Sigma launches first PRS fund

Sigma Capital has launched the first REIT dedicated to the PRS on the London Stock Exchange with a £250m flotation. It will be called the PRS REIT. The Homes and Communities Agency will invest 9.99% into the company, up to £25m, while Sigma PRS Management, a subsidiary of Sigma, has been appointed as the investment adviser. It has launched on the specialist fund segment of the stock exchange. Sigma has been considering the launch of the REIT for some time, and said in April it was exploring starting a long-term holding vehicle into which the company could sell its developed assets and recycle capital. Sigma Capital has built and let PRS more than 1,100 PRS homes worth £138m and has a further £130m under development. This has been achieved in 30 months over 30 sites and without any cost overruns. Unlike many operators that focus solely on purpose-built apartments, it includes housing stock in its portfolio. The REIT said its investment objective was to provide attractive levels of income with the prospect of income and capital growth through investment in a portfolio of newly-constructed, residential PRS sites. The homes will mainly consist of family homes let on assured shorthold tenancies and will be located across cities and towns in England outside London. The board will consist of three non-executive directors: Stephen Smith, Steffan Francis and Roderick MacRae. Sigma PRS Management will source investments and manage the assets of the REIT. It said the there was a pipeline of 2,535 homes worth £375m already identified and contracted, including a seed portfolio of £72 million either completed or under construction. Stephen Smith, chairman, said: “This IPO is also available to sophisticated retail investors via an intermediaries offer. We believe the PRS REIT will break new ground, being the first quoted real estate investment trust to address the shortage of high-quality family homes in the private rented sector. “We are targeting a dividend yield of 6% or more pa and net total shareholder returns of 10% or more pa once the REIT is fully invested and geared. The target dividend yield in the period to 30 June 2018 is 5%. Graham Barnet, chief executive of Sigma Capital Group, said: “We look forward to using our experience and expertise in our role as investment adviser and development manager to the PRS REIT to generate the attractive dividend returns and capital growth being targeted – a stabilised dividend yield of 6% or more pa and total returns of 10% or more pa.” Nplus1 Singer Advisory is acting as financial adviser and joint bookrunner, and Stifel Nicolaus Europe is acting as joint bookrunner to the company. G10 Capital Limited is acting as the alternative investment fund manager. To send feedback, e-mail alex.peace@egi.co.uk or tweet @egalexpeace or @estatesgazette