The Regulator of Social Housing has launched an investigation into Falcon Housing Association, one of Civitas Social Housing’s biggest tenants.
RSH said: “The regulator is currently investigating matters which may impact on Falcon Housing Association CIC’s compliance with the governance and financial viability standard.”
Civitas has recently come under attack from short-seller ShadowFall, which has raised a number of concerns over the company’s partnerships and overall viability. Civitas has refuted the allegations.
In a scathing 22-page open letter, ShadowFall alleges that Civitas’ stakeholders face “significant risk” through their exposure to Falcon and Auckland Home Solutions. The two housing associations share a number of the same directors. Combined, the two tenants contributed 44% of Civitas’ rental income in 2021.
The regulator found Auckland Homes did not comply with governance and financial viability standards at the end of August. In its judgment, the regulator said Auckland had failed to deliver effective risk management solutions and had not demonstrated it has managed resources effectively to ensure viability can be maintained.
At the time of this judgment, the RSH said some of the lease transaction arrangements that Auckland had entered into “have involved companies linked to directors of Auckland and its shareholder” and sought shareholder approval to authorise reported conflict of interests.
It said: “Auckland has layered long-term risks onto the business, for which we lack assurance that they can be adequately managed under the current terms.”
ShadowFall’s main criticisms of Civitas largely centre on its dealings with Isle of Man-registered Specialist Healthcare Operations. Civitas has sold three operating businesses to SHO, a company which directors Tom Pridmore and Andrew Dawber are both alleged to have invested in and subsequently conducted deals without informing shareholders of their interest.
Auckland leases homes from Civitas, with SHO said to lease those buildings from Auckland. ShadowFall further alleges that Civitas “appears to have de facto control” over Auckland, and describes the company as a “middleman” used for REIT compliance for transactions between Civitas and SHO.
ShadowFall published the open letter on 23 September. In a statement to shareholders, Civitas said: “This letter was issued without any engagement on the author’s part with the board of Civitas. It is the board’s belief that the letter is based on factual inaccuracies, incorrect assumptions, erroneous comments and assertions which are not grounded in fact.”
Civitas said it would publish a full response to the accusations once it had reviewed the letter in detail.
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