Scandal-hit real estate investor Home REIT has pushed through a deal to take back hundreds of leases from a major tenant as it continues its turnaround efforts.
Liverpool-based charity group Big Help has agreed to give up leases on more than 600 properties, equivalent to around 30 per cent of the Home REIT portfolio.
The couple have been in a major dispute since early last year after the charity withheld rent in protest over housing conditions.
In a statement to the stock market yesterday, Home REIT, which specializes in housing the homeless, said taking back leases would allow it to collect rent and open up new opportunities.
The upgrade was a much-needed boost for the former FTSE 250 group, which has faced a series of scandals since 2022 and was suspended from the stock exchange in January last year after failing to file accounts on time.
Leases: Liverpool-based charity group Big Help has agreed to waive leases on more than 600 properties, equivalent to around 30% of the Home REIT portfolio.
Problems first arose more than 18 months ago when short seller Viceroy Research expressed concerns about the sustainability of its business model.
Viceroy had questioned the group’s ability to collect rent from tenants, most of whom were charities and community interest groups.
Home REIT was promoted as a way to house vulnerable people, including the homeless, by renting properties to charities and other groups, who would pay rent from government housing benefits.
The company went public in London in October 2020 and tapped investors for £850m to build a portfolio of 12,000 beds.
But since the Viceroy report, it has been rocked by a series of damning revelations.
These include an investigation by forensic accountants Alvarez & Marsal that uncovered transparency and due diligence failures by its former investment advisor Alvarium Home REIT Advisors.
Alvarium was subsequently looted and another company, AEW, was hired to try to stabilize the ship.
Since then, the group has been struggling to sell properties in its portfolio, often at deep discounts, to raise cash and stay afloat.
Over the past year, the company was able to complete the sale of 585 properties and exchange another 262 properties.
Several of its main tenants have also fallen into insolvency after failing to obtain Government assistance, leaving the company without rental income.
In the group’s last trading update in December, it revealed that its 2,473 properties were worth an estimated £412.9 million, almost 60 per cent less than the £977 million it had paid for them.
Its problems are far from over and in February the Financial Conduct Authority opened an investigation covering the period between September 2020 and January 3 last year.
Home REIT said it would “fully cooperate.”
Law firm Harcus Parker has also filed a lawsuit against the company, which represents hundreds of shareholders.
“Investors bought shares based on its claims that it had strict processes to ensure the acquisition of properties that would provide safe accommodation for vulnerable residents and generate strong, sustainable returns,” said Jennifer Morrissey, partner at Harcus Parker.
“It is now clear from all the facts widely reported in the press that Home REIT did nothing of the sort.”
The group has denied the allegations and said it will defend itself.
Last month it revealed it was taking legal action against parties it considers “responsible for wrongdoing”.