5 March 2024
Home REIT plc
("HOME" or the
"Company")
Monthly Update
The Board and AEW UK Investment Management LLP
("AEW" or the "Investment Manager") provide their monthly update in
respect of February 2024.
Summary
The Company and AEW highlight the following
updates, with further detail on these items also provided
below.
· As
announced on 15 February 2024, 119 properties exchanged for sale at
auction for a total of £5.7m with completion expected during
March.
·
Repayment of £13.7m of debt to the Company's lender in
February comprising a cash repayment of £11.7m and net break gains
of £2.0m applied to loan principal. Total borrowings reduced to
£149.1m.
· The
Company continues to make encouraging progress on re-financing, as
part of the strategy for the long-term financial stability of the
Company.
· An
additional 82 internal property inspections have been completed in
February taking the total to 1,904 as at 29 February 2024. The
inspection programme is due to continue throughout
March.
· The
Company intends to bring legal proceedings against those parties it
considers are responsible for wrongdoing. The Company announced on
13 February 2024 the commencement of a Financial Conduct Authority
("FCA") investigation into the Company and the Company will
cooperate fully with the FCA in its work.
Stabilisation Period
Update
The Company entered a stabilisation period in
August 2023, following the approval of a revised investment policy.
AEW is now approximately six months into the stabilisation period
and a very significant amount of effort has been undertaken to
provide a firmer platform for the future of the Company. The AEW
team, along with the Board, continues to stabilise the financial
position of the Company in line with the Investment Policy. Since
August 2023, the Company has completed disposals totalling £74.6m
(394 properties), reduced bank debt from £220.0m to £149.1m,
increased unrestricted cash and has initiated a re-financing
process that is progressing well.
Substantial tenant engagement has occurred
during this time, with lease surrenders agreed in respect of 315
properties and specific strategies in place with each tenant to
drive a future improvement in rental collection, including via
re-tenanting. In addition, 77% of the property portfolio has been
subject to internal inspection. On the corporate side, updated
draft valuation reports have been produced by Jones Lang LaSalle
Limited ("JLL") as part of the process to produce the financial
results for past periods and achieve a restoration of trading of
the Company's shares. Overall, AEW has looked to establish firm
foundations from which to move forward and believe the Company is
able to take the next step forward in terms of implementation of
the stabilisation strategy with re-tenanting. AEW has several
initiatives ongoing and expects to make further positive
announcements in the near future.
Portfolio and Financial
Highlights
Financial
Position (Unaudited)
|
As at
31 August 2023
|
As at
29 February 2024
|
Valuation:
|
|
|
Draft August 2023 Valuation
|
£412.9m
|
£339.2m
1
|
Number of properties
|
2,473
|
2,079
|
Cash and
Borrowings:
|
|
|
Unrestricted Cash
|
£0.8m
|
£7.4m
|
Total Cash
|
£13.5m
|
£12.5m
|
Borrowings
|
£220.0m
|
£149.1m
|
Income:
|
|
|
Annual Contracted Rent
|
£53.9m
|
£38.6m
|
Tenants 2 3
|
29
|
26
|
Properties under lease to tenants
|
2,358
|
1,901
|
Properties under separate management
agreement
|
115
|
119
|
Properties under property management agreements
- Direct Let (PRS)
|
-
|
59
|
|
|
|
|
To date
1
September 2023 to
29
February 2024
|
Month
1
February 2024 to
29
February 2024
|
Investment
Activity:
|
|
|
Proceeds from properties sold in the
period
|
£74.6m
|
£7.8m
|
Number of properties sold in period
|
394
|
28
|
Price for properties exchanged and not
completed at period end
|
£15.1m
|
£5.7m
|
Number of properties exchanged and not
completed at period end
|
253
|
119
|
Rent
collection:
|
|
|
Rent collection 4 %
|
11%
|
11%
|
Rent collection total
|
£2.5m
|
£0.4m
|
Inspections:
|
|
|
Completed
|
1,904
|
82
|
Occupancy: (at date
of inspection on 1,463 Vibrant inspections)
Occupancy (at least one bed
occupied)
Vacant (whole building)
|
78%
22%
|
1 Proforma
value at 29 February 2024 being the draft JLL August 2023 valuation
(as announced on 20 December 2023) less disposals as valued in the
draft JLL August 2023 valuation.
2 Excluding
properties under separate management agreements
3 Excluding properties under property management agreements with
HOME having direct AST leases with occupiers
4 Rent collection - rent collected including
arrears /rent invoiced for the period
FOR
FURTHER INFORMATION, PLEASE CONTACT:
FTI Consulting (Communications
Adviser)
Dido Laurimore
Eve Kirmatzis
Oliver Harrison
|
HomeREIT@fticonsulting.com
+44 (0)20
3727 1000
|
The Company's LEI is:
213800A53AOVH3FCGG44.
For more information, please visit
the Company's website: www.homereituk.com
Portfolio assessment
· AEW
continues to undertake its comprehensive review and data collection
exercise of the property portfolio. Analysis of the underlying
condition of the properties is paramount to determine suitability,
capital expenditure requirements and income and capital return
prospects for each asset as AEW works to rationalise the portfolio
as part of the stabilisation strategy.
· The
inspection programme continues to require significant co-ordination
with multiple parties and is due to continue throughout
March. Vibrant and AEW continue to prioritise completion of
the inspection programme with 77% of the portfolio inspected as at
29 February 2024.
· As
AEW continues to obtain increased visibility on underlying
occupancy from tenants, the majority of the portfolio has currently
been identified as private rented sector ("PRS") rather than
homeless accommodation backed by exempt rents from local
authorities. However, PRS occupiers 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.
Investment Activity
· As
announced on 15 February 2024, 119 properties exchanged for sale at
auction for a total of £5.7m being £1.0m (15.5%) below the draft
JLL August 2023 values. The majority of the properties exchanged
were below the portfolio average lot size which may cause a greater
percentage variation when comparing sale price to the August draft
valuation. Overall, the value of properties exchanged at
auction since August 2023, has been £0.3m (0.3%) below the draft
JLL August 2023 valuations.
·
Following announcements of exchanges at auction in previous
months, 28 properties completed during February for a total of
£7.8m and 253 properties remain exchanged for sale for a total of
£15.1m with completion expected in March.
· The
overall sales programme continues with total completed sales of
£74.6m (394 properties) since August 2023, £0.9m (1.2%) above the
draft JLL August 2023 valuations.
Rent Collection and tenant
engagement
· AEW
continues to focus on obtaining control of the portfolio with legal
action being taken against non-performing tenants. The Company is
progressing negotiations with a number of tenants to facilitate
restructuring of leases and rationalisation of the portfolio,
further announcements will be made in due course.
·
Rent collected on operating leases including arrears
represents 11% of the rent invoiced for the month of February.
AEW continues to work with selected tenants on payment
plans. It is anticipated that rent collection will vary month on
month in the near term as AEW continues to work on stabilising the
portfolio and pursues legal action.
· The
Company is pleased to report that AEW is in active dialogue with a
number of providers who have significant demand for properties for
Supported Living and other forms of Social Use
accommodation.
· AEW
is currently undertaking a comprehensive onboarding process for
these new providers which involves qualitative and quantitative
assessments including desktop and physical assessments of their
operations and existing stock.
·
Further announcements on re-tenanting will be made in due
course.
Financial position and related
matters
·
Although AEW continues to implement strategies to increase
rental income, further sales are expected in the near term as part
of the strategy to stabilise the financial position of the
Company.
· The
Company had £12.5m cash balance as at 29 February 2024 of which
£7.4m is unrestricted.
· The
Board and AEW continue to engage proactively and constructively
with the Company's lender through regular meetings and continue to
service interest payments in full as they fall due.
· The
Company repaid £13.7m of debt to the Company's lender in February
comprising a cash repayment of £11.7m and a net break gain of £2.0m
also being applied in repayment of the debt. A total of £70.9m of
debt has been repaid since the Company entered the stabilisation
period during August 2023.
· As
at 29 February 2024, the Company has total borrowings of £149.1m,
comprising a £58.8m interest-only term loan, repayable in 2032,
with a fixed rate of 2.07% per annum, and a £90.3m interest-only
term loan, repayable on 2036, with a fixed rate of 2.53%per
annum. An additional fee of 5.00% per annum is charged on the
aggregate outstanding loan balances, with the fee accruing on a
daily basis from 30 November 2023. The additional fee is
payable at the earlier of 28 June 2024 or full repayment of the
loans.
· The
Company is making encouraging progress on re-financing, as part of
the strategy for the long-term financial stability of the
Company.
· The
Company has incurred "exceptional" expenses of c. £16m since
January 2023. The exceptional costs of £16m include £5m in relation
to property legal and disposal costs, £4m for strategic advisers,
£3m for legal advisers and the Alvarez & Marsal report, £2m for
valuation work and inspections, and £1m for accounting advisers'
fees in relation to outstanding annual accounts. The Board
continues to review all third‐party appointments and manage
costs.
Valuation, Publication of the annual
and interim reports
·
JLL, as external valuer, is undertaking valuations of the
properties as at 29 February 2024 on the basis of fair value.
Relevant announcements on the portfolio valuation will be
made in due course.
· The
audit process remains on-going with AEW dedicating very substantial
resource to complete this key workstream. The completion of the
audit is primarily subject to the continuing internal
inspection programme, the associated finalisation of the
valuation for the relevant financial periods and the application of
revised accounting policies back to inception. Access
constraints remain a significant challenge for the completion of
the internal inspections.
· The
Board and AEW are committed to continuing to work at pace with BDO
to publish the audited results for both 31 August 2022 and 31
August 2023, during the second quarter of 2024.
· 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.
Shareholder engagement
· As
announced on the 29 February 2024, the Annual General Meeting of
the Company (AGM) was held and the resolution to re-elect Michael
O'Donnell as Director was approved with 99.3% in favour.
· AEW
and the Board continues engagement with the Company's
shareholders. AEW's third quarterly online presentation open
to all retail shareholders is expected to be held in late April
2024. Further details will be provided in the next monthly
report.
· The
next monthly update is expected to be announced on Thursday 4 April
2024.
FCA Investigation and Potential
Litigation
· The
Company announced on 13 February 2024 the commencement of a
Financial Conduct Authority ("FCA") investigation into the Company
and the Company will cooperate fully with the FCA in its
work.
· The
Company intends to bring legal proceedings against those parties it
considers are responsible for wrongdoing. The Company cannot
comment any further at this stage as to do so may prejudice the
Company's position in any potential proceedings. Any relevant
announcements in this regard will be made at the appropriate
time.
Board succession
·
Good progress is being made in identifying new independent
Non-Executive Directors including a new Chair of the Audit
Committee with the process being overseen by Michael O'Donnell. The
Company remains well placed to conclude this process in advance of
the restoration of the listing of its shares.
Geographic
Region
As at 29
February 2024
|
Number of
Properties
|
Number of Properties
(%)
|
North East
|
756
|
36.4%
|
North West
|
383
|
18.4%
|
Yorkshire and the Humber
|
259
|
12.5%
|
East Midlands
|
198
|
9.5%
|
West Midlands
|
184
|
8.9%
|
South West
|
110
|
5.3%
|
London
|
75
|
3.6%
|
South East
|
68
|
3.3%
|
East of England
|
23
|
1.1%
|
Wales
|
23
|
1.0%
|
Total
|
2,079
|
100.0%
|
Top 10
Tenants
As at 29
February 2024
|
Number of Properties
|
% of portfolio annual contracted
rent
|
Big Help Project Ltd
|
352
1
|
16.2%
|
One (Housing & Support)
CIC
|
213
|
16.0%
|
CG Community Council
|
54
|
7.4%
|
Dovecot & Princess Drive
Community Association
|
52
|
6.7%
|
Bloom Social Housing CIC
|
77
|
6.7%
|
Noble Tree Foundation
Limited
|
143
|
6.6%
|
LTG Vision CIC
|
180
|
5.3%
|
Mears Ltd
|
177
|
5.0%
|
Ashwood Housing Solutions
CIC
|
186
|
3.9%
|
Gen Liv UK CIC
2
|
46
|
3.8%
|
Total
|
1,480
|
77.6%
|
|
|
|
1 1 property shown as
Big Help Project Ltd (in previous updates) is under lease to
another tenant
2 In
liquidation
Tenants in liquidation (GEN LIV UK CIC,
Supportive Homes CIC, Marigold Housing and Eden Safe Homes CIC
account for 8.2% of the annual contracted rent as at 29 February
2024).