The Company will target inflation-protected income and capital returns by investing in a diversified portfolio of homeless accommodation assets, let or pre-let to registered charities, housing associations, community interest companies and other regulated organisations that receive housing benefit or comparable funding from local or central government, on very long-term and index-linked leases.
The Company will invest in these assets directly or through holdings in special purpose vehicles and will seek to acquire high-quality properties, taking into account the following key investment considerations:
- The properties will provide high-quality accommodation to homeless and vulnerable individuals in need of housing;
- Each property should demonstrate strong residual land value characteristics;
- Very long unexpired lease terms (typically 20 to 30 years to expiry or first break); and
- Rent reviews to be inflation-linked or contain fixed uplifts.
The Company will be dedicated to tackling homelessness in the UK and will target a wide range of sub-sectors within homelessness including, but not limited to, women fleeing domestic abuse, people leaving prison, individuals suffering from mental health or drug and alcohol issues and foster care leavers.
The Company will seek to only acquire assets let or pre-let to robust tenants on long leases (typically 20 to 30 years to expiry or first break), with index-linked or fixed rental uplifts, in order to provide security of income and low cost of debt. The Company will only invest in assets with leases containing regular upward-only rental reviews. These reviews will typically link the growth in rents to an inflation index such as CPI (with potentially a minimum and maximum level) or alternatively may have a fixed annual growth rate.
The Company will neither undertake any direct development activity nor assume direct development risk. However, the Company may invest in fixed-price forward funded developments, provided they are pre-let to an acceptable tenant and full planning permission is in place. In such circumstances, the Company will seek to negotiate the receipt of immediate income from the asset, such that the developer is paying the Company a return on its investment during the construction phase and prior to the tenant commencing rental payments under the terms of the lease.
Where the Company invests in forward funded developments:
- The Company will not acquire the land until full planning consent and tenant pre-lets are in place;
- The Company will pay a fixed price for the forward funded purchase, covering land, construction cost and developer’s profit;
- All cost overruns will be the responsibility of the developer/contractor; and
- If there is a delay to completion of the works, this will be a risk for the developer/contractor, as they will pay the Company interest/rent until practical completion occurs.
The Directors intend to conduct the affairs of the Company so as to enable it to qualify as a REIT for the purposes of Part 12 of the Corporation Tax Act 2010 (and the regulations made thereunder).