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Triple Point Social Housing REIT: high yield with a high social impact

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Triple Point Social Housing REIT (LON:SOHO) was one of three organisations that presented investment opportunities at February’s UK Investor Magazine Virtual Investor Conference

High impact investment strategy

The trust’s aim is to allow investors to get a solid long-term return while having a positive impact on society. Their mission is geared towards addressing the ongoing housing crisis by investing in the UK social housing sector. The REIT supplies homes adapted to the needs of vulnerable adults who require long-term care and support. Triple Point Social Housing generates a long-term investment stream for investors from tenants whose rent is ultimately paid by the government. 

The Department for Work and Pensions funds housing benefits for individuals in specialised housing. The relevant local authority will pay both the core rent, along with the service and management fee, to an approved provider. The approved provider keeps the service and maintenance charge while passing the rent onto Triple Point Social Housing. 

“Often when it comes to investing, money sloshes about and has no real impact but here the money we raise and invest is having a tangible impact on society,” said investment director at Triple Point Social Housing, Freddie Cowper-Coles.

Secure income stream

The nature of government subsidised housing means Triple Point’s annualised income of £28m is on a secure foundation. 100% of rent payments were collected by the trust over the first half of 2020, proving to be unaffected by the pandemic. In addition, inflationary increases in housing benefit have been achieved. 

Value

Triple Point Social Housing is trading at a 2.55% market premium which reflects a positive sentiment around the portfolio’s underlying assets. 

The company’s current IFRS valuation at £510.3m means Triple Point Social Housing has earned a 7.25% uplift against investment of £476.1m. In addition, its portfolio premium valuation, the amount the company would achieve if it sold off all of its assets, is at £548.5m. SOHO is therefore significantly undervalued by its IFRS valuation.

Properties

The trust has funded 404 properties, housing 2,872 people. Triple Point Social Housing has a geographically diversified portfolio with properties in every region of the UK. 

Since its initial public offering SOHO has funded 22 construction projects, committing £56.2m.

Triple Point Social Housing dividend

Triple Point Social Housing’s target dividend is at 5.8p per share for the company’s upcoming financial report, which is around the same level as the previous two years. In 2018 and 2019 the company’s dividend yield was 5% and 5.7% respectively. 

Debt

The REIT used debt to leverage its portfolio, which is secured against properties Trust Point bought. The company’s debt stands at £185.1m. However, it appears to be at a manageable level with a gearing of 33.1% LTV.

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