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Home REIT properties lose almost 60% of their value
The beleaguered investment trust that specialises in accommodation for homeless people has confirmed its properties are worth almost 60% less than the £977m it paid for them.
Property consultancy JLL has inspected 97% of Home REIT’s 2,473 properties and estimated they had a combined value of just £412.9m.
The inspections, which began in July, also revealed that 88% of homes were either empty or occupied by such an unreliable tenant that they were valued on a “vacant possession basis”.
Last month, Home REIT collected 14% of rent due.
In a stock market update, Home REIT acknowledged “there has been a very material reduction” in the value of the company’s portfolio.
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It added that JLL found many properties to be in need of “extensive renovation” before they could be occupied, or reconfiguration to provide an “appropriate number of rooms” to suit the local market.
The trust also blamed a “deterioration” in the housing market and interest rate rises for the reduced value of its homes.
Home REIT said it had learned from AEW, the company’s latest property advisor appointed in May 2023, that a “larger than expected” proportion of its portfolio was classed as in the private rented sector rather than homeless accommodation backed by exempt rents from local authorities.
It did not provide an exact percentage of private rented accommodation.
AEW continues to collect data on the properties and take control of assets with tenants who are withholding rent, using legal action in some cases.
Lynne Fennah, chair of Home REIT, said: “The board is extremely disappointed by the significant value reduction announced today, which reflects the information that has come to light regarding the quality of the company’s assets and tenants.
“This information is in contradiction to reporting provided to the board during these periods.
“The company reserves all of its rights in respect of the matters referred to in today’s announcement and is still considering the conclusions and implications of the revaluation exercise with its advisors, and what consequential actions it may take.”
Home REIT debuted on the London Stock Exchange in October 2020, but has been rocked by difficulties since November 2022, after Viceroy Research, the short-seller, raised doubts about its business model.
The fund leases more than 10,000 beds across 135 local authorities to charities to provide accommodation for homeless people.
Trading in Home REIT’s shares was suspended in January 2023 after it missed a deadline to publish its annual report.
Harcus Parker is bringing a lawsuit against Home REIT on behalf of 250 of the company’s shareholders, who are seeking compensation for losses on their investments.
Jennifer Morrissey, a partner at the law firm, said: “Home REIT now acknowledges that its property portfolio has been vastly overvalued due to failures to properly understand tenant covenant strength and the quality of the property assets.
“Despite it now being more than a year since many of these issues were raised, the company still does not appear to understand precisely where its rent is (or should be) coming from.
“A year on, the company is unable to tell what portion of their tenants qualify for social housing benefit, and has provided no clarity whatsoever on how the investors will be compensated for their losses.
“While the shareholders’ questions remain unanswered, we are now awaiting a response from the company and its former advisors to the letter of claim that we have sent on behalf of a growing body of investors.”
Home REIT declined to comment on the lawsuit.
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