(Alliance News) - Bluestar Group Ltd on Thursday confirmed it has made an "indicative proposal" to acquire embattled real estate investment trust Home REIT PLC.
The news comes as Home REIT, focused on accommodation for homeless people, faces issues over rent payments in its portfolio. It also recently came under short-seller scrutiny.
"There can be no certainty that any firm offer will ultimately be made for Home nor as to the terms on which any firm offer might be made," Bluestar said.
It has until March 16 to make a firm offer, or say it does not plan on making a formal takeover bid.
Home REIT shares were suspended at the start of January, after it failed to publish its annual financial report within four months after the end of its financial year on August 31, in accordance with Financial Conduct Authority regulations. The company blamed the issues on its independent auditor, BDO LLP.
Home REIT said that its two brokers, Alvarium Securities and Jefferies International, have resigned. It noted that this was "unexpected". Since then, it appointed Smith Square Partners as its new financial adviser.
Home REIT then said that it received a report from Alvarium Home REIT Advisors Ltd on Wednesday regarding rent collection and the operational performance of the company's portfolio following a detailed review undertaken by Simpact Group.
Simpact is a specialist social housing property manager engaged by Alvarium. It oversees a housing portfolio across 100 local authorities in England and Wales.
Home REIT said the report highlighted a "serious deterioration" in rent collections for the quarter to November 2022 and identified serious challenges in rent collection for December and January. For the quarter ending November, only 23% of rent had been collected, meaning that out of the GBP14.8 million quarterly rent roll, only GBP3.4 had been paid.
In addition, the report showed that the rent forecast to be collected for the coming months is "highly uncertain", due to tenants' ability, or willingness, to pay. However, it noted that it is not possible to quantify the future amounts of rent to be collected with certainty, as the issues are not straightforward.
On January 25, Home REIT confirmed that its tenant, Lotus Sanctuary CIC, has failed to pay rent on difficulties gaining "exempt status" from local authorities. It said that Lotus has yet to pay rent for the quarter to November 30.
Lotus is a Wolverhampton, England-based company, which provides over 2,000 beds to vulnerable people.
As at August 31, Lotus represented 12% of Home REIT's overall rent roll, providing 939 beds, predominantly to vulnerable women. As at December 31, the company's properties let to Lotus were 55% occupied, inclusive of properties undergoing refurbishment.
On January 12, the company told investors that both Big Help Group and Noble Tree Foundation had disputed their rental obligations, and failed to pay for the three months to November 30.
On Thursday, Home REIT also said that the report has indicated that around 25% of its portfolio requires "at least some level of refurbishment". The cost of refurbishing these properties is expected to be between GBP15 million and GBP20 million.
"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," Home REIT said.
Alvarium Home REIT Advisors noted that about GBP10 million of retentions held by solicitors, which may become available to Home REIT if the required refurbishment works are not undertaken by vendors.
In light of this report, Home REIT said it is considering all strategic options, including the possible sale of the company.
Further, Home REIT noted "media speculation of allegations of wrongdoing." It said it has instructed Alvarez & Marsal, independent forensic accounting experts, to investigate these allegations. This investigation is now ongoing.
Chair Lynne Fennah said: "We recognise the serious issues facing the company and are examining all options to preserve shareholder value, and the interests of all stakeholders."
By Sophie Rose, Alliance News reporter; updated by Eric Cunha, Alliance News news editor
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