TRIPLE POINT SOCIAL HOUSING REIT PLC plc REIT Housing Social Point Triple
2020 September
PROSPECTUS
SEPTEMBER 2020
Placing, Open Offer & Offer for Subscription of Ordinary Shares
and
Placing Programme for
Ordinary Shares
THIS PROSPECTUS IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the action you should take, you should immediately contact your stockbroker, accountant or other independent financial adviser, who is authorised under the Financial Services and Markets Act 2000 (as amended) ("FSMA") if you are in the United Kingdom, or another appropriately authorised independent financial adviser if you are in a territory outside the United Kingdom.
This document (the "Prospectus") constitutes a prospectus relating to Triple Point Social Housing REIT plc (the "Company") and has been prepared in accordance with the Prospectus Regulation Rules of the FCA made under section 73(A) of the FSMA (the "Prospectus Regulation Rules").This document has been approved by the Financial Conduct Authority (the "FCA") as competent authority under the Regulation (EU) 2017/1129 (the "Prospectus Regulation") and will be published and made available to the public in accordance with the Prospectus Regulation Rules. The FCA only approves this Prospectus as meeting the standards of completeness, comprehensibility and consistency imposed by the Prospectus Regulation and such approval shall not be considered as an endorsement of the Company or the quality of the Ordinary Shares that are the subject of this Prospectus. This Prospectus has been drawn up as part of a simplified prospectus in accordance with Article 14 of the Prospectus Regulation. Investors should make their own assessment as to the suitability of investing in new Ordinary Shares.
The Prospectus has been made available to the public in accordance with Rule 3.2 of the Prospectus Regulation Rules at www.triplepointreit.com.
The Prospectus has been published in connection with the issue of up to 94,339,622 Ordinary Shares as part of the Issue, comprising the Placing, Open Offer and Offer for Subscription. Application will be made to the FCA for such Ordinary Shares to be admitted to the premium listing segment of the Official List of the FCA and to the London Stock Exchange for all such Ordinary Shares to be admitted to trading on the Main Market ("Initial Admission"). It is expected that Initial Admission will become effective, and that dealings in such Ordinary Shares will commence, at 8.00 a.m. on 23 October 2020. This Prospectus has also been issued in connection with the issue of up to 150 million Ordinary Shares in one or more tranches throughout the period commencing on 30 September 2020 to 29 September 2021 in connection with the Placing Programme.
Application will also be made to the FCA for any Ordinary Shares issued under the Placing Programme to be admitted to the premium listing segment of the Official List of the FCA and to the London Stock Exchange for all such Ordinary Shares to be admitted to trading on the London Stock Exchange's Main Market for listed securities ("Subsequent Admission"). Admission of such Ordinary Shares issued pursuant to the Placing Programme will become effective and dealings in such Ordinary Shares will commence as described in Part 11 of this Prospectus.
The Company and each of the Directors, whose names appear on page 40 of this Prospectus, accept responsibility for the information contained in this Prospectus. To the best of the knowledge of the Company and the Directors, the information contained in this Prospectus is in accordance with the facts and the Prospectus does not omit anything likely to affect its import.
The Investment Manager accepts responsibility for the Investment Manager's Statements. To the best of the knowledge of the Investment Manager, such Investment Manager's Statements are in accordance with the facts and such Investment Manager's Statements do not omit anything likely to affect its import.
Potential investors should read the whole of this Prospectus and, in particular, their attention is drawn to the risk factors set out on pages 13 to 26 of this Prospectus.
TRIPLE POINT SOCIAL HOUSING REIT PLC
(Incorporated in England and Wales under the Companies Act 2006 with registered number 10814022 and registered as an
investment company under section 833 of the Companies Act 2006)
Placing, 1 for 6 Open Offer and Offer for Subscription of up to 94,339,622 Ordinary Shares at an
Issue Price of 106 pence per Ordinary Share
Placing Programme for 150 million Ordinary Shares
Sponsor, Joint Financial Adviser, Sole Global Coordinator and Bookrunner
STIFEL NICOLAUS EUROPE LIMITED
Joint Financial Adviser
AKUR LIMITED
Investment Manager
TRIPLE POINT INVESTMENT MANAGEMENT LLP
Akur Limited ("Akur"), which is authorised and regulated in the United Kingdom by the FCA, is acting exclusively for the Company and for no-one else in connection with the Issue, the Placing Programme, Initial Admission and any Subsequent Admission and will not regard any other person (whether or not a recipient of this Prospectus) as a client in relation to the Issue, the Placing Programme, Initial Admission and any Subsequent Admission and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Akur, nor for providing advice in connection with the Issue, Initial Admission, the Placing Programme, any Subsequent Admission, the contents of the Prospectus or any matters referred to therein. Nothing in this paragraph shall serve to exclude or limit any responsibilities which Akur may have under FSMA or the regulatory regime established thereunder.
Stifel Nicolaus Europe Limited ("Stifel"), which is authorised and regulated in the United Kingdom by the FCA, is acting exclusively for the Company and for no-one else in connection with the Issue, the Placing Programme, Initial Admission and any Subsequent Admission and will not regard any other person (whether or not a recipient of this Prospectus) as a client in relation to the Issue, the Placing Programme, Initial Admission and any Subsequent Admission and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Stifel, nor for providing advice in connection with the Issue, Initial Admission, the Placing Programme, any Subsequent Admission, the contents of the Prospectus or any matters referred to therein. Nothing in this paragraph shall serve to exclude or limit any responsibilities which Stifel may have under FSMA or the regulatory regime established
thereunder.
Apart from the responsibilities and liabilities, if any, which may be imposed on Stifel and Akur by FSMA, or the regulatory regime established thereunder, or under the regulatory regime of any other jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, each of Stifel and Akur and any person affiliated with them does not accept any responsibility whatsoever and makes no representation or warranty, express or implied, for the contents of this Prospectus, including its accuracy or completeness, or for any other statement made or purported to be made by any of them, or on behalf of them, by or on behalf of the Company or any other person in connection with the Company, the Ordinary Shares, the Issue or the Placing Programme and nothing contained in this Prospectus is or shall be relied upon as a promise or representation in this respect, whether as to the past or future. Each of Stifel and Akur and any of their respective affiliates accordingly disclaim to the fullest extent permitted by law, all and any responsibility or liability whatsoever whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this Prospectus or any such statement.
Investors should rely only on the information contained in this Prospectus. No person has been authorised to give any information or make any representations other than those contained in this Prospectus and, if given or made, such information or representations must not be relied upon as having been so authorised by the Company, the Investment Manager, Stifel or Akur. Without prejudice to the Company's obligation to publish a supplementary prospectus pursuant to article 23 of the Prospectus Regulation and Rule 3.4.1 of the Prospectus Regulation Rules, neither the delivery of this Prospectus nor any subscription for or purchase of Ordinary Shares pursuant to the Issue or the Placing Programme, under any circumstances, creates any implication that there has been no change in the affairs of the Group since, or that the information contained herein is correct at any time subsequent to, the date of this Prospectus.
Each of Stifel and Akur and any of their respective affiliates may have engaged in transactions with, and provided various investment banking, financial advisory and other services for the Company and the Investment Manager, for which they would have received customary fees. Each of Stifel and Akur and any of their respective affiliates may provide such services to the Company and the Investment Manager and any of their respective affiliates in the future.
In connection with the Issue and the Placing Programme, each of Stifel and Akur and any of their respective affiliates, acting as investors for its or their own accounts, may subscribe for or purchase Ordinary Shares and in that capacity may retain, purchase, sell, offer to sell or otherwise deal for its or their own account(s) in the Ordinary Shares and other securities of the Company or related investments in connection with the Issue, the Placing Programme or otherwise. Accordingly, references in this Prospectus to Ordinary Shares being issued, offered, acquired, subscribed or otherwise dealt with, should be read as including any issue or offer to, acquisition of, or subscription or dealing by Stifel and Akur and any of their respective affiliates acting as an investor for its or their own account(s). Neither Stifel nor Akur nor any of their respective affiliates intends to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so. In addition, Stifel and Akur may enter into financing arrangements with investors, such as share swap arrangements or lending arrangements in connection with which Stifel and Akur may from time to time acquire, hold or dispose of shareholdings in the Company.
The contents of this Prospectus are not to be construed as legal, financial, business, investment or tax advice. Investors should consult their own legal adviser, financial adviser or tax adviser for legal, financial, business, investment or tax advice. Investors must inform themselves as to: (a) the legal requirements within their own countries for the purchase, holding, transfer, redemption or other disposal of Ordinary Shares; (b) any foreign exchange restrictions applicable to the purchase, holding, transfer, redemption or other disposal of Ordinary Shares which they might encounter; and (c) the income and other tax consequences which may apply in their own countries as a result of the purchase, holding, transfer, redemption or other disposal of Ordinary Shares. Investors must rely on their own representatives, including their own legal advisers and accountants, as to legal, financial, business, investment, tax, or other any related matters concerning the Company and an investment therein. None of the Company, the Investment Manager, Stifel or Akur or any of their respective representatives is making any representation to any offeree or purchaser of Ordinary Shares regarding the legality of an investment in the Ordinary Shares by such offeree or purchaser under the laws applicable to such offeree or purchaser.
No action has been taken to permit the distribution of this Prospectus in any jurisdiction other than the United Kingdom. Accordingly, this Prospectus may not be used for the purpose of, and does not constitute, an offer or solicitation by anyone in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or not authorised or to any person to whom it is unlawful to make such offer or solicitation.
Notice to U.S and Other Overseas Investors
This Prospectus is not being sent to investors with registered addresses in Canada, Australia, the Republic of South Africa, New Zealand, Japan or, except in the limited circumstances described below, the United States, and does not constitute an offer to sell, or the solicitation of an offer to buy, Ordinary Shares in any jurisdiction in which such offer or solicitation is unlawful. In particular, this Prospectus is not for release, publication or distribution in or into Canada, Australia, the Republic of South Africa, New Zealand, Japan or, except in the limited circumstances described below, the United States.
The offer and sale of the Ordinary Shares have not been and will not be, registered under the U.S. Securities Act of 1933, as amended (the "Securities Act") or under the securities laws of any other state or jurisdiction of the United States or under the applicable securities laws of Canada, Australia, the Republic of South Africa, New Zealand or Japan. Except as set forth below, the Ordinary Shares may not be offered, sold, delivered or distributed, directly or indirectly, in, into or within the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S under the Securities Act, "U.S. Persons") or to any national, resident or citizen of Canada, Australia, the Republic of South Africa, New Zealand or Japan.
The Company has not been, and will not be, registered under the U.S. Investment Company Act of 1940, as amended (the "Investment Company Act") and, as such, investors will not be entitled to the benefits of the Investment Company Act. No offer, purchase, sale or transfer of the Ordinary Shares may be made except under circumstances which will not result in the Company being required to register as an investment company under the Investment Company Act.
In connection with the Issue and the Placing Programme, Ordinary Shares will be offered and sold only: (i) outside the United States to, and for the account or benefit of, non-US persons in "offshore transactions" within the meaning of, and in reliance on, Regulation S under the Securities Act; and (ii) in a concurrent private placement in the United States to a limited number of "qualified institutional buyers" as defined in Rule 144A under the Securities Act that are also "qualified purchasers" within the meaning of section 2(a)(51) of the Investment Company Act and the rules thereunder. There will be no public offer of Ordinary Shares in the United States. The Ordinary Shares will be "restricted securities" within the meaning of Rule 144 under the Securities Act and may be resold or transferred only in accordance with the restrictions referred to in this Prospectus.
Neither the U.S. Securities and Exchange Commission (the "SEC") nor any state securities commission or other U.S. regulatory authority has approved or disapproved of the Ordinary Shares or passed upon or endorsed the merits of the offering of the Ordinary Shares nor have they approved this Prospectus or confirmed the adequacy or accuracy of the information contained herein. Any representation to the contrary is a criminal offence in the United States.
Until 40 days after the commencement of the Issue (or in the case of a Subsequent Placing, 40 days after the commencement of that Subsequent Placing), an offer or sale of the Ordinary Shares within the United States by any dealer (whether or not participating in the Issue) may violate the registration requirements of the Securities Act if that offer or sale is made otherwise than in accordance with an exemption from registration, or in a transaction not subject to the registration requirements, under the Securities Act.
Subject to certain exceptions, the Ordinary Shares may not be acquired by: (i) investors using assets of (A) an "employee benefit plan" as defined in Section 3(3) of U.S. Employee Retirement Income Security Act of 1974, as amended ("ERISA") that is subject to Title I of ERISA; (B) a "plan" as defined in section 4975 of the U.S. Internal Revenue Code of 1986, as amended (the "U.S. Tax Code"), including an individual retirement account or other arrangement that is subject to section 4975 of the U.S. Tax Code; or
(C) an entity which is deemed to hold the assets of any of the foregoing types of plans, accounts or arrangements that is subject to Title I of ERISA or section 4975 of the U.S. Tax Code. In addition, Ordinary Shares may not be acquired by a governmental, church, non-U.S. or other employee benefit plan that is subject to any federal, state, local or non-U.S. law that is substantially similar to the provisions of Title I of ERISA or section 4975 of the U.S. Tax Code, unless its purchase, holding, and disposition of the Ordinary Shares will not result in a violation of applicable law and/or constitute a nonexempt prohibited transaction under section 503 of the U.S. Tax Code or any substantially similar law.
All prospective purchasers of Ordinary Shares are urged to consult with their own tax advisors concerning the US federal income tax considerations associated with acquiring, owning and disposing of Ordinary Shares in light of their particular circumstances, as well as any considerations arising under the laws of any non-US state, local or other taxing jurisdiction.
The enforcement by investors of civil liabilities under the United States federal securities laws may be adversely affected by the fact that the Company is incorporated outside the United States, and that some of its directors, and the experts named herein, are residents of a foreign country. As a result, it may be difficult or impossible for investors to effect service of process within the United States upon the Company, its directors or the experts named herein, or to realise against them upon judgments of courts of the United States predicated upon civil liabilities under the federal securities laws of the United States or "blue sky" laws of any state within the United States. In addition, investors should not assume that the courts of the United Kingdom: (a) would enforce judgments of US courts obtained in actions against such persons predicated upon civil liabilities under the federal securities laws of the United States or "blue sky" laws of any state within the United States; or (b) would enforce, in original actions, liabilities against such persons predicated upon civil liabilities under the federal securities laws of the United States or "blue sky" laws of any state within the United States.
This Prospectus has not been approved or authorised by the Guernsey Financial Services Commission for circulation in Guernsey and may not be distributed or circulated directly or indirectly to any persons in the Bailiwick of Guernsey other than: (i) by a person licensed to do so under the terms of the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended; or (ii) to those persons regulated by the Guernsey Financial Services Commission as licensees under the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, the Banking Supervision (Bailiwick of Guernsey) Law, 1994, the Insurance Business (Bailiwick of Guernsey) Law, 2002 or the Regulation of Fiduciaries, Administration Business and Company Directors etc. (Bailiwick of Guernsey) Law, 2000. Neither the Guernsey Financial Services Commission nor the States of Guernsey take any responsibility for the financial soundness of the Company, or for the correctness of any of the statements made or opinions expressed with regard to it.
This Prospectus does not purport to provide investment advice and shall not be construed as giving advice on the merits or suitability of the subscription or purchase of the Ordinary Shares. This Prospectus is not subject to and has not received approval from either the Jersey Financial Services Commission or the Registrar of Companies in Jersey and no statement to the contrary, explicit or implicit, is authorised to be made in this regard. The Ordinary Shares being offered may be offered or sold in Jersey only in compliance with the provisions of the Control of Borrowing (Jersey) Order 1958 ("COBO").
This document has not been approved or reviewed by the Isle of Man Financial Services Authority or any other governmental or regulatory authority in the Isle of Man. The Placing is available, and may be made, in the Isle of Man and this document is being provided in connection with the Placing in the Isle of Man only to persons: (a) licensed under the Isle of Man Financial Services Act 2008; or (b) falling within exclusion 2(r) of the Isle of Man Regulated Activities Order 2011 (as amended); or (c) whose ordinary business activities involve them in acquiring, holding, managing or disposing of shares or debentures (as principal or agent), for the purposes of their business.
The Investment Manager is authorised and supervised by the FCA as a full-scope AIFM of the Company and has permission to market the Ordinary Shares in the United Kingdom. In accordance with Article 32 of AIFMD, the Investment Manager has been given clearance by the FCA to market the Ordinary Shares to professional investors in Ireland, the Netherlands and Belgium in accordance with AIFMD and the UK AIFMD Rules and has been duly notified by the FCA that the relevant marketing notifications have been made by the FCA to the relevant competent authorities in those jurisdictions.
ELIGIBILITY FOR INVESTMENT BY UCITS OR NURS
The Ordinary Shares should be "transferable securities" and, therefore, should be eligible for investment by UCITS or NURS on the basis that: (i) the Company is a closed-ended investment company incorporated in England and Wales as a public limited company; (ii) the Ordinary Shares are to be admitted to trading on the Main Market; and (iii) the AIFM is a full scope UK alternative investment fund manager under the AIFMD and the UK AIFMD Rules and is regulated by the FCA and, as such, is subject to the FCA's rules for the purpose of investor protection. The manager of a UCITS or NURS should, however, satisfy itself that the Ordinary Shares are eligible for investment by that UCITS or NURS, including the factors relating to that UCITS or NURS itself, specified in the Collective Investment Scheme Sourcebook of the FCA Handbook.
In relation to each member state in the European Economic Area that has implemented the AIFMD, no Ordinary Shares have been or will be directly or indirectly offered to or placed with investors in that member state at the initiative of or on behalf of the Company or the Investment Manager or AIFM other than in accordance with methods permitted in that member state, which may include but are not limited to marketing under: (i) Article 32 of AIFMD; or (ii) any other form of lawful offer or placement (including on the basis of an unsolicited request from a professional investor) to an investor resident in such member state.
Copies of this Prospectus will be available on the Company's website (www.triplepointreit.com) and the National Storage Mechanism of the FCA at https://data.fca.org.uk/#/nsm/nationalstoragemechanism and hard copies of the Prospectus can be obtained free of
charge from the Receiving Agent, Computershare Investor Services PLC, Corporate Actions Projects, Bristol, BS99 6AH and the offices of Taylor Wessing LLP, 5 New Street Square, London EC4A 3TW.
TABLE OF CONTENTS | |
PART 6 - DIRECTORS, MANAGEMENT AND CORPORATE GOVERNANCE ....................................... | |
PART 8 - THE PLACING PROGRAMME ................................................................................................ | 101 |
PART 9 - THE UK-REIT REGIME AND TAXATION INFORMATION....................................................... | 104 |
PART 10 - ADDITIONAL INFORMATION ................................................................................................. | 113 |
PART 11 - TERMS AND CONDITIONS OF THE PLACING AND THE PLACING PROGRAMME ......... | 135 |
PART 12 - TERMS AND CONDITIONS OF THE OFFER FOR SUBSCRIPTION................................... | 146 |
PART 13 - TERMS AND CONDITIONS OF THE OPEN OFFER ............................................................ | 156 |
PART 14 - FINANCIAL INFORMATION................................................................................................... | 176 |
PART 15 - DEFINED TERMS .................................................................................................................. | 180 |
NOTES ON HOW TO COMPLETE THE OFFER FOR SUBSCRIPTION APPLICATION FORM ........... | 190 |
OFFER FOR SUBSCRIPTION APPLICATION FORM ............................................................................ | 192 |
SUMMARY INFORMATION
SECTION A - INTRODUCTION AND WARNINGS
This summary should be read as an introduction to this Prospectus. Any decision to invest in Ordinary Shares should be based on the consideration of this Prospectus as a whole by the investor. The investor could lose all or part of the invested capital. Where a claim relating to the information contained in this Prospectus is brought before a court, the plaintiff investor might, under national law, have to bear the costs of translating the Prospectus before the legal proceedings are initiated. Civil liability attaches only to those persons who have tabled the summary, including any translation of the summary, but only where the summary is misleading, inaccurate or inconsistent when read together with the other parts of this Prospectus or it does not provide, when read together with the other parts of this Prospectus, key information in order to aid investors when considering whether to invest in Ordinary Shares.
Name and ISIN of the securities: | Ordinary Shares of £0.01 each with ISIN GB00BF0P7H59. |
Identity of issuer: | Triple Point Social Housing REIT plc (the "Company"). Company number: 10814022. |
Registered office: 1 King William Street, London, EC4N 7AF. Telephone number: +44 (0)20 | |
7201 8989. LEI: 213800BERVBS2HFTBC58. | |
Identity of offeror of the securities: | Other than the Company, there are no other persons or entities offering to sell Ordinary |
Shares in connection with the Issue or the Placing Programme | |
Identity of competent authority | The Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN. |
approving the Prospectus: | Telephone number: +44 20 7066 1000. |
Date of approval of Prospectus: | 30 September 2020 |
SECTION B - KEY INFORMATION ON THE ISSUER
- WHO IS THE ISSUER OF THE SECURITIES?
- The Company was incorporated as a public company limited by shares in England and Wales under the Companies Act with registered number 10814022 on 12 June 2017. The Company is registered as an investment company under section 833 of the Companies Act and is domiciled in the United Kingdom. It is qualified as a REIT for the purposes of Part 12 of the CTA 2010 (and any regulations made thereunder). Its LEI is 213800BERVBS2HFTBC58. The liability of the members of the Company is limited. The principal legislation under which the Company operates, and under which the Ordinary Shares are created, is the UK Companies Act 2006.
- The Company is an externally managed, closed-ended investment company. Its Ordinary Shares are listed on the premium listing segment of the Official List, and admitted to trading on the Main Market.
- The Group's principal activity is to invest in a diversified portfolio of Social Housing assets across the UK. The Portfolio focuses on properties housing people with specialist Supported Housing needs. The Company is the ultimate holding company of the Group. The Company owns a top holding company which in turn holds a small number of intermediate holding companies. Each intermediate holding company holds a property holding company, which directly owns (or will in the future acquire) various of the Group's investment properties. In addition to acquiring and holding investment properties through its property holding companies, the Company also directly acquires existing SPVs that hold property. Since its IPO in August 2017, the Company has deployed £496.9 million (including costs) in acquiring, committing to acquire or forward funding 434 Supported Housing properties across the UK.
- Insofar as is known to the Company, as at the close of business on 29 September 2020 (being the latest practicable date prior to the publication of this Prospectus), the following holdings represented a direct or indirect interest of 3 per cent. or more of the Company's issued share capital or voting rights:
Name | Ordinary Shares held | Ordinary Shares held (%) |
CCLA Investment | 42,122,250 | 12.00 |
Management Limited | ||
BlackRock, Inc. | 42,019,080 | 11.97 |
East Riding of Yorkshire | 32,879,797 | 9.37 |
Council |
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Name | Ordinary Shares held | Ordinary Shares held (%) |
Investec Wealth & | 29,215,399 | 8.33 |
Investment Limited | ||
Nottinghamshire County | 19,417,475 | 5.53 |
Council Pension Fund | ||
Tilney Investment | 16,665,920 | 4.75 |
Management Services | ||
Limited | ||
Aberdeen Standard | 16,084,130 | 4.58 |
Investments | ||
West Yorkshire Pension | 13,850,000 | 3.95 |
Fund | ||
South Yorkshire Pensions | 11,955,713 | 3.41 |
Authority |
- The Company and its Directors are not aware of any person who, as at 29 September 2020 (being the latest practicable date prior to the publication of this Prospectus), directly or indirectly, jointly or severally, exercises or could exercise control over the Company.
- The Board of the Company comprises Christopher Phillips (non-executive Chairman), Ian Reeves CBE, Peter Coward, Paul Oliver and Tracey Fletcher-Ray (all non-executive directors). The Company is externally managed by Triple Point Investment Management LLP (the "Investment Manager"), which is authorised and regulated by the FCA to act as external investment fund manager. The Investment Manager has also been granted permission to act as an AIFM under the AIFMD and is also responsible for the overall portfolio management, risk management and preparation of valuations for the Company.
- The Company's statutory auditors are BDO LLP (registered number OC305127).
- WHAT IS THE KEY FINANCIAL INFORMATION REGARDING THE ISSUER?
- The selected financial information in the tables below has been extracted without material adjustment from the audited consolidated financial information of the Company for the period from 1 January 2019 to 31 December 2019 and the unaudited consolidated financial information for the interim period from 1 January 2020 to 30 June 2020.
- Additional information relating to closed ended funds
Ordinary £369.65 million
350,902,210*
105.34p
Financial year ended 31 December 2019
Dividend per share: 5.095p; Total Accounting Return: 6.5%
Financial period ended 30 June 2020
Dividend per share: 2.59p; Total Accounting Return: 2.42%
Financial period ended 30 June 2019
Dividend per share: 2.54p; Total Accounting Return: 2.73% *excluding 450,000 Ordinary Shares held in treasury
2.3 Income statement for closed ended funds
Full Year ended 31 | Full Year ended 31 | Half-year period | Half-year period | |
December 2019 | December 2018 | ended 30 June | ended 30 June | |
(audited) | (audited) | 2020 (unaudited) | 2019 (unaudited) | |
Rental income | 21,112 | 11,490 | 13,372 | 9,348 |
(£'000) | ||||
Profit for the period | 23,717 | 19,897 | 8,965 | 9,915 |
(£'000) | ||||
Management fees | 3,869 | 2,309 | 1,975 | 1,859 |
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(£'000) | ||||
IFRS Earnings per | 6.75p | 8.37p | 2.55p | 2.82p |
share (basic and | ||||
diluted) | ||||
EPRA Earnings per | 3.39p | 2.27p | 2.12p | 1.53p |
share (basic and | ||||
diluted) |
2.4 Balance sheet for closed ended funds
Full Year ended 31 December | Half-year period ended 30 June | |
2019 (audited) | 2020 (unaudited) | |
Total net assets (£'000) | 369,733 | 369,645 |
Leverage ratio* | 31.1% | 33.1% |
* The proportion of the Group's portfolio funded by borrowings.
2.5 The review and audit reports on the financial statements of the Group incorporated by reference in this Prospectus do not contain any qualifications.
- WHAT ARE THE KEY RISKS THAT ARE SPECIFIC TO THE ISSUER?
- Risk of changes to the Social Housing regulatory regime (for example, a reduction in Government funding to Local Authorities which may, in turn, impact upon the ability of Approved Providers to pay rent to the Group at the level agreed in a Lease) which may have an adverse impact on the sector and the Company.
- Risks relating to the potential for Approved Providers to breach the terms of (or default on) Leases (which may be exacerbated if Care Providers were to become unable to fund any rent or voids periods for which they are liable), particularly given the financial strain caused by the COVID-19 pandemic.
- Risks caused by the COVID-19 pandemic, which has negatively impacted economic conditions globally and is having an adverse and disruptive effect on the UK economy. Whilst the Group's income has thus far proved to be largely resilient to the economic effects of the COVID-19 pandemic, the potential impact of the pandemic is significant and could have wide ranging and unpredictable adverse effects on the Group, including a reduction in portfolio valuations, an increase in bad debts, void rates and costs, an adverse impact on existing banking covenants and health risks to the Group's employees and tenants.
- Risks relating to the potential for Registered Providers to receive a non-compliant financial viability or governance rating by the Regulator which could negatively impact the Market Value of the relevant properties which are the subject of such lease(s) and depending on the Group's exposure to such Registered Provider, may have a material adverse effect on the Company's NAV until the matter is resolved through an improvement in rating or a change in Registered Provider. If a Registered Provider's situation deteriorates further and is unable to meet its financial obligations, there is no certainty that the Company would recover lost rental income or costs incurred.
- Risk of not securing debt funding at sustainable rates which may restrict the Group's ability to grow or pay the target level of dividends. If real estate assets owned by the Group decrease in value, any loan to value and interest covenants in the Group's borrowings could be breached, and the impact of such an event could include: an increase in borrowing costs; a call for additional capital from the lender; payment of a fee to the lender; a sale of an asset; or a forfeit of any asset to a lender.
- A reduction in availability of investments as a result of conditions in the Social Housing sector or increased competition for assets may reduce the number of opportunities available to, and adversely affecting the terms upon which investments can be made by, the Group.
- Property valuation is inherently subjective and uncertain and is based on a number of assumptions which may not turn out to be true. Investors should be aware that the basis of valuation used by JLL (the Company's independent valuer) reflects a higher value for the Portfolio than would otherwise be obtained on a vacant possession valuation basis.
- The result of the referendum and the resulting departure of the UK from the EU on 31 January 2020 has created uncertainty surrounding the economy of the UK. It is possible that arrangements between the UK and the EU will lead to greater restrictions on the free movement of goods, services, people
8
and capital between the UK and the EU, and increased regulatory complexities which could potentially disrupt and adversely impact the Group's business.
- Risk of negative media attention having an adverse effect on the Company and its reputation (for example, as a result of the removal or eviction of a tenant by an Approved Provider or an outbreak of COVID-19 in one or more of the properties in the Portfolio).
- The Group is dependent on the efforts of the Investment Manager and the Investment Team, together with the performance and retention of key personnel.
- The Investment Manager's acquisition due diligence may not identify all risks and liabilities which may result in the Company incurring unexpected liabilities (such as defects in title or an inability to obtain permits).
- The Company cannot guarantee that it will continue to comply with all of the REIT conditions. If the Company fails to remain qualified as a REIT, the rental income and gains of the Group will be subject to UK corporation tax and chargeable gains on the sale of properties which would reduce the funds available to distribute to investors.
SECTION C - KEY INFORMATION ON THE SECURITIES
- WHAT ARE THE MAIN FEATURES OF THE SECURITIES?
- The Ordinary Shares being issued by the Company pursuant to the Issue and the Placing Programme will, on Admission, rank equally in all respects with the existing Ordinary Shares in issue and will rank in full for all dividends and other distributions declared, made or paid on the issued Ordinary Share capital of the Company after Admission. When listed on the premium listing segment of the Official List and admitted to trading on the Main Market of the London Stock Exchange, the Ordinary Shares to be issued pursuant to the Issue and the Placing Programme will be registered with ISIN: GB00BF0P7H59 and SEDOL: BF0P7H5
- The currency of the Ordinary Shares to be issued pursuant to the Issue and the Placing Programme is pounds sterling, the lawful currency of the United Kingdom.
- As at the date of this Prospectus, there are 350,902,210 Ordinary Shares in issue (excluding the 450,000 Ordinary Shares held in treasury), each of which is credited as fully paid. The nominal value of each Ordinary Share is £0.01.
- The Ordinary Shares issued pursuant to the Issue and the Placing Programme will be credited as fully paid and will rank in full for all dividends and distributions declared, made or paid after their issue and otherwise pari passu in all respects with each of the Ordinary Shares currently in issue and will have the same rights (including voting and dividend rights and rights on a return of capital) and restrictions as each of the Ordinary Shares currently in issue, as set out in the Articles. The Ordinary Shares are freely transferable, subject to the limited restrictions contained in the Articles.
- The Company is targeting a dividend of 5.18 pence per Ordinary Share (in respect of the Company's financial year to 31 December 2020).1 The Company intends to increase this target dividend annually thereafter in line with inflation, reflecting the CPI-based rent reviews typically contained in the Leases of the assets within the Portfolio. Dividends will only be paid subject to the Company satisfying the requirements of the Companies Act.
- The Company intends to pay quarterly interim dividends to Ordinary Shareholders three months after a quarter end in respect of the three month periods ending on 31 March, 30 June, 30 September and 31 December each calendar year ("Quarters"). In respect of the financial year ending 31 December 2020, the Company expects to pay dividends of 1.295 pence in respect of each Quarter.
- WHERE WILL THE SECURITIES BE TRADED?
5.1 Applications will be made to the FCA for the Ordinary Shares issued in connection with the Issue to be admitted to the premium listing segment of the Official List and to the London Stock Exchange
- This target dividend is a target only and not a profit forecast. The Company's ability to distribute dividends on an annual basis will be determined by the existence of realised profits, legislative requirements, and available cash reserves. There is no certainty as to any level of dividends. The dividend targets may not be achieved, and all dividend payments are subject to the Company having adequate distributable reserves and cash reserves. Accordingly, potential investors should not place any reliance on this target in deciding whether or not to invest in the Company and should decide for themselves whether or not the target dividend yield is reasonable or achievable.
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for the Ordinary Shares to be admitted to trading on the Main Market. It is expected that Initial Admission will become effective and dealings in such Ordinary Shares will commence on 23 October 2020.
5.2 Applications will be made to the FCA for the Ordinary Shares issued in connection with Subsequent Placings under the Placing Programme to be admitted to the premium listing segment of the Official List and to the London Stock Exchange for such Ordinary Shares to be admitted to trading on the Main Market. It is expected that any Subsequent Admission will become effective and that dealings for normal settlement in Ordinary Shares issued under the Placing Programme will commence at any time between Initial Admission and 29 September 2021.
- WHAT ARE THE KEY RISKS THAT ARE SPECIFIC TO THE SECURITIES?
- The value and/or market price of the Ordinary Shares may go down as well as up and the market price of the Ordinary Shares may not reflect the underlying value of the Company. The Ordinary Shares may trade at a discount to NAV and Shareholders may be unable to realise their investments through the secondary market at Net Asset Value.
- The Company may, in the future (including pursuant to the Placing Programme) issue new equity, which may dilute Shareholders' voting rights and depress the market price of the Ordinary Shares.
- The Company's ability to pay dividends will depend upon its ability to generate sufficient earnings and certain legal and regulatory restrictions. There is no guarantee that the target dividend in respect of any period will be paid, covered by income or achieved, as applicable.
SECTION D - KEY INFORMATION ON THE ISSUE AND ADMISSION
- UNDER WHICH CONDITIONS AND TIMETABLE CAN I INVEST IN THIS SECURITY?
- The Issue comprises the Placing, Open Offer and Offer for Subscription. Under the Issue, the Company is targeting an issue of 66,037,735 Ordinary Shares at an Issue Price of 106 pence per Ordinary Share. At the discretion of the Board, the Company may issue up to an additional 28,301,887 Ordinary Shares, bringing the maximum number of Ordinary Shares the Company may issue in connection with the Issue up to 94,339,622. The target Gross Proceeds of the Issue are £70 million, with maximum Gross Proceeds of £100 million.
- The actual number of Ordinary Shares to be issued pursuant to the Issue, and therefore the Gross Proceeds, are not known as at the date of this Prospectus but will be notified by the Company via a Regulatory Information Service announcement prior to Initial Admission. If subscriptions under the Placing, Open Offer and Offer for Subscription exceed the maximum number of Ordinary Shares to be issued pursuant to the Issue, the Company (in consultation with Stifel, Akur and the Investment Manager) will scale back subscriptions (other than Open Offer Basic Entitlements) at its absolute discretion.
- The Issue, which is not underwritten, is conditional upon, inter alia, the passing of the Issue Resolutions at the General Meeting to be held on 21 October 2020 (or at any adjournment thereof), Initial Admission occurring no later than 8.00 a.m. on 23 October 2020 (or such later time and/or date as the Company, Akur and Stifel may agree, being not later than 8.00 a.m. on 30 November 2020), the Placing Agreement not being terminated and becoming unconditional in accordance with its terms prior to Initial Admission. If these conditions are not met, the Issue will not proceed and an announcement to that effect will be made via a Regulatory Information Service.
- The Company, the Investment Manager, Stifel and Akur have entered into the Placing Agreement, pursuant to which Stifel has agreed, subject to certain conditions, to use its reasonable endeavours to procure subscribers for the Ordinary Shares to be made available in the Placing. The latest time and date for receipt of placing commitments under the Placing is 11.00 a.m. on 20 October 2020.
- Eligible Shareholders will have the basic entitlement to apply for 1 Ordinary Share for every 6 Ordinary Shares held and registered in their name as at the Record Date (28 September 2020). Valid applications under the Open Offer received by 11.00 a.m. on 19 October 2020 will be satisfied in full up to the amount of each applicant's Open Offer Basic Entitlement. Eligible Shareholders who wish to subscribe for Ordinary Shares in excess of their Open Offer
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Basic Entitlement should make an application for such additional Ordinary Shares under the Excess Application Facility or the Offer for Subscription or, if appropriate, the Placing. Eligible Shareholders should be aware that the Open Offer is not a rights issue and Open Offer Basic Entitlements cannot be traded. The Open Offer Basic Entitlement is not subject to scaling back in favour of the Placing or the Offer for Subscription, though the Excess Application Facility may be scaled back.
- Ordinary Shares will be made available under the Offer for Subscription, with the latest time and date for receipt of completed Application Forms and payment in full under the Offer of Subscription being 11.00 a.m. on 19 October 2020. The Offer for Subscription is only being made in the UK. The Company may terminate the Offer for Subscription in its absolute discretion at any time prior to Initial Admission. If such right is exercised, the Offer for Subscription will lapse and any monies will be returned as indicated without interest.
- Following the Issue, the Directors intend to implement the Placing Programme for Ordinary Shares to enable the Company to raise additional equity capital in the period from 30 September 2020 to 29 September 2021 allowing for the issue of up to 150 million new Ordinary Shares. Details of any Subsequent Placing pursuant to the Placing Programme, including the number of Ordinary Shares, the relevant Placing Programme Price and timings, will be notified by the Company via a Regulatory Information Service prior to each Subsequent Admission. The number of Ordinary Shares available under the Placing Programme is intended to be flexible and should not be taken as an indication of the number of Ordinary Shares finally to be issued.
- Each Subsequent Placing under the Placing Programme is conditional, inter alia, on: (i) the Placing Programme Resolutions being passed at the General Meeting; (ii) the Placing Programme Price being agreed between the Company, Akur, Stifel and the Investment Manager;
- Admission of the Ordinary Shares issued pursuant to each Subsequent Placing becoming effective by 8.00 a.m. on such date as agreed between the Company, Akur, Stifel and the Investment Manager; (iv) the Placing Agreement not having been terminated prior to the date of the Subsequent Admission of the relevant Ordinary Shares; and (v) a valid supplementary prospectus being published by the Company if required by the Prospectus Regulation Rules.
- Details of the applications for Admission in respect of the Issue and the Placing Programme are set out in paragraph 5 above. It is expected that the results of the Issue will be announced by 8.00 a.m. on 21 October 2020 and that Initial Admission will become effective and dealings in such Ordinary Shares will commence at 8.00 a.m. on 23 October 2020.
- If an existing Shareholder does not subscribe under the Issue and Subsequent Placings for such number of new Ordinary Shares as is equal to that Shareholder's proportionate ownership of existing Ordinary Shares, their proportionate ownership and voting interest in the Company will be reduced and the percentage that Shareholder's existing Ordinary Shares will represent of the total share capital of the Company will be reduced accordingly following completion of the Issue and any Subsequent Placings. Eligible Shareholders who take up their full Open Offer Entitlement will have their proportionate shareholdings in the Company diluted by approximately 1.8 per cent. as a consequence of the Issue (assuming 66,037,735 Ordinary Shares are issued pursuant to the Issue) and by 27.8 per cent. as a consequence of the Issue and the Placing Programme (assuming in aggregate 216,037,735 Ordinary Shares are issued pursuant to the Issue and the Placing Programme). Eligible Shareholders who do not take up any of their Open Offer Entitlements will have their proportionate shareholdings in the Company diluted by approximately 15.8 per cent. as a consequence of the Issue (assuming 66,037,735 Ordinary Shares are issued pursuant to the Issue) and by 38.1 per cent. as a consequence of the Issue and the Placing Programme (assuming in aggregate 216,037,735 Ordinary Shares are issued pursuant to the Issue and the Placing Programme).
- On the assumption that target Gross Proceeds of £70 million are raised in connection with the Issue, the expenses payable by the Company will be approximately £2 million (representing approximately 2.9% of the Gross Proceeds).
- The costs and expenses of the Placing Programme will depend on the subscriptions received under Subsequent Placings. The price at which Ordinary Shares will be issued under the Placing Programme will represent a premium to the prevailing Net Asset Value per Ordinary Share at the time of the issue. The maximum expenses payable by the Company in respect of each Subsequent Placing will be approximately 2% of the gross proceeds in respect of that Subsequent Placing.
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7.13 No commissions, fees or expenses will be charged by the Company to investors who acquire Ordinary Shares through the Placing, Open Offer, Offer for Subscription or Placing Programme.
- WHY IS THIS PROSPECTUS BEING PRODUCED?
- The Issue is being undertaken in order to raise funds to ensure that the Company is able to continue to take advantage of the Investment Manager's pipeline of attractive investment opportunities and make investments in line with the Company's Investment Policy. The Issue is also expected to increase the size of the Company, increase liquidity and lower ongoing costs. The Gross Proceeds of both the Issue and the Placing Programme will be used to acquire Social Housing assets in accordance with the Company's Investment Policy and to pay the Issue Costs.
- On the assumption that the target of 66,037,735 Ordinary Shares are issued pursuant to the Issue at the Issue Price, the Issue Costs will be approximately £2 million (being 2.9 per cent. of the Gross Proceeds), resulting in Net Proceeds of approximately £68 million. At the discretion of the Board, the Company may issue up to an additional 28,301,887 Ordinary Shares, bringing the maximum number of Ordinary Shares the Company may issue in connection with the Issue up to 94,339,622. The actual number of Ordinary Shares to be issued pursuant to the Issue, and therefore the Gross Issue Proceeds, is not known as at the date of this Prospectus but will be notified by the Company via a Regulatory Information Service announcement prior to Initial Admission.
- The net proceeds of the Placing Programme are dependent, inter alia, on: (a) the level of subscriptions for new Ordinary Shares received in connection with Subsequent Placings and (b) the price at which such new Ordinary Shares are issued. Assuming 150 million Ordinary Shares are issued pursuant to the Placing Programme at the Issue Price (noting that the actual placing price may be different), gross proceeds would be £159 million and the costs of the Placing Programme would be approximately £3.2 million (being 2 per cent. of the gross proceeds) resulting in net proceeds of approximately £155.8 million.
- The Issue is not being underwritten. Subsequent Placings are not being underwritten.
- Tracey Fletcher-Ray, a Director, intends to participate in the Issue up to a maximum of £40,000, which will result in her being issued 37,735 new Ordinary Shares which will comprise her aggregate holding following Initial Admission. Except as otherwise stated in this paragraph 8.5, as at 29 September 2020, being the latest practicable date, in so far as is known to the Company, there are no interests, including conflicting interests, that are material to the Issue, the Placing Programme, or Initial Admission or any Subsequent Admission.
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RISK FACTORS
Any investment in the Company, including the acquisition of Ordinary Shares under the Issue, is subject to a number of risks. Accordingly, prior to making any decision relating to the Issue, prospective investors should consider carefully the factors and risks associated with any investment in the Company and the Group's business together with all other information contained in this Prospectus including, in particular, the risk factors described below.
Prospective investors should note that the risks relating to the Group, its industries and the Ordinary Shares summarised in the section headed "Summary Information" of this Prospectus are the risks that the Directors and the Company believe to be the most essential to an assessment by a prospective investor of whether to consider an investment in Ordinary Shares. However, as the risks which the Group faces relate to events and depend on circumstances that may or may not occur in the future, prospective investors should consider not only the information on the key risks summarised in the section headed "Summary Information" of this Prospectus but also, among other things, the risks and uncertainties described below. The risks and uncertainties described below represent those the Directors consider to be material as at the date of this Prospectus. However, these risks and uncertainties are not the only ones facing the Group. Additional risks and uncertainties relating to the Group that are not currently known to the Group, or that the Group currently deems immaterial, may individually or cumulatively also have a material adverse effect on the Group's business, prospects, results of operations and financial condition and, if any or a combination of such risks should occur, the price of the Ordinary Shares may decline and investors could lose all or part of their investment. In particular, the Company's performance may be affected by changes in the market and/or economic conditions and/or in legal, regulatory and tax requirements. Investors should consider carefully whether an investment in the Company is suitable for them in light of the information in this Prospectus and their personal circumstances.
The Ordinary Shares being issued in connection with the Issue and the Placing Programme are only suitable for investors: (i) who understand and are willing to assume the potential risks of capital loss and that there may be limited liquidity in the underlying investments of the Company; (ii) for whom an investment in the new Ordinary Shares is part of a diversified investment programme; and (iii) who fully understand and are willing to assume the risks involved in such an investment. If you are in any doubt about the contents of this Prospectus, you should consult your accountant, legal or professional adviser or financial adviser. An investment in new Ordinary Shares is only suitable for investors capable of evaluating the risks and merits of such investment and who have sufficient resources to bear any loss which may result from the investment.
RISKS RELATING TO THE COMPANY'S BUSINESS AND INDUSTRY
Risk of changes to the Social Housing regulatory regime
There is the risk that the current or future governments may take a different approach to the Social Housing regulatory regime. This may result in changes to the law (including the Housing and Regeneration Act 2008, Regulatory Standards, Rent Standard Guidance and the Care Act 2014) and other regulation or practices of the Government with regard to Social Housing. Regulatory changes may, for example, lead to a reduction in Government funding to Local Authorities which may in turn impact upon the ability of Approved Providers to pay rent to the Group at the level agreed in a Lease, or impose increased responsibilities on the owners of Social Housing assets in the event that the Approved Provider fails to maintain adequate maintenance and safety standards. Any such changes may adversely affect the Company's business, financial condition, results of operations, ability to maintain its dividend policy, NAV and/or the market price of the Ordinary Shares. In such event, the investment returns of the Company may be materially adversely affected.
Other changes in regulation that may have an impact on the Company include the split of the Homes and Communities Agency into two bodies, Homes England and the Regulator of Social Housing. The Supported Social Housing sector has been the subject of increasing engagement with the Regulator of Social Housing and this engagement has resulted in a series of regulatory notices and judgments, some of which related to properties owned by the Group. Whilst none of these regulatory judgments and notices have negatively affected the valuation of the Group's Portfolio, this different approach to regulating the Social Housing sector may have an adverse impact on the sector and the Company.
A White Paper on Social Housing, which is likely to give insights into what (if any) changes to Social Housing the Government is considering, is expected to be published before the end of 2020. It is expected to focus on, amongst other things, regulation and consumer protection. Increased regulation
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may (depending on the nature of the changes) adversely affect the Company's business and/or increase compliance costs.
Potential future changes to the Mental Health Act 1983 and 2007 may also have a financial or operational impact on Care Providers, who provide in situ care to residents of the Company's properties. Care Providers do not usually contract directly with the Company, but any impact of legislative or regulatory changes on Care Providers may impact the Company primarily if either: (i) an event occurs relating to a Care Provider that has a detrimental impact on the Company's reputation; or (ii) an event or development leads a Care Provider into financial difficulty (see the risk factor below in relation to the potential for Care Providers to be unable to fund any rent or voids periods for which they are liable).
Risks relating to the potential for Approved Providers to breach the terms of (or default on) Leases
The Group enters into long-term fully repairing and insuring Leases with Approved Providers in connection with the properties in the Portfolio. Although unlikely, there is a potential risk that an Approved Provider lessee may breach the terms of the Lease, fail to pay rent to the Group or adequately maintain the property or attempt to unilaterally terminate the Lease. An Approved Provider may also default on its obligations under a Lease as a result of a downturn in business which may lead to bankruptcy or insolvency. As a result, the Group's business and results of operations may be adversely affected by any change in its contractual arrangements with such Approved Providers.
The Group seeks to minimise this risk by forming long-term strategic relationships with Approved Providers in addition to negotiating favourable termination provisions when appointing Approved Providers. The Investment Manager also seeks to negotiate Leases which are set and maintained at sustainable rental levels for its tenants. In addition, the Investment Policy restricts the maximum exposure to any one Approved Provider to a maximum of 30 per cent. of Gross Asset Value other than in exceptional circumstances.
In the event that one or more Leases with Approved Providers are breached or terminated, or an Approved Provider defaults on one or more Leases, the value of the Group's assets and/or the Company's ability to achieve its targeted returns may be adversely impacted. In particular, in the event that an Approved Provider defaults on its rental payment obligations under a Lease, the Company's rental income will decline or cease altogether for a period of time and would only resume were the Group able to transfer the Leases to another Approved Provider. There is no certainty in these circumstances that the Company would recover some or any of the lost rental income or costs incurred, none of which would be underwritten by the Regulator.
Risks relating to the potential for Care Providers to be unable to fund any rent or voids periods for which they are liable
Most of the properties owned by the Group benefit from voids cover from a Care Provider whereby through a legal agreement, typically called a service level agreement, between an Approved Provider to whom a property is leased and a Care Provider providing care to the individuals housed in the property, the Care Provider underwrites any voids in the property for a period of time (usually between 5 and 10 years from the point at which the property was developed). If a Care Provider were to default under a service level agreement, this might have an impact on the Approved Provider's rental income and ability to pay rent under the relevant Lease. COVID-19 has placed financial strain on some Care Providers (see below) but other factors that could impact a Care Provider's ability to make void payments to an Approved Provider include, but are not limited to, changes in the Mental Health Act 1983 and 2007 (see above) and strain on the finances of Local Authorities.
Risks arising out of the COVID-19 pandemic
The outbreak of COVID-19 in early 2020 has negatively impacted economic conditions globally and is having an adverse and disruptive effect on the UK economy (triggering a technical recession after the second quarter of 2020). The Group's financial performance has proven to be resilient to effects of COVID-19 thus far, however, its way of operating has adapted and is likely to need to continue to adapt in the near term in response to the developments relating to the COVID-19 outbreak.
Whilst the Group's income generated through long leases to Approved Providers has thus far proved to be largely resilient to the economic effects of the COVID-19 pandemic, due to the speed with which the situation is developing and the uncertainty of its duration and the timing of recovery, it is difficult at this time to be certain about the extent to which the COVID-19 pandemic may have a material effect on the Group's financial or operational results. In addition to the immediate health risks to the Group's tenants and employees of the Investment Manager, the potential impact of the pandemic is significant and could
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have wide ranging and unpredictable adverse effects on the Group, including but not limited to a reduction in portfolio valuations, an increase in bad debts, void rates and costs, an adverse impact on existing banking covenants, and reduced quality of services and support from professional advisors and other service providers to the Group.
For Approved Providers managing Supported Housing properties, the COVID-19 pandemic is presenting service challenges relating to the delivery of repairs and maintenance, given the need to enforce social distancing measures to protect both tenants and staff. Instances of the COVID-19 outbreak may spread within the Group's Portfolio and impact on housing service levels provided by Approved Providers. These challenges can also affect the Care Providers who provide care to individuals housed in the properties by way of increased care operating costs due to the requirement to source and pay for additional personal protective equipment (PPE) and a greater reliance on (more expensive) agency staff as a result of lower available staff numbers. This additional financial burden could cause the financial viability of Care Providers to deteriorate and impact the care provision within the Group's assets and increase the potential for Care Providers to be unable to fund any rent or voids.
Approved Providers are regulated entities and are often in receipt of Government funding (including from Local Authorities and often in the form of housing benefit), as are the Care Providers who provide care to individuals living in properties owned by the Group. In light of the adverse and disruptive effect on the UK economy caused by the COVID-19 pandemic and the associated lockdown and the resultant strain on central and local government resources, there can be no assurance that the COVID-19 pandemic will not have an impact on the Government's ability to continue to fund housing benefit and/or the care of individuals housed in Supported Housing (despite the Government's focus thus far on ensuring that vulnerable people receive the funding, care and support that they need and the resultant resilience of the Group's income streams). Were the Government to reduce the amount of housing benefit that they were able or willing to pay for Supported Housing, or the funding available for social care, this may have a material adverse effect on the creditworthiness of those affected Approved Providers and Care Providers which could, in turn, have a material adverse effect on the Group's profitability, the Net Asset Value and the share price.
The Group is also engaged in several ongoing construction projects. During March, April and May of 2020, work stopped on a number of these sites due to the restrictions associated with the national lockdown. Work has now recommenced on all sites and there have been no major construction problems caused by the delays. The Group is largely insulated from any cost overruns, including the costs associated with delays, through contractual protections that are put in place at the point at which a project is entered into by the Group. Nonetheless, were lockdown restrictions to be tightened in the UK or other countries that are relevant to the efficacy of the supply chain required to provide the building materials for the Group's construction projects, then this could impact the deliverability of projects still under construction. This in turn could lead to further delays to project completion dates and/or impact the financial viability of the contractors involved in the projects and this could negatively impact the Group as described in the forward funding risk below.
Risks relating to a Registered Provider receiving a non-compliant financial viability or governance rating by the Regulator
Registered Providers, including Housing Associations, with fewer than 1,000 social housing units under management (representing over 80 per cent. of Registered Providers) which then pass through the 1,000 unit threshold are subject to a detailed in-depth assessment ("IDA") by the Regulator within three years of passing through such threshold. The Company and the Investment Manager see this as positive for the sector due to the increased accountability and higher degree of transparency which it brings. The IDA assesses the Registered Provider's compliance with the requirements of the Governance and Financial Viability Standard. The outcome of an IDA results in the Regulator publishing a formal grading, known as regulatory judgment, ranging from V 1-4 for Viability and G 1-4 for Governance, where V 1-2 and G 1-2 are considered "compliant" ratings, and V 3-4 and G 3-4 are considered "non-compliant" ratings. Registered Providers with fewer than 1,000 units under management may also be subject to a notice from the Regulator detailing any perceived failings, including commentary on its financial viability, if the Regulator deems it to be underperforming. To date, the Regulator has issued judgements or notices in respect of four Registered Providers with which the Group has one or more leases in place, and the Regulator has announced that one of the Group's lessees, My Space, is currently under review. Should a Registered Provider with which the Group has one or more leases in place receive a non-compliant rating (in particular in relation to Viability), or be the subject of a negative notice issued by the Regulator, depending on the further actions of the Regulator, it is possible that there may be a negative impact on the Market Value of the relevant properties which are the subject of such lease(s) since Market Value
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takes into account, inter alia, the covenant strength of the counterparty and likelihood of a continuation of rental (and growth in relation to inflation) on a property over the remaining term of the lease. Depending on the exposure of the Group to such Registered Provider, this in turn may have a material adverse effect on the Company's NAV until such time as the matter is resolved through an improvement in the relevant Registered Provider's rating or a change in Registered Provider. However, in some cases, the Provider's situation may deteriorate further, leading to an inability to meet its financial obligations and possible further intervention by the Regulator, and/or the appointment of a housing administrator. As above, there is no certainty in these circumstances that the Company would recover any lost rental income or costs incurred, none of which would be underwritten by the Regulator.
Risk of not securing debt funding at sustainable rates which may restrict the Group's ability to grow or pay the target level of dividends
The Group seeks to use gearing to enhance equity returns. There is no assurance that debt funding will be available to the Group on acceptable commercial terms and at sustainable rates. Without sufficient debt funding, the Company may be unable to pursue suitable investments in accordance with the Investment Policy, its ability to pay dividends to Shareholders at the targeted level may be impaired and the dividend, at the targeted level, may not be covered by income generated by the Company's Portfolio. These outcomes may, in turn, have a material adverse effect on the financial performance of the Company. Nothing in this risk factor should be construed as qualifying the working capital statement in paragraph 1 of Part 14 of this Prospectus.
Availability of investments and competition for assets
The growth of the Group depends upon the ability of the Investment Manager to identify, select, acquire and manage investments that offer the potential for satisfactory returns. The availability of such investment opportunities will depend, in part, upon conditions in the Social Housing sector and the level of competition for assets in the market. The Group competes against other investors (including both Approved Providers and private sector investors) to acquire real estate assets available in the Social Housing sector. Competition for appropriate investment opportunities may increase, thus reducing the number of opportunities available to, and adversely affecting the terms upon which investments can be made by, the Group.
In the case that the Group is unable to acquire a sufficient number of assets in its pipeline that offer the potential for satisfactory returns, the anticipated timetable for investing the Net Proceeds may potentially be delayed which may impact the growth of the Group's portfolio and the NAV per Ordinary Share alongside cash drag.
The appraised value of the Group's properties may not accurately reflect the current or future value of the Group's assets
Property valuation is inherently subjective and uncertain owing to the individual nature of each property and is based on a number of assumptions which may not turn out to be true. Incorrect assumptions underlying the valuation reports could negatively affect the value of any property assets the Company acquires and thereby have a material adverse effect on the Company's financial condition.
The basis on which the Portfolio is valued is Market Value as defined in the RICS "Red Book". This basis of valuation reflects a higher value for the Portfolio than would otherwise be obtained on a vacant possession valuation basis. While the Company's independent valuer, JLL, has confirmed that Market Value is the correct basis of valuation on which the Portfolio should be assessed, investors should be aware of this difference.
In particular, if an Approved Provider were to default on its obligations under a Lease (whether as a result of a downturn in business, bankruptcy or insolvency or otherwise) without another Approved Provider entering into a replacement Lease on the same or better terms, the Market Value of the relevant property is likely to be negatively impacted, which will have a negative impact on the Company's NAV. In addition, the valuation assumes that at the end of the term of the Lease, such Lease is renewed on substantially the same terms which may not be the case and failure to do so may impact the valuation.
Risks relating to the use of debt finance by the Group
Given that the Group may use debt finance secured over some or the entire Portfolio (at all times in compliance with the Company's Investment Policy) there will be an amplified impact of property price movements (positive or negative) as a result. In addition, the part(s) of the Portfolio which are included in any debt facility will be secured in favour of the lender, including by way of a charge. In a severe market
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downturn there is a risk that providers of debt finance will require repayment which may necessitate the sale of an asset at a time of unfavourable market conditions. This is mitigated by the gearing limits set out in the Investment Policy and the fact that interest coverage ratios for the Portfolio will be materially higher than the monthly interest charges required to service debt.
The borrowings which the Group uses now and in the future may contain loan to value and interest covenants, being the accepted market practice in the UK. If real estate assets owned by the Group decrease in value, such covenants could be breached, and the impact of such an event could include: an increase in borrowing costs; a call for additional capital from the lender; payment of a fee to the lender; a sale of an asset; or a forfeit of any asset to a lender. This could result in a total or partial loss of value for a specific asset, or the Group as a whole. Nothing in this risk factor should be construed as qualifying the working capital statement in paragraph 1 of Part 14 of this Prospectus.
Risks relating to the economic environment
If economic conditions were to weaken further in the United Kingdom or elsewhere (whether as a result of the COVID-19 pandemic or otherwise) and, in particular, if this were to restrict the availability of credit, this may reduce the value of assets once they have been acquired, and may reduce liquidity in the real estate market. The performance of the Company would be adversely affected by a downturn in the real estate market and may adversely affect the Company's business, financial condition, results of operations, NAV and/or the market price of the Ordinary Shares. See the risk factor on COVID-19 above.
Both the condition of the real estate market and the overall UK economy will impact the returns of the Company, and hence may have a negative impact on or delay the Company's ability to execute investments in suitable assets that generate acceptable returns. Market conditions may also negatively impact the price at which the Company is able to dispose of these assets. In these circumstances, the Company's ability to make distributions to Shareholders from rental income could be affected. A severe fall in values or rental income may result in the Group selling assets from its Portfolio to repay future loan commitments. These outcomes may, in turn, have an adverse effect on the Company's performance, financial condition and business prospects.
Risks relating to the political climate in the UK
The result of the referendum and the resulting departure of the UK from the EU on 31 January 2020 ("Brexit") has created uncertainty surrounding the economy of the UK. The extent of the impact of this decision on the Group will depend in part on the nature of the arrangements that are negotiated between the UK and the EU during the transitional period in place until 31 December 2020, and the extent to which the UK continues to apply laws that are based on EU legislation following this period.
It is possible that arrangements between the UK and the EU will lead to greater restrictions on the free movement of goods, services, people and capital between the UK and the EU, and increased regulatory complexities. Any such restrictions could potentially disrupt and adversely impact the Group's business. The effects of Brexit could also lead to legal uncertainty and potentially divergent national laws and regulations, which may, directly or indirectly, increase compliance and operating costs for the Group and may also have a material adverse effect on the Group's tax position, financial condition, business, prospects and results of operations. In particular, the effects of Brexit could result in legal and regulatory changes which may make it more difficult for the Group to raise capital in the EU and/or increase the regulatory compliance burden on the Group. This could also restrict the Group's future activities and thereby negatively affect returns.
In addition, the macroeconomic effect of an eventual withdrawal by the UK from the EU on the value of investments in the UK property market, and, by extension, the Group's investment portfolio is unknown. The UK's exit from the EU could also create significant UK (and potentially global) stock market uncertainty. As such, it is not possible to state the impact that the UK's withdrawal from the EU will have on the Group and its investments.
Risk relating to negative media attention
There may be circumstances in which the removal or eviction of a tenant is warranted or deemed necessary by the relevant Approved Provider. Such circumstances include instances of a tenant of the Company undertaking illegal activities, perpetrating domestic violence, or permanent rental arrears. Further, a particular Approved Provider, including a Care Provider, may fail to provide a suitable duty of care to its tenants. While these circumstances would be the responsibility of the relevant Approved Provider managing the property or providing the care services, there is the potential that, as freeholder or ultimate landlord, the Group may receive negative media attention. Furthermore, the Group is exposed
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to sectors which are considered to be at high risk of forced labour and human trafficking including, in particular, carers or domestic workers. Whilst the supply chain within an Approved Provider or Care Provider is the responsibility of the relevant Approved Provider or Care Provider, and whilst the Investment Manager requests that all Approved Providers and Care Providers supply a Modern Slavery Act statement, there is a risk of negative media attention where any workers at any of the properties are connected to (or alleged to be connected to) forced labour or human trafficking. These circumstances may adversely affect the Company's reputation and, consequently, adversely affect the share price.
The Company can give no assurance as to how long it will take to invest the Net Proceeds or proceeds from future share issues
Until such time as the Net Proceeds and any proceeds from future share issues, including under the Issue and the Placing Programme, are invested by the Group to acquire properties, they will be held by the Company on bank deposit or in money market instruments in anticipation of future investment and to meet the running costs of the Company. Such deposits or money market instruments would be expected to yield lower returns than the expected returns from Social Housing investment.
The Company can give no assurance as to how long it will take it to invest any or all of the net proceeds from share issues or indeed if such proceeds will be invested at all. There can be no assurance as to how long it will take for the Company to invest any or all of the Net Proceeds from the Issue and the Placing Programme in Social Housing assets and the Investment Manager may not find suitable properties in which to invest all of the Net Proceeds. As discussed above, the Investment Policy depends upon the availability of investment opportunities. Locating suitable properties, conducting due diligence, negotiating acceptable purchase contracts and leases with Approved Providers and ultimately completing the purchase of a property will typically require a significant amount of time. The Group may face delays in locating and acquiring suitable investments and, once the properties are identified, there could also be delays in completing the purchases, including delays in obtaining any necessary approvals. In addition, the Company may have borrowings available from time to time, some or all of which may be utilised for investment opportunities prior to the use of the Net Proceeds and any net proceeds from future share issues.
The longer the period of deployment, the greater the likely adverse effect on the Company's performance, financial condition and business prospects. In particular, a significant delay may negatively impact dividend cover and NAV growth.
The Group is subject to various risks when carrying out development and construction for forward funded projects
The Investment Policy enables the Company to (subject to certain restrictions) forward finance Social Housing assets. The Company will be protected from many of the hazards and risks normally associated with the construction and development of real estate as all development will be carried out under a fixed priced construction contract with a developer, the Company will only pay for work that has been completed and audited by a chartered surveyor retained by the Company, and the majority of the developer's profit margin (typically 10-15 per cent. of project value) will be retained by the Company until after practical completion, only being released once the Lease has been enacted.
If for any reason a developer were to be unable to complete the construction of a Social Housing asset then the Company would look to appoint an alternative developer to finish the works, or it can, in some cases, (depending on the transaction documentation) compel a developer to buy back the land or the property it has acquired with the intention of forward funding development. To the extent that any additional costs were to exceed the retained developer's profit margin then this increase in cost may be borne by the Company, if required, although this is not the intention when entering into a forward funding arrangement. Any such further costs could have an adverse effect on the Company's business, financial condition, results of operations or future prospects.
Where the Group seeks to create value by providing forward funding in respect of a development, the Group is dependent on the performance of third-party contractors and sub-contractors. Whilst the Group will seek to negotiate contracts to contain appropriate warranty protection, any failure to perform against contractual obligations on the part of a contractor could adversely impact the value of the Group's property assets and/or could result in delays in development of those Social Housing assets. The Group could be exposed to an element of risk where, for example, the relevant developing entity fails and is unable to complete the development in question and the Group has to appoint another developer. These risks may, in turn, have a material adverse effect on the Group's performance, financial condition and business prospects.
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In addition, there is a risk of disputes with third party contractors or sub-contractors should they fail to perform against contractual obligations. Any litigation or arbitration resulting from any such disputes may increase the Group's expenses and distract the Directors and the Investment Manager from focusing their time to fulfil the strategy of the Company.
Conflicts of interest
The Investment Manager and its directors, employees, service providers, agents and connected persons and the Directors and their connected persons and any person or company with whom they are affiliated or by whom they are employed (each an "Interested Party") may invest in the Company and may be involved in other financial, investment or other professional activities which may cause potential conflicts of interest with the Company and its investments. In particular, these Interested Parties may provide services similar to those provided to the Company to other clients or entities and will not be liable to account for any profit earned from any such services.
The Group may (directly or indirectly) acquire assets from or dispose of securities to any Interested Party or any investment fund or account advised or managed by any such person. An Interested Party may provide professional services to the Group (provided that no Interested Party will act as auditor to the Company) or hold Shares and buy, hold and deal in any investments for their own accounts, notwithstanding that similar investments may be held by the Group (directly or indirectly). An Interested Party may contract or enter into any financial or other transaction with the Company or with any Shareholder or any entity any of whose securities are held by or for the account of the Company, or be interested in any such contract or transaction. Furthermore, any Interested Party may receive commissions to which it is contractually entitled in relation to any sale or purchase of any investments of the Company effected by it for the account of the Company, provided that in each case the terms are no less beneficial to the Company than a transaction involving a disinterested party and any commission is in line with market practice.
Interest rate and inflation risks
Changes in interest rates and rates of inflation may adversely affect the Group's investments. Changes in the general level of interest rates and inflation can affect the Company's profitability by affecting the spread between, amongst other things, the income on its assets and the expense of its interest-bearing liabilities, the value of its interest-earning assets and its ability to realise gains from the sale of assets should this be desirable. Changes in interest rates and rates of inflation may also affect the valuation of the Group's assets. Interest rates and rates of inflation are sensitive to many factors, including governmental, monetary and tax policies, domestic and international economic and political considerations, fiscal deficits, trade surpluses or deficits, regulatory requirements and other factors beyond the control of the Company and the Investment Manager.
In addition, while the Group's leases are inflation-linked, some may over time increase faster than local government funding (which, if not linked to CPI or RPI, may be frozen or significantly decreased at the UK Government's discretion). This may lead to demands to reduce or freeze rent levels in the longer term, which in turn may have an adverse effect on the Company's performance or future prospects.
Certain new Leases may contain provisions capping the amount by which rental payments under the Lease may be increased in any one year. The Company seeks to mitigate this by resisting the inclusion of rent review caps in Leases and none of the Leases in the Current Portfolio contains such a cap. To the extent that any such cap were to apply, the Company's rental income under the relevant Lease will not increase in line with annual rate of inflation, and the Company's ability to increase its dividend in line with inflation may therefore be impaired.
The Group may finance its activities with fixed, floating rate or inflation-linked debt. The Company's performance may be affected adversely if it fails to, or chooses not to, limit the effects of changes in the applicable interest rate or inflation by employing an effective hedging strategy (relative to the cashflows generated by the assets), including engaging in interest rate swaps, caps, floors or other interest rate contracts, or buying and selling interest rate futures or options on such futures. However, there can be no assurance that such arrangements will be entered into or that they will be sufficient to cover such risk.
Liquidity and value of investments
A sizeable proportion of investments made by the Group comprise interests in the legal title to Social Housing and residential property assets that are not publicly traded or freely marketable and may, therefore, be difficult to value and/or realise at the value attributed to such investments, or at all. The value of the Portfolio and the Group's revenue, cash flow and profits from renting and/or the sale of properties will be dependent on economic and real estate market conditions in the United Kingdom. If the Group is
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required to undertake accelerated sales of its properties, it may not be able to realise the full potential value of its properties.
Returns from the Group's investments will be affected by the price at which assets are acquired. The value of these investments may be primarily based on the value of their expected future cash flows generated by leases with counterparties to those investments at the time of acquisition. The value of these investments will also depend on other factors, such as the competition from other investors for such assets. The Net Asset Value should not be assumed to represent the value at which the assets or properties could be sold in the market or that the assets of the Group are readily saleable or otherwise.
RISKS RELATING TO THE INVESTMENT MANAGER
The Group is dependent on the efforts of the Investment Manager and the Investment Team, together with the performance and retention of key personnel
The Group is reliant on the management and advisory services the Group receives from the Investment Manager. As a result, the Group's performance is, to a large extent, dependent upon the ability of the Investment Manager. Any failure to source assets, execute transactions or manage investments by the Investment Manager may have a material adverse effect on the Company's performance. Furthermore, there can be no assurance as to the continued involvement of the Investment Manage or (indirectly) with the Company. The departure of key members of the Investment Manager without adequate replacement may also have a material adverse effect on the Company's performance. However, suitable provisions on the employment of sufficient personnel are contained in the Investment Management Agreement as summarised in paragraph 4 of Part 6 of this Prospectus.
The Investment Manager will also be responsible for carrying out the day to day management of the Group's affairs and, therefore, any disruption to the services of the Investment Manager (whether due to termination of the Investment Management Agreement or otherwise) could cause a significant disruption to the Company's operations until a suitable replacement is found.
In addition, the Company will only have limited control over the personnel of or used by the Investment Manager. If any such personnel were to do anything or were alleged to have done something that may be the subject of public criticism or other negative publicity or may lead to investigation, litigation or sanction, this may have an adverse impact on the Company and its reputation by association, even if the criticism or publicity is factually inaccurate or unfounded and notwithstanding that the Company may have no involvement with, or control over, the relevant act or alleged act. Any damage to the reputation of the personnel of the Investment Manager could result in potential counterparties and other third parties such as Approved Providers, occupiers, joint venture partners, lenders or developers being unwilling to deal with the Investment Manager and/or the Company. This may have a material adverse effect on the ability of the Company to successfully pursue its investment strategy and may have a material adverse effect on the Company's financial condition, business prospects and results of operations.
The Investment Manager's acquisition due diligence may not identify all risks and liabilities
Prior to entering into any agreement to acquire any property, the Investment Manager, on behalf of the Group, performs or procures an in-depth due diligence exercise on proposed investment opportunities.
In so doing, the Investment Manager typically relies in part on third parties to conduct a significant portion of this due diligence (such as surveyors' reports and legal reports on title and property valuations) and the Group incurs costs associated with this. Whilst the Company will always seek to minimise any such costs, it can give no assurances as to the on-going level of these costs or that negotiations to acquire such assets will be successful. The greater the number of deals which do not reach completion, the greater will be the impact of such costs on the Company's performance, financial condition and business prospects.
To the extent the Company, the Investment Manager or other third parties underestimate or fail to identify risks and liabilities associated with the investment in question, the Company may incur, directly or indirectly, unexpected liabilities, such as defects in title, an inability to obtain permits, or environmental, structural or operational defects requiring remediation. For example, the discovery of previously undetected environmentally hazardous conditions in the Group's properties could result in unforeseen remedial work or future liabilities even after disposal of such property. In addition, if there is a failure of due diligence, there may be a risk that properties are acquired which are not consistent with the Investment Policy, that properties are acquired that fail to perform in accordance with projections or that material defects or liabilities are not covered by insurance proceeds. This may, in turn, have a material adverse effect on the Company's performance, financial condition and business prospects.
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In addition, the various restrictions imposed by the Government in connection with COVID- 19 may impact on the Company's ability to carry out its usual level of due diligence on future pipeline assets to the extent that these restrictions prevent property surveys, site visits or other due diligence methods that require an in-person presence. Such failures to identify risks and liabilities may also have a material adverse impact on the Net Asset Value and the price of the Ordinary Shares. Future acquisitions may expose the Group to unforeseen risks and liabilities associated with properties the Group acquires.
RISKS RELATING TO STRUCTURE, REGULATION AND TAXATION
Continuation of REIT status
If the Company fails to remain qualified as a REIT, the rental income and gains of the Group will be subject to UK corporation tax.
The Company cannot guarantee that it will continue to comply with all of the REIT conditions. There is also a risk that the REIT regime may cease to apply to the Company in certain circumstances. If the Company fails to remain in compliance with the REIT conditions, the members of the Group may be subject to UK corporation tax on some or all of their property rental income from their Property Rental Business and chargeable gains on the sale of properties which would reduce the funds available to distribute to investors.
Adverse changes in taxation law and in the tax position of the Company
This Prospectus is prepared in accordance with current taxation laws and practice in the UK. UK taxation legislation and interpretation is subject to change. The taxation of an investment in the Company depends on the individual circumstances of investors. Any change in the Company's tax position or status or in tax legislation or proposed legislation, or in the interpretation of tax legislation or proposed legislation by tax authorities or courts, or tax rates, could adversely affect the Company's ability to pay dividends, dividend growth and the market value of the Ordinary Shares and thus may alter the net return to investors. In particular, an increase in the rates of SDLT could have a material impact on the price at which UK land can be acquired and, therefore, on asset values. The UK government has been known to introduce retrospective tax legislation and this cannot be ruled out in the future.
Changes in laws or regulations
The Company is subject to laws and regulations enacted by national and local governments. In particular, the Company is subject to, and will be required to comply with, certain legal and regulatory requirements that are applicable to investment companies and real estate investment trusts.
The AIFM is subject to, and will be required to comply with, certain regulatory requirements of the FCA, some of which affect the management of the Company.
The laws and regulations affecting the Company and/or the AIFM are evolving and any changes in such laws and regulations may have an adverse effect on the ability of the Company and/or the AIFM to carry on their respective businesses.
Any such changes may also have an adverse effect on the ability of the Company to pursue its Investment Policy, and may adversely affect the Company's business, financial condition, results of operations, NAV and/or the market price of the Ordinary Shares. In such event, the investment returns of the Company may be materially affected.
For regulatory, tax and other purposes, the Company and the Shares may potentially be treated in different ways in different jurisdictions. For instance, in certain jurisdictions and for certain purposes, the Shares may be treated as akin to holding units in a collective investment scheme, which may have an adverse effect on the taxation of Shareholders in such jurisdictions. Furthermore, in certain jurisdictions, the treatment of the Company and/or the Shares may be uncertain or subject to change, or it may differ depending on the availability of certain information or disclosure by the Company of that information. While it will continue to comply with all regulatory requirements placed upon it, the Company may be constrained from disclosing, or may find it unduly onerous to disclose, any or all of such information or to prepare or disclose such information in a form or manner which satisfies the regulatory, tax or other authorities in certain overseas jurisdictions. Failure to disclose or make available information in the prescribed manner or format, or at all, may adversely impact the Company in those jurisdictions, and therefore the price of the Shares.
Distribution requirements may limit the Company's flexibility in executing its acquisition plans
The Company's business model contemplates future growth to its investment portfolio through the
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acquisition of Social Housing assets. However, to obtain full exemption from tax on the Tax-Exempt Business afforded by the REIT regime, the Company is required to distribute annually (either in cash or by way of stock dividend) to Shareholders, at least 90 per cent. of the Company's rental income as calculated for tax purposes each year by way of Property Income Distribution. The Company would be required to pay tax at regular corporate rates on any shortfall to the extent that it distributes as a Property Income Distribution less than the amount required to meet the 90 per cent. distribution test each year. Therefore, the Company's ability to grow its investment portfolio through acquisitions with a value in excess of its permitted retained earnings and uninvested capital will be limited by the Company's ability to obtain further debt or equity financing.
Disposal of properties may have unfavourable tax consequences
Although the Company and any SPVs will not be trading entities, if the Company or an SPV disposes of a property in a manner indicative of trading in property rather than investing, the property may be treated as having been disposed of in the course of a trade, and any gain will be subject to corporation tax at regular corporate rates. For example, acquiring a property with a view to sale followed by a disposal on completion of the development would indicate a trading activity, whereas disposal of a property as part of a normal variation of a property rental portfolio after development with a view to retention as part of that portfolio, would not.
Whilst the Company does not intend that it or any members of the Group will dispose of property in the course of a trade, there can be no assurance that HMRC will not deem a disposal to have been in the course of a trade, with the consequence that corporation tax will be payable in respect of any profits from the disposal of such property.
The Group's status as a REIT may restrict business consolidation opportunities and distribution opportunities to Shareholders
If the Company is acquired by an entity that is not a REIT, the Group is likely in most cases to fail to meet the requirements for being a REIT. If so, the Group will be treated as leaving the REIT regime at the end of the accounting period preceding the takeover and ceasing from the end of that accounting period to benefit from the regime's tax exemptions. In addition, a REIT may become subject to an additional tax charge if it pays a dividend to, or in respect of, a Substantial Shareholder. This additional tax charge will not be incurred if the Company has taken reasonable steps to avoid paying dividends to a Substantial Shareholder. Therefore, the Articles contain provisions designed to avoid the situation where dividends may become payable to a Substantial Shareholder. These provisions provide the Directors with powers to identify Substantial Shareholders and to prohibit the payment of dividends on Ordinary Shares that form part of a Substantial Shareholding, unless certain conditions are met. The Articles also allow the Board to require the disposal of Ordinary Shares forming part of a Substantial Shareholding in certain circumstances where the Substantial Shareholder has failed to comply with the above provisions.
Accordingly, while there is no prohibition on the Ordinary Shares of the Company being acquired by another entity or person(s), there might be potentially negative tax consequences of such an acquisition if made by an entity which itself is not a REIT which might make such an acquisition less likely than would be the case for other types of companies.
Changes to regulation may impair the ability of the AIFM to manage investments of the Company, which may materially adversely affect the Company's ability to implement its Investment Policy and achieve its Investment Objective
The AIFMD, which was transposed by EU member states into national law on 22 July 2013, imposed a regulatory regime for EU managers of AIFs and in respect of managing and marketing AIFs in the EU. The AIFMD was transposed in the UK by the UK AIFMD Rules. The AIFMD requires that EU AIFMs of AIFs are authorised and regulated as such.
Based on the provisions of AIFMD and the UK AIFMD Rules, the Company is an AIF within the scope of AIFMD and the UK AIFMD Rules. The Company operates as an externally managed AIF, with Triple Point Investment Management LLP being the Company's AIFM.
There is uncertainty as to how alternative investment fund managers will be regulated after the Brexit implementation period expires on 31 December 2020. Should negotiations between the UK Government and the EU fail to establish a deal and the implementation period is not extended, the Company is likely to be treated as a third country AIF and the AIFM will be a third country alternative investment fund manager post-Brexit. This will mean that Ordinary Shares of the Company cannot be marketed to professional clients in the EEA under the AIFMD passport.
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As an FCA authorised firm, the AIFM must comply with various organisational, operational and transparency obligations under the AIFMD and the UK AIFMD Rules. If applicable regulations were to change, then the Company, and/ or the AIFM may be required to amend the Investment Policy (subject to shareholder approval), provide additional or different information to or update information given to investors and appoint or replace external service providers that the Company intends to use, including those referred to in this Prospectus. In addition, compliance with new regulations may increase management and operating costs of the Company and/or the AIFM. This in turn may adversely affect the Company's business, financial condition, results of operations, NAV and/or the market price of the Ordinary Shares.
If the AIFM does not or cannot maintain its authorisation under the AIFMD, the operation of the Company or the marketing of Ordinary Shares to investors in the EU may be prohibited. This will adversely impact the Company's ability to raise further capital and manage and/or add to the Company's property portfolio in future. It will also require the Company to appoint an alternative manager with the required authorisation to replace Triple Point Investment Management LLP as the AIFM of the Company.
PRIIPs
Investors should be aware that the PRIIPs Regulation requires the Investment Manager, as a PRIIP manufacturer (as defined in the PRIIPs Regulation), to prepare a KID in respect of the Ordinary Shares. The KID must be made available by the Investment Manager to retail investors prior to them making any investment decision and will be available on the Company's website. Neither the Company, Stifel nor Akur is responsible for the information contained in the KIDs. Investors should note that the procedures for calculating the risks, costs and potential returns are prescribed by law. The figures in the KIDs may not reflect the expected returns for the Company and anticipated performance returns cannot be guaranteed.
RISKS RELATING TO THE ORDINARY SHARES
The value and/or market price of the Ordinary Shares may go down as well as up
Prospective investors should be aware that the value and/or market price of the Ordinary Shares may go down as well as up and that the market price of the Ordinary Shares may not reflect the underlying value of the Company. Investors may, therefore, realise less than, or lose all of, their investment.
The market price of the Ordinary Shares may not reflect the value of the underlying investments of the Company and may be subject to wide fluctuations in response to many factors, including, among other things, variations in the Company's operating results, additional issuances or future sales of the Ordinary Shares or other securities exchangeable for, or convertible into, its Ordinary Shares in the future, the addition or departure of Board members, replacement of the Investment Manager, change in the Investment Team, expected dividend yield, divergence in financial results from stock market expectations, changes in stock market analyst recommendations regarding the UK commercial property market as a whole, the Company or any of its assets, a perception that other markets may have higher growth prospects, general economic conditions, prevailing interest rates, legislative changes in the Company's market and other events and factors within or outside the Company's control. Stock markets experience extreme price and volume volatility from time to time, and this, in addition to general economic, political and other conditions, may materially adversely affect the market price for the Shares. The market value of the Ordinary Shares and the Ordinary Shares may vary considerably from the Company's underlying Net Asset Value, Portfolio Net Asset Value and EPRA Net Asset Value. There can be no assurance, express or implied, that Shareholders will be able to sell the Ordinary Shares at a time or price that they deem appropriate or that Shareholders will receive back the amount of their investment in the Ordinary Shares.
Discount to NAV
The Ordinary Shares may trade at a discount to NAV and Shareholders may be unable to realise their investments through the secondary market at Net Asset Value. The Ordinary Shares may trade at a discount to their Net Asset Value for a variety of reasons, including market conditions, Company performance and imbalances in supply and demand for the Ordinary Shares. While the Board may seek to mitigate any discount to Net Asset Value per Ordinary Share through discount management mechanisms (such as Share buybacks), there can be no guarantee that they will do so or that such mechanisms will be successful and the Board accepts no responsibility for any failure of any such strategy to effect a reduction in any discount.
Liquidity of Shares
The share price of listed companies can be highly volatile and shareholdings illiquid. The market price of
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the Ordinary Shares may be subject to wide fluctuations in response to many factors, some specific to the Group and its operations, and others to the broader equity markets in general, such as variations in the operating results of the Group, divergence in financial results from analysts' expectations, changes in earnings estimates by stock market analysts, general economic conditions or legislative changes in the Group's sector.
Shareholders have no right to have their Ordinary Shares redeemed or repurchased by the Company at any time. Shareholders' ability to value their investment at NAV per Ordinary Share or at all is dependent on the existence of a liquid market for Ordinary Shares.
Although the Ordinary Shares to be issued pursuant to the Issue and the Placing Programme will be freely transferable (subject to certain restrictions in the Articles), and will be admitted to the premium listing segment of the Official List and to trading on the Main Market, the ability of Shareholders to sell their Ordinary Shares in the market and the price which they may receive will depend on market conditions. In addition, the Directors may refuse the registration of any transfer of Ordinary Shares under the Articles, which may affect the ability of certain persons (and, in particular, US Persons) to own any Shares.
The Company has the ability to make market purchases of Ordinary Shares from Shareholders. Any such market purchases will be made entirely at the discretion of the Directors and will be subject to the Company having the requisite Shareholder authorities and the provisions of the Listing Rules. As such, Shareholders will not have any ability to require the Company to make market purchases of all or any part of their holdings of Ordinary Shares. Consequently, Shareholders should not expect to be able to realise their Ordinary Shares at a price reflecting their underlying Net Asset Value per Share.
The London Stock Exchange has the right to suspend or limit trading in a company's securities. Any suspension or limitation on trading in the Ordinary Shares may affect the ability of Shareholders to realise their investment.
The Company may, in the future, including pursuant to the Placing Programme, issue new equity, which may dilute Shareholders' voting rights and depress the market price of the Ordinary Shares
Subject to legal and regulatory requirements, the Company may issue new Ordinary Shares (including under the Placing Programme) in the future. While the Articles contain pre-emption rights for Shareholders in relation to issues of shares in consideration for cash or non-cash consideration, such rights can be disapplied in certain circumstances. Although the Company will not issue shares at a discount to NAV, where pre-emption rights in the Articles are disapplied, any additional share issuance will be dilutive to the voting rights of Shareholders who cannot, or choose not to, participate in such financing. In addition, the Company's ability to issue further Ordinary Shares under the Placing Programme could depress the market price of the Ordinary Shares.
The Company's ability to pay dividends will depend upon its ability to generate sufficient earnings and certain legal and regulatory restrictions
All dividends and other distributions paid by the Company will be made at the discretion of the Board. For the Company to continue to be eligible for REIT status, the Company will be required to distribute to Shareholders at least 90 per cent. of the income profits arising from its Tax-Exempt Business. The payment of any such dividends or other distributions will, in general, depend on the ability of the members of the Group to generate realised profits and cash flow and their ability to pass such profits and cash flows to the Company on a timely basis.
Risks relating to dividends and target returns
There is no guarantee that the target dividend in respect of any period will be paid, covered by income or achieved, as applicable. The Company's ability to pay dividends will be dependent principally upon the investments comprising the Portfolio. The Company's target dividends for the Ordinary Shares are based on assumptions which the Board considers to be reasonable. However, there is no assurance that all or any assumptions will be justified, and the dividends and returns may be correspondingly reduced. In particular, there is no assurance that the Company will achieve its stated policy on dividends and/or returns. Any change or incorrect assumption in the tax treatment of dividends or interest or other receipts received by the Company may reduce the level of distributions received by Shareholders. In addition any change in the accounting policies, practices or guidelines relevant to the Company and its investments may reduce or delay the distributions received by investors.
The target dividend is not a profit forecast and should not be taken as an indication of the Company's expected future performance or results over any period. The target dividend is a target only and there is
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no guarantee that it can or will be achieved and it should not be seen as an indication of the Company's expected or actual return. Accordingly, investors should not place any reliance on the target return in deciding whether to invest in the Ordinary Shares.
Dividend growth on the Ordinary Shares will depend principally on growth in rental and other income returns on the underlying assets (which may fluctuate). The Net Proceeds will be used by the Group to make investments in Social Housing assets in accordance with the Company's Investment Policy. The timing of any investment in such assets will depend, amongst other things, on the availability of suitable properties that may be let to Approved Providers at reasonable prices. Accordingly, there may be a period of time between completion of the Issue and the Net Proceeds being fully invested by the Group. Further, to the extent that there are impairments to the value of the Group's underlying investments that are recognised in the Company's income statement under IFRS, this may affect the profitability of the Company (or lead to losses) and affect the ability of the Company to pay dividends.
Until the Net Proceeds and the proceeds of the Revolving Credit Facility are fully invested by the Group, the Company may not generate sufficient income to cover dividends payable in respect of the Ordinary Shares. Additionally the Company may only pay dividends from reserves deemed distributable under the Companies Act.
If under the laws applicable to the Company (including the regime applicable to REITs) there were to be a change to the basis on which dividends could be paid by such companies, this could have a negative effect on the Company's ability to pay dividends. Furthermore, if there are changes to the accounting standards or to the interpretation of accounting standards applicable to the Company this could have an adverse effect on the Company's ability to pay dividends.
The Company will not be able to pursue asset growth through acquisitions solely from cash provided from its operating activities because of its obligation to distribute at least 90 per cent. of the income profits as calculated for tax purposes arising from the Group's property rental business each year (either in cash or by way of stock dividend) to Shareholders in order to continue to enjoy the full exemption from tax on rental income afforded by the UK REIT regime. The Company would be required to pay tax at regular corporate rates on any shortfall to the extent that it distributes as a Property Income Distribution less than the amount required to meet the 90 per cent. distribution condition each year. Consequently, the Company may be forced to rely on the availability of debt or equity capital to fund future acquisitions once the Net Proceeds are fully deployed. In addition, differences in timing between the receipt of cash and the recognition of income for the purposes of the UK REIT regime and the effect of any potential debt amortisation payments could require the Company to borrow funds to meet the distribution requirements that are necessary to achieve the full tax benefits associated with qualifying as a REIT, even if the then- prevailing market conditions are not favourable for these borrowings. As a result of these factors, the constraints of maintaining REIT status could limit the Company's flexibility to make investments. Potential investors should decide for themselves whether or not the target returns are reasonable or achievable in deciding whether to invest in the Company.
Risk relating to continuation vote
The Articles include a requirement for the Board to propose an ordinary resolution for the Company to continue in its current form at the annual general meeting following the fifth anniversary from the IPO and at every fifth annual general meeting thereafter. If at such annual general meeting such resolution is not passed, the Board is required to propose an ordinary resolution for the winding up or reconstruction of the Company, the latter being required to provide an option for Shareholders to elect to realise their investment. In the event that a winding up or reconstruction of the Company is approved, the Company's ability to return cash to Shareholders will depend principally on the ability of the Investment Manager to realise portfolio assets which are inherently illiquid and also on the availability of distributable profits, share capital or share premium, all of which can be used to fund share repurchases and redemptions under the Articles.
The Company has not registered, and will not register, the Ordinary Shares with the US Securities and Exchange Commission, which may limit the Shareholders' ability to resell them
The Ordinary Shares have not been, and will not be, registered under the Securities Act or any US state securities laws. The Company will be relying upon exemptions from registration under the Securities Act and applicable state securities laws in offering and selling the Ordinary Shares. As a consequence, for Securities Act purposes, the Ordinary Shares can only be transferred or re-sold: (i) to the Company; (ii) outside of the United States to a non US Person; or (iii) in the United States (and in the case of "qualified purchasers", to a non US Person) in transactions registered under the Securities Act, or in accordance with
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exemptions from the registration requirements of the Securities Act and exemptions under applicable state securities laws. Shareholders will not have registration rights and, therefore, will not be entitled to compel the Company to register their securities. These restrictions may materially affect certain Shareholders' ability to transfer their Ordinary Shares.
The Company has not registered, and will not register, as an investment company under the Investment Company Act
The Company is not, and does not intend to become, registered in the United States as an investment company under the Investment Company Act and related rules. The Investment Company Act provides certain protections to investors and imposes certain restrictions on companies that are registered as investment companies. As the Company is not so registered and does not plan to register, none of these protections or restrictions are or will be applicable to the Company. In addition, to avoid being required to register as an investment company under the Investment Company Act, the Company may, under the Articles, serve a notice upon any person to whom a sale or transfer of Ordinary Shares may cause the Company to be classified as an investment company under the Investment Company Act requiring such person to transfer the Ordinary Shares to an eligible transferee within 14 days of such notice. If, within 14 days, the notice has not been complied with, the Company may cause Shareholders to forfeit the Ordinary Shares or sell the Ordinary Shares. These procedures may materially affect certain Shareholders' ability to transfer their Ordinary Shares.
The Company may be treated as a "passive foreign investment company" for US federal income tax purposes, which could have adverse tax consequences to US Shareholders.
The Company may be treated as a "passive foreign investment company" or PFIC, for U.S. federal income tax purposes, which could have adverse consequences to US Shareholders. A non-US company is deemed to be a PFIC if, during any taxable year: (i) 75 per cent. or more of its gross income consists of certain types of passive income; or (ii) the average value (or basis in certain cases) of its passive assets (generally assets that generate passive income) is 50 per cent. or more of the average value (or basis in certain cases) of all of its assets. For purposes of these tests, "passive income" includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business.
The determination of PFIC status is a factual determination that must be made annually at the close of each taxable year. It has not been determined whether the Company will be treated as a PFIC in the current or succeeding taxable years. If the Company were treated as a PFIC for US tax purposes, US Shareholders may become subject to certain US reporting obligations and to adverse US federal income tax consequences, including with respect to the income derived by the Company, the distributions received and the gain, if any, derived from the sale or other disposition of Shares. Specifically, the PFIC rules could have the effect of subjecting US Shareholders to an interest charge on any deferred taxation and taxing gain upon the sale of shares as ordinary income. If the Company were classified as a PFIC in any year with respect to which a US Shareholder owns Shares, the Company would continue to be treated as a PFIC with respect to the US holder in all succeeding years during which the US holder owns such securities, regardless of whether the Company continues to meet the tests described above.
US investors are urged to consult their own tax advisors with respect to their own particular circumstances and with respect to any available tax elections under the PFIC rules.
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IMPORTANT INFORMATION
GENERAL
This Prospectus should be read in its entirety before making any application for Ordinary Shares. In assessing an investment in the Company, investors should rely only on the information in this Prospectus. No broker, dealer or other person has been authorised by the Company to issue any advertisement or to give any information or to make any representations in connection with the offering or sale of Ordinary Shares other than those contained in this Prospectus and, if issued, given or made, such advertisement, information or representation must not be relied upon as having been authorised by the Company, the Board, the Investment Manager, Stifel or Akur or any of their respective affiliates, directors, officers, employees or agents or any other person.
Without prejudice to any obligation of the Company to publish a supplementary prospectus pursuant to Article 23 of the Prospectus Regulation and Rule 3.4.1 of the Prospectus Regulation Rules, neither the delivery of this Prospectus nor any subscription or purchase of Ordinary Shares made pursuant to this Prospectus shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since, or that the information contained herein is correct at any time subsequent to, the date of this Prospectus.
Prospective investors should not treat the contents of this Prospectus as advice relating to legal, taxation, accounting, regulatory, investment or any other matters. Prospective investors should inform themselves as to:
- the legal requirements within their own countries for the purchase, holding, transfer or other disposal of the Ordinary Shares;
- any foreign exchange restrictions applicable to the purchase, holding, transfer or other disposal of the Ordinary Shares which they might encounter; and
- the income and other tax consequences which may apply in their own countries as a result of the purchase, holding, transfer or other disposal of the Ordinary Shares.
Prospective investors must rely upon their own legal advisers, accountants and other financial advisers as to legal, tax, accounting, regulatory, investment or any other related matters concerning the Company and an investment in the Ordinary Shares.
Apart from the liabilities and responsibilities (if any) which may be imposed on Stifel or Akur by FSMA or the regulatory regime established thereunder, neither Stifel nor Akur make any representation or warranty, express or implied, nor accept any responsibility whatsoever for the contents of this Prospectus including its accuracy, completeness or verification or for any other statement made or purported to be made by it or on its behalf in connection with the Company, the Investment Manager, the Ordinary Shares, the Issue or the Placing Programme. Each of Stifel and Akur (and their respective affiliates, directors, officers or employees) accordingly disclaims all and any liability (save for any statutory liability) whether arising in tort or contract or otherwise which they might otherwise have in respect of this Prospectus or any such statement.
This Prospectus does not constitute, and may not be used for the purposes of, an offer or solicitation to anyone in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation. The distribution of this Prospectus and the offering of Ordinary Shares in certain jurisdictions may be restricted and accordingly persons into whose possession this Prospectus is received are required to inform themselves about and to observe such restrictions.
In connection with the Issue, each of Stifel and Akur and any of their affiliates acting as an investor for its or their own account(s), may subscribe for the Ordinary Shares and, in that capacity, may retain, purchase, sell, offer to sell or otherwise deal for its or their own account(s) in such securities of the Company, any other securities of the Company or other related investments in connection with the Issue or otherwise. Accordingly, references in this Prospectus to the Ordinary Shares being issued, offered, subscribed or otherwise dealt with, should be read as including any issue or offer to, or subscription or dealing by, each of Stifel and Akur and any of their affiliates acting as an investor for its or their own account(s). Neither Stifel nor Akur intends to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so.
The Board has reviewed MiFID II and the European Securities and Markets Authority guidance published thereto and has concluded that the Ordinary Shares constitute a non-complex product for the purposes of MiFID II. For the avoidance of doubt, any distributor of the Ordinary Shares is responsible for undertaking
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its own assessment of the product in respect of its suitability and/or appropriateness obligations for the purposes of MiFID II and should accordingly satisfy itself that the Ordinary Shares constitute a non- complex product for the purposes of MiFID II.
Investors should be aware that the PRIIPs Regulation requires the Investment Manager, as a PRIIP manufacturer (as defined in the PRIIPs Regulation), to prepare a KID in respect of the Ordinary Shares. The KID must be made available by the Investment Manager to retail investors prior to them making any investment decision and will be available on the Company's website. The Company is not responsible for the information contained in the KID and investors should note that the procedures for calculating the risks, costs and potential returns are prescribed by law. The figures in the KID may not reflect the expected returns for the Company and anticipated performance returns cannot be guaranteed. The KID does not form part of this Prospectus.
FOR THE ATTENTION OF PROSPECTIVE INVESTORS IN THE EUROPEAN ECONOMIC AREA
Prospectus Regulation
In relation to each Relevant Member State, no Ordinary Shares have been offered or will be offered to the public pursuant to the Issue or the Placing Programme in that Relevant Member State prior to the publication of a document in relation to the Ordinary Shares which has been approved by the competent authority in that Relevant Member State, or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Regulation, except that offers of Ordinary Shares to the public may be made at any time under the following exemptions under the Prospectus Regulation, if they are implemented in that Relevant Member State:
- to any legal entity which is a "qualified investor" as defined in the Prospectus Regulation;
- to fewer than 150 natural or legal persons (other than "qualified investors" as defined in the Prospectus Regulation) in such Relevant Member State; or
- in any other circumstances falling within Article 1(4) of the Prospectus Regulation,
provided that no such offer of Ordinary Shares shall result in a requirement for the publication of a document pursuant to Article 1 of the Prospectus Regulation or any measure implementing the Prospectus Regulation in a Relevant Member State and each person who initially acquires any Ordinary Shares or to whom any offer is made under the Issue will be deemed to have represented, acknowledged and agreed that it is a "qualified investor" within the meaning of Article 2(e) of the Prospectus Regulation.
For the purposes of this provision, the expression an "offer to the public" in relation to any offer of Ordinary Shares in any Relevant Member State means a communication in any form and by any means presenting sufficient information on the terms of the offer and any Ordinary Shares to be offered so as to enable an investor to decide to purchase or subscribe for the Ordinary Shares and the expression Prospectus Regulation means Regulation (EU) 2019/1129.
AIFMD
In relation to each member state in the European Economic Area that has implemented the AIFMD, no Ordinary Shares have been or will be directly or indirectly offered to or placed with investors in that member state at the initiative of or on behalf of the Company or the AIFM / Investment Manager other than in accordance with methods permitted in that member state, which may include but are not limited to marketing under: (i) Article 32 of AIFMD; or (ii) any other form of lawful offer or placement (including on the basis of an unsolicited request from a professional investor) to an investor resident in such member state.
FOR THE ATTENTION OF OVERSEAS INVESTORS
The attention of investors who are not resident in, or who are not citizens of, the United Kingdom is drawn to the paragraphs below.
The offer of Ordinary Shares under the Issue or the Placing Programme to persons who are resident in, or citizens of, countries other than the United Kingdom ("Overseas Investors") may be affected by the laws of the relevant jurisdictions. Such persons should consult their professional advisers as to whether they require any government or other consents or need to observe any applicable legal requirements to enable them to subscribe for Ordinary Shares under the Issue or the Placing Programme. It is the responsibility of all Overseas Investors receiving this Prospectus and/or wishing to subscribe for Ordinary Shares under the Issue or the Placing Programme to satisfy themselves as to full observance of the laws of the relevant
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territory in connection therewith, including obtaining all necessary governmental or other consents that may be required and observing all other formalities needing to be observed and paying any issue, transfer or other taxes due in such territory.
No person receiving a copy of this Prospectus in any territory other than the United Kingdom may treat the same as constituting an offer or invitation to him/her, unless in the relevant territory such an offer can lawfully be made to him/her without compliance with any further registration or other legal requirements.
The Company reserves the right to treat as invalid any commitment to subscribe for Ordinary Shares under the Issue or the Placing Programme if it appears to the Company or its agents to have been entered into by, subject to certain exceptions, a US Person or a person in the United States, or by a person in Canada, Australia, the Republic of South Africa, New Zealand or Japan, or otherwise entered into in a manner that may involve a breach of the securities legislation of any jurisdiction.
Persons in whose possession this Prospectus comes should inform themselves about and observe any restrictions on the distribution of this Prospectus and the offer of new Ordinary Shares contained in this Prospectus. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.
Guernsey
This Prospectus has not been approved or authorised by the Guernsey Financial Services Commission for circulation in Guernsey and may not be distributed or circulated directly or indirectly to any persons in the Bailiwick of Guernsey other than: (i) by a person licensed to do so under the terms of the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended; or (ii) to those persons regulated by the Guernsey Financial Services Commission as licensees under the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, the Banking Supervision (Bailiwick of Guernsey) Law, 1994, the Insurance Business (Bailiwick of Guernsey) Law, 2002 or the Regulation of Fiduciaries, Administration Business and Company Directors etc. (Bailiwick of Guernsey) Law, 2000. Neither the Guernsey Financial Services Commission nor the States of Guernsey take any responsibility for the financial soundness of the Company, or for the correctness of any of the statements made or opinions expressed with regard to it.
Jersey
This Prospectus does not purport to provide investment advice and shall not be construed as giving advice on the merits or suitability of the subscription or purchase of the Ordinary Shares. This Prospectus is not subject to and has not received approval from either the Jersey Financial Services Commission or the Registrar of Companies in Jersey and no statement to the contrary, explicit or implicit, is authorised to be made in this regard. The Ordinary Shares being offered may be offered or sold in Jersey only in compliance with the provisions of the Control of Borrowing (Jersey) Order 1958 ("COBO").
Isle of Man
This document has not been approved or reviewed by the Isle of Man Financial Services Authority or any other governmental or regulatory authority in the Isle of Man. The Placing is available, and may be made, in the Isle of Man and this document is being provided in connection with the Placing in the Isle of Man only to persons: (a) licensed under the Isle of Man Financial Services Act 2008; or (b) falling within exclusion 2(r) of the Isle of Man Regulated Activities Order 2011 (as amended); or (c) whose ordinary business activities involve them in acquiring, holding, managing or disposing of shares or debentures (as principal or agent), for the purposes of their business.
Switzerland
This Prospectus may only be freely circulated and interests in the Company may only be freely offered, distributed or sold to regulated financial intermediaries such as banks securities dealers, fund management companies, asset managers of collective investment schemes and central banks as well as to regulated insurance companies.
Circulating this Prospectus and offering, distributing or selling any Ordinary Shares under the Placing and/ or Placing Programme to other persons or entities including qualified investors as defined in the Federal Act on Collective Investment Schemes ("CISA") and its implementing Ordinance ("CISO") may trigger, in particular, (i) licensing/prudential supervision requirements for the distributor and/or the Company, (ii) a requirement to appoint a representative and paying agent in Switzerland and (iii) the necessity of a written distribution agreement between the representative in Switzerland and the distributor. Accordingly, legal advice should be sought before providing this Prospectus to and offering, distributing or selling/on-selling Ordinary Shares under the Placing and/or Placing Programme to any other persons or entities.
This Prospectus does not constitute an issuance prospectus pursuant to Articles 652a or 1156 of the Swiss
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Code of Obligations and may not comply with the information standards required thereunder. Neither the Ordinary Shares under the Placing and/or Placing Programme will be listed on the SIX Swiss Exchange nor on any other stock exchange or regulated trading facility in Switzerland, and consequently, the information presented in this Prospectus does not necessarily comply with the information and disclosure standards set out in the relevant listing rules. The documentation of the Company has not been and will not be filed and approved and may not be able to be approved, by the Swiss Financial Market Supervisory Authority FINMA ("FINMA") under the Swiss Collective Investment Schemes Act (CISA). Therefore, investors do not benefit from protection under the CISA or supervision by FINMA. This Prospectus does not constitute investment advice. It may only be used by those persons to whom it has been provided in connection with the Ordinary Shares under the Placing and/or Placing Programme and may neither be copied nor directly or indirectly distributed or made available to other persons.
If you (or any person for whom you are acquiring Ordinary Shares under the Placing and/or Placing Programme) are in Switzerland, you (and any such person) represent and warrant that you are (i) a regulated financial intermediary such as a bank, securities dealer, fund management company, asset manager of collective investment schemes or a central bank, or (ii) a regulated insurance institution.
The United States
The Placing and/or Placing Programme is not a public offering (within the meaning of the Securities Act) of securities in the United States. Neither the Ordinary Shares under the Placing and/or Placing Programme have been, and will not be, registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered or sold in the United States except in reliance on Section 4(a)(2) of the Securities Act or in a transaction otherwise not subject to the registration requirements of the Securities Act and in accordance with applicable securities laws of any securities regulatory authority of any state or other jurisdiction of the United States.
Each purchaser of Ordinary Shares under the Placing and/or Placing Programme located outside the United States, by accepting delivery of this Prospectus, will be deemed to have represented, agreed and acknowledged that it has received a copy of this Prospectus and such other information as it deems necessary to make an investment decision and that:
- it is not a US Person, is not located in the US and it is acquiring the Ordinary Shares under the Placing and/or Placing Programme in an offshore transaction meeting the requirements of Regulation S;
- it is aware that the Ordinary Shares under the Placing and/or Placing Programme have not been, and will not be, registered under the Securities Act or under any applicable securities laws or regulations of any state of the United States and may not be offered or sold in the United States absent registration under, or an exemption from, or in a transaction not subject to registration under, the Securities Act;
- if in the future it decides to offer, sell, transfer, assign or otherwise dispose of the Ordinary Shares under the Placing and/or Placing Programme , it will do so only in compliance with an exemption from the registration requirements of the Securities Act;
- it understands that the Company, Stifel, Akur and their respective directors, officers agents, employees, advisers and others will rely upon the truth and accuracy of the foregoing representations, agreements and acknowledgments;
- if any of the representations, agreements and acknowledgments made by it are no longer accurate or have not been complied with, it will immediately notify the Company, Stifel and Akur; and
- if it is acquiring any Ordinary Shares under the Placing and/or Placing Programme as a fiduciary or agent for one or more accounts, it has sole investment discretion with respect to each such account and it has full power to make, and does make, such foregoing representations, agreements and acknowledgments on behalf of each such account.
Each subscriber for Ordinary Shares under the Placing and/or Placing Programme located within the United States, by accepting delivery of this Prospectus, will be deemed to have represented, agreed and acknowledged that it has received a copy of this Prospectus and such other information as it deems necessary to make an investment decision, that all of the foregoing representations (b) - (f) are hereby made and that:
- it is acquiring the Ordinary Shares under the Placing and/or Placing Programme for the subscriber's own account, does not have any contract, undertaking or arrangement with any person or entity to sell, transfer or grant a participation with respect to any of the Ordinary Shares under the Placing and/or Placing Programme, and is not acquiring Ordinary Shares under the Placing and/or Placing Programme with a view to or for sale in connection with any distribution of the Ordinary Shares under the Placing and/or Placing
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Programme;
- it or a purchaser representative, adviser or consultant relied upon by it in reaching a decision to subscribe has such knowledge and experience in financial tax and business matters as to enable it or such adviser or consultant to evaluate the merits and risks of an investment in the Company and to make an informed investment decision with respect thereto;
- it understands and agrees that the Ordinary Shares under the Placing and/or Placing Programme (i) will be offered and sold to it in a transaction that will not be registered under the Securities Act or under any state law, (ii) have not been and will not be registered for offer or sale by it under the Securities Act or any state law, and (iii) may not be re-offered or resold except in accordance with the Securities Act and the rules and regulations thereunder, and all relevant state securities and blue sky laws, rules and regulations; and it understands that the Company has no intention to register the Company, Ordinary Shares under the Placing and/or Placing Programme with the SEC or any state and is under no obligation to assist it in obtaining or complying with any exemption from registration. The Company may require that any transferor furnish a legal opinion satisfactory to the Company and its counsel that the proposed transfer complies with any applicable federal, state and any other applicable securities laws. Appropriate stop transfer instructions may be placed with respect to the Ordinary Shares under the Placing and/or Placing Programme and any certificates issued representing the Ordinary Shares under the Placing and/or Placing Programme will contain the following legend:
TRIPLE POINT SOCIAL HOUSING REIT PLC (THE "COMPANY") HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE "U.S. INVESTMENT COMPANY ACT"). IN ADDITION, THE SECURITIES OF THE COMPANY REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT"), OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO THE COMPANY OR A SUBSIDIARY THEREOF;
(2) IN AN OFFSHORE TRANSACTION COMPLYINGWITH THE PROVISIONS OF REGULATION S UNDER THE U.S. SECURITIES ACT TO A PERSON OUTSIDE THE UNITED STATES AND NOT KNOWN BY THE TRANSFEROR TO BE A U.S. PERSONOR ACTING FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON, BY PREARRANGEMENT OR OTHERWISE; OR (3) INSIDE THE UNITED STATES TO A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE U.S. SECURITIES ACT THAT IS ALSO A "QUALIFIED PURCHASER" WITHIN THE MEANING OF SECTION 2(A)(51) OF THE U.S. INVESTMENT COMPANY ACT AND THE RULES THEREUNDER IN A TRANSACTION OTHERWISE EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES LAWS AND UNDER CIRCUMSTANCES THAT WOULD NOT REQUIRE THE COMPANY TO REGISTER UNDER THE U.S. INVESTMENT COMPANY ACT; PROVIDED THAT IN THE CASE OF TRANSFERS PURSUANT TO (2) ABOVE, A DECLARATION AND, IF REQUESTED, A LEGAL OPINION SATISFACTORY TO THE ISSUER MUST FIRST BE PROVIDED, AND IN THE CASE OF TRANSFERS PURSUANT TO (3) ABOVE, A LEGAL OPINION SATISFACTORY TO THE ISSUER MUST FIRST BE PROVIDED.
IN ADDITION, FOLLOWING THE INITIAL PLACEMENT OF THE SECURITIES BY THE COMPANY THIS SECURITY MAY NOT BE SUBSEQUENTLY OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED TO ANY PERSON USING THE ASSETS OF: (I) (A) AN "EMPLOYEE BENEFIT PLAN" AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") THAT IS SUBJECT TO TITLE I OF ERISA; (B) A "PLAN" AS DEFINED IN SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "U.S. TAXCODE"), INCLUDING AN INDIVIDUAL RETIREMENT ACCOUNT OR OTHER ARRANGEMENT THAT IS SUBJECT TO SECTION 4975 OF THE U.S. TAX CODE; OR (C) AN ENTITY WHICH IS DEEMED TO HOLD THE ASSETS OF ANY OF THE FOREGOING TYPES OF PLANS, ACCOUNTS OR ARRANGEMENTS THAT IS SUBJECT TO TITLE I OF ERISA OR SECTION 4975 OF THE U.S. TAX CODE; OR (II) A GOVERNMENTAL, CHURCH, NON-U.S. OROTHER EMPLOYEE BENEFIT PLAN THAT IS SUBJECT TO ANY FEDERAL, STATE, LOCAL OR NON-U.S. LAW THAT IS SUBSTANTIALLY SIMILAR TO THE PROVISIONS OF TITLE I OF ERISA OR SECTION 4975 OF THE U.S. TAX CODE IF THE PURCHASE, HOLDING OR DISPOSITION OF THE SECURITIES WILL NOT RESULT IN A VIOLATION OF APPLICABLE LAW AND/OR CONSTITUTE A NONEXEMPT PROHIBITED TRANSACTION UNDER SECTION 503 OF THE U.S. TAX CODE OR ANY SUBSTANTIALLY SIMILAR LAW.
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NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE FOREGOING, THESE SECURITIES MAY NOT BE DEPOSITED INTO ANY UNRESTRICTED DEPOSITARY RECEIPT FACILITY IN RESPECT OF THE COMPANY'S SECURITIES, ESTABLISHED OR MAINTAINED BY A DEPOSITARY BANK. THIS SECURITY MAY NOT BE DEMATERIALISED INTO CREST OR ANY OTHER PAPERLESS SYSTEM UNTIL THE HOLDER OF THE SECURITIES OF THE COMPANY REPRESENTED BY THIS CERTIFICATE DELIVERS A WRITTEN CERTIFICATION THAT SUCH HOLDER IS TRANSFERRING SUCH SECURITIES IN COMPLIANCE WITH THE FOREGOING RESTRICTIONS IN THE FORM OF A DULY COMPLETED AND SIGNED OFFSHORE TRANSACTION LETTER (THE FORM OF WHICH MAY BE OBTAINED FROM THE REGISTRAR) TO THE COMPANY, WITH COPIES TO THE REGISTRAR AND THE ADMINISTRATOR.
- in formulating a decision to invest in the Company, it has not relied or acted on the basis of any representations or other information purported to be given on behalf of the Company except as set forth herein (it being understood that no person has been authorised by the Company to furnish any such representations or other information);
- it recognises that there is currently no public market for the Ordinary Shares under the Placing and/or Placing Programme in the United States and that such a market in the United States is not expected to develop; its overall commitment to the Company and other investments which are not readily marketable is not disproportionate to its net worth and it has no need for immediate liquidity in its investment in the Ordinary Shares under the Placing and/or Placing Programme;
- prior to the transfer of any Ordinary Shares held by US Shareholders in uncertificated form through CREST over the facilities of the London Stock Exchange or any other market outside the United States, such US Shareholder must deliver a declaration (in the form as the Company may prescribe from time to time) to the Registrar, to the effect that the proposed transfer will be effected pursuant to Rule 904 under Regulation S under the Securities Act;
- it can afford a complete loss of its investment in the Company and can afford to hold its investment in the Company for an indefinite period of time;
- if it is not a "natural person," it has not been and will not be formed or "recapitalized" (as defined below) for the specific purpose of purchasing the Ordinary Shares under the Placing and/or Placing Programme and has substantial assets in addition to the funds to be used to purchase the Ordinary Shares under the Placing and/or Placing Programme;
- neither the Ordinary Shares under the Placing and/or Placing Programme have been offered to it by means of any general solicitation or general advertising or directed selling efforts by the Company or any person acting on its behalf, including without limitation (i) any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio, or contained on a website that is not password-protected, or (ii) any seminar or meeting to which it was invited by any general solicitation or general advertising or directed selling efforts;
- it is a "qualified institutional buyer" as defined in Rule 144A under the Securities Act that is also a "qualified purchaser" within the meaning of section 2(a)(51) of the Investment Company Act, and the related rules thereunder, and has delivered to Stifel and Akur an investor representation letter; and
- no portion of the assets used to acquire, and no portion of the assets used to hold, the Ordinary Shares or any beneficial interest therein constitutes or will constitute the assets of: (i) an "employee benefit plan" as defined in section 3(3) of ERISA that is subject to Title I of ERISA; (ii) a "plan" as defined in Section 4975 of the US Tax Code, including an individual retirement account or other arrangement that is subject to section 4975 of the US Tax Code; or (iii) an entity whose underlying assets are considered to include "plan assets" by reason of investment by an "employee benefit plan" or a "plan" described in the preceding clauses (i) or (ii) in such entity, pursuant to 29. C.F.R. 2510.3-101 as modified by section3(42) of ERISA. In addition, if an investor is a governmental, church, non-US or other employee benefit plan that is subject to any federal, state, local or non-US law that is substantially similar to the provisions of Title I of ERISA or section 4975 of the US Tax Code, its acquisition, holding, and disposition of the Ordinary Shares will not constitute a violation of law or result in a non-exempt prohibited transaction under section 503 of the US Tax Code or any substantially similar law.
The Republic of Ireland
Neither the Ordinary Shares under the Placing and/or Placing Programme will be offered, sold, placed or underwritten in Ireland (a) except in circumstances which do not require the publication of a prospectus pursuant to Article 4(1) of Regulation (EU) 2017/1129 of the European Parliament and of the Council as implemented in Ireland pursuant to the European Union (Prospectus) Regulations 2019 (S.I. No. 380
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of 2019), as amended, and the Central Bank (Investment Market Conduct) Rules 2019 (S.I. No. 366 of 2019) issued by the Central Bank of Ireland (the "CBI") under Section 1363 of the Irish Companies Act 2014 (the "Irish Companies Act"); (b) otherwise than in compliance with the provisions of the Irish Companies Act; (c) otherwise than in compliance with the provisions of the European Union (Markets in Financial Instruments) Regulations 2017 (S.I. No. 375 of 2017), as amended, and Stifel, Akur and any introducer appointed by the Company will conduct themselves in accordance with any codes or rules of conduct and any conditions or requirements, or any other enactment or regulation, imposed or approved by the CBI with respect to anything done by them in relation to the Company, the Placing and/or the Placing Programme; (d) otherwise than in compliance with the provisions of the Market Abuse Regulation (EU) No. 596/2014, together with all delegated and implementing regulations introduced thereunder, the European Union (Market Abuse) Regulations 2016 (S.I. No. 349 of 2016) and the Central Bank (Investment Market Conduct) Rules 2019 (S.I. No. 366 of 2019) issued by the CBI under Section 1370 of the Irish Companies Act; and (e) except to "professional investors" as defined in the Alternate Investment Fund Managers Directive (Directive 2011/61/EU) ("AIFMD") and otherwise in accordance with the AIFMD, Commission Delegated Regulation 231/2013, the Irish European Union (Alternative Investment Fund Managers) Regulations 2013 (S.I. No. 257 of 2013), as amended, and any rules issued by the CBI pursuant thereto.
The Netherlands
No offer of Ordinary Shares under the Placing and/or Placing Programme, which are the subject of the Issue contemplated by this document, has been made or will be made in the Netherlands, unless in reliance on Article 1(4) of the Prospectus Regulation and provided such offer is made exclusively to persons who or legal entities which are or considered to be "qualified investors" (gekwalificeerde beleggers) within the meaning of section 1:1 of the Dutch Financial Supervision Act (Wet op het financieel toezicht or the Wft) and provided that no such offer of Ordinary Shares shall require the publication of a prospectus pursuant Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation. Each person in the Netherlands who acquires any Ordinary Shares under the Placing and/or Placing Programme or to whom any offer is made will be deemed to have represented, acknowledged and agreed that it is a qualified investor within the meaning of section 1:1 of the Dutch Financial Supervision Act (Wet op het financieel toezicht or the Wft). The Company, the Investment Manager, Stifel and Akur and their respective affiliates will rely upon the truth and accuracy of the foregoing representations, acknowledgements and agreements. The term 'offer' means any communication in any form and by any means of sufficient information on the terms of the offer and the Ordinary Shares to be offered so as to enable an investor to decide to purchase or subscribe for the Ordinary Shares and the term 'Prospectus Regulation' means Regulation (EU) 2017/1129 and includes any relevant delegated regulations.
Belgium
No offer of Ordinary Shares under the Placing and/or Placing Programme, which are the subject of the Issue contemplated by this document, has been made or will be made in Belgium, unless in reliance on Article 1(4) of the Prospectus Regulation and provided such offer is made exclusively to persons who or legal entities which are or considered to be "professional investors " in the meaning of Article 3, 30°, of the Belgian law of 19 April 2014 on alternative investment funds and their managers ("Loi relative aux organismes de placement collectif alternatifs et à leurs gestionnaires" / "Wet betreffende de alternatieve instellingen voor collectieve belegging en hun beheerders") and provided that no such offer of Ordinary Shares shall require the publication of a prospectus pursuant Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation. Each person in Belgium who acquires any Ordinary Shares under the Placing and/or Placing Programme or to whom any offer is made will be deemed to have represented, acknowledged and agreed that it is a professional investor within the aforementioned meaning. The Company, the Investment Manager, Stifel and Akur and their respective affiliates will rely upon the truth and accuracy of the foregoing representations, acknowledgements and agreements. The term 'offer' means any communication in any form and by any means of sufficient information on the terms of the offer and the Ordinary Shares to be offered so as to enable an investor to decide to purchase or subscribe for the Ordinary Shares and the term 'Prospectus Regulation' means Regulation (EU) 2017/1129 and includes any relevant delegated regulations.
UNITED STATES (U.S.) TAX WITHHOLDING AND REPORTING UNDER THE FOREIGN ACCOUNT TAX COMPLIANCE ACT ("FATCA")
The FATCA provisions of the US Tax Code may impose a 30 per cent. withholding tax on payments of
33
US source interest and dividends made on or after 1 July 2014 and of gross proceeds from the sale of certain US assets made on or after 1 January 2017 to a foreign financial institution (or "FFI") that, unless exempted or deemed compliant, does not enter into, and comply with, an agreement with the US Internal Revenue Service ("IRS") to provide certain information on its U.S. shareholders. Beginning no earlier than 1 January 2017, a portion of income that is otherwise non-US-source may be treated as US-source for this purpose.
The Company may be treated as an FFI for these purposes. If the Company is treated as an FFI, to avoid the withholding tax described above, the Company may need to enter into an agreement (an "IRS Agreement") with the IRS or alternatively, comply with the requirements of the intergovernmental agreement (an "IGA") between the United States and the United Kingdom in respect of FATCA (including any legislation enacted by the United Kingdom in furtherance of the IGA). An FFI that fails to comply with the applicable IGA or, if required, does not enter into IRS Agreement or whose agreement is voided by the IRS will be treated as a "non-ParticipatingFFI".
In general, an IRS Agreement will require an FFI to obtain and report information about its "U.S. accounts", which include equity interests in a non-US entity other than interests regularly traded on an established securities market. The following assumes that the Company will be an FFI and that its Ordinary Shares will not be considered regularly traded on an established securities market for purposes of FATCA. The Company's reporting obligations under FATCA would generally be less extensive if its Ordinary Shares were considered regularly traded on an established securities market for purposes of FATCA. An IRS Agreement would require the Company (or an intermediary financial institution, broker or agent (each, an "Intermediary") through which a beneficial owner holds its interest in Ordinary Shares) to agree to: (i) obtain certain identifying information regarding the holder of such Ordinary Shares to determine whether the holder is a US person or a US owned foreign entity and to periodically provide identifying information about the holder to the IRS; and (ii) comply with withholding and other requirements. In order to comply with its information reporting obligation under the IRS Agreement, the Company will be obliged to obtain information from all Shareholders. To the extent that any payments in respect of the Ordinary Shares are made to a Shareholder by an Intermediary, such Shareholder may be required to comply with the Intermediary's requests for identifying information that would permit the Intermediary to comply with its own IRS Agreement. Any Shareholder that fails to properly comply with the Company's or an Intermediary's requests for certifications and identifying information or, if applicable, a waiver of non-US law prohibiting the release of such information to a taxing authority, will be treated as a "Recalcitrant Holder". The Company will not be required to enter into an IRS Agreement provided that it complies with legislation enacted by the UK that generally requires similar information to be collected and reported to the UK authorities.
Under the UK IGA (including any legislation enacted in furtherance of the IGA) or an IRS Agreement, an Intermediary (and possibly the Company) may be required to deduct a withholding tax of up to 30 per cent. on payments (including gross proceeds and redemptions) made on or after 1 January 2017 to a Recalcitrant Holder or a Shareholder that itself is an FFI and, unless exempted or otherwise deemed to be compliant, does not have in place an effective IRS Agreement (i.e. the Shareholder is a non-Participating FFI). Neither the Company nor an Intermediary will make any additional payments to compensate a Shareholder of the Company or beneficial owner for any amounts deducted pursuant to FATCA. It is also possible that the Company may be required to cause the disposition or transfer of Ordinary Shares held by Shareholders that fail to comply with the relevant requirements of FATCA and the proceeds from any such disposition or transfer may be an amount less than the then current fair market value of the Ordinary Shares transferred.
If the Company (or any Intermediary) is treated as a non-Participating FFI, the Company may be subject to a 30 per cent. withholding tax on certain payments to it.
Further, even if the Company is not characterised under FATCA as an FFI, it nevertheless may become subject to such 30 per cent. withholding tax on certain US source payments to it unless it either provides information to withholding agents with respect to its "substantial US owners" or certifies that it has no such "substantial US owners." As a result, Shareholders may be required to provide any information that the Company determines necessary to avoid the imposition of such withholding tax or in order to allow the Company to satisfy such obligations.
The foregoing is only a general summary of certain provisions of FATCA. Prospective investors should consult with their own tax advisors regarding the application of FATCA to their investment in the Company. The application of the withholding rules and the information that may be required to be reported and disclosed are uncertain and subject to change.
If prospective investors are in any doubt as to the consequences of their acquiring, holding or
34
disposing of Ordinary Shares, they should consult their stockbroker, bank manager, solicitor, accountant or other independent financial adviser.
INFORMATION TO DISTRIBUTORS
Solely for the purposes of the product governance requirements contained within: (a) MiFID II; (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the Product Governance Requirements) may otherwise have with respect thereto, the Ordinary Shares have been subject to a product approval process, which has determined that such securities are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment").
Notwithstanding the Target Market Assessment, distributors should note that: the price of the Ordinary Shares may decline and investors could lose all or part of their investment; the Ordinary Shares offer no guaranteed income and no capital protection; and an investment in the Ordinary Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Issue and the Placing Programme. Notwithstanding the Target Market Assessment, Stifel will only place Ordinary Shares to investors meeting the definitions of "professional investors" or "eligible counterparties", each as defined in the FCA Rules.
For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Ordinary Shares.
Each distributor is responsible for undertaking its own target market assessment in respect of the Ordinary Shares and determining appropriate distribution channels.
FORWARD-LOOKING STATEMENTS
This Prospectus includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Prospectus and include statements regarding the intentions, beliefs or current expectations of the Company, the Directors and the Investment Manager concerning, amongst other things, the Investment Objective and Investment Policy, investment performance, results of operations, financial condition, prospects, and dividend policy of the Company and the markets in which it is involved. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. The Company's actual investment performance, results of operations, financial condition and dividend policy may differ materially from the impression created by the forward-looking statements contained in this Prospectus. In addition, even if the investment performance, results of operations and financial condition of the Company are consistent with the forward-looking statements contained in this Prospectus, those results or developments may not be indicative of results or developments in subsequent periods.
Given these uncertainties, prospective investors are cautioned not to place any undue reliance on such forward-looking statements. Prospective investors should carefully review the "Risk Factors" section of this Prospectus for a discussion of additional factors that could cause the Company's actual results to differ materially before making an investment decision. Forward-looking statements speak only as at the date of this Prospectus.
Subject to its legal and regulatory obligations (including under the Prospectus Regulation and the Prospectus Regulation Rules), the Company expressly disclaims any obligations to update or revise any forward-looking statement contained herein to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances. The information in this Prospectus will, however, be
35
updated as required by law or any appropriate regulatory authority, including FSMA, MAR, the Prospectus Regulation, the Prospectus Regulation Rules and the Disclosure Guidance and Transparency Rules. Nothing in the preceding three paragraphs should be taken as qualifying the working capital statement in paragraph 1 of Part 14 of this Prospectus.
36
EXPECTED TIMETABLE
Expected Issue Timetable | |
The Open Offer | |
Record Date for entitlements under the Open Offer | Close of business on 28 |
September 2020 | |
Ex-entitlement date for the Open Offer | 8.00 a.m. on 30 September 2020 |
Open Offer Application Forms despatched to Eligible Non-CREST Shareholders | 30 September 2020 |
Open Offer Basic Entitlements credited to CREST accounts of Eligible CREST | 8.00 a.m. on 1 October 2020 |
Shareholders | |
Recommended latest time and date for requesting withdrawal of Open Offer | 4.30 p.m. on 13 October 2020 |
Basic Entitlements from CREST | |
Latest time and date for depositing Open Offer Basic Entitlements into CREST | 3.00 p.m. on 14 October 2020 |
Latest time and date for splitting of Application Forms under the Open Offer | 3.00 p.m. on 15 October 2020 |
Latest time and date for receipt of completed Application Forms and payment in | 11.00 a.m. on 19 October 2020 |
full under the Open Offer or settlement of relevant CREST instruction | |
The Placing and Offer for Subscription | |
Placing and Offer for Subscription open | 30 September 2020 |
Latest time and date for receipt of completed Application Forms and payment in | 11.00 a.m. on 19 October 2020 |
full under the Offer for Subscription | |
Latest time and date for receipt of placing commitments under the Placing | 11.00 a.m. on 20 October 2020 |
Announcement of the results of the Issue | 21 October 2020 |
Trade date (on a T+2 basis) for Ordinary Shares to be issued to Placees | 21 October 2020 |
pursuant to the Placing | |
Other key dates | |
General Meeting | 10.00 a.m. on 21 October 2020 |
Admission of the Ordinary Shares to the premium listing segment of the Official | 8.00 a.m. on 23 October 2020 |
List and commencement of dealings on the London Stock Exchange | |
Crediting of CREST stock accounts | as soon as practicable after 8.00 |
a.m. on 23 October 2020 | |
Share certificates dispatched (where appropriate) | week commencing 2 November |
2020 (or as soon as possible | |
thereafter) | |
Expected Placing Programme Timetable | |
Placing Programme opens | 30 September 2020 |
Publication of Placing Programme Price in respect of each Subsequent Placing | on, or as soon as practicable |
following, the announcement of | |
each Subsequent Placing | |
Admission of the Ordinary Shares to the premium listing segment of the Official | 8.00 a.m. on each day Ordinary |
List and commencement of dealings on the London Stock Exchange | Shares are issued pursuant to |
the Placing Programme | |
Crediting of CREST stock accounts | as soon as practicable following |
the issue of Ordinary Shares | |
pursuant to the Placing | |
Programme | |
Share certificates dispatched (where appropriate) | as soon as practicable following |
the issue of Ordinary Shares | |
pursuant to the Placing | |
Programme | |
Last date for Ordinary Shares to be issued pursuant to the Placing Programme | 29 September 2021 |
The dates and times specified in this Prospectus are subject to change without further notice. All references to times in this Prospectus are to London time unless otherwise stated. In particular the Board may, with the prior approval of the Investment Manager, Stifel and Akur, bring forward or postpone the closing time and date for the Issue. In the event that such date is changed, the Company will notify investors who have applied for Ordinary Shares or taken up Open Offer Basic Entitlements of changes to the timetable either by post, by electronic mail or by the publication of a notice through a Regulatory Information Service.
37
ISSUE AND PLACING PROGRAMME STATISTICS
Issue Statistics
Open Offer
Issue Price per Ordinary Share Ordinary Shares being issued* Gross Proceeds*
Net Proceeds*
1 Ordinary Share for every 6 Ordinary Shares held on 28 September 2020 106 pence 66,037,735(1) (2) £70 million(2) £68 million(2)
- The number of Ordinary Shares issued and to be issued pursuant to the Issue, and therefore the Gross Proceeds and the Net Proceeds of the Issue, is not known as at the date of this Prospectus but will be notified by the Company via a Regulatory Information Service prior to Initial Admission. If the Issue does not proceed, subscription monies received will be returned without interest at the risk of the applicant.
- Under the Issue, the Company is targeting an issue of 66,037,735 Ordinary Shares at an Issue Price of 106 pence per Ordinary Share. At the discretion of the Board, the Company may issue up to an additional 28,301,887 Ordinary Shares, bringing the maximum number of Ordinary Shares the Company may issue in connection with the Issue up to 94,339,622.
- Assuming the Issue is subscribed as to 66,037,735 Ordinary Shares, to raise the target Gross Proceeds of £70 million in connection with the Issue, the expenses payable by the Company will be approximately £2 million.
Placing Programme Statistics | |
Maximum size of Placing Programme | up to 150 million Ordinary Shares |
Placing Programme Price per Ordinary Share | Not less than the prevailing NAV per |
Ordinary Share at the time of issue |
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DEALING CODES | |
Company | |
LEI | 213800BERVBS2HFTBC58 |
Ordinary Shares | |
Ticker of the Ordinary Shares | SOHO |
ISIN for the Ordinary Shares | GB00BF0P7H59 |
SEDOL for the Ordinary Shares | BF0P7H5 |
Open Offer | |
ISIN of the Open Offer Basic Entitlements | GB00BLN8N207 |
SEDOL of the Open Offer Basic Entitlements | BLN8N20 |
ISIN of the Excess Open Offer Entitlements | GB00BLN8N314 |
SEDOL of the Excess Open Offer Entitlements | BLN8N31 |
39
DIRECTORS, MANAGEMENT AND ADVISERS
Directors
Registered Office
Investment Manager and AIFM
Sponsor, Joint Financial Adviser, Sole Global Coordinator and Bookrunner
Joint Financial Adviser
Legal Advisers to the Company as to English law
Legal Advisers to the Joint Financial Advisers and the Sponsor, Sole Global Coordinator and Bookrunner as to English law
Auditor
Reporting Accountant
Company Secretary
Depositary
Registrar
Receiving Agent
Christopher Phillips (Non-executive Chairman)
Ian Reeves CBE (Non-executive Senior
Independent Director)
Peter Coward (Non-executive Director) Paul Oliver (Non-executive Director)
Tracey Fletcher-Ray(Non-executive Director)
1 King William Street
London
EC4N 7AF
Triple Point Investment Management LLP 1 King William Street
London
EC4N 7AF
Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
Akur Limited
66 St James's Street
London
SW1A 1NE
Taylor Wessing LLP
5 New Street Square London EC4A 3TW
CMS Cameron McKenna Nabarro Olswang LLP Cannon Place
78 Cannon Street
London
EC4N 6AF
BDO LLP
55 Baker Street
London
W1U 7EU
PricewaterhouseCoopers LLP
1 Embankment Place
London
WC2N 6RH
Hanway Advisory Limited
1 King William Street
London
EC4N 7AF
INDOS Financial Limited
54 Fenchurch Street
London
EC3M 3JY
Computershare Investor Services PLC The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Computershare Investor Services PLC The Pavilions
40
Bridgwater Road | |
Bristol | |
BS99 6AH | |
Administrator | Hanway Advisory Limited |
1 King William Street | |
London | |
EC4N 7AF | |
Valuers | Jones Lang LaSalle Limited |
30 Warwick Street | |
London | |
W1B 5NH | |
Tax Adviser | Deloitte LLP |
1 New Street Square | |
London | |
EC4A 3BZ |
41
PRESENTATION OF FINANCIAL INFORMATION AND OTHER DATA
PRESENTATION OF FINANCIAL INFORMATION
The Company prepares its financial information under IFRS and in accordance with EPRA's best practice recommendations.
Certain financial and statistical information contained in this Prospectus has been rounded to the nearest whole number or the nearest decimal place. Therefore, the actual arithmetic total of the numbers in a column or row in a certain table may not conform exactly to the total figure given for that column or row. In addition, certain percentages presented in the tables in this Prospectus reflect calculations based upon the underlying information prior to rounding, and, accordingly, may not conform exactly to the percentages that would be derived if the relevant calculations were based upon the rounded numbers.
PRESENTATION OF INDUSTRY, MARKET AND OTHER DATA
This Prospectus includes certain market, economic and industry data, which were obtained by the Company from industry publications, data and reports compiled by professional organisations, analysts and data from other external sources. Where information has been referenced in this Prospectus, the source of that third party information has been disclosed. The Company and the Directors confirm that all information contained in this Prospectus that has been sourced from third parties has been accurately reproduced and, as far as the Company is aware and able to ascertain from information published by such third parties, no facts have been omitted which would render the reproduced information inaccurate or misleading.
In many cases, there is no readily available external information (whether from trade associations, government bodies or other organisations) to validate market-related analyses and estimates, requiring the Company to rely on internally developed estimates and the Directors' knowledge of the UK property market.
CURRENCY PRESENTATION
Unless otherwise indicated, all references in this Prospectus to "GBP", "Sterling", "pounds sterling", "£", "pence" or "p" are to the lawful currency of the UK.
The Company publishes its financial statements in British pounds sterling. Financial statements and information included or incorporated by reference into this document have been prepared under IFRS and in accordance with EPRA's best practice recommendations, and are subject to auditing and auditor independence standards in the United Kingdom, and thus may not be comparable to financial statements of US entities.
REFERENCES TO DEFINED TERMS
Certain terms used in this Prospectus, including capitalised terms and certain technical and other terms are explained in Part 15 of this Prospectus.
TIMES AND DATES
References to times and dates in this Prospectus are, unless otherwise stated, to United Kingdom times and dates.
NO INCORPORATION OF WEBSITE INFORMATION
The Company's website address is www.triplepointreit.com. Save in respect of any information incorporated by reference into this Prospectus as contained in paragraphs 4 and 6 of Part 14 of this Prospectus, the contents of the Company's website do not form part of this Prospectus.
GOVERNING LAW
Unless otherwise stated, statements made in this Prospectus are based on the law and practice currently in force in England and are subject to changes therein.
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PART 1 - INVESTMENT OPPORTUNITY
The Company offers investors the opportunity to invest in a diversified portfolio of Social Housing assets across the UK. The Portfolio focuses on properties housing people with specialist Supported Housing needs.
The Company's Investment Objective is to provide Shareholders with stable, long-term,inflation-linked income. The Company is targeting a dividend of 5.18 pence per Ordinary Share in respect of the Company's financial year to 31 December 2020.2 The Company intends to increase this target dividend annually in line with inflation, reflecting the inflation-linked (typically CPI-based)upwards-only rent reviews typically contained in the Leases of the assets within the Portfolio.
Some of the key features of the Company's investment proposition are set out below.
LONG-TERMINFLATION-LINKED YIELD
The Company agrees long-term, fully repairing and insuring Leases with Approved Providers. These Leases are typically between 20 and 30 years in length, although they can be longer. The Current Portfolio has a weighted average unexpired lease term of 25.4 years (including put/call options and reversionary leases).
The Company benefits from its Leases with inflation-linked (typically CPI) upwards-only rent reviews, ensuring long-term growth in Lease rental income in line with inflation, underpinning the Company's progressive dividend policy.
SECURE INCOME STREAMS
The Company has only invested in opportunities where the counterparty to the Lease is an Approved Provider.3 Approved Providers are providers of Social Housing, typically Housing Associations and Local Authorities regulated by the Regulator of Social Housing (an executive non-departmental public body, sponsored by the Ministry of Housing, Communities & Local Government) or, less typically, care providers or charities regulated by the Care Quality Commission and the Charity Commission respectively.
Due to the vulnerable nature of individuals who live in Supported Housing, the Approved Provider receives rent for all occupied units in the form of housing benefit directly from the Local Authority, with Local Authorities in turn receiving funding directly from central government (the Department of Work and Pensions).
STRONG DEMAND FOR SOCIAL HOUSING
The extreme demand and supply imbalance for new Social Housing units (including Supported Housing units) means that the requirement for funding in the sector is likely to be a pertinent issue for the foreseeable future. Growing demand alongside constrained supply has led to a shortfall of Supported Housing that is expected to reach 46,771 units by 2024/2025 which puts increased pressure on local authorities who have a statutory obligation to provide homes for vulnerable people in the community.
Demand for housing, generally, is being driven by the growing UK population and the increasing number of people needing care. In addition, improvements in healthcare are resulting in improved life expectancy and increasing numbers of mentally or physically challenged individuals who are able to live more independently, which places additional pressure on the overall demand for housing and the requirement for supported accommodation, with or without specialist care facilities. The growth in demand for specific Supported Housing units is further compounded by the improved quality of life it can unlock for residents when compared to care homes and hospital settings and the resultant statutory pressure on local authorities to move individuals with care needs out of institutional care settings and into the community.
Approved Providers continue to focus on working with local authorities to enable them to respond to the shortage of Supported Housing by making new adapted homes available which in turn ensures that the Company benefits from a pipeline of investment opportunities.
-
This target dividend is a target only and not a profit forecast. The Company's ability to distribute dividends on an annual basis will be determined by the existence of realised profits, legislative requirements, and available cash reserves. There is no certainty as to any level of dividends. The dividend targets may not be achieved, and all dividend payments are subject to the Company having adequate distributable reserves and cash reserves. Accordingly, potential investors should not place any reliance on this target in deciding whether or not to invest in the Company and should decide for themselves whether or not the target dividend yield is reasonable or achievable.
3 Notwithstanding that, in accordance with the Investment Policy, the Group may acquire a portfolio consisting predominantly of Social Housing assets where a small minority of such assets are leased to third parties who are not Approved Providers.
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As at 29 September 2020, the Group has added 1,914 units of new Supported Housing stock to the market, unlocking new homes for vulnerable adults and enabling local authorities to reduce their social housing waiting lists.
POSITIVE SOCIAL IMPACT
The Company's investments help address the housing crisis and deliver both savings for the government and better health outcomes to residents.
Residents benefit from the development of purpose-builthomes-for-life in the community that allow them to typically be more independent, develop more skills and have better overall wellbeing. This accommodation is also more cost efficient to the government. It is estimated that each resident in specialised Supported Housing saves the government circa £200 per week compared to being in a care home and circa £2,000 per week compared to being in a hospital.
This social impact in turn underpins the demand for this type of housing and consequently impacts the returns for the Company's investors. Positive returns encourage continued investment, which in turn allows the Company to fund more housing. This creates more positive social impact and more returns, becoming a virtuous circle of positive social impact and creating value for all stakeholders.
AVAILABLE INVESTMENT PIPELINE
Through the Triple Point Group's 16 year history in asset management and existing industry relationships, the Company expects to benefit from access to an identified pipeline of assets currently in excess of £150 million. Assets in the pipeline will be assessed against the same criteria that have underpinned the Triple Point Group's previous deal flow, namely long-datedinflation-linked Leases, high quality counterparties, and low operational risk. It is also envisaged that, due to the demand in the Social Housing market, the potential pipeline available to the Company will continue to increase.
Within the existing pipeline, the Investment Manager is currently in active negotiations in relation to a number of attractive assets, predominantly sourced off-market, to be funded from the proceeds of the Issue. If, following publication of the Prospectus and prior to Initial Admission, the Investment Manager identifies additional investments (the "Additional Investments") within the existing pipeline which it reasonably believes can be secured for the Company's Portfolio by March 2021, the Board may decide to increase the size of the Issue up to a maximum of 94,339,622 Ordinary Shares at the Issue Price.
The Company intends to carry out each Subsequent Placing under the Placing Programme only when the Net Proceeds of the Issue (or earlier Subsequent Placings) and associated gearing have been invested or committed in order to manage cash drag.
INCREASED DEAL FLOW AND THE ADVANTAGES OF FORWARD FUNDING
The Group typically only acquires Social Housing assets once they are let or pre-let and are, or are about to begin, generating revenue. However, it may also forward fund the development of new Social Housing assets.
Forward funding is provided in circumstances where there is an agreement to lease in place and where the Group receives a coupon on its investment (or equivalent reduction in the purchase price) during the construction phase and prior to the entry into a Lease. This gives greater certainty over long-term deal flow to the Group as developers are often willing to grant exclusivity over their pipeline of deal flow to a single partner, as opposed to using two partners (one for construction and another for take-out funding). This provides the Group with a significant competitive advantage, as it can access high quality assets at early stages where others cannot.
Investing private capital into a sector with limited access to grant funding has helped to bridge the funding gap and facilitate the development of new social housing stock. Encouraging private investment into social housing is in fact one of the objectives of the Regulator of Social Housing. The Group's investment strategy has always been focused on additionality, bringing new properties into the social housing sector either through converting or adapting existing residential and very occasionally commercial properties or through funding the development of new builds. The Group currently owns 434 properties, 67.4 per cent. of which are new to the social housing sector. These properties are then leased to Approved Providers to allow them to provide additional housing services for the benefit of both residents and the taxpayer.
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PART 2 - INFORMATION ON THE COMPANY
- INTRODUCTION
The Company is a UK REIT incorporated in England and Wales which invests in Social Housing assets in the UK, with a particular focus on Supported Housing.
To date, the Company has raised £355.7 million (before expenses) through the issue of equity.
The Company is a constituent of the FTSE All-Share index and the FTSE EPRA/NAREIT Global Real Estate Index Series.
On 23 July 2018, the Company announced that the Group had entered into a long dated, fixed rate, interest-only financing arrangement through a private placement of Loan Notes in an amount of £68.5 million with MetLife Insurance KK. On 24 December 2018, the Company announced that the Group had secured a £70 million Revolving Credit Facility with Lloyds Bank plc. On 29 October 2019, the Company made a further announcement that the Group had secured a £60 million increase to the Revolving Credit Facility (increasing the total amount to £130 million) previously exclusively provided by Lloyds Bank plc on identical terms. As part of the transaction, National Westminster Bank plc joined Lloyds Bank plc as a new lender under the Revolving Credit Facility. Further details of the Company's debt financing activities are set out in paragraph 7 of this Part 2.
Since its IPO in August 2017, the Company has deployed £496.9 million (including costs) in acquiring, committing to acquire or forward funding 434 Supported Housing properties across the UK. All of the assets are subject to inflation-linked,long-term, fully repairing and insuring leases with Approved Providers. The Current Portfolio (being the Group's portfolio as at 31 August 2020) was valued by JLL on an IFRS basis and in accordance with the RICS "Red Book" at £531.9 million. The Current Portfolio valuation does not take into account the full value of seven assets in respect of which the Company has entered into forward funding commitments which had not completed as at the Valuation Date, which in aggregate amount to a further £8.3 million. Since the Valuation Date, the Company has completed on the purchase of one further asset totalling £1.0 million, completed the lease of two forward funding assets and released a further £0.5 million in aggregate in respect of five forward funding assets which have not yet completed.
As at 30 June 2020, the unaudited Net Asset Value (and the unaudited EPRA Net Tangible Assets) per Ordinary Share was 105.34 pence. Taking into account the interim dividend for the period from 1 April to 30 June 2020 declared on 26 August 2020 of 1.295 pence and paid on 25 September 2020, the adjusted NAV per Ordinary Share was 104.05 pence. As at 29 September 2020, the Company had a market capitalisation of approximately £379 million. The dividend for the period 1 July 2020 to 30 September 2020 is yet to be declared and the new Ordinary Shares issued pursuant to the Issue will qualify for this dividend. Application will be made at the relevant time to the FCA for all of the Ordinary Shares issued pursuant to the Issue and the Placing Programme to be admitted to the premium listing segment of the Official List of the FCA and to the London Stock Exchange for all such Ordinary Shares to be admitted to trading on the Main Market.
Further details regarding the Issue and the Placing Programme are set out in Part 7 and Part 8 of this Prospectus.
- THE ISSUE
The Issue, which is conditional, inter alia, on approval by Shareholders at the General Meeting, is being implemented by way of a Placing, Open Offer and Offer for Subscription.
In light of the strong pipeline of investment opportunities identified by the Investment Manager, the Company is targeting an issue of £70 million, representing 66,037,735 Ordinary Shares at an Issue Price of 106 pence per Ordinary Share under the Issue. In the event that the Company has demand from investors which exceeds the target issue size of £70 million, the Board may consider increasing the size of the Issue up to a maximum of 94,339,622 Ordinary Shares at the Issue Price. Any decision to increase the Issue would only be made after careful consideration of the prevailing market conditions, the availability and estimated price of the properties that the Investment Manager has identified as being suitable for purchase by the Company and the length of time it would likely take to acquire them.
The Open Offer ensures that a significant proportion of the Ordinary Shares available under the Issue is reserved in the first instance for existing Shareholders.
Under the Open Offer, Eligible Shareholders are entitled to subscribe for an aggregate of approximately
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58,483,701 Ordinary Shares pro rata to their holdings of Ordinary Shares on the Record Date (being the close of business on 28 September 2020) as follows:
1 Ordinary Share for every 6 Ordinary Shares held at the Record Date (being an Eligible
Shareholder's Open Offer Basic Entitlement)
If subscriptions under the Placing, Open Offer and Offer for Subscription exceed the maximum number of Ordinary Shares available, the Company (in consultation with Stifel, Akur and the Investment Manager) will scale back subscriptions (other than Open Offer Basic Entitlements, as described below) at its absolute discretion. The Company reserves the right to decline in whole or in part any application for Ordinary Shares pursuant to the Issue in accordance with the terms and conditions of the Issue set out in Parts 11, 12 and 13 of this Prospectus.
In addition, subject to the Placing Programme Resolutions being passed, the Company will have the authority to issue up to 150 million new Ordinary Shares pursuant to the Placing Programme, which will open on 30 September 2020 and will close on 29 September 2021. The Placing Programme will allow the Company to raise further equity capital through Subsequent Placings.
The Company is seeking Shareholder approval for the Resolutions at the General Meeting to be held on 21 October 2020. Approval of the Issue Resolutions is required in order for the Issue to proceed, and approval of the Placing Programme Resolutions is required in order for the Placing Programme to proceed. The Issue is not conditional on the Placing Programme Resolutions being passed. Further details of the Resolutions are set out in the Circular dated 30 September 2020 (containing notice of the General Meeting) which has been sent to Shareholders and in paragraph 3.2 of Part 10 of this Prospectus.
- THE PLACING PROGRAMME
The total net proceeds of the Placing Programme will depend on the number of Ordinary Shares issued under the Placing Programme, the issue price of such Ordinary Shares, and the aggregate costs and commissions for each Subsequent Placing. However, assuming that the maximum number of Ordinary Shares available under the Placing Programme are issued at the Issue Price of 106 pence per Ordinary Share with aggregate costs and commissions of approximately £3.2 million (being 2 per cent. of the gross issue proceeds), the total net proceeds of the Placing Programme would be approximately £155.8 million. The size and frequency of each Subsequent Placing will be determined in the sole discretion of the Company in consultation with the Investment Manager, Stifel and Akur. The Company intends to carry out each Subsequent Placing under the Placing Programme only when the Net Proceeds of the Issue (and earlier Subsequent Placings) and associated gearing have been invested or committed in order to manage cash drag.
- BENEFITS OF THE ISSUE AND THE PLACING PROGRAMME
The Directors believe that the Issue and the Placing Programme will have the following principal benefits:
- they will provide additional equity capital which will enable the Company to capitalise on the attractive acquisition and development opportunities available in the Supported Housing sector and have a further positive impact on society by developing adapted homes for vulnerable individuals who would otherwise be living in unsuitable accommodation;
- it is expected that, following investment of the Net Proceeds of both the Issue and, in due course, the Placing Programme, the Company's assets will be further diversified across geography and Approved Providers as well as providing further scale to the Company's portfolio;
- the increased size of the Company will mean fixed costs are spread over a larger asset base, reducing the ongoing charges per Share for Shareholders and, in addition, the fee payable to the Investment Manager is tiered such that it reduces from 0.9 per cent. to 0.8 per cent. on NAV in excess of £500 million (with further reductions triggered when the Company's published NAV exceeds £1 billion);
- increasing the size of the Company will help to increase liquidity and make the Ordinary Shares more attractive to a wider investor base, particularly as certain institutional investors are constrained by the maximum percentage of an issuer which they can own. If a company's market capitalisation is too small, such investors typically cannot invest as they cannot get a meaningful allocation in the context of their underlying funds;
- as the Company is actively considering a number of specific property opportunities, the Issue should assist in matching the capital requirements of the Company to the investment opportunities
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identified; and
- the Placing Programme will allow the Company to tailor future equity issuance to its pipeline, providing flexibility and minimising cash drag.
- INVESTMENT OBJECTIVE
The Company's investment objective is to provide Shareholders with stable, long-term,inflation-linked income from a portfolio of Social Housing assets in the United Kingdom, with a particular focus on Supported Housing assets. The portfolio comprises investments into operating assets and the forward funding of pre-let development assets, the mix of which the Company seeks to optimise to enable it to pay a covered dividend increasing in line with inflation and generate an attractive risk-adjusted total return.
- INVESTMENT POLICY
In order to achieve its Investment Objective, the Company invests in a diversified portfolio of freehold or long leasehold Social Housing assets in the UK. Supported Housing assets to be acquired and/or held account for at least 80 per cent. of Gross Asset Value. The Company acquires portfolios of Social Housing assets and single Social Housing assets, either directly (in the case of property-holding SPVs) or via intermediate holding companies (in the case of direct property assets). Assets are then held over the long term by the Company in an intermediate holding company structure. Each asset is subject to a Lease or occupancy agreement with an Approved Provider for terms primarily ranging from 20 years to 30 years, with the rent payable thereunder subject to adjustment in line with inflation (generally CPI). Title to the assets remains with the Group under the terms of the relevant Lease. The Group is not responsible for any management or maintenance obligations under the terms of the Lease or occupancy agreement, all of which are serviced by the Approved Provider lessee. The Group is not responsible for the provision of care to occupants of Supported Housing assets.
The Social Housing assets are sourced in the market by the Investment Manager and from the Triple Point Group.
The Group intends to hold the Portfolio over the long term, taking advantage of long term upward only inflation-linked Leases. The Group will not be actively seeking to dispose of any of its assets, although it may dispose of investments should an opportunity arise that would enhance the value of the Group as a whole.
The Group may forward finance the development of new Social Housing assets when the Investment Manager believes that to do so would enhance returns for Shareholders and/or secure an asset for the Group's Portfolio at an attractive yield. Forward funding will only be provided in circumstances in which:
- there is an agreement to lease the relevant property upon completion in place with an Approved Provider;
- planning permission has been granted in respect of the site; and
- the Group receives a coupon on its investment or equivalent reduction in the purchase price (generally slightly above or at least equivalent to the projected income return for the completed asset) during the construction phase and prior to the commencement of the relevant Lease.
For the avoidance of doubt, the Group will not acquire land for speculative development of Social Housing assets.
In addition, the Group may engage third party contractors to renovate or customise existing Social Housing assets, as necessary.
Gearing
The Company seeks to use gearing to enhance equity returns. The Directors will employ a level of borrowing that they consider to be prudent for the asset class and will seek to achieve a low cost of funds, whilst maintaining flexibility in the underlying security requirements and the structure of both the Portfolio and the Group.
The Directors intend that the Group will target a level of aggregate borrowings over the medium term equal to between 35 to 40 per cent. 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 per cent. of the Gross Asset Value.
Debt will typically be secured at the asset level, whether over a particular property or a holding entity for
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a particular property (or series of properties), without recourse to the Company and also potentially at the Company or SPV level with or without a charge over some or all of the assets, depending on the optimal structure for the Group and having consideration for key metrics including lender diversity, cost of debt, debt type and maturity profiles.
For details relating to gearing arranged to date please refer to the section below on Financing Arrangements.
Use of derivatives
The Company may utilise derivatives for efficient portfolio management. In particular, the Company may engage in full or partial interest rate hedging or otherwise seek to mitigate the risk of interest rate increases on borrowings incurred in accordance with the Investment Policy as part of the Company's portfolio management. The Group will not enter into derivative transactions for speculative purposes.
Investment restrictions
The following investment restrictions apply:
- the Group will only invest in Social Housing assets located in the United Kingdom;
- the Group will only invest in Social Housing assets where the counterparty to the Lease or occupancy agreement is an Approved Provider. Notwithstanding that, the Group may acquire a portfolio consisting predominantly of Social Housing assets where a small minority of such assets are leased to third parties who are not Approved Providers. Provided that the assets leased to third parties who are not Approved Providers are acquired as part of a portfolio acquisition where no less than 90 per cent. (by value) of the assets are leased to Approved Providers and, in aggregate, all such assets within the Group's total portfolio represent less than 5 per cent. of the Gross Asset Value at the time of acquisition, this will remain within the Investment Policy;
- at least 80 per cent. of the Gross Asset Value will be invested in Supported Housing assets;
- the unexpired term of any Lease or occupancy agreement entered into (or in the case of an acquisition of a portfolio of assets, the average unexpired term of such Leases or occupancy agreements) shall not be less than 15 years, unless the Investment Manager reasonably expects the term of such shorter Lease or occupancy agreement (or in the case of an acquisition of a portfolio of assets, the average term of such Leases or occupancy agreements) to be extended to at least 15 years;
- the maximum exposure to any one asset which, for the avoidance of doubt, will include houses and/or apartment blocks located on a Contiguous basis, will not exceed 20 per cent. of the Gross Asset Value of the Group;
- the maximum exposure to any one Approved Provider will not exceed 30 per cent. of Gross Asset Value, other than in exceptional circumstances for a period not to exceed three months;
- the Group may forward finance Social Housing units in circumstances where there is an agreement to lease in place and where the Group receives a coupon on its investment or equivalent reduction in the purchase price (generally slightly above or equal to the projected income return for the completed asset) during the construction phase and prior to the entry into the Lease. The sum of the total forward financing commitments will be restricted to an aggregate value of not more than 20 per cent. of the Net Asset Value of the Group, calculated at the time of entering into any new forward funding arrangement;
- the Group will not invest in other alternative investment funds or closed-ended investment companies (which, for the avoidance of doubt, does not prohibit the acquisition of SPVs which own individual, or portfolios of, Social Housing assets);
- the Group will not set itself up as an Approved Provider; and
- the Group will not engage in short selling.
The investment limits detailed above apply at the time of the acquisition of the relevant asset in the Portfolio. The Group will not be required to dispose of any investment or to rebalance its Portfolio as a result of a change in the respective valuations of its assets or a merger of Approved Providers.
Changes to the Investment Policy or Investment Objective
Any material removal, amendment or other modification of the Company's stated Investment Objective or Investment Policy, or additional investment restrictions, will only take place with the approval of Shareholders in a general meeting.
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Cash management policy
Cash held for working capital purposes or received by the Group pending reinvestment or distribution will be held in Sterling only and invested in cash, cash equivalents, near cash instruments and money market instruments. The Board determines the cash management policy in consultation with the Investment Manager.
REIT status
The Directors will at all times conduct the affairs of the Company so as to enable it to the extent possible to remain qualified as a REIT for the purposes of Part 12 of the CTA 2010 (and any regulations made thereunder).
Other
In the event of a breach of the Investment Policy and restrictions set out above, the Investment Manager shall inform the Directors upon becoming aware of the same and, if the Directors consider the breach to be material, notification will be made to a Regulatory Information Service.
Application of the Investment Policy to Ordinary Shares
The Investment Policy applies to the Group in its entirety and the restrictions set out above will be assessed across the share pool.
- DEBT FINANCING ARRANGEMENTS
On 20 July 2018, the Group secured a fixed rate, interest-only financing arrangement in the form of a private placement of Loan Notes of £68.5 million with MetLife Insurance KK.
The Loan Notes are secured against a portfolio of Supported Housing assets throughout the UK, worth approximately £183 million, acquired in the period from IPO in August 2017 to the end of March 2018. The Loan Notes are split into two tranches: Series A, in an amount of £41.5 million, has a term of 10 years from utilisation and is priced at an all-in coupon of 2.924 per cent.; and Series B, in an amount of £27 million, has a term of 15 years from utilisation and is priced at an all-in coupon of 3.215 per cent. Accrued interest is payable in arrears on a quarterly basis. The principal is repayable at term.
On 21 December 2018, the Group secured a £70 million Revolving Credit Facility with Lloyds Bank plc. The Revolving Credit Facility has an initial term of four years which may be extendable by a further two years. The interest rate on drawn funds is 1.85 per cent. per annum over 3-month LIBOR. For undrawn funds the Group pays a commitment fee of 40 per cent. of the margin.
On 28 October 2019, the Group secured a £60 million increase to the Revolving Credit Facility and as part of the transaction, National Westminster Bank plc provided debt alongside Lloyds Bank plc on identical terms. The Group now has the ability to draw a total of up to £130 million under the Revolving Credit Facility.
As at 29 September 2020 the Revolving Credit Facility was 89.7 per cent. drawn.
The Note Purchase Agreement and Revolving Credit Facility are secured against two separate, ring- fenced portfolios of UK Supported Housing assets without recourse to the Company. Both facilities have been secured and drawn at an initial loan-to-value of 40 per cent. of the value of the secured assets referred to above, which is in line with the Company's investment policy and long term debt strategy of a long-term level of aggregate borrowings equal to 40 per cent. of the Group's gross asset value.
As at 30 June 2020, the LTV was 37.4 per cent. for the Loan Notes and 40.0 per cent. for the Revolving Credit Facility. On a Group consolidated basis the current LTV is 33.1 per cent.
Additional details of the Company's debt financing activities are set out in paragraphs 10.2 and 10.3 of Part 10 of this Prospectus.
The Company expects to have fully drawn the Revolving Credit Facility at the beginning of October 2020. The Group is also in advanced negotiations to have the option to increase the Revolving Credit Facility by £30 million.
- INVESTMENT OVERVIEW
The Company principally looks to acquire and hold (either directly via intermediate holding companies or through SPVs) the freehold or long leasehold of existing tenanted social residential properties in the
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Supported Housing sector. Whilst the Company's emphasis is on Supported Housing units, the Company may also seek to invest up to 20 per cent. of Gross Asset Value in general needs Social Housing. The geographical focus of the Group is England and Wales but with the ability to invest in other regions within the UK should suitable opportunities arise.
On acquisition of an asset, the Group either takes the benefit of an existing Lease with an Approved Provider or, if there is a change in the Approved Provider at the point of purchase or the asset has previously been let to a private sector tenant, the Group enters into a new Lease with an Approved Provider. The properties acquired by the Group are let to an Approved Provider (other than in certain limited circumstances permitted by the Investment Policy). Most Approved Providers benefit from regulation by the Regulator for Social Housing, whose role it is to regulate the Social Housing sector and to intervene and enforce its regulations where appropriate. The Regulator for Social Housing has the following objectives in support of the sector:
- protect social housing assets;
- ensure providers are financially viable and properly governed;
- maintain the confidence of lenders to invest into the sector;
- encourage and support the supply of Social Housing;
- ensure tenants are protected and have opportunities to be involved in the management of their housing; and
- ensure value for money in service delivery.
Due to the vulnerable nature of individuals who live in Supported Housing, the Approved Provider receives rent for all occupied units in the form of housing benefit directly from the Local Authority, with Local Authorities in turn receiving funding directly from central government (the Department of Work and Pensions).
Further information on the Social Housing sector in the UK and, in particular, Supported Housing is set out in Part 3 of this Prospectus.
All properties owned by the Group, whether Supported Housing assets or general needs Social Housing assets, are leased directly to an Approved Provider with the Group retaining the freehold (or long leasehold, as applicable). These Leases are normally fully repairing and insuring with rent linked to CPI or RPI. The Leases typically have remaining terms of at least 15 years and usually 20 to 30 years.
The Group is not responsible for the maintenance or the upkeep of the properties it acquires as these are the responsibility of the Approved Providers. In addition, in respect of each asset acquired, the Group receives the rent for the whole property directly from the Approved Provider and, under the terms of the Lease, the rent is subject to an annual increase in line with (generally CPI) inflation. Similarly, the nature of the Lease arrangements with the Approved Providers is such that the Approved Providers, and not the Company (or any other member of the Group), are the landlords under applicable landlord and tenancy legislation.
- INVESTMENT PROCESS
Since 1 July 2020, the Investment Manager has provided and continues to provide risk management services and services concerning the calculation of NAV to the Company.
Since incorporation of the Company, the Investment Manager has also had responsibility for portfolio management. The Investment Manager manages the Portfolio with a view to achieving the Investment Objective in accordance with the Investment Policy set out in this Prospectus. The Board has overall responsibility for the management of the Company and oversees compliance with Company's Investment Objective and Investment Policy.
The Investment Manager has also been granted permission to act as an AIFM under the AIFMD and, since 1 July 2020, has also been responsible for the overall portfolio management, risk management and preparation of valuations.
The investment process undertaken by the Investment Manager is broadly as follows:
9.1 Sourcing investments
The primary source of new investment opportunities derives from the close relationships that the Investment Manager has established with many of the key participants in the UK Social Housing market including developers, Housing Associations and Care Providers. This enables the Investment Manager
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to pursue a comprehensive approach to the acquisition of Supported Housing and general needs Social Housing assets.
The Company typically targets single assets developed by developers and portfolios of between £1 million and £30 million in size.
Working with Social Housing property developers:
The Investment Team has a number of existing relationships with property development companies in the Social Housing sector which develop specialised new build properties or refurbish existing properties to enable their conversion to Social Housing assets. The Investment Manager seeks to secure, on behalf of the Group, preferential access to a developer's pipeline of Supported Housing and/or general needs Social Housing assets, typically ranging in value from approximately £1 million to £10 million, in portfolios of five to 20 units. When working with developers, the Company may choose to provide forward funding (described below in paragraph 9.2) in order to gain exclusivity over the developer's pipeline.
The property development companies work closely with Local Authorities and other Approved Providers, as well as Care Providers, to identify where the need for Social Housing is most acute, enabling Local Authorities to meet the housing requirements of their local populations.
In circumstances where the Company is acquiring existing properties that will be refurbished or upgraded, the Company works with developers who manage the renovation work. To mitigate construction risk in these circumstances, the Company seeks to retain an amount equal or similar in value to the planned construction work. The retention is then usually not released until such time as the planned construction work is completed. In any event, lessees' fully repairing and insuring leases negate the construction risk the Company is exposed to in these circumstances.
Private sales:
A large portion of Supported Housing stock is owned privately and leased to Approved Providers, and portfolios of assets frequently come up for sale. The Investment Team has established strong relationships with private landlords and property brokers who specialise in the Social Housing space and, therefore, the Investment Manager seeks to source these portfolios off market. In addition, care providers are under increasing pressure from both Local Authorities and the Care Quality Commission (the "CQC") to separate out the provision of care from the provision of accommodation. They are therefore increasingly looking to divest portfolios of assets, such that they will no longer be responsible for the provision of accommodation and so can continue to provide care.
Approved Provider stock rationalisation:
In order to drive efficiencies or as part of a post-merger stock rationalisation process, or as a result of mergers between Housing Associations, Approved Providers often look to divest non-core assets or properties they do not consider to be a good strategic fit with the rest of their portfolios. This is usually due to location (i.e. the properties are in a part of the UK where the Approved Provider has very little coverage or sectoral preference) or underlying strategy (for example, a preference for general needs Social Housing rather than Supported Housing). In these instances, the Investment Manager may look to acquire the properties directly from the vendors and works alongside an incoming Approved Provider to ensure that, on acquiring the assets, the Group simultaneously enters into a Lease with the incoming Approved Provider. The Investment Team's existing relationships with Approved Providers can enable it to identify such disposals prior to the assets formally coming to market. In addition, the Investment Team is well placed to work in partnership with the Approved Providers known to it to ensure that there is a new Approved Provider in place on acquisition.
9.2 Forward funding
The Group typically only acquires properties when they are complete and there is a Lease in place with an Approved Provider. However, the Group may forward finance Social Housing units in circumstances where there is an agreement to lease in place and where the Group receives a coupon on its investment or equivalent reduction in the purchase price (generally slightly above or equal to the projected income return for the completed asset) during the construction phase and prior to entry into the Lease. The Company does not forward fund a set pool of developers, but works with its existing relationships to provide forward funding where this is necessary or appropriate to ensure the acquisition of a good quality asset. In addition, the Group may engage third party contractors to renovate or customise existing Social Housing assets, as necessary, as explained in paragraph 9.1 above. The use of forward funding from sources of private
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investment, such as that offered by the Company, means that the development and renovation of much- needed Social Housing assets is not solely reliant on the provision of capital by Approved Providers. Where forward funding is provided by the Group, the Group acquires the land or existing building with, inter alia, planning consent and an agreement for lease with an Approved Provider being in place. A sale contract is used to purchase the land or existing building.
On acquisition of the site, the Group simultaneously enters into a forward funding agreement with a developer for the construction of the project. This sets out the finance terms and the time limits within which the construction must be completed. During construction, the work is managed by the developer and is reviewed by an independent construction professional. The Group then makes staged payments to the developer either monthly or against pre-agreed milestones (reviewed by the independent construction professional), but capped at a maximum commitment. On practical completion of the project (an event that must be certified by an independent construction professional), the Approved Provider which has entered into the agreement for lease will be obliged to enter into the Lease. The Group pays any balance remaining of the maximum commitment to the developer following completion of the Lease.
On practical completion, the repairing and insuring obligations pass to the Approved Provider under the Lease and the Group begins to receive rent in accordance with the terms of the Lease.
During and after construction, the Company receives the benefit of construction warranties from the developer and its subcontractors. This, combined with the review of the independent construction professional, helps to mitigate construction risk.
If construction is completed for an amount above the agreed cost, this extra amount is borne by the developer. If a project is delayed past the long stop date agreed in the forward funding agreement, the Company can usually (depending on the transaction documentation) compel the developer to buy back the land or the property in accordance with a buy back agreement entered into at the time of acquiring the land or property. The Company also has the ability, after the long stop date, to find a replacement developer to complete the planned project. These measures further mitigate construction risk.
9.3 Review and approval
The Board has overall responsibility for the management of the Company and oversees compliance with the Company's Investment Objective and Investment Policy.
When any potential acquisition or disposal, forward funding transaction, secured debt financing or asset management opportunity ("Investment Opportunity") is identified by the Investment Team, the Investment Manager undertakes initial due diligence/analysis on the Investment Opportunity in order to verify that it meets the Company's Investment Objective and Investment Policy and is commercially sound. Initial due diligence on an asset acquisition typically includes:
- an indicative valuation;
- a survey of the property;
- preparation of a financial model;
- a review of the acquisition documents and Lease, with a focus on the commercial terms and any other material commercial agreements; and
- desktop analysis on the property, including its location, tenant requirements, number of units, demand for units, Care Provider and Approved Provider.
In completing due diligence of an Approved Provider, the Investment Manager seeks to review (as appropriate):
- recent management accounts of the Approved Provider; and
- the property management and internal controls processes the Approved Provider follows to ensure it maintains the properties it manages to an appropriate standard.
If the outcome of the initial due diligence/analysis process is positive, the Investment Manager will propose the Investment Opportunity to its Investment Committee who will review, challenge and approve the investment (as appropriate) ensuring investments proposed are in accordance with the Company's Investment Policy. Should the Investment Committee approve an Investment Opportunity the Investment Manager will seek to agree indicative terms for the Investment Opportunity, and where appropriate, in the case of an acquisition, disposal or forward funded opportunity, seeks to enter into a period of exclusivity.
The Investment Manager's due diligence process evolves with every transaction the Group undertakes and
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is focused around three key areas: (i) Asset Quality; (ii) Environmental, Social and Corporate Governance (ESG); and (iii) Impact and Financial Performance.
As a result of the Investment Manager's extensive due diligence process, over £650 million of potential acquisitions have been turned down by the Group to date. This equates to over 57.1 per cent. of the assets for which due diligence has been undertaken by the Investment Manager.
When the Investment Committee has approved the Investment Opportunity and the Investment Manager expects that the Investment Opportunity is likely to complete, it delivers to the Board as soon reasonably practicable a report on the Investment Opportunity.
The transaction report includes a written confirmation from the Investment Manager that the Investment Opportunity falls within the scope of the Investment Policy and Investment Objective.
The Board makes such observations and comments as it sees fit on the Transaction Report and communicates them to the Investment Manager as soon as reasonably practicable. Any decision to proceed with the Investment Opportunity is the responsibility of the Investment Manager but shall only be made having taken account of these observations and comments and provided that the Board is satisfied that it falls within the remit of the Company's Investment Objective and Investment Policy. The established track record of the Investment Manager means that the Board may, in due course, decide that it requires less reporting of de minimis transactions that are within specified investment parameters.
9.4 Investment execution
Where an Investment Opportunity proceeds to execution phase, in addition to carrying out further due diligence on the Investment Opportunity (as applicable), the Investment Manager:
- project manages the transaction, including coordinating the work of other professional advisers and service providers, including agents, surveyors, valuers, lawyers, accountants, and tax advisers;
- leads in the negotiation with any third party (whether buying, selling, refinancing, or otherwise) and the third party's agent (if any);
- leads in the negotiation and structuring of the transaction to ensure it meets the Company's Investment Objective and Investment Policy and that the transaction does not detrimentally impact the Company's status as a REIT;
- leads in the negotiation and structuring of any borrowings on the transaction;
- leads in the preparation and negotiation of any new Lease with an Approved Provider, or review the implications of any existing Lease; and
- leads the preparation of final documentation (in conjunction with legal and accounting advisers).
9.5 Investment monitoring and reporting
The Investment Manager continually monitors the progress of the Company's investments, including the visiting of properties as appropriate. Monitoring activity also includes regular meetings with Approved Providers, as required.
The Investment Manager prepares valuation statements for the Portfolio in each three month period (working with the Administrator and independent professional valuers and assisting the Company in selecting appropriate valuers).
The Investment Manager also prepares the relevant sections of the half year and annual reports for the Company relating to the Portfolio and the report of the Investment Manager and is responsible for making any periodic disclosures required to be made by the Investment Manager under the FCA rules in the Investment Manager's capacity as an alternative investment fund manager.
Amongst other general roles, the Investment Manager also works closely with the Company's advisers to assist in the preparation of relevant regulatory announcements and in the observation of other ongoing regulatory obligations of the Company, including maintaining its status as a REIT.
The Investment Manager supplies to the Board for its information any reports on investments, due diligence reports or any other information in relation to investment opportunities as may be requested from time to time.
9.6 Holding and exit strategy
The Group's holding period and exit strategy for each asset depends on the characteristics of the asset,
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transaction structure, exit price potentially achievable, suitability and availability of alternative investments (capital recycling), balance of the Portfolio and lot size of the asset as compared to the value of the Portfolio. While the Directors intend to hold the Group's investments on a long term basis, the Group may from time to time dispose of investments should an appropriate opportunity arise where, in the Investment Manager's opinion, the value that could be realised from such disposal would represent a satisfactory return on the investment and/or otherwise enhance the value of the Company as a whole, having consideration to the Company's Investment Objective and Investment Policy.
9.7 Conflict management and right of first refusal
The Investment Manager has a clear operating framework to ensure that any conflicts of interest are appropriately governed.
Potential conflict where the Investment Manager is party to the transaction
Where a portfolio management decision concerns a transaction which may give rise to a conflict of interest between the Company and the Investment Manager (including, but not limited to, transactions where the Investment Manager will be party to the transaction as vendor or purchaser, or where it is funding a developer which is selling (directly or indirectly) that asset to the Group, or where a member of the Triple Point Group is providing debt finance to the Group (a "Conflict Transaction"), the Investment Manager shall first consult with the Board, having provided details of the Conflict Transaction including full disclosure of any possible conflict. The Conflict Transaction shall not continue unless the Board has confirmed that there is no conflict or that the conflict is appropriately managed, either by a decision of the Board at a Board meeting or in writing. Following clearance from the Board with respect to a Conflict Transaction, the Investment Manager will exercise its discretion in accordance with the review and approval process in paragraph 9.3 above as to whether to proceed with the investment opportunity.
Right of first refusal
The Investment Manager is under an obligation to, as far as reasonably practicable, exclusively offer all new Investment Opportunities which are reasonably determined as falling within the Company's Investment Policy to the Company before any other clients.
If the Investment Manager proposes to reject an opportunity on behalf of the Company with a view to pursing the opportunity for itself (or its affiliates), then the Investment Manager shall inform the Board of the Investment Opportunity and state why it proposes not to extend the Investment Opportunity to the Company. The Investment Manager shall consult with the Board. The Company shall have a maximum of 14 days to decide if it wishes to pursue the Investment Opportunity, during which period neither the Investment Manager nor its affiliates will pursue the opportunity themselves.
Other measures to avoid conflicts
To further prevent and/or manage any potential conflicts of interest between the Investment Manager and the Company, in particular regarding the value, quality or other terms relating to the acquisition or disposal (if appropriate) of assets from or to the Triple Point Group or provision of debt funding by the Triple Point Group to the Group, the Company has established the following procedures:
- prior to a purchase or sale of an asset, all properties will have a formal valuation from an independent professional valuer, such as Jones Lang LaSalle, or another professional valuer of equivalent standing appointed by the Company;
- the Investment Manager will have no representation at Board meetings convened to discuss whether a Conflict Transaction should proceed;
- any debt funding shall be proposed on terms no less favourable than those available from other UK based lenders in the market; and
- no Director with any interest in an Investment Opportunity shall be allowed to vote at a Board meeting at which the transaction is considered, for example, Christopher Phillips would not vote at a Board meeting at which a potential transaction between a Places for People group entity and the Company was considered, if at such time he was a director of a Places for People group entity.
10 DIVIDEND POLICY
The Company is targeting a total dividend of 5.18 pence per Ordinary Share (in respect of the Company's financial year to 31 December 2020), comprised of four interim dividends of 1.295 pence each. The
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Company intends to increase this target dividend annually thereafter in line with inflation, reflecting the CPI-based rent reviews typically contained in the Leases of the assets within the Portfolio.
In the financial year ended 31 December 2019, the Company paid a total dividend of 5.095 pence per Ordinary Share.
Timing of dividends
In normal circumstances, the Company intends to pay quarterly interim dividends to Ordinary Shareholders three months after a quarter end in respect of the three month periods ending on 31 March, 30 June, 30 September and 31 December in each calendar year.
New Ordinary Shares issued pursuant to the Issue or the Placing Programme will be eligible for dividends declared with a record date falling after Admission or Subsequent Admission, as the case may be. In particular, new Ordinary Shares issued pursuant to the Issue will be eligible for the dividend declared in respect of the quarter ending 30 September 2020.
General
As a REIT, the Company is required to distribute by way of dividend a minimum of 90 per cent. of the income profits of the Property Rental Business for each accounting period, as adjusted for tax purposes. Dividends will only be paid subject to the Company satisfying the requirements of the Companies Act. The Directors may offer the Shareholders the opportunity to receive dividends in the form of scrip dividends.
11 STRUCTURE AS A REIT
As a REIT, the Group has a tax efficient corporate structure with the consequences for UK Shareholders described in detail in Part 9 of this Prospectus. As a REIT, the Group does not pay UK corporation tax on profits and gains from its UK Qualifying Property Rental Business. However, the Company is required to distribute to Shareholders at least 90 per cent. of the income profits arising from the Tax-Exempt Business as calculated for tax purposes, by the filing date of the Company's corporation tax return.
Under the current REIT regime, a tax charge might be levied on the Company if it were to make a distribution to a Substantial Shareholder. The Articles contain provisions relating to Substantial Shareholders.
12 DISCOUNT AND PREMIUM MANAGEMENT
The Board has the discretion to seek to manage, on an ongoing basis, any discount or premium at which the Ordinary Shares may trade to their Net Asset Value through further issues or buy-backs of Shares, as appropriate.
12.1 Discount control
The Directors will consider repurchasing Ordinary Shares in the market if they believe it to be in Shareholders' interests as a whole and as a means of correcting any imbalance between supply of, and demand for, the Ordinary Shares.
A special resolution was passed on 14 May 2020 at the Company's annual general meeting granting the Directors authority to repurchase up to approximately 10 per cent. of the Company's then issued share capital expiring at the conclusion of the earlier of the Company's next annual general meeting or 15 months from the date the resolution was passed. Renewal of this buy-back authority will be sought at each annual general meeting of the Company.
The Directors will have regard to the Company's REIT status when making any repurchase and will only make such repurchase through the market at prices (after allowing for costs) below the relevant prevailing Net Asset Value per Ordinary Share and otherwise in accordance with guidelines established from time to time by the Board. Purchases of Ordinary Shares may be made only in accordance with the Companies Act, the Listing Rules and the Disclosure Guidance and Transparency Rules. Under the current Listing Rules of the FCA, the maximum price (exclusive of expenses) that may be paid by the Company on the repurchase of any Ordinary Shares pursuant to a general authority is 105 per cent. of the average of the middle market quotations for the Ordinary Shares for the five Business Days immediately preceding the date of purchase or, if higher, that stipulated by Article 5(6) of the MAR.
Shareholders should note that the purchase of Ordinary Shares by the Company is at the absolute
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discretion of the Directors and is subject to the working capital requirements of the Company and the amount of cash available to the Company in the respective Share Pools to fund such purchases. Accordingly, no expectation or reliance should be placed on the Directors exercising such discretion on any one or more occasions.
12.2 Premium management
The Company is seeking authority at the General Meeting to issue up to 94,339,622 Ordinary Shares pursuant to the Issue and up to 150 million Ordinary Shares pursuant to the Placing Programme on a non- pre-emptive basis.
Investors should note that the issuance of new Ordinary Shares is entirely at the discretion of the Board, and no expectation or reliance should be placed on such discretion being exercised on any one or more occasions or as to the proportion of new Ordinary Shares that may be issued. Any issuance of Ordinary Shares for cash pursuant to the authority will in any event only be undertaken at a price greater than the prevailing NAV per Ordinary Share (unless otherwise authorised by Shareholders).
Ordinary Shares issued to the Investment Manager in accordance with the terms of the Investment Management Agreement will be issued for cash pursuant to the general authorities obtained at the Company's annual general meeting held on 14 May 2020.
12.3 Treasury shares
Any Shares repurchased pursuant to the general authority referred to in paragraph 12.1 above may be held in treasury. The Companies Act allows companies to hold shares acquired by way of market purchase as treasury shares, rather than having to cancel them. These shares may be subsequently cancelled or sold for cash. This would give the Company the ability to reissue shares quickly and cost efficiently, thereby improving liquidity and providing the Company with additional flexibility in the management of its capital base.
The Board currently intends only to authorise the sale of Shares from treasury at prices at or above the prevailing Net Asset Value per the relevant class of Shares (plus costs of the relevant sale). This will be accretive to Net Asset Value in circumstances where Shares are bought back at a discount and then sold at a price at or above the Net Asset Value per the relevant class of Shares (plus costs of the relevant sale).
13 NET ASSET VALUE VALUATION
The Net Asset Value and the EPRA Net Asset Value metrics per Ordinary Share are calculated quarterly by the Administrator and relevant professional advisers in consultation with the Investment Manager and presented to the Board for its approval and adoption. Calculations are made in accordance with IFRS and EPRA's best practice recommendations or as otherwise determined by the Board. In addition, for information purposes only, the Company prepares the Portfolio Net Asset Value based on a valuation of the Portfolio which assumes the sale of all the properties in an SPV with reduced purchaser costs. Details of each quarterly valuation are announced by the Company through a Regulatory Information Service as soon as practicable after the end of the relevant period. In addition, the calculations are reported to Shareholders in the Company's annual report and interim financial statements. Net Asset Value, EPRA Net Asset Value metrics per Ordinary Share and, for information only, the Portfolio Net Asset Value, are calculated on the basis of an up to date quarterly valuation of the Group's properties, conducted by an independent valuer.
The Investment Manager (in its capacity as alternative investment fund manager) manages the valuation process. Valuation of the Portfolio is calculated by a professional independent valuer in accordance with Market Value ("MV") as defined by the RICS "Red Book", the latest edition of which was published in July 2017.
The conventional methodology used in arriving at an opinion of MV for specialist supported housing is a discounted cashflow. This takes into account a number of variables which include (but are not limited to): rental income currently payable; the next uplift due in that income on review; the likelihood of a continuation of that rental income - with growth in accordance with the terms of the Leases - over the remaining terms; assessment of the reversionary value; and costs associated with the purchase of the assets in an arm's length transaction.
So many variables can only be taken into account through an explicit, financial model, which is conventionally run over the period of the lease term, with the net income in the final year capitalised into perpetuity, reflecting the long-term,income-producing potential of the housing stock. However, the opinions of MV arrived at in this way must remain rooted in the market and have regard to emerging evidence of
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trading between investors of stock comparable to that being valued.
The calculation of the Net Asset Value, EPRA Net Asset Value metrics and, for information only, the Portfolio Net Asset Value will only be suspended in circumstances where the underlying data necessary to value the investments of the Company cannot readily, or without undue expenditure, be obtained or in other circumstances (such as a system's failure of the Administrator) which prevents the Company from making such calculations. Details of any suspension in making such calculations will be announced through a Regulatory Information Service as soon as practicable after any such suspension occurs.
The Company reports its EPRA Net Asset Value metrics according to EPRA guidelines. For reporting periods starting on 1 January 2020 the EPRA NAV has been replaced by three EPRA NAV metrics, namely EPRA Net Reinstatement Value, EPRA Net Tangible Assets and EPRA Net Disposable Value. The one most comparable to the previously reported EPRA NAV measure is EPRA Net Tangible Asset (NTA) which, therefore, the Company has adopted as its primary reporting metric.
As at 30 June 2020, the unaudited IFRS NAV (and the unaudited EPRA NTA) per Ordinary Share was 105.34 pence. Taking into account the interim dividend for the quarter ending 30 June 2020 (declared on 26 August 2020 and paid on 25 September 2020) of 1.295 pence, the adjusted NAV per Ordinary Share (and EPRA NTA per Ordinary Share) was 104.05 pence.
14 MEETINGS AND REPORTS
The audited accounts of the Company are prepared in Sterling under IFRS and in accordance with EPRA's best practice recommendations. The Company's accounting reference date is 31 December and the Company's annual report and accounts are prepared up to 31 December each year, with the next accounting period of the Company being the period ending on 31 December 2020. Copies of the report and accounts are sent to Shareholders by the end of April each year. The Company also publishes an unaudited half-yearly report covering the six months to the end of June each year.
The audited consolidated financial information of the Company for the period from 1 January 2019 to 31 December 2019 and the unaudited consolidated financial information for the interim period from 1 January to 30 June 2020, including the audit reports prepared by the Auditor thereon, have been incorporated by reference in Part 14 of this Prospectus.
The Company holds an annual general meeting each year. The annual general meeting for 2020 was held on 14 May 2020.
The Company is seeking shareholder approval for the Resolutions at the General Meeting to be held on 21 October 2020. Approval of the Issue Resolutions is required in order for the Issue to proceed, and approval of the Placing Programme Resolutions is required in order for the Placing Programme to proceed. Further details of the Resolutions are set out in the Circular dated 30 September 2020 (containing notice of the General Meeting) which is being sent to Shareholders on or around the date of this Prospectus and in paragraph 3.2 of Part 10 of this Prospectus.
15 DIRECTORS
The Directors of the Company are responsible for the determination of the Company's Investment Objective and Investment Policy (subject to Shareholder approval, where appropriate) and have overall responsibility for supervising the Company's activities, including the review of investment activity and performance and compliance with the AIC Code of Corporate Governance. The Directors are also responsible for the control and supervision of the Investment Manager.
The Board comprises the following individuals, all of whom are non-executive directors:
Christopher Phillips (Chairman)
Ian Reeves CBE (Senior Independent Director)
Peter Coward
Paul Oliver
Tracey Fletcher-Ray
All of the Directors are independent of the Investment Manager. Brief biographies of the Directors and an overview of the Company's approach to corporate governance are set out in Part 6 of this Prospectus.
16 TYPICAL INVESTORS
The Directors believe that an investment in Ordinary Shares is only suitable for institutional investors,
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professionally-advised private investors or non-advised, private investors who understand and are capable of evaluating the risks of such an investment and who have sufficient resources to be able to bear any losses (which may equal the whole amount invested) that may result from such an investment. Furthermore, an investment in Ordinary Shares should constitute part of a diversified investment portfolio. It should be remembered that the price of securities and the income from them can go down as well as up.
17 TAXATION
Your attention is drawn to the taxation information set out in Part 9 of this Prospectus. Investors who are in any doubt as to their tax position or who are subject to tax in jurisdictions other than the UK are strongly advised to consult their own financial advisers immediately.
18 LIFE OF THE COMPANY AND THE CONTINUATION VOTE
The Company has been established with an indefinite life. However, in accordance with its Articles, the Board will propose an ordinary resolution for the Company to continue in its current form to Shareholders at the annual general meeting to be held in 2023 and at the annual general meeting held every five years thereafter. If the resolution is not passed, the Board will be required to formulate proposals to be put to Shareholders within six months of such resolution being defeated for the reorganisation or reconstruction of the Company.
19 INVESTOR INFORMATION
The latest Net Asset Value will be announced through a RIS and will be available on the Company's website at www.triplepointreit.com. The market price of any Share will be determined by market forces. The Investment Manager (as the AIFM) is required to make available to Shareholders an annual report that complies with Article 22 of AIFMD. The first three annual reports are available at www.triplepointreit.com. Details of the Company's historical performance are contained in its annual reports and accounts which are available at www.triplepointreit.com.
Key information documents for the Ordinary Shares prepared in accordance with the PRIIPs Regulation are available at www.triplepointreit.com.
The Investment Manager (as the AIFM) is required under AIFMD to make certain periodic disclosures to Shareholders of the Company.
Under Article 23(4) of AIFMD, the Investment Manager (as the AIFM) must periodically disclose to Shareholders:
- the percentage of the Company's assets which are subject to special arrangements arising from their illiquid nature;
- any new arrangements for managing the liquidity of the Company; and
- the current risk profile of the Company and the risk management systems employed by the Investment Manager to manage those risks.
This information is disclosed as part of the Company's annual and half year reporting to Shareholders. Under Article 23(5) of AIFMD, the Investment Manager (as the AIFM) must disclose to Shareholders on a regular basis:
- any changes to:
- the maximum level of leverage that the Investment Manager may employ on behalf of the Company; and
- any right or re-use of collateral (including any security, guarantee or indemnity) or any guarantee granted under the leveraging arrangement; and
- the total amount of leverage employed by the Company.
Information on changes to the maximum level of leverage and any right of re-use of collateral or any guarantee under the leveraging arrangements must be provided without undue delay.
Information on the total amount of leverage employed by the Company is disclosed as part of the Company's periodic reporting to Shareholders.
Without limitation to the generality of the foregoing, any information required under Article 23(4) or 23(5) of AIFMD may be disclosed to Shareholders: (a) in the Company's annual report or half-yearly report; (b)
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by the Company issuing an announcement via a RIS; (c) in a subsequent prospectus; and/or (d) by the Company publishing the relevant information at www.triplepointreit.com.
20 NON-MAINSTREAM POOLED INVESTMENTS
As the Company is a REIT, the Ordinary Shares are "excluded securities" under the FCA's rules on non- mainstream pooled investments. Accordingly, the promotion of the Ordinary Shares will not be subject to the FCA's restriction on the promotion of non-mainstream pooled investments.
21 RISK FACTORS
The Company's performance is dependent on many factors and potential investors should read the whole of this Prospectus before making an investment decision and, in particular, the section entitled "Risk Factors" on pages 13 to 26.
22 FURTHER INFORMATION
Your attention is drawn to further additional information set out in Part 10 of this Prospectus.
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PART 3 - THE SOCIAL HOUSING MARKET
- INTRODUCTION
At its core, the term "social housing" refers to housing that is both more affordable and more secure (in terms of tenancy length and rights) than the private sector offers. Social housing is typically provided by housing associations (including Registered Providers and other Approved Providers), which are regulated by the Regulator of Social Housing, can be not-for-profit and which, in many cases, receive direct payment from local government to provide housing to qualifying tenants.
As per the latest Registered Providers' register in August 2020, there are around 1,600 active Housing Associations in the UK, of which around 1,400 are private (both not-for-profit and for-profit)4.
According to The Ministry for Housing, Communities & Local Government ("MHCLG"), which is responsible for housing and planning policy in the UK, there were an estimated 24.4 million homes in England as at 31 March 2019, made up of 20.3 million private homes; 2.5 million owned by Registered Providers; and 1.6 million owned by Local Authorities. As such, Social Housing (provided by Local Authorities and other Approved Providers) represented approximately 17 per cent. of the total housing stock in England as at 31 March 2019.5
In the UK, there is a growing shortage of Social Housing with new housing supply falling behind new household growth. Recent figures indicate that, in England alone, the number of households on Local Authority housing waiting lists was approximately 1.16 million, an increase of 4 per cent. from the previous year. 6 In a report published in May 2018 by the Association for Public Service and Excellence and research provided by the Town and Country Planning Association, 98 per cent. of the Local Authorities surveyed rated their need for Social Housing as either severe or moderate.
More specifically, there is a chronic undersupply of Specialised Supported Housing in the UK which is likely to increase primarily due to the increasing size of the UK population, medical advancements leading to longer life expectancy, the closure of long-stay hospitals and government policy promoting care in the community. In addition, there is a growing prevalence of disability in the UK which is driving demand for Supported Housing that has been adapted to provide long-term homes for vulnerable people with care and support needs. The shortfall of Specialised Supported Housing alone is expected to reach 46,771 units by 2024/25.7 This has been exacerbated by a combination of factors, including:
- the new supply of Social Housing has not kept pace with growth in other sectors;
- in the long term, the new supply of Social Housing has generally not been sufficient to compensate for the amount lost through sales and demolitions;
- since 1980 to 2017, the right-to-buy policy, allowing tenants to purchase their social homes, has reduced the available Social Housing stock and has seen the share of social housing dwellings rented from Registered Providers or Local Authorities decline by 6 percentage points; and8
- Since 1980, the UK's population has grown by nearly 19 per cent., house building has slowed (in 2015 and 2016, total new supply of Social Housing was lower than at any other point recorded) and Government grants available for the sector were reduced.
The housing crisis impacts people of all generations and has created a wide range of societal issues from homelessness and serious debt to overcrowding and ill health. The Government's drive for increased new housing supply has put political pressure on Housing Associations to increase their housing delivery. Housing Associations delivered approximately 46,000 homes in the 12 months up to and including September 2019, of which 39 per cent. were delivered outside the Affordable Homes Programme. In the last three months of that period, almost 9,000 affordable homes were completed.9 The MHCLG is supporting to support the Government's targeted delivery of one million new homes by the end of 2020 and half a million more by the end of 2022. Source: MHCLG Single Departmental Plan - 27 June 2019.
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Source: https://www.gov.uk/government/publications/current-registered-providers-of-social-housing.
5 Source: MHCLG - Dwelling Stock Estimates: 31 March 2019, England
6 Source: HCLG LT-600 - 28 January 2020.
7 Source: National Housing Federation, Supported Housing: Understanding need and supply (2015).
8 Source: MHCLG LT-104 - 21 May 2020
9 Source: How many homes did housing associations build in Q2 2019/20? National Housing Federation, January 2020.
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- SOCIAL HOUSING SECTOR
2.1 Housing benefit
The Social Housing sector is characterised by the fact that all, or a significant portion of, rent is effectively paid by the Government through housing and other benefits. In the Supported Housing sub-sector, this rent is normally paid directly to Registered Providers by the Government and does not 'pass through' tenants themselves. In October 2017, the Government announced its intention to set a long term rent deal for social housing landlords in England. The policy was confirmed in February 2019 and permitted annual rent increases on both social rent and affordable rent properties of up to the consumer price index (CPI) plus one percentage point from 2020, for a period of at least five years. The policy came into effect on 1 April 2020. Separately on 9 August 2018, following a consultation on funding for Specialised Supported Housing, the Government confirmed that housing benefit will be kept in place for all those living in Specialised Supported Housing.
2.2 Opportunities in the sector
The principal drivers of demand for housing across the UK are quality, undersupply and a lack of affordability. In 2001, the Department for Communities and Local Government set out a definition of a decent home, requiring homes to meet a statutory minimum standard, be in reasonable repair, have modern facilities, and provide thermal comfort. At the time it was suggested that 1.6 million social rented homes in England failed to meet these requirements and, while by 2013 this number had decreased to less than 650,000,10 there is still a significant need for improvement. Recent research commissioned by the National Housing Federation, undertaken by Heriot-Watt University, and published in September 2019 has identified that 8.4 million people in England (or 1 in 7) are living in unaffordable, insecure or unsuitable homes and that 3.6 million people will only be able to afford to live in an acceptable standard home if they are given access to social housing11.
Public sector funding is struggling to cope with systemic undersupply and growing excess demand and so there is an opportunity for private capital to work alongside Housing Associations, developers and local authorities to deliver much needed new social homes throughout the UK.
2.3 Specialised Supported Housing
Under the Company's Investment Policy, at least 80 per cent. of the assets owned by the Group will be Specialised Supported Housing properties. To date, the Group has invested almost exclusively in Specialised Supported Housing properties.
These properties typically provide accommodation for the most vulnerable members of society, such as those with learning disabilities, mental health problems and people with physical or sensory impairment. There is currently a pronounced move amongst Local Authorities away from housing such tenants in institutional style registered care homes, towards housing them in individual, independent, community- based accommodation of the type provided by Specialised Supported Housing. This, together with medical advances resulting in greater life expectancies, is leading to a significant increase in the demand for this type of accommodation. This change also follows recommendations from the Winterborne View Report and is in keeping with the statutory obligations of Government and local authorities under the Care Act 2014, to provide care in the community and independent living opportunities.
Specialised Supported Housing is also generally far less expensive for Local Authorities because the accommodation is paid for by central Government funded housing benefit rather than Local Authority budgets. Specialised Supported Housing is also generally a more cost-effective way of providing housing to those with the most complex needs. The overall cost for each resident within a Specialised Supported Housing accommodation is on average £1,569 per person per week for care and housing costs, compared to £1,760 per week on average for a residential care placement and £3,500 per week on average for an in-patient place12.
Normally, larger properties are used to house multiple tenants in independent one- or two-bedroom flats. As well as requiring suitable and specialist housing, the tenants also often have a care need. Specialised Supported Housing properties owned by the Group are leased to an Approved Provider and, where required, a care provider regulated by the Care Quality Commission may be retained (usually by the Local Authority) to provide care to the tenant. In most cases, the individual tenants of Specialised Supported
- Source: National Audit Office Report,Housing in England: overview- 19 January 2017.
- Source: https://www.housing.org.uk/news-and-blogs/news/1-in-7-people-in-england-directly-hit-by-the-housing-crisis/
- Source: Mencap, Funding supported housing for all (2018).
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Housing have both their rent and care paid for by the Government. The MHCLG and the Department of Work and Pensions fund the Local Authority which then pays the Approved Provider and the Care Provider directly.
2.4 General use Social Housing assets
General needs housing caters for families, individuals and couples who require standard residential accommodation and who are eligible to receive housing benefit from the Local Authority. Typically this takes the form of self-contained bungalows, houses, flats or maisonettes. Individuals may, however, be accommodated in 'shared' dwellings.
The tenants will typically have the majority of their rent subsidised by the Local Authority through the receipt of housing benefit. In turn, the Local Authorities will receive funding directly from the Department of Work and Pensions. General needs Social Housing has fewer barriers to entry than Supported Housing and hence is open to greater competition, with resulting investment yields being typically some 20 to 30 per cent. lower for general needs Social Housing compared to Specialised Supported Housing.
2.5 Sector dynamics
The Social Housing sector has traditionally had a low financial risk profile, in part due to the ongoing monitoring presence of the Regulator and much of the rent being funded by central government through housing benefit and latterly universal credit. The Regulator has an involved role in the sector, with responsibility, amongst other things, for identifying potential issues in the market. It adopts an active role in reviewing the sector and seeking to resolve any issues. Historically, when an issue has concerned a Registered Provider that has come close to financial stress, the Regulator has stepped in before the issue could lead to a collapse of the Registered Provider. This has often been achieved through strengthening the board, helping to facilitate a merger between the Registered Provider under stress and a larger more robust Registered Provider or assisting with moving properties to a different Registered Provider better placed to manage them.
An example of intervention by the Regulator occurred in February 2018 when the Regulator issued a Regulatory Notice that First Priority Housing Association Limited ("FPHA") did not appear to have the financial capacity to meet its debts as they fell due. The Regulator began working with FPHA to understand its financial position, strengthen its board and seek a resolution for the 227 individual properties leased and managed by FPHA. During 2018, FPHA's landlords, assisted by the Regulator, went through a successful process of assigning their leases to other Registered Providers. In July 2018, FPHA's remaining creditors entered into a Company Voluntary Arrangement under which FPHA reached a resolution with its remaining creditors five months after publication of the Regulatory Notice.
2.6 Regulatory environment
Most of the Housing Associations in the UK (representing over 80 per cent. of all Registered Providers) have less than 1,000 social housing units under management. When a Registered Provider passes the 1,000 unit threshold, it becomes subject to a detailed in-depth assessment ("IDA") by the Regulator, to be carried out within three years of passing the threshold. The IDA assesses compliance with the requirements of the Governance and Financial Viability Standard. The outcome of an IDA results in the Regulator publishing a formal grading (V 1-4 for Viability and G 1-4 for Governance, where V1-2 and G1-2 are considered "compliant" ratings, and V3-4 and G3-4 are considered "non-compliant" ratings), known as a regulatory judgement. The Company and the Investment Manager see this as positive for the sector due to the increased accountability and higher degree of transparency which it brings.
In response to an increase in local authority demand, the number of Registered Providers that focus exclusively on providing Specialised Supported Housing has grown relatively rapidly over the last five years. A number of these organisations have passed through the 1,000 units under management threshold and so have been or will be subject to an IDA by the Regulator. Similarly, throughout the Specialised Supported Housing sector, the Regulator has been keen to promote high levels of accountability, governance and performance irrespective of the size of the Registered Provider and this has resulted in several regulatory notices and judgements being issued in relation to Registered Providers that manage Specialised Supported Housing properties.
For example, in early 2019, following an initial IDA, the Regulator published a Regulatory Judgement on Inclusion Housing C.I.C., deeming it non-compliant in terms of Financial Viability (V3) and Governance (G3).13 Inclusion Housing is working with the Regulator to address the issues resulting from the Regulatory
13 Source: Regulator of Social Housing, Current regulatory judgement: Inclusion Housing Community Interest Company (2019).
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Judgement.
Encircle Housing and Bespoke Supportive Tenancies Limited both received non-compliant ratings in April and May 2019, respectively, however,14neither was given a formal rating because each had fewer than 1,000 units under management at the time the Regulator conducted its investigations. Their judgements focused on specific issues relating to risk management and, in August 2019, a further short notice was published about Bespoke Supportive Tenancies concerning shortcomings in its compliance checks at certain properties.
In September 2019, the Regulator changed Westmoreland Supported Housing's original Governance rating from G3 to G4 (with its Viability remaining at V3).15 This followed a winding up petition submitted - but then withdrawn - by one of Westmoreland's landlords over disputed rent. The Regulator deemed that Westmoreland had a governance shortcoming as it had allowed this to happen. Westmoreland has now had three new board members appointed by the Regulator to improve its governance.
The Government Green Paper, 'A New Deal for Social Housing' recognised the need for a strong regulatory environment to ensure that tenants are protected and private Registered Providers are well governed and financially viable. While increased regulatory oversight has tempered the growth of some Registered Providers, governance and viability standards continue to rise. There are always further improvements that Registered Providers can make and legacy issues to work through, both of which continued regulatory engagement helps towards.
The Regulator has also acknowledged that business models are changing, an example of which is more Registered Providers choosing to lease assets exclusively rather than own them. The Regulator's April 2019 addendum to its 2018 Sector Risk Profile focused on the risks of providers of Specialised Supported Housing which predominantly lease, rather than own, properties owned by public or private funds while acknowledging the importance of private investment into this sector.
For all Registered Providers the regulation of three economic standards will continue to be assessed; governance and financial viability, value for money standard and rent standard. Furthermore, the Government is due to publish a social housing white paper before the end of 2020. The Government has stated that ensuring greater redress, better regulation and improving the quality of social housing for tenants are its priorities and the white paper itself is expected to focus on tenant protection and strengthening the Regulator's powers in this area.
- CONCLUSION
Following decades of under investment and the mass sell-off of social housing homes through the Right to Buy scheme, set against a backdrop of sustained population growth and rising private sector rents, the social housing sector faces systemic undersupply issues. In the Specialised Supported Housing sector, these are exacerbated by pressure on Local Authorities to move people out of institutional care settings and into independent community-based accommodation.
The Group's investment strategy, therefore, remains focused on creating new social housing properties and working with Local Authorities to bring their waiting lists down whilst delivering long-term homes to individuals with care and support needs. The chronic nature of the undersupply of Specialised Supported Housing is driving the requirement for funding in the asset class and it is likely that private capital will play an increasingly vital role in providing adapted properties for people with care needs over the longer term.
- Source: Regulator of Social Housing, Regulatory Notice: Encircle Housing Limited (2019) Regulator of Social Housing, and, Regulatory Notice: Bespoke Supportive Tenancies Limited (2019).
- Source: Regulator of Social Housing, Current regulatory judgement: Westmoreland Supported Housing Limited (2019).
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PART 4 - PORTFOLIO AND PIPELINE ASSETS
- THE PORTFOLIO
From the date of the IPO until 29 September 2020, being the latest practicable date, the Group has deployed £496.9 million (including costs) in acquiring, committing to acquire or forward funding 434 Supported Housing properties across the UK. The market value of the Portfolio as at 30 June 2020 (comprising 404 properties) on an IFRS basis was £510.3 million and the contracted annual rental income was £28.0 million (excluding forward funding assets). Since 30 June 2020, the Group has acquired a further 30 properties, comprising an aggregate 122 units, for £19.8 million (including costs).
Acquisition Trajectory as at 30 June 2020
In addition, the Group has committed approximately £56.2 million to forward fund 22 properties. These commitments have been included in the calculation of the Company's deployed capital (being £476.1 million), in particular, for the purposes of the working capital statement set out in paragraph 1 of Part 14 of this Prospectus. However, as these properties are not currently income-producing for the Group, the full commitment amount has not been included in the Portfolio statistics in this Part 4 or the Valuation Report contained in Part 5 of this Prospectus.
The Portfolio is diversified across the UK as set out in the table below (as at 30 June 2020). Portfolio Summary
Region | Properties | Units | % of funds Invested |
North West | 91 | 692 | 21.1 |
West Midlands | 60 | 450 | 16.3 |
East Midlands | 53 | 404 | 13.5 |
London | 26 | 198 | 10.9 |
North East | 44 | 341 | 9.9 |
South East | 51 | 242 | 9.7 |
Yorkshire | 32 | 253 | 8.9 |
South West | 27 | 149 | 5.1 |
East | 16 | 94 | 3.3 |
Scotland | 2 | 29 | 0.7 |
Wales | 2 | 20 | 0.6 |
Total | 404 | 2,872 | 100.0 |
As at 30 June 2020, the properties in the Portfolio were leased across 18 Approved Providers, with a weighted average unexpired lease term of 25.4 years. The properties are typically subject to inflation- adjusted, long-term, fully repairing and insuring leases, with 89.7 per cent. of contracted rental income attributed to leases with a term between 20 years to 30 years.
Rental Income by Lease Length
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Lease term maturity profile
The Group has a diversified exposure to the Approved Providers, with the greatest exposure to Inclusion Housing as a percentage of Portfolio value (on an IFRS basis), rental income and GAV metrics. As shown below, the chart depicts Approved Providers as a percentage of GAV as at 30 June 2020:
Approved Providers by IFRS value as a percentage of GAV
IFRS Valuation as a % of GAV by Approved Provider
A list of the assets acquired by the Company since the IPO and which form part of the Current Portfolio is set out in full in the Valuation Report in Part 5 of this Prospectus. The Current Portfolio (being the Group's portfolio as at 31 August 2020) was valued by JLL on an IFRS basis and in accordance with the RICS "Red Book" at £531.9 million. The Current Portfolio valuation does not take into account the full value of seven assets in respect of which the Company has entered into forward funding commitments which had not completed as at the Valuation Date, which in aggregate amount to a further £8.3 million. Since the Valuation Date, the Company has completed on the purchase of one further asset totalling £1.0 million, completed the lease of two forward funding assets and released a further £0.5 million in aggregate in respect of five forward funding assets which have not yet completed.
The Company confirms that no material changes have occurred between the Valuation Date and the date of this Prospectus.
- OVERVIEW OF PIPELINE ASSETS
The Investment Manager has access to a pipeline of potential investments and is engaged in active discussions with various parties (including Approved Providers and developers) in relation to a number of assets that meet the Company's strict investment criteria and are on terms that the Investment Manager considers attractive for the Group. Together, the various sources equate to a pipeline in excess of £150
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million, which may potentially be acquired (subject to, inter alia, satisfactory due diligence and agreement on terms) by the Company over the next 12 months to the extent that the Company has sufficient cash to make such acquisitions out of the proceeds of an equity raise and from debt finance.
The Company intends to carry out each Subsequent Placing under the Placing Programme only when the Net Proceeds of the Issue (or earlier Subsequent Placings) and associated gearing have been invested or committed in order to manage cash drag.
There can be no certainty that the Company will complete any of these acquisitions, or that the Company will complete any of the transactions in its investment pipeline and there are no legally binding commitments in respect of any such pipeline assets. However, with the preparatory work and discussions undertaken to date, and having the benefit of the Investment Manager's strong sector experience and relationships, the Directors expect the Company to be able to acquire a number of these assets, subject to it having requisite funds at the time of any such opportunity arising.
It is also envisaged that, due to the demand in the Social Housing market, the potential pipeline available to the Company will continue to increase. The Issue and the Placing Programme will provide the Company with funds to capitalise on the investment opportunities referred to above.
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PART 5 - VALUATION REPORT
67
30 September 2020
The Directors
Triple Point Social Housing REIT plc 1 King William Street
London
EC4N 7AF
FAO: Chris Phillips
Stifel Nicolaus Europe Limited
150 Cheapside London EC2V 6ET
Akur Limited
66 St. James's Street
London
SW1A 1NE
Dear Sirs,
TRIPLE POINT SOCIAL HOUSING REIT PLC SUPPORTED LIVING PROPERTIES - VALUATION
Jones Lang LaSalle Ltd
30 Warwick Street London W1B 5NH
+44 (0)20 7493 4933 jll.co.uk
Richard Petty
Director | |
Direct line | 020 7087 5971 |
Mobile | 07767 413 631 |
richard.petty@eu.jll.com
Jones Lang LaSalle Limited ("JLL") has been instructed by Triple Point Social Housing REIT plc (hereafter the "Client" or the "Company") to provide valuation advice in relation to their asset base (the "Properties"). The Properties are principally currently let as specialist supported housing and are leased to various Registered Providers ("RPs") of Social Housing. For reasons of client and resident confidentiality, given the vulnerable nature of the people housed in some of the properties, we have provided only limited information in the schedule appended to this report.
This Valuation Report complies with 5.4.5 G and 5.4.6 G of the Prospectus Regulation Rules and Paragraphs 128 to 130 of the ESMA update of CESR'S recommendations for the consistent implementation the European Commission Regulation (EC) No. 809/2004 implementing the Prospectus Directive (as now applicable to the Prospectus Regulation).
Reliance
Our report is addressed to Triple Point Social Housing REIT plc as our Client under the Terms of our Engagement Letter dated 29 September 2020 (the "Terms") and, in accordance with our instructions and the Terms, is also addressed to Stifel Nicolaus Europe Limited and Akur Limited.
Reliance on our report is therefore extended to the following entities, in the roles and/or for the reasons given below:
Jones Lang LaSalle Limited
Registered in England & Wales Number 1188567
Registered Office 30 Warwick Street London W1B 5NH
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Stifel Nicolaus Europe Limited of 150 Cheapside, London EC2V 6ET - acting in its capacity as Sponsor, Joint Financial Adviser, Sole Global Coordinator and Bookrunner to the Client; and Akur Limited of 66 St. James's Street, London, England, SW1A 1NE - acting in its capacity as Joint Financial Adviser to the Client.
The above is not intended to limit our responsibility for our report under Prospectus Regulation Rule 5.3.2R(2)(f) and we refer to the paragraph entitled "Restriction on Use" set out below.
Purpose of Valuation
JLL has been instructed to provide a formal valuation in accordance with the Terms. The valuation is required solely for the purpose of this Prospectus and for use in connection with the Placing, Open Offer, Offer for Subscription and the Placing Programme of ordinary shares of £0.01 each in the capital of the Company (the ''Shares'') and the admission of the Shares to the premium segment of the Official List of the Financial Conduct Authority and to trading on the London Stock Exchange's Main Market for listed securities (together the, "Transaction") and the prospectus to be issued by the Company in connection with the Transaction (the "Prospectus").
Our opinions of value given in this report may be used for this purpose only, and may not be relied upon by, or shared with, any third parties for any other purpose, including expressly not for loan security purposes. However, reliance on our report is extended, as noted above.
Disclosures
Our valuations have been prepared in accordance with the publication, RICS Valuation - Global Standards, which incorporates the IVS, published by the Royal Institution of Chartered Surveyors and the RICS Valuation
- Global Standards 2017 - UK national supplement (the RICS Red Book). Our valuations may be subject to monitoring by the RICS.
In addition, we are pleased to include in this report various information requested in recommendations by The European Securities and Markets Authority (ESMA) (formerly The Committee of European Securities Regulators (CESR)).
This valuation report has been prepared by Mark Nevett, MRICS, Director (#1197767); and counter signed by Richard Petty, FRICS, Lead Director for Residential Advisory (#0089005). Both Mark Nevett and Richard Petty are Registered RICS Valuers.
Since the Client's first equity raise in August 2017, further equity raises in March 2018 and September 2018, JLL has valued some, but not all, of the stock purchased by the Client at the point of acquisition.
JLL recognises the potential concern that, where a valuer responsible for a valuation with third party reliance holds that responsibility for many years, there may be a possibility that a threat of familiarity may arise with either the client or the properties being valued, leading to the perception that the valuer's independence and objectivity could possibly be compromised. We therefore aim to initiate discussions concerning rotation of signatories at year five of an instruction, with any changes implemented in year seven.
We confirm that we are acting as an external valuer and as an independent expert and that we have the knowledge, skills and understanding to undertake the valuation.
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We further confirm that, in relation to our preceding financial year, the proportion of the total fees payable by the Client to our total fee income was less than 5% and is therefore not material.
Valuation Basis and Valuation Date
Our valuation advice has been prepared on the basis of Market Value, according to the definition published in the Red Book, which reads as follows:
"The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion."
The valuation date is 31 August 2020 (the "Valuation Date"). We confirm that we are not aware of any material changes to the Properties which would adversely affect our opinion of value since the Valuation Date.
This valuation has been carried out with the benefit of external inspections of every one of the Properties, which have been carried out by (or on behalf of) JLL; and with the benefit of internal inspections of a proportion of the Properties conducted for the purposes of acquisition. We are therefore satisfied that we have a good and sufficient knowledge of the Properties. The Properties were inspected on acquisition or during the following quarterly valuation exercise.
Sources of Information
We have relied on property information provided by the Client, particularly in respect of the current rent roll. We have received a property schedule which has included the following information:
- Addresses;
- Tenant;
- Number of service users;
- Lease start date;
- Rent review basis (indexation);
- Current annual rent;
- term; and
- Lease end date.
We have not verified this information nor reviewed leases for the Properties but have relied on the information as being complete and accurate. We have also relied in some instances on building condition reports provided by the JLL Building Consultancy team, where available as part of our original acquisition advice.
Valuation Approach
We have agreed with the Client that we are to provide in this report our opinions of value of the individual property assets, in accordance with the principles of Section 40 of the International Accounting Standards ("IAS 40"), including consideration for Stamp Duty Land Tax, ignoring the structure of special purpose vehicles in which the properties are held, and the way in which such assets are commonly transacted.
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We have formed our opinions of value of the Properties using an investment approach. This means that we have considered the rental income currently payable; the next uplift due in that income on review; the likelihood of a continuation of that rental income - with growth in relation to inflation - over the remaining terms of the individual leases; and then a long-term reversion which, in our opinion, should be based on the likely ability of the Properties to continue to generate rent through market renting or affordable or supported housing occupation, as distinct from a reversion to vacant possession value.
We recognise that there is, of course, a risk involved in both assessing the value of the rental income over the remaining terms of the leases and a greater risk in predicting that income will continue beyond the end of the existing leases. However, that is a balanced judgement which, in our view, can properly be reflected in the exit yield applied to the final year's income and in the overall return to a purchaser.
We believe it should suffice to record here that our valuations are based on information provided by the Client and have been prepared using established methodologies of discounted cashflows, reflecting the income flows both current and expected to the respective owners of the portfolios over both the remaining terms of the existing leases and with assumed reversions to future leases on essentially the same terms. We have expressly not assumed a reversion to Market Value with vacant possession. In all cases, the Client owns either the freehold or long leasehold interest in the Properties.
In all cases, the leases granted are on full repairing and insuring terms, whilst the underlying occupation of the Properties is on the basis of either assured or assured shorthold tenancies. For most of the supported housing properties, there is also a separate care agreement in place for the provision of care to residents from third party care providers.
Our valuations are concerned only with the rental income payable by the lessees of the Company, which holds the leases. The Company does not bear any responsibility for the management, maintenance or repair of the Properties during the terms of the leases. Accordingly, the gross income receivable, which is equivalent to the net income, is £28,949,124.
There is an established investment market for properties of this nature, let on full repairing and insuring leases of sufficient length and to suitably specialist and expert covenants, particularly housing associations. Our opinions of value reflect current and recent activity in this investment market in which we are directly involved as both investment agents, acquisition advisors, valuers and surveyors.
Forward Funding Agreements
Of the properties we have valued, seven are works in progress and are owned by the Company which is also funding the development through Forward Funding Agreements with the respective developers. Valuations of such assets comprise a number of additional parameters including: the anticipated value of the completed scheme; the cost required to satisfy the contract with the developer; and the Company's interest payment charged through a deduction to the final balancing payment.
The value of the future cashflow of the development changes on a monthly basis as the developer draws funds up to the maximum commitment which, after adjustment for tax and interest, does not exceed the value of the completed asset. The value of this scheme is provided as at the Valuation Date and we have not accounted for any sums drawn after this date. Please note, however, that the sums paid to the developer result in an increase in the value of the assets and that the current value of the forward funding arrangements is 3.3% of the portfolio value.
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8 Top Lodge Close
We understand that a planning application for the property for a change of use to a seven-bedroom HMO was refused and the property can currently accommodate six persons, the number on which the passing rent has been calculated.
Furthermore, the property is subject to various restrictive covenants and proceedings have been started against TP REIT Propco 2 Limited/TP REIT Propco 3 Limited and 28A Supported Living (RP) for breaching one of those covenants, in particular: "not to carry on or permit to be carried out on any trade or business on the property or otherwise not to use the property other than as a private dwelling house for the occupation of one family unit".
The current use of the property for assisted living would appear to be a breach of that covenant. However, the legal process to prove a breach is incomplete and we are not able to anticipate the court's decision on a breach with any certainty.
Valuations for Accounts Purposes (CESR Recommendations - Para. 130 (vi))
In accordance with the requirements of para 130 (vi), we provide a brief comment on how our opinions of value presented in this report may be compared with the last published consolidated accounts of Triple Point Social Housing REIT plc, which were prepared as at 30 June 2020.
The key points to note are:
- there have been additions to the portfolio since the date of the last published balance sheet, in the form of the completed acquisition of various properties and forward funding commitments which were completed between 1 July and 31 August 2020, being the Valuation Date. Between 1 July 2020 and the Valuation Date, the Company completed the acquisition of 29 additional Properties;
- subsequent to the Valuation Date and the publication of this report, there has been a further acquisition of a property called Glendale which should have a positive effect on the value of the Properties;
- subsequent to the Valuation Date and the publication of this report, the developers of the forward funded development assets have drawn additional funds under the Forward Funding Agreements totalling £1,094,843. The value of the developments increase as funds are drawn and additional interest is charged. This will have a positive effect of the Value of the Properties;
- the opinions of value presented in this report are as 31 August 2020, and there are therefore consequent changes in the unexpired lease terms and the period of time between the Valuation Date and the next rent review under each lease; and
- it is important to emphasise that, because the Company prepares and presents its accounts in accordance with the principles of IAS 40, which dictate that valuations are carried out at the level of individual property assets, the appropriate comparison for any reader to make between the published accounts and this report is with the figure given below for the Market Value on the basis of a stand-alone purchase of each individual property asset.
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Opinions of Value
In accordance with the Terms, and as set out above, our opinions of Market Value are prepared and stated in accordance with the principles of IAS 40 and are therefore valuations of the individual property assets.
Details of our valuations of the Properties are set out in the table which is attached as a Schedule to this report (the "Valuation Table").
The figures in the fifth column in the Valuation Table assume a stand-alone purchase of each Property as an independent real estate transaction with full purchaser's costs (calculated individually for each Property) in line with IAS 40.
In our opinion, the aggregate Market Value of the Properties, on the basis of hypothetical sales of each individual property, in accordance with the principles of IAS 40, after deduction of estimated purchaser's costs (assessed on a property by property basis), is:
£531,910,000
(five hundred and thirty one million, nine hundred and ten thousand pounds)
This represents a range of net initial yields of between 4.5% and 6.0% (allowing for purchaser's costs) which we consider, overall, to represent a fair measure of risk to reflect the characteristics and scale of the Properties. These yields represent a margin of between 3.6% and 5.1% over 30-year UK Government Gilts, which were traded at 0.9% on 28 August 2020.
In accordance with CESR Recommendations - Para 130 (v), we are pleased to include in the table below a summary showing the number of freehold and leasehold Properties together with the aggregate of their respective valuations:
Interest | Unit | Market Value |
count | ||
Freehold | 405 | £499,450,000 |
Leasehold | 19 | £32,460,000 |
Totals | 424 | £531,910,000 |
Restrictions on Use
This report has been prepared for inclusion in the Prospectus and may not be reproduced or used in connection with any other purposes without our prior consent.
Save for any responsibility arising under Prospectus Rule 5.3.2R(2)(f) to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such person as a result of, arising out of, or in accordance with this report or our statement, required by and given solely for the purposes of complying with Annex III item 1.3 of the Prospectus Regulation Rules, consenting to its inclusion in the Prospectus.
For the purposes of Prospectus Regulation Rule 5.3.2R(2)(f), JLL accepts responsibility for this report. To the best of the knowledge of JLL, the information contained in this report is in accordance with the facts and this report does not omit anything likely to affect its import. This declaration is included in the Prospectus in compliance with Annex III item 1.2 of the Prospectus Regulation Rules.
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Save as agreed by JLL in this report, neither our report, nor any part of it, is to be reproduced or referred to in any document, circular or statement without our prior, written approval as to the form and context in which it may appear.
Should you have any queries on any aspect of the report or our valuations, please do not hesitate to contact Richard Petty using the contact details given at the top of this letter.
Yours faithfully, | Yours faithfully, |
Mark Nevett | Richard Petty |
Director | Director |
For and on behalf of | For and on behalf of |
Jones Lang LaSalle Limited | Jones Lang LaSalle Limited |
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Unique | Market Value | |||
Property | Region | Tenure | Inspection Date | Stand Alone |
Reference | Purchase | |||
1 | West Midlands | Freehold | 29/06/2017 | £4,895,926 |
2 | Yorkshire | Freehold | 28/06/2017 | £5,134,414 |
3 | East Midlands | Freehold | 29/06/2017 | £5,515,989 |
4 | North East | Freehold | 29/06/2017 | £4,652,106 |
5 | West Midlands | Freehold | 29/06/2017 | £5,316,379 |
7 | Yorkshire | Freehold | 12/02/2018 | £1,200,733 |
8 | West Midlands | Freehold | 29/01/2018 | £1,971,459 |
9 | South East | Freehold | 01/02/2018 | £1,859,768 |
10 | North East | Freehold | 29/01/2018 | £2,083,146 |
11 | North East | Freehold | 25/01/2018 | £502,113 |
12.1 | North East | Leasehold | 22/02/2018 | £800,229 |
12.2 | North East | Leasehold | 12/02/2018 | £800,229 |
12.3 | North East | Leasehold | 01/02/2018 | £666,857 |
12.4 | North East | Leasehold | 05/02/2018 | £800,229 |
12.5 | North East | Leasehold | 14/02/2018 | £800,229 |
12.6 | North East | Leasehold | 30/01/2018 | £800,229 |
12.7 | North East | Leasehold | 30/01/2018 | £800,229 |
12.8 | North East | Leasehold | 30/01/2018 | £800,229 |
12.9 | North East | Leasehold | 05/02/2018 | £800,229 |
13 | North East | Leasehold | 31/01/2018 | £3,709,249 |
14 | North East | Freehold | 23/02/2018 | £1,991,386 |
15 | North West | Freehold | 01/02/2018 | £726,507 |
16 | South East | Freehold | 02/02/2018 | £2,569,829 |
17 | East Midlands | Leasehold | 30/01/2018 | £1,254,180 |
18 | North West | Leasehold | 08/02/2018 | £3,445,311 |
19 | East Midlands | Freehold | 02/02/2018 | £2,284,197 |
20 | West Midlands | Freehold | 31/01/2018 | £2,089,386 |
21 | South East | Freehold | 27/01/2018 | £1,130,012 |
22 | North West | Leasehold | 02/02/2018 | £753,548 |
23.1 | North West | Freehold | 25/10/2017 | £275,059 |
23.2 | North West | Freehold | 25/10/2017 | £275,059 |
23.3 | North West | Freehold | 25/10/2017 | £275,059 |
23.4 | North West | Freehold | 25/10/2017 | £275,059 |
23.5 | North West | Freehold | 25/10/2017 | £275,059 |
23.6 | North West | Freehold | 25/10/2017 | £275,059 |
23.7 | North West | Freehold | 25/10/2017 | £275,059 |
23.8 | North West | Freehold | 25/10/2017 | £275,059 |
23.9 | North West | Freehold | 25/10/2017 | £275,059 |
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Unique | Market Value | |||
Property | Region | Tenure | Inspection Date | Stand Alone |
Reference | Purchase | |||
23.10 | North West | Freehold | 25/10/2017 | £275,059 |
23.11 | North West | Freehold | 25/10/2017 | £275,059 |
23.12 | North West | Freehold | 25/10/2017 | £275,059 |
23.13 | North West | Freehold | 25/10/2017 | £275,059 |
23.14 | North West | Freehold | 25/10/2017 | £275,059 |
23.15 | North West | Freehold | 25/10/2017 | £275,059 |
23.16 | North West | Freehold | 25/10/2017 | £275,059 |
23.17 | North West | Freehold | 25/10/2017 | £275,059 |
23.18 | North West | Freehold | 25/10/2017 | £275,059 |
23.19 | North West | Freehold | 25/10/2017 | £275,059 |
23.20 | North West | Freehold | 25/10/2017 | £275,059 |
23.21 | North West | Freehold | 25/10/2017 | £275,059 |
23.22 | North West | Freehold | 25/10/2017 | £275,059 |
23.23 | North West | Freehold | 25/10/2017 | £275,059 |
23.24 | North West | Freehold | 25/10/2017 | £275,059 |
23.25 | North West | Freehold | 25/10/2017 | £275,059 |
23.26 | North West | Freehold | 25/10/2017 | £275,059 |
23.27 | North West | Freehold | 25/10/2017 | £275,059 |
23.28 | North West | Freehold | 25/10/2017 | £275,059 |
24 | North West | Freehold | 02/02/2018 | £1,952,283 |
25 | North West | Leasehold | 26/01/2018 | £400,000 |
26 | North West | Freehold | 28/01/2018 | £267,657 |
27 | North West | Freehold | 09/02/2018 | £1,665,271 |
28 | Yorkshire | Freehold | 29/01/2018 | £1,958,715 |
29 | West Midlands | Freehold | 02/02/2018 | £2,619,302 |
30 | North West | Freehold | 02/02/2018 | £927,328 |
31 | North West | Freehold | 26/01/2018 | £3,807,643 |
32 | North West | Freehold | 29/01/2018 | £3,370,458 |
33 | North West | Leasehold | 30/01/2018 | £1,449,621 |
34 | North West | Leasehold | 30/01/2018 | £5,000,236 |
35 | West Midlands | Freehold | 26/01/2018 | £2,137,607 |
36 | North West | Freehold | 05/02/2018 | £1,616,065 |
37 | West Midlands | Freehold | 01/02/2018 | £1,280,924 |
38 | West Midlands | Freehold | 01/02/2018 | £1,838,105 |
39 | North West | Freehold | 29/01/2018 | £3,259,941 |
40 | South East | Freehold | 27/01/2018 | £1,116,850 |
41 | South East | Freehold | 26/01/2018 | £909,023 |
42 | North West | Freehold | 31/01/2018 | £2,623,264 |
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Unique | Market Value | |||
Property | Region | Tenure | Inspection Date | Stand Alone |
Reference | Purchase | |||
43.1 | North West | Freehold | 09/02/2018 | £3,151,260 |
43.2 | North West | Freehold | 09/02/2018 | £1,575,630 |
43.3 | North West | Freehold | 06/02/2018 | £2,250,900 |
44.1 | Yorkshire | Freehold | 01/12/2017 | £2,070,878 |
44.2 | North East | Freehold | 29/11/2017 | £1,571,933 |
44.3 | East Midlands | Freehold | 01/12/2017 | £1,327,008 |
44.4 | East Midlands | Freehold | 01/12/2017 | £739,417 |
44.5 | North West | Freehold | 01/12/2017 | £314,509 |
44.6 | North West | Freehold | 01/12/2017 | £303,165 |
45 | South East | Freehold | 25/01/2018 | £1,192,349 |
46 | South East | Freehold | 26/01/2018 | £707,487 |
47 | London | Freehold | 29/01/2018 | £1,467,004 |
48 | London | Freehold | 27/01/2018 | £1,165,117 |
49 | London | Freehold | 27/01/2018 | £1,091,894 |
50 | South East | Freehold | 02/02/2018 | £1,579,666 |
51 | South East | Freehold | 01/02/2018 | £1,315,630 |
52.1 | North East | Freehold | 31/01/2018 | £449,601 |
52.2 | North East | Freehold | 31/01/2018 | £449,601 |
52.3 | North East | Freehold | 24/01/2018 | £449,601 |
52.4 | North East | Freehold | 24/01/2018 | £449,601 |
52.5 | North East | Freehold | 24/01/2018 | £449,601 |
52.6 | North East | Freehold | 24/01/2018 | £337,200 |
52.7 | North East | Freehold | 27/01/2018 | £449,601 |
52.8 | North East | Freehold | 01/02/2018 | £449,601 |
52.9 | North East | Freehold | 01/02/2018 | £1,011,601 |
53 | Yorkshire | Freehold | 29/01/2018 | £624,159 |
54 | North West | Freehold | 30/01/2018 | £767,064 |
55 | East Midlands | Freehold | 06/12/2017 | £450,626 |
56.1 | North West | Freehold | 06/12/2017 | £1,173,303 |
56.2 | North West | Freehold | 06/12/2017 | £1,173,303 |
57 | North West | Freehold | 29/11/2017 | £879,981 |
58 | North East | Freehold | 05/12/2017 | £907,606 |
59 | North West | Freehold | 01/12/2017 | £928,223 |
60 | Yorkshire | Freehold | 01/12/2017 | £1,258,181 |
61 | East Midlands | Freehold | 30/11/2017 | £2,372,518 |
62 | East Midlands | Freehold | 01/12/2017 | £881,890 |
63 | North West | Freehold | 30/11/2017 | £1,142,773 |
64 | North West | Freehold | 06/12/2017 | £2,655,569 |
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Unique | Market Value | |||
Property | Region | Tenure | Inspection Date | Stand Alone |
Reference | Purchase | |||
65 | North East | Freehold | 15/12/2017 | £397,187 |
66 | East Midlands | Freehold | 22/02/2018 | £4,962,957 |
67 | North East | Freehold | 22/02/2018 | £624,057 |
68.1 | West Midlands | Freehold | 15/02/2018 | £631,811 |
68.2 | West Midlands | Freehold | 15/02/2017 | £631,811 |
68.3 | West Midlands | Freehold | 16/02/2018 | £631,811 |
68.4 | West Midlands | Freehold | 16/02/2018 | £421,207 |
68.5 | West Midlands | Freehold | 16/02/2018 | £631,811 |
68.6 | West Midlands | Freehold | 16/02/2018 | £631,811 |
68.7 | West Midlands | Freehold | 16/02/2018 | £631,811 |
68.8 | West Midlands | Freehold | 20/02/2018 | £2,106,035 |
69 | North West | Freehold | 15/02/2018 | £230,000 |
70 | Yorkshire | Freehold | 15/02/2018 | £439,054 |
71 | Yorkshire | Freehold | 21/02/2018 | £301,803 |
72 | Yorkshire | Freehold | 16/02/2018 | £315,179 |
73 | Yorkshire | Freehold | 20/02/2018 | £396,899 |
74 | East Midlands | Freehold | 20/02/2018 | £2,494,853 |
75 | North East | Freehold | 21/02/2018 | £2,956,043 |
76 | North East | Freehold | 16/02/2018 | £1,032,223 |
77 | North West | Freehold | 15/02/2018 | £1,503,159 |
78 | South East | Freehold | 26/02/2018 | £1,406,994 |
79 | South East | Freehold | 18/02/2018 | £882,843 |
80 | South East | Freehold | 20/02/2018 | £694,866 |
81 | South East | Freehold | 18/02/2018 | £882,850 |
82 | South East | Freehold | 20/02/2018 | £1,293,459 |
83 | South East | Freehold | 26/02/2018 | £1,185,316 |
84 | South East | Freehold | 16/02/2019 | £1,185,316 |
85 | South East | Freehold | 22/02/2018 | £3,681,462 |
86 | London | Freehold | 11/09/2020 | £1,425,751 |
87 | West Midlands | Freehold | 19/02/2018 | £3,138,958 |
88 | West Midlands | Freehold | 21/02/2018 | £853,096 |
89 | North West | Freehold | 20/02/2018 | £1,188,050 |
90 | North West | Freehold | 19/02/2018 | £1,181,678 |
91 | North West | Freehold | 01/08/2018 | £1,700,796 |
92 | Yorkshire | Freehold | 07/09/2020 | £1,416,556 |
93 | South East | Freehold | 16/07/2018 | £626,925 |
94 | East of England | Freehold | 13/07/2018 | £1,617,501 |
95 | South West | Freehold | 17/07/2018 | £308,411 |
11
78
Unique | Market Value | |||
Property | Region | Tenure | Inspection Date | Stand Alone |
Reference | Purchase | |||
96 | North West | Freehold | 19/07/2018 | £443,930 |
97 | East of England | Freehold | 31/07/2018 | £476,713 |
98 | South West | Freehold | 01/08/2018 | £752,341 |
99 | East of England | Freehold | 19/07/2018 | £909,914 |
100 | East Midlands | Freehold | 17/07/2019 | £1,274,303 |
101 | East Midlands | Freehold | 17/07/2019 | £710,678 |
102 | North West | Freehold | 03/08/2018 | £2,583,600 |
103 | North West | Freehold | 17/07/2018 | £585,718 |
104 | North East | Freehold | 27/07/2018 | £879,437 |
105 | Yorkshire | Freehold | 13/07/2018 | £1,175,015 |
106 | East Midlands | Freehold | 08/09/2020 | £729,674 |
107 | Yorkshire | Freehold | 12/02/2018 | £1,543,428 |
108 | East Midlands | Freehold | 30/07/2018 | £1,909,408 |
109 | North East | Freehold | 30/07/2018 | £2,837,442 |
110 | North West | Leasehold | 20/07/2018 | £4,396,329 |
111 | North West | Freehold | 14/07/2018 | £251,668 |
112 | East Midlands | Freehold | 16/07/2018 | £1,320,033 |
113 | North East | Freehold | 14/07/2018 | £2,548,999 |
114 | South East | Freehold | 29/07/2018 | £1,186,751 |
115 | East Midlands | Freehold | 31/07/2018 | £2,464,400 |
116.1 | East Midlands | Freehold | 25/07/2018 | £602,343 |
116.2 | East Midlands | Freehold | 25/07/2018 | £602,343 |
116.3 | East Midlands | Freehold | 25/07/2018 | £602,343 |
116.4 | East Midlands | Freehold | 29/07/2018 | £602,343 |
116.5 | East Midlands | Freehold | 17/07/2018 | £602,343 |
117 | North East | Freehold | 08/09/2020 | £2,038,351 |
118 | North West | Freehold | 07/07/2018 | £1,469,184 |
119 | East Midlands | Freehold | 13/07/2018 | £1,906,189 |
120 | North West | Freehold | 13/07/2018 | £402,497 |
121 | London | Freehold | 28/08/2018 | £1,076,952 |
122 | South Wales | Freehold | 17/07/2018 | £974,350 |
123 | East Midlands | Freehold | 17/07/2018 | £1,967,368 |
124 | East Midlands | Freehold | 06/09/2018 | £1,639,059 |
125 | West Midlands | Freehold | 05/09/2018 | £1,358,144 |
126 | London | Freehold | 19/06/2018 | £1,501,961 |
127 | London | Freehold | 19/06/2018 | £1,737,705 |
128 | London | Freehold | 19/06/2018 | £1,475,377 |
129 | London | Freehold | 19/06/2018 | £1,475,377 |
12
79
Unique | Market Value | |||
Property | Region | Tenure | Inspection Date | Stand Alone |
Reference | Purchase | |||
130 | London | Freehold | 19/06/2018 | £1,453,749 |
131 | London | Freehold | 19/06/2018 | £1,475,377 |
132 | London | Freehold | 19/06/2018 | £1,444,783 |
133 | London | Freehold | 19/06/2018 | £1,205,885 |
134 | London | Freehold | 19/06/2018 | £1,462,833 |
135 | South East | Freehold | 04/09/2018 | £792,128 |
136 | South West | Freehold | 05/09/2018 | £703,976 |
137 | West Midlands | Freehold | 05/09/2018 | £753,587 |
138 | Yorkshire | Freehold | 05/09/2018 | £499,840 |
139 | North West | Freehold | 06/09/2018 | £1,034,074 |
140 | West Midlands | Freehold | 09/09/2020 | £2,742,157 |
141 | South East | Freehold | 03/10/2018 | £846,544 |
142 | West Midlands | Freehold | 04/10/2018 | £481,505 |
143.1 | South East | Freehold | 03/10/2018 | £926,556 |
143.2 | South East | Freehold | 04/10/2018 | £308,852 |
143.3 | South East | Freehold | 03/10/2018 | £463,278 |
144 | South West | Freehold | 01/10/2018 | £800,065 |
145 | West Midlands | Freehold | 07/09/2020 | £2,907,502 |
146 | West Midlands | Freehold | 04/10/2018 | £579,130 |
147 | West Midlands | Freehold | 04/10/2018 | £579,130 |
148 | West Midlands | Freehold | 04/10/2018 | £579,130 |
149 | North West | Freehold | 05/07/2018 | £1,094,810 |
150 | North West | Freehold | 04/10/2018 | £532,367 |
151 | South | Freehold | 22/03/2018 | £549,543 |
152 | South East | Freehold | 23/01/2019 | £694,162 |
153 | South East | Freehold | 01/12/2018 | £671,972 |
154 | Yorkshire | Freehold | 05/07/2018 | £902,041 |
155 | South | Freehold | 27/11/2018 | £638,818 |
156 | North West | Freehold | 03/09/2020 | £2,445,778 |
157 | North West | Freehold | 29/11/2019 | £946,770 |
158 | North West | Freehold | 29/11/2019 | £1,088,941 |
159 | North West | Freehold | 29/11/2019 | £946,770 |
160 | North West | Freehold | 29/11/2019 | £946,770 |
161 | East Midlands | Freehold | 29/11/2019 | £1,640,291 |
162 | East | Freehold | 22/01/2018 | £1,888,434 |
163 | South West | Freehold | 14/09/2018 | £1,142,226 |
164 | South West | Freehold | 14/09/2018 | £1,142,226 |
165 | South West | Freehold | 14/09/2018 | £1,580,053 |
13
80
Unique | Market Value | |||
Property | Region | Tenure | Inspection Date | Stand Alone |
Reference | Purchase | |||
166 | South West | Freehold | 14/09/2018 | £700,599 |
167 | West Midlands | Freehold | 27/11/2018 | £635,310 |
168 | Yorkshire | Freehold | 28/11/2018 | £1,599,816 |
169 | West Midlands | Freehold | 28/11/2018 | £191,693 |
170 | East Midlands | Freehold | 29/11/2018 | £544,831 |
171 | West Midlands | Freehold | 29/11/2018 | £793,897 |
172 | South | Freehold | 19/10/2018 | £1,119,517 |
173 | West Midlands | Freehold | 22/01/2019 | £1,891,244 |
174 | North East | Freehold | 21/01/2019 | £2,454,149 |
175.1 | South | Freehold | 08/11/2018 | £686,183 |
175.2 | South | Freehold | 08/11/2018 | £668,311 |
175.3 | South | Freehold | 08/11/2018 | £331,157 |
175.4 | South | Freehold | 05/11/2018 | £1,049,441 |
175.5 | South | Freehold | 05/11/2018 | £841,532 |
175.6 | East Midlands | Freehold | 09/11/2018 | £873,518 |
175.7 | East Midlands | Freehold | 08/11/2018 | £873,518 |
175.8 | East Midlands | Freehold | 08/11/2018 | £873,518 |
175.9 | East Midlands | Freehold | 08/11/2018 | £873,518 |
175.10 | East Midlands | Freehold | 08/11/2018 | £1,045,818 |
175.11 | East Midlands | Freehold | 09/11/2018 | £873,518 |
175.12 | East Midlands | Freehold | 08/11/2018 | £1,045,818 |
175.13 | East Midlands | Freehold | 08/11/2018 | £1,045,818 |
175.14 | East Midlands | Freehold | 08/11/2018 | £1,045,818 |
175.15 | East Midlands | Freehold | 08/11/2018 | £1,223,873 |
175.16 | East Midlands | Freehold | 08/11/2018 | £1,045,818 |
175.17 | South West | Freehold | 07/11/2018 | £991,207 |
175.18 | South West | Freehold | 09/11/2018 | £492,356 |
175.19 | South West | Freehold | 07/11/2018 | £1,655,890 |
175.20 | South East | Freehold | 08/11/2018 | £1,349,491 |
175.21 | South East | Freehold | 08/11/2018 | £1,082,003 |
175.22 | West Midlands | Freehold | 08/11/2018 | £1,672,515 |
176 | South | Freehold | 21/01/2019 | £1,107,710 |
177 | West Midlands | Freehold | 21/09/2019 | £736,334 |
178 | North West | Freehold | 24/01/2019 | £2,957,478 |
179 | Yorkshire | Freehold | 24/01/2019 | £644,052 |
180 | North West | Freehold | 04/02/2019 | £1,373,713 |
181 | Yorkshire | Freehold | 24/01/2019 | £2,381,043 |
182 | North East | Freehold | 22/01/2019 | £280,384 |
14
81
Unique | Market Value | |||
Property | Region | Tenure | Inspection Date | Stand Alone |
Reference | Purchase | |||
183.1 | London | Freehold | 07/12/2018 | £3,727,909 |
183.2 | West Midlands | Freehold | 05/12/2018 | £1,934,594 |
183.3 | London | Freehold | 10/12/2018 | £4,591,540 |
184 | South East | Freehold | 24/01/2019 | £838,458 |
185 | South East | Freehold | 04/12/2018 | £1,059,726 |
186 | East Midlands | Freehold | 10/04/2019 | £860,845 |
187 | West Midlands | Freehold | 09/04/2019 | £713,568 |
188 | West Midlands | Freehold | 11/04/2019 | £576,594 |
189 | North West | Leasehold | 10/04/2019 | £3,503,025 |
190 | South | Freehold | 08/04/2019 | £907,042 |
191 | West Midlands | Freehold | 27/11/2018 | £484,848 |
192 | North West | Freehold | 11/04/2018 | £677,218 |
193 | North West | Freehold | 10/04/2019 | £1,774,197 |
194 | West Midlands | Freehold | 11/04/2019 | £2,440,005 |
195 | South East | Freehold | 09/04/2019 | £670,220 |
196 | Yorkshire | Freehold | 09/04/2019 | £1,937,043 |
197 | South West | Freehold | 09/04/2019 | £1,152,709 |
198 | North west | Freehold | 04/04/2019 | £2,952,839 |
199 | London | Freehold | 10/04/2019 | £2,480,119 |
200 | East Midlands | Freehold | 10/09/2020 | £3,600,077 |
201 | South West | Freehold | 10/04/2019 | £1,823,650 |
202 | Yorkshire | Freehold | 11/04/2019 | £1,272,855 |
203 | North West | Freehold | 09/09/2020 | £2,380,703 |
204 | West Midlands | Freehold | 10/12/2018 | £724,843 |
205 | South Scotland | Freehold | 11/07/2019 | £2,593,942 |
206 | South Wales | Freehold | 23/05/2019 | £2,155,401 |
207 | South East | Freehold | 23/05/2019 | £714,215 |
208 | North West | Freehold | 17/05/2019 | £1,058,650 |
209 | South West | Freehold | 10/07/2019 | £2,394,813 |
210 | East | Freehold | 12/07/2019 | £2,699,591 |
211 | South East | Freehold | 22/05/2019 | £514,004 |
212 | South West | Freehold | 27/03/2019 | £1,110,440 |
213 | West Midlands | Freehold | 10/07/2019 | £1,937,170 |
214 | South West | Freehold | 01/05/2019 | £571,675 |
215 | London | Freehold | 03/05/2019 | £1,263,618 |
216 | London | Freehold | 01/05/2019 | £5,532,187 |
217 | London | Freehold | 01/05/2019 | £1,896,249 |
218 | London | Freehold | 01/05/2019 | £4,927,567 |
15
82
Unique | Market Value | |||
Property | Region | Tenure | Inspection Date | Stand Alone |
Reference | Purchase | |||
219 | London | Freehold | 01/05/2019 | £2,023,651 |
220 | London | Freehold | 01/05/2019 | £2,023,651 |
221 | London | Freehold | 03/05/2019 | £1,728,499 |
222 | London | Freehold | 30/04/2019 | £1,891,818 |
223 | London | Freehold | 07/05/2019 | £1,896,249 |
224 | North West | Freehold | 10/07/2019 | £950,137 |
225 | East Midlands | Freehold | 08/07/2019 | £687,935 |
226 | North West | Freehold | 09/07/2019 | £1,307,736 |
227 | East Midlands | Freehold | 12/03/2019 | £1,938,664 |
228 | East Midlands | Freehold | 10/07/2019 | £971,330 |
229 | East Midlands | Freehold | 13/12/2018 | £2,724,547 |
230 | West Midlands | Freehold | 11/02/2019 | £2,150,095 |
231 | North West | Freehold | 09/10/2019 | £2,846,576 |
232 | South East | Freehold | 14/10/2019 | £1,109,317 |
233 | South East | Freehold | 16/10/2019 | £1,170,330 |
234 | East Midlands | Freehold | 09/10/2019 | £2,372,163 |
235 | North West | Freehold | 09/10/2019 | £774,349 |
236 | North East | Freehold | 09/10/2019 | £474,000 |
237 | Yorkshire | Freehold | 16/10/2019 | £2,017,670 |
238 | West Midlands | Freehold | 12/07/2019 | £285,286 |
239 | Yorkshire | Freehold | 25/07/2019 | £488,390 |
240 | North West | Freehold | 16/07/2019 | £806,963 |
241 | South East | Freehold | 18/07/2019 | £619,645 |
242 | Yorkshire | Freehold | 22/07/2019 | £494,656 |
243 | South West | Freehold | 17/07/2019 | £568,036 |
244 | East | Freehold | 19/07/2019 | £740,120 |
245 | East | Freehold | 19/07/2019 | £465,283 |
246 | East | Freehold | 19/07/2019 | £619,645 |
247 | South West | Freehold | 17/07/2019 | £610,028 |
248 | West Midlands | Freehold | 12/07/2019 | £447,519 |
249 | East | Freehold | 19/07/2019 | £821,200 |
250 | East | Freehold | 17/07/2019 | £821,200 |
251 | South East | Freehold | 18/07/2019 | £776,086 |
252 | South West | Freehold | 17/07/2019 | £510,849 |
253 | South West | Freehold | 18/07/2019 | £231,223 |
254 | East | Freehold | 19/07/2019 | £738,861 |
255 | Yorkshire | Freehold | 25/07/2019 | £405,312 |
256 | West Midlands | Freehold | 12/07/2019 | £380,568 |
16
83
Unique | Market Value | |||
Property | Region | Tenure | Inspection Date | Stand Alone |
Reference | Purchase | |||
257 | West Midlands | Freehold | 12/07/2019 | £185,087 |
258 | West Midlands | Freehold | 12/07/2019 | £188,019 |
259 | East Midlands | Freehold | 17/07/2019 | £1,225,930 |
260 | West Midlands | Freehold | 12/07/2019 | £3,225,180 |
261 | West Midlands | Freehold | 18/07/2019 | £476,650 |
262 | South East | Freehold | 15/07/2019 | £637,521 |
263 | South East | Freehold | 11/07/2019 | £1,097,396 |
264 | West Midlands | Freehold | 12/07/2019 | £423,037 |
265 | South East | Freehold | 15/07/2019 | £1,019,063 |
267 | South East | Freehold | 15/07/2019 | £325,651 |
268 | West Midlands | Freehold | 12/07/2019 | £2,919,647 |
269 | West Midlands | Freehold | 12/07/2019 | £1,275,311 |
270 | West Midlands | Freehold | 12/07/2019 | £395,341 |
271 | South West | Freehold | 17/07/2019 | £478,812 |
272 | South West | Freehold | 17/07/2019 | £259,535 |
273 | Yorkshire | Freehold | 22/07/2019 | £298,591 |
274 | East | Freehold | 08/10/2019 | £888,999 |
275 | West Midlands | Freehold | 16/10/2019 | £1,207,546 |
276 | West Midlands | Freehold | 15/10/2019 | £894,808 |
277 | Yorkshire | Freehold | 10/10/2019 | £453,964 |
278 | West Midlands | Freehold | 22/01/2020 | £2,146,660 |
279 | South West | Freehold | 13/01/2020 | £1,062,567 |
280 | Yorkshire | Freehold | 16/01/2020 | £459,926 |
281 | West Midlands | Freehold | 12/07/2019 | £1,081,786 |
282 | West Midlands | Freehold | 16/01/2020 | £1,167,568 |
283 | East Midlands | Freehold | 13/01/2020 | £144,571 |
284 | East Midlands | Freehold | 13/01/2020 | £144,571 |
285 | East Midlands | Freehold | 13/01/2020 | £144,571 |
286 | East Midlands | Freehold | 13/01/2020 | £234,258 |
287 | East Midlands | Freehold | 13/01/2020 | £561,418 |
288 | East Midlands | Freehold | 14/01/2020 | £283,512 |
289 | East Midlands | Freehold | 15/01/2020 | £283,512 |
290 | South West | Freehold | 10/01/2020 | £887,444 |
291 | Scotland | Freehold | 22/01/2020 | £858,699 |
292 | North East | Freehold | 24/07/2019 | £1,354,135 |
293 | North East | Freehold | 23/07/2019 | £764,870 |
294 | North East | Freehold | 24/07/2019 | £828,805 |
295 | North East | Freehold | 23/07/2019 | £610,948 |
17
84
Unique | Market Value | |||
Property | Region | Tenure | Inspection Date | Stand Alone |
Reference | Purchase | |||
296 | North West | Freehold | 24/01/2020 | £3,143,542 |
297 | Yorkshire | Freehold | 20/01/2020 | £627,947 |
298 | East | Freehold | 13/01/2020 | £945,607 |
299 | Yorkshire | Freehold | 22/01/2020 | £3,218,114 |
300 | Yorkshire | Freehold | 05/11/2019 | £1,918,811 |
301 | Yorkshire | Freehold | 10/09/2020 | £2,643,109 |
302 | North West | Freehold | 10/12/2019 | £482,365 |
303 | South East | Freehold | 11/09/2020 | £1,123,875 |
304 | West Midlands | Freehold | 06/12/2019 | £3,561,192 |
305 | West Midlands | Freehold | 06/12/2019 | £6,132,622 |
306 | Yorkshire | Freehold | 06/12/2019 | £3,198,905 |
307 | Yorkshire | Freehold | 06/12/2019 | £2,389,634 |
308 | Kent | Freehold | 18/09/2020 | £669,563 |
309 | North East | Freehold | 10/09/2020 | £1,997,261 |
310 | East | Freehold | 10/09/2020 | £1,097,611 |
311 | Yorkshire | Freehold | 08/09/2020 | £2,510,369 |
312 | North West | Freehold | 03/09/2020 | £1,273,238 |
313 | South West | Freehold | 08/09/2020 | £647,996 |
314 | East | Freehold | 08/09/2020 | £1,049,166 |
315 | South West | Freehold | 10/09/2020 | £853,473 |
316 | East | Freehold | 13/02/2020 | £837,041 |
317 | Yorkshire | Freehold | 10/09/2020 | £367,975 |
318 | North West | Leasehold | 16/07/2019 | £1,476,610 |
319 | East Midlands | Freehold | 18/09/2020 | £2,763,254 |
320 | North East | Freehold | 02/09/2020 | £1,816,454 |
321 | West Midlands | Freehold | 29/05/2020 | £369,642 |
322 | West Midlands | Freehold | 29/05/2020 | £126,947 |
323 | West Midlands | Freehold | 29/05/2020 | £126,947 |
324 | West Midlands | Freehold | 29/05/2020 | £129,136 |
325 | West Midlands | Freehold | 29/05/2020 | £129,136 |
326 | West Midlands | Freehold | 29/05/2020 | £140,201 |
327 | West Midlands | Freehold | 29/05/2020 | £153,717 |
328 | West Midlands | Freehold | 29/05/2020 | £275,425 |
329 | West Midlands | Freehold | 29/05/2020 | £298,340 |
330 | West Midlands | Freehold | 29/05/2020 | £312,581 |
331 | West Midlands | Freehold | 29/05/2020 | £2,788,985 |
332 | West Midlands | Freehold | 29/05/2020 | £564,501 |
333 | West Midlands | Freehold | 29/05/2020 | £564,501 |
18
85
Unique | Market Value | |||
Property | Region | Tenure | Inspection Date | Stand Alone |
Reference | Purchase | |||
334 | West Midlands | Freehold | 29/05/2020 | £564,501 |
335 | West Midlands | Freehold | 29/05/2020 | £755,242 |
336 | West Midlands | Freehold | 10/09/2020 | £1,797,000 |
337 | South West | Freehold | 08/09/2020 | £1,934,279 |
338 | South West | Freehold | 07/09/2020 | £1,702,127 |
Total | £531,910,718 |
19
86
PART 6 - DIRECTORS, MANAGEMENT AND CORPORATE GOVERNANCE
- BOARD OF DIRECTORS
The Directors of the Company are responsible for the determination of the Company's Investment Objective and Investment Policy and have overall responsibility for the Company's activities, including the review of investment activity and performance and compliance with the AIC Code of Corporate Governance. The Directors of the Company are also responsible for the control and supervision of the Investment Manager and AIFM.
Triple Point Investment Management LLP (the "AIFM") is the alternative investment fund manager of the Company, with responsibility for exercising investment discretion on behalf of the Company in accordance with the Investment Objective, the Investment Policy and the investment process (as set out in Part 2 of this Prospectus). The AIFM is also responsible for portfolio management of the Group pursuant to the Investment Agreement (see paragraph 4 of this Part 6). The Board is also responsible for the appointment, supervision and monitoring of the Company's service providers, including amongst others, the AIFM. The Board is responsible for the half year and annual financial statements of the Company and, in conjunction with the Administrator and the AIFM, also approves the periodic calculations of Net Asset Value.
The Board meets at least quarterly. For this purpose, the Directors receive periodic reports from the AIFM detailing the Group's performance. The Board delegates certain responsibilities and functions to the audit committee. The audit committee, chaired by Peter Coward, meets at least twice a year.
Each of the Directors is entitled to receive a fee from the Company at such rate as may be determined in accordance with the Articles. The Directors are each entitled to a fee of £50,000 per annum, other than the Chair who is entitled to a fee of £75,000 per annum. The Directors are also entitled to out-of-pocket expenses incurred in the proper performance of their duties.
The Directors of the Company, all of whom are non-executive, are listed below and details of their current and recent directorships and partnerships are set out in paragraph 5.8 of Part 10 of this Prospectus. Christopher Phillips (Chair) (aged 70)
Chris is the current non-executive Chairman of Places for People, the UK's leading registered social landlord, with over 150,000 properties, and approximately 1,500 employees. He has more than 35 years' experience of real estate and listed companies experience. Of note is his role at Colliers where, after heading its residential consultancy business, he became the first Managing Director of Colliers Capital UK Ltd (Colliers' commercial real estate property fund), from 1998 to 2005. Chris is chairman of Londonewcastle, a leading residential led, mixed-use developer in London and he was previously a member of the Octopus Healthcare Advisory Board which invests, develops, and creates partnerships to deliver innovative healthcare buildings to improve the health and wellbeing of the UK.
Professor Ian Reeves CBE (Senior Independent Director) (aged 75)
Among a number of other appointments, Ian is currently visiting Professor of infrastructure investment and construction at Alliance Manchester Business School and chairman of both The Estates and Infrastructure Exchange Limited and GCP Infrastructure Investments Limited, a FTSE 250 company. He was the founder and chairman of the High-Point Rendel Group PLC and led the development of its multi-disciplinary group of companies specialising in business, management and engineering technology consultancy, with a network of offices in Europe, Asia, the Middle East, and the US. Ian was president and chief executive of Cleveland Bridge Worldwide Group and Dorman Long as well as chairman of the London regional council of the CBI and other public and private bodies. Ian currently holds a number of other directorships in the construction, financial and security industries and was awarded his CBE for services to business and charity in 2003.
Peter Coward (aged 64)
Peter was, until the end of June 2016, a Senior Tax Partner at PwC (specialising in property), for whom he had worked since 1977 and was a partner from 1989. He has a BA in Economics and qualified as a Chartered Accountant in 1980. Peter has worked with private and quoted businesses, from small entrepreneurial firms to large international organisations across a wide spectrum of industries advising on structuring and the tax implications of complex international transactions. He has a detailed knowledge and understanding of tax regimes worldwide and of organisational and project structuring to optimise the tax position.
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Paul Oliver (aged 65)
Paul has over 40 years' experience in real estate development and investment management in both the UK and Europe. He has been at the forefront of the establishment of property funds since 1991 when he launched UK Prime, a shopping centre fund operated by Dusco UK. Paul established Equity Partnerships Limited, promoting and managing collective investment schemes, which merged with the Teesland Group in 2000. In 2002 he launched Teesland plc on the London Stock Exchange, building funds under management to €6.5 billion before its sale to Valad in June 2007. Paul is Chief Executive of Curlew Capital, which currently manages Curlew Student Trust 1 and 2, which together hold a portfolio of over 9,000 student accommodation beds in the UK.
Tracey Fletcher-Ray(aged 55)
Tracey has considerable expertise as an executive and non-executive in the care and support sectors. Tracey is currently non-executive director to L&Q Group, one of the UK's largest Housing Associations and developers, and Managing Director of Caring Homes, a leading provider of care homes for the elderly. She spent nearly two years leading the Care Homes business at Berendsen PLC, where she was in charge of developing the company's healthcare business, strategy and growth and eight years at Bupa, holding Senior Director and business leadership roles in the Care Home business which involved contracting with and providing services on behalf of local authorities and the NHS, and as Managing Director for Bupa Health Clinics, operating as a member of the Bupa UK board.
All of the Directors are independent of the Investment Manager.
- THE INVESTMENT MANAGER
2.1 Overview
Triple Point Investment Management LLP (the "Investment Manager") was incorporated as a limited liability partnership in the United Kingdom on 28 July 2006, with registered number OC321250. The registered office and principal operational place of business is 1 King William Street, London, United Kingdom, EC4N 7AF. The Investment Manager is domiciled in England and Wales. The Investment Manager's telephone number is +44 (0)20 7201 8989 and its website is www.triplepoint.co.uk. The Investment Manager is authorised and regulated by the FCA and acts as the alternative investment fund manager to the Company under the AIFMD. Its FCA registered number is 456597.
The Triple Point Group, of which the Investment Manager is a part, is a specialist investment firm founded in 2004. The ultimate beneficial owners of the Investment Manager are Ben Beaton, James Cranmer, Claire Ainsworth, Michael Bayer, Justin Hubble, Max Shenkman, Neil Richards and Ian McLennan. The Investment Manager has a team of property, legal and finance professionals with a successful track record of creating value for clients by funding and by establishing strong partnerships and networks, in order to deliver essential services including technology, renewable energy and asset finance.
The Triple Point Group had £1.5 billion of assets under management as at 29 September 2020 and manages assets on behalf of institutional and retail investors, financial institutions, pension funds, the UK Government and high net worth individuals. The Triple Point Group has launched and managed a range of venture capital trusts ("VCTs") as well as the Company (current VCTs are Triple Point Income VCT plc and Triple Point VCT 2011 plc, both listed on the Main Market) and also offers a range of tax planning products including estate and inheritance tax planning. The Triple Point Group has extensive experience in asset and project finance, private equity, portfolio management and structured investments in sectors including property, technology, renewable energy and industrial support services. The Triple Point Group currently employs 130 people including investment, property, legal and finance professionals (16 of whom work on the management of the Company's Portfolio).
Over the last 12 years, the Investment Manager has arranged over £1 billion of investment in property, local government, NHS hospital trusts and infrastructure including lease and asset finance. The Investment Manager is the corporate service provider of one of the largest privately capitalised leasing businesses in the UK, and has deep operational relationships with key providers of Social Housing and Local Authorities responsible for commissioning Social Housing. The Triple Point Group has been active in the social housing market since 2014, leveraging these active relationships to develop over 80 Supported Housing units over five properties to provide critical accommodation for young adults with mental and or physical disabilities who are often looking to move out of their family homes or institutional care for the first time. All of the units were newly built and incorporated bespoke infrastructure to accommodate the specific needs
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of the tenants. These assets were acquired by the Company for £17.9 million on the IPO and formed the Company's seed portfolio.
Since the IPO, the Investment Manager has transacted on a total of 434 Supported Housing assets. Further details regarding the Portfolio are set out in Part 4 of this Prospectus. The Investment Manager has continued to strengthen existing, and develop new, relationships with developers, Approved Providers (who act as the counterparty to the Lease with the Company) and financial vendors of Social Housing assets.
2.2 Summary biographies
The key personnel of the Investment Manager who are involved in the provision of portfolio management services to the Group under the terms of the Investment Management Agreement are as follows:
James Cranmer - Managing Partner
James joined Triple Point in 2006 to establish its flagship leasing business, Triple Point Lease Partners, which has grown to be one of the UK's most active providers of operating lease finance into Local Authorities and NHS Trust Hospitals. James has over 20 years' experience in structured, asset and vendor finance, and has been responsible for in excess of £1 billion of funding into UK Local Authorities, NHS Hospital Trusts, FTSE 100 and small and medium-sized companies. James is a graduate of St. Andrews University. He became co-Managing Partner in 2016.
Ben Beaton - Managing Partner
Ben joined Triple Point in 2007 to lead the sourcing and execution of a broad spectrum of investments including renewable energy, long leased infrastructure and property bridge lending. He has spent his career building innovative products for investors and offering attractive and flexible funding solutions to a range of businesses, both in the public and private sector. Ben has a BSc (Hons) in Biological Sciences from the University of Edinburgh. He became co-Managing Partner in 2016.
Max Shenkman - Partner & Head of Investment
Max joined Triple Point in 2011 and has led investments across the product range. He has arranged both debt and equity funding for a number of property backed transactions in the social housing, infrastructure and agricultural sectors. Max has led over £150 million of investment into Supporting Housing assets for the Company. Prior to joining Triple Point, Max was an Associate in the Debt Capital Markets team at Lazard where he advised private equity clients on both the buy and sell side. Max graduated from the University of Edinburgh. He became a Partner in July 2018.
Justin Hubble - Partner & General Counsel
Justin joined Triple Point in 2017 as General Counsel. He began his legal career as a barrister in New Zealand before moving to the UK where he worked as a private practice lawyer specialising in commercial and corporate matters at City firm Ashurst during the dot-com era. On leaving private practice, he pursued in-house roles as the General Counsel of several high growth, disruptive technology businesses from startup to float. Justin is qualified as a barrister and solicitor in New Zealand and as a solicitor in the UK. He is a graduate of Otago University, New Zealand and holds a Master of Laws degree from University College London. He became a Partner in July 2018.
Ralph Weichelt - Investment Director
Ralph joined Triple Point in November 2017 as a member of the Investment Team. Prior to joining Triple Point, Ralph was a partner in Chalkhill Partners LLP, a debt advisory firm focusing on commercial real estate debt origination via institutions and debt capital markets. Prior to this, he held a number of positions in pan-European real estate entities spanning fund management, transactional work (sourcing/ underwriting/execution) and advisory. His over 20 years' experience spans across all investment strategies, ranging from core, value added to opportunistic. Ralph is also a qualified Chartered Surveyor.
Isobel Gunn-Brown - Head of Fund Management Services
Isobel joined Triple Point in 2010 and is currently head of the Fund Management Services department. Isobel is ACCA qualified with over 30 years' experience in the financial services sector. At Triple Point, her responsibilities are wide ranging and have included managing the financial reporting for eight listed venture capital trusts, managing Triple Point's FCA regulation and reporting requirements and monitoring investee
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companies' ongoing compliance with HMRC regulation. Isobel leads the financial reporting responsibilities of the Company. Isobel became a Partner in July 2018
Freddie Cowper-Coles - Investment Director
Freddie is an Investment Director in the Property Investment Team at Triple Point. He works exclusively on social and affordable housing, with responsibility for origination, execution and general operations. He began his career as a solicitor, qualifying at Mishcon de Reya where he worked in the property department. Since joining Triple Point in 2015, Freddie has worked on a number of investments, including the firm's first investment into a construction company, and he has overseen the investment of over £150 million into social housing. Freddie has degrees in history from the University of Edinburgh and King's College, London, and holds the Investment Management Certificate and the Corporate Finance Certificate.
- Corporate Governance
3.1 Chairman
Christopher Phillips is one of the directors of Centaurea Investments Limited ("Centaurea") which has an introducer agreement in place with TPIM pursuant to which Centaurea may introduce deals (excluding those relating to any social housing assets or other matters relating to the business of the Company) to TPIM in return for a fee. The Board is aware of this arrangement and level of fees paid (which are immaterial) and is satisfied that it does not impact Mr Phillips's independence or create any conflict of interest.
3.2 Share dealing code
The Board has adopted and implemented a dealing code for Directors and other persons discharging managerial responsibility ("PDMRs") which imposes restrictions on conducting transactions in the Company's shares beyond those imposed by law. Its purpose is to ensure that the Directors, PDMRs and their closely associated persons do not abuse (and do not place themselves under suspicion of having abused) inside information they may have or be thought to have, in particular during periods leading up to the announcement of the Company's results.
3.3 Fair treatment of investors
In addition, the Directors have certain statutory duties with which they must comply. These include a duty upon each Director to act in the way he or she considers, in good faith, would be most likely to promote the success of the Company for the benefit of its Shareholders as a whole.
The Investment Manager maintains conflicts of interest policies to avoid and manage any conflicts of interest that may arise between themselves and the Company.
No Shareholder has a right to obtain preferential treatment in relation to their investment in the Company and the Company does not give preferential treatment to any Shareholder.
- The AIFM Agreement and the Investment Management Agreement
4.1 Introduction
With effect from 1 July 2020, the Company appointed the Investment Manager as the alternative investment fund manager pursuant to the AIFM Agreement in place of Langham Hall Fund Management LLP. At the same time, the Investment Manager and the Company entered into a new Investment Management Agreement. The Investment Management Agreement replaced the delegated investment management agreement entered into on 20 July 2017 (and amended and restated on 23 August 2018) pursuant to which Langham Hall Fund Management LLP (as former alternative investment fund manager) delegated portfolio management responsibilities to the Investment Manager.
4.2 Services under the Investment Management Agreement and the AIFM Agreement
The Board is responsible for the determination of the Company's Investment Objective and Investment Policy and has overall responsibility for the Company's activities except for any alternative investment fund management functions which are provided by the Investment Manager.
The Investment Manager is the Company's alternative investment fund manager and discharges risk management and valuation oversight functions under the AIFM Agreement. In order to cover potential professional liability risks resulting from the Investment Manager's activities, the Investment Manager holds
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a professional indemnity insurance policy against liability arising from professional negligence which is appropriate to the risks covered.
Under the terms of the Investment Management Agreement, the Investment Manager is responsible for portfolio management and risk management of the Company pursuant to the AIFMD. The Investment Manager also performs certain property management services to the Group, including preparing budgets for the properties and co-ordinating with third parties providing services to the Company.
Each of the AIFM Agreement and the Investment Management Agreement were entered into by the Investment Manager and the Company and Shareholders do not have any direct rights to enforce the terms of either agreement.
4.3 Investment Manager's fees under the Investment Management Agreement and the AIFM Agreement
In consideration of the performance by the Investment Manager of the various portfolio management and | |
other services under the Investment Management Agreement, the Investment Manager (or such of the | |
Investment Manager, Triple Point LLP, Advancr Group LLP and each of their respective groups (within | |
the meaning of s421 FSMA) as the Investment Manager may direct) receives an annual management fee | |
which is calculated quarterly in arrears based upon a percentage of the NAV of the Company (not taking | |
into account cash balances) as at 31 March, 30 June, 30 September and 31 December in each year on | |
the following basis (the "Management Fee"): | |
Company NAV (excluding cash balances) where | Annual management (percentage of NAV) |
"cash balances" means positive uncommitted cash | |
balances after deducting any borrowings | |
Up to and including £250 million | 1.0 per cent. |
Next £250 million up to and including £500 million | 0.9 per cent. |
Next £500 million up to and including £1 billion | 0.8 per cent. |
Further amounts over £1 billion | 0.7 per cent. |
The Management Fee is paid quarterly in arrears within 15 Business Days of the release of a NAV announcement or eNav calculation, in respect of each quarter, provided that the Management Fee for the period commencing on the first day of the quarter in which the Investment Management Agreement terminates and ending on the date of termination of the Investment Management Agreement shall be the appropriate pro-rated amount. The asset management aspect of the fee (currently 50 per cent. of such fee) is subject to VAT which the Group does not expect to be in a position to recover. The portfolio management aspect of the fee (currently 50 per cent. of such fee) is VAT exempt.
The Investment Manager is also entitled to be reimbursed for all reasonable disbursements, fees and costs payable to third parties, including travel expenses and attendance at Board meetings incurred by the Investment Manager on behalf of the Company pursuant to provision of services under the Investment Management Agreement.
On a semi-annual basis, once the Company's half year or year end NAV has been announced, the Investment Manager shall procure that 25 per cent. of the total annual Management Fee due to the Investment Manager (or such of the Investment Manager, Triple Point LLP, Advancr Group LLP and each of their respective groups (within the meaning of s421 FSMA) as the Investment Manager may direct) (net of any applicable tax) is payable in the form of Ordinary Shares rather than cash. The deemed issue price for such Ordinary Shares is the prevailing NAV at the end of the relevant period concerned (as disclosed in the half year or year end NAV announcement prior to such subscription). If, however, the Company's Ordinary Shares are trading at a discount to the prevailing NAV at the relevant time, no Ordinary Shares will be issued and instead the Investment Manager shall direct the Company to instruct its broker to acquire Ordinary Shares in the Secondary Market to the value as near as possible equal to 25 per cent. of the management fee payable to the Investment Manager in the relevant period. Even though the Management Fee payable to the Investment Manager is payable on a quarterly basis, Ordinary Shares will only be issued to the Investment Manager on a half-yearly basis, being within 60 Business Days following the release of the half year NAV announcement or the year-end NAV announcement (as applicable).
Under the AIFM Agreement, the Investment Manager receives an annual fee which equates to 3.5 basis points on net assets of up to £300 million, and 3.0 basis points for net assets above £300 million.
All such fees and expenses are exclusive of VAT.
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Other than the fees paid to Investment Manager pursuant to the Investment Management Agreement and AIFM Agreement, no performance fee is payable to the Investment Manager.
The fees chargeable by the Investment Manager during the six months ended 30 June 2020 amounted to £1.98 million, with net assets of £369.65 million at the period end.
4.4 Term and termination
AIFM Agreement
The AIFM Agreement is terminable by the Investment Manager on it giving the Company not less than 12 months' written notice and using its reasonable endeavours to assist with the appointment of a successor alternative investment fund manager of the Company or the Company giving to the Investment Manager not less than 12 months' written notice to the Investment Manager. The AIFM Agreement may be terminated earlier by either party with immediate effect in certain circumstances, including if an order or resolution for liquidation is passed for the other party or the other party has committed a breach of its obligations under the AIFM Agreement that is material in the context of the AIFM Agreement.
Investment Management Agreement
The Company may terminate the Investment Management Agreement by giving the Investment Manager not less than 12 months' prior written notice. The Investment Manager may terminate the Investment Management Agreement by giving the Company not less than 12 months' prior written notice.
The Company is entitled to terminate the Investment Management Agreement at any time if, inter alia, the Investment Manager goes into liquidation (or other insolvency event), ceases to be qualified to be appointed as a portfolio manager, if the FCA requires such termination, if the Investment Manager is no longer capable of performing its duties and obligations or functions under the Investment Management Agreement or if a material breach has been committed by it which (if capable of remedy) has not been remedied within 30 days.
The Investment Manager is entitled to terminate the Investment Management Agreement if the Company goes into liquidation (or other insolvency event) or if the Company has committed a material breach of any terms of the agreement.
4.5 Key Man Event under the Investment Management Agreement
If at any time during the term of the Investment Management Agreement either of James Cranmer or Max Shenkman (each of them being a "Key Man") are unable to perform the services in that agreement (a "Key Man Event"), the Investment Manager shall promptly inform the Company and shall as soon as reasonably practicable and in any event not more than three months after the Key Man Event (or such longer period as the Board may in its absolute discretion approve) propose a replacement key executive, who shall be approved by the Board, such approval not to be unreasonably withheld or delayed.
The Investment Manager may at any time propose to the Company a person as a new key executive of the AIFM in anticipation of the departure or change in the role of a Key Man. If the appointment is approved by the Board (acting reasonably), the departure or change in the role of the Key Man shall not count in the determination of circumstances in which a Key Man Event occurs.
4.6 Investment process and conflict management
The Investment Manager's investment process and conflicts of interest policy are described in paragraph9 of Part 2 of this Prospectus.
- THE TAKEOVER CODE
The City Code applies to the Company. Further details are set out in paragraph 9 of Part 10 of this Prospectus.
- OTHER ADVISERS
Other normal market based fees are payable to additional service providers to the Company and, where relevant, on a property-by-property basis.
The main additional service providers to the Company are set out below.
6.1 Registrar
Computershare Investor Services PLC is the Company's registrar. Under the terms of the Registrar
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Agreement, the Registrar is entitled to a minimum annual fee of £3,000 per year (exclusive of VAT) in respect of the provision of basic registration services, with additional fees being charged for additional services. Further details of the Registrar Agreement are set out in paragraph 12 of Part 10 of this Prospectus.
The appointment of the Registrar was made by the Company and Shareholders do not have any direct rights to enforce the terms of that appointment.
6.2 Administration and Company Secretarial Services
Hanway Advisory Limited (which is a wholly owned subsidiary of Triple Point LLP) is the Company's company secretary and administrator (with such role including responsibility for the production of quarterly NAVs). The combined cost of the administration and company secretarial services provided by Hanway Advisory Limited is £155,000 per annum together with a further fee of 0.01 per cent. of Net Asset Value. Additional costs may be payable in respect of, inter alia, work carried out in relation to special purpose vehicles.
6.3 Auditor
BDO LLP provides audit services to the Company. The annual report and accounts are prepared in accordance with the accounting standards set out under IFRS and with EPRA's best practice recommendations. The fees charged by the Auditor depend on the services provided and on the time spent by the Auditor on the affairs of the Company; there is therefore no maximum amount payable under the Auditor's engagement letter.
The appointment of the Auditor was made by the Company and Shareholders do not have any direct rights to enforce the terms of that appointment.
6.4 AIFMD Depositary
The Company and the AIFM entered into a depositary agreement pursuant to which INDOS Financial Limited (registered number 08255973) (the "Depositary") was appointed with effect from 1 July 2020. The AIFM is authorised by the FCA as a manager of AIFs for the purposes of the AIFMD and is required, in accordance with the AIFMD and the UK AIFMD Rules, to ensure that a single appropriately authorised depositary is appointed to perform certain activities such as monitoring the Company's cash flow, the safe keeping of Scheme Property of the Company entrusted to it (which it holds on trust for the Company) and performing general oversight in relation to the issuance of Shares.
The Depositary was incorporated in England and Wales as a private company limited by shares on 16 October 2012 and its registered office address is 54 Fenchurch Street, London, England, EC3M 3JY. The Depositary is authorised and regulated by the FCA (reference number 602528) and has permission (and operates pursuant to) Part 4A Financial Services and Markets Act 2000 to act as a depositary of an AIF. The Depositary's telephone number is +44 02038762220 and its website is https://www.indosgroup.com/. The costs of the depositary services are £40,000 per annum (exclusive of VAT). These costs are borne by the Company.
The depositary agreement was entered into by the Depositary, the Company and the AIFM and Shareholders do not have any direct rights to enforce the terms of it.
6.5 Property valuation
JLL provides valuation services in relation to the Portfolio. JLL provides quarterly valuations of the Portfolio | |
addressed to the Company. JLL receives a quarterly base fee which is calculated as a percentage of the | |
total reported market value of the Portfolio. JLL also receives an additional one-off fee of £750 for each | |
property added to the Portfolio, where it did not value the property on acquisition and decides an on-site | |
inspection is required. The fee schedule is as follows: | |
Reported market value | Base fee per quarter |
Below £150 million | £10,000 |
Between £150 million to £250 million | £15,000 |
Between £250 million to £350 million | £20,000 |
Between £350 million to £450 million | £25,000 |
Between £450 million to £500 million | £30,000 |
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Reported market value | Base fee per quarter |
Over £500 million | £40,000 |
- ONGOING COSTS AND EXPENSES
The Ongoing Charges Ratio of the Group for the six months ended 30 June 2020 was 1.61 per cent.
The fees and expenses for the various services are set out in this Part 6. Given that many of the fees are irregular in their nature, the maximum amount of fees, charges and expenses that Shareholders will bear in relation to their investment cannot be disclosed in advance.
- INTERNAL CONTROLS
The Board is responsible for maintaining the Company's system of internal control and risk management in order to safeguard the assets of the Company. This system is designed to identify, manage and mitigate financial, operational and compliance risks inherent to the Company. The system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable, but not absolute, assurance against material misstatement or loss.
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PART 7- THE ISSUE
- INTRODUCTION
The Company is a UK REIT incorporated in England and Wales which invests in Social Housing assets in the UK, with a particular focus on Supported Housing.
To date, the Company has raised £355.7 million (before expenses) through the issue of equity.
On 23 July 2018, the Company announced that the Group had entered into a long dated, fixed rate, interest-only financing arrangement through a private placement of Loan Notes in an amount of £68.5 million with MetLife Insurance K.K. Further details of the Loan Notes are set out in paragraph 7 of Part 2.
On 21 December 2018, the Group secured a £70 million Revolving Credit Facility with Lloyds Bank plc. The Revolving Credit Facility was amended and restated on 28 October 2019 to provide for, amongst other things, National Westminster Bank plc to accede as a lender and increase the facility by £60 million to £130 million. Further details of the Revolving Credit Facility are set out in paragraph 7 of Part 2.
Since its IPO in August 2017, the Company has deployed £496.9 million (including costs) in acquiring, committing to acquire or forward funding 434 Supported Housing properties across the UK. The Current Portfolio (being the Company's portfolio as at 31 August 2020) was valued by JLL on an IFRS basis and in accordance with the RICS "Red Book" at £531.9 million. The Current Portfolio valuation does not take into account the full value of seven assets in respect of which the Company has entered into forward funding commitments which had not completed as at the Valuation Date, which in aggregate amount to a further £8.3 million. Since the Valuation Date, the Company has completed on the purchase of one further asset totalling £1.0 million, completed the lease of two forward funding assets and released a further £0.5 million in aggregate in respect of forward funding assets which have not yet completed.
The unaudited IFRS Net Asset Value per Ordinary Share as at 30 June 2020 was 105.34 pence. Taking into account the interim dividend for the period 1 April to 30 June 2020 declared on 26 August 2020 and paid on 25 September 2020 of 1.295 pence, the adjusted IFRS NAV per Ordinary Share as at 30 June 2020 was 104.05 pence. As at 29 September 2020, the Company had a market capitalisation of approximately £379 million.
The Company has fully utilised and invested all proceeds of the £68.5 million Loan Notes and as at 30 September 2020 the Revolving Credit Facility was 89.7 per cent. drawn. The Company expects to have fully drawn the Revolving Credit Facility at the beginning of October 2020 and intends to have substantially invested or committed the Revolving Credit Facility proceeds by the beginning of November 2020. The Investment Manager has access to a significant pipeline of potential investments and is currently engaged in discussions with various parties (including Approved Providers and developers) in relation to a number of assets that meet the Company's investment criteria on terms the Investment Manager considers attractive to the Company. There is no guarantee that the Company will be able to acquire any of these potential investments either at valuations which the Investment Manager considers attractive or at all.
In light of the strong pipeline of investment opportunities identified by the Investment Manager, the Company is targeting an issue of £70 million, representing 66,037,735 Ordinary Shares at an Issue Price of 106 pence per Ordinary Share under the Issue. In the event that the Company has demand from investors which exceeds the target issue size of £70 million, the Board may consider increasing the size of the Issue up to a maximum of 94,339,622 Ordinary Shares at the Issue Price. Any decision to increase the Issue would only be made after careful consideration of the prevailing market conditions, the availability and estimated price of the properties that the Investment Manager has identified as being suitable for purchase by the Company and the length of time it would likely take to acquire them.
The Issue which is not underwritten, is conditional upon, inter alia, the passing of the Issue Resolutions (but, for the avoidance of doubt, not the Placing Programme Resolutions) at the General Meeting on 21 October 2020 (or at any adjournment thereof) and Initial Admission occurring no later than 8.00 a.m. on 23 October 2020 (or such later time and/or date as the Company, Akur and Stifel may agree, being not later than 8.00 a.m. on 30 November 2020) and the Placing Agreement not being terminated and becoming unconditional in accordance with its terms. If these conditions are not met, the Issue will not proceed and an announcement to that effect will be made via a Regulatory Information Service.
Application will be made at the relevant time to the FCA for all of the Ordinary Shares issued pursuant to the Issue to be admitted to the premium listing segment of the Official List of the FCA and to the London Stock Exchange for all such Ordinary Shares to be admitted to trading on the Main Market.
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- USE OF PROCEEDS
The Company is targeting an issue of 66,037,735 Ordinary Shares pursuant to the Issue to raise Gross Proceeds of £70 million.
The Company expects to use the Net Proceeds of the Issue to ensure that the Company is able to continue to take advantage of the Investment Manager's pipeline of attractive investment opportunities and make investments in line with the Company's Investment Policy.
The Gross Proceeds will be used to acquire Social Housing assets in accordance with the Company's Investment Policy and to pay the Issue Costs.
The Investment Manager intends to deploy the net proceeds of the Issue by 6 months from Admission.
- THE OPEN OFFER
3.1 Open Offer Basic Entitlement
Under the Open Offer, up to an aggregate amount of approximately 58,483,701 Ordinary Shares will be made available to Eligible Shareholders at the Issue Price pro rata to their holdings of existing Ordinary Shares on the terms and subject to the conditions of the Open Offer on the basis of 1 Ordinary Share for every 6 Ordinary Shares held at the Record Date (being 28 September 2020).
Eligible Shareholders should be aware that the Open Offer is not a rights issue and Open Offer Application Forms cannot be traded.
Fractional entitlements under the Open Offer will be rounded down to the nearest whole number of Ordinary Shares and will be disregarded in calculating Open Offer Basic Entitlements. All fractional entitlements will be aggregated and made available to Eligible Shareholders under the Excess Application Facility.
The latest time and date for acceptance and payment in full in respect of the Open Offer will be 11:00 a.m. on 19 October 2020. Valid applications under the Open Offer will be satisfied in full up to the applicants' Open Offer Basic Entitlements. Eligible Shareholders are also being offered the opportunity to subscribe for Ordinary Shares in excess of their Open Offer Entitlements under the Excess Applications Facility described below.
The Open Offer is subject to the terms and conditions of the Open Offer which are set out in Part 13 of this Prospectus and should be read carefully before an application is made under the Open Offer. Shareholders should consult an independent financial adviser if they are in doubt about the contents of this Prospectus or the action they should take.
The ISIN of the Open Offer Basic Entitlement is GB00BLN8N207. The SEDOL of the Open Offer Basic Entitlement is BLN8N20.
3.2 Excess Application Facility under the Open Offer
Eligible Shareholders who take up all of their Open Offer Basic Entitlements may also apply under the Excess Application Facility for additional Ordinary Shares in excess of their Open Offer Basic Entitlement. The Excess Application Facility will comprise whole numbers of Ordinary Shares which are not taken up by Eligible Shareholders pursuant to their Open Offer Basic Entitlements or the Placing and Offer for Subscription.
Eligible Non-CREST Shareholders who wish to apply to subscribe for more than their Open Offer Basic Entitlement should complete the relevant sections on the Open Offer Application Form.
Eligible CREST Shareholders are expected to receive a credit to their CREST stock account of their Open Offer Basic Entitlement (equal to the basic number of Ordinary Shares for which they are entitled to apply for under the Open Offer) and their Excess Open Offer Entitlement (which is made up of the maximum size of the Open Offer less their Open Offer Basic Entitlement) and should refer to paragraph 2 of the "Terms and Conditions of the Open Offer" in Part 13 of this Prospectus for information on how to apply for Excess Shares pursuant to the Excess Application Facility.
The CREST stock account to be credited will be an account under the participant ID and member account ID that applies to the Ordinary Shares held at the Record Date by the Eligible CREST Shareholder in respect of which the Open Offer Basic Entitlement and Excess Open Offer Entitlement have been allocated.
Eligible CREST Shareholders who wish to take up all or part of their Open Offer Basic Entitlements and,
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if applicable, any of their Excess Open Offer Entitlements should refer to the CREST Manual for further information on the CREST procedures. If you are a CREST sponsored member, you should consult your CREST sponsor if you wish to take up your entitlement, as only your CREST sponsor will be able to take the necessary action to take up your Open Offer Basic Entitlements and any of your Excess Open Offer Entitlements.
All but the Open Offer Basic Entitlements are subject to scaling back at the discretion of the Company (in consultation with Stifel, Akur and the Investment Manager).
The ISIN of the Excess Open Offer Entitlements is GB00BLN8N314. The SEDOL of the Excess Open Offer Entitlements is BLN8N31.
3.3 Action to be taken under the Open Offer
Non-CREST Shareholders
Eligible Non-CREST Shareholders will be sent an Open Offer Application Form giving details of their Open Offer Basic Entitlement.
Persons that have sold or otherwise transferred all of their existing Ordinary Shares held in certificated form before close of business on 28 September 2020 should forward this Prospectus, together with any Open Offer Application Form (duly renounced), if and when received, at once to the purchaser or transferee, or the bank, stockbroker or other agent through whom the sale or transfer was effected, for delivery to the purchaser or transferee, except that the Prospectus and the Open Offer Application Form should not be sent to any jurisdiction where to do so might constitute a violation of local securities laws or regulations, including, but not limited to, the United States and other Excluded Territories.
The latest time and date for receipt of completed Open Offer Application Forms and payment in full under the Open Offer and settlement of relevant instructions (as appropriate) is expected to be 11.00 a.m. on 19 October 2020, with Initial Admission of the Ordinary Shares expected to take place at 8.00 a.m. on 23 October 2020. The Open Offer Application Form is available from the Receiving Agent, Computershare Investor Services PLC, Corporate Action Projects, Bristol BS99 6AH.
Any existing Shareholder that has sold or otherwise transferred only some of their existing Ordinary Shares held in certificated form on or before 28 September 2020, should refer to the instructions regarding split applications in the "Terms and Conditions of the Open Offer" in Part 13 of this Prospectus and in the Open Offer Application Form.
CREST Shareholders
Eligible CREST Shareholders will not be sent an Open Offer Application Form. Instead, Eligible CREST Shareholders will receive a credit to their appropriate stock accounts in CREST in respect of their Open Offer Basic Entitlement and their Excess CREST Open Offer Basic Entitlement as soon as practicable after 8.00 a.m. on 1 October 2020.
In the case of any existing Shareholder that has sold or otherwise transferred only part of its holding of existing Ordinary Shares held in uncertificated form on or before 30 September 2020 (being the ex- entitlement date under the Open Offer), a claim transaction will automatically be generated by Euroclear which, on settlement, will transfer the appropriate Open Offer Basic Entitlement and Excess CREST Open Offer Basic Entitlement to the purchaser or transferee.
- THE OFFER FOR SUBSCRIPTION
Ordinary Shares will be available under the Offer for Subscription, at the discretion of the Directors (in consultation with Stifel, Akur and the Investment Manager). The Offer for Subscription is being made only in the UK but, subject to applicable law, the Company may allot Ordinary Shares on a private placement basis to applicants in other jurisdictions. The Offer for Subscription Terms and Conditions are set out in Part 12 of this Prospectus and an Offer for Subscription Application Form can be found at the end of this Prospectus. The Offer for Subscription Terms and Conditions should be read carefully before an application is made. Investors should consult their respective stockbroker, bank manager, solicitor, accountant or other financial adviser if they are in any doubt about the contents of this Prospectus. The Offer for Subscription is not underwritten.
Application Forms accompanied by a cheque or banker's draft should be in Sterling and made payable to "CIS PLC RE: Triple Point SOHO OFS Account" and crossed "A/C Payee Only" for the appropriate sum and should be returned to the Receiving Agent to be received by no later than 11.00 a.m. on 19 October
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2020.
For applicants sending subscription monies by electronic bank transfer (CHAPS), payment must be made for value by 11.00 a.m. on 19 October 2020. Please contact Computershare by email at OFSPaymentQueries@Computershare.co.uk and Computershare will then provide applicants with the relevant bank accounts details, together with a unique reference number which must be used when sending payment.
Applicants choosing to settle via CREST, that is DVP, will need to match their instructions to Computershare's participant account (8RA25) by no later than 11.00 a.m. on 19 October 2020, allowing for the delivery and acceptance of Ordinary Shares to be made against payment of the Issue Price per Ordinary Share, following the CREST matching criteria set out in the Offer for Subscription Application Form.
Applications under the Offer for Subscription must be for a minimum subscription amount of £1,000 and thereafter in multiples of £100. Lesser amounts may be accepted by the Company at its sole discretion. Applications may be rejected in whole or in part at the sole discretion of the Company.
Investors subscribing for Ordinary Shares pursuant to the Offer for Subscription may elect whether to hold the Ordinary Shares in certificated form, or in uncertificated form through CREST. If an investor requests for Ordinary Shares to be issued in certificated form on the Offer for Subscription Application Form and ticks the relevant box to request a share certificate, a share certificate will be despatched either to them or their nominated agent (at their own risk) within 14 days of completion of the registration process of the Ordinary Shares. As further set out in the Offer for Subscription Application Form, investors who elect to hold their Ordinary Shares in certificated form may elect at a later date to hold their Ordinary Shares through CREST in uncertificated form, provided that they surrender their share certificates and provide any "know your client" evidence requested by the Company and/or the Receiving Agent.
The publication of the Prospectus and any actions of the Company, Stifel, Akur, the Investment Manager or other persons in connection with the Open Offer, Offer for Subscription and/or Placing should not be taken as any representation or assurance as to the basis on which the number of Ordinary Shares to be offered under the Excess Application Facility, Offer for Subscription and/or Placing or allocations between applications in the Excess Application Facility, Offer for Subscription and/or Placing will be determined, and any such actions or statements and hereby disclaimed, by the Company (in consultation with Stifel, Akur and the Investment Manager).
- THE PLACING
The Company, the Investment Manager, Stifel and Akur have entered into the Placing Agreement, pursuant to which Stifel has agreed, subject to certain conditions, to use reasonable endeavours to procure subscribers and placees for Ordinary Shares made available in the Placing at the Issue Price. The Placing is not being underwritten.
Applications under the Placing will be subject to the terms and conditions set out in Part 11 of this Prospectus.
The latest time and date for receipt of placing commitments under the Placing is 11.00 a.m. on 20 October 2020.
Details of the terms of the Placing Agreement are detailed in paragraph 10.1 of Part 10 of this Prospectus.
- BASIS OF ALLOCATION UNDER THE ISSUE
Subject to the number of Ordinary Shares subscribed for pursuant to the Open Offer Basic Entitlement, the basis of allocation of any remaining Ordinary Shares under the Excess Application Facility, Offer for Subscription and Placing shall be determined by the Company at the sole discretion of the Directors (in consultation with Stifel, Akur and the Investment Manager).
No assurance can be given that applications made under the Excess Application Facility, the Placing or the Offer for Subscription will be met in full or in part or at all.
The Company (acting through Stifel in respect of the Placing and the Receiving Agent in respect of the Open Offer and Offer for Subscription) will notify investors of the number of Ordinary Shares in respect of which their application has been successful and the results of the Issue will be announced by the Company on or around 21 October 2020 via a Regulatory Information Service announcement.
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- GENERAL
Subject to those matters on which the Issue is conditional, the Directors (in consultation with Stifel and Akur) may bring forward or postpone the closing date for the Issue.
To the extent that any application for subscription is rejected in whole or in part, or if the Issue does not proceed, monies received will be returned to each relevant applicant by electronic transfer to the account from which payment was originally received or by cheque (as applicable) at the applicant's risk and without interest.
The ISIN for the Ordinary Shares is GB00BF0P7H59 and the SEDOL is BF0P7H5.
Subject to their statutory right of withdrawal pursuant to section 87(Q)(4) of FSMA, in the event of the publication of a supplementary prospectus, applicants may not withdraw their applications for Ordinary Shares.
Applicants wishing to exercise their statutory right of withdrawal pursuant to section 87(Q)(4) of FSMA after the publication by the Company of a prospectus supplementing this Prospectus must do so by lodging a written notice of withdrawal (which shall include a notice sent by any form of electronic communication) which must include the full name and address of the person wishing to exercise statutory withdrawal rights and, if such person is a CREST member, the Participant ID and the Member Account ID of such CREST Member by post to Computershare Investor Services PLC, Corporate Actions Projects, Bristol, BS99 6AH or by hand (during normal business hours only) to the Receiving Agent, Computershare Investor Services PLC at The Pavilions, Bridgwater Road, Bristol, BS13 8AE or by email to OFSPaymentQueries@Computershare.co.uk so as to be received not later than two Business Days after the date on which the supplementary prospectus is published. Notice of withdrawal given by any other means or which is deposited with or received by Computershare Investor Services PLC after expiry of such period will not constitute a valid withdrawal. The Company will not permit the exercise of withdrawal rights after payment by the relevant applicant of his subscription in full and the allotment of Ordinary Shares to such applicant becoming unconditional in such event Shareholders are recommended to seek independent legal advice.
- COSTS AND EXPENSES OF THE ISSUE
The commissions and other estimated fees and expenses of the Issue will be met by the Company from the Gross Proceeds of the Issue. Assuming Gross Proceeds of £70 million are raised pursuant to the Issue, the costs and expenses payable by the Company will amount to approximately £2 million, being approximately 2.9 per cent. of the Gross Proceeds. No commissions, fees or expenses will be charged by the Company to investors who acquire Ordinary Shares through the Issue.
- OVERSEAS INVESTORS
The attention of persons resident outside the UK is drawn to the notices to investors set out on pages 2 to 4 of this Prospectus which contains restrictions on the holding of Ordinary Shares by such persons in certain jurisdictions.
In particular, investors should note that the Ordinary Shares have not been and will not be registered under the Securities Act or under the applicable state securities laws of the United States, and the Company has not registered, and does not intend to register, as an investment company under the Investment Company Act. Accordingly, the Ordinary Shares may not be offered, sold, pledged or otherwise transferred directly or indirectly in or into the United States or to, or for the account or benefit of, any US Persons except in a transaction exempt from, or not subject to, the registration requirements of the Securities Act.
Prior to the transfer of any Ordinary Shares held by US Shareholders in uncertificated form through CREST over the facilities of the London Stock Exchange or any other market outside the United States, such US Shareholder must deliver a declaration (in the form as the Company may prescribe from time to time) to the Registrar, to the effect that the proposed transfer will be effected pursuant to Rule 904 under Regulation S under the US Securities Act.
10 TYPICAL INVESTOR
The Directors believe that an investment in Ordinary Shares is only suitable for institutional investors, professionally-advised private investors or non-advised, private investors who understand and are capable of evaluating the risks of such an investment and who have sufficient resources to be able to bear any losses (which may equal the whole amount invested) that may result from such an investment. Furthermore, an investment in Ordinary Shares should constitute part of a diversified investment portfolio.
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Triple Point Social Housing REIT plc published this content on 30 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 September 2020 14:19:03 UTC
