In all the covid-induced uncertainty in the property market, it was refreshing to see a REIT report strong figures and prospects for the future this week.
Civitas Social Housing’s full year results saw it deliver a total return to shareholders of 20.4%, increase its NAV, and boost its dividend target for FY2021 to 5.4p.
The group’s resilient characteristics – it owns 613 properties that caters for people with learning and mental disabilities – has seen its share price perform a complete turnaround during the crisis.
Due to concerns by the regulator about some of the housing associations in the sector, which sign the leases at Civitas’s properties, the company had been languishing at a significant discount for much of 2019 and early part of 2020.
But the pandemic has only reinforced the message that Civitas has been saying all along.
The fundamentals that underpin the supported living sector – namely the chronic shortage in supply of appropriate accommodation, and growing demand; the better health outcomes specialist supported housing brings to occupants; and the substantial cost saving to government – are not going away.
In contrast to most other REITs, it has collected almost all its rent throughout the period (99%) and its income is now covering its annual 5.3p dividend on a run-rate basis. Its share price has gone from a low of 78.8p on 20 March to 109.4p on 1 July, and it now trades at a premium of 1.4%.
The future is looking rosy too.
The company has opened up its investment strategy to include partnerships with the NHS that should see it own a range of healthcare facilities as well as homelessness facilities.
Civitas is in talks with NHS trusts that want to extend their hospital facilities and offer accommodation for those who need care but don’t need to stay in an expensive ward bed.
To carry out these growth plans, the group is looking to raise between £80m and £120m. An equity fundraise is likely in our opinion and judging by the successful placings of other REITs that are performing well during covid-19, there is certainly appetite from investors.
Civitas said it is also looking at debt markets. Pre-covid-19 it was in advanced negotiations on new bank debt facilities, but with banks putting a hold on lending the group said it could turn to a private lender.
With covid-19 heavily impacting the property market, it is good to see a REIT that has growth at the top of its agenda. Long may it continue.
QuotedData has published several research notes on Civitas. You can read them here