TIDMHOME
RNS Number : 3800X
Home REIT PLC
20 December 2023
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION
WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR
REGULATIONS OF SUCH JURISDICTION
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
FOR IMMEDIATE RELEASE
20 December 2023
Home REIT plc
Property valuation and portfolio update
Home REIT plc (LSE: HOME) ("HOME" or the "Company"), today
announces an updated property valuation and associated property
portfolio update.
On 28 July 2023, the Company announced that Jones Lang LaSalle
Limited ("JLL") had been appointed to carry out a valuation of the
portfolio as at 31 August 2022, 28 February 2023 and 31 August 2023
on the basis of Fair Value. In addition, the Company announced that
Vibrant Energy Matters Limited ("Vibrant"), a subsidiary of
Connells Limited ("Connells"), had been appointed to inspect all
properties and report on condition, and that Countrywide Surveyors
Limited ("Countrywide"), also a subsidiary of Connells, had been
appointed to provide building surveys in respect of required
repairs and refurbishment on a selection of the Company's
properties.
Following the substantial completion by JLL of external
inspections of 2,391 properties, comprising 97 per cent. of the
Company's property portfolio, in addition to 195 internal
inspections, together with the preliminary findings of the
inspections of both Vibrant and Countrywide, the former of which
has completed 884 internal inspections, JLL has today issued the
Company with its draft valuation reports on the Company's property
portfolio. The valuations for the periods referred to above were
prepared in accordance with the current Royal Institution of
Chartered Surveyors' Valuation - Global Standards, effective from
January 2022, incorporating the IVS, and the RICS Valuation -
Global Standards 2017 UK national supplement (the "RICS Red Book").
JLL expects to report values in the region of those set out in the
table below. They may be subject to further amendment due to the
ongoing inspection programme and subject to completion of the
formal valuation process. These valuations are unaudited.
31 August 28 February 31 August
2023 2023 2022
Number of properties 2,473 2,473 2,239
---------- ------------ ----------
Portfolio valuation GBP412.9m GBP422.9m GBP414.4m
---------- ------------ ----------
The Board of the Company acknowledges that there has been a very
material reduction in the valuation of the Company's property
portfolio with the August 2023 valuation representing 42.26% of the
unaudited historical acquisition costs of GBP977.0m (excluding
purchase costs). The reduction in the property valuation is
principally a result of a re-assessment of the quality of the
assets through the on-going inspection programme, and of the
covenant strength of the tenants, several of which have gone into
liquidation in 2023.
The majority of properties are now valued on a vacant possession
basis and where a valuation has continued to be prepared on an
investment basis, limitations on the duration of the income streams
have been applied to account for the covenant strengths of the
tenants, and the rent levels demanded under the leases. In all
cases, JLL has considered the rental value for the existing uses of
the properties and Local Housing Allowance rates.
The comprehensive inspection programme has also led to a
significant re-assessment of the quality of the property assets.
This has resulted in many properties found to be in need of
extensive renovation before they can be occupied or properties that
may need to be reconfigured to provide an appropriate number of
rooms to suit the local market. JLL has considered the quality of
the assets in reaching its assessment of value.
In addition to the above, the valuation of the assets has also
been impacted by a deterioration in the housing market and an
increase in property yields more generally following a rise in
interest rates.
31 August 2023 28 February 31 August 2022
2023
Number of properties
owned 2,473 2,473 2,239
--------------- ------------ ---------------
Percentage of the
portfolio valued on
a vacant possession
basis(1) 88% 68% 39%
--------------- ------------ ---------------
Percentage of the
portfolio valued at
investment value 12% 32% 61%
--------------- ------------ ---------------
(1) The difference between the percentage of properties valued
on a vacant possession basis for 31 August 2023, 28 February 2023
and 31 August 2022, reflects the assessment of the tenant covenant
strength as indicated by prevailing data available at the
respective periods.
Additional property information
Initial evidence from AEW's ongoing asset management initiatives
indicates a larger than expected proportion of the portfolio is
private rented sector ("PRS") rather than homeless accommodation
backed by exempt rents from local authorities. As AEW works to
stabilise and assume direct control of the portfolio, the Company
expects to quantify a higher proportion of PRS but is unable to
provide definitive percentages at this stage. It is worth noting
however, that the occupiers of these properties could meet the
criteria of broader Social Use, as defined in the Current
Investment Policy, based on the location of the properties and the
type of accommodation they provide, but this remains to be
determined over the stabilisation period.
As part of the stabilisation strategy, AEW has been undertaking
a comprehensive review and data collection exercise of the property
portfolio. Analysis of the underlying property condition is
paramount as part of an exercise to determine suitability, capital
expenditure requirements, and the prospects for income and capital
returns prospects as AEW works to rationalise and re-tenant the
portfolio.
The valuation report for the August 2023 period is a key step in
the stabilisation strategy, and AEW continues to make progress in
obtaining control of Home REIT's assets in respect of
non-performing tenants. AEW is pursuing all strategies available to
the Company including taking legal action on selected tenants that
are not engaging constructively and continue to withhold payment of
rent.
The issuance of the valuation reports is a key step in the
process for the audit and publication of the Company's annual
results for the periods ending 31 August 2022 and 31 August 2023.
However, the audit process remains on-going and is subject, amongst
other things, to the completion of the valuation process, the
continuing internal inspection programme ( which requires
significant co-ordination with multiple parties), and the
application of revised accounting policies back to inception.
Accordingly, the Company is not in a position to publish an
estimated net asset value at this time. The Board and AEW are
committed to continuing to work at pace with BDO to publish the
audited results in a timely manner.
The Board and AEW remain committed to the restoration of trading
in the Company's ordinary shares and fulfilling Home REIT's mission
of providing accommodation to vulnerable people as soon as is
practically possible.
Lynne Fennah, Chair of Home REIT, commented:
"The Board is extremely disappointed by the significant value
reduction announced today which reflects the information that has
come to light regarding the quality of the Company's assets and
tenants. This information is in contradiction to reporting provided
to the Board during these periods. The Company reserves all of its
rights in respect of the matters referred to in today's
announcement and is still considering the conclusions and
implications of the revaluation exercise with its advisers, and
what consequential actions it may take.(1)
"The publication of the Company's portfolio valuation marks an
important step in the stabilisation strategy and ongoing work being
done to publish the Company's annual results for the periods ending
31 August 2022 and 31 August 2023."
(1) The Company does not wish to prejudice its position in
respect of any further action which may follow and so is unable to
comment further at this time .
FOR FURTHER INFORMATION, PLEASE CONTACT:
FTI Consulting (Communications HomeREIT@fticonsulting.com
Adviser) +44 (0)20 3727 1000
Dido Laurimore
Eve Kirmatzis
Ellie Perham-Marchant
Oliver Harrison
The Company's LEI is: 213800A53AOVH3FCGG44.
For more information, please visit the Company's website:
www.homereituk.com
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END
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