Monthly Update

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 31 August 2023	As at 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)	-	544
	To date 1 September 2023 to 30 April 2024	Month 1 April 2024 to 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:
Completed5	2,077	106
Occupancy: (at date of inspection on 1,556 Vibrant inspections) Occupancy (at least one bed occupied) Vacant (whole building)		79% 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) Dido Laurimore Eve Kirmatzis Oliver Harrison

[e-mail] [phone]

The Company's LEI is: 213800A53AOVH3FCGG44.

For more information, please visit the Company's website: 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 As at 30 April 2024	Number  of Properties	Number of Properties (%)
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 As at 30 April 2024	Number of Properties	% of portfolio annual contracted rent
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 CIC1	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.

 

END