Prs Reit Share Discussion Threads

[jimbobbaby] 11/9/2023 13:28

Article out today from Hamptons projecting 25% rise in UK rents by 2026 due to accommodation shortage.

[jimbobbaby] 05/9/2023 04:12

Not disagreeing with overall comments. Particularly given the failure to lock in lower cost finance. However would not include items like rates and insurance too? Annual rates in my area are typically around 1.5 times a months rent and insurance about 5% of annual rent. Allowing 5% for letting agents would mean 13% for rates and insurance and similar - which are harder to bring down than letting fees?

[damp seaweed] 04/9/2023 10:32

Non recoverable property costs of 18.8% is a ridiculously high figure. The letting agent fees to such a big client with new properties in concentrated pockets should be less than 5%.
It’s just further evidence in my book as to how inept the management of PRSR truly are. They seem to under perform in nearly every aspect of this build and rent business.
Hence the lowly share price

[1tx] 29/8/2023 15:18

The lettings website is www.simplelifehomes.co.uk hopefully lettings cost will decline as PRS have been in the main letting out & marketing new estates of houses,the key is to retain renters for long periods as renewals of tenancy will be cheaper;but these costs need watching.

[spectoacc] 29/8/2023 09:19

Snagging should be the builder's job. Could it be kit-out costs, eg white goods? Or property management costs, or do they self manage? 12%+VAT a fairly standard property letting agent fee.

Must be a better note to the accounts somewhere.....

Have never looked at PRS in any detail.

[jonwig] 29/8/2023 09:14

In the March interims they say:

"Currently, non-recoverable property costs are 18.8% of gross rent, reflecting the lower lettings costs. All other costs are in line with management’s targets."

So these appear to be lettings costs. Although they own the properties, perhaps they employ managing agents, and new builds will have snagging expenses.

[giltedge1] 29/8/2023 08:49

After reviewing annual accounts can anyone advise why non-recoverable costs are so high?. €8m on £40m revenue. Mgt fees & admin costs are not included & shown separately. Seems high as new properties, should be minimal extra fees.

[smithers1] 21/8/2023 20:54

Other thing to look out for in terms of dividend cover is whether the dividend announcement is a Property Income distribution (rental income) or a non-Property Income Distribution (essentially increases in NAV but paid out as a dividend via a return of equity raised and not yet deployed). The most recent dividend was 100% non-pid. The previous dividend was 75% PID / 25% non-PID.

As at end of June ERV of £55m
Less 5-10% to get passing rent= £49.5m-£52.25m
Less 20% gross-to-net = £39.6m - £41.8m
Less debt interest of £16m = £23.6m - £25.8m
Less investment management fee of £5.1m and other admin expenses totals less £7.5m = £16.1m - £18.3m
Divided by 549.25m shares in issue = 2.9p - 3.3p covered dividend.
With rents rising and most debt costs fixed

[pdosullivan] 21/8/2023 13:33

https://www.ft.com/content/b8d029a5-337d-46c3-806d-d06a5e10749c

[smithers1] 21/8/2023 00:01

Thanks pdosullivan. That's useful. My only comment is you have used ERV to calculate dividend cover. The ERV is based on the rent achieved for new lettings applied to all other homes of the same house type on that development I.e. if every property was let at the current full market rent. The passing rent of the portfolio (rents actually being charged) will always be below the ERV. PRSR have noted rental increases for existing tenants are lower than for new lets. Makes sense as you do not want to lose sitting Tenants over a few per cent as voids and re-letting costs would quickly wipe this out. But it is unclear how much lower the passing rent of the whole portfolio is below the stated £55m ERV. PRSR do not as yet include the passing rent in their reports and it is not possible to establish this from rental income figures in the half year and annual reports as the portfolio has been growing as they have been building more homes and deploying the last of the capital. It would be a useful inclusion in the reports moving forwards to see where the passing rent sits in relation to the stated ERV.

[pdosullivan] 20/8/2023 10:52

Hi Jonwig, I did a back of the envelope calculation on the dividend cover at PRSR a couple of weeks ago on my blog here https://tbifund.wordpress.com/2023/07/28/stocks-update-28-7-2023/

[jonwig] 20/8/2023 10:17

I haven't checked the details, but "earnings" include non-cash items, mainly higher property values. You have to find the net rental income to determine cover.

[fidra] 20/8/2023 09:35

Thanks for the good replies.

What have the cost of dividends been compared to earnings.

I had thought we were quite well covered.I have obs been mistaken in this.

[pdosullivan] 20/8/2023 07:25

The dividend has been uncovered up to now. It should be covered in FY 2024 but the scope for a dividend increase this side of FY 2025 is likely small.

[jonwig] 20/8/2023 07:21

fidra - bing a REIT, they have to pay out at least 90% of net rent as dividends, so the dividend should be rising anyway.

[pdosullivan] 19/8/2023 17:31

I wonder if LLOY might consider bidding for PRSR as a nice fit for its buy to rent unit.

[fidra] 19/8/2023 13:24

Fallen back quite a lot here .

Assume NAV still way above share price.circa £1.20 (?)

Do they have room for a divi rise ?,I was expecting one.

Or will this fall to a 7% yield ,which means further down to go?

Anyone any thoughts.

I have a few ,and thought there could be an offer for the entire estate,as appears pretty good value rent wise going forward.

[makinbuks] 10/8/2023 12:00

Its a great point hindsight, attention seeking journalists at the BBC or The Mail only ever focus on the rent rises

[hindsight] 10/8/2023 11:41

Amazing its only 63%
Rents have to rise and prices fall. I make real btl net rents 3.5% and cost of capital 5.5%

[jimbobbaby] 10/8/2023 10:16

Quote form independent article today: "Property professionals' expectations that rents will rise in the next few months are at the strongest levels seen so far this century, said the Royal Institution of Chartered Surveyors (Rics) on Thursday.Some 63 per cent of professionals expect rental prices to increase over the three months ahead, marking a fresh record high in records going back to the second quarter of 1999, Rics said."Demand shows no signs of letting up, supply remains constrained and that means rents are likely to continue rising sharply despite the cost-of-living crisis," said Rics chief economist Simon Rubinsohn.

[davebowler] 25/7/2023 22:18

Liberum;The company published an update to its performance for the quarter ending 30 June 2023. It reported continued strong asset performance with 444 homes contracted in the quarter and increasing the total number of completed homes to 5,080 (+6.1% YoY). Estimated rental value per annum has increased 15% YoY to £55.0m and like-for-like rental growth has been 7.5%. Rent collection remains strong at 99% and affordability, measured as average rent relative to gross household income remains good at 25%, well below Home England's guidance of less than 35%.On 10 July the company refinanced its £150m RCF (previously reported) with a 15-year fixed rate debt for £102m and a £75m floating-rate debt for two years with an interest rate cap. Approximately 82% of debt is now covered by long-term fixed rate facilities. The average maturity of the company's debt portfolio has increased from 10.9 years at the end of 2022 to 13.7 years now and if the floating-rate RCF is fully drawn the average blended interest rate would be 4.3%.Liberum viewPRS REIT is hard to compare to the other companies in its sector due to its unique focus on the private rented sector rather than social housing or student homes. But it is this focus on the PRS sector that makes PRS attractive from a structural point of view since there is a persistent shortage of homes in the UK and with mortgage rates at 30-year highs, the demand for rental properties is only going to increase in coming quarters.?And while we are not specialists in the PRS market, it is clear that PRS Reit is able to increase its rents at a substantially higher rate than the average in England. The latest ONS data to March 2023 shows an average rent increase in England of 1.5% vs. PRS Reit's 7.5%.

[jonwig] 25/7/2023 07:11

Q4 update (link in header). Summary -

The business model remains firmly supported by market fundamentals, most significantly, a rapidly expanding rental sector, population growth, changing household formation and grossly insufficient new housing volumes. Reflecting this and the general lack of supply of good quality rental homes, demand for the Company's homes - single-family rental housing - remains very high.

The performance of the portfolio continues to be outstanding. Occupancy levels and rent collection are high, whilst arrears are low and, over the 12 months to 30 June 2023, rental growth was at 7.5% across the portfolio.

The PRS REIT remains in a very strong market position, and the Board is confident about prospects, with affordability (being average rent as a proportion of gross household income) at 25% and the Company's costs substantially fixed following the recent debt refinancing.

[giltedge1] 22/7/2023 14:22

Private rents in Great Britain have soared to all-time highs and the average amount being asked for outside London is now a third higher than four years ago, figures from Rightmove show.