Home REIT has appointed AEW as its new investment manager, in a move that it hopes will draw a line under recent difficulties.
The appointment will see the £75bn AUM global real estate asset management group take over the role from Alvarium Home REIT Advisers.
Under the deal AEW will be paid an annual property advisory fee of £3m, along with other fees on top of that. Alvarium was instead paid a percentage of asset value.
The REIT’s valuer, Knight Frank, has given it six months’ notice, stating that its contract to provide valuation services to the company will terminate from 3 November 2023.
Home REIT chair Lynne Fennah said: “The appointment of a new investment manager is an important step. AEW brings deep fund management and property expertise that will be critical in enabling the company to stabilise its property portfolio, maintain its mission of providing accommodation to vulnerable people and maximise value for shareholders. The board has run a thorough process to enable it to make this change in investment manager. AEW has undertaken detailed diligence before taking on the mandate and is well placed to hit the ground running. I am delighted with the appointment and look forward to working together.”
A statement by the REIT this morning said AEW’s immediate priorities would be to undertake “a thorough review of the company’s assets to help inform a longer-term strategy for the portfolio”. It will also be charged with dealing with a number of “short-term requirements”, including preparing for the potential sale of a limited number of properties.
Home said AEW would also engage with the company’s current tenant base “regarding issues with their properties that may have been previously unaddressed, while improving rent collection efficiency”. The REIT has recently been collecting less than a quarter of rent due, after a number of tenants were either unable to pay or refused to do so due to renovations allegedly not being carried out on the properties.
The REIT’s board said it would write to shareholders “as soon as practicable” to detail proposed changes to its investment policy, which will include enabling the company to enter into shorter-term leases with tenants, and details of how shareholder approval will be sought.
As well as its £3m fee, AEW will receive a variable management fee for disposals of £422 per bed for every property sold and a variable management fee to incentivise rent collection of 10% of all rent collected, subject to an aggregate cap of £10m for the initial two-year period.
Following that initial period, AEW will instead receive an investment management fee equal to 0.75% of NAV per annum on an ongoing basis, subject to a minimum fee of £3m per annum. This will increase annually in line with inflation by a maximum of 5% per annum.
If Home REIT were to be taken over, AEW would receive a £9m payout. AHRA would have received £7m.
Home REIT has also agreed terms with Bill Starn, an experienced turnaround CFO, as a consultant to the company. He will now transfer as a consultant to the AEW team.
Nick Winsley, head of AEW UK, said: “We are committed to working with Lynne and the board to protect the interests of all of Home REITs stakeholders, shareholders, the company’s lender and the residents. While our immediate priority will be to address a number of short-term requirements, we will also undertake a thorough review of the company’s assets that will allow us to formulate a longer-term strategy for the entire portfolio, which we will propose to the board in due course.”
To send feedback, e-mail piers.wehner@eg.co.uk or tweet @PiersWehner or @EGPropertyNews
