NAV, Investment and Market Update

RNS Number : 5579S

Civitas Social Housing PLC

07 November 2019

 

CIVITAS SOCIAL HOUSING PLC

("Civitas" or the "Company")

Net Asset Values, Dividend Declaration, Investment and Market Update

7 November 2019

The Board of Civitas Social Housing PLC ("Board"), the first London listed Real Estate Investment Trust ("REIT") dedicated to investing into regulated social housing in the UK, is pleased to announce its quarterly net asset value ("Net Asset Value" or "NAV") as at 30 September 2019.

Highlights:

·      Annualised rent roll £46.5 million (30 June 2019: £46.0m)

·      IFRS NAV per share 107.23p (30 June 2019: 107.21p)

·      1.325p quarterly dividend declared

·      EPRA dividend cover 88% (EPRA run rate 96%)

·      Lease indexation targets achieved

·      New £60m NatWest debt facility secured

·      Share buy-backs commenced

Net Asset Values:

IFRS NAV

The unaudited IFRS NAV, disclosed below, reflects an independent RICS "Red Book" valuation prepared on an individual asset basis by Jones Lang LaSalle Ltd ("JLL").

IFRS NAV	30 Sept 2019	30 June 2019
Ordinary NAV (£'000)	667,441	667,319
Ordinary NAV per share (pence)	107.23	107.21

The portfolio, based on individual asset valuations, has been valued overall at 30 September 2019 at an average of 5.28% Net Initial Yield, unchanged from 30 June 2019.

The three-month period to 30 September 2019 has fewer lease indexation events than other periods during the year, reflecting the timing of the original asset purchases and therefore the annual indexation.

In the period to 30 September 2019, an Ordinary Share dividend of 1.325p per share was declared and paid, amounting to £8.2 million.

Portfolio NAV

The unaudited Portfolio NAV, disclosed below, reflects an independent RICS "Red Book" valuation prepared on a portfolio basis by JLL.

PORTFOLIO NAV	30 Sept 2019	30 June 2019
Ordinary NAV (£'000)	736,401	739,244
Ordinary NAV per share (pence)	118.30	118.79

The portfolio as a whole has been valued at 30 September 2019 at 5.05% Net Initial Yield compared to 5.03% Net Initial Yield at 30 June 2019. The slight variation reflects JLL's current view of the market and comparable transactions.

The JLL Portfolio NAV valuation incorporates two additional assumptions when considering the Red Book valuation. First, that the assumed sale costs (from Civitas to a subsequent buyer) are reduced as the portfolio is assumed to be sold (with all properties within SPVs) with stamp duty being charged at 0.5% on the sale of shares in SPVs as opposed to 5.0% for the sale of each underlying property. Second, that the portfolio is sold in its entirety rather than as individual properties (making it better suited to a wider group of institutional buyers) and so attracting more competitive prices (5.05% Net Initial Yield as opposed to 5.28% under IFRS). This assumption is supported by transactional evidence that JLL has observed in the market.

Company Update

On 10 September 2019, the Company announced a new £60 million 5-Year Term Facility with National Westminster Bank Plc that has the potential to be extended by a further £40 million.

The availability of these funds enabled the Company to take the opportunity to buy shares at a discount to NAV. This discount emerged following the publication by the Regulator of Social Housing ("RSH') of a risk update in April 2019 that raised a number of concerns over lease-based Housing Associations, many of which have now been resolved. Prior to this time, and since IPO in November 2016, the Company's shares had typically traded at a premium to IFRS NAV.

More recently, the RSH has issued a further risk report in relation to the entire social housing sector that is regarded as being more supportive of lease-based Housing Associations. The RSH has now stated publicly that they have no issue with the lease-based model.

During this time, the Company has continued to grow its rental income, deliver enhanced operational cashflow, meet its dividend obligations and move closer to the target of 100% dividend cover. It has also worked closely with the RSH and with its Housing Association and other partners and taken a hands-on role in bringing about improvements, many of which are now very apparent.

The Company continues to honour the commitments made to investment counterparties and to balance the ability to buy-back shares with these commitments. This is both to vendors of new properties, particularly in areas where the Company has existing properties and has built strong relationships with local authorities and existing properties that are within the portfolio that are presently being extended significantly. The Board will continue to monitor this balance and update the market accordingly.

Since IPO, the Company has successfully attained the following investment milestones and created a high quality, nationally based, diversified portfolio of regulated social housing in England and Wales as well as partnering with new Housing Associations and care providers in new local authorities:

Period	30-Sept 2017	31-Dec 2017	31-Mar 2018	30-Jun 2018	30-Sept 2018	31-Dec 2018	31-Mar 2019	30-Jun 2019	30-Sept 2019
Investment* (£m)	284	431	472	508	619	674	758	761	764
Properties	282	384	414	440	521	557	591	594	599
Tenancies	1,820	2,405	2,621	2,845	3,440	3,746	4,075	4,094	4,114
Local Authorities	82	99	109	123	140	144	157	158	160
Housing Associations	10	10	11	12	15	15	15	15	15
Care Providers	50	59	64	71	93	98	113	113	114

In the three-month period to 30 September 2019, the Company acquired five properties for a consideration of £3.5 million.

Market Update 

Demand for the properties provided by the Company remains very strong across the UK and supported living is a preferred care solution for government and for most local authorities.

Our experience increasingly confirms that this demand is greatest for the provision of properties in which higher acuity care is delivered, as this generates the highest cost saving for the state and local authorities and the best personal outcomes for individuals.

It is also where the rental cost is at its lowest when compared with the total cost of care and accommodation combined. In some examples within the Company's portfolio the rental cost is below 5% of the total cost. This encourages care providers to enter into back to back 25-year leases with our Housing Association partners to ensure access to these specialist adapted properties over the long term.

A third of the Civitas portfolio by rental income is now covered by such long-term care back-to-back care provider leases that complement the leases we hold with Housing Associations and this is expected to continue to increase over time.

The market generally has continued to evolve and now reflects the role played by significant parties such as Civitas and certain other landlords, experienced in care who are designing schemes and working directly with major care providers and local authorities. This results in the delivery of high-quality bespoke buildings, both existing newly adapted properties and new build properties acquired at completion. It avoids the need to take either development or financing risk, as both of these are usually taken by large care providers or developers.

Whilst the Company will continue to work with a small select group of experienced and reliable counterparties who deliver completed turn-key schemes, much is now generated and assembled directly by the Company. We consider this increasingly represents a key point of differentiation that enhances our portfolio.

Dividend

The Board has declared a quarterly dividend for the period from 1 July 2019 to 30 September 2019 of 1.325p per Ordinary Share. The dividend will be paid on or around 29 November 2019 to holders on the register as at 15 November 2019 (the record date) and the corresponding ex-dividend date being 14 November 2019. The dividend will be paid as a REIT property income distribution ("PID").

Quarterly Fact Sheet

The Company has today published its Fact Sheet for the quarter to 30 September 2019 and this is available to view on the Company's website.

For further information, please contact:

Civitas Housing Advisors Limited

Paul Bridge                            Tel: [phone]

Andrew Dawber                   Tel: [phone]

Cenkos Securities PLC

Robert Naylor                       Tel: [phone]

Andrew Worne                    Tel: [phone]

Liberum Capital Limited

Gillian Martin                        Tel: [phone]

Buchanan

Helen Tarbet / Henry Harrison-Topham          Tel: [phone]

Henry Wilson / Hannah Ratcliff                         [e-mail]

Notes:

Civitas Social Housing PLC is the first Real Estate Investment Trust offering pure play exposure to social housing across the UK.  The Company is advised by Civitas Housing Advisors Limited, who are authorised and regulated by the Financial Conduct Authority under Firms Reference Number 815699. The Company is listed on the premium listing segment of the Official List of the Financial Conduct Authority and was admitted to trading on the main market for listed securities of the London Stock Exchange in November 2016.  

 

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