Monday, February 13, 2023 5:00 a.m.
The biggest tenant at beleaguered property investor Home REIT is seeking to assign its leases to other housing providers after warning it could no longer pay rent to the company, AM City. has learned.
Gurpal Judge, the head of Lotus Sanctuary – which Home REIT says accounts for 12.2% of its rental income – told staff last week that the company was struggling to obtain so-called exempt housing status on many of his properties, a precondition to secure the payment of housing allowances, which was choking his cash flow.
In an email seen by AM City., The judge said: “As a result of [its failures to secure exempt housing status]Lotus’ financial situation is deteriorating month by month and Lotus has now reached the stage where it is unable to continue to meet the payments due to landlords under the leases as they come due.
In the email, the judge claimed that Lotus “carried a significant debtor on its balance sheet” in relation to the unpaid bills. [housing benefits]” but there was “no visibility on when these payments will be received from [local authorities]if at all.
Lotus is now “very open to the option of assigning the lease to another lessor”, he said.
The new warnings come after AM City revealed last month that Lotus had told staff it had built “significant debtof £2.7million and was suffering from cash flow problems due to his inability to obtain exempt housing status.
Home REIT has repeatedly claimed that its rental income is supported by taxpayer-funded housing allowances from local authorities. However, Lotus’ failure to gain exempt status underscores the threats facing Home REIT’s rental income and raises major questions about the former FTSE250 company’s repeated claims that its rent is ultimately backed by the taxpayer. Home REIT declined to comment.
In a statement to AM City The judge said Lotus owed £2.7million to ‘several local authorities across the UK due to the time it takes for councils to review and accept applications for exempt accommodation’.
“This puts Lotus and our residents at serious risk,” he said.
“We don’t have a lot of arrears and were meeting all of our rental obligations until very recently.”
Home REIT has been rocked by rent issues in recent months as a the host of its major tenants withholds rental payments from the business.
AM City revealed in January that the group Big Help and its sister charities, which cumulatively account for almost a fifth of its rent, were withholding rent in protest at the state of the accommodation it provided. Another charity, Noble Tree Foundation, has also withheld rent from the business in protest at the lack of promised renovations and rental support.
Some 35% of Home REIT’s total rental income is now at risk.