Civitas Social Housing PLC £85.6m acquisition of regulated social housing properties
Civitas Social Housing PLC has completed the purchase of 19 regulated social housing properties comprising 266 tenancies for a total consideration of approximately £73.5m. In addition, the Company has also exchanged contracts on two further properties comprising 65 tenancies for a total consideration of £12.1m, with completion expected in due course following certain works being undertaken.
The properties are situated across England and Wales over 14 local authority areas and supported by six separate care providers. The acquisition enables Civitas to extend the coverage of the Company’s national portfolio and further enhances the geographic diversity.
The properties are leased to Registered Providers (‘RP’s) Encircle Housing Limited (‘Encircle’), Chrysalis Supported Association Limited (‘Chrysalis’), Inclusion Housing and Community Interest Company (‘Inclusion’), Hilldale Housing Association Limited (‘Hilldale’) and Bespoke Supported Tenancies Limited (‘BeST’). All of these RPs are regulated by the Regulator of Social Housing and are counterparties to existing leases within the Company’s portfolio. Civitas is satisfied that all of these RPs are operationally robust and are in continuous and positive interaction with the Regulator.
The properties will be immediately income-generating with an initial net yield in line with the Company’s expectations. The properties were sourced by Civitas Housing Advisors Limited, the Company’s investment adviser.
All the properties that have been acquired are either purpose built or have been adapted for use as accommodation for tenants with lifelong learning disabilities and other care needs who are expected to remain in occupation for the long-term and who receive 100% state funding. The properties are subject to long-term leases with rents adjusted annually in line with CPI over the full period and in the majority of instances are subject to a lower limit of inflation indexation of 1% per annum and a maximum indexation of 4% per annum.
The properties have been financed from the Company’s existing debt facilities as all equity capital raised to date has, save for a contingency reserve, been invested in income generating properties.
Arrangement of Additional Debt Facilities
In the coming weeks, Civitas intends to complete and announce the arrangement of additional debt facilities on terms that the Company believes will be favorable and which will enhance cash generation and the overall return to shareholders. This reflects the quality of the properties being acquired and their long-term income characteristics together with the subdued future expectations for inflation.
Following this transaction, the Company gross LTV ratio is approximately 22%. Civitas maintains a conservative target for average gross indebtedness of 35% of portfolio value with a hard cap on average of 40%. This will enable the Company to secure approximately £170 million of additional debt facilities in due course.
£45m Rental Income
Following this announcement, the Company’s run rate rental income has now increased from approximately £41 million to approximately £45 million, an increase of 10% and this is expected to increase further as additional acquisitions are announced in due course. The Civitas pipeline of quality investment opportunities remains strong reflecting the brand recognition and the strong track record of completed transactions that the Company now enjoys within its sector.
Civitas Portfolio (as at 21 March 2019)
31 March 2019 Dividend and NAV Announcement
The Company intends, on or around Wednesday 8 May 2019, to announce the quarterly dividend for the period to 31 March 2019. It is expected that the dividend will benefit from an upward adjustment to reflect inflation and the strength of the Company’s underlying cash flows. The quarterly NAV will be announced in mid-May.