Sigma prepares to ramp up BTR in the wake of the pandemic
Sigma Capital has seen lettings, development and income slashed in the first half of the year, but is preparing to ramp up development as demand for rentals surges.
The family housing investor reported revenue drops of 13.8% to £5m, with pretax profit shrinking 76.7% to £1m in the six months to 30 June.
The drops were attributed to suspending construction sites and lettings, with £3.5m in administration costs as it readies for growth with a new vehicle targeting London in partnership with EQT .
Sigma Capital has seen lettings, development and income slashed in the first half of the year, but is preparing to ramp up development as demand for rentals surges.
The family housing investor reported revenue drops of 13.8% to £5m, with pretax profit shrinking 76.7% to £1m in the six months to 30 June.
The drops were attributed to suspending construction sites and lettings, with £3.5m in administration costs as it readies for growth with a new vehicle targeting London in partnership with EQT .
However, portfolio growth has been significant: its net assets rose to £59m up 9.4% with NAV per share rising to 65.9p.
Sigma’s investment vehicle for the regions, the PRS REIT, delivered 465 homes in H1 with an ERV of £19.1m and it is under construction on a further 2,565 homes across 34 sites.
In H1 it completed 1,343 reservations and it is currently averaging record figures of around 60-70 reservations a week.
Chief executive Graham Barnet expects a further 500 homes to be delivered this quarter and ongoing growth as people look to rent in affordable areas.
“There is a huge opportunity in housing, but in the rental piece we are going to see a paradigm shift now,” says Barnet. “People want that flexibility and they want choice.”
Sigma homes are priced at 35% of average earnings for an area. “It is more robust at that level in the market,” says Barnet.
In the short-term new growth will come from the £1bn jv with EQT targeting Greater London and commuter towns.
“If there was a shortage of housing before Covid, then it has just gone through the roof,” he adds. “The mismatch of demand and supply is significant. This level is the last big disenfranchised bit of the market.”
“We literally cannot build it quick enough,” he adds.
The PRS REIT has deployed 92% of its £900m raised and that is expected to hit 100% in the coming weeks. But, Barnet isn’t anticipating a fresh equity raise just yet.
“We obviously want to grow the REIT, but right now, the mindset is head down, drive the completions and ERV, get the performance coming through and the shareholders comfortable,” says Barnet.
He would like to see completions hit 4,000 with an ERV north of £40m. “Then inevitably investors will want it to be bigger, because it is a natural extension, de-risking it for them with scale. We just need to engage with them at the right time.”
Scotland is more challenging for Sigma, where coronavirus restrictions have prevented growth and it is currently under review.
“The political climate is different here,” says Barnet. “If we deploy capital, we need to be getting similar returns across each region.
“We need to see how the market in Scotland is going to pan out, there is plenty of opportunity, but we need to ensure that it meets the financial dynamics of what we as a business and what our partners are looking for.”
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