Home REIT opts for ‘controlled liquidation’ amid debts and regulatory probe

Home REIT, the London-listed property investor, is set to carry out a “controlled liquidation” in a bid to secure redress for shareholders after two years marred by scandal and financial difficulties.

The former FTSE 250 group, whose shares have been suspended since January, faces a City watchdog investigation, unsustainable debt levels and legal action on behalf of its shareholders.

Home REIT on Tuesday decided to end its four-year run as a London-listed investment trust, telling investors that a controlled liquidation was in its best interests while outlining plans to sell its assets to maximise the remaining value for shareholders and pay down its accumulated debt.

The investment trust highlighted debts worth around £115m, a significant amount of which is owed to Scottish Widows, warning that repayment may leave the debt “considered too small by many investors”.

Home REIT also said its stabilisation strategy, which has already seen the group offload a sizeable portion of its portfolio, “faces considerable challenges”.

‘This includes a high fixed corporate cost base, required due to the REIT structure and as a result of the issues the Company is facing at this time, and the requirement for capital expenditure to drive an increase in rental value and portfolio valuation,’ he added.

‘As a result of these factors… the Board has concluded that it is in the best interest of shareholders to propose a controlled liquidation strategy for the Company, pursuant to which the Company’s assets would be sold with the objectives of maximising the remaining value for shareholders and repaying the balance of the Company’s loan.’

Home REIT was suspended from the stock exchange in January last year after failing to file accounts on time.

Problems first arose more than 18 months ago when short-seller Viceroy Research raised concerns about the sustainability of its business model.

The 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 rents using government housing benefits.

The company went public in London in October 2020 and raised £850m in investors to build a portfolio of 12,000 beds.

But since Viceroy’s report, the company has been rocked by a series of damning revelations, including transparency and due diligence failures by its former investment adviser Alvarium Home REIT Advisors.

Since then, the group has been struggling to sell properties in its portfolio, often at deep discounts, to raise cash and stay afloat.

Several of its major tenants also filed for bankruptcy after failing to secure government aid, leaving the company without rental income.

In February, the Financial Conduct Authority opened an investigation covering the period from September 2020 to January last year, while law firm Harcus Parker also filed a lawsuit against the company, representing hundreds of shareholders.

Michael O’Donnell, non-executive chairman of Home REIT, said: ‘It is clear that Home REIT continues to face significant challenges, including in relation to its debt position and in bringing and defending legal action, and in responding to an FCA investigation.

‘Against this backdrop and in light of the anticipated reduction in the size of the Company’s portfolio, following a thorough review, the Board of Directors has concluded that the best course of action for shareholders is to propose a managed liquidation strategy.

‘I would like to thank shareholders for their continued patience and support during the stabilization process as we strive to address and seek solutions to the issues facing the company.’