Investment Advisory & Development Mgnt Agreements

PRS REIT PLC (The)

09 July 2024

 

PRSR.L

The PRS REIT plc

("the PRS REIT" or "the Company")

Investment Advisory & Development Management Agreements

New Terms Signed

The PRS REIT, the closed-ended real estate investment trust that invests in high-quality, new build, family homes in the private rented sector, is pleased to announce that it has extended its existing Investment Advisory Agreement and Development Management Agreement (together, the "Agreements") with Sigma PRS Management Ltd, the Company's Investment Adviser and Development Manager (together, the "Investment Adviser"). At the same time, it has agreed improved fee structures in both the Agreements. The amendments to the Agreements have been signed following a consultation with the Company's major shareholders. The contract changes apply from 1 July 2024. The terms of the Investment Advisory Agreement have also been agreed with the Alternative Investment Fund Manager, G10 Capital Limited

The Investment Adviser operates the largest build-to-rent platform in the UK and has established a leading position in the single family homes market, which is further underpinned by a substantial pipeline of development opportunities. Its 'Simple Life' rental brand is award-winning and has helped to set new standards of customer care in the private rented sector, especially the single family homes segment.

Both Agreements have been extended  to 30 June 2029, an extension of 2.5 years from the end of the previous term, and the revised fee rates are set out below and, as stated, take effect from 1 July 2024. On a pro forma basis, they are expected to result in immediate cost savings for The PRS REIT of approximately 0.1 pence per annum on EPRA EPS, or c.£0.46 million per annum, based on the Company's last published Net Asset Value as at 31 December 2023. Save as outlined below, no other terms of the Agreements have been changed.

Extension of Agreements

The Agreements took effect from 1 January 2021 and provided for a minimum contracted term of five years to 31 December 2026 (inclusive of a one-year notice period). In connection with the reduction in the Investment Adviser and Development Management fees, the contracted term for the Agreements has been extended by 2.5 years, to 30 June 2029 (inclusive of a one-year notice period).

Revised Investment Adviser & Development Management Fees

(a)   The Investment Adviser fee has been revised as follows and remains payable monthly in arrears:

(i)	0.90 per cent. (previously 1.00%) per annum of the Adjusted Net Asset Value up to, and including, £250 million;
(ii)	0.85 per cent. (previously 0.90%) per annum of the Adjusted Net Asset Value in excess of £250 million and up to, and including, £500 million;
(iii)	0.70 per cent. (previously 0.75%) per annum of the Adjusted Net Asset Value in excess of £500 million and up to, and including, £1 billion;
(iv)	0.40 per cent. (previously 0.50%) per annum of the Adjusted Net Asset Value in excess of £1 billion and up to, and including, £2 billion; and
(v)	0.30 per cent. (previously 0.40%) per annum of the Adjusted Net Asset Value in excess of £2 billion.

(b)   The Development Management fee has been reduced to 3% on land and to 3.5% on construction (previously 4% on both land and construction) components of the Development Cost. The fee remains payable monthly in arrears, with 50% of the fee used to subscribe for ordinary shares in the Company bi-annually as previously.

Related party transaction

The amendments to the Agreements constitute a related party transaction to which the modified requirements for smaller related party transactions in the FCA's Listing Rules apply (LR11.1.10R).  The Investment Adviser is defined as a related party of the Company under the Listing Rules.  Under the smaller related party transaction rules, there is no requirement for shareholders to vote on the new terms to the Agreements that have been agreed.

Summary

Having consulted with the Company's major shareholders, the Board believes that the amendments to the Agreements are in the best interests of shareholders. They result in immediate cost savings for the Company as well as providing additional certainty regarding the Company's arrangements with its Investment Adviser. 

The Board believes that the Investment Adviser is singularly well-placed to support the delivery of the Company's strategy and investment objectives, and that this relationship has been effective and remains central to the ongoing successful management of the existing portfolio and to unlocking further attractive investment opportunities in the future.

Steve Smith, Chairman of The PRS REIT plc, said:

"I am pleased to announce these new terms with Sigma PRS Management Ltd, the Company's Investment Adviser and Development Manager. They extend the relationship and reduce costs, generating around £0.46m of annual cost savings.

"Over the last seven years, Sigma has established the largest portfolio of new-build family rental homes in the UK on our behalf, pioneering a highly efficient delivery model and a new rental brand at the same time. The portfolio has performed extremely well and, with the huge undersupply of high-quality family homes in the UK, the Company is well positioned for further success. 

"These new terms lay the foundation for the next phase of our growth. If, as we anticipate, interest rates reduce in the coming period, I expect the Company's investment proposition to become increasingly attractive to investors.

"We look forward to reporting our next quarterly trading update towards the end of July."

Graham Barnet, Founder and CEO of Sigma Capital Group Limited, said:

"Having founded and managed the PRS REIT since its inception, we are delighted to be extending the relationship. We view the PRS REIT's prospects very positively; asset performance is excellent, rental income continues to grow, and we have improved the Company's operational cost base. In addition, 82% of long-term debt is fixed at an average weighted cost of 3.8% over an average term of 16 years.

"The PRS REIT will continue to benefit from our market-leading rental brand, Simple Life, as well as our technology platform. The Company is strongly positioned in the single family homes market, which remains significantly undersupplied."

DEFINITIONS

Adjusted Net Asset Value	the Net Asset Value, less an amount equal to the Development Cost incurred in relation to the PRS Development Sites under construction at the relevant time by the Company and its subsidiaries, calculated in accordance with the Investment Advisory Agreement
Development Cost	in relation to any PRS Development Site, the sum which is the aggregate of the costs (excluding value added tax) incurred to acquire and develop such site including, inter alia, land price and proper fees and expenses associated with the acquisition, stamp duty land tax, total construction costs.

For further information, please contact:

The PRS REIT plc Steve Smith, Non-executive Chairman	Tel: [phone] (c/o KTZ Communications)
Sigma PRS Management Ltd Graham Barnet, Mike McGill	Tel: [phone]
Singer Capital Markets James Maxwell, Asha Chotai (Investment Banking) Alan Geeves, James Waterlow, Sam Greatrex (Sales)	Tel: [phone]
Jefferies International Limited Gaudi Le Roux, Tom Yeadon, Harry Randall, Ollie Nott	Tel: [phone]
G10 Capital Limited (alternative investment fund manager and part of IQ-EQ group) Maria Baldwin	Tel: [phone]
KTZ Communications Katie Tzouliadis, Robert Morton	Tel: [phone]

NOTES TO EDITORS

About The PRS REIT plc www.theprsreit.com

The PRS REIT plc is a closed-ended real estate investment trust established to invest in the Private Rented Sector ("PRS" or "the Company") and to provide shareholders with an attractive level of income together with the potential for capital and income growth. The Company is investing over £1bn in a portfolio of high-quality homes for private rental across the regions, having raised a total of £0.56bn (gross) through its Initial Public Offering, on 31 May 2017 and subsequent fundraisings in February 2018 and September 2021. The UK Government's Homes England has supported the Company with direct investments. On 2 March 2021, the Company transferred its entire issued share capital to the premium listing segment of the Official List of the FCA and to the London Stock Exchange's premium segment of the Main Market. With over 5,300 new rental homes, the Company believes its portfolio is the largest build-to-rent single-family rental portfolio in the UK.

LEI: 21380037Q91HU97WZX58

About Sigma Capital Group Limited (formerly Sigma Capital Group plc) www.sigmacapital.co.uk

Sigma Capital Group Limited ("Sigma") is a build-to-rent ("BTR") regeneration specialist, with offices in Edinburgh, Manchester and London. The Company's principal focus is on the delivery of large-scale housing schemes for the private rented sector and Sigma is the UK's leading provider of BTR homes for the single family sector. The Company also has extensive experience in the delivery of multi-family apartment schemes and a well-established track record in assisting with property-related regeneration projects in the public sector, acting as a bridge between the public and private sectors.

Sigma has created an unrivalled property delivery and management platform, which has delivered or is in the process of delivering over 12,00 homes across the UK to date. The Company has a significant pipeline of development opportunities, which currently stands at over £3 billion in gross development cost.  Sigma manages the letting of completed homes through its property platform, which includes its award-winning rental brand 'Simple Life'. The Company's subsidiary, Sigma PRS Management Ltd, is Investment Adviser to The PRS REIT plc.

About Sigma PRS Management Ltd

Sigma PRS Management Ltd is a wholly-owned subsidiary of Sigma Capital Group Limited and is Investment Adviser to The PRS REIT plc. It sources investments and operationally manages the assets of The PRS REIT plc and advises the Alternative Investment Fund Manager ("AIFM") and The PRS REIT plc on a day-to-day basis in accordance with The PRS REIT plc's Investment Policy. The AIFM is G10 Capital Limited. Sigma PRS Management Ltd is an appointed representative of G10 Capital Limited, which is authorised and regulated by the Financial Conduct Authority (FRN:648953).

 

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