Over 300 thousand people in the United Kingdom are homeless. The figures have risen a lot over the last 12 months – the social effect is drastic and the economic impact is huge.
Local authorities have a responsibility to pursue accommodation for someone who is without shelter or at risk of losing their residency. But their choices are small, and assets are frequently both bad and expensive, so they cash out £1.1B annually on temporary accommodation just in England.
Home Reit is a property investment trust that seeks to aid in these times by offering purpose-built or renovated assets where rentals are considerably less costly than existing options.
Home rentals vary from £60 to £85 per week in assets specially built to house the homeless. On the other side, emergency B&B accommodation, for which the English councils paid GBP 344M in the past year, normally costs even to a £250 weekly.
Tenancy is safe and tenants are given preparation and rehabilitation to learn skills to ensure a brighter future.
Home Reit is expected to float on the stock exchange on October 12 and investors will be able to subscribe to shares until Tuesday.
The deal is a convincing one. Shares are at the price of one pound, with a min. subscription of £100. The company expects to raise £250 million and is planning a 5.5p yearly dividend payable on a quarterly basis from September next year. This places the stock at a return of 5.5 percent, with the management aiming for a whole return, counting in capital gains, of around 7.5 percent annually.
The goals are appealing in an environment where savings rates are practically non-existent and the majority of companies – including a few in the real estate sector – cut or forgot about their dividend payments.
Home Reit is in a different kind of place. Local authorities cash out fees for homeless individuals and can recover much of the cash from the Department of Work and Pensions, so Home Reit’s profit is government-backed and leases are usually two to three decades in length.
The trust will be run by Alvarium, an investment company that handles cash for rich families. The group also has a private fund of £430M for these donors, and 620 homes for the homeless.
Home Reit is going to be headed by the social housing experts Jamie Beale and Gareth Jones, who spent decades on the real estate marketplace. They identified £350M of land and assets on which to invest the proceeds of floating in 6 to 9 months.
Certain assets will be constructed from the ground up, with Home Reit supplying the funding as soon as planning permission is given and tenants are deemed secure.
Other locations will include restored hotels, offices and other structures, many of which are probably to become empty as Covid-19 affects the way people function and move around.
Home Reit has also entered into an arrangement with Crisis charity, offering financial assistance and guidance on where to build new real estate. All of Home Reit’s sites will be low-rise, placed in good locations and based on genuine treatment.
Homeless people are seldom without a home as their own choice. They could be victims of domestic violence, young people previously in foster care, ex-offenders, opioid users, or simply families who bumped into obstacles. They are much more likely to move on if the roots of their problems are treated, instead of the symptoms.
Home Reit is also willing to burn the environmental certification with a pledge to better the carbon footprint of its properties by reducing energy and water usage and promoting recycling.
There are proposals to raise the fund volume to around £1B, but the company will progressively add new assets to its portfolio and just after it ensures that there is a need and that tenants are located.
Homelessness does not exist in the perfect world. But this is an imperfect world and figures are increasing – the government can not deal with the problem on its own. Home Reit was founded to assist, give homeless individuals the hope of a better present and save hundreds of millions of pounds annually for local authorities. In the meantime, shareholders are likely to reap good dividends and the expectation of capital growth. A truly altruistic investment.