Final Results and Audited Annual Report and Accounts for the Year to 31 March 2021

Walls & Futures REIT plc (“WAFR”) the Ethical Housing Investor and Developer, is pleased to announce its final results and the publication of its audited annual report and accounts for the year to 31 March 2021. A copy of the annual report and accounts can be viewed here

Walls & Futures is an ethical housing investor and developer on a mission to address the unfulfilled demand for specialist social housing in the UK.

We design, fund and develop specialist social housing which is let on Full Repairing and Insuring (FRI), inflation linked leases to our partners and customers who include local authorities, registered providers and charities. Their tenants are often individuals with learning & physical disabilities, autism, dementia, mental health and life changing injuries.

Walls & Futures REIT plc does not have any involvement with the care delivered within the properties, this is managed by care providers approved by local authorities.

Highlights Include: 

• Net Asset Value (NAV) down 4.9% to 102p per share (2020: 107p per share)
• Revenue £148,420 up 7.5% (2020: £138,036)
• Loss -£214,169 (2020: Profit of £625,767)
• 100% of Specialist Supported Housing rents collected
• 97% of Private Rental Sector rents collected
• Investment property value fell by 1%
• Earnings per share -5.70p (2020: 16.93p)
• Outperformed MSCI UK residential benchmark by 423% for year ending 31 December 2020
• Generated over £1.3m cash through sale of two Private Rented Sector (PRS) properties with funds to be invested in new SSH
• Repaid entire £600,000 revolving credit facility
• Pipeline of new partners & projects

Key elements of the final results can be viewed below.

Joe McTaggart, CEO of Walls & Futures REIT plc said:

“Against the challenging economic backdrop caused by Covid-19, we are pleased with the performance of our portfolio which saw 100% of our Specialist Supported Housing rents and 97% of our Private Rental Rents collected.

Our investment strategy showed further resilience as we outperformed our benchmark, the MSCI UK Residential Annual Property Index for the fourth year running with a total return of 3.53% over 0.57%.

 We’re looking forward to announcing further partners in the coming months and continuing to build the future of specialist supported housing with the launch of our bespoke modular housing solution for autism.”

Overview

Against the challenging economic backdrop caused by Covid-19, which has seen many property companies experience non-payment of rents and significant falls in asset values, we are pleased with the robust performance of our portfolio. For the 12 months to 31st March 2021, we collected 100% of the Specialist Supported Housing (SSH) and 97% of Private Rental Sector (PRS) rents due.

Part of our strategy, previously outlined, involved selling our London PRS properties, which were let on Assured Shorthold Tenancies (ASTs), to fund further SSH investments. The sale was delayed by emergency legislation introduced by the government to protect tenants on ASTs, with notice periods increased to 6 months. Working with our tenants we completed the sale of two of the three properties.

Our Wimbledon property completed in June 2020 at £656,000 and was followed by one of our Southfields properties which completed in January 2021 at £660,000. Generating a total of £1,316,000 in cash before fees, part of which was used to pay down our £600,000 revolving credit facility.

Following the valuation of our property assets, we can report a modest fall of 1.9% due to a fall in our last PRS property. Our SSH assets remained the same as last year. As at 31st March 2021, our Net Asset Value (NAV) fell by 4.9% to 102p per share.

Our investment strategy built on developing our own projects has enabled us to build a resilient portfolio. We are delighted to announce that for the calendar year ending 2020, our portfolio outperformed the benchmark, MSCI UK Residential property index delivering a total return of 3.53% vs 0.57%. This is the fourth consecutive year we have outperformed the benchmark. Our intention is to scale the business so our investment strategy, which averaged a total return of 268%, is reflected in terms of operating cash flow and share price.

To illustrate the financial impact of our strategy, we have to date invested a total of £1.34 million in SSH developments. Based on the long-term nature of the leases, the quality of the covenants and the income generated they are currently valued at £2.57 million. An increase of £1.23 million in value or 92 percent.

Unsolicited offer and share price performance

On 8th April 2021, we received an unsolicited bid from Virgata Services Ltd. It materially undervalued the company and was overwhelmingly rejected by our shareholders and ultimately lapsed on 6th July 2021.

Our share price has underperformed relative to our NAV over the last few years. We believe a significant component this is due to a small number of shareholders who hold their Walls & Futures Shares on one particular investment platform continually selling because the platform was unfamiliar with the regulatory status of the AQSE Growth Market.

We believe the majority of the Shareholders are long term holders so in the short term we are actively working to engage with new investors to replace the minority of shareholders who voted to accept the bid. With fewer investors selling and more buying into the company we believe this will serve to close the discount that we currently trade at.

Additionally, we have had constructive discussions with Aquis regarding improving liquidity in Walls & Futures Shares.

In November 2020, the Aquis Stock Exchange introduced a new market-making scheme with founding market makers Canaccord Genuity, Liberum, Peel Hunt, Shore Capital, Stifel and Winterflood Securities all supporting the initiative to reduce spreads and increase liquidity.

Both AJ Bell and Interactive Investor recently announced that they have added AQSE Growth Market securities to their online trading platforms, extending AQSE Growth Market investment opportunities to over 500,000 retail investors. It is reported that Hargreaves Lansdown and IG Group are also working with Aquis to include Aquis Stock Exchange traded securities on their online offering, joining Barclays Smart Invest and Jarvis who already offer most AQSE Growth Market securities online.

Outlook for the future

Throughout 2020, we actively engaged with stakeholders including special education needs (SEN) schools, care providers, local authority commissioners, charities and housing associations in order to identify an area that was not being adequately served.

We concluded that autism was an area where we could apply our experience of delivering high quality, design led, specially adapted homes. This has enabled us to maximise both our positive social impact and generate returns for our ethically minded investors.

We have developed direct relationships with new partners across a network of specialist charities, care providers and housing associations who provide support, care and advice to those affected by autism.

Together with these partners, who geographically cover most of England, we plan to provide small, innovative housing solutions to accommodate three to ten individuals with autism per development. The aim is to provide our partners with the ability to deliver a pathway of progress and highly specialised services which can support individuals, from childhood (as young as seven), through adolescence and onto adulthood. With the right support, individuals will be able to progress through autism-specific homes and avoid hospitals.

We have now agreed lease terms and signed memorandums of understanding with new partners covering the North East, South West and the South East. These memorandums set out the framework for the provision of SSH which will be let to our partners on long term leases and work together on joint venture opportunities to deliver new schemes. There is no guarantee that these memorandums will result in final agreements being entered into with these partners.

We are in the process of finalising the design of our bespoke home for autism. Designed in collaboration with a specialist architectural practice and our partners, we believe our autism housing solution enables us to deliver homes at scale, that support the needs and sensory requirements of individuals across the autism spectrum.

Designed in pods and constructed off site, using modern building methods (modular), we will be able to offer a wide range of configurations from a single one-bedroom self-contained apartment to a cluster of eight one- or two-bedroom apartments with communal areas and sensory/therapy rooms plus staff office and overnight accommodation, providing 24/7 care if required.

The use of modular construction can reduce the build process by up to 50 per cent. enabling us to deliver projects in as little as 12 weeks when compared to traditional construction methods. Additionally, the materials used in modular construction make it more sustainable and have less of an impact on the environment, enabling us to make progress towards net zero.

Future funding

During the 2020-21 year we disposed of all but one of our PRS assets generating a total of £1,316,000 in cash before fees, part of which was used to pay down our £600,000 revolving credit facility.

In the short term, our new investments will be made from our cash deposits and from the capital released from the expected sale of our final London property. Based on our internal estimates, we estimate we would be able to invest approximately £1 million in these projects.

We will seek to raise fresh capital to fund the remainder of our pipeline, which will consist of new build developments, from investors seeking to make a real positive social impact; however, we will not raise new equity at the current substantial discount to net asset value, as this would result in a significant dilution to Shareholders. The Company is also able to draw down on its £600,000 secured revolving credit facility until April 2024, on which it currently has no funds drawn.

Finally, we would like to thank all our shareholders for their continued support.

Consolidated Income Statement for the year ended 31 March 2021

Consolidated Statement of Financial Position as at 31 March 2021