A new valuation report on Home REIT’s portfolio has revealed a 57.7% reduction to the price it paid for them of £977.0m.
The report conducted by JLL, which was appointed by Home’s new manager AEW, valued the portfolio at £412.9m at 31 August 2023.
The majority of the properties have been valued on a vacant possession basis, but the report shines a light on just how much Home’s previous managers over paid for the assets. An internal investigation into the practices of previous manager Alvarium is ongoing.
The company said that the reduction in the property valuation is principally a result of a re-assessment of the quality of the assets through the on-going inspection programme, and of the covenant strength of the tenants, several of which have gone into liquidation in 2023.
Lynne Fennah, outgoing chairman, 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 advisers, and what consequential actions it may take.
“The publication of the company’s portfolio valuation marks an important step in the stabilisation strategy and ongoing work being done to publish the company’s annual results for the periods ending 31 August 2022 and 31 August 2023.”
New sales
The company has exchanged on the sale of a further 80 properties at auction (the majority of which took place on 19 December 2023) for £16.238m with completion expected in a month’s time.
Of the properties, 48 were subject to leases with tenants in liquidation which will be surrendered prior to completion.
The sales price represented an average of 33% of their purchase price (67% discount). Sale proceeds will be used to reduce borrowings and provide working capital as part of AEW’s strategy to stabilise the property portfolio.
Additional property information
AEW expects a larger than expected proportion of the portfolio going forward will be for the private rented sector (PRS) rather than homeless accommodation backed by exempt rents from local authorities.
AEW added that it was continuing to make progress in obtaining control of Home REIT’s assets from non-performing tenants. It said it was pursuing all strategies available including taking legal action on selected tenants that are not engaging constructively and continue to withhold payment of rent.
The company said that there was still some work to do before it is in a position to publish an estimated net asset value (NAV) and its results for August 2022 and August 2023.
HOME : Home REIT valuation report reveals 57.7% drop in value to price paid