Social housing trust offers a safe home for residents – and for investors’ capital
Triple Point Social Housing Reit is suffering no loss of rent during the pandemic and is still investing in new properties
SPECIALIST housing associations provide life-changing accommodation and care to residents who have special needs – and vital sustainable income to those who invest in them via dedicated investment trusts.
While Questor’s Income Portfolio does not have a specific “ethical” aspect, it will no doubt cheer many readers who followed our advice to buy shares in Triple Point Social Housing Reit to know that their capital is deployed to such worthy ends.
They will also be cheered by the trust’s ability to collect income from its holdings through thick and thin. In an update to investors early last month it said it had collected 100pc of rents due in April and 95pc of those due for May, with the balance expected to arrive within the following two weeks. This is exactly the kind of update we had hoped
for and expected to hear from the trust when we added it to the portfolio in April, along with some similar funds, as a replacement for five stocks whose dividends had been cancelled, or seemed likely to be, as a result of coronavirus-induced disruption.
Neither was the consistent income the only good news from the trust. It announced at the same time that it had bought seven new properties for a total of £7.6m. The trust’s current value, for comparison, is about £372m. The income it is to receive from these properties will increase its dividend cover – income received divided by income paid to shareholders – to 95pc, which is comfortable enough. As with all of its other properties, the newly acquired ones are leased to its housing association or local authority tenants on contracts that stipulate annual inflation-linked rental increases. This means that shareholders too can expect their income to rise broadly in line with the cost of living.
All 171 of the trust’s leases subject to rent increases in April did indeed have their rents increased in line with the consumer prices index. The figure from February, 1.7pc, was used. The third welcome statement in last month’s update was that the company employed by the trust to carry out independent valuations of its estate, Jones Lang LaSalle, had withdrawn an earlier stipulation that those valuations were subject to “material uncertainty”.
The trust said Jones Lang LaSalle “no longer considers that there is material uncertainty when valuing specialised supported housing of all types on the basis of market value”. It said the removal of the material uncertainty clause reflected “the continued timely receipt of rents in line with pre-Covid-19 levels and the level of activity within the sector, which remains consistent”.
We will of course hold on to this fund.
This investment trust survived the wholesale change in holdings forced on us by the epidemic: it has been in the portfolio since April last year.
One feature that attracted us was its record of dividend growth. At that time the divi had grown by an average of 7pc over the previous 29 years.
Now, of course, the future of dividends across the London market, and beyond, is up in the air. But although Lowland said last month in its interim report that its own dividend income had fallen to 14.5p a share from 22.2p last year, it maintained its divi at 30p for the half-year. It did not give up hope for the future either, although it acknowledged that there could be no guarantees.
The chairman, Robert Robertson, pointed out that Lowland’s reserves had amounted to 68p a share at the end of the financial year. “Revenue reserves are there for a rainy day. At present it feels more like a thunderstorm and we will have to make a judgment on whether we can maintain the [dividend] policy,” he said. “We are cognisant of shareholders’ desire for regular income and it is our firm intention to maintain the policy if possible.” Hold.