Home Reit Faces Heavy Legal Fees amid Shareholder Litigation

The board of the embattled Home Reit has accumulated £5 million in legal fees as it defends against shareholder litigation.

In a circular to investors ahead of next month’s vote on the potential “managed wind-down” of the housing-for-the-homeless group, Chairman Michael O’Donnell stated that the company intends to “vigorously defend itself” against the threatened litigation and has refuted the claims made against it. He confirmed that a significant portion of the legal fees stem from this legal action.

Shareholders, represented by the law firm Harcus Parker, have launched a class-action damages claim against Home Reit, its former board members under Lynne Fennah’s chairmanship, and Alvarium, its former investment adviser. The claims include “deceit and negligent misrepresentation” related to the group’s business model, “social impact,” the “financial strength” of its tenants, and the quality, use, and valuation of its property portfolio.

Home Reit was launched in October 2020 by Alvarium, now part of Alti Global, listed in New York. It raised £850 million from the City before a short-seller, Viceroy Research, attacked the group in November 2022, revealing various dubious dealings. These included non-paying charity tenants and connections between tenants, property vendors, and key Alvarium investment managers, Jamie Beale and Gareth Jones.

Due to its failure to publish its accounts, Home Reit’s shares have been suspended at 38p since January of last year. The company has engaged in fire sales of properties to repay its debt to Scottish Widows, reducing the debt from £220 million to £106 million since last August. An additional £34.1 million reduction is anticipated following further property sales.

O’Donnell, appointed in January at age 57, revealed in the circular that Home Reit’s “unaudited draft valuation for the 2,079 properties as of 29 February 2024” stands at £341 million. The company aims to publish its 2022 accounts by “mid-September.”

The company’s winding-down process will enable Home Reit to settle its debt with Scottish Widows, due by the end of the year, and potentially return some funds to shareholders. However, O’Donnell cautioned that any returns would be “constrained” by the shareholder litigation and a Financial Conduct Authority investigation into the group.

Additionally, Home Reit is pursuing legal action against “those parties it considers responsible for wrongdoing,” specifically targeting various corporate entities of Alvarium and its former personnel.

The shareholder meeting to vote on the managed wind-down of the company is scheduled for September 16.