Triple Point maintains strong Fitch rating and outlook

The Regulator of Social Housing has found a number of Triple Point’s lessees non-compliant, including Falcon Housing Association, Auckland Home Solutions CIC, Hilldale and Parasol Homes.

Inclusion, which is Triple Point’s largest lessee, according to the REIT’s latest annual report, was found non-compliant in 2019 and later mounted an unsuccessful legal challenge over the grading in the High Court.

Questions have long been raised about the lease-based model. 

According to Fitch, the RPs where governance and financial viability issues were found represent around 80 per cent of Triple Point’s rent roll.

However Fitch said that the REIT can “largely address” any problems with providers by switching the association it works with. 

“Fitch believes Triple Point’s ability to re-assign a lease to another RP can largely address the risk of RP failure, although the potential rental loss or associated administrative costs may not always be recovered fully or in a timely manner,” the agency’s report said. 

“Lease re-assignments are a preferable outcome as they ensure the least disruption to the individuals living in the properties.”

Fitch said the judgements show that “some RPs’ boards would benefit from greater professional expertise and better systems to quantify and manage assumed risks”.

But it added: “Many entities have since changed their boards, their reporting, and improved their profitability.”

Fitch also said that most of Triple Point’s leases have lease negotiation mechanisms in place should there be a change in government policy to housing benefit’s exempt rent, although such a change is not expected.

As of the end of March this year, Triple Point’s weighted average lease length was 26.2 years and more than 90 per cent of its rental income in 2021 was derived from leases over 20 years, Fitch noted.

Triple Point has also changed its policy to allow it to enter into new shorter-term leases, assume some maintenance costs, and index rents to inflation or housing benefit changes, according to Fitch.

But the agency added that it “does not expect these changes would materially alter Triple Point’s business profile or financial obligations”.

Chris Phillips, chair of Triple Point, said: “We are delighted that the company’s investment grade rating has been affirmed by Fitch.

“This is a reflection of not only the company’s continued financial resilience, but also the resilience of the sector in spite of the broader economic and market conditions.”

In its last full year to the end of December 2021, Triple Point Social Housing reported a 16 per cent jump in profit to £28.4m, off an income of £33.1m.