Home REIT has received an unsolicited approach by Bluestar to buy the business, as auditors show just 23% of quarterly rent has been collected.
The REIT has said it is “considering all strategic options including the possible sale of the company”.
The news of the bid comes as the results of a detailed review by Simpact Group are revealed, which concluded there had been a “serious deterioration in rent collections for the quarter to November 2022 and identified serious challenges in rent collection for December 2022 and January 2023”.
For the quarter ending November 2022, only 23% of rent has been collected. This means that, of the £14.8m quarterly rent roll, only £3.4m has been paid.
An update published by Home REIT added: “In addition, the rent forecast to be collected for the coming months is highly uncertain as the investment adviser [Alvarium Home REIT Advisers] deals with a combination of issues surrounding the tenants’ ability, or willingness, to pay.”
Home REIT added: “It is not possible to quantify the future amounts of rent to be collected with certainty as the issues are not straightforward.”
Chair Lynne Fennah said: “We recognise the serious issues facing the company and are examining all options to preserve shareholder value, and the interests of all stakeholders.”
Statutory demands have been served on seven of the defaulting tenants, with Home REIT retaining its right to forfeit leases of defaulting tenants without prejudicing its ability to pursue arrears.
Home REIT has asked Alvarium and Simpact to assess the impact of its report in terms of rental and capital values going forward.
Simpact assessed that Home REIT would have to pay between £15m and £20m to refurbish properties accounting for 67% of its portfolio. Home REIT has a £10m pot that it can use for refurbishments.
Home REIT said that “in light of this information from the report” it was considering all options, including a potential sale to Bluestar Group.
Home REIT said it “has received an unsolicited approach from Bluestar Group Limited regarding a possible offer for the entire issued share capital of the company. Any offer by Bluestar would likely be in cash”.
Bluestar now has until 16 March to “put up or shut up”.
Home REIT said it was also looking into “media speculation of allegations of wrongdoing”. It confirmed that it instructed independent forensic accounting expert, Alvarez & Marsal in early January 2023 “to investigate these allegations. This investigation is ongoing and it is not possible to confirm its outcome at this stage”.
The REIT added that it was still “engaging” with BDO to finalise an enhanced audit of its accounts for the year ended 31 August 2022. The accounts were due to be published in November last year.
The REIT is also in talks with its lender, Scottish Widows.
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