Civitas Social Housing Share Discussion Threads

[apollocreed1] 14/2/2022 23:56

@saltaire111-Good news but unfortunately it hasn't helped the share price.

[saltaire111] 14/2/2022 07:44

14 February 2022

CIVITAS SOCIAL HOUSING PLC

Investment Grade Credit Rating Affirmed

Fitch Ratings has affirmed Civitas Social Housing PLC's Long-Term Issuer Default Rating (IDR) at 'A-' with a Stable Outlook, and its senior secured rating at 'A'

The Board of Civitas Social Housing PLC ("Civitas" or the "Company"), the UK's leading care-based and healthcare REIT, is pleased to announce that Fitch Ratings Limited ("Fitch") has affirmed the Company's existing Investment Grade rating of "A" (senior secured) and a Long-Term IDR (Issuer Default Rating) of "A-" with a Stable Outlook. Fitch published their first rating on the Company in March 2021 with the same Investment Grade distinctions.

The latest Fitch report published on 10(th) February 2022 highlights the following attributes which it observes in the Company and its investment strategy:


-- A net debt/EDITDA ratio of under 8.0x and interest cover around 5.0x;
-- Assisting local authorities to meet their obligations to provide accommodation and support for vulnerable adults with significant care needs;

-- Facilitating provision that is at a lower cost to the State than other appropriate alternatives such as hospital settings;

-- Long-term contracts reflecting the on-going need for these specialist assets and provision of care for longer-living tenants.

[saltaire111] 09/2/2022 08:01

Solid results today. Doing exactly what this company is designed to do: providing crucial services for vulnerable people and delivering value for government and shareholders. Excellent operating model in my view. Pleased to hold here.

Salty.

[alanpro1] 09/2/2022 07:35

Surprised this has been manipulated so low. Order book constantly being suppressed by tiny 100 share sales on the offer to narrow the spread and put pressure on the bid. Usual shorter tactics.NAV if purchased as a complete entity is circa 120p. Wouldn't surprise me if a bid came at some point. The valuations aren't stretched, your only looking at around £180k per single occupant swelling at todays price. Good price at present.

[williamcooper104] 29/12/2021 11:50

Good article from the ever excellent React News on CSH Earlier this month, ShadowFall, the hedge fund that launched a stinging public attack on Civitas Social Housing in the autumn, scaled back its short position, but others remain.Just after ShadowFall's position dipped under the threshold below which it no longer has to disclose its position publicly with the Financial Conduct Authority, another short seller popped up. Lombard Odier has built up a short position representing 0.52% of Civitas' shares.So how much substance is there to the case against the REIT, and what are the repercussions for others in the sector? Here we take a look at the key questions.How serious are the governance questions?Much of ShadowFall's initial letter to shareholders focused the disclosure of property deals dating back to 2018. Civitas bought a care homes group and kept ownership of the properties and then sold the operating business to a company that was part-owned by Civitas directors, but this was not disclosed to shareholders. The directors' economic interest in the company was not significant enough for them to be obliged to disclose their involvement, but some still feel that they should have done.Lord Oakeshott, director of the Value and Indexed Property Income Trust, told the Sunday Times that he was "appalled" and had decided to sell the trust's £2.2m stake in the REIT.Part of Civitas' argument for not providing fuller disclosure was that the deal was innovative and that it did not want rivals to cotton on because it was benefiting from "a competitive first mover advantage". There is reason to question this. Are opco/propco deals where the operating business is separated from the real estate really so innovative that Civitas would want to keep rivals in the dark? And even if they are, the basic nuts and bolts of the deal were disclosed in the 2020 annual report. What wasn't disclosed was that Civitas directors had a stake in the operating business.What about the financial outlook for Civitas?Irrespective of the rights and wrongs, questions of disclosure and transparency have little impact on financial performance. On the face of it, there's nothing of alarm in the headline numbers from Civitas' recent financial results. Since IPO in 2016, the REIT has delivered a cumulative total return of almost 30%, with the latest half-year results earlier this month showing little change in NAV or earnings per share.But ShadowFall argues that there is trouble ahead. It warned in its first open letter that much of the REIT's rental income and dividend were at risk, arguing that the housing associations it works with are being propped up with developer loans, rent support and lease incentives.Not all of its arguments are that convincing. The hedge fund argued that lease incentives were rising, accounting for 23% of Civitas' annual rent in its last financial year, but £10m of the £11.2m that it based this figure on comprised a payment made by Civitas as a second instalment for the purchase of new build property. This is classed as a lease incentive for accounting reasons, but is really nothing of the sort.Does this mean that there are no good reasons to question Civitas' financial performance?This is certainly the conclusion Civitas' management would like investors to draw."A lot of what was put out has not proven to be correct," says Civitas Investment Management director Andrew Dauber. "It's quite a frustrating process because short sellers don't have the same restrictions on them that we have."And the very fact that ShadowFall has scaled back its short position would suggest that the hedge fund does not believe that Civitas' shares have much further to fall. The shares were trading at around 105p when ShadowFall's position became public at the end of August and then slumped to a low of 85.2p following publication of the hedge fund's highly critical reports on the REIT, before recovering to 93p when the position dropped below 0.5%.Plot, Text, NumberCivitas' share price had been falling when ShadowFall's short position became public and then fell further following publication of its reportsCivitas directors have also signaled their confidence in the outlook this week by buying shares in the REIT. However, there are still some significant issues. Civitas' latest results show its dividend cover is just 87.5% – although this rises to just over 100% assuming that the REIT invests much of the proceeds of a new debt facility. At the very least, this means that the REIT could be vulnerable in the event that rental income falls.How likely is it that income would drop and should others in the sector be worried?This is the big question for investors. The bear case is that rents are unsustainably high and that rental income is at risk from regulatory intervention or from housing associations failing financially. The public statements from the Regulator of Social Housing do not bode well for Civitas or others in the sector. In a 2019 report, it said it was "hard to see" how a provider of supported housing funded by "long-term leases and subsequent tight margins can meet the requirements of the governance and financial viability standard".Fiona MacGregor, Regulator of Social Housing CEO, takes a dim view of the long-term lease funding modelThe danger, therefore, is that the regulator would intervene to force changes that would hit rental income levels and make supported housing properties less valuable. There is no saying when this could happen, what form it would take or even whether it will, but it remains a threat.Since the 2019 report, there has certainly been no let-up from the regulator, which continues to issue damning judgements on many housing associations funded with long-term leases, including providers that account for a significant share of Civitas' rent roll.In one of the latest examples, the regulator found Aukland Home Solutions to be "non-compliant", citing various concerns about its governance and financial viability. Aukland accounts for 16.9% of Civitas' rent roll and the regulatory judgement raises questions about the effectiveness of The Social Housing Family CIC, a non-profit organisation set up by Civitas to help providers holding Civitas leases to improve their standards. In 2019, Aukland became the first housing association to join The Social Housing Family CIC.The other danger is of financial failure among the housing associations that Civitas works with. Going by the regulator's judgements, it is a very real possibility that providers that hold Civitas leases will run into financial difficulty at some stage. When First Priority came close to collapse in 2018, Civitas successfully transferred the leases to another provider but there is doubt over how easy this will be to achieve in future. The REIT says it mitigates against the risk by ensuring that the underlying properties are well-located and properly adapted so they will be in high demand regardless.Are there any other areas of concern?Currently, just 54% of Civitas' properties are EPC rated A-C, which means it has work to do to improve the green credentials of the rest of the portfolio to comply with regulations coming into force in 2030. The REIT hopes to be able to benefit from government grants to help pay for improvement works, but it remains unclear exactly how much of the bill will have to be footed by the trust.

[saltaire111] 29/12/2021 11:45

The Salty portfolio is now 50% cash but of my equities, Civitas is now my second biggest holding after IMB. It amounts to just over 10% of my equity holdings. I’ve been topping up these last couple of months and I think this share will recover nicely in 2022. And the yield’s just a no-brainer. Tempted to buy more but my trading plan will not allow me a concentration of more than 10% and I’m already just over that threshold so I’m not allowing myself to do it. But the temptation to do so is strong.

Salty.

[williamcooper104] 09/12/2021 08:42

SF have cut their position by at least half

[saltaire111] 09/12/2021 07:59

Solid results.

[nicd] 06/12/2021 22:03

Green shoots?

[saltaire111] 09/11/2021 14:05

It’s going to sting those short on this stock. Suggest they close out now before doing so gets even more expensive!

[hindsight] 09/11/2021 12:03

So far so good, divi cost lands on short books 18th

[plat hunter] 02/11/2021 11:59

Shake shake shake. Smart peeps know this is effectively an investment trust valued at less than it's net asset value.

[plat hunter] 27/10/2021 12:55

Yup happy days

[saltaire111] 27/10/2021 12:36

Base formed here. Looking bullish now.

Salty

[plat hunter] 26/10/2021 08:38

Discount to nav should be bought here, and the tasty dividend represents free money for your gains.

[williamcooper104] 22/10/2021 09:58

Yep - pretty negative article

[williamcooper104] 22/10/2021 09:56

RSH says it has seen instances where large housing associations have turned down long-term leases offered to them by social care landlords after judging them uneconomical.In a statement, Civitas said: "Large housing associations (HAs) have not turned down leases with Civitas due to them being uneconomical. These lease agreements are not applicable to large HAs owing to the granularity of the assets involved."In recent weeks, Civitas has also sought to reassure investors after a bearish report from research group Shadowfall accused directors of failing to disclose a related-party transaction connected to a 2020 acquisition. Shadowfall, which has a short position in around 1 per cent of Civitas stock, has since accused the group of taking a "pass the parcel" approach to lease management."As far as we can tell, when some tenants of Civitas are found to be in difficulty, likely arising from the unaffordability of long-term leases, Civitas' solution appears to us to be to transfer those leases to another tenant," Shadowfall managing partner Matthew Earl wrote to Civitas chairman Michael Wrobel this month. "This transfer is often accompanied by a lease incentive and an extension."The board has not responded directly to that letter, other than to state that the company's assets continue "to perform in line with expectations" and reiterate plans to pay a 5.55p dividend this financial year. Over the past month, Civitas has also spent £4m buying back its own shares.For a landlord that collected more than 99 per cent of rents in the 12 months to March, the recent erosion in market sentiment towards Civitas has been dramatic. Despite a small rebound in recent days, the Reit's shares are off a fifth in the past three months, returning to the discount to book value at which they traded throughout 2019.That period of bearishness followed the failure of tenant First Priority. Although the financial impact to Civitas was limited to £400,000 in lost income after reassigning leases, the incident illustrated the risk of housing association failure. A subsequent RSH report into First Priority's collapse highlighted governance and financial viability issues among many providers.In response to Walters' comments, Civitas highlighted the critical needs its care-based housing helps to meet. "Without Civitas and other specialist support housing providers many of these people would otherwise reside in institutions or other inappropriate accommodation with poor social outcomes," it added.Of that there can be little doubt, but this also explains why the RSH is so concerned about counterparty risk from weak tenant financial controls. Civitas' tenant base may be diversified, but the proportion now under regulatory scrutiny should worry investors."We talk with officials in the department for Levelling Up, Housing and Communities and they're clearly concerned about what is happening," Walters told us. For all the demand in this sector, bad news is never far off. Avoid.

[williamcooper104] 22/10/2021 09:55

watchdog that raised finance and governance concerns around a string of Civitas Social Housing's (CSH) tenants says it is yet to see a plan for how the censured housing associations can improve their financial viability, adding a fresh source of doubt to the Reit's long-term business model. In September, the Regulator of Social Housing (RSH) launched an investigation into Civitas' largest tenant, Falcon Housing Association, after identifying matters that may impact its compliance with governance and financial viability standards. As of June, Falcon made up 19.3 per cent of the landlord's rent roll.A month before, Civitas' second-largest tenant, Auckland Home Solutions – which accounts for 16.3 per cent of rents – was accused of serious lapses of governance and failure to "manage their resources effectively to ensure their viability can be maintained"."So far, we haven't seen the housing associations come up with anything," the RSH's deputy chief executive Jonathan Walters told the Investors' Chronicle. "We are also concerned with the assumptions some providers are making around the rents they charge their tenants and we haven't had very good answers on why they will continue to qualify."The RSH has grown increasingly concerned with the financial strength of the fast-growing social care sector in recent years. Of the 1,500 or so housing associations it oversees in England, just 20 have been deemed non-compliant, the vast majority of which are in the social care sub-sector.Currently, tenants responsible for more than 70 per cent of Civitas' annual rent roll are under investigation by RSH or have been served with regulatory notices about their compliance with economic, governance or financial viability standards.Civitas is a major player in the sector and owns £916m-worth of properties which cater to the complex needs of supported-living tenants. These service users are ultimately funded by central government, via local authorities who appoint care providers to meet individuals' needs. In turn, these care providers work with housing associations and so-called aggregators who source and convert buildings into supported accommodation before selling them on to landlords such as Civitas."The crux is some housing associations haven't understood the leases they've entered into, or the costs that come with them," said Walters. "What we're left with are leases that are uneconomic for them and providers that are very vulnerable to higher-than-expected void rates, changes to legislation or local authority re-tendering."Walters believes the only way to remedy concerns around tenants' capital strength and liability management is "through a better sharing of risk and reward between freeholder and leaseholder". This could include "lower lease payments and more provider expertise on the lease size".

[cwa1] 22/10/2021 08:59

Tweet by Shadowfall, apparently a negative article in IC agreeing with Shadowfall's POV. NB I have NOT seen the article myself

[pdt] 19/10/2021 11:02

The Edison report on Triple Point is an interesting read in respect of the Regulatory discussions and one way that they have dealt with the long lease issue;

"SOHO has recently introduced a ‘change of law’ clause into leases, which allows its lessees to negotiate changes in lease terms in such circumstances, providing greater flexibility in the longterm planning"



If Civitas have something similar that would be a step forward.

If Civitas continues buying back their own shares and there are no further "revelations" it looks like the share price is currently well supported with 100% rent collection, 6% inflation protected yield. I only hold a small amount but happy to continue holding.

[millennialinvestor] 18/10/2021 16:15

Don't listen to the spoon called ukrentboy.

BOOHOO lets try again
UKNEONBOY 18 Oct '21 - 16:06 - 58836 of 58838

shares go down - we make money

shares go up - we make money

[ghhghh] 18/10/2021 08:20

The Paper has been thoroughly considered by the Company's independent Board, the Company's external alternative investment fund manager, G10 Capital Limited, CIM, and the Company's other professional advisers. The Paper has also been verified by the Company's legal adviser Cadwalader, Wickersham & Taft LLP.

It's conceivable that CIM could be dodgy but the allegations will have been thoroughly investigated, it is inconceivable that the BoD/G10 are also corrupt and/or incompetent.

[gopher] 15/10/2021 22:29

Having read the shadowfall letters I would say that CSH has adopted procedures not unknown in property companies but this is a disconnect with ESG principles the Trust represents and I am guessing a good proportion of shareholders thought they were buying into.I don't see who the buyers would be at this level but obviously if the share price continues to fall then vultures circle.

[ukneonboy] 15/10/2021 18:04

Matt Earl and SHADOWFALL were also 100% spot on with Boohoo PLC too

[george stobart] 15/10/2021 11:11

Some CSH supporters are arguing: i) These are real hard assets (property) and have value, ii) Leases are long-term and provide income

Answer is:

i) Shopping centres are also real hard assets (property) with value but are dead for the last few years
ii) 25+ yr Leases are effectively engineered by Civitas and the regulator will like crack down these scammy leases with thinly capitalised counterparties and go further beyond the Apr-20 risk assessment.

Why would any distressed Housing association want to enter 25 yr leases when the care agreements in place (that cover void liabilities) are typically 7 yrs?

The equity of CSH is permanently impaired as opposed to Burford