Portfolio update: Westmoreland Supported Housing

30 November 2018

Triple Point Social Housing REIT plc

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

Portfolio update - Westmoreland Supported Housing Association

The Board of Triple Point Social Housing REIT plc (ticker: SOHO) notes the Regulatory Judgement published today by the Regulator of Social Housing (the "Regulator") in relation to Westmoreland Supported Housing Association ("Westmoreland").

Westmoreland, a registered provider focused on the supported housing sector, has 1,379 social housing units under management and has recently been subject to a review by the Regulator, resulting in Westmoreland being given a 'non-compliant' rating of V3 for viability and G3 for governance.  

The Company's investment manager, Triple Point Investment Management LLP (the "Manager"), has an established relationship with Westmoreland and has been in regular dialogue with it, particularly with regard to the regulatory review.  The Company notes that Westmoreland is working with advisers and the Regulator to produce and implement a financial and governance improvement action plan in order to address the Regulator's concerns.  Westmoreland has also voluntarily decided to appoint an independent board member and amend the governance arrangements of its board in order to address the Regulator's concerns around conflicts of interest and is improving the quality of information provided to senior management.

The Company has 17 assets leased to Westmoreland, the aggregate value of which, as at 30 September 2018, was £22.2 million. Two of these properties are forward funded assets with an aggregate value of £5.9 million which are in the process of being transferred to another registered provider.  The Company had instigated the transfer of these agreements to lease several weeks ago reflecting Westmoreland's decision to focus on the consolidation of its existing portfolio.  Accordingly, following the transfer of the two properties, Westmoreland will account for £16.4 million of the Company's assets (under 5 per cent. of the Company's net assets). 

There has been no suggestion from Westmoreland that the rent payable under the leases with the Company will not continue to be forthcoming.

As with all properties acquired for the Company's portfolio, the Manager confirmed local demand, the suitability of the rental levels and the quality of those assets owned by the Company and leased to Westmoreland at the time of acquisition.  Given the ongoing local authority support and the contractual obligations of the care providers attached to the properties, the Manager and the Board remain of the view that these are attractive assets.  However, notwithstanding the quality of the Company's assets leased to Westmoreland, the Board and Manager understand that Jones Lang LaSalle Limited ("JLL"), the Company's independent valuer, will have regard to the Regulator's rating of a registered provider - and thus investors' likely perception of its covenant strength - as one factor, amongst various considerations, in determining the valuation of a leased supported housing asset.  Following conversations with JLL, the Manager and the Board estimate that the potential impact of Westmoreland's rating on the Company's net asset value would be less than 1 per cent.

Both the Board and the Manager see the Regulator's involvement as a positive for the sector due to the increased accountability and higher degree of transparency which it brings. The Regulatory Judgements give registered providers the opportunity to address any specific concerns the Regulator might have thereby ensuring that their governance and viability are compliant and reflective of their growing size and maturity.  

The Board and the Manager note that Westmoreland is actively engaging with the Regulator in order to put themselves into a position to achieve grading improvements in the future.

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.

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-adjusted, 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.

There is increasing political and financial pressure on Housing Associations to increase their housing delivery and this is creating opportunities for private sector investors to participate in the market. The Group's ability to provide forward financing for new developments not only enables the Company to secure fit for purpose, modern assets for its portfolio but also addresses the chronic undersupply of suitable supported housing properties in the UK at sustainable rents as well as delivering returns to investors.

Triple Point Investment Management LLP (part of the Triple Point Group) is responsible for management of the Group's portfolio (with such functions having been delegated to it by Langham Hall Fund Management LLP, the Company's alternative investment fund manager).

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.