REG - Home REIT PLC - Monthly Update

Home ReitAnnouncement

08/01/2024 07:00

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RNS Number : 8625Y  Home REIT PLC  08 January 2024

 

8 January 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 December 2023.

Summary

The Company and AEW highlight the following updates, with further detail on
these items also provided below.

·    Rent collection including arrears representing 12% of rent invoiced
during the month.

·    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 Company had £15.8m cash balances as at 31 December 2023 of which
£5.4m is unrestricted.

·    As announced on 20 December 2023, auction sales have continued. A
further 81 properties exchanged for £16.4m in December with completion
expected in January. Further receipts are expected in respect of the
properties which exchanged for sale in September, November and December that
have not yet completed.

·    Repayment of £25.6m of debt to the Company's lender in December
comprising a cash repayment of £23.1m and net break gains of £2.5m applied
to loan principal. Total borrowings reduced to £172.7m (from £198.3m the
prior month).

·    An additional 287 internal property inspections have been completed
in December taking the total to 1,515 as at 31 December 2023. The inspection
programme is due to continue during January and February.

·    On 20 December 2023, the Company announced an updated valuation of
the Company's property portfolio based on draft valuation reports from JLL.
The unaudited fair market value of the 2,473 properties held at 31 August 2023
was £412.9m.

 

FOR FURTHER INFORMATION, PLEASE CONTACT:

 FTI Consulting (Communications Adviser)  HomeREIT@fticonsulting.com

 Dido Laurimore                           +44 (0)20 3727 1000

 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
(http://www.homereituk.com/)

 

 

Portfolio assessment and tenant engagement

·    As part of the stabilisation strategy AEW continues to undertake 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 income
and capital returns prospects as AEW works to rationalise the portfolio.

·    Of the 1,093 property inspections undertaken by Vibrant, occupancy
(at least one bed occupied) is 75% as at the date of the property inspections
with 25% being vacant (whole building).

·    The inspection programme requires significant co-ordination with
multiple parties and is due to continue throughout January and February.

·    As previously announced on 20 December 2023, at a series of public
auctions held in December, the Company exchanged on the sale of 80
properties.  A further property exchanged post auction taking the total
anticipated sales proceeds to £16.4m with completion expected in January.
Sale proceeds will be used to provide working capital and reduce borrowings.

·    AEW continues to focus on obtaining control of the portfolio with
legal action being taken against non-performing tenants. The Company also
continues to work constructively with many tenants to facilitate restructuring
of leases and rationalisation of the portfolio.

Rent Collection, Financial position and related matters

·    Rent collected including arrears represents 12% of the rent invoiced
in the month of December.  It is anticipated that rent collection will vary
month on month in the near term as AEW continue to work on stabilising the
portfolio. 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.

·    Following previous announcements of exchanges at auction, 98
properties completed during December for a total of £26.5m and 162 properties
remain exchanged for sale at total of £25.7m and are expected to complete in
January.

·    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 has repaid £25.6m of debt to the Company's lender in
December comprising a cash repayment of £23.1m and a net break gain of £2.5m
also being applied in repayment of the debt.  Due to reductions in future
interest swap rates the potential value of the net break gains has reduced
significantly.

·    As at 31 December 2023, the Company has total borrowings of £172.7m,
comprising a £82.4m interest-only term loan, repayable in 2032, with a fixed
rate of 2.07 per cent. per annum, and a £90.3m interest-only term loan,
repayable on 2036, with a fixed rate of 2.53 per cent. 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 had £15.8m cash balances as at 31 December 2023 of which
£5.4m is unrestricted.

·    Further sales are expected in the near term as part of the strategy
to stabilise the financial position of the Company.

Valuation, Publication of the annual and interim reports

·    On 20 December 2023, the Company announced an updated property
valuation following the issuance by JLL, as external valuer, of draft
valuation reports, as at 31 August 2022, 28 February 2023 and 31 August 2023
on the bases of market value and market value on the special assumption of
vacant possession

·    JLL has externally inspected 2,391 properties comprising 97 per cent.
Of the Company's portfolio, in addition to 195 internal inspections as at 20
December 2023.

·    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 2023  28 February 2023  31 August 2022
 Number of properties  2,473           2,473             2,239
 Portfolio valuation   £412.9m         £422.9m           £414.4m

 

·    The draft valuation of the Company's property portfolio as at 31
August 2023 represents 42.3% of the unaudited historical acquisition costs of
£977.0m (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 entered liquidation in 2023.

·    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.

 

Shareholder engagement

·    AEW continues engagement with the Company's shareholders.

·    The next monthly update is expected to be announced on 5 February
2024.

·    The second quarterly online presentation open to all retail
shareholders is expected to be held on 26 January 2024.  Further details will
be provided in due course.

 

Board succession

·    Further to the Company's previous announcements, the Company has made
good progress in identifying a new independent Non-Executive Chair. Following
a comprehensive search and process, a preferred candidate has been selected
and the individual is currently completing their own due diligence. The
Company remains well placed to make this proposed appointment in advance of
the restoration of the listing of its shares. It is expected that the whole
Board will transition entirely within 12 months as announced on 4 September
2023.

 

 

Portfolio Metrics

Set out below are certain unaudited key portfolio metrics at 31 December 2023.

 As at:                                                        31 August 2023                    31 December 2023
 Number of properties                                          2,473                             2,209
 Number of beds                                                11,861                            10,416
 Number of tenants (1) (2)                                     29                                27
 Annual rent roll (1 2 3)                                      £53.9m                            £42.1m

 In period:                                                    1 June 2023 to 30 November 2023   1 December 2023 to 31 December 2023
 Properties sold                                               165                               98
 Properties exchanged for sale                                 179(4)                            81
 Number of assets with asset management initiatives completed  284                               -

 Rent collected in period (1 2)                                £2.3m                             £0.4m
 Rent collection % (1) (2 5)                                   9%                                12%

(1) Excluding 157 properties under separate management agreements (184
properties as at 30 November 2023)

(2) Excluding 38 properties under property management agreements with HOME
having direct AST leases with occupiers

(3) Contracted rent as at period end

(4) ( )2 properties previously exchanged for sale have fallen through

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

 

 Geographic Region         Number  of Beds   Number  of Properties   Number of Properties (%)

 As at 31 December 2023
 North East                2,475             775                     35.1%
 North West                1,912             402                     18.2%
 Yorkshire and the Humber  1,555             289                     13.1%
 East Midlands             1,162             226                     10.2%
 West Midlands             1,083             190                     8.6%
 South West                757               125                     5.7%
 London                    566               76                      3.4%
 East of England           286               35                      1.6%
 South East                494               68                      3.1%
 Wales                     126               23                      1.0%
 Total                     10,416            2,209                   100.0%

 

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

 As at 31 December 2023
 One (Housing & Support) CIC                         1,200           234                   15.7%
 Big Help Project Ltd                                1,303           353                   14.7%
 Bloom Social Housing CIC                            645             94                    7.3%
 CG Community Council                                386             54                    6.7%
 Dovecot & Princess Drive Community Association      396             52                    6.2%
 Noble Tree Foundation Limited                       527             143                   6.0%
 Supportive Homes CIC*                               436             85                    5.7%
 Gen Liv UK CIC*                                     351             66                    5.1%
 LTG Vision CIC                                      598             187                   5.0%
 Mears Ltd                                           747             177                   4.6%
 Total                                               6,589           1,445                 77.0%
 * In liquidation

 

Tenants in liquidation (Supportive Homes CIC, GEN LIV UK C.I.C. and Serenity
Support CIC, Marigold Housing account for 12.2% of the annual contracted rent
as at 31 December 2023).

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