The City watchdog is under pressure to investigate scandal-hit social housing investor Home REIT on the grounds it repeatedly misled the market and left investors “badly burnt”, City A.M. can reveal.
In a letter to the Financial Conduct Authority obtained by City A.M., Home REIT shareholder The Boatman Capital called for a probe into claims the firm made on the quality of its housing stock and rental income.
Home REIT, which claimed to invest in “high quality” accommodation for the homeless, has been engulfed by scandal since November last year when short seller Viceroy Research sounded the alarm over the quality of its tenant base.
The firm initially dismissed the claims made by Viceroy but has since admitted that its rental take has collapsed and its sprawling portfolio of properties would require some £15-20m to refurbish.
The Boatman Capital, which has been agitating for a change of board at Home REIT, has called on the regulator to investigate the claims it has made to the market.
“Investors have been badly burnt by Home REIT and we believe one reason for this has been the company’s failure to provide complete and accurate information to the market,” The Boatman Capital said in the letter.
“We are concerned that statements made by Home REIT have been demonstrated to be false and/or misleading and, as such, we are calling on the FCA to investigate,” the firm added.
The provision of sub-standard properties to vulnerable people is the “opposite of what investors were promised in Home REIT’s prospectus”, the Boatman said.
The calls will add to the mounting woes of Home REIT after a disastrous eight months for the firm in which it has been suspended on the London Stock Exchange and attracted the scrutiny of the National Crime Agency.
In the two months after Viceroy’s allegations, Home REIT insisted repeatedly that its properties were high quality and fully refurbished. Bosses also issued statements to the market in November and December that its rental income was being paid by tenants and its portfolio was “operating effectively”.
However, City A.M. revealed in January that one of Home REIT’s biggest tenants, the Big Help Group, had negotiated a rent relief deal worth £5.5m due to the dilapidated state of its housing. On the 25th January, Home REIT then revealed it had “witnessed a deterioration in its rent collection position, with a significant number of its tenants in arrears”.
The Boatman has raised doubt over the speed of the decline in rental income however and said the initial comments should be scrutinised by the watchdog.
“We find it hard to believe that the environment could have changed so swiftly and are, therefore, concerned that the Board may have given investors a misleading impression of Home REIT’s situation in its December 12th statement,” the Boatman added.
The Boatman added that some of its earlier statements “would appear to be an attempt to mislead investors by obfuscating the problem of rent arrears in the August quarter.”
The FCA declined to comment on whether it had opened an investigation into the firm. Home REIT declined to comment.
Calls for an investigation into Home REIT from regulators come after a damning report from Alvarez & Marsal found that the firm’s investment managers passed over “inaccurate” information to an ESG inspector, while certain top figures had “undisclosed potential business interests” with third parties.
Home REIT has pointed the finger at its investment adviser Alvarium for presiding over the breakdown in the portfolio and since called in AEW to try and steady the ship.