Civitas Social Housing — Focus returning to positive drivers

Civitas Social Housing (LSE: CSH)

Currency in GBP

Last close As at 02/02/2023

GBP0.56

−0.70 (−1.23%)

Market capitalisation

GBP341m

Research: Real Estate

Civitas Social Housing — Focus returning to positive drivers

Continuing positive accounting returns, confirmed by the H122 results, active shareholder engagement and accretive share repurchases at lower levels have all supported the Civitas Social Housing REIT’s share price recovery from September lows. With an attractive 5.8% yield and 10% discount to NAV there is further strong potential, supported by continuing strong demand for care-based social housing.

Martyn King

Written by

Martyn King

Director, Financials

Real Estate

Civitas Social Housing

Focus returning to positive drivers

Company update

Real estate

1 February 2022

Price

97p

Market cap

£597m

Gross debt (£m) at 30 September 2021

357.1

Gross LTV at 30 September 2021
(gross debt as % of gross assets)

34.5%

Shares in issue

622.5m

Free float

99%

Code

CSH

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(0.4)

2.8

(10.5)

Rel (local)

0.0

1.2

(22.2)

52-week high/low

121p

87p

Business description

Civitas Social Housing invests across the UK in care-based community housing and healthcare facilities, particularly specialised supported housing, for the benefit of working age adults with long-term care needs. Its investment objective is to provide an attractive level of income, with the potential for capital growth.

Next events

FY22 results released

30 June 2022

Analyst

Martyn King

+44 (0)20 3077 5745

Civitas Social Housing is a research client of Edison Investment Research Limited

Continuing positive accounting returns, confirmed by the H122 results, active shareholder engagement and accretive share repurchases at lower levels have all supported the Civitas Social Housing REIT’s share price recovery from September lows. With an attractive 5.8% yield and 10% discount to NAV there is further strong potential, supported by continuing strong demand for care-based social housing.

Year end

Net rental income (£m)

EPRA earnings (£m)

EPRA EPS*
(p)

NAV/ share* (p)

DPS
(p)

P/NAV
(x)

Yield
(%)

03/20

45.9

28.8

4.6

107.9

5.30

0.89

5.5

03/21

47.8

30.6

4.9

108.4

5.40

0.89

5.6

03/22e

51.6

31.5

5.1

109.3

5.55

0.88

5.8

03/23e

55.6

35.5

5.8

111.8

5.68

0.86

5.9

Note: *EPRA net tangible assets (NTA) per share.

Positive returns but delayed capital deployment

Civitas shares have begun to recover the weakness that followed the publication of open letters by a short seller in September 2021, but significant potential remains. In August 2021 the shares traded at a c 10% premium to NAV, and the company was considering capital raising measures to support further accretive growth. H122 extended Civitas’s track record of consistently positive accounting returns and it is on track to meet its 5.55p aggregate FY22 DPS target. Including the deployment of existing available capital resources into a strong pipeline of opportunities, the dividend is fully covered (c 101% vs 87% reported in H122). Recent events have slowed acquisition activity, but we expect this to pick up. Our FY22e EPRA earnings is reduced by 8% and FY23e by c 3% but our DPS forecasts are unchanged.

Positive outcomes driving demand

In our July Outlook note we provided a detailed overview of Civitas’s strategy and the specialised social housing (SSH) market. The shortage of homes is forecast to increase, yet compared with the alternatives of residential care or hospitals, SSH improves lives in a cost-effective manner. This explains government policy to offer supported housing to more people and private capital is crucial in meeting this need. For those individuals receiving SSH, rents are funded by central government and paid, via the commissioning local authorities, directly to the approved providers (APs), which lease the properties from Civitas and manage them. In some cases, APs have struggled to keep pace with the rapid growth of the sector, attracting regulatory scrutiny. We believe this is aimed at delivering sector sustainability (by improving their governance, operational performance and financial strength). This should benefit the security of contracted rents and the long-term growth of the sector.

Valuation: Further strong potential

Dividends are backed by stable income, uncorrelated with the wider economy, with good inflation-linked growth prospects. Civitas targets aggregate FY22 DPS of 5.55p, which represents an attractive 5.8% yield. Meanwhile the shares trade at a c 10% discount to H122 NAV.

Focus returning to positive drivers

This report provides an update on recent developments at Civitas. For a detailed review of the company’s strategy and the opportunity within the care-based social housing sector, please see our July 2021 Outlook note.

Share price recovering but significant further potential

Civitas shares have begun to recover the weakness that followed the publication of open letters by short-seller ShadowFall in September 2021.1 We attribute this recovery to the detailed response made by Civitas, which was supported by an active programme of investor engagement,2 accretive share repurchases, taking advantage of the discount to net asset value (NAV), and continuing positive accounting returns, confirmed by the interim results (H122) published in December 2021. However, although the discount to NAV has closed to c 10% (from c 20% during September 2021) we believe the share price recovery has some way to go. In August 2021 the shares traded at a c 10% premium to NAV, reflecting consistently positive accounting returns since its initial public offering (IPO) in November 2016, a robust performance during the pandemic with uninterrupted rent collection, long inflation-linked leases and strong underlying demand for supported housing.

  Among other matters ShadowFall claimed that Civitas had failed to disclose a conflict of interest in certain property transactions, to the detriment of shareholders. It also raised concerns about the financial viability of the SSH business model in general and certain Civitas registered provider lessees in particular.

  Civitas and its investment adviser Civitas Asset Management (CIM) were active in engaging with existing and new shareholders following the publication of its detailed market update in October 2021, gaining new and significant institutional shareholders as a result, including several leading European institutions.

Exhibit 1: Civitas price to net asset value

Source: Civitas NAV data, Refinitiv prices as at 19 January 2022

Consistent income driven returns

Civitas has consistently delivered positive total returns3F3 on both an annual and quarterly basis since its IPO in November 2016. Dividends have been the main component of returns and have increased each year. Operational and financial resilience has been maintained. During the pandemic, rents were received in line with expectations and quarterly dividend payments have been uninterrupted. Since IPO Civitas has generated an aggregate NAV total return of 32.6% or an annual average of 6.0%. Dividends paid represent two-thirds of the total return in the period.

  Change in IFRS NAV per share during the period with dividends paid added back (but not assuming reinvestment of dividends). There is no material difference between IFRS NAV and EPRA net replacement value (NRV).

Exhibit 2: Total return record

FY18

FY19

FY20

FY21

H122

From IPO to end-H122

Opening NAV per share (p)

98.0

105.5

107.1

107.9

108.3

98.0

Closing NAV per share (p)

105.5

107.1

107.9

108.3

108.5

108.5

Dividends paid (p)

3.0

5.0

5.3

5.4

2.7

21.4

NAV total return

7.9%

6.2%

5.7%

5.4%

2.7%

32.6%

Annualised total return

6.0%

Source: Civitas Social Housing data, Edison Investment Research

As Civitas has steadily increased its equity and debt capital to fund portfolio growth since IPO, dividends have run ahead of earnings and cash flow as this capital is deployed. Including the benefits of increased scale, Civitas estimates that dividends are now fully covered by earnings on a run rate basis.4 We note that had near-term dividend payments been restricted to a fully covered level, this would have had no impact on the achieved accounting total return, with increased NAV and capital returns offsetting reduced income returns.

  The run rate is assumed by Civitas to include the completed acquisition of certain pipeline opportunities utilising the fully drawn M&G debt facility while maintaining a cash buffer.

Share repurchases

In September 2021, the board recommenced share repurchases5 to manage the share price discount to NAV and underline its confidence in the company’s prospects and its firm belief that the issues raised by the short sellers were incorrect and misleading.

  Similar action was taken in the third quarter of 2019 when 85,000 shares were repurchased at an average of c 85p (a discount to the 107.2p NAV per share at the time) and subsequently re-issued at an average price of c 109p.

During September and November 2021 Civitas repurchased c 6.9m shares at an average c 91p, held in treasury, at an accretive c 16% discount to prevailing NAV per share. The narrowing discount has reduced the advantages of share repurchases versus accretive portfolio growth and there have been no further repurchases since 30 November.

A number of short positions became apparent in September 2021 but it appears that this has now substantially reduced and, since the interim results were published in early December 2021, both Michael Wrobel (non-executive chairman) and Paul Bridge (CEO, social housing at the investment adviser, Civitas Investment Management) have acquired shares6.

  On 9 December 2021 it was announced that Michael Wroble had acquired 20,000 shares at c 95p per share. On 20 December 2021 it was announced that Paul Bridge had acquired 52,240 shares at c 94p per share.

Significant pipeline of potential acquisitions

Local authority demand for SSH and other care-based social housing7 with similar characteristics remains strong and well ahead of existing supply. The demand for SSH reflects the value for money that it provides compared with the alternatives of residential care or long-stay hospitals, and a recognition of the enhancement to quality SSH can provide to those in need. Capital deployment has slowed in recent months, in part reflecting the pandemic but also the diversion of management time towards responding to the short-seller and the application of capital towards share repurchases. Several investment projects are presently under active consideration by Civitas as it continues to deploy the proceeds of the £85m M&G debt facility. This facility was fully drawn in late FY21 and contributes to the £76m H122 cash position. These opportunities are spread broadly across SSH (specialist supported living as well as high acuity specialist supported living and residential care8) and advanced homelessness.9 The ‘opportunity pool’ is well ahead of Civitas’s current available capital (we estimate c £25–30m), suggesting that in the near term it will be highly selective in the projects chosen while having significant longer-term acquisition opportunities subject to additional capital, both equity and debt capital. Debt raising should be supported by Civitas’s investment grade credit rating.10

  Civitas remains focused on SSH but has also begun to provide other types of care-based social housing such as homelessness, supported by third-party care (‘advanced homelessness’).

  SSH may be provided in adapted property and supported by external, third-party care, or it may be provided in a residential setting with integrated care provided.

  Homeless provision supported by integrated care and support aimed at breaking the cycle of homelessness.

  In March 2021, Civitas announced that Fitch Ratings had awarded the company an investment grade high credit quality rating of A (senior secured) and a long-term issuer default rating of A- with a stable outlook.

Exhibit 3: Investment pipeline opportunities

Source: Civitas Social Housing. Note: The data are indicative and subject to change. All transactions are subject to due diligence and may not complete.

Interim results

As noted above, during the six months to 30 September 2021 (H122) Civitas continued to generate consistent financial returns for shareholders while continuing to generate strong social value. Specialist social impact consultancy The Good Economy estimates that Civitas’s portfolio generated a total social value of £127.0m pa during FY21, including £75.9m of fiscal savings for public budgets and £51.2m in respect of social impact through improved outcomes for residents.

Exhibit 4: Summary of H122 financial performance

Sep-21

30-Sep-20

31-Mar-21

£m unless stated otherwise

H122

H121

H122/H121

FY21

Net rental income

25.1

24.1

4.2%

47.8

Total administrative expenses

(4.9)

(4.6)

6.8%

(9.5)

Operating profit/(loss) before revaluation of properties

20.1

19.4

3.6%

38.3

Change in fair value of investment properties

2.3

2.9

5.5

Operating profit/(loss)

22.4

22.3

43.9

Net finance expense

(5.2)

(3.9)

32.6%

(7.7)

Change in fair value of interest rate derivatives

0.7

(0.9)

(0.1)

PBT

17.9

17.5

36.1

Tax

0.0

0.0

0.0

IFRS net earnings

17.9

17.5

36.1

Adjust for:

Change in fair value of investment properties

(2.3)

(2.9)

(5.5)

Change in fair value of interest rate derivatives

(0.7)

0.9

0.1

EPRA earnings

14.9

15.5

-3.8%

30.6

Basic IFRS EPS (p)

2.87

2.81

5.80

Diluted EPRA EPS (p)

2.40

2.49

-3.8%

4.93

DPS declared (p)

2.78

2.70

2.8%

5.40

Dividend cover (x)

0.87

0.93

0.92

Fair value of investment portfolio

946.3

898.5

5.3%

893.7

EPRA Net Reinstatement Value per share (p)

108.5

108.2

0.2%

108.4

Balance sheet cash

76.5

40.9

107.1

Gross debt

(357.1)

(272.5)

(357.1)

Gross LTV (gross debt/gross assets)

34.5%

28.6%

34.5%

Source: Civitas Social Housing

In particular we note that:

The annualised rent roll continued to increase, to £52.5m at end-H122 (H121: £49.5m; FY21: £50.8m) due to CPI-indexed rent uplifts and acquisitions.

Net rental income earned in the period was £25.1m, up 4.2% versus H121.

Administrative expenses increased 6.8% compared with H121 but were at a similar level to H221.

Operating profit before property valuation movements increased 3.6% to £20.1m and operating cash flow (not shown in Exhibit 4) by a similar amount to £19.8m.

Net finance expense increased due the full drawdown of the £85m M&G debt facility, only partially invested during the period.

The increase in net finance costs more than offset the increase in operating profit before property revaluation movements, and EPRA earnings and EPRA EPS were both reduced by 3.8% versus H121. As the available proceeds of the M&G debt facility are fully deployed, increased rental income will offset the additional finance expense.

DPS declared in the period increased 2.8% and Civitas is well on track to meet its 5.55p target for the year (FY21: 5.4p). Dividend cover was 87% but should increase as available capital is deployed. Assuming this to be the case, Civitas estimates run-rate dividend cover of c 101%.

Including a positive £2.3m gain on the valuation of investment properties, driven by rent-indexation, a positive movement in the value of interest rate derivatives as interest rates increased, and after DPS paid, EPRA NTA per share increased slightly to 108.5p.

With the M&G debt facility fully drawn in late FY21, there was no change in debt or in gross loan to value (34.5%). Balance sheet cash was £76.5m at end-H122 or £72.0m on an unrestricted basis.

The H122 portfolio comprised 648 individual properties providing homes for almost 4,400 residents, mostly vulnerable, younger adults with an average age of 32 years, receiving an average 43 hours per week of care. The properties are leased to diversified group of 17 different approved providers with an average unexpired lease length of 22.7 years and were independently valued at £946m, reflecting an IFRS valuation yield of 5.27%. Long average lease lengths have been a feature of the sector that has supported property valuations. However, as important as contractual lease length, it is the durability of cash flows that really underpin valuations. The positive demand-supply balance in the sector as well as the relatively young age of current and prospective residents underpins this durability. A young resident can be expected to live in their home for many years and the commissioning local authority has no incentive to move them from either a care or financial perspective. If the market were to move towards slightly lower lease lengths this should have no practical impact on cash flows and this is very likely to mitigate any potential impact on valuations.

Forecast update

Our reduced forecasts for FY22 and to a lesser extent for FY23 primarily reflect the impact of our revised acquisition assumptions. We have introduced a forecast for FY24.

We had previously indicated (see our November update) that our acquisition assumptions would be reviewed after the interim results. H122 acquisition investment of c £22m was below the £44m that we had forecast, to be followed by £25m in Q322. Our revised forecasts now include £25m of future acquisitions, at the end of FY22, only. This is an effective c £22m in overall deployment. The new assumption also includes a higher prudential cash position than previously, at c £40m compared with c £30m. Civitas has guided towards at least £30m. We continue to assume a gross acquisition yield of 5.6%.

The impact of these changes is primarily on net rental income with no significant changes in our other assumptions. We have not changed our DPS forecasts although full cover is delayed until FY23.

Exhibit 5: Summary of forecast changes

Net rental income (£m)

EPRA earnings (£m)

EPRA EPS (p)

EPRA NTA/share (p)

DPS (p)

New

Old

% chg

New

Old

% chg

New

Old

% chg

New

Old

% chg

New

Old

% chg

03/22e

51.6

54.0

(4.4)

31.5

34.3

(8.2)

5.1

5.5

(8.2)

109.3

110.4

(1.0)

5.55

5.55

0.0

03/23e

55.6

56.6

(1.8)

35.5

36.7

(3.3)

5.8

6.0

(3.0)

111.8

112.7

(0.8)

5.68

5.68

0.0

03/24e

0.0

N/A

N/A

36.7

N/A

N/A

6.0

N/A

N/A

114.4

N/A

N/A

5.80

N/A

N/A

Source: Edison Investment Research

Valuation

Despite a strong record of low volatility and consistently positive accounting returns, the targeted 5.55p aggregate FY22 DPS, represents a prospective yield of 5.8% while the shares are trading at a c 10% discount to the H122 NAV per share.

Compared with a group of companies that we would consider to be the closest peers to Civitas, investing in housing and healthcare properties, Civitas shares offer a noticeably higher yield than the average with a significantly lower P/NAV. Operational and financial performance during the pandemic has been robust, with rents collected as expected and with no impact on valuations. Yet to fully recover from recent weakness, the valuation of Civitas shares indicates significant potential while also delivering a material social benefit.

Exhibit 6: Peer valuation and performance comparison

Price

Market cap

P/NAV*

Yield**

Share price performance

(p)

(£m)

(x)

(%)

1 month

3 months

12 months

From 12M high

Assura

67

1,972

1.15

4.3

-4%

-8%

-9%

-17%

Home REIT

117

654

1.11

2.1

-10%

1%

11%

-10%

Impact Healthcare

115

455

1.03

5.5

-3%

-2%

3%

-5%

Primary Health Properties

144

1,915

1.25

4.3

-5%

-5%

-2%

-16%

Residential secure Income

108

185

1.02

4.6

0%

9%

21%

-4%

Triple Point Social Housing

93

375

0.87

5.6

-4%

-3%

-12%

-18%

Target Healthcare

115

712

1.03

5.9

-3%

-2%

0%

-9%

Average

1.07

4.6

-4%

-1%

2%

-11%

Civitas Social Housing

97

594

0.89

5.7

0%

6%

-10%

-20%

UK property sector index

1,928

-4%

3%

22%

-5%

UK equity market index

4,192

0%

1%

14%

-2%

Source: Company data, Refinitiv prices as at 1 February 2022. Note: *Based on last reported EPRA NAV. **Based on trailing 12-month DPS declared.

Exhibit 7: Financial summary

Period ending 31 March (£'000s)

2018

2019

2020

2021

2022e

2023e

2024e

INCOME STATEMENT

Net rental income

18.6

35.7

45.9

47.8

51.6

55.6

57.0

Directors' remuneration

(0.2)

(0.2)

(0.2)

(0.2)

(0.2)

(0.2)

(0.2)

Investment advisory fees

(5.8)

(6.5)

(6.2)

(6.1)

(6.2)

(6.2)

(6.3)

General & administrative expenses

(2.9)

(3.0)

(3.5)

(3.2)

(3.4)

(3.4)

(3.5)

Total expenses

(8.9)

(9.6)

(9.9)

(9.5)

(9.8)

(9.8)

(10.1)

EPRA cost ratio

47.8%

27.0%

21.5%

20.3%

18.9%

17.7%

17.7%

Operating profit/(loss) before revaluation of properties

9.7

26.1

36.0

38.3

41.8

45.7

46.9

Change in fair value of investment properties

30.6

3.7

9.4

5.5

7.3

14.4

14.8

Operating profit/(loss)

40.3

29.7

45.4

43.9

49.2

60.1

61.7

Net finance expense

(0.6)

(3.5)

(7.2)

(7.7)

(10.3)

(10.2)

(10.2)

Change in fair value of interest rate derivatives

0.000

0.000

(0.5)

(0.1)

0.7

0.0

0.0

C share amortisation

(2.8)

(6.4)

0.0

0.0

0.0

0.0

0.0

PBT

36.9

19.9

37.7

36.1

39.5

49.9

51.5

Tax

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net profit

36.9

19.9

37.7

36.1

39.5

49.9

51.5

Adjusted for:

Change in fair value of investment properties

(30.6)

(3.7)

(9.4)

(5.5)

(7.3)

(14.4)

(14.8)

Fair value change in interest rate derivatives

0.0

0.0

0.5

0.1

(0.7)

0.0

0.0

C share amortisation

2.8

6.4

0.0

0.0

0.0

0.0

0.0

EPRA earnings

9.1

22.6

28.8

30.6

31.5

35.5

36.7

Average number of shares (m)

350.0

425.4

622.1

621.7

620.0

615.6

615.6

Average diluted shares (m)

633.1

622.5

622.1

621.7

620.0

615.6

615.6

Basic IFRS EPS (p)

10.6

4.7

6.1

5.8

6.4

8.1

8.4

Diluted EPRA EPS (p)

1.4

3.6

4.6

4.9

5.1

5.8

6.0

DPS declared (p)

4.25

5.08

5.30

5.40

5.55

5.68

5.80

DPS paid (p)

3.00

5.00

5.30

5.38

5.51

5.65

5.77

Dividend cover (x)

0.87

0.91

0.87

0.92

0.92

1.02

1.03

BALANCE SHEET

Investment properties

516.2

820.1

868.0

893.7

958.0

976.8

996.1

Other non-current assets

0.0

6.8

10.8

21.9

22.9

23.8

24.7

Total non-current assets

516.2

826.9

878.7

915.6

980.9

1,000.7

1,020.8

Cash & equivalents

249.6

54.3

58.4

107.1

43.1

40.0

37.4

Other current assets

3.3

5.7

10.8

12.8

11.4

12.0

12.3

Total current assets

252.9

60.1

69.2

119.9

54.5

52.0

49.7

Bank loan & borrowings

0.0

0.0

(59.7)

(59.9)

0.0

0.0

0.0

Other current liabilities

(308.9)

(15.3)

(7.7)

(9.3)

(9.8)

(10.3)

(10.6)

Total current liabilities

(308.9)

(15.3)

(67.5)

(69.3)

(9.8)

(10.3)

(10.6)

Bank loan & borrowings

(90.8)

(205.2)

(209.4)

(292.2)

(352.4)

(354.0)

(355.6)

Other non-current liabilities

0.0

0.0

(0.5)

(0.5)

0.0

0.0

0.0

Total non-current liabilities

(90.8)

(205.2)

(209.9)

(292.7)

(352.4)

(354.0)

(355.6)

Net assets

369.4

666.5

670.6

673.5

673.2

688.4

704.3

Adjust for:

C shares

298.8

0.0

0.0

0.0

0.0

0.0

0.0

Fair value of interest rate derivatives

0.0

0.0

0.5

0.5

(0.1)

(0.1)

(0.1)

Diluted EPRA NTA

668.1

666.5

671.0

674.0

673.1

688.2

704.2

Period-end basic number of shares (m)

350.0

622.5

621.6

621.9

615.6

615.6

615.6

Period end diluted number of shares (m)

633.1

622.5

621.6

621.9

615.6

615.6

615.6

Basic IFRS NAV per share (p)

105.5

107.1

107.9

108.3

109.4

111.8

114.4

Diluted EPRA NTA per share (p)

105.5

107.1

107.9

108.4

109.3

111.8

114.4

CASH FLOW

Net cash flow from operating activity

8.1

23.3

32.9

26.1

40.9

44.7

46.0

Cash flow from investing activity

(483.9)

(302.6)

(61.9)

(6.2)

(57.2)

(4.5)

(4.5)

Net proceeds from equity issuance

343.0

(0.1)

0.0

0.0

0.0

0.0

0.0

Net proceeds from C share issuance

296.0

0.0

0.0

0.0

0.0

0.0

0.0

Loan interest paid

(0.4)

(3.0)

(5.8)

(6.0)

(8.5)

(8.6)

(8.6)

Bank borrowings drawn/(repaid)

92.5

116.0

64.1

84.6

0.0

0.0

0.0

Share repurchase/reissue

0.0

0.0

(0.7)

0.0

(4.9)

0.0

0.0

Dividends paid

(10.1)

(27.6)

(32.9)

(33.3)

(34.2)

(34.8)

(35.5)

Other cash flow from financing activity

(2.2)

(5.3)

(7.9)

(8.8)

(14.9)

(8.6)

(8.6)

Cash flow from financing activity

719.2

83.0

23.3

42.4

(49.0)

(43.3)

(44.1)

Change in cash

243.3

(196.2)

(5.7)

62.4

(65.3)

(3.1)

(2.6)

Opening cash

0.0

243.3

47.1

41.4

103.8

38.6

35.5

Closing cash (excluding restricted cash)

243.3

47.1

41.4

103.8

38.6

35.5

32.9

Restricted cash

6.3

7.2

16.9

3.3

4.5

4.5

4.5

Cash as per balance sheet

249.6

54.3

58.4

107.1

43.1

40.0

37.4

Debt as per balance sheet

(90.8)

(205.2)

(269.2)

(352.1)

(352.4)

(354.0)

(355.6)

Unamortised loan arrangement costs

(1.6)

(3.3)

(3.3)

(4.9)

(4.7)

(3.0)

(1.4)

Total debt

(92.5)

(208.4)

(272.5)

(357.1)

(357.1)

(357.1)

(357.1)

Net (debt)/cash excluding restricted cash

150.9

(161.3)

(231.1)

(253.2)

(318.5)

(321.6)

(324.2)

Gross LTV (gross debt/gross assets)

12.0%

23.5%

28.7%

34.5%

34.5%

33.9%

33.4%

Source: Civitas Social Housing historical data, Edison Investment Research forecasts

General disclaimer and copyright

This report has been commissioned by Civitas Social Housing and prepared and issued by Edison, in consideration of a fee payable by Civitas Social Housing. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Civitas Social Housing and prepared and issued by Edison, in consideration of a fee payable by Civitas Social Housing. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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