The Lemon Fool

This is my first visit to this board, as REITs aren't really my thing. However, I came across this report from Viceroy Research regarding Home REIT, which I found extremely disturbing, and it occurred to me that if any Fools are investors they might want to review their position - https://viceroyresearch.org/2022/11/23/ ... hankfully/

Admittedly, Viceroy are short sellers, and have a financial interest in driving down the share price, but I've looked at some of the specific allegations, and they appear to hold up. In fact, there would appear to be some very serious questions to be asked, and if I were able to short these shares myself I'd be eager to do so.

https://www.cityam.com/home-reit-shares ... rt-seller/

''Shares in property investor Home REIT tanked nearly 25 per cent yesterday after it came under siege from notorious short seller Viceroy Research over the financial stability of the charity tenants in its property portfolio."

They called "Wirecard" correctly

"Viceroy, which previously campaigned against collapsed German payments firm Wirecard..."

I noted a comment in The Times 27th Nov. 2022.

https://www.thetimes.co.uk/article/home ... -vrbn9dm5x

A property investment trust specialising in housing for the homeless has had to delay publishing its results, due on Monday, after coming under fire from an activist investor."

Aye Caramba!

I've been following this since it broke as it has a reflected impact on Civitas SH, which I have, and also had similar allegations made against it some time ago. What seems worrying about HOME, is the lack of defense put up by their own BoD. Some way to run on this I fear.

Situation is discussed in this weeks Money Maker Podcast here:

https://money-makers.co/2022/11/26/mone ... -nov-2022/

Does anybody know which institutions have exposure here?

flyer61 wrote:Does anybody know which institutions have exposure here?

There may be some private investors as well, it was an IPO in 2020.
https://www.bdo.co.uk/en-gb/deals/deals ... e-reit-plc

Shares suspended 3 January 2023 at 38p - delayed accounts etc.

https://www.cityam.com/bruised-home-rei ... -accounts/

RockRabbit wrote:Shares suspended 3 January 2023 at 38p - delayed accounts etc.

https://www.cityam.com/bruised-home-rei ... -accounts/

They need to sack the board. Absolute jokers!

They should have saw what was done to Civitas social housing by hedge fund short sellers and adjusted and had contingencies in place before all this.

It seems things are going from bad to worse for these guys.

Will this cowboy outfit remain listed and what contagion be out there for the rest of the sector.



https://www.investmentweek.co.uk/news/4 ... -extension

JDot wrote:It seems things are going from bad to worse for these guys.

Will this cowboy outfit remain listed and what contagion be out there for the rest of the sector.



https://www.investmentweek.co.uk/news/4 ... -extension

It's the fallout that's really bothering me. I don't hold HOME but I do hold SOHO. I thought it was a pretty low risk income generating investment. How wrong can you be? 50% capital loss and no bottom in sight.

BullDog wrote:It's the fallout that's really bothering me. I don't hold HOME but I do hold SOHO. I thought it was a pretty low risk income generating investment. How wrong can you be? 50% capital loss and no bottom in sight.

It's at a massive discount to NAV, but then the properties are specialist so may be difficult to realise at stated values. According to their information, their tenants are mostly housing associations and local authorities. Dividend yield is now over 12%. Being a REIT it's not so easy for dividends to just be cancelled, so on paper that should give a floor to the share price, although where is anyone's guess.

I wonder what the problem is? As you suggest it may be fallout with the published accounts and statements not being regarded as trustworthy.

Alaric wrote:

BullDog wrote:It's the fallout that's really bothering me. I don't hold HOME but I do hold SOHO. I thought it was a pretty low risk income generating investment. How wrong can you be? 50% capital loss and no bottom in sight.

It's at a massive discount to NAV, but then the properties are specialist so may be difficult to realise at stated values. According to their information, their tenants are mostly housing associations and local authorities. Dividend yield is now over 12%. Being a REIT it's not so easy for dividends to just be cancelled, so on paper that should give a floor to the share price, although where is anyone's guess.

I wonder what the problem is? As you suggest it may be fallout with the published accounts and statements not being regarded as trustworthy.

I can't really see anything wrong at SOHO. That's why I am worried. The portfolio seems to be of a higher quality than many out there. There is a problem with the MySpace lease but that's quite small beer and is being dealt with. There was fallout from the Civitas short selling and now fallout from HOME too. It's not really obvious why a 50% or so discount to NAV is justified. Am I kidding myself though?

BullDog wrote:It's not really obvious why a 50% or so discount to NAV is justified. Am I kidding myself though?

I think the level of borrowing needs to be checked out. If now or in the future, borrowing costs are a good deal higher, they may not be able to offset these either by increasing rents or by removing some of the gearing by selling assets and reducing borrowings. Thus it's the dividend which would take the hit and that may be what the market is factoring in.

The borrowings and the cost thereof may well be a problem for many REITS with otherwise notionally secure levels of rental income.

This particular sub sector of REIT has a whiff of something unpleasant about it. I reduced my CSH holding yesterday as I feel that there may be other skeletons rattling. Although different in many ways, it has the feel of Morses and Amigo.

airbus330 wrote:This particular sub sector of REIT has a whiff of something unpleasant about it. I reduced my CSH holding yesterday as I feel that there may be other skeletons rattling. Although different in many ways, it has the feel of Morses and Amigo.

Hi airbuss330

I agree with you but I'm not selling.
In fact I am still buying in the hope it will all blow over eventually. (Home reit not trading atm)

The structural case for investment into the residential sector is still very strong with demand far outstripping supply.

The massive discounts to NAV are too attractive not to take a punt and the large share price falls have probably priced in all these problems now.

But I may be wrong

JDot wrote:

airbus330 wrote:This particular sub sector of REIT has a whiff of something unpleasant about it. I reduced my CSH holding yesterday as I feel that there may be other skeletons rattling. Although different in many ways, it has the feel of Morses and Amigo.

Hi airbuss330

I agree with you but I'm not selling.
In fact I am still buying in the hope it will all blow over eventually. (Home reit not trading atm)

The structural case for investment into the residential sector is still very strong with demand far outstripping supply.

The massive discounts to NAV are too attractive not to take a punt and the large share price falls have probably priced in all these problems now.

But I may be wrong

I hope you're right. I feel too uncomfortable to buy more though. I already have quite a lot of SOHO (and Regional which is equally as beaten up but is in offices, not housing). There's significant cash on the table if this all blows over for those brave enough to buy.

JDot wrote:

airbus330 wrote:This particular sub sector of REIT has a whiff of something unpleasant about it. I reduced my CSH holding yesterday as I feel that there may be other skeletons rattling. Although different in many ways, it has the feel of Morses and Amigo.

Hi airbuss330

I agree with you but I'm not selling.
In fact I am still buying in the hope it will all blow over eventually. (Home reit not trading atm)

The structural case for investment into the residential sector is still very strong with demand far outstripping supply.

The massive discounts to NAV are too attractive not to take a punt and the large share price falls have probably priced in all these problems now.

But I may be wrong

Well, I hope you are correct as I reduced rather than sold out. I have quite a bit of REIT exposure, some underwater atm, but with well run management. So, all things being equal, a recovery will happen and in the meantime the divi is very nice. However, I don't have confidence in the management of CSH to navigate their way out. TBH, I'm not even sure that investment in social housing for vulnerable people is even an appropriate area for my money.

airbuss

I respect your views but I differ in my opinion.

I see social housing investment as a public good and not at odds with my own personal ethics.

The fact an investor could stand to profit on an investment to improve vulnerable people's lives is merely a function of the risk we take with our hard earned money to achieve this purpose.
..
In regards to management I thought about this after my last post and although I feel the case for social housing investment is still sound, I do now think that the current model may be defective.

Third party intermediaries such as housing associations and care providers collecting rent and then passing on to said reits, rather than a direct reit- tennant relationship introduces significant and unnecessary counter party risk to an otherwise simple investment idea.

However that said I've still topped up my positions within my portfolio today as I feel sooner or later that the incompetent boards will be replaced. When that happens maybe a new business model that better serves all stakeholders within the sector will emerge.

JDot wrote:airbuss

I respect your views but I differ in my opinion.

I see social housing investment as a public good and not at odds with my own personal ethics.

The fact an investor could stand to profit on an investment to improve vulnerable people's lives is merely a function of the risk we take with our hard earned money to achieve this purpose.
..
In regards to management I thought about this after my last post and although I feel the case for social housing investment is still sound, I do now think that the current model may be defective.

Third party intermediaries such as housing associations and care providers collecting rent and then passing on to said reits, rather than a direct reit- tennant relationship introduces significant and unnecessary counter party risk to an otherwise simple investment idea.

However that said I've still topped up my positions within my portfolio today as I feel sooner or later that the incompetent boards will be replaced. When that happens maybe a new business model that better serves all stakeholders within the sector will emerge.

With great respect this is the wrong board for your views. You should be posting on the charity board. This is an investment board. I look for good investments first and then check to try to ensure that they agree with my ethics, not the other way round. Social housing does not strike me as a good investment, REIT or no REIT. I would not have touched this with a bargepole. Most REITs have problems with valuing their assets at the moment. If that is the problem, fine but it is the fundamental business that would bother me.

Dod

JDot wrote:Third party intermediaries such as housing associations and care providers collecting rent and then passing on to said reits, rather than a direct reit- tennant relationship introduces significant and unnecessary counter party risk to an otherwise simple investment idea.

It seems more like the unnecessary party in that system is the REIT, not the care provider?