Prs Reit Share Discussion Threads

[giltedge1] 07/7/2023 07:22

Build costs have gone up at least 20%, since PRS Reit started portfolio, yet shares below IPO £1, Insurance Companies & Lloyds Bank, looking to increase PRS share as dependable income to match liabilities. So will be taken out at some stage & get 5% & rising income while waiting. More likely to be taken out before interest rates start falling as can bid at say £1, instead of £1.20 in 2 years. Of course I may be wrong?.

[jonwig] 30/6/2023 07:17

From the FT:

UK housebuilder Barratt Developments announced the agreed future sale of 604 homes for £168.4mn to Citra Living Properties, which is wholly owned by Lloyds Bank. Barratt group chief executive David Thomas said the single-family dwelling segment of the private rental sector continued to grow strongly.

Direct read-across to PRSR.

[giltedge1] 29/6/2023 16:34

IC Article 29/06/2023, I will be adding, good long term investment, see below.
Is there a way to generate better returns from catering to this high-demand, low-supply market? Enter PRS Reit (PRSR). The real estate investment trust is an enormous buy-to-let (BTL) landlord with more than 5,000 UK properties.
Tip style
GROWTH
Risk rating
MEDIUM
Timescale
LONG TERM
Bull points
Niche in buy-to-let market
Demand ahead of supply
Energy-efficient portfolio
Shares trade far below NAV
Bear points
Dividend not fully covered
High debt gearing
PRS says its new homes are better quality than older houses and are 25 per cent cheaper to run than properties built between 2007 and 2011 and up to 74 per cent cheaper to run than older buildings. High energy efficiency helps, with the whole portfolio achieving an energy performance certificate (EPC) of C or above, 85 per cent achieving B, and 1 per cent at A. The company is well ahead of the government’s proposals to raise the minimum EPC for residential rental properties to C from 2025 for new tenancies and 2028 for existing tenancies.

[giltedge1] 24/6/2023 06:24

Yes many positives as mentioned on fixed debt, saving about €8 m per year, also as new properties low cap ex & meet EPC rules already. Full occupancy, no voids allowing for move ins & outs & more liquid than commercial property. Worse case can sell a block to an insurance company. I think 4p well covered looking for increase!

[smithers1] 22/6/2023 22:07

1tx it is a tricky one. As others have noted, on the one hand you have rising rents, strong demand and a really solid and diversified gross rental income, much more so than certain commercial property REITs. You also have £250m of debt at an average term of 17.6 years at a fixed average weighted cost of 2.9%.

On the other hand, with base rate now at 5%, the yield on which the portfolio is valued must surely have moved out so the NAV is likely overstated. The question now is by how much and what implications that has on debt covenants. Whilst gearing is low to moderate, it is still geared so a small movement in yields will be having a larger impact on the NAV. This will be partially counterbalanced by rising rents but I suspect yield movements will outweigh this in the short term.

£190m of the REITs £440m debt facilities are variable rate which will now be costing a lot and possibly dilutive to earnings. Of the £190m, a £150m facility was extended in Dec last year until 14 July. The REIT was looking to refinance that but nothing has been announced as yet. With the era of cheap debt over there is uncertainty around whether a 4p covered dividend target is still achievable in the short term and whether or not the current 78p share price is below or above the true NAV.

Some real underlying strengths but I won't be topping up until their is an announcement on the debt facilities and clarity on the earnings net of interest costs

[1tx] 21/6/2023 10:07

I would have thought that mortgage rate increases would benefit PRS by increasing demand for its available properties as potential buyers are unfortunately priced out of the market.
I bought an initial stake here recently but it is looking more attractive if the price falls here further.....

[giltedge1] 30/5/2023 15:47

250m debt capped at 2.9%, for 17 years, other reits renewing debt are paying 6.4 %, so a saving of circa £8m a year worth 2% saving on market cap, every year alone. Sounds a good deal, buy.

[spectoacc] 12/5/2023 13:20

Free first month?? Rental market is nuts. I'd be wary if too many of those appeared.

[1tx] 12/5/2023 12:09

It is worth looking at the PRS retail rental site www.simplelifehomes.co.uk to get an idea of present & near future availability of properties and rentals being asked.In the context of a portfolio of 5000 properties & new properties still coming on stream we can see some availability but not a glut with only the odd incentive offered such as a free first months rental on a few properties.We have got to remember the portfolio is skewed to the NW where rental demand is less than SE and ability to pay higher rents lower.

I have bought shares recently.If it can pass on rental increases in line to wage growth hopefully it should maintain its value.

[giltedge1] 02/5/2023 08:52

I am still buying market has not appreciated, zero tenant risk vs commercial funds. If one tenant leaves 10 wanting to take place in new build properties. Vs commercial maybe one if you give rent free period or incentives. Rents still rising. Have done better in GRI.

[hindsight] 01/5/2023 10:27

Yes speaking as one, the way to increase housing supply was not to penalise landlords but to build more houses.
And what has Gove now done, removed the mandatory house building targets for councils. You couldnt make it up.
Starmer naturally now saying labour will reverse this mad decision

[spectoacc] 30/4/2023 13:40

Govnt policies have caused a lot of that, not helped by scaring landlords into selling with their "EPC C by 2025" talk (now I believe moved out to 2027).

It's shockingly awful for potential renters out there, with knock-on effects to the economy due to affecting labour mobility.

[giltedge1] 28/4/2023 18:58

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 11:34

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

[makinbuks] 13/4/2023 14:49

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

[jonwig] 12/4/2023 16:27

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 15:29

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

[jonwig] 12/4/2023 13:46

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 12:31

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 10:41

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

[giltedge1] 12/4/2023 10:31

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