Edinburgh-based asset manager RM Funds has tabled an offer to take over as investment adviser of the beleaguered Home Reit.
The move would see the firm replace current adviser Alvarium. The news follows hot on the heels of FTSE Russell’s decision to evict Home Reit from its indices after the prolonged suspension of the trust’s shares.
Pietro Nicholls, portfolio manager at RM, told Portfolio Adviser: “We have submitted a proposal to the board that doesn’t relate to a bid for the company and instead relates to the reform of the company. Our proposal seeks to give back control to the company and its board by replacing most of the service providers.”
While the board has acknowledged the proposal, it is yet to formally respond. Nicholls also disclosed that the Home Reit board had reached out to RM for solutions to its myriad issues earlier in the year. “The board turned around to us about a month ago and said,’ if you have a solution we want to hear it’,” he said.
“When we spoke with shareholders, and we really have spoken to a cross-section of shareholders and have good indicative support from them, there were two objectives. The first was the preservation and generation of shareholder value. The second was to maintain the social purpose of the company. Every element of our solution considers those two aspects.
“It’s very easy, given it’s a public company, to distil things down into the idea that this is just about share price moving up. The collapse of this vehicle will have a real ripple effect across local authorities, across 2,500 individuals and families that are in a vulnerable state. It’s got political ramifications, it’s a very serious matter and it needs to be dealt with appropriately.”
He added: “That’s why we’re really looking toward higher quality housing associations as our partners in delivering some of these solutions.”
Home Reit’s shares fell over 70% last year, and it recently revealed 77% of its rent roll remains uncollected for the quarter to 30 November 2022.
RM has hired two senior housing association advisers to assist should it take over as investment adviser of Home Reit.
The trust, which aims to provide social housing to alleviate homelessness while seeking returns for shareholders, announced it had received an unsolicited takeover offer from Bluestar on 16 February.
Months of uncertainty
Today’s update comes after months of uncertainty surrounding the trust’s future, in the wake of allegations made against the firm in recent months.
In January, it emerged that property deals made by Home Reit were to be examined by the National Crime Agency amid allegations of wrongdoing. In response, Home Reit instructed independent forensic accountancy firm Alvarez & Marsal to investigate.
The trust first came under scrutiny during the final months of 2022 over concerns regarding its viability and investments.
It faced allegations from Viceroy Research in November, which accused the firm of investing in “bad assets”.
In December, law firm Harcus Parker launched a compensation claim on behalf of Home Reit shareholders, who alleged the firm had not followed its original investment philosophy while suffering significant losses.
The trust rejected the allegations, and said it would undertake enhanced auditing procedures in a bid to reassure shareholders.
As a result of these procedures, Home Reit was unable to publish its annual results within the four-month window required by the Financial Conduct Authority, leading to the suspension of its shares at the beginning of January. It was then put on notice by FTSE Russell on 30 January, before ultimately being removed from indexes on 28 February.
See also: Scrooge-like short selling attack on Home Reit raises questions
