Exclusive: Home REIT investors draw up plans for ‘landlord of last resort’ as tenants collapse
Investors in beleaguered social housing investor Home REIT are drawing up plans for a ‘landlord of last resort’ as the firm’s cash dries up and its tenant base collapses, CityAM has learned.
Home REIT shareholders, led by Edinburgh-based RM Funds, are looking to provide an emergency backstop for the vulnerable residents of the former FTSE 250 firm’s properties as its rental income disintegrates and tenants go under, emails seen by City A.M. reveal.
A slew of the community interest group (CIC) tenants of Home REIT have collapsed in recent months, with its largest tenant Lotus Sanctuary and Gen Liv CIC filing for bankruptcy in March and shutting off over 18 per cent of its total rental take.
Home REIT admitted last month that it had collected just 23 per cent of its total rent roll while its dilapidated portfolio would require around £15-20m to refurbish.
Edinburgh-based RM Funds, itself a Home REIT shareholder, is vying to replace the firm’s former investment adviser Alvarium, which presided over the troubles in its portfolio.
RM Funds’ chief Pietro Nicholls emailed some 35 shareholders last night detailing plans to create a body which will step in if further tenants go under, as part of plans dubbed ‘Project Casa’, the emails obtained by City A.M. reveal.
“A key work stream of the last fortnight has been to develop a “Landlord of Last Resort” plan,” Nicholls told investors yesterday.
“RM Funds are cognisant that the underlying residents could be at risk and cash flow at the REIT level under pressure.
“We are currently agreeing terms, which would see a LOLR step-in, assume a short-term lease, which would ensure residents are protected, rent is collected and limited to no service interruption.”
RM Funds revealed a bid to take on the role of investment manager for Home REIT last month. CityAM has since revealed that the firm is gathering support for a sweeping tenant clear out that would see its CIC tenants replaced by housing associations.
The plans are understood to have the backing of around 20 of its top 30 investors.
The emails last night claim that a number of housing associations have already been lined up to take on the leases from the struggling CICs.
“We have held high level conversations with several prospective new counterparties, including 10 Housing providers in total (most are Regulated Social Landlords/Housing Associations) including G1/1 rated parties [a government standard for housing ratings],” RM Funds said, adding that it had “received letters of support” from five housing associations.
RM Funds did not respond to CityAM’s request for comment.
Home REIT said it was also working with a specialist social housing firm Simpact, to “explore all options”.
“Support for vulnerable tenants remains our priority and we have set up alternative measures to ensure continuity of support for underlying residents in properties where tenants have entered liquidation,” the firm said.