Home REIT is set for a fresh showdown with shareholders today as it looks to ditch its homeless investment strategy in a bid to restore its rental income and steady the ship.
The scandal-ridden social housing investor floated in 2020 on the promise of “contributing to the fight against homelessness in the UK” but is now on the cusp of scrapping that policy in favour of more general real estate investment.
“With the issues faced by the company and the need to stabilise matters, the investment manager does not wish to be constrained during the stabilisation period and accordingly requires the flexibility to include any form of residential use,” Home REIT told investors earlier this month.
Shareholders will now get the chance to face down the board and vote on the policy change today at a meeting in London. Home REIT is also proposing ditching the 25-year lease approach which has triggered many of the troubles at the firm.
The meeting today marks only the second time that Home REIT shareholders will have a chance to grill the board since its shares were suspended on the London Stock Exchange in January.
Shares in Home REIT had cratered beyond 50 per cent in value between November and January after Viceroy Research launched a damning short report raising concerns over the state of its portfolio. A slew of its tenants have since gone bust and stopped paying rent to the company.
The firm has called in investment manager AEW after sacking former manager Alvarium, which had presided over the breakdown in its rental income and portfolio.
Law firm Harcus Parker, which is suing the company on behalf of shareholders, said the move to ditch its homeless focus reflects a “watering down or abandonment of the company’s founding objectives and the basis on which investors bought in to the company”.
“Under the proposals, its properties can be used for any form of residential use or any social use rather than being reserved for homeless accommodation; its properties are allowed to be ‘good’ rather than ‘high’ quality; and there is no longer any mention of robust tenants,” Ed Argles, a lawyer at Harcus Parker, told City A.M.
AEW is still weighing up the health of Home REIT’s tenants and how much of an overhaul is required. The firm has proposed a “stabilisation period” to shore up the financial position of the company.
RM Funds, a shareholder in Home REIT, which also previously bid to become the investment manager, said it was “broadly supportive” of the manager and new broker but a board refresh was still needed.
“We would like to draw a line under past governance issues and focus on the company executing its update investment objectives,” boss Pietro Nicholls told City A.M.
“This also means we would like to see a structured succession plan for governance of the company, ideally with two of the neds moving on this year and two next year, so there is a fresh board, with no legacy issues.”