Exclusive: Home REIT and property vendor urged tenants to ‘corroborate’ sustainability claims as part of ESG ‘box ticking’
Home REIT and a property dealmaker urged the firm’s tenants to “corroborate” dubious sustainability claims as part of an environmental, social and governance (ESG) “box ticking exercise”, City A.M. can reveal.
Gareth Jones, a partner at the beleaguered social housing firm’s former investment adviser Alvarium, told property vendor Christopher Downing in August to ensure that tenants backed up its sustainability claims when quizzed by ESG analysis firm the Good Economy, which had been called in to compile a report on its housing stock, leaked emails seen by City A.M. reveal.
After the Good Economy flagged concerns over the shoddy state of some homes leased to Home REIT tenant Serenity CIC, Jones tried to explain away the issues and told Downing to ensure that Serenity backed up its claims if asked. Serenity was at the time run by Downing’s daughter.
A private email from Jones to Downing’s personal email address read “Hey mate – see below – this is that we’ve gone back to the ESG Auditor in relation to enquiries about some properties. Can you make sure they [Serenity CIC] get and corroborate in line if asked?”
A separate email sent the previous month by Downing to a group of community interest companies, who leased properties that Downing’s property aggregation company Karla had sold to Home REIT, told tenants to put a positive spin on the homes when questioned.
“Their [Home REIT’s] investors want to be told that they are ESG compliant with positive outcomes, and it is the investors that pay for their lifestyle, they Homes REIT tell us that they would like to receive such information and with notes of positive interaction and ESG compliance, and Homes REIT funds the lifestyle of Karla and now i on behalf of Karla am asking that all of you to take this seriously, because Karla funds your lifestyle, including mine and i like my lifestyle,” Downing wrote to the tenants.
“So can we stop for a second and realise how important this small box ticking exercise is within the small bubble we live in,” he added.
The exchanges raise fresh questions over how much Home REIT bosses knew of the state of its housing and whether investors were misled.
City A.M. can also reveal The Good Economy froze its relationship with Home REIT in November amid questions over the stability of Home REIT’s rental income and housing stock.
“It’s important who we work with as a company and we decided to end the relationship,” The Good Economy founder and chief executive, Sarah Forster told City A.M..
A Home REIT spokesperson told City A.M. that there “have been a number of allegations made against the company, all of which the Board takes seriously.”
“As announced, an investigation is ongoing with Alvarez & Marsal. This investigation is complex and covering a broad range of different issues,” the spokesperson said.
They added that it was not “appropriate to comment further at this stage.”
Jones stepped back from Home REIT in November for “health reasons”. Downing’s lawyers told City A.M. that the email demonstrates that “[Downing] was taking these responsibilities seriously and that the other parties were failing to take them seriously and [Downing] was effectively dressing them down and telling them to take it seriously.”
Home REIT has said repeatedly that the property aggregators like Downing, who put together huge portfolios of properties before selling them on to the fund, were responsible for refurbishing the houses out of their own pocket.
After a short seller report from Viceroy Research in November sounded the alarm over the firm’s business model, Home REIT insisted it only acquired “fully refurbished” and “high quality” homes.
However, Home REIT acknowledged the scale of dilapidation across its portfolio for the first time last month and said that it would likely require between £15m-£20m to refurbish.