Exclusive: Home REIT’s biggest tenant dished out £1.2m to bosses before bankruptcy
The three bosses of Home REIT’s now-bankrupt biggest tenant pocketed over £1.2m last year even as the firm struggled to pay rent and slumped to a multi-million-pound loss, City A.M. can reveal.
Gurpaal Judge, the chief of Wolverhampton-based social housing provider Lotus Housing, hiked his own and two directors’ pay to £1.2m in 2022 – up from a total of just £9,200 in 2020 – despite the firm’s losses growing to around £4.75m by October last year, a confidential insolvency report obtained by City A.M. reveals.
The bumper paypackets came as the community interest company ramped up its expansion plans despite struggling to secure so-called exempt housing status for its properties, which would have entitled its vulnerable residents to tax-payer backed rental support.
Lotus reported an annual profit of £225,900 in March last year but swung to a £4.75m loss just seven months later as it failed to pay its landlords and win financial support from local authorities.
Lotus was Home REIT’s biggest single tenant and made up some 12.2 per cent of its total rent roll, operating 939 beds before it collapsed into bankruptcy earlier this month.
The report, compiled by insolvency practitioner Begbies Traynor, raises fresh questions over Home REIT’s vetting of those renting its properties and highlights the misuse of cash by its inexperienced tenants.
Founded by former estate agent and homeless volunteer Judge in 2018, the firm passed Home REIT’s due diligence processes in the summer of 2020 but began to run into trouble months later as local authorities failed to approve its exempt housing applications.
According to the report, Judge accelerated the firm’s expansion plans despite a backlog of applications for support from local authorities. Judge then pivoted the firm into private rental to try and generate profits.
“The company operated across multiple local authorities with exempt accommodation applications still not approved over nine months following the making of those applications, an example being Hull which had been applied for in October 2020 but had still not been accepted by March 2023,” the Begbies Traynor report states.
“As cash flows were further strained and cash reserves began to be further affected, the company took on further properties in the private rental market as a way of generating profits,” Begbies Traynor’s report said.
Home REIT insisted repeatedly that its rental take was ultimately backstopped by the tax payer. However, the report from Begbies Traynor underscores the troubles of Home REIT’s tenants in securing the status.
City A.M. also revealed in December that the firm also kept no track of how much of its rent was actually paid via exempt housing benefits. The revelations today are likely to now spark fresh questions for the beleaguered former FTSE 250 firm over the monitoring of its portfolio and tenant base.
The firm has been scrambling to steady the ship since a damning short seller report from Viceroy Research in November raised questions over the experience in its tenant base and stability of its business model.
City A.M. has since revealed a host of its biggest tenants have stopped paying rent to the firm in protest at the shoddy state of housing it provided. Home REIT admitted in February that its portfolio would likely take between £15-20m to refurbish.
Judge told City A.M.: “Lotus was not rejected for exempt status, but unfortunately faced significant delays in achieving exempt status leading to an accrual of £4.1m in unpaid housing benefit, that would have been paid once Lotus was accepted.
“The demand for Lotus’ services far outpaced the growth. Lotus had 1600 vulnerable homeless people on a waiting list for housing, who unfortunately will not be housed due to the significant delays from the councils.”
Home REIT did not respond to requests for comment.
