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CSH Civitas Social Housing Plc

0.00 (0.0%)
05 Dec 2023 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Civitas Social Housing Plc LSE:CSH London Ordinary Share GB00BD8HBD32 ORD 1P
  Price Change % Change Share Price Shares Traded Last Trade
  0.00 0.0% 79.80 0.00 00:00:00
Bid Price Offer Price High Price Low Price Open Price
79.70 80.20
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Last Trade Time Trade Type Trade Size Trade Price Currency
- O 0 79.80 GBX

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Posted at 26/4/2023 08:46 by lucydesouza1
Auckland was controlled and owned by Lalani and Mawji for years until they sold it to The Social Housing Family CIC, which was set up by Paul Bridge, a CSH executive.

Lalani and Mawji sold many properties to CSH through a shell game similar to that employed by Fairhome, earning millions of pounds in profits. It might be natural to assume that some of those profits ended up funding lease payments from Auckland and Falcon to CSH, given Lalani and Mawji also controlled those major tennants which have since proven to have serious governance defficiencies (much like the Fairhome/Westmoreland scheme).

Auckland subleases a number of the properties to TLC, which is owned by Civitas execs and their associates. This arrangement might allow profits from other related party transactions to flow back to CSH through Aukland.

Cleaning up Aukland and Falcon is key to resolving "governance" concerns at CSH and CSH's direct involvement in the process should be seen as undesirable, in my opinion.
Posted at 10/2/2023 13:35 by chucko1
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.
Posted at 28/1/2023 06:08 by up4itt
Lucy, although the exact text of the lease clause has not been made public, the following summary by Marten & Co includes more detail than was provided by CSH in their RNS of 13th September 2022:

The clause would allow a housing association to temporarily stop paying rent in certain circumstances, such as if it had not received housing benefit from a local authority. This would apply after an initial period of time, and then only if paying the rent in full would cause the housing association to fail to meet the regulator’s standards. CSH would receive rent arrears as and when the housing benefit is subsequently received by the housing association. Under the terms of the clause, the housing association would provide CSH with full data and step-in rights. (Source: google Civitas lease clause)

Yes, it is clear from what they say in the interim results: the clause is being applied to a very limited number of leases (ones that are not subject to borrowing, I believe). As you rightly say, JLL have assured CSH that the new clause would not adversely affect valuations of CSH’s properties. On the face of it, as you suggest, this does not make complete sense if genuine “sharing of risk” is involved. One would have to look at the details and rationale offered by JLL. It may be the case that the clause has been cleverly drafted to protect CSH’s interests (see above). But in any event, the clause has not yet been widely applied.

I understand your point that CSH might end up caught between the demands of the RSH and the rights of its lenders. But as I see it, they are adopting the old bureaucratic tactic of “making haste slowly”. CSH can claim, with some justification, that they are engaging with the regulator’s concerns about compliance. They are also buying time, because the clause will not be rolled out yet and only “with the clear understanding that its inclusion will assist housing associations in achieving regulatory compliance”.

The discussions with the lenders (I’m not sure I would call them “negotiations”) could, I suppose, lead to modifications to the clause that would further ringfence CSH’s exposure to risk. Alternatively, lenders could accept the clause as it is, but look to negotiate higher borrowing costs in the future, if they can show that CSH is taking on greater risk. But you will have noticed from the Interim Results that CSH have just concluded a new loan agreement with a new lender and I don’t think that any of their 5 other loan agreements are coming up for renewal imminently. So the risk of higher borrowing costs is theoretical at this stage, and I suspect that when the time comes, future interest rates generally will be of far greater importance in determining borrowing costs than the lease clause, assuming it is widely applied to new or existing leases.
Posted at 27/1/2023 11:18 by lucydesouza
Up4itt, CSH agreed with certain customers to introduce a new clause to their leases - this was in Q2/Q3 last year. The RSH liked the new clause because it increased the "sharing of risk" between CSH and its customers. I think this initiative stemmed from the RSH's concerns over the financial health of the RPs. JLL (responsible for all CSH's valuations) said that the amendment doesn't impact the value of the leases to CSH, despite it increasing the risk that CSH is exposed to (!). However, last I heard, it still needed approval by CSH's lenders, and the language used in the interim results appears to downgrade the likelihood of the new clauses roll out.

It would be nice to see CSH clarify whether this has indeed been approved by the lenders and share the actual language of the new clause. Otherwise, one might jump to the conclusion that the lenders have rejected the amendment and that CSH is caught between the demands of the RSH and the rights of its lenders.
Posted at 25/1/2023 04:58 by up4itt
Lucy presents the information about Herleva / SHO like a dark little secret that has been exposed. In fact, the matter was openly reported by CSH in its 2022 accounts (page 104) as follows:

“During the year the Group acquired a property holding company from Herleva Properties Limited which held assets totalling £8,611,000. Herleva Properties Limited is a subsidiary of Specialist Healthcare Operations Limited (“SHO”). Andrew Dawber and Tom Pridmore (both directors of the Investment Adviser) are each 14.99% shareholders in SHO. They are not directors of SHO and have no operational role in that business. SHO does not meet the definition of a related party under IAS 24”.

(Note: IAS 24.11 states that two entities are deemed not to be related simply because they have a director or key manager in common.)

Regardless of what one might think of this and the other transactions mentioned in Lucy’s latest comment, they are all in the public domain and are in line with the relevant rules and standards. I would think that, having been the victim of a short attack in 2021, CSH will now be doubly careful to ensure that their future conduct is above reproach.

William illustrates his tendency to confuse ropes and snakes by meandering off from CSH into a discussion about HOME. I believe that the market is currently subject the same confusion, hence the weakness of the share price of CSH. Of course, the market may remain irrational for longer than is reasonable, but rational investors would be wise not to be taken in by this unjustified and no doubt transient negativity.
Posted at 24/1/2023 17:56 by lucydesouza
"Round tripping" is when a company sends money to its customers that then comes back as reported income. In the case of Fairhome, some of the profits from the transactions with CSH were lent to a related party of Fairhome, called Westmoreland. And Westmoreland took on the leases with CSH. The money that Fairhome lent to Westmoreland helped pay the rent to CSH.

That was a while ago, of course, but the opportunity for a similar set up still exists, at least in FY2022. For instance, CSH acquired properties from Herleva last year. Herleva is/was indirectly owned by SHO (the Isle of Man holdco that is part owned by CSH insiders). SHO also owns TLC Care which leases/subleases CSH properties.

In a separate transaction last year, CSH sold the operating business of CPI Care to a subsidiary of SHO, at quite a low earnings multiple.

So, you still have the same opportunity for profits from these transactions to end up coming back to CSH as rental income.

CSH spent as much on acquisitions in FY2022 as it earned in operating cash flow, and at least half of its acquisitions involved some sort of related party transaction. In effect, broadly speaking, CSH borrowed money to pay the dividend having spent half its operating cash flows on related party transactions.

I'm not saying that CSH are engaged in "round tripping" in the traditional sense. But it is a matter of public record that some of the profits earned by Fairhome ended up coming back to CSH as rent from Westmoreland. And the SHO structure that has profited from transactions with CSH is also paying rent to CSH through TLC Care.
Posted at 18/1/2023 14:59 by lucydesouza
The scheme: Flip the property into the REIT at a massive profit, round-trip some of the gains through the RPs as income. (RP stands for "regulated provider" but could also be "related party"). This is why so many of CSH's transactions are related party - they need to keep feeding their customers. Note: The Herleva Properties and CPI Care transactions in 2022FY (which represented half of CSH's acquisitions) effectively saw cash and/or an operating business taken over by customers of CSH. Herleva and CPI Care are part of the infamous Specialist Healthcare Operations structure. That structure includes TLC Care, which sublets some of the properties owned by CSH. In other words, the Herleva and CPI Care transactions effectively transferred value to customers of CSH, which in turn are controlled by Pridmore and his associates.

This game of musical chairs will eventually stop when the customers of CSH become unable to pay the rent. How long will that be? Have they fired five bullets, or six? :)
Posted at 20/12/2022 09:36 by up4itt
The stuff about Fairhome and Westmoreland was the subject of an investigation by the Social Housing Regulator who published their conclusions in 2018. The facts have been in the public domain for at least 4 years and I’m not sure that there is anything new in what Lucy is alleging.

Lucy only posts on Civitas (and now on Victoria) and has tended to do so when Shadowfall and other shorters are active. There is circumstantial evidence, therefore, that she has an agenda. I have no problem with that, but it’s worth knowing, although that does not in itself nullify the value of her research.

The Civitas share price has fallen sharply since October, but so have, to more or less the same extent, the share prices of other REITS unrelated to social housing. This suggests that the falls reflect the macro environment and higher interest rates and are not specifically related to the business model of Civitas and Triple Point. I suspect that the unique issues faced by HOME may have leached, unjustifiably, into perceptions of Civitas and Triple Point.

All investments involve risk, but investors in Civitas and Triple Point are compensated for this risk by the low NAV and the high dividend.

Full disclosure: I hold both CSH and SOHO. Together they comprise about 16% of my REITS holdings which in turn represent about 15% of my total UK share portfolio. I am well under water with both CSH and SOHO, and had not expected them to fall this far, but plan to hold for income and long-term recovery and may well add in the coming months on any further weakness.
Posted at 16/12/2022 10:29 by lucydesouza
The yield is, on the surface, highly attractive. But I think there's a good reason for this.

The history of CSH is one where massive profits were earned (not by CSH) through properties being flipped into the REIT at huge mark ups, with some of those profits coming back to CSH in rental payments through the RPs. Fairhome/Westmoreland is the easiest scheme to spot and if you take the time, you can follow it through on Companies House and the Land Registry. Filings on the Jersey Trade Registry are relevant as well.

Fairhome (a "property developer") would set up a shell company, which then bought a property. The shell company would then be sold to CSH at a big uplift in value generating a huge profit for Fairhome. This was repeated dozens of times generating tens of millions of profits for Fairhome. Some of those profits were loaned to Westmoreland, which became the tenant on the property taking on the lease with CSH. So, in effect, some of the profits from the flip were used to pay the rent on the property. But a big chunk of the profits were paid out in dividends by Fairhome or used to service steep interest payments on a "deep discount bond" that Fairhome had issued. And here's the kicker - Fairhome was financed by an entity called Beaufort, in Jersey. And who ran that vehicle? That's right: Tom Pridmore and his associates.

That was just one of several schemes used to build the CSH portfolio.

It's in that context (and many other related party transactions) that you have to assess CSH. It's easy to rely on this being an audited, transparent, publicly traded REIT, with the valuation fully and independently assessed by the mighty JLL, no less. But the valuations are all entirely dependent on the rental income, rather than a true a mark-to-market on the properties. In effect, this is mark-to-model with the key input in the model being the rental income.

And if you think it's "all in the past", check this out: In the year to March 2022, at least half of of CSH's new property acquisitions involved a related party transaction of one sort or another... and those related parties are the same shrewd chaps involved with Beaufort.

This is why the yield is high.
Posted at 15/9/2022 07:14 by cwa1
This is a very strange concept, where the CSH share price appears NOT to be going down as is normal. Do I have a computer malfunction, or can everybody else see it?

Possibly if I switch the laptop off and then back on again, or leave it for a few days, normal service weill be resumed?

Civitas Social Housing share price data is direct from the London Stock Exchange

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