PRS REIT (PRSR), the £588m provider and developer of affordable family rental homes, remains in discussions with its sole potential bidder Long Harbour but has issued a “very strong” trading statement in the hope of attracting further approaches.
The company, where activists Robert Naylor and Christopher Mills joined the board last October, said today it had completed consultation with shareholders regarding its options under the strategic review and formal sale process announced after their appointment.
Based on the feedback received, the real estate investment trust will continue with the sale and engage with potentially interested parties. This includes discussions with Long Harbour, the UK real estate manager that made a 115p per share cash offer in June priced at a 17.6% discount to net asset value at 31 December.
PRS said that as the non-binding proposal remained subject to due diligence and financing there was no certainty a formal offer would be made.
With this year’s flurry of REIT cash bids coming in at an average discount of 10.7% to NAV, PRS shareholders will hope a higher offer will be made.
QotedData property analyst Richard Williams said: “I’m surprised that further bids have not been made for PRS, especially when you consider the scale of the business, the very favourable market fundamentals at play, and the impressive rental growth the portfolio has consistently achieved. Let’s hope that the board does not cave to the first offer – which massively undervalues the portfolio – and it can attract a counter bid.“
Today’s fourth quarter update might help their cause showing that 35 homes were delivered on schedule in April-June taking the total portfolio to 5,478 built-to-rent homes, believed to be the largest in the country, with an estimated annual rental value of £72m up from £65.1m a year ago.
Like-for-like rents on stabilised sites grew 9.6% over the year to 30 June with 99% rent collection in the last three months and a provision for bad debts slipping to £1m from £1.1m a year ago. Affordability (average rent as a proportion of gross household income) was stable at 24% (2024: 23%) despite the hike in rent. As a guidance, the Office for National Statistics has an upper limit on average rent as a proportion of gross household income of 30%.
The 3.9%-yielding quarterly dividend payer has distributed 3.2p so far for the financial year, up from 3p in 2023/24, and expects to declare a fourth interim dividend next month.
The shares edged higher to just over 107p, below the Long Harbour offer and around 23% below analysts’ estimates of PRSR’s current net asset value.
