Home Reit Share Discussion Threads

[spectoacc] 29/4/2024 20:33

Thanks @nexusltd.

Suspect there's a shedload of CapEx needed on most - certainly the ones I've seen.

They've generally bought cheap - or rather, paid expensive for cheap - and some rental areas are very low rents. Impossible to call anything as general as "North East" or "Yorkshire", eg I have 2x 3 beds in the same Yorkshire city, one rents at £1.2k/month, the other at £400/month.

Of the HOME properties I've bought, all NE, the next to complete is a 2-bed at £325/month. There's probably £2k of necessary CapEx, a £555 fee for Selective Licencing, and the tenant is currently not paying (due mainly to the repairs backlog - he will).

I got it cheaply - shudder to think what HOME paid for it.

Can they get to a core of performing assets? Maybe - the Mears portfolios seem sensible - but low-end housing is often 10-15% yields, and for a reason. That needs factoring in to any valuation changes.

Nice to hear they may actually check up on their CIC lessees this time around. They'd have learnt a lot if they'd done that to start with.

[williamcooper104] 29/4/2024 18:50

Thanks for that 5 year leases are fine, most ASTs are for 12 months and the 30 year index linked leases forfeited were an illusion, and valuations now reflect that so won't be a loss of value

[nexusltd] 29/4/2024 18:22

@Williamcooper re: your post#1386

From my notes re: Webinar Presentation Friday, April 26th 2024, 9:00 am, mainly info delivered during Q&A. Presentation slide deck should be published this week.

Valuation methodology
Vacant possession for most properties, a few as investment assets with time limited lease durations.

Lease framework agreement
1. 5 year, 2 year break. Early break if lessee is not performing.
2. Rents to be affordable, set at LA levels, and where possible indexed.
3. Rents to be paid gross, to Home, then an agreed cost quantum, released monthly to lessee for maintenance, refurb etc..
4. Rigorous vetting of lessee, including visits to offices, and meeting staff.
5. Two / three lessees will have national scope, most will be regional/local.

Property strategy
1. For efficiency looking to establish regional property clusters. Selling assets:
a. If do not fit into a cluster,
b. Rebalancing asset locations as have too many in the North East.
c. Unsuited to Home’s revised remit,
d. Capex to bring asset up to reasonable standard uneconomic.

2. Cluster locations dependent on demand, and having a responsive LA.
3. Each region to be assigned an AEW manager.
4. At the granular level the assets will be managed by contractors.

Mears agreement
1. Mainly east side of England, did not specify latitude (north? south? East Anglia?)
2. Mears funded directly by central government. Short route for funds.
3. May take on more assets, but AEW feels that there are other parties with strong interest / better options.

Capex estimates: WIP, have assessed a small number of properties to establish a benchmark.

Auction costs: 4%-5%


Crunched some KI’s into shape the NAV & LTV estimates account for 5% accumulating covenant breach liability:
FY23 Q4 @31/12.
1. NAV: 26.4pps (amusingly, in line with my December guesstimate #1312)
2. LTV: 45.4%

FY24 Q1 @31/03.
1. NAV: 25.3pps
2. LTV: 42.3%

Cash burn?
Tried to get a handle on negative cash flow. To make the assessment I have backed out:
1. The receipts from asset sales and associated auction costs.
2. Loan reduction payments.

The monthly cash flow profile is very lumpy, reflecting lumpy rental receipts.
1. The monthly cash outflow averaged over the period Sept-23 to March-24 (7 months), is c. 3.6mn. Segmented as:
a. Loan Interest, excluding 5% penalty: 0.36mn,
b. Extraordinary fees incurred for “stabilisation” professional advice & services, 1.3mn.
c. Other expenses 1.94mn

2. FY24Q1 negative cash flow is tending to ramp up wrt FY23Q4; likely due to increasing legal fees.

Total rent 7 months: 2.747mn of which Mears 0.947mn.

Questions to/for our community:
1. If 5year lease agreements to good quality covenants are delivered as intended; what might be the % increase in asset valuation?
2. What assistance packages do LA’s offer & at what value?

3. What are typical rent ranges for 3 & 4 bed properties in the following regions?
a. North East 3bed-, 4bed-
b. North West 3bed-, 4bed-
c. Yorkshire and the Humber 3bed-, 4bed-
d. East Midlands 3bed-, 4bed-
e. West Midlands 3bed-, 4bed-
f. South West 3bed-, 4bed-
g. London 3bed-, 4bed-
h. South East 3bed-, 4bed-
i. East of England 3bed-, 4bed-
j. Wales 3bed-, 4bed-

[spectoacc] 27/4/2024 17:47

Feels like fewer HOME properties at the next Allsops - @Flyer59, any views?

Should reach a point where they've paid down sufficient loan, & can start concentrating on the remaining portfolio.

Problem is that rent collection is jaw-droppingly awful. One thing to have a REIT with say £250m property, £50m loan (a point they may reach). Another when rent collection including recovered arrears is c.8%. Considering the two Mears portfolios, there seems to be basically no rent at all from the remainder.

Of my cheapos - all that I can go on - one out of six were up to date with rent. And that's to CICs, not necessarily on to HOME.

They'll need cash put by for the eventual fines too, hopefully offset by what they can recover from Alvarium (as was).

But no, didn't watch the presentation. Much as I enjoy following HOME, life's too short.

[tradez4dayz] 27/4/2024 15:30

No but is it worth watching for a laugh?

[williamcooper104] 26/4/2024 18:34

Anyone watch the retail shareholders presentation

[spectoacc] 19/4/2024 10:41

Ha yes - if you know the property, you know the CapEx you spent on it, perhaps still know the tenants (including those where HOME claim to have no info), then why not.

Has occurred to me a few times that I may be bidding against those who know the Lot much better than I do.

My 3 from January are all now completed fwiw; the 3 from February still no date yet.

Luckily the first 3 turn out to have all been managed by the same lettings agency, so I'm getting hold of gas certs etc. Deposits haven't been transferring tho - there's such a disconnect between ownership (a HOME subsid), seller (AEW), CIC (often bust, always dodgy), manager (lettings agent in these cases), and tenants (I've one who keeps calling me because neither AEW, nor the CIC, will deal with anything because they say they're no longer legally responsible - despite me not having a completion date).

In all cases bar one, tenants aren't paying rent.

Some will have made out like bandits legitimately, eg approached to sell portfolio at more than it was worth, now buying back at less than it's worth.

Most will be actual bandits.

[flyer61] 19/4/2024 10:31

be interesting to know if the have gone back to their original owners.....

[spectoacc] 19/4/2024 10:00

Good point, & other than the cheapos it appears they did sell a number of whoppers:

[rj allen] 19/4/2024 09:36

The last batch of 65 properties appear to have been sold for an average of £245,000 each!

[spectoacc] 19/4/2024 07:31

Interesting that they're claiming the sale proceeds are in line with the August valuation, and that overall, all the sales are.

This is the first I can remember that's met - most have been below.

Eg previous month: -7.7%. Month before: -15.5%. January: -8.4%. The December sales were merely stated as "33% below purchase price", but also as being the poorer properties.

And are they omitting fees? Allsop, and legals? Suspect they'll be reported elsewhere, and aren't included.


"Since August 2023, the Company has completed on the sale of 533 properties and exchanged on a further 240 properties. The gross proceeds from properties sold and exchanged totals £111.4m, which in aggregate is in line with the August 2023 draft valuation."

£144k per property? I must be watching different auctions. I've seen hundreds sell below £50k.

Based on the last 4 months, there's no way they're meeting the heavily written-down valuation, even before fees.

[spectoacc] 18/4/2024 07:11

The first part is in belly laugh territory:


"The letter of claim alleges that the Company, along with certain other parties, provided information to investors which was false, untrue and/or misleading.

The Company intends vigorously to defend itself in respect of the threatened litigation and has denied the allegations made against it.

Further, as announced on 5 March 2024, the Company intends to bring legal proceedings against those parties it considers are responsible for wrongdoing. To that end, the Company has itself recently issued pre-action letters of claim to Alvarium Fund Managers (UK) Limited (its former alternative investment fund manager) and AlTi RE Limited, its former investment adviser's appointed representative. The Company intends to issue further pre-action correspondence in due course."

[terminator101] 18/4/2024 07:05

What a mess huh

[williamcooper104] 14/4/2024 20:22

https://www.livpost.co.uk/p/special-investigation-the-collapsing

[spectoacc] 12/4/2024 06:47

Lol @cm21 - that article out 3 hours after I posted. Difficult to believe there's still revelations coming out on HOME.

Presented without comment:


"But the reason his role has triggered such interest is due to his personal ties to the former fund manager of Alvarium Home REIT Advisors, Gareth Jones.

Dawes went to Cardiff University with Jones, according to screenshots of their now deleted LinkedIn profiles seen by City A.M....

Jones stepped down from Home REIT in November 2022 for “health reasons”, according to a previous statement from the firm."

[triskelion] 12/4/2024 00:59

hxxps://hspg.co.uk/people/
"Charlotte Fletcher
General Council"
sic. LOL

[williamcooper104] 11/4/2024 23:12

There's a book to be written out of all this

[cm21] 11/4/2024 22:52

hxxps://hspg.co.uk/people/

Heads up temporary accommodation platform! Blimey

[cm21] 11/4/2024 22:46

hxxps://www.cityam.com/who-is-tom-dawes-the-home-reit-mystery-man-that-profited-from-property-deals/

[spectoacc] 11/4/2024 14:51

Quite enjoying being "inside" on the HOME fiasco. Spoken to the letting agent for the CIC for 3 of the houses I bought. Someone in the NE owned loads of them, sold them to the HOME CIC for double market value, and is now enjoying buying some back at half price.

For only 1 or the 3 houses did they do tenant find - the other 2 already had sitting tenants, much as we might expect from VR's allegations.

[williamcooper104] 10/4/2024 17:45

Yep only way to underwrite it is on the assumption that you need to fund a lot on refurbishment One thing to guess that but then to also have to guess the sf too

[spectoacc] 10/4/2024 07:15

They're all annoyingly priced to sell at auction - most of the ones I've looked at have been 18-22k Guide, and gone for c.30-45k. Worth perhaps 40-65k.

The key is finding the 30k purchase that's worth 65k, rather than the 45k purchase worth 40k :) I've seen at least one where someone paid 38k, plus fees, which will have needed c.10k, and been worth 40k max when finished.

When you can't go inside a lot of them, it's tricky. One of the latest I've got has no tenants, a rat infestation, and been left as bad as can be imagined.

It struck me last night that VR's point about AST lettings was underplayed - if HOME bought 3,500-4,000 houses, say avg 3 bed, anything up to 12,000 beds, just how many "homeless" were there to house? Every one I've looked at so far has been a bog-standard AST. At the lower end, but still.

[williamcooper104] 09/4/2024 15:00

Funny My quick reading of the lease is that in the last year of the contractual term the landlord can compel the tenant to enter into a new lease So basically it's a 40 year lease That allows you under GAAP to average in 40 years of rental increases Needless to say few commercial entities would enter into such a lease

[williamcooper104] 09/4/2024 14:56

The legal pack took about 5 minutes to read No EPCThe "passing" rent is £140k So guessing HOME paid about £2.8m (or c£1.4k psf)