6 November 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 October. 

Summary

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

·    At a public auction held on the 2 November 2023, the Company has exchanged on the sale of a further 14 properties for £8,982,500. Further property disposals are expected at two auctions this week.

·    Rent collection including arrears representing 18% of rent invoiced during the month. 

·    AEW continues to develop its strategy for non-performing tenants during the stabilisation period. For those tenants that do not engage constructively and continue to withhold payment, AEW is assessing all strategies available to the Company which has included serving statutory demands and section 146 notice of forfeiture on selected tenants.

·    £15.3m cash balances as at 31 October of which £2.7m is unrestricted.

·    534 internal property inspections now completed to 31 October 2023, assessing the condition, compliance and occupancy of properties.  The inspection programme is due to continue throughout November and December.

·    The Company's valuer has externally inspected 2,247 properties and internally inspected 131 properties as at 27 October 2023.  Currently, the Company expects to publish valuation information by the end of the year.

·    The Company and AEW have now reviewed 1,690 of the historical 2,473 property transactions to apply revised accounting policies back to inception.    

·    Due to the application of the revised accounting policies, the ongoing inspection programme and BDO enhanced audit requirements, the Board currently anticipates publication of the outstanding accounts in early 2024. 

·    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:

The Company's LEI is: 213800A53AOVH3FCGG44.

For more information, please visit the Company's website: www.homereituk.com

Portfolio assessment and tenant engagement

·    At a public auction held on the 2 November 2023, the Company has exchanged on the sale of 14 properties for £8,982,500, with completion expected in approximately one month's time.  The 14 properties were identified as liquid assets primarily due to the condition, occupancy and location, and have been sold at a value representing an average of 51% of their purchase price.  Sale proceeds will be used to provide working capital and reduce borrowings. Further properties are expected to be sold via two auctions this week and the Company will publish details of these disposals when the auction process has completed.

·    AEW continues to work constructively with those tenants which are experiencing deterioration of financial strength and unable to meet in full rent demands and pay arrears.

·    AEW continues to develop its strategy for non-performing tenants during the stabilisation period. For those tenants that are not engaging constructively and are continuing to withhold payment, AEW is assessing all strategies available to the Company which has included serving statutory demands and section 146 notice of forfeiture on selected tenants. 

·    As at 31 October 2023, 534 properties had been inspected by Vibrant Energy Matters Limited ("Vibrant"), a subsidiary of Connells Limited.  The process of inspections is taking longer than initially anticipated. Inspections require significant co-ordination and communication between all the relevant parties including tenants, property managers and individual occupiers.  As at 31 October 2023, 335 inspections have been aborted due to Vibrant being unable to obtain access when attending properties.  The inspection programme is due to continue throughout November and December. AEW intends to provide further analysis on inspection results in future monthly updates.

·    Jones Lang LaSalle Limited ("JLL") as the external valuer has externally inspected 2,247 properties and internally inspected 131 properties as at 27 October 2023. Currently the Company expects to publish valuation information by the end of year.

Rent collection, financial position and related matters

·    Rent collected including arrears represents 18% of the rent invoiced in the month of October.  Whilst this is an increase on the previous period's collection of 3%, rent collection will vary month on month in the near term as some tenants continue to experience deterioration of financial strength and inability to meet rental payments and pay arrears. In addition, late payments from previous months can impact the total received in a particular month.

·    As announced on the 29 September 2023, the Company exchanged contracts on the sale at auction of 137 properties for £22.8m.  37 of these have completed with the remaining expected to complete over the coming two weeks.    

·    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.

·    As at 31 October 2023, the Company had total borrowings of £216.2m, comprising a £116.2m interest-only term loan, repayable in 2032, with a fixed all-in rate of 2.07%. per annum, and a £100m interest-only term loan, repayable on 2036, with a fixed all-in rate of 2.53% per annum.

·    As at 31 October 2023, the Company had cash balances of £15.3m including amounts held on account with the Company's lender and subject to certain restrictions regarding its availability; the Company had £2.7m 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 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.

·    As announced on 4 September 2023, 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 is undertaking the extensive exercise of reviewing all 2,473 property acquisitions in order to apply the revised accounting policies with 1,690 reviews having been completed as at 27 October 2023. 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 first quarterly online presentation open to all retail shareholders was held on the 19 October 2023 and a copy of the presentation is available on the Company's website.

·    To enable continued engagement with all shareholders, AEW intends to provide quarterly presentations open to all retail shareholders. 

·    The next monthly update is expected to be announced on 5 December 2023.

Board succession

·    Further to the Company's announcements on 4 September and 2 October 2023, Fidelio Partners has made good progress in identifying a new independent Non-Executive Chair and the Company is therefore 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.

·    The appointment of a new Chair is being overseen by Mark Davies who has been acting as a Senior Advisor to the Board since March 2023. Mark is independent from the Board, has many years' experience in capital markets and is well known to the Company's largest shareholders, having met with those representing 37% of the share register to discuss the recruitment process, proposed skillset and timing of appointing a new Chair, with a new independent Board to follow.

·    It is expected that as soon as the new Chair is appointed that they will oversee the appointment of a new independent Board of directors.

Portfolio Metrics

Set out below are certain unaudited key portfolio metrics at 31 October 2023.

¹ Contracted rent as at period end

² Excluding 184 properties under separate management agreements

³ A further 22 property disposals completed on 1^st and 2^nd November

⁴ Rent collection - rent collected including arrears /rent invoiced

Tenants in liquidation (Supportive Homes CIC, GEN LIV UK C.I.C. and Serenity Support CIC ) account for 20.4% of the annual contracted rent as at 31 October 2023.