Troubled Home REIT’s portfolio value has amounted to 42.3% of acquisition costs, according to its latest valuation.
Home REIT’s valuation stood at £412.9m on 31 August, across 2,473 properties. Unaudited historical acquisition costs were £977m.
The REIT hired JLL in September to value its entire portfolio. An 88% majority of properties were valued on a vacant possession basis.
JLL made internal inspections of 195 properties, as well as 2,391 external inspections.
The board said it acknowledges the “very material reduction”, attributing it to “a reassessment of the quality of the assets through the ongoing inspection programme, and of the covenant strength of the tenants, several of which have gone into liquidation in 2023”.
The company also said it is still not in a position to publish an estimated net asset value. It said its board and its investment manager AEW are working “at pace” with BDO to publish audited results in “a timely manner”.
It added that initial evidence showed a “larger than expected proportion” of the portfolio is private rented sector, rather than homeless accommodation backed by exempt rents from local authorities. AEW said it expects to quantify a higher proportion of PRS in its portfolio.
Lynne Fennah, chair of Home REIT, 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.”
Fennah said the company is “still considering the conclusions and implications of the revaluation exercise with its advisers and what consequential actions it may take”.
She added: “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.”
The news comes as the REIT exchanges on the sale of a further 80 properties after a series of public auctions held over the past five days. Those represented 3.6% of its portfolio by number, changing hands for a total of just over £16.2m. The purchases are expected to close in around a month’s time.
Sale proceeds represent an average of 33% per cent of their purchase price. They will be used to reduce borrowings and provide working capital as part of AEW’s strategy to stabilise the property portfolio.
The majority of the assets by value were included in an auction that took place on 19 December.
The properties, the majority of which are vacant and are expected to require significant capital expenditure, were chosen by AEW. Of the properties exchanged for sale, 48 were subject to leases with tenants in liquidation which will be surrendered prior to completion.
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