FCA to investigate Home REIT
Home REIT will be the subject of an investigation by the Financial Conduct Authority.
The investigation will focus on the period between 22 September 2020, a few weeks before its float, and 3 January 2023, when its shares were suspended.
In a statement issued to the markets this morning, the REIT said: “Naturally, the company will cooperate fully with the FCA in its work.”
Home REIT will be the subject of an investigation by the Financial Conduct Authority.
The investigation will focus on the period between 22 September 2020, a few weeks before its float, and 3 January 2023, when its shares were suspended.
In a statement issued to the markets this morning, the REIT said: “Naturally, the company will cooperate fully with the FCA in its work.”
The FCA only investigates where it believes there is evidence of “serious misconduct”. It has the power to impose serious fines, search premises and make arrests.
The REIT was set up in 2020 with the aim of investing in housing for the homeless, raising £850m from investors and £250m in debt to build a portfolio that cost it more than £1bn to assemble.
However, it has been beset by crisis since November 2022, when a report by short-seller Viceroy Research exposed serious failings of governance, tenants on the brink of collapse and alleged possible corruption in its deals.
The claims were refuted by the REIT, but it was subsequently forced to agree that many of the allegations were correct.
Since then the REIT has been forced to suspend its shares, in January last year, after its auditor, BDO, refused to sign off its accounts. It has seen tenants account for a third of its portfolio fall into liquidation and been forced to revalue its property portfolio.
JLL concluded the valuation of the 2,473 properties in December, stating that the assets were worth £413m, almost two-thirds lower than the £977m Home REIT paid for them.
JLL also found that almost 90% of the buildings were either empty or were occupied by such an unreliable tenant that they might as well be, and as such they were valued on a “vacant possession basis”.
AEW, which took over as investment manager from Alvarium in May last year, has steered the REIT away from its mission to provide homes for the homeless in favour of shoring up its shaky position. It has also been selling hundreds of homes at auction, at a loss of two-thirds. The REIT had 2,473 properties at 31 August, against 2,209 at 31 December. In that time rent roll reduced from £53.9m to £42.1m.
Currently the REIT is collecting just 10% of the rents owed on its portfolio.
The FCA investigation is expected to look into the deals made by the former investment manager, Alvarium Hone REIT Advisers, which appear to have overvalued the properties and given some concerning incentives to the sellers. It is also likely to look into what the board knew and when.
The board is in the process of being replaced in its entirety, after former Helical board member Michael O’Donnell was appointed as its new chair in January to replace Lynne Fennah.
Home REIT also faces legal action from its shareholders, who are furious that shares have been frozen for over a year and are now worth next to nothing.
