An additional 162 properties have been exchanged for sale at a total of £25.7m, which are expected to complete this month.
Home REIT has completed the sale of 98 properties in December for a total of £26.5m, its board revealed in a stock exchange filing today (8 January).
An additional 162 properties have been exchanged for sale at a total of £25.7m, which are expected to complete this month.
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Throughout December, the trust's board said it collected 12% of rent invoiced including arrears, warning that rent collection is likely to vary on a monthly basis in the short term as investment manager AEW "continues to work on stabilising the portfolio".
AEW is also considering taking legal action against tenants that are "not engaging constructively and continue to withhold payment of rent", it added.
Last month, the trust also repaid £25.6m of debt to its lender, comprising a cash payment of £23.1m and a net break gain of £2.5m, which is being applied to Home REIT's debt repayment.
The board noted the value of the trust's break gains has "reduced significantly" due to reductions in future interest swap rates.
As of the end of December, Home REIT had total borrowings of £172.7m, comprising of an £82.4m interest-only term loan repayable in 2032 with a fixed rate of 2.07% per annum, and a £90.3m interest-only term loan repayable in 2036 with a fixed rate of 2.53% per annum.
The trust also has to pay an additional fee of 5% a year on the aggregate outstanding balances, with the fee accruing on a daily basis from 30 November 2023, the board explained. The fee is payable at the earliest of 28 June 2024 or full repayment of its loans.
As of 31 December, the trust had cash balances of £15.7m, of which £5.4m was unrestricted; and the board said it expects further sales of the property portfolio as part of its strategy to "stabilise the financial position" of the trust.
Home REIT has also provided an update regarding the valuation of its properties, with draft valuation reports for the periods ending 31 August 2022, 28 February 2023 and 31 August 2023, based on market value and market value "on the special assumption of vacant possession".
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As of 20 December, the firm said JLL had externally inspected 2,391 properties (around 97% of the portfolio), and conducted 195 internal inspections and in turn, Home REIT had updated its valuation estimates based on those reports.
According to the draft valuation reports, which are unaudited, as of 31 August 2022 Home REIT had 2,239 properties worth £414.4m.
The number of properties rose to 2,473 for the periods ending 28 February and 31 August 2023, but their value increased in February to £422.9m and then dropped to £412.9m as of the end of August last year.
The board explained: "The draft valuation of the company's property portfolio as at 31 August 2023 represents 42.3% of the unaudited historical acquisition costs of £977m (excluding purchase costs). The reduction in the property valuation is principally a result of a re‐assessment of the quality of the assets through the on‐going inspection programme, and of the covenant strength of the tenants, several of which entered liquidation in 2023."
The valuation reports are part of the process required of Home REIT to audit and then publish its annual results for the periods ending 31 August 2022 and 31 August 2023.
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Yet the trust's board said the auditing process "remains ongoing" and is subject to the completion of the valuation process, the internal inspection programme and the application of the revised accounting policies, among other things.
A timeline for the publication of the annual results was not provided, and Home REIT said it is not "in a position to publish an estimated net asset value at this time".
The board said it and AEW are working with BDO to publish the audited results "in a timely manner".
The trust's shares remain suspended.
Peel Hunt analyst Thomas Pocock said: "Property sales from the Home REIT portfolio continue apace and progress has been made in reducing the company's debt balance, which now incurs and further 5% p.a. of interest above the c.2-2.5% fixed costs of the loans.
"The biggest development in December was the announcement of the draft portfolio valuation which we estimated implied a c.30p NAV per share and paves the way for a potential resumption of trading in the company's shares."
