Net Asset Values, Investment and Market Update

RNS Number : 9744H

Civitas Social Housing PLC

06 August 2019

 

6 August 2019

CIVITAS SOCIAL HOUSING PLC

("Civitas" or the "Company")

Net Asset Values, Dividend Declaration, Investment and Market Update

The Board of Civitas Social Housing PLC ("Board"), the first London listed Real Estate Investment Trust ("REIT") dedicated to investing in regulated social housing in England and Wales, announces its quarterly net asset value ("Net Asset Value" or "NAV") as at 30 June 2019.

Highlights:

·      Annualised rent roll £46.0 million (31 March: £45.7m)

·      IFRS NAV per share up 0.12% to 107.21p (31 March: 107.08p)

·      1.325p quarterly dividend

·      EPRA dividend cover 88%, advancing to target cover

·      Lease indexation targets were achieved during the period

·      Corresponding increase in fair value of investment property

·      First tranche of new debt facilities at advanced stage of negotiation

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 June  2019	31 March 2019
Ordinary NAV (£'000)	667,319	666,508
Ordinary NAV per share (pence)	107.21	107.08

The portfolio has been valued on an IFRS basis with a 5.28% net initial yield (31 March 2019 - 5.27%). This slight change is purely a reflection of rent indexation in this quarter being weighted towards properties with a slightly higher yield, given the IFRS NAV is constituted on a property by property basis with individual yields attaching to each property in the portfolio.

In the period to 30 June 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 June 2019	31 March 2019
Ordinary NAV (£'000)	739,244	741,170
Ordinary NAV per share (pence)	118.79	119.07

The portfolio as a whole has been valued with a 5.03% net initial yield (31 March 2019 - 5.01%). This slight change is not the result of any underlying adjustment in the portfolio itself but reflects the broader market for healthcare transactions in the period that are monitored by JLL as part of their valuation process.

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.

Secondly, 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 (5.03% cap rate as opposed to 5.28% under IFRS). This assumption is supported by transactional evidence that JLL has observed in the market.

Investment Update

As previously noted, Civitas has deployed its presently available equity, subject to a cash buffer. More than £208 million of borrowings have also been successfully deployed, against available facilities of £212.5 million. As a result, our run-rate annualised rent roll as at 30 June 2019 was £46.0 million, an increase of 62% since 31 March 2018, underpinning the move towards the target of a fully covered dividend (88% dividend cover at 30 June 2019).

In light of this, and the current pipeline of attractive investment opportunities which exceeds £200 million, the Company has been working to bring on board the next tranches of debt facilities, in order to achieve its stated objective of an average leverage of 35% on a gross asset basis.

The first tranche of these facilities with a new lender is at an advanced stage of negotiation, following a full programme of due diligence by the lender and their retained independent valuation advisers. It is expected to be in the order of £60 million with an extension to around £100 million, and with pricing consistent with the Company's existing debt facilities. In addition, detailed discussions are underway with other counterparties to secure an additional debt facility tranche of up to £70 million over the coming months to complement the potential £100 million facility noted above. Further announcements will be made when appropriate.

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-Jun 2017	30-Sept 2017	31-Dec 2017	31-Mar 2018	30-Jun 2018	30-Sept 2018	31-Dec 2018	31-Mar 2019	30-Jun 2019
Investment* (£m)	206	284	431	472	508	619	674	758	761
Properties	167	282	384	414	440	521	557	591	594
Tenancies	1,130	1,820	2,405	2,621	2,845	3,440	3,746	4,075	4,094
Local Authorities	68	82	99	109	123	140	144	157	158
Housing Associations	7	10	10	11	12	15	15	15	15
Care Providers	42	50	59	64	71	93	98	113	113

*excluding purchase costs, including completed properties only.

During the period, Civitas acquired a further 3 properties for a consideration of approximately £3.2 million.

Civitas' investment portfolio is well diversified and through our active asset management activities we give consideration to making the portfolio as efficient as possible. We also continue to appraise individual properties with a view to ensuring that they deliver the very best long-term accommodation while meeting the stringent quality standards expected by the Company.

We continue to work closely with our Housing Association partners as they develop and strengthen their financial, governance and regulatory status. We are actively involved in helping with this work, and we expect that our and their efforts will be reflected in some measure in the future views expressed by the Regulator of Social Housing (RSH) with whom the Company continues to be in regular, productive and collaborative dialogue. The RSH has indicated publicly more than once in the period that it does not have an issue with the lease-based model for the delivery of supported housing, although it is keen to see the sector evolve and mature, as are we. Examples of the significant progress the sector has made in its evolution, and our involvement in helping secure this, can be found in our annual report.

Market Update

Supported housing is integral to the healthcare pathway in the UK and a key component in facilitating the delivery of care for individuals with significant long-term care needs. Supported housing enables such people to live fulfilling lives within the community and close to their families, rather than in a hospital or institution. It is a substantial and well-established sector, housing more than 170,000 individuals[1] and growing at an average of around 5% a year.  Laing Buisson estimates that supported living is seeing the most significant growth in investment (CAGR 7.8%) which is a reflection of its success in providing high quality community-based accommodation, as well as the ongoing UK demographic shifts and other favourable factors which drive demand[2].

Demand

Our experience of working on the ground across half the local authorities in England and Wales indicates that demand for supported housing is growing and expanding to cover a wider range of underlying needs faced by people who are battling homelessness, various forms of addiction or who are stepping down from the NHS into a more appropriate supportive care environment before returning home. The pressure on local authority budgets at this current time is well known, and this is changing behaviour as authorities look for high quality solutions that deliver from a social perspective and also save money. It is universally accepted that supported living meets both of these criteria.

Rents

Supported living often costs more than general housing and this goes beyond just the physical adaptions to the buildings, extensive and specialised though they are. This is well understood and accepted by local authorities, government ministers and leading charities, who all appreciate that for people who need long term care, the alternative to supported housing is a hospital or institution, at a much greater personal, social and economic cost. Whilst supported housing rents cannot be meaningfully compared to market rents or general needs social rents, because the individuals in consideration cannot live in general needs accommodation, it is well understood by those commissioning care that supported housing provides better outcomes and value for money than institutionalisation. This has been the case since its inception more than 20 years ago.

Government

Across the broad political cross party landscape, we know that there remains very strong support for supported housing to facilitate the provision of community-based care particularly for those individuals with significant long-term care needs and who are regarded as vulnerable as a result. Supported housing enables people to achieve better and more independent lives and outcomes which are positive for those individuals and also ultimately represent a major cost saving for the taxpayer.

Dividend

The Board has declared a quarterly dividend for the period from 1 April 2019 to 30 June 2019 of 1.325p per Ordinary Share. The dividend will be paid on or around 6 September 2019 to holders on the register as at 16 August 2019 (the record date) and the corresponding ex-dividend date being 15 August 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 June 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

Sapna Shah                                                             Tel: [phone]

Tom Scrivens                                                          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 in England and Wales.  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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[1] House of Commons, First Joint Report of the Communities and Local Government and Work and Pensions Committees - "Future of Supported Housing: May 2019

[2] LaingBuisson, Adult Specialist Care, 3^rd Edition: April 2019

 

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