The PRS REIT raises £250m to help fund massive housing pipeline

Closed-ended real estate investment trust, the PRS REIT, announced on Tuesday that it has successfully raised gross proceeds of £250m through a recent placing.

The London-listed specialist fund said 243,902,440 ordinary shares were placed at a price of 102.5p each, to qualified investors as it described in its announcement on 31 January.

It said the UK Government's Homes England organisation, formerly known as Homes and Communities Agency, continued to be supportive of its objectives, and participated in the placing.

The fund’s board said the gross proceeds of £250m would be used to continue its investment in private rented sector (PRS) development sites and newly-completed PRS sites to create a large scale portfolio of newly-built, high quality homes, mainly focused on families, across the regions in the UK.

It said it was targeting a dividend yield of 6% or more per annum, with net total shareholder returns of 10% or more per annum following stabilisation and based on its IPO issue price of 100p per ordinary share.

The target dividend yield in the period to 30 June 2018 stood at 5%, the board said, with the target dividend yield in the following period to 30 June 2019 also being 5%.

Through its investment adviser Sigma PRS Management - a subsidiary of Sigma Capital Group - PRS REIT said it had visibility on the potential delivery of more than 10,000 new homes.

Those would be delivered through a combination of construction framework agreements in place with current house building partners, and “strong relationships” with local authorities to ensure land delivery and planning throughout the UK.

Its current house building partners included Countryside Properties, Keepmoat Homes and Engie Regeneration.

A pipeline of approximately 3,800 new homes with a total gross development cost of around £540m had been identified, and was under active appraisal, the board explained.

That was in addition to the current committed investment to create around 1,720 new homes in the North West of England, the Midlands and South Yorkshire.

The company said it would seek to use gearing as it pursued its growth strategy as outlined in its prospectus, and credit approved terms had been agreed for £200m of debt facilities.

“We are delighted to have raised £250m in this second round of funding for the PRS REIT, some eight months after its IPO last May, when we raised £250m,” commented chairman Steve Smith.

“The placing has been supported by existing shareholders and we are pleased to welcome new investors.”

Smith said the fund was aiming to create a “very substantial” portfolio of high-quality new houses, mostly focused on middle-income families, with the new funds a “key step” towards that objective.

“We believe we are the only PRS operator building new family houses to this scale across England.”