‘Hoodwinked from IPO onwards’: Home REIT shareholders round on scandal-hit investor over wind-down plans
Home REIT shareholders have rounded on the firm and its investment manager today after the scandal-hit social housing investor revealed plans to wind down in the coming months.
In a statement to the market yesterday, the former FTSE 250 investment trust said it had concluded a “stabilisation strategy” introduced by its investment manager, AEW, was unworkable and it would now look to offload its entire property portfolio and enter a “managed wind down” process.
While Home REIT said it intends to return cash to shareholders after the sale of its portfolio, it was uncertain whether any money would be available given the scale of costs associated with a slew of legal challenges and a probe from the Financial Conduct Authority.
The announcement may bring a close to a turbulent two years for Home REIT after short seller Viceroy Research sounded the alarm on the company in October 2022. Since then, the company’s shares have been suspended and a string of its tenants have imploded, effectively shutting off its rental take.
Investors will have a chance to vote on the plans in the coming months, Home REIT said. However, the news triggered a backlash among certain shareholders yesterday, who accused the board of misleading investors since its float in 2020.
“The winding up of Home REIT shows that this was a flawed business and investors were hoodwinked from the IPO onwards,” said a spokesperson for The Boatman Capital, a shareholder in Home REIT that had initially held a short position against the firm.
“What remains of the company and the [Financial Conduct Authority] need to hold those responsible to account.”
The Financial Conduct Authority opened an investigation into the firm in January. Morning Wire then revealed in February that officials from the Serious Fraud Office [SFO] had also opened inquiries into the company. The SFO says it cannot confirm or deny investigations.
If the “incompetent board” had been replaced earlier, more of the company “might have been salvaged”, the Boatman Capital spokesperson added.
Home REIT’s former chair Lynne Fennah clung on for nearly 18 months before agreeing to step down along with the rest of the board at the beginning of this year. She was tasked with overseeing the work of its investment manager, Alvarium, which is now being sued by Home REIT over its role in mismanaging its sprawling portfolio of social housing.
While Home REIT called in AEW to replace Alvarium and try and boost its rental take last year, the new investment manager was criticised yesterday for failing to steady the ship.
“Selecting AEW to manage a complex nationwide portfolio was a mistake from the outset,” said a person who has worked with the company. “AEW simply wasn’t equipped to handle the unique challenges of managing such a diverse and widespread portfolio.”
Shareholders in Home REIT now look set to recover a fraction of the cash they have lost in its implosion since October 2022. The company said its ability to offer payouts “will be constrained whilst the company faces potential group litigation and an FCA investigation”.
The move to wind down the firm comes as Home REIT struggles to pay off a hefty debt pile owed to its primary lender Scottish Widows. While it has cut the total owed from £220m to £114.6m, Home REIT has struggled to lift its rental take beyond 11 per cent and has been told it will need to pay off its debts by the end of this year.
A tranche of property sales is also set to yield another £24.5m which will be used to pay off its debts, Home REIT said.
Pietro Nicholls, boss of shareholder RM Funds, said that while he “appreciates” the transparency AEW have brought to the company, there were concerns over the still-delayed publication of its accounts and the costs of an audit.
“We do remain concerned by the length of delay in publication of the audit, financial results and asset valuations – and the likely costs associated with the enhanced audit,” he told Morning Wire
“Whilst it’s disappointing the assets haven’t been repositioned as quickly as might have been possible, the key focus for investors now, is to ensure the secured creditor is repaid and that the assets are repositioned to maximise value prior to sale and return of capital,” he added.
Harcus Parker, which is suing the firm on behalf of shareholders, said the plans would not impact the “validity of [its] claims against those responsible”.
The law firm is taking action against “not just Home REIT, but also its directors, its former investment adviser, Alvarium Home REIT Advisors, and other defendants who are now part of the AlTi Global group, including Alvarium Fund Managers (UK) Limited and AlTi RE Limited.”
Home REIT was contacted for comment.