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Civitas expects ‘more positive sentiment’ from regulator as profits surge
Social housing real estate investment trust (REIT) Civitas Social Housing said it expects “more positive sentiment” from the sector regulator as it posted a 65% jump in profits this week.
Civitas owns 599 specialist supported housing (SSH) properties covering 4,114 tenancies, which are mostly managed by housing associations that have signed up to long-term lease deals, where they make monthly inflation-linked payments, with the REIT.
This lease-based model has come under criticism from the Regulator of Social Housing (RSH) in recent times, with the regulator saying in April that it was “hard to see” how housing associations funded this way can comply with its standards.
Five of the 15 providers currently housing vulnerable people in homes owned by Civitas have been deemed non-compliant by the RSH.
The REIT issued its financial results for the first half of 2019/20 on Monday showing a pre-tax profit of £17.4m over the period – up from £10.6m in the first six months of 2018/19.
In his foreword to the results, Michael Wrobel, chair of Civitas, said the REIT is “working with the RSH and with housing association partners to assist them in making improvements to address the risks identified by the RSH”.
He added: “I am confident that as we continue to deliver our strategy and as our housing association partners continue to demonstrate improvements to satisfy the RSH, this will be reflected in more positive sentiment.”
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Civitas, which has the largest portfolio of SSH properties in the country, has invested £764m in the sector, including £10.2m in the first half of 2019/20. Its stock is valued at £841.5m.
The REIT took £22.7m in rental income in the six months to 30 September 2019, up 45% on the same period last year, while paying out £4.9m in investment advisory fees, general expenses and directors’ remuneration.
Westmoreland Supported Housing, which accounts for 10.8% of Civitas’s rental income, was given the lowest possible regulatory grading for governance in September after temporarily entering the RSH’s insolvency process this summer.
According to its results, Civitas has raised its interim dividend by 6% to 2.65p per share, with a full-year target dividend of 5.3p.
Civitas’s share price plunged from 95.5p at the start of April to 76.7p on 14 June, after the RSH released a critical report on the lease-based model.
Its share price climbed in recent months and stood at 89.8p on Tuesday.
Last month, Civitas appointed Alison Haddon to its board, a former housing association boss with experience of helping problem-hit landlords.
It has also set up a community interest company to advise its partner housing associations.
Auckland Home Solutions, which has not been censured by the RSH and manages the second-highest number of Civitas leases, has become the first member of the company.
Civitas said: “Since this time, the [community interest company] has supported a programme of additional recruitment within Auckland to enhance the skill set within the business as part of creating a stronger and more resourced organisation.”
