REG - Home REIT PLC - Appointment of AEW

Home ReitAnnouncement

23/05/2023 07:00

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RNS Number : 2684A  Home REIT PLC  23 May 2023

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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

 

23 May 2023

Home REIT plc

 

("Home REIT" or the "Company")

 

Appointment of AEW as Property Adviser and Investment Manager

Further to the announcement on 5 April 2023, the Board announces that it has
entered into an agreement with AEW UK Investment Management LLP ("AEW") under
which, effective immediately, AEW will act as the Company's Property Adviser.
AEW will become the Investment Manager and Alternative Investment Fund Manager
("AIFM") to the Company following Alvarium Fund Managers (UK) Limited ceasing
to act as AIFM of the Company, Alvarium Home REIT Advisors Limited ceasing to
act as Investment Adviser to the Company, receipt of the required FCA approval
for AEW to take on the AIFM functions and adoption by the Company of a revised
investment policy.

Selection process

AEW's selection follows a competitive process in which the Board received a
total of seven proposals and conducted detailed discussions and negotiations
with three short-listed parties. AEW was selected based on its expertise both
in property, including managing residential for rent, and in managing listed
funds, as well as its depth of immediately available resource, the strength of
its network in the real estate marketplace, and its experience in taking on
investment management mandates, amongst other factors.

The Company's lender has given its consent to this appointment.

Background on AEW

AEW is a highly experienced real estate asset manager and part of the AEW
group, which has £74.5 billion of assets under management globally as at 31
December 2022. AEW is the investment manager of AEW UK REIT plc, AEW UK Real
Return Fund and AEW UK Core Plus Property Fund, in addition to a number of
separate account mandates. AEW represents the real estate asset management
platform of Natixis Investment Managers, one of the largest asset managers in
the world, with £980 billion of assets under management as at 31 December
2022.

Immediate priorities and proposed amendments to investment policy

AEW's immediate priorities will be to undertake a thorough review of the
Company's assets to help inform a longer-term strategy for the portfolio, as
well as dealing with a number of short-term requirements, including preparing
for the potential sale of a limited number of properties and engaging with the
Company's current tenant base regarding issues with their properties that may
have been previously unaddressed, while improving rent collection efficiency.
As announced on 15 March 2023, the Board will write to shareholders as soon as
practicable setting out the proposed changes to the Company's investment
policy, which will include enabling the Company to enter into shorter-term
leases with tenants, and details of how shareholder approval will be sought.

Terms of appointment

Effective immediately, AEW will act as Property Adviser to the Company. AEW
will become the Investment Manager and AIFM to the Company following Alvarium
Fund Managers (UK) Limited ceasing to act as AIFM of the Company, Alvarium
Home REIT Advisors Limited ceasing to act as Investment Adviser to the
Company, receipt of FCA approval and adoption by the Company of a revised
investment policy. Alvarium Home REIT Advisors Limited continues to work
closely with the Board and its advisers, and is committed to delivering an
orderly handover. Simpact is continuing to assist the Company on a rolling
three-month contract.

As part of this process, the Company has sought to reduce the level of the
management fees from their previous level. Following its appointment as
Property Adviser (and until its appointment as AIFM), AEW will be entitled to
a property advisory fee of £3 million per annum. During the first two years
of its appointment as AIFM (the "Initial Period"), AEW will be entitled to (i)
a fixed base asset management and AIFM fee of £3 million per annum
(increasing annually in line with inflation by a maximum of 5 per cent. per
annum), (ii) a variable management fee for disposals of £422 per bed for
every property sold and (iii) a variable management fee to incentivise rent
collection of 10% of all rent collected, subject to an aggregate cap of £10
million for the Initial Period. Following the Initial Period, AEW will instead
become entitled to an investment management fee equal to 0.75% of NAV per
annum on an ongoing basis, subject to a minimum fee of £3 million per annum
(increasing annually in line with inflation by a maximum of 5 per cent. per
annum). Under certain circumstances, including a takeover of the Company
completing during the initial period (which would cause the Investment
Management Agreement to be terminated), AEW will be entitled to receive a
termination payment of £9 million, less any fees already paid or payable to
AEW under the Investment Management Agreement. This compares favourably with a
management fee of approximately £7 million per annum that would have been
payable to Alvarium Home REIT Advisors Limited under the existing investment
advisory agreement.

Current trading and additional updates

 

On 16 February 2023, the Company announced that, for the quarter ended 30
November 2022, only 23% of rent had been collected, meaning that out of a
£14.8 million quarterly rent roll, only £3.4 million had been paid. During
the five months ended 30 April 2023, the Company collected a total of
approximately £3.4 million, including sums in relation to rent arrears, from
tenants. Rent demanded during the same period was £25.9 million. With AHRA,
the Company has developed a number of initiatives to improve rent collection,
which AEW will now take forward under a revised investment policy. As at 19
May 2023, the Company had a cash balance of £18.9 million. The Company's cash
balance reflects the repayment of £30 million of cash held in a restricted
account to its lender, as announced on 5 April 2023. The Company's lender has
been supportive throughout this operationally challenging period.

Following the appointment of AEW, the Board intends to proceed with the sale
in the near term of a number of properties, as the Company works to stabilise
its property portfolio, provide additional liquidity and reduce its
borrowings.

Home REIT has agreed terms with Bill Starn, a highly experienced turnaround
CFO, as a consultant to the Company. Following AEW's appointment as Investment
Manager, he is expected to transfer as a consultant to the AEW team.

The Company has been given six months' notice by its property valuer, Knight
Frank, such that Knight Frank's contract to provide valuation services to the
Company will terminate from 3 November 2023. AEW will assist the board with
the selection and appointment of a new property valuer.

Lynne Fennah, Chair of Home REIT, said: "The appointment of a new Investment
Manager is an important step. AEW brings deep fund management and property
expertise that will be critical in enabling the Company to stabilise its
property portfolio, maintain its mission of providing accommodation to
vulnerable people and maximise value for shareholders. The Board has run a
thorough process to enable it to make this change in Investment Manager. AEW
has undertaken detailed diligence before taking on the mandate and is well
placed to hit the ground running. I am delighted with the appointment and look
forward to working together."

Nick Winsley, Head of AEW UK, said: "We are committed to working with Lynne
and the Board to protect the interests of all of Home REITs stakeholders,
shareholders, the Company's lender and the residents. While our immediate
priority will be to address a number of short-term requirements, we will also
undertake a thorough review of the Company's assets that will allow us to
formulate a longer-term strategy for the entire portfolio, which we will
propose to the Board in due course."

Further updates will be provided in due course, as appropriate.

The person responsible for arranging the release of this announcement on
behalf of the Company is FTI Consulting.

 

FOR FURTHER INFORMATION, PLEASE CONTACT:

 

 For Home REIT:

 Smith Square Partners (Financial Adviser)  +44 (0)20 3696 7260

 John Craven

 Toby Rolls

 

 FTI Consulting (Communications Adviser)  HomeREIT@fticonsulting.com

 Dido Laurimore                           +44 (0)20 3727 1000

 Eve Kirmatzis

 Ellie Perham-Marchant

 Oliver Harrison

 For AEW:

 AEW
 Stefano Bassi, AEW                       stefano.bassi@eu.aew.com

 FTI Consulting
 Richard Sunderland                       richard.sunderland@fticonsulting.com

 

 

The Company's LEI is: 213800A53AOVH3FCGG44.

 

For more information, please visit the Company's website: www.homereituk.com
(http://www.homereituk.com/)

 

About AEW

AEW is one of the world's largest real estate asset managers, with €84.9
billion of assets under management as at 31 December 2022. AEW has over 800
employees, with its main offices located in Boston, London, Paris and
Singapore and offers a wide range of real estate investment products including
comingled funds, separate accounts and securities mandates across the full
spectrum of investment strategies. AEW represents the real estate asset
management platform of Natixis Investment Managers, one of the largest asset
managers in the world.

As at 31 December 2022, AEW managed €38.5 billion of real estate assets in
Europe on behalf of a number of funds and separate accounts. AEW has over 470
employees based in 10 offices across Europe and has a long track record of
successfully implementing Core, Value-Add and Opportunistic investment
strategies on behalf of its clients. In the last five years, AEW has invested
and divested a total volume of €21.9 billion of real estate across European
markets.

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

Inside Information

The information contained within this announcement is deemed by Home REIT to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) no. 596/2014 (as it forms part of domestic law by virtue of the European
Union (Withdrawal) Act 2018). On the publication of this announcement via a
Regulatory Information Service, this inside information is now considered to
be in the public domain.

Disclaimer

 

Smith Square Partners LLP ("Smith Square"), which is authorised and regulated
in the United Kingdom by the Financial Conduct Authority, is acting for Home
REIT and no one else in connection with the matters set out in this
Announcement. In connection with such matters, Smith Square will not regard
any other person as its client and will not be responsible to any persons
other than Home REIT for providing the protections afforded to clients of
Smith Square, or for providing advice in relation to the contents of this
announcement or any other matter referred to herein. Smith Square does not owe
or accept any duty, liability or responsibility whatsoever (whether direct,
indirect, consequential, whether in contract, in tort, under statute or
otherwise) to any person who is not a client of Smith Square in connection
with this announcement, in any statement contained herein or otherwise.

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