Home Reit Share Discussion Threads

[marben100] 30/11/2022 13:00

Re Peterlee, as the rebuttal points out £326k vs £848k is not a fair comparison.

The £848k figure (which is the amount paid by HOME for the portfolio, not the current valuation) includes the following, in addition to the original purchase cost:

- £191k of refurbs
- £54k of initial vendor rent contribution*
- £33k of other developer costs

*This should clearly unwind in future valuations

Total estimated costs incurred by the developer, before selling this portfolio to HOME were £636k. Admittedly that still leaves a handsome but not outrageous margin of £213k for the developer.

I have asked HOME to publish Knight Frank's report on their website, so we can see what the current valuation of the individual portfolios they have acquired (e.g. Peterlee) is.

[george stobart] 30/11/2022 12:59

Chairwoman of HOME is Lynne Fennah who destroyed shareholder value when managing Empiric Student REIT and she got booted out recently.

She has long track record of incinerating value for investors.

is her HOME REIT ponzi heading to £0 or not?

when is the official delisting date?

[wallywoo] 30/11/2022 12:58

This is a interesting situation, imo.Does society have a major problem with homelessness and is it getting worse; yep!Is it likely that reit investments are fudged to try and support homes for the homeless; yepDoes that mean this is worthless as an investment?? ??? Complicated, charity's, councils, society, etc need it to work. Against it's a bit of a fudge. I have stuck a few quid in at 51.7, for a bounce but don't think I will hold for long!

[loglorry1] 30/11/2022 12:52

@marben there is no such thing as a partial fraud. If this is a fraud, I'm not totally convinced either way to be fair, then they won't leave anything behind for shareholders no matter what the debt level is.

At the moment it is very hard to see how the BoD could have been blind to a lot of what seems to be going on.

[marben100] 30/11/2022 12:33

A key question I asked is this:

"I estimate that HOME REIT’s LTV is currently around 11%, based on your published news reports. That gives me some comfort that even in the event of impairments to property values, the current discount to NAV of the shares more than accounts for that. However, your target LTV is 35%. Will you consider pausing deploying further funds and increasing your debt burden until your tenants have better demonstrated their ability to meet their lease obligations?"

Alvarium responded that they are indeed pausing further acquisitions and have no current intention to increase leverage towards their 35% maximum.

ISTM that that gives a fair margin of safety, even in the event of writedowns, at the current share price/discount to NAV.


Alvarium indicated that a recording of the call will be published on the HOME website. Most of the call was dedicated to answering questions, of which there were many!

[spectoacc] 30/11/2022 12:30

@tr200g - "...No KF don't use the price paid as starting point. That's the point about an independent valuation."


KF are in deep. Agree it's possibly better to have a roof over your head in Peterlee, than be homeless - but it's marginal :)) A lot of wrecks, a lot boarded up, and bottom line - these houses haven't gone from being worth £326k to £848k in less than a year, particularly not with part of that 848k not even being for the bricks & mortar. There is no "alternative use" that could ever justify that price, whatever HOME have said this morning.

The most brilliantly appointed house in that Peterlee portfolio might fetch £50k in a really strong market. Plenty available at £15-30k. Ergo, KF's valuation is bunkum, and so is HOME's NAV.

Only Peterlee? I don't know - VR's report mentioned others. Perhaps all the rest of nearly a billion quid of property they've bought is correctly-valued, and these 20-47% mark-ups by the selling co just reflect their brilliant acquisition skills.

[williamcooper104] 30/11/2022 12:13

Well done Alas my feed keeps cutting out

[williamcooper104] 30/11/2022 11:59

Buybacks - with what Most cash is blocked with Widows

[williamcooper104] 30/11/2022 11:54

It's a simple red book based on market comps Problem is - what if the whole market is working on same business model - eg CSH and SOHO

[marben100] 30/11/2022 11:27

Home REIT's call is now open to all investors (after some persuasion by me/ShareSoc):

Register here:

[tr200g] 30/11/2022 11:16

on Peterlee-isn't the point on valuations that the market value is so low as very few people with a choice wants to actually live there in a very deprived town with horrible looking houses? but for vulnerable people with no choice (ie. those funded by the govt) there is utility for both them and the government for finding a roof over their head? even if there is value leakage to the vendors it is still worth it.

perhaps.

as for valuation again, no KF don't use the price paid as starting point. That's the point about an independent valuation.

certainly the whole thing would look better if the charities were well established with big balance sheets - I think that Alvarium are going to be able to explain why their tenants don't fit that description

[spectoacc] 30/11/2022 11:05

Thanks @tr200g - but isn't the problem that KF's starting point is the 848k that HOME paid? Not the 326k/350k, which is a lot nearer to the actual value (as is demonstrably true at Peterlee, the only one I've looked at in depth).

And more demonstrably true when you consider a large chunk of the 848k wasn't for the 10 houses at all - it was to go on to the lessees to cover the first 12 months of what they pay back to HOME in rent. So not even possible to argue the huge uplift is thanks to the tenants in place.

If 848k isn't what they went in the books at, if they actually went in at say 400k (to pick a number), that would indeed change things.

[tr200g] 30/11/2022 11:01

Specto I see some merit in your posts concerning fears over the longevity of the charity tenants but it's not true that the properties go in their "books" at the price paid and then are "uplifted". The NAV valuation is the KF red book valuation in line with accounting standards. The uplift comes from any move in yields and comparative valuations that KF uses at the next valuation point. I will listen to the investor call and feedback

[tradez4dayz] 30/11/2022 10:34

True re the valuation, but I suspect KF are valuing as an income stream of the lease rather than the asset value which I agree doesn't quite sit right.However the lenders independent valuers must have also agreed with that approach.

[spectoacc] 30/11/2022 10:29

@Tradez4Dayz - absolutely, on the first point. Fraser Perring is in this to make money, made some bonkers allegations, but - fundamentally, he's right IMO. Unfortunately by coming out with the bonkers stuff, he allowed HOME to include some legitimate rebuttals. We've all been saying on here that some of what he claimed was clearly mistaken.

As to the circling of income - it's basically Ponzi. We're told (to use my favourite Peterlee example) that HOME has paid £848k for 10 houses, let to an experienced charity lessee on a very long-term lease. Great.

But we hadn't been told that that portfolio was put together for £326k (VR) or £350k (HOME), less than a year earlier, and that some of that £848k is being paid to the lessee to cover the first 12 months of rent. Now, either they're very slow to get those 10 houses rented, or the charity should be absolutely in clover in Year 1. Accounts evidence across all the lessees suggest that's not the case.

So if they're not in clover with a 12 month rent bung, how on earth will they afford to pay full rent in subsequent years? Of course HOME can go on about receiving 100% of rents - it's their money! More, as @74Tom points out, the rents are actually only about half of the cash bung - where's the rest gone?

Yes, delays to initial LA payments etc - but the point stands, the business models seem to only have a few years in them, not 25-30 years.

Main point for me - if you grant a rent-free, or give other incentives, that shouldn't/doesn't count as part of the capital value. So the value of the property in HOME's books shouldn't be £848k, it should be the market value of the actual buildings. Not only is it not, but they've subsequently increased it by 6%. That's simply nuts, and demonstrably so at Peterlee.

[tradez4dayz] 30/11/2022 10:20

Two things from me,1 we talk about crooks setting up charities what about Fraser Perring owner and lead analyst of Viceroy. Dig into his past and you will find plenty of amoral dodgy stuff. For me he isn't to be trusted and is clearly just scare mongering go make money. Though I do get some of his points, a lot were actually due to his incompetence, not knowing a company has to straight line their income under IFRS?? Pretty basic for an 'analyst.'2 there is so much discussion about this round circling of income. What really is the difference between this and landlords paying lease premiums, giving long rent frees or other lease incentives? Seems bizarre people keep focusing on it. I get that it then falls back to stability of tenant which is where there are genuine questions to be asked.

[spectoacc] 30/11/2022 10:20

@74tom - remarkable isn't it. And knowing who's involved with the charity lessees (some alleged dodgy characters, & many of the same ones), the whole thing stinks.

Assuming LA's keep funding the rents, it can roll on until the backlog of maintenance etc (& 4% annual rental uplifts) causes major problems. But then presumably another charity gets set up, and gets bunged some more cash?

Knight Frank seem the weak link in all this.

[dodddy] 30/11/2022 09:54

It's a nonsense rebuttal that raises more questions. Viceroy will rip this to shreds. This has 25p written all over it

[74tom] 30/11/2022 09:48

They've also disclosed that £1.47m of the £28.3m spent has been given to tenants as 'additional funding' to cover 12 months rent. As stated above this is 5.2% of the cash deployed by Home REIT and as far as I know this is the first time it has been publicly disclosed.

HOME have deployed an astonishing ~£950m since IPO on >2200 properties, if the 5.2% in additional tenant funding disclosed this morning is typical of the entire portfolio then they have given tenants ~£49.4m of additional funding...

Rental income in their 2021 final results to 31/08/21 was £11.7m and in the half year to 28/02/22 £17.7m, so that would leave a potential £20m in 'additional funding' still to flow though...

What's worse is that this funding cost has apparently been capitalised in the property NAV, can anyone confirm why this would make any sense as it clearly adds no value to the property?

They've then revalued the whole portfolio upwards by a further 6.4% / £43m

If the £49.4m of additional tenant funding estimated above is anywhere near the mark, it's then been increased in value by 6.4% / £3m...

[sunshine today] 30/11/2022 09:41

Umm.

It’s interesting to see the buying first thing this morning, as investors see pages of dribble, and take the view all is fine.

The next round from the shorter will probably be as hard hitting as the first. ( previous form ).

The real smell will in my opinion, come to light if those developers, doing the selling, are in any way :

Linked to the business

Linked to each other.

A great deal has come to light from the companies reply, unfortunately for them, it’s just made matters worse in my opinion.

[alanpro1] 30/11/2022 09:15

Spec the thing is you bring up so many r3tarded points its not even worth refuting you. A vast amount of properties are passed on to relatives at reduced prices to negate any capital gain from them. You highlight all the individual anomalies like its the norm, but look at any postcode and youl see some properties haven't changed value for 2 decades yet others have tripled in value.

[alanpro1] 30/11/2022 09:07

But granted the 25-38% profit from developers is far higher than the 15%-18% CSH reported.