Sigma plans REIT flotation as it ‘scales up’ PRS presence

The PRS specialist developer has posted a pre-tax profit of £3.7m for 2016, and has announced plans to raise £250m through the flotation of a real estate investment trust on the London Stock Exchange.

Last year Sigma recorded revenue of £5.4m, down from £6.7m in 2015. However, the pre-tax profit results in a 42% increase on the £2.6m posted in 2015.

Several residential projects either started on site or completed last year. Sigma’s first site of 50 homes in Merseyside was completed and fully let by December.

A joint venture with Gatehouse Bank saw £108m invested in the first phase of the partnership, the construction of 918 family homes in the North West, which completed in the first quarter of 2017. According to an announcement to the stock market, the homes are 99% let and give a rental income of £7.5m each year.

Sigma is also on site with the £84m development of 607 homes for rent across the North West and Midlands on seven plots, with 252 homes completed.

Alongside its results for 2016, Sigma also announced that it would float a PRS REIT on the main market of the London Stock Exchange by the end of the month, with the Homes & Communities Agency buying 10% of the shares in the new REIT at £25m. Due to what Sigma described as the “potentially transformational” decision for the company, some planned construction starts may be delayed to allow for a pipeline of projects when the REIT launches.

David Sigsworth, chairman of Sigma, said: “I am delighted to report another year of significant development as we continued to scale Sigma’s presence in the private rented sector. The Group’s financial results demonstrate the progress we are making, with profit before tax rising by 42% to £3.7m. While these results are encouraging, the strategic progress we made over the year, including our major funding agreement with the Homes & Communities Agency, is of greater significance and supports the material value creation we are targeting in the medium and long term.

“Today’s announcement of the proposed flotation of The PRS REIT plc, with Sigma appointed as investment adviser and development manager, is potentially transformational for the Group. We believe it will be the first quoted REIT to address opportunities in the PRS sector. Once launched, the REIT will support greater visibility of Sigma’s revenues and future earnings and help us to maximise the value of our pipeline of development opportunities.

“In preparation for the REIT, we have altered our development schedules, delaying certain planned starts, so that we can provide the PRS REIT with a significant and immediate pipeline of development opportunities when it launches. We look forward to updating shareholders further at the end of May.”

Sigma’s share price was down 0.5p to 69p a share this morning.