Hundreds of investors hit Home REIT with High Court claims
Hundreds of current and former shareholders in Home REIT have launched High Court proceedings against the scandal-hit property firm in a bid for compensation, accusing it of misleading investors and negligently misrepresenting its operations as a company.
Over 800 shareholders have hit the former London-listed social housing company with a claim for losses they allege were caused by misleading statements and omissions of key details about the company, its business model and property portfolio.
The proceedings have been brought against Home REIT and the the company’s directors. Its former investment adviser, Alvarium Home REIT Advisors, and former alternative fund manager, Alvarium Fund Managers, have also been named in the proceedings alongside others involved with the company.
The actions issued include statutory securities claims, which cover misleading reports or accounts, as well claims of deceit and negligent misrepresentation.
Sold a narrative that did not ‘reflect reality’
The investors allege the housing firm painted a misleading picture on the security of its rental income, tenant experience and valuation of its portfolio, all of which they say was “fundamental” in their decision to invest.
Home REIT raised more than £850m from investors in its first three years, telling shareholders their capital would be used to acquire accommodation for vulnerable and homeless people while also generating returns from rental income.
Investors were also informed that properties would be leased on long-term agreements to organisations providing accommodation to vulnerable people, allowing rental income to be supported by government-funded housing benefit.
Nate Barber, partner at Harcus Parker and lead lawyer for the claim, said: “Our case is that what investors were told did not reflect the reality. The allegations concern the security of Home REIT’s income, the financial strength of its tenants, its stated social impact, and the acquisition, use and valuation of its property portfolio.”
Twists and turns
Home REIT, which floated in 2020, has been rocked by a series of crises since the end of 2022, when a short seller, Viceroy Research, sounded the alarm on the make-up of its tenants in a damning report.
Previous reporting by City AM revealed in 2023 that a string of its biggest tenants had gone bust and it was repeatedly forced to offload chunks of its portfolio in attempts to raise cash and pay off debts.
Shares in the business were suspended in January 2023 after it failed to publish its annual accounts before a regulatory deadline. It was also found that some properties were marketed to students and holiday makers.
The UK’s top financial crime unit unveiled a major probe into its past management earlier this year, after identifying as much as £300m in suspected fraud and bribery. The Serious Fraud Office conducted a series of raids and arrests in January, searching properties in Maidenhead, Altrincham and London.
“What has happened since is extraordinary. Home REIT’s property portfolio has been sold, its four wholly owned subsidiaries are now in liquidation, and many investors have suffered significant losses,” Barber said.
“They are entitled to understand how that happened and, where they were misled, to seek compensation from those responsible.”
Home REIT said it “notes today’s announcement” and would not comment further. The firm added that an “announcement will be made at an appropriate time”.