Home REIT: Beleaguered property fund value falls 60 per cent
Scandal-hit housing investor Home REIT has published its long-delayed 2023 annual results, revealing its property portfolio has been valued at just 40.7 per cent of its original purchase cost.
The results for the year to 31 August 2023 revealed that the value of Home REIT’s assets had decreased by more than a third in a year, thanks largely to a £71.4m write-down of the fair value of its investment properties.
Other decreases in its valuation included a fall in net rental income from £36.4m to £8.1m, thanks to writing off doubtful debts (£49.5m), and a £14.2m write-off of seller’s works that had not been initiated.
After spending more than £1bn on property acquisitions throughout its history, the former FTSE 250 firm’s market value is only £412.7m, an independent valuation revealed.
“While some will be keen to pick over the bones in detail, we acknowledge that these results will be of little significance to most shareholders,” said Deutsche Numis analyst Andrew Rees.
Instead, shareholders are closely watching the ongoing sale of Home REIT’s properties in an attempt to receive back some of the cash they had invested.
Since August 2023, the fund has sold 1,622 properties for £244.1m, with the remaining 851 properties marketed for sale at around £175m.
“However, the board has previously cautioned that the timing and quantum of any return of capital to shareholders is uncertain given the possible impact from ongoing legal proceedings involving the company,” warned Rees.
Home REIT was set up on the promise of housing the homeless while delivering returns to investors, but was embroiled in crisis following a report from short-seller Viceroy Research, which sounded the alarm on its shaky tenant base and housing portfolio.
Since then, a slew of charities that rented its properties have gone bankrupt, and the Financial Conduct Authority has launched a probe into the firm.
Home Reit vowed to ‘vigorously to defend itself’
Home REIT issued pre-action letters of claim to former managers Alvarium and AlTi in April last year, and to Alvarium Home REIT Advisors in May last year, though the latter is in liquidation.
Also facing legal proceedings itself, the trust said it “intends vigorously to defend itself in respect of the threatened litigation and has denied the allegations made against it”.
A pre-action letter of claim has been received by Home REIT from Harcus Parker on behalf of a group of current and former shareholders, but no legal proceedings have been issued yet.
Home REIT’s remaining interim and annual results have also been prepared, and the trust said it intends to publish them over the next three months.
Once the 2024 results have been released, the trust’s shares will be allowed to begin trading again, with the board reiterating its commitment to a restoration of trading as soon as possible.
“The publication of the 2023 annual report and accounts is a further positive step toward the relisting of the company’s shares,” said Michael O’Donnell, chair of Home REIT.
“We remain focused on optimising the value of the portfolio and maximising returns to shareholders, while keeping disruption to underlying residents to a minimum, in line with the company’s managed wind-down strategy.
“The company has made significant progress in recent months, with debt now fully repaid and the remaining portfolio launched for sale.”
“Home REIT’s results present a disappointing summary of losses sustained by its shareholders and the damage done to the sector providing accommodation for vulnerable individuals,” Jennifer Morrissey, partner at Harcus Parker said.
“While the financial statements include an independent third-party assessment of the company’s value – which underscores the dramatic extent of the management’s failures – the published accounts are still not backed up by an auditor’s opinion.
“It has now been over two years since the company’s shares were suspended, nearly as long as they were trading. Shareholders and the wider public still lack a full and clear picture of how their investments were eroded and how the company’s management allowed this to happen.”