Investigation: Home REIT said the FCA has opened an investigation covering the period from September 2020 to January 2023.
Troubled Home REIT faces an investigation by city regulators over fears it misled investors.
The landlord, who specializes in homeless accommodation, said the Financial Conduct Authority (FCA) opened an investigation covering the period from September 2020 to January 3 last year.
Home REIT said it would “fully cooperate.”
The FCA declined to comment, but its investigation is another blow for Home REIT.
It has been mired in crisis since November 2022, when short seller Viceroy Research questioned its business model and its ability to collect rent from tenants, most of whom were charities and community interest groups.
Despite initially denying the allegations, the debacle led to the suspension of Home REIT’s shares in January last year and a prolonged delay in its financial results, which remain unpublished.
Home REIT promoted itself as a way to house vulnerable people, including the homeless, by renting properties to charities and other groups who would pay the rent with government housing benefits.
But since the Viceroy report, the company has been hit 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.
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 fell into insolvency after failing to obtain government assistance, leaving the company with no rental income.
Home REIT suffered another blow in December when real estate group Jones Lang LaSalle (JLL), which it hired to assess the value of its portfolio, concluded that its properties were worth less than half of what they cost to buy.
JLL estimated Home REIT’s equity was worth £412.9 million at the end of August, or just 42.3 per cent of the £977 million it paid in total for the properties.
The report appeared to be the final nail in the coffin for Home REIT’s embattled management.
In January, it announced that its chair, Lynne Fennah, would resign and that the rest of the board would leave when it finally released its results. They are expected to arrive in the second quarter of this year.
The company remains in a deep financial hole, and earlier this month reported it was still £162.8m in debt.