Prs Reit Share Discussion Threads

[pdosullivan] 04/4/2024 15:39

Very interesting - the Investors Chronicle article has been amended. It now says "The company knows [it does not have cash to build more houses] and told Investors' Chronicle it is speaking to its shareholders about its next move" with a footnote adding - This article has been amended to clarify the nature of PRS REIT's discussions with shareholders

[smithers1] 03/4/2024 20:45

Also on radar likely Labour Government by end of the year. Possible rent controls given the level of recent rent rises across the country?? Political hot potato but I wouldn't rule it out

[jimbobbaby] 03/4/2024 13:36

A capital raise now would be purely in the managers interest and very detrimental to shareholders given the long term fixed nature of much of the debt.If leverage and gearing ratio are a concern they should sell some properties to reduce debt.This would have a much smaller impact on current holders.Or if issuing new capital it should be to all shareholders pro rata.Is there enough private holders to block it / cause a fuss by e-mailing investor relations setting out the concerns.

[asagi] 03/4/2024 13:18

I'm expecting the share price to rise in the coming 18 months as rates fall.

couldn't agree more Makinbuks. I'm also a shareholder and the PRS REIT and think it is one of the best plays on the market for interest rates coming down.

Asagi (long PRSR)

[makinbuks] 03/4/2024 09:38

I'm expecting the share price to rise in the coming 18 months as rates fall. A capital raise now would be very badly timed

[spectoacc] 03/4/2024 06:59

Agree re fees, but I've said all along on PRSR, the business model (also applies to many others eg renewables, infrastructure) relies on a stream of new purchases. Property may be less of a wasting asset than some, but BtL needs CapEx, and it needs to not all come in a lump.

Wonder if they'll try a trick like issuing at slightly higher than current s/p, support by a few major s/holders spending OPM.

[pdosullivan] 02/4/2024 23:11

PRSR shareholder here. I would be very strongly opposed to any equity raise at a discount to NAV.

[smithers1] 02/4/2024 23:07

Investors Chronicle states today PRSR speaking to shareholders about an equity raise. Do not see shareholder value in this. Investment Manager self interest looking to increase assets under management.

PRSR launched in 2017 targeting a geared 6p dividend. Almost 7 years in dividend is 4p and still not yet fully covered and share price 21p below raise price. Do not see the attractions of equity raise based on track record and current discount to "stated" NAV when can get 5%+ interest on deposit. Given gearing risk and longer term maintenance cost risk I would be looking for 8% min. div.

Portfolio should be left to stabilise and investment advisor fees slashed given their role now is limited to overseeing a third party letting / property management company. £6m a year to do that seems excessive

[makinbuks] 20/3/2024 14:27

Look like very good results today. Positive market reaction. Surprised theres not more interest here

[spectoacc] 18/1/2024 09:10

Thanks @Makinbuks. I'd be surprised if many bathrooms/kitchens needed renewing this early. How many they've done - and when - would be a key question.

[makinbuks] 18/1/2024 08:56

Spec, whilst I share your concern over the managers motivation I don't agree that no one is prepared to discuss this. If you look back to the exchanges in October of last year here we covered this in some detail. I particularly like the input that Grainger is 34% and PRSR 36% incl admin. I also refer you to the answer given at the company meeting where they said they upgrade bathrooms and kitchens and increase rent accordingly

[spectoacc] 18/1/2024 07:32

I couldn't see it in the Notes, nor in the balance sheet, nor could one of the writers at the IC (who tipped it) tell me.

You could - possibly - argue that strong rent rises over the next say 7 years, will allow for a decent provision to be built up.

But the fact remains - if you take on a bunch of built-at-around-the-same-time property, in the thousands of units, it'll likely all need the same things doing over the same few year period. Perhaps that's 4 years, but when it comes it won't be cheap.

Could easily spend c.£15k on new kitchen and bathroom, per house, even done in bulk (but good look finding the labour). Like car insurance, it's a lot more expensive than it was.

Is clear to me that the business model, as with so many ZIRP-era ITs, is to buy - issue more shares - buy some more. Then instead of 5,000 properties, all needing CapEx at once, you'd have say 25,000, with 5,000 needing CapEx in any few years period.

There's similar arguments on lifespan of assets at some of the renewable ITs, particularly wind. PRS just seems that much more "obvious".

IMO PRS's costs/fees are much too high, and management will do very well regardless of the future.

[jonwig] 18/1/2024 07:25

Spec - In the last FY results:

Non-recoverable property costs rose slightly to 19.1% of revenue (2022: 18.2%), mainly reflecting the increasing number of assets out of warranty and marginally increased maintenance costs.

Is that where they're hidden? Maybe the NRPCs include a sinking fund? (The word depreciation doesn't occur anywhere in the results statement.)

[spectoacc] 18/1/2024 07:05

I regard PRS as a doomsday machine REIT. No one seems keen to debate it, but the majority of their property will all need Capex (kitchens, bathrooms) at the same time. I can't see any provision being made for this, even within the c.20% pa being taken from shareholders' rent.

Note that this won't happen for a good 5 years, likely 7-10.

[nexusltd] 17/1/2024 21:51

@Jimbo. Interesting take. Thank you.

I propose a thought experiment. Say this community owned the PRSR properties and:
1) We agreed to have a single nationwide managing agent to take care of finding renters, take care of contracts, respond to renters' calls for assistance, etc. What fee could we negotiate as a % of ERV?
2) Given the age profile, quality, and relatively low tenant turnover (low rents) what would be the annual maintenance capex we need to budget for, as a % of the EV?

[jimbobbaby] 17/1/2024 17:08

ERV of £63M. Mkt Cap ~£450M + net debt ~£300M = EV ~£750M=>ERV/EV yield of ~8.4% with rents growing at ~10% p.a.?Will be bumpy but cheaper and less hassle than trying to run your own BTL - esp if in a tax free wrapper.

[pillion] 24/12/2023 17:45

Tipped on Motley Fool today

[davebowler] 21/12/2023 17:47

htTPs://www.telegraph.co.uk/money/investing/stocks-shares/property-trust-prs-reit-valuation-big-discount/

[giltedge1] 14/11/2023 13:33

Great up leg, topped up low 70,s + div going in right direction.

[masurenguy] 05/11/2023 09:07

Interesting share tip - no position but added to my watchlist.

MIDAS SHARE TIPS: Home in on cash from PRS Reit
4 November 2023

The group was set up in 2017 to deliver high-quality homes at affordable rates, while generating robust income for shareholders. To date, it has delivered on each of those ambitions, amassing a portfolio of more than 5,000 purpose-built, private rental homes and paying attractive dividends along the way. Yet PRS shares have fallen from £1.10 in the summer of 2022 to just 79p today, with investors deserting property stocks in droves, concerned by rising interest rates and weak economic growth. For PRS, the decline seems overdone, reflecting neither the value of its properties nor its growth potential.

Earnings per share were 3.1p in the last financial year and dividends were 4p, so some of the money paid out to shareholders came from the company's balance sheet rather than tenants' rents. That should change this year as PRS is on track to add another 400 homes to its portfolio, taking the estate to 5,500 homes, each of which will be generating rent and ensuring that dividends are covered by earnings. Brokers predict a 16% increase in rental income to more than £46m by next June, rising to £51m in 2025. Dividends are likely to remain at 4p this year, but they should rise steadily from 2024.

Midas verdict: PRS Reit shares have been hit by stock market woes and now look like a bargain. At 79p, the stock offers attractive dividend income, capital growth potential and the opportunity for investors to help solve one of the UK's most pressing problems. Buy.

[giltedge1] 16/10/2023 12:18

BBC reported average rents outside London now over £1,200, this trust average £900 for new 3 bed homes so plenty of growth next few years. Disappointed with performance as all external variables since IPO, moved to their advantage. ie rents rising, portfolio fully let, no rent frees & void costs like commercial property & shortage of 3 bed homes after covid, most debt fixed, building cost inflation which is a barrier to entry. Should really be closer to £1. NAV is reasonable & real 5,000 homes at £200k average. Directors need to shape up fee structure, costing 1 _ 2p in dividends.

[spectoacc] 11/10/2023 09:52

"All homes for The PRS REIT plc are marketed under Sigma’s Simple Life private rental brand."



[...] (Edit - Trustpilot link blocked, but easy to Google it.)


I believe Simple Life are owned by Sigma and aren't a separate co. I assume it's Simple Life to whom the 8% +VAT is being paid by PRS shareholders.

So it sort of is "In-house", just that it's c.£6m a year being ripped out the trust.

Open to anyone putting me right.

It isn't even my main gripe:

1.PRS appear to be subprime lettings (or "cheap end", for want of a better description) without getting the enhanced rents for that end of the market;

2. There's a cliff edge CapEx cost ahead. No way should newbuild be costing this much in repairs/maintenance already, tho I acknowledge @Makinbuks' point about eg £700pcm = c£500 pa. But £500 on each of 5,000 relatively new properties? What will that look like when it's kitchens/bathrooms?


Would add that the RCF, which they're using to finish off a few hundred remaining houses, is costing c.6%.

And a cliff edge refinancing a long way down the line on the long-term debt, which isn't likely to be cheaper than now.

And an uncovered divi.

I can see rents rising, the divi getting covered, but costs steadily rising up to the cliff edge of bathrooms/kitchens. So no divi growth of note.

Is it unreasonable to assume say two years of "repairs/maintenance" at 10x existing? ie £500 pa per house atm; you'd be doing well to get a bathroom or kitchen for just £5k these days but do them in consecutive years, and 6% of rent becomes 60% of rent :)

What am I missing?

Having been involved exposing HOME, have become increasingly cynical, & more than happy to hear counter-arguments. One is "It's all in the price". PRS isn't HOME, but I'm not sure it's what it was sold as either.

[makinbuks] 11/10/2023 09:42

Firstly, wskill thanks for posting and congratulations on eliciting such a thorough response from the company. Why that text isn't the basis of a note to the accounts I don't know.

Secondly, unlike some other posters I was fully aware that an external management company was managing the properties and that a fee would be payable for that service. I hadn't factored that VAT would be irrecoverable (as VAT is not charged on the rent to tenants). I didn't think they would disclose what they are paying but again I appreciate it. 9.6% with VAT is of course 8% without which seems reasonable. Like Spec I own BTL properties in the North West and while I think his 12% is top of the range I do think 8% is reasonable. I note the suggestion that the management should be brought in house. Interestingly this happened recently at PHP and the justification was cost saving and synergy savings for shareholders. At the time there I did think, OK but Harry has profited for years from this.

I intend to look further into exactly who the management company is and who controls them, but don't have time right now

Thirdly I'm not sure about the repairs and maintenance and certainly not as outraged as Spec. If you rent for £700pcm, 5% is £35. £420 per year doesn't seem a ridiculous budget for repairs and maintenance on a property if you think of it like that. None the less the comments about deposits, dilapidations, etc were interesting

This conversation has greatly improved my understanding of this business. thanks to all

[jimbobbaby] 11/10/2023 04:01

Is there any chance of getting the manager to change the model? Write to CEO questioning how it is in the best interests of shareholders rather than the manager?Manager has to be making a decent margin on this which should rightly be captured by shareholders.

[giltedge1] 11/10/2023 03:00

I feel mislead on costs I naively assumed mgt costs means managing properties, not passing mgt to letting agents then charge again. Fixed interest savings wasted on admin fees. Dividend could be 5p to 6p if double charging removed. Think will stop adding & move to GRI. More London centric & internally managed, should match PRS yield in a few years.