PUBLICATION OF CIRCULAR
22 June 2018
Triple Point Social Housing REIT plc
(the "Company" or, together with its subsidiaries, the "Group")
PUBLICATION OF CIRCULAR IN CONNECTION WITH PROPOSED RELATED PARTY TRANSACTION
The Board of Triple Point Social Housing REIT plc (tickers: SOHO; SOHC) has today published a circular to shareholders (the "Circular") in order to convene a general meeting of the Company to be held at 12.00 noon on 11 July 2018 (the "General Meeting") in connection with the proposed acquisition by the Company of the entire issued share capital of TP Social Housing Investments Limited (the "SPV"), a special purpose company which holds a portfolio of 19 Supported Housing assets, consisting of both operating leased assets and forward funded development projects (the "Assets"). The SPV is wholly owned by Pantechnicon Capital Limited ("Seller"), a member of the Triple Point Group.
The acquisition of the SPV from the Seller and the repayment of the oustanding loan (together with accrued interest, repayment premiums and costs under the Loan Agreement as further described below) (the "Acquisition") constitutes a related party transaction for the purposes of the Listing Rules of the Financial Conduct Authority (the "Related Party Transaction"). Consequently, the Acquisition is subject to, and conditional upon, the approval of Ordinary Shareholders at the General Meeting.
Background to and reasons for the Related Party Transaction
Following the Company's recent C Share Issue, which raised gross proceeds of £47.5 million, the Company is seeking to deploy this capital by making further investments in line with its investment objective and investment policy.
The Company's Delegated Investment Manager continues to identify attractive opportunities in the Supported Housing sector which it considers appropriate for investment by the Company. Between February and April 2018, the SPV acquired the Assets utilising debt funding provided by TP Leasing, a member of the Triple Point Group, via a short term secured debt facility (the "Loan Agreement"). The Delegated Investment Manager aggregated this portfolio within the SPV to take advantage of attractive investment opportunities with a view to offering the Assets to the Company for acquisition when the Company had obtained further equity or debt funding. Further information on the Assets is set out in paragraph 3.2 of Part 1 of the Circular.
As at today's date, the Ordinary Share Pool is fully committed and invested and the Company is in the process of securing a new debt facility against assets in the Ordinary Share Pool which, once available for drawdown, will be deployed in full ahead of the balance of any uninvested proceeds of the C Share Issue.
As the new debt facility is not in place at the date of the Circular, it is proposed that the equity proceeds of the C Share Issue be used to fund the acquisition of the SPV and hence the Assets. Assuming completion of the Related Party Transaction, the Assets will therefore initially form part of the C Share Pool. Following conversion of the C Shares into Ordinary Shares in accordance with the terms of the Articles, the Assets will then cease to form part of the C Share Pool and will instead form part of the general asset portfolio of the Company.
It is therefore proposed that the Company will purchase the entire issued share capital of the SPV from the Seller for a total consideration of £1.00 (representing the net asset value of the issued shares in the SPV taking into account the outstanding loan liability under the Loan Agreement), and, concurrently with completion of the acquisition, put the SPV in funds to enable it to repay the outstanding loan (together with accrued interest, repayment premiums and costs) under the Loan Agreement in full. The total funds to be paid by the Company from the C Share Pool to complete the acquisition (excluding acquisition costs) will consequently be £22,316,439.61. Taking into account the further funding that the Company will provide to the SPV to complete the full purchase of Assets 17, 18 and 19 (as described further below), the maximum capital commitment payable by the Company as a result of the Related Party Transaction (excluding transaction costs) will be £24,067,560.39.
It is anticipated that, taking into account the Related Party Transaction and further acquisitions expected to be announced by the Company shortly, the C Share Pool will be 90 per cent. invested or committed and accordingly, the calculation date for conversion of the C Shares will be 30 June 2018, conditional on Ordinary Shareholder approval of the Related Party Transaction at the General Meeting.
The Assets
The Delegated Investment Manager considers all of the Assets held by the SPV to be suitable investments for the Company, and has followed the same rigorous due diligence process in acquiring the Assets for the SPV as it does with all other assets acquired by the Company, including independent valuation, detailed legal title due diligence, where relevant, building/structural surveys and an assessment of the financial standing of the relevant Approved Providers who are the lessees of the Assets.
The Assets comprise 16 operating leased assets, let on new FRI leases (for a minimum period of 20 years) to Hilldale (3 assets, 50 units), Care Housing Association (1 asset, 9 units), Inclusion (1 asset, 15 units), Falcon (6 assets, 23 units), My Space (2 assets, 23 units) and Chrysalis (2 assets, 16 units), all of whom have previously entered into leases with the Company, and Partners Foundation Limited (1 asset, 2 units).
In addition, the SPV has exchanged contracts and awaits completion of an asset (Asset 17) under renovation in South Wales comprising 6 units which has been pre-let on a new FRI lease for 20 years (with the option to extend for a further 5 years) to Inclusion and on which the SPV is currently earning interest. Asset 18 is a forward funded development project in the North East, comprising 12 units pre-let to Care Housing Association on a new FRI lease for 20 years (with the option to extend for a further 5 years), currently under construction. As at the date of the Circular, approximately £1.34 million in aggregate has been paid by the SPV pursuant to the sale and/or forward funding agreements for these two Assets, with a further approximately £1.45 million due to be paid to the developers either during the construction phase or after their respective works are completed. Practical completion is expected at the end of June 2018 and early November 2018 respectively.
The final Asset (Asset 19), in respect of which the SPV has exchanged contracts, with completion anticipated in September 2018, relates to a property of 5 units in the South East, pre-let to Falcon on a new FRI lease for 20 years (with the option to extend for a further 5 years).
The current blended net yield of the Assets is 5.89 per cent. which, taking into account the estimated costs associated with the Related Party Transaction, is expected to reduce to 5.87 per cent. This compares to the portfolio yield of 5.32 per cent. in respect of the Company's portfolio as at 31 December 2017 (being the date of the Company's most recently published Report and Accounts).
The SPV acquired all of the Assets utilising debt funding provided via the Loan Agreement by TP Leasing, another member of the Triple Point Group.
Principal Terms of the Related Party Transaction
Under the terms of the SPA, the Company has agreed, conditionally upon approval of the Resolution at the General Meeting, to acquire the entire issued share capital of the SPV at its nominal value of £1.00 and to capitalise the SPV as required to allow it to repay the Loan Agreement in full concurrently with completion.
The total funds to be paid by the Company from the C Share Pool to complete the acquisition (excluding acquisition costs) will consequently be £22,316,439.61. It is expected that the costs payable by the Company in relation to the Related Party Transaction will be approximately £67,000 plus VAT.
Excluding the expenses payable in connection with the acquisition of the SPV shares, the effective cost of the acquisition of the portfolio of Assets by the Company will be equal to the original aggregate price paid by the SPV for such Assets.
General Meeting
A notice convening the General Meeting to be held at 12.00 noon on 11 July 2018 at the offices of Canaccord Genuity Limited, 88 Wood Street, London EC2V 7QR is set out in the Circular.
The Resolution to be put forward at the General Meeting proposes that the acquisition by the Company of the entire issued share capital of the SPV from the Seller and the provision of funding to repay the Loan to TP Leasing pursuant to the SPA be approved. The Resolution is to be proposed as an ordinary resolution, requiring a simple majority of Ordinary Shareholders entitled to vote and present in person or by proxy to vote in favour in order for it to be passed.
All Ordinary Shareholders are entitled to attend and vote at the General Meeting. C Shares do not carry voting rights and accordingly C Shareholders are not entitled to vote at the General Meeting in respect of any C Shares held by them.
Recommendation and Voting Intentions
The Board considers the Related Party Transaction to be fair and reasonable so far as Shareholders are concerned and has been so advised by the Sponsor. In providing advice to the Board, the Sponsor has taken into account the Board's commercial assessment of the Related Party Transaction. Consequently, the Board considers the Resolution to be in the best interests of the Company and Shareholders as a whole.
Accordingly, the Board recommends that Ordinary Shareholders vote in favour of the Resolution to be proposed at the General Meeting, as the Directors also intend to do in respect of their own beneficial holdings amounting to 202,967 Ordinary Shares in aggregate, representing approximately 0.1 per cent. of the current voting share capital of the Company.
As a related party for the purposes of the Listing Rules, the Delegated Investment Manager has confirmed it will not vote on the Resolution to be proposed at the General Meeting and has undertaken to take all reasonable steps to ensure that its associates will not vote on the Resolution to be proposed at the General Meeting.
Publication of Circular
A copy of the Circular has been submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM. In addition, a copy of the Circular will shortly be available on the Company's website at www.triplepointreit.com.
Capitalised words and phrases in this announcement shall have the meaning given to them in the Circular, unless otherwise defined.
FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:
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Triple Point Investment Management LLP (Delegated Investment Manager) |
(via Newgate below) |
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James Cranmer |
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Ben Beaton |
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Max Shenkman |
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Justin Hubble |
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Canaccord Genuity Limited (Sponsor, Joint Financial Adviser and Corporate Broker) |
Tel: 020 7523 8000 |
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Lucy Lewis |
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Denis Flanagan Andrew Zychowski
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Akur Limited (Joint Financial Adviser) |
Tel: 020 7493 3631 |
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Tom Frost |
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Anthony Richardson |
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Siobhan Sergeant |
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Newgate (PR Adviser) |
Tel: 020 7680 6550 |
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James Benjamin |
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Anna Geffert |
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The Company's LEI is 213800BERVBS2HFTBC58.
Further information on the Company can be found on its website at www.triplepointreit.com.
NOTES:
The Company invests in social housing assets in the UK, with a particular focus on supported housing. The assets within the portfolio are subject to inflation-adjusted, long-term (typically from 20 years to 30 years), Fully Repairing and Insuring ("FRI") leases with Approved Providers (being Housing Associations, Local Authorities or other regulated organisations in receipt of direct payment from local government). The portfolio comprises investments into properties which are already subject to an FRI lease with an Approved Provider, as well as forward funding of pre-let developments but does not include any direct development or speculative development.
There is increasing political and financial pressure on Housing Associations to increase their housing delivery and this is creating opportunities for private sector investors to participate in the market. The Group's ability to provide forward financing for new developments not only enables the Company to secure fit for purpose, modern assets for its portfolio but also addresses the chronic undersupply of suitable supported housing properties in the UK at sustainable rents and delivering returns to investors.
Triple Point Investment Management LLP (part of the Triple Point Group) is responsible for management of the Group's portfolio (with such functions having been delegated to it by Langham Hall Fund Management LLP, the Company's alternative investment fund manager).
The Company was admitted to trading on the Specialist Fund Segment of the Main Market of the London Stock Exchange on 8 August 2017 and was admitted to the premium segment of the Official List of the Financial Conduct Authority and migrated to trading on the premium segment of the Main Market on 27 March 2018. The Company operates as a UK Real Estate Investment Trust ("REIT") and is a constituent of the FTSE EPRA/NAREIT index.
Canaccord Genuity Limited ("Canaccord Genuity") is authorised and regulated by the Financial Conduct Authority. Canaccord Genuity is acting exclusively for the Company and no-one else in connection with the Related Party Transaction. Canaccord Genuity will not regard any other person as its clients in relation to the subject matter of this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to its clients, nor for providing advice in relation to the contents of this announcement or any transaction, arrangement or other matter referred to herein.
Apart from the responsibilities and liabilities, if any, that may be imposed on Canaccord Genuity under FSMA or the regulatory regime established thereunder, or under the regulatory regime of any jurisdiction where the exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, Canaccord Genuity accepts no responsibility whatsoever and make no representation or warranty, express or implied, as to the contents of this document, 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 Shares or the Related Party Transaction. Canaccord Genuity accordingly disclaims, to the fullest extent permitted by law, all and any liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise have in respect of this document or any such statement.
This announcement contains forward-looking statements which are subject to assumptions, risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, there can be no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by those forward-looking statements. Each forward-looking statement is correct only as of the date of the particular statement. The Company does not undertake any obligation publicly to update or revise any forward-looking statement as a result of new information, future events or other information, although such forward-looking statements will be publicly updated if required by the Listing Rules, the Prospectus Rules, the Disclosure and Transparency Rules, the rules of London Stock Exchange plc or by law.
Akur Limited ("Akur") is authorised and regulated by the Financial Conduct Authority. Akur is acting exclusively for the Company and no-one else in connection with the Related Party Transaction. Akur will not regard any other person as its clients in relation to the subject matter of this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to its clients, nor for providing advice in relation to the contents of this announcement or any transaction, arrangement or other matter referred to herein.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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