Alvarium Home REIT Advisors has announced its intention to launch an initial public offering (IPO) in Home REIT, a company focused on the alleviation of homelessness in the UK.
Home REIT will target inflation-protected income and capital returns, by investing in a diversified portfolio of assets across the UK which will be dedicated to providing accommodation to the homeless. It is targeting net total shareholder return of at least 7.5% per annum.
It said the accommodation assets will be let or pre-let on very long (typically 20 to 30 years), inflation-linked leases 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 the homeless and which receive housing benefit or comparable support from local or central government to fund the provision of such accommodation to the homeless.
Home REIT will target an issuance of £250m in the placing of 250 million ordinary shares at an issue price of 100p. The directors could increase the size of the issue to a maximum of 300 million ordinary shares.
The company will be making an application for its shares to be admitted to the premium segment of the official list of the Financial Conduct Authority and to trading on the premium segment of the main market of the London Stock Exchange. The company also intends to become a real estate investment trust.
Overview
- Investment strategy is to be part of the solution to the homelessness crisis in the UK whilst delivering inflation-protected income and capital growth over the medium term for shareholders through funding the acquisition and creation of high-quality accommodation for the homeless across the UK let on long-term index-linked leases.
- Targeting a diversified portfolio of homeless accommodation assets, let or pre-let to registered charities, housing associations, community interest companies and other regulated organisations that receive housing benefit or comparable funding from local or central government, on very long-term and index-linked leases.
- Targeting a wide range of assets across various sub-sectors within homelessness including women fleeing domestic violence, people leaving prison, individuals suffering from mental health or drug and alcohol issues and foster care leavers.
- Focus on training and rehabilitation within the homeless accommodation assets to provide individuals with the skills and confidence to find long-term accommodation and enable them to reintegrate back into society.
- Home REIT will seek to acquire or create new accommodation for the homeless, creating new asset supply to meet significant demand – according to Shelter more than 320,000 people sleep rough, are in homeless shelters or other temporary housing in Great Britain.
- Expected savings to local authorities and other providers of accommodation to the homeless via lower rents versus more expensive alternative accommodation.
- The homeless accommodation assets are expected to give providers of homeless accommodation long-term security of tenure, which the investment adviser believes is crucial to rehabilitating vulnerable individuals and helping to break the cycle of homelessness seen in short term accommodation.
- Focus on well-located properties that provide a sustainable level of rent for the tenant.
- Ability to invest in fixed-price forward funded pre-let developments is expected to help deliver lower purchase costs and discount to built value (but no speculative development by the company).
- Assets acquired by the company will benefit from triple net, full repairing and insuring leases.
- Targeting a minimum annual dividend of 5.5 pence per share, starting from the financial period commencing 1 September 2021, with the potential to grow through upward-only inflation-protected long-term lease agreements.
- Targeting net total shareholder return of at least 7.5% per annum over the medium term.
- The company intends to enhance equity returns by using a conservative level of aggregate borrowings with a maximum level of aggregate borrowings of 35% of the company’s gross assets at the time of drawdown of the relevant borrowings.
- Substantial pipeline of homeless accommodation assets already identified with an aggregate value of over £350m which meet the company’s investment objective and investment policy. All of these assets have been identified off-market through the investment adviser’s extensive contacts and relationships and are under exclusivity.
- Net proceeds of the issue expected to be invested or committed within six to nine months following admission.
Home REIT’s investment team, Alvarium Home REIT Advisers, has capitalised and transacted over £1.5bn of property assets with a particular focus on accessing secure, long-let and index-linked UK real estate through forward funding and built asset structures. The investment adviser’s personnel have extensive expertise in the target homeless accommodation assets sector and have successfully managed a £430m social impact fund specialising in this strategy over the last two years.
The company has a fully independent board of non-executive directors, chaired by Lynne Fennah, CFO/COO of Empiric Student Property, and the other directors are Marlene Wood, Peter Cardwell and Simon Moore.
Fennah said: “We believe a significant investment opportunity now exists in the UK homeless accommodation asset market and the Alvarium team has already identified a substantial pipeline of homeless accommodation assets that we, and the Alvarium team, consider are at low and sustainable rent levels.
“We aim to be part of the solution to the homelessness crisis in the UK, drawing on the Alvarium team’s sector specialist expertise to achieve our objective of delivering secure inflation-protected income and capital returns to shareholders, whilst delivering a positive social impact.”
Home REIT will be managed by Alvarium Fund Managers (UK). Dickson Minto W.S. is acting as sole sponsor to the company, and Alvarium Securities is acting as sole broker, placing agent and intermediaries offer adviser to the company.