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Lease-based provider REITs bullish over coronavirus impact
Real estate investment trusts (REITs), which back lease-based supported housing providers, have expressed optimism about the coronavirus pandemic’s potential impact on their businesses.
In a stock market update on Monday, Civitas Social Housing, the largest such firm, said that its rents have so far “been received as expected, unaffected by COVID-19”.
It added that its 4,216 specialist supported housing tenants have an average age of around 32 and “do not suffer generally from the type of underlying health conditions that would fall under the NHS definition of individuals who are at high risk” from the disease.
Triple Point Social Housing REIT also told investors that “ongoing receipt of rents remains timely and in line with both expectations and the experience of prior years” and that its portfolio “has continued to increase in value”.
The Regulator of Social Housing (RSH) has voiced concerns that some small supported housing providers could struggle to cope with financial and operational shocks caused by the pandemic.
But Civitas, which owns properties worth £789m, said its “financial performance has not been negatively affected” by the virus to date.
It reported collecting £48.4m in rent in the year up to 31 March 2020, the vast majority of which is paid by housing benefit.
Last Thursday, Triple Point said that 100% of rent due for the first quarter of 2020 has been received, while 95% of rent due for April 2020 had been received to date, with “the balance expected over the next few days”.
Shareholders have been told that Civitas will target a 5.4p per ordinary share dividend for 2020/21 – up from the current year’s rate of 5.3p – reflecting “strong underlying cash generation” and the board’s current view of the company’s financial prospects.
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Civitas uses 15 housing associations to run its properties, mostly through long-term lease deals which see the firm paid monthly inflation-linked payments.
It suggested that less than 3% of its tenants – who are mostly working-age adults with significant care needs for learning disabilities, autism, or mental health issues – are at “high-risk” from coronavirus.
“Our housing association and specialist care provider partners have made various adjustments to working practices with the priority of preserving the health, safety and well-being of tenants and staff,” the market update said.
“This includes the implementation of enhanced procedures relating to hygiene, social distancing and restricting access to the company’s properties to essential visits only.
“The ability to implement such practices is significantly assisted by the configuration of many of the company’s properties in the form of self-contained apartments and small housing clusters.”
Some Civitas-owned accommodation has also been made available “to support the response to COVID-19” following “direct requests” from councils and the NHS, the firm added.
It thanked staff at its housing association and care provider partners “who are dedicated to ensuring that the tenants living in the company’s properties have a safe and supported environment”.
The English regulator has previously been highly critical of the lease-based model operated by housing associations backed by Civitas and Triple Point.
In March it promised to be yet “more vocal” on the model following a High Court victory against lease-based provider Inclusion Housing Community Interest Company. Inclusion launched a landmark legal challenge against the regulator to get a non-compliant judgement overturned. The judgement was originally published in February 2019.
Five of Civitas’ 15 partner housing associations have been declared non-compliant by the RSH. Some of Triple Point’s partners have also been deemed non-compliant.
But the regulator’s in-depth assessments programme has now been suspended as a result of the coronavirus pandemic.
Update: at 12.36pm 13/05/20 the story was changed to reflect that Civitas owns properties worth £789m. The previous stated figure was £212m, which only refers to the value of the firm’s portfolio with no gearing in place.
Lease-based providers the regulator has found non-compliant
Regulatory gradings (for providers with more than 1,000 homes):
Prospect Housing (G3/V3 in May 2020)
New Roots (G3/V3 in February 2020)
Westmoreland (G4/V3 in September 2019)
Inclusion (G3/V3 in February 2019)
Sustain (UK) (G3/V2 in January 2019)
Trinity (G3/V3 in November 2018)
Regulatory notices (for providers with fewer than 1,000 homes):
Larch (November 2019)
Expectations (UK) (September 2019)
Bespoke Supportive Tenancies (May 2019)
Encircle (April 2019)
First Priority (February 2018)
