Home REIT faces legal threat from biggest tenant over £5.5m rent relief deal
Troubled social housing investor Home REIT faces a potential legal battle with its biggest tenant after reneging on a £5.5m rent relief deal it struck due to the dilapidated state of its properties, Morning Wire can reveal.
Liverpool-based Big Help Group and its two sister charities, which account for nearly a fifth of Home REIT’s total rental income, withheld £6m in rent from the firm between March and the end of August in protest at the dire state of housing it provided, prompting the two parties to strike a deal for two years’ rent relief worth £5.5m from September.
Big Help paid its arrears as part of the deal. However, emails from Home REIT to Big Help seen by City A.M., show that the firm is now looking to scrap the original agreement due to the “exceptional circumstances” it finds itself in.
The previously undisclosed deal raises major questions over the stability of Home REIT’s financial position and the consistency of its rental income, after a slew of criticism over its business model and the reliability of its revenues in recent weeks.
The revelations over the state of the properties also blow apart claims from Home REIT that it only acquires “newly refurbished” properties and a “full refurbishment” is carried out as part of any acquisitions.
In an interview at its Liverpool offices, Big Help chief executive Peter Mitchell told Morning Wire that the charity was a “victim” of Home REIT and the firm had hamstrung its ability to support vulnerable groups.
“Our first and foremost priority is for the tenants who live in our houses. Our intention was to support Home REIT on the way forward, and they come back and say to us and say ‘no, we want to tear up our agreement’. That’s their problem, not mine. And I’m happy to go to court,” he told Morning Wire
“It’s particularly galling that we, as the main number one provider for them, have worked in support of this project since day one, have been left to hang out to dry,” he said.
Mitchell said that one of the properties had no running water for 18 months and the charity was forced to pay thousands of pounds to bring the properties up to scratch.
Home REIT told Morning Wire: “Following further review by the board and the investment advisor of the detail provided by the tenant, it was decided that Home REIT would not proceed with this proposal and the tenant was notified.”
‘No hot water for 18 months‘
A spokesperson for Home REIT added that the “properties are refurbished at the vendors cost post acquisition. It is the responsibility of the tenant to ensure the continuing repair and condition of the property.”
However, the comments contradict claims from Home REIT in early December that a “full refurbishment” must be completed and paid for by the property vendor in order for “the deal to progress”.
Emails from Home REIT to Big Help, show that the firm committed to a “full review of [Big Help’s] operational portfolio… on a line by line basis in January to identify properties that have long term viability issues in terms of lease rent”.
Home REIT added that it would also review “potential capital contributions” needed for some of the sites.
Big Help’s rebuttal of a renegotiation has prompted Home REIT to threaten legal action in return, Mitchell said, although neither party had yet moved to file a claim.
The fresh revelations expose the scale of the troubles facing Home REIT and cast doubt over the claims it has made in its response to short sellers.
Home REIT has been in turmoil since November after a critical report from short seller Viceroy Research alleged that many of its tenants were not paying rent and had no financial track record. The firm said the claims were “baseless and misleading”.
Morning Wire has since revealed Home REIT admitted it does not track how much of its rental income comes via exempt housing benefits, despite repeatedly stating that its business model relies on them.
Shares in the firm plummeted 50 per cent in the weeks to the end of the year before trading was suspended due to delays publishing its full year accounts.