City round-up: PRS REIT
11th January 2023
PRS REIT, the Manchester private rented sector housing group, published an update for its second quarter period, including Christmas, when it said 57 new rental homes were added to the portfolio.
This took the number of completed homes added to the company’s portfolio during the first half of the financial year to 127 and the total number of completed homes in the portfolio to 4,913 as at December 31, 2022. The delivery programme is now at a very mature stage, approximately 85% complete.
The estimated rental value (ERV) of the 4,913 completed homes in the portfolio is £50.7m per annum, some 17% higher than a year ago – December 31, 2021: 4,489 homes with an ERV of £43.5m per annum.
A further 613 homes were contracted as at December 31, 2022, and are at varying stages of the construction process. Once these new homes have been completed, the ERV of the portfolio is expected to total c.£57.3m per annum.
Rental demand for the company’s homes remains extremely strong. Occupancy at December 31, 2022 stood at 97% with 4,788 of the 4,913 completed homes occupied. A further 44 homes were reserved for applicants who had passed referencing and paid rental deposits, giving an occupancy rate of 98%. Like-for-like rental growth on an annualised basis was 5.7%.
Rent collection – defined as rent collected in the period relative to rent invoiced in the same period – was strong at 98%. Total arrears remained low at £0.7m at December 31, 2022 (December 31, 2021: £0.4m), representing around one per cent of annualised ERV on completed units. Affordability remains strong, with average rent as a proportion of household income at c.25%, which is significantly ahead of Home England’s 35% target.
Miranda Cockburn, an analyst with investment bank Panmure Gordon, said: “PRS REIT’s Q2 trading update highlights continued progress with completions and strong rental demand. Importantly in the current climate the homes remain affordable.
The shares have had a weak start to the year down c.six per cent compared with the UK REIT sector up three per cent. At 83p they are trading on a 27% discount to current NAV and offer a 4.8% dividend yield which looks good value given the underlying demand for the product and we retain our Buy rating.
Author: Neil Hodgson, The Business Desk.com
Managing Director, Research Analyst