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REIT in ‘active dialogue’ with struggling association
Real estate investment trust (REIT) Civitas has confirmed it is in “active dialogue” with an association found to have a “fundamental failure of governance”.
First Priority Housing Association manages 45 properties owned by Civitas, worth around £40m. It is obliged to pay £3m in annual rent to the REIT.
In an update to the stock exchange, Civitas said: “The company would like to confirm it is in active dialogue with the management team at First Priority, to assist them with their current situation.”
Civitas, which raised £350m in its initial public offering in November 2016, buys portfolios of supported housing and leases them to housing associations, targeting a 5% yearly dividend for shareholders.
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The REIT’s last transaction with First Priority was on 5 May last year, when it bought 16 supported homes for £16.7m and split the leases between First Priority and another housing association, Westmoreland.
Civitas added: “As at 31 January 2018, all rents were received in full from First Priority by [Civitas]. Any inability of First Priority to meet the lease obligations is currently not expected to impact [Civitas’] dividend targets.
“Civitas is actively working with First Priority to ensure there is no disruption to the underlying tenants. Until the current situation is resolved, [Civitas] will not be entering into any new leases with First Priority.”
After the announcement, Civitas’ share price fell to a historic low of 102.5p. Already in 2018, the REIT has seen its share price drop by almost 10%. Some other social housing REITs have also seen their share prices fall in the year so far.
As part of its intervention in the situation, the Regulator of Social Housing has appointed three people to sit on First Priority’s board.
Last night, these three were revealed on Companies House as: Tony King, group treasurer at Sanctuary; Sara Beamand, former director of care and support at Midland Heart; and John Simpson, former chair of Sovereign.
It was also announced that Clive Parker, director of retirement housing and care consultancy Caresec, had resigned from his position on the board.
First Priority leases properties from 26 companies, but Inside Housing understands that five of these own the majority of the stock.
As well as the properties it leases from Civitas, it also leases £40m worth of homes from investment trust GCP Infrastructure Investments.
Its only lender is Topland Henley Healthcare Investments, a joint venture between two investment groups which put £100m into supported housing in 2017 and has recently announced its intention to invest £250m more in the coming year.
Update: at 14.33 on 22.2.18 This story was updated to include a reference to Civitas’ share price.
Update: at 11.54 on 12.6.18 This story was updated to correct the annual rent figure.
