Home REIT said it will collaborate with the FCA in its work
The Financial Conduct Authority has opened an investigation into embattled trust Home REIT, more than a year since the suspension of its shares.
In a stock exchange notice today (13 February), the Home REIT board said it had been notified by the regulator of its commencement of an investigation into the trust, covering the period from 22 September 2020 to 3 January 2023.
"Naturally, the company will cooperate fully with the FCA in its work," it said.
Shareholders and analysts have welcomed the investigation, with Richard Williams, research analyst at QuotedData, noting that any wrongdoing within the company and its former manager Alvarium "will hopefully be uncovered".
Home REIT shareholder calls for FCA probe into 'campaign of misinformation'
"Shareholders have suffered misery at the hands of this company, which promised to be helping the most vulnerable in society," he said. "It is difficult to comment on allegations of wrongdoing before they have been investigated thoroughly, but the facts to have come out so far are pretty damning."
Pietro Nicholls, portfolio manager at RM Funds, a Home REIT shareholder, said the firm is "wholly supportive of the FCA investigation into this matter".
"We have previously raised our concerns with the legacy board about the timing of the company's disclosure of material information," he said.
"In particular the events immediately after the short-seller allegations, the rebuttals and then the January disclosure, where it came to light that the company knew about this prior to the stock's suspension."
More than a year of turmoil
In October 2020, Home REIT floated on the London Stock Exchange to become the first real estate investment trust focused solely on reducing homelessness. Since IPO, the former FTSE 250 trust has raised over £850m in equity to deliver on this objective.
However, a scathing report published in November 2022 by short-seller Viceroy Research raised questions over the valuation of Home REIT's properties and the ability of its tenants to pay rent.
Under increased scrutiny following the report, the trust failed to publish its annual accounts, culminating in the suspension of its shares on 3 January 2023.
Last June, an Investment Week investigation brought to light the extent of former investment adviser Alvarium's due diligence failings, revealing a complex web of conflicts of interest between the trust's tenants and property developers.
In an attempt to remedy the trust's rent collection issues amid a raft of tenant liquidations, new investment adviser AEW initiated a stabilisation period for Home REIT, which would involve a programme of re-tenanting and property sales to steady its financial position.
After the trust reported late last year that its portfolio is now worth less than half of what it spent on acquisitions, the law firm representing Home REIT investors, Harcus Parker, has progressed legal action against the trust and Alvarium.
Entire Home REIT board commits to step down on publication of results as chair Fennah replaced
Home REIT shareholders are still awaiting the trust's long-overdue audited results, which the board aims to publish in the second quarter of this year, it announced last week.
The entire Home REIT board has committed to step down from their positions once the results are published. Chair Lynne Fennah ended her role with immediate effect last month and was succeeded by Michael O'Donnell, although she remains on the board as a non-executive director.
Emma Bird, head of investment trust research at Winterflood, said that while it is "positive" that the board is in the process of being refreshed, this latest development "will cause even greater downward pressure on the share price as and when the trading suspension is lifted".
The FCA declined to comment.
