Home Reit Share Discussion Threads

[74tom] 24/11/2022 09:14

Williamcooper104, you state that there isn't a problem because HOME's external manager isn't conflicted on valuation... you are wrong IMO as page 55 of the annual report says;

"Investment Adviser

On 22 September 2020 Alvarium Home REIT Advisors Ltd was appointed as the investment adviser to the Company by entering into the Investment Advisory Agreement with the Company.

Under this agreement, the Investment Adviser will advise the Company in relation to the management, investment and reinvestment of the assets of the Company. Alvarium Home REIT Advisors Ltd is a subsidiary of Alvarium Investments Limited, the ultimate parent company of the AIFM and the Broker to the Company. The investment advisory fees shall be an amount calculated in arrears in respect of each month, in each case based upon the net asset value of the Company on the following basis:

a One-twelfth of 0.85 per cent, per calendar month of net asset value up to and including £500 million;

b One-twelfth of 0.75 per cent per calendar month of net asset value above £500 million up to and including £750 million; and

c One-twelfth of 0.65 per cent per calendar month of net asset value above £750 million"

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So there is a clear benefit of overvaluing assets to Alvarium, the more cash that is deployed the more fees they earn...

On £1b deployed they earn £4.25m per annum on the first £500m, £1.875m on the next £250m and then £650k per £100m incremental thereafter.

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"Buy at £300k, spend £200k get £300k profit via letting at higher rental levels to an apparently strong covenant"


Not sure I get this. Are you effectively saying that in the eyes of a lender the value of a property is higher because it's been let at a higher rental price on an apparently unbreakable 25 year term with 'upward only' rent reviews? I.e. the NPV of 25 years of future rental cashflows means the asset has additional value to it's list price?

The annual report says;

"The investment properties have been independently valued at fair value by Knight Frank LLP, the Independent Valuer, an accredited external valuer with recognised and relevant professional qualifications and recent experience of the location and category of the investment properties being valued. The valuations are the
ultimate responsibility of the Board; please see note 7 for further information"

I specifically noted the point on 'category of the investment properties being valued'

So is a terrace house in Easington Colliery that was sold for £29k in November 2020 now worth £75k because it's classed as an 'investment property' rather than simply residential?

If the answer to that question is yes then we might be getting somewhere here...

[babbler] 24/11/2022 08:54

They will probably just do it with results.

[spectoacc] 24/11/2022 07:40

@alanpro1 - thanks for your contribution.

There's not that many points raised, if they're not easily rebutted then that implies there's something behind them, just as there was with CSH/Shadowfall.

Eg
"- The Reit’s largest tenants ‘do not appear to be paying any rent’.
- Its largest clients ‘appear’ to share the same office and are run by the same people in contravention of a policy to limit individual client exposure to 15% of assets.
- Properties had been flipped between tenants to generate profits.
- Many of the properties were bought at inflated prices to artificially inflate the trust’s net asset value (NAV).
- Fund manager Alvarium’s payment as a percentage of NAV was not aligned with the performance of the portfolio."

(H/T Citywire).

[alanpro1] 24/11/2022 07:29

Spec you talk so much sh1te. You honestly think there will be a rebuttal to a 27 page short in 18 hours. Amateur

[spectoacc] 24/11/2022 06:57

Interesting stuff, thanks all.

I know Peterlee, it's the pits (no, wait - former pits). Can see both arguments on prices paid but does rely on those rents keeping coming in - because if not, HOME are getting back what AHG1 paid, not what they themselves paid.

Then the question becomes - where does the benefit of the AHG1 profit reside.

Expecting a rebuttal today, and it had better be a comprehensive one.

[williamcooper104] 24/11/2022 06:15

Buy at £300k, spend £200k get £300k profit via letting at higher rental levels to an apparently strong covenant A good profit isn't necessarily proof of over valuation; unlike CSH, HOMEs external manager isn't conflicted on this - Notable that HOME don't apply any portfolio valuation premium; eg KF value each asset separately That rents paid for specialist/temp accommodation are higher than HMO/AST rents is fine - the question is how much of a premium and can admin/gov actions cram it down Against that if HOME refuses to renew a tenancy with a post admin charity then that means a big B&B bill for the local authority

[williamcooper104] 23/11/2022 20:52

Funded by local councils/grants £61 does look cheap - but all depends on location

[danny500] 23/11/2022 18:37

Circle we’re paying £61 per bed per week. That doesn’t sound expensive to put a roof over someone’s head. How were Circle funded?

[nexusltd] 23/11/2022 18:20

@ Williamcooper. Good points, thanks.

[williamcooper104] 23/11/2022 17:29

So - I think it all comes down to the sustainability of their rents The administer of circle has said that some of the rents of some of circles properties are unsustainable - we don't know by how much and what post admin rental levels will look like and how typical that is across the estate (my guess would be quite typical)

[williamcooper104] 23/11/2022 17:27

They bought at 5.9 and value at 5.6 That's a discount to what genuine 25 year index linked rents to good covenants would have traded at - c4.5 - and also limits a bit their sensitivity to yield shift The £95 per bed looks good relative to average B&B - but per bed implies around £1.3k per property which in many parts of the country will likely be more expensive than a regular tenancy At full deployment they were targeting >7 yield on equity (assuming 35 LTV) On current share price that looks to be c11 percent net income returns

[walterwhite1] 23/11/2022 17:12

Delayed and closing trades are worth a look :-)
Bought here at 61 this afternoon. The 'report' was garbage as far as I can see. Shorters with their dirty tactics is all

[williamcooper104] 23/11/2022 17:07

Debt covenants are set at 50 percent against a target debt level of 35 percent That really leaves little room for yield shift and any downward setting of rental tone (should it occur)

[nexusltd] 23/11/2022 16:21

@danny. Thanks. So arrears are normal in this type of REIT.

[zoa] 23/11/2022 16:20

I guess that the IC report was a warning, as usually there is no smoke without fire and it should not be forgotten that warnings usually come in 3's, so too early to get back in, best to wait until all the dirty washing has come out.

[wskill] 23/11/2022 16:20

Spec this has come at an opportune time for my accounts as losing nbmi which I have now replaced with home bit of luck for a change.

[danny500] 23/11/2022 16:19

Local housing allowance and universal housing credits paid in arrears

[nexusltd] 23/11/2022 16:02

@Williamcooper. Quarterly in advance certainly the case for commercial property; accounts show a credit line. HOME accounts might imply contracted rents are collected in arears. What do other social REITS do e.g., SOHO, CSH?

Edit: Looked at CSH
CSH 31st March 22
Trade receivables 5.0mn, Property value 969mn

HOME
Tenant receivables 6.1mn, Property value 713mn

So HOME looks slow at getting the rent in.

[williamcooper104] 23/11/2022 15:59

I think the difference between HOME and CSH is that CSHs external manager appeared to be developing and flipping properties into CSH - a most lovely business model Where's HOME are buying off developers and not taking that profit in conflict to HOMEThe fee arrangements between HOME and its manager are standard with the standard conflicts of interest

[spectoacc] 23/11/2022 15:56

@wskill - I'm all for shorters, shorting is just the same as longing (one a sell/buy, the other a buy/sell). But agree some of these "reports" are nearly as bad as the rampers, eg spurious bid rumours.

There's next to no risk for shorting, releasing a "report", then closing again. Even if the whole thing's nonsense (and I can completely believe there's some truth in it, as there very much was at CSH), people will sell first, ask questions (or get answers) later.

If the rebuttal is as obvious as HOME have implied, they need to come out with it very quickly.

[bozzy_s] 23/11/2022 15:54

Is 27 Neswick Street, Plymouth lined with gold? Extraordinary to see the transacton on Zoopla - last sale £11.657 million, current value £196-217k.

Sounds absolutely fine. Nothing to worry about!!! Hope whoever's behind the dodgy dealings gets properly dealt with. And of course the big question, is that £200k property on HOME's books at £11.657 million?

[blackbear] 23/11/2022 15:52

Wouldn't want to be short overnight

[williamcooper104] 23/11/2022 15:50

Rents usually quarterly in advance