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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Home Reit Plc | LSE:HOME | London | Ordinary Share | GB00BJP5HK17 | ORD GBP0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 38.05 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Investment Trust | 11.76M | 20.93M | 0.0373 | 10.20 | 213.72M |
From Apr 2021 to Apr 2024
TIDMHOME
RNS Number : 0190S
Home REIT PLC
11 November 2021
11 November 2021
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014 as it forms part of the domestic law of the United Kingdom by virtue of the European Union (Withdrawal) Act 2018 (as amended). This announcement has been authorised for release by the Board of Directors.
Home REIT plc (the "Company")
Annual results for the period ended 31 August 2021
Strong performance since IPO with deployment of proceeds ahead of schedule, dividend targets met and tangible social impact delivered
The Board of Home REIT plc (ticker: HOME) is pleased to report its maiden annual results for the period from incorporation on 19 August 2020 to 31 August 2021.
Strategy
The Company seeks to contribute responsibly to the alleviation of homelessness in the UK, delivering a tangible social impact whilst targeting inflation-protected income and capital returns, by funding the acquisition and creation of a diversified portfolio of high-quality, well located accommodation assets across the UK.
The Company's portfolio delivers much needed, tailored accommodation for vulnerable, homeless people, providing critical and sustainable housing solutions for people fleeing from domestic abuse, those faced with homelessness due to poverty, people suffering from drug and alcohol abuse and mental health issues, prison leavers and ex-servicemen.
There is a critical need for further accommodation for the homeless in the UK, due to an increasing homeless population and a lack of available and affordable high-quality, fit-for- purpose stock to address the problem. Local housing authorities are under a statutory duty to secure accommodation for individuals who are unintentionally homeless and in priority need but current accommodation for the homeless is limited in quantum and often sub-standard and uneconomical.
The Company focuses on responsibly investing in and creating well-located properties that provide a sustainable low level of rent for the tenant and that are expected to deliver savings to local authorities and other providers of accommodation to the homeless via lower rents versus more expensive alternative accommodation.
Highlights
Strong financial performance and IPO objectives met
-- The Company and its subsidiaries (the "Group") acquired 711 investment properties within the period, which were independently valued on 31 August 2021 at GBP328 million, representing an increase of approximately 4.5 per cent above the aggregate acquisition price (including acquisition costs). The properties have been valued on an individual basis. No portfolio premium has been applied
-- The net asset value ("NAV") and EPRA net tangible asset ("NTA") per ordinary share ("Share") increased to 105.0 pence as at 31 August 2021, an increase of 7.2 per cent from the 98.0 pence (after share issue expenses) at the time of the Company's IPO in October 2020, reflecting the discount achieved on off market acquisitions, early mover advantage in this sector, and yield compression in the wider long -- lease sector
-- In October 2020, Home REIT plc (the "Company") raised gross proceeds of GBP240 million in its initial public offering ("IPO") followed by an oversubscribed follow-on equity issue in September 2021, raising gross proceeds of GBP350 million. The Company is listed on the Official List of the Financial Conduct Authority and was admitted to trading on the premium segment of the main market of the London Stock Exchange on 12 October 2020
-- In relation to the period, the Company paid or declared dividends totalling 2.5 pence per Share, in line with our initial target dividend for the first financial period. Taken together with the increase in NAV/NTA referenced above, the Company has delivered a NAV total return of 8.9 per cent. since IPO. From 1 September 2021, the Company will target a minimum annual dividend of 5.5 pence per Share
-- Profit before tax for the period of GBP21 million
-- Long term 12 -- year debt facility of GBP120 million secured with Scottish Widows at an all -- in fixed rate of 2.07 per cent per annum for the term. This provides a widespread (378 basis points) between the current average net initial property purchase yield of 5.85 per cent and the 2.07 per cent per annum fixed rate of the debt
Diversified portfolio delivering clear social impact
-- Net IPO proceeds fully and responsibly deployed within five months, in line with the Company's investment strategy and ahead of the stated target at launch
-- 3,846 beds provided across 711 properties acquired at an attractive average net initial property yield of 5.85 per cent (including acquisition costs)
-- Low and sustainable average weekly rents of GBP90 per bed vs GBP225 average estimated weekly B&B rate per bed in England, providing an average 60 per cent estimated saving to local authorities with fit-for-purpose, high quality accommodation
-- The typical building size in the portfolio comprises 3 to 4 bed houses or small 7 bed apartment blocks
-- Assets are broadly diversified geographically across 81 different local authorities in the UK as well as across different sub sectors within homeless accommodation, ranging from drug and alcohol abuse, domestic abuse, prison leavers, general needs poverty and those with mental health issues
-- Let to 21 different registered charities, housing associations, community interest companies and other regulated organisations, which have a proven operating track record in providing low -- cost accommodation to homeless people. They also provide care, support, training, and rehabilitation at the properties to provide vulnerable homeless people with the skills and confidence to reintegrate back into society, a fundamental pillar of the Group's strategy
-- As per the structure highlighted on the diagram in the Annual Report, all the rent payable by Home REIT's tenants is funded by support from local and central government
-- The portfolio is 100 per cent let and income producing with a long weighted average unexpired lease term ("WAULT") of 24.3 years
-- 100 per cent of the income is index -- linked
-- The Company has not seen any impact to its own rent collection levels as a result of the COVID -- 19 pandemic and rent collection rates through the period were 100 per cent
Post period highlights
Dividends
-- The Company paid its third interim dividend of 0.84 pence per Share on 22 October 2021. Dividends distributed in relation to the financial year to August 2021 equal 2.5 pence per share, in line with initial targets. The Board is targeting a minimum total dividend of 5.5 pence per Share for the financial year ending 31 August 2022, in line with the Company's stated target at launch.
Further fundraise
-- In September 2021, the Company raised gross proceeds of GBP350 million through a significantly oversubscribed issue of new ordinary shares.
Acquisitions
-- Since 31 August 2021, the Company has acquired 539 new assets totalling GBP229 million (net of purchase costs) across various geographical locations in London, North West, South West, South East, East, Midlands, Yorkshire, North East regions of England and North Wales region.
-- These properties provide over 2,679 further beds for vulnerable homeless people whose circumstances cover a range of sectors, including drug and alcohol abuse, domestic abuse, general needs poverty and those with mental health issues.
Lynne Fennah, Chairman of Home REIT plc, commented:
"In just over a year since listing, Home REIT has produced an admirable performance, meeting, and in some areas exceeding, the objectives set out at IPO. In this short time the Company has helped many charity and operating partners provide much needed, effective support to homeless people across the UK; offered local authorities a stable, cost effective and fit-for-purpose solution to their statutory obligation to provide homes for those in need; and has also delivered on behalf of its shareholders, whose support was gratefully received in September's oversubscribed equity raise.
"Unfortunately, as the UK emerges from the pandemic, the requirement for good quality accommodation for homeless people is only set to grow. However, the Investment Manager has proven its ability to effectively and responsibly source and deliver properties in line with the investment strategy and with a pipeline of potential further acquisitions identified, we believe the Company is well positioned to continue to deliver meaningful social impact."
For further information, please contact:
Alvarium Home REIT Advisors Limited Via FTI Consulting below Jamie Beale Gareth Jones Alvarium Securities Limited Mark Thompson +44 (0)20 7016 6711 Eddie Nissen +44 (0)20 7016 6713 Oliver Kenyon +44 (0)20 7016 6704 FTI Consulting (Communications Adviser) HomeREIT@fticonsulting.com Claire Turvey +44 (0)20 3727 1000 Eve Kirmatzis Ellie Perham-Marchant Oliver Harrison
The Company's LEI is: 213800A53AOVH3FCGG44.
About Home REIT plc:
Home REIT plc seeks to contribute to the alleviation of homelessness in the UK, whilst targeting inflation-protected income and capital returns, by funding the acquisition and creation of a diversified portfolio of high-quality accommodation assets across the UK which are dedicated to providing accommodation to homeless people. The accommodation assets are let or pre-let on very long (typically 20 to 30 years) leases, containing inflation-linked or fixed uplift rent review provisions, to registered charities, housing associations, community interest companies and other regulated organisations which have a proven operating track record in providing low-cost accommodation to homeless people and which receive housing benefit or comparable support from local or central government to fund the provision of such accommodation to homeless people.
There is a critical need for further accommodation for homeless people in the UK, due to an increasing homeless population and a lack of available and affordable high-quality, fit-for-purpose stock to address the problem. Local housing authorities are under a statutory duty to secure accommodation for individuals who are unintentionally homeless and in priority need but current accommodation for homeless people is limited in quantum and often sub-standard and uneconomical.
The Company focuses on investing in and creating well-located properties that provide a sustainable level of rent for the tenant. Within the homeless accommodation assets, there is a focus on care, support, training and rehabilitation to provide vulnerable homeless people with the skills and confidence to find long-term accommodation and enable them to reintegrate back into society. Savings are expected to be made to local authorities and other providers of accommodation to homeless people via lower rents versus more expensive alternative accommodation.
The Company is listed on the premium segment of the Official List of the UK Financial Conduct Authority and its Ordinary Shares were admitted to trading on the main market of the London Stock Exchange, premium segment, on 12 October 2020.
Company presentation for investors and analysts
A company presentation for investors and analysts will take place on Thursday 11 November at 9.00am (UK). Those wishing to register should contact FTI Consulting on the details above.
Annual Report and Accounts
Hard copies of the Annual Report and Accounts or a notification of availability will be sent to shareholders. The Annual Report and Accounts will be made available on the Company's website at www.homereituk.com . In accordance with Listing Rule 9.6.1, copies of these documents will be submitted to the UK Listing Authority via the National Storage Mechanism and will be available for viewing shortly at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
Annual General Meeting
The Company's Annual General Meeting will be held at the offices of Stephenson Harwood LLP at 1 Finsbury Circus, London, EC2M 7SH on 27 January 2022 at 10.00 a.m.
The Notice of the Annual General Meeting is set out in the Annual Report and Accounts for the period ended 31 August 2021.
Alternative performance measures
The Group uses alternative performance measures including the European Public Real Estate Association ("EPRA") best practice recommendations to supplement IFRS as the Board considers that these measures give users of the financial statements a better understanding of the underlying performance of the Group's property portfolio.
The EPRA measures are widely recognised and used by public real estate companies and investors and seek to improve transparency, comparability and relevance of published results in the sector.
Reconciliations between EPRA measures and the IFRS financial statements can be found in Note 22.
Definitions of alternative performance measures are given in the key performance indicators and EPRA performance measures sections.
Chairman's statement
Dear Shareholder
I am pleased to present the maiden annual results for the Group for the period from its incorporation to 31 August 2021 (the "Period"). Home REIT plc (the "Company" or "Home REIT") commenced business operations on 12 October 2020 when its ordinary shares ("Shares") were admitted to trading on the premium segment of the main market of the London Stock Exchange, with gross proceeds of GBP240 million having been raised in the Company's IPO, followed by an oversubscribed follow-on equity issue in September 2021 raising gross proceeds of GBP350 million from a broad range of investors.
The Company has performed strongly since its launch despite the constraints created by the COVID-19 pandemic, delivering on our stated objectives and in many areas exceeding our original expectations at IPO. The Company is advised by Alvarium Home REIT Advisors Limited (the "Investment Adviser"), whose principals have built a successful track record in this sector and they continue to draw on their strong network of relationships, extensive experience and market intelligence.
This allows the Company to source attractive investments and, coupled with the Investment Adviser's robust capital discipline, create value for our shareholders whilst also achieving significant positive social impact for some of the most vulnerable members of society, through providing critically needed accommodation to those at risk of homelessness .
In accordance with the Company's investment policy, the net proceeds of the IPO have been carefully invested in a portfolio of high quality, well located properties let on very long, inflation -- linked leases to a wide range of tenants across a diverse range of sub -- sectors within homelessness.
Our high quality properties are let at a low and sustainable rental level, on new, long term, full repairing and insuring ("FRI") leases to specialist registered homeless charities, housing associations, community interest companies and other regulated organisations, which have a proven operating track record in providing low -- cost accommodation to homeless people. Crucially, they also provide care, support, training and rehabilitation at the properties to provide vulnerable homeless people with the skills and confidence to find long -- term accommodation and enable them to reintegrate back into society. Providing long term security of tenure to Home REIT's tenants is essential to rehabilitating vulnerable individuals and helping to break the cycle of homelessness seen in short term accommodation, a fundamental pillar of our social impact strategy.
All of the rent payable by Home REIT's tenants is funded through support from local and central government and the rents received under these leases are subject to annual upward -- only rent reviews, index -- linked to the Consumer Prices Index, subject to an annual collar and cap of one per cent. and four per cent., respectively.
As at 31 August 2021, the Group's portfolio consisted of 3,846 beds across 711 properties let to 21 tenants. Across the Group's assets, the average net initial purchase yield was 5.85 per cent, the WAULT was 24.3 years and 100 per cent of the income was index linked. The portfolio is 100 per cent let and income producing.
The Group's portfolio has been independently valued by Knight Frank LLP in accordance with the RICS Valuation Professional Standards. As at 31 August 2021, the Group's portfolio had a market value of GBP328 million, representing an increase of approximately 4.5 per cent above the aggregate acquisition price (including acquisition costs). The properties have been valued on an individual basis. No portfolio premium has been applied.
The NAV and EPRA NTA per share increased to 105.0 pence as at 31 August 2021, an increase of 7.2 per cent from the 98.0 pence (after share issue expenses) at the time of the Company's IPO in October 2020.
The asset value growth reflects: (i) the discount achieved on off -- market acquisitions; (ii) early mover advantage in this sector; and (iii) yield compression in the wider long -- lease sector.
The profit before tax of the Group for the Period was GBP21 million.
Dividends
The Company paid its third interim dividend of 0.84 pence per Share on 22 October 2021. Dividends distributed in relation to the financial year to August 2021 equal 2.5 pence per share, in line with initial targets. The Board is targeting a minimum total dividend of 5.5 pence per Share for the financial year ending 31 August 2022, in line with the Company's stated target at launch.
Social Impact
The Company's portfolio of 711 properties at 31 August 2021 provides 3,846 beds for people who would otherwise be homeless, at rental levels that are low and sustainable for the Company's tenants. All of the Company's properties make a genuine impact to the people they house and for the communities in which they are located.
The Company's assets provide a safe and comfortable environment for vulnerable people whose circumstances cover a range of sectors, including drug and alcohol abuse, domestic abuse, prison leavers, general needs poverty and those with mental health issues. By offering stable housing and pastoral care to these vulnerable people, they have the opportunity to develop the necessary confidence and skills ultimately to reintegrate back into society.
The tragic reality of the knock -- on economic effects caused by COVID -- 19 means there is expected to be a greater number of individuals who will become homeless (the Office for Budget Responsibility is currently forecasting an additional two million unemployed in the UK). As a result, the underlying demand, and indeed the need, within society for the Company and its properties will very likely only increase.
Financing
On 11 December 2020, the Group entered into a new, 12 -- year, interest only, GBP120 million (35 per cent LTV) loan agreement with Scottish Widows at an all -- in fixed rate of 2.07 per cent per annum, expiring in December 2032. This provides a widespread (378 basis points) between the current average net initial property yield of 5.85 per cent and the 2.07 per cent per annum fixed rate. The loan was fully drawn down on 26 February 2021.
The Group is in the process of finalising the terms of an additional fixed rate, fixed term, interest only debt GBP130m facility with an annuity lender. We look forward to updating Shareholders on this in due course.
Corporate Governance
The Group benefits from a strong board with substantial real estate, financial, commercial and sector experience and has established appropriate committees (including Audit Committee and Management Engagement Committee), which meet on a regular basis.
The Board is responsible for leading and controlling the Company and has overall authority for the management and conduct of the Company's business, strategy and development.
The AIFM and the Investment Adviser
Home REIT appointed Alvarium Fund Managers (UK) Limited as its alternative investment fund manager (the "AIFM"). Home REIT and the AIFM have appointed the Investment Adviser to provide certain services in relation to Home REIT and its portfolio, including sourcing and advising on investments for acquisition by Home REIT and due diligence in relation to proposed investments.
The Investment Adviser has provided the Group with access to investment opportunities at attractive pricing through the Investment Adviser's long -- established industry contacts and extensive knowledge of the sector.
The Investment Adviser has achieved a prominent position in developing and acquiring long income properties and this expertise and network of contacts provides the Group with access to off -- market transactions and specialised funding opportunities.
Post -- balance sheet matters
Since 31 August 2021, the Company has acquired 539 new assets totalling GBP229 million (net of purchase costs) across various geographical locations in London, North West, South West, South East, East, Midlands, Yorkshire, North East regions of England and North Wales region.
These properties provide over 2,679 further beds for vulnerable homeless people whose circumstances cover a range of sectors, including drug and alcohol abuse, domestic abuse, general needs poverty and those with mental health issues.
COVID -- 19 Update
In these uncertain times, the Company's portfolio remains robust with secure long -- dated inflation linked income underpinned by built property assets with a low spread to vacant possession value. This is a factor of low and sustainable starting rents set for the Company's housing provider tenants, often below rental levels for alternative uses, such as private rented sector or student accommodation, yielding low capital values on entry. The Company has not seen any impact to its own rent collection levels and rates of recovery through the Period were 100 per cent.
The Company's income stream is covered by statutory protected housing benefit that is paid by local authorities which have a legal obligation to house individuals that are homeless or vulnerable to homelessness and is ultimately funded from central UK Government. Each of the Company's assets provides safe and high -- quality accommodation to those amongst the most vulnerable in our society.
The resulting economic downturn in the UK due to COVID-19, and the end of government support measures, means that a greater number of individuals will likely become homeless and, as a result, the underlying demand and indeed the need within society for the Company and its properties will increase. The Company is working hard on deploying further pipeline assets to ensure this increased demand can be met.
The Investment Adviser is reassured that the UK Government has put supporting vulnerable people at the top of the political and financial agenda as it tackles the current disruption and impact on the nation's health. This central response has been reflected at a community level and the Company has seen inspiring action and collaboration between its tenants and local authorities as they ensure that the people living in the Company's properties continue to receive responsible care and support with the minimum of disruption. This has required huge levels of personal commitment from care workers and housing managers for which the Company is extremely grateful.
Rental Collection
The Investment Adviser notes that many of the Company's peer group in the long income space have made announcements or written to their investors regarding rent collection levels, reflecting the unprecedented impact that COVID -- 19 has had and continues to have on many commercial tenants.
As stated above, the Company has not seen any impact to its own rent collection levels and rates of recovery through the Period were 100 per cent.
Outlook
The Board has been encouraged by the strong performance since the Company's IPO in October 2020, deploying the proceeds into a high quality sustainable portfolio of assets, diversified by sub sector, strong tenants and geography, at attractive yields and in line with the Company's investment policy.
Alongside this deployment, the Investment Adviser has leveraged its network of relationships to develop an attractive pipeline of further potential acquisitions. This has already led to the oversubscribed follow-on issue of shares in September 2021 and we look forward to updating Shareholders on the deployment of this capital into new acquisitions. The Company has put in place a Placing Programme until 1 September 2022 in order to give the Investment Adviser the flexibility to pursue the Company's investment objective.
The Group is already delivering excellent returns to shareholders through a secure, diversified and growing index -- linked income stream as well as attractive capital appreciation across its long -- let portfolio, reflecting the Investment Adviser's disciplined and value -- led approach to investments.
What matters most is that the Company is helping to improve the lives of homeless people or those at risk of homelessness and therefore I am pleased to be able to reflect on the tangible social impact that the Company has made to some of the most vulnerable in society. Working with our tenant partners to provide critically needed accommodation for people at risk of homelessness, the Company now provides homes for almost 4,000 people across the UK. In July 2021, The Good Economy Partnership Limited independently explored the Company's positive social impact in a report published on our website. We look forward to Good Economy's next report, where it will deepen its assessments of partner organisations and the outcomes experienced by the Company's residents.
The Company is continuing to build responsibly on this sustainable growth momentum and we remain confident about delivering further value for shareholders and wider stakeholders and achieving significant positive social impact in the next financial period to 31 August 2022 and beyond and fulfilling our longer -- term ambitions.
Finally, I would like to thank all our shareholders for their support since the Company's launch and I look forward to updating you on the Company's further progress in due course.
Lynne Fennah
Chair of the Board of Directors
10 November 2021
Investment Adviser's report
Home REIT plc is a real estate investment trust (REIT) targeting attractive inflation -- protected income and capital returns by investing in a diversified portfolio of homeless accommodation assets, let or pre -- let to registered charities, housing associations, community interest companies and other regulated organisations that receive housing benefit or comparable funding from local or central government, on very long -- term and index -- linked leases.
The Company is listed on the Official List of the Financial Conduct Authority and was admitted to trading on the premium segment of the main market for listed securities of the London Stock Exchange in October 2020.
The Group has effectively executed its investment strategy with the dual objectives of delivering inflation -- protected income and capital returns underpinned by a portfolio of secure, long -- let and index -- linked property assets, diversified by sub -- sectors within homelessness, tenant and geography, whilst achieving significant positive social impact.
As at 31 August 2021, the Group's portfolio consisted of 3,846 beds across 711 properties let to 21 tenants. Across the Group's assets, the average net initial purchase yield was 5.85 per cent, the WAULT to first break was 24.3 years and 100 per cent of the income was index linked. The portfolio is 100 per cent let and income producing.
This has been a successful and active period for the Group, and we are well positioned to continue to deliver on the Company's investment strategy and target returns to the Company's investors through our robust, long established relationships and experience in the sector, underpinned by our value -- led approach to investments.
Demand drivers
The fundamentals driving the continued growth and performance of the Company are:
-- the critical need for further accommodation for homeless people in the UK, due to an increasing homeless population and a lack of available and affordable, high quality, fit for purpose, stock to address the problem;
-- the statutory duty(1) placed on local authorities to secure accommodation for people who are unintentionally homeless and in priority need and to provide meaningful help to any person who is homeless or at risk of becoming homeless irrespective of any priority need status; and
-- the increasing, unsustainable cost borne by local authorities in providing accommodation to homeless people. The severe shortage of fit for purpose housing stock means that local authorities often house individuals in unsuitable bed and breakfast hotels and guesthouses, which are significantly more expensive than housing an individual in one of the Company's properties.
The Company's pipeline has been developed principally through relationships with charities, local authorities, housing associations and high -- quality developers. The Company will continue to identify the areas in the UK where the need for more homeless accommodation is most acute and work with its contacts to source and develop new high -- quality assets in these areas.
Investment rationale and summary
Government funding for each individual user generally represents the full cost of care and housing benefit and is paid from the Department of Work and Pensions to the relevant local authority, which then passes funds directly to the Company's tenants.
While we have a close and engaged relationship with our tenant partners, the Company does not undertake responsibility for the operations of the care for the individual user, which is provided by a professional care provider in this sector.
The income flow to the Company is funded through the provision of 'exempt' housing benefit paid directly to the tenants from the relevant local authority. Such exempt status prevents local authorities from restricting the level of rent recoverable by tenants via housing benefit and enables such tenants to recover the full costs of providing additional support and services to residents.
Rental levels are set at a sustainable level with significant headroom between property rent and housing benefit allowance received from the local authority. The headroom between core lease rent and housing benefit is represented by the management charge and the cost of intensive housing management/buildings upkeep associated with homelessness provision.
Across the Company's portfolio to date, the average rent payable by the charity is circa 45 per cent of the total housing benefit received per property, providing a robust 2.25x portfolio rent cover for our tenants. In addition, rents are pre -- agreed with local authorities and the leases provide for a cap (at 4 per cent per annum) on the inflation linked annual rent reviews to ensure that rents grow in a sustainable manner.
Homelessness
The UK is in the grip of a housing emergency according to the housing and homelessness charity, Shelter.(2) Recent figures published by the Ministry of Housing, Communities & Local Government show that local authorities in England owed a statutory duty to prevent or relieve homelessness to over 288,000 households in England between Q2 2019 and Q2 2020. These figures are 15 per cent higher than the year before.(3) In Q4 2020, the homeless charity Crisis estimated that 1 in 185 people in England were living without a home.(4) Shelter's emergency helpline received 25,000 calls from people in England in Q4 2020 with a new person calling every minute during October and November.(5)
Since the outbreak of the COVID -- 19 pandemic at the end of Q1 2020, over 90,000 people have called the charity's free national helpline with 65 per cent of callers already experiencing homelessness or at risk of becoming homeless, 19 per cent requiring urgent help to find temporary homeless accommodation and 18 per cent seeking help to stay in their current home. In Q1 2021, there were 632 mortgage repossessions and rental evictions, meaning that a household was made homeless every three-and-a-half hours. In Q3 2021, it was reported that 564,000 people are in rent arrears, 190,000 owner-occupied homes are in financial difficulty and 4.3 million people are behind on household bills, drastically highlighting the number of people who are at risk of homelessness as government supports such as furlough end.(6)
The number of rough sleepers identified across England has increased by 52 per cent since 2010, with an estimated 2,688 people sleeping on the streets on a single night in Q3 2020.(7) There is widespread debate as to the true accuracy of rough sleeping statistics; the Mayor of London published figures estimating that as many as 4,227 people were seen sleeping on the streets in London in Q2 2020, representing a 33 per cent increase on the same period in 2019.(8) Rough sleeping in London has risen year-on-year and is continuing to rise despite the Government's 'Everyone In' scheme which provided emergency accommodation during the COVID-19 pandemic. During Q2 2021, rough sleeping increased by 25 per cent in London.(9)
Many people only associate homelessness with "rough" sleeping on the streets. The reality, however, is that sleeping rough is the most extreme form of homelessness. Most homeless people, although not sleeping rough, have no permanent home, stay with relatives and friends or reside in temporary accommodation, such as bed and breakfast hotels, hostels, night shelters and refuges.
Crisis recently estimated that 95 per cent of homeless households in England are hidden from view; trapped in insecure, temporary accommodation or moving from sofa to sofa.(10) There is no national figure for how many people are homeless in the UK due to the devolved nations' differing recording methods. Many homeless people are not picked up by these recording methods and Crisis estimates that as many as 62 per cent of single homeless people do not show up in official homeless statistics.(11)
Homelessness has a devastating impact on individuals' lives, significantly affecting their physical and mental health. Compared to the general population, homeless people are 17 times more likely to experience abuse and violence and nine times more likely to take their own life.(12)
The Office for National Statistics ("ONS") recently published figures revealing that homeless deaths in England and Wales increased by 7.2 per cent between 2018 and 2019 with 778 homeless people dying on the streets or in temporary accommodation in 2019. This represents a 61.4 per cent increase in deaths among homeless people since the ONS started recording in 2013.(13) The majority of deaths were attributed to drug -- related poisoning, suicide and alcohol -- specific causes. The average age at death was 46 years for men and 43 years for women.(14) Separately, the Museum of Homelessness recently estimated that 976 homeless people died on the streets or in temporary accommodation in the UK in 2020, representing a 37 per cent increase on the number of deaths noted in the same study carried out in 2019.(15)
For the last five years homelessness has been rising year on year in England. A household became homeless in England every four minutes between Q1 2018 and Q1 2019(16) and there was an 11 per cent increase in the number of people sleeping rough or in temporary accommodation in England from Q2 2016 to Q1 2019.(17) In a two-year period, the number of households residing in temporary accommodation in England has increased by 18 per cent to exceed 95,000.(18)
The number of families with dependent children placed in B&B -- style accommodation increased from 630 at the end of March 2010 to 1,440 at the end of Q2 2020.(19) As shown below, the biggest regional increase in homelessness in England has been in the North West. In this region alone, the Company has provided over 3,846 beds at the reporting date, offering safe, clean, modern and suitable accommodation to otherwise homeless individuals. The Company aims to continue to significantly invest in areas where homelessness is a growing problem in order to increase the availability of high quality, fit for purpose housing stock.
Hot Features
Premium
Regional Trends Homelessness % change since
in England at Q2 2016
Q2 2019
South East 24,195 27%
---------------- ----------------
South West 7,127 0%
---------------- ----------------
East 16,696 18%
---------------- ----------------
East Midlands 4,818 50%
---------------- ----------------
West Midlands 23,715 64%
---------------- ----------------
Yorks & Humber 2,654 16%
---------------- ----------------
North East 1,061 4%
---------------- ----------------
North West 9,038 117%
---------------- ----------------
London 170,068 4%
---------------- ----------------
Source: Shelter; This is England: A Picture of Homelessness ; December 2019
Tackling Homelessness in the UK
Homelessness is caused by a complex interplay between a person's individual circumstances and adverse external factors. Examples of these factors are:
-- a lack of affordable housing; -- mental health illnesses; -- alcohol and drug dependency; -- relationship breakdowns;
-- domestic abuse (out of the domestic abuse victims supported by the charity Women's Aid between 2018--2019, 44 per cent women sofa--surfed, 14 per cent stayed in local authority emergency accommodation, 7 per cent slept rough and 4 per cent stayed in a B&B, hostel or hotel)(20) ;
-- eviction by private landlords; and -- institutional backgrounds such as being in care, leaving the armed forces or prison.
A December 2020 report published by the Ministry of Housing, Communities and Local Government provides insights into the experiences of people sleeping rough. The findings are based on interviews with over 550 respondents, all of whom who had slept rough within the last year. The report found that 82 per cent of those surveyed had a mental health vulnerability, 83 per cent had a physical health need, and 60 per cent had a substance misuse need. Before experiencing rough sleeping, 91 per cent had stayed in a form of short -- term homeless accommodation and 71 per cent had sofa surfed.(21)
Between 2018 and 2019, 11,483 people were released from prison into homelessness and in Q2 2020, an estimated 13 per cent of people released from prison did not have a home to go to.(22) In a 2019 paper, the Ministry of Justice estimated that the social and economic cost of re -- offending is in excess of GBP18 billion a year.(23)
41 per cent of single homeless people surveyed by Crisis had previously served a prison sentence(24) and data obtained by the Guardian newspaper from the Ministry of Justice shows that 66.6 per cent of prisoners who identify as homeless reoffend within a year of release.(25) The Institute for Policy Research has estimated that a 20 per cent reduction in reoffending could be achieved via the provision of stable housing to a prison leaver.(26)
Local authorities are under a statutory duty to secure accommodation for families or individuals who are unintentionally homeless and in priority need. They also have a duty to provide meaningful help to any person who is homeless or at risk of becoming homeless irrespective of their priority need status.(27) Current accommodation for homeless people is limited in quantum and often sub -- standard and uneconomical. Poor quality privately rented housing stock or expensive bed and breakfast hotels are frequently being utilised by local authorities to manage increasing demands for accommodation. Between Q1 2011 and Q2 2018 the number of households placed in temporary accommodation in England increased by 65 per cent(28) and between Q3 2019 and the end of Q2 2020, the total number of households accommodated in bed and breakfasts in England increased by 60 per cent.(29)
The current lack of purpose -- built accommodation for homeless people is felt acutely by local authorities. A research project commissioned by Crisis, reveals that the fastest -- growing component of homelessness is households living in unsuitable temporary accommodation; the proportion of homeless situations attributable to such accommodation increased 260 per cent between 2010 and 2018.(30)
This reflects the growing pressure on local authorities as increased demand has faced a static or falling supply of accommodation. Analysis published by Shelter reveals that local authorities across England spent over GBP1bn on temporary accommodation (such as hostels, bed and breakfast hotels and private rentals) in 2018 -- 19, with spending on bed and breakfast accommodation increasing 111 per cent since 2014.(31)
L ocal Authority spending on Bed & Breakfast and temporary accommodation in England(32)
Homeless Households
at Q3 2020 Number of households in B&Bs 10,330
Increase since Q3 2011 206 per cent
----------------------------------------------------------- ----------------
Q1 2019 - Q1 2020 Amount spent on B&B accommodation GBP410,380,000
------------------------------------ ----------------
Proportion of overall spending 34 per cent
on temporary accommodation
----------------------------------------------------------- ----------------
Q1 2015 - Q1 2020 Increase in amount spent on 123 per cent
B&B accommodation over five
years
------------------------------------ ----------------
Figures released by the Ministry of Housing, Communities & Local Government in October 2020 show a further 16 per cent annual increase in the number of households accommodated in B&Bs with 8,180 households living in bed and breakfast accommodation at the end of Q1 2020.(33)
Delivering attractive growing income and capital growth
The Group's investment properties acquired within the period were independently valued on 31 August 2021 Knight Frank LLP at GBP328 million, representing an increase of approximately 4.5 per cent above the aggregate acquisition price (including acquisition costs). The properties have been valued on an individual basis. No portfolio premium has been applied.
The NAV and EPRA NTA per share has increased to 105.0 pence as at 31 August 2021, an increase of 7.2 per cent from the 98.0 pence (net of share issue costs) at the time of the Company's IPO in October 2020.
The asset value growth reflects, inter alia:
-- the discount achieved on off market acquisitions; -- early mover advantage in growth sectors where yields have compressed; and
-- yield compression in the wider long--lease sector in recent months, resulting from increased demand.
Portfolio Overview
The headline statistics for the Period are:
Contracted
Top 10 tenants Rental exposure rent (GBPm)
Lotus Sanctuary CIC 12.6% GBP2.3
------------------- --------------
Dawson Housing Limited 9.5% GBP1.7
------------------- --------------
Big Help Project 9.2% GBP1.7
------------------- --------------
CG Community Council 8.3% GBP1.5
------------------- --------------
Circle Housing and Support CIC 7.5% GBP1.4
------------------- --------------
Noble Tree 7.1% GBP1.3
------------------- --------------
Gen Liv UK CIC 7.1% GBP1.3
------------------- --------------
One CIC 6.9% GBP1.3
------------------- --------------
Bloom Social Housing CIC 6.6% GBP1.2
------------------- --------------
Dovecot and Princess Drive Community 6.2% GBP1.1
Association
------------------- --------------
Operational statistics:
Beds 3,846
Properties 711
------------
Average net initial yield 5.85%
------------
WAULT to first break 24.3 years
------------
Index -- linked income or
fixed uplifts 100%
------------
Tenants 21
------------
Sub sectors 6
------------
Local authority diversification 81
------------
Home REIT fully deployed the net proceeds of its GBP240 million IPO within five months of listing, acquiring high quality, well located assets with a long WAULT to first break of 24.3 years -- one of the longest in the real estate sector. The assets have been let to a wide range of tenants with robust financials and a proven long -- term operating track record across a diverse range of homeless sub sectors and locations.
100 per cent of the Group's assets contain rent reviews linked to CPI inflation thus providing strong inflation -- protected income across the Group's portfolio.
As at 31 August 2021:
-- 100 per cent of assets, by value, had caps and collars of 1 per cent and 4 per cent -- 100 per cent of assets, by value, had annual rent reviews
All of the assets acquired by the Group benefit from triple net, full repairing and insuring leases. These lease agreements oblige the tenants to pay all taxes, building insurance, other outgoings and repair and maintenance costs on the property, in addition to the rent and service charge, therefore avoiding any property cost leakage for the Group.
Building characteristics
Home REIT has 711 properties across 81 local authority areas. The typical building in the portfolio comprises 3 to 4 bed houses or small 7 bed blocks of apartments.
As with all properties Home REIT acquires, a full independent building condition survey is carried out prior to acquisition. As a result, over GBP100 million of transactions have been rejected by the Investment Adviser for not meeting the Company's standards with regards to the rent levels, building location, including proximity to public transport, layout/suitability and/or reputation of the selling party.
All of the buildings in the Company's portfolio are of traditional construction with no system built or clad properties. All of the Company's assets are suitable for all types of residential accommodation, ensuring strong residual land value and alternative use options.
Strategies for delivering value and growth
The Investment Adviser employs a number of techniques to secure assets for the Group at an attractive initial yield, without compromising on the asset quality, security of income or lease length, including:
-- opportunistic investments across a large population of assets to find value; -- targeting smaller lot sizes generally, which are below the radar of most institutions;
-- acquiring the vast majority of its assets through off--market purchases identified via the Investment Adviser's extensive contacts and deep network of relationships, driven by its reputation for speed and certainty of transacting;
-- avoiding over--heated locations where yields are at historic lows;
-- repeat business with longstanding counterparty relationships, including developers, vendors and agents; and
-- early mover advantage in sector.
Strong residual land value and alternative use options
In addition to robust tenants and long, index -- linked leases, the Group targets assets underpinned by strong residual land value and alternative use options which will preserve capital values. For example, the Group has acquired properties:
-- with low starting rents; -- which are of strategic importance to the housing provider tenant; -- with strong underlying local authority demand; and -- located in areas with a large population and close to local amenities and transport links.
Market opportunity -- rental growth
Inflation has historically outpaced open market rent reviews and it has been steadily increasing since 2016. As set out below, the anticipated continuing outperformance of inflation over open market rental growth forecasts is expected to prove advantageous to the Group's rental growth.
The HM Treasury Forecasts for the Economy (Medium term forecasts, August 2021) shows an average CPI growth forecast of 2.3 per cent per annum from 2020 to 2025 (see below). The Investment Property Forum UK Consensus Forecasts Report (Summer, 2021) shows an average open market rental growth forecast of 1.1 per cent per annum from 2021 to 2025 (see below), which is materially lower than the above mentioned HM Treasury RPI and CPI growth forecasts.
Open market rental growth forecast
Year Open market
rental growth p.a.
2021 -0.7%
---------------------
2022 1.2%
---------------------
2023 1.6%
---------------------
2024 1.6%
---------------------
2025 1.6%
---------------------
Average growth forecast
p.a. 1.1%
---------------------
Source: Investment Property Forum UK Consensus Forecasts (Summer 2021)
CPI forecast
Year CPI p.a.
2021 2.2%
----------
2022 2.8%
----------
2023 2.2%
----------
2024 2.1%
----------
2025 2.0%
----------
Average growth forecast
p.a. 2.3%
----------
Source: HM Treasury Forecasts for the UK Economy (Medium term forecasts, August 2021)
With higher inflation and more subdued open market rental growth, strategically the Company has taken advantage of this economic reality through acquiring inflation -- linked leases. To date 100 per cent of the Company's rental income is linked to CPI. This allows for higher rental growth via rental increases in line with inflation. This climate of continuing inflation together with the fixed low cost of debt (as detailed below) which the Group has secured, is expected to allow for:
-- higher rental growth via rental increases in line with inflation;
-- enhanced dividend yield due to substantial free cash flows generated via the 378 bps spread between triple--net rental income (5.85 per cent average NIY) and low fixed cost of debt (2.07 per cent p.a.), rising to potentially 536 bps by expiry of the 12--year loan facility; and
-- capital growth through: (i) the capitalisation of rental increases following rent reviews; (ii) acquiring mispriced assets where the seller is driven by factors other than price; and (iii) the net purchase price on off market assets being at a discount and therefore, providing scope for 'natural' yield compression.
Debt finance
The Group entered into a new, 12 -- year interest -- only, fixed -- rate, GBP120 million term loan agreement with Scottish Widows on 11 December 2020 (the "Facility"). The loan was fully drawn down on 26 February 2021.
The Facility is repayable in December 2032 and has a fixed all -- in rate payable of 2.07 per cent per annum, for the duration of the 12 -- year loan term.
This fixed interest rate is 378 basis points lower than the Group's average net initial purchase yield on property acquisitions of 5.85 per cent and this spread is expected to rise to approximately 536 bps by expiry of the 12 -- year loan facility (see below). The rate of 2.07 per cent is highly accretive to the Group's anticipated future dividend and mitigates potential interest rate and refinancing risks for the 12 -- year period.
The Facility is secured against the assets acquired by the Group utilising the equity raised on admission in October 2020 and debt drawn down from the Facility.
The full drawing of the Facility reflects a loan -- to -- value ratio of 33 per cent. As set out in the Group's investment policy, the Group will maintain a conservative level of aggregate borrowings with a maximum level of aggregate borrowings of 35 per cent of the Group's gross assets.
As at the date of this report, the Group is in the process of finalising the terms of an additional fixed rate, fixed term, interest only debt GBP130 million facility with an annuity lender.
Responsible investment
The Good Economy Report
In July 2021, the Company instructed The Good Economy Partnership Limited, a leading social
advisory firm specialising in impact measurement, management and reporting, to carry out the first annual independent assessment of the Company's performance against its impact objectives and expected outcomes and to report its findings to the Board (the "Good Economy Report").
See the Company's website (https://www.homereituk.com/) for the full Good Economy Report.
The Company's impact objectives are to:
1. address the social need of those experiencing homelessness;
2. fund high quality homes;
3. form quality partnerships;
4. increase supply of accommodation; and
5. provide good value for money.
Based on the findings of the Good Economy Report, the Board is satisfied that the Company has, to date, met its impact objectives as follows:
Social need
The Company provides long-term accommodation to address the social need of those who are unintentionally homeless or at risk of homelessness. As at May 2021, the Company's properties provided homes for 3,035 people. Residents include people fleeing domestic violence, in poverty and suffering from mental health issues, as well as prison leavers.
The Company's growth is based on local need, as identified by local authorities and their not-for-profit housing partners. As at the date of the Good Economy Report, 79 per cent. of the Company's properties were in the 40 per cent. of local authorities with the highest rates of statutory homelessness in England.
Quality homes
The Company invests in both self-contained flats and Houses of Multiple Occupancy ("HMOs"). However, it will typically only invest in HMOs with fewer than 10 beds and rejects properties that it considers too large and not fit-for-purpose. The Company ensures that its homes are of good quality. As at the date of the Good Economy Report, the Company had invested GBP18.7 million in repurposing and redeveloping its properties (such costs being included within the purchase price paid).
In addition, the Company ensures that schemes are located centrally. As at the date of the Good Economy Report, the Company's properties were on average 196 meters from the nearest transport hub.
All of the Company's properties meet the Minimum Level of Energy Efficiency (EPC E). Even so, the Company aims to improve their energy efficiency and plans to improve all EPC E-graded properties within six months of acquisition and will monitor whether this is achieved.
Quality partnerships
The quality and strength of the Company's operating partners is critical to its positive impact creation. The management team of the Investment Adviser has assessed the market and decided to partner with and support the growth of organisations that have strong local authority support and which welcome the leasing model as a means of expanding their provision of homelessness accommodation.
As at the date of the Good Economy Report, the Company worked with 17 not-for-profit partners. Most of these are relatively small organisations and some have scaled up significantly since working with the Company and have now expanded into new locations.
The management team of the Investment Adviser is fully aware of difficulties that some specialist supported housing organisations encountered after scaling up rapidly using lease-based models and has put in place measures to mitigate this type of risk. The Investment Adviser's policies and processes ensure rigorous due diligence and ongoing monitoring and support of partners. Partners provide a minimum of three hours of support per resident per week. This aims to help residents' transition into living independently.
Increase supply
All of the Company's homes have been newly repurposed as social sector housing and are typically converted from private housing.
The Company has been able to grow by working with dynamic housing partners who have been able to scale up their housing provision significantly since starting partnering with the Company.
Value for money
The Board believes that the Company provides excellent value for money for its housing partners and good value for money for the taxpayer.
Historically, the Company's housing partners have rented properties at private market rates before leasing them to local authorities. Since the Company charges at or near the Local Housing Allowance (LHA), its housing is significantly more affordable for its partners.
Placing residents in the Company's properties is significantly cheaper for local authorities than B&B alternatives. For example, as at the date of the Good Economy Report, in Nottingham, the average rent charged to housing partners was GBP90 per week per bed, which compared to an average of GBP225 per week for a B&B.
What matters most is that the Company is helping to improve the lives of those who are homeless or at risk of homelessness. The Good Economy will deepen its assessment of partner organisations and the outcomes experienced by the Company's residents in the next impact report. To date, the residents that The Good Economy have spoken to were very satisfied with the quality of accommodation and the support from the housing partners is helpful and valued.
Outlook
We are very pleased with the Group's strong performance during what was a very active period, underlining our ability to successfully source and execute on attractively priced, very long -- let and index -- linked property assets leased to robust tenants, while also meeting a critical social need that is unfortunately ongoing.
We remain confident about continuing to deliver both a tangible social impact and attractive inflation -- protected income and capital growth to the Company's shareholders sustainable over the short and longer term, through our diversified high quality portfolio, our growing pipeline of attractive investments and our expanding partnership base.
Case studies
CASE STUDY: ELAINE
TGE spoke to Elaine, a resident for one month at Lotus Sanctuary, living in a shared flat. Coming out of prison and having previously been placed in very poor accommodation, she found Lotus Sanctuary to be a refreshing surprise, the type of place she was hoping for but didn't expect to get.
Her previous experience of resettlement was completely different, being moved around a lot and placed in a poor quality city guest house with a toxic environment of widespread drug use and violence - somewhere she "never should have been put". In contrast, Elaine has appreciated the increased stability and support her home at Lotus has provided, allowing her to feel safe and secure.
The quality of accommodation was a pleasant surprise for Elaine, having her own space and shower, and even a TV. She spoke of the flat as "lovely and homely" and highlighted the care that goes into selecting a mix of residents with different backgrounds for each flat, which she has found helpful as an ex-drug user.
The city centre location is also highly convenient. Elaine described the support she's received since moving in as 'brilliant', as the Lotus Sanctuary staff held the room for her and fought for her to be somewhere that would work for her.
Having a welcoming and stable home has allowed Elaine to start thinking about moving to a single flat (also within Lotus Sanctuary) before living independently, and to feel like she's able to work towards something.
CASE STUDY - ANNA
Anna has experienced a huge positive difference in her mental health and wellbeing since moving to her Home REIT home - 5 months prior. Before moving in, Anna experienced street homelessness and drug problems. She spoke of this time as the lowest point of her life and herself as 'close to giving up'. Anna initially lived in a shared apartment, before progressing recently to a studio flat. She described her new home and the support from staff as 'life-saving', now feeling safe and at home in her flat, which she spoke of as not only a nice building but also as having all the amenities needed.
The support Anna has received has been invaluable in helping her health improve. TGE heard that her previous experiences had made it more difficult for her to open up and trust staff, as she felt she had lost the flow of being around people. Anna has benefitted from the persistence and accessibility of staff and how support has been tailored to meet her needs. She described the staff as 'helping to break her walls down and to trust', and her self-assessment of outcomes has improved from low when initially moving in to 'top of the scale'.
Having a stable home and increased mental wellbeing has allowed Anna to reconnect with her family and kids again and start to look forward to transitioning into her own house with her children again once she is ready. The city-centre location has been convenient to see her brother and family locally, who are letting her back into their lives and proud of her progress. As she didn't finish school, she has been using this time to increase her education and training, with courses in English, Maths and IT as well as soon learning to drive. Anna hopes to start an apprenticeship soon, and is making the most of this time to increase her career opportunities before becoming a mother again.
CASE STUDY - ESME
Coming out of care, Esme was sofa-surfing for a year and moving around a lot after being kicked out by her carer. Her experience of her new home has been highly positive. The support from staff has helped her start applying for further training and jobs. Esme spoke of the staff as able to "help me with anything - it's crazy how much they can help", and has appreciated their accessibility. She has started applying for jobs and hopes to work in the care sector.
Esme described her home as a "beautiful place" that is nice, friendly and clean. The relationships she has built have been important to her, speaking of the support as "a big family where everyone cares for each other". The other accommodation options offered to her had a very different feel, whereas she noted that "people are happy" in her current building. She has been pleased with the progress she has made with her cooking and hopes to move into her own flat or house when she is able.
Alvarium Home REIT Advisors Limited
10 November 2021
References
(1) Housing (Homeless Persons) Act 1977, Housing Act 1996; Homelessness Act 2002; Homelessness Reduction Act 2017 and Domestic Abuse Act 2021
(2) The Independent: We are in a housing emergency - from 'sex for rent' to evictions, the government needs to act by Polly Neate; 10 January 2021
(3) Ministry of Housing, Communities & Local Government: Statutory Homelessness Annual Report 2019-2020, England; 1 October 2020
(4) https://www.crisis.org.uk/about -- us/media -- centre/more -- than -- 200 -- 000 -- households -- across -- england -- will -- be -- homeless -- this -- christmas/
(5) https://england.shelter.org.uk/media/press_release/shelter_issues_winter_warning_as_someone_calls_its_emergency_helpline_every_minute_
(6) https://bigissue.com/news/housing/the-big-issues-urgent-plan-to-stop-mass-homelessness/
(7) https://www.bigissue.com/news/housing/britains-homelessness-shame-cold-hard-facts/
(8) https://www.london.gov.uk/press-releases/assembly/third-more-rough-sleepers-on-londonsstreets#::text=Our per cent20data per cent20analysis per cent20found per cent3A,increase per cent20from per cent20two per cent20years per cent20ago
(9) https://inews.co.uk/news/uk/homelessness-back-rise-covid-emergency-measures-wear-off-1195138
(10) https://www.crisis.org.uk/about-us/media-centre/more-than-200-000-households-across-england-will-be-homeless-this-christmas/
(11) https://www.crisis.org.uk/media/236816/the_hidden_truth_about_homelessness_es.pdf
(12) https://www.crisis.org.uk/ending-homelessness/about-homelessness/
(13) Office for National Statistics: Deaths of Homeless People in England and Wales: 2019: 14 December 2020
(14) Office for National Statistics: Deaths of Homeless People in England and Wales: 2019: 14 December 2020
(15) https://www.bigissue.com/news/housing/britains-homelessness-shame-cold-hard-facts/
(16) https://england.shelter.org.uk/media/press_releases/articles/a_household_became_homeless_every_4_minutes_in_england_in_the_last_year
(17) Shelter; This is England: A Picture of Homelessness; December 2019
(18) Ministry of Housing, Communities & Local Government: Statutory Homelessness Live Tables
(19) Ministry of Housing, Communities & Local Government: Statutory Homelessness Live Tables
(20) https://www.womensaid.org.uk/women-escaping-domestic-abuse-left-at-risk-of-homelessness/
(21) Ministry of Housing, Communities and Local Government: Understanding the Multiple Vulnerabilities, Support Needs and Experiences of People who Sleep Rough in England; December 2020
(22) https://www.theguardian.com/uk-news/2020/jul/08/thousands-of-high-risk-offenders-in-uk-freed-into-homelessness and https://insidetime.org/2000-leave-prison-homelessduringlockdown and https://insidetime.org/2000-leave-prison-homeless-during-lockdown
(23) Alexander Newton, Xennor May, Steven Eames & Maryam Ahmad (Ministry of Justice); https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/814650/economic-social-costs-reoffending.pdf ; 2019
(24) https://www.crisis.org.uk/ending-homelessness/law-and-rights/prison-leavers/
(25) https://www.theguardian.com/society/2019/aug/12/two-thirds-of-homeless-ex-prisoners-reoffend-within-a-year
(26) https://www.prisonstudies.org/sites/default/files/resources/downloads/reducing_report20pdf.pdf
(27) Housing (Homeless Persons) Act 1977, Housing Act 1996; Homelessness Act 2002 and Homelessness Reduction Act 2017
(28) Wendy Wilson and Cassie Barton; House of Commons Briefing Paper Number 02110: Households in temporary accommodation (England); 26 July 2018
(29) https://commonslibrary.parliament.uk/research-briefings/sn02110
(30) Suzanne Fitzpatrick, Hal Pawson, Glen Bramley, Jenny Wood, Beth Watts, Mark Stephens & Janice Blenkinsopp. Institute for Social Policy, Housing and Equalities Research (I-SPHERE), and The Urban Institute, Heriot-Watt University; City Futures Research Centre, University of New South Wales: Crisis' Homeless Monitor 2019: May 2019
(31) https://england.shelter.org.uk/media/press_releases/articles/homelessness_crisis_costs_councils_over_1bn_in_just_one_year (Source contains full details of Shelter's calculation methods)
(32) Shelter; Homelessness crisis costs councils over GBP1bn in just one year; 14 November 2019 (updated via UK Government live homelessness statistics; Q1 2021). Source contains full details of Shelter's calculation methods
(33) Ministry of Housing, Communities & Local Government: Statutory Homelessness Annual Report 2019-2020, England; 1 October 2020
The Investment Adviser
The Investment Adviser comprises property, legal and finance professionals with significant experience in real estate. The team has capitalised and transacted over GBP2 billion of commercial and residential property assets with a particular focus on accessing secure, long-let and index-linked UK real estate through both forward funding and built asset structures.
The core management team (whose details are set out below) is supported by a team of other finance, legal, property and compliance professionals and administrative support staff. The key individuals responsible for executing the Company's investment strategy are:
Jamie Beale (Partner/Fund Manager)
Jamie has significant experience in both public and private real estate markets, specialising in the long income, social housing and forward funding commercial real estate space.
Prior to joining Alvarium, Jamie spent six years in the City of London as a real estate lawyer where he acted for leading developers and property funds on a variety of deals, ranging from large scale residential developments to substantial commercial property transactions.
Jamie co-founded a private social impact real estate fund in 2018, which has grown to become one of the largest social impact funds in Europe.
Gareth Jones (Partner/Fund Manager/CFO)
Gareth has been active across various disciplines across UK equities and fund management market for over 10 years after beginning his career qualifying as a chartered accountant with Ernst & Young.
Having performed as a CFO for both public and private companies Gareth went into fund management in 2014, overseeing the finance function for a newly established social housing private equity fund. Prior to joining Alvarium in 2018, he was a director at a listed social housing fund.
Charlotte Fletcher (Partner/Head of Transactions)
Charlotte is a qualified solicitor with responsibility for managing and implementing transactions. Prior to joining the team, Charlotte trained and practised within the commercial real estate team at Travers Smith LLP, where she advised property funds, developers and lenders on a range of matters, including commercial and residential development and forward funding, acquisitions and disposal, re-financing and landlord and tenant work.
Investment objective and policy
Investment objective
The investment objective of the Company is to deliver inflation-protected income and capital growth over the medium term for shareholders through funding the acquisition and creation of high-quality homeless accommodation across the UK let on long-term index-linked leases.
Investment policy
The Company will target inflation-protected income and capital returns by investing in a diversified portfolio of accommodation for people facing homelessness, let or pre-let to registered charities, housing associations, community interest companies and other regulated organisations that receive housing benefit or comparable funding from local or central government, on very long-term and index-linked leases.
The Company will invest in these assets directly or through holdings in special purpose vehicles and will seek to acquire high-quality properties, taking into account the following key investment considerations:
-- the properties will provide high-quality accommodation to homeless people and vulnerable individuals in need of housing;
-- each property should demonstrate strong residual land value characteristics; -- very long unexpired lease terms (typically 20 to 30 years to expiry or first break); -- all leases to be 'triple net, full repairing and insuring leases'; and -- rent reviews to be inflation-linked or contain fixed uplifts.
The Company will be dedicated to tackling homelessness in the UK and will target a wide range of subsectors within homelessness including, but not limited to, women fleeing domestic violence, people leaving prison, individuals suffering from mental health or drug and alcohol issues and foster care leavers.
The Company will seek to only acquire assets let or pre-let to robust tenants on long leases (typically 20 to 30 years to expiry or first break), with index-linked or fixed rental uplifts, in order to provide security of income and low cost of debt. The Company will only invest in assets with leases containing regular upward-only rent reviews. These reviews will typically link the growth in rents to an inflation index such as CPI (with potentially a minimum and maximum level) or alternatively may have a fixed annual growth rate.
The Company will neither undertake any direct development activity nor assume direct development risk. However, the Company may invest in fixed-price forward funded developments, provided they are pre-let to an acceptable tenant and full planning permission is in place. In such circumstances, the Company will seek to negotiate the receipt of immediate income from the asset, such that the developer is paying the Company a return on its investment during the construction phase and prior to the tenant commencing rental payments under the terms of the lease.
Where the Company invests in forward funded developments:
-- the Company will not acquire the land until full planning consent and tenant pre-lets are in place;
-- the Company will pay a fixed price for the forward funded purchase, covering land, construction cost and developer's profit;
-- all cost overruns will be the contractual responsibility of the developer/contractor; and
-- if there is a delay to completion of the works, this will primarily be a risk for the developer/contractor, as they will pay the Company interest/rent until practical completion occurs.
The Company may utilise derivative instruments for efficient portfolio management. The Company may engage in full or partial interest rate hedging or otherwise seek to mitigate the risk of interest rate increases as part of the Company's portfolio management.
The Company will not invest in other investment funds.
Investment restrictions
The Company will invest and manage its assets with the objective of spreading risk. In order to achieve a portfolio that is diversified by property, tenant and location, the Company will be subject to the following investment restrictions:
-- the value of no single property, at the time of acquisition, will represent more than 5 per cent. of the higher of: (i) Gross Asset Value; or (ii) where the Company has not yet become fully geared, Gross Asset Value adjusted on the assumption that the Company's property portfolio is geared at 35 per cent. loan to value;
-- the aggregate maximum exposure to any one tenant will not be greater than 15 per cent. of the higher of: (i) Gross Asset Value; or (ii) where the Company has not yet become fully geared, Gross Asset Value adjusted on the assumption that the Company's property portfolio is geared at 35 per cent. loan to value;
-- the aggregate maximum exposure to properties located within the boundary of any one local authority will not be greater than 15 per cent. of the higher of: (i) Gross Asset Value; or (ii) where the Company has not yet become fully geared, Gross Asset Value adjusted on the assumption that the Company's property portfolio is geared at 35 per cent. loan to value;
-- the aggregate maximum exposure to forward funded developments will not be greater than 20 per cent. of the higher of: (i) Gross Asset Value; or (ii) where the Company has not yet become fully geared, Gross Asset Value adjusted on the assumption that the Company's property portfolio is geared at 35 per cent. loan to value; and
-- the aggregate maximum exposure to any single contractor in connection with any forward funded developments will not be greater than 10 per cent. of the higher of: (i) Gross Asset Value; or (ii) where the Company has not yet become fully geared, Gross Asset Value adjusted on the assumption that the Company's property portfolio is geared at 35 per cent. loan to value.
The investment limits detailed above will apply once the Gross Issue Proceeds are fully invested and will be calculated at the time of investment.
The Directors are focused on delivering capital growth over the medium term and intend to reinvest proceeds from future potential disposals in assets in accordance with the Company's investment policy. However, should the Company fail to re-invest the proceeds or part proceeds from any disposal within 12 months of receipt of the net proceeds, the Directors intend to return those proceeds or part proceeds to shareholders in a tax efficient manner as determined by the Directors from time to time.
Cash held for working capital purposes or received by the Company pending reinvestment or distribution will be held in sterling only and invested in cash, cash equivalents, near cash instruments and money market instruments.
The Directors currently intend at all times to conduct the affairs of the Company so as to enable it to qualify as a REIT for the purposes of Part 12 of the CTA 2010 (and the regulations made thereunder).
The Company will at all times invest and manage its assets in a way that is consistent with its objective of spreading investment risk and in accordance with its published investment policy and will not at any time conduct any trading activity which is significant in the context of the business of the Company as a whole.
Borrowing policy
The Company will seek to utilise borrowings to enhance equity returns.
The level of borrowing will be on a prudent basis for the asset class, and will seek to achieve a low cost of funds, whilst maintaining flexibility in the underlying security requirements and the structure of the Company.
The Directors intend that the Company will maintain a conservative level of aggregate borrowings with a maximum level of aggregate borrowings of 35 per cent. of the Company's Gross Asset Value at the time of drawdown of the relevant borrowings.
Debt will be secured at the asset level and potentially at the Company or SPV level, depending on the optimal structure for the Company and having consideration to key metrics including lender diversity, debt type and maturity profiles.
In the event of a breach of the investment policy and investment restrictions set out above, the Directors, upon becoming aware of such breach, will consider whether the breach is material, and if it is, notification will be made to a Regulatory Information Service.
No material change will be made to the investment policy without the approval of shareholders by ordinary resolution at a general meeting, which will also be notified by a regulatory information service announcement.
ESG report
This Environmental, Social and Governance Policy applies to Home REIT plc (the "Company") and all its subsidiary companies (both directly and indirectly held) (together, the "Group").
The Board of Directors, together with the Investment Adviser (together, "we") have a responsibility to conduct the Company's investment business in a socially responsible way and, in managing a social impact fund, we recognise that our investors may have the same values.
We seek to provide shareholders with regular, attractive income, together with capital growth over the medium term in accordance with the Company's investment policy and objective which this policy does not alter or supersede. This policy documents the Company's commitment to and process of carrying out investing activity at the lowest possible cost to, or indeed to the benefit of, the environment whilst fulfilling the key objective of providing housing for homeless people.
ENVIRONMENTAL
We recognise that our investment activities directly and indirectly impact the environment. We are committed to managing those environmental impacts in the most effective and responsible manner and seek continuously to improve our level of environmental performance.
Where consistent with the Board's fiduciary responsibilities, we will encourage the Company's tenants to reduce the carbon footprint of assets coming under their control by virtue of their leases and will explore ways in which the Company can support its tenants to meet this objective.
Where appropriate, we engage specialist consultants to evaluate the sustainable characteristics of properties as part of our pre-acquisition due diligence, identifying risks to future financial performance and exploring opportunities to create additional value or to improve environmental performance. We will also endeavour to assess the impact of new acquisitions on the overall environmental performance of the Company.
We will not ordinarily acquire buildings that fall short of our minimum standards unless we are able to demonstrate that affordable improvements can be made. We will not ordinarily acquire buildings, for example, with an Energy Performance Certificate rating of less than D without having an affordable plan in place to improve the rating during the period of the Company's ownership.
Where making a forward commitment to acquire new developments, we will use our influence to encourage the tenant, developer and its contractors to consider sustainability-related issues in the design, construction and fit-out of buildings. We expect the environmental performance of new developments to exceed the minimum standards laid down by building regulations and planning policy.
We expect all new buildings to have Energy Performance Certificates rated at C or higher and that the design will incorporate enhanced insulation, advanced energy efficiency and a suitable range of water-saving features.
Aside from managing assets in an environmentally responsible manner, we see sustainability as both a threat and as an opportunity. There is a risk that the future value of some properties may be adversely affected by issues of sustainability. We have systems in place to enable us to monitor and then manage these emerging risks as part of our overall approach to risk management.
Conversely, we believe that some assets may experience a positive change in value as a result of the move towards a lower carbon economy and we are always looking for opportunities to create added value through the creation of more sustainable assets when considering asset allocation and stock selection.
Issues
Sustainability is considered under these key headings:
-- Financial performance -- CO(2) emissions -- Energy -- Accessibility -- Physical risks -- Water -- Waste -- Engagement
Some of these issues may have implications for the future financial performance of the Group. Others relate to "best practice" and social responsibility but we would not expect them to have an impact on the Group's financial performance. Our policy is intended to:
-- Promote environmental protection -- Promote pollution reduction -- Promote sustainable development -- Anticipate future policy impacts
-- Identify risks from the physical impacts of climate change and develop mitigation strategies
-- Promote reduction of waste
Due to the ever-changing nature of sustainability we will continue to improve and update the relevant criteria that are used within the investment process.
While keeping our focus on maximising individual assets' financial performance, we account for our sustainability objectives by incorporating them into our business planning and reporting. By integrating such issues into the investment appraisal process we aim to minimise downside risks and capitalise on opportunities for enhancing returns wherever possible.
Financial Performance
We assess the likely implications of climate change related government policies on each individual asset and on the overall performance of the Group.
We identify properties where there is a risk of losing income from existing tenants through migration to properties with better environmental qualities and quantify the potential impact of lower than average tenant retention rates, longer voids and higher costs on projected income returns.
We ensure that risks from sustainability-related issues are consistent with our defensive strategy for investing and reducing over-exposure to sustainability-related risk, during asset allocation and stock selection decisions and in the day to day management of the portfolio.
We identify the cost of improvements that may be required, either to protect the future quality of an asset or as a result of statutory interventions and ensure that they are properly reflected in individual asset management plans.
We monitor the emerging impact of sustainability-related issues on values and will amend performance projections and offers for future transactions in the light of hard evidence as it emerges.
Energy
Energy is the most significant contributor to CO(2) emissions from the built environment and during the building of new forward-funded assets we are committed to promoting reduction of consumption.
The Company does not directly operate or manage its assets. Therefore, we have no direct control over the way that energy is used by our tenants and have no ability to improve energy efficiency as responsibility for buildings has been devolved to our tenants. Despite this, we will engage with our tenants to encourage the more efficient use of energy and to promote energy efficiency improvements.
Few tenants are obliged to provide details of consumption and large organisations are often unable to identify consumption at individual buildings where they are part of a large operational estate. Where appropriate, we undertake a high-level assessment of energy efficiency and identify ways in which energy efficiency can be improved. Where analysis suggests that energy savings are proportionate to costs, we invite tenants to undertake a more detailed assessment and identify ways in which energy efficiency can be improved.
Accessibility
We recognise that, after the consumption of energy, the most significant source of CO(2) emissions is from transport and that assets which are less accessible, based on the criteria set out below, may prove less desirable to occupiers for whom energy cost is a consideration and/or to those that share our values.
We consider the accessibility of all assets as part of our investment due diligence.
There is no common measure of accessibility, but our analysis is based on three factors:
-- Distance from public transport: Over-reliance on private transport generates higher emissions than properties which are well served by public transport. Offices, residential and retail properties which are more than one kilometre from suitable public transport may be considered "inaccessible".
-- Congestion: Properties which rely on road transport should be within easy reach of the national motorway network and accessible from a major trunk road without being ensnarled in stationary traffic. Properties which are more than a 15-minute drive-time from the nearest motorway or major trunk road may be considered "inaccessible".
-- Car parking: The adequate provision of car parking can be a major contributor to the value of properties. Under-provision, displacing vehicles into neighbouring streets, will have a negative impact on the quality of the surrounding area. Over-provision may encourage the unnecessary use of private transport. Buildings which differ +/- 20 per cent from local standards may be considered "inaccessible".
Physical Risks
We recognise that some properties are at risk of flooding and that, in some locations, the risk of flooding may worsen over time as a result of climate change-related issues. In some cases, the risk is not reflected in current market values but that may change.
We identify which assets are at risk from flooding and forecast the extent to which values may be compromised. We can then ensure that the exposure of the Group is consistent with our appetite for risk.
On acquiring new assets, we have regard both to the impact of flood issues on the future performance of each asset and its impact on the overall exposure of the Group to flood-related risks.
Water
We recognise that water is a scarce commodity in some regions and that, over time, scarcity is likely to affect an increasing number of territories. We consider ourselves to be under an obligation to use all natural resources, including water, responsibly.
To this end, we promote the use of water-saving measures in buildings devolved to our tenants. We encourage our tenants to identify water saving measures that can be achieved at little or no cost.
We also have regard to water saving opportunities during the regular repair, refurbishment and replacement of water-related services.
Waste
We support the principle of "re-use, recycle, reduce" and its application to waste.
We encourage our tenants to recycle waste and to reduce waste sent to landfill sites.
Engagement
We recognise that the largest impact we can make on the environment is through influencing the behaviour of others - our developers, our service providers and our tenants.
We ensure all our counterparties are aware of our policy, objectives and targets and that relevant individuals have the knowledge and skills necessary to implement the strategy in their day-to-day roles. We provide appropriate training to our staff.
Through our procurement policies and practices, we encourage our counterparties to minimise the negative impact of their operations on the environment.
We engage with our tenants to encourage the sustainable management of areas under their direct control and in the way that common parts and shared services are used. We encourage tenants to make improvements to energy efficiency and, where appropriate, prepare high level "sustainable design guides" for tenants' reference in preparing plans for fit outs and periodic refurbishments.
We identify tenants whose businesses are most influenced by sustainability-related issues and who have the most advanced Environmental Policies and explore ways in which tenants' aspirations to reduce carbon emissions can be supported and encouraged.
SOCIAL
The Company is dedicated to fighting homelessness through addressing the severe shortage of suitable housing for homeless people and will target investments exclusively in the UK, focussing on the delivery of high-quality homeless accommodation. Each asset will be let to a specialist housing association/registered charity on full repairing and insuring leases and we will not be responsible for any repairing, management or maintenance obligations.
We have identified the major stakeholders in the Company's business and endeavour to consider the impact of our decisions upon these.
Shareholders: As a public company listed on the London Stock Exchange, the Company is subject to the Listing Rules and the Disclosure Guidance and Transparency Rules. The Listing Rules include a listing principle that a listed company must ensure that it treats all holders of the same class of shares that are in the same position equally in respect of the rights attaching to such shares. We use our best endeavours to abide by the Listing Rules at all times.
Employees: As a real estate investment trust, the Company does not have any employees as all its functions are carried out by third party service providers. However, the Company has a Board of Directors comprised of non- executive directors who receive fixed fee remuneration. The Company's Board receive regular market and regulatory updates from its professional advisors such as the Investment Adviser, Broker and Company Secretary and attend seminars where required. Diversity is at the centre of the Company's recruitment policy and future director recruitment processes will reflect this.
Tenants: The Investment Adviser performs extensive due diligence before a tenant is selected, and during the tenancy agreement we maintain a constructive relationship. We take into account our tenants' changing needs and we use our expertise to assist them in any way within our ability.
Service Providers: A list of the Company's key service providers can be found in the Company's Prospectus. The Company conducts all its business through its key service providers. Before the engagement of a service provider, we ensure that our business outlook as well as our values are similar. The Company performs an annual evaluation of all of its key service providers to ensure inter alia that our values remain aligned.
GOVERNANCE
Our investing activities are overseen by the Investment Adviser, the Company's Board of Directors and the Company's AIFM, who work together to ensure proper execution of our investment strategy, consistent application of our policies, compliance with our procedures and compliance with local and regional regulatory requirements.
Compliance
The Company was incorporated and registered in England and Wales as a public company limited by shares. The Company is not authorised or regulated as a collective investment scheme by the FCA, however it is subject to the Listing Rules and the Disclosure Guidance and Transparency Rules. The principal legislation under which the Company operates is the Companies Act 2006. The Directors intend, at all times, to continue to conduct the affairs of the Company to enable to continue to qualify as a REIT for the purposes of Part 12 of the CTA 2010 (and the regulations made thereunder).
The Company seeks to comply with the AIC Code of Corporate Governance (the "AIC Code") and will report on its compliance with the AIC Code each year in its Annual Report.
Risk Management
Our governance model is designed to manage investment risk and operational risk.
Investment Risk
The Company at all times invests and manages its assets in a way that is consistent with its objective of spreading investment risk and in accordance with its published investment policy and will not at any time conduct any trading activity which is significant in the context of the business of the Company as a whole.
Operational Risk
The Investment Adviser endeavours to follow best practice recommendations as established by EPRA and assess operational risk on a continuous basis and report regularly to the Company's Board.
RESPONSIBLE INVESTMENT
The Good Economy
The Investment Adviser has commissioned The Good Economy, a leading social impact advisory firm, specialising in impact measurement, management and reporting to (i) further support the Company in developing its impact assessment methodology and (ii) carry out an independent review of the impact performance of the Company on an annual basis and publish a report detailing this review.
UN Principles of Responsible Investment
The Investment Adviser is a signatory to the UN-supported Principles of Responsible Investment ("PRI") which represent a global standard for asset owners, investment advisers and service providers to incorporate environmental, social, and corporate governance policies into investment practice. As a signatory to the PRI, the Investment Adviser is also required to report annually on its responsible investment activities and in accordance with the PRI's reporting framework. These reporting requirements aim to ensure signatories' accountability and transparency and facilitate feedback from which signatories can then develop and learn.
Signatories to the PRI recognise that they have a duty to act in the best long-term interests of their investors and, by applying the PRI, aim to align their investors with broader objectives of society. Therefore, where consistent with its fiduciary responsibilities, the Investment Adviser has committed to:
-- Incorporate ESG issues into its investment analysis and decision-making processes. -- Be an active owner and incorporate ESG issues into ownership policies and practices. -- Seek appropriate disclosure on ESG issues by any entities in which it invests. -- Promote acceptance and implementation of the PRI within the investment industry.
-- Work with the PRI Secretariat and other signatories to enhance their effectiveness in implementing the PRI.
-- Report on activities and progress towards implementing the PRI.
UN Sustainable Development Goals
The United Nations Sustainable Development Goals were adopted by all UN Member States in 2015, as part of the 2030 Agenda for Sustainable Development. These goals are designed to act as a blueprint to achieve a better and more sustainable future for all.
As part of its investment objective, the Company is committed to contributing (whether directly or indirectly) to the implementation of the following goals:
-- Goal 1: End poverty in all its forms everywhere -- Goal 3: Ensure healthy lives and promote well-being for all at all ages
-- Goal 8: Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all
-- Goal 10: Reduce inequality within and among countries -- Goal 11: Make cities and human settlements inclusive, safe, resilient and sustainable -- Goal 13: Take urgent action to combat climate change and its impacts
Ownership
The Company's Investment Adviser is the owner of this policy. It shall be subject to annual review. The Investment Adviser, in consultation with the Board of Directors of the Company, shall have authority to vary this policy whenever necessary or appropriate.
Key performance indicators
The Company's objective is to deliver attractive, low risk returns and positive social impact to shareholders, by executing its investment policy.
Set out below are the key performance indicators ("KPIs") that are used to track the Group's performance.
KPI and definition Relevance to Performance Results
strategy
1. Total NAV Total NAV return 8.9 per cent Performance ahead
return measures the of expectations
Total NAV return ultimate outcome with medium term
measures the of our strategy, target of 8 per
change in the which is to deliver cent exceeded.
EPRA NTA and value to our
dividends during shareholders
the period as through our portfolio
a percentage and to deliver
of EPRA NTA at a secure and
the start of growing income
the period. We stream.
are targeting
a minimum of
8 per cent per
annum over the
medium term.
------------------------------ --------------- --------------------------
2. Dividend per The dividend 1.66 pence Performance in
share reflects our line with expectations.
Dividends paid ability to deliver Post period end
to shareholders a low risk but dividend declared
and proposed growing income of 0.84 pence
in relation to stream from our per share takes
a period. Dividends portfolio and total dividend
declared post is a key element paid in relation
period end not of our total to period end
included. NAV return. As of 2.5 pence
the first interim per share.
dividend was
paid post period
end it is not
reflected in
this assessment.
------------------------------ --------------- --------------------------
3. Adjusted earnings The Adjusted 2.9 pence Performance ahead
per share earnings per of expectations
Post-tax Adjusted share reflects as initial target
earnings per our ability to of 2.5 pence
share attributable generate income per share exceeded.
to shareholders. from our portfolio,
Calculation takes which ultimately
into account underpins our
average shares dividend payments.
in issue from
listing in October
2020 to period
end.
------------------------------ --------------- --------------------------
4. Total expense The total expense 1.41 per cent Performance in
ratio ratio is a key line with expectations
The ratio of measure of our with total expense
total operating operational excellence. ratio being below
expenses, including Maintaining a 1.5 per cent.
management fees low-cost base
expressed as supports our
a percentage ability to pay
of the average dividends.
net asset value.
Note: this calculation
excludes GBP75,000
of costs relating
to the share
premium cancellation
as non-recurring.
The annualised
figure has been
calculated commencing
from the IPO
date.
------------------------------ --------------- --------------------------
5. EPRA NTA The NTA reflects 105.0 pence Performance ahead
The value of our ability to of expectations
our assets (based grow the portfolio with a 7.2 per
on an independent and to add value cent uplift in
valuation) less to it throughout the period being
the book value the life cycle the reason Total
of our liabilities, of our assets. NAV return KPI
attributable was exceeded.
to shareholders
and calculated
in accordance
with EPRA guidelines.
At the period
end there were
no differences
between EPRA
NTA and IFRS
NAV.
------------------------------ --------------- --------------------------
6. Pro-forma The LTV measures 32.4 per cent Performance marginally
LTV the prudence ahead of expectations
The proportion of our financing coming in below
of our total strategy, balancing 35 per cent.
assets that is the additional
funded by borrowings. returns and portfolio
Calculated as diversification
gross borrowings that come with
as proportion using debt against
of total assets the need to successfully
adjusted for manage risk.
working capital.
Our target maximum
LTV is 35 per
cent.
------------------------------ --------------- --------------------------
7. Weighted average The WAULT is 24.3 years Performance in
unexpired lease a key measure line with expectations
term of the quality given the short
The average unexpired of our portfolio. timeframe between
lease term of Long lease terms IPO and period
the property underpin the end.
portfolio weighted security and
by annual passing predictability
rents. Our target of our income
WAULT is a minimum stream.
of 20-years.
------------------------------ --------------- --------------------------
8. Percentage This measures 100 per cent Performance in
of contracted the extent to line with expectations.
rents index-linked which we are
or fixed investing in
This takes the line with our
total value of investment objective,
contracted rents to provide inflation-linked
that contain returns.
rent reviews
linked to inflation
or fixed uplifts.
------------------------------ --------------- --------------------------
9. Homeless beds This measures 3,846 beds Performance in
created the extent of line with expectations.
This takes into the impact our
account the number investment has
of bed spaces on the homelessness
created by Home issue in the
REIT since inception. UK.
------------------------------ --------------- --------------------------
EPRA performance measures
The table below shows additional performance measures, calculated in accordance with the Best Practices Recommendations of EPRA. We provide these measures to aid comparison with other European real estate businesses.
Reconciliations of EPRA Earnings and NAV measures are included in Notes 21 and 22 to the consolidated financial statements respectively.
Measure and Definition Purpose Performance
=========================== ============================================ ==============
1. EPRA Earnings A key measure of a company's underlying 2.9 pence
operating results and an indication
of the extent to which current dividend
payments are supported by earnings.
=========================== ============================================ ==============
2. EPRA Net Tangible Assumes that entities buy and sell 105.0 pence
Assets ("NTA") assets, thereby crystallising certain
levels of unavoidable deferred tax.
=========================== ============================================ ==============
3. EPRA Net Reinstatement Assumes that entities never sell 111.5 pence
Value ("NRV") assets and aims to represent the
value required to rebuild the entity.
=========================== ============================================ ==============
4. EPRA Net Disposal Represents the shareholders' value 107.8 pence
Value ("NDV") under a disposal scenario, where
deferred tax, financial instruments
and certain other adjustments are
calculated to the full extent of
their liability, net of any resulting
tax.
=========================== ============================================ ==============
5. EPRA Net Initial EPRA NIY is annualised net rents 5.32 per
Yield ("NIY") on investment properties as a percentage cent
of the investment property valuation,
less purchaser's costs.
=========================== ============================================ ==============
6. EPRA 'Topped-Up' The 'topped-up' measure incorporates 6.4 per cent
NIY an adjustment to the EPRA NIY in
respect of the expiration of rent-free
periods (or other unexpired lease
incentives such as discounted rent
periods and step rents).
=========================== ============================================ ==============
7. EPRA Vacancy A 'pure' (per cent) measure of investment 0 per cent
property space that is vacant, based
on ERV.
=========================== ============================================ ==============
8. EPRA Cost Ratio A key measure to enable meaningful 27.0 per
measurement of the changes in a company's cent
operating costs.
=========================== ============================================ ==============
Principal risks and uncertainties
The Prospectus issued in September 2021 includes details of risks faced by the business. The Board considers that the principal risks and uncertainties faced by the Group are as follows:
Risk Mitigation
====================================== ==================================================
Global pandemic
====================================== ==================================================
COVID-19 global pandemic - The Board monitors the business continuity
rapid spread of infectious position of each of our key service
disease has caused governments providers to ensure adequate procedures
to implement policies to restrict are in place to limit the impact on
travel and take other measures the Company.
to prevent its spread, resulting The Board, Investment Adviser and key
in a slowdown to the economy, members of the management team have
significant share price volatility, been working remotely since inception.
changes to the working habits Regular communication is maintained
for our key service providers, between the Board, the Investment Adviser,
and unprecedented disruption tenants and key service providers.
to many of our tenants' businesses. The Investment Adviser is closely monitoring
the impact on our assets and on our
tenants' ability to meet rent obligations
and regularly reports the position to
the Board.
The Board is committed to providing
all relevant information to the market
on a timely basis to foster good communication
with our shareholders and other stakeholders.
Further detail of this is given in the
going concern section of the Annual
Report.
====================================== ==================================================
Investment strategy and operations
====================================== ==================================================
The Company may not achieve The Board regularly reviews the Company's
its investment objective or investment performance against its stated
return objective. objective in relation to deployment,
The Company has a limited purchase yields achieved, debt finance
operating history and targeted costs/availability, dividends, and total
returns are based on estimates shareholder return.
and assumptions subject to The Investment Adviser's senior management
significant uncertainties team has extensive experience in executing
and contingencies. real estate investments in strategies
The Company may face delays similar to that of the Company.
in deployment of proceeds The Investment Adviser has identified
and may not be able to find a strong pipeline of opportunities and
suitable investments on acceptable continues to deploy capital well within
terms. original timescales and expected yields.
====================================== ==================================================
Real estate
====================================== ==================================================
Performance will be subject The Investment Adviser and the Board
to the condition of property monitor the position on a regular basis.
markets in the UK - a significant Performance in terms of underlying Investment
downturn in the underlying Property valuation and rent collection
value of the Company's investment has remained robust throughout the COVID-19
property would impact shareholder pandemic.
returns and ability to meet The long-term nature of the asset class's
banking covenants. cash flows underpinned by central government
support means volatility is kept to
a minimum which is further underpinned
by 100 per cent of the Company's leases
being indexed linked with a minimum
uplift per annum of 1 per cent.
The Company's current LTV is 32.4 per
cent (against a maximum target of 35%)
giving significant head room in relation
to the default LTV banking covenant
of 50 per cent.
====================================== ==================================================
The Group's investments are The Company is expected and has planned
illiquid and may be difficult to hold its investments on a long-term
to realise at a particular basis, and therefore it is unlikely
time which could put the Company's that quick disposals will be required.
Balance Sheet under strain. The Investment Adviser and the Board
monitor the position on a regular basis
maintaining a cash buffer on the Balance
Sheet for any short-term requirements.
Current conditions and valuation, supported
by recent transactions point to disposals
at holding value or better if required.
====================================== ==================================================
Risk of tenants defaulting The Group undertakes thorough due diligence
- dividends payable by the before acquisition and acquires assets
Group and its ability to service let to strong tenants with track records
the Group's debt will be dependent in servicing the sector giving confidence
on the income from the properties that they will be able to pay the rents
it owns. Failure by one or as and when they are due. In addition,
more tenants to comply with as part of the transaction, contingencies
their rental obligations could are put in place to further strengthen
affect the ability of the tenant balance sheets.
Company to secure dividends The credit quality of the tenants is
and meet banking covenants assessed by the Investment Adviser on
associated with its borrowings. an initial and an ongoing basis.
The Investment Adviser and the Administrator
monitor payments received to ensure
any difficulties are raised in a timely
fashion.
====================================== ==================================================
Property valuation is inherently The Group generally acquires properties
subjective and uncertain - with strong fundamentals that are of
Valuations are subject to strategic importance to their tenants.
uncertainty and there can The Group aims to hold assets for long-term
be no assurance that the estimates income and embeds income growth into
resulting from the valuation leases which contributes toward positive
process will reflect actual valuation movements.
sales prices that could be An experienced Independent Valuer has
realised by the Company in been appointed to carry out bi-annual
future. property valuations.
The performance of all third party service
providers is regularly reviewed by the
Board.
====================================== ==================================================
Other risks
====================================== ==================================================
The Company is reliant on The Board has executed a long-term Investment
the AIFM, the Investment Adviser Advisory Agreement securing the services
and the Company's other key of Investment Adviser until October
services providers - The Company 2025. The Board meets regularly with
relies on its key service the Investment Adviser to promote a
providers, market intelligence, positive working relationship with its
relationships and expertise. performance monitored against the Company's
The performance of the Company investment objective and investor expectations.
is to a large extent dependent The Investment Advisory fee is based
on the performance of the on a sliding scale of the Company's
Investment Adviser and its net asset value to align the Investment
other key service providers. Adviser's interests with those of the
shareholders.
The Board has appointed experienced
service providers to provide key services
to the Company.
Performance of the key service providers
is also monitored by the Board and the
Management Engagement Committee.
The Management Engagement committee
will perform a formal periodic review
process to consider the ongoing performance
of the AIFM, the Investment Adviser
and other key service providers.
====================================== ==================================================
Failure to comply with the The AIFM and the Investment Adviser
REIT rules and other regulations monitor compliance with the REIT regime.
may have a negative impact The Group has appointed experienced
on the Company - If the Group third-party tax advisers to assist with
fails to remain qualified tax compliance matters with appropriate
as a REIT, the Group will relevant experience.
be subject to UK corporation Calculation of dividends is carried
tax on some or all its property out by the Group's Administrator before
rental income and chargeable review by the AIFM and/or Investment
gains, which would reduce Adviser.
the earnings and amounts available The performance of third party service
for distribution to shareholders. providers is regularly reviewed by the
Board.
====================================== ==================================================
Interest rate risk - returns The Group entered into a new, 12--year
targeted by the company are interest--only, fixed--rate, GBP120
predicated on a modest level million term loan agreement with Scottish
of debt being available on Widows on 11 December 2020 .
terms that are accretive to The Facility is repayable in December
shareholder returns. If debt 2032 and has a fixed all--in rate payable
isn't available it will impact of 2.07% per cent per annum, for the
the ability for the Company duration of the 12--year loan term.
to hit targets. This long-term facility will provide
the Company with stability during periods
of interest rate fluctuation.
In relation to the new equity raise
the Company is final legal due diligence
to put in place a fixed rate, interest
only facility on terms that will enable
the Company to hit targets. This long-term
facility will provide the Company with
stability during periods of interest
rate fluctuation.
====================================== ==================================================
Inflation risk - returns targeted 100% per cent of the Company's rental
by the Company are intended income is linked to CPI annual rent
to broadly track inflation reviews with caps and collars of 1 per
cent. and 4 per cent respectively. Rental
income will therefore track inflation
up to the 4 per cent cap.
In times of deflation the 1 per cent
collar will provide continuation of
upward only rental growth.
====================================== ==================================================
Statement of directors' responsibilities
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, and have elected to prepare the company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss for the Group and the Company for that period.
In preparing these financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently; -- make judgements and accounting estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union subject to any material departures disclosed and explained in the financial statements;
-- prepare a directors' report, a strategic report and directors' remuneration report which comply with the requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the annual report and accounts, taken as a whole, are fair, balanced, and understandable and provides the information necessary for shareholders to assess the Group's performance, business model and strategy.
Website publication
The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.
Directors' responsibilities pursuant to DTR4
The Directors confirm to the best of their knowledge:
-- The Group's financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, and Article 4 of the IAS Regulation and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group.
-- The annual report includes a fair review of the development and performance of the business and the financial position of the Group and the parent company, together with a description of the principal risks and uncertainties that they face.
Having taken advice from the Audit Committee, the Directors consider that the Annual Report and financial statements taken as a whole are fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.
Approval
This Directors' responsibilities statement was approved by the Board of Directors and signed on its behalf by:
Lynne Fennah
Chairman of the Board of Directors
10 November 2021
Consolidated statement of comprehensive income
19 August
2020 to
31 August
2021
Note GBP'000
Income
------ ------------
Rental income 3 11,755
------ ------------
Total income 11,755
------ ------------
Operating expenses
------ ------------
General and administrative expenses 4 (3,255)
------ ------------
Total expenses (3,255)
------ ------------
Change in fair value of investment property 7 14,012
------ ------------
Operating profit for the period 22,512
------ ------------
Finance costs 5 (1,580)
------ ------------
Profit before taxation 20,932
------ ------------
Taxation 6 -
------ ------------
Comprehensive income for the period 20,932
------ ------------
Earnings per share - basic and diluted (pence
per share)* 21 10.15
------ ------------
Consolidated statement of financial position
As at
31 August
2021
Note GBP'000
Non-current assets
------ ------------
Investment property 7 327,860
------ ------------
Total non-current assets 327,860
------ ------------
Current assets
------ ------------
Trade and other receivables 9 1,406
------ ------------
Restricted cash 10 35,872
------ ------------
Cash and cash equivalents 10 6,218
------ ------------
Total current assets 43,496
------ ------------
Total assets 371,356
------ ------------
Non-current liabilities
------ ------------
Bank borrowings 8 117,528
------ ------------
Total non-current liabilities 117,528
------ ------------
Current liabilities
------ ------------
Trade and other payables 11 1,130
------ ------------
Total current liabilities 1,130
------ ------------
Total liabilities 118,658
------ ------------
Net assets 252,698
------ ------------
Capital and reserves
------ ------------
Share capital 14 2,406
------ ------------
Special distributable reserve 16 229,360
------ ------------
Retained earnings 20,932
------ ------------
Total capital and reserves attributable to
equity holders of the company 252,698
------ ------------
The consolidated financial statements were approved and authorised for issue by the Board of directors on 10 November 2021 and signed on its behalf by:
Marlene Wood
Director
Consolidated statement of changes in shareholders' equity
Total equity
attributable
to
Share Share owners
For the period from capital premium Distributable Retained of the
19 August 2020 account account reserve earnings company
to 31 August 2021 Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Profit and total comprehensive
income attributable
to shareholders - - - 20,932 20,932
------ ---------- ----------- --------------- ----------- ---------------
Transaction with owners:
------ ---------- ----------- --------------- ----------- ---------------
Dividend distribution - - (3,993) - (3,993)
------ ---------- ----------- --------------- ----------- ---------------
Share capital issued 14 2,406 238,164 - - 240,570
------ ---------- ----------- --------------- ----------- ---------------
Share issue costs 15 - (4,811) - - (4,811)
------ ---------- ----------- --------------- ----------- ---------------
Cancellation of share
premium 16 - (233,353) 233,353 - -
------ ---------- ----------- --------------- ----------- ---------------
Balance at 31 August
2021 2,406 - 229,360 20,932 252,698
------ ---------- ----------- --------------- ----------- ---------------
Consolidated statement of cash flow
For the period
from 19 August
2020 to
31 August
2021
Note GBP'000
Cash flows from operating activities
------ -----------------
Profit before tax 20,932
------ -----------------
Less: Change in fair value of investment
property 7 (14,012)
------ -----------------
Operating result before working capital changes 6,920
------ -----------------
(Increase) in trade and other receivables 9 (1,406)
------ -----------------
Increase in trade and other payables 11 1,130
------ -----------------
Net cash flow from operating activities 6,644
------ -----------------
Cash flows from investing activities
------ -----------------
Purchase of investment properties 7 (313,848)
------ -----------------
Net cash used in investing activities (313,848)
------ -----------------
Cash flows from financing activities
------ -----------------
Proceeds from issue of share capital 14 2,406
------ -----------------
Proceeds from issue of share premium 15 238,164
------ -----------------
Share issue costs 15 (4,811)
------ -----------------
Dividend distribution 17 (3,993)
------ -----------------
Unamortised loan arrangement fee 8 (2,472)
------ -----------------
Cash released from restricted cash account 84,128
------ -----------------
Net cash generated from financing activities 313,422
------ -----------------
Net increase in cash and cash equivalents 6,218
------ -----------------
Cash and cash equivalents at beginning of
the period -
------ -----------------
Cash and cash equivalents at end of the period 10 6,218
------ -----------------
Notes to the consolidated financial statements
1. General information
Home REIT PLC (the "Company") is a closed-ended investment company, incorporated in England and Wales on 19 August 2020 and is registered as a public company limited by shares under the Companies Act 2006 with registered number 12822709. The Company commenced operations on 12 October 2020 when its shares commenced trading on the London Stock Exchange.
The Company intends to carry on business as a REIT with an investment objective to deliver inflation-protected income and capital growth over the medium-term for Shareholders through funding the acquisition and creation of high quality homeless accommodation across the UK let on long-term index-linked leases.
2. Accounting policies
The principal accounting policies applied in the preparation of the financial statements are set out below. The policies have been consistently applied throughout the period.
2.1 Basis of preparation of financial statements
This consolidated set of financial statements has been prepared in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
The consolidated financial statements for the period from 19 August 2020 to 31 August 2021 have been audited by the Company's Independent Auditor, BDO LLP. This consolidated financial statements do not constitute statutory accounts for the purposes of section 434 of the Companies Act 2006.
The Independent Auditor's report on the 31 August 2021 financial statements was unqualified, and did not contain statements under s498(2) or (3) of the Companies Act 2006.The comparative presentation is not required in the current period of commencement of operations.
The consolidated financial statements for the period ended 31 August 2021 have been prepared on a historical cost basis, as modified for the Group's investment properties which are carried at fair value with changes presented in the statement of comprehensive income.
The consolidated financial statements are presented in Sterling, which is the Company's presentation and functional currency, and values are rounded to the nearest thousand pounds, except where indicated otherwise.
Changes to accounting standards and interpretations
At the date of authorisation of the financial statements, there were a number of standards and interpretations which were in issue but not yet effective. The Company has assessed the impact of these amendments and has determined that the application of these amendments and interpretations in current and future periods will not have a significant impact on its financial statements.
Description Effective Date ==================================================== ================ Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform - Phase 2 1 January 2021 ==================================================== ================ Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets 1 January 2022 ==================================================== ================ Annual Improvements to IFRSs (2018-2020 Cycle) - IFRS 1, IFRS 9, Illustrative Examples accompanying IFRS 16, IAS 41 1 January 2022 ==================================================== ================ Amendments to IAS 1: Classification of Liabilities as Current or Non-current 1 January 2023 ==================================================== ================
Going Concern
The Directors of the Company have made an assessment of the Group's ability to continue as a going concern and are satisfied that the Groups has the resources to continue in business for at least a period of 12 months from the date when the financial statements are authorised for issue. Furthermore, as the Group has a robust Statement of Financial Position and lets properties on long-term index-linked leases which give rise to strong current and projected future cash flows, the Directors consider that any negative impact on the Group's financial position as a result of COVID 19 will be minimal.
The Directors have reviewed the current and projected financial position of the Group, making reasonable assumptions about its future trading performance including the impact of COVID-19. Various forms of sensitivity analysis have been performed having a particular regard to the financial performance of its tenants, taking into account any discussions held with tenants surrounding operating performance and the current and ongoing rent collection levels achieved by the Group.
The Group's financial covenants have been complied with for all loans throughout the period and up to the date of approval of these financial statements.
The Directors are not aware of any material uncertainties that may cast significant doubt upon the Group's ability to continue as a going concern. Therefore, the financial statements have been prepared on the going concern basis.
2.2 Significant accounting judgements and estimates
The preparation of financial statements requires the Directors of the Company to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability in the future. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. The estimates and associated assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below:
Valuation of investment properties
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.
2.3 Summary of significant accounting policies
The principal accounting policies applied in the presentation of these financial statements are set out below.
a Presentation and functional currency
The primary objective of the Company is to generate returns in Sterling, its capital-raising currency. The Company and the Group's performance is evaluated in Sterling. Therefore, the Directors consider Sterling as the currency that appropriately represents the economic effects of the underlying transactions, events, and conditions and the Company has therefore adopted it as the presentation and functional currency for its consolidated financial statements.
b Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank, cash held by lawyers and short-term deposits with an original maturity of three months or less.
c Restricted cash
Restricted cash represents cash withheld by the lender on drawdown borrowings, as referred to in note 10, until certain security is provided to release the funds and, in consequence, does not form an integral part of the Group's cash as at the reporting date.
d Capital management
The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure. The Company aims to ensure that sufficient capital is available for a programme of investment in a pipeline of assets and that these investments generate sufficient forecasted income such that dividends may be maintained to shareholders at the appropriate rate to ensure REIT status is preserved.
e Other payables and accrued expenses
Other payables and accrued expenses are initially recognised at fair value and subsequently held at amortised cost.
f Taxation
Taxation on the profit or loss for the period not exempt under UK REIT regulations would comprise of current and deferred tax. Tax would be recognised in the statement of comprehensive income except to the extent that it relates to items recognised as direct movement in equity in which case it would be recognised as a direct movement in equity. Current tax is expected tax payable on any non-REIT taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet date.
g Dividend payable to shareholders
Final dividend distribution to the Company's shareholders is recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders. Interim dividends are recognised when paid.
h Share issue costs
The costs of issuing or reacquiring equity instruments of the Company are accounted for as a deduction from equity.
i Leases - the Company as lessor
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The Company has determined that it retains all the significant risks and rewards of ownership of the properties and accounts for the contracts as operating leases. Properties leased out under operating leases are included in investment property in the statement of financial position. Rental income from operating leases is recognised on a straight-line basis over the expected term of the relevant leases.
j Business combinations
The Company adopted the amendments to IFRS 3 (effective 1 January 2020) in the current period. Under the amendments of IFRS 3, to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. An optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is a business has been added. The Company opted to apply the concentration test in the period to all of its corporate acquisitions, concluding these to be treated as asset purchases rather than business combinations because they are considered to be acquisitions of properties rather than businesses.
k Rental income
Rental income arising from operating leases on investment property is accounted for on a straight-line basis over the expected term of the relevant leases and is included in rental income in the statement of comprehensive income due to its operating nature.
For leases, which contain fixed or minimum uplifts, the rental income arising from such uplifts is recognised on a straight line basis over the lease term.
The Group's main source of revenue is rental income earned from its investment properties, which is excluded from the scope of IFRS 15.
2.4 Financial instruments
a Financial assets
The Company classifies its financial assets as fair value through profit or loss or amortised cost, depending on the purpose for which the asset was acquired and based on the business model test. There are no financial assets held at fair value through profit or loss. The Company's accounting policy for financial assets classified as amortised cost is as follows:
Amortised cost
These assets arise principally from the provision of goods and services to customers (e.g. rent receivables), but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and contractual cash flows are solely payments of principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost being the effective interest rate method, less provision for impairment.
Impairment provisions for trade receivables (rental income) are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the rent receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the rent receivables.
Impairment provisions for other receivables are recognised based on the general approach within IFRS 9 and a loss allowance for lifetime expected credit losses is recognised if there has been a significant increase in credit risk since initial recognition of the financial asset.
The Company's financial assets measured at amortised cost comprise rent receivable, restricted cash and cash and cash equivalents in the statement of financial position. Cash and cash equivalents comprise cash in hand and deposits held at call with banks, it also includes cash held by lawyers for subsequent completions.
b Financial liabilities
The Company's accounting policy for financial liabilities is as follows:
Trade and other payables that are financial liabilities are initially recognised at fair value. Where a financing component is identified in respect of long-term payables the fair value is calculated with reference to an imputed interest rate and subsequently amortised using the effective interest rate method. Short term financial liabilities are carried at their expected settlement value.
Bank borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensure that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the Group Statement of Financial Position. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payment while the liability is outstanding.
The Company's financial liabilities comprise of trade and other payables and borrowings.
c Write-off policy
The Company writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, and all the efforts for collection of the receivables are exhausted. Financial assets written off may still be subject to enforcement activities under the Company's recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognised in profit or loss.
d Measurement and recognition of expected credit losses
The measurement of expected credit losses is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. For the interim accounts, the assessment of the probability of default and loss given default has been based on current and forward-looking information. As for the exposure at default, for financial assets, this is represented by the assets' gross carrying amount at the reporting date. Expected credit losses are recognised in other expenses in the statement of comprehensive income.
2.5 Investment property
Investment property, which is property held to earn rentals and/or for capital appreciation, is initially held at cost and then subsequently held at fair value. This valuation includes reference to the initial consideration given, including expenditure that is directly attributable to the acquisition of the investment property, and independent expert guidance. At mid-year and year-end, investment property is valued by an independent valuer and is stated at its fair value as at the reporting date. Gains and losses arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise in the statement of comprehensive income.
The Group's accounting policy is to recognise acquisitions on the date of unconditional exchange, as the directors consider this to be the point where substantially all the risks and rewards of ownership of the properties have transferred and the outstanding amount payable to the seller at completion is included on the consolidated statement of financial position as a liability in trade and other payables.
Subsequent expenditure is capitalised only when it is probable that future economic benefits are associated with the expenditure. An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is incurred in profit or loss in the period in which the property is derecognised.
2.6 Fair Value hierarchy
In accordance with IFRS 13, the Company recognises investment properties at fair value at each balance sheet date in accordance with IFRS 13 which recognises a variety of fair value inputs depending upon the nature of the investment. Specifically:
Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation at the end of each reporting period. Please see note 7.
3. Rental income
19 August
2020
to 31 August
2021
GBP'000
Rental income from investment
property 10,677
---------------
Accretion effect of straight-lining
rent 1,078
---------------
Total 11,755
---------------
Includes amounts receivable in respect of property rental income and is measured at the fair value of the consideration received or receivable. The future minimum rents receivable under non-cancellable operating leases are:
GBP'000
Future minimum rents receivable
in the period:
---------
Year 1 18,275
---------
Year 2 18,458
---------
Year 3 18,643
---------
Year 4 18,829
---------
Year 5 19,018
---------
> 5 years 422,935
---------
Total 516,518
---------
20-year leases (with an option to renew for a further 5 years) were granted on the date of acquisition of the properties, with an annual CPI-linked rent review scheduled on the annual anniversary of the lease being granted. A collar of 1 per cent and a cap of 4 per cent is applicable to these reviews. Rental income is recognised on a straight-line basis over the expected term of the relevant lease.
4. General and administrative expenses
GBP'000
Investment adviser fee 1,828
---------
Auditor's fee for audit at
28 February 126
---------
Auditor's fee for audit at
31 August 200
---------
Non-audit fees 240
---------
Board and Directors fee 150
---------
Other administrative expenses 711
---------
Total general and administrative
expenses 3,255
---------
Fees payable to the auditor of the Company relate to the Initial Accounts audit fees of GBP42,000 (including VAT). Fees payable to the interim review at the mid-year amounted to GBP30,000 (including VAT). Fees payable to the auditor of the Company in relation to the audit at 28 February 2021 amounted to GBP126,000 (including of VAT). The Company also incurred additional non-audit fees of GBP90,000 from the auditor related to the admission on the London Stock Exchange which have been treated as a reduction in Equity as share issue costs (see note 15).
In addition to the above, the auditor's fee in respect of the audit of these consolidated financial statements is GBP199,800 (including VAT).
5. Finance costs
19 August
2020
to 31 August
2021
GBP'000
Loan interest 1,274
---------------
Non-utilisation fees 190
---------------
Amortisation of loan arrangement
fees 116
---------------
Total finance costs 1,580
---------------
6. Taxation
The Group is a real estate investment trust ("REIT") and as a result the profit and gains arising from the Group's property rental business are exempt from UK corporation tax provided it meets certain conditions as set out in the UK REIT regulations. Profits arising from any residual activities (e.g. trading activities and interest income), after the utilisation of any available residual tax losses, are subject to corporation tax at the main rate of 19 per cent for the year.
19 August
2020
to 31 August
2021
GBP'000
Current tax -
---------------
Origination and reversal
of
temporary differences -
---------------
Total deferred tax -
---------------
Tax charge -
---------------
Reconciliation of the total tax charge
The reconciliation of profit before tax multiplied by the standard rate of corporation tax for the half-year of 19 per cent to the total tax charge in the statement of comprehensive income is as follows:
19 August
2020
to 31 August
2021
GBP'000
Profit before tax 20,932
---------------
Tax at the standard rate
of UK corporation tax of
19 per cent 3,977
---------------
Effect of:
---------------
REIT exempt income and gains (1,315)
---------------
Revaluation of investment
properties (2,662)
---------------
Tax charge -
---------------
UK REIT exempt income includes property rental income that is exempt from UK Corporation Tax in accordance with Part 12 of the Corporation Tax Act 2010.
7. Investment property
Freehold
Investment
Property
GBP'000
Property acquisitions in
the period 312,770
-------------
Accretion effect of straight-lining
rent 1,078
-------------
Change in fair value of investment
property 14,012
-------------
Fair value at 31 August 2021 327,860
-------------
The properties are held at fair value as determined by the independent valuer as at 31 August 2021. All corporate acquisitions during the period have been treated as asset purchases rather than business combinations because they are considered to be acquisitions of properties rather than businesses (see note 2(j)).
The Company's investment policy targets inflation-protected income and capital returns by investing in a diversified portfolio of homeless accommodation assets, let or pre-let to registered charities, housing associations, community interest companies and other regulated organisations that receive housing benefit or comparable funding from local or central government, on long-term and index-linked leases. The Company will neither undertake any direct development activity nor assume direct development risk.
The Company will focus on delivering capital growth by holding assets over the long term and therefore it is unlikely that the Company will dispose of any part of its portfolio. In the unlikely event that a part of the portfolio is disposed of, the Directors intend to reinvest proceeds from such disposals in assets in accordance with the Company's investment policy.
The following descriptions and definitions relating to valuation techniques and key observable inputs may also be used in determining fair values:
Valuation techniques: market value method
Under the market value method, the estimated amount for which an asset or liability should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.
Observable input: passing rent
The rent at which space could be let in the market conditions prevailing at the date of valuation. Passing rents are dependent upon several variables in relation to the Company's property. These include size, location, tenant covenant strength and terms of the lease.
Unobservable input: rental growth
The estimated average increase in rent based on both market estimations and contractual arrangements. A reduction of the estimated future rental growth in the valuation model would lead to a decrease in the fair value of the investment property and an inflation of the estimated future rental growth would lead to an increase in the fair value. No quantitative sensitivity analysis has been provided for estimated rental growth as a reasonable range would not result in a significant movement in fair value.
The Company classifies all assets measured at fair value as below:
Fair value hierarchy
Quoted
prices Significant Significant
in active observable unobservable
markets inputs inputs
(level (level (level
Total 1) 2) 3)
As at 31 August 2021 GBP'000 GBP'000 GBP'000 GBP'000
Assets measured at fair value:
---------- ------------ ------------- ---------------
Investment property 327,860 - - 327,860
---------- ------------ ------------- ---------------
Passing rent and yield range
Passing
rent pa Passing Valuation
31 August rent Valuation yield
2021 pa range 31 August range
Sector GBP'000 GBP'000 2021 GBP'000 %
5.25 per
cent -5.78
Residential 18,275 3-365 327,860 per cent
------------ ----------- --------------- -------------
The table below shows the sensitivities of measurement of the Group's investment property to certain inputs:
-5 per +5 per +25bps -25bps
cent in cent in in net in net
passing passing initial initial
rent rent yield yield
As at 31 August 2021 GBP'000 GBP'000 GBP'000 GBP'000
Investment property (16,393) 16,393 14,073 (15,395)
---------- ---------- ---------- ----------
Unobservable input: net initial yield
The net initial yield is defined as the initial gross income as a percentage of the market value (or purchase price as appropriate) plus standard costs of purchase.
Sensitivities of measurement of significant unobservable inputs
As set out within significant accounting estimates and judgements above, the Company's property portfolio valuation is open to judgements and is inherently subjective by nature.
8. Financial instruments
Set out below is a comparison of the book value and fair value of the Group's financial instruments where a difference exists. The fair value of financial instruments not included in the comparison is equal to book value.
Book value Fair value
Bank borrowings GBP'000 GBP'000
Term loan 120,000 113,468
------------ ------------
Unamortised loan arrangement
fees (2,472) -
------------ ------------
Bank borrowings 117,528 113,468
------------ ------------
The following table sets out the fair value of those financial liabilities measured at amortised cost where there is a difference between book value and fair value.
Borrowings Date of valuation Total GBP'000 Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
Level 1 Level 2 Level 3
GBP'000 GBP'000 GBP'000
Borrowings 31 August 2021 113,468 - 113,468 -
-------------------- --------------- --------------- ------------- ---------------
The Group's borrowings comprise a GBP120 million fixed term loan facility with Scottish Widows Limited. The facility has an all-in rate of 2.07 per cent per annum for the duration of the loan term and is due for repayment in December 2032. The fair value of the loan is determined by comparing the discounted future cashflows using the mid-market swap rate on 31 August 2021 of 0.9456 per cent plus the implied margin that is unchanged since the date of fixing. The loan is considered to be a level 2 fair value measurement.
9. Trade and other receivables
As at
31 August
2021
GBP'000
Tenant receivables 1,191
------------
Prepaid expenses 215
------------
Trade and other receivables 1,406
------------
All trade and other receivable amounts are due within one year. The carrying value of trade and other receivables classified at amortised cost approximates fair value.
The Directors analysed the expected credit loss and concluded there was no material exposure for the period ended 31 August 2021.
The following table sets out the maturity profile of trade and other receivables that are financial assets:
As at
31 August
2021
GBP'000
30 days or fewer 742
------------
31 to 60 days 234
------------
61 to 90 days 408
------------
91 days or more 22
------------
Over one year -
------------
1,406
------------
10. Cash reserves
As at
31 August
2021
GBP'000
Cash at bank 6,218
------------
Cash and cash equivalents 6,218
------------
Restricted cash (Note 12) 35,872
------------
Total cash at bank 42,090
------------
Restricted cash is money held in accounts to which the Group does not have immediate access and as such does not form part of the Group's short-term cash management. These amounts arise both when initially drawing on term-loans prior to the bank taking adequate security and where a securitised asset is disposed prior to the bank replacing the asset with adequate security. Security over owned properties is required to be provided before access to restricted cash is given. The purpose of the restricted cash is for further investment in the portfolio.
11. Trade and other payables
As at
31 August
2021
GBP'000
Trade creditors 353
------------
Accrued expenses 777
------------
Total trade creditors and
accrued expenses 1,130
------------
All trade and other payables are due within one year. The Directors consider that the carrying amount of trade and other payables matches their fair value.
12. Bank borrowings
On 11 December 2020 the Group entered into a 12-year fixed-rate loan facility for GBP120 million with Scottish Widows; the Company acts as a guarantor to the loan facility. The Group considers and accounts for all guarantees as insurance contracts. A financial guarantee is recognised where a contract requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make a payment when due. The loan was fully drawn on 31 August 2021 of which a balance of GBP35.9m and was held in a restricted cash account at 31 August 2021.
13. Financial risk management
The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk and interest rate risk.
The AIFM and the Investment Adviser have risk management procedures and processes in place which enable them to monitor the risks of the Company. The objective in managing risk is the creation and protection of shareholder income and value. Risk is inherent in the Company's activities, but it is managed through a process of ongoing identification, impact assessment, and monitoring and subject to risk limits and other controls.
The principal financial risks facing the Company in the management of its portfolio are as follows:
Credit risk
Credit risk is the risk that a tenant or other counterparty will cause financial loss to the Company by failing to meet a commitment it has entered into with the Company.
It is the Company's policy to enter into banking arrangements with reputable financial institutions. The AIFM monitors the credit worthiness of banks used by the Company by review of credit ratings, financial statements and other public records and news on a regular basis.
In respect of investment property, in the event of a default by a tenant, the Company may suffer an income shortfall and additional costs in reletting the property. The distributions payable by the Company are dependent on the income from the underlying investment property. The receipt of any rental income due and payable in respect of the underlying property, and the possibility that tenants may default on their rental obligations, creates a consequential risk for the Company in that it could cause a decline in the Company's income available for distribution to shareholders. The Investment Adviser reviews the position of new tenants and monitors tenant exposure in accordance with the investment policy.
The table below shows the Company's exposure to credit risk:
As at
31 August
2021
GBP'000
Cash and cash equivalents 6,218
------------
Restricted cash 35,872
------------
Tenant receivables 1,191
------------
43,281
------------
Liquidity risk
The Group manages its liquidity and funding risks by considering cash flow forecasts and ensuring sufficient cash balances are held within the Group to meet future needs. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of financing through appropriate and adequate credit lines, and the ability of tenants to settle obligations within normal terms of credit. The Group ensures, through forecasting of capital requirements, that adequate cash is available.
The following table details the Group's liquidity analysis in respect of its financial liabilities on contractual undiscounted payments:
3-12 1-5 5 years
< 3 months months years + Total
31 August 2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Bank borrowings and interest
(Note 12) 620 1,881 9,950 135,640 148,091
------------ ---------- ---------- ---------- ----------
Trade and other payables 1,130 - - - 1,130
------------ ---------- ---------- ---------- ----------
1,750 1,881 9,950 135,640 149,221
------------ ---------- ---------- ---------- ----------
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The Group has reduced the interest rate risk on its external borrowing by fixing the rate of interest payable.
Capital management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital.
The Group considers proceeds from share issuance, bank borrowings and retained earnings as capital. The Group will maintain a conservative level of aggregate borrowings with a maximum level of aggregate borrowings of 35 per cent of the Group's gross assets.
The Group has remained compliant with its banking covenants during the period and since the period end.
14. Share Capital
As at As at
31 August 31 August
Ordinary shares of GBP0.01 2021 2021
each Number GBP'000
On incorporation 1 -
------------- ------------
Further shares issued during
the period 240,570,464 2,406
------------- ------------
Issued and fully paid at period
end 240,570,465 2,406
------------- ------------
The Company was incorporated on 19 August 2020 when one ordinary share of GBP0.01 nominal value was issued for GBP1. On 3 September 2020, a further 50,000 redeemable preference shares of GBP1 each were issued at GBP1 per share (quarter paid up). The Company achieved admission to the premium listing segment of the Official List of the London Stock Exchange (the "IPO") on 12 October 2020.
At the date of the Company's IPO, the Company issued and allotted a further 240,570,464 ordinary shares of 1 pence nominal value each at GBP1 per share. Therefore, 240,570,465 ordinary shares have been issued and fully paid. The redeemable preference shares were redeemed at par and cancelled on the date of the IPO.
15. Share premium account
As at
31 August
2021
GBP'000
Share premium arising on ordinary
shares issued in relation
to equity issuance 238,164
------------
Share issue costs (4,811)
------------
Transfer to special distributable
reserve (note 16) (233,353)
------------
Balance at end of period -
------------
In order to increase distributable reserves available for the payment of future dividends, the Company resolved on 3 September 2020 that, conditional upon Admission and the approval of the Court, the amount standing to the credit of the share premium account of the Company immediately following completion of the Issue be cancelled and transferred to a special distributable reserve.
The Court approved the cancellation of the share premium account on 8 December 2020 and the cancellation was registered with the Registrar of Companies on 9 December 2020 following which the cancellation of the share premium account became effective. Accordingly, the amount of GBP233,353,351 previously held in the share premium account has been cancelled and credited to a special distributable reserve. The Company may, at the discretion of the Board, pay all or any part of any future dividends out of this special distributable reserve, taking into account the Company's investment objective.
16. Special distributable reserve
As at
31 August
2021
GBP'000
Balance at beginning of period -
------------
Transfer from share premium
account (note 15) 233,353
------------
Dividends distribution (3,993)
------------
Balance at end of period 229,360
------------
17. Dividends
On 15 February 2021, the Company declared an interim dividend of 0.83 pence per ordinary share, which was paid on 19 March 2021 to shareholders on the register as at 26 February 2021. This dividend was paid as a property income distribution.
On 20 May 2021, the Company declared a dividend of 0.83 pence per ordinary share, which was paid on 25 June 2021 to shareholders on the register as at 4 June 2021. This dividend was paid as a property income distribution.
18. Related party transactions
AIFM
Under the terms of the Investment Management Agreement dated 22 September 2020, Alvarium Fund Managers (UK) Limited was appointed as the Alternative Investment Fund Manager (AIFM) to the Company. The AIFM acts as investment manager with responsibility for the management of the assets of the Company in accordance with the investment policy of the Company and the policies and directions of the Board and is regulated in the conduct of investment business by the FCA. Alvarium Fund Managers (UK) Limited is a subsidiary of Alvarium Investments Limited, the ultimate parent company of the Broker and the Investment Adviser to the Company. Under the Investment Management Agreement, the AIFM receives a fee of GBP40,000 per annum. No performance fee is payable to the AIFM.
Corporate Broker
Alvarium Securities Limited ("Alvarium Securities") was appointed on 22 September 2020 to provide corporate broking services to the Company and is a subsidiary of Alvarium Investments Limited, the ultimate parent company of the AIFM and the Investment Adviser. Alvarium Securities is paid an annual retainer fee in the amount of GBP50,000 by the Company; the Company also incurred additional fees of GBP3,878,000 from Alvarium Securities in relation to the initial public offering and subsequent admission to the London Stock Exchange. These costs have been treated as a reduction in Equity as share issue costs.
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 GBP500 million;
b One-twelfth of 0.75 per cent per calendar month of net asset value above GBP500 million up to and including GBP750 million; and
c One-twelfth of 0.65 per cent per calendar month of net asset value above GBP750 million.
The Investment Advisory Agreement may be terminated on 12 months' written notice, such notice to expire on or at any time after the fifth anniversary of 12 October 2020. The Investment Advisory Agreement may be terminated with immediate effect on the occurrence of certain events, including insolvency or in the event of a material and continuing breach.
Directors
Directors are entitled to receive a fee from the Company at such rate as may be determined in accordance with the Articles. The initial fees are GBP36,000 for each Director and GBP50,000 for the Chairman per annum. The Chair of the Audit Committee receives an additional fee of GBP5,000 per annum. During the period ended 31 August 2021, Directors fees of GBP150,068 were paid, of which none was payable at the period end.
As detailed in the Prospectus, the Directors subscribed for the below Ordinary Shares at 100p per share during the Company's initial public offering and have therefore held (and continue to hold) beneficial interests in these shares since Admission.
Number per cent
of Ordinary of Ordinary
Shares Shares
held in issue
Lynne Fennah 50,000 0.021
-------------- --------------
Simon Moore 36,000 0.015
-------------- --------------
Marlene Wood 20,000 0.008
-------------- --------------
Peter Cardwell 10,000 0.004
-------------- --------------
The above Directors were appointed on 3 September 2020. On incorporation on 19 August 2020 William Saunders and Alan Sauvain were appointed as Directors, and subsequently resigned as Directors on 3 September 2020.
19. Reconciliation of liabilities to cash flows from financing activities
Borrowing
(GBPm)s Total (GBPm)
Balance on 19 August 2020 - -
----------- --------------
Bank borrowings drawn down 84.1 84.1
----------- --------------
Bank borrowing held in restricted
account 35.9 35.9
----------- --------------
Loan arrangement fees paid (GBP2.6) (2.6)
----------- --------------
Amortisation of loan arrangement
fees 0.1 0.1
----------- --------------
Balance at 31 August 2021 117.5 117.5
----------- --------------
20. Contingent liabilities
At 31 August 2021 the Group had no contingent liabilities.
21. Earnings per share
Earnings per share per IFRS is calculated by dividing profit for the period attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue since the Company was incorporated on 19 August 2020 to 31 August 2021. Amounts shown below are both basic and diluted measures as there were no dilutive instruments in issue throughout the period.
Period ended
31 August2021
Earnings (GBP'000) 20,932
----------------
Weighted average number of ordinary shares in issue from
19 August 2020 to 31 August 2021 206,203,256
----------------
EPS (pence) 10.15
----------------
Adjusted EPS is a performance measure used by the Board to assess the Company's dividend payments and therefore the Board considers it to be relevant information for investors. The Adjusted EPS reflects the Company's ability to generate income from its portfolio and the Board considers disclosure of Adjusted EPS to be relevant information for investors (see key performance indicators).
22. Net asset value per share
Net asset value per share is calculated by dividing the consolidated net assets attributable to ordinary equity holders of the Company by the number of ordinary shares outstanding at the reporting date. Amounts shown below are both basic and diluted measures as there were no dilutive instruments in issue throughout the current or comparative periods.
Period ended
31 August
2021
GBPm
NAV 252.70
--------------
Number of ordinary shares (million) 240.57
--------------
NAV per share 105.04p
--------------
A reconciliation of IFRS NAV per share to the three EPRA NAV measures is shown below.
EPRA NTA EPRA NRV EPRA NDV
As at 31 August 2021 GBP'000 GBP'000 GBP'000
Net asset value 252,698 252,698 252,698
---------- ---------- ----------
Fair value of debt - - 6,532
---------- ---------- ----------
Real estate transfer tax - 15,636 -
---------- ---------- ----------
At 31 August 2021 252,698 268,334 259,230
---------- ---------- ----------
Number of ordinary shares 240,570 240,570 240,570
---------- ---------- ----------
Per share 105.04p 111.54p 107.76p
---------- ---------- ----------
The Group consider EPRA NTA to be the most relevant NAV measure for the Group, EPRA NTA excludes the cumulative fair value adjustments for debt-related derivatives which are unlikely to be realised.
23. Segmental information
Operating segments are identified on the basis of internal financial reports about components of the Group that are regularly reviewed by the chief operating decision maker (which in the Group's case is the Board of Directors of the Company) in order to allocate resources to the segments and to assess their performance.
The internal financial reports contain financial information at a Group level as a whole and there are no reconciling items between the results contained in these reports and the amounts reported in the consolidated financial statements.
The Group's property portfolio comprises investment property. The Board considers that all the properties have similar economic characteristics. Therefore, in the view of the Board, there is one reportable segment.
All of the Group's properties are based in the UK and as such no geographical grouping is considered appropriate for segmental analysis.
During the period the Group had 1 tenant, which was considered to be a major customer, contributing more than 10 per cent of the Group's contractual annual passing rent.
GBP'000
Major customers 13 per cent 2,297
-------------- ---------
Other tenants (each less
than 10 per cent) 87 per cent 15,970
-------------- ---------
100 per
Rental income cent 18,267
-------------- ---------
24. Consolidated entities
The Company owns 100 per cent of the equity shares of all subsidiaries listed below and has the power to appoint and remove the majority of the Board of Directors of those subsidiaries. The relevant activities of the below subsidiaries are determined by the respective Directors based on simple majority votes. Therefore, the Board of the Company has concluded that the Company has control over all these entities and all these entities have been consolidated within this set of financial statements.
Name of entity Principal activity Country of incorporation Ownership
Home Holdings 1
Limited Property investment UK 100%
---------------------- --------------------------- -----------
Home Holdings 2
Limited Property investment UK 100%
---------------------- --------------------------- -----------
Home Holdings 3
Limited Property investment UK 100%
---------------------- --------------------------- -----------
Home Holdings 4
Limited Property investment UK 100%
---------------------- --------------------------- -----------
Fox Alpha SPV Limited Property investment UK 100%
---------------------- --------------------------- -----------
Fox Bravo SPV Limited Property investment UK 100%
---------------------- --------------------------- -----------
FPI Co 417 Limited Property investment UK 100%
---------------------- --------------------------- -----------
FPI Co 418 Limited Property investment UK 100%
---------------------- --------------------------- -----------
FPI Co 419 Limited Property investment UK 100%
---------------------- --------------------------- -----------
Grolar Developments
SPV 9 Limited Property investment UK 100%
---------------------- --------------------------- -----------
Grolar Developments
SPV 11 Limited Property investment UK 100%
---------------------- --------------------------- -----------
Pathway Homes Group
(Exeter) Limited Property investment UK 100%
---------------------- --------------------------- -----------
Pathway Homes Group
(Luton) Limited Property investment UK 100%
---------------------- --------------------------- -----------
Pathway Homes Group
(Morecambe) Limited Property investment UK 100%
---------------------- --------------------------- -----------
Pathway Homes Group
(Plymouth) Limited Property investment UK 100%
---------------------- --------------------------- -----------
Pathway Homes Group
(Stoke) Limited Property investment UK 100%
---------------------- --------------------------- -----------
25. Post balance sheet events
Issue of New Ordinary Shares
On 27 September 2021 the Company raised GBP350 million through an initial issue of 321,100,917 New Ordinary Shares at an issue price of 109 pence per New Ordinary Share.
Dividends
On 15 September 2021, the Company declared an ordinary dividend of 0.84 pence per ordinary share, which was paid on 22 October 2021 to shareholders on the register as at 24 September 2021.
Acquisitions and disposals
Since 31 August 2021, the Company has acquired 539 new assets totalling GBP229 million (net of purchase costs) across various geographical locations in London, North West, South West, South East, East, Midlands, Yorkshire, North East regions of England and North Wales region.
These properties provide over 2,679 further beds for vulnerable homeless people whose circumstances cover a range of sectors, including drug and alcohol abuse, domestic abuse, general needs poverty and those with mental health issues.
Restricted cash
As detailed in note 10, as at 31 August 2021, GBP120 million of cash was held in accounts to which the Group did not have immediate access. As at the date of signing these accounts GBP35.9 million of this cash remains restricted and GBP84.1 million has been utilised or is available for use by the Group.
26. Controlling parties
There is no ultimate controlling party of the Group.
Company statement of financial position
Company number: 12822709
As at
31 August
2021
Note GBP'000
Non-current assets
------ ------------
Investment property 5 9,465
------ ------------
Investment in subsidiaries 4 10,390
------ ------------
Amounts due from subsidiaries 6 185,551
------ ------------
Total non-current assets 205,406
------ ------------
Current assets
------ ------------
Amounts due from subsidiaries 6 26,279
------ ------------
Trade and other receivables 6 201
------ ------------
Cash and cash equivalents 7 68
------ ------------
Total current assets 26,548
------ ------------
Total assets 231,954
------ ------------
Non-current liabilities
------ ------------
Amounts due to subsidiaries 8 1,750
------ ------------
Total non-current liabilities 1,750
------ ------------
Current liabilities
------ ------------
Trade and other payables 8 589
------ ------------
Total current liabilities 589
------ ------------
Total liabilities 2,339
------ ------------
Net assets 229,615
------ ------------
Capital and reserves
------ ------------
Share capital 9 2,406
------ ------------
Special distributable reserve 229,360
------ ------------
Retained earnings (2,151)
------ ------------
Total capital and reserves attributable to
equity holders of the company 229,615
------ ------------
The Company has taken advantage of the exemption allowed under Section 408 of the Companies Act 2006 and has not presented its own profit and loss account in these financial statements. The loss and total comprehensive income attributable to the shareholders of the parent Company for the period from 19 August 2020 until 31 August 2021 amounted to GBP2.2million.
The company financial statements were approved and authorised for issue by the Board of directors on 10 November 2021 and signed on its behalf by:
Marlene Wood
Director
Company statement of changes in shareholders' equity
Total
equity
attributable
to
Share Share owners
For the period from capital premium Distributable Retained of the
19 August 2020 account account reserve earnings company
to 31 August 2021 Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Loss for the period - - - (2,151) (2,151)
------ ---------- ----------- --------------- ----------- ---------------
Transaction with owners:
------ ---------- ----------- --------------- ----------- ---------------
Dividend distribution - - (3,993) - (3,993)
------ ---------- ----------- --------------- ----------- ---------------
Share capital issued 14 2,406 238,164 - - 240,570
------ ---------- ----------- --------------- ----------- ---------------
Share issue costs 15 - (4,811) - - (4,811)
------ ---------- ----------- --------------- ----------- ---------------
Cancellation of share
premium 16 - (233,353) 233,353 - -
------ ---------- ----------- --------------- ----------- ---------------
Balance at 31 August
2021 2,406 - 229,360 (2,151) 229,615
------ ---------- ----------- --------------- ----------- ---------------
Marlene Wood
Director
Notes to the company financial statements
1. Basis of preparation
This consolidated set of financial statements has been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework ("FRS 101"). The Company is registered in England and Wales under company registration 12822709.
Disclosure exemptions adopted
In preparing these financial statements the Company has taken advantage of disclosure exemptions conferred by FRS 101 and therefore these financial statements do not include:
-- Certain disclosures regarding the Company's capital; -- A statement of cash flows; -- The effect of future accounting standards not yet adopted; -- The disclosure of the remuneration of key management personnel; and -- Disclosure of related party transactions with wholly owned members of the Company.
The principal accounting policies applied in the preparation of the financial statements are set out below. The policies have been consistently applied throughout the period.
2. Significant accounting judgements, estimates and assumptions
The preparation of financial statements requires the Directors of the Company to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability in the future. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. The estimates and associated assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below:
Valuation of investment properties
The Company's estimates in relation to its investment property are consistent with the Group for which details are given in Note 7 of the to the consolidated financial statements.
3. Principal accounting policies
The principal accounting policies adopted in the preparation of the Company financial statements are consistent with the Group which are described in Note 2. Policies adopted in the preparation of the Company's financial statements that are not included in the consolidated financial statements are given below:
4. Investment in subsidiaries
Investment in subsidiaries is included in the statement of financial position at cost less provision for impairment .
As at
31 August
2021
GBP'000
Balance at beginning of period -
------------
Additions in the year 10,390
------------
Balance at end of period 10,390
------------
A list of Company's subsidiary undertakings is included in Note 23 to the consolidated financial statements.
5. Investment Property
As at
31 August
2021
GBP'000
Property acquisitions in the
period 8,980
------------
Accretion effect of straight-lining
rent 48
------------
Change in fair value of investment
property 437
------------
Fair value at 31 August 2021 9,465
------------
Detailed information about the valuation of investment property is included in Note 7 to the consolidated financial statements.
6. Trade and other receivables
As at
31 August
2021
GBP'000
Amounts due from subsidiaries 185,551
------------
Non-Current Assets 185,551
------------
These amounts due related to the acquisition of Investment Properties on behalf of subsidiary companies during the period. The subsidiary companies have no intention of liquidating these Investment Properties within the next 12 months. The Directors do not expect this amount to be paid within one year.
As at
31 August
2021
GBP'000
Amounts due from subsidiaries
repayable on demand 25,399
------------
Amounts due from subsidiaries 880
------------
Prepaid expenses 201
------------
Trade and other receivables 26,480
------------
7. Cash and cash equivalents
As at
31 August
2021
GBP'000
Cash held at bank 68
------------
8. Trade and other payables
As at
31 August
2021
GBP'000
Amounts due to subsidiaries 1,750
------------
Non-Current Liabilities 1,750
------------
As at
31 August
2021
GBP'000
Trade and other payables 589
------------
Current liabilities 589
------------
9. Share capital
As at
31 August
2021
Ordinary shares of GBP0.01 each Number
On incorporation 1
-------------
Further shares issued during
the period 240,570,464
-------------
Issued and fully paid at period
end 240,570,465
-------------
Detailed information about the share capital of the Company is included in note 14.
10. Share premium account
As at
31 August
2021
GBP'000
Share premium arising on ordinary
shares issued in relation to
equity issuance 238,164
------------
Share issue costs (4,811)
------------
Transfer to special distributable
reserve (note 16) (233,353)
------------
Balance at end of period -
------------
Detailed information about the share premium of the Company is included in Note 15 to consolidated financial statements.
11. Net asset value per share
Net asset value per share is calculated by dividing the consolidated net assets attributable to ordinary equity holders of the Company by the number of ordinary shares outstanding at the reporting date. Amounts shown below are both basic and diluted measures as there were no dilutive instruments in issue throughout the current or comparative periods.
Period ended
31 August
2021
NAV (GBPm) 228.85
--------------
Number of ordinary shares (million) 240.57
--------------
NAV per share (GBP) 0.95
--------------
12. Related party transactions
The Company has taken advantage of the exemption not to disclose transactions with other members of the Group as the Company financial statements are presented together with the consolidated financial statements.
Note 18 of the consolidated financial statements includes details of other related party transactions undertaken by the Company and its subsidiaries.
13. Ultimate controlling party
There is no ultimate controlling party of the Company.
END
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