Sigma’s PRS fund eyes second spending round

PRS REIT has acquired assets valued at £134.6m since floating at the end of May and is on track to spend its £250m initial pot by the middle of next year.

The Manchester-based company used a quarterly update to the stock market on Friday morning for the period to the end of September to confirm it is in talks with lenders to raise additional capital. Shares in the PRS REIT, the first publicly listed real estate investment trust for rental housing, have not budged far from their initial offer price of 100p, up to 102p today and peaking at 109p.

The stock was oversubscribed at launch, among the investors the government’s Homes & Communities Agency with 10%, and has seen only low volumes of shares traded in the first four months.

The portfolio includes assets acquired, forward-purchased or under construction equating to 926 new rental homes with an estimated rental value of £8.4m a year.

Three newly built PRS sites were acquired, or are under contract for acquisition in September, from Sigma for a total consideration of £24.4m, taking the total number of acquired PRS sites to four.

A further four sites are under construction by Sigma for the REIT with the first homes scheduled for handover in October.

Five new design-and-build contracts were agreed or entered into during the period with Countryside Properties and Keepmoat, bringing the total to six sites under construction or moving onto site.

The portfolio includes sites in Rochdale, Oldham, Salford, Kirkby, Winsford, Atherton, Smethwick, Sheffield and Telford.

REITs are tax-efficient property investment funds that are allowed to pay profits out in dividends to shareholders and avoid corporation tax.

Sigma has offices in Manchester, London and Edinburgh. Sigma turned over £1.8m in the six months to July, down from £2.8m in the same period last year. Pre-tax profit during the first half was flat at £1.01m and net cash on 30 June was £5.2m, compared to £17.5m a year earlier due to increased spending on investments.

David Sigsworth, chairman of Sigma, said: “The first half has been a landmark period for Sigma, with the launch of the PRS REIT plc, the first quoted real estate investment trust to address opportunities in the PRS sector, and its associated fund-raising of £250m, marking the most significant milestone to date in the roll-out of our PRS model. We were delighted that the REIT was so well received by a large number of leading UK institutional fund managers and that the UK Government’s Homes & Communities Agency has taken a 10% shareholding.

“The REIT will be utilising Sigma’s PRS platform and, under the terms of our contract, Sigma will receive fees for delivering new rental homes to the REIT and additional fees for managing the REIT’s assets. Sigma will also generate development profits on assets it builds and sells into the REIT.

“These new revenues will complement our existing PRS activities and significantly improve visibility of our revenue streams, and enhance the quality of our earnings. The process of investing the first tranche of the REIT’s capital is now well underway and it is anticipated that all the REIT’s IPO funding will be fully committed by the end of H1 2018.

“The potential to scale our activities further is substantial. The structural undersupply of rental homes in the UK, especially family homes, together with growing demand, underpin the long term positive prospects of the sector.

“Looking ahead over the remainder of the year and beyond, Sigma is on track to deliver the board’s expectations, and we view 2018 as a pivotal year for Sigma’s profitability as we benefit from our engagement with the REIT and take full advantage of our PRS platform.”

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