TRADING UPDATE AND NOTICE OF HALF YEAR RESULTS
01 November 2022
Home REIT plc
("Home REIT" or the "Company")
TRADING UPDATE AND NOTICE OF HALF YEAR RESULTS
Home REIT plc (ticker: HOME), which funds the acquisition and creation of high-quality properties across the UK that are dedicated to providing accommodation to homeless people, announces an update ahead of its results for the year ended 31 August 2022 which will be released on 28 November 2022.
Lynne Fennah, Chairman of Home REIT, commented:
"In the current cost of living crisis, the importance of providing high quality affordable homes to homeless people and those at risk of being homeless is plain to all. Tragically, there remains an acute shortage of suitable accommodation and in this context I am pleased that our portfolio now provides over 11,700 beds.
"Whilst the social impact is clear, our portfolio has also generated savings for local authorities and has helped to rebuild, renovate and re-purpose over 2,400 residential houses and flats to date.
"The Company is well positioned to deliver attractive inflation-linked returns to our shareholders against a challenging economic backdrop, via our long and sustainable leases, supported by our long dated fixed low-cost debt.
"We are proud of what has been achieved since our IPO just over two years ago and look forward to continue helping to be a part of a long-term solution to homelessness in the UK."
Rent collection
The Company has collected 100% of rents due to 31 August 2022.
The Company has carried out 711 index linked rent reviews since 31 August 2021 with an average annualised rental growth rate of 3.5 % on the rents reviewed. This equates to like for like rental growth across the portfolio of 3.5% since 31 August 2021 and takes total annual rent to £53.9 million as of 31 August 2022.
Portfolio valuation
Whilst the wider economic backdrop has resulted in uncertainty over recent months, the Company's independent valuer has confirmed that it has not observed any transactional activity that would imply a material change in the investment yields used to value the Company's assets as at 31 August 2022.
LTV and debt facilities
The Company benefits from a strong balance sheet with a low loan-to-value ratio ("LTV"), significant headroom to financial covenants and very long term maturities.
The Company's debt comprises two fully drawn secured term loan facilities of £120 million and £130 million, maturing in 2032 and 2036 respectively, with no amortisation. The Company's debt is 100% fixed to maturity with a very low weighted average all in cost of 2.3% pa.
Operational activity and asset fundamentals
As at 31 August 2022, the Company's portfolio consisted of 2,239 properties in total, let to 29 different tenants with a weighted average lease length of 24 years to first break. All the Company's properties benefit from fully repairing and insuring ("FRI") green leases with annual upward-only rent reviews, index-linked to the Consumer Prices Index, with an annual collar and cap of 1% and 4% respectively.
During the financial year to 31 August 2022, the Company acquired 1,528 investment properties, with a further 220 investment properties acquired since the year end, taking the total to 2,459 investment properties with 11,796 beds.
The Company notes these properties are providing a key service to local authorities and the rent is statutorily protected and funded by central government. Importantly, the rent is also affordable when benchmarked against alternative uses and the assets benefit from high vacant possession value from alternative uses.
There remains an urgent need for more accommodation and the Company will continue to be highly disciplined when evaluating new investment opportunities and currently has approximately £30 million of available cash which it has not yet committed to new investments.
Tenant Update
Circle Housing, a tenant of the Company representing less than 3% of the annual rent of the Company, was placed into voluntary administration in July 2022. Their rents are set at affordable levels, averaging under £61 per bed per week and rents continue to be paid by the Administrator whilst the Company progresses assignment of the leases to an existing portfolio tenant. All residents are unaffected by this process.
Dividends
On 4 August 2022 the Company announced a third quarterly interim dividend of 1.38 pence per share, taking the total dividends paid and declared in respect of the financial year to 4.12 pence per share to date. The Company remains on target to pay a total dividend of 5.5 pence per share (1) for the financial year to 31 August 2022 with its fourth quarterly interim dividend, which the Board expects to announce at the time of its annual results.
Management team update
The Company is pleased to announce that the Investment Advisor has appointed James Snape as Chief Financial Officer. James will lead on all strategic financial matters, including Company reporting, budgeting and forecasting, treasury management and the monitoring of internal controls.
James is a qualified Chartered Accountant and most recently worked as a Director at a funds specialist firm based in the Cayman Islands. Prior to that, James was a senior member of BDO's Real Estate and Construction team in London, where he spent eight years working with UK REITs, private property funds, developers and major contractors.
The Company is also pleased to announce that the Investment Advisor has appointed Barbora Melezinkova as Head of ESG. Barbora will lead on all ESG matters and has joined from Legal & General Investment Management ('LGIM'), where she was the ESG Lead on LGIM's long income funds.
The Board has been informed by the Investment Advisor that Gareth Jones will be stepping back from his role as fund manager whilst he takes a period of leave for health reasons. Charlotte Fletcher remains as co-fund manager whilst Alex Baker has been promoted from assistant fund manager to co-fund manager. The Investment Advisor management team also benefits from additional support from senior Alvarium Investments employees.
Appointment of Joint Corporate Broker
The Company is pleased to announce the appointment of Jefferies International Limited as the Company's Joint Corporate Broker, alongside the Company's existing corporate broker Alvarium Securities Limited.
Annual results
The Company will announce its results for the year ended 31 August 2022 on 28 November 2022. A Company presentation for analysts and investors will take place on the day via a webcast, details of which will be published in due course on the Company's website.
FOR FURTHER INFORMATION, PLEASE CONTACT:
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Alvarium Home REIT Advisors Limited Charlotte Fletcher James Snape Alex Baker |
Via FTI Consulting below |
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Alvarium Securities Limited Mark Thompson Eddie Nissen Oliver Kenyon |
020 7016 6716 |
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J efferies International Tom Yeadon Harry Randall Ollie Nott |
020 7029 8000 |
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FTI Consulting (Communications Adviser) Dido Laurimore Eve Kirmatzis Ellie Perham-Marchant Oliver Harrison |
+44 (0)20 3727 1000 |
NOTES
(1) This is a target and not a forecast
The Company's LEI is: 213800A53AOVH3FCGG44.
For more information, please visit the Company's website: www.homereituk.com
Home REIT plc seeks to contribute to the alleviation of homelessness in the UK, whilst targeting inflation-protected income and capital returns, by funding the acquisition and creation of a diversified portfolio of high-quality accommodation assets across the UK which are dedicated to providing accommodation to homeless people. The accommodation assets are let or pre-let on very long (typically 20 to 30 years) leases, containing inflation-linked or fixed uplift rent review provisions, to registered charities, housing associations, community interest companies and other regulated organisations which have a proven operating track record in providing low-cost accommodation to homeless people and which receive housing benefit or comparable support from local or central government to fund the provision of such accommodation to homeless people.
There is a critical need for further accommodation for homeless people in the UK, due to an increasing homeless population and a lack of available and affordable high-quality, fit-for-purpose stock to address the problem. Local housing authorities are under a statutory duty to secure accommodation for individuals who are unintentionally homeless and in priority need but current accommodation for homeless people is limited in quantum and often sub-standard and uneconomical.
The Company focuses on investing in and creating well-located properties that provide a sustainable level of rent for the tenant. Within the homeless accommodation assets, there is a focus on care, support, training and rehabilitation to provide vulnerable homeless people with the skills and confidence to find long-term accommodation and enable them to reintegrate back into society. Savings are expected to be made to local authorities and other providers of accommodation to homeless people via lower rents versus more expensive alternative accommodation.
The Company is listed on the premium segment of the Official List of the UK Financial Conduct Authority and its Ordinary Shares were admitted to trading on the main market of the London Stock Exchange, premium segment, on 12 October 2020.
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