TIDMHOME
RNS Number : 2594O
Home REIT PLC
02 October 2023
2 October 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
September as AEW remains focused on stabilising the property
portfolio and financial condition of the Company and seeking to
maximise income and capital returns.
Summary
The Company and AEW highlight the following updates, with
further detail on each of these items also provided below.
-- Surrender of 146 leases with Redemption Project CIC allowing
the transfer and reassignment of leases to new tenants
-- Since appointment as Investment Manager on 21 August 2023,
AEW has now completed lease surrenders and re-tenanting, where
appropriate on 10% of the portfolio as part of its strategy to
stabilise the property portfolio
-- As previously announced, the Company exchanged contracts on
the sale of 137 properties at auction generating gross proceeds of
GBP22.8m, with completion expected in late October
-- Repayment of GBP3.8m of debt to Company's lender
-- Rent collection reduced to 3% during the month following
further deterioration of some tenants' financial strength and
continued non-performance of some tenants
-- GBP14.0m cash balances of which GBP1.4m is unrestricted,
excluding proceeds of sales referred to above
-- 362 internal property inspections completed by Vibrant to 27
September 2023, assessing the condition, compliance and occupancy
of properties
-- The Company's Valuer has externally inspected 1,704
properties and 90 internal inspections as at 29 September 2023
-- AEW continues to assess strategies for non-performing tenants
and continued non-payment of rent by some tenants
Portfolio assessment and tenant engagement
-- The Company announced on 22 September 2023 the surrender of
leases on 146 properties by Redemption Project CIC ("Redemption").
Mears Limited, guaranteed by Mears Group PLC, the housing and
social care provider, became a direct tenant on the 77 properties
they have been occupying for their remaining lease term of 8 years
with an initial contracted rent income of GBP732,720 per annum. The
surrender agreement allows the Company to receive a sustainable
income stream from a strong tenant covenant and is expected to
generate higher rent collection than has previously been received
from Redemption.
-- Following the transaction, the Company's direct exposure to
Mears Limited increased to 177 properties and GBP1,623,875 million
per annum of contracted rent as at 29 September 2023.
-- For the remaining 69 Redemption leases that have been
surrendered, the Company has agreed flexible leases on these
properties with the Community Accommodation Group ("CAG"), a
Charitable Incorporated Organisation and a provider of social
housing and care, for a term of 5 years and appointed Myshon
Limited, a specialist intensive housing manager with a specific
focus on specialist supported housing, supported housing and
affordable housing, to manage the properties, also on a flexible
agreement.
-- The Company has no further exposure to Redemption, a
non-performing tenant which had not paid any rent for 2023. The
transaction was in line with AEW's strategy to stabilise the
Company's portfolio with the aim of improving future rent
collection
-- Since appointment as Investment Manager on 21 August 2023,
AEW has now completed lease surrenders and re-tenanting where
appropriate on 10% of portfolio as part of its strategy to
stabilise the property portfolio
-- The Company previously announced on 7 September 2023, that
Supportive Homes CIC had entered into liquidation. AEW continues to
engage with the liquidators of Supportive Homes CIC, GEN LIV UK
C.I.C. and Serenity Support CIC. Tenants in liquidation account for
21.0% of the annual contracted rent as at 29 September 2023. AEW
expects more tenants to enter into liquidation in the short term.
Liquidations provide opportunities for AEW to re-tenant and carry
out other asset management initiatives.
-- Discussion with prospective tenants and quality providers of
social housing and support services continue in respect of
properties suitable for occupation. Stringent covenant analysis and
due diligence will be undertaken on all proposed tenants in
accordance with AEW's rigorous processes.
-- Assessment of all tenants remains ongoing and AEW continues
to develop its strategy for non-performing tenants during the
stabilisation period particularly as the ongoing inspection program
provides evidence of underlying occupancy and suitability of
property for use.
-- As at 27 September 2023, 362 properties had been inspected by
Vibrant Energy Matters Limited ("Vibrant"), a subsidiary of
Connells Limited. Vibrant has been appointed to inspect all
properties in the portfolio which are not under contract for sale,
with 16% completed to 27 September 2023 and target completion by
mid-November 2023, in parallel to the valuations being undertaken
by Jones Lang LaSalle Limited ("JLL").
-- Inspections include assessment of compliance with Health
& Safety and other regulations. Where inspections identify
non-compliance, AEW is in the process of informing the relevant
tenants of their responsibility for compliance and will monitor
tenant's rectification of these incidences.
-- JLL has externally inspected 1,704 properties and internally
inspected 90 properties as at 29 September 2023 with target
completion by mid-November of all property externally and 10%
internally.
Rent Collection, Financial position and related matters
-- Rent collection reduced to 3% for the month of September from
7% for the 3 month period ending 31 August 2023 resulting from the
continuing deterioration of some paying tenants' financial strength
and their ability to meet rental payments.
-- AEW expects that the asset management initiatives it is
putting in place to generate higher rent collection in future
periods.
-- AEW continues to assess strategies for non-performing tenants
and continued non-payment of rent by some tenants and will consider
all actions available to the Company to improve rent collection in
future periods.
-- As announced on the 4 August 2023, the Company exchanged
contracts on the sale at auction of 40 properties for GBP4.8m and
these completed in early September, of which GBP3.1m was utilised
for repayment of debt to the Company's lender.
-- The Board and AEW continue to engage proactively and
constructively with HOME's lender through regular meetings and
continue to service interest payments in full as they fall due.
-- As at 29 September 2023, the Company has total borrowings of
GBP216.2m, comprising a GBP116.2m interest-only term loan,
repayable in 2032, with a fixed all-in rate of 2.07 per cent. per
annum, and a GBP100m interest-only term loan, repayable on 2036,
with a fixed all-in rate of 2.53 per cent. per annum.
-- As at 29 September 2023, the Company had cash balances of
GBP14.0m including amounts held on account with the Company's
lender and subject to certain restrictions regarding its
availability. The Company has GBP1.4m of unrestricted cash, this
low unrestricted cash balance was expected given the debt repayment
and the continued decline in rent payment from non-performing
tenants
-- As announced on the 29 September 2023, the Company exchanged
contracts on the sale at auction of 137 properties for GBP22.8m
which are expected to complete in late October 2023. AEW, as
Investment Manager to the Company, identified a portfolio of
properties that were in poor condition, largely vacant and
requiring significant capital expenditure in order to be brought up
to specification. Of the properties exchanged for sale, 100
properties were subject to leases with tenants in liquidation which
will be surrendered prior to completion
-- Further sales are expected in the near term as part of the
strategy to stabilise the financial position of the Company.
Shareholder engagement
-- AEW continues engagement with the Company's major shareholders
-- To enable engagement with all shareholders, AEW intends to
provide quarterly presentations open to all shareholders.
-- The first quarterly online presentation open to all
shareholders will be held on the 19 October 2023. Further details
of how to join will be released by RNS on or before 12 October
2023.
Board succession
-- Further to the Company's announcement on 4 September
regarding the initiation of a formal and phased Board succession
process, the Company announces that it has appointed Fidelio
Partners to identify and evaluate potential new board members.
Further announcements will be made in due course.
Portfolio Metrics
Set out below are certain unaudited key portfolio metrics at 29
September 2023.
As at: 31 August 2023 29 September 2023
Number of properties 2,473 2,432
Number of beds 11,861 11,695
Number of tenants 29 31
Annual rent roll (1 2) GBP53.9m GBP48.5m
In period: 1(st) June 2023 1 September 2023
to 31 August 2023 to 29 September
2023
Properties sold - 41
Properties exchanged for
sale 41(3) 137
Number of assets with asset
management initiatives completed 100 146
Rent collection (2) GBP0.9m GBP0.1m
% rent collection (2) 7% 3%
(1) Contracted rent as at period end
(2) Excluding 184 (period to 31 August: 115) properties under
separate management agreements
(3) Previously reported as 40 - two properties were sold as one
auction lot in the August auction sales
Geographic Region Number Number of Number of
As at 29 September 2023 of Beds Properties Properties
(%)
-------------------------- --------- ------------ ------------
North East 2,522 790 32.5%
North West 2,008 417 17.2%
Yorkshire and the Humber 1,882 336 13.8%
East Midlands 1,184 206 8.5%
West Midlands 540 86 3.5%
South West 1,408 277 11.4%
London 685 88 3.6%
East of England 126 23 0.9%
South East 494 68 2.8%
Wales 846 141 5.8%
-------------------------- --------- ------------ ------------
Total 11,695 2,432 100.0%
Top 10 Tenants Number Number of % of portfolio
As at 29 September 2023 of Beds Properties annual contracted
rent
------------------------------------- --------- ------------ -------------------
One (Housing & Support) CIC 1,200 234 13.4%
The Big Help Project 1,303 353 12.5%
Supportive Homes CIC * 1,046 209 12.3%
GEN LIV UK C.I.C. * 571 107 7.2%
Bloom Social Housing CIC 645 94 6.2%
CG Community Council 386 54 5.8%
Dovecot & Princess Drive Community
Association 396 52 5.2%
Noble Tree Foundation Limited 527 143 5.1%
LTG Vision CIC 627 192 4.5%
Community Restore CIC 397 84 3.9%
TOTAL 7,098 1,522 76.1%
* In liquidation
FOR FURTHER INFORMATION, PLEASE CONTACT:
FTI Consulting (Communications HomeREIT@fticonsulting.com
Adviser) +44 (0)20 3727 1000
Dido Laurimore
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
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END
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