Home Reit on track

With no comparable figures to speak of, full-year results for Home Reit (HOME) present somewhat of an embryonic picture of the homelessness-focused landlord. Throw in a £350m post-period fundraising, and that picture is already out of date.

But investment manager Alvarium has so far done what it promised at last year’s IPO: deploy capital buying up off-market portfolios from the private-rented sector, and then rent those properties on long-term leases to organisations whose funding ultimately comes from local authorities with a statutory duty to secure housing for the homeless.

In the first year and a bit of trading, this led to an 8.9 per cent net asset value (NAV) return, powered by a 4.5 per cent rise in the portfolio valuation. Confidence in property valuations, and a 100 per cent rent collection track record, mean the goal to return a minimum 5.5p in dividends this year is on track.

Alvarium says this is a good deal for local authorities. The Reit’s average weekly rents are £90 per bed, which is both 60 per cent below the average estimated weekly rate for a B&B room in England and less than half the total housing benefit received per property. Fund managers Jamie Beale and Gareth Jones insist there is no trade off in accommodation quality for its tenants, and that thorough due diligence is carried out on all of its counterparties.

Home currently lacks analyst forecasts, but does not appear short of properties to acquire, ready sources of capital and (sadly) demand. As such, while it is tempting to view the shares’ premium to NAV as an ESG buyers’ effect, the combination of off-market discount purchases, rent collections and high net initial yields are likely to entice even the most dispassionate of investors. Speculative buy.

Last IC View: Buy, 111p, 28 Apr 2021