RUTH SUNDERLAND: Harm from unhappy Home REIT
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Harm from Home REIT: When dealing with vulnerable people there is more need for good governance, not less, says RUTH SUNDERLAND
- Home REIT is an investment company that provides housing to the homeless
- It is against tenants withholding millions of pounds in rent
- Investors should not be blinded by companies that are labeled as socially responsible
Home REIT, a troubled real estate investment company that shelters the homeless, has plenty of explaining to do today at its annual shareholder meeting.
Exceptionally, this will go ahead without shareholders seeing the accounts because the accountants are doing an investigation and can’t sign off on them.
I can’t recall a similar case in 30 years of financial journalism. The media is denied access, showing a disdain for small shareholders who could have read a report. Their holdings have fallen in value and investors are trapped as transactions have been halted by the authorities.
Home REIT seems to be a real fiasco. It is against tenants withholding millions of pounds in rent.
Alvarez & Marsal accountants have been called in to investigate allegations of wrongdoing following a media report that the National Crime Agency is investigating real estate transactions. The plight has led critics to suggest the homeless shelter industry may be experiencing a “Southern Cross moment,” a reference to the care home group collapsing after a period of private equity ownership.
Are you doing well?: When Home REIT went public in 2020, investors were drawn to claims it would help tackle homelessness
This mess makes it all the more important that the board, led by chairman Lynne Fennah, act transparently.
Several major shareholders, including investment giants M&G, BlackRock and Legal & General, are likely to attend the meeting. Short-seller Fraser Perring, the head of Viceroy Research, whose critical report to Home REIT was the catalyst for its demise, may also emerge.
There are plenty of questions begging for an answer. These include information on how properties were valued and acquired, intermediaries involved and fees paid. What due diligence was performed on the charitable tenants who rented properties from Home REIT to verify their ability to pay?
Tenants signed very long, inflation-linked leases, some for 25 years. These may have suited well-funded charities with a solid track record.
However, some of Home REIT’s largest tenants don’t fit that template. One of those who have not paid the rent due is Lotus Sanctuary, which was founded in 2018 by a former rental agent named Gurpaal Singh Judge, now 29 years old.
Why did Alvarium, the London asset manager who was Home REIT’s fund manager, endorse a business model that was so fragile? And what connections, if any, does entrepreneur Benoit Gotlieb have with Home REIT?
Gottlieb controls BlueStar Group, which wants to take over the company. He is also involved with another entity, BlueStar Advisers, which is in turn part-owned by Home REIT’s original backer, Alvarium.
Most importantly, what protections are there for vulnerable adults housed in properties in the Home REIT portfolio if those properties need to be sold urgently?
The affair is a lesson that investors shouldn’t be too rigid about companies labeled as socially responsible. There have been disasters in this zone in the past.
When Home REIT went public in 2020, investors were drawn to claims it would help tackle homelessness.
The float took place during the pandemic, when virtue signaling about community spirit and kindness was at its peak.
Anyone who bought shares will now be disillusioned. When a company is dealing with the housing and care needs of vulnerable people, there is more, not less, a need for a robust business model, good governance and transparency.