The PRS REIT release debt refinancing and trading update

The PRS REIT has recently announced that it has completed the refinancing of its £150m revolving credit facility.

The PRS REIT has released its debt refinancing and trading update. The portfolio includes over 5,000 single-family Build to Rent homes | BTR News
The PRS REIT has released its debt refinancing and trading update. The portfolio includes over 5,000 single-family Build to Rent homes.

Closed-ended real estate investment trust The PRS REIT has completed the refinancing of its £150m revolving credit facility (RCF) provided by The Royal Bank of Scotland plc and Lloyds Banking Group plc.

Investing in new build family homes in the private rented sector, the completion of the RCF by The PRS REIT had been originally due to mature in February 2023 but was extended on substantially the same terms to mid-July (with an option to extend until October 2023).

The company views the refinancing as having been completed on positive commercial terms amidst the current interest rate environment. 

Investment Manager Sigma Capital has secured a £102m facility of fixed-rate debt for 15 years, together with a further £75m of floating-rate debt agreed for two years, providing the company with the flexibility to refinance this element over that period.

The refinancing and an almost completed construction programme have substantially reduced the risks facing the portfolio, reinforcing its influence and growth in the Build to Rent sector.

An interest rate cap will be put in place on the floating rate debt to hedge against downside risk on further interest rate movements.

These new facilities have been established with Legal and General Investment Management and RBS respectively. 

Sigma Capital will deploy almost two-thirds (£115m) of the total debt – specifically the entire £102m fixed-rate facility and £13m of the floating-rate facility – to fund already completed and stabilised sites.

The balance of £62m of floating-rate debt is expected to be drawn down to fund sites completing and stabilising before calendar year 2024.

Resultant total debt facilities

The PRS REIT now has total fixed long-term debt facilities of £352m, with an average blended interest rate of 3.8%. This compares favourably with the average net initial valuation yield of 4.3% as at 31 December 2022.    

Approximately 82% of the company’s overall debt is now covered by long-term facilities, which have an average term of 16 years. This compared to 63% of overall debt previously covered by long term facilities, with an average term of 17 years.

The average term for all debt has increased to 13.7 years at 30 June 2023, from 10.9 years at 31 December 2022.

Portfolio performance

The company’s portfolio of over 5,000 Build to Rent homes continues to perform well, in line with management expectations.

Performance data as at 31 May 2023, shows occupancy at 97% and at 98% including applicants who had passed referencing and paid rental deposits, rent collection at 100% for the 11 months ended 31 May 2023, total arrears remains modest at c.£0.6m and like-for-like rental growth over the 12 months – ended 31 May 2023 – averaged 6.5%, an increase on rental growth of 5.7% over the 12 months ended 31 March 2023. 

Affordability remains strong, with average rent as a proportion of household income at c.25%. This fits comfortably within Home England’s 35% target.

The PRS REIT expects to provide an update on trading in the fourth quarter of its financial year in late July.