An investment trust that counts a number of homeless accommodation providers among its tenants faces an uncertain future after concerns were raised over low rent collection and a number of disputes.
In a statement to the stock exchange today (February 16), Home Reit said it collected 23 per cent of rent in the three months to November 2022, and that there were “serious challenges” in rent collections in December and January.
The trust's ultimate tenants are vulnerable and include refugees and victims of domestic abuse, who rely on state benefits to pay rent.
This rent goes to the charities who take long leases on buildings owned by trusts such as Home Reit, who have described their income as 'government backed'.
However, the trust is under investigation by the Charity Commission regarding a “serious incident” with Noble Tree, one of its charity tenants, according to the Investors Chronicle.
Property deals involving the Reit are also being scrutinised by the National Crime Agency, according to City AM.
In the statement today, the company said it has instructed consultancy firm Alvarez & Marsal to look into these allegations.
[Bluestar's cash offer] may be the best option availableOli Creasy, Quilter Cheviot.Lynne Fennah, chair of Home Reit’s board, said: "We recognise the serious issues facing the company and are examining all options to preserve shareholder value, and the interests of all stakeholders."
The trust said statutory demands had been served on seven of the defaulting tenants.
The Reit has been the subject of criticism after a report last year by a short-seller Viceroy Research, which said many of the trust’s tenants do not appear to be paying any rent and questioned the long-term viability of some of its tenants.
In response, the Reit said it had no overdue arrears in the period ending August 31 last year, but since the report it had seen a “general deterioration” in its rents.
Home Reit’s share price crashed 65 per cent between mid-September and December last year, and was suspended temporarily due to a delay in the company publishing its annual report.
In the statement today, the Reit said it estimates around a quarter of its portfolio requires refurbishment, which it estimates will cost between £15mn and £20mn.
Investment firm Bluestar Group has approached Home Reit with a cash offer, the trust reported today, giving Bluestar Group until March 16 to confirm the offer.
Oli Creasey, equity research analyst at Quilter Cheviot said the offer from Bluestar might be the best option for Home Reit's shareholders.
"Unfortunately for shareholders, the situation shows no sign of imminent resolution, and may even be getting worse...it is not clear why the money is no longer cascading down the chain."
He added that the cash bid may come in at below the the company's previous share price low.
"That would be a difficult outcome to accept for existing shareholders, but given the shares are still untradeable on the LSE (and with no timeline for trading to resume), it may be the best option available."
Home Reit has been approached for comment.
sally.hickey@ft.com
