In its 2023 annual results published today (29 June), Civitas chair Michael Wrobel said the trust's share price had been "disappointing", reflecting in part the "broad derating" of real estate investments, higher interest rates and investor concern about the sector.
Despite the NAV dip, the trust's annualised contracted rent roll increased by 6% to £56.3m, while the value of its portfolio of 697 properties rose 1% to £978.1m from £968.8m and the IFRS valuation net initial yield averaged 5.55%.
Civitas Social Housing REIT agrees to £485m take-private offer
Wrobel said demand for the type of properties within the company's portfolio "remains strong", with independent forecasts predicting there will be "continued growth for many years to come".
"The board remains confident in the strength of the portfolio and its potential revenue generation," he said.
In May, the Civitas board agreed to a recommended all-cash offer by Wellness Unity at 80 pence per share. The bid made by CK Asset Holdings' wholly-owned indirect subsidiary CK Bidco valued the investment trust at approximately £485m.
On 23 June, with shareholder acceptances representing 64.2%, the offer became unconditional after the trust revised the percentage required to satisfy the ‘acceptance condition', from not less than 75% of the voting rights usually required to more than 50%.
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Wrobel noted that a "difficult challenge" during the year came from the sharp increase in interest rates. The trust entered into a new debt facility for £70.9m in February, which was partly used to repay the loan facility with Lloyds.
"We also fixed our interest rate exposure to provide greater certainty," he said "However, the overall re-financing was achieved at a material increase in ongoing interest costs."
Civitas said it continues to work closely with The Social Housing Family CIC (TSHF) to enable it to expand and play a broader role in the sector and become "part of critical local authority pathways".
Auckland Home Solutions CIC, part of TSHF and the trust's second-largest tenant, representing 16.5% of Civitas' annual contracted roll, was served an enforcement notice by the Regulator of Social Housing for failing to comply with regulatory standards in April.
Civitas' second largest tenant faces enforcement action from regulator
The regulator said it has "serious concerns" about Auckland's governance, business planning and approach to setting rents, and noted it had not demonstrated it is appropriately managing actual or potential conflicts of interest.
Civitas has continued to buy back shares to address the derating of the trust, which is trading at a 26.7% discount, according to data from the Association of Investment Companies.
Over the past 12 months, it has acquired 6,050,000 shares for a total investment of £4.65m. This has enhanced the NAV by 0.3% and benefited the EPRA earnings.