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Supported housing REIT agrees to ‘undervalued’ £485m takeover

One of the sector’s biggest supported housing real estate investment trusts (REITs) has agreed a £485m deal with a Hong Kong-based property giant.

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Bosses at the supported housing REIT accept offer despite believing it “undervalues the long-term prospects of Civitas” #UKhousing

In a stock market update, the board of Civitas said it has accepted the offer from Wellness Unity Ltd despite believing it “undervalues the long-term prospects of Civitas”.

The £485m all-cash offer from Wellness Unity, a company owned by Hong Kong property conglomerate CK Asset Holdings (CKA), will be recommended by the Civitas board to all of its shareholders. 

Under the terms of the offer, each Civitas shareholder will be entitled to receive 80p in cash per share.

Civitas was launched in 2016 and is one of several funds set up in recent years that acquires properties and then leases them to small housing associations for use as specialist supported housing or exempt accommodation. These leases are often index-linked and can last for periods of up to 20 years.

The fund was set up to fill a gap in specialist supported housing provision across the country. In 2018, research by charity Mencap estimated that the shortfall could be up to 33,500 properties in 2021-22. 


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Civitas’ net rental income was £26.6m for the six-month period to 30 September 2022, alongside an annual contracted rent roll of £55m.

The REIT has a current portfolio of 697 properties, supported by 130 specialist care providers and 18 approved providers across 178 local authority areas.

In May last year, Civitas revealed that it would issue new draft lease clauses, in a bid to improve compliance issues at a number of housing associations it leases properties to.

Part of the reasoning for accepting the offer by the board of Civitas was the “considerable negative sentiment in the public markets towards Civitas and the social housing sector which the Civitas board believes are unlikely to be overcome in the short to medium term”. 

The Regulator of Social Housing (RSH) has publicly criticised the lease-based model in the past. Chief executive Fiona MacGregor said it was “hard to see” how housing associations adopting this model could comply.

Several of Civitas’ biggest partners have been deemed non-compliant, with the RSH highlighting the thin capitalisation of some of these providers and the concentration of risk that comes from long-term, low-margin, inflation-linked leases as issues.

In explaining the deal, CKA said it believes that Civitas’ position as one of the leading social housing providers in the UK, as well as its social impact and earnings profile, are complementary to its investment criteria and make for a suitable strategic fit.

It is not expected to create any disruption to tenants as a result of the deal and that CKA will focus on the continuation of relationships with regulated providers, care providers and the RSH following the completion.

Michael Wrobel, non-executive chair of Civitas, said: “Since our IPO in 2016, the Civitas portfolio has delivered consistently on its financial and social impact objectives.

“While 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, face a number of challenges in sentiment which the public markets are unlikely to overcome in the short to medium term.

“The offer provides liquidity to shareholders with the opportunity to exit in full and in cash at a significant premium to the current share price, in a time of macroeconomic uncertainty.”

The deal is expected to be completed later this year.

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