Prs Reit Dividends - PRSR

Prs Reit Dividends - PRSR

Stock Name Stock Symbol Market Stock Type
Prs Reit (the) Plc PRSR London Ordinary Share
  Price Change Price Change % Stock Price Last Trade
0.00 0.0% 93.40 09:13:09
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Prs Reit PRSR Dividends History

Announcement Date Type Currency Dividend Amount Period Start Period End Ex Date Record Date Payment Date Total Dividend Amount

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Posted at 31/1/2023 17:33 by giltedge1
PRS Reit is like an inflation linked Gilt, thousands of tenants to spread the risk almost 100% occupancy & properties brand new, I am hoping for a dividend increase this year. Only negative low LTV, 45%, 50 - 60 is the norm for residential property. Good buying at this level, should go to £1.00.
Posted at 27/11/2022 00:15 by smithers1
Giltedge thanks for the comments.

My own analysis is suggesting a lower div. and happy to share as this stock is not widely covered by analysts.

Annual results 2022 show ERV of completed & contracted sites of £56.7m. The ERV is above the actual rents received as it is based on the rents achieved on new lettings, with those rents then applied on a site by site basis across the portfolio to arrive at the estimated ERV. There is a slight lag until annual rent reviews complete across the portfolio over the period to catch up with the ERV but also and more importantly PRSR has opted to only increase rents on existing tenancies by an average of 4% V's 10% on lets to new tenants. Potentially rents received in 2023 year may be circa 6% below the stated ERV. Likely 4% increases are a truer reflection of the market as on a site of 80 homes for example, whilst you may achieve the 10% increase on a couple of new lets after previous tenants vacate, it is debatable if the remaining existing 70 or so tenants would tolerate a 10% increase without considering alternatives. One swallow doesn't make a summer as the saying goes but this is nonetheless how valuation surveyors arrive at the ERV and this is a contentious point for all REITs. Also the stated ERV of £56.7m includes estimated rents on some sites not built out yet so those rents are not yet being received. Notwithstanding lets look ahead and use £56.7m.

Non-recoverable direct property costs (property management charge which is outsourced, landlords insurance, maintenance, bad debts etc.) was 18.2% in recent results. Deduct that from ERV of £56.7m = £46.4m.

The REIT's admin expenses for 2022 were £2.2m and the investment adviser's asset management fee was £5.2m = £39.0m.

Interest on bank loans is the trickiest part and slightly subjective when forecasting. Ignoring non-cash amortisation charges for legals and arrangement fees, debt interest was £8m in 2022. £350m of the £440m total debt facilities were drawn as at 30 June 2022. The facilities will likely become fully drawn as the remaining sites complete in 2023. £190m of the £440m of debt is on a variable rate which will now be higher. Add to that in 2022 the £90m of undrawn debt was all variable rate so was probably only being charged at non-utilisation rates rather than full rate. At the existing debt interest rates as at 30 June 2022 per the annual results, once fully drawn annual debt interest would be £13.9m. Not factoring in increased rates on the variable debt, debt interest deduction of £13.9m = £25.1m.

No. of shares in issue 549.3m = 4.6p div. per share.

The key variables are:

-rents received / how close PRSR can get this to the stated ERV. My analysis above could currently be overstating by circa 6% even once remaining sites in progress are fully built out
-Ongoing rental growth which will hopefully counterbalance some of this. As you have noted the rents are affordable so hopefully despite the outlook there is scope to drive further increases
-debt interest costs and the uncertainties around the cost of the variable rate debt and whether or not if will be fully drawn once the remaining sites are built out

As an aside and for the sake of clarity, the Prospectus of 2017 actually stated an initial dividend of 5 pence per share paid out of capital initially, with a targeted covered dividend of "6 pence or more" by June 2020...... The targeted dividend has since been downgraded a couple of times. It is somewhat irrelevant now but disappointing that despite reported stronger than anticipated initial rents achieved, strong rental growth, tightening of yields, and a strong housing market (until June 2022 at least) the dividend remains an as yet not fully covered 4p per share. It does leave one wondering where the targeted "6% or MORE" came from and what assumptions were used to arrive at that figure!

Posted at 25/11/2022 14:40 by giltedge1
All metrics are fine rents rising, shortage of affordable housing (500K immigrants 2022) brand new EPC A or B, no maintenance issues. Only bug bear is LTV set at a lowish 50% of Assets, which is odd should be 60%+. I rate these as a buy as hopefully will start raising dividend from 4p this year, prospectus said 5.5p & I think achievable.
Posted at 11/10/2022 06:42 by jonwig
The answer would be "because they can raise the rents and therefore the dividend". But this of course raises the question of arrears and defaults.

A shame, but virtually every investment decision these days has to refer back to politics, which is a toxic situation.

Posted at 11/10/2022 06:28 by jonwig
I've been looking at the FY results (I don't hold):

The debt profile looks very good, and I see around 95% of their homes look likely to be built by Vistry (now that it's taken over Countryside). I don't think the concentration will cause any problems, but who knows, in the current environment.

Rent collection at 99% looks great, but are there headwinds, and how strong?

My only concern is that buying anything in the UK looks a gamble right now.

Posted at 26/9/2022 20:32 by smithers1
Annual report for the year to June 2021 notes portfolio benefited from yield compression with an investment yield range of 4.0 - 4.75% applied. States 0.125% improvement in yield would increase NAV by £24m whilst worsening in yield by 0.125% would lower NAV by £22m. Portfolio has grown since then as funds deployed so impact would be greater either way. This time last year UK 5 year GILT negative 0.10% and 10 year UK GILT +0.18%. Currently 5 year is 4.06% and 10 year 3.83%. Would expect investment yield range of PRSR portfolio to have moved out significantly with corresponding impact on NAV
Posted at 08/9/2022 19:37 by giltedge1
PRS Reit was affected by sentiment in Commercial property sector, but is more insulated. As you correctly stated rising rents, full occupancy, new energy efficient homes & if tenants lose job, can claim housing benefit as rents in lower bracket. Obviously Commercial Landlords, do not have that safety net. I am hoping dividend next year will be raised from 4p as now portfolio almost complete. If shares stay at current level Lloyds Bank or Legal & General will swoop, probably have to pay at least £1.20 for takeover premium.
Posted at 25/7/2022 07:54 by davebowler

5% like-for-like rental growth in 12m period to June 2022

Mkt Cap £600m | Share price 109.2p | Prem/(disc) 4.5% | Div yield 3.7%


PRS REIT added almost 300 completed units in the six-month period to June 2022. The portfolio now comprises 4,786 completed units with a further 693 contracted. During the quarter, PRSR completed the acquisition of a contracted site in Nuneaton from Sigma Capital Group (50 completed and let homes) and a new 41-unit development site in Burton-Upon-Trent. Three further site acquisitions are expected in the period to December 2022.

PRSR achieved 100% rent collection in the 12 months to 30 June 2022. Total occupancy of the completed units is 98% and a further 1% are reserved. Like-for-like rental growth on stabilised sites over the 12 months to June 2022 was 5.1%.

Liberum view

PRS REIT has now achieved 84% of its target of 5,700 completed units. PRSR's NAV performance has improved considerably since June 2020 due to an acceleration in the pace of completions, yield compression and portfolio rental growth. The six-month period to June 2022 is also likely to show meaningful capital growth given the like-for-like rental growth achieved in the period. Operational performance has also been strong with consistently high levels of rent collection and occupancy.

Posted at 12/10/2021 08:20 by davebowler

Full dividend cover expected by FY 2023

Mkt Cap £555m | Share price 101p | Prem/(disc) 2.0% | Div yield 4.0%


PRS REIT's results for the 12-month period to June 2021 have confirmed an EPRA NTA per share of 99.0p (previously reported), resulting in a 9.4% NAV total return over the year.

The total number of completed and contracted units at 30 June 2021 was 5,055, representing a slight reduction from December 2020. The portfolio is spread across 64 sites and has an ERV of £48.1m on completion (6.1% yield on cost). Rental growth for new lettings rose by 6.2% and renewals increased by 4%.

1,902 units were completed in FY 2021 (June period end), representing a 91% increase in the year. A further 307 homes were added in the quarter to September 2021, bringing the total number of completed units to 4,291 (June 2020: 2,082). PRS REIT has now achieved 85% of its target of 5,200 completed units (prior to any adjustments resulting from the recent capital raise). The company raised £56m post period end to fund a pipeline of five additional sites (500 homes). Two of the sites have been acquired.

Rent collection has been strong with 98% collected in FY 2021, rising to 99% in the quarter to September 2021. Total arrears were recently reported to be £0.4m (0.8% of ERV on completed units). Occupancy of completed units was 98% with a further 1% of units reserved. EPRA EPS in FY 2021 rose to 1.2p, representing dividend cover of 0.3x. The board expects the current dividend to be almost fully covered on a run-rate basis by the end of FY 2022. Gross to net costs showed an improvement from 21.1% in FY 2020 to 19.5% in FY 2021.

Liberum view

PRSR had previously disclosed the NAV figures for June together with the key portfolio operating metrics. Development profits have driven the high return in the period as the pace of completions accelerated. Development gains will remain the key driver of performance over the medium term. The recent raise has pushed out out the company's delivery of EPRA EPS growth. At the time of the interim results in March 2021, the company had indicated it expected to be able to increase the dividend in FY 2022. That now appears unlikely and we expect the company will maintain an uncovered dividend of 4.0p pa

Posted at 04/10/2019 10:00 by quintus1
Despite the positive remarks from the PRS REIT Chairman Steve Smith, the actual financials for the full year results 2018/19 make for disappointing reading. It follows June’s RNS announcement that the forecast stabilised dividend had been reduced from 6% to 5.5%. In light of the restated commitment to pay a 5% dividend until stabilisation in FY 2022, with the majority of the dividend still continuing to be from return of equity given the ongoing absence of significant rental income generation, it appears likely the 5.5% dividend target will have to be lowered again with NAV set to fall further.

The PRS REIT pays out approx. £25m per annum as a dividend to achieve the development phase 5% dividend “target”. The majority of the dividend is still coming by way of return of equity, after the investment adviser Sigma Capital has first charged a 1% annual management fee which is calculated as a percentage of NAV and therefore notably includes unspent cash. Net rental income was £4.9m for the full 2018/19 year. However, that is pre the deduction of £5.9m of administrative expenses leaving the PRS REIT in negative cashflow of £1m for the year. This increases further to negative £26m after payment of the 5p dividend. Looking ahead to the 2019/20 year the annualised gross rental income at 30th June 2019 was £10.7m which nets down to approx. £8.8m after property maintenance/running costs. Further deductions of Sigma’s £5m per annum investment management fee and £0.9m for the REIT board’s salaries and administrative running costs will reduce this to £2.9m. There were also finance costs of £0.9m for the year although this was largely offset by interest received from unspent cash (as the REIT has unexplainably drawn £100m of debt before first spending the remaining £130m of equity raised).  As the remaining equity is expended in 2019/20 and beyond, interest on funds on deposit will undoubtedly decrease and debt interest increase as more debt is drawn.  It is not unreasonable therefore to assume a net cashflow position of only £2m for the 2019/20 year, prior to payment of the £25m annual dividend. From a cashflow position, two years in the REIT is barely breaking even. Once the dividend is paid, cashflow remains significantly negative with NAV likely to continue to fall as a result. Gross rents received should increase from £10.7m as the year progresses with more homes completing and becoming income producing however, a significant proportion of the dividend will continue to be paid out of funds raised for the foreseeable future.

NAV at 95.8p has not deteriorated as much as feared (although the stated figure was pre the final 2p dividend which has since been paid and will have reduced NAV further) given investment gains on completed as well as ongoing development sites, but is nonetheless disappointing. From net funds raised of £500m, approx. £491m after costs of the share issues, £50m of dividend payments over the last two years and administrative costs uncovered by net rent in years 1 and 2, investable funds will have dropped to approx. £430m and falling. This was to be supplemented with £400m of debt and whilst NAV has been supported to a degree by investment gains, given the REIT’s gearing restriction at a maximum of 45% of NAV it is hard to see how the originally intended full £400m of debt can be drawn. Tellingly the REIT has only committed to £350m of debt facilities, with an ability to extend by a further £50m. Given the current situation it appears unlikely the additional £50m will be drawn without breaching gearing restrictions. One positive is that £150m of 15 year debt (yet to be drawn) has been secured at an exceptionally low swap rate of 1.164% plus margin which should be return enhancing. Notwithstanding, the significant reduction in investable equity, fall in NAV, and associated reduction in accompanying debt (albeit at low interest rates) will likely result in a further lowering of the stabilised dividend target. NAV could potentially be supported by further investment gains but regrettably the dividend cannot.

In retrospect raising the second £250m in Feb 2018 was premature and the Board should take a large degree of the responsibility for this. It significantly increased cash drag and lowered overall returns. In light of the concerns above it would be imprudent to raise further equity until the current equity and debt are deployed and the actual stabilised dividend and NAV established. Equally, any future fundraise must surely be by way of a separate share class so as not to again adversely impact any existing shareholders who do not wish to participate in further equity injections.

On analysis of the 2018/19 full year accounts, the Chairman, Steve Smith’s statement that the 5p dividend paid in the full year to 30th June 2019 “is in line with target” is disingenuous. The majority of the dividend was paid from funds raised. NAV has declined to 95.8p and is likely to be significantly lower as at today’s date, with the final 2p dividend having been paid post the year end. The NAV situation is more worrying still when considering the second £250m was raised at a premium of £1.025. The Prospectus stated equity could be used to top up the dividend provided it did not reduce NAV per share below 98p. However, equity has and it appears will continue to form the majority of the dividend into 2019/20 with the NAV already some way below the 98p criteria. It is concerning that the REIT board have allowed this given it explicitly contravenes the Prospectus. The apparent ability to reduce the NAV as low as required by paying out sufficient equity to achieve a 5p dividend, renders the 5p dividend target meaningless and undermines the Chairman’s statement: “Acta deos numquam mortalia fallunt”. Total return (including NAV) is critical but worryingly absent from Steve Smith’s comments.

The Chairman goes on to state “the remainder of the £900m funds will be DEPLOYED over the coming months” with “91% of net proceeds already DEPLOYED”. This is misleading and one can only hope not deliberately so. Certainly the chairman should be more careful with his choice of words in future. The REIT board have prior to this adopted strict and defined definitions for the terms “committedR21; and “contracted221; for good reason. Deployed to the vast majority implies the £900m funds will have been spent ;within the next few months and therefore be generating an income. However, this is not the case. Investment property as at 30 June 2019, including recognised gains on partially developed sites, stood at £362m. The REIT had £230m of cash (which included £100m of debt drawn). It is unclear why the £100m of debt was drawn earlier this year, £50m of which as early as March according to a previous RNS, with debt interest chargeable, when at 30 June 2019 there would still have been £130m of equity to spend without having drawn any debt. Had the second fundraise not taken place, under the Prospectus the intention was to supplement the initial £250m raised with £200m of debt. This would have significantly enhanced returns and notably even then the £450m combined would not have been fully deployed as at 30 June 2019. As at year end the REIT had £230m of cash plus a further £250m of debt still to be drawn (potentially £300m of debt subject to gearing restrictions). Therefore there was £480m (potentially £530m) still to deploy. Given it had taken two years to deploy less than £362m (as that includes investment gains) it is simply incredulous for the Chairman to state 91% of funds have already been deployed with the remainder of the £900m funds to be deployed over the coming months. Perhaps he meant “committedR21; but sadly committed funds do not generate an income until they are deployed which as we have seen to date can take some time. One can only hope such rhetoric does not precede a further equity raise which would only increase cash drag and hamper returns further.

Serious conflicts of interest remain (hxxps:// around the investment adviser Sigma Capital who is:

-investment adviser to the PRS REIT;
-development manager to the PRS REIT and;
-sells its own completed investment assets to the PRS REIT.

The IA fee is 1% of NAV so approx. £5m p.a.. Notably the second £250m fundraise in Feb 2018, whilst being extremely premature and lowering returns given the resultant cash drag, doubled assets under management and hence doubled Sigma’s IA fee.

The REIT is set to use a minimum of two thirds of the £900m gross funds, so £600m, on developing its own assets (although as noted above this is likely to be lower given cash leakage and potential gearing restrictions). Of this Sigma charges a 4% development management fee which if one adopts the £600m equates to £24m.

The amount Sigma earns from completed investment sites it sells directly to the PRS REIT is unknown but if one assumes a not unreasonable 10-20% developers margin, the £300m (again likely to be lower) of investments sold to the REIT will generate approx. £27m - £50m of profits for Sigma.

It is clear the fees to the company are substantial. That in itself is not necessarily an issue although in this case they do appear excessive. Given the poor financial performance to date and the REIT board’s contrasting positive and misleading comments in the full year results it does not instil faith that they are appropriately managing and overseeing the obvious conflicts of interest that Sigma Capital has with its many roles on both sides of the fence: “Quis Custodiet Ipsos Custodes”

Outlook: Stabilised dividend target likely to be lowered further with potential for NAV to continue downward trajectory. One to revisit once all equity and available debt fully invested and income producing.

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