The parlous financial situation of Home Reit (HOME ) has worsened with the news that two tenants accounting for more than 18% of its rent roll have collapsed.

The suspended homeless accommodation provider subject to a probe into its accounts announced that community interest companies Lotus Sanctuary, which generated 12.5% of rents, and Gen Liv UK, 5.7%, had both entered creditors’ voluntary liquidation.

Lancashire-based Gen Liv UK has appointed corporate finance specialist FRP Advisory Trading to oversee its wind down.

Pietro Nicholls of RM Funds, which last week approached Home with a proposal to become its new investment manager, demanded to know where this left the board’s strategic review.

Last month Home’s board put the business up for sale after an approach from Bluestar, an investment company founded by a former employee of its fund manager Alvarium. Bluestar has until 16 March to firm up its cash offer or withdraw.

The Reit also revealed that less than a quarter of rent due had been paid in the November quarter and warned rent collection would be ‘highly uncertain’ in the coming months.

It also faced a potential refurbishment bill of £15m-£20m for upgrading sub-standard buildings, which have been the subject of dispute with its charity tenants. 

‘The concern is these liquidations raise questions over short to long-term liquidity profile of the business. Should the board wait for a bid to materialise or take action now using proposals such as the one we’ve presented. If we wait much longer, who’s next?’ he said in an email to Citywire.

Winterflood analyst Emma Bird said the development ‘poses a genuine challenge to financial stability’ and raised further questions about the due diligence the board and its fund manager had performed on the real estate investment trust’s investments.

Investors were already downcast about the prospect for their holdings. The shares plunged 70% last year in response to highly critical report by short-seller Viceroy Research and have been suspended since the New Year. There are doubts whether the stock can return to trading and what will happen to the price if, as seems likely, investors rushed to sell. 

Investor concerns were already heightend at the weekend by an article in The Times highlighting the role of Chrstopher Downing, the property vendor from whom Home Reit bought the bulk of its assets.

Three of Home’s tenants, Noble Tree Foundation, Big Help and LTG Vision, have stopped paying rent to the Reit alleging that Downing’s social housing group Karla owes them more than £10m to refurbish some of their properties. Downing denies their claims and told the paper he had provided the tenants with ‘sums of over £19m’. 

Wolverhampton-based Lotus, which provides 939 beds for vulnerable women, was reported to be facing financial dificulties in January after failing to secure exempt housing benefit on its properties. At the time, Home said it had not paid rent in the three months to November.

Home said today it was in discussions with prospective tenants to take on new leases for the Gen Liv and Lotus’s properties. It said arrangements had been made for existing care and support services to continue and that no residents would lose their accommodation as a result of the liquidations.

A spokesperson for Home declined to comment on RM Funds’ proposal, its finances or when its six-month delayed annual results would be published. ‘We continue to review all options. We cannot comment further at this stage.’