Home REIT set for showdown with investors as crises mount

Home REIT, troubled landlord to the homeless, will face a fiery meeting with investors tomorrow after a torrid few months that have left it in dire financial straits.

The group has been locked in a series of escalating crises. Its plight has led critics to suggest the homeless accommodation sector may be facing a ‘Southern Cross moment’ – a reference to the care home giant that collapsed a decade ago after a period in private equity ownership.

Home REIT, (which stands for Real Estate Investment Trust) will confront shareholders at 9.30am in the offices of advisory group FTI in the City of London. It has barred the media, who are usually welcomed to annual meetings. Major Home REIT shareholders – which include investment firms M&G, BlackRock and Legal & General – are expected to attend.

The Mail on Sunday also understands that short-seller Fraser Perring, the head of Viceroy Research, may also go. A report by Perring – containing allegations largely denied by Home REIT – set off a chain reaction that caused the shares to be suspended at the start of this year.

Perring, who shot to fame for calling out German payments firm Wirecard before its collapse, questioned Home REIT’s business model and its ability to collect rent. The firm describes the claims as ‘baseless and misleading’.

Helping hand: Home REIT caters for the homeless and is in dispute with several of its major tenants

Home REIT is in dispute with several of its major tenants who have withheld payments in protest against the conditions of some of the properties. Others tenants have been unable to pay their rent due to financial problems.

The company’s rent roll has now collapsed. It managed to collect only around £3.4 million for the three months to November from a total of £14.8 million owed.

The firm’s annual results, delayed after Viceroy’s broadside, still have not been published, as its auditor BDO is examining the accounts. The group has brought in forensic accountants Alvarez and Marsal to investigate allegations of wrongdoing.

Some in the industry fear the debacle could exacerbate the social housing crisis by making it harder for legitimate charities and providers to raise funds from private investors.

The head of one major stockbroker, who did not wish to be named, said individual savers and others ‘genuinely thought that [Home REIT] was a vehicle that was going to deliver substantial social benefit’. He added: ‘All of those people are now going to look at other attempts to fund specialist housing support and think twice.’

The broker said that following the Southern Cross scandal it had become ‘virtually impossible’ for care home operators to raise cash.

‘Losing large sums of money in Home REIT is going to have the same impact on people’s attitude towards specialist supported housing as the Southern Cross moment did for care homes.’ Southern Cross was the largest provider of care homes in the UK until it collapsed.

Home REIT could be saved by a takeover swoop from London-based investment firm Bluestar Capital, which has made an unsolicited bid for the firm. The bid vehicle, Bluestar Group Limited, is controlled by director Benoit Gotlieb, who is involved in running Bluestar Advisors, which is part-owned by Alvarium, the investment firm that originally set up Home REIT.

Adrian Bell, the chief executive of Allia C&C, a broker providing financial services to charities, said: ‘People who are providing assets to accommodate those in need must behave with care and responsibility in a way that does not appear to have happened here.

‘Home REIT tapped into the desire of wealth managers and retail investors to deliver strong social good while earning a predictable return. Unfortunately, its use of long-term inflation-linked leases to provide assets to thinly capitalised charities was inappropriate and exposed those charities to significant financial risk.’

He said Southern Cross’s collapse undermined the ability to raise funds from investors for care homes, ‘a problem that continues to this day’.