REG - Home REIT PLC - Monthly Update

Home ReitAnnouncement

03/07/2024 07:00

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RNS Number : 8815U  Home REIT PLC  03 July 2024

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR
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

 

3 July 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 June 2024.

Summary

·    As announced on 21 June 2024, 133 properties exchanged for sale at
auction for a total of £11.4m with completion expected during July.

·     Repayment of £17.1m of debt to the Company's lender in June
comprising a cash repayment of £14.9m and net break gains of £2.2m applied
to loan principal. Total borrowings reduced to £114.6m.

·     As announced on 17 June 2024, the Company has not been able to
secure a re-financing of the existing debt facility, on terms that it could
recommend to shareholders, despite extensive and advanced discussions with
another potential lender.

·     The Company is implementing a strategy to repay its outstanding
borrowings in a timely manner and there will therefore be further property
sales in the short term.

·     The existing lender has revised the terms of the additional fee
charged on the outstanding loan amount and the 5% fee will increase to 7% from
1 July 2024 until the full repayment of the loan.  The lender expects to be
fully repaid no later than 31 December 2024.

·     Total income received for the month of June was £0.6m, which
represents a 60% increase from the previous month.

·     The Company continues to remove non-performing tenants from the
portfolio and has now re-gained control of c.70% of the Company's portfolio by
number of properties enabling the Company to collect the income from these
properties, increasing rent collection and facilitating asset management
opportunities.

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

·     As announced on 28 June 2024, the Company's audited results for
the year ended 31 August 2022 ("FY22 Audit") are now expected to be published
during August 2024. The FY22 Audit is substantially complete, but the Company
has been advised by its auditor, BDO, that further time is required to
finalise the audit.

·   As previously announced, the Company intends to bring legal
proceedings against those parties it considers are responsible for wrongdoing.

 

 

 

Portfolio and Financial Highlights

 

 Financial Position (Unaudited)                                  As at                             As at

                                                                 31 August 2023                    30 June 2024
 Valuation:
 Draft August 2023 Valuation                                     £412.9m                           £298.0m (1)

 Number of properties                                            2,473                             1,683
 Cash and Borrowings:
 Unrestricted Cash                                               £0.8m                             £6.5m
 Total Cash                                                      £13.5m                            £11.7m
 Borrowings                                                      £220.0m                           £114.6m
 Net debt                                                        £206.5m                           £102.9m
 Income:
 Annual Contracted Operating Lease Rent                          £53.9m                            £15.2m
 Tenants (2 3)                                                   29                                23
 Properties under lease to tenants                               2,358                             752
 Properties under property management agreements                 115                               931(4)

                                                                 To date                           Month

                                                                 1 September 2023 to               1 June 2024 to 30 June 2024

                                                                 30 June 2024
 Investment Activity:
 Properties sold in the period                                   £112.5m                           £15.0m
 Number of properties sold in period                             790(5)                            88
 Properties exchanged in period/not yet completed                £24.5m                            £11.4m
 Number of properties exchanged not yet completed at period end  187                               133
 Rent Collection:
 Operating lease rent collection                                 £3.6m                             £0.3m
 Operating lease rent collection(6) %                            11%                               16%
 Management agreement income collection                          £1.4m                             £0.3m
 Total income collected                                          £5.0m                             £0.6m
 Inspections:
 Completed(7)                                                    2,144                             20

 Occupancy: (at date of inspection on 1,577 Vibrant inspections)

 Occupancy (at least one bed occupied)                                                             78%

 Vacant (whole building)                                                                           22%

( )

(1) Proforma value at 30 June 2024 being draft (as announced on 20 December
2023) less disposals in period at 31 August 2023 draft valuation.

(2) Excluding properties under separate management agreements

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

(4) 15 properties have been sold since last month's reporting

(5) Two properties were sold as one auction lot in the February auction sales.

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

(7) 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/)

 

 

Investment Activity

·     Following announcements of exchanges at auction in previous
months, 88 properties completed during June for a total of £15.0m.

·      As announced on 21 June 2024, 133 properties exchanged for sale
at auction for a total of £11.4m.

·    Since August 2023, the Company has completed on the sale of 790
properties and exchanged on a further 187 properties. The gross proceeds from
properties sold and exchanged totals £137.0m, 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.

·     The Company is implementing a strategy to repay its outstanding
borrowings in a timely manner and there will therefore be further property
sales in the short term.

Financial Position and Related Matters

·     The Company had a cash balance of £11.7m as at 30 June 2024 of
which £6.5m is unrestricted.

·     The Company repaid £17.1m of debt to the Company's lender in June
comprising a cash repayment of £14.9m and a net break gain of £2.2m also
being applied in repayment of the debt. A total of £105.4m of debt has been
repaid since the Company entered the stabilisation period during August
2023.

·   As at 30 June 2024, the Company has total borrowings of £114.6m,
comprising a £24.3m 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.

·    As mentioned in previous announcements, 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 was
payable at the earlier of 28 June 2024 or on full repayment of the loans. The
Company could not pay the fee when due. The lender has revised the terms of
the additional fee charged on the outstanding loan amount with an increase
from 5.00% to 7.00% from 1 July 2024 until the full repayment of the loan.

·     The lender expects to be fully repaid no later than 31 December
2024.

·   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.

Valuation, Publication of the Annual and Interim Reports

·     As announced on 28 June 2024, the Company's audited results for
the year ended 31 August 2022 ("FY22 Audit") are now expected to be published
during August 2024.

·    The FY22 Audit is substantially complete, but the Company has been
advised by its auditor, BDO, that further time is required to finalise the
audit.

·     The audited results for the year ended 31 August 2023 have been
prepared in parallel and, along with interim results for the periods to 28
February 2023 and 2024 respectively, are expected to be published during the
third quarter.

·     AEW UK Investment Management is continuing to dedicate substantial
resource and BDO remains focused on finalising the audit as soon as possible.

·    The Board and AEW remain committed to the restoration of trading in
the Company's ordinary shares as soon as is practically possible.

Rent Collection and Tenant Engagement

·    Due to the recent tenant surrender deals and the subsequent increase
in properties under management agreements, rent collection is now being
reported on two bases: operating lease rent and management agreement income.

·    Rent collection on operating leases for the month of June was £0.3m,
representing 16% of the rent invoiced for the period. AEW continues to work
with selected tenants on payment plans.

·    Total net income collected for the month of June from properties
under management agreements was £0.3m. The income reported is net income, as
the income is still to be reconciled by the Property Managers due to the
extensive onboarding process underway. Once this exercise is complete, both
the gross and net income received will be reported.

·     Total income received for the month of June was £0.6m, this is an
60% increase from the previous month and 31% above the monthly average.

·     On 4 June 2024, the Company announced that Noble Tree, a tenant of
143 properties, entered into administration. These properties have now been
surrendered and the tenancies transferred to HOME. This will enable the
Company to directly collect the underlying income from these properties,
increasing rent collection and facilitating asset management opportunities.

·    AEW continues to make good progress with on-boarding the c.600
properties that were surrendered in May 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.

·     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
on-boarding properties that have been surrendered.

·   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.

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

Portfolio Assessment

·    Vibrant and AEW continue the inspection programme with 87% of the
portfolio inspected as at 30 June 2024.

·    Completion of the inspection programme is no longer required as part
of the audit process.

 

Shareholder Engagement

·    AEW continues engagement with the Company's shareholders. The next
monthly update is expected to be announced on Monday 5 August 2024.

 

Potential Litigation

·     As previously announced, the Company has 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 has also issued pre-action letters of claim to
Alvarium Fund Managers (UK) Limited (its former alternative investment fund
manager) and AlTi RE Limited, its former Investment Adviser's principal. The
Board 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 to the market at the appropriate time.

 

Board Succession

·    As announced on 7 June 2024, Rod Day was appointed as Independent
Non-Executive Director. Rod will join the Audit Committee, Management
Engagement Committee and Nomination Committee of the Company and in due course
will Chair the Audit Committee.

 

Portfolio and tenant breakdown

 

 Geographic Region         Number  of Properties   Number of Properties (%)

 As at 30 June 2024
 North East                505                     30.1%
 North West                360                     21.4%
 Yorkshire and the Humber  227                     13.5%
 West Midlands             152                     9.0%
 East Midlands             167                     9.9%
 South West                104                     6.2%
 London                    73                      4.3%
 South East                53                      3.1%
 East of England           19                      1.1%
 Wales                     23                      1.4%
 Total                     1,683                   100.0%

 

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

 As at 30 June 2024
 One (Housing & Support) CIC      100                   27.0%
 LTG Vision CIC                   171                   13.0%
 Mears Ltd                        177                   12.8%
 Gen Liv UK CIC(1)                44                    9.4%
 Community Restore CIC            46                    7.5%
 Supportive Homes CIC(1)          34                    5.9%
 Mansit Housing CIC               68                    5.2%
 Lifeline (NW) CIC                10                    3.8%
 Complete Homes NW CIC            4                     3.6%
 Marigold Housing(1)              15                    2.7%
 Total                            669                   90.9%

(1) In liquidation

Tenants in liquidation (Gen Liv UK CIC, Supportive Homes CIC and Marigold
Housing) account for 18.0% of the annual contracted rent as at 30 June 2024.

 

 

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