Prs Reit Share Discussion Threads

[giltedge1] 28/4/2023 19:58

Rightmove said the average rent being asked outside the capital topped £1,190 per month for the first time during the first three months of the year.

It completed, the company said, a rise in rents outside London during every quarter since the end of 2019.

The main reason why rental costs have climbed so steeply has been demand outstripping the supply of available properties.

This was exacerbated last September when the financial market chaos that followed the Liz Truss government's mini-budget prompted a temporary spike in mortgage costs.

The fallout has contributed to a sharp easing in annual house price growth.

Agents and landlords have been inundated with enquiries while some have been able to lock in longer, more lucrative tenancy agreements of up to three years due to the high demand.

Rightmove said the largest imbalance between supply and demand was in the terraced houses sector.

[giltedge1] 14/4/2023 12:34

A nice rise end of week going right direction, PRS a great solid income play ask L&G.

[makinbuks] 13/4/2023 15:49

As opposed to paying down debt or returning more cash to shareholders

[jonwig] 12/4/2023 17:27

Makinbuks - so long as revenue exceeds costs, like any property company ... or any company at all? And if it's not possible, wait until it is.

[makinbuks] 12/4/2023 16:29

Why would we want to add more homes? That benefits the manager more than shareholders

[jonwig] 12/4/2023 14:46

Most of their homes are built by Vistry (VTY, ex-Countryside) in partnership deals. It ought to be possible to organise any new debt arrangement which would generate positive returns for both companies in the partnership.

I haven't looked into the balance sheets of the two to make a judgment.

[pdosullivan] 12/4/2023 13:31

A very solid update this morning. Not sure what the next step is for PRSR, however. The big discount to NAV rules out the possibility of a capital raise to further grow the portfolio.

[jonwig] 12/4/2023 11:41

Certainly scope for rent increases. They're collecting pretty well 100% and their affordability level is 25% vs recommended 35%.

[giltedge1] 12/4/2023 11:31

Good update this morning, rents rising 5.7%, Building programme 90% complete with ERV target £ 58M, topped up but missed lows unfortunately. Rents should keep rising YOY as shortage & properties brand new, fully let, energy efficient etc. Miss read annual report LTV 55% covenant, I quoted 45% in a previous posting, this is the Companies target, not the Bank LTV, which is good. Also half the debt long duration, so reasonably insulated from interest rate rises. A good long term income stock.

[jonwig] 24/3/2023 07:10

Helps:

· Stephen Smith, Non-executive Chairman of the Company, acquired 50,000 ordinary shares in the Company ("Ordinary Shares") on 22 March 2023 and 20,000 Ordinary Shares on 23 March 2023. As a result, Mr Smith's total interest in the Company is now 305,000 Ordinary Shares, representing 0.06 per cent of the total voting rights of the Company.

· Jim Prower, Non-executive Director of the Company, acquired 48,000 Ordinary Shares on 22 March 2023. As a result, Mr Prower's total interest in the Company is now 100,000 Ordinary Shares, representing 0.02 per cent of the total voting rights of the Company.

[makinbuks] 23/3/2023 10:50

To achieve a yield of 6.5% requires a share price drop of almost 20%. I don't think that's very likely on fundamentals.

With regards to NAV what drives it is the rents. To be fair I expect these to hold up pretty well. I have a BTL where the agent is recommending a 14% increase one year into a tenancy. I will not be following that advice for a sitting tenant but it illustrates what i think we'll see here for the next couple of years, ie reasonable increases for sitting tenants, 10% for new and growth in NAV as a result.

Default levels could be the fly in the ointment

[nickelmer] 23/3/2023 09:48

Makinbuks, brilliant point, the manager should sell some properties and either reduce gearing or buy some shares back, if they truly believe in their own valuations. Somehow I suspect they won't however. I am waiting for the shares to drop to a point where the yield is closer to 6.5% and then buy some instead of owning a BTL property

[makinbuks] 23/3/2023 09:20

Taking Spec's point on opportunity cost above, at 80p this yields 5% which is expected to be "almost covered". That is not overly attractive when you can get 3% on an instant access deposit account or 7% on an Aviva pref. They need to get to maturity and take stock in my opinion. The manager might not like it, but if he believes his NAV shareholders would be best served by selling a few units and realising the 30% discount

[nickelmer] 23/3/2023 07:22

I may have misread things, but in prior full-year and half-year results, profits have been partly increased by re-valuation of properties, this cannot continue forever and in the current climate what happens if they have to lower the valuation due to falling property prices which would reduce profits and NAV. Maybe this is what the market can sense coming.

[hindsight] 22/3/2023 16:24

Well they are a landlord and I know how landlords feel

[spectoacc] 22/3/2023 12:01

Yet interest rates shouldn't really bother fixed-rate PRSR, I think? Or at least only marginally on the variable. And rental market is absolutely gangbusters still, at least anecdotally.

But yes, guess rates rises alters the risk-free and the opportunity cost, to the detriment of all existing investments.

Didn't see any bounce when SVB/CS made it look like rates may have peaked tho.

Not a holder, but watching.

[jonwig] 22/3/2023 11:56

Vistry (FY results today) builds most of their homes and doesn't seem unduly stressed (yes, slowdown next year, but balance sheet sound). I wonder if today's fall is down to something as simple as the inflation numbers and implication for rates.

[spectoacc] 22/3/2023 11:26

At some point, it bottoms. Not sure when tho.

[jimbobbaby] 10/3/2023 10:25

2.9% cost on the 250m with a 17 year average term looks pretty solid. Even if the interest cost on the other £200M increased 5% worst case they will still have plenty of interest cover (even before rent increases)From what I'm seeing locally prices on energy efficient homes are holding up much better than the general market and they have rents at an affordable level so have scope to increase. I think is is a decent time to add for long term hold.

[jimbobbaby] 10/3/2023 10:15

Extract from last published details on debt. Company had GBP440 million of committed debt facilities available for utilisation as at 30 June 2022. Gearing on portfolio (measured as net debt vs. investment value) remains low at 31%, and 62.5% of the GBP400 million of investment debt is fixed rate at an average of 2.9%.The GBP440 million of committed debt facilities comprised GBP400 million of investment debt facilities and GBP40 million of development debt facilities although a small portion of the investment debt facilities can also be utilised as development debt facilities.Our lending partners are: Scottish Widows (GBP250 million); The Royal Bank of Scotland plc (GBP100 million); Lloyds Banking Group plc (GBP50 million); and Barclays Bank PLC (GBP40 million). GBP25 million of the Lloyds Banking Group/ RBS facility and the GBP40 million Barclays Bank PLC debt facility are available to be drawn as development debt facilities, which enables sites to be developed simultaneously.The debt facilities are subject to the maximum gearing ratio of 45% of gross asset value. Approximately GBP350 million of these facilities have been drawn to date, with the remainder presently forecast to be utilised over the next 12 months as we finish the current phase of construction, completion and letting activity. The fixed interest long-term investment debt facilities of GBP250 million have an average term of 17.6 years and an average weighted cost of 2.9% once fully drawn.

[makinbuks] 07/2/2023 12:37

I'm pleased with todays announcement, further good operational performance and the real prospect of completing the 5600 homes this year.

I'm slightly confused by the debt position

Total facilities £440m, however the Barclays £40m is for development purposes. Hence, when they say 62.5% is fixed interest they refer to the Scottish Widows portion £250m as a percentage of £400m, ie the investment debt.

Does that mean that if the current planned build were completed to budget PRSR would have £400m investment debt drawn and £40m development undrawn awaiting further opportunities? Grateful if anyone could confirm or correct that understanding.

It matters for the LTV calculation and how safe we would be in the face of a further 0,5% rise in rates

[jimbobbaby] 07/2/2023 08:19

NAV @117 on 31 Dec. Increase in rents offset yield softening. Affordability is still decent showing there is scope for growth in rents yet. Seems solid enough to me.

[giltedge1] 31/1/2023 17:33

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.

[davebowler] 11/1/2023 10:56

Liberum;
Mkt Cap £458m | Share price 83.3p | Prem/(disc) -28.5% | Div yield 4.8%

Event

PRS REIT (PRS) published a 2Q23 update this morning. Key take-aways are: (i) 57 new rental homes have been added to the portfolio. (ii) ERV has increased +17% y.y (iii) An additional 613 homes have been contracted at varying stages of the construction process. (iv) Occupancies are at 98% (after taking into account new applicants) with LFL rental growth at 5.7%.

Liberum view

We view the strong growth in LFL rentals and improvement in occupancies as encouraging data points, indicating that the BTR market is holding up. The statement mentions that affordability remains strong with average rent as a proportion of household income at c.25%.

[pdosullivan] 09/1/2023 06:51

The development surplus (market value > build cost) on the completions will help towards defraying downward pressure on asset values generally.