Home REIT probe blasts investment adviser for lack of transparency

An investigation into allegations of wrongdoing at embattled homeless accommodation provider Home REIT has levelled substantial criticism at its investment adviser.

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

It also found failures in the investment adviser’s due diligence efforts, with Alvarez & Marsa highlighting ‘limited evidence of detailed ongoing monitoring of tenants being undertaken’.

Home REIT has been embroiled in crisis for much of this year amid the delay of its financial results, a damaging short seller report and the waning ability of its tenants to pay rents.

With regard to transparency, the report found arrangements for the refurbishment of properties were not brought to the board’s attention by the adviser.

The board said: ‘Some arrangements with the company’s corporate tenants and developers relating to the cost of refurbishment of properties were not brought to the attention of the board by the investment adviser, so that the board was unable to consider whether a release of a developer’s liabilities for refurbishment of properties was appropriate

‘A settlement was entered into by a number of the company’s tenants and a key developer, without the knowledge of the board, to release the developer from future liability to complete refurbishment works

‘In certain cases these settlement amounts have been utilised by the tenants, with the knowledge of the investment adviser, to settle outstanding rent arrears due from such tenants instead of being used to complete refurbishment works.

‘[There were also] a number of examples whereby refurbishment works have not been completed, leading to complaints by tenants and resulting in unlettable properties.’

It also found that settlement of rent arrears and arrangements with tenants were not brought to the board’s attention.

Alvarium is also said to have made ‘inaccurate’ disclosures to a consulting firm, The Good Economy.

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

‘This board doesn’t listen to shareholders. I’ve spoken to lots of other investors and none have been contacted about this process,’ one shareholder said at the time.

‘They spent months ‘running a process’. So to now U-turn just shows that the board are out of their depth and have an adviser who does not seem to care about the process or engaging with shareholders.’

On Tuesday the board also said ‘other matters’ were investigated by the report, including ‘certain allegations were made by third parties to the investment adviser about the affairs of the company which were not properly investigated nor brought to the attention of the board.’

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

‘The board may decide to investigate some or all of these additional matters further, particularly if new information comes to light.

‘The board is still considering the conclusions and implications of the A&M report with its advisers, and what actions it may take in response to the matters raised by the A&M report.’

Partner at Harcus Parker, which is suing Home REIT on behalf of investors, Jennifer Morrissey said:  ‘Home REIT’s admissions confirm some of the findings from our own investigations, which will form the basis of our legal case against the company and its investment adviser. 

‘The statement confirms that the information disclosed by and on behalf of the company misrepresented how it was operating its business and how it was performing in respect of certain significant matters. 

‘Shareholders suffered losses because they were presented with a false picture of the state that the properties were in, how much rent was being collected, and how the portfolio was monitored. It is now up to investors to hold both the company and its adviser to account.’