Home Reit Share Discussion Threads

[williamcooper104] 05/12/2022 11:13

Note - Boatman are long HOME, with a view to increasing their position This might read like a short hit piece; but it's not

[williamcooper104] 05/12/2022 11:12

Good report; and the way forward here Change the external manager, and engage with the public sector to create a sustainable model

[tradez4dayz] 05/12/2022 10:46

Who are boatman? Never heard of them before

[hortonpond] 05/12/2022 10:26

Boatman out with a report on Home REIT today saying board must go. Mention of the work of this thread in the footnotes (footnote 8).

hxxps://theboatmancapital.com/2022/12/05/home-reit-time-to-change-the-board/

[george stobbart] 05/12/2022 07:30

Is Lynne Fennah being investigated by the Met Police for criminal negligence?

The HOME collapse is due to her incompetence.

Lynne Fennah destroyed Empiric shareholders whilst grabbing massive fees

[williamcooper104] 05/12/2022 07:19

I'm struggling to think of a REIT whose share price has collapsed which hasn't been because of high leverage (ok bad assets too - eg shopping centres, but it's the leverage that's the killer) Whatever else we can probably assume that the developers/vendors to HOME didn't overpay, so that ought to give a value floor

[spectoacc] 05/12/2022 06:58

Yes - does the business model work, when the "charities" are often newly set up, by many dubious characters, some also involved in extracting value from HOME via the property co's (that's surely undeniable). And when this end of the housing market is intensely capital-intensive. And when HOME get 1-4% (currently 4%) annual rent increases, which the charities don't from LA payments. And when costs (repair, labour, utilities) have rocketed.

At best, there's gross naivety from HOME Board, Alvarium, BDO, Knight Frank. Find it hard to believe any/all are doing something dodgy, but then couldn't you say the same about every corporate collapse?

Not that HOME needs be a collapse - it has assets, not too much debt.

[williamcooper104] 04/12/2022 17:30

Don't really care about NAV - it'll be written down 5-15 percent - doesn't really tell us anything - unless we get more clarity through it on likelihood of leases being restructured/extent of over-renting Current share price has discontinued that; so it's really all about IMO - are the properties fit for purpose; or is there a massive capex liabilityBDO will be freaking out; but there's still not that many issues to work through

[tradez4dayz] 04/12/2022 17:10

For me the only issue left is the valuation.The pre funding for leases was disclosed jb the prospectus. I think as specto says if its 1 happy days but 2 is the issue. We need clarity on nav.The other issues are all just noise and detracting from the issues. I rate alvarium and what they have done on lxi and home. They are a huge wealth manager they aren't going to be bothered doing a ponzi scheme. BDO as all accountants will be spooked by these allegations and spend weeks with their knickers in a twist, I don't think the delay is a warning sign just auditors with layers of useless governance

[williamcooper104] 04/12/2022 15:52

With such shabbiness it's hard not to reach for malevolent explanations - though personally on Alveriums part I think it's more likely driven by getting AUM up as quick as possible; spend equity and get to the next equity raise - it's remarkable how quickly they raised and deployed capital One question that kept getting asked was would the BoD sue VR The BoD ought to consider having a go at Alvarium - whether the rents are over-rented is going to be hard to substantiate - but if the refurbs didn't happen and Alvarium didn't do the most basic checks then that looks like basic negligence, and would be very easy to prove fault and damages

[williamcooper104] 04/12/2022 15:44

As it's 31 August; it's going to be easy to argue that the yields hadn't really moved much But of course if the properties haven't been refurbished then that would hit values as at 31 August The only explanation I can think of for quick timing between buying and flip to HOME is that the refurbs were started when the vendor bought, and then finished whilst HOME owned the properties - but then how come HOME hasn't a clue for most of its assets what was actually spent??? Also a rolling refurb while the properties are partially occupied!!!

[spectoacc] 04/12/2022 15:37

The conclusion has to be that they've done it this way (kept the initial purchasing at arms-length) to enable the "bung" (the 12 month rent equivalent paid to the new charity) to be hidden and off HOME's books.

Without VR & Circle's admin, would we ever have known?

Yet the cost to shareholders has been a multiple of that - massive profits to those doing the middlemanning.

[williamcooper104] 04/12/2022 15:34

Actually it's nuts Alverium could legitimately charge a development management fee on all capex (3.5-5%) and then sub-contract out the project management taking a decent profit for themselves That would be win/win - more fees for Alvarium, and development profits for HOME The - it's too difficult argument - nope it's not - it takes too long - nope didn't take the vendors long at all to build up portfolios

[spectoacc] 04/12/2022 15:30

That they've no idea on refurb is damning, as is the fact some of the flipping happened over weeks, so likely no refurbs whatsoever.

The only get-out for what are often comical valuations on purchase (and upgraded once on the books!) are:

(a) The valuations aren't in as what they paid, perhaps in as what they paid less the 12 month rent gift to the lessees? But how does that tie in with where the NAV is now? Seems too high.

(b) The valuations are based mainly on the income stream/long lease, which is the more likely.


If it is (b), they're stuffed - many of the lessees are ridiculously dubious IMO. HOME claim their rent is only 45% of the LA payments, but with the 1-4% annual increase, rocketing utility bills, voids, loads of repairs/maintenance, and bizarrely under-capitalised new charities (bizarre because, didn't they all get a year of rent up front?), the notion 25-30 year leases is laughable. Only the "bung" keeps the show on the road.

But I'm going over the same ground. Yes - the accounts will be interesting, BDO have had some shockers and will want to avoid another. Perhaps a 20p NAV mark-down and a "nothing more to see".

[williamcooper104] 04/12/2022 15:29

Note that KN haven't viewed any of the properties Have Alvarium/QS working for????? Given that the properties would have been let up/partially let up by sub-tenants, and a lot of properties were bought quickly; my guess is they probably haven't Cannot see any reason why HOME can't assemble/refurbish properties themselves/pay an external developer a DM fee to do so

[williamcooper104] 04/12/2022 15:25

Really ought to be the accounts published It's a simple business; there's not that much for BDO to look at; clearly longer it takes the more the share price likely to drift down on expectations of worst fears Large auditors now have their own valuation departments; so BDO will have their own surveyors going through the KN values Two issues likely to be difficult I'd guess being the transfer of lease obligations to One CIC, and the murkiness about sub-letting and what incentive was given to the any sub-tenant plus whether refurb works actually carried out/carried out to a reasonable standard

[spectoacc] 04/12/2022 15:19

All gone a bit quiet - shouldn't HOME respond to the VR response?

What happens next? Keeping an eye out for any director resignations, auditor, more charity lessees getting into difficulty, anything at all from Knight Frank, which is where IMO the bodies are buried.

[williamcooper104] 02/12/2022 08:09

FT lex Home truths about betting shares will fall https://on.ft.com/3EXxc4C Gift link for first three clicks

[williamcooper104] 02/12/2022 08:06

They were very clear on yesterdays call "no incentives given" I asked the question - "so the new tenant is paying a net effective rent c4 percent higher than the old one" (being 1 year on a 25 year lease, so One CIC by not getting the incentive are paying c4 percent more than Circle - of course didn't get asked Back door incentives, are of course incentives If those aren't disclosed to the valuer, if they have been made, then you are getting towards valuation fraud territory There is a strong whiff of rot; which is why the external manager should be changed

[spectoacc] 02/12/2022 07:28

Snippet from FT Alpha yesterday:


" To Viceroy, Circle’s entry into administration shows that Home Reit’s client base is fragile, and state support is illusory. Home Reit says the opposite, because in November the leases were transferred to another operator, One CIC, on the same rental terms.

One missing piece relates to social housing group Mears, which has sublet the Circle portfolio for ten years. Home Reit says the transfer required a kickback from an unidentified property developer to Circle “to cover the difference over the course of the lease between the cost of the head lease to Home Reit and the cost of the sublease to Mears.” The unanswered question is why, as Peel Hunt analysts highlight:

'Whilst these leases (and the donation) have since been transferred to One CIC, it is not clear why the difference in rent exists, whether this impacts the valuation of those assets, and what happens at the end of the Mears sublease. Noble Tree, another tenant, also sublets to Mears, and it is unclear if similar issues exist here.'

Peel Hunt’s team is not convinced by Home Reit’s rebuttal around apparent conflicts of interest, particularly where charity directors are involved in property development, and questions the company’s choice of rent affordability measures. (“We note that the price per bed per week that Home Reit charges for refurbished homes appears to be circa 35 per cent higher than those charged by PRS Reit for new-build properties.”)"


That covers several points, but the main one is that the Circle/One CIC rent seems only to be affordable due to the bung coming from HOME, to the property co, on to the charity (and back to HOME as part of the rent!). That's only visible here because of the sub-letting to Mears & the situation at Circle - otherwise, we'd simply not have known.

The rot is deeper than just buying £450m of property for £900m.

[spectoacc] 02/12/2022 06:59

The joy of the market is that we can agree to disagree.

And agreed the value of something is different from the price paid - I buy a lot of cheap property, and curse the Land Reg letting the next buyer see what I paid. But I buy it cheap compared to the market, and then sell at market price. The co's that are selling to HOME buy at market price, then flog at more than double - Peterlee has the most market info and is damning.

The fact a co can sweep up auction properties to pass straight on to HOME is very different to eg a co who's owned them for 20 years selling them on. Because clearly, HOME could have bought them itself. The market price is what that co paid, not what HOME paid. Even the CapEx argument goes out the window when the holding period is only weeks.

The best yield I've ever bought on was 40%. I'd happily package that up for you and sell on at c.6% ;) But it was 40% for a reason.

Yes, HOME's business model doesn't fall apart after 12 months, it'll probably keep going for what, 5 years? Year 1 - don't have to pay a penny of LA rent over to HOME because they've already given you 12 months to pay to them. Then moving forwards, you've got that reserve (yr 1 rent) to last as long as it lasts & cover shortfalls/4% uplifts.

But - how come these charities don't appear very flush in their a/cs? Why do so many have crooks involved? Maybe they've all seen the light and want to help the downtrodden?

Circle - it's a lot more interesting than just "another charity took it over". HOME effectively pay part of their own rent, Circle is the canary, and the business model of constantly buying new properties has come to a juddering halt.

[retailgains12] 01/12/2022 23:02

Spectro, on your first point i think we will have to agree to disagree.

You're disgruntled by the fact they've bought something for £365k which someone else bought for £195k, and you see this as a bad reflection on Home. For me i think the price they've paid compared to what the previous owners paid is largely irrelevant as long as the purchase price still hits the target yield on cost. I doubt we will ever agree on this.

That said, if you happen to see any other properties with an annual rent of £28k which are going for £195k please do let me know as for that yield i'll be happy to overpay for it myself.

Regarding this point "..Charity backing.." - have you seen who's behind these charities? How long they've been going? What has happened already at Circle?"

Yes I have seen what has happened at Circle, and have you seen the impact that admin had on Home? Thats right - absolutely 0 impact as they just end up getting replaced by another charity, thats why the model works. With an inherent lack of homes there will always be another charity ready to take their place.


'- HOME's rent, at least for the first 12 months, is effectively part of the capital they paid to purchase the properties. Stop and think about that - the "100% of rents paid" is made up in significant part by HOME's own money. It's farcical.'

If your argument about this is that after 12 months Home is screwed as the charities don't pay, then why 2 years on is there still 0 rent arrears? The business started to deploy capital in Dec 20 so there has been at least a year where many of these charities will be out of the first 12 month window, and yet still not a single default. If however your view on this is correct then at least surely it shouldn't be long before everything starts to unravel and the house of cards comes falling down. Time will tell I guess.


- There's a reason yields are so high in sheltered housing, housing the homeless, housing refugees etc - it's intensely capital and labour intensive. Do the "characters" who've set up charities have any skill in it?

Do they have any skill in it - who knows i don't have time to vet every single charity employee, but if their entire charity is centered around homelessness i'd imagine they will learn pretty quickly. Do Viceroy have any skill in researching property companies? Clearly not as they don't even know about the basics of straight lining revenue under IFRS, but that doesn't stop you quoting their report repeatedly.

[williamcooper104] 01/12/2022 21:46

That's about same ball park I'm in If we start at what probably is alternative use value eg half of NAVThere's a plus for the long dated cheap debt There's a plus for, if rent is cut, then having proper covenants/FRI leases and minimal gross to net rent leakages There's a plus for you ought to be able to legitimately get away with a small premium to alternative use But - what if the EPCs are terrible and the refurbishment works haven't been done/poorly done, leaving big capex liabilities - so will be keen to hear what the company has to say further on this - what's clear is that they don't appear to really know - which is damming in and of itself

[williamcooper104] 01/12/2022 21:23

https://www.bbc.co.uk/programmes/m0018c0cWorth a watch - BBC Panorama programme about the developer SPV/Charity model - not one of HOMEs tenants but similar business model