Home REIT (HOME) has announced the acquisition of a further twelve separate portfolios of properties located across England for a total purchase price of £64.3 million (including acquisition costs). This takes the total capital deployed by the Company since IPO to £115 million, which is just under 50 per cent. of the net IPO proceeds. Home REIT has also finalised a £120 million interest-only debt facility with Scottish Widows.
About the Properties
The Properties will provide new, high quality accommodation for vulnerable, homeless people in need of housing, delivering critical solutions for women fleeing domestic abuse, prison leavers, those faced with homelessness due to poverty, and vulnerable people at risk of homelessness.
The Properties are let at a low and sustainable rental level, on new, unbroken, long term, full repairing and insuring leases to six different specialist registered homeless charities and two housing associations, providing them with long term security of tenure. The charities and housing associations, regulated by the Charities Commission and Regulator of Social Housing, respectively, will provide specialist care, training, support and rehabilitation to the vulnerable homeless people at the Properties.
The rents received under these leases are subject to annual upward-only rent reviews, index-linked to the Consumer Prices Index, subject to an annual collar and cap of 1 per cent. and 4 per cent., respectively. Each of the properties is immediately income producing and the blended net initial yield of the Properties is ahead of the Company’s target level.
The new £120m interest-only debt facility
This new £120 million interest-only debt facility with Scottish Widows has been secured on a 12-year term with a low fixed all-in rate payable of under 2.1 per cent. per annum for the duration of the facility. Home REIT says that, when the facility is drawn, the competitive interest rate it incurs will be highly accretive to the Company’s average net initial property yield, whilst mitigating potential interest rate risk for the 12-year period. The Company says it is targeting a conservative level of gearing, with a maximum level of aggregate borrowings of 35 per cent. of the Company’s gross assets at the time of drawdown of the relevant borrowings.
Home REIT’s pipeline
The Company says it is in “advanced legals on a significant pipeline of further assets to allow for the efficient deployment of both its remaining IPO proceeds (c. £118 million) and its debt facility (£120 million), in-line with expectations”. HOME says that these further acquisitions will enhance tenant and geographic diversification.
Portfolio update
HOME has provided the following summary of key points:
- High quality accommodation for vulnerable, homeless people, providing critical housing solutions for women fleeing from domestic abuse, those faced with homelessness due to poverty, people suffering from drug and alcohol abuse and mental health issues, prison leavers and ex-servicemen.
- Low and sustainable average weekly rents of £78 per person per week.
- Housing c. 1,700 people in over 315 properties.
- Following the acquisition of the Properties, the Company’s portfolio is diversified across 36 different local authorities and 11 tenants, with the following geographical exposures:
- East of England: 9.8%
- London: 7.6%
- North West: 21.3%
- West Midlands: 11.0%
- Yorkshire and the Humber: 9.1%
- East Midlands: 13.8%
- North East: 27.5%
Comments from Jamie Beale, Partner at Alvarium Home REIT Advisors Limited
“Since listing in October, we are pleased to have carefully deployed nearly 50 per cent. of Home REIT’s IPO proceeds through the purchase to date of £115 million of high-quality accommodation, providing homes to approximately 1,700 vulnerable, homeless people. Our portfolio of assets addresses a critical need within local communities and is let at low, sustainable rents to our tenant partners, who are proven to make a difference to the people they house, care for and support. All the rent payable by our tenants is funded by support from local and central government.
We are also pleased to have secured the 12-year £120 million debt facility , which provides Home REIT with a long-dated senior financing package at a very low fixed rate whilst offering the Company substantial flexibility in making future acquisitions, underlining the support for our strategy and strong sector fundamentals.”