Civitas Social Housing Share Discussion Threads

[george stobart] 06/10/2021 10:55

the longer it takes for the Board to issue a response, the further the share price will continue to fall

if the Board doesn't issue an articulated response with clear answers, then the share price will fall further anyway

[wskill] 06/10/2021 09:42

This below is the RNS of the asset referred to and which they have paid another £10 million for an asset they already own.

So each of the 65 units cost £184,000 and they have paid another £154,000 per unit for an enhanced rent to who and for an asset they already own,surely the auditors would flag this up as questionable at the very least.

24 August 2020

24 August 2020

CIVITAS SOCIAL HOUSING PLC

("Civitas" or the "Company")

Completion of New Facilities in Wales

The Board of Civitas Social Housing PLC, the leading care-based social housing REIT, is pleased to announce that the Company has now completed the acquisition of the final, larger phase of its new build supported housing and healthcare facilities in Wales. This follows the completion of the first phase in June 2020 (together the "Schemes"). The Schemes were acquired for a total consideration of GBP12.4 million (excluding purchase costs). This acquisition enables Civitas to extend the geographic coverage of the Company's portfolio within the UK and further enhances portfolio diversity.

The Schemes provide 65 beds for individuals with learning disabilities, autism and mental health care needs. They have been designed to meet the specific needs of its residents and have been developed in collaboration with relevant local authorities and commissioning bodies.

The properties within the Schemes are situated in two separate local authority areas within South Wales and are supported by an established care provider with a proven track record and a strong reputation in the region.

The properties are leased to the social landlord Bespoke Supported Tenancies Limited ("BeST") who are an existing counterparty to leases within the Company's portfolio. The Schemes also benefit from equivalent back-to-back leases between the care provider and BeST.

The Schemes are immediately income-generating with an initial net yield in line with the Company's expectations. Th e development was identified off-market by Civitas Investment Management Limited, the Company's investment adviser.

Paul Bridge, CEO Social Housing, Civitas Investment Management, said:

"We are delighted with the completion of this acquisition. These are needs led state-of-the-art facilities, specifically designed to enable vulnerable adults to live in secure, safe and suitable homes within their communities. This is in line with our stated objective: to deliver sustainable returns to our shareholders by making socially beneficial investments within the housing and healthcare sectors in the UK."

ENDS

For further information, please contact:

Civitas Investment Management Limited

[wskill] 05/10/2021 09:19

Still cannot see anything honest in the below statement from last results ,So you pay £10 million for an enhanced rent of what over the life of an asset why ?invest the £10 million in new rent producing assets there is no reason at all to increase the risk in a single asset by £10 million.Will the local authorities not be asking why they are paying this amount extra for similar properties or does some of it go to grease palms.

(1) Gross of a GBP10.0m consideration payment made in the ordinary course of investment in respect of acquiring additional rental income from new build facilities in Wales, completion of which was announced by RNS on the 24 August 2020. From a technical perspective, the consideration has been classed as a lease incentive rather than a capital item in accordance with accounting standards IAS 40 and IFRS 16 (leases) so reducing stated operating cash flow and increasing stated trade receivables. This reflects the GBP10.0m payment being made in respect of the acquisition of additional rental income under an existing lease rather than an entirely new property purchase.

I am sending an email to the welsh government asking if they are are aware of this skullduggery.

[williamcooper104] 01/10/2021 13:59

Nope - that's why I specifically said a corporate rating 2008 was on structured finance ratings - a very different thing

[chucko1] 01/10/2021 12:50

Ultimately, who is paying the rent?

[george stobart] 01/10/2021 12:25

But Civitas does not lease its properties to local authorities, but to Housing associations.

[kemche] 01/10/2021 12:08

"it’s not easy getting an A corporate rating"

Agreed. 2008 taught us that.

[chucko1] 01/10/2021 11:45

The local authorities are rated between A and AA themselves, so the financial ability to keep paying the rents is strong aside the politics. In reality, each LA is backed by the government no matter what the theoretical probability of default is. We saw that recently, for example, in Northampton.

[williamcooper104] 01/10/2021 11:11

On a more positive note the accounts contain the Fitch note (and before anyone slags of rating agencies it's not easy getting an A corporate rating) which gives a good background on the regulatory situation Interestingly it seems that while there isn't a formal guarantee, each local authority has a statutory obligation to cater for many of CSHs tenants; which should give more leverage to CSH on a tenant rental default

[george stobart] 01/10/2021 11:04

This morning the Regulator for Social Housing has announced a formal investing into Falcon

30 September 2021: Falcon Housing Association CIC (4771)
The regulator is currently investigating matters which may impact on Falcon Housing Association CIC’s compliance with the Governance and Financial Viability Standard.

Falcon Housing Association CIC has fewer than 1,000 social housing units and does not therefore have grades.

The regulator uses its ‘Grading under Review’ list “to alert stakeholders to the possibility that the provider may be moving towards non-compliance,̶1; in relation to the required economic standards. If the regulator’s investigation concludes that Falcon is non-compliant it will issue a regulatory notice, at which point, Falcon could appeal the decision.

[williamcooper104] 01/10/2021 10:53

There's a note in the accounts that refers to an acquisition (RNSd in August 2020) as being what the £10m lease incentive relates to, suggesting that the £10m was in exchange for higher rent (the more positive interpretation; though can't immediately see this reflected in the valuation movements) However when you read the RNS it's states that the acquisition was for £12m and no mention is made of the potential to almost double this investment All very curious; on balance I still think it has the smell of bailing out troubled tenants; but could be wrong and await the companies response to SF

[williamcooper104] 30/9/2021 21:34

Will have to see CSHs response - some of what they are accused of such as misrepresenting 10 year leases as 20 years is very serious (though actually that could be positive as might make it easier to remove the manager) - but we've only heard one side of the story - the the covenants/security of income is compromised, but we don't yet know just how dodgy management are Not sure if there's a huge upside to shorting now - it may bounce on managements response - and the share price is pricing in some lease restructuring Short CSH and long SOHO might be interesting if you just want to play CSH being dodgy

[williamcooper104] 30/9/2021 21:28

The same line used to be trotted out about care homes pre credit crunch It's government paid for but operating covenant backed Two very different things Care homes used to sign up to landlords wet dream leases - 30 years, uncapped RPI (market if higher) - but they were at c70-90 percent EBITDAR The old opco/propco trick has always been to get dump real estate investors/lenders to put a property yield on operating income Not sure what the EBITDAR ratios are at CSH but looks like they are high

[george stobbart] 30/9/2021 20:14

Yes both Falcon and Auckland are non-compliant according to the Regulator. They are no sanctions / penalties however they will need to improve their Viability and Governance standards to be viable as they are having going concern issues.

Remember CSH does not lease its properties to social tenants - the properties are rented by housing associations.

When First Priority went bust, CSH lost c £240k of annual income permanently so the income is definitely not government backed.

[chucko1] 29/9/2021 12:32

I sold 2/3rds but have bought a bunch of SOHO to replace as that's got partly trashed also.

[saltaire111] 29/9/2021 11:29

One question - if Civitas doesn’t provide these buildings for (essential) use for vulnerable people, who else will? Privatisation - I don’t think so. Civitas is an essential supplier to the public sector. The regulator may whinge about its model, but what’s the alternative?

I’m holding.

Salty

[williamcooper104] 29/9/2021 09:08

Interesting in CSHs accounts that they granted £10m (or c20 percent of headline rent) of incentives on two rent reviews There's a good reason for doing this for red book valuations as you value of headline and not net effective rent But given the uplift in profile value it doesn't look like that happened - suggesting that they money went to support tenants - which is never a good look The implied yield on GAV looks around 6.25 which is at a discount to the c4.25 percent you would expect for 22 years of index linked income to high quality covenants - so it's possible that restructured leases give a yield enhancmeentg

[williamcooper104] 29/9/2021 09:03

The low alternative use value doesn't help CSH when the regulator tries to negotiate lower rents/restructured leases But equally charities have also paid a premium when renting from the private sector and the regulator will not want to see thousands of tenancies ended

[williamcooper104] 29/9/2021 09:01

I'm guessing that the 4300 tenancies is around 1m sf - c 220 sf per tenancy - assuming each tenancy That would put the portfolio at c£900 per sf Average UK house prices are around £350 psf - say £300 for CSH (they're reasonably geographically diversified) and you're at alternative use of about a third of current use valueAgree that it's highly unlikely that the assets will be used for anything other than current use

[george stobbart] 28/9/2021 20:07

To be perfectly clear they don’t lease their properties to residents- they lease them to housing associations.

And to be more clear, falcon and Auckland (c 44% of total income) are directly controlled by Civitas.

‘When the tenant and the landlord is the same person, investors always lose’

[chucko1] 28/9/2021 19:41

WC, there is no specific mention in the annual report or on their web site as to the sqft in aggregate. They have 619 properties and house 4300 residents. I would expect the value of this portfolio not really to be the issue as the demand would remain and they appear to be of decent quality. At a rough guess, I would see the average sqft per property to be 2500 to 3000sqft.

Are they actually earning what they say? Even if not, I suspect it will be close. If they are thieving money in some way for personal benefit, there will be trouble for sure - but at the current 20% discount, it's getting interesting. If people want to panic, that's up to them.

[peckers56] 28/9/2021 19:28

Mushypeas. Thank you for acknowledging my post(s) [relevant emoji - does ADFVN support Emojis -HELP}. But, I am still wondering why nobody (not even a "continuing holder", 18:11, i.e. YOU) raised a question (i.e. before/during the AGM). about (possible?) Board member conflicts of interest??