Civitas Social Housing Share Discussion Threads

[giltedge1] 10/2/2023 21:24

Cost of adapting properties for special needs can be prohibitive, so creates a barrier to entry. I just adapted a house for a disabled relative, cost an eye watering amount, when you add all the other features fire regs etc, I don,t think appreciated by market. CSH have just given a good update on credit rating A, some footsie 100 companies only have a B rating. Add in only 3% drop in NAV latest quarter, vs Commercial REIT's up to 20% drop, so a buy in my opinion.

[jg231] 10/2/2023 16:31

I have been quite negative on this stock in the past. I'm pretty sure that Civitas significantly overpaid for these properties initially (and as SpectoAcc says, there was some skullduggery going on too). However:

- home building construction price index is now +40% since fund inception, so replacement cost is now much higher than it was

- they've done a decent job of showing that what needs to happen at tenant level (eg care provision) is happening to ensure that local authority payments flow

- they're putting through uncapped CPI inflation uplifts, so the dividend is highly protected

- if they are making sure that tenants are getting the operational stuff right at unit level, then the local authority covers maintenance capex, so that shouldn't be a concern

- CKI bought into the investment manager platform, so you would think the skullduggery days might be behind them (too much downside now)

Am beginning to think this looks quite attractive

[spectoacc] 10/2/2023 14:03

Personally I think ZIRP is over @wskill (say 3-5% vs sub-1%). But agree there's likely some value around.

@chucko1 - perhaps a bigger question is whether the business model works at all. Govn't doesn't seem so sure. HOME's was flawed even without paying more than double MV for HMOs - if you set rental increases at uncapped RPI, but income doesn't grow the same, and utilities/CapEx/repairs all going up significantly, then the rent increases simply won't come through (or the rent itself, as is the case for some of HOME's).

Some very shady stuff went on at CSH IMO, but the discount got me in for a few eventually.

[chucko1] 10/2/2023 13:35

Wskill, tend to agree with your moderate view on CSH. It has had its own accusers, but some other tangible factors such as rent collection/increases etc. and concrete actions regarding lease terms and one or two other things suggest good value at the yield.

Although SOHO have more exposure to MySpace, they did not have the issues CSH were dealing with one or two years back regarding good governance, and that strikes me as equally, if not better, value. Easy to say during the hour in which its share price has just risen 4%, but CSH has just bounced 20% the past month, so some SOHO movement is not surprising. Especially that they are also cited positively in the Fitch note on CSH.

Fitch are far from all-knowing, but at least they are a neutral and intelligent voice.

[wskill] 10/2/2023 12:52

SpectoAcc I dodged a bullet with Home made a small profit even after reading about the shenanigans around the fliping of properties between connected parties,Do not believe that CSH now in its 7th year on the market is as badly run, not whiter than white of course but the worst offenders have been shown the door over previous actions.
Relatively safer than others is my belief but I have been wrong before, with property prices increased the past 7 years there is value here cannot see interest rates staying high over any great length of time .

[spectoacc] 10/2/2023 11:52

Interesting, thanks @wskill.

Compare that to HOME, where you can only guess at the EPC's of the ones in these pictures (are there double-glazed windows behind those boards?):

[wskill] 10/2/2023 11:42

Good to see our investment grade rating confirmed rightly so in my opinion ,would like to see an update on CSH EPC ratings I know they have a large project ongoing with EON to upgrade EPCs in all their properties by my calculation it should be 25% complete .

[wskill] 08/2/2023 08:44

Still a decent investment at this level,would not be too happy if I had been buying at £1’20 but am a long term holder for the 10% yield don’t really care if they never close the nav gap.

And a decent trading update as well considering how other REITS are faring a 3% fall is not too bad.

Reading below from todays update I wonder if the supply levels have reduced because of the HOME fiasco when they bought anything that was for sale with little or no inspection of the properties to ascertain their suitability for purpose of housing the homeless,I know CSH is not in this sector of the market but tainted by the actions of HOME management .

From the Company's constant activity within the specialist social housing sector, it is evident that demand for quality accommodation in a community environment remains strong whilst levels of supply have further reduced. This decline in part reflects the effects of inflation on the cost of building and adaptation works and the ability for developers to deliver highly adapted properties within a tight rental framework.

[cwa1] 03/2/2023 11:11

Lifted directly from DaveBowler post elsewhere...

Liberum;
Trading update - two lessees in arrears

Mkt Cap £205m | Share price 50.8p | Prem/(disc) -54.5% | Div yield 10.7%

Event

Triple Point Social Housing REIT's trading update notes that 91.7% of the rent due at 31 December 2022 was collected (Dec 21: 99.8%). Two out of the 27 lessees were in rent arrears (My Space and Parasol Homes - combined 17.5% of rent roll). The portfolio recorded a weighted average rent increase of 6.7% in the calendar year, with 92.6% of the leases linked to CPI and the balance linked to 7.4% linked to RPI. SOHO notes that 5.1% of the leases have caps, with a 7% cap to be applied to its Registered Provider leases in 2023. SOHO re-iterated its commitment to the 5.46p dividend for the year.

SOHO is seeking to introduce a risk-sharing clause into existing leases in Q2 2023 for enhanced compliance with the Regulator of Social Housing's standards.

Rent arrears update

Two out of the 27 lessees were in rent arrears, with SOHO noting the following:

My Space (7.9% of rent roll) - Due to solvency concerns, the manager is looking to shift properties to alternate providers. It is noted that were My Space to enter administration, this would impact c.38% of the value of properties let to My Space or 2.4% of SOHO's total valuation.
Parasol Homes (9.6% of rent roll) - failed to pay all rent due in H2 2022. The manager is working on a repayment plan.
Liberum view

Discounts applied to the social housing sector have increased by c.20 percentage points since the second half of November 2022, led mostly by Home REIT and more recent newsflow around rent rolls and the regulator for social housing's view that many of My Space's tenants did not meet its definition of specialised supported housing. Out of the two social housing trusts with exposure to My Space, Civitas Social Housing has lower exposure (1.3% of rent roll) and is our preferred fund in the sector.

[wskill] 02/2/2023 20:02

Seems like a decent plan giltedge1 was thinking along the same lines myself very quiet here today probably the shock of a tick up,good the shorts are not getting it all their own way.

[giltedge1] 01/2/2023 12:37

Residential REIT's having a good run as I have posted elsewhere, ie PRS, GRI etc.
Market has cottoned on indexed Link Gilt like features. CSH can ride on the coat tails of the rise, I wouldn't get tied down with the minutiae of individual transactions like some posters leave that to Auditors , Managers etc thats what they are there for!
Other footsie companies, you would be surprised eg. BT, VOD, GSK etc have hundreds of lawsuits outstanding at any time, just isn't reported!.

[up4itt] 31/1/2023 11:15

The new £70.8 facility is for 5 years. The £60m facility with Lloyds Bank, at SONIA plus 1.67% margin, was agreed in July 2022 and due to expire in July 2024. Yes, it is likely that the new facility is at a higher interest rate than the Lloyds one, given that interest rates have moved up since mid-2022, and it is therefore doubtful that the Lloyds one could have been further extended on the same terms. It might be advisable, on grounds of prudent financial management, to secure the 5-year facility now, so as to avoid the uncertainty of waiting until closer to July 2024. I don’t think any further details of the new facility (even the identity of the lender) have been released yet. Normally such details appear in the Annual or Interim Report. It would be best to keep an open mind until this happens, rather than assume “bad news”.

I think their business model is reliant on ensuring that their portfolio qualifies as Specialist Supported Housing and is exempt from caps on housing benefit. Given the recent controversy about “related parties”, I would expect them to steer clear of such transactions for the time being. A separate question is whether, in view of the current regulatory environment and political uncertainties, they might slow down the pace of acquisitions in the short term.

[lucydesouza] 31/1/2023 09:38

Normally if a company doesn't tell you something then it's either bad news or they're not allowed to for commercial reasons - here, it's unlikely to be the latter. So this debt facility is probably on a higher interest rate than the existing one. Why then did they redeem the existing facility early if the new facility was on a higher rate? Answer: most likely because the new facility is larger (it is, by around £10m) and they need the extra liquidity. Why do they need the extra liquidity if their rental income is growing and there are no payment delays?

Hmm... I think it's because their "business model" is reliant on them continuing to make acquisitions from related parties.

[up4itt] 30/1/2023 13:51

By the way, is the first time that “CIM” as distinct from “CSH” have issued an RSN under their own name? If so, it is a sign that the adults are now running the asylum, which I find encouraging. This may also explain the improved literary quality of the RSN.

[williamcooper104] 30/1/2023 11:47

Annoyingly they didn't state what the cost of the new facility was But still a positive update

[up4itt] 30/1/2023 10:51

One thing that struck me about today’s RNS: they seem to have on board a bright person who has a fluent pen and knows how to write this stuff. Pity: I was going to suggest that Lucy might like to apply for the role.

The other thing I noted was the prominence they give, once again, to emphasizing that they are a “care-based and healthcare REIT” (as distinct from the plain vanilla social housing concept which forms the last two letters of their EPIC) and the efforts they are making to distance themselves from the rest of the social housing sector (including HOME).

The market may be starting to “get” this, as can be seen from the 3% rise in the share price today, while SOHO remains marooned. Or perhaps SOHO will catch up, once the HOME furore dies down.

[lucydesouza] 30/1/2023 08:27

Spoole5!! You flatter me!

One thing to note, they've increased their borrowing (edited) [capacity] despite rising rental income?

mmm

[spectoacc] 30/1/2023 08:24

HOME needs to shake out before life can return to the sector - a nascent sector, with a regulator on its back. CSH hasn't been immune from the problems, albeit agree the number of hours they provide ought to set it apart a bit.

There's still the unresolved issue of how index-linked rents can be afforded on long leases - suspicion is always that it's at the increasing expense of CapEx (itself far more expensive than when leases were signed).

As an aside - because it isn't CSH - this re HOME today:

"[HOME has} begun an internal investigation into payments made to a previously undisclosed third party as part of deals where the Home REIT appears to have significantly overpaid for rundown housing stock."

[spoole5] 30/1/2023 08:02

Forced into an unscheduled update by lucydesouza!?

[saltaire111] 30/1/2023 07:57

Excellent update. This is significantly under valued and the gap up must be just around the corner.

Salty

[spoole5] 30/1/2023 07:54

Doubt it will make much difference, only time will tell.

[wskill] 30/1/2023 07:41

Yes a very decent update with a 50 hour average care for residents I am sure there has been an increase since I last checked this.

[spoole5] 30/1/2023 07:07

Quite a detailed trading update. Unscheduled?

[up4itt] 30/1/2023 03:38

Lucy, it’s very good to know that, while coming at this from different sides of the argument, we arrive at a place where we are in broad agreement, although I might describe things in a more nuanced way. The RSH has statutory powers (“teeth”) but chooses to exercise them carefully. It is responsible for regulating the RPs (not the REITs) although clearly the REITS fall within its purview. The RSH has many objectives, of which some of the most important include ensuring the good governance, financial viability and value for money of the RPs, as well as lender confidence and the interests of the taxpayer. The RSH regulates the entire social housing sector in the UK, of which Specialized Social Housing is a relatively small subset. CSH and SOHO are just part of that small subset, which also includes many privately owned, non-listed providers. The state has imposed a 7% cap on social rents from April, which is less than current inflation but more than the 5% that was widely expected. According to Fitch Ratings, the social housing sector generally will “have a mildly negative trajectory due to growing cost pressures and limitations on revenue generation in the next 12 months.” That forecast probably applies also to the niche occupied by the two REITs. On the JLL valuation point, the market obviously agrees with you, hence the current generous discounts to NAV, but the market may lack your grasp of all the available details and there may be scope for the discount to narrow once more information emerges.

[lucydesouza] 29/1/2023 13:17

Yep, that's exactly how I read it. CSH string the regulator along by pretending (edited:) [they have a plan] to implement a new lease that reduces the risk to the RPs. But they don't implement it, because the lenders won't accept the change without an increase in the borrowing rate. No impact on NAV because it's not being implemented. (JLL's claim that the new clause would have no impact on valuation is clearly nonsensical and, I think, just raises doubt over the independence of their role here.)

If the RSH had any teeth, then I doubt this tactic would be possible.