'Fighting A Losing Battle'

Launched in October 2020, the trust came to market with a noble objective of delivering "tangible social impact", focused solely on tackling homelessness "responsibly", while enticing investors with the promise of a decent, inflation-protected dividend.

But, as Investment Week's senior reporter Valeria Martinez has learned over the past few months, this is not the reality, with the trust arguably in a state of ruin akin to some of its properties.

Returning the focus to Woodford investors

In her in-depth exposé, Martinez uncovered the broken system that was Home REIT's investment plan and put forward a case study of lacklustre due diligence.

I will allow you to get the full details from her excellent piece (which I highly recommend you read), but by way of a quick run through, the investigation details the extent of due diligence failures by Home REIT and its investment adviser Alvarium Fund Managers.

The article shines a light on the trust's dealings with Liverpool-based developer Pathway Homes Group, now in creditors' voluntary liquidation, which has left Home REIT with a partially demolished house it paid more than £600,000 for - an almost 400% premium compared to the price Pathway paid.

The properties aggregated by Pathway Homes Group were leased by them to a number of tenant groups, including Supportive Homes CIC - Home REIT's second-largest tenant - Gen Liv UK CIC and Community Restore CIC, whose directors signed 25-year leases.

Investment Week's investigation reveals several connections between directors of these firms and the developer's associates, raising questions of potential conflicts of interest and Alvarium's due diligence process.

Over two years since its successful IPO, Home REIT's business model has begun to show serious cracks. In the quarter to 30 November 2022, it collected just 23% of rent, with its rental income falling to just 13.1% for the five months to 30 April 2023 as several of its biggest tenants, including Lotus Sanctuary CIC and Gen Liv UK CIC, entered voluntary liquidation in March 2023.

Lasting legacy of Anne-Marie McConnon

According to Home REIT, its key source of rental payments is the exempt housing benefit its tenants receive from the local authority to pay rent for their residents.

However, the money provided by developers to help pay rent while tenants secure the benefit is running out.

Tenants are failing to get the local authority to foot the bill due to the poor standards of some of the properties.

As Harcus Parker's Jennifer Morrissey said: "The circle is collapsing."

The situation has left a lot of questions for investors, with many now pursuing legal action against Home REIT through the claim launched by Harcus Parker in December.

James Carthew, head of investment companies QuotedData, said: "I am a shareholder in Home REIT - acquired for the same reasons as most investors in the company I should think, the chance to do something to alleviate the homelessness problem in the UK while earning a reasonable dividend yield. This morning [7 June], I finally feel compelled to join one of the legal cases against the company.

"The failures here seem criminal to me, and I feel that a number of people should be held accountable for them."

The Caledonian Ranger

What comes next remains to be seen as the trust's elusive annual report remains unpublished, and its shares suspended.

As and when it is released, I am sure it will reveal more complications to this story and hopefully unveil the reality of the financial situation of the trust.

Home REIT is pinning its hopes on the appointment of AEW as its new fund manager, subject to approval, to improve the trust's fortunes.

A spokesperson told Investment Week the new investment adviser's "immediate priorities" would be to undertake a "thorough review" of the company's assets to help inform a longer-term strategy for the portfolio.

Personally, I hope that in coming months not only do clients and shareholders in Home REIT get some clarity from the board, but other social housing portfolios grasp that this is a delicate space to navigate, and the people the trusts set out to help receive the support they claim to provide.

The line that struck me came from Harcus Parker's Morrissey: "Home REIT's stated purpose is ‘contributing to the alleviation of homelessness in the UK' - there seems to be a real risk that it will be doing the exact opposite."

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