REG - Home REIT PLC - Monthly Update

Home ReitAnnouncement

04/04/2024 07:00

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RNS Number : 2372J  Home REIT PLC  04 April 2024

 

4 April 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 March 2024.

Summary

·    As announced on 28 March 2024, 63 properties exchanged for sale at
auction for a total of £6.1m with completion  expected during April.

·    Repayment of £5.1m of debt to the Company's lender in March
comprising a cash repayment of £4.5m and net break gains of £0.6m applied to
loan principal. Total borrowings reduced to £144.0m.

·    The Company continues to make good progress on re-financing, as part
of the strategy for the long-term financial stability of the Company.

·    An additional 67 internal property inspections have been completed in
March taking the total to 1,971 as at 31 March  2024. The inspection
programme is due to continue into April.

·     The Company continues to progress legal action against selected
non-performing tenants.

·    As announced on 2 April, the Board of Home REIT plc appointed Peter
Williams as Senior Independent Non-Executive  Director with immediate effect.

 

Portfolio and Financial Highlights

 

 Financial Position (Unaudited)                                      As at                             As at

                                                                     31 August 2023                    31 March 2024
 Valuation:
 Draft August 2023 Valuation                                         £412.9m                           £334.1m (1)

 Number of properties                                                2,473                             2,017
 Cash and Borrowings:
 Unrestricted Cash                                                   £0.8m                             £9.1m
 Total Cash                                                          £13.5m                            £12.6m
 Borrowings                                                          £220.0m                           £144.0m
 Net Debt                                                            £206.5m                           £131.4m
 Income:
 Annual Contracted Rent                                              £53.9m                            £37.3m
 Tenants (2 3)                                                       29                                26
 Properties under lease to tenants                                   2,358                             1,831
 Properties under separate management agreement                      115                               127
 Properties under property management agreements - Direct Let (PRS)  -                                 59

                                                                     To date                           Month

                                                                     1 September 2023 to               1 March 2024 to

                                                                     31 March 2024                     31 March 2024
 Investment Activity:
 Properties sold in the period                                       £79.7m                            £5.1m
 Number of properties sold in period                                 456                               62
 Properties exchanged in period/not yet completed                    £15.8m                            £6.1m
 Number of properties exchanged not yet completed at period end      252                               63
 Rent collection:
 Rent collection (4) %                                               11%                               8%(5)
 Rent collection total                                               £2.8m                             £0.2m
 Inspections:
 Completed                                                           1,971                             67

 Occupancy: (at date of inspection on 1,463 Vibrant inspections)

 Occupancy (at least one bed occupied)                                                                 78%

 Vacant (whole building)                                                                               22%

( )

(1) Proforma value at 31 March 2024 being draft less (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) ( )Rent collection - rent collected including arrears /rent invoiced for
the period

(5) An additional £0.1m of rent was transferred by tenants on Friday 29 March
2024, which was a bank holiday, therefore the funds did not clear until 2
April.  These receipts will therefore be reported in April's rent collection
figures. If this amount was included in March, the rent collection would be
12%.

 

 

 

FOR FURTHER INFORMATION, PLEASE CONTACT:

 FTI Consulting (Communications Adviser)  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 April.
Vibrant and AEW continue to prioritise completion of the inspection programme
with 80% of the portfolio inspected as at 31 March 2024.

 

Investment Activity

·     Following announcements of exchanges at auction in previous
months, 62 properties completed during March for a total of £5.1m and 252
properties remain exchanged for sale for a total of £15.8m with completion
expected in April.

·    As announced on 28 March 2024, 63 properties exchanged for sale at
auction for a total of £6.1m being £0.5m (7.7%) 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.

·    Since August 2023, the Company has completed on the sale of 456
properties and exchanged on a further 252 properties. The gross proceeds from
properties sold and exchanged totals £95.5m, 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 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 8% of
the rent invoiced for the month of March.   A  further 4% (£0.1m) was
transferred by tenants prior to month end but did not clear until 2 April, and
as such will be reported in April collections.  AEW continues to work with
select 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.

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

·    AEW continues undertaking a comprehensive onboarding process for
these new providers and property managers which  involves qualitative and
quantitative assessments including desktop and physical assessments of their
operations and existing stock.

·     On 2 April 2024, the Company signed new 5-year leases on eight
properties with a specialist provider of accommodation  and support services
to public bodies, working primarily to prevent homelessness. The tenant
currently supports over 5,000 vulnerable individuals and families every night
by partnering with over 100 local authorities. The properties will be used to
house vulnerable individuals. The properties were previously leased to
Serenity Support CIC who has been in liquidation since 6 June 2023. The new
lease allows Home REIT to receive a sustainable income stream in line with the
Investment Policy.

·     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

·    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 £12.6m cash balance as at 31 March 2024 of which
£9.1m 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 £5.1m of debt to the Company's lender in March
comprising a cash repayment of £4.5m and a net break gain of £0.6m also
being applied in repayment of the debt. A total of £76.0m of debt has been
repaid since the Company entered the stabilisation period during August
2023.

·    As at 31 March 2024, the Company has total borrowings of £144.0m,
comprising a £53.7m 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.

 

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 bases 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 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

·   AEW and the Board continue to engage 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 due course.

·    The next monthly update is expected to be announced on Tuesday 7 May.

 

Potential Litigation

·    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

·   As announced on 2 April 2024, the Board of Home REIT plc appointed
Peter Williams as Senior Independent Non- Executive Director with immediate
effect.

·     Having stepped down as Senior Independent Non-Executive Director,
Simon Moore will continue in his capacity as a Non-Executive Director of the
Company until publication of the outstanding 2023 and 2023 Annual Report and
Accounts.

·     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.

 

Portfolio and tenant breakdown

 

 Geographic Region         Number  of Properties   Number of Properties (%)

 As at 31 March 2024
 North East                715                     35.4%
 North West                382                     18.9%
 Yorkshire and the Humber  258                     12.8%
 East Midlands             190                     9.4%
 West Midlands             174                     8.6%
 South West                110                     5.5%
 London                    75                      3.7%
 South East                68                      3.4%
 East of England           22                      1.1%
 Wales                     23                      1.1%
 Total                     2,017                   100.0%

 

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

 As at 31 March 2024
 Big Help Project Ltd                                352                   16.7%
 One (Housing & Support) CIC                         185                   15.1%
 CG Community Council                                54                    7.6%
 Dovecot & Princess Drive Community Association      52                    6.9%
 Bloom Social Housing CIC                            77                    6.9%
 Noble Tree Foundation Limited                       143                   6.4%
 LTG Vision CIC                                      180                   5.5%
 Mears Ltd                                           177                   5.2%
 Gen Liv UK CIC(1)                                   46                    3.9%
 Supportive Homes CIC (1)                            48                    3.4%
 Total                                               1,314                 77.6%

(1) In liquidation

 

Tenants in liquidation (GEN LIV UK CIC, Supportive Homes CIC, Marigold Housing
and Eden Safe Homes CIC account for 8.7% of the annual contracted rent as at
31 March 2024).

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