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Client of homelessness investment fund surrenders 100 leases amid board clear-out
A client of the beleaguered investment trust Home REIT has agreed to surrender the leases on 100 properties, made up of 418 beds.
The decision by One (Housing & Support) CIC to surrender the leases was part of a monthly update to the stock market by Home REIT this week.
The private fund leases more than 10,000 beds across 135 local authorities for charities to provide accommodation to homeless residents and is listed on the London Stock Exchange.
The firm said the surrender agreement would allow it “to receive a sustainable income stream from a strong tenant covenant and is expected to generate significantly higher rent collection than has previously been received from One CIC”.
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At the same time, the update revealed that Home REIT’s board “has initiated a formal and phased succession process” and that JLL will conduct a fresh valuation of its portfolio, following a recent sell-off and a number of clients going bust.
Mears Limited, the housing and social care provider that is guaranteed by the Mears Group, has been occupying the properties on a sub-lease from One CIC.
These sub-leases will now transfer to Home REIT, with Mears Limited becoming a direct tenant for the remaining lease term of around 6.6 years, and an initial contracted rental income of £891,155 per year.
Home REIT said it would continue to work constructively with One CIC to find sustainable solutions for the other 234 properties it currently rents from the trust.
This transaction reduces the firm’s exposure to One CIC from 13.5% to 9.5% by number of properties, and 14.2% to 11.9% by contracted rent roll.
Mears Group and One CIC were both contacted for comment.
The monthly update also revealed that Home REIT’s property advisor is engaging with the liquidators of Redemption Project CIC and Serenity Support CIC “to re-tenant and carry out other asset management initiatives”.
The update states: “When completing re-tenanting exercises, there will be a focus on minimising any potential disruption to the underlying occupants and any support services.”
Both Serenity and the Redemption Project filed for voluntary liquidation at the start of last month, as the under-fire firm struggles to collect rent.
Four charity clients of the fund has now gone bust in the space of six months. The fund made a similar announcement to the stock market in March.
Also in August, Home REIT announced it had agreed to sell 40 properties to cut its debt and provide working capital.
At the time, the firm said it had exchanged contracts on the homes for a total of £4.8m after a public auction.
But the properties, which represent 1.6% of the firm’s portfolio, were sold at an average loss of 61%.
Home REIT said the prices reflected the “vacant status of the majority of the properties and their condition”.
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