REG - Home REIT PLC - Monthly Update

Home ReitAnnouncement

05/12/2023 07:15

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RNS Number : 6428V  Home REIT PLC  05 December 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

 

5 December 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 November.

Summary

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

·      Rent collection including arrears representing 14% 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 s 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.

·   As announced on 28 November 2023, Eden Safe has surrendered leases on 38
properties. The majority of these properties are occupied by private rented
sector ("PRS") tenants.  This enables the Company to collect the underlying
income from these properties directly from the occupiers.

·    Marigold Housing, which leases 15 properties representing 0.9% of
rent demanded in November, entered into liquidation on 15 November 2023. AEW
is engaging with the appointed liquidator Path Business Recovery Ltd.

·   Auction sales have continued. A further 169 properties have exchanged
for £33.5m with completion expected in December.

·      £16.4m cash balances as at 30 November of which £3.3m is
unrestricted. Further receipts are expected in respect of 181 properties which
exchanged for sale in September and November that have not yet completed.

·      Repayment of £17.9m of debt to Company's lender in the period
comprising a cash repayment of £15.0m and net break gains of £2.9m applied
to loan principal.

·     The Company and the Lender have agreed an additional fee of 5.00%
per annum charged on the aggregate outstanding loan balances, on a daily basis
from 30 November 2023.  The additional fee is payable at the earlier of 28
June 2024 or on full repayment of the loans.

·      1,228 internal property inspections now completed to 30 November
2023, The inspection programme is due to continue during December and January.

·   The Company's valuer has externally inspected 2,251 properties and
internally inspected 194 properties as at 30 November 2023.  The Company
expects to publish valuation information by the end of the calendar year.

·     The Company and AEW have now reviewed almost all the historical
transactions for 2,473 properties and are applying revised accounting policies
back to inception.

·     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

·    As part of the stabilisation strategy AEW has been undertaking 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.

·     External inspections performed by Jones Lang LaSalle Limited ("JLL")
to date classified the condition of the properties as 0% very good, 10% good,
65% fair, 20% poor and 4% as very poor.

·    The Company has commissioned capital expenditure reports on a sample
of properties.  Further details will be provided in future reports.

·    Of the 813 property inspections undertaken by Vibrant, occupancy (at
least one bed occupied) is 71% as at the date of the property inspections with
29% being vacant (whole building).

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

·    As previously announced on 6 and 9 November 2023, at a series of
public auctions held in early November, the Company exchanged on the sale of a
total of 167 properties. A further two properties have exchanged post-auction,
taking the total anticipated sales proceeds to £33.5m with completion due in
early December.  Sale proceeds will be used to provide working capital and
reduce borrowings.

·   AEW continues to work constructively with many tenants to facilitate
restructuring of leases and rationalisation of the portfolio.  As announced
on 28 November 2023, Eden Safe has surrendered leases on 38 properties.  The
majority of the properties are occupied by PRS tenants on Assured Shorthold
Tenancies ("ASTs"). These ASTs will now transfer to HOME, enabling the Company
to collect the underlying income directly from the occupiers of these
properties, increasing rent collection and facilitating asset management
opportunities. Centrick, a residential property specialist, has been appointed
as property manager in respect of these properties.

·     AEW continues to make progress in obtaining control of the portfolio
with legal action being taken against

     non-performing tenants.  During the period, the Company has served
statutory demands and section 146 notice of forfeiture on selected tenants.
 The Company has taken carriage of a winding up petition against a tenant in
place of the previous petitioner.

·    Marigold Housing which leases 15 properties, representing 0.9% of
rent demanded in November entered into liquidation on 15 November 2023. AEW is
engaging with the appointed liquidator Path Business Recovery Ltd.

Rent Collection, Financial position and related matters

·    Rent collected including arrears represents 14% of the rent invoiced
in the month of November.  Whilst this is a decrease on the previous period's
collection of 18%, it is anticipated that rent collection will vary month on
month in the near term as AEW 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, 181 properties are exchanged for
sales and are expected to complete in December.

 

 Sales               Exchanged    Completed October  Completed November  Expected to Complete December
 September  Number:  137*         16**               109                 12

            Price:   £22.8m       £2.7m              £17.6m              £2.4m
 November   Number:  169          n/a                -                   169

            Price    £33.5m       n/a                -                   £33.5m

*1 Sale was aborted post exchange

** 1 Sale exchanged and completed via Private Treaty in October

 

·   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 utilised £15.0m of net sale proceeds received
during the period for repayment of debt to the Company's lender with
associated net break gain of £2.9m also being applied in repayment of the
debt.

·   The Company and the Lender have agreed an additional fee of 5.00% per
annum to be 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.

·     As at 30 November 2023, the Company has total borrowings of
£198.3m, comprising a £98.3m interest-only term loan, repayable in 2032,
with a fixed all-in rate of 2.07 per cent. per annum, and a £100m
interest-only term loan, repayable on 2036, with a fixed all-in rate of 2.53
per cent. per annum.

·    As at 30 November 2023, the Company had cash balances of £16.4m
including amounts held on account with the Company's lender and subject to
certain restrictions regarding its availability; the Company has £3.3m 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 the external valuer, 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.

·    JLL has externally inspected 2,251 properties and internally
inspected 194 properties as at 30 November 2023. Currently the Company expects
to publish valuation information by the end of the calendar year.

·    As previously announced, 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 has undertaken the extensive exercise of
reviewing acquisitions for all 2,473 properties in order to apply the revised
accounting policies.  The reviews are now substantially complete and the
resulting adjustments are being finalised. 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 next monthly update is expected to be announced on 8 January
2024.

·   The second quarterly online presentation open to all retail
shareholders is expected to be held in late January 2024.  Further details
will be provided in the next monthly report.

 

Board succession

·     Further to the Company's previous announcements in September,
October and November 2023, the Company has made further progress in
identifying a new independent Non-Executive Chair. Following a comprehensive
search and process a shortlist of candidates has been identified and 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 30 November 2023.

 As at:                                                        31 August 2023                   30 November 2023
 Number of properties                                          2,473                            2,307
 Number of beds                                                11,861                           11,001
 Number of tenants (1) (2)                                     29                               27
 Annual rent roll (1 2 3)                                      £53.9m                           £43.9m

 In period:                                                    1 June 2023 to 31 October 2023   1 November 2023 to 30 November 2023
 Properties sold                                               57                               109(4)
 Properties exchanged for sale                                 121                              169
 Number of assets with asset management initiatives completed  246                              38

 Rent collected in period (1 2)                                £1.8m                            £0.6m
 Rent collection % (1) (2 5)                                   8%                               14%

(1) Excluding 184 properties under separate management agreements

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

(3) Contracted rent as at period end

(4) 1 property disposal completed on 1(st) December 2023

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

 

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

 As at 30 November 2023
 North East                2,481             776                     33.7%
 North West                1,943             406                     17.6%
 Yorkshire and the Humber  1,658             308                     13.4%
 East Midlands             1,325             259                     11.2%
 West Midlands             1,153             197                     8.5%
 South West                790               131                     5.7%
 London                    654               86                      3.7%
 East of England           377               53                      2.3%
 South East                494               68                      2.9%
 Wales                     126               23                      1.0%
 Total                     11,001            2,307                   100.0%

 

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

 As at 30 November 2023
 One (Housing & Support) CIC                         1,200           234                   15.1%
 Big Help Project Ltd                                1,303           353                   14.1%
 Supportive Homes CIC *                              695             137                   8.6%
 Bloom Social Housing CIC                            645             94                    6.9%
 CG Community Council                                386             54                    6.4%
 Gen Liv UK CIC *                                    485             91                    6.3%
 Dovecot & Princess Drive Community Association      396             52                    5.8%
 Noble Tree Foundation Limited                       527             143                   5.7%
 LTG Vision CIC                                      607             188                   4.8%
 Mears Ltd                                           747             177                   4.4%
 TOTAL                                               6,991           1,523                 78.1%
 * In liquidation

 

Tenants in liquidation (Supportive Homes CIC, GEN LIV UK C.I.C. and Serenity
Support CIC, Marigold Housing account for 16.3% of the annual contracted rent
as at 30 November 2023).

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