REG - Home REIT PLC - Monthly Update

Home ReitAnnouncement

05/02/2024 07:00

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RNS Number : 9432B  Home REIT PLC  05 February 2024

 

5 February 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 January 2024.

Summary

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

·    Rent collection including arrears representing 10% of rent invoiced
during the month.

·    The Company had £18.9m cash balances as at 31 January 2024 of which
£6.9m is unrestricted.

·    As announced on 24 January 2024, 103 properties exchanged on sale at
auction for £6.6m with completion expected during February and March. Further
receipts are expected in respect of the properties which exchanged for sale in
November and December 2023 that have not yet completed.

·    Repayment of £9.9m of debt to the Company's lender in January
comprising a cash repayment of £8.5m and net break gains of £1.4m applied to
loan principal. Total borrowings reduced to £162.8m (from £172.7m as at 31
December 2023). In addition, the Company has commenced a re-financing process
to consider alternative finance options, as part of an exercise to consider
the long-term financial stability of the Company

·    An additional 313 internal property inspections have been completed
in January taking the total to 1,828 as at 31 January 2024. The inspection
programme is due to continue during February and into March.

 

 

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 and tenant engagement

·    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.

·    Of the 1,973 properties externally inspected by Jones Lang LaSalle
Limited ("JLL") and owned at 31 January 2024, the condition of the properties
has currently been assessed as 0% very good, 15% good, 68% fair, 15% poor and
2% very poor.

·    Of the 1,380 property inspections undertaken by Vibrant, occupancy
(at least one bed occupied) is 78% as at the date of the property inspections
with 22% being vacant (whole building).

·    The inspection programme continues to require significant
co-ordination with multiple parties and is due to continue throughout February
and into March.  To date, 1,135 scheduled inspections have been cancelled or
aborted in total since the inspection programme commenced.  Vibrant and AEW
continue to prioritise completion of the inspection programme.

·    As previously announced on 24 January 2024, the Company exchanged on
the sale of 103 properties at auction with completion expected during February
and March. Sale proceeds will be used to provide working capital and reduce
borrowings.

·    AEW continues to focus on obtaining control of the portfolio with
legal action being taken against non-performing tenants. The Company also
continues to work constructively with a number of tenants to facilitate
restructuring of leases and rationalisation of the portfolio.

Rent Collection, Financial position and related matters

·    Rent collected including arrears represents 10% of the rent invoiced
in the month of January.  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.

·    Following announcements of exchanges at auction in previous months,
102 properties completed during January for a total of £15.0m and 59
properties remain exchanged for sale for a total of £10.5m with completion
expected in February. The 103 properties exchanged for sale in January are
expected to complete during February and March for a total of £6.6m.

·    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 £9.9m of debt to the Company's lender in January
comprising a cash repayment of £8.5m and a net break gain of £1.4m also
being applied in repayment of the debt. A total of £57.2m of debt has been
repaid since the Company entered the stabilisation period during August
2023.

·    As at 31 January 2024, the Company has total borrowings of £162.8m,
comprising a £72.5m 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.

·    In addition, the Company has commenced a re-financing process to
consider alternative finance options, as part of an exercise to consider the
long-term financial stability of the Company. Further announcements will be
made in due course.

·    The Company had £18.9m cash balances as at 31 December 2023 of which
£6.9m is unrestricted.

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

Valuation, Publication of the annual and interim reports

·    As announced on 20 December 2023, JLL, as external valuer, has issued
draft valuation reports, as at 31 August 2022, 28 February 2023 and 31 August
2023 on the bases of fair value and market value on the special assumption of
vacant possession.  These valuations may be subject to further amendment due
to the ongoing inspection programme and subject to completion of the formal
valuation and audit process.

·    As previously announced, the publication of the Company's results for
the financial years ended 31 August 2022 had initially been delayed to allow
the Company's auditor, BDO LLP, to undertake an enhanced set of audit
procedures in respect of the financial year ended 31 August 2022, and for the
Board to instruct Alvarez & Marsal Disputes and Investigations, LLP to
conduct an investigation into allegations of wrongdoing. Without waiver of
privilege, the key findings of this report, including the arrangements for
refurbishment of properties, settlement of rent arrears and arrangements with
tenants which had not been brought to the Board's attention by the appointed
investment advisor at the time, caused the Board to determine that revised
accounting policies for acquisition accounting and revenue recognition were
required to appropriately account for the substance of historical acquisitions
and lease contracts.

·    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 and the application of revised
accounting policies back to inception. As outlined above, access constraints
remain a significant challenge for the completion of the internal inspections.
 AEW's work in relation to the adjustments for the revised accounting
policies is now substantially complete.  The Board and AEW are committed to
continuing to work at pace 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 continues engagement with the Company's shareholders, including
via a retail shareholder webinar on 26 January 2024. The presentation for this
is available on the Company's website.

·    As announced on the 1 February, the Annual General Meeting of the
Company (AGM) is to be held on 29 February 2024.

·    The next monthly update is expected to be announced on Tuesday 5
March 2024.

 

Board succession

·    As announced on 18 January 2024, Michael O'Donnell has been appointed
to succeed Lynne Fennah as the independent Non-Executive Chair of the Company.

·    Having stepped down as Non-Executive Chair, Lynne Fennah will
continue in her capacity as a Non-Executive Director of the Company to provide
continuity and will use her invaluable experience and knowledge of the Company
to support the Board and the Company's advisers. As announced in the Notice of
AGM, released on 1 February 2024, Lynne Fennah will offer herself for
re-election at the Accounts Meeting which will be held as soon as possible
after publication of the accounts referred to above.

·    As announced on 18 January 2024, Simon Moore, Marlene Wood and Peter
Cardwell will step down on publication of the 2022 and 2023 Annual Reports and
Accounts.

·    Progress continues to be made in identifying new independent
Non-Executive Directors including a new Chair of the Audit Committee and the
process will be 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 Metrics

Set out below are certain unaudited key portfolio metrics at 31 January 2024.

 As at:                                                        31 August 2023                    31 January 2024
 Number of properties                                          2,473                             2,107
 Number of beds                                                11,861                            9,845
 Number of tenants (1) (2)                                     29                                27
 Annual rent roll (1 2 3)                                      £53.9m                            £40.5m

 In period:                                                    1 June 2023 to 31 December 2023   1 January 2024 to 31 January 2024
 Properties sold                                               264                               102
 Properties exchanged for sale                                 161                               103
 Number of assets with asset management initiatives completed  281(4)                            35
 Number of assets with asset management initiatives ongoing                                      1,265
 Rent collected in period (1 2)                                £2.7m                             £0.3m
 Rent collection % (1) (2 5)                                   9%                                10%

(1) Excluding 157 properties under separate management agreements

(2) Excluding 73 properties under property management agreements with HOME
having direct AST leases with occupiers

(3) Contracted rent as at period end

(4) 3 properties subsequently sold

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

 

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

 As at 31 January 2024
 North East                2,406             756                     35.9%
 North West                1,831             386                     18.3%
 Yorkshire and the Humber  1,433             269                     12.8%
 East Midlands             979               200                     9.5%
 West Midlands             1,073             187                     8.9%
 South West                705               117                     5.6%
 London                    566               76                      3.6%
 East of England           232               25                      1.2%
 South East                494               68                      3.2%
 Wales                     126               23                      1.0%
 Total                     9,845             2,107                   100.0%

 

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

 As at 31 January 2024
 Big Help Project Ltd                                1,303           353                   15.4%
 One (Housing & Support) CIC                         1,099           214                   15.3%
 LTG Vision CIC                                      574             180                   6.9%
 Bloom Social Housing CIC                            576             83                    6.8%
 CG Community Council                                386             54                    6.7%
 Dovecot & Princess Drive Community Association      396             52                    6.4%
 Noble Tree Foundation Limited                       527             143                   6.3%
 Mears Ltd                                           747             177                   4.8%
 Gen Liv UK CIC*                                     281             52                    4.3%
 Supportive Homes CIC*                               302             56                    4.1%
 Total                                               6,191           1,364                 77.0%
 * In liquidation

 

Tenants in liquidation (Supportive Homes CIC, GEN LIV UK C.I.C. and Serenity
Support CIC, Marigold Housing account for 9.9% of the annual contracted rent
as at 31 January 2024).

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