London-listed social housing investor Civitas revealed it had struck an “undervalued” deal to sell itself to a Hong Kong property giant today, as it looks to escape a barrage of criticism from short sellers and the media.
Bosses at Civitas said this morning they had agreed to a £485m offer from Wellness Unity Limited, a company owned by Hong Kong property conglomerate CK Asset Holdings, and would now unanimously recommend the deal to shareholders.
Shares in the real estate investment trust (REIT) rocketed beyond forty per cent this morning after the announcement.
The proposed offer marks a 44.4 per cent premium on the firm’s share price on the 5th May but is well below the value of the firm’s sprawling portfolio of properties and the 104p per share price the firm floated at in 2016.
Bosses at Civitas said they had agreed to the “undervalued” offer amid a wave of “negative sentiment” towards the social housing sector and increasing scrutiny from the social housing regulator.
“Equity market sentiment to specialist supported housing has been poor, with ongoing negative commentary around the sector as a whole,” the firm said in the announcement today.
“The Civitas Board believes that this has largely been driven by some critical judgements issued by the Regulator of Social Housing about the long lease model and, in turn, some of Civitas’ housing association providers, which has led to sustained negative press commentary around private sector involvement in the sector, particularly in the social housing trade press.”
The issue had been fuelled by “an aggressive and vocal shortselling attack” on the firm from ShadowFall in 2021 which was widely covered by the media and “created further negative sentiment”, Civitas said.
Chair of the firm Michael Wrobel said the deal marked a good option for shareholders as the sector is rocked by a “number of challenges in sentiment” which the market was “unlikely to overcome”.
However, the offer was slammed by some analysts today. Head of investment companies at QuotedData – and Civitas shareholder – James Carthew, said the offer from CK Holdings was an “opportunistic bid” and investors should reject the offer.
“Many other funds could be targets,” he added.” “However, the Civitas shareholders that stuck by the company over the past few years deserve better than this and should reject the offer at this level, as I intend to do with my shareholding.”
The deal comes amid a turbulent period for Civitas after the social housing regulator served its second biggest tenant with an enforcement notice last month, posing questions over the stability of its rental income.
Investors have also been jittery over the long-lease social housing model amid the scandal surrounding its peer Home REIT over the past six months.
Home REIT has been rocked by a string of crises and a collapse in its rental income after a number of its 25-year tenants collapsed and failed to pay rent to the firm.