Home Reit Share Discussion Threads

[nexusltd] 28/11/2022 12:10

I believe that HOME's income for Peterlee portfolio is £65/bed-week
= £67,600 p.a.
= 7.9% NIY

[williamcooper104] 28/11/2022 12:04

It's not a clean pass through The rent is set at c40 percent of the grant, the rest of the grant funds the charities considerable OpEx Each charity will be seeing a lot of inflationary pressure, and it seems that the charities post rent are not operating on a prudent surplus basis So the rent cover by profit/surplus is none existent

[kimboy2] 28/11/2022 11:56

The question is valuation of the properties now.

Presumably there is a market for these types of properties. No idea what the going rate is.

They say they are getting £95 per bed per week. On the Peterlee numbers they paid, apparently, £848k for 10 2 bed properties.

If they are getting £95/week/bed that is an income of £98,800 pa. That is a yield of 11.6% on these properties.

Clearly HOME is paying triple the open market price for the property. However, if the tenant is rock solid, and there was some form of inflation linking, then it would look a bargain to me.

If the alternative for the Councils is B&B then it is probably a good bargain for them as well.

They give their overall NAV yield as 7.9% so presumably Peterlee is at the grottier end of the spectrum.

The problem may be the quality of the tenants, but IMV HOME may have an arguable case.

[williamcooper104] 28/11/2022 11:44

It's probably not actually a fraud but that doesn't mean that HOME shareholders haven't been burned One of the oldest tricks is you set up an externally managed investment vehicle, it raises capital and uses that to forward fund your developments You then have a machine that allows you to develop out with very little capital

[74tom] 28/11/2022 11:43

Lloyds have fixed / floating charges over the vast majority of Home's portfolio as per Companies House filings;



Same situation for Home Holdings 2 /3 etc.

It looks to me like it would be difficult / impossible for Home to start selling property to repay the debt if that property is held as collateral by Lloyds?

[williamcooper104] 28/11/2022 11:41

Interesting game of poker Could get very political very quickly

[williamcooper104] 28/11/2022 11:40

By going from an AST to an FRI net lease you get about 25 percent more net op income - so that's a legitimate reason for the priorities to be worth c1.25x The alternative use for most of these properties is likely to be a HMO - that'll get considerably higher rents than an AST, but with higher operating costs and much higher valuation yields Given that you'd think there's a good chance that the administrator could hard ball it HOME would cause difficulties for the concerned local authority if they just evicted the charity and it's tenants Interesting fans of like

[williamcooper104] 28/11/2022 11:29

Debt net of blocked cash is about half of that

[williamcooper104] 28/11/2022 11:25

The other legitimate reason to pay cash to a tenant is if you are going to rentalise tenant fit outsI don't think that's the case here though

[williamcooper104] 28/11/2022 11:15

I think the pass back to the tenant is from HOME Will be a capital contribution - eg rather than say get a 2 year rent free period on a 20 year lease, HOME will have just paid the 2 year rent free to the tenant and the tenant will then pay the full rent from the start of the lease; or indeed use the cash to do whatever they wantEffect is the same; which is that we don't really know if the tenant can afford the rent until the capital cont runs out

[spectoacc] 28/11/2022 11:13

Maybe the question should be "how can HOME not be a zero". Am assuming there's genuine tenants, genuine needs being met, and that the properties could continue producing rent albeit at a lower level (Circle seems to still be paying, despite being in admin.).

Switch out the allegedly dodgy lessees for new ones, make the leases less onerous - does that leave enough NAV to back up the debt, & keep HOME going?

The concern would be "the money's already gone" - gone to that web of co's who put the portfolios together in the first place.


Edit - @tr200g - posts crossed. I think there's at least a chance the fraud is perpetrated on HOME, rather than from within. And I think the reason there's been no detailed rebuttal, & delayed results, is because they've only just cottoned on.

VR are definitely wrong on some concerns - eg the "this property was £180k now it's £5m" Land Reg stuff. Trouble is, there's enough else to go on.

[tr200g] 28/11/2022 11:11

some good thinking on this board
anyone have any thoughts on these bullish points? I have bought in recently. i'd welcome intelligent feedback

-the sheer number of people in and outside Alvarium to be involved is enormous if the BoD was fraudulently buying properties at the wrong price
-Alvarium have employed lots of analysts for a company who are committing fraud (allegedly)
-straight-line accounting is required by IFRS- is Perring deliberately overegging or just not on top of basic accounting rules?
-as has been said a while ago, the 70 receivables days is hugely overstated due to the number of beds doubling in the period - so why would Viceroy knowingly overstate this number? they must realise they are wrong and is a deliberate overegging again. it does undermine the whole document maybe
-the constant tweeting by Perring. if he is so sure why doesn't he let the thing just unwind and collapse
-one would expect similar directors and trustees in this nascent sector, esp in one area such as Liverpool where Peter Mitchell is based
-there is no performance fee in the structure-if this really was a fraud there would be...the structure imho that generates annual management fees is one where it will take a very long time to accumulate big money for the fund managers. money for already wealthy people to be interested in risking jail time for
-although knight frank havent been inside, tenants and local authorities certainly will have been. as also did the Good Economy report people
-this is worth reading hxxps://thegoodeconomy.co.uk/resources/reports/Home-REIT-2021-Impact-Report-Single-pages.pdf
-the local authorities will have agreed the rents per bed-therefore, even if there are some bad eggs in the tenant base, the leases themselves are not at evidently the wrong price and therefore neither is the Knight Frank valuation. More reputable social enterprises or charities would be able to step in and take over the operations
-HOME have done fantastically to tie in their debt at a fixed 2.3pc for over 10y
-this creates enormous interest cover and basically zero liquidity issues

questions for experts
-the Good Economy report states HOME invested 7% of consideration in refurb. is this a realistic number to get these properties up to scratch?
-is it normal for vendors to do this work before purchase by a landlord like HOME?
-are the quoted numbers for rents v b&b realistic? the HOME group numbers are distorted heavily by London I expect

[loglorry1] 28/11/2022 10:56

Question - if 1-6 all true (I would say 60% certain now) - is HOME equity a zero? With £230m of debt I assume yes?

[blackhorse23] 28/11/2022 10:55

Added CURY (LSE) at my portfolio , another dividend news in 2 weeks lol

[74tom] 28/11/2022 10:54

It's certainly something I've been contemplating given the CBW comments, but it's a case of waiting and seeing what Home respond with and then what Viceroy come back with after that.

Note Fraser Perrring's tweet a couple of days ago mentioned further info to be disclosed re. incentives / provision of services...



"As regulators & local authorities pay attention, $HOME's denials are meaningless. The game is over on the structure they have created. Notably, very serious questions are being asked about incentives & the provision of services. We
@viceroyresearch will come to this post rebuttal"

[dodddy] 28/11/2022 10:38

>spectoAcc

great summary

[spectoacc] 28/11/2022 10:19

Blimey @74tom - are you saying:

1. A co (multiple co's, we know that) are formed, acquire some cheap houses;
2. Same co leases the houses to a new-ish charity tenant (we know connections between the supposedly separate charities);
3. It sells on the (formerly cheap) houses at say a 150% mark-up to HOME (we know that, eg Peterlee example above);
4. It passes some of the proceeds back to the charity tenant to pay the rent for a time to HOME (a gap in our knowledge - is this happening??);
5. HOME ups the value of those houses, beyond what even it paid, in its own a/c's, and uses that valuation to borrow more (we know that from the a/cs);
6. Rinse & repeat.

I'd not thought it could be as involved as that - and caveat it entirely with "allegedly". Not sure even VR are saying it. But the Circle Housing example seems telling.

Why would you seed a tenant with cash, if not to directly or indirectly pay rent?

[dodddy] 28/11/2022 09:36

Agreed,but the excuse they gave was 'due to the sensitive tenants'etc. can't wait to see the replies they give. Everyone will be panicking and covering their backsides.

[74tom] 28/11/2022 09:35

It's also about potential round tripping of cash too. I.e. the Circle administrators made reference to; "In its previous form as a Community Investment Company, the Charity had expanded its property portfolio in 2020, entering 20-year leases for 150 properties in return for contributions of over £3million from the landlords"



Doesn't mention Home directly, however it's very odd that leases suddenly became onerous post Circle getting in new ownership when they were a top 10 tenant in the previous year...

If this has been happening more widely then could most of the top 10 tenants go bust? Bear in mind those top 10 represented some 75% of rental exposure at the last interims.

The other question is what would the cash flow look like if they has been round tripping? I.e. where did Circle get £3m from? Was it straight from Home's cash pile or did it come indirectly from third parties via the cash paid for the property portfolios?

[williamcooper104] 28/11/2022 09:29

Large portfolio valuations usually are desktop - though normally with some samples picked randomly for more in-depth examination

[spectoacc] 28/11/2022 09:17

Absolutely the alleged fraud is perpetrated on HOME shareholders - question is, at what level?

[loglorry1] 28/11/2022 09:13

But arguable HOME shareholders are being ripped off here. They are paying 2x+ times for housing that they could have bought much cheaper. They could have also done the rental deals from the charties to justify this (assuming the charaties are real and have enough funding).

It does feel abit whiffy to be honest but I think a decent rebuttle will emerge.

[spectoacc] 28/11/2022 09:06

@loglorry1 - almost, but that isn't the "alleged fraud" AFAIK. It wasn't HOME who put the tenants in I don't think.

A newish Ltd co buys up a load of cheap housing, lets it on long-term leases to also newly set-up charities, then sells on to HOME at vast (min double, if not more) prices.

The dubiousness is at two levels - who is extracting all this cash from HOME at huge valuations - valuations which then grow still further once on HOME's books - and who are the charities named as head tenants.

HOME says they're experienced, unconnected. VR says they're often new, share some execs, share Head Office addresses.

Even if (and it's an if the size of an elephant) the charities are legit, and the money keeps coming in to HOME, it's surely clear to anyone who looks that the properties themselves aren't worth even half of what they're claimed to be worth. Look at my Peterlee example above.

And yet HOME then further increases their value in the NAV.

Edit - @doddy, even more of a worry considering HOME's gearing. Wonder to what extent similar criticism applies to CSH & SOHO - haven't checked what prices they've been paying for properties.

[dodddy] 28/11/2022 09:06

I agree, but to just dismiss all the allegations as a planted short story is ludicrous. There are so many points in that report that are red flags. I'm not going to list them again. I own property slightly above the space that HOME is targeting. You can't go and spend the sort of money that they have in that short space of time without either massively overspending or with big capex to get them ready to let. Desktop valuations without internal viewing ?None of my lenders would ever fall for that. It's all well and good people on here saying they have a billion pounds worth of assets. Real valuations will be around 30-40% of that and fire sale even less. That's without any possible fraud that may have occurred I'm