PRS REIT extends, amends advisory agreements

9th Jul 2024 10:36

(Sharecast News) - PRS REIT announced on Tuesday that it has extended its investment advisory agreement and development management agreement with Sigma PRS Management, effective from 1 July.

The London-listed firm said the extension, which followed consultations with major shareholders, included improved fee structures and extended the agreements by two-and-a-half years to 30 June 2029.

It said the revised fee structure was expected to generate immediate cost savings of around £0.46m per annum, equivalent to 0.1p per annum on EPRA earnings per share, based on the company's net asset value as of 31 December 2023.

The amendments would see the investment adviser fee reduced across various asset value bands.

For adjusted net asset values up to £250m, the fee was now 0.9% per annum, down from 1%, while for values between £250m and £500m, the fee would be 0.85%, down from 0.9%.

Fees for values exceeding £500m and up to £1bn were reduced from 0.75% to 0.7%, and for values between £1bn and £2bn, from 0.5% to 0.4%.

For values above £2bn, the fee was reduced from 0.4% to 0.3%.

The development management fee had also been revised, now set at 3% for land and 3.5% for construction components of the development cost, reduced from 4% on both.

PRS said the fees remained payable monthly in arrears, with 50% used to subscribe for ordinary shares in the company bi-annually.

The board, after consulting with major shareholders, said it believed the amendments were in the best interests of shareholders, offering cost savings and greater certainty in the company's arrangements with its investment adviser.

"I am pleased to announce these new terms with Sigma PRS Management, the company's investment adviser and development manager," said chairman Steve Smith.

"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."

Smith said the portfolio had performed "extremely well" and, with a large undersupply of high-quality family homes in the UK, the company was 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."

At 1026 BST, shares in the PRS REIT were down 0.63% at 77.01p.

Reporting by Josh White for Sharecast.com.