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Watchdog bites another of Civitas’ housing associations

9 May 2019

Regulatory pressure on social housing real estate investment trusts shows no sign of letting up with sector's watchdog ruling another of the housing associations used by Civitas (CSH) and Triple Point (SOHO) is non-compliant.

The regulatory pressure on social housing real estate investment trusts shows no sign of letting up with the sector's watchdog ruling that another of the housing associations used by Civitas (CSH) and Triple Point (SOHO) is non-compliant with its standards.

The Regulator of Social Housing has stated that Bespoke Supportive Tenancies (Best), a Manchester-based provider of homes to vulnerable adults with learning, physical or mental difficulties, is in breach of its governance and viability requirements.

Following up on its recent hard-hitting report questioning the business model of leased-based providers of specialised, supported housing, the RSH said Best had a rental income from housing benefit payments to its tenants lower than its lease expenditure and ‘can only currently continue to meet its lease obligations with the continuation of growth, third party support, and the use of pooled service charge income’.

Best, which manages nearly 1,000 homes, is the sixth housing association to be taken to task by the regulator, following similar notices issued to First Priority, which has now entered insolvency, Encircle, Trinity, Westmoreland, and Inclusion. 

Civitas Social Housing (CSH ), the largest trust in the sector at £550 million, has the greatest exposure to Best, which runs 11.5% of the properties in its portfolio.

Best is one of 15 housing associations working with Civitas, which recently cut its fees. The trust said it remains up-to-date with its lease payments and the regulatory announcement has no impact on the portfolio.

Civitas chief executive Paul Bridge said the announcement was anticipated and ‘does not affect our ongoing, successful relationship with Best, not the vital services which Best provides’.

‘We operate in a sector which is evolving and maturing, and we work with our housing association partners and care providers to continue to enhance the sustainability of our sector,’ he said.

Shares in Civitas dipped only 0.6p to 87p but have fallen 17% this year and trade at a wide 18% discount below net asset value.

Best is the third-largest counterparty for GCP Infrastructure (GCP ), representing 6.7% of the portfolio. Unluckily for the infrastructure debt trust, the leases were originally with First Priority Housing, but were transferred to Best when First Priority entered financial difficulties in 2018.

Social housing makes up 15% of GCP’s portfolio but the trust is yet to comment on the impact the latest news will have on the fund. Its shares eased 0.5% to 128.6p. On a high 17% premium over NAV, the shares have escaped the storm that has struck Civitas and, to a lesser extent, Triple Point. 

Triple Point Social Housing (SOHO ) has five properties leased to Best, accounting for 1.4% of its NAV. In a statement, it said the units leased to Best were ‘either fully occupied or otherwise covered by voids agreements’ and three assets each have one unoccupied unit.

‘The assets are of a high quality and the rent payable under the leases with the company continues to be paid,’ it said.

Its shares shed 0.4% to 94.6p. They have fallen 3% this year and stand on an 8% discount to NAV. 


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