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Home REIT plans to fight shareholders’ legal claim
As it published its overdue annual accounts, Home REIT revealed it plans to fight a legal claim made by a group of shareholders.
The under-pressure investment trust, which is in the process of winding down, confirmed in a stock market update that it has received a pre-action letter of claim from law firm Harcus Parker on behalf of a group of current and former shareholders.
However, no legal proceedings have been issued at this stage. The real estate investment trust, which specialises in accommodation for people experiencing homelessness, has issued a comprehensive response to this pre-action letter and correspondence is continuing between the parties.
Home REIT intends vigorously to defend itself in respect of the threatened litigation and has denied the allegations made against it.
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Jennifer Morrissey, a partner at Harcus Parker, said: “Home REIT’s results present a disappointing summary of losses sustained by its shareholders and the damage done to the sector providing accommodation for vulnerable individuals.
“While the financial statements include an independent third-party assessment of the company’s value – which underscores the dramatic extent of the management’s failures – the published accounts are still not backed up by an auditor’s opinion.
“It has now been over two years since the company’s shares were suspended, nearly as long as they were trading. Shareholders and the wider public still lack a full and clear picture of how their investments were eroded and how the company’s management allowed this to happen.”
Ms Morrissey explained that the firm is progressing the claim because it is vital that potential investors seeking social impact exposure in their UK portfolios have mechanisms to hold to account those who fall short of expected standards.
Home REIT explained that due to the number of challenges the company has faced, this has unfortunately led to its auditors’ opinion being disclaimed.
Alongside the action brought by Harcus Parker, Home REIT is taking legal action against Alvarium, its former investment advisor.
The Financial Conduct Authority launched an investigation into the investment trust in February 2024.
Home REIT highlighted how any fees incurred in defending the company against threatened litigation will directly reduce the amount of capital ultimately returned to all shareholders and may impact the timing of any distribution to shareholders.
The organisation’s loss before tax for the period to 31 August 2023 was £118.2m, which was considerably lower than the loss of £474.8 in 2022.
It also reported a decrease in fair value of investment property of £71.4m, which it said reflects the assessment of tenant covenant strength and the condition of the assets for new acquisitions. Provision for doubtful debts stands at £49.5m.
Commenting on the firm’s belated accounts, Michael O’Donnell, chair of Home REIT, said: “The publication of the 2023 annual report and accounts is a further positive step toward the re-listing of the company’s shares.
“We remain focused on optimising the value of the portfolio and maximising returns to shareholders, while keeping disruption to underlying residents to a minimum, in line with the company’s managed wind-down strategy.
“The company has made significant progress in recent months, with debt now fully repaid and the remaining portfolio launched for sale. I would like to once again thank shareholders for their ongoing patience as we continue to work towards the resolution of the remaining challenges facing the company.
“The publication of these accounts also marks the point when Lynne Fennah, Marlene Wood, Peter Cardwell and Simon Moore stand down from the board. I would like to take this opportunity to thank them for their support since I took the chair role in January last year.”
The London-based firm has been beset by problems in recent years and has been selling off properties in an attempt to try and pay off its debts. By October, it had raised £216.9m.
It posted a pre-tax loss of £475m in its delayed financial accounts for the financial year ending on 31 August 2022, which it published in October 2024.
The organisation has struggled to collect rents from some of its tenants, with multiple charity clients entering voluntary liquidation in recent months.
Home REIT, which floated on the London Stock Exchange in 2020, has been rocked by multiple problems in the past two years, ever since short-seller Viceroy Research published a report raising doubts about its business model in 2022.
Among the issues raised was whether Home REIT’s clients would be able to service their leases on a long-term basis.
Southey Capital emerged as a potential buyer for Home REIT in December, valuing the firm at £32m.
