Monthly Update

Home REIT PLC

05 December 2023

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR 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) Dido Laurimore Eve Kirmatzis Ellie Perham-Marchant 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 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: Price:	137* £22.8m	16** £2.7m	109 £17.6m	12 £2.4m
November	Number: Price	169 £33.5m	n/a n/a	- -	169 £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	1094
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 As at 30 November 2023	Number  of Beds	Number  of Properties	Number of Properties (%)
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 As at 30 November 2023	Number of Beds	Number of Properties	% of portfolio annual contracted rent
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).

 

END