Home REIT, the property company that specialises in premises for homeless people, has said it faces serious challenges with rental collections standing at only 23% in the quarter ending November 2022.
The listed company commissioned a special operational report on the precarious state of the company.
It has now emerged Bluestar Group has made an unsolicited takeover approach likely to be in cash.
Lynne Fennah, chair of the board, said: ‘We recognise the serious issues facing the company and are examining all options to preserve shareholder value, and the interests of all stakeholders.’
The company’s share price reached 129 pence a share at the end of 2021 but has slumped to 37.8 pence since then.
In a message to shareholders, the company said it had been working with its advisors, however the process has been hampered by the unexpected resignation of its two brokers, Alvarium Securities and Jeffries International.
After a quick-fire process, it has appointed Smith Square Partners as a replacement.
Earlier this week, the report it commissioned from Alvarium Home REIT Advisors and the operational review by Simpact Group – a specialist in social housing – found among other things that the forecasted rent to be collected in the coming months was ‘highly uncertain’ given tenants’ ability or willingness to pay.
Statutory demands have been served on seven of the defaulting tenants.
More than two-thirds of the portfolio requires refurbishment. These are estimated to cost between £15 mln and £20 mln.
The company explained: ‘Vendors are contractually responsible for the refurbishment of properties, and so it is therefore hard to quantify the net exposure to the company, however the investment adviser is working with Simpact to further investigate the full level of refurbishments required across the entire portfolio.'
'The Investment Adviser notes that there is approximately £10 mln of retentions held by solicitors which may become available to the Company if the required refurbishment works are not undertaken by certain vendors.’
To make matters worse, there has been media speculation of alleged wrongdoing. The beleagured company has consequently brought in experts: ‘The board confirms that it instructed Alvarez & Marsal, independent forensic accounting experts, to investigate these allegations in early January 2023. This investigation is ongoing and it is not possible to confirm its outcome at this stage,' it said.
BDO is still engaged to finalise an enhanced audit of accounts for the year ended 31 August 2022. The company is also engaging with its lender, Scottish Widows.
As previously reported, rent payable by Home REIT’s tenants is funded by support from local and central government.
Its portfolio has been housing around 2,500 vulnerable homeless people across the UK.
The IPO on the London Stock Exchange took place in 2020.
Potential acquirer, Bluestar, was founded in 2016 and provides specialist debt finance solutions.
