PRS REIT PLC (The) Second Quarter Update (4330M)

TIDMPRSR

RNS Number : 4330M

PRS REIT PLC (The)

08 January 2019

8 January 2019

PRSR.L

The PRS REIT plc

("Company" or "PRS REIT")

Second Quarter Update

The PRS REIT, the closed-ended real estate investment trust established to invest in new-build homes in the Private Rented Sector ("PRS"), is pleased to provide an update for the second quarter (three months to 31 December 2018) of its financial year to 30 June 2019.

KEY POINTS

Initial target of committing GBP900m of funding to

new rental homes has now been achieved

Completed and Contracted Development stood at approx. GBP530m at 31 December 2018

Deployment of Funding

 
--  Initial target of committing GBP900m of funding to new private 
     rental homes was achieved in Q2: 
    -   equates to about 5,600 new rental homes when completed 
         (30 Sept 2018: GBP756m and 5,100 homes) 
    -   estimated rental value ("ERV") of these homes is GBP57.0m 
         p.a. (30 Sept 2018: GBP47.1m p.a.) 
--  Completed and Contracted* development at 31 Dec 2018 totalled 
     approx. GBP530m in gross development cost ("GDC") (30 Sept 
     2018: approx.GBP384m) and equates to about 3,575 new homes 
     when fully built 
--   Number of homes completed as at 31 Dec 2018 increased to 
      775 (30 Sept 2018: 595 completed homes) 
--  Committed development at 31 Dec 2018 totalled approx. GBP406m 
     in GDC (30 Sept 2018: GBP372m) and equates to about 2,540 
     homes when fully built 
 

Rental Income

 
--  Annualised rental income at 31 Dec 2018 increased to approx. 
     GBP7.0m from 775 completed homes (30 Sept 2018: approx. 
     GBP5.7m from 595 completed homes) 
--  ERV from completed and Contracted sites at 31 Dec 2018 
     is estimated at GBP33.2m p.a. (from approx. 3,575 new homes) 
--  ERV from Committed development sites at 31 Dec 2018 is 
     estimated at GBP23.9m p.a. (from approx. 2,543 new homes) 
 

Debt Finance

 
--  Discussions for an additional GBP200m of debt remain on 
     track to be completed by the end of March 2019 
 

Dividend

 
--  The quarterly dividend distribution is expected to be declared 
     at the end of January 2019 
 

Outlook

 
--  The Pipeline of additional development opportunity now 
     stands at approx. GBP1bn 
 

*see Definitions

*DEFINITIONS

 
Contracted  refers to sites under construction (under a design 
             & build contract), which have been purchased by the 
             PRS REIT or the PRS REIT's Investment Adviser (forward 
             sold to the PRS REIT). 
Committed   refers to development sites that have been approved 
             or are under formal appraisal by the Investment Adviser, 
             and where planning consent is being sought, and/or 
             are in the process of being acquired. 
Pipeline    refers to sites that have been identified as being 
             suitable for appraisal. These sites are typically 
             sourced from Sigma's PRS Platform, and are typically 
             under a Framework Agreement or Collaboration Agreement 
             with a construction partner. 
 

QUARTERLY REPORT FOR THE THREE MONTHSED 31 DECEMBER 2018

Introduction

The PRS REIT made very strong progress in the second quarter of the financial year, most notably achieving its target of committing over GBP900m of funding to suitable sites for Private Rented Sector development. As previously reported, the Company is in the process of creating a substantial portfolio of high quality, new rental homes across the UK, catering mainly to the family market. Locations are carefully chosen, with the Company delivering homes near key centres of employment, with convenient access to the transport infrastructure, and close to good primary schools.

Deployment of Funding

During the period, 15 sites were contracted with construction starting on 12 new development sites. When all 15 sites are completed, this will add approximately 1,310 new homes with an estimated rental value ("ERV") of about GBP12.5m p.a., for a gross development cost ("GDC") of approximately GBP205m.

By 31 December 2018, over GBP900m of funding had been committed to deployment (30 September 2018: GBP756m), with almost 60% or approximately GBP530m either Contracted or completed at that date (30 September 2018: GBP384m).

The GBP900m will equate to about 5,600 new rental homes when all the sites have been completed (30 September 2018: 5,100) and an estimated rental income stream of GBP57.0m p.a. (30 September 2018: GBP47.1m). This represents significant progress over the last quarter.

The GBP530m of completed and Contracted development activity will equate to some 3,575 new homes when construction finishes, contributing an estimated rental income stream of GBP33.2m p.a. The expected gross initial yield is 6.3%, which helps to underpin the Company's long term yield and dividend targets. These homes are spread across 43 sites in six regions in England - the North-West, West Midlands, Greater Birmingham, East Midlands, South Yorkshire, and the South.

The running total of completed PRS homes at 31 December 2018 stood at 775 (30 September 2018: 595 completed homes), and these homes are expected to generate annualised rental income of GBP7.0m (30 September 2018: GBP5.7m). Located across 15 sites, they comprise a mix of two, three and four-bedroom properties.

At 31 December 2018, the gross development cost of Committed development totalled GBP406m, with this equating to approximately 2,543 PRS homes when all the sites are built-out, and an estimated rental income stream of GBP23.9m p.a.

The Company's Investment Adviser, Sigma PRS Management Limited ("Sigma PRS"), a subsidiary of Sigma Capital Group plc ("Sigma"), continues to source sites that meet the Company's investment criteria, and to qualify, manage and oversee all assets.

Acquisitions

In the period, the PRS REIT purchased a newly-completed and let PRS site in Salford, Greater Manchester, from Sigma for GBP11.7m. Comprising 73 homes, the properties generate an annual rental income of approximately GBP0.6m. In addition, the Company has signed forward purchase agreements with Sigma to acquire five further PRS sites, which are due for completion at various stages in 2019 and in the first half of 2020.

Debt Facilities

Sigma PRS is in advanced discussions with the Company's banking partners regarding an additional GBP200m of debt to support the growth of the PRS REIT. Once agreed, this will bring the total funding capacity of the PRS REIT to GBP900m.

Dividend

The Company expects to declare an interim dividend relating to the second quarter of the new financial year at the end of January 2019. It continues to target a total dividend of 5p(1) per share for the year to 30 June 2019.

Summary

Rental demand for the PRS REIT's high quality new homes remains very strong and the Company anticipates this continuing.

The Board believes that the Company remains well-positioned for continued progress. It has clear visibility on the deployment of over GBP900m of funding, with over GBP530m of GDC now either under construction of completed. In addition, the Company has access to a further GBP1bn Pipeline of development opportunity through Sigma's PRS Platform.

(1) This is a target only and there can be no assurance that the target can or will be met and should not be taken as an indication of the Company's expected or actual future results. Accordingly, potential investors should not place any reliance on this target in deciding whether or not to invest in the Company or assume that the Company will make any distributions at all and should decide for themselves whether or not the target dividend yield is reasonable or achievable.

This announcement is released by The PRS REIT plc and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

For further information, please contact:

 
The PRS REIT plc                            Tel: [phone] (c/o KTZ Communications) 
 Steve Smith, Non-executive Chairman 
Sigma PRS Management Limited                Tel: [phone] 
 Graham Barnet, Graeme Hogg 
N+1 Singer                                  Tel: [phone] 
 James Maxwell, James Moat, Ben Farrow 
Stifel                                      Tel: [phone] 
 Mark Young, Neil Winward, Gaudi Le Roux 
G10 Capital Limited (AIFM)                  Tel: [phone] 
 Gerhard Grueter, Anthony Wood, Gaia Udage 
KTZ Communications                          Tel: [phone] 
 Katie Tzouliadis, Dan Mahoney 
 

NOTES TO EDITORS

About The PRS REIT plc

(www.theprsreit.com)

The PRS REIT is a closed-ended real estate investment trust established to invest in the Private Rented Sector and to provide shareholders with an attractive level of income together with the potential for capital and income growth. It has raised a total of GBP500m (gross) through its Initial Public Offering, on 31 May 2017, and a subsequent placing in February 2018. Both fundraisings were supported by the UK Government's Homes England with direct investments.

LEI: 21380037Q91HU97WZX58

About Sigma Capital Group plc

(www.sigmacapital.co.uk)

Sigma Capital Group plc is a private rented sector, residential development, and urban regeneration specialist, with offices in Edinburgh, Manchester and London. Sigma's principal focus is on the delivery of large scale housing schemes for the private rented sector. It has a well-established track record in assisting with property-related regeneration projects in the public sector, acting as a bridge between the public and private sectors. Its subsidiary, Sigma PRS Management Limited, is Investment Adviser to The PRS REIT plc.

About Sigma PRS Management Limited

Sigma PRS Management Limited is a wholly-owned subsidiary of AIM-quoted Sigma Capital Group plc and is Investment Adviser to The PRS REIT plc. It sources investments and manages the assets of The PRS REIT plc and advises the Alternative Investment Fund Manager ("AIFM") and The PRS REIT plc on a day-to-day basis in accordance with The PRS REIT plc's Investment Policy. The Investment Adviser is an appointed representative (reference number: 776293) of the AIFM.

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