Scandal-hit social housing investor Home REIT is set to wind down after failing to pay off a huge debt pile and struggling under the costs of a slew of legal battles and a probe from the City regulator.
In a statement to the market this morning, the former FTSE 250 firm said it had concluded its “stabilisation strategy” was unworkable and the company would now look to offload its entire portfolio and enter a “managed wind down”.
While the firm said it intends to return cash to shareholders by offloading properties, it was uncertain whether any money would be available given the scale of costs associated with a number of legal challenges and a probe from the Financial Conduct Authority.
Shareholders in Home REIT have launched legal action against the company and it has in turn sued its former investment manager, Alvarium, which oversaw the calamitous breakdown of its portfolio.
Investment manager AEW was called in to boost its rental take in May last year and set about selling off houses to raise cash. However, its rental take has barely budged in that time. Between September and May it collected just 11 per cent of billed rent.
Today’s plans come as a sharp u-turn in strategy after AEW said it had been pushing ahead with plans to raise cash via property sales and refinance its debt as recently as two months ago.
If executed as planned, the so-called “managed wind-down” would bring to a close a turbulent two years in which the company was rocked by a string of crises triggered by a report from short-seller Viceroy Research, which sounded the alarm on the company’s tenant base in October 2022.
City A.M. has since revealed that a string of its tenants were withholding rent and that swathes of its portfolio were dilapidated and did not qualify for ‘exempt housing benefits’, on which the company said its business model relied.
The FCA opened an investigation into the firm in January. City A.M. then revealed in February that officials from the Serious Fraud Office have also opened inquiries into the company. The SFO says it cannot confirm or deny investigations.
Home REIT said today that after failing to refinance its debt with lender Scottish Widows, the “considerable challenges” and high cost base facing the company made a turnaround unfeasible.
“It is clear that Home REIT continues to face extensive challenges, including in respect of its debt position and pursuing and defending litigation action, and responding to an FCA investigation,” said Michael O’Donnell, non-executive chairman of Home REIT.
“Against this backdrop and the expected reduced size of the company’s portfolio, following an extensive review the board has concluded that the best course of action for shareholders is to propose a managed wind-down strategy.”
The company said it had cut its debt pile from £220m to £114.6m, and Scottish Widows would now need repayment by the end of this year. Home REIT said a tranche of property sales is also set to yield another £24.5m.
The company said it will now pursue “a broad and managed approach to the disposal of assets” to generate cash and service the debt.
Shares in the company have been suspended since the end of 2022, when Home REIT failed to publish its accounts before a regulatory deadline
In today’s announcement, bosses said they were still on track to publish their accounts in August and would then apply to have their listing reinstated on the London Stock Exchange.