PRS REIT EGM 2021

Please read the circular which is here

If approved by shareholders at the General Meeting, the Company’s investment policy will be restated, as will the means by which the Company will achieve its investment objective, as follows with effect from the end of the General Meeting:

Investment objective

The Company seeks to provide investors with an attractive level of income together with the prospect of income and capital growth through investment in a portfolio of newly constructed residential private rented sector sites of multiple units (“PRS units”) comprising mainly family homes, to be let on Assured Shorthold Tenancies (as defined in the Housing Act 1988) to qualifying tenants.

Investment policy

The Company’s investment policy is to pursue its investment objective by investing in PRS units in or near towns and cities in the UK predominantly the Midlands and the North.

The Company is creating a portfolio of homes targeted at the family market, the largest cohort within the private rented sector, and therefore is investing predominantly in housing with the addition of some low rise apartments to provide both choice and wider market appeal, in the major conurbations and larger employment centres in the UK, predominantly England, outside London. The locations are chosen for their accessibility, in that they are situated on the main road and rail links, with access to good primary schooling and economic activity, promoting long term employment prospects and thereby a strong need for housing. The new build nature of the assets, alongside standardised specifications, means that they benefit from a 10-year building warranty, typically from the NHBC (National House Building Council) as well as manufacturers warranties, providing for a low level of capital expenditure allied to a predictable and low cost maintenance regime.

The sourcing of assets is undertaken by the Investment Adviser (“Sigma PRS”) and is done so by two principal methods. In the first instance, development sites (‘PRS development sites’) are selected and assessed, detailed planning permission achieved and a fixed price design and build contract signed with one of the Sigma PRS’s construction partners and the delivery process is managed on behalf of the Company by Sigma PRS. As the assets are acquired with detailed planning consent and fixed price design and build contracts, the Company is exposed to minimal development risk. The construction risk is mitigated with standard design and build contracts containing liquidated damages clauses for non-performance, financial retentions for one year post completion and a parent company guarantee ensuring the satisfactory performance by the contractor and providing an indemnity for losses incurred. In accordance with the right of first refusal agreement with Sigma PRS, the Company intends to source not less than two thirds of its assets in this way.

To expedite the growth of the Company, the balance of assets are acquired by entering into forward purchase agreements with the Sigma Capital Group plc (“Sigma”), the ultimate holding company of Sigma PRS, which are acquired as completed and stabilised developments using the same construction partners and supply chain, thereby ensuring homogeneity of the housing stock. A variation on this method is the purchase of completed and stabilised developments from third parties using approved construction partners.

Investment Restrictions

The Group is aiming to create a high quality, diversified portfolio and the following investment restrictions are observed:

·    the Group is only investing in private rented residential houses and apartments located in the UK (predominantly in England);

·    the Group may invest in assets that require development by means of the Group’s forward funding model, which when completed would fall within the Company’s investment policy, provided that the Group will not undertake development without planning consent in place and that the gross committed (but unspent) construction costs to the Group of all such forward funded development does not exceed 25 per cent. of the aggregate gross value of total assets of the Group at the time of commitment, as determined in accordance with the accounting principles adopted by the Group from time to time (the ‘gross asset value’).  Any forward funded development will only be for investment purposes.

·    In order to further manage risk in the portfolio, no investment in the Group in any completed PRS site or PRS development site will exceed 10 percent of the aggregate value of the gross asset value of the Group at the time of commitment); and

·    the Group is not investing in other alternative investment funds or closed ended investment companies