Exclusive: Major Home REIT tenant on the brink of collapse after failing to win benefits backing
One of the biggest tenants of troubled property investor Home REIT has stopped paying rent and is on the brink of going under as it struggles to secure sign off for government-backed housing benefits, City PM has learned.
Lotus Sanctuary, which provides supported housing and accounts for 12.2 per cent of former Home REIT’s rental income, warned staff yesterday it had built a “substantial debt” pile of £2.7m and is suffering from cash flow issues as it struggles to get approval for “exempt status” from local authorities.
The warnings further blow apart claims made by London-listed Home REIT’s that its rental income is ultimately backstopped by government-supported payouts.
It also underscores the growing instability of its business model, after it admitted a “general deterioration” in its rental income over the past two months.
Some 35 per cent of Home REIT’s total rental income is now in jeopardy after City A.M. revealed earlier this month that its biggest tenant Big Help and its sister organisations were withholding rent.
The Times has also reported that Home REIT was locked into a dispute with another tenant Noble Tree.
In an email to staff seen by City A.M. Gurpal Judge, the boss of Lotus said the organisation was finding it “increasingly difficult to get sign off on exempt status from local authorities and concurrently we are also seeing delays in the processing of housing benefit applications again from local authorities”.
“As a business our main revenue stream is enhanced housing benefit from our supported housing units and currently, we aren’t in payment for most of these units,” he added. “We are working hard to unlock these payments and are in talks with landlords and other suppliers about the current issues.”
Home REIT has previously claimed it has received in full £3.7m invoiced rent from Lotus but the warnings from Judge raise questions over statements made by the firm.
The revelations of rent troubles at Lotus come after City A.M. revealed in December the firm had no idea how much rent it receives through government housing benefit payments despite saying its business model ultimately relies on them.
The firm has been hit by a slew of claims since a report from short seller Viceroy Research in November which raised major questions over its business model and the stability of its rental income.
Shares in Home REIT plunged around 50 per cent before they were suspended at the start of January.
Lotus and Home REIT did not respond to comment.