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REITs claim regulator’s report has ‘no new information’
Two leading social housing real estate investment trusts (REITs) have claimed that a critical report by the regulator into their financial model contains “no new information”.
In updates to the stock market, Civitas and Triple Point responded to a report by the Regulator of Social Housing that questioned the sustainability of housing associations which only operate the lease-based model which the funds offer.
According to the regulator, it is “hard to see” how any housing associations that rely substantially on this method of financing could comply with its standards.
The report also contained various criticisms of the financial model operated by Civitas, Triple Point and other private and listed funds, which involves them leasing out specialist supported housing (SSH) to housing associations.
SSH homes are aimed at vulnerable adults, generally with learning disabilities and other mental health issues.
Both organisations have seen their share prices fall in the wake of the report, with Civitas’ hitting a low of 86p on Friday. It has recovered slightly today to 88.6p. Triple Point shares were trading at 99.4p, a recent low.
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The housing associations involved have to make monthly, inflation-linked payments to the REITs, the regulator said, many have made “unsustainable” business models.
Civitas, the larger REIT, said in its response that the report “contains no new information or opinion of material relevance to Civitas and its leases”.
It added: “Civitas continues to be fully supportive of, and in regular and positive dialogue with, the regulator and welcomes the regulator’s acknowledgement of the importance of the growing supported social housing sector.
“Civitas also continues to work closely with all the housing associations with whom it has lease agreements to assist them in improving and maintaining operational performance and is implementing a number of initiatives to this end.”
In its response, Triple Point called the report a “helpful commentary on the risks” facing those involved with this financial model.
It claimed, however, that the report “does not highlight material new information”.
Triple Point also released its annual financial report on Friday. This revealed that during 2018, it invested a further £170.8m into SSH in the UK, bringing the total number of properties it owns to 272.
The REIT recorded a pre-tax profit of £19.9m, a huge increase from the previous year, in which it made £5.7m.
This was in part down to a leap in the rental income it now receives from housing associations that lease its properties. As of 31 December last year, it was receiving an annual rental income of £11.5m, up from £1m in the previous year.
It also made significant gains thanks to adjustments in the value of its properties. In this area, it brought in £14.5m, up from £5.6m.
