Home REIT probe blasts investment adviser for lack of transparency

An investigation into allegations of misconduct at controversial homeless shelter provider Home REIT has drawn significant criticism of its investment adviser.

The board of the London-listed trust told investors today that a report from forensic accountants Alvarez & Marsal found that a lack of transparency on the part of Alvarium Home REIT Advisors had limited its ability to assess the financial strength of its tenant base.

It also found flaws in the investment advisor’s due diligence efforts, with Alvarez & Marsa highlighting “limited evidence of detailed, ongoing monitoring of tenants.”

Home REIT has been in crisis for much of this year amid the slowdown in its financial results, a damaging report from short sellers and the declining ability of its tenants to pay rent.

With regard to transparency, the report found that arrangements for refurbishment of premises had not been brought to the attention of the board by the consultant.

The board said: “Some of the agreements with the company’s corporate tenants and developers regarding the cost of property renovations have not been brought to the board’s attention by the investment advisor, so the board was unable to consider whether a release of a developer’s property renovation obligations was appropriate

A settlement has been reached by some of the company’s tenants and a major developer, without the board’s knowledge, to release the developer from future liability for full renovation work.

In certain instances, these liquidation amounts have been used by the tenants, with the knowledge of the Investment Adviser, to settle outstanding rent arrears of such tenants, rather than being used to complete renovations.

‘[There were also] a number of examples where renovation work has not been completed, leading to complaints from tenants and resulting in vacancy.’

She also found that the settlement of rent arrears and agreements with tenants were not brought to the attention of the board.

Alvarium is also said to have made “inaccurate” disclosures to a consultancy, The Good Economy.

Home REIT is facing multiple lawsuits from disgruntled investors, while its board has drawn fierce criticism for avoiding a recent takeover attempt by Bluestar.

“This board does not listen to shareholders. I have spoken to many other investors and no one has been contacted about this process,” a shareholder said at the time.

“They spent months ‘running a process’. So until now U-turn shows that the board is not well informed and has an advisor who doesn’t seem to care about the process or dealing with shareholders.’

On Tuesday, the board also said “other matters” were being investigated by the report, including “certain allegations made by third parties to the investment advisor about the company’s affairs that were not properly investigated or brought to the attention of the board.”

It added: ‘A&M also identified the existence of certain undisclosed potential outside business interests and undisclosed potential conflicts of interest between certain individuals associated with the Investment Adviser and third parties.

‘The board can decide to further investigate (some of) these additional matters, especially if new information comes to light.

“The board is still discussing with its advisors the conclusions and implications of the A&M report and what actions it can take in response to the matters raised in the A&M report.”

Jennifer Morrissey, a partner at Harcus Parker, who is suing Home REIT on behalf of investors, said, “Home REIT’s admissions corroborate some of the findings of our own investigation, which will form the basis of our lawsuit against the company and its investment advisor.

“The statement confirms that information released by and on behalf of the company misrepresented how it ran its business and how it performed on certain important matters.

‘Shareholders suffered damage because they got a wrong picture of the state of the buildings, how much rent was collected and how the portfolio was monitored. It is now up to investors to hold both the company and its adviser accountable.”