Prs Reit Share Discussion Threads

[makinbuks] 04/12/2024 17:28

Indeed it would make no sense of selling the entire portfolio. Better just realise enough to pay down the expensive floating rate debt and secure the dividend

[williamcooper104] 03/12/2024 12:05

Should be ok as PRSs developments are forward funded acquisitions So the development activity sits with the seller and PRS should be treated as just buying an investment property(Not 100% sure on that of course - but given how far advanced PRS are to selling the whole REIT it would be very poor form not to report any tax liabilities in NAV - ASLI did this; though EBOX didn't)

[jimbobbaby] 02/12/2024 10:10

Thanks. Did not know this.

[nexusltd] 15/11/2024 15:25

@Jimbo re#325

[jimbobbaby] 15/11/2024 11:28

What's relevant about the 3 year age mark?

[nexusltd] 11/11/2024 12:25

Amendment to Investment Advisory Agreement.
"Under the terms of the Amendment, in the event of a change of control of the Company, both the Company and the Investment Adviser have the right to serve notice to terminate the Agreement on 12 months' notice."

Might reduce potential takeover costs; enabling a fuller price to be offered.

[pdosullivan] 24/10/2024 05:57

It is a pity that we have not yet been provided with a schedule of the age of the whole portfolio so we can precisely work out the tax implications for selling the newer parts. That way we could work out the fair discount to NAV - a discount that will narrow every month as more houses pass the three year age mark.

[c3479z] 23/10/2024 20:15

great- a chance the company may be sold nearer to NAV and we can escape the wretched management contract, well done Naylor and Mills thus far!

[c3479z] 14/10/2024 10:35

apparently received an opportunistic bid during the year, according to Citywire,
wasn't communicated to the shareholders....

[giltedge1] 10/10/2024 12:51

Sold out yesterday at £1.05, still a good company I like, but can see short term opportunities elsewhere. Can't complain paid £0.76 4 months ago as posted on purchase date, so 40% gain also biggest holding so plenty of cash to reinvest. looking at SREI, SHED & GRI (same rental business as prs but hasn't appreciated last 4 months, so looks good value).

[makinbuks] 10/10/2024 07:56

Thanks for that explanation, still a surprising phenomenon given that they have so many tenants. Also still a concern that the underlying figure is up 30% on the previous year

[pdosullivan] 09/10/2024 20:37

In the statement PRSR says the end June figure was higher due to the year end falling on a weekend hence the fall in arrears from GBP1.7m at end-June to GBP1.3m at end-July.

[giltedge1] 08/10/2024 13:22

NAV up to €1.33 Q1 div increase 2025, assume 4.5p surprised if they go to 5p in one go. All good rental growth 12% like for like. Main problem overhead costs of Sigma as posted previously double dipping, once to Sigma & then to local agents. Fair enough Sigma received fee while building, but now building almost complete, can put out for tender.

[makinbuks] 08/10/2024 09:18

Not read the results in full yet. A new dividend policy to be announced in Q1 shows that the debate with the new board members is ongoing. Generally excellent numbers, but to be picky, arears rose from £1m to £1.7m, but bizarrely were back to £1.3m a month later. How come £400k of arrears settled like that?

[giltedge1] 19/9/2024 11:57

Great increase last 3 months, 33% saved my embarrassment of large loss on Nick Train's LTI. Made the right decision for once, switched at right moment. Now my largest holding by far, tempted to take profits but still rising. NAV £1.25 but I think conservative, so I will wait for now.

[giltedge1] 14/9/2024 11:21

Smithers1 Thanks for excellent analysis. I have also posted in the last year, my thoughts on overcharging admin fess 1% to Sigma & then second lot of fees to agents. Not equitable, agents fees should come out of Sigma,s fees otherwise put mgt of portfolio, up for tender. I would imagine a national chain can manage at a good discount to fees currently charged. Only good point is shareholder disillusionment depressed share price & I managed to pick up shares at a good entry point. Going forward with board shake up hoping for 5p div & rising!. Any thoughts on valuation of portfolio mainly new builds 3 - 4 bedrooms about £205k each on the capitalisation of interest method. Should be more like £230k imo so I think NAV on the light side, should be 10% more.

[smithers1] 13/9/2024 08:47

Glad to see announcement this morning that Robert Naylor and Christopher Mills being brought onto the Board.

Checked the terms in the Prospectus. 4% is charged against the “Total Development Cost” which in the Prospectus definition includes Land (and SDLT!) & Construction costs amongst other things (valuation, title indemnity insurance, pre-dev, Employer’s Agent, CDM compliance, construction bond).

So in summary, broad agreement 4% development management fee is at the very top end of everyone’s range and is being charged against all costs including land. Milked. Unclear why the Investment Management contract was not put out to tender but hopefully Naylor & Mills will now get on top of this to focus on shareholder value

[williamcooper104] 13/9/2024 07:58

4 is at the upper end but it's still very common I've never seen anything less than 3 Also depends on whether it covers everything bar land and interest or only hard construction costs

[pdosullivan] 13/9/2024 07:12

I hope the former. From experience, piecemeal breakups of portfolios can take much longer than initially expected

[c3479z] 13/9/2024 06:31

Boardroom battle win for Naylor and Mills, does that mean the company likely will be sold? Or will the properties be slowly realised and the company wound down?

[makinbuks] 08/9/2024 15:15

Yes excellent I agree

"Industry standard DM fees are not 2% - it’s more like 3.2-4" OK but Sigma were still at the very top of the range then

[pdosullivan] 07/9/2024 18:33

Excellent analysis.

[williamcooper104] 06/9/2024 11:26

Lot of good points Industry standard DM fees are not 2% - it's more like 3.2-4

[smithers1] 06/9/2024 10:37

Looking forward to a shake up here and change of manager. Many obvious management mistakes by management – both Sigma and Board - and issues with fee structure:

-As previously noted taking £102m of debt at 6.04% in July last year was an obvious mistake and dilutive as the properties yield less than that after allowing for maintenance and property management costs (not to mention the investment management fee). It's fixed for 15 years so paying that off early will be expensive. Sigma and the Board keep referring to the total blended debt interest cost but the last tranche of debt should not have been taken. When PRS REIT secured long term fixed debt tranches at 2.76% and 3.14% it was accretive but with these properties throwing off net income yields of 4-5% debt at 6/7/8% is dilutive.

-Manager allowed to charge 1% fee p.a. throughout development phase so most of this in the early years was charged on unspent cash. In addition a high 4% development management fee was charged on Development costs so on certain tranches of money Sigma received 5%. Development contracts were fixed price Design & Build with substantial housebuilders so 4% development management fee excessive and unjustified – industry norm. 2%. This fee was not renegotiated in the recent management contract extension.

-Clear conflicts of interest with Sigma selling its own completed sites to the PRS REIT, on one hand acting as seller but on the other representing the PRS REIT as buyer. Relationship with the “independent” valuer Savills far too cosy and 7 years in they remain the valuer.

-Initial £250m raised in June 2017. Prospectus stated: “Upon full investment of the capital and associated gearing the Company is targeting a dividend yield of 6 per cent. or more per annum based on the Issue Price, which the Company expects to increase broadly in line with inflation. The Directors will seek to maintain the dividend over the long term. In addition, the Company is targeting a net total Shareholder return of 10 per cent. or more per annum based on the Issue Price at stabilisation of the PRS Portfolio. It is anticipated that the Company will reach stabilisation by the third anniversary of First Admission.” 6% dividend!!!! 7 years in and they still do not have a fully covered 4% dividend against issue price (never mind 6%) despite reported strong rental growth over the intervening years, high occupancy and low maintenance costs. On that benchmark Sigma have failed miserably and yet no explanation has ever been given.

-Second £250m raised in Feb 2018 far too early after the initial raise. Clear asset gathering by Sigma to boost investment management fee which as noted previously was charged on unspent cash. Why was this allowed to happen? 7 years in since initial launch the proceeds raised with associated investment debt are still not fully deployed.

-Sigma outsource the day to day property management and rent collection to a third party with those costs charged directly to the REIT. Long term debt is in place. Their role is now reduced to overseeing the property management company and reporting. In that context a 1% annual management fee is simply not justifiable and the recent extension of their contract on broadly these terms was not acceptable.

The underlying fundamentals for this REIT are extremely strong: a granular income spread across thousands of Tenants across the whole country that makes it extremely robust unlike commercial where the loss of a few large Tenants can significantly impact total rental collection; obsolescence less of an issue unlike commercial; annual rent increases. Unfortunately it has been mismanaged and milked by Sigma since inception. I welcome the long overdue overhaul and the positive impact this should have for shareholders.