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[bozzy_s] 25/11/2022 16:45

Absolutely bloody sensational research from you two. Really appreciate your efforts.

[spectoacc] 25/11/2022 15:31

Messaged you @74tom.

[spectoacc] 25/11/2022 15:20

What we need is to make the connection between the multi-connected charity tenants, and management/friends of management at HOME REIT.

Recall CSH had something similar where they'd set up a management co to run the properties - same head office addresses etc. Have HOME, or people acting for HOME, done something similar? In which case, it's not arms-length.

If you follow the money, it's about finding who has benefited from buying cheapo houses, leasing them to multi-linked co's, then selling at large mark-up to HOME. That's where the money has left the REIT. The money coming in is simply from govnt-funded rents, albeit that those may be unsustainable.

I'm in the North East next week, I could pop to Peterlee for a look around. But suspect Monday will have answered things for us.

[74tom] 25/11/2022 14:36

Very good summary again SpectoAcc. After the digging I've done this morning on the top 10 tenants I'd put the odds at worse than that... Most of their filed accounts can be found via either the Charities commission or companies house.

I started with Big Help Project who are listed as the Home REIT's largest tenant at 10.5% of rental exposure / £4.2m at 28/02/2022, up significantly from just £1.7m contracted rent exposure at 31/08/2021

I noted that the auditor was a 'Leslie Eriera & Co Accountants', and that the accounts were signed off on 20th January 2022 (p5 of the 2021 accounts);



So I looked through companies house to see what the auditors filing history was...

I found a 'Leslie Eriera & Co Limited' of the same address, however this company was dissolved on 14th September 2021 and a Leslie Eriera had resigned on 7th November 2020...



I then found a second company called 'Leslie Eriera Accountants Limited', again of the same address as the auditor in the Big Help Project, however once again this company was dissolved, this time on 5th January 2021, having only been incorporated in June 2020...



There is no registered company called Leslie Eriera & Co Accountants;



Both similarly named companies from the same address were dissolved in 2021. So who signed off the Big Help Projects 2021 accounts?

What's more, the independent examiner for CG Community Council's 2019 accounts also happened to be a Leslie Eriera;



CG were a 6.5% rental exposure at 28/02

And the third link is the Dovecot and Princess Drive Community Association who were a further 6.2% exposure... their 'independent examiner' was a Mark Roberts;



Mark Roberts was also the named accountant in the Big Help Projects 2021 accounts which were signed off by Leslie Eriera & Co Accountants (who apparently don't exist according to companies house records!)

Clearly there could be an innocent explanation here, I'd certainly love to hear it from Home REIT...

[spectoacc] 25/11/2022 13:56

@andyArat - yes & no, I reckon.

Firstly, consider the debt, & LTV - the "V" of that could change very dramatically.

Secondly, it depends which parts of VR's allegations are true (if any). I don't believe there's anything in the "130k house sold on for £5m" nonsense, that's just Land Reg quirks. But clearly someone (with connections to HOME management, or not?) goes about putting together a portfolio of dirt-cheap, mainly NE properties. Then presumably does at least some capital spend - but not enough to bring up EPC's - and lets the houses to a 3rd party operator, who possibly shares a Head Office address with other HOME 3rd party operators (again - any connection to management, or to each other?).

Then, with leases in place, the whole shebang is shuffled onto HOME at vast mark-up. Knight Frank values them but doesn't go inside, so presumably mainly values them based on the lease terms/operator.

HOME claim 100% of rent being collected - and presumably the auditors have poured over that. VR say rent arrears, and little prospect of the rents being affordable for the duration of the lease.

If I had to guess:

10% chance everything's completely fine - but reduces with every hour HOME take to respond
40% chance it's "dodgy", CSH-style (something iffy that's been undeclared, but isn't necessarily an actual con-job on shareholders)
50% chance of it being something serious, as shown in @74tom's EPC research above, eg as evidenced by the huge mark-ups HOME shareholders have been paying on what is generally pretty junk resi.


Others will have different %'s, but not convinced your 90p is odds-on. Near term - any truth to rent arrears, mark-up allegations. Longer term - any truth to the leases being unsustainable.

[andyarat] 25/11/2022 13:10

If the management of Home have mislead investors to the extent suggested by the shorts, then their behaviour has to be criminal and all bets are off. If the management are borderline on their behaviour, then here is a company owning assets that must be worth 90p per share in a firesale situation, available for 60p.

[bondholder] 25/11/2022 10:42

The figure that's missing from all of this is the vacant possession value of all these properties if the thing goes wrong.The fact that they've never provided this crucial bit of information (which the valuers could easily have produced ) is a red flag imo.

[jg231] 25/11/2022 10:13

@Nexusltd, you are right, the vendor does all of the refurbishment so Home doesn't incur any capex. Clearly that justifies some uplift in valuation, but I assume most of the uplift comes from putting the properties on long leases. So you are right again, that the quality of the tenants is probably the biggest concern. In theory the tenants should be passing through Government housing payments, but if they are shell entities with little / no governance and connections to shady individuals, there is risk. I see that risk as twofold - (1) short term liquidity risk, where the tenant has to fund repairs etc. and there is a delay in that being funded and (2) a bigger risk that the rents may get challenged by the local authority on the level of rents. If the latter happens, that has a material impact on Home's cashflows. I think a key question here is whether the rents are justifiable on a per room basis or a per property basis. I think they look ok per room, but high on a per property basis and that's because typically the vendor has turned all the common space (living room) into another bedroom.

[74tom] 25/11/2022 08:07

The point on running costs could be critical I think. I.e. Circle supposedly had properties with average weekly rents of £61. If these properties are all D or E rated with little or no roof or wall insulation then what are monthly heating costs going to be?

The ratio of heating costs vs average monthly rents will be vastly different to this time last year…

[spectoacc] 25/11/2022 06:54

Thanks @74tom, great digging.

@elbru55 - if a lot had been spent on refurbs (as the sale price to HOME suggests), you'd strongly expect that to have included bringing the homes up to at least a "C".

So it both implies that not much was spent, and also that when the rules change, tenants may need to vacate whilst work is done/expense incurred.

Not certain the 2025 "C" is actually legislated yet? But a minor point.

Also suggests the running costs aren't cheap for many of these.

[williamcooper104] 25/11/2022 05:14

Very few non new build resi units are C and aboveIt costs a few hundred £ to get a new EPC

[elbrus55] 25/11/2022 04:19

If there existing EPC meets legal requirements, is there any benefit to getting a new one after refurbishment?

[williamcooper104] 24/11/2022 21:55

Not looking good Surprised the shorts didn't pick up on this

[williamcooper104] 24/11/2022 21:54

Not looking good

[74tom] 24/11/2022 21:21

Stoke on Trent portfolio;

5x C rating
21x D rating
8x E rating

3 of them were expired. Worth noting that quite a few were renewed in 2020, with Home buying the portfolio on 2/3rd December 2020.

[74tom] 24/11/2022 20:53

Plymouth portfolio, EPC’s checked for 27 of 28 properties (1 has an incorrect postcode)

3x C rating
21x D rating
3x E rating

If all had been refurbished surely there would be at least some evidence?

Given the change in EPC law coming from 2025 this is surely another red flag…

[spectoacc] 24/11/2022 19:40

Just to be clear on the multi-million pound single property valuations - it will be for all the properties in that particular purchase. Land Reg will describe it as "..For this and other titles..".

So agree that's not relevant, whatever VR claims.

Relevant is the gap between purchase price by previous co, and what HOME paid. Relevant is who owns the previous co and reaps the benefit. Relevant is lease security and likelihood of rent being paid for the duration. Relevant is who is behind the operating co's - is it a CSH-style fiddle.

Considering the first answer is so simple, can only think HOME may be struggling with some of the later responses.

[74tom] 24/11/2022 19:07

Great idea William...

Let's go through the Peterlee portfolio from P24 of the short report, which helpfully has full addresses for the properties

1. 13 Argent Street, Easington Colliery;

Certificate expired in October 2020...

2. 17 Jesmond Road, Hartlepool;

Certificate was renewed last month on 22/10/22, EPC rating D...


3. 24 Ninth Street, Peterlee;

Certificate expired in April 2020 having previously been rated F...


4. 51 Eleventh Street, Peterlee;

Certificate valid until 2025, rating D

5. 57 Seventh Steet, Harden;

Certificate valid until September 2029, rating C

6. 94 Third Street, Harden;

Certificate renewed in September 2021, rating D

7. 21 Eleventh Street, Harden;

Certificate renewed August 2020, rating D

8. 96 Seventh Street, Peterlee;

Certificate renewed August 2020, rating D

9. 6 Twelvth Steet, Peterlee;

Certificate renewed May 2020, rating D

10. 44 Rydal Street, Harlepool;

Certificate renewed September 2020, rating D

So we have 1x C, 7x D and 2x expired...

And remember these properties were apparently purchased for £326k in October 2020 and then sold to Home REIT for £848k a year later...

Onto the Plymouth Portfolio...

[nexusltd] 24/11/2022 18:39

I have this suspicion. I'll run it past this BB and see if it has legs. My understanding is that HOME buy the properties as job lots, i.e., 5-20 assets in a single transaction from a single vendor. When HOME makes the RNS announcement after the property purchase, this line is always present; " Each Property is immediately income producing . . . .".

Is it possible that all the work and relevant costs to refurb the assets are contracted to the vendor, so that they all pass to HOME fully refurbished?

Is it possible that the refurb costs for all the properties are loaded onto a single property, perhaps this accounting simplification makes sense to them, though evidently it is far from transparent?

Frankly I would be far more concerned about the quality of leases than the odd few mn in a portfolio of 700+mn.

Edit: Regarding EPC's, an excellent point. If we know the address of a property, I believe that the EPC is public domain and can be downloaded.

[bozzy_s] 24/11/2022 18:08

If they really paid £11.6m for a terraced house in Plymouth, the EPC needs to be A at the least!

It's strange that some sites are giving a realistic current value, and some have just added a % to the artificially inflated price.

themovemarket.com showing it as worth £13m

zoopla.com showing it as worth £196k - £217k


Very strange happenings. On the face of it, someone has done something VERY VERY naughty. Whether that's the management company ripping off HOME, or whether it's HOME itself, time will tell. No-one pays £11.6m for a 4-bed terraced house in Plymouth on the same day it was sold for £170k.

[74tom] 24/11/2022 18:06

M&G have been buying the shares sold by the shorters ever since the mini budget disaster...

On 27th September they TR1'd a holding increase to ~79.5m shares from the ~77m they held in June...this evening's TR1 takes them to 113.1m, so they've bought nearly 34m shares in 2 months.

If they hadn't been buying then where would the share price be right now?

[williamcooper104] 24/11/2022 17:30

EPCs a good test If it's an old property they if it's not been refurbished it will be EPC D or below Conversely nobody would refurbish without getting an EPC C or B

[williamcooper104] 24/11/2022 17:28

Anyone seen anything on the EPCs of HOMEs assets