For asset and wealth managers seeking to include the increasingly important environment, social and governance (ESG) theme into their portfolios, social housing REIT Civitas certainly ticks a lot of boxes.
A glance at its shareholder register indicates that fund houses and wealth managers have already taken to this listed specialist in an increasingly important sector. Its largest shareholder is asset manager Investec, which holds just over 10 percent of the company although its top 20 investors reads like a ‘who’s who’ of the biggest wealth and fund managers along with a smattering of institutional investors and private banks.
According to data provided by Bloomberg, among the names of those who hold significant positions in Civitas include BlackRock, Legal & General, Close Brothers, Rathbones and private bank EFG Harris Allday to name but a few.
CEO Paul Bridge told Fundeye: “From the launch of Civitas we had a number of local authority pension funds invested and some ESG and social impact investors as well, this interest has continued to grow.” These investors include the West Yorkshire Pension Fund and East Riding Yorkshire Council, with the former having a 5 percent stake in the company.
Its interim results suggest that these investors aren’t merely trying to boost their socially responsible kudos by holding the company, it’s near 6 percent dividend yield is now almost fully covered and given the rental income is more or less guaranteed as it’s government sourced make this a logical source for any income seeking investor.
As with many UK-focused companies, the share price has suffered recently, compounded by the political upheaval brought about by all things Brexit related. However, while trading at steep discount, forecast to be 18.1 percent in 2020 by house broker Liberum, this may be a great entry point for those seeking exposure to the social housing sector.
Mr Bridge said a Channel Four documentary entitled Home Free tracked a number of young people with certain special needs moving into properties supplied by Civitas.
Andrew Dawber, a director of the trust, added: “The joint party committee on human rights put out a report recently on the scandal of people caught in large scale institutional care, there was a couple of pretty harrowing case studies of young people stuck in institutional care.” He added that the trust truly displays value for money.
One of the major talking points at last month’s Fund Forum’s ESG event was defining what is meant by ESG. Rachel Whittaker of UBS said that one tenant of ESG, impact investing, should be reserved for those companies who actively do good and wouldn’t be able to achieve this without investor funds.
Given the cross party support for social housing polices, Civitas is unlikely to be faced with many issues if there’s a change in government this month. While Labour may well spend more money on social care, this will likely be on domiciliary care or ‘help at home’ which has seen its funding slashed in the last decade.
The trust had a gearing level of 24 percent up to the end of its half year reporting period. Mr Dawber said that this can be increased to 35 percent although on speaking to shareholders, they don’t want the company to get overly leveraged although it has plans to take on another £80 million of debt in Q1 of next year. For a company that can hardly be described as ‘greenwashing’, it seems that it can do well under a new government, given the rare cross party support for the Care Act. With a 23 year track history, Mr Bridge said that while it may not have ‘invented’ the sector, it has certainly professionalised it.
