Broker Liberum has put a note out highlighting the attractions of Civitas, a social housing real estate investment trust (REIT).

Civitas is currently trading on a 18.7 percent discount to NAV, which represents a tempting entry point for investors. The note also points to the trust’s dividend yield of 6.2 percent, among the highest in its sector.

Joe Brent, analyst at Liberum, described Civitas as a ‘market leader’, adding it ‘is the largest investor in the specialised supported housing (SSH) sector and has established strong relationships with many key stakeholders such as the Regulator of Social Housing (RSH), housing associations, care providers and local authorities’.

Other benefits of owning Civitas are outlined, for instance that its average lease term in the portfolio is a lengthy 24 years. Furthermore, rents increase annually in line with inflation and the investment adviser follows a low risk approach (no development funding or forward purchase agreements).

Other benefits include cross-party political support for the sector, with the government reaffirming its funding for supported housing via the welfare system in August 2018 following a consultation.

Given that Civitas also operates in the specialised supported housing sector, this area has been praised for its cost cutting benefits. Research from Mencap indicates the total cost of care in SSH is £1,569 per week, 11 percent and 56 percent lower than the average cost in care homes and hospitals respectively.

This is not a risk free investment though. The rent roll for Civitas’ portfolio is funded mainly through Housing Benefit payments. The cash flows are therefore government-backed and could be sensitive to bond yield movements. In the event of a significant shift in UK gilt yields, the relative proposition of cash flows from the portfolio could diminish