Beleaguered homeless accommodation landlord Home Reit (HOME) is mulling a potential sale due to the collapse of its rental income after months of scrutiny over the financial stability of its business model. Meanwhile, Investors’ Chronicle can reveal that the Charity Commission is investigating the ongoing rental dispute between Home Reit and its charity tenant Noble Tree as a “serious incident”.
Home Reit collected just 23 per cent of the rent due for the quarter to November and said future rent collection is “highly uncertain”. The admission comes after months of rental disputes between it and several of its biggest tenants, who are largely inexperienced homeless accommodation providers, over what some say is a failure by the Reit's managers to pay for agreed refurbishment.
Home Reit said it would cost between £10mn and £15mn to carry out the works, although it reiterated that this was the responsibility of the vendor that originally sold it the properties.
The company also said it had received an unsolicited approach from Bluestar Group about buying the company, a deal it said was likely to be done with cash, and which it said it was considering in light of its situation. Home Reit’s shares have been suspended since the first week of January because its auditor has not signed off accounts covering the 12 months to 31 August 2022.
In addition, Home Reit acknowledged “allegations of wrongdoing” in media reports in the Thursday statement and said it had instructed forensic accountancy firm Alvarez & Marsal to investigate these allegations. The revelation comes after City AM reported that the National Crime Agency was investigating the company.
The Charity Commission is looking into the rental dispute between Noble Tree and Home Reit over refurbishment payments as a “serious incident”. Noble Tree said it had a conversation with the commission about the fallout following media coverage of it and has filed a report to the commission.
The commission said: “Our remit involves looking into potential wrongdoing in charities and governance by trustees. I can confirm we have an ongoing regulatory compliance case into Noble Tree Foundation Limited around the charity’s management and administration. We can’t comment further on this while the case is ongoing.”
A chorus of critics has long been concerned about the ethics and financial stability of Home Reit’s business model, worrying that the push for profits and its dependence on thinly capitalised tenants with little operating record ultimately leads to a bad outcome for the vulnerable people living in its buildings.
In August last year, Matt Downie, chief executive of national homeless charity Crisis, told Investors' Chronicle that it “has been concerned for some time about the worrying growth in unsafe, poorly managed exempt accommodation, and the role of some investment vehicles such as Reits in driving this”.
In October last year a parliamentary committee called for a ban on the set-up of “profit-making schemes” using the same model that Home Reit uses. In following months, Home Reit’s share price plummeted after short sellers Viceroy Research and The Boatman Capital Research and legal firm Harcus Parker, which has launched a lawsuit against Home Reit, criticised the valuation assumptions behind the company’s portfolio and its due diligence regarding its tenants. Home Reit dismissed the claims at the time as “baseless and misleading”.
