Prs Reit Share Discussion Threads

[spectoacc] 17/7/2023 09:45

A former Bank of England economist.

I rest my case.

[jonwig] 17/7/2023 09:43

Reeves, an economist, surely knows all that stuff?

[spectoacc] 17/7/2023 09:37

They'll do something - it'll be popular, idiot laws like wealth taxes, rent controls etc always are - but they're being careful not so sound like they're going to rock the boat so far.

Wouldn't fancy being a renter atm - AirBnb is something they need to do something about.

[hindsight] 17/7/2023 09:31

Yep rent controls another worry

[spectoacc] 16/7/2023 15:39

With the effects of a Labour govnt still to come.

[hindsight] 16/7/2023 10:28

Speaking as a landlord who has been selling when become vacant, the government thought it had a golden goose to pluck. BTL was ok with ZIRP but at 5% not a chance

As I see it three things can and are happening to square the circle
1 Rents rise - happening
2 Property Values fall - happening
3 Interest rates fall

Pension funds buying new builds now is akin to them selling equities to buy index linked gilts in ZIRP

At least the listed BTLs like here have priced in 20% property falls if take shareprice as NAV

[jonwig] 16/7/2023 07:06

FT -

The number of UK homes available to rent has dropped to a 14-year low, piling more pressure on tenants competing to find an affordable place to live, new analysis has found.

In June, 241,000 homes were available in the private rented sector, compared with 370,000 in June 2019 — a fall of over one-third (35 per cent), according to consultancy TwentyCi.


Private BTL landlords exiting the sector.

Gives lots of scope for PRS to raise rents especially as they've a 25% affordability score vs government's 35% limit.

In longer term, insurance/pensions are being encouraged to diversify out of bonds. L&G for one is interested in BtL.

[makinbuks] 10/7/2023 15:11

hxxps://citywire.com/investment-trust-insider/news/prs-reit-refinances-as-5-yielder-aims-for-dividend-cover/a2421292?re=110859&ea=1797382&utm_source=BulkEmail_Investment+Trust+Insider+Daily&utm_medium=BulkEmail_Investment+Trust+Insider+Daily&utm_campaign=BulkEmail_Investment+Trust+Insider+Daily

Citywire say the RCF from RBS is Sonia +1.75%, I don't believe that was from the announcement

[spectoacc] 10/7/2023 14:51

Interesting, thanks @Makinbuks.

Chances of rates being 2% lower in 2 years time - hmm - not good I'd say.

[makinbuks] 10/7/2023 12:22

A very cleverly worded statement.

The Scottish Widows £250m LT facility was at 2.9%. If the blended rate is now 3.8% that makes the new L & G facility £102m at 6%

No wonder therefore that they decided to take the view that they can do better than that is two years time when the new RBS £75m facility expires but they need rates to fall by at least 2% from their current level if they are to stand a chance of maintaining that 3.9% average.

In the meantime no disclosure of the cost of the £75m or what has happened to the Barclays £40m development loan. I'm assuming that is repaid by the send of the year as all the development activity is over. So a combined £190m facility is replaced with £177m and they had £13m headroom

Not much else they could have done. They could have rolled the floating RCF for another six months but obviously saw rates increasing further in that timeframe. At least now things are more certain

[davebowler] 10/7/2023 09:50

Liberum;
Debt refinancing and trading update
Analyst: Bjorn Zietsman

Mkt Cap £444m | Share price 80.9p | Prem/(disc) -32% | Div yield 5%

Event

PRS REIT has announced its Q1 trading update and the completion of the refinancing of its £150m RCF. Q1 trading is said to be performing well and in line with management expectations, achieving 97% occupancy and 100% rent collection. Total arrears are low at 0.6% and LfL rental growth has averaged 6.5% over the 12 months ended May. The debt refinancing announcement fails to mention the rate at which the debt has been refinanced, but that £102m is fixed with a further £75m on a floating rate for two years, but that a cap will be placed on the floating rate debt to hedge against downside risk on further interest rate movements. Despite not mentioning the respective rate at which the debt refinancing took place, PRS states that they have total fixed long-term debt facilities of £352m with a blended average interest rate of 3.8%

[makinbuks] 07/7/2023 09:43

Back in December they announced an extension of the RCF from Feb to 14th July. Have I missed an update or is this running to the wire?

[hindsight] 07/7/2023 09:28

giltedge1, yes build costs gone up but land values have fallen

[giltedge1] 07/7/2023 08:22

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 08:17

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 17:34

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 07:24

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 23:07

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 11:07

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 16:47

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 14:20

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

[1tx] 12/5/2023 13:09

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 09:52

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 11:27

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 14:40

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.