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Social housing real estate investment trust (REIT) Civitas made a profit of nearly £20m in the last financial year before the company’s share price experienced a significant drop.
In its full year accounts posted today, the REIT saw its profit hit £19.9m for the year ending 31 March 2019. Since that date, the company has seen its share price fall by more than 17%.
Civitas’ annual results for 2018/19 revealed that over the year, it received £35.7m in rental income from housing associations, paying out £9.6m in investment advisory fees, general expenses and directors’ remuneration.
Civitas’ business model involves using money from the stock market to buy specialised supported housing (SSH), which is aimed mainly at people with learning disabilities, and leasing it to housing associations on a long-term basis.
Those housing associations then pay an index-linked return to the REIT, which in turn pays a dividend to its shareholders.
Civitas has now spent £755m on SSH. During the year, it bought 177 properties, bringing the total it owns to 591, housing more than 4,000 people.
These homes, it said, are leased to 15 housing associations across 157 local authorities – half the total for England and Wales.
Civitas grew rapidly in the past financial year, but it has so far not bought any properties in 2019/20. The current financial year saw its share price plummet to 78.8p, down from 95.4p at the start of April.
This fall was precipitated by the Regulator of Social Housing (RSH)’s report on supported housing associations that use a lease-based model, as Civitas’ lease counterparties do.
Civitas said in response that the report “contained no new information or opinion of material relevance to Civitas and its leases”.
Civitas announced plans in May to set up a company to advise its counterparties and to introduce a clause into new leases to deal with housing associations that struggle to make payments.
Its second-largest counterparty, Westmoreland Supported Housing, also published its accounts for the year today, revealing a £4.7m loss.
Westmoreland provides £7m (19.7%) of Civitas’ annual rental income, for the 108 properties housing 612 tenants it leases from the REIT.
Despite the pause in acquisitions, Civitas said in its accounts that it has an investment pipeline of potential transactions worth £210m, which are at “various stages of due diligence”.
It said it is hoping to further diversify, buying homes for people with other specialist needs, such as “dependency, homelessness, key workers and the desire to release hospital beds through the use of ‘step down’ accommodation associated with the NHS”.