Suspended investment trust to wind up amid debts
The embattled investment trust is to wind up and sell its properties, with the board warning that the ability to make shareholder distributions will be constrained.
16th July 2024 15:17
by Kyle Caldwell from interactive investor
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The board of embattled investment trust Home REIT Ord (LSE:HOME), which has been suspended for the past 19 months, is proposing to wind up the company.
The investment trust, which owns social housing that is let out to charities and housing associations, is recommending it close its doors on the grounds that when it has repaid its debts, which total £115 million, it would be too small to continue.
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It said in a statement this morning: “The board has conducted a full review of the stabilisation strategy and while it recognises that there is an opportunity to add value to the portfolio at a property level, it has concluded that this strategy faces considerable challenges.
“These include a high, fixed corporate cost base, required due to the REIT structure and as a result of the issues being dealt with by the company at this time, and the requirement for capital expenditure to drive an increase in rental value and valuation of the portfolio.
“In addition, the board is aware that the size of the vehicle following the repayment of debt may be considered too small by many investors when considering its future as a listed REIT.”
Home REIT suspended its shares last January following its failure to publish annual reports on time after an investor report highlighted valuation issues and difficulties with tenants paying rent.
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In addition, a law firm has been seeking compensation for investors because it believes the investment trust had not followed its original investment theses.
Some charities the trust let to stopped paying rent, claiming that the properties were not fit for use.
The trust claimed to help alleviate homelessness in the UK while giving investors inflation-protected income.
In May, Home REIT appointed a new fund manager – AEW UK Investment Management – in an attempt to stabilise the portfolio and reduce its borrowings. Alvarium Fund Managers, which had managed the trust since launch in 2020, was removed.
The Financial Conduct Authority (FCA) is investigating events leading up to Home REIT’s suspension.
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The board said its intention is that capital will be returned to shareholders on the completion of the realisation strategy and following the repayment of its outstanding debt facilities.
However, it noted that “shareholders should be aware that the ability of the company to make distributions to shareholders will be constrained while the company faces potential group litigation and an FCA investigation”.
Michael O'Donnell, non-executive chair of Home REIT, said: “It is clear that Home REIT continues to face extensive challenges, including in respect of its debt position and pursuing and defending litigation action, and responding to an FCA investigation.
“Against this backdrop and the expected reduced size of the company's portfolio, following an extensive review the board has concluded that the best course of action for shareholders is to propose a managed wind-down strategy.
“I would like to thank shareholders for their ongoing patience and support through the stabilisation process as we strive to address, and seek redress for, the issues facing the company.”
The proposed closure of the investment trust requires the green light from shareholders.
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