Home REIT tenant delivers 100 leases

The troubled housing provider Home REIT will take control of 100 property leases, consisting of 418 beds, after tenant (Housing & Support) CIC (One CIC) agrees to give it up.

Mears Limited, guaranteed by housing and social care provider Mears Group, occupies the premises on a sublease basis from One CIC.

These subleases will now transfer to Home REIT, with Mears Limited becoming a direct tenant for the remaining lease term of just over six years for an initial contracted rental income of £891,155 per annum, shareholders were told on Wednesday.

Home REIT said the buyout deal would provide the company with a “substantial revenue stream from a strong tenant covenant.”

It added that the deal meant that Home REIT was expected to generate “significantly higher” rental income than One CIC’s for the properties, despite a lower par value. The annual rent for the properties used to be £1,227,405 per annum.

It read: “The transaction is in line with AEW’s strategy as an investment manager to stabilize the company’s portfolio. The current occupants of the buildings will not be affected by this transaction.’

Home REIT said it continues to work “constructively” with One CIC to find “sustainable solutions” for the other 234 properties it currently leases from Home REIT.

The transaction reduces Home REIT’s exposure to One CIC from 13.5 percent to 9.5 percent by number of properties and from 14.2 percent to 11.9 percent by contracted rentals.

An investigation by forensic accountants Alvarez & Marsal previously revealed shortcomings in the transparency and due diligence of former investment advisor Alvarium Home Reit Advisors.

In May, Home Reit’s board announced that Knight Frank, the independent real estate appraiser, had terminated its contract to provide valuation services to the group. Jones Lang LaSalle was appointed to replace the company in July.

Last month, the group unveiled plans to seek shareholder approval to drop its social-purpose investment policy during a two- to three-year stabilization period devised by new fund manager, AEW.

This week, Home REIT investors showcased the dramatic change in its business model as it scrambles to prop itself up.

In a near-unanimous vote at a meeting at the city’s office of public relations firm FTI, shareholders approved a plan to shift real estate owners’ focus on owning homes for vulnerable residents, such as the homeless.

Instead, the decision would allow the country to invest in all kinds of housing.

The strategy also enables the firm’s investment manager AEW to restructure its portfolio and make lease terms more flexible.

Home REIT previously warned the changes were “urgently” needed after collecting just 7 per cent of the nearly £8.8 million in rent it owed for the May-June period.

The review of its investment ethic comes after the group sold some of its properties to raise cash and stay afloat, with some homes selling for more than 80 percent less than the purchase price.