- Circle Housing & Support entered into 20-year leases
- Administrators trying to "exit onerous leases", although did not specify which landlords these were with
A charity tenant of homeless accommodation landlord Home Reit (HOME) has collapsed into administration due to the “onerous leases” it had entered into.
Circle Housing & Support, which accounts for 2.7 per cent of Home Reit’s rental income, entered into administration on 6 July with the administrators Carter Backer Winter (CBW) saying that “leases for certain locations are onerous and that without a restructuring of the portfolio, the charity would be unable to pay its ongoing liabilities in the not-too-distant future”.
Home Reit did not report the administration to shareholders in July. It said in a statement to Investors' Chronicle rent was still being paid and occupants would be unaffacted by the administrators taking control.
CBW said that Circle was founded in 2009 as a social housing operator but that in 2020 it changed its status to a charity and entered into 20-year leases for 150 properties.
John Dickinson, a partner CBW, added: “We are continuing to trade the charity while we work with the landlords to negotiate exits from those onerous leases and, hopefully, to then solvently hand back the charity to its trustees.”
The administration raises questions about the thin capitalisation of Home Reit’s tenants.
Many are young charities which have entered into long leases and critics worry that this type of arrangement is financially risky, potentially leading to a low quality standard of care for the vulnerable people living in the buildings. Investors’ Chronicle found that seven of Home Reit’s ten biggest tenants were incorporated after 2017 and four were incorporated after 2020.
Matt Downie, Crisis chief executive, said last month that the homeless charity “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”.
A Home Reit spokesperson said: “Circle Housing & Support currently represents 2.7% of Home Reit’s rental income, but this figure is falling as we deploy our equity and diversify our tenant base. Home Reit’s portfolio is diversified across 126 different local authorities and 28 tenants.
“Circle Housing & Support has always paid its rent on time, and it continues to do so. We are confident that all relevant leases will be assigned to alternative tenants in an orderly manner with no loss of income for Home Reit. The underlying occupants are unaffected by this process.
“Home Reit is working constructively with the administrators to arrive at the best possible outcome for all parties.”
