A Home REIT tenant has agreed to surrender leases on 100 properties as the REIT’s new investment manager attempts to “stabilise” the beleaguered company.
One CIC surrendered leases covering a total of 418 beds, which had been occupied on a sub-lease by housing and social care provider Mears Group.
The sub-leases will now transfer to Home REIT, with Mears becoming a direct tenant for the remaining lease term of 6.6 years with an initial contracted rental income of £891,155 per annum.
The new rent paid is more than £300,000 pa less than Home was initially contracted to receive.
However, the surrender agreement will allow Home to take direct control of the income stream and, in theory, improve the tenant covenant.
The REIT said it expected to achieve a “significantly higher rent collection” than was previously being received from One CIC, despite the lower headline rent. Headline rent was previously £1.23m pa.
Home REIT said it “continues to work constructively” with One CIC to find sustainable solutions for the other 234 properties it rents from Home REIT.
However, the deal reduces the REIT’s exposure to One CIC from 13.5% to 9.5% by number of properties, and from 14.2% to 11.9% by contracted rent roll.
The transaction is a first salvo from new investment manager AEW, in its strategy to “stabilise” the portfolio.
Shareholders earlier this week approved AEW’s plans, with 99.96% of the 70% who voted agreeing to measures including suspending the focus on homelessness.
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