The Financial Conduct Authority (FCA) has launched an investigation into scandal-hit Home REIT.
Trading in shares of the company has been suspended since January 2023 after allegations of serious wrongdoing by its manager Alvarium surfaced in a short-seller report in November 2022.
The allegations in the short-seller report led to a delay in the publishing of the company’s accounts for the year to 31 August 2022 (which are still yet to be published) and the suspension of its shares, as it went under an enhanced audit.
The most serious allegation of wrongdoing centres on the acquisition of properties at vastly inflated prices thereby artificially inflating its NAV (and thereby management fee paid to the manager Alvarium).
The company has since appointed a new manager – AEW – and new valuers, with a recent valuation report revealing that the portfolio was worth 57.7% less than it was acquired for.
Many of the homes have been found to be in varying states of disrepair and some unlivable. It was also alleged that some of the charity and housing association tenants were new companies set up for the purpose of signing the leases with Home REIT.
Rent collection from the tenants has dwindled, leaving the company in a perilous position as it tries to service its debt interest payments.
The board, whose job it was to oversee the manager, has vowed to resign once a new set of directors have been found, with chairman Lynne Fennah stepping down to be replaced by Big Yellow Group director Michael O’Donnell. She will, for the time being, stay on as a director “for continuity”.
Home REIT launched in October 2020 after raising £240m at IPO. It then raised a further £613m in two capital raises in 2021 and 2022.
The FCA’s investigation will cover the period from 22 September 2020 to 3 January 2023. Home REIT said it would cooperate fully with the investigation.