REG - Home REIT PLC - Monthly Update

Home ReitAnnouncement

07/05/2024 07:15

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RNS Number : 2740N  Home REIT PLC  07 May 2024

 

7 May 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 April 2024.

Summary

·   As announced on 19 April 2024, 65 properties exchanged for sale at
auction for a total of £15.9m with completion expected during May.

·     Repayment of £3.9m of debt to the Company's lender in April
comprising a cash repayment of £3.3m and net break gains of £0.6m applied to
loan principal. Total borrowings reduced to £140.1m.

·     Progress continues on refinancing, as part of the strategy for the
long-term financial stability of the Company.

·    An additional 106 internal property inspections have been completed
in April, taking the total to 2,077 as at 30 April 2024. The inspection
programme is due to continue into May.

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

·    The Company intends vigorously to defend itself in respect of the
threatened litigation and has denied the allegations  made against it.

·   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 April 2024
 Valuation:
 Draft August 2023 Valuation                                         £412.9m                           £329.3m (1)

 Number of properties                                                2,473                             1,920
 Cash and Borrowings:
 Unrestricted Cash                                                   £0.8m                             £7.5m
 Total Cash                                                          £13.5m                            £10.6m
 Borrowings                                                          £220.0m                           £140.1m
 Net debt                                                            £206.5m                           £129.5m
 Income:
 Annual Contracted Rent                                              £53.9m                            £36.9m
 Tenants (2 3)                                                       29                                26
 Properties under lease to tenants                                   2,358                             1,739
 Properties under separate management agreement                      115                               127
 Properties under property management agreements - Direct Let (PRS)  -                                 54(4)

                                                                     To date                           Month

                                                                     1 September 2023 to               1 April 2024 to

                                                                     30 April 2024                     30 April 2024
 Investment Activity:
 Properties sold in the period                                       £83.6m                            £3.9m
 Number of properties sold in period                                 553                               97
 Properties exchanged in period/not yet completed                    £27.6m                            £15.9m
 Number of properties exchanged not yet completed at period end      219                               65
 Rent collection:
 Rent collection (4) %                                               11%                               11%
 Rent collection total                                               £3.1m                             £0.3m
 Inspections:
 Completed(5)                                                        2,077                             106

 Occupancy: (at date of inspection on 1,556 Vibrant inspections)

 Occupancy (at least one bed occupied)                                                                 79%

 Vacant (whole building)                                                                               21%

( )

(1) Proforma value at 30 April 2024 being draft (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) 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/)

 

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 May.
Vibrant and AEW continue to prioritise completion of the inspection programme
with 84% of the portfolio inspected as at 30 April 2024.

 

Investment Activity

·    Following announcements of exchanges at auction in previous months, 97
properties completed during April for a total of £3.9m and 219 properties
remain exchanged for sale for a total of £27.6m with completion expected in
May.

·    As announced on 19 April 2024, 65 properties exchanged for sale at
auction for a total of £15.9m, in line with the draft JLL August 2023 values.

·    Since August 2023, the Company has completed on the sale of 553
properties and exchanged on a further 219 properties. The gross proceeds from
properties sold and exchanged totals £111.3m, 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 selected 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 11%
of the rent invoiced for the month of April. AEW continues to work with
selected 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.

·     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 to support the Company's
cashflow and to reduce debt.

·     The Company had £10.6m cash balance as at 30 April 2024 of which
£7.5m is unrestricted.

·    The Company repaid £3.9m of debt to the Company's lender in April
comprising a cash repayment of £3.3m and a net break gain of £0.6m also
being applied in repayment of the debt. A total of £79.9m of debt has been
repaid since the Company entered the stabilisation period during August
2023.

·      As at 30 April 2024, the Company has total borrowings of
£140.1m, comprising a £49.8m 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 on full repayment of the loans.

·      The Board and AEW continue to engage proactively and
constructively with the Company's lender, Scottish Widows Limited, through
regular meetings and continue to service interest payments in full as they
fall due.

·      The Company's lender has, however, advised that their objective
is for repayment of the loan balance in the short term.

·    On 5 February 2024, the Company announced that it had commenced a
refinancing process to consider alternative finance options. The Directors
consider that a refinancing of the existing facility with an alternative
lender is the most appropriate option for the Company to maintain a suitably
sized and diversified portfolio upon which stabilisation may be achieved and
allowing, in turn, the Company's long-term objectives to be continued.

 

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 continues engagement with the Company's shareholders, which
includes its most recent  retail shareholder webinar which was held on 26
April 2024. The presentation for this is available on the Company's website.

·    The next monthly update is expected to be announced on Wednesday
5(th) June.

 

Potential Litigation

·     As announced on 18 April, the Company has recently issued a
comprehensive response to a pre-action letter of claim received from Harcus
Parker Limited, on behalf of certain shareholders. The letter of claim alleges
that the Company, along with certain other parties, provided information to
investors which was false, untrue and/or misleading.

·    The Company intends vigorously to defend itself in respect of the
threatened litigation and has denied the allegations made against it.

·   As previously announced, the Company intends to bring legal proceedings
against those parties it considers are responsible for wrongdoing. To that
end, in April the Company 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 Company
intends to issue further pre-action correspondence in due course.

·    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.

 

* Correction: the RNS announcement dated 18 April 2024 referred to AlTi RE
Limited as the Company's former investment adviser's "appointed
representative".

 

Board Succession

·    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 30 April 2024
 North East                624                     32.6%
 North West                380                     19.8%
 Yorkshire and the Humber  254                     13.2%
 East Midlands             190                     9.9%
 West Midlands             174                     9.1%
 South West                110                     5.7%
 London                    75                      3.9%
 South East                68                      3.5%
 Wales                     23                      1.2%
 East of England           22                      1.1%
 Total                     1,920                   100.0%

 

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

 As at 30 April 2024
 Big Help Project Ltd                                352                   16.4%
 One (Housing & Support) CIC                         185                   15.2%
 CG Community Council                                54                    7.7%
 Dovecot & Princess Drive Community Association      52                    7.0%
 Noble Tree Foundation Limited                       143                   6.9%
 Bloom Social Housing CIC                            77                    6.7%
 LTG Vision CIC                                      180                   5.6%
 Mears Ltd                                           177                   5.3%
 Gen Liv UK CIC(1)                                   46                    4.0%
 Supportive Homes CIC (1)                            47                    3.4%
 Total                                               1,313                 78.2%

(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
30 April 2024.

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