Homelessness investment fund considers sale as outstanding rent tops £10m
A listed homelessness accommodation investment fund is considering a possible sale after a report revealed over £10m in outstanding rent for the quarter ending November 2022.
In a stock market update, Home REIT said it is considering the possible sale of the company after revealing a “highly uncertain” rent forecast alongside refurbishment costs of up to £20m.
The company is a private fund that leases more than 10,000 beds across 135 local authorities for charities to provide accommodation to homeless residents.
These charities are the fund’s tenants and pay an index-linked return for the bed spaces, which they raise through the rents charged to users and covered by housing benefit.
A report by Home REIT’s investment advisors “highlighted a serious deterioration in rent collections for the quarter to November 2022 and identified serious challenges in rent collection for December 2022 and January 2023”, the note said.
For the quarter ending November 2022, only 23% of rent had been collected, meaning that out of a £14.8m quarterly rent roll, only £3.4m has been paid.
READ MORE
The news follows an earlier stock market update that claimed Liverpool-based Big Help Group did not pay rent “contractually due” for the quarter to 30 November 2022.
However, the charity claimed the rent is not owed, as it was required to invest its own resources to bring the properties it leases up to standard and agreed rent waivers from the fund to claim back this cost.
Today’s stock market update stated: “The rent forecast to be collected for the coming months is highly uncertain as the investment advisor deals with a combination of issues surrounding the tenants’ ability, or willingness, to pay.
“It is not possible to quantify the future amounts of rent to be collected with certainty as the issues are not straightforward.”
Home REIT said it has served statutory demands on seven of the defaulting tenants. As a result, the company said it retains its right to forfeit leases of defaulting tenants.
The report also found that, based on information provided by tenants for approximately 67% of the portfolio, the cost of refurbishing properties in need of work is estimated to be between £15m and £20m.
Home REIT pointed out that “vendors are contractually responsible for the refurbishment of properties, and so it is therefore hard to quantify the net exposure to the company”.
The trading update also revealed the recent resignations of the organisation’s two brokers, Alvarium Securities and Jefferies International. Following these resignations, Home REIT appointed financial advisors Smith Square Partners.
The firm told the stock market: “In light of this information from the report, the board is considering all strategic options, including the possible sale of the company with Smith Square Partners and its other advisors, while at the same time not losing sight of the paramount importance of preserving shareholder value.”
But it warned shareholders that “there can be no certainty that an offer will ultimately be made for the company, nor as to the terms on which any firm offer might be made”.
Home REIT has set an initial deadline of 5pm on 16 March for offers. In the meantime, independent forensic accountants have been instructed to investigate “media speculation of allegations of wrongdoing”.
Lynne Fennah, chair of the firm’s board, said: “We recognise the serious issues facing the company and are examining all options to preserve shareholder value and the interests of all stakeholders.”
Sign up for our development and finance newsletter
Already have an account? Click here to manage your newsletters
