REG - Home REIT PLC - Monthly Update

Home ReitAnnouncement

05/06/2024 07:00

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RNS Number : 1285R  Home REIT PLC  05 June 2024

 

5 June 2024

Home REIT plc

("HOME" or the "Company")

 

Monthly Update

 

The Board of HOME and AEW UK Investment Management LLP ("AEW" or the
"Investment Manager") provide their monthly update in respect of May 2024.

Summary

·    As announced on 10 May 2024, 76 properties exchanged for sale at
auction for a total of £14.6m with completion expected during June.

·    Repayment of £8.3m of debt to the Company's lender in May comprising
a cash repayment of £7.1m and net break gains of £1.2m applied to loan
principal. Total borrowings reduced to £131.8m from £220.0m in the last nine
months.

·    Negotiations continue on a refinancing as part of the strategy for
the long-term financial stability of the Company.

·    An additional 47 internal property inspections have been completed in
May, taking the total to 2,124 in the last nine months.

·    As announced on 29 May, the Company surrendered leases from tenants
on over 30% of the Company's portfolio by number of properties. The tenancies
have now transferred to Home REIT, enabling the Company to directly collect
the underlying income from these properties, increasing rent collection and
facilitating asset management opportunities.

·    The Company is progressing legal action against selected
non-performing tenants.

·    As previously announced, the Company intends to bring legal
proceedings against those parties it considers are responsible for wrongdoing
and has now issued a pre-action letter of claim to its former investment
adviser, Alvarium Home REIT Advisors Limited (in liquidation).

 

Portfolio and Financial Highlights

 

 Financial Position (Unaudited)                                      As at                             As at

                                                                     31 August 2023                    31 May 2024
 Valuation:
 Draft August 2023 Valuation                                         £412.9m                           £315.2m (1)

 Number of properties                                                2,473                             1,772
 Cash and Borrowings:
 Unrestricted Cash                                                   £0.8m                             £7.5m
 Total Cash                                                          £13.5m                            £12.9m
 Borrowings                                                          £220.0m                           £131.8m
 Net debt                                                            £206.5m                           £118.9m
 Income:
 Annual Contracted Rent                                              £53.9m                            £21.6m
 Tenants (2 3)                                                       29                                20
 Properties under lease to tenants                                   2,358                             1,005
 Properties under separate management agreement                      115                               115(4)
 Properties under property management agreements - Direct Let (PRS)  -                                 652

                                                                     To date                           Month

                                                                     1 September 2023 to               1 May 2024 to 31 May 2024

                                                                     31 May 2024
 Investment Activity:
 Properties sold in the period                                       £97.5m                            £13.8m
 Number of properties sold in period                                 701                               149
 Properties exchanged in period/not yet completed                    £28.2m                            £12.9m
 Number of properties exchanged not yet completed at period end      145                               75
 Rent collection:
 Rent collection(5) %                                                11%                               7%
 Rent collection total                                               £3.1m                             £0.2m
 Inspections:
 Completed(6)                                                        2,124                             47

 Occupancy: (at date of inspection on 1,563 Vibrant inspections)

 Occupancy (at least one bed occupied)                                                                 79%

 Vacant (whole building)                                                                               21%

( )

(1) Proforma value at 31 May 2024 being draft (as announced on 20 December
2023) less disposals in period at 31 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) 12 properties have been sold since last month's reporting

(5)Rent collection - rent collected including arrears /rent invoiced for the
period

(6) Inspections - these are of the portfolio held as at 31 August 2023.

 

 

 

FOR FURTHER INFORMATION, PLEASE CONTACT:

 FTI Consulting (Communications Adviser)  HomeREIT@fticonsulting.com (mailto:HomeREIT@fticonsulting.com)

 Dido Laurimore                           +44 (0)20 3727 1000

 Eve Kirmatzis

 Oliver Harrison

 

The Company's LEI is: 213800A53AOVH3FCGG44.

 

For more information, please visit the Company's website: www.homereituk.com
(http://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 returns 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 June.
Vibrant and AEW continue to prioritise completion of the inspection programme
with 86% of the portfolio inspected as at 31 May 2024.

 

Investment Activity

·    Following announcements of exchanges at auction in previous months,
149 properties completed during May for a total of £13.8m.

·    As announced on 10 May 2024, 76 properties exchanged for sale at
auction for a total of £14.6m. One of these properties also completed in May
for £1.7m.

·    Since August 2023, the Company has completed on the sale of 701
properties and exchanged on a further 145 properties. The gross proceeds from
properties sold and exchanged totals £125.7m, which in aggregate is in line
with the August 2023 draft valuation.

·    Sale proceeds continue to be used to reduce borrowings and provide
working capital.

 

Rent Collection and Tenant Engagement

·    AEW continues to focus on obtaining control of the portfolio and 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 collection on operating leases from 1 September 2023 to 31 May
2024 is 11% of the rent invoiced for the period. 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 continue to work on stabilising
the portfolio and pursues legal action.

·    On 29 May 2024, the Company announced that it has reached an
agreement with a number of tenants for the surrender of leases on over 600
properties, equating to circa. 30% of the Company's portfolio by number of
properties. The Company and AEW have diligently analysed the properties and
their various tenancies to ensure there is a comprehensive handover with
minimal disruption to occupiers. The tenancies have now transferred to Home,
enabling the Company to directly collect the underlying income from these
properties, increasing rent collection and facilitating asset management
opportunities.

·    AEW is in active dialogue with a number of prospective providers who
have significant demand for properties for Supported Living and other forms of
Social Use accommodation.

·    AEW continues to make good progress with the stabilisation strategy
and further announcements on re-tenanting will be made in due course.

 

 

Financial Position and Related Matters

·    The Company had a cash balance of £12.9m as at 31 May 2024 of which
£7.5m is unrestricted.

·    The Company repaid £8.3m of debt to the Company's lender in May
comprising a cash repayment of £7.1m and a net break gain of £1.2m also
being applied in repayment of the debt. A total of £88.2m of debt has been
repaid since the Company entered the stabilisation period during August
2023.

·    As at 31 May 2024, the Company has total borrowings of £131.8m,
comprising a £41.5m 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 on full repayment of the loans.

·    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.

·    As previously announced the Company's lender has advised that their
objective is for repayment of the loan balance in the short term.

·    On 5 February 2024, the Company announced that it had commenced a
refinancing process to consider alternative finance options. Work on the
refinancing strategy continues.

 

Valuation, Publication of the Annual and Interim Reports

·    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 with BDO to
publish the audited results for 31 August 2022 during the second quarter of
2024, with 31 August 2023 to follow soon after.

·    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

·    AEW continues engagement with the Company's shareholders. The next
monthly update is expected to be announced on Wednesday 3 July 2024.

 

Potential Litigation

·    Further to the announcement on 18 April 2024, the Company has now
issued a pre-action letter of claim to its former investment adviser, Alvarium
Home REIT Advisors Limited (in liquidation). Shortly before issuance of the
pre-action letter of claim the Company was made aware that Alvarium Home REIT
Advisors Limited had appointed joint liquidators for the purpose of winding up
the company. Notwithstanding this event, it remains important that all means
of potential financial recovery are fully considered and that any wrongdoing
is thoroughly investigated. 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 continues to be made in identifying 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 and further announcements will be
made in due course.

 

Portfolio and tenant breakdown

 

 Geographic Region         Number  of Properties   Number of Properties (%)

 As at 31 May 2024
 North East                520                     29.3%
 North West                369                     20.8%
 Yorkshire and the Humber  234                     13.2%
 East Midlands             186                     10.5%
 West Midlands             171                     9.7%
 South West                109                     6.2%
 London                    74                      4.2%
 South East                67                      3.8%
 Wales                     23                      1.3%
 East of England           19                      1.1%
 Total                     1,772                   100%

 

 Top 10 Tenants                      Number of Properties  % of portfolio annual contracted rent

 As at 31 May 2024
  One (Housing & Support) CIC        161                   24.7%
  Bloom Social Housing CIC           78                    11.9%
  Noble Tree Foundation Limited(2)   143                   11.8%
  LTG Vision CIC                     172                   9.2%
  Mears Ltd                          177                   9.0%
  Gen Liv UK C.I.C.(1)               45                    6.6%
  Community Restore CIC              54                    5.2%
  Supportive Home's CIC(1)           37                    4.6%
  Mansit Housing CIC                 68                    3.7%
  Lifeline (NW) CIC                  10                    2.7%
 Total                               945                   89.4%

(1) In liquidation

Tenants in liquidation (Gen Liv UK CIC, Supportive Homes CIC and Marigold
Housing) account for 13.10% of the annual contracted rent as at 31 May 2024.

 

(2) As announced on 4 June 2024, Noble Tree Foundation Limited has entered
into administration

 

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