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Civitas Social Housing soars as CKA Group bids to take Reit private

Investment Trust Insider on Perpetual Income and Growth

GAVIN LUMSDEN, MICHELLE MCGAGH, Investment Trust Insider, 9 May 2023:

Civitas Social Housing (CSH) is to exit the UK stock market after CKA Group, a Hong Kong asset management group and direct investor in the real estate investment trust’s fund manager, pounced with a premium cash bid.

Shares in the provider of supported social housing have soared 24p, or 43%, to 79.4p just short of the recommended and agreed 80p per share offer announced today.

Weighed down by regulatory pressures on the housing associations that lease its properties, Civitas and its main rival Triple Point Social Housing (SOHO), have seen their shares fall to discounts of over 50% to net asset value…

In a statement, CSH chair Michael Wrobel said the offer gave investors the chance of a full exit during a time of economic uncertainty.

He said CKA, which invested in the trust’s manager in 2021, had a detailed understanding of the sector’s fundamental attractions and the expertise of its management team which it will retain after the acquisition.

‘Since our IPO in 2016, the Civitas portfolio has delivered consistently on its financial and social impact objectives. Whilst the Civitas board believes that the offer undervalues the long-term prospects of Civitas as expressed by net asset value, we also recognise that Civitas, and its sector as a whole, faces a number of challenges in sentiment which the public markets are unlikely to overcome in the short to medium term,’ Wrobel said in a statement.

‘Shareholders can do better’

The 80p per share bid, although a boon to the share price today, has left investors and analysts underwhelmed…

James Carthew, head of investment companies at QuotedData, said the bid ‘materially undervalues the company’ and he, as a shareholder, would be rejecting it…

Carthew said he had ‘been warning for some time’ that the extreme discounts some investment companies have found themselves trading at would attract ‘opportunistic bids’.

‘Many other funds could be targets,’ he said. ‘However, the Civitas shareholders that stuck by the company over the past few years deserve better than this and should reject the offer at this level, as I intend to do with my shareholding.’

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