TIDMPRSR TIDMSGM
RNS Number : 1628T
PRS REIT PLC (The)
02 July 2018
2 July 2018
PRSR.L
The PRS REIT plc
("Company" or "PRS REIT")
Fourth Quarter Update
The PRS REIT, the closed-ended real estate investment trust
established to invest in new-build homes in the Private Rented
Sector ("PRS"), is pleased to provide an update for the final three
months of its maiden financial year to 30 June 2018.
KEY POINTS
Maiden Financial Year Closes With:
c.GBP248m of Completed and Contracted Development, and
c.GBP437m of Committed Development,
Providing for Total of c. 4,600 New Rental Homes
Development Activity
-- Construction commenced on three new sites in Q4, for a further
c.238 new rental homes, with total gross development cost
("GDC") of c. GBP34.4m
- estimated rental value ("ERV") of these homes is c. GBP2.2m
when fully let
-- Two additional development sites were purchased at the end
of Q4. Once fully developed these sites will add a combined
c.160 homes at a total GDC of c. GBP25.0m, with construction
commencing this month
- ERV of these homes is c. GBP1.5m when fully let
-- At the end of Q4, total development activity (completed,
contracted and committed*), amounted to c.4,600 new homes,
with GDC of c. GBP685m
- c.GBP48m of completed and contracted* development and c.GBP437m
of committed* development
-- There were some site-specific delays in Q4, nonetheless,
the overall timetable for the delivery of the full portfolio
of c. 6,000 new homes utilising the proceeds from the two
equity fundraisings and full potential gearing remains on
track
Purchase of Completed PRS Site
-- An additional, newly-completed and fully-let PRS site was
acquired from Sigma Capital Group plc, in Q4, for a total
consideration of c. GBP9.1m, following an independent valuation.
The site comprises 59 new homes, providing a rental income
of c.GBP0.54m p.a.
Rental Income
-- Annualised rental income at the end of Q4 stands at c. GBP3.63m
from 405 completed new homes (31 March 2018: GBP2.4m)
-- ERV from completed and contracted* sites (c. 1,710 new homes)
at the end of Q4 is c. GBP15.6m
Interim Dividend
-- An interim dividend of 2.5 pence per share is expected to
be declared around the end of July, taking the total dividend
for the period from launch to 30 June 2018 to the Company's
target of 5.0 pence per share - for full commentary see below
Construction Resource
-- Recent major scaling of construction resource - allows the
Company's Investment Adviser to map out continuing delivery
and expansion with significantly greater clarity, and supports
geographic expansion
- facilitated by new Framework Agreement signed in June 2018
between Sigma Capital Group plc (parent company of the
Investment Adviser) and Countryside Properties PLC
Debt Finance
-- Final terms concluded for an initial GBP200m of debt facilities,
from Scottish Widows and Lloyds Bank, with blended 'all-in'
interest cost of 2.65% and average term, including extension,
of 9.5 years
Net Asset Value
-- An announcement reporting the Company's audited Net Asset
Value as at 30 June 2018 is expected to be published in September
at the same time as the audited financial statements
*see Definitions
FOURTH QUARTER UPDATE
Introduction
The Board is pleased to provide a fourth quarter update in the
PRS REIT's maiden financial year ended 30 June 2018.
Overall, the PRS REIT continued to make encouraging progress in
the fourth quarter, with significant new development activity
commenced and a major new Framework Agreement that will support the
PRS REIT's continuing delivery and expansion, as well as its
geographic diversification plans. This new Agreement is discussed
in more detail below. However, there was also some delay with
certain development activity in the period, owing to site
scheduling and planning consents, although it is not expected to
affect the overall timetable for the completion of the full planned
portfolios of c. 6,000 new homes utilising the proceeds from the
two equity fundraisings and full gearing. The fourth quarter closed
with c. GBP248m of completed and contracted* development and
c.GBP437m of committed* development, which together equate to
c.4,600 new homes, when construction completes.
With regard to the interim dividend, which during the Company's
development phase is paid out of the special distributable reserve,
a dividend of 2.5 pence per share is expected to be declared around
the end of July. This will take the total dividend for the
Company's maiden year to its target of 5.0 pence per share. We note
that once paid, the effect will be to lower the Company's net asset
value ("NAV") to below GBP0.98 per share, being the opening net
asset value at flotation. The Board expects the NAV to recover
during the development period, as revaluations on completed
portfolio development sites make a meaningful contribution to the
Company's balance sheet.
The Company continues to target a total dividend of 5.0 pence
per ordinary share(1) for the year from 1 July 2018 to 30 June 2019
and, upon full investment of the capital and associated gearing, a
dividend of 6.0 pence or more(1) at stabilisation of the PRS
portfolio.
An announcement reporting the Company's audited net asset value
as at 30 June 2018 is expected to be published in September at the
same time as the audited financial statements for period ended 30
June 2018.
Progress on Delivery of New Homes
In the period, the PRS REIT commenced construction on three
sites, with c.238 new family homes planned, at a GDC of c.GBP34.4m.
The estimated rental value ("ERV") of these homes is c.GBP2.2m when
fully let. At the end of the quarter, the Company also acquired a
further two development sites. Together, these two new development
sites will deliver an additional c. 160 high quality, new homes for
rent, at a gross development cost ("GDC") of c. GBP25.0m. The
estimated rental value ("ERV") of these homes when fully let is c.
GBP1.5m.
As at 30 June 2018, the Company has 405 properties, across sites
in North West, South Yorkshire, and the Midlands, which generate a
combined annualised rental income of c. GBP3.63m (31 March 2018:
GBP2.4m). The PRS REIT's ERV from completed and contracted sites
(c.1,710 new homes), as at 30 June 2018, is c. GBP15.6m.
A newly completed PRS site was acquired in Q4 from Sigma Capital
Group plc ("Sigma"), for a total consideration of c.GBP9.1m,
following an independent valuation on behalf of the PRS REIT by
Savills. The site adds a further 59 new family homes, with a rental
value of c.GBP0.54m p.a. The number of completed PRS sites that the
PRS REIT has acquired over its first year of operation now totals
five sites.
Up to a third of the PRS REIT's properties are anticipated to be
sourced through the purchase of fully completed PRS sites, and
Sigma has a further three sites that are expected to be fully
completed by the end of 2018 for purchase by the PRS REIT upon
completion, with additional sites underway that are expected to be
acquired by the PRS REIT from Sigma in 2019. The PRS REIT retains
exclusive access to Sigma's PRS Platform, the key source of
completed PRS sites. All such sites are independently valued on
behalf of the PRS REIT.
As previously highlighted, the Company's aim is to deliver
family homes near key centres of employment, with convenient access
to the transport infrastructure, and close to good primary schools.
There is continued strong demand for the Company's homes and
forecast demand continues to outstrip supply, particularly for
family homes, the PRS REIT's major focus.
The Investment Adviser continues to believe that the Company is
the leading provider of new privately rented homes for families in
the UK. Importantly, the Company's costs in the management of the
assets is within budget.
Construction Resource
The construction resource available to The PRS REIT has been
substantially increased through expansion of the existing
partnership between Sigma, the parent company of the Company's
Investment Adviser, Sigma PRS Management Limited, and Countryside
Properties PLC ("Countryside"). The recently agreed new Framework
Agreement, signed between Sigma and Countryside in mid-June,
supports the PRS REIT's growth objectives. It targets the delivery
of a further 5,000 PRS homes over the next three years via Sigma's
PRS Platform. Most importantly, this agreement allows Sigma PRS
Management Limited to map out the PRS REIT's continuing delivery
and expansion with significantly greater clarity. Sigma's
commitment also allows Countryside to deliver homes more quickly on
its larger, mixed tenure sites.
Debt Facilities
Two separate debt facilities amounting to a combined GBP200m
were finalised in the fourth quarter with Scottish Widows and
Lloyds Bank. The blended 'all-in' interest cost is 2.65% per annum
and the average term, including potential extension, is 9.5
years.
The Company's Investment Adviser is exploring other structures
with its banking partners for the delivery of additional debt to
support the growth of the PRS REIT. Based on the equity of GBP500m
raised so far since the PRS REIT's IPO, including the subsequent
GBP250m placing in February 2018, the Company has the capacity to
utilise a further c. GBP200m of debt over and above the GBP200m of
facilities already agreed. This would bring the total resource
capacity of the PRS REIT to c.GBP900m.
Pipeline
The Investment Adviser continues to assess further development
opportunities for the Company and, as at the end of the fourth
quarter, has sourced an additional GBP482m GDC of sites across
target geographies. These opportunities are principally through
Sigma's PRS Platform where there are well-developed relationships
with third parties, including construction partners and local
authorities.
In addition to those sites, the Investment Adviser has available
for review sites with a potential GDC of GBP700m, which may
suitable for development for PRS, subject to further funding being
available.
*DEFINITIONS
Contracted refers to sites that have been completed, and purchased
by the PRS REIT and where there is active construction
underway, under a design & build contract.
Committed refers to development sites that have been approved
or are under formal appraisal by the Investment Adviser,
and where planning consent is being sought, and/or
are in the process of being acquired.
Pipeline refers to sites that have been identified as being
suitable for appraisal. These sites are typically
sourced from Sigma's PRS Platform, and are typically
under a Framework Agreement with a construction partner.
(1) This is a target only and not a profit forecast. There can
be no assurance that the target can or will be met and should not
be taken as an indication of the Company's expected or actual
future results. Accordingly, potential investors should not place
any reliance on this target in deciding whether or not to invest in
the Company or assume that the Company will make any distributions
at all and should decide for themselves whether or not the target
dividend yield is reasonable or achievable.
This announcement is released by The PRS REIT plc and contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) 596/2014 ("MAR"), encompassing information
relating to the Placing described herein, and is disclosed in
accordance with the Company's obligations under Article 17 of
MAR.
For further information, please contact:
The PRS REIT plc Tel: 020 3178 6378 (c/o
Steve Smith, Non-executive Chairman KTZ Communications)
Sigma PRS Management Limited Tel: 0333 999 9926
Graham Barnet
Graeme Hogg
N+1 Singer Tel: 020 7496 3000
James Maxwell, Liz Yong (Corporate Finance)
Stifel Tel: 020 7710 7600
Mark Young, Neil Winward, Gaudi Le Roux
G10 Capital Limited (AIFM) Tel: 020 3696 1302
Gerhard Grueter, Anthony Wood, Gaia Udage
KTZ Communications Tel: 020 3178 6378
Katie Tzouliadis, Emma Pearson
NOTES TO EDITORS
About The PRS REIT plc
(www.theprsreit.com)
The PRS REIT is a closed-ended real estate investment trust
established to invest in the Private Rented Sector and to provide
shareholders with an attractive level of income together with the
potential for capital and income growth. In its Initial Public
Offering, on 31 May 2017, the Company raised GBP250m gross equity
capital and, on 20 February 2018, it raised a further GBP250m
(gross) through an additional Placing. Both fundraisings were
supported by the UK Government's Homes England with direct
investments totaling c. GBP30m.
About Sigma Capital Group plc
(www.sigmacapital.co.uk)
Sigma Capital Group plc is a private rented sector, residential
development, and urban regeneration specialist, with offices in
Edinburgh, Manchester and London. Sigma's principal focus is on the
delivery of large scale housing schemes for the private rented
sector. It has a well-established track record in assisting with
property-related regeneration projects in the public sector, acting
as a bridge between the public and private sectors. Its subsidiary,
Sigma PRS Management Limited, is Investment Adviser to The PRS REIT
plc.
About Sigma PRS Management Limited
Sigma PRS Management Limited is a wholly owned subsidiary of
AIM-quoted Sigma Capital Group plc and is the Company's Investment
Adviser. It sources investments and manages the assets of The PRS
REIT plc and advises the Alternative Investment Fund Manager
("AIFM") and the PRS REIT on a day-to-day basis in accordance with
the PRS REIT's Investment Policy. The Investment Adviser is an
appointed representative (reference number: 776293) of the
AIFM.
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END
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