Only just noticed the upcoming change of management from Triple Point to Atrato probably January next year. I don't actually know anything really about either of them. Any likely upside for shareholders after the management change or just business as usual? Thanks. |
Not SOHO specific but usually because they get paid to do so, either through raising more from a sale and leaseback than they otherwise would and/or getting cash from the landlord or other incentives - eg the landlord does the fit out the tenant should do and gives a large rent free and accepts an SPV covenant such that the tenant has a free/cheap option I've been shorting a large US hospital reit for the last 2.5 years - MPW that did all of this - and more HOME reit was SPV tenants with the landlord supposedly funding the fit out but that money then been used to pay the landlord thier rent once the rent frees had expired |
Good question - also, what impact does the over renting have on NAV? Guessing the value these properties are held at is considerably more than their market value given triplepoint have been involved.... |
Trying to understand the incentives here.Why would a care provider want to contract in a patient/client to over rented accomodation rather than to accomodation that reflects market rates ? |
Thanks. Sounds reasonable.
"There’s plenty of room in the share price to allow for it"
I tend to agree. Just considering what the market reaction might be under such circumstances. |
At a guess take away 10% of the income to reduce the GAV by c5-7%There's plenty of room in the share price to allow for it |
"In the current market this shouldn’t trade at more than a 20% discount to a kitchen sinked NAV"
Any thoughts on what the kitchen-sinked NAV is likely to be?
Just plucking a figure out of the air, a 20% cut in NAV to 90p would put this on a 28% discount at the current price. |
Or in simple terms; the current valuation will have priced in some degree of rent cuts in the future |
If you're passing rents are higher than fhe market rent then that over-rented part of your rent gets valued at a higher yield So when you remove that over-rented income then you should lower your overall valuation yield as there's of fhe high yield income The degree of the discount depends on the length of the term certain leases and the covenant of the tenant - eg if you're overrated to a strong covenant on a long lease then the yield premium is there but it should be too penal But if it's over rented with short leases and/or to a weak covenant then you'd expect more of an adjustment |
Hi William can you explain what you mean by 'valuation yield includes a premium for being over rented'. |
A fall in the income doesn't necessary lead to a one for one fall in GAV as the valuation yield includes a premium for being over rented so you'd expect to see the valuation yield come in a bit Also taking the hit on income with a good general kitchen sinking is likely to help narrow the share price discount to NAV In the current market this shouldn't trade at more than a 20% discount to a kitchen sinked NAV |
There are issues both at board and management level.
A key matter will is what aspects of performance the new managers are remunerated upon.
We have endured TP entering into contract with incompetent care providers and it is not clear how deep that runs. They say 2 are materially in arrears, but refuse to say how many are in arrears.
Re-contracting at 90% of previous rent should mean that the asset value of those properties falls 10% and the nav 14% [gearing] but TP have again refused to clarify.
The board have had more than 2 years to clear this up, but have been too slow. The chair has been in place since 2017 and has numerous other board positions [10+ according to wsj].
Replacing the manager is only beneficial to shareholders if it is cheaper, but for greater competence to the key issues.
Once that has been dealt with, the board should be replaced. |
Do we know Atrato to be materially better? Although can hardly be worse - my hope is that they see a meaningful and mutually profitable long term engagement - my worry is pillage |
 James CARTHEW in Citywire-...Ibought some Triple Point Social Housing Reit (SOHO) at 57p back in July 2023, and have made some money on this given the high yield and a roughly 15% uplift in the share price since then. However, it still feels too cheap, and I may add to the position.The most recent interim results (covering the six months to 30 June) were published a couple of weeks ago. The net asset value was down slightly, as the valuation yield rose from about 5.6% to 6%, more than offsetting rising rents. Falling UK interest rates should bring the yield back down and the NAV back up in time. The dividend was covered, thanks to improved rent collection.There is an ongoing review of the trust's investment management arrangements. The board has pushed back the timing of the announcement of the conclusion of that, saying it wants to secure an appropriate, cost-effective agreement for the benefit of the company and its shareholders. I am not necessarily expecting anything dramatic to come out of it, but the implication is that good news is on the way. On that basis, a 49% discount and 8.4% yield looks pretty attractive. |
I agree - one for the long run. Swapping Triple Point for Atrato is pretty well as much as one might have wished for. |
Do you think there's any chance of a bit of "kitchen sinking" after Atrato get their feet under the table? |
That's great news Much greater chance now that we don't get a cheap take out Like SUPR this is one I intend to hold forever |
Fantastic news
he Board of Triple Point Social Housing REIT plc (ticker: SOHO) announces that after careful consideration it has selected Atrato Partners Limited ("Atrato") to be appointed as the Company's new investment manager.
The appointment of Atrato is subject to agreeing a new investment management agreement (the "New IMA"). The key terms of the New IMA will be announced in due course, however the Board is satisfied that the New IMA will deliver significant cost savings whilst maintaining the existing high levels of service provision."
Perhaps the re-rate to a more fitting discount (49% currently) will gain pace now :-)
|
ok thanks for the info. That's interesting, it makes a bid more likely for the REIT than if this disparity didn't exist. TBH I have no idea on the likelihood of PE or anyone else making a bid for SOHO, I'll defer to someone else on that point. thx |
Yep - ultimately on a going concern basis the NAV doesn't matter; unless you're going to sell assets or you've got debt covenant issues - as that's when NAV means cashflow US REITs just hold their properties at amortised cost; and the US reit market has outperformed Of course it very much matters if we get a bid for the REIT - as this is likely to be at a cheap level |
ok thanks so I think what you're saying is as long as TP are managing the REIT as a going concern the EPRA NDV doesn't really mean anything. It only would if there's a complete wind up of the REIT or sale to a third party where debt can't be transferred over. Guess will have to wait and see then. thx |
The important point is that if the debt can be ported and there's a takeover for the reit is that the IFRS NAV (with fhe PV of the debt) should be used to judge any offer and not EPRA NAV And even if the debt can't be ported we are still giving up that asset |
The only way to realise it would be to sell the whole REIT The calculation will be taking the forward implied rates over the current cost of debt and then discounting back at the current swap rates; it's pretty simple With bank loans and swaps you can monitise it by simply breaking the swap In theory you could go to your creditors and offer to repay at a bit of a discount - they wouldn't give you the full PV but you ought to be able to get some of it - so long as they believe you won't repay if there's no discount. |
ok but I assume there's no easy way for the co to realise the £62m or at least a part of it, if they could they would already be doing it as this is like 17 points accretion to the NAV. Can't be as straightforward as raising new cheaper debt to retire older expensive debt. But without seeing how TP have calculated it it's hard to say. |
Register for streaming realtime charts, analysis tools, and prices.
Hot Features
Premium
