REG - Home REIT PLC - Monthly Update

Home ReitAnnouncement

06/11/2023 07:00

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RNS Number : 4132S  Home REIT PLC  06 November 2023

6 November 2023

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 October.

Summary

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

·    At a public auction held on the 2 November 2023, the Company has
exchanged on the sale of a further 14 properties for £8,982,500. Further
property disposals are expected at two auctions this week.

·    Rent collection including arrears representing 18% of rent invoiced
during the month.

·    AEW continues to develop its strategy for non-performing tenants
during the stabilisation period. For those tenants that do not engage
constructively and continue to withhold payment, AEW is assessing all
strategies available to the Company which has included serving statutory
demands and section 146 notice of forfeiture on selected tenants.

·    £15.3m cash balances as at 31 October of which £2.7m is
unrestricted.

·    534 internal property inspections now completed to 31 October 2023,
assessing the condition, compliance and occupancy of properties.  The
inspection programme is due to continue throughout November and December.

·    The Company's valuer has externally inspected 2,247 properties and
internally inspected 131 properties as at 27 October 2023.  Currently, the
Company expects to publish valuation information by the end of the year.

·    The Company and AEW have now reviewed 1,690 of the historical 2,473
property transactions to apply revised accounting policies back to
inception.

·    Due to the application of the revised accounting policies, the
ongoing inspection programme and BDO enhanced audit requirements, the Board
currently anticipates publication of the outstanding accounts in early 2024.

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

 

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

·    At a public auction held on the 2 November 2023, the Company has
exchanged on the sale of 14 properties for £8,982,500, with completion
expected in approximately one month's time.  The 14 properties were
identified as liquid assets primarily due to the condition, occupancy and
location, and have been sold at a value representing an average of 51% of
their purchase price.  Sale proceeds will be used to provide working capital
and reduce borrowings. Further properties are expected to be sold via two
auctions this week and the Company will publish details of these disposals
when the auction process has completed.

·    AEW continues to work constructively with those tenants which are
experiencing deterioration of financial strength and unable to meet in full
rent demands and pay arrears.

·    AEW continues to develop its strategy for non-performing tenants
during the stabilisation period. For those tenants that are not engaging
constructively and are continuing to withhold payment, AEW is assessing all
strategies available to the Company which has included serving statutory
demands and section 146 notice of forfeiture on selected tenants.

·    As at 31 October 2023, 534 properties had been inspected by Vibrant
Energy Matters Limited ("Vibrant"), a subsidiary of Connells Limited.  The
process of inspections is taking longer than initially anticipated.
Inspections require significant co-ordination and communication between all
the relevant parties including tenants, property managers and individual
occupiers.  As at 31 October 2023, 335 inspections have been aborted due to
Vibrant being unable to obtain access when attending properties.  The
inspection programme is due to continue throughout November and December. AEW
intends to provide further analysis on inspection results in future monthly
updates.

·    Jones Lang LaSalle Limited ("JLL") as the external valuer has
externally inspected 2,247 properties and internally inspected 131 properties
as at 27 October 2023. Currently the Company expects to publish valuation
information by the end of year.

Rent collection, financial position and related matters

·    Rent collected including arrears represents 18% of the rent invoiced
in the month of October.  Whilst this is an increase on the previous period's
collection of 3%, rent collection will vary month on month in the near term as
some tenants continue to experience deterioration of financial strength and
inability to meet rental payments and pay arrears. In addition, late payments
from previous months can impact the total received in a particular month.

·    As announced on the 29 September 2023, the Company exchanged
contracts on the sale at auction of 137 properties for £22.8m.  37 of these
have completed with the remaining expected to complete over the coming two
weeks.

·    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 at 31 October 2023, the Company had total borrowings of £216.2m,
comprising a £116.2m interest-only term loan, repayable in 2032, with a fixed
all-in rate of 2.07%. per annum, and a £100m interest-only term loan,
repayable on 2036, with a fixed all-in rate of 2.53% per annum.

·    As at 31 October 2023, the Company had cash balances of £15.3m
including amounts held on account with the Company's lender and subject to
certain restrictions regarding its availability; the Company had £2.7m of
unrestricted cash.

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

Publication of the annual and interim reports

·    The independent valuation reports of JLL 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 are key to the publication of
the annual and interim reports.

·    As announced on 4 September 2023, the Board and AEW have determined
revised accounting policies for revenue recognition and acquisition accounting
to better reflect the substance of the historical acquisitions and lease
arrangements.  The revised policies have been presented to the Company's
auditors BDO LLP ("BDO") and are being finalised.

·    The Company with AEW is undertaking the extensive exercise of
reviewing all 2,473 property acquisitions in order to apply the revised
accounting policies with 1,690 reviews having been completed as at 27 October
2023. The resulting adjustments will involve restatement of the 2021 accounts
and will be applied to the 2022 and 2023 accounts.

·    With the revised accounting policies being applied back to inception
and the inspection programme continuing through November and into December,
the Board currently anticipates publication of the outstanding accounts in
early 2024.  As previously announced, BDO is conducting an enhanced audit,
the Board and AEW will continue to work with BDO to publish the results as
soon as practically possible.

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

 

Shareholder engagement

·    AEW continues engagement with the Company's shareholders.

·    The first quarterly online presentation open to all retail
shareholders was held on the 19 October 2023 and a copy of the presentation is
available on the Company's website.

·    To enable continued engagement with all shareholders, AEW intends to
provide quarterly presentations open to all retail shareholders.

·    The next monthly update is expected to be announced on 5 December
2023.

 

Board succession

·    Further to the Company's announcements on 4 September and 2 October
2023, Fidelio Partners has made good progress in identifying a new independent
Non-Executive Chair and the Company is therefore 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.

·    The appointment of a new Chair is being overseen by Mark Davies who
has been acting as a Senior Advisor to the Board since March 2023. Mark is
independent from the Board, has many years' experience in capital markets and
is well known to the Company's largest shareholders, having met with those
representing 37% of the share register to discuss the recruitment process,
proposed skillset and timing of appointing a new Chair, with a new independent
Board to follow.

·    It is expected that as soon as the new Chair is appointed that they
will oversee the appointment of a new independent Board of directors.

Portfolio Metrics

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

 As at:                                                        31 August 2023                         31 October 2023
 Number of properties                                          2,473                                  2,416
 Number of beds                                                11,861                                 11,615
 Number of tenants                                             29                                     28
 Annual rent roll (1 2)                                        £53.9m                                 £50.2m

 In period:                                                    1(st) June 2023 to 30 September 2023   1 October 2023 to 31 October 2023
 Properties sold                                               41                                     16(3)
 Properties exchanged for sale                                 137                                    -
 Number of assets with asset management initiatives completed  246                                    -

 Rent collected in period (2)                                  £1.2m                                  £0.7m
 Rent collection % (4)                                         7%                                     18%

(1) Contracted rent as at period end

(2) Excluding 184 properties under separate management agreements

(3) A further 22 property disposals completed on 1(st) and 2(nd) November

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

 

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

 As at 31 October 2023
 North East                2,525             790                     32.7%
 North West                1,998             416                     17.2%
 Yorkshire and the Humber  1,885             337                     14.0%
 East Midlands             1,398             275                     11.4%
 West Midlands             1,161             199                     8.2%
 South West                833               139                     5.8%
 London                    679               87                      3.6%
 East of England           516               82                      3.4%
 South East                494               68                      2.8%
 Wales                     126               23                      0.9%
 Total                     11,615            2,416                   100.00%

 

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

 As at 31 October 2023
  One (Housing & Support) CIC                          1,200           234                   13.1%
  Big Help Project Ltd                                 1,303           353                   12.3%
  Supportive Homes CIC *                               1,046           209                   12.2%
  GEN LIV UK C.I.C. *                                  548             103                   6.8%
  Bloom Social Housing CIC                             645             94                    6.1%
  CG Community Council                                 386             54                    5.6%
  Dovecot & Princess Drive Community Association       396             52                    5.0%
  Noble Tree Foundation Limited                        527             143                   5.0%
  LTG Vision CIC                                       627             192                   4.4%
  Mears Ltd                                            747             177                   3.9%
 TOTAL                                                 7,425           1,611                 74.4%
 * In liquidation

 

Tenants in liquidation (Supportive Homes CIC, GEN LIV UK C.I.C. and Serenity
Support CIC ) account for 20.4% of the annual contracted rent as at 31 October
2023.

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