Home Reit Share Discussion Threads

[spectoacc] 30/11/2022 08:58

If you want to refute any of the above @alanpro1, by all means add something to the debate, I'd be happy to hear an actual contribution.


3 of the 10 Peterlee properties at random:


24 Ninth Street, SR8 4LZ, sold for £19k on October 2019 - it previously sold for the same price in Nov 2003, and for £26.5k in October 2005. Gives a flavour of the area, and whether property values rise or fall around there.

See photos from 2016 listing - not too bad inside, tho next door boarded up at the time, fairly typical.

Price now around 30k for the postcode.


51 Eleventh Street, SR8 4QQ, sold for £23.5k in March 2017, having been bought for £13k in Feb 2016 - maybe an auction & refurb job. Looks decent in the pictures from 2017:


96 Seventh Street, SR8 4JQ, sold for £42,750 in December 2005, £16k in April 2017, £17k in December 2017. Current prices £15k-£40k for same postcode.


[Rightmove links all removed for length - but easy to look up].

[dodddy] 30/11/2022 08:56

With a lot more informed comment than your worthless post. Add to the argument or go and play somewhere else

[spectoacc] 30/11/2022 08:35

Sorry, a rare bull point, be remiss not to post it:

"Tenants typically seek to run a minor surplus on their financial accounts. As previously disclosed, the rent paid to Home REIT represents on average c. 45% of the exempt housing benefit that they can claim, with the remainder of the funds allocated to maintenance costs, the provision of additional support services and a share of central costs."

But I'd susggest utilities/maintenance costs (eg wages) recently are going to test each and every business model.

Also love the way almost every lessee - that they've done significant Due Diligence on - has some kind of error in its website, accounts, management etc acknowledged this morning.


"Viceroy states that several Tenant directors/trustees (e.g. at Big Help Project and CG Community Council) also own property development companies. As described in Allegation 5 below, Home REIT has rigorous controls and processes in place to ensure that the assets it acquires represent fair value for all stakeholders."

Not sure I need comment on that.


Interesting:

"· Knight Frank inspects the properties externally for the valuation following the purchase of those properties by Home REIT. It is not standard market practice for a residential property portfolio of this scale for every property to be inspected internally at each bi-annual valuation especially where access to the building can be difficult and the Valuer can obtain sufficient information about the internal layout and state of repair of the residential property from other sources. However, to provide further assurance in this area, Knight Frank intends to start internal inspections on a random sample basis going forward."

"Knight Frank has provided Home REIT with details of comparable market transactions when presenting its valuations."

"The Company has £250 million of long-term fixed rate debt. This debt requires in-depth lender engagement, which includes reviewing property titles, building surveys, valuations, rental credit quality and other technical due diligence. At no point have the Company's lenders raised any material issues with either their own valuations or due diligence or the Company's valuations in any discussion with the Company."


I'm going to repeat the Peterlee stuff in another post, apologies for repetition but it needs saying again, in light of the above.

I note HOME demonstrate profits to the co's they're buying from of between 20% and 47%, some in less than a year - do they think that's reasonable? Am I in the wrong game? How much do the "charities" pay their execs? Some of the execs are also involvedin the property co's putting the portfolios together. This is all acknowledged this morning by HOME, and easily verifiable anyway.

[spectoacc] 30/11/2022 08:23

Thanks @dodddy. Seems HOME's rents are capped at 4%, collared at 1%. 4% pa escalates pretty quickly, more so when you've utility bills to pay and significant upkeep costs.

"Home REIT is completely confident in the integrity of the business it is operating, its financial soundness..."

Share price reaction today says they're among the only ones - it fell from near-80p.


I could spend all day on this, but:


..Provide high-quality accommodation to homeless and vulnerable individuals in need of housing; [Maybe]
· Benefit from residual value and alternative use characteristics; [Proven nonsense]
· Are let on very long unexpired lease terms (typically 20 to 30 years to expiry or first break); [Arguably useless when examining the lessees]
· Have triple net, full repairing and insuring leases; [Gulp]
· Have rent reviews that are inflation-linked (typically capped at 4% and collared at 1%) or contain fixed uplifts. [Seemingly unsustainable]


This one too:

. The long-term supply demand imbalance for all forms of residential accommodation in the UK, which has historically supported consistent capital appreciation for UK housing stock.

They've not been checking Peterlee on Rightmove then.

[dodddy] 30/11/2022 08:15

LA rates aren't index linked. About 6 years ago they froze HB rate for four years. Think we have that to come again soon too

[spectoacc] 30/11/2022 08:06

@tr200g - what have they been paid from? They've been paid in part from the money HOME paid the co who put the portfolio together - that's Key Point no.1, & where the "Ponzi" allegation comes from, and has been admitted this morning.

Key Point no.2 is that the rents are supposedly index-linked, but are the LA payments? What about upkeep of the properties? What about increasing utilities costs? How are these charities in any way sustainable? (In Circle's case, it went pop very quickly).

Key Point no.3 - the people behind these charities - whom HOME acknowledged this morning are a web of the same people - have (chooses words carefully) extremely chequered histories. What, speaking hypothetically, would a conman be doing running a charity for the homeless? Same applies to many of the co's putting the portfolios together to flog to HOME.

Key Point no.4 - HOME are defending alternative use, yet I've demonstrated that's a complete farce with the Peterlee portfolio. I can't prove that's the case across the entire portfolio, but if it's anywhere close, HOME do not have the NAV to back their loans. And yes - that means Knight Frank are balls-deep in this.


Follow the money - it's being extracted from HOME at the point they pay hugely inflated prices for "portfolios" to a web of co's. It's being extracted from LA's/govnt by the supposed charities. I don't see either lasting.

[tr200g] 30/11/2022 08:00

The problem with this theory specto is the local authorities have signed off on and continue to 100pc pay the rents across some 3,000 properties.
If the valuation is wrong, that's at the hands of Knight Frank and is not some kind of ponzi. The rents are not unaffordable - the evidence is they have been paid!

[spectoacc] 30/11/2022 07:52

I guess there's a chance Peterlee is an isolated example, where HOME got conned. And yet they're defending it as legit.

£190k on refurbs! Honestly, the 10 houses together may only be worth that. They'd lose at least half a million quid on an 850k purchase on alternative use.

And defending a c.6% valuation uplift post-purchase - I guess if you overpay 3-fold, what's an extra 6% on top.

Confirmation that the early rents effectively come from the price HOME paid seems the key thing. They've refuted the VR allegations we knew weren't true, but have effectively confirmed most of the rest.

HOME's denouement may have to wait until the inflation-linked rents become clearly unaffordable, and there's no gifted money left to pay them. It'll be an almighty mess when it implodes, and affect a lot of people.

[74tom] 30/11/2022 07:37

Indeed Specto. Very end of the RNS contains reconciliations of what they paid vs what was spent prior to purchase - says £190k was spent on refurbishing the 10 Peterlee properties, imagine spending that and only having 1 with an EPC rating of C or better ;)

[george stobbart] 30/11/2022 07:23

Share price should collapse today on failure to address allegations and confirmation of HOME being a Ponzi

[spectoacc] 30/11/2022 07:10

"This is a business whose sole focus is on providing safe and secure accommodation to some of the most vulnerable in society, whilst generating shareholder value. It is with deep frustration that the Board is having to spend time and resources responding to these baseless and misleading allegations."


A breathtaking statement.

Loads to dig through, but this leapt out from a brief read:

"The Company generally acquires properties in off-market bulk purchases from developers ("Vendors"), which means that properties can be refurbished and upgraded prior to occupation by the Tenant's residents. Vendors typically provide the Company's Tenants with additional funding, usually representing twelve months of rent, to assist Tenants at any stage of the lease where the residential property may not have full occupancy, including in the important ramp up stage of a lease where properties may not be fully occupied"


So yes - the early rents come from the capital value of HOME's purchase. Sustaining the rents relies on council/govnt money continuing to flow, at a high enough level.


Someone needs to point out to HOME the people behind their so-called safe tenants.


This is meant to refute Peterlee? Strewth. Utter, utter tosh:

"6. The non-specialist and fully refurbished nature of the Company's property portfolio, coupled with the low current rent and attractive yield on cost, provides multiple avenues for downside protection, including (1) re-letting to general needs social housing tenants, students, or other private renters and (2) sale to owner-occupiers or buy to let portfolio owners."


"Home REIT undertakes financial and operational due diligence on its Tenants at the outset of any relationship... "

And yet they've demonstrably leased properties to highly dubious characters, with various denials of allegations, restatements of accounts etc listed.


Loved this:

"Viceroy notes that many of the Tenants are administered by the same parties. There is nothing unusual in these arrangements....For smaller charities, it is common practice to share senior level expertise, administrative support functions and office space, which drives a reduction in operating costs, allowing them to focus resources on the vulnerable people they support. Indeed, Home REIT believes that this organisational approach is currently conducive to helping the greatest number of vulnerable people."


More to come on this. Much more.

[spectoacc] 29/11/2022 16:11

"Circle Housing", the irony of the name just dawned on me. Someone has a sense of humour.

From VR report:

"The administrators specifically commented on a
round-trip transaction model wherein the charity entered 20-year leases for 150 properties in return for over
£3m in 2020. In its July 2021 Impact Report Circle Housing accounted for 101 properties leased from Home REIT."

The rent gets paid, but in a circle. Come on HOME, what do you have to say? It's not the equivalent of a rent-free if the lessee goes into administration shortly after.

[spectoacc] 29/11/2022 15:58

@bozzy_s - indeed - and they aren't even the worst. My (least) favourite are Bond Wolfe, owned direcly & indirectly by the two main directors of RLE (not, you'll note, by RLE itself). They like to slip the costs in in words as well as numbers, so you'll scan the legal pack and see something like that £6,000 fee. A few pages later, there'll be another fee for nine thousand nine hundred, curiously a lot harder to spot.

But fair point that the £5k's aren't what they seem, and the Rightmove sold prices (the below from an actual HOME property postcode) are more accurate:


Tho saying that, the auction sales, which are the lowest, often never hit Rightmove Sold Prices page.

I maintain that the Peterlee portfolio is worth around what AHG1 Ltd paid for it.

If HOME's £848k ultimately included a wad to the charity lessee, it makes subsequently marking it up in the HOME NAV even more egregious.

I'd argue we currently have a false market in HOME. A statement was made refuting VR's allegations, yet seemingly there's definitely something up, and radio silence from the Board.

[george stobart] 29/11/2022 15:50

Sometimes women marry men because of their money, but most times they make sure they have fallen in love with them.

[bozzy_s] 29/11/2022 15:49

Off topic, but that first dump linked by Specto above. In the auctioneer's terms & conditions:

Bidder pays a 'reservation fee' of £6000 minimum, or 4.8% of the auction price. This is in addition to the purchase price, and non-refundable.

Bidder pays £300 for an information pack. Non-refundable, and must be bought by anyone wishing to bid.

So the auctioneers, who describe that fire-damaged dump as 'exceptional' will take £6300 from the winning bidder, in addition to the sale price!!! Note to avoid Hunters of Peterlee at all costs!

For HOME, question is what are their assets really worth? More or less than the debt on the balance sheet?

[spectoacc] 29/11/2022 13:47

No, because you can buy a house on a resi lease up there for c.20% yield (for good reason). So why should HOME's be valued at 6%?

If the answer is because they have long-term leases to experienced operators (as per HOME), then only a small amount of digging shows the problem - that's bunkum.

Add in the possibility that the rents are being paid partly out of the consideration money...... (VR say some aren't being paid at all, but I've no evidence to prove that & VR's examples from charity accounts aren't particularly recent).

Agree re low refurb costs - tho is possible the original portfolio was made up of the good, c.£30k ones, not the £5k utter junk. And if they're not trashed, maybe the 10 are worth nearer to £300k.

[tr200g] 29/11/2022 13:19

They spent 7pc of total purchase price on refurb per the Good Economy report (including in the prices paid as it was done by the vendors). Does that sound sensible? seems slightly low to me
Given the prices per bed are agreed by the councils, the accomm must be of suitable standard though one assumes. Therefore...if the rent is right for the type of accomodation, and the yield at ~6% if broadly right, the NAV has got to be ballpark correct doesn't it?

[spectoacc] 29/11/2022 12:04

Good points, particularly on the illusory risk transfer.

I want to know more about the alleged sums paid to the lessees. Particularly if we're right that this is coming out of HOME's purchase price. That's where the Ponzi element comes in. (Edit - and would be entirely deniable by HOME, and never hit their books, since it's presumably paid to the charity lessee by the co that put the portfolio together, from what HOME have paid them for the properties. Knight Frank, wake up).

The HOME lot seem a fairly upstanding bunch, from a random sample, fwiw:


Yet the people they've got into bed with really aren't, and the prices they've paid/increase in valuations are just daft.

Haven't got up to Peterlee, but asked a friend up there, & he sent me this:



Go through the pictures, and tell me if you think this is the sort of area where HOME should be owning houses for "vulnerable tenants".


Edit - another one, for the interiors:


If I was a HOME shareholder, I'd be saying "This proves nothing. So what if there's a large number of £5k starting bid houses there, who's to say HOME's aren't soundly renovated and producing a strong income, justifying an average £84k capital value".

But I'd also be looking for the sell button. Your residual values are nearer £50k (for all 10) than £848k (what you as a HOME shareholder paid), & there's more than enough evidence in the VR report and on Co House/Charity Commission about the people behind the lessees.

[williamcooper104] 29/11/2022 11:33

The FRI risk pass through is superficially attractive But operating on zero to little surplus how many of the tenant charities are running sinking repair funds!!!! Thus in practice it's likely to be an illusionary risk transfer

[1tx] 29/11/2022 11:26

The average price paid by HOME for properties is about £400k & has an average of just over 5 beds.So one hopes most are of better quality than the Peterlee,Stoke & Portsmouth properties featured in the report although all the pictures I have seen of HOME properties in their reports are of older buildings albeit in apparent good condition.We do not know the buying process for these either.I note the properties are leased on a full repairing & insuring leases.The cost & logistics of maintaining and managing properties particularly multi occupancy properties containing tenants with in most cases rather more problems than we have is huge.How many charity workers does it take to change a light bulb let alone repair a leaking roof?!From what little we can find out about the organisations who lease the properties they don't obviously have the abilities & proven track record.

[ridingthewaves1] 29/11/2022 11:20

StillNoRnsThat's worrying

[74tom] 29/11/2022 09:36

"But it'll be really interesting to read what HOME say about the things we've all worked out for ourselves."

Exactly this. It's not really worth digging / speculating any further until they actually get round to releasing their comeback. They've had nearly 6 full days now, which IMO is more than enough time for a FTSE 250 company to produce a detailed response. If they had convened the board on Wednesday afternoon post the release of the Viceroy report & put together a plan I can't understand why they wouldn't have been aiming to release a reply yesterday morning. The results can wait a few weeks, the main thing is to clearly refute what has been thrown at them, we're still waiting...

Glad to see the Times upping the pressure a bit, it's certainly not a good look to issue an RNS at 6.18pm on a Friday evening, it makes it look like a last minute decision which had been debated back and forth internally before someone decided it would be the lesser of two evils vs a 7am Monday morning release.

Oh to be a fly on the wall at Home REIT HQ today!

[spectoacc] 29/11/2022 06:59

Thanks - a fair summary, tho with only a little digging they could have confirmed the "bad actors".

@podgyted - there was no reason to delay the results IMO. None of the allegations are particularly difficult to refute, if there's no basis to them - some we've refuted ourselves already (eg the single properties with seeming multi-million pound valuations).

Unfortunately for HOME, some we've confirmed - and I assume it's those that are taking time to explain, as well as those that could go either way (eg whether rent is actually being received or not).

If Knight Frank are indeed responsible for the valuations (relying, I assume, on what the auditors tell them), they've a pretty big case to answer. Yes, they can perhaps justify hugely inflating the Peterlee portfolio on purchase - "look at the leases" - but how do they justify increasing it further once it's in HOME's a/cs? Discount rates have only gone one way, valuation in Peterlee have gone absolutely nowhere, and it was 3x overvalued on alternative use to begin with.

This isn't a minor point - everything flows from the valuations.

And for the over-valuations, everything flows from the charity lessees, with plenty of evidence about those on posts above.

Someone previously pointed out that you read VR's report, and think one thing, and will read HOME's refutation, and think the other. But it'll be really interesting to read what HOME say about the things we've all worked out for ourselves.