REG - Social Housing Reit - RESULTS FOR THE YEAR ENDED 31 DECEMBER 2024
24/03/2025 07:00
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RNS Number : 7731B Social Housing Reit PLC 24 March 2025
THIS ANNOUNCEMENT HAS BEEN DETERMINED TO CONTAIN INSIDE INFORMATION FOR THE
PURPOSES OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014.
24 March 2025
Social Housing REIT plc
(the "Company" or "SOHO" or, together with its subsidiaries, the "Group")
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2024
The Board of Directors of Social Housing REIT plc (LON: SOHO), the real estate
investment trust investing in specialised supported housing across the UK, is
pleased to announce the Group's audited results for the year ended 31 December
2024.
Chris Phillips, Chair of Social Housing REIT plc, commented:
"We are pleased to present another resilient set of results for the year. The
portfolio continues to perform operationally, with high levels of resident
occupancy and tenant satisfaction.
Our newly appointed Investment Manager, Atrato, is in post and is already
progressing key strategic improvements for SOHO. Its initial focus has been on
successfully completing the Westmoreland transfer and resolving the My Space
issue, where we have entered into an option agreement which provides us with
control over the solution.
This proactive step, led by Atrato, will help improve rent collection and
resident occupancy. With the dividend for last year being effectively covered
(0.99x), top line growth has the potential to drive earnings and valuation
upside going forwards, particularly when coupled with our long term, low cost
debt and the cost savings resulting from the switch to market capitalisation
management fee under Atrato's appointment.
Looking ahead, we are excited to take SOHO forwards with Atrato, building on
our track record of providing much needed homes for vulnerable residents,
allowing them to live independent and happy lives whilst delivering long-term,
growing income for shareholders."
31 December 2024 31 December 2023
IFRS & EPRA Net Tangible Assets per share 99.05p 113.76p
Total Accounting Return (8.1)% 9.32%
Adjusted Earnings per Share 5.40p 4.61p
Adjusted Dividend Cover 0.99x 0.85x
Loan to Value(1):
Gross 40.0% 37.0%
Net 37.7% 34.5%
Rent Collection 92.6% 90.2%
Ongoing Charges Ratio 1.64% 1.63%
EPRA Cost Ratio 29.89% 20.60%
Exposure to Largest Approved Provider 30.9% 29.5%
Financial summary
· Annualised contracted rental income increased to £42.6
million (2023: £41.0 million).
· Dividends paid with final quarter declared totalling 5.46 pence per
Ordinary Share, in line with the Company's target for the year.
· Dividend 0.99x covered by EPRA adjusted earnings(2) despite
the issues with Parasol and My Space.
· Portfolio valuation of £626.4 million (2023: £678.4 million)
reflecting recently achieved pricing for comparable transactions in the wider
market, together with a softening of valuation assumptions relating to
properties within the portfolio leased to My Space.
· EPRA Net Tangible Assets per share of 99.05 pence (2023:
113.76 pence).
· No refinancing risk with £263.5 million of fixed-rate debt with a
weighted average coupon of 2.74% and a weighted average maturity of 8.6 years.
· EPRA cost ratio of 29.89% includes the impact of termination fee
and before the benefit of the reduced management fee.
· Reduction in costs, attractive debt profile and increasing
rental income provide platform for earnings and dividend growth.
Operational highlights
· Total investment portfolio of 494 properties (2023: 493) with
3,424 units (2023: 3,417 units).
· 100% of contracted rental income is either CPI or RPI-linked
with annual uplifts.(3)
· In 2024, the Company's weighted average annual rental uplift
was 4.3%.
· 92.6% rent collection with My Space accounting for 100% of arrears.
Pass-through rent collection has increased to 72% of contracted rent in repect
of the properties previously leased to Parasol and now transferred to
Westmoreland.
· 86% resident occupancy, with My Space and former Parasol
properties accounting for over 50% of the voids.
Post Balance Sheet Activity
· On 1 January 2025, the appointment of Atrato Partners Limited
as the Company's new Investment Manager with a reduction in management fees
expected to deliver a £1.9m per annum saving.
· On 10 February 2025, Shareholders approved a change in the
Company's Investment Policy to increase the maximum exposure to any one
Approved Provider to 35% (from 30%) of the Group's gross asset value, with the
maximum aggregate exposure to the top two Approved Providers not to exceed 55%
(previously not restricted).
· My Space entered into a company voluntary arrangement on 7 March
2025. The Investment Manager negotiated an option agreement for the Company
permitting the assignment of SOHO's 34 properties leased to My Space. The
Investment Manager has agreed heads of terms with a nationwide Approved
Provider to assign all My Space leases and expects rent collection to
re-commence and resident occupancy to increase during 2025.
Notes:
1 Gross LTV is calculated as balance sheet borrowings divided by gross asset
value. Net LTV is calculated as balance sheet borrowings less cash and cash
equivalents divided by investment property.
2 The Company reports dividend cover on an EPRA adjusted earnings basis
which removes the impact of non-cash items and the termination payments to the
previous investment manager from IFRS profit. Dividend cover on a contracted
run-rate basis for the year ended 31 December 2024 was 0.83x (2023: 0.85x)
which, when all rent is being paid, is equivalent to EPRA adjusted earnings
dividend cover.
3 13.5% of leases are capped at 4%, with one additional lease capped at
5%.
Live Webcast
A live webcast of the presentation including Q&A will be held today at
8.30 am for investors and analysts and will be available via our website at
www.socialhousingreit.com or on https://brrmedia.news/SOHO_FY_2024. The
webcast will be available for playback after the event.
FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:
Social Housing REIT plc Via Brunswick Group
Chris Phillips
Atrato Partners Ltd (Investment Manager) ir@atratopartners.com
Adrian D'Enrico
Michael Carey
Eddie Gilbourne
Akur Capital (Financial Adviser) SOHO@akur.co.uk
Tom Frost
Anthony Richardson
Siobhan Sergeant
Stifel (Joint Financial Adviser and Corporate Broker) Tel: 020 7710 7600
Mark Young
Rajpal Padam
Madison Kominski
Brunswick Group (Financial PR Adviser) Tel: 020 7404 5959
Nina Coad
Robin Wrench
Mara James
The Company's LEI is 213800BERVBS2HFTBC58.
Further information on the Company can be found on its website at
www.socialhousingreit.com (http://www.socialhousingreit.com) .
NOTES:
The Company primarily invests in social housing assets in the UK, with a
particular focus on specialised supported housing (SSH). SSH is accommodation
for vulnerable adults requiring support to live independently, including those
with learning difficulties, mental health problems and physical disabilities.
These properties are specially designed or adapted to meet residents' needs
and are managed by Approved Providers who are predominantly regulated by the
Regulator of Social Housing. Approved Providers consist of Housing
Associations and Local Authorities, or other regulated organisations in
receipt of direct payment from local government.
These operational residential properties deliver sustainable, long-term,
growing income for shareholders, improved outcomes for residents and savings
to the taxpayer.
The Company is listed on the Closed-ended investment funds category of the
FCA's Official List and its Ordinary Shares are traded on the LSE's Main
Market.
Atrato Partners Limited is the Company's Investment Manager.
CHAIR'S STATEMENT
I am pleased to present my Chair's statement for the newly renamed Social
Housing REIT plc, the first with Atrato Partners Limited ("Atrato") as the
newly appointed Investment Manager after an extensive selection process.
Throughout 2024, the Company's Portfolio continued to perform operationally,
with high levels of resident occupancy and tenant satisfaction. Our homes are
key facilitators of independence for those vulnerable adults who live in our
Specialised Supported Housing ("SSH") properties. For the management of our
homes, we rely exclusively on registered providers of social housing
("Approved Providers") who maintain our properties and collect the rent paid
for our residents through housing benefit. Unfortunately, challenges with two
of the Approved Providers, Parasol and My Space, have impacted the level of
rent received by the Company during the year.
Following its appointment, Atrato is working to resolve these current
challenges, completing the stabilisation of properties transferred from
Parasol to Westmoreland during the year and delivering a solution to the
properties currently leased to My Space in the year ahead.
Atrato are committed to taking a more proactive approach to resolving any
future issues with Approved Providers, before they escalate to the extent we
have experienced with Parasol and My Space. Alongside this, Atrato is already
exploring options to develop long-term solutions to mitigate counterparty risk
through structuring solutions which would enhance the security of the
Company's claim to rents owed in respect of its properties.
Outside of our portfolio, broader investment market conditions remained
challenging, particularly in the investment trust sector. The Company's share
price continued to trade at a material discount to Net Asset Value ("NAV"),
despite the reduction in NAV resulting from the valuation falls recognised
during the year.
Review of Investment Management Arrangements
In May 2024, after careful consideration, the Board decided to conduct an
independent review of the investment management arrangements for the Company,
inviting proposals from both Triple Point Investment Management LLP ("Triple
Point") and alternative investment managers. The Board was impressed by both
the number and the quality of the proposals submitted, which ultimately
resulted in the Board appointing Atrato in September 2024, succeeding Triple
Point from 1 January 2025.
Atrato was selected due to its deep sector knowledge, investment trust
experience and strategic vision for SOHO and the broader supported housing
sector. I believe the new investment management team at Atrato will bring a
fresh perspective and a renewed focus to the Company, leveraging their
experience and ambition for the sector to proactively manage the portfolio,
restore investor confidence and ultimately help to narrow the discount to NAV.
The Board set a target of 1 January 2025 for the completion of the transfer of
investment manager, which included the transfer of the outgoing manager's
operational team, data and systems. We would like to thank Atrato, Triple
Point and all advisers involved for their input in ensuring a swift and very
smooth transition.
Atrato has been a market leader in moving its investment management fees to a
market capitalisation basis, ensuring alignment with the interests of
shareholders. The new fee basis delivers a significant annual saving to the
Company. The Board has also asked the new Investment Manager to conduct a
thorough line-by-line review of the Group's cost base to ensure the Group is
getting best value for money from all of its service providers and that its
costs are appropriate for the size of the Group and in line with the wider
sector.
Macroeconomic backdrop
The macroeconomic environment remained challenging throughout the year.
Concerns that interest rates would remain 'higher for longer' put sustained
pressure on property valuations. Nonetheless, the general decline in inflation
(despite a modest uptick in the final quarter) is providing some relief and we
are optimistic that UK interest rates will continue to decline further during
2025 which should be positive for property sector valuations.
The Company benefits from a very attractive long-term cost of debt. The
Company's debt is fixed rate, with a weighted average term of 8.6 years and at
a weighted average fixed rate of 2.74%.
Sector tailwinds
The UK residential sector continues to face a major imbalance between supply
and demand. The new Labour government has set out its ambitions to facilitate
a much-needed increase in the delivery of new homes, albeit with a target
supply level remaining unchanged at 300,000 homes per year. However, supply
responses in the built environment are complex and will take time to deliver.
The demand for SSH continues to rise, resulting in high levels of occupancy
across the SSH sector and the Company's portfolio.
Central and local Government continue to provide financial support for
individuals who require housing and care. This strong demand dynamic, combined
with inflation-linked rental growth, has helped offset some of the broader
valuation declines of the Group's property portfolio over the last 12 months.
Operational performance
Across the portfolio, outside of the Parasol and My Space issues noted above,
rent collection remained strong with 100% collection. The homes within the
portfolio are well maintained and well utilised by residents in need of our
properties. We look forward to both extending our upgrade programme to improve
building efficiency and completing the development of our new scheme in
Chorley later in the year. The void units are largely attributable to the
homes originally leased to Parasol and My Space and these are the immediate
focus of the new investment manager.
Atrato is assessing the current portfolio and has identified that there are a
small number of units which are not suitable for SSH or do not otherwise meet
our required standards. It has been determined that these properties will be
disposed of over the coming months. The proposed, larger portfolio sale
identified in early 2024 did not progress, due to the inability of the
counterparty to secure the necessary funding.
Post-year end, the Company received overwhelming shareholder approval to amend
its Investment Policy, permitting a maximum exposure of 35% to any one
Approved Provider, where it was previously restricted to 30%. This additional
flexibility ensures that we have the fullest range of solutions to move the
properties away from My Space. We are confident that we will deliver a
successful assignment of the My Space leases during the first half of the
year, leading to both improved occupancy and the resumption of rent
collection.
2025 Outlook
Following the completion of these initiatives, the portfolio will be well
positioned and we are confident about the future of the Company. We expect our
improving rent collection and resident occupancy will contribute to narrowing
the discount to NAV. We also believe a proactive, transparent approach will be
key to restoring investor confidence in the Company and the sector.
Financially, the dividend for the year was effectively covered (0.99x) and the
transition of the management fee basis will reduce costs going forwards.
Atrato are also undertaking a line-by-line review of costs across the Company
to identify any further savings which can be made. From this position, the
completion of the Westmoreland transfer and recommencement of rent collection
for the properties leased to My Space will drive top line growth in 2025,
providing earnings and valuation upside.
Atrato will also look to continue to roll out its EPC Upgrade Programme across
the portfolio, building on the results of the pilot project to meet
legislative targets and deliver operational efficiencies for residents in our
homes. It will also oversee the completion of our first new development for
some time, with 12 new homes being delivered into our portfolio later in the
year.
As we look forward to these positive changes and the year ahead, I would like
to thank our advisers and shareholders for their continued support. I would
also like to thank the Triple Point team for their dedication to the Company
in the seven years since its IPO and their efforts in building a substantial,
diversified portfolio.
We are excited to take SOHO forwards with Atrato, building on our track record
of providing much needed homes for vulnerable residents, allowing them to live
independent and happy lives whilst delivering long-term, growing income for
shareholders
Chris Phillips
Chair
21 March 2025
KEY PERFORMANCE INDICATORS
We set out below our key performance indicators for the Company.
KPI Definition Performance (as at 31 December 2024)
1. IFRS & EPRA NTA per share The value of our assets (based on an independent valuation) less the book 99.05 pence per share (31 December 2023: 113.76p)
value of our liabilities, attributable to Shareholders and calculated in
accordance with EPRA guidelines. Further information is set out in Note 3 of
the Unaudited Performance Measures.
2. Total Accounting Return Total accounting return is measured by reference to the growth in the Group's (8.1)% for the year. (31 December 2023: 9.32%).
share price over a period, plus dividends declared for that period.
The total accounting return since IPO is 38.3%.
3. Adjusted EPS EPRA earnings adjusted for company specific items to reflect the underlying 5.40 pence per share for the year (31 December 2023: 4.61p)
profitability of the business, calculated on the weighted average number of
shares in issue during the year.
4. Adjusted Dividend Cover Dividends paid or declared in respect of the year ended 31 December 2024 The dividend was 0.99x covered for the year (31 December 2023: 0.85x)
totalled 5.46 pence, with dividend cover based on adjusted earnings.
5. Loan to Value ("LTV") The Group's medium to long-term target LTV is 35% to 40% with a maximum of 40.0% (31 December 2023: 37.0%)
50%, calculated as balance sheet borrowings divided by gross asset value.
6. Rent Collection Rent collection is one of the Group's principal measures of performance, 92.6% collected for the year (31 December 2023: 90.2%)
measured against total contracted rent due.
Material rent arrears during the year was mainly attributable to one Approved
Provider, My Space Housing Solutions.
7. Ongoing Charges Ratio A measure of all operating costs incurred, calculated as a percentage of 1.64% (31 December 2023: 1.63%)
average net assets in that year.
8. EPRA Cost Ratio Administrative & operating costs (including costs of direct vacancy) 29.89% (31 December 2023: 20.60%)
divided by gross rental income.
9. Exposure to Largest Approved Provider The percentage of the Group's gross assets that are leased to the single 30.9% (31 December 2023: 29.5%)
largest Approved Provider.
Adjusted earnings is a performance measure used by the Board to assess the
Group's financial performance and dividend payments. The metric adjusts EPRA
earnings for non-cash items such as the amortisation of finance costs and the
movement in lease incentive debtor. Adjusted earnings is considered a better
reflection of the measure over which the Board assesses the Group's trading
performance and dividend cover.
Adjusted EPS reflects the adjusted earnings defined above attributable to each
share.
The Group uses alternative performance measures including the European Public
Real Estate ("EPRA") Best Practice Recommendations ("BPR") to supplement its
IFRS measures as the Board considers that these measures give users of the
financial statements the best understanding of the underlying performance of
the Group's property portfolio. The EPRA measures are widely recognised and
used by public real estate companies and investors and seek to improve
transparency, comparability and relevance of published results in the sector.
The EPRA cost ratio does not exclude the impact of non-operational or
exceptional items.
Reconciliations between EPRA measures and the IFRS financial statements can be
found in the unaudited performance measures section.
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.
For a full reconciliation of all EPRA performance indicators, please see the
Notes to EPRA measures within the supplementary section of the financial
statements.
Measure Definition Performance (as at 31 December 2024)
1. EPRA EPS A measure of EPS designed by EPRA to present underlying earnings from core 5.08 pence per share for the year (31 December 2023: 4.92p)
operating activities.
2. EPRA Net Reinstatement Value ("NRV") per share An EPRA NAV per share metric which assumes that entities never sell assets and 108.86 pence per share (31 December 2023: 124.43p)
aims to represent the value required to rebuild the entity.
3. EPRA Net Tangible Assets ("NTA") per share An EPRA NAV per share metric which assumes entities buy and sell assets, 99.05 pence per share (31 December 2023: 113.76p)
thereby crystallising certain levels of unavoidable deferred tax.
4. EPRA Net Disposal Value ("NDV") per share An EPRA NAV per share metric which represents the Shareholders' value under a 113.95 pence per share (31 December 2023: 128.02p)
disposal scenario, where deferred tax, financial instruments and certain other
adjustments are calculated to the full extent of their liability, net of any
resulting tax.
5. EPRA Net Initial Yield ("NIY") Annualised rental income based on the cash rents passing at the balance sheet 6.44% (31 December 2023: 5.57%)
date, less non-recoverable property operating expenses, divided by the market
value of the property, increased with (estimated) purchasers' costs.
6. EPRA "Topped-Up" Net Initial Yield This measure incorporates an adjustment to the EPRA NIY in respect of the 6.45% (31 December 2023: 5.72%)
expiration of rent-free periods (or other unexpired lease incentives such as
discounted rent periods and step rents).
7. EPRA Vacancy Rate Estimated Market Rental Value ("ERV") of vacant space divided by ERV of the 0.32% (31 December 2023: 0.33%)
whole portfolio.
8. EPRA Cost Ratio Administrative & operating costs (including costs of direct vacancy) 29.89% (31 December 2023: 20.60%)
divided by gross rental income.
9. EPRA LTV Net debt divided by total property portfolio and other eligible assets. 37.7% (31 December 2023: 34.3%)
10. EPRA Like-for-like Rental Growth Changes in net rental income for those properties held for the duration of Rental increase of 4.16% for the year (31 December 2023: 5.98%)
both the current and comparative reporting period.
11. EPRA Capital Expenditure Amounts spent for the purchase and development of investment properties £2.2 million for the year (31 December 2023: £(0.2) million)
(including any capitalised transaction costs).
INVESTMENT MANAGER'S REPORT
Introduction
This is Atrato's first report as Investment Manager of the renamed Social
Housing REIT plc ("SOHO"). We would firstly like to thank the Board for
selecting Atrato and believing in our strategic vision for the Company. We
believe that Specialised Supported Housing ("SSH") is a key component of the
UK residential property market, delivering vital homes to help vulnerable
residents live independently.
Tom Still and Michael Carey are sector specialists and former colleagues who
have been leading Atrato's social housing strategy. I joined them in October
2024 and Michael is working alongside me on SOHO, heading up the asset
management and operations initiatives, whilst Tom leads on growing Atrato's
wider social housing platform. We are strong advocates for the sector and the
dual benefits that it can deliver - robust, income-driven financial returns
for investors and a genuine, positive social impact for residents. Delivering
improved outcomes for shareholders and residents is our key focus for SOHO and
comes at an important time, as we seek to reinvigorate the sector and evidence
its attractiveness as a private sector asset class.
A consistent challenge in the SSH sector has been the financial weakness of
many of the Approved Provider lessees. This contrasts with the Government
backing of the underlying cashflows, paid by local authorities for housing
vulnerable adults in appropriately adapted properties. We believe that we can
reduce the historical issues around Approved Provider failures that have
arisen in the SSH sector, through a combination of enhanced monitoring, taking
early proactive action and better cashflow structuring. We have already
commenced work on these initiatives for SOHO.
As part of the Company's management transition, we onboarded key members of
the team from Triple Point. Their detailed understanding of the portfolio
builds on our knowledge and long-standing, trusted relationships with Approved
Providers and developers. At its core, SSH is simply operational residential
real estate. It is essential to have a knowledgeable, hands-on operations team
who understand the intricacies of the portfolio, can develop and maintain
strong relationships with its lessees and ensure the properties are safe and
well maintained.
In common with the broader SSH sector, the SOHO portfolio is, of course, not
without its challenges. Our primary focus is on delivering a solution to
improve resident occupancy and restore our rent collection for the properties
currently leased to My Space Housing Solutions ("My Space"). To facilitate
that, near-unanimous shareholder approval was received in February 2025 to
increase the Company's tenant counterparty exposure limit from 30% to 35%,
broadening the range of potential Approved Providers who might take
assignments. At the same time, we progressed negotiations and secured an
Option Agreement to facilitate the transfer of those properties. More details
are provided below.
The immediacy of these actions is representative of our proactive approach to
portfolio and asset management, which will characterise the next phase of SOHO
under our tenure. We will combine this with an open and transparent approach
to disclosure, ensuring shareholders are fully aware of our actions and
intentions for the Company as we work to restore investor confidence in the
sector and narrow the discount to NAV.
Demonstrating Sector Value and Restoring Investor Confidence
SSH are homes for vulnerable adults with care and/or support needs, who may
have learning difficulties, mental health issues, physical disabilities or a
combination of diagnoses. Their homes are, in most cases, specially adapted to
ensure their comfort and safety, living independently whilst receiving
appropriate assistance. SSH is vital in providing beneficial individual
outcomes whilst delivering a significant saving to the public purse. This is a
particular benefit in an era of strained public budgets, at both local and
national levels.
Unfortunately, over the seven years since SOHO's IPO, well-publicised
challenges in other listed housing strategies have overshadowed the clear
social and financial benefits that SSH can deliver for residents and
shareholders.
These other poor performing strategies did not benefit from the same quality
of homes and residents with long-term housing needs. SOHO is operating in a
different subsector with a very different investment strategy, philosophy and
management team. We view a key component of our role, as a new manager, is to
communicate effectively to the market why SOHO is different and why our
approach differs from the former investment manager. In line with Atrato's
investment management philosophy, we intend to operate with far greater
transparency with respect to the property portfolio, its financials and the
social impact that is being delivered.
Leveraging our real estate, banking, legal and structuring expertise, as
Investment Manager we are also seeking to implement structural changes to
SOHO's arrangements with its tenants to enhance the security of its cashflows.
Together with a more proactive approach to tenant monitoring and resolution,
the Investment Manager believes that it will be possible to materially reduce
the potential financial impact of situations like Parasol and My Space.
We believe that over time this will help re-establish confidence in the
investment case and the operating model and will ultimately narrow SOHO's
discount to NAV. Our medium-term ambition is to move to a position of being
able to grow the SOHO portfolio, delivering additional, much-needed homes for
vulnerable adults.
Financial Review
We are pleased to present the financial results for the year ended 31 December
2024.
In the year the portfolio generated net rental income of £35.8 million (31
December 2023: £35.2 million). The Group's financial performance is
underpinned by increases in annualised rental income from its inflation-linked
leases, partially offset by the impact of the variations in the lease terms on
the transfer from Parasol to Westmoreland.
The annualised contracted rental income of the Group increased to £42.6
million as at 31 December 2024, compared to £41.0 million at 31 December
2023.
The dividend was 0.99x (2023: 0.85x) covered on an adjusted basis for the
year. This measure is based upon adjusted earnings, which removes the impact
of non-cash items and the termination payments to the previous investment
manager from IFRS profit.
The Adjusted Earnings per Share ("Adjusted EPS") is determined on the same
basis, measured on the weighted average number of shares in issue during the
year. Adjusted EPS was 5.40 pence per share for the year ended 31 December
2024, compared to 4.61 pence for the year ended 31 December 2023.
The EPRA Net Initial Yield ("NIY") has increased from 5.57% at 31 December
2023 to 6.44% at 31 December 2024 following the rental uplifts which occurred
during the year.
The EPRA Earnings per Share ("EPRA EPS") excludes the fair value movement on
investment properties and non-recurring termination payments to the previous
Investment Manager. It is measured on the weighted average number of shares in
issue during the year. EPRA EPS was 5.08 pence for the year ended 31 December
2024, compared to 4.92 pence for the year ended 31 December 2023.
The EPRA Net Tangible Assets ("EPRA NTA") per share at 31 December 2024 was
99.05 pence per share, the same as the IFRS NAV per share, compared to 113.76
pence as at 31 December 2023.
At the year end, the portfolio was valued at £626.4 million on an IFRS basis,
compared to £678.4 million at 31 December 2023. There was a like-for-like
reduction in portfolio value of £53.0 million. The valuation falls reflect
recently achieved pricing for comparable transactions in the wider market,
together with a softening of valuation assumptions relating to properties
within the portfolio leased to My Space.
Debt Financing
With the volatility around interest rates over the last two years, the Group's
debt continues to be a valuable asset. All £263.5 million of the Group's debt
is fixed-rate (with a weighted average coupon of 2.74%) with a large
proportion of it being long-term (with a weighted average maturity of 8.6
years). The earliest debt maturity will occur in mid-2028, providing strong
protection from current elevated interest rates.
A summary of the Group's debt structure is outlined below:
• Short-term debt (<2 years to maturity): £nil
• Medium-term debt (2-5 years to maturity): £41.5 million
• Long-term debt (>5 years to maturity): £222.0 million
In July 2018, the Group secured a £68.5 million long-term, fixed-rate,
interest-only facility with MetLife Investment Management secured against a
defined portfolio of the Group's properties at an initial loan-to-value of
40%. 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 2021, the Group secured a £195.0 million long-term, fixed-rate,
interest-only, sustainability- linked facility with Barings and MetLife
Investment Management clients secured against a defined portfolio of the
Group's properties at an initial loan-to-value of 50%. The facility comprises
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 August 2024, Fitch Ratings re-affirmed the Group's existing long-term
Issuer Default Rating of 'A-' and senior secured ratings of 'A' in respect of
both debt facilities. Fitch published its first rating on the Company in
August 2021 with the same Investment Grade distinctions. Further information
on the Group's debt facilities is set out in Note 20 of the financial
statements.
EPC Upgrade Programme
The Company is actively working to upgrade its portfolio so that all
properties have an Energy Performance Certificate ("EPC") rating of C or
above, to meet the current legislative deadline of 2030.
71% of the Company's properties already meet this target. Whilst this is
materially better than the Social Housing sector average of 43%, the Company
is committed to improving the quality of the portfolio and being a sector
leader when it comes to reducing emissions. The pilot project has already seen
11 homes upgraded in collaboration with Approved Providers, delivering
compliant EPC ratings and already showing reductions in occupational energy
consumption.
Atrato are reviewing the outcomes of the improvements delivered within the
pilot, applying learnings and best practice to shape and plan the next phase
of upgrades. The EPC Upgrade Programme will improve the environmental
credentials of SOHO's homes, meet legislative targets and also maintain value
for shareholders.
The process will be managed by SOHO's operations team, working closely with
Atrato's Head of ESG, Isabelle Smith.
Asset Management
Parasol to Westmoreland Assignment
In August 2024, the Parasol Homes ("Parasol") leases were assigned to
Westmoreland.
As part of the transfer process, all 38 properties (7.9% of the gross asset
value as at 31 December 2024) previously leased to Parasol moved to an initial
stabilisation period where the Company receives rent on an agreed passthrough
basis. This allows Westmoreland to assess the condition of each property and
evaluate the individual rent levels to ensure they comply with market testing.
We expect this period to last for approximately 12 months from the initial
date of transfer and, once a property has been deemed sustainable, it will
return to the previous long-term fully repairing and insuring ("FRI") basis.
We are pleased with the progress that Westmoreland has made to date and the
level of engagement SOHO's operational team have had in this process. This has
enabled an increase in rent collection from the 60% of contracted rent
previously received by the Group from Parasol to 72% on a pass-through basis
from the date of transfer to the end of February 2025 by Westmoreland. This is
in line with expectations and the Group forecasts a further increase in rent
collection to between 75% to 85% by the end of August 2025.
My Space Housing Solutions
The principal portfolio challenge facing the Company relates to the My Space
Housing Solutions ("My Space") portfolio. My Space has not paid the Company
any rent since June 2024, as it continues to face significant financial
difficulties, despite the efforts of a new My Space management team. During
the investment management transition, Atrato has been in regular dialogue with
the new senior team at My Space. While their commitment and determination to
resolve the challenges they face is commendable, the Company feels that the
assignment of SOHO properties leased to My Space to one or more other Approved
Providers is in the best interests of shareholders.
On 31 January 2025, My Space and its appointed insolvency specialist, Begbies
Traynor, issued a proposal for a company voluntary arrangement ("CVA") to
remedy structural challenges in their business and avoid an administration or
liquidation process. The proposal was passed by a creditor vote on 7 March
2025. Prior to the vote, the Investment Manager negotiated an option agreement
for the Company, which permits the assignment of SOHO's properties within
12-months of the end of the CVA challenge period.
The Company has 34 properties leased to My Space (6.9% of the portfolio), of
which 22 are used for Supported Housing, which commands a lower level of care
or support. In My Space's case, that care is provided directly by My Space as
opposed to a third-party Care Provider (which would be the case for SSH). As
a result, when seeking a wholesale solution for the My Space portfolio, Atrato
has sought an alternative lessee (or lessees) with (a) the expertise to
provide both housing and support, (b) operate across a broad geographical area
(including the Midlands, North West and North East of England) and (c) a track
record in honouring the financial commitments.
The Investment Manager has agreed heads of terms with a nationwide Approved
Provider about transferring the My Space leases, who have both the capacity
and proven ability to operate the My Space properties. The Company is now
working with them, My Space and relevant regulatory bodies to facilitate the
transfer over the coming months.
We expect rent collection to re-commence and resident occupancy to increase
during 2025, which will have a positive valuation impact on this part of the
portfolio. Given that My Space has not paid rent since June 2024, there is
material upside for the Company in terms of rent collection and, subsequently,
dividend cover.
The Investment Manager is working with its advisers to monitor counterparty
exposures within the wider SOHO portfolio , whilst also assessing potential
structural enhancements to cashflows to help mitigate counterparty exposures.
We are also assessing options to reduce exposures over time (potentially
through asset sales or lessee buybacks), though only if the outcome is
beneficial for both residents and shareholders.
Proactive Asset Management
Our approach to asset management is to be rigorous, responsive and proactive,
leveraging operational data and a deep understanding of our properties and
lessees. By adopting this approach, we will seek to address tenant issues such
as those experienced with Parasol and My Space in a more expeditious manner
than has been achieved historically.
As part of our appointment, we are undertaking a full review of the portfolio
to identify operational issues that may reasonably be expected before they
result in any loss of rent or reduction in quality of service. Using a
detailed, diligent approach with frequent lessee engagement and property
inspections, Atrato will proactively work with lessees to minimise the
occurrence of operational risks and, should they arise, remedy any issues
swiftly. If required, as Investment Manager we will not hesitate to assign
leases to more appropriate Approved Providers or find alternative solutions
for properties.
Lessee Update
It is important to note that whilst the SSH sector has often historically been
described as one which offers government-backed income, the reality of the
sector and its lease counterparts is more nuanced. Robust contractual
arrangements in the form of long-term fully repairing and insuring ("FRI")
leases are in place. However, although the Company's lessees are highly
specialist organisations which deliver social good to society's most
vulnerable people, they are not institutional grade covenants.
As noted earlier, it is key to understand that SSH comprises operational
residential properties and relies on two key elements:
• The property fundamentals of location, structural quality and
appropriate functionality with an appropriate rent basis; and
• The operational efficacy of the lessees.
The Group's lessees are instrumental in delivering day-to-day operational
performance. The properties are typically specialised or adapted to house
people often with a variety of complex needs. The lessees' staff are trained
individuals who are passionate about improving people's lives. The properties
require both intensive housing management and to be kept to a high standard,
requiring specific levels of adaption that is suitable for residents. These
requirements are far beyond what one would expect to see in the Private Rental
Sector which makes the lessees' expertise vital.
Top 10 Lessees Number of Properties Annual Rent Roll % Rent Roll % 2024 Rent Collection % Resident Occupancy
Inclusion 124 £12,667,000 29.8% 100% 89%
Westmoreland 38 £3,972,000 9.3% 100%* 80%
Hilldale 30 £3,597,000 8.5% 100% 90%
Falcon 62 £3,550,000 8.3% 100% 86%
My Space 34 £3,391,000 8.0% 13.0% 59%
Chrysalis 27 £2,345,000 5.5% 100% 90%
BeST 41 £2,063,000 4.8% 100% 88%
Auckland 30 £1,980,000 4.7% 100% 92%
Blue Square 12 £1,632,000 3.8% 100% 90%
Care Housing 11 £1,592,000 3.7% 100% 94%
409 £36,789,000 86.4%
* Following the assignment of leases away from Parasol, Westmoreland have
moved to a pass-through lease basis during the stabilisation phase. Up to the
year end, this has reflected improved rent collection of 72% against the
pre-assignment contracted rent level.
Property Portfolio
As at 31 December 2024, the portfolio comprised 494 properties offering homes
for 3,424 individuals which are geographically diversified across the UK. The
table below shows the portfolio split by region.
Valuation
Market pricing certainty has, for some time, been hampered by a limited volume
of transactional activity. Atrato has been liaising with the Company's
third-party valuer, Jones Lang LaSalle, to identify a greater number of
completed and potential transactions over this period, with which to support
the portfolio's latest valuation. There has been a softening of the portfolio
NIY to 6.22% at year-end (reflecting an EPRA NIY of 6.44%), which we believe
is more reflective of current market sentiment.
The portfolio value as at 31 December 2024 was £626.4 million compared to
£678.4 million at 31 December 2023, representing a decline of 7.7% during the
year.
Rental Income
In total, the Company has 391 leases with a total annualised contracted rental
income of £42.6 million as at 31 December 2024. Over the past 12 months, the
Company has collected 92.6% of the contracted rental income with no arrears
(noting that prior to the assignment of the Parasol properties to
Westmoreland, a creditors agreement saw rents on those leases reduced to 60%
of initial contracted rent).
Of the £2.9 million contracted rent due, but uncollected, My Space accounts
for 100% of this. As noted above, recommencing the collection of rent across
these homes is a key focus for Atrato and we are progressing a solution to
restore rent collection and improve occupancy in the homes concerned.
WAULT
As at 31 December 2024, the portfolio had a Weighted Average Unexpired Lease
Term ("WAULT") of 23.4 years (2023: 24.3 years). This WAULT includes the
initial lease term, as well as any reversionary leases and put/call options
available to the Group at expiry of the initial term.
Successful SSH schemes require two key components - strong property
fundamentals and a counterparty with operational efficacy. When these are in
place, residents are referred into properties, generating inflation-linked
rents paid by local authorities. As the sector has evolved, this has brought
into question the value of longer-term lease arrangements, given that Approved
Providers are typically nascent, thinly capitalised counterparties.
The SSH sector operating model is evolving in this regard. Whilst the SOHO
portfolio benefits from many long-term FRI lease arrangements of 20 years and
above, increasingly new schemes have shorter-term arrangements of 5 to 10
years which is usually coterminous with the Service Level Agreement ("SLA").
Given the strong operational performance of the Group's portfolio and the
specialist nature of its Approved Providers, the Investment Manager does not
believe additional lease length beyond the SLA term is accretive to value and
as part of its appointment, will work with the Group's valuers to determine
this position.
Indexation
100% of the Group's contracted income is generated under leases which are
indexed against either CPI (91.9%) or RPI (8.1%). In 2024, the Company's
weighted average annual rental uplift was 4.3%.
The majority of annual inflation uplifts are uncapped contractually. However,
we have sought to mitigate the risk to our tenants' financial viability should
Government policy change through the adoption of a risk-sharing clause. The
clause enables the Boards of the Approved Providers we work with to
demonstrate an improved risk management strategy to help address a historical
concern of the Regulator of Social Housing.
67% of the Group's leases now include the Company's risk-sharing clause, which
was rolled out to re-balance the apportionment of risk between landlords and
tenants in the context of a long lease model. Negotiations are ongoing with
respect to the remainder of the Group's leases.
As part of this clause, annual rent increases are set at the lower of the
relevant inflation index and prevailing Government policy in relation to
social housing rent increases, as it applies to SSH. Given that the Government
has recently stated that it expects social housing rents to be able to
increase annually by CPI +1% for the next ten years, these inflation linkages
provide the Group and its investors with the comfort that the rental income
will be aligned with inflation.
The clause also aligns annual rental uplifts to April (which is consistent
with rent setting across the broader Social Housing sector) and enables our
Approved Provider lessees to accurately calculate housing benefit submissions
ahead of the annual uplift.
For April 2025 rent reviews, the September 2024 reference CPI figure used as
the basis to determine the uplift is 1.7%, whilst the RPI basis is 2.7%.
Outlook
Throughout the onboarding process as SOHO's new investment manager, Atrato has
been evaluating the portfolio, strategy and team. We remain convinced that the
outlook for SOHO is positive. We have three key, but manageable, challenges in
the short to medium-term:
• Drive the Parasol to Westmoreland transfer to a successful
conclusion and commence a similar process for the My Space portfolio,
improving occupancy and restoring rent collection;
• Proactively manage the whole portfolio, working with current
and future Approved Providers to maintain operational performance and deliver
positive resident outcomes; and
• Improve transparency for shareholders and enhance both
shareholder and market engagement, helping to restore investor confidence in
the SSH model by evidencing its attractive financial returns and genuine
social impact.
We have already commenced these activities, working with our new team and
specialist third-party advisers to deliver on each. By doing so, we will
improve the operational performance of the business, begin restoring investor
confidence and contribute to narrowing the discount to NAV - all whilst
delivering much needed homes for vulnerable people.
We look forward to the challenge and the year ahead.
Adrian D'Enrico
Fund Manager
21 March 2025
PORTFOLIO BY LOCATION
Region Properties % of funds invested*
North West 98 19.3
West Midlands 81 16.1
Yorkshire 66 15.1
East Midlands 55 11.1
North East 51 9.8
South East 61 9.4
London 27 8.6
South West 30 4.9
East 21 4.2
Scotland 2 1.0
Wales 2 0.5
Total 494 100.0
* calculated excluding acquisition costs
SUSTAINABILITY REPORT
Message from the Sustainability & Impact Committee Chair
Dear Shareholder,
I am pleased to present Social Housing REIT plc's Sustainability Report and
Task Force on Climate-related Financial Disclosures ("TCFD") aligned
climate-related disclosures for FY24.
In this report we provide an overview of our sustainability and
climate-related performance and progress over the last year, as well as
setting out our priorities moving forward.
Providing better social outcomes for vulnerable people remains at the heart of
everything SOHO does. Our focus on sustainability continues to be grounded in
our commitment to responsible investment and good stewardship, with the aim of
delivering long-term value for our stakeholders. This year, we have continued
to deliver on our impact measurement and management ("IMM") framework and the
results of this have again been independently assessed by social impact
advisory firm, The Good Economy. Full details of our impact goals and
real-world outcomes can be found in our annual Impact Report on our website.
The appointment of Atrato Partners Limited ("Atrato") as the new Investment
Manager for SOHO provides us with an opportunity to take stock of
sustainability performance to date and assess how our approach to
sustainability could be enhanced going forwards. Atrato have already
identified a number of sustainability priorities for the next year, including
conducting a materiality assessment to underpin a refreshed sustainability
strategy, expanding on our collection and monitoring of Environmental, Social
and Governance ("ESG") data and reviewing our targets to better enable
tracking of, and transparent reporting on, our sustainability performance.
In tandem with these strategic review priorities, working with Atrato we are
committed to expanding our focus on the environmental performance of our
portfolio in addition to our social impact priorities, with particular
attention to energy efficiency measures, emission reduction opportunities and
addressing climate-related risks.
Immediate enhancements that have already been made, as part of the onboarding
of SOHO by Atrato, include the enhanced Greenhouse Gas ("GHG") disclosures we
have made in this Sustainability Report, an expansion of our Scope 3 reporting
to cover for the first time all relevant Scope 3 emissions categories and
making our first full disclosures against the EPRA Sustainability Best
Practices Recommendations ("sBPR") framework.
The progress we have achieved to date, and shared within this report,
highlights how investing responsibly for long-term value creation remains core
to our business model. Looking forward to the year ahead, we are excited to
refresh and expand on our sustainability approach to build on the material
positive social and environmental impact we have delivered to date.
Professor Ian Reeves CBE
Chair of the Sustainability & Impact Committee
21 March 2025
SOHO and Sustainability
The Company believes that by embedding ESG factors within investment and asset
management processes, it can not only deliver broader positive outcomes for
residents, society and the environment but better manage financial risks and
returns over the long-term.
The Company's approach to sustainability is underpinned by the Board's
commitment to good stewardship and creating long-term shareholder value. To
support the integration of ESG priorities into the execution of the investment
strategy, the Board established a dedicated 'Sustainability & Impact
Committee' in May 2023.
Both the Company's Board and its new Investment Manager recognise the
importance of transparent, decision-useful sustainability reporting to improve
accountability to stakeholders. As a result, the Company has committed to
publishing an annual Sustainability Report and TCFD disclosures.
Our Impact Measurement and Management Framework
The Company's impact goal is to increase the provision of Specialised
Supported Housing ("SSH") that delivers positive outcomes for vulnerable
adults with care and support needs.
Under this overarching impact goal, the Company has established the following
set of impact objectives and target outcomes.
Impact objectives - the primary areas under the Company's direct control or
influence.
1) Deliver homes which meet social need
2) Fund high-quality sustainable developments
3) Provide quality services and partnerships
4) Increase supply
Target outcomes - the primary outcomes for people and planet; these depend on
many factors, one of which may be the Company's activities.
1) Improve wellbeing
2) Deliver value for money
Further information about the Company's impact objectives and real-world
outcomes can be found in our annual Impact Report on the Company's website
(www.socialhousingreit.com (http://www.socialhousingreit.com) ).
FY25 Priorities
The Company's Investment Manager, Atrato, is responsible for the day-to-day
delivery of the sustainability strategy approved by the Board and associated
stakeholder engagement on behalf of the Company.
Atrato has initiated a review of the Company's sustainability strategy to
assess how the Company's approach to sustainability could be enhanced going
forward. As a result, a number of key sustainability priorities for the next
reporting period have been identified, including:
1) Conducting a materiality assessment and UN Sustainable
Development Goals ("UN SDG") alignment review to underpin a refreshed
sustainability strategy;
2) Evaluating options to improve collection and monitoring of
ESG data; and
3) Reviewing and refreshing the Company's ESG targets.
In tandem with these strategic review priorities, the Company is committed to
expanding its focus on the environmental performance of its portfolio in
addition to its social impact priorities. This includes enhancing
sustainability activities related to energy efficiency measures, emission
reduction opportunities and addressing climate-related risks.
Responsible Investment and ESG Integration
The Company's new Investment Manager, Atrato, has a Responsible Investment
Policy developed in line with the Principles of Responsible Investment
("PRI"). This Policy, which has been endorsed by the Board, outlines how ESG
factors are incorporated into investment policies, practices and processes.
The responsible investment process aims to avoid, mitigate and manage
potential ESG-related asset risks and optimise the ESG potential of
investments at all stages of the investment cycle. These aims are achieved
through both ESG incorporation and stewardship activities.
FY24 Sustainability Performance
The Company has used the metrics below to monitor and track sustainability
performance during the reporting year. The Company is currently reviewing its
sustainability metrics and targets - see FY25 Priorities section above for
more details
Metric FY24 FY23 FY22
Portfolio EPC ratings A-C: 71.2% A-C: 71.04%(( 1 )) A-C: 70.87%(( 2 ))
A: 0.4% A: 0.41% A: 0.40%
B: 30.8% B: 30.80% B: 31.15%
C: 40.0% C: 39.83% C: 39.31%
D: 21.9% D: 21.99% D: 22.02%
E: 6.7% E: 6.81% E: 6.95%
F: 0.2% F: 0.12% F: 0.12%
Emissions See GHG Inventory in TCFD Report below.
Metric FY24 FY23 FY22
Number of properties and location Region Assets Units Region Assets Units Region Assets Units
East 21 128 East 21 128 East 20 125
East Midlands 55 412 East Midlands 55 412 East Midlands 58 442
London 27 191 London 27 191 London 27 192
North East 51 398 North East 51 400 North East 50 377
North West 98 715 North West 97 705 North West 99 732
Scotland 2 29 Scotland 2 29 Scotland 2 29
South East 61 272 South East 61 272 South East 62 276
South West 30 171 South West 29 167 South West 29 167
Wales 2 20 Wales 2 20 Wales 2 20
West Midlands 81 539 West Midlands 82 545 West Midlands 84 554
Yorkshire 66 549 Yorkshire 66 548 Yorkshire 64 542
494 3424 493 3417 497 3456
Percentage of residents satisfied with the quality of their home 90% 3 91% 91%
Quality rating of care providers (Care Quality Commission) % at outstanding / 85% 84% 5 85%
good 4
SOHO Governance Governance metrics including in relation to Board composition can be found in
the following appendix to the Sustainability Report: Appendix: EPRA sBPR Index
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 3417
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 3456
Percentage of residents satisfied with the quality of their home
90% 3
91%
91%
Quality rating of care providers (Care Quality Commission) % at outstanding /
good 4
85%
84% 5
85%
SOHO Governance
Governance metrics including in relation to Board composition can be found in
the following appendix to the Sustainability Report: Appendix: EPRA sBPR Index
Net Zero Update
The Company is committed to measuring and reducing its carbon emissions across
its portfolio. Safe, comfortable and efficient homes provide better outcomes
for the environment and for residents.
In January 2024, the Board adopted this near-term science aligned net zero
pathway for the Company: reduce social housing portfolio emissions by 75% per
m(2) by 2035 from a baseline year of 2021.
The 2021 baseline for this target utilised 100% estimated data sources and
included only Scope 3: Category 13 emissions (comprising electricity and
natural gas only). The Company has engaged the services of a specialist data
provider to extract actual metered emissions data from its properties and has,
for the first time, calculated a complete GHG inventory covering all relevant
Scope 3 emissions categories (see GHG Inventory Table below). In addition, the
Company's near-term target was developed before the Science Based Target
Initiatives ("SBTi") published its criteria and guidance for the buildings
sector in August 2024.
With the new Investment Manager appointment, the Company has initiated a
review of its near-term emissions reduction target. Through this review, the
Company is evaluating its baseline emissions, given recent enhancements to its
emissions data and calculation process, and is assessing options to refresh
the target. This will ensure alignment with best practice target setting
methodology and facilitate setting ambitious yet achievable decarbonisation
targets for the Company.
The Company will provide an update on this target setting review within its
interim results reporting.
Energy Efficiency
The UK Government has confirmed its ambition to have all rented properties
achieving a minimum EPC rating of 'C' by 2030, as part of broad efforts to
reduce carbon emissions and improve the energy efficiency of housing across
the country.
The current SOHO portfolio of 494 properties has an average EPC of C with the
breakdown shown below in Table 6. To place this in context, the average
residential EPC rating for the UK is currently D.
For every property that the Company acquires, the Investment Manager targets a
minimum EPC rating of C for renovated properties and B for new-build
properties, notwithstanding the legal requirement for any privately rented
properties to have a minimum rating of E.
During 2023 and 2024, the Company implemented a pilot programme focused on
enhancing the energy efficiency of 11 properties (eight directly and twenty
two in conjunction with Approved Providers securing grant) with the intention
of scoping the cost, technologies and preferred suppliers to implement a
portfolio-wide EPC Upgrade Programme (in the first instance focusing on
properties which do not currently align with the 2030 minimum EPC target). The
primary objectives include aligning with EPC regulation changes, reducing
energy costs for tenants and minimising portfolio-wide emissions. The retrofit
pilot was successfully completed in the year, implementing a range of upgrades
to the 11 properties, as well as improving the building fabric.
The pilot phase was strategically designed to gain a deeper understanding of
the practicalities associated with retrofitting Specialised Supported Housing
and the Group's ability to access grant funding. The execution of a wider EPC
Upgrade Programme will require careful and considerate planning, especially
with regard to the impact on residents whilst works are carried out and the
ongoing ease of use of all technology that is implemented. The Company's
Investment Manager, Atrato, expects to announce the details and costings of
the EPC Upgrade Programme during the first half of 2025, setting out a phased
approach to complete upgrade works in line with the required EPC standards and
timetable.
Modern Slavery Statement
The Company is within the scope of the Modern Slavery Act 2015 and is
therefore obliged to make a slavery and human trafficking statement. The
Company's Modern Slavery Act statement can be found on the Company's website
(www.socialhousingreit.com (http://www.socialhousingreit.com) ).
EPRA sBPR Report
This year, the Company has made full sustainability disclosures against the
European Public Real Estate Association ("EPRA") Sustainability Best Practices
Recommendations ("sBPR") framework for the first time. Please see the
following appendix to the Sustainability Report for more details: Appendix:
EPRA sBPR Index.
Taskforce On Climate-Related Financial Disclosures ("TCFD") REPORT
The TCFD recommendations provide a framework for organisations to more
effectively take account of and disclose climate-related risks and
opportunities. The TCFD Report for the Company, included below, contains
voluntary climate-related financial disclosures for the reporting period 1
January 2024 - 31 December 2024 in relation to governance, strategy, risk
management and metrics and targets 6 . It addresses all four core elements and
11 TCFD Recommended Disclosures as detailed in "Recommendations of the Task
Force on Climate-Related Financial Disclosures" 7 .
Recommendation Recommended Disclosures
Governance a. Describe the Board's oversight of climate-related risks and opportunities.
Disclose the organisation's governance around climate-related risks and
opportunities.
b. Describe management's role in assessing and managing climate-related risks
and opportunities.
Strategy a. Describe the climate-related risks and opportunities the organisation has
identified over the short, medium, and long-term.
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.
b. Describe the impact of climate-related risks and opportunities on the
organisation's businesses, strategy, and financial planning.
c. Describe the resilience of the organisation's strategy, taking into
consideration different climate-related scenarios, including a 2°C or lower
scenario.
Risk Management a. Describe the organisation's processes for identifying and assessing
climate-related risks.
Disclose how the organisation identifies, assesses, and manages
climate-related risks.
b. Describe the organisation's processes for managing climate-related risks.
c. Describe how processes for identifying, assessing, and managing
climate-related risks are integrated into the organisation's overall risk
management.
Metrics and Targets a. Disclose the metrics used by the organisation to assess climate-related
risks and opportunities in line with its strategy and risk management process.
Disclose the metrics and targets used to assess and manage relevant
climate-related risks and opportunities where such information is material.
b. Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas
("GHG") emissions and the related risks.
c. Describe the targets used by the organisation to manage climate-related
risks and opportunities and performance against targets.
Governance
· Describe the board's oversight of climate-related risks and
opportunities.
The Board is responsible for setting the Company's sustainability strategy and
overseeing the Company's approach to climate-related risks and opportunities
affecting its business.
The Board established its 'Sustainability & Impact Committee' in May 2023,
ensuring that sustainability issues, including climate change, are discussed
in sufficient detail and given appropriate focus. The Sustainability &
Impact Committee, Chaired by Professor Ian Reeves CBE, meets not less than
once a year (and more frequently as required) and has responsibility for
overseeing the delivery of the Company's Sustainability Strategy, including
identification and management of climate-related risks. The Board is primarily
informed of climate-related risks and opportunities by the Investment Manager
through the meetings of the Sustainability & Impact Committee.
Climate-related risks are 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 (a) the time frame over which they might
materialise and (b) the potential impacts they may have both operationally and
in terms of asset value.
The Board is invested in enhancing the Company's understanding of climate
risks and opportunities and, as part of this, has approved budget allocation
for ongoing climate-related activities for the next reporting year. This
facilitates forward planning and preparation of ESG matters targeted for the
next reporting year.
· Describe management's role in assessing and managing climate-related
risks and opportunities.
The Investment Manager is responsible for the day-to-day delivery of the
sustainability strategy as approved on behalf of the Company by the Board,
including the assessment, management and reporting of climate-related risks
and opportunities.
At the Investment Manager level, assessment and management of climate-related
risks and opportunities is shared across the Social Housing Team and the wider
business of the Investment Manager.
The Company's new Investment Manager, Atrato, has a dedicated Managing
Director, ESG, who is responsible for the operational delivery of
climate-related risks and opportunities measures within the Investment
Manager's operations and leads the provision of climate risk advice to the
Company.
Strategy
• Describe the climate-related risks and opportunities the
organisation has identified over the short, medium and long term.
Investing in real assets exposes the Company to both physical and transition
risks associated with climate change. The Company's properties may require
additional work to bolster their resiliency against increasingly extreme
weather events 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.
In FY23, the Company engaged 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 simulates 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.
The main risks to the fund, which were first disclosed in the Company's FY23
TCFD Report, are shown below.
The Company considered undertaking another assessment of the portfolio through
Climate X in FY24 but determined this was unnecessary given there have been no
material changes to the portfolio during the reporting period.
• Describe the impact of climate-related risks and opportunities on
the organisation's businesses, strategy and financial planning.
In the Company's FY23 TCFD Report, the impact of climate-related risks and
opportunities on the Company's businesses, strategy and financial planning was
disclosed. See below risk and opportunity impact summary tables for details.
Over the next reporting period the Company plans to review its risk mitigation
opportunities with the aim to improve the Company's resiliency to these
identified risks and opportunities moving forward.
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 Given the vulnerable nature of many of the Company's tenants, overheating of Increasing frequency of storms may lead to an increased frequency of surface
frequency of droughts may cause water shortages and also lead to subsidence the Company's properties is an undesirable risk. flooding, if current drainage options prove to be insufficient.
issues in certain properties.
Potential Financial Impacts Increased utility bills for Approved Providers. May require installation of Capital expenditure may be required to add additional insulation and Potential damage to properties as a result of flooding, requiring repairs and
more water-efficient appliances. ventilation to properties to prevent overheating. Frequent overheating of affecting property value.
Subsidence may affect property values and require repair work. buildings can cause wear and tear and potentially lower building values.
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 to medium term
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 Government may introduce legislation to mandate all social housing properties Currently, the Company follows market practice in reporting estimated Increasing expectations and requirements linked to housing efficiency Construction activities and manufacturing of materials is carbon intensive, As part of the energy transition, home requirements may change, and will need
change and to reduce energy consumption. Such work requires high quality and to a certain level of energy efficiency and this will require upgrade works to emissions for its portfolio due to difficulties in accessing actual energy performance. Running and maintaining high quality and efficient homes is causing high exposure to any potential future carbon pricing measures. to be factored into planning and design standards. Facilities such as secure
knowledgeable contractors. Activity to date has found sourcing and securing be undertaken. The design specification of properties are agreed well ahead of consumption data for its properties. In future, market expectations may shift becoming more expensive. bicycle parking, electric vehicle charging points and public transport
quality contractors with access to resources at reasonable prices presents completion. If regulations develop particularly quickly, even newly completed to collecting real data. Without this data, the fund may be less competitive accessibility will become more important.
difficulties. properties may have to be retrofitted. in the market-place, as investors are less able to gauge the risk.
Potential Financial Impacts To implement required works at a point in time required may incur unexpectedly Properties that do not meet standards may become stranded assets, require Without transparency on necessary asset data there may be an increased Failure to manage this challenge may result in the reduction of value in the Carbon pricing in the supply chain of materials may be passed on to the Including these features in property designs may increase costs.
high costs if the ability to secure contractors is limited. retrofitting, or face a 'brown tax', with a lower valuation and less difficulty accessing funding, resulting in a higher cost of capital. property portfolio. developers, increasing property prices.
liquidity.
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
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 Although not formally assessed, the geographical spread of the Company's In improving the energy efficiency and resiliency of a property it should
increase, with a 'green premium' attached to housing stock with good properties means that opportunities are likely to exist for on-site renewable serve residents more effectively, making them more desirable residencies and
efficiency credentials. energy generation. Energy generated could be provided to tenants in the first increasing willingness for stakeholder engagement.
instance, to reduce energy bills, with the excess being sold to the grid by
the Company. 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 property value
resulting in an increased value of properties.
Likelihood High High High
Magnitude High Low Medium
Time Horizon Medium term Long term Medium to long term
• Describe the resilience of the organisation's strategy, taking
into consideration different climate-related scenarios, including a 2°C or
lower scenario.
In FY23, the Company 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, and the overall
resiliency of the strategy was assessed under the following two scenarios:
· 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; and
· 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.
Quantitative scenario analysis was conducted for the portfolio utilising
climate modelling from Climate X (described in the Risk Management section).
The findings from the FY23 Climate X assessment showed the Company's assets
have a low vulnerability to physical climate risks and the portfolio is more
efficient than average.
As noted above, the Company did not repeat the Climate X assessment given
there were no material changes to the portfolio during the reporting period.
Over the next reporting period the Company plans to conduct further analysis
over the outputs from this assessment and will assess the benefit of
refreshing this assessment in FY25.
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
The Company's approach to risk assessment is as set out in the Our Principal
Risks and Uncertainties Section.
The new Investment Manager, Atrato, has overall responsibility for the
Company's risk management and internal controls, with the Audit and Risk
Committee reviewing the effectiveness of the Board's risk management processes
on its behalf. The Sustainability & Impact Committee is responsible under
the delegated authority of the Board for the identification and monitoring of
climate-related risks which are incorporated into the risk management process.
The Sustainability & Impact Committee considers both physical and
transition climate-related risks, including existing and emerging regulatory
requirements related to climate change.
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; and
• Impact: low, moderate, high.
The alignment to the Company's general risk management structure 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 regularly with the Board of the Company. This
meeting brings together the SOHO team, 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; and
• Long-term: over 5 years
These time scales are aligned to the Company's overall risk management
framework, considering the nature of the Company's assets and liabilities.
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.
The Company recognises the need for continuous improvement of data collection
and monitoring to accurately assess climate risks and opportunities in line
with its strategy and risk management process.
The Company measures and monitors the following key climate-related metrics:
1) EPC ratings: see above for breakdown and YoY comparison;
2) Energy consumption: see details of energy consumption data provided
below; and
3) GHG Emissions: see GHG Inventory below
EPC Ratings
The EPC ratings of each property are monitored on an ongoing basis. Currently,
71.2% of the portfolio is rated at C or above. The chart below shows the EPC
breakdown of properties as at 31 December 2024.
Energy Consumption Data
The Company has engaged the data provider, Perse, to enable access to actual
energy consumption through direct APIs to every property's meter. This data is
utilised in the preparation of the Company's GHG Inventory.
The energy consumption data from Perse not only improves the completeness and
accuracy of the Company's GHG Inventory but will also support improved
emissions reductions modelling to improve decision making in relation to
available decarbonisation levers.
• Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse
gas (GHG) emissions, and the related risks.
GHG Inventory
The Company engaged external consultants, Anthesis, to prepare its GHG
Inventory for FY24 in line with the GHG Protocol methodology. The Company does
not have any Scope 1 and 2 emissions but has reported all relevant categories
of Scope 3 emissions. 8
The Company's GHG Inventory is disclosed below in Table A (see the following
appendix to the Sustainability Report for further details of the GHG Inventory
methodology: Appendix: GHG Inventory Methodology).
Table A - GHG Inventory(( 9 ))
Emissions FY24 FY23
Location-based tCO2e Market-based tCO2e Location-based tCO2e
Scope 1 and 2 Total N/A N/A N/A
1: Purchased Goods and Services 1,216 1,216 Not measured in FY23
6. Business Travel 3 3 Not measured in FY23
13: Downstream Leased Assets ("DLA") 6,044 7,570 4,763 10
Scope 3 Total 7,263 8,789 Not measured in FY23 11
• Describe the targets used by the organisation to manage
climate-related risks and opportunities and performance against targets.
Climate-related Targets
In January 2024, the Board adopted the following near-term science aligned net
zero pathway for the Company: reduce social housing portfolio emissions by 75%
per m(2) by 2035 from a baseline year of 2021. However, this target is
currently under review. See Net Zero Update for more details.
The Company and its Investment Manager intend to asset manage the portfolio to
ensure all properties have an EPC rating of C or above by 2030 to ensure
compliance with current legislative targets and that the homes it provides for
residents are environmentally and economically efficient.
APPENDIX: GHG INVENTORY METHODOLOGY
Emissions were calculated using the Anthesis 'Route Zero' software tool, in
alignment with the GHG Protocol.
For lessees, 7% of emissions were estimated by Anthesis, 22% were based on
estimated consumption of SOHO and 70% of emissions were calculated based on
actual data provided. 75% of electricity emissions and 76% of natural gas
emissions were calculated based on actual data.
Purchased Goods & Services
The Environmentally Extended Input Output ("EEIO") method, which estimates
emissions from expenditure, was used to calculate the emissions from this
category. The SOHO team provided spend for the reporting year split by
supplier. The suppliers were mapped against the DEFRA Input/Output ("IO")
categories, which are based on SIC codes and have an associated emission
factor. The DEFRA IO emission factors were multiplied by the spend to
calculate the emissions. Exclusions include service charge costs and costs
that are recharged to tenant in full.
Business travel
This includes the upstream well-to-tank emissions of business travel
activities.
Downstream leased assets
Where actual fuel and electricity consumption data was provided, this was
used. For any gap-filling and estimations, methodology notes are included
below:
Electricity estimates:
Electricity consumption is estimated using actual data from sites with
recorded usage. First, electricity consumption and floor area data are
collected from sites with available records. This helps calculate electricity
intensity, which serves as a benchmark. The benchmark intensity is calculated
by dividing electricity consumption by floor area (kWh/m²). This value
represents typical electricity usage per square meter. For sites without
actual data, the benchmark intensity is multiplied by their floor area to
estimate electricity consumption.
Natural Gas estimates:
Natural gas consumption is estimated using actual data from sites with
recorded usage. Natural gas consumption and floor area data are collected from
sites with available records. This helps calculate electricity intensity,
which serves as a benchmark. The benchmark intensity is calculated by dividing
natural gas consumption by floor area (kWh/m²). This value represents typical
electricity usage per square meter. For sites without actual data, the
benchmark intensity is multiplied by their floor area to estimate natural gas
consumption.
Waste estimates:
Waste consumption is estimated using UK Government data on household waste,
utilising the number of households and an average floor area of dwellings.
This data was used to create a benchmark, estimating average tonnes of waste
per m2. This benchmark was multiplied by property floor area, estimating total
waste per lessee.
Water estimates:
Water consumption is estimated using GRESB benchmarks. The benchmarks consider
cubic meters of water per meter squared of floor area (m3/m²). The benchmarks
were multiplied by property floor area, to estimate total water usage per
lessee.
APPENDIX: EPRA SBPR INDEX
Introduction
This report contains Social Housing REIT plc's (LSE:SOHO) EPRA Sustainability
Performance Measures and Overarching Recommendations ("sBPR") disclosures for
the reporting period 1 January 2024 to 31 December 2024.
About us
SOHO seeks to address the ongoing UK social housing sector demand-supply
imbalance, providing sustainable high-quality homes which have been adapted
for vulnerable adults with long-term care and support needs including mental
health issues, learning disabilities, or physical and sensory impairments or a
combination of diagnoses.
Our portfolio
SOHO has built a unique portfolio of Supported Housing properties, diversified
by geography and leased to a variety of Approved Providers across the UK. The
below map shows SOHO's property exposure across the UK (as at 31 December
2024).
Overarching recommendations
The table below highlights how SOHO has made a focused effort to implement the
overarching sBPR recommendations into its reporting.
Table 1: How SOHO has addressed the overarching recommendations.
Overarching recommendations How SOHO integrate these recommendations
Organisational boundaries SOHO's approach to organisational boundaries is based on the Operational
Control approach (as defined by the Greenhouse Gas (GHG) Protocol 12 ). 100%
of SOHO's portfolio is represented within this organisational boundary.
Coverage SOHO are currently able to report electricity for 100% of their portfolio,
with 24% estimated; fuels for 100%, with 24% estimated; and water for 100%,
with 100% estimated.
SOHO aim to improve data coverage and completeness overtime through engagement
with data providers and improving data collection processes.
Estimation of landlord-obtained utility consumption 24% of landlord-obtained electricity consumption was estimated; 24% of
landlord-obtained natural gas was estimated.
Third party assurance SOHO has not sought third-party assurance for this reporting year.
Boundaries All available tenant data is reported. Estimations were used to gap-fill data
so that 100% of consumption is reported.
Normalisation MWh / m(2) is used to measure intensity.
Segmental analysis This report covers the property assets within SOHO's portfolio for the
financial year 1 January 2024 to 31 December 2024.
During the financial year, SOHO engaged in a single segment business, namely,
investment in the United Kingdom in social housing assets.
Disclosure on own offices SOHO is an externally managed real estate investment trust (REIT) and
therefore does not have any employees or office premises in operation.
Narrative on performance An overview is provided for each topic in this report and further sources are
highlighted where required.
Location of EPRA Sustainability Performance Measures EPRA Sustainability Performance Measures are included in the tables on the
following pages.
Reporting period Financial year 1 January 2024 to 31 December 2024.
Materiality 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 SOHO are investing in.
SOHO intends to conduct a refreshed materiality assessment as part of the
refinement of its Sustainability Strategy in FY25.
Environmental performance
The environmental data on which SOHO's emissions are calculated comes from
electricity and natural gas. There is no consumption of district heating and
cooling at SOHO sites. Waste and water data were estimated based on GRESB 2020
Benchmarks 13 and Defra waste statistics 14 , and are not included in the
assessment of GHG emissions.
Below is a breakdown of environmental data and a more in-depth analysis by
topic, including Energy, GHG emissions, Waste and Water and Sustainably
certified assets.
Any reference to 'N/A' for Scope 1 and 2 emissions is due to the nature of
SOHO's organisation. SOHO does not have any offices and therefore does not
have any direct emissions. Like-for-like comparisons have also been excluded
within this report. For reporting year 1 January 2024 to 31 December 2024,
SOHO has calculated a complete GHG inventory, where this has not been
completed previously. Changes in methodology also means that like-for-like
comparisons will not be an accurate representation of SOHO's emissions.
Table 2: SOHO's environmental performance measures
Impact Area EPRA code Environmental performance measures Performance
Energy Elec-Abs Total electricity consumption 9,167 MWh
Elec-Lfl Like-for-like total electricity consumption N/A
DH&C-Abs Total district heating and cooling consumption N/A
DH&C-Lfl Like-for-like total district heating and cooling consumption N/A
Fuels-Abs Total fuel consumption 14,655 MWh
Fuels-Lfl Like-for-like total fuel consumption N/A
Energy-Int Building energy intensity 0.15 MWh/ m(2)
GHG emissions GHG-Dir-Abs Total direct greenhouse gas (GHG) emissions N/A
GHG-Indir-Abs Total indirect greenhouse gas (GHG) emissions 7,262 tCO(2)e*
GHG-Int GHG emissions intensity from building energy consumption See breakdown below
Water & Waste Water-Abs Total water consumption 325,212 m(3)
Water-Lfl Like-for-like total water consumption N/A
Water-Int Building water intensity 2.01 m(3)/ m(2)
Waste-Abs Total weight of waste by disposal route See breakdown below
Waste-Lfl Like-for-like total weight of waste by disposal route See breakdown below
Sustainably certified assets Cert-Tot Type and number of sustainably certified assets See breakdown below
*FERA emissions are included in Scope 3 Category 13: Downstream Leased Assets.
Emissions are reported on a location-basis.
Energy and GHG emissions
Between 1 January and 31 December 2024, SOHO calculated Scope 3 GHG emissions.
Scope 3 emissions reported include:
1. Category 1: Purchased Goods and Services;
2. Category 6: Business Travel; and
3. Category 13: Downstream Leased Assets.
This is the first complete GHG Inventory SOHO has developed, where previously
only emissions relating to category 13: Downstream Leased Assets have been
captured.
The tables below provide energy consumption and GHG emissions for SOHO's
assets for the reporting year 1 January to 31 December 2024. Emissions and
associated consumption data reported below include both a location-based and
market-based approach.
In relation to floor area coverage, 100% of floor area of properties is tenant
managed and included in Scope 3 downstream leased assets.
Table 3: SOHO's Energy impact area performance
EPRA code Indicator Metric 1 January 2024 to 31 December 2024
Elec-Abs Electricity Total electricity consumption - landlord obtained N/A
% of floor coverage N/A
Total electricity consumption - tenant obtained 9167.4 MWh
% of floor coverage 100%
% of landlord-obtained electricity from renewable sources N/A
% of tenant-obtained electricity from renewable sources 0%
Total electricity consumption 9167.4 MWh
% of floor coverage 100%
% of electricity estimated 24%
DH&C-Abs District Heating & Cooling Total heating & cooling - landlord obtained N/A
Total heating & cooling - tenant obtained N/A
% of heating & cooling from renewable sources - landlord N/A
% of heating & cooling from renewable sources - tenant obtained N/A
Fuels-Abs Fuels Total fuels - landlord obtained N/A
% of floor coverage N/A
Total fuels - tenant obtained 14,654 MWh
% of floor coverage 100%
% of landlord obtained fuels from renewable sources N/A
% of tenant obtained from renewable sources 0%
Total fuel consumption 14,654 MWh
% of floor coverage 100%
% of fuels estimated 24%
Fuels-LfL Fuels Like-for-like total fuel consumption N/A
Energy-Int Energy intensity Energy intensity per m2 0.15 MWh / m2
Table 4: SOHO's GHG emissions impact area performance
EPRA code Indicator Metric Location-based: Market-based*:
1 January to 31 December 2024
1 January and 31 December 2024
GHG-Dir-Abs Direct Scope 1 N/A N/A
% of floor area coverage N/A N/A
GHG-Indir-Abs Indirect Scope 2 N/A N/A
% of floor area coverage N/A N/A
Scope 3 7,262 tCO(2)e 8,788 tCO(2)e
% of floor area coverage 100% 100%
GHG-Int GHG emissions intensity N/A N/A N/A
Scope 3 0.045 tCO(2)e/m(2) 0.054 tCO(2)e/m(2)
Water and waste
The table below provides water and waste consumption values for SOHO's assets
for the reporting year 1 January 2024 to 31 December 2024.
Water and waste were estimated this year using GRESB 2020 Benchmarks(2) and
Defra waste statistics(3).
Table 5: SOHO's Water and Waste impact area performance
EPRA code Indicator Metric 1 January to 31 December 2024
Water-Abs Water consumption Total water consumption 325,212 m(3)
% of floor area coverage 100%
% of water estimated 100%
Water-LfL Water consumption Like-for-like total water consumption N/A
Water-Int Water Intensity Building water intensity 2.01 m(3) / m(2)
Waste-Abs Total waste Total waste sent to landfill 593 t
Total waste diverted from landfill 753 t
% of floor area coverage 100%
% of waste estimated 100%
Waste LfL Proportion of waste Proportion of waste sent to landfill N/A
Proportion of waste diverted from landfill N/A
Sustainably certified assets
The table below provides a breakdown of the EPC ratings for SOHO's assets for
the reporting year: 1 January 2024 - 31 December 2024.
Table 6: SOHO's EPC certifications by percentage of the portfolio's total units
EPRA code Metric 1 January to 31 December 2024
Cert-Tot No. of units with an EPC Rating Certification 2,445
A 0.4%
B 30.8%
C 40.0%
D 21.9%
E 6.7%
F 0.2%
G 0%
A-C 71.2%
Social performance
Below is an overview of SOHO's social performance data and a more in-depth
analysis by topic, including Diversity, Employees 15 , Health & Safety and
Community Engagement.
Table 7: An overview of SOHO's social performance.
EPRA code Indicator Metric 1 January 2024 to 31 December 2024
Diversity-Emp Employee gender diversity Percentage of male & female employees N/A: SOHO does not have any employees.
Diversity-Pay Gender pay ratio Pay ratio 1.125
Emp-Training Employee training and development Average number of hours N/A: SOHO does not have any employees.
Emp-Dev Employee performance appraisals Percentage of total workforce
Emp-Turnover New hires and turnover Total number and rate of new employee hires and turnover
H&S-Emp Employee health and safety Injury rate, lost day rate, absentee rate and work-related fatalities N/A: SOHO does not have any employees.
H&S-Asset Asset health and safety assessments Percentage of assets 0%
N/A: All the property leases in the SOHO portfolio are FRI leases. As a
result, the asset health and safety assessments fall under the responsibility
of the tenants.
H&S-Comp Asset health and safety compliance Number of incidents N/A: As above.
Comty-Eng Community engagement, impact assessments, development programmes Percentage of assets 100% of assets are included in SOHO's annual independent impact assessment
which assess impacts of the portfolio of assets including on inhabitants and
the local economy.
Table 8: A detailed breakdown of SOHO's Diversity social performance.
EPRA code Indicator Unit 1 January 2024 to 31 December 2024
Diversity-Emp Governance body (SOHO Board of Directors) % male 60%
% female 40%
Directors % male N/A: SOHO does not have any employees.
% female
Line managers % male
% female
Other employees % male
% female
Table 9: A detailed breakdown of SOHO's Employees social performance.
EPRA code Indicator Unit 1 January 2024 to 31 December 2024
Emp-Training Employee training and development Average hours of training per male employee N/A: SOHO does not have any employees.
N/A: SOHO does not have any employees.
Average hours of training per female employee
Emp-Dev Employee performance appraisals Percentage of male employees with regular performance review
Percentage of female employees with a regular performance review
Emp-Turnover New hires and turnover: males Total number of employee hires
Rate of employee hires
Total number of employee turnover
Rate of employee turnover
New hires and turnover: females Total number of employee hires
Rate of employee hires
Total number of employee turnover
Rate of employee turnover
Table 10: A detailed breakdown of SOHO's Health and Safety social performance.
EPRA code Indicator Unit 1 January 2024 to 31 December 2024
H&S-Emp Employee health and safety Rate of employee turnover N/A: SOHO does not have any employees.
Injury Rate
Lost day rate
Absentee rate
H&S-Asset Asset health and safety assessments Percentage of assets of which H&S impacts are assessed or reviewed 0%
N/A: All the property leases in the SOHO portfolio are FRI leases. As a
result, the asset health and safety assessments fall under the responsibility
of the tenants.
H&S-Comp Asset health and safety compliance Number of incidents of non-compliance N/A: As above.
Table 11: A detailed breakdown of SOHO's Community Engagement performance.
EPRA code Indicator Unit 1 January 2024 to 31 December 2024
Comty-Eng Community engagement, impact assessments, development programmes Percentage of assets The Company is committed to a relationship-driven partnership approach with
the Registered Providers and Care Providers.
100% of assets are included in SOHO's annual independent impact assessment
which assess impacts of the portfolio of assets including on inhabitants and
the local economy.
Governance performance
Below is an overview of SOHO's governance performance data.
Table 12: An overview of SOHO's Governance.
EPRA code Performance measures 1 January 2024 to 31 December 2024
Gov-Board Composition of highest governance body The Board is composed of five non-executive Directors.
Gender diversity: three male and two female Board members.
Minority Ethnic diversity: one Board member is from an ethnic minority.
Average tenure on governance body: 6 years
Number of independent/non-executive board members with competencies relating
to environmental and social topics: see Board of Directors section for Board
member biographies detailing the competencies and experiences of each member.
Gov-Select Nominating and selecting the highest governance body The recruitment process followed in relation to Board appointments is designed
to be independent and transparent.
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 Company's strategy.
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 Company's
website.
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.
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 in 2024. 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 Bryan Sherriff as an Independent Non-Executive Director on 24
December 2024, effective from 1 January 2025.
Gov-Process for managing conflicts of interest Process for managing conflicts of interest The Company 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 Company. 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 Company 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
Company.
STAKEHOLDER ENGAGEMENT
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 Why is it important to engage? How have the Investment Manager/Directors engaged? What were the key topics of engagement? What was the feedback obtained and the outcome of the engagement?
Shareholders Investment from our shareholders plays an important role by providing capital The way in which we engage with our shareholders is set out in our Corporate Financial and operational performance. The Board and the Investment Manager considered further share buybacks and a
to ensure we can deliver additional housing into the Specialised Supported Governance Report.
portfolio sale to address investor feedback regarding the Company's share
Housing sector. price.
Through the investment of private capital into an under-funded sector, we can Share price discount to NAV and potential rectification action.
achieve a positive social impact whilst ensuring our shareholders receive a
long-term inflation-linked return. The Board and the Investment Manager undertook and completed the transfer of
the 38 properties previously leased to Parasol to Westmoreland.
The share price, potential share buybacks and the sale of a portfolio.
The Board and Investment Manager consider shareholder concerns when speaking
The regulatory environment of the Supported Housing sector. to the Regulator of Social Housing and agreed to keep shareholders updated of
any developments. We understand the importance of, and are committed to,
working with Approved Providers to address the concerns of the Regulator.
Refer to the Investment Manager's Report.
Environmental, social and governance considerations.
The Investment Manager has enhanced environmental, social and governance
Understanding the underlying concerns of shareholders that resulted in votes considerations within its investment process, and within its own business.
against resolutions 4, 5, 6, 7 and 14, at the Company's 2024 Annual General Refer to the Investment Manager's Report, and the Sustainability Report.
Meeting.
The Board and Investment Manager had previously consulted with a number of the
Company's shareholders in accordance with Provision 5.2.4 of the AIC Code of
Corporate Governance in relation to the pre-emption rights resolution at the
The Company's key service provider appointments, including the Investment previous AGM, following which it was acknowledged that active consideration is
Manager and broker arrangements. required regarding alleviation of the persistent discount to EPRA NTA.
Atrato was appointed as the Company's new Investment Manager from 1 January
2025.
Residents Our strategy is centred on providing Specialised Supported Housing for our The Investment Manager monitors resident welfare through engagement with We provide oversight of resident welfare by undertaking due diligence on Resident issues raised as a result of engagement through care providers were
Approved Provider lessees to home vulnerable adults. We remain focused on Approved Providers to assess the quality of the service they deliver to properties before residents move in. We then monitor our Approved Provider addressed with the relevant Approved Provider.
providing homes which offer the vulnerable adult residents greater residents. The Investment Manager receives quarterly reports from Approved lessees' compliance with health and safety standards to ensure that residents
independence than institutional accommodation. Providers to ensure compliance with health and safety standards. We do not are looked after by the Group's counterparties; we request updates on any Any compliance issues are remedied with any associated works undertaken.
generally engage with residents directly. Instead, day-to-day engagement is health and safety issues every quarter.
done by care providers and, to a lesser extent, Approved Providers. The Group's investment decisions are informed by the long-term needs of the
Approved Provider lessees and their residents.
The Group completed on the pilot phase of its building upgrade program, which
has provided more efficient homes for our Approved Providers to house
vulnerable adults safely and efficiently.
Investment Manager The Investment Manager is responsible for executing the Investment Objective The Board maintains regular and open dialogue with the Investment Manager at In addition to all matters related to the execution of the Company's The Investment Manager produces reports to the Board every quarter on various
within the Investment Policy of the Company. Board meetings and has regular contact on operational and investment matters Investment Objective, the Board engaged with the Investment Manager on governance and operational matters at the Board's request. Capital allocation
outside of meetings. developments in the market and updates from the Regulator. is also considered with regard to the views of the Board.
The change of Investment Manager from Triple Point to Atrato. The Board closely monitored the transition process from Triple Point to Atrato
to ensure that it was effective and minimised disruption to the Group's
stakeholders.
The collaboration between the Board, Triple Point and Atrato ensured that the
welfare of the residents of the Group's properties was prioritised,
operational performance was preserved and that progress continued with
corporate initiatives.
Approved Providers Our relationship with Approved Providers is integral to ensuring rent is paid The Investment Manager looks to maintain strong relationships with Approved The Investment Manager discussed a number of topics with Approved Providers Refer to the Investment Manager's Report.
to the Group and that properties are managed appropriately. Providers, having formal meetings with senior management at least every six including that properties are managed in accordance with their leases;
months as well as engaging more frequently on an ad hoc basis on a variety of financial reporting and governance; and specific property-related issues such Further detail on the outcome of the transfer of leases from Parasol to
The Group's leases with Approved Providers are fully repairing and insuring - matters. Quarterly operational surveys and biannual compliance surveys are as occupancy, health and safety issues, rent levels, management accounts and Westmoreland and the planned assignment from My Space is set out in the
meaning that Approved Providers are responsible for management, repair and provided to the Investment Manager. governance. Investment Manager's Report.
maintenance, in addition to tenanting the properties.
During the year, the Investment Manager had significant engagement with My
Space and Parasol regarding lease transfers to alternative Approved Providers,
and further detail is set out in the Investment Manager's Report.
Care Providers Our Approved Providers house residents who receive care from care providers. The Investment Manager engages with care providers as part of its due The Investment Manager engages with care providers on: the specific care and The Investment Manager will not consider deals where care providers do not
It is important to ensure that these vulnerable residents receive the best diligence process and regularly meets and engages with our provider support requirements of residents including health and safety compliance meet the care or governance standards expected or where care providers are
possible care. In addition, the care providers often cover the rental cost of representatives when inspecting the Group's portfolio, when reviewing (refer to Investment Manager's Report); property management by Approved unable to demonstrate the financial strength to meet their obligations under a
void units so we engage with care providers to ensure our Approved Providers quarterly data and on an ad hoc basis. Providers; financial and operational capacity for new schemes; occupancy service level agreement.
are able to pay our rent in the event of empty units. levels; and financial performance.
Following engagement, scopes of work was agreed with care providers to ensure
Therefore, whilst we have no contractual relationship with the care providers properties facilitate the specific care needs of residents.
operating in our portfolio, they play an essential role in the occupancy
levels of our properties and strong engagement with the Group ensures the best Whilst done at the relevant Local Authorities' discretion, care providers have
possible outcomes for our Approved Provider lessees and their residents. been changed where expectations around the standard of care were not met or
where engagement identified care providers in financial difficulties.
Local Authorities Local Authorities are responsible for identifying appropriate housing and care When looking at a new acquisition, the Investment Manager engages with, or The aim of the engagement is, as much as possible, to ensure that the The Investment Manager will listen to feedback from local authorities and,
for the individuals who live in the Group's properties. receives feedback from, various departments within Local Authorities including properties acquired by the Group are consistent with the requirements of the where possible, will work with Approved Providers to improve and upgrade
Commissioners and Housing Benefit officers. The Investment Manager will look relevant Local Authority. properties to ensure that they meet ongoing commissioning requirements.
New acquisitions are assessed to ensure that they meet the expectations of the to engage with a Local Authority in relation to an existing scheme if required
relevant Local Authority in order to ensure that referrals are made as (for example, if a new care provider is needed).
efficiently and safely as possible.
Where necessary, Local Authorities will be engaged with directly The Group completed the pilot phase of its building efficiency upgrade
post-acquisition of a property to access ongoing demand levels and any changes programme across 11 properties. Refer to the Investment Manager's Report for
in commissioning strategy. more detail.
The Regulator The Regulator of Social Housing ("RSH") regulates Registered Providers of The Investment Manager is in contact with the RSH in order to understand the Discussions with the RSH are focused on ensuring the market evolves in line The Investment Manager continues to work with the Boards of its lessees to
social housing to ensure providers are financially viable and properly key concerns and priorities for the Specialised Supported Housing Sector. with its observations, and Registered Providers can best focus on addressing understand how best we can help them meet the standards of the RSH. Refer to
governed. It is important to ensure that, as much as possible, the Group the RSH's observations. the Investment Manager's Report for more detail.
reflects observations made by the RSH in its investment structures and its
engagement with its lessees.
Lenders The Group's investments in social housing assets are partly funded by debt. The Investment Manager engages with its lenders mainly via the reporting of The Group engaged on the following topics: financial and information covenant The Group is fully compliant with its debt covenants.
Prudent debt financing is required to achieve the Group's return targets. financial and information covenants under the existing loan agreements on a reporting and active asset management activities undertaken by the Group e.g.
quarterly basis. any other asset management activity that requires lenders' consent. The Investment Manager's pro-active engagement with the Group's lenders is
All secured debt is long-term and so it is important for the Group and the
welcomed by them and, to date, no concerns in relation to the performance of
Investment Manager to form a good relationship with our debt provider partners In addition, there are regular ad-hoc engagements in relation to general its loans have been raised by the lenders.
and provide them with all information and commentary required. topics relating to the social housing sector as well as specific topics
arising from the financial and operational performance of the Group's The Board continues to monitor compliance with debt covenants and keeps
activities and future opportunities, and any other general matters affecting liquidity under constant review to make certain the Group has sufficient
the relationship between the Group and the lenders. headroom in its debt facilities.
In August 2024, Fitch Ratings Limited reaffirmed the Group's existing
Investment Grade, long-term Issuer Default Rating (IDR) of 'A-' and a senior
secured rating of 'A' for the Group's existing loan notes.
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.
Appointment of New Investment Manager
During the year, the Board made the decision to undertake an independent
review of the investment management arrangements. This was conducted by Akur
Limited and included the benchmarking of market precedents and engagement with
other market participants. After careful consideration, the Board appointed
Atrato Partners Limited as the Company's new Investment Manager with effect
from 1 January 2025. Further detail on this can be found in the Chair's
Statement. The Board believes that the appointment of Atrato Partners Limited
will result in closer alignment with shareholders' interests and material cost
savings for the Company in the long term, underpinned by a management fee
calculated on the basis of market capitalisation and also a renewed focus,
with a strategy to improve the quality and security of rental income via
proactive asset management.
Lease Transfer
The Board decided to transfer all 38 properties previously leased to Parasol
Homes Limited (representing 8.1% of the Group's Gross Asset Value and 9.70% of
the rent roll as at 31 December 2023) to Westmoreland Housing Association. The
transfer completed on the 19 August 2024.
Dividend target to remain flat
In May 2024, the Board decided to keep the target dividend flat for the year
ended 31 December 2024.
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 concluded the transfer of the 38
properties from Parasol to Westmoreland and were intending to proceed with the
proposed sale of a portfolio of properties, which ultimately did not take
place. Further detail can be found in the Investment Manager's Report.
Appointment of New Non-Executive Director
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. The Board were pleased to announce the appointment of
Bryan Sherriff as an Independent Non-Executive Director with effect from 1
January 2025.
It was also announced that, as part of the Succession Plan for the Board, Ian
Reeves will step down from his role as an Independent Non-Executive Director
at the 2025 Annual General Meeting following an orderly handover.
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.
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 in this announcement, which is adhered to and for which the Board has
overall responsibility. In February 2025, the Company received shareholder
approval to amend its investment policy, which will now allow for a maximum
exposure of 35% to any one Approved Provider, where it was previously
restricted to 30%.
Following the appointment of Atrato as the Company's new investment manager
effective from 1 January 2025, a comprehensive review of the current risk
framework was undertaken resulting in various enhancements to the existing
risk management methodology being made. The changes to approach are more
reflective of the individual nature of the risks being considered and will
enable the Board to view the risks on a more granular level.
In the Group's 2024 Interim Report, it was reported that the principal risks
and uncertainties remained unchanged during the period. Following the
comprehensive review undertaken by the Investment Manager, two existing
principal risks have now been determined to be non-material and two risks that
were previously deemed non-material have now been re-classified as principal
risks. More information on the changes can be found in the Principal Risks and
Uncertainties table.
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 review of the risks
identified by the Investment Manager, 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 in the Audit Committee Report.
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.
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.
Having conducted a full review of the Group's existing risk register, the
Investment Manager has reclassified the previous Principal Risks of
"Inflation" and "Reliance on Investment Manager" as non-material and also
assessed that "Volatile trading market" and "Health and safety standards"
should be captured within the Group's Principal Risks.
Risk Category Presentational Name Risk Description Mitigating Actions Likelihood Potential Impact
Credit Approved Provider Default The default of one or more of the Group's Approved Provider lessees could Under the terms of the Group's Investment Policy and restrictions, no more Possible High
impact the rental income received from the relevant assets. If the Approved than 35% of the Group's Gross Asset Value may be exposed to one lessee, with
Provider cannot remedy the default, the Group may have to forfeit, assign or no two lessees representing more than 55% of exposure. This restriction is in
regear the relevant lease. This could lead to a temporary or sustained place to mitigate against the risk of significant rent loss in the event of an
reduction in rental income. Approved Provider default.
When a lessee defaults or when the Group believes it likely that a lessee
would default on its lease obligations, the Group will look to move the
impacted properties to another Approved Provider. The intention is to ensure
both ongoing provision of services to residents, and, as much as possible, to
preserve the income stream associated with the relevant properties.
The Group is currently looking to restructure the agreements it has with
Approved Providers to improve the security of the income it receives from
them, subject to agreement with the relevant Approved Provider and the
consideration of the Regulator of Social Housing.
Credit Non-payment of Voids by Care Providers The Group has leases with Approved Providers under which they are responsible Whilst the Group does not have a contractual relationship with Care Providers, Possible Moderate
for paying rent irrespective of resident occupancy of the underlying property. it monitors and engages with them to ensure, as far as reasonably possible,
The Approved Provider will usually mitigate this risk by entering into a that they are financially viable and operationally robust. Should a Care
Service Level Agreement ("SLA") with a Care Provider under which the Care Provider experience a deterioration in financial performance, the Group works
Provider agrees to cover the rent in relation to any voids in the property with a wide range of alternative Care Providers who would be invited to step
(the Approved Provider being unable to claim Housing Benefit for void units). in to provide care services and maintain void cover arrangements.
If a Care Provider enters financial difficulty and is unable to meet the terms
Resident occupancy is also closely monitored by the Group, who proactively
of the SLA (specifically paying the contracted voids cover to an Approved engages with Approved Providers and Care Providers to optimise occupancy
Provider), this could have a negative impact on the financial performance of throughout the portfolio.
the Approved Provider, impinging its ability to pay the Group its rent. This
risk is compounded if there is low occupancy or persistent voids in a
property.
ESG Potential Impact of Climate Change Changing weather patterns under projected climate change scenarios could The Investment Manager's sustainability team has been working with the Possible Moderate
physically damage the properties owned by the Group, reducing their value and operations team to assess the risk that climate change poses to the Group's
impacting their operational viability. properties and ensuring that protections (or plans to implement protections)
are put in place for any properties that are deemed to be at high risk of
New regulatory standards (e.g. minimum EPC standards) could require capital material adverse impacts resulting from climate change.
expenditure works to improve efficiency or result in a reduction in the
economic utility of properties and their valuations if not undertaken.
The key transition risks to the portfolio have been identified and
qualitatively assessed. Physical risks to the portfolio have been assessed
The impact of the most prominent climate-related risks to the portfolio is using analytical software and the outputs of this analysis are demonstrated in
assessed in detail in the Group's Task Force on Climate-related Financial the Group's TCFD reporting.
Disclosures ("TCFD") reporting.
The Group believes that its reporting on climate change meets regulatory
requirements and is reviewed on an ongoing basis to ensure continued
compliance, in conjunction with the Sustainability Committee.
The Group is actively working to upgrade the portfolio so that all properties
meet the current legislative target (for England and Wales) of having an EPC
rating of C or above from 2030.
Economic Volatile Trading Market A volatile trading market for the Group's shares could inhibit its growth. The Investment Manager and the Board review share performance on an ongoing Possible Moderate
Shareholders may also not be able to realise their shares at a price above or basis. Normal share market pricing management may be utilised by the Board,
the same as they paid for the shares or at all. The Company's shares have including share buybacks, enhanced reporting and investor engagement, within
continued to be traded at a discount to Net Tangible Assets ("NTA"), which is the regulated framework.
limiting the ability to raise additional capital and thereby grow the fund.
Legal, Tax & Regulatory Regulatory Changes Impacting the Sector Risk of changes to the social housing regulatory regime and changes to It is important that the Group works with its Approved Provider lessees to Unlikely High
government policy in relation to social housing and Housing Benefit policy. ensure that they engage with the Regulator and respond proactively to any
changes in regulation or policy. It is also important that the Group
understands what, if any, impact it will have on their organisation and the
properties leased to them.
The Group frequently engages directly with the Regulator of Social Housing
("RSH") to gain insight into any proposed regulatory changes reasonably
expected to be implemented. The social housing regulatory regime, in which
most of the Group's lessees operate, provides a high degree of accountability
and transparency.
The Group has rolled out a risk sharing clause with 67% of its Approved
Providers to re-balance the apportionment of risk between the parties,
including mitigating changes in central government policy relating to
Specialised Supported Housing ("SSH").
Legal, Tax & Regulatory Non-compliance with Regulatory Standards Should an Approved Provider lessee of the Group be deemed non-compliant by the The Investment Manager has established relationships with the Approved Likely Low
RSH, in particular in relation to financial viability, depending on the Providers with whom it works. The Approved Providers keep the Investment
further actions of the RSH it is possible that there may be a negative impact Manager informed of developments surrounding regulatory notices and
on the market value of the relevant leased properties. interactions with the RSH.
Depending on the exposure of the Group to such an Approved Provider(s), this
Where Approved Providers have been deemed non-compliant, the Group seeks to
in turn may have a material adverse effect on the Group's NTA unless the work with them to help address issues identified by the RSH. The Group has
matter is resolved through an improvement in the relevant Approved Provider's leases in place with 10 Registered Providers that have been deemed
rating or the transfer of leases to an alternative Approved Provider. non-compliant by the Regulator and is working with them in the manner set out
above.
Economic Property Valuation Volatility Property valuations are inherently subjective and uncertain, particularly when All of the Group's property assets are independently valued on a quarterly Likely Low
market liquidity and transactional evidence is low. Market conditions, which basis by a third-party valuer (currently Jones Lang LaSalle, a specialist
may impact the creditworthiness of Approved Provider lessees, may adversely property valuation firm), who are provided with regular updates on portfolio
affect valuations. activity by the Investment Manager. The valuer inspects a proportion of the
portfolio annually to ensure that desktop based valuations are appropriate.
The Group portfolio is valued on a Market Value (investment) basis, which
takes into account the expected rental income to be received under the leases
The Investment Manager and Audit Committee meet with the external valuers to
in the future. This valuation methodology provides a significantly higher discuss the basis of their valuations and their quality control processes.
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
Default risk of Approved Providers is mitigated in accordance with the
in the portfolio may be negatively affected. "Approved Provider default" principal risk explanation provided above.
Any changes could affect the Group's NTA and the share price of the Group.
In order to protect against loss in value, the Investment Manager's
operational 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.
Service Provider Poor or Inadequate Housing Management Approved Providers and care providers may face a number of operational The Investment Manager undertakes proactive property inspections to review the Unlikely High
challenges (e.g. rising costs and labour shortages) heightening the risk of physical condition of the Group's properties, ensure lessee compliance with
poor or inadequate housing management of the Group's properties. lease obligations and to observe the quality of services being provided to the
Group's residents. In addition, there is frequent engagement with the Group's
Poor property management services being provided to the individuals in the Approved Providers and Care Providers, along with quarterly operational and
Group's properties could undermine the benefits of SSH and cause reputational compliance surveys, to collect data on the performance of the Group's lessees
damage to the Group which could negatively impact the Group's performance and properties.
and/or the price of the Company's shares. Individual cases of poor housing
management at a property or Approved Provider portfolio level may also reduce
A key part of the Investment Manager's due diligence pre-acquisition is to
the referral demand for those properties, impacting the ability of Approved ensure sure that - whilst the Group has no contractual relationship with them
Provider to pay rent to the Group. and no responsible for the care they provide -the Care Provider attached to a
project is capable to deliver the quality of care provided and financially
robust to meet its void obligations.
Most Care Providers are regulated by the Care Quality Commission ("CQC"),
offering an additional layer of regulation and oversight. The Investment
Manager operations team monitor the Care Providers on an ongoing basis. The
team engage with Care Provider staff when carrying out property inspections,
hold regular calls with Care Providers to which the Group has the largest
exposure, monitor CQC ratings for those Care Providers relevant to the Group
and track these ratings using an internal CQC register that the team updates
on an ongoing basis.
Financial Performance Debt Covenant Breaches The borrowings the Group currently has and which the Group uses in the future The Investment Manager monitors relevant debt covenants on an ongoing basis. Unlikely High
may contain loan to value and interest covenants ratios, alongside In the unlikely event that an event of default occurs under these covenants,
sustainability targets. If property valuations and rental income significantly the Group has a remedy period during which it can potentially cure the
decrease, such covenants could be breached. The impact of such an event could covenant breach by either injecting cash collateral or utilising unencumbered
result in an increase in borrowing costs, a requirement for additional cash or property assets in order to restore covenant compliance.
property collateral, payment of a fee to the lender, a sale of an asset or
assets and / or the forfeiture of an asset(s) to a lender.
Any of the above could result in a material decrease to the Group's NTA.
Legal, Tax & Regulatory Health and Safety Non-compliance Any non-compliance with Health and Safety ("H&S") standards by an Approved The contractual responsibility for making sure that the property is compliant Unlikely High
Provider(s) of the Group could lead to H&S issues for the individuals sits with the Approved Provider and not the Group. However, to mitigate the
living in the properties owned by the Group. This could have serious moral, risk of non-compliance, the Investment Manager's operations team assess Health
reputational and financial implications for the Group. and Safety compliance by conducting property visits, issuing bi-annual
compliance surveys sent to all Approved Providers and by engaging regularly
with the senior teams at each Approved Provider. Compliance of the Group's
properties is also tracked on the internal REIT Risk Register, managed by the
Investment Manager's operations team.
GOING CONCERN AND VIABILITY
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 Group and its ability to continue as a going
concern in Board meetings throughout the year.
The Directors have reviewed the Group's forecast which shows the expected
annualised rental income exceeds the expected operating costs of the Group.
92.6% of rental income due and payable for the year ended 31 December 2024 has
been collected, rent arrears are predominantly attributable to one Approved
Provider, My Space Housing Solutions.
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 during this period 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 on the right. 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 Ratio (ACR)
ACR Covenant x2.00 x1.67
ACR 31 December 2024 x2.49 x2.01
Blended Net initial yield 6.59% 6.23%
Headroom (yield movement) 149bps 119bps
Interest Cover Ratio (ICR)
ICR Covenant 1.75x 1.75x
ICR 31 December 2024 4.78x 4.28x
Headroom (rental income movement) 63% 56%
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 term refinancing risk given the 8.6 year weighted
average maturity of its 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 have prepared these financial statements on the going
concern basis.
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 2029, 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:
· 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 23.4 years to expiry,
representing a long-term income stream for the period under consideration.
· The Group's Loan Notes have a weighted average term of 8.6 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 in this announcement 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. Approved Provider default (taking into account that two of the
Group's lessees have built up arrears since 2022)
2. Non-payment of voids cover by Care Providers
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 two Approved
Providers are lower than the previously contracted rent levels.
· 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 during the period up to 31 December
2029.
BOARD APPROVAL OF THE STRATEGIC REPORT
The Strategic Report was approved by the Board and signed on its behalf by:
Chris Phillips
Chair
21 March 2025
GROUP FINANCIAL STATEMENTS
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2024
Year ended Year ended
31 December 2024 31 December
2023
Note £'000 £'000
Income
Rental income 5 39,072 39,839
Expected credit loss 5 (3,329) (4,593)
Insurance charge income 5 713 -
Insurance charge expense 5 (713) -
Other income 5 106 -
Total income 35,849 35,246
Expenses
Directors' remuneration 6 (307) (312)
General and administrative expenses 9 (3,556) (3,245)
Management fees 8 (7,814) (4,651)
Total expenses (11,677) (8,208)
(Loss)/Gain from fair value adjustment on investment properties 14 (53,030) 15,477
Operating (loss)/profit (28,858) 42,515
Finance income 11 148 52
Finance costs 12 (7,679) (7,578)
(Loss)/Profit for the year before tax (36,389) 34,989
Taxation 13 - -
(Loss)/Profit and total comprehensive income (36,389) 34,989
for the year
IFRS earnings per share - basic and diluted 36 (9.25)p 8.81p
The accompanying notes form an integral part of these Group Financial
Statements.
GROUP STATEMENT OF FINANCIAL POSITION
As at 31 December 2024
31 December 2024 31 December 2023
Note £'000 £'000
Assets
Non-current assets
Investment properties 14 624,695 675,497
Trade and other receivables 15 3,306 4,233
Total non-current assets 628,001 679,730
Current assets
Trade and other receivables 16 3,315 3,864
Cash, cash equivalents and restricted cash 17 27,492 29,452
Total current assets 30,807 33,316
Total assets 658,808 713,046
Liabilities
Current liabilities
Trade and other payables 18 6,095 2,722
Total current liabilities 6,095 2,722
Non-current liabilities
Other payables 19 1,528 1,524
Bank and other borrowings 20 261,441 261,183
Total non-current liabilities 262,969 262,707
Total liabilities 269,064 265,429
Total net assets 389,744 447,617
Equity
Share capital 22 3,940 3,940
Share premium reserve 23 203,753 203,753
Treasury shares reserve 24 (378) (378)
Capital redemption reserve 25 93 93
Capital reduction reserve 25 155,359 155,359
Retained earnings 26 26,977 84,850
Total equity 389,744 447,617
IFRS net asset value per share - basic and diluted 37 99.05p 113.76p
The Group Financial Statements were approved and authorised for issue by the
Board on 21 March 2025 and signed on its behalf by:
Chris Phillips
Chair
21 March 2025
The accompanying notes form an integral part of these Group Financial
Statements.
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2024
Share capital Share premium reserve Treasury shares reserve Capital redemption reserve Capital reduction reserve Retained earnings Total equity
Year ended Note £'000 £'000 £'000 £'000 £'000 £'000 £'000
31 December 2024
Balance at 1 January 2024 3,940 203,753 (378) 93 155,359 84,850 447,617
Loss and total comprehensive income for the year - - - - (36,389) (36,389)
-
Transactions with owners
Dividends paid 27 - - - - - (21,484) (21,484)
Balance at 31 December 2024 3,940 203,753 (378) 93 155,359 26,977 389,744
Share capital Share premium reserve Treasury shares reserve Capital redemption reserve Capital reduction reserve Retained earnings Total equity
Year ended Note £'000 £'000 £'000 £'000 £'000 £'000 £'000
31 December 2023
Balance at 1 January 2023 4,033 203,753 (378) - 160,394 71,483 439,285
Profit and total comprehensive income for the year - - - - 34,989 34,989
-
Transactions with owners
Dividends paid 27 - - - - - (21,622)
(21,622)
Shares repurchased 25 (93) - - 93 (5,035) - (5,035)
Balance at 31 December 2023 3,940 203,753 (378) 93 155,359 84,850 447,617
The accompanying notes form an integral part of these Group Financial
Statements.
GROUP STATEMENT OF CASH FLOWS
For the year ended 31 December 2024
Year ended Year ended
31 December 31 December
2024 2023
Note £'000 £'000
Cash flows from operating activities
(Loss)/profit before income tax (36,389) 34,989
Adjustments for:
Expected credit loss 3,329 4,593
Loss/(gain) from fair value adjustment on investment properties 53,030 (15,477)
Finance income (148) (52)
Finance costs 7,679 7,578
Operating results before working capital changes 27,501 31,631
Increase in trade and other receivables (1,853) (5,528)
Increase/(decrease) in trade and other payables 3,421 (240)
Net cash flow generated from operating activities 29,069 25,863
Cash flows from investing activities
Capital expenditure on investment properties (2,271) 67
Disposal proceeds from sale of assets (net of transaction costs) - 7,472
Restricted cash movement (155) 5
Interest received 103 8
Net cash (used in)/generated from investing activities (2,323) 7,552
Cash flows from financing activities
Interest paid (7,348) (7,228)
Shares repurchased (including transaction costs) 25 - (5,035)
Loan arrangement fees paid 21 (29) (212)
Dividends paid 27 (21,484) (21,622)
Net cash used in financing activities (28,861) (34,097)
Net decrease in cash and cash equivalents (2,115) (682)
Cash and cash equivalents at the beginning of the year 29,014 29,696
Cash and cash equivalents at the end of the year 17 26,899 29,014
The accompanying notes form an integral part of these Group Financial
Statements.
NOTES TO THE GROUP FINANCIAL STATEMENTS
For the year ended 31 December 2024
1. CORPORATE INFORMATION
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 The Scalpel 18th Floor, 52 Lime Street, United Kingdom,
EC3M 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 Company was formerly known as Triple Point Social Housing REIT plc, its
name was changed to Social Housing REIT plc on 24 December 2024.
The principal activity of the Company and its subsidiaries (the "Group") is 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
judgements 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.
92.6% of rental income due and payable for the year ended 31 December 2024 has
been collected, rent arrears are predominantly attributable to one Approved
Provider, My Space Housing Solutions.
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.
The Directors have performed an assessment of the ability of the Group to
continue as a going concern, for the period up to 30 June 2026. The Directors
have considered the expected obligations of the Group during this period 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. The Group has adhered to all these covenants throughout the year
and is also expected to comfortably meet these covenants over the next twelve
months.
Norland Estates Limited TP REIT Propco 2 Limited
Asset Cover
Asset Cover Ratio Covenant x2.00 x1.67
Asset Cover Ratio 31 December 2024 x2.49 x2.01
Blended Net initial yield 6.59% 6.23%
Headroom (yield movement) 149bps 119bps
Interest Cover
Interest Cover Ratio Covenant 1.75x 1.75x
Interest Cover Ratio 31 December 2024 4.78x 4.28x
Headroom (rental income movement) 63% 56%
Under the downside model the forecasts have been stressed to show the effect
of some lessees ceasing to pay their voids liability, and as a result this
causes Approved Providers to default under some of the Group leases. The
assumptions for the amount of rent paid by two Approved Providers have been
sensitised, one of whom has built up significant arrears and one to whom
leases were transferred during 2024. Under the downside model the Group will
be able to settle its liabilities for the period to 30 June 2026. 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 8.6-year
weighted 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%.
Having reviewed and considered the forecasts prepared, the Directors consider
that the Group has adequate resources in place and will be able to settle its
liabilities for a period of at least 12 months from the date of signing these
financial statements and have therefore adopted the going concern basis of
accounting in preparing these financial statements.
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 - Global
Standards (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
The Group recognised an additional ECL provision of £3.3 million in the
current year (2023: £4.6 million) resulting in a total ECL provision of £8.0
million as at 31 December 2024 (31 Dec 2023 £6.7 million) which entirely
relates to rental and recharge arrears for one of the Group's Approved
Providers (2023: entire rental arrears for two of the Group's Approved
Providers). The £6.7 million ECL provision as at 31 December 2023 included an
amount of £2.0 million in respect of rents due from Parasol. This was fully
written off in the current year, when the leases were reassigned to
Westmoreland. A default probability for each of the Approved Providers,
representing the estimated percentage likelihood of them paying outstanding
rent due at year end, was determined based on their latest known financial
position and any repayment plans that had been agreed or discussed. For each
provider the estimated probability percentage of receiving unpaid rent has
been multiplied by the rental and recharge arrears as at the statement of
financial position date. The figure has been aggregated to arrive at the ECL
provision. The expected credit loss for the current year relates wholly to one
tenant (2023: two tenants).
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
each 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 £1,018,000 (2023: £1,500,000), this amount
is stated before the impact of the £1,984,000 that has been written off in
respect of the Parasol leases which were reassigned during the year.
4. SUMMARY OF SIGNIFICANT 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 legal 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
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.
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 where 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 advisory 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.
5. RENTAL AND OTHER INCOME
Year ended Year ended
31 December 2024 31 December 2023
£'000 £'000
Rental income - freehold assets 36,709 37,473
Rental income - leasehold assets 2,363 2,366
39,072 39,839
Expected credit loss (3,329) (4,593)
Insurance charge income 713 -
Insurance charge expense (713) -
Other income 106 -
35,849 35,246
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 expected credit loss for the
current year relates wholly to one tenant (2023: two tenants).
The movement in the expected credit loss provision during the year has been
set out below:
Year ended Year ended
31 December 2024 31 December 2023
£'000 £'000
Opening expected credit loss provision (6,666) (2,073)
Increase in provision for My Space Housing (3,329) (2,962)
Increase in provision for Parasol - (1,631)
Write off of Parasol debtor 1,974 -
Closing expected credit loss provision (8,021) (6,666)
6. DIRECTORS' REMUNERATION
Year ended Year ended
31 December 2024 31 December 2023
£'000 £'000
Directors' fees 275 280
Employer's National Insurance Contributions 32 32
307 312
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 (2023: £75,000), and the other Directors of the Board
receive a fee of £50,000 per annum (2023: £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 2024 or 2023. 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 (2023: none).
8. MANAGEMENT FEES
Year ended Year ended
31 December 2024 31 December 2023
£'000 £'000
Management fees 4,651 4,651
Termination fees 3,163 -
7,814 4,651
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 (2023: £4,651,000) were chargeable by TPIM
during the year. At the year-end £1,151,000 (2023: £1,180,000) was due to
TPIM, the amount was settled in early January 2025.
By two agreements dated 30 June 2020, the Company appointed TPIM as its
Alternative Investment Fund Manager ('AIFM') 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.
The terms of both the Investment Management Agreement and the AIFM Agreement
between the Company and TPIM provided for a termination period of 12 months.
An agreement was reached to terminate both the contracts with effect from 31
December 2024 and to pay early termination fees. These fees totalled £3.343
million (£3.163 million in respect of Investment Management and £0.18
million in respect of the AIFM) and was structured in two tranches. This was
in addition to the regular quarterly fees.
The AIFM termination fee of £0.18 million is included within General and
Administrative expenses as set out in note 9.
9. GENERAL AND ADMINISTRATIVE EXPENSES
Year ended Year ended
31 December 2024 31 December 2023
£'000 £'000
Legal and professional fees 1,356 972
Marketing costs 471 466
Audit fees 429 400
AIFM fees 233 216
AIFM termination fees 180 -
Administration and secretarial fees 319 318
Lease transfer costs 271 11
Property costs 148 579
Other administrative expenses 149 283
3,556 3,245
On 1 October 2019, Hanway Advisory Limited, which was associated with Triple
Point Investment Management LLP ("TPIM"), the delegated investment manager at
the time, was appointed to provide Administration and Company Secretarial
Services to the Group. Within Administration Fees is an amount of £319,000
(2023: £318,000) for Administration and Company Secretarial Services
chargeable by Hanway Advisory Limited. Hanway Advisory Limited was sold to
JTC (UK) Limited on 1 July 2024 and ceased to be associated with TPIM from
that date.
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, TPIM was appointed as the fund's Alternative Investment Fund
Manager ("AIFM") to perform certain functions for the Group. During the year,
AIFM services of £233,000 (2023: £216,000) were chargeable by TPIM,
£180,000 of this amount relates to termination fees. At the year-end
£238,000 (2023: £53,000) was due to TPIM. As described in note 8, as part of
the change in investment manager, an early termination fee of £180,000 was
agreed between the Company and TPIM in addition to the usual quarterly AIFM
fees.
10. AUDIT FEES
Year ended Year ended
31 December 2024 31 December 2023
£'000 £'000
Group audit fees - current year 280 259
Subsidiary audit fees 34 33
314 292
Non audit fees paid to BDO LLP included £42,500 (2023: £40,000) 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 2024 31 December 2023
£'000 £'000
Other interest income 148 52
148 52
12. FINANCE COSTS
Year ended Year ended
31 December 2024 31 December 2023
£'000 £'000
Interest payable on bank borrowings 7,217 7,217
Amortisation of loan arrangement fees 287 307
Lender valuation fees 121 -
Head lease interest expense 44 44
Bank charges 10 10
7,679 7,578
Total finance cost for financial liabilities not measured at fair value 7,669 7,568
through profit or loss
Under the terms of the debt facilities the lenders require an annual
independent valuation to be undertaken at the Company's expense. The cost of
these valuations is set out above.
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 2024, 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 2024 31 December 2023
£'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 year is less than the standard rate of corporation tax
in the UK of 25% (2023: 25%). The differences are explained below.
Year ended Year ended
31 December 2024 31 December 2023
£'000 £'000
(Loss)/profit for the year before tax (36,389) 34,989
Tax at UK corporation tax standard rate of 25% (9,098) 8,747
Change in value of investment properties 13,258 (3,969)
Disposal of investment property - 100
Exempt REIT income (5,194) (5,707)
Amounts not deductible for tax purposes 35 49
Unutilised residual current year tax losses 999 780
- -
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 2024 675,497
Acquisitions and additions* 2,221
Fair value adjustment (53,027)
Movement in head lease ground rent liability 4
As at 31 December 2024 624,695
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
*Additions in the table above differs to the total capital expenditure amount
in the Group statement of cash flows due to retentions no longer payable which
were credited to Investment Property additions.
Reconciliation to the Group Statement of 31 December 2024 31 December 2023
Comprehensive Income ("SOCI"):
£'000 £'000
Fair value adjustment in note 14 (53,027) 15,875
Loss from fair value adjustments on assets held for sale (3) (284)
Loss on disposal - (114)
(Loss)/gain from fair value adjustments in SOCI (53,030) 15,477
Reconciliation to independent valuation: 31 December 2024 31 December 2023
£'000 £'000
Investment property valuation 626,351 678,358
Fair value adjustment - headlease ground rent 1,468 1,463
Fair value adjustment - lease incentive debtor (3,124) (4,324)
624,695 675,497
The carrying value of leasehold properties at 31 December 2024 was £35.9
million (2023: £41.1 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 five years.
% Key Statistic
The metrics below are in relation to the total investment property portfolio
held as at 31 December 2024.
Portfolio metrics 31 December 2024 31 December 2023
Capital Deployed (£'000) * 576,804 574,827
Number of Properties 494 493
Number of Tenancies*** 391 390
Number of Registered Providers*** 28 27
Number of Local Authorities*** 148 153
Number of Care Providers*** 109 116
Valuation Net Initial Yield** 6.22% 5.71%
*calculated excluding acquisition costs
**calculated using IAS 40 valuations (excluding forward funding acquisitions)
*** calculated excluding forward funding acquisitions
31 December 2024 31 December 2023
Region *Cost £'000 % of funds invested *Cost £'000 % of funds invested
North West 111,206 19.3 109,880 19.1
West Midlands 93,006 16.1 93,635 16.3
Yorkshire 87,103 15.1 87,148 15.2
East Midlands 63,979 11.1 63,979 11.1
North East 56,653 9.8 56,653 9.9
South East 54,366 9.4 53,674 9.3
London 49,626 8.6 49,626 8.6
South West 28,099 4.9 27,466 4.8
East 24,206 4.2 24,206 4.2
Scotland 5,900 1.0 5,900 1.0
Wales 2,660 0.5 2,660 0.5
Total 576,804 100.0 574,827 100
*excluding acquisition costs
Fair value hierarchy
Date of valuation Total Quoted prices in active markets Significant observable inputs Significant unobservable inputs
(Level 1) (Level 2) (Level 3)
£'000 £'000 £'000 £'000
Assets measured at fair value: 31 December 2024 624,695 - - 624,695
Investment properties
Investment properties 31 December 2023 675,497 - - 675,497
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 -
Global Standards (commonly known as the "Red Book") 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.
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 lessees
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 three 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;
2. the estimated rental value ('ERV') based on market
conditions prevailing at the valuation date and
3. 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. A decrease in ERV would decrease the
fair value. A decrease in discount rate would increase the fair value. 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, rental values and range:
2024 2023
Range of discount rates 6.4%-10.4% 6.5%-10.0%
Average discount rate 7.6% 7.3%
Range of Rental values (passing rents or ERV as relevant) of Group's £0.07m - £0.55m £0.07m - £0.50m
Investment Properties
Average of Rental values (passing rents or ERV as relevant) of Group's £0.1m £0.1m
Investment Properties
CPI/RPI increase over the term of the relevant leases 2.0%/2.5% 2.0%/2.5%
The tables below analyse the sensitivity on the fair value of investment
properties for changes in discount rates and inflation rates. As a result of
the indexation within the leases the inflation sensitivity captures the impact
of changes to rental values.
-1.0% +1.0% +0.5% -0.5%
change in change in change in change in
Discount Rate Discount Rate CPI CPI
£'000 £'000 £'000 £'000
Changes in the IFRS fair value of investment properties
As at 31 December 2024 70,645 (59,690) 36,318 (33,639)
-0.5% +0.5% +0.25% change in -0.25%
change in change in change in
Discount Rate Discount Rate CPI CPI
£'000 £'000 £'000 £'000
Changes in the IFRS fair value of investment properties
As at 31 December 2023 38,653 (35,403) 19,143 (18,377)
The valuations have not been influenced by climate related factors due to
there being little measurable impact on inputs at present.
Valuations have weakened generally, reflecting:
1. achieved market pricing for transactions which have occurred or are
reasonably expected to occur for opportunities currently being marketed.
2. while the average ERV across the portfolio is consistent with the
prior year, there is a softening of valuation assumptions relating to
properties with challenging lessee situations within the portfolio (including
My Space in particular), reflecting updated expectations on rent collection
and longer-term achievable rent levels.
3. softening of discount rates.
4. adjustment of expectations regarding a number of properties, moving
towards vacant possession value.
15. TRADE AND OTHER RECEIVABLES (non-current)
31 December 2024 31 December 2023
£'000 £'000
Lease incentive debtor 3,156 4,072
Other receivables 150 161
3,306 4,233
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.
16. TRADE AND OTHER RECEIVABLES (current)
31 December 2024 31 December 2023
£'000 £'000
Rent receivable 2,667 2,436
Lease incentive debtor 202 252
Prepayments 164 189
Other receivables 282 987
3,315 3,864
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 trade and other receivables at
31st December 2024 is £8,021,000 (2023: £6,666,000) of which £3,329,000
(2023: £4,593,000) were charged to the Statement of Comprehensive Income in
the year. An amount of £1,974,000 due from Parasol, which was fully impaired
in the prior year, was written off in the current year (2023: nil). The net
movement in the provision for expected credit loss in the current year is
£1,355,000.
17. CASH, CASH EQUIVALENTS AND RESTRICTED CASH
31 December 2024 31 December 2023
£'000 £'000
Cash at bank 26,899 29,014
Restricted cash 593 438
27,492 29,452
Restricted cash represents monies held in escrow in relation to the transfer
of leases to be used for future costs.
31 December 2024 31 December 2023
£'000 £'000
Total Cash, cash equivalents and restricted cash 27,492 29,452
Restricted cash (593) (438)
Cash reported on Statement of Cash Flows 26,899 29,014
18. TRADE AND OTHER PAYABLES
Current liabilities
31 December 2024 31 December 2023
£'000 £'000
Trade payables 139 -
Accruals 5,522 2,270
Head lease ground rent (note 28) 40 40
Other creditors 394 412
6,095 2,722
The Other Creditors balance consists of retentions due on completion of
outstanding works and outstanding accrued acquisition costs. 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. The £5.5 million accruals fees include £3.3 million of the termination
fees payable to TPIM as set out in note 8. £2.9 million of these fees have
been paid post year end.
19. OTHER PAYABLES
Non-current liabilities
31 December 2024 31 December 2023
£'000 £'000
Head lease ground rent (note 28) 1,428 1,424
Rent deposit 100 100
1,528 1,524
20. BANK AND OTHER BORROWINGS
Non-current liabilities
31 December 2024 31 December 2023
£'000 £'000
Bank and other borrowings drawn at year end 263,500 263,500
Unamortised costs at beginning of the year (2,317) (2,412)
Less: loan issue costs incurred (29) (212)
Add: loan issue costs amortised 287 307
Unamortised costs at end of the year (2,059) (2,317)
Balance at year end 261,441 261,183
At 31 December 2024 there were undrawn bank facilities of £NIL (2023: £NIL).
As at 31 December 2024, 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
· £195.0 million long dated, fixed rate, interest only
sustainability-linked loan notes through a private placement with MetLife
Investment Management clients and Barings.
Loan Notes
The Loan Notes of £68.5 million are secured against a portfolio of
Specialised Supported Housing assets throughout the UK, worth approximately
£170.0 million (2023: £192.0 million). The details of the notes are set out
in the table below. At 31 December 2024, the Loan Notes have been
independently valued at £59.0 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 4.170% 2028 Gilt (Tranche
A) and Treasury 4.370% 2033 Gilt (Tranche B), with an implied margin that is
unchanged since the date of fixing.
Loan Note Principal LTV Term Repayment date All in rate Independent Valuation
Tranche A £41.5 million 40% 10 years 30 June 2028 2.924% £37.4 million
Tranche B £27.0 million 40% 15 years 30 June 2033 3.215% £21.6 million
Blended Tranche A & B £68.5 million 40% 12 years 3.039% £59.0 million
In August 2021, the Group put in place Loan Notes of £195.0 million which
enabled the Group to refinance the full £130.0 million previously drawn under
its £160.0 million RCF with Lloyds and NatWest. The Loan Notes are secured
against a portfolio of Specialised Supported Housing assets throughout the UK,
worth approximately £392.0 million. The details of these notes is set out in
the table below. At 31 December 2024, the Loan Notes have been independently
valued at £143.8 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 4.290% 2031 Gilt (Tranche A) and
Treasury 4.590% 2036 Gilt (Tranche B), with an implied margin that is
unchanged since the date of fixing.
Loan Note Principal LTV Term Repayment date All in rate Independent Valuation
Tranche A £77.5 million 40% 10 years 26 August 2031 2.403% £61.6 million
Tranche B £117.5 million 40% 15 years 26 August 2036 2.786% £82.2 million
Blended Tranche A & B £195.0 million 40% 13 years 2.634% £143.8 million
The Groups loan to value at the year-end was 40.0% (2023: 37.0%).
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.
Effect of covenants
All of the Group's non-current loans and borrowings contain covenants, which,
if not met, would result in the borrowings becoming repayable on demand. These
borrowings are otherwise repayable more than 12 months after the end of the
reporting period. As at 31 December 2024, the Group complied with all the
covenants that were required to be met on or before 31 December 2024. The
covenants that are required to be complied with after the end of the current
interim period do not affect the classification of the related borrowings as
current or non-current at the statement of financial position date. Therefore,
all these borrowings remain classified as non-current liabilities.
21. NOTES SUPPORTING STATEMENT OF CASH FLOWS
Reconciliation of liabilities to cash flows from financing activities:
Bank borrowings Head lease Total
£'000 £'000 £'000
(note 20) (note 18,19)
At 1 January 2024 261,183 1,464 262,647
Cashflows:
Loan arrangement fees paid (29) - (29)
Non-cash flows:
-Amortisation of principal on head lease liabilities - (40) (40)
-Amortisation of loan arrangement fees 287 - 287
-Accrued interest on head lease liabilities - 44 44
At 31 December 2024 261,441 1,468 262,909
Bank borrowings Head lease Total
£'000 £'000 £'000
(note 20) (note 18,19)
At 1 January 2023 261,088 1,460 262,548
Cashflows:
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
22. SHARE CAPITAL
Issued and fully paid Issued and fully paid
Number £'000
At 1 January 2024 393,916,490 3,940
Shares cancelled in the year - -
At 31 December 2024 393,916,490 3,940
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
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 with a
further 193,916,490 Ordinary Shares of one pence each being 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 regards 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.
23. SHARE PREMIUM RESERVE
The share premium reserve relates to amounts subscribed for share capital in
excess of nominal value.
31 December 2024 31 December 2023
£'000 £'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 2024 31 December 2023
£'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. 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 2024 and 31 December 2023, 450,000 1p Ordinary Shares were held by
the Company.
25. CAPITAL REDUCTION RESERVE
31 December 2024 31 December 2023
£'000 £'000
Balance at beginning of year 155,359 160,394
Share buybacks and cancellation - (5,035)
Balance at end of year 155,359 155,359
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 2024 31 December 2023
£'000 £'000
Balance at beginning of year 93 -
Original shares repurchased & cancelled - 93
Balance at end of year 93 93
The Capital Redemption Reserve is the nominal value of the shares cancelled
from the share buybacks.
26. RETAINED EARNINGS
31 December 2024 31 December 2023
£'000 £'000
Balance at beginning of year 84,850 71,483
Total comprehensive income for the year (36,389) 34,989
Dividends paid (21,484) (21,622)
Balance at end of year 26,977 84,850
27. DIVIDENDS
Year ended Year ended
31 December 2024 31 December 2023
£'000 £'000
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
1.365p for the 3 months to 31 December 2023 paid on 28 March 2024 5,371 -
1.365p for the 3 months to 31 March 2024 paid on 28 June 2024 5,371 -
1.365p for the 3 months to 30 June 2024 paid on 4 October 2024 5,371 -
1.365p for the 3 months to 30 September 2024 paid on 13 December 2024 5,371 -
21,484 21,622
On 20 March 2025, the Company declared an interim dividend of 1.365 pence per
Ordinary Share for the period 1 October 2024 to 31 December 2024, the total
dividend of £5,370,818 will be paid on or around 11 April 2025 to Ordinary
shareholders on the register on 28 March 2025.
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.
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 1-2 years 2-3 years 3-4 years 4-5 years > 5 years Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Lease payables
31 December 2024 40 40 40 40 40 7,158 7,358
31 December 2023 40 40 40 40 40 7,197 7,397
31 December 2024 31 December 2023
£'000 £'000
Current liabilities (note 18) 40 40
Non-current liabilities (note 19) 1,428 1,424
Balance at end of year 1,468 1,464
The above is in respect of properties held by the Group under leasehold. There
are 23 properties (2023: 23) held under leasehold with lease terms which range
from 125 years to 999 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 undiscounted future minimum lease payments receivable by the Group under
non-cancellable operating leases are as follows:
< 1 year 1-2 years 2-3 years 3-4 years 4-5 years > 5 years Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Lease receivables
31 December 2024 42,689 42,689 42,689 42,689 42,689 469,767 683,212
31 December 2023 40,971 40,971 40,971 40,971 40,971 451,354 656,209
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:
31 December 2024 31 December 2023
Registered Provider % of total annual rent % of total annual rent
Inclusion Housing CIC 30 29
Parasol Homes (previously 28A Supported Living) - 10
Other disclosures about leases are provided in notes 5, 14, 16, 19 and 33.
29. CONTROLLING PARTIES
As at 31 December 2024 there is no ultimate controlling party of the Company.
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 for the year covered by
these financial statements). From 1 January 2025 this will be Atrato Partners
Limited, which was appointed as the AIFM for the Company with effect from this
date, as set out in note 34.
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 494 Social Housing properties as of
31 December 2024 (2023: 493) 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 (2023: £75,000), and the other directors of the Board
receive a fee of £50,000 per annum (2023: £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 (2023: £2,995)
Peter Coward: £4,372 (2023: £4,372)
Tracey Fletcher-Ray: £2,060 (2023: £2,060)
No shares were held by Ian Reeves and Cecily Davis as of 31 December 2024 (31
December 2023: nil).
Investment Manager
As at 31 December 2024, the Company considered Triple Point Investment
Management LLP ("TPIM") as providing the key management personnel and,
therefore, a related party. Further details of the investment management
contract and transactions with TPIM are disclosed in Note 8 and 9. With effect
from 1 January 2025, Atrato Partners Limited has been appointed as the
Company's Investment Manager, further details of which are provided in note
34.
32. CONSOLIDATED ENTITIES
The Group consists of a parent Company, 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 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 2024:
Name of Entity Registered Office Country of Incorporation Ownership %
TP REIT Super HoldCo Limited* The Scalpel 18(th) Floor, 52 Lime Street London, EC3M 7AF UK 100%
TP REIT HoldCo 1 Limited The Scalpel 18(th) Floor, 52 Lime Street London, EC3M 7AF UK 100%
TP REIT HoldCo 2 Limited The Scalpel 18th Floor, 52 Lime Street London, EC3M 7AF UK 100%
TP REIT HoldCo 3 Limited The Scalpel 18th Floor, 52 Lime Street London, EC3M 7AF UK 100%
TP REIT HoldCo 4 Limited The Scalpel 18th Floor, 52 Lime Street London, EC3M 7AF UK 100%
TP REIT HoldCo 5 Limited The Scalpel 18th Floor, 52 Lime Street London, EC3M 7AF UK 100%
TP REIT PropCo 2 Limited The Scalpel 18th Floor, 52 Lime Street London, EC3M 7AF UK 100%
TP REIT PropCo 3 Limited The Scalpel 18th Floor, 52 Lime Street London, EC3M 7AF UK 100%
TP REIT PropCo 4 Limited The Scalpel 18th Floor, 52 Lime Street London, EC3M 7AF UK 100%
TP REIT PropCo 5 Limited The Scalpel 18th Floor, 52 Lime Street London, EC3M 7AF UK 100%
Norland Estates Limited The Scalpel 18th Floor, 52 Lime Street London, EC3M 7AF UK 100%
* indicates entity is a direct subsidiary of 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 2024, and are not expected to
in the immediate future, but will continue to be monitored closely.
There was no impact on the valuations in the year ended 31 December 2024 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 2024 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.
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 2024 the Group has
£27.5 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 2024, Fitch has assigned the Company an Investment Grade Long-Term
Issuer Default Rating of 'A-' and a senior secured rating of 'A' for the
Group's existing loan notes, for the third consecutive time, 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 relating to 31 December 2024 was
nil as at 28 February 2025, 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 2024 (2023: ten). 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 RSH's concerns. The Board
believes that the credit risk associated with the non-compliant rating is
limited.
Rent receivable and insurance debtor are the Group's only financial assets
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 2024 < 3 months 3-12 1-5 > 5 Total
months Years years
£'000 £'000 £'000 £'000 £'000
Headleases (note 28) 10 30 160 7,158 7,358
Trade and other payables (note 18) 6,055 - - - 6,055
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 27,049 27,909 62,175
- Variable interest rate - - - - -
Total 7,869 5,443 68,709 257,067 339,088
31 December 2023 < 3 months 3-12 1-5 > 5 Total
months Years years
£'000 £'000 £'000 £'000 £'000
Headleases (note 28) 10 30 160 7,197 7,397
Trade and other payables (note 18) 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 - - - - -
Total 4,301 5,638 69,923 263,110 342,972
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 Fair value Book value Fair value
31 December 2024 31 December 2024 31 December 2023 31 December 2023
£'000 £'000 £'000 £'000
Financial liabilities:
Borrowings 261,441 202,836 261,183 205,078
34. POST BALANCE SHEET EVENTS
Investment Manager
With effect from 1 January 2025 Atrato Partners Limited ('Atrato') was
appointed as the Investment Manager, taking over from TPIM. As part of the
change of investment manager a new Investment Management Agreement was entered
into between the Company and Atrato.
Under the new Investment Management Agreement the management fee, payable by
the Company on a quarterly basis, will be based on a percentage of the
Company's market capitalisation at the end of each quarter (the "Management
Fee"), ensuring alignment with shareholders. The Management Fee will be
calculated using the following fee thresholds and rates:
Market capitalisation threshold Relevant fee rate (per annum)
Up to and including £150m 1.25 per cent.
Above £150m and up to and including £300m 1.00 per cent.
Above £300m 0.70 per cent.
The Investment Manager, or any connected person nominated, undertakes to
invest in and hold an amount of shares in the Company equal to 25% of the
Management Fee (after making an allowance for tax payable by the Investment
Manager). The Investment Manager has agreed, subject to certain exceptions,
not to dispose of such shares for a period of 12 months from the date of their
acquisition.
Success Fee
If Atrato arranges and effects the sale of any properties at the direction of
the Company, and the Company elects to return such value to shareholders, the
Company shall pay to Atrato a fee equal to 0.5% of the gross sale price of the
relevant properties.
Notice
The new Investment Management Agreement with Atrato may be terminated by the
Company on 12 months' written notice at any time.
My Space
My Space has not paid the Company any rent since June 2024, as it continues to
face significant financial difficulties. During the investment management
transition, Atrato has been in regular dialogue with the new senior team at My
Space.
On 31 January 2025, My Space and its appointed insolvency specialist, Begbies
Traynor, issued a proposal for a company voluntary arrangement ("CVA") to
remedy structural challenges in their business and avoid an administration or
liquidation process. The proposal was passed by a creditor vote on 7 March
2025. Prior to the vote, Atrato negotiated an option agreement for the
Company, which permits the assignment of the Group's properties within
12-months of the end of the CVA challenge period.
The Company has 34 properties leased to My Space, of which 22 are used for
Supported Housing. Atrato has agreed heads of terms with a nationwide Approved
Provider about transferring the My Space leases and is now working with them,
My Space and relevant regulatory bodies to facilitate the transfer over the
coming months. We expect rent collection to re-commence and resident occupancy
to increase post-transfer.
Dividend
On 20 March 2025, the Company declared an interim dividend of 1.365 pence per
Ordinary share for the period 1 October 2024 to 31 December 2024. The total
dividend of £5,370,818 will be paid on or around 11 April 2025 to Ordinary
shareholders on the register on 28 March 2025.
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 2024 31 December 2023
Calculation of Basic Earnings per share
Net profit attributable to Ordinary Shareholders (£'000) (36,389) 34,989
Weighted average number of Ordinary Shares (excluding treasury shares) 393,466,490 397,007,975
IFRS Earnings per share - basic and diluted (9.25) 8.81p
Calculation of EPRA Earnings per share
Net (loss)/profit attributable to Ordinary Shareholders (£'000) (36,389) 34,989
Loss/(gain) from fair value adjustment on investment properties (£'000) 53,030 (15,477)
Termination fees 3,343 -
EPRA earnings (£'000) 19,984 19,512
Non-cash adjustments to include:
Amortisation of loan arrangement fees (£'000) 287 307
Movement in Lease Incentive Debtor (£'000) 965 (1,500)
Adjusted earnings (£'000) 21,236 18,319
Weighted average number of Ordinary Shares (excluding treasury shares) 393,466,490 397,007,975
EPRA earnings per share - basic and diluted 5.08p 4.92p
Adjusted earnings per share - basic and diluted 5.40p 4.61p
EPRA released revised Best Practice Reporting guidelines during September 2024
which are effective for reporting periods beginning on or after 1 October
2024. The Company has early adopted these guidelines for the current reporting
period. The revised guidelines permit adjustments in respect of non-operating
or exceptional items within EPRA earnings as they are unusual in nature and
very unlikely to reoccur in the foreseeable future. The termination payments
of £3.3 million in respect of the change in Investment manager are considered
to be exceptional items and have been added back in arriving at EPRA
earnings. There is no impact in respect of the prior year as there were no
items that fall within this category.
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 the current year, an amount of
£1,984,000 (2023: nil) was written off in respect of a lease incentive debtor
relating to Parasol when the leases were transferred to Westmoreland as this
is not reflective of the actual cashflows. The Board sees these adjustments as
a reflection of actual cashflows which are supportive of dividend payments.
The Board compares adjusted earnings to the available distributable reserves
when considering the level of dividend to pay.
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 2024 31 December 2023
Net assets at the end of the year (£'000) 389,744 447,617
Shares in issue at end of the year (excluding treasury shares) 393,466,490 393,466,490
Dilutive shares in issue - -
IFRS NAV per share - basic and dilutive 99.05p 113.76p
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 2024, the Group
was fully compliant with both covenants with an asset cover ratio of x2.49
(2023: x2.81) and an interest cover ratio of x4.78 (2023: x4.63).
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 2024, the Group
was fully compliant with both covenants with an asset cover ratio of x2.01
(2023: x2.01) and an interest cover ratio of x4.28 (2023: x4.26).
UNAUDITED PERFORMANCE MEASURES
For the year ended 31 December 2024
1. EPRA Net Reinstatement Value
31 December 2024 31 December 2023
£'000 £'000
IFRS NAV/EPRA NAV (£'000) 389,744 447,617
Include:
Real Estate Transfer Tax* (£'000) 38,594 41,962
EPRA Net Reinstatement Value (£'000) 428,338 489,579
Fully diluted number of shares 393,446,490 393,446,490
EPRA Net Reinstatement value per share 108.86p 124.43p
* Purchaser's costs
2. EPRA Net Disposal Value
31 December 2024 31 December 2023
£'000 £'000
IFRS NAV/EPRA NAV (£'000) 389,744 447,617
Include:
Fair value of debt* (£'000) 58,605 56,106
EPRA Net Disposal Value (£'000) 448,349 503,723
Fully diluted number of shares 393,446,490 393,446,490
EPRA Net Disposal Value per share** 113.95p 128.02p
* 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 2024 31 December 2023
£'000 £'000
IFRS NAV/EPRA NAV (£'000) 389,744 447,617
EPRA Net Tangible Assets (£'000) 389,744 447,617
Fully diluted number of shares 393,446,490 393,446,490
EPRA Net Tangible Assets per share* 99.05p 113.76p
* Equal to IFRS NAV and previous EPRA NAV metric as none of the EPRA Net
Tangible Asset adjustments are applicable as at 31 December 2024 or 31
December 2023.
4. EPRA net initial yield (NIY) and EPRA "topped up" NIY
31 December 2024 31 December 2023
£'000 £'000
Investment Property - wholly-owned (excluding head lease ground rents) 623,227 674,034
Less: development properties - -
Completed property portfolio 623,227 674,034
Allowance for estimated purchasers' costs 38,594 41,962
Gross up completed property portfolio valuation 661,821 715,996
Annualised passing rental income 42,606 39,912
Property outgoings - -
Annualised net rents 42,606 39,912
Contractual increases for lease incentives 83 1,059
Topped up annualised net rents 42,689 40,971
EPRA NIY 6.44% 5.57%
EPRA Topped Up NIY 6.45% 5.72%
5. ONGOING CHARGES RATIO
31 December 2024 31 December 2023
£'000 £'000
Annualised ongoing charges 6,885 7,242
Average undiluted net assets 418,681 443,451
Ongoing charges 1.64% 1.63%
6. EPRA VACANCY RATE
31 December 2024 31 December 2023
£'000 £'000
Estimated Market Rental Value (ERV) of vacant spaces 138 138
Estimated Market Rental Value (ERV) of whole portfolio 42,826 40,971
EPRA Vacancy Rate 0.32% 0.33%
7. EPRA COST RATIO
31 December 2024 31 December 2023
£'000 £'000
Total administrative and operating costs 11,677 8,208
Gross rental income 39,072 39,839
EPRA cost ratio 29.89% 20.60%
1 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%).
2 As above.
3 Based on 118 responses from residents in the Fund's homes, representing
around 3% of residents in occupied units. The survey was conducted between
January and February 2025.
4 CQC, The state of health care and adult social care in England 2023/24.
(https://www.cqc.org.uk/publications/major-report/state-care/2023-2024)
5 Figure restated. Corrected previous statement of 83% in FY23 Report.
6 The Company is not in scope of the UK's Companies (Strategic Report)
(Climate-related Financial Disclosure) Regulations 2022 or the FCA listing
rules TCFD reporting requirements (ESG 2.1) as yet, but the Company has
decided to produce this TCFD report ahead of FCA expectations to demonstrate
its support for the disclosures.
7 Task Force on Climate-related Financial Disclosures, "Final Report:
Recommendations of the Task Force on Climate-related Financial Disclosures"
(June 2017).
8 The Company is an externally managed business and does not have any
employees or office space.
9 FERA emissions associated with tenant activities under Scope 3 downstream
leased assets are not included in the figures reported.
10 The FY23 emissions data incorporated over 90% of the Group's electricity
and gas meters, with the remaining portfolio meters unable to be matched
within the reporting period and excluded. In FY24, any gaps in actual data
were filled with either Perse or Anthesis estimated data.
11 The emission data calculated in FY23 used property gas and electricity
consumption only, and therefore was not a complete Scope 3 figure.
12 Organisational boundaries for asset level performance measures as defined
by the GHG Protocol include Operational Control, Financial Control and
Equity-share.
13 GRESB (2020) Environmental performance data, Asset Portal guide - GRESB
(https://www.gresb.com/nl-en/asset-portal-guide/)
14 Defra (2023) Local Authority Collected Waste Statistics - Local Authority
data UK statistics on waste - GOV.UK (www.gov.uk)
(https://www.gov.uk/government/statistics/uk-waste-data/uk-statistics-on-waste)
15 SOHO is an externally managed REIT and does not have any employees.
Therefore, the employee related performance measures are not applicable.
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