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REIT looks to expand geographical reach
A social housing real estate investment trust (REIT) is looking to expand its geographical reach in the UK.
Civitas, which has invested nearly £500m in supported housing properties around the country, currently owns homes in 120 local authorities. It plans to expand to over 150 in the next 12 months.
The REIT was a pioneer in the social housing sector when it launched in November 2016, aiming to buy homes and lease them to housing associations, providing a 5% dividend to its shareholders.
Since then, it has spent £482.3m on 424 properties with 2,618 tenants, working with 64 care providers and 11 housing associations.
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One of these associations, First Priority, has encountered financial difficulties in 2018 so far, with the Regulator of Social Housing censuring it for “a fundamental failure of governance” and saying it did not have the capacity to meet its debts when they fall due. First Priority has a number of other funders alongside Civitas.
Speaking last week at the Social Housing Finance Conference, Andrew Dawber, director of Civitas Housing Advisors, the investment manager for the REIT, said: “At the start of the process – if we’re bringing properties into the sector for the first time – we’ll set the pricing we pay against the rent level that is eventually agreed.
“And therefore, between ourselves and the housing association, we know that the flows of income that are coming in are commensurate with the lease payments that have to go out of the system.”
The Regulator of Social Housing has written to associations with similar business models to First Priority seeking assurances over issues like portfolio management, cash flow and conflict of interest.
What is a REIT?
A real estate investment trust (REIT) is a company that raises money by issuing shares on the stock market and uses it to buy up property in order to raise income and provide a dividend to its shareholders. REITs generally aim to provide a 5% return to investors.
They are exempt from corporation tax on any profits they derive from their property rental businesses.
REITs have been investing in other areas of real estate for decades but have only become involved in social housing since 2016.
In general, the REITs that have launched in the sector have bought properties, repurposed them to be used as supported housing, and leased them to housing associations that own very few homes themselves at levels of rent linked to inflation.
