Triple Point's Rose: Two 'solid' areas for income during challenging times
Opportunities in public sector leasing
Over the past couple of months, Covid-19 has come to dominate every aspect of daily life for billions of people around the world.
Capital markets have suffered greatly, with the FTSE All-Share index losing close to a third of its value by the end of March compared to the turn of the year.
For investors who prefer a predictable, solid and steady economic environment, many are now looking for safe havens in order to protect returns and income for shareholders.
Two areas that stand out at this moment in time are impact-driven opportunities in the areas of public sector leasing and social housing.
Long-term income with a societal impact
Leasing as an asset class is something that the majority of investors can relate to outside of financial services.
If you have hired a car on holiday or leased a piece of equipment for work, you will understand the basic concept.
Leasing refers to a contract stipulating a payment or a series of payments for the use of the asset that are payable irrespective and unlinked to market conditions.
It creates a valuable service for end user companies and organisations, and also a predictable income stream and solid returns for investors.
There are, of course, risks associated. Investors have limited control over how a lessee will use the product, and there is a residual risk attached to the value of the asset.
However, in a low-interest environment defined by diminished returns, long-term inflation-linked income of about 5% can ultimately be an attractive proposition.
This is especially true of leasing assets, which often do come with a form of protection.
Leasing critical assets to government-linked or public sector institutions, such as the NHS for example, the credit quality of your counter-party is gilt-edged, offering capital protection to investors.
Investing in social housing assets provide a similar protection. Triple Point Social Housing REIT aims to create long-term inflation-linked value underpinned by government income by investing in long lease property stock, the need for which is growing steadily year-on-year.
Rental payments from registered providers are underwritten by local authorities, eliminating some of the downside risk.
But the purpose of both of these trades is to combine value for shareholders with the opportunity to create a real and lasting social impact.
Our investments in social housing provide high-quality accommodation to help some of the most vulnerable people in society have a better quality of life, while at the same time helping local authorities meet their needs and save money.
Leasing also provides opportunities to create value in terms of social impact as well as monetary value, for example by providing critical equipment such as ventilators and ambulances to the health industry at a time when they are in high demand.
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