TIDMHOME
RNS Number : 8839A
Home REIT PLC
30 May 2023
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION
WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR
REGULATIONS OF SUCH JURISDICTION
30 May 2023
Home REIT plc
("Home REIT" or the "Company")
Update on Internal Investigation
As announced on 16 February 2023, the board of directors of the
Company (the "Board") instructed Alvarez & Marsal Disputes and
Investigations, LLP ("A&M") as independent forensic accountants
in early January 2023 to conduct an investigation in relation to
allegations of wrongdoing including matters raised in the Viceroy
Research report.
A&M has delivered to the Company a detailed report (the
"A&M Report") [i] . The A&M Report has been prepared from
documents and information (including emails and telephone messages
of relevant parties) provided by the Company, Alvarium Home REIT
Advisors Limited (the "Investment Adviser"), Alvarium Fund Managers
(UK) Limited (the Company's alternative investment fund manager,
the ("AIFM")) and by other third parties, as well as information
derived from publicly available sources [ii] .
The Company reserves all of its rights in respect of the matters
referred to in the A&M Report and does not wish to prejudice
its position in respect of any further action which may follow.
Accordingly, and mindful of its obligations, there is a limit on
the information that the Company feels that it is appropriate to
disclose publicly.
Key findings from the A&M Report are summarised below.
Arrangements for the refurbishment of properties were not
brought to the Board's attention by the Investment Adviser
The information reviewed by A&M indicates that 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. In addition, although it is accepted by all parties
that the developer (from whom the Company acquires properties) is
responsible for any required refurbishment works, A&M has
identified certain situations in which 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. Where settlement
amounts have been paid by the developer pursuant to such
arrangements, the A&M Report identifies that 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, as described further below. In addition,
A&M has identified a number of examples whereby refurbishment
works have not been completed, leading to complaints by tenants and
resulting in unlettable properties.
Settlement of rent arrears and arrangements with tenants were
not brought to the Board's attention by the Investment Adviser
In its announcement dated 30 November 2022, the Company stated
that, "There are no overdue arrears in relation to amounts billed
to 31 August 2022". Whilst this statement was correct at the time
it was made, A&M has identified, through its investigation, a
number of different methods used by the Investment Adviser to
offset or clear outstanding rent arrears accrued by tenants up to
31 August 2022 which gave the appearance that rents were being
settled in the normal course by tenants, but which were not from
sustainable cashflow sources and were not paid or collected in the
form of rent. These methods included: (i) the Company receiving
funds from developers as part of a settlement payment in relation
to a dispute in which the Company and the Investment Adviser were
not a party and which were subsequently allocated to accrued rent
arrears, (ii) the allocation of receipts from developers against
rent arrears due from tenants beyond the additional funding
typically provided by developers, usually representing 12 months of
rent, to assist tenants where the residential property may not be
fully occupied, (iii) certain tenants settling the rent arrears for
other tenants, (iv) the retention of funds due to be paid to
developers to offset against rent arrears from tenants, and (v)
proposed additional or extended rent free periods being granted to
tenants who had outstanding rent arrears due to various reasons,
including refurbishment and capital expenditure costs, cash flow
issues and disputes between developers and tenants.
The A&M Report findings show that the Board had not
approved, or been provided with information regarding these
alternative arrangements to settle outstanding rent arrears.
Consequently, the Board believes that this lack of transparency on
the part of the Investment Adviser hampered the Board's ability to
assess the medium term financial strength of its tenant base and
the ability of its tenants to pay rent to the Company on a
sustainable basis.
Ongoing monitoring of tenants was limited by the Investment
Adviser
As part of its investigation, A&M undertook an exercise in
relation to the initial and ongoing due diligence performed by the
Investment Adviser in relation to a sample of the Company's
tenants. As a result of this sampling exercise, and based on the
information reviewed, A&M concluded that, although evidence of
initial tenant due diligence, at the point of taking on a new
tenant, was present, there was limited evidence of detailed ongoing
monitoring of tenants being undertaken by the Investment
Adviser.
Information provided to The Good Economy by the Investment
Adviser was inaccurate
The Good Economy ("TGE") is a consulting firm specialising in
providing advice, analysis and research to organisations seeking to
improve their social, environmental and economic impact. TGE was
engaged by the Company to provide annual impact reports in 2021 and
2022. The TGE impact report for 2021 was made available on the
Company's website and key findings from the report were referenced
in the Company's annual report for 2021. The impact report for 2022
was not finalised or published.
The evidence reviewed by A&M indicates that inaccurate
information was provided, without the knowledge of the Board, by
the Investment Adviser to TGE in both 2021 and 2022, including
inaccurate information about occupancy rates for portfolio
properties in the sample properties reviewed by TGE for the
purposes of their reports. In addition, TGE was informed by the
Investment Adviser that the Board was unwilling to allow TGE to
carry out physical inspections of certain identified properties.
This matter was never discussed with, or approved by, the Board who
would have authorised full and unrestricted access to the Company's
properties.
The Board believes that these matters were likely to have had an
impact on the conclusions reached by TGE in their assessment of the
Company.
Other matters
Other matters, in addition to those noted above, were considered
by A&M as part of its investigation, including some matters
where no firm conclusion could be reached on the basis of the
information available to A&M. Such other matters include
information obtained by A&M which indicates that 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. 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. All
of the Company's rights are therefore reserved.
FOR FURTHER INFORMATION, PLEASE CONTACT:
FTI Consulting (Communications Adviser) HomeREIT@fticonsulting.com
Dido Laurimore +44 (0)20 3727 1000
Eve Kirmatzis
Ellie Perham-Marchant
Oliver Harrison
The Company's LEI is: 213800A53AOVH3FCGG44.
For more information, please visit the Company's website:
www.homereituk.com
[i] The A&M Report is addressed to the Company and A&M
accepts no responsibility to third parties in connection with the
A&M Report. It is a legally confidential and privileged
document and no confidentiality or privilege in relation to the
A&M Report is waived pursuant to this announcement.
[ii] The A&M Report is based on information that has been
provided to, or obtained by, A&M in the course of its
investigation and which may not be complete or exhaustive.
Therefore, it is important to note, that it is possible that
conclusions reached in the A&M Report may be subject to change
if additional information comes to light.
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END
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