SOHO ups dividend as investor disquiet grows over board

Shareholder disquiet is growing over three Social Housing Reit (SOHO ) board members, including chair Chris Phillips, as new manager Atrato works to revive the heavily-discounted trust with its first dividend increase in three years.

SOHO’s annual general meeting saw a significant minority of votes against the re-election of existing board members like Phillips and non-executives Peter Coward and Tracey Fletcher-Ray.

Only 69.9% of shareholders voted in favour of re-electing the trio. In response, the board said it would consult with shareholders to understand their concerns.

‘While all resolutions were passed with a requisite majority, the board acknowledges that [the] resolutions…received more than 20% of shareholder votes that did not support them,’ it said in a statement to the stock exchange.

‘The board takes the views of shareholders seriously and…will continue to consult and engage with shareholders…and understand and discuss their concerns.’

All three have been members of the board since launch in 2017 and oversaw a turbulent time for the £260m real estate investment trust (Reit). During this period, performance was marred by the financial failures of two housing association tenants, unpaid rents, a short-lived buyback plan, and the discount widening to close to 50% at its worst last year.

Turnaround efforts

Since then, Triple Point was sacked as manager and replaced with Atrato late last year, which has already resulted in the discount on the portfolio of specialist supported housing narrowing a little to 42%.

To keep shareholders onside, Atrato raised the dividend, declaring a target payout of 5.6p per share for the financial year to the end of December 2025.

This is a 3% increase on the 5.5p paid last year, and the first target increase since 2022. The board said it would be driven by the ‘successful progress achieved with the lease assignments from Parasol to Westmoreland’.

Parasol was one of the two troubled tenants, the other being Bolton-based My Space, which caused rent collections to come to a halt after it was unable to meet its obligations. All of the 38 properties that were leased to Parasol have now been successfully transferred to the Westmoreland housing association.

A reduced management fee as a result of basing the charge on the fund’s market capitalisation under Atrato has also freed up more cash to distribute to shareholders, as has an improvement in earnings thanks to inflation-linked rent increases.

The trust said the board and manager ‘expect the company to return to a long-term progressive dividend policy’.

An interim dividend of 1.4p per share was paid in line with the 2024 target of 5.6p.

The board also announced plans to move from quarterly to bi-annual valuations of the portfolio, bringing the trust in line with its Reit peers. This forms part of a drive for ‘further efficiency savings’.

SOHO’s shares were up 1.3% to 67.1p this morning. Deutsche Numis analyst Andrew Rees pointed out the stock had ‘performed strongly’ over the first four months of the year – with a total shareholder return of 18.3% – although gains were pared back in recent weeks.

‘We expect the new management team’s primary focus will remain on resolving the 34 homes previously let to My Space – which entered a company voluntary arrangement in March – as well as implementing further planned steps to improve the security of cash flows,’ he said.

SOHO’s shares are down 6.2% over the past three years, which compares to a 22.2% fall by the average trust in the AIC’s UK residential sector. SOHO currently yields 8.3%.