Social Housing REIT plc (SOHO.L) Earnings Call Transcript & Summary

Good morning, and welcome to the Social Housing REIT plc Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However the company can review all the question submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Ben Green. Good morning to you, sir.

Good morning. Thank you, everyone, for joining for -- this is the first chance that we've had as Atrato to present on SOHO. So we really appreciate you taking the time. So I'm Ben Green. I'm one of the principals of Atrato, and I'm joined this morning by Adrian D'Enrico and Mike Carey, who are the fund managers for SOHO. I want to start by saying that we're delighted to have been appointed as the AIFM for SOHO effective from the 1st of January. What does that mean? Well, you'll see it means a new approach to managing the fund, but it's also very importantly, delivers a material cost saving of about GBP 1.9 million per annum, which, of course, drops directly to the bottom line. And you'll appreciate that, that wouldn't have been reflected in last year's financials, which we just presented. So do bear that in mind when you're thinking about the earnings potential for the company going forward. The operational team from the previous manager have all transferred over to us, ensuring continuity and we've also had a successful data transfer, and that's all gone very seamlessly. So what's going to be different about the way that Atrato approaches managing SOHO? Well, we view this as operational real estate. It was sold to the market originally as a long lease asset class. We don't really look at it that way. We think that it can still provide a highly attractive, sustainable and growing income stream, but it needs to be approached differently. Firstly, the real estate fundamentals are absolutely key here. The properties need to be in the right locations and those properties need to have the right adaptations to be suitable for the vulnerable adults who are going to be housed in them. And then turning to those vulnerable adults, their occupancy, so our resident occupancy is what really drives our income. It's no good having 100% of the portfolio leased to approved providers if those approved providers aren't getting vulnerable people into the homes and generating rent. What we've seen is that there might be a lease, but obviously, the approved provider isn't going to pay you any rent if they haven't got anyone in the property and they're not receiving housing benefit from the government. And that's because the approved providers don't really have substantial resources. And that is a weakness, which we want to be very open about in this model, and we're looking to address that. But saying that, provided the real estate fundamentals are sound and there's decent resident occupancy, the underlying cash flows really are attractive. They are sustainable, and they do grow with inflation every year. And we've been really pleasantly surprised by our review to date. We do think that is the case for SOHO. So our mission here is to restore investor confidence in not only SOHO, but also the specialist supported housing sector. So how are we going to do that? So taking these points from left to right. So we're taking proactive and decisive asset management decisions. We've moved very quickly on the My Space situation, which have been rumbling on for 18 months or so. In the middle, I know some of you may have already been investors in Supermarket Income REIT, which was just internalized this week or may have been investors in ROOF, which is our on-site energy fund. I think we -- I hope we have a reputation in the market for being open and transparent. That's what you should expect from Atrato. We'll tell you the good and the bad. And then finally, turning to the point on the right. We think we can restructure the income in this sector. As I've said already, the weak link in all of this is the approved provider, who's our lessee. We think we can do a better job of having direct line of sight to the cash that they're collecting on the underlying properties. These approved providers, they're generally speaking, good operators doing social good. They don't have strong balance sheets. We're confident we can find a solution for that. It's going to take a little bit of time because we have to deal with the regulator to do it. But if we can do that, then there should be a massive re-rate in this sector. Just turning to a few financial highlights. We've moved the -- you'll see in the results presentation the full financials for last year, but we just highlighted a few, few points here. So we're currently at 93% rent collection. We have an adjusted EPS of 5.4p per share, and that delivers us a practically covered dividend for the last year, and that's despite the well-publicized issues with My Space and Parasol. The portfolio has been revalued at GBP 626 million. That gives us an EPRA NTA per share of 99p, which we think is a much fairer reflection of the actual value of the portfolio. And we have a net loan-to-value of 38%. And then finally for me before I hand over to Adrian. I think it's really important not only to focus on the asset side for SOHO, where as I say, we've been pleasantly surprised, that SOHO also has on the liability side, one of the most attractive debt profiles in the REIT sector. So we've got 8.6 years left of a very attractively priced debt structure at 2.74%. There is a small refinancing coming in 2028, but that's very manageable. So this is a very attractive feature for SOHO. And when you think about the combination of the earnings, which should grow as we recover the My Space and Parasol situation, we get those annual uplifts on all of our rents by inflation. You add to that the nearly GBP 2 million of cost savings that we're delivering just through the reduction in the management fee and the debt structure, which is fixed at a very low cost for a long time, gives us a really solid foundation for earnings growth. And of course, when that earnings growth is delivered, that should then lead to being able to return to a progressive dividend policy. So I'll hand you over now to Adrian, who's going to take you through the sector.

Thanks, Ben, and good morning. So we just wanted to take a moment to actually remind everyone what specialized supported housing is and also importantly, what it isn't. So specialized supported housing, we've got a description on the left or SSH as we refer to it, provides homes for vulnerable adults. These homes allow our residents to live independently in their communities, and that's important, close to their families and their support networks. Our residents have care needs, and these can include learning disabilities, physical disabilities, mental health challenges or a combination of diagnoses. And the residents receive care for their conditions in their home rather than in an institutional or medical setting. Our homes are especially adapted or designed specifically to meet their needs, and they're managed by approved providers or APs, who are predominantly regulated by the regulator of social housing. SSH can lead to better resident well-being and outcomes and also savings to the public purse as we'll show later. Now as Ben said, there's been a lot of noise around the sector, in part because of the challenges in other residential strategies. So we wanted to address some of the misconceptions about SSH. On this slide here, we've got some common misconceptions shown on the left-hand side that the sector is similar to homeless accommodation, that it's a long lease investment, as Ben has already touched on, and there are misconceptions about occupancy and counterparties. So I'll take each one of these in turn. Firstly, the assumption that specialized supported housing is the same as homeless or temporary accommodation. And that accommodation, as the name suggests, is very short term in nature and specialized supported housing is not that. It offers homes for vulnerable adults with care needs, as I've mentioned, but they tend to stay a very long time, and the average length of stay is often above 10 years. In many instances as well, these will actually become homes for life. That provides income stability. Secondly, everyone assumed that this was a passive investment with a long lease. Yes, we do have long leases in place. The WAULT is above 20 years, but this is operational real estate and the security of income is driven by resident occupancy, not just the lease. So we look at it as a long income rather than a long lease investment. Thirdly, it's assumed that because there is this demand overhang, you'll have 100% occupied properties because of the supply shortfall. We will have high levels of resident occupancy, as Mike will touch on later, but referrals are thoughtfully considered by commissioning bodies who make placements very carefully. We also will have some rotation of residents because their condition might deteriorate and they move into a higher acuity facility or actually positively, their condition might improve and they'll move out into the communities. So you'll always have some vacancy, but that's okay because the way the model works, the scheme will actually be profitable if the occupancy is above 80%. And finally, in terms of the counterparties, the sector was historically sold as a quasi-government income stream with robust counterparties, and that hasn't turned out to be the case. Our rents are ultimately funded by the government, but the intermediaries are small scale, specialist organizations, relatively thinly capitalized, and so they require close scrutiny, which is part of our approach. So first things first, just having a look at what is a specialized supported housing property. To get them right and to purchase a good specialized supported housing investment, you need to focus on five things, we think, relatively straightforward, and these make the homes work functionally and financially. Firstly, of course, you need the right property, the right property in the right place, close to amenities, transport links and within the community. That's for the residents' benefit, but it's also for the approved providers. They need to staff the scheme and deliver repairs and maintenance to our properties. Secondly, adaptations. Our properties need to be suitable for the residents who will call them home in many instances for years to come, if not for life. Thirdly, we need to have identified demand. So where we choose properties, they need to be in locations where there is a referral pipeline from the local area. Fourthly, the rents, of course, need to be sustainable. They need to be affordable in their local context at a level agreed by the local authority. And finally, the specialist partners, our approved provider lessees who ensure that our properties are safe, well maintained and compliant with regulatory standards. If we get these five things right, schemes are sustainable for the long term, and that benefits the approved providers, our residents and also our shareholders. So looking at these in a little bit more detail. Firstly, the properties. Here, we have a selection of 20 assets within our portfolio of almost 500 properties across the U.K. And you can see they're a mix. They range from single traditional homes to purpose-built blocks of self-contained flats. From the outside, they look like regular properties because they are appropriate for their local setting. But what makes them specialized supported housing are the adaptations inside for the residents' benefits. Those adaptations are a range. They might be physical and external. So we can see access ramps shown in the top left. Internally, you might have lifts, wider doorways, amenity spaces, all manner of adaptations. We also have accessibility features such as wet rooms and features like walk-in baths, shown in the top right. And to ensure our residents can move around their homes safely, we also have hoists, rails and other supports as shown in the bottom left. We also have bespoke features like adjustable height kitchens, and those are designed to make sure that our residents can live with independence with the support that they receive. The adaptations are purpose-built during construction or they get added subsequently. And it's about making those reasonable adaptations so these residents can call these homes for life. So if we've got the right property in the right location, the next thing we need to look at is referral demand. Now it is true to say that the sector is structurally undersupplied. It's also experiencing though, a high increase in demand with more people moving from institutional settings, as shown on the left, the registered care settings, hospital settings, but also from family homes or with carers. As we can see on the right-hand side, that leads to a forecast supply gap of around 30,000 homes additionally required over the next decade. Specialized supported housing is already a relatively large sector, specialist, but relatively large, and it's got strong growth potential to meet that growing need. And that also provides a significant demand overhang for the existing properties that we already have in our portfolio. But to secure that demand, of course, and particularly in the current economic environment, rents need to be set appropriately. Rents in the specialized supported housing sector are exempt from local housing allowance caps, but it's important still that those are appropriate rents in their local context. They're at a level which encourages not prohibits referrals and also that they offer value for money for the public purse, particularly important in the time of constrained financial budgets. On the chart, we can see our rents compared to sector averages. So SOHO's rents are shown on the left-hand side, GBP 231 per person per week, and that's very much in line with other privately funded specialized supported housing portfolios. Our rents are, though slightly higher than broader supported housing sector, but that difference is justified by the adaptations that I've just mentioned and the fact that we have a very modern portfolio, either purpose-built or a very modern refurbishment. We also have a majority of self-contained accommodation, which commands a higher rent. And of course, unlike the wider supported housing sector average shown on the right-hand side, no grant is used to subsidize our properties. So overall, our rents are on market, affordable and sustainable. There's an additional defensive advantage we also have from having an existing established portfolio. We've recently been through, as everyone will know, a period of high inflation, and that period of high inflation has been exceeded by build cost inflation, which has risen higher than consumer inflation as shown in the chart on the bottom right. What that means is that replacement costs actually exceed current valuations. One of our properties here is shown Sunnyside up in Telford, and that's currently valued at GBP 1.5 million. And if we were to build that today or forward fund it as we did a few years ago, it would actually cost GBP 1.7 million to build the same property. So when we look across the portfolio, we've got a very defensive underpin of sustainable assets delivering market level income. And the final thing, of course, that makes the model work are specialist partners, our approved providers. Here, we've got a model of how the rental income actually flows through the specialized supported housing sector. SOHO, shown in the top right, leases its properties to the approved provider and residents occupy these properties under a tenancy agreement. Once there is a resident in situ, the approved provider can then make a claim to the local authority. And then ultimately, that's funded by the Department of Work and Pensions. So that income is very secure when it comes from the government, but it's crucial to mitigate the approved provider counterparty risk, as Ben mentioned earlier. Given that they present a risk, of course, an obvious question is why do we actually need them. And they're essential to make the model work. Put simply, they're specialist operators and they provide intensive housing management services. They also can access housing benefit at exempt levels, and that's what let them pays the rents for us on behalf of the vulnerable residents that are in the properties. They are additionally regulated predominantly by the regulator of social housing, and that helps ensure that the homes are safe, well maintained and sustainable. So they are essential, but given that they're not institutional-grade covenants, they do present a risk to our income, which we need to mitigate. And we do this by focusing on three key areas shown on this slide. Firstly, on the left and very much part of our approach, we regularly and proactively engage with them. That's something that we are enhancing because it's essential to have the right information from them. We receive current financial information, property, unit and resident level data, and we supplement this by inspecting our properties ourselves. And the SOHO team complete almost 200 formal inspections every year of our properties. They're out there every day. And that makes us informed and we can make data-driven timely decisions. As an issue is identified, we're proactive and decisive to make a positive change as people will have seen in terms of our approach to the My Space challenge. Finally, on the right-hand side, as Ben mentioned earlier, we're working to derisk the model by restructuring the income to enhance security. That will take some time, but we're working on it with our approved providers and liaising with the regulator of social housing, and we'll share more on this work stream as it progresses. Hopefully, that's a helpful recap of the sector, how it works and our approach to managing SOHO successfully. And I'm now going to hand you over to Michael, who's going to talk you through the portfolio.

Thanks, Adrian, and good morning. So as Ben said, we're delighted to be managing SOHO, and I'll now run you through the portfolio in a bit more detail. So in summary, SOHO owns 494 properties comprising over 3,000 lettable units. It has a contracted rent roll of GBP 42.6 million, all of which is inflation linked. And also 71% of the portfolio is EPC C or above. So in terms of location, the map on the left shows the geographical spread of the portfolio. As you can see, this is highly diverse with properties in every region of the U.K., which really highlights the national demand for SSH. Moving to the chart in the middle, you can see that 64% of the portfolio is self-contained and 36% shared accommodation. And then lastly, the chart on the right shows the diverse range of needs of the residents that we house, which include land difficulties, mental health, autism and in some cases, a combination of all three. So over the next few slides, we'll focus on SOHO's income streams. So as mentioned earlier, 100% of SOHO's rents are inflation linked with reviews every single year. This means, as you can see from the graph on the right-hand side, that SOHO's rents have kept up with inflation since 2018, which makes this an incredibly defensive asset class. And we, of course, expect this to continue into the future. So key to SOHO's income streams is its occupancy levels. And by that, we mean how many vulnerable residents are living in the properties. So first of all, it's worth noting that due to the complex needs of the underlying residents, this is not a sector where you should expect 100% occupancy. In fact, 80% is a reasonable and profitable expectation. So if we focus on the last 3 years and looking at the screen, you can see that occupancy is steadily growing year-on-year and currently sits at a sustainable level of 86%, which is comfortably ahead of sector norms. I think it's also important to note that My Space and the former Parasol properties account for over half of the current voids. So therefore, once our solution for both of these approved providers progresses, we expect that overall occupancy number to increase significantly over the next 12 months. So we've looked at rent levels and occupancy, and now we will look at how that translates into rent collection. So if you look at the graph on the left -- sorry, as you can see from the graph on the left, the issues with Parasol and My Space have caused rent collection to drop below 100% over the last 3 years. So to improve this and walk you through the boxes on the right-hand side, the Parasol leases have now been assigned to Westmoreland. And at the end of February, rent collection was 72% of the Parasol contracted amount, and we expect this to continue to grow to above the target of 75% in the short term. And then on My Space, we're slightly earlier on that journey, but they started paying -- stopped paying rent in June '24 and entered a CVA on the 7th of March 2025. Now as part of that CVA, we've agreed an option to assign all of SOHO's leases away from My Space and to a better performing approved provider, which means that we are now in control of this situation. So moving to the third box. It is key to ensure what has happened with My Space and Parasol doesn't happen again. So the approved providers, whilst they are specialist in what they do and of course, key to the SSH model are not institutional entities. And at any one point, it's quite possible that one of them will need some form of help, hence, this being operational real estate. Therefore, it's very important that SOHO is proactive in our engagement with the approved providers. And if an issue does arise, we act quickly and decisively to ensure that we don't have a repeat of Parasol and My Space. Now all of this will see rent collection improve throughout 2025. Therefore, as Ben said earlier, if you combine this with cheap debt and annual rent inflation, this provides a really strong underpin to earnings growth. So moving on to valuation. Net initial yield has moved out by 51 bps to 6.22%. Now clearly, both the My Space and Parasol issues have caused some of this movement, both in terms of rent roll and -- both in terms of rent roll and yield on the individual properties. But we've also worked with JLL, utilizing our sector relationships to identify more market transactions. And as a result, we believe that a 6.22% net initial yield better reflects where the SSH market is today. Having said that, and given the improvements we believe we can make and the potential for structural changes to protect the cash flows, SSH offers incredible relative value when compared to yields for other living sectors, as you can see from the graph on the right-hand side. So one of the reasons we're in this sector is that we can do genuine, measurable social good. And as part of that, it's important to remember that these are people's homes. So as part of the annual social impact report, a third-party consultant called The Good Economy go to the properties and speak directly to some of the residents to get their perspective about the homes they live in. And the quotes on the slide are direct quotes from our residents, which is clearly fantastic feedback to see. Also, as part of The Good Economy's remit, they look at the saving that SOHO creates for the U.K. taxpayer. So the graph on the left-hand side shows the potential saving of SSH per week when compared to the alternatives of residential care or NHS beds. However, what the good economy have done is look at SOHO's actual saving. And as you can see from the number on the right, they have estimated this to be a massive GBP 71.6 million per annum, which is, of course, a significant saving to the U.K. taxpayer. So as we said, we're looking to improve transparency around the portfolio. So on the next few slides, we'll look at three case studies and highlight why they make good SSH properties, and in one case, don't. So the first one is a very typical SSH property. It's a purpose-built block of 16 self-contained flats in Yorkshire. They're fully occupied, have an EPC rating of B and over 100 hours of care is delivered every single week for mental health. But what is key here is to understand why this makes a good SSH property. So going back to what Adrian said earlier, if you look across the bottom, it's in the right location. It's suit to be adapted. There's demand and a sustainable level of rent is paid by a specialist approved provider. So the next property is an interesting one. At first glance, this looks like any other standard residential house, whereas in reality, this is a highly adapted specialist home where 24-hour 3:1 care is delivered to a person with extremely complex needs. So again, focusing on the bottom of the slide, this property also ticks the relevant boxes that make it a good SSH property. Lastly, as we've said, not all properties will tick those boxes and work for SSH. So this is a property we own in the Southwest. So whilst there is demand and the rent is set at the right level, it is in the wrong location, and it is not suitably adapted for the identified cohort. So this is a property as part of a trio strategy where we will be decisive and sell. I think at this point, it's also important to say that we're currently in the process of triaging the whole portfolio. And of the 494 properties we own, 27 require some form of asset management with only 9 of these currently being considered for sale. So the good news is that we only expect a handful of properties will be sold, which will have a de minimis impact on value. I'll now hand back to Ben to conclude the presentation.

Thank you. So as I said at the beginning, we're on a mission here to restore investor confidence in the sector and in SOHO. We're fixing the immediate tenant issues around My Space and Parasol, and we're dealing very quickly with any issues we find in the portfolio. But as Mike has mentioned, we've been pleasantly surprised on that front, and we're only expecting a handful of problems. That very attractive debt structure, the reduction in the management fee that we've already delivered and the recovering income leaves us really well positioned for EPS growth. And we're also confident that we can deliver a long-term solution for the approved provider counterparty risk. And that really is the weak link in this sector. We're very focused on that. So if we can deliver that on top of the growing earnings per share, which should flow through more quickly in the medium term, we should see a really significant re-rate of this sector. We're very confident that we can deliver that. It's just going to take a bit of time. So that is the end of our prepared slides. I know we've got a lot of questions, which I'm very happy to run through. I'll just pull those up now. And I've kind of tried to -- there's a lot of very good questions here, and they're grouped around some themes. So maybe I've just tried as we've gone along to sort of just group them together. So I'll deal with a few of them and then hand over to the guys for some of the others. So I guess just as a -- an overarching point, obviously, we've only been in the role for about 12 weeks now. We've been very focused on the immediate issues and My Space has taken a lot of time. We've -- as Mike says, we've been triaging the portfolio. The next step for us is to come up with a broader strategy for the Board, having now got under the hood of SOHO. And that includes the sort of capital allocation strategy for SOHO. And as I've said at results, that is going to consider the dividend policy. It's going to consider the relative value of share buybacks through other uses of the company's capital. It's going to consider the appropriate level of leverage for the business given the counterparty risk that we have. So to some extent, all of the answers around those issues are going to have to be caveated by the fact that we need to agree that strategy with the Board, and we're aiming to do that by the time of the AGM.

So with that in mind, just going through some of the questions. So there's a question around the asset disposal program. Unfortunately, we don't think that the purchaser was ever particularly credible. They couldn't source funding. And so one of our recommendations to the Board was to acknowledge that wasn't going to happen and move on. That said, we are, as I say, very focused on turning around the institutional perception of this sector. And in the medium term, that should facilitate -- if that's the right thing to do, it will facilitate much larger asset disposals at much more attractive prices than we could achieve today. So I think our view is that right now, it wouldn't be the right thing to try to sell a material amount of the portfolio, but that's definitely something that we want to position the company for if that is the right thing to do for shareholders at the time, and we think that is achievable. And that then flows through into, I guess, some share buybacks. Again, we'll be analyzing the relative value of share buybacks. Of course, on the plus side, they can be very earnings accretive. On the downside, they increase the leverage in the business, and that's something we need to discuss with the Board. And then that question also included a question around dividends. I think that we are very strongly positioned for EPS growth for the coming year. We're already collecting 93% of the contracted rent, which is GBP 42.6 million. That would in itself deliver a material uplift in net rental income. And then, of course, we're also working hard to recover the rental situation on Parasol and My Space. And on top of that, we've got GBP 2 million of cost savings and a debt structure that's fixed. So all of that positions us very strongly to come back with a progressive dividend policy, but something we need to agree with the Board. There was then a question which is sort of related around the NAV LTV and refinancing. So sort of looking at all of that together, as Mike said, we're confident that on a kind of individual basis that the current valuation reflects the correct value of the portfolio. Obviously, we've said that we don't think that we could sell a significant or material amount of the portfolio at that level because there is institutional capital isn't available right now. What does that mean for LTV? We're not worried about LTV because that is based on the valuation. We've got contracted rental uplifts. We're also going to recover a significant amount of rent on the My Space and Parasol situation, which also underpin valuation strongly going forward. So we're not really concerned about LTV and the covenant is also materially wider than our current LTV position. And then sticking on debt structure, there's a GBP 40 million debt refinancing in 2028. Even if you assume that our cost of debt on that bit of the capital structure went up by, say, 4% to kind of more realistic, and that's probably being a bit conservative, more realistic sort of financing cost of 6% plus. Actually, that's not a hugely material amount of money in terms of millions of pounds, sort of GBP 1.5 million, which just on this year's numbers will be offset by the reduction in the management fee. So it's not the kind of increase that's going to be material in terms of dividend cover. And it's not a concern for us. But of course, we'll look at all of the options around refinancing that or whether disposing of assets and paying down the debt at the time would be a more sensible strategy. That's something that we are going to put into the plan. There's a question around narrowing the discount. I mean I'm kind of pleased to say the discount has narrowed already since we came out and announced results and got out and started talking about the message here. We think there's a very strong value story here. We think that SOHO has been quite neglected in the market because it's quite small. So we're confident that if we can reposition SOHO and the sector, the discount will narrow in itself. Of course, there are other steps we can take like share buybacks, and those are going to be actively considered by us and the Board over the coming months. We had a couple of questions on -- general questions around tenants. So there was a question rightly pointing out that it's concerning that tenants can use SOHO's cash for kind of other purposes than paying SOHO's rents, and that is a key weakness in this sector. Frankly, My Space were allowed to get on and didn't do it for too long. And one of the mitigants is that we will never allow that to happen for any kind of prolonged period. We also are going to actively monitor all of the tenants, and it's very easy to see when their financial situation is deteriorating, when their underlying actual operational performance is deteriorating, and we'll take active steps much earlier to address those issues. And usually, most of the tenants now are actually they're run by decent people with good governance, and they want to do the right thing. So we can actually usually help them in those scenarios. Nonetheless, it would be much better if we had a more direct line of sight to the cash flows. We've alluded to that throughout our results presentation. So that's something we're actively working on with approved providers and the regulator to say it's a medium-term solution because it's a regulated sector, but we're pretty confident that we can get a solution there, which would mean that it would no longer be possible for those cash flows to be misappropriated by our tenants. And then the final bit of me talking before I hand over to Mike is on tenant concentration, absolutely another good question around whether we're concerned about having 30% to one tenant. The answer to that is yes, absolutely. That isn't an ideal situation at all. But that tenant is a very good operator. We are going to monitor them like a hawk. And if we can implement our restructuring strategy, they'll be one of the first people we want to do that with. That said, we want to be completely transparent. That is one of the biggest risks in this investment, and it's one that we all need to be cognizant of. We're going to do our absolute best to manage that risk, and we're sure that we can do a much better job than the previous incumbents in doing that. And I think the final question was just around what we expect to receive in terms of My Space rents, and you appreciate we can't give any forecast, but I think we can maybe give you just a bit of shape of what's going on and what we expect in terms of collecting rents on the My Space properties.

Yes, I think -- so looking at Parasol kind of gives you a bit of an idea of the stepping up structure that we would expect. So to give you the numbers on Parasol to start with, the target was always 75% to 85% over a 12-month period. That assignment happened in August, and we're at 72% as of the end of February. So we're very confident that we're going to be within target, if not the higher end of that target. The My Space properties are in a similar situation. So in terms of the process, we need to agree terms with the new provider, and then we need to call that option to assign those leases. In the interim period, we're expected to receive a pass-through rent from My Space. We are at 60% occupancy. So in our properties that with My Space have 60% occupancy. theoretically, you should, therefore, receive 60% rent, but we think that's probably unlikely. But we do expect to receive some rent from My Space in the period between the end of the challenge period of CVA, which is in a couple of weeks' time and the assignment of the leases. Then once the leases are assigned, as Ben said, it's very difficult to put an exact number on it, but I think the reasonable assumption will be to look at the Parasol assignment and expect a similar rent collection profile.

And there's a few more questions have popped up. So one is around -- we do most. Okay. So there's a question on Atrato. What's the shape of our organization following the internalization? Does it have any impact on the management of SOHO? That doesn't have any impact on SOHO. The individuals who transferred into super were all dedicated to managing supermarket income REIT. We have 18 people in our social housing team at Atrato. It's growing our living business is a key focus for us. So that's -- it's -- if anything, it's kind of more important part of our business, and it's getting a lot of focus. One around selling unsuitable properties, will that have an impact on valuation? I think it's a very simple answer there, which is no, it won't. They've mostly been -- well, they've been written down to levels that reflect the fact that they're not suitable for specialist afforded housing. So I don't expect a material impact from any sales. Question on what other steps there are to align management with the interest of shareholders. So as this person has noted, the management fee is now based on market cap, which we think is the right structure. We've also committed to have -- to invest 25% of fee in shares, and we'll maintain that going forward. As you know, Steve Windsor has made a purchase already. We, generally speaking, expect everyone in the organization to own some shares in the funds that we manage. So kind of just expect to see that going forward. And then there's a good question around the impact of any reform to welfare benefits. Should I take that as well? I mean I think it's sort of -- there is a risk there, but the reality is that housing vulnerable people in these properties saves the government so much money that actually the bigger focus, we think is on how to encourage more private capital into this space. So it would be highly counterproductive for the government to do something that impacted the attractiveness of this space as an investment class. What they really want to do is build thousands more of these properties. And in order to do that, they need to provide stability around the regulation and the expectation on rents. So that's very much the discussion we're having with the regulator for social housing is it's all about, look, how do we create a situation where it's possible to fund new construction of houses to create a positive impact. I think that's the end of the questions. So I really appreciate all the really insightful and thoughtful questions. And also we very much appreciate as a team of your time today to consider the investment case with SOHO.

Perfect. Ben, Adrian and Michael, I'd like to thank you for updating investors today. Could I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of Social Housing REIT plc, we'd like to thank you for attending today's presentation, and good morning to you all.