Civitas Social Housing has announced its net asset value as at 30 September 2020, made a dividend declaration and has provided a trading and market update. The key highlights from the announcement are as follows:
- Strong financial and operational performance in line with expectations
- IFRS NAV per share 108.01p (30 June 2020: 107.92p)
- Rents received as normal with no COVID 19 impact
- Excellent health and safety compliance reported by housing associations
- 1.35p quarterly dividend declared in line with full year target of 5.4p
- Two additional properties (51 beds) acquired for £10.4m in the quarter
- Further progress on new debt facilities and investment pipeline
CSH continues to perform in line with expectations
CSH says that it has continued to perform in-line with expectations, with rents in the quarter being collected as normal unaffected by COVID-19. It says that, as at 5 November 2020, over 98 per cent. of rents had been received across CSH’s 618 properties with the balance expected shortly. It reports that rental income and net cash generation have advanced positively to provide further support for its aim of paying a total dividend of 5.4p for the year to 31 March 2021. Revenue from the portfolio, including income contracted from new investments, delivers 100% EPRA dividend cover on a run rate basis.
Portfolio additions
The investment portfolio has seen the addition of two further properties in the period, leased to Inclusion Housing Community Interest Company and Bespoke Supported Tenancies Limited. The properties together comprise 51 bed spaces of which 49 are supported by a new back to back care provider lease. This covers the entirety of the rental income over the 22-year period including void protection.
Responding to Covid-19 driven demand
CSH says that, more broadly the COVID-19 pandemic has generated further additional demand for specially adapted, high quality accommodation for vulnerable and disabled adults, to which CSH has been able to respond by making available vacant properties in the portfolio. Furthermore, CSH’s investment adviser has extended its regular dialogue with housing associations to include detailed reports on pandemic responsiveness. The Board says that it is pleased to note continuing levels of the highest dedication to health and safety, resulting in excellent compliance reports together with a strong performance in the unbroken delivery of essential care for residents.
Continues progress on ESG
CSH continues to focus on Environmental, Social and Governance (ESG) principles, and during the quarter has:
- Increased the Environmental Performance Certificate rating within the CSH portfolio to 99.5% (98% as at 31 March 2020) with full compliance expected by the end of the year;
- Maintained its status as an “Impact Investor” under the International Finance Corporation (“IPC”) principles;
- Become an early adopter of the new Sustainability Reporting Standard developed for the social housing sector by a leading social impact consultancy; and
- Been at the forefront of improving governance in the sector.
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 (“JLL”).
| wdt_ID | IFRS NAV | 30-Sep-20 | 30-Jun-20 |
|---|---|---|---|
| 1 | Ordinary NAV (£'000) | 671,412.00 | 670,898.00 |
| 2 | Ordinary NAV per share (pence) | 108.01 | 107.92 |
CSH says that the growth in IFRS NAV reflects the contribution from the indexation of leases in the period, (based on the current low level of CPI inflation) and the cost of modest discretionary capital expenditure that has been incurred to enhance further the quality of the Company’s properties to reflect the individual needs of tenants for the long term. It also reflects the asset purchases in the period, which were limited in number as the Company is almost fully invested (above a cash buffer and capital reserved for transactions expected to complete shortly), notwithstanding a growing pipeline of strong acquisition opportunities.The portfolio, based on individual asset valuations, has been valued at 30 September 2020 at an average Net Initial Yield of 5.26% (30 June 2020: 5.26%) after taking into account the initial costs of property acquisitions incurred by the Company and the assumed costs of a subsequent theoretical sale. The individual valuations are determined by JLL based on a range of underlying metrics including applicable discount rates and expected long-term inflation.
In the period to 30 September 2020, an Ordinary Share dividend of 1.35p per share was declared in respect of the period ended 30 June 2020 and paid in September 2020, amounting to £8.4 million.
Portfolio NAV
The unaudited Portfolio NAV, disclosed below, reflects an independent RICS “Red Book” valuation prepared on a portfolio basis by JLL.
| wdt_ID | PORTFOLIO NAV | 30-Sep-20 | 20-Jun-20 |
|---|---|---|---|
| 1 | Ordinary NAV (£'000) | 735,913.00 | 736,057.00 |
| 2 | Ordinary NAV per share (pence) | 118.40 | 118.40 |
The portfolio, as a single entity, has been valued at 30 September 2020 at 5.08% Net Initial Yield (30 June: 5.07%) reflecting the enhanced value from the aggregation of individual properties into a single portfolio company and the positive effects of the stamp duty adjustment noted below.
The JLL Portfolio NAV valuation incorporates two additional assumptions when considering Red Book valuation. Firstly, that the assumed theoretical sale costs (from CSH 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 pricing. This assumption is supported by transactional evidence that JLL has observed in the market.
Second quarterly dividend declared at 1.35p
CSH Board has declared a second quarterly dividend for the period from 1 July 2020 to 30 September 2020 of 1.35p per Ordinary Share as part of the target of 5.4p per Ordinary Share for the year to 31 March 2021. The dividend will be paid on or around 4 December 2020 to holders on the register as at 20 November 2020 (the record date) with the corresponding ex-dividend date being 19 November 2020. The dividend will be paid as a REIT property income distribution (“PID”).
The target dividend of 5.4p per Ordinary Share for the year to 31 March 2021 reflects both the strong underlying cash generation that the Company continues to achieve and the Board’s view, at the present time, of the Company’s prospects in the current financial year.
Progress being made on new debt facilities
CSH says that the pandemic slowed, temporarily, the ability of lenders to consider new facilities with their focus being applied to existing borrowers who required support and with most or all staff working remotely. However, it says that, more recently, lenders have been more open to consider new funding opportunities on competitive rates and CSH is now working with parties to finalise a new debt facility. A further announcement will be made in due course.