Suspended Home Reit (HOME ) has offloaded another 14 properties for less than half their purchase price as AEW, the new manager of the distressed investor in social housing, battles to improve its balance sheet. 

At a public auction last week the suspended trust sold properties acquired for homeless accommodation for £8.9m, representing a 51% cut to the purchase price. 

The latest auction takes the number of properties sold to 191 for a total of £36.5m and two more auctions are planned for this week as it raises money to pay down its £216m debt pile and provide working capital. The fund is sitting on £15.3m of cash, of which £2.7m is unrestricted. 

The board is anticipating the publication of the outstanding accounts in early 2024 and said it was ‘committed to the restoration of the trading in the company’s ordinary shares as soon as it practically possible’.  

AEW UK Investment Management, which was appointed in May alongside company turnaround specialist Bill Starn is transferring leases and re-tenanting 10% of the portfolio. It also collected 18% of rents invoiced in October and it ‘continues to develop its strategy for non-performing tenants during the stabilisation period’. While the rent collection figure is low it is a huge improvement on the 3% of rents collected in September as tenants’ ability to meet their rent obligations deteriorated.

The manager said it ‘assessing all strategies’ for tenants who are unwilling to ‘engage constructively’ and are withholding payments, including serving statutory demands and section 146 notices of forfeiture. 

AEW expects more tenants, many of which are charities, to enter into liquidation in the short term, which despite causing short-term pain, will allow the manager to re-tenant the properties and carry out other asset management initiatives that should generate higher rents in future. 

As part of this remedial work, which includes changing the mandate to become an all-property real estate investment trust (Reit), the manager is undertaking a review of the portfolio and the condition of the properties. A total of 534 property inspections were completed by Vibrant Energy Matters at the end of October, assessing the ‘condition, compliance, and occupancy of properties’. 

The board warned these inspections are ‘taking longer than initially anticipated’ due to ‘Vibrant being unable to obtain access when attending properties’ but the inspections will carry on until the end of the year. 

Home Reit’s valuer, Jones Lang LaSalle, has externally inspected 2,247 properties and internally inspected 131, which will allow AEW to ‘publish valuation information by the end of the year’. The manager has also reviewed 1,690 of the historical 2,473 property transactions completed by Home Reit to apply revised accounting policies back to inception as it stays on the path to recovery and relisting of the shares.  

The trust also used its monthly report to update shareholders on its board succession plans, stating that Fidelio Partners, which was appointed at the beginning of October to replace its board, has ‘made good progress in identifying a new independent non-executive chair and the company is therefore well placed to make this proposed appointment in advance of the restoration of the listing of its shares’.  

The whole board will be replaced entirely within 12 months, a process which is being overseen by Mark Davies, who has been the independent senior adviser to the board since March 2023. Davies, who is the founder of NewRiver Reit (NRR) and will succeed Harry Hyman as head of Primary Health Properties (PHP) next year, has met with the largest Home Reit shareholders representing 37% of the share register to discuss the board transition.