Civitas agrees to £485m offer from Hong Kong developer

Listed supported housing investment trust Civitas Social Housing has agreed to a £485m takeover bid by Hong Kong-based property developer CK Asset Holdings.

The board of the supported housing landlord, which is structured as a real estate investment trust, said it was recommending the offer to shareholders despite the fact that the offer undervalued the business, due to “considerable negative sentiment” surrounding the sector at the current time.

The offer of 80p per Civitas share, represents a premium of 44% to the closing share price of the firm the day before the offer was made, and is far higher than the firm’s  price has been since September last year. However, it is lower than Civitas’ valuation at the same point last year, and prior to June last year the firm had only twice dipped below 80p in value.

Civitas has invested more than £800m since being set up in buying a portfolio of 697 supported housing properties, housing 4,594 tenants. While it commonly buys existing homes, around a third of its stock are new build.

>> See also Can ‘for-profit’ providers rescue affordable housebuilding?

The firm offering to buy Civitas, CK Asset Holdings operates predominantly in Hong Kong and the Chinese mainland, however it has built a number of luxury properties in London over the last 25 years, including the 196-home Albion Riverside scheme, and also owns the Greene King pub and brewery group. CK is currently developing the 3,500-home Convoys Wharf scheme in Greenwich designed by Farrells.

Civitas said in a statement that it believed “the Offer undervalues the long-term prospects of Civitas”. However, it said the board recognised that “Civitas and the sector in which it operates faces a number of challenges in light of the current macro environment and outlook”.

It said these included: “considerable negative sentiment in the public markets towards Civitas and the social housing sector which the Civitas Board believes are unlikely to be overcome in the short to medium term and which will continue to have a material impact on Civitas’ share price prospects”.

It said that the directors of the firm intended to “unanimously to recommend that Civitas Shareholders accept the Offer”.

The purchase comes amid increasing concern from the social housing sector about the standard of care provided by some providers in the supported housing sector. Yesterday the National Audit Office found that gaps in data and regulation were in some cases allowing landlords to profit by providing costly, sub-standard housing with little or no support, supervision or care.