The board of Home REIT has proposed a managed wind down of the company after failing to secure a refinancing of its debt facility.
That loan facility with Scottish Widows, which totals £114.6m, will need to be repaid by the end of the year – all the while incurring a charge on the outstanding amount of 7%.
Once repaid through the proceeds of portfolio sales, the remaining portfolio will be valued at around £200m (depending on values achieved in the sales process). This, the company said, (coupled with the requirement for capital expenditure to drive an increase in rental value and valuation of the remaining portfolio) means that the only viable option would be a managed wind down of the company.
The board said assets would be sold with the objectives of optimising remaining shareholder value and repaying the company’s loan balance.
It added that there was significant support from shareholders for a realisation strategy and the return of capital when the company is able to do so.
The proposed managed wind down requires a change to the company’s investment policy and therefore a general meeting will be called to seek approval from shareholders.
Approach to the managed wind down
HOME’s investment manager, AEW, will adopt a broad and managed approach to the disposal of assets. A proportion of the property portfolio will be sold before 31 December 2024 to meet the requirements of Scottish Widows and repay the outstanding debt. However, sales will otherwise be structured and executed to achieve best value and to minimise disruption to the underlying occupiers of the properties. A decision on the preferred method of disposal will be determined by a number of factors, including property condition, location, tenant type, and lease terms.
During the managed wind down, asset management initiatives will be focused on adding value to properties and preparing them for sale to maximise liquidity.
Return of capital to shareholders
The board said that it intends to return capital to shareholders upon the completion of the realisation strategy and following the repayment of the company’s outstanding debt facilities, but the ability to make distributions to shareholders may be constrained whilst the company faces potential group litigation and an FCA investigation. It said that, at present, it was unable to assess properly its ability to make distributions under the applicable legal requirements. In addition, the company expects to retain capital to meet corporate costs and allow it to pursue legal action against those it considers responsible for wrongdoing.
The most appropriate timing and mechanism to return capital to shareholders will be determined in due course.
Financial statements and restoration of listing
As previously announced, the company’s audited results for the year ended 31 August 2022 are expected to be published during August 2024. The audited results for the year ended 31 August 2023 have been prepared in parallel and, along with interim results for the periods to 28 February 2023 and 2024 respectively, are expected to be published during the third quarter. Following publication of all outstanding financial information, the company is then able to apply to the FCA for a restoration of its listing and the recommencement of trading on the London Stock Exchange.
Shareholder communications
The board and AEW will provide a presentation to shareholders via a live webcast following publication of a circular before the general meeting.
The presentation will also provide an update on the activities that AEW has undertaken in respect of the company’s property portfolio, as well as an overview of ongoing workstreams. There will also be an opportunity for shareholders to ask questions.
A further update on timing will be provided in due course.
Michael O’Donnell, non-executive chairman of Home REIT, said:
“It is clear that Home REIT continues to face extensive challenges, including in respect of its debt position and pursuing and defending litigation action, and responding to an FCA investigation. Against this backdrop and the expected reduced size of the company’s portfolio, following an extensive review the board has concluded that the best course of action for shareholders is to propose a managed wind-down strategy. I would like to thank shareholders for their ongoing patience and support through the stabilisation process as we strive to address, and seek redress for, the issues facing the company.”