PRS REIT racks up construction programme
PRS REIT, the Manchester-based closed-ended real estate investment trust established to invest in new-build homes in the Private Rented Sector (PRS), revealed it is involved in the development of aound 4,600 new rental homes.
In a trading update covering the final three months of its maiden financial year, to June 30, the company confirmed £248m-worth of completed and contracted developments, and £437m of committed development, totalling £685m of gross development costs.
Construction has also commenced on three new sites in the fourth quarter for a further 238 new rental homes, with a gross development cost of £34.4m, generating an estimated rental value (ERV) of £2.2m when fully let.
Two further development sites were purchased at the end of the fourth quarter which, once fully developed, will add a combined 160 homes at a total gross development cost of around £25m, with construction commencing this month. The ERV on these homes is approximately £1.5m when fully let.
An additional, newly-completed and fully-let PRS site was acquired from Sigma Capital Group in the fourth quarter for a total consideration of around £9.1m. The site comprises 59 new homes, providing a rental income of about £540,000 a year.
Annualised rental income at the end of the fourth quarer stands at around £3.63m from 405 completed new homes, compared with £2.4m by March 31.
The ERV from completed and contracted sites, including approximately 1,710 new homes, is about £15.6m.
An interim dividend of 2.5 pence per share is expected to be declared around the end of July, taking the total dividend for the period from launch to June 30, 2018, to the company’s target of 5 pence per share.
The company’s statement today said: “Overall, the PRS REIT continued to make encouraging progress in the fourth quarter, with significant new development activity commenced and a major new framework agreement that will support the PRS REIT’s continuing delivery and expansion, as well as its geographic diversification plans.”
The framework agreement was signed between Sigma, the parent company of the company’s investment adviser Sigma PRS, and Countryside Properties in mid-June, and supports the PRS REIT’s growth objectives.
It targets the delivery of a further 5,000 PRS homes over the next three years.
Two separate debt facilities amounting to a combined £200m were finalised in the fourth quarter with Scottish Widows and Lloyds Bank.
The company’s investment adviser is exploring other structures with its banking partners for the delivery of additional debt to support the growth of the PRS REIT.
Based on the equity of £500m raised so far since the PRS REIT’s independent public offering, including the subsequent £250m placing in February, the company has the capacity to utilise a further £200m of debt over and above the £200m of facilities already agreed.
This would bring the total resource capacity of the PRS REIT to around £900m.
