GROUP INTERIM FINANCIAL STATEMENTS (UNAUDITED)

For the six months ended 30 June 2023

1. CORPORATE INFORMATION

Triple Point Social Housing REIT plc (the "Company") is a Real Estate Investment Trust ("REIT") incorporated in England and Wales under the Companies Act 2006 as a public company limited by shares on 12 June 2017. The address of the registered office is 1 King William Street, London, United Kingdom, EC4N 7AF. The Company is registered as an investment company under section 833 of the Companies Act 2006 and is domiciled in the United Kingdom.

The principal activity of the Company is to act as the ultimate parent company of Triple Point Social Housing REIT plc and its subsidiaries (the "Group") and to provide shareholders with an attractive level of income, together with the potential for capital growth from investing in a portfolio of social homes.

2. BASIS OF PREPARATION

These condensed Group interim financial statements for the six months ended 30 June 2023 have been prepared in accordance with IAS 34 "Interim Financial Reporting" and also in accordance with the measurement and recognition principles of UK-adopted international accounting standards. They do not include all of the disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2022 Annual Report.

The comparative figures for the financial year ended 31 December 2022 presented herein do not constitute the full statutory accounts within the meaning of section 434 of the Companies Act 2006. Those accounts have been reported on by the Group's auditors and delivered to the registrar of companies. The report of the auditor (i) was unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The condensed Group interim financial statements for the six months ended 30 June 2023 have been reviewed by the Company's Auditor, BDO LLP, in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. The condensed Group interim financial statements are unaudited and do not constitute statutory accounts for the purposes of the Companies Act 2006.

The condensed Group interim financial statements have been prepared on a historical cost basis, as modified for the Group's investment properties, which have been measured at fair value. Gains or losses arising from changes in fair values are included in profit or loss.

The Group has applied the same accounting policies and method of computation in these condensed Group interim financial statements as in its 2022 annual financial statements and are expected to be consistently applied during the year ending 31 December 2023. At the date of authorisation of these financial statements, there were a number of standards and interpretations which were in issue but not yet effective. The Group has assessed the impact of these amendments and has determined that the application of these amendments and interpretations in current and future periods will not have a significant impact on the financial statements.

2.1. Going concern

The Group benefits from a secure income stream from long leases which are not overly reliant on any one tenant and present a well-diversified risk. The Directors have reviewed the Group's forecast which show the expected annualised rental income exceeds the expected operating costs of the Group. 88.1% of rental income due and payable for the six months ended 30 June 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 period, Fitch Ratings Limited assigned the Company an investment 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 going concern, for a period of at least 12 months from the date these condensed Group interim financial statements have been authorised for issue. 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. TP REIT Propco 5 Limited's Revolving Credit Facility (RCF) with Lloyds and Natwest was cancelled in December 2022. Prior to cancellation the facility was undrawn.

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.

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 Approved Providers defaulting under some of the Group's 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 these condensed Group interim financial statements have been authorised for issue. As a result of the above, the Directors are of the opinion that the going concern basis adopted in the preparation of the condensed Group interim financial statements is appropriate.

The Group has no short or medium term refinancing risk given the 10.1 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 Group, the Directors consider that the Group will be able to settle its liabilities for a period of at least 12 months from the date these condensed Group interim financial statements have been authorised for issue and therefore has prepared these condensed Group interim financial statements on the going concern basis.

2.2 Reporting period

These condensed Group interim financial statements have been prepared for the six months ended 30 June 2023. The comparative periods are the six months ended 30 June 2022 and the year ended 31 December 2022.

2.3 Currency

The Group's 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, 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. In the Directors' view, there have been no significant changes since the annual report for the year ended 31 December 2022, to the extent of estimation uncertainty, key assumptions or valuation techniques relating to investment properties as a result of the current macroeconomic environment. Further details can be found in note 8.

3.1 Expected Credit Losses (ECL)

The Group recognised an additional ECL provision of £3.2 million in the current period (30 June 2022 - £0.5 million, 31 Dec 2022 - £2.1 million) resulting in a total ECL provision of £5.2 million as at 30 June 2023 (30 June 2022 - £0.5 million, 31 Dec 2022 - £2.1 million) which 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 30 June 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.

4. RENTAL INCOME

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 by the Group.

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 period of £3.2 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.

5. MANAGEMENT FEES

On 20 July 2017 Triple Point Investment Management LLP 'TPIM' was appointed as the delegated investment manager of the Company by entering into the property management services and delegated portfolio management agreement. Under this agreement the delegated investment manager will advise the Company and provide certain management services in respect of the property portfolio. A Deed of Variation was signed on 23 August 2018. This defined cash balances in the Net Asset Value calculation in respect of the management fee as "positive uncommitted cash balances after deducting any borrowings".

The management fee is an annual management fee which is calculated quarterly in arrears based upon a percentage of the last published Net Asset Value of the Group (not taking into account uncommitted cash balances after deducting borrowings) as at 31 March, 30 June, 30 September and 31 December in each year on the following basis with effect from Admission:

(a) on that part of the Net Asset Value up to and including £250 million, an amount equal to 1% of such part of the Net Asset Value;

(b) 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;

(c) 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

(d) 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 £2,339,000 were chargeable by TPIM during the six months ended 30 June 2023 (six months ended 30 June 2022 - £2,362,000, year ended 31 December 2022 - £4,704,000). At the period end, £1,156,000 was due to TPIM (30 June 2022 - £1,187,000, 31 December 2022 - £1,159,000).

By two agreements dated 30 June 2020, the Company appointed TPIM as its Alternative Investment Fund Manager by entering into an Alternative Investment Fund Management Agreement and (separately) documented TPIM's continued appointment as the provider of portfolio and property management services by entering into an Investment Management Agreement.

6. FINANCE COSTS

Written off loan arrangement fees relate to the Lloyds and NatWest loan facility that was reduced and subsequently cancelled during the year ended 31 December 2022, all remaining unamortised loan arrangement fees were written off.

7. TAXATION

As a UK REIT, the Group is exempt from corporation tax on the profits and gains from its property investment business, provided it meets certain conditions as set out in the UK REIT regulations. For the six months ended 30 June 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.

8. INVESTMENT PROPERTIES