Supported housing investor indicates extent of damage to business after attack prompts share price plunge

Housing investor Civitas Social Housing (CSH) said it was forced to put a capital raise on hold after its share price plummeted following criticism from a short seller.

CSH, a real estate investment trust which provides lease-based finance to supported and specialist housing providers, has hit back at several claims from activist short seller Shadowfall Capital & Research about its business.

In a statement to the markets this week, CSH said: “An unwarranted attack by an activist short seller on the fabric of Civitas Social Housing (CSH), coinciding with it falling out of the FTSE 250 index, has driven down CSH’s share price in recent months.

“CSH has published a strong rebuttal saying these claims are baseless. The short seller may have made a quick profit, however CSH has had to put a planned capital raise to grow its portfolio on ice and it has impacted the wider sector to the detriment of thousands of people in need of specialist housing.”

In open letters in September and October, Shadowfall criticised Civitas’ business model and raised questions about the viability of its rental stream and transparency of investments. Shadowfall said in September it holds a 0.82% stake in Civitas on a short position, meaning it makes money if the share price goes down.

Civitas has today published a detailed rebuttal to Shadowfall’s claims.

See also>>Civitas and global asset manager raise £192m for new supported housing

CSH’s share price had been falling towards the end of the summer from a high of £1.19 in August, but plummeted to £0.87 in September following the first Shadowfall letter. It has since recovered slightly to £0.93.

CSH acquires portfolios of supported housing stock from registered providers and leases them back.

The Regulator of Social Housing (RSH) has said that this new lease-based funding model allows a “rapid expansion” of supported housing supply due to the extra capital coming into the sector.

However, the RSH has also raised concerns about the concentration of risk to housing associations using lease-based funding models, particularly if they are thinly capitalised or are over-reliant on long-term, low-margin, inflation-linked leases as a source of finance.

It has placed two Civitas-funded providers, Auckland Home Solutions and Falcon, on its list of organisations non-compliant with the RSH governance and financial viability standard.

According to the RSH global accounts of private registered providers, leases for supported housing across the sector totalled around £500m as of 31 March 2020.