Home REIT sees huge drop in portfolio value after audit

(Sharecast News) - UK residential real estate group Home REIT said it is "extremely disappointed" with a material reduction in the estimated value of its portfolio after an audit wrote down valuations by nearly 58%. Home REIT said that an audit by Jones Lang LaSalle valued the portfolio at just £412.9m as of 31 August, representing just 42.26% of the unaudited historical acquisition costs of £977m.

"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 have gone into liquidation in 2023," the company explained.

Some 88% of the portfolio is now valued on a "vacant possession basis, where a valuation has continued to be prepared on an investment basis, limitations on the duration of the income streams have been applied to account for the covenant strengths of the tenants, and the rent levels demanded under the leases".

In a separate statement, Home REIT said it had sold 80 properties in auctions over the past five days, representing 3.6% of the portfolio by number, for £16.2m, which will be used to cut debt and provide working capital.

"The board is extremely disappointed by the significant value reduction announced today which reflects the information that has come to light regarding the quality of the company's assets and tenants. This information is in contradiction to reporting provided to the board during these periods," said Home REIT's chair Lynne Fennah.

"The company reserves all of its rights in respect of the matters referred to in today's announcement and is still considering the conclusions and implications of the revaluation exercise with its advisers, and what consequential actions it may take."