Prs Reit Share Discussion Threads

[makinbuks] 10/10/2023 10:40

Interesting update. Model looks like it just about hangs together with a 4p dividend. the future all depends on the direction of interest rates. My prediction FWIW is two years from now the base rate is 2% lower and the share price goes to £1, still yielding 4%.

There is the risk of a really sharp recession with a crash in house prices pushing the LTV beyond the 45% covenants. Rent arrears would also increase, but rates would be cut more quickly cutting the cost of debt and the discount for the income stream

The real question as we complete the build out in that period is what next. The manager will want to increase AUM. Possible asset management approach? Could existing investors be invited to invest in a separate managed fund?

[wskill] 05/10/2023 18:49

Evening SpectoAcc got an email back from the company very fast but was out travelling today costs are a tad high but 5.5 % of cost is repair and maintenance of properties I will pick up a few more now .He did also say as most properties are out of the 1 year builder defect warranty they pay for repairs.

[wskill] 05/10/2023 09:06

Has the company given any explanation of these costs Spec was looking to buy here as like asset backed income investments .
Or has anyone asked them about this charge 18% every year means no free cash for dividends.

Have emailed them and asked what it is and why the 1.2% increase in cost .

[spectoacc] 04/10/2023 09:06

A thread of a bunch of people arguing whether something is true or not - which it probably isn't.

Can't see any Holdings RNS implying RICA have any large stake in PRS.

As for PRSR themselves - the substantial and largely unexplained "non-recoverable property costs" of 18% puts me off. As does the fact they now can't grow - plenty geared already, no chance of raising equity.

At some point, their houses age and need CapEx, with no new ones having been added.

Difficult to argue it's expensive here, but will that 18% recur each year? What is it?

[jonwig] 14/9/2023 16:11

1tx - the point is they can't raise new equity when the share price is at a discount to nav.

[1tx] 14/9/2023 16:00

Hardly much point raising new money to expand this company or for others to invest in this sector if the properties you buy are going to be worth 30% less than you paid for them.Maybe a case for buying these shares "second hand" however!

With Nimby Sir Keir Starmer,Ed Davey & their House of Lords Chums doing their best to block house building reforms with faux green agendas rents are going to continue to increase......

[jonwig] 14/9/2023 05:38

A number of pension funds and insurers are looking to move into the sector (L&G, Aviva I know about). They could build houses or buy companies.

I wonder how attractive PRSR would be to a buyer - at a discount, naturally!

[pdosullivan] 13/9/2023 22:31

This is it exactly. PRSR yields 5.7% here. Far higher yields available elsewhere, which puts a cap on near term share price appreciation. It is a good business and I am a happy long term holder, but we must be patient until it gets back up to 100p+

[jonwig] 13/9/2023 09:34

Growth will be limited by inability to raise new equity at this discount. Lower interest rates would help a lot.

[giltedge1] 13/9/2023 09:15

Yes agree seem very good value, almost 100% occupancy, shortage of properties, rents rising circa 5% pa, interest rates fixed, brand new homes EPC A or B. Only costs a bit higher than should be, but addressable by board. I am slowly accumulating. Board needs to forecast a dividend raise which should now be affordable.

[jimbobbaby] 11/9/2023 12:28

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

[jimbobbaby] 05/9/2023 03:12

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 09:32

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 14:18

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 08:19

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 08:14

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 07:49

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 19:54

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 12:33

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

[smithers1] 20/8/2023 23:01

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 09:52

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 09:17

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.