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Civitas increases NAV during COVID-19 crisis

News Team, 12/05/2020

As investors seek safe havens during the global pandemic that is COVID-19, listed Civitas Social Housing has released an update showing that it has increased its net asset value (NAV) and also hiked its dividend as other trusts seek to protect themselves from large losses that have plagued the market.

Paul Bridge, CEO of Civitas, told Fundeye: “The sector is fully functioning, COVID-19 is very low in our sector. It’s in demand, people want to come out of child services into our properties.”

Civitas offers an attractive proposition to those who need care, according Mr Bridge’s colleague Andrew Dawber, some of whom need over 200 hours of care a week, a figure which is more than one-on-one.

The trust is the largest of its kind on the market, with 4,500 residents in the portfolio. What makes this closed-ended fund attractive is that the revenue, or rent, is government sourced, putting it in a far better position than other REITs which have commercial tenants who may be feeling the strain from the lockdown.

However, Mr Dawber said that to get this government sourced money, the REIT has to show value for money. Given that Civitas works with 164 local authorities, 15 housing associations and 117 care providers it seems that these bodies seem to view the company as providing a decent service.

Given the average age of a Civitas resident is just 32, the company doesn’t have to worry as much as those looking after the elderly, who as a group are far more susceptible to the coronavirus. Furthermore, given the level of care needed by the residents, the care workers don’t tend to move from one property to another, again reducing the risk of the virus spreading.

The trust currently has a gearing level of 27 percent which it aims to raise to 35 percent. The problem is the cost of debt. According to the company, its current debt was secured at just 240 basis points, this has since widened after the COVID-19 outbreak. However, when it narrows, Civitas has a strong pipeline of assets it wishes to add to the portfolio and there is a certainly demand for its services.

For investors seeking to bolster the ESG credentials of their portfolios, Civitas Social Housing is regarded by many as one of the top ESG investments available. Trading at a discount of 4 percent, which has narrowed significantly, it still represents a good entry point given its recent results. The NAV news prompted a share price boost of 5 percent, and with the forecast dividend hike looks set to have a 5 percent dividend yield.

 This REIT is not a secret though, its shareholder register includes names such as BlackRock, Legal & General, Close Brothers, Rathbones and private bank EFG Harris Allday to name but a few. But any company doing well in this ‘black swan’ market is certainly worth a look.

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