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5 August 2024
Home REIT plc
("HOME" or the "Company")
Monthly Update
The Board of HOME and AEW UK Investment Management LLP ("AEW" or the "Investment Manager") provide their monthly update in respect of July 2024.
Managed Wind-Down proposal
On 16 July 2024, the Company announced the proposed adoption of a managed wind-down strategy (the "Managed Wind-Down") pursuant to which the assets of the Company would be sold with the objectives of optimising remaining shareholder value and repaying the Company's loan balance. The implementation of the proposed Managed Wind-Down will require a change to the Company's investment policy and the Company expects to publish a circular in the near future to seek approval from shareholders for this.
The Company will continue to provide regular updates during the Managed Wind-Down, however this, and the level of disclosure included, will be reviewed throughout the process in order to protect the Company's commercial interests and allow disposals to be completed in a manner that preserves shareholder value.
Monthly Summary
· As announced on 2 August 2024, 226 properties exchanged for sale at auction for a total of £26.5m at auctions held over the previous three days.
· Repayment of £8.5m of debt to the Company's lender in July comprising a cash repayment of £7.4m and net break gains of £1.1m applied to loan principal. Total borrowings were reduced to £106.1m as at 31 July 2024.
· Total income received for the month was £0.65m, which represents a 13% increase from the previous month.
· The Company's audited results for the year ended 31 August 2022 ("FY22 Audit") are now expected to be published in late August 2024 or early September.
· Lynne Fennah has notified the Company of her intention to step down from the Board on the publication of the 2023 financial results, but will continue to assist the Company, when necessary, on historic legal and FCA matters.
Portfolio and Financial Highlights
| Financial Position (Unaudited) | As at 31 August 2023 | As at 31st July 2024 |
| Valuation: |
|
|
| Draft August 2023 Valuation
| £412.9m | £282.1m 1 |
| Number of properties | 2,473 | 1,560 |
| Cash and Borrowings: | | |
| Unrestricted Cash | £0.8m | £6.9m |
| Total Cash | £13.5m | £14.2m |
| Borrowings | £220.0m | £106.1m |
| Net debt | £206.5m | £91.9m |
| Income: | | |
| Annual Contracted Operating Lease Rent | £53.9m | £15.3m |
| Tenants 2, 3 | 29 | 23 |
| Properties under lease to tenants | 2,358 | 751 |
| Properties under property management agreements | 115 | 809 |
|
| | |
| | To date 1 September 2023 to 31 July 2024 | Month 1 July 2024 to 31 July 2024 |
| Investment Activity: |
|
|
| Properties sold in the period | £128.8m | £16.4m |
| Number of properties sold in period | 914 | 124 |
| Properties exchanged in period/not yet completed | £34.1m 4 | £26.5m 4 |
| Number of properties exchanged not yet completed at period end | 287 4 | 226 4 |
| Rent Collection: | | |
| Operating lease rent collection | 3.8m | £0.2m |
| Operating lease rent collection 6 % | 11% | 19% |
| Management agreement income collection | £1.8m | £0.4m |
| Total income collected | £5.6m | £0.6m |
| Inspections: | | |
| Completed 7 | 2,144
| - |
| Occupancy: (at date of inspection on 1,577 Vibrant inspections) Occupancy (at least one bed occupied) Vacant (whole building) | 78% 22% | |
1 Proforma value at 31 July 2024 being draft valuation as at 31 August 2023 (as announced on 20 December 2023) less disposals in period.
2 Excluding properties under separate management agreements
3 Excluding properties under property management agreements with HOME having direct AST leases with occupiers
4 Including properties sold in the auction on 1st August 2024
6 Rent collection - rent collected including arrears /rent invoiced for the period
7 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 | +44 (0)20 3727 1000 |
The Company's LEI is: 213800A53AOVH3FCGG44.
For more information, please visit the Company's website: www.homereituk.com
Investment Activity
· Following announcements of exchanges at auction in previous months, 124 properties completed during July for a total of £16.4m.
· As announced on 2 August 2024, 226 properties were exchanged for sale at auctions over the previous three days for a total of £26.5m.
· Since August 2023, the Company has completed on the sale of 914 properties and exchanged on a further 287 properties. The gross proceeds from properties sold and exchanged totals £162.9m, which in aggregate is in line with the August 2023 draft valuation.
Financial Position and Related Matters
· The Company had a cash balance of £14.2m as at 31 July 2024 of which £6.9m is unrestricted.
· The Company repaid £8.5m of debt to the Company's lender in July comprising a cash repayment of £7.4m and a net break gain of £1.1m also being applied in repayment of the debt. A total of £113.9m of debt has been repaid since the Company entered the stabilisation period during August 2023.
· As at 31 July 2024, the Company has total borrowings of £106.1m, comprising a £15.8m 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.
· As mentioned in previous announcements, 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 increased from 5.00% to 7.00% from 1 July 2024 until the full repayment of the loan.
· The lender expects to be fully repaid no later than 31 December 2024.
· The Company continues to service interest payments in full as they fall due.
Valuation, Publication of the Annual and Interim Reports
· The Company's audited results for the year ended 31 August 2022 ("FY22 Audit") are expected to be published during late August or early September 2024.
· The audited results for the year ended 31 August 2023 have been prepared in parallel and, along with interim results for the periods to 28 February 2023 and 2024 respectively, are expected to be published during the third quarter.
· The Board and AEW remain committed to the restoration of trading in the Company's ordinary shares as soon as is practically possible.
Rent Collection and Tenant Engagement
· Due to the recent tenant surrender deals and the subsequent increase in properties under management agreements, rent collection is now being reported on two bases: operating lease rent and management agreement income.
· Rent collection on operating leases for the month of July was £0.2m, representing 19% of the rent invoiced for the period. AEW continues to work with selected tenants on payment plans.
· Total net income collected for the month of July from properties under management agreements was £0.4m. The income reported is net income, as the income is still to be reconciled by the Property Managers due to the extensive onboarding process underway. Once this exercise is complete, both the gross and net income received will be reported.
· Total income received for the month of July was £0.65m, this is a 13% increase from the previous month.
· The Company is progressing legal action against selected non-performing tenants.
Shareholder Engagement
· AEW continues engagement with the Company's shareholders. The next Webinar update will be held in September the date of which will be announced following publication of the Investor Circular.
Potential Litigation
· No changes to the potential litigation position occurred during the month. Any relevant announcements in this regard will continue to be made to the market at the appropriate time.
Board Succession
· As previously announced Marlene Wood, Simon Moore and Peter Cardwell have advised the Company that they will step down from the Board on the publication of the 2023 financial results. Lynne Fennah, has now also notified the Company of her intention to step down at the same time but will continue to assist the Company, when necessary, on historic legal and FCA matters.
Portfolio and tenant breakdown
| Geographic Region As at 31 July 2024 | Number of Properties | Number of Properties (%) |
| North East | 424 | 30.1% |
| North West | 347 | 21.4% |
| Yorkshire and the Humber | 212 | 13.5% |
| East Midlands | 165 | 9.9% |
| West Midlands | 152 | 9.0% |
| South West | 103 | 6.2% |
| London | 69 | 4.3% |
| South East | 52 | 3.1% |
| Wales | 18 | 1.4% |
| East of England | 18 | 1.1% |
| Total | 1,560 | 100.0% |
| Operating Leases - Top 10 Tenants As at 31 July 2024 | Number of Properties | % of portfolio annual contracted rent |
| One (Housing & Support) CIC | 110 | 26.3% |
| Mears Ltd | 177 | 12.6% |
| LTG Vision CIC | 171 | 11.8% |
| Gen Liv UK CIC1 | 44 | 9.1% |
| Community Restore CIC | 46 | 6.5% |
| Supportive Homes CIC1 | 34 | 5.7% |
| Mansit Housing CIC | 68 | 5.2% |
| Lifeline (NW) CIC | 10 | 3.8% |
| Complete Homes NW CIC | 20 | 3.5% |
| Concept Housing Association CIC | 4 | 3.5% |
| Total | 684 | 88.0% |
| | | |
1 In liquidation
Tenants in liquidation (Gen Liv UK CIC, Supportive Homes CIC and Marigold Housing) account for 17.0% of the annual contracted rent as at 31 July 2024.
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