The PRS Reit PLC Annual Report 2019

FY2019 Annual Report · The PRS Reit PLC
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Annual Report & 
Financial Statements

For the year ended 30 June 2019

Company Number
10638461

Investing in newly 
built private rented 
family housing 

Contents

3  Highlights

7  Strategic Report 
7  Chairman’s Statement 
10  Market Dynamics 
12  Portfolio Analysis 
25  Investment Strategy & Business Model 
29  Investment Adviser’s Report 
37  Corporate Social Responsibility 
50  Principal Risks & Uncertainties

1    The PRS REIT plc     Annual Report & Financial Statements 2019

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55  Corporate Governance 
55  Directors 
57  Advisers 
58  Report of the Directors 
66  Statement of Directors’ Responsibilities 
67  Corporate Governance Statement 
76  Audit Committee Report 
79  Directors’ Remuneration Policy 
81  Directors’ Remuneration Report

85   Independent Auditors Report to the 
Members of The PRS REIT plc

91  Financial Statements 
91  Consolidated Statement of 
Comprehensive Income 

92  Consolidated Statement of Financial Position 
93  Consolidated Statement of Changes in Equity 
94  Consolidated Statement of Cash Flows 
95  Company Statement of Financial Position 
96  Company Statement of Changes in Equity 
97  Company Statement of Cash Flows

98  Notes to the Financial Statements

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The PRS REIT plc     Annual Report & Financial Statements 2019     2

 
 
 
 
 
 
 
 
 
 
Highlights

Summary 

 768 

new rental homes were added to 
the Company’s portfolio over the 
year, taking the cumulative total to

1,173

at 30 June 2019 (30 June 2018: 
405 homes), and annualised 
estimated rental income to 

£10.7m

 (30 June 2018: £3.6m).

3,196 

further homes were under 
construction across 37 sites at 
30 June 2019 (30 June 2018: 
1,305 homes across 17 sites), with 
wider geographic exposure. When 
completed the annualised estimated 
rental income will rise to

£41.2m.

>   The number of homes 

completing is rising materially.

>   Remainder of £900m (gross) of 
funds will be deployed over the 
coming months: 

-  expected total is for 5,400 new 
family rental homes across an 
estimated 75 sites, generating 
an estimated rental value 
(“ERV”) of £55m per annum 
once completed.

3    The PRS REIT plc     Annual Report & Financial Statements 2019

 
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Dividends

Financial

>   Dividends paid in respect of FY 
2019 totalled 5p per share (FY 
2018: 5p), in line with targets.

>   Total dividend targeted at 

stabilisation is 5.5p1 per share  
in FY 2022.

Year to		

13	months	

30 June 2019	

to		30	June	2018	

Change

Revenue	

Net	rental	income	

Operating	profit	

Profit	after	tax	

Basic	earnings	per	share	

Net	assets	at	30	June*	

IFRS	and	EPRA	NAV*	per	
per	share	at	30	June

*after dividend payments

£6.0m	

£4.9m	

£14.6m	

£14.6m	

2.9p	

£474m	

95.8p	

£1.8m	

+233%

£1.5m	

+227%

£2.7m	

+441%

£3.2m	

+356%

1.0p	

+190%

£486m	

(3%)

98.3p	

(3%)	

1 This is a target only and there can be no assurance that the target can or will be met and should not be taken as an indication of the Company’s 
expected or actual future results. Accordingly, potential investors should not place any reliance on this target in deciding whether or not to 
invest in the Company or assume that the company will make any distributions at all and should decide for themselves whether or not the target 
dividend yield is reasonable or achievable.

The PRS REIT plc     Annual Report & Financial Statements 2019     4

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Highlights (continued)

Operational

Outlook

>  To date, 1,351 units have now 

been completed, with an ERV of 
£12.3m.

>  Underlying structural drivers for 
growth remain unchanged, with 
critical supply shortage and rising 
demand for high-quality family 
rental houses.

>  The number of completions is set 
to rise significantly over the new 
financial year and the Company 
remains well-positioned to achieve 
its targets.

At		

At	

30 June 2019	

30	June	2018	 Change

Number	of	completed	homes	

1,173	

405	 +190%

Estimated	rental	value	of	
completed	homes

£10.7m p.a.	 £3.6m	p.a.	 +197%	

Completed	sites	

17	

5	 +240%

Gross	development	cost		
(“GDC”)	of	completed	sites

£145.0m	

£40.7m	 +256%	

Part-completed	sites	

4	

5	

-

Number	of	contracted	homes	

3,196	

1,305	 +145%

Estimated	rental	value	of	
contracted	homes

£30.5m p.a.	 £12.0m	p.a.	 +154%	

Sites	in	progress	

37	

17	 +118%

GDC	of	sites	in	progress	

£517.0m	

£174.0m	 +197%

Average	capital	uplift	on	current	
assets	to	vacant	possession

13.4%	

12.8%	 +4.7%	

“The PRS REIT made good progress 
over its second year of activity, 
and our portfolio of newly-built 
family rental homes increased by 
768 to 1,173 by the year end, 
with a further 3,200 or so homes 
under construction across 37 sites. 
The pace of completions continues 
to accelerate, and we have since 
completed a further 178 homes, 
taking our total to 1,351. 

“Within the next few months the 
remainder of the Company’s £900m 
of gross funds will be deployed.  
When the last house is completed, 
this will take the PRS REIT’s 
portfolio to some 5,400 homes in 
75 sites across the major regions 
of England, and should provide 
an ongoing dividend of 5.5p per 
annum.

“Family rental homes remain 
critically undersupplied throughout 
the U.K., and the PRS REIT 
is playing a part in addressing 
this need, bringing high quality, 
professionally-managed homes to 
middle-income families. Whilst 
there is political uncertainties, the 
Board believes that the Company is 
in good shape and remains on track 
to achieve both its short and long-
term goals.”

Steve Smith,  
Chairman of the PRS REIT

5    The PRS REIT plc     Annual Report & Financial Statements 2019

	
	
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The PRS REIT plc   Annual Report & Financial Statements 2019   6
The PRS REIT plc     Annual Report & Financial Statements 2019     6

 
 
 
 
 
 
 
Strategic Report

Chairman’s Statement

I am pleased to present the PRS REIT’s audited 
financial results for the year to 30 June 2019. 
Comparatives are provided although it should be 
noted that the period last year covered 13 months, 
from 31 May 2017 to 30 June 2018. 

Over the year, construction activity 
increased significantly, with a further 
768 new rental homes added to the 
Company’s portfolio. This took the 
cumulative number of completed 
homes at the year-end to 1,173  
(30 June 2018: 405), and the 
annualised rental income to £10.7m 
per annum (30 June 2018: £3.6m). 
Given the level of construction now 
underway, the number of completions 
is set to rise significantly over the new 
financial year. Demand remains high 
and our homes are renting well. 

37 development sites underway at 
30 June 2019. It also includes the 
newly-built, fully let third party sites 
that we acquired. Once construction 
has been completed across the 
37 sites, the number of homes in 
the portfolio is expected to rise to 
4,369, yielding an estimated rental 
value (“ERV”) of about £41.0m per 
annum (30 June 2018: 1,710 homes 
with an ERV of £15.5m per annum). 
By the end of August, including 
third party sites, there were 42 
development sites in progress.

Proximity to good schools, as well 
as to transport networks and 
employment hubs, remain key 
criteria in the site selection process. 

The Company agreed additional 
debt facilities towards the end of 
the financial year, which have taken 
gross funds to £900m (comprising 
£500m of equity and £400m of 
debt). Currently, about 91% of the 
net proceeds has been deployed, 
and we expect the remainder to be 
deployed over the coming months. 

The running total of gross 
development cost (“GDC”) 
stood at £661m by the year-end 
(2018: £214.7m). This figure is 
the cost of the 17 completed 
sites in the portfolio and the 
expected completed cost of the 

The portfolio is geographically well 
dispersed, with sites in the North 
West, North East, Yorkshire, and  
the Midlands, as well as in the South 
East (excluding London) and the  
East of England - although there  
are fewer in these areas currently.  

The full deployment of funds should 
result in some 5,400 family rental 
homes. As previously reported, 
this estimate reflects the increased 
allocation to sites in the South East 
and allows for the previously stated 
schedule delays. 

7    The PRS REIT plc     Annual Report & Financial Statements 2019

Dividends

As set out in the IPO Prospectus, 
the Company’s policy is to pay 
a quarterly dividend during the 
development phase, even though 
it is not currently fully covered by 
rental income. For the year to 30 
June 2019, dividends worth a 
total of 5p per share were paid to 
shareholders (2018: 5p per share). 

The Board

I am delighted to welcome Jim 
Prower to the Board. He was 
appointed as a Non-executive 
Director in May 2019 and brings  
a wealth of relevant experience.  
Jim spent the major part of his career 
at UK-based property developer 
Argent Group plc, where he was 
Group Finance Director. He was 
involved in several significant national 
development regeneration schemes, 
including the re-development of 
Kings Cross Station in London, 
one of Europe’s largest transport 
infrastructure projects. Jim is 
currently a Non-executive Director 
at Empiric Student Property plc and 
AEW UK Long Lease REIT plc, and 
was previously a Non-executive 
Director of Tritax Big Box REIT plc.

Corporate Social 
Responsibility

We are proud to be creating  
a stock of high quality, professionally 
managed rental homes in the UK, 
and the size of our estate is growing 
strongly. The ‘Simple Life’ brand, 
through which our properties are 
marketed and managed, links 
us to the families and individuals 
who rent our properties, as well as 
to the communities in which our 
developments are located. 

Through our Investment Advisor,  
we endeavour to ‘make a difference’ 
to our tenants and wider society. 
We aim to achieve this through the 
quality of our homes, the care we 
take in maintaining our properties 
and their surroundings, and through 
a high standard of customer care. 
Through our Investment Adviser, 
we also support initiatives that 
will foster a sense of community 
and neighbourly spirit within our 
developments and are forging links 
with local communities. Over the year, 
our Investment Advisor provided 
support to schools and charities, 
including Salford Loaves and 
Fishes, which helps homeless and 
vulnerable people in Manchester, 
and Park Palace Ponies, an inner-
city starter riding school based in 
Liverpool as well as others. We intend 
to build on these links and extend 
our social interaction over time. 

The overall yield target at stabilisation 
in 2022 remains unchanged at 5.5p 
per share.  

The Investment Adviser’s report, 
which covers the Company’s 
business model and progress, 
provides further commentary on the 
Company’s progress over the year.

Financial Results

Revenue increased to £6.0m for 
the year to 30 June 2019 (2018: 
£1.8m) and entirely comprises 
rental income. After the deduction 
of non-recoverable property costs, 
net rental income for the year was 
£4.9m (2018: £1.5m). 

Expenses in the period were 
£5.9m (2018: £4.3m) reflecting 
the increased construction activity 
during the year. The gain from the 
fair value adjustment on investment 
property was £15.6m (2018: 
£5.5m). As a result, the Company’s 
operating profit increased to 
£14.6m (2018: £2.7m). 

Finance income from short term 
deposits rose to £0.8m (2018: 
£0.6m). Finance costs in relation to 
bank loans were £0.9m (2018: £nil). 

The profit after taxation increased to 
£14.6m (2018: £3.2m) and basic and 
diluted earnings per share rose to 
2.9p (2018: 1.0p) on an IFRS basis.

Net assets as at 30 June 2019 
were slightly lower at £474m (2018: 
£486m), mainly reflecting the outflow 
from dividends payments. The net 
asset value (“NAV”) per share, on an 
IFRS basis, is 95.8p (2018: 98.3p) 
as is the EPRA NAV per share 
(2018: 98.3p). 

The PRS REIT plc     Annual Report & Financial Statements 2019     8

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Chairman’s Statement (continued)

Outlook

The Company has entered its third 
year of activity and, as previously 
reported, by the end of August, 
our portfolio of completed homes 
had grown to 1,289. The pace of 
completion is increasing, reflecting 
the growing number of sites under 
construction, and over the next few 
months the remainder of our £900m 
of gross funds will be fully deployed. 
When all the homes are completed 
the portfolio is expected to grow 
to 5,400 homes across 75 sites, 
covering most of the major regions 
of England outside London.  

Demand for good quality family 
rental homes remains high and 
our completed homes are renting 
well. It is especially pleasing to note 
that 98.5% of our tenants who 
responded to a survey conducted 
10 months into their tenancies 
reported that they were happy  
with their home. 

The underlying structural drivers 
of demand for homes remains 
unchanged, with rental supply short 
and more households entering the 
private rented sector. Whilst there is 

political uncertainty, we believe that 
the Company is well-positioned to 
deliver its stabilised dividend target 
of 5.5p per share in 2022.

We look forward to reporting the 
next dividend declaration in mid-
October 2019, and to providing 
further updates as appropriate.

Steve Smith 
Chairman

24 September 2019

IFRS and EPRA Performance Measures

KPI

Explanation

Performance

Year to 30  
June 2019

Period from 31 May 
2017 to 30 June 2018

IFRS NAV  
(see note 26)

EPRA NAV  
(see note 26)

Unadjusted net asset value

95.8p per share

98.3p per share

Net asset value adjusted to include 
properties and other investment interests 
at fair value and to exclude certain items 
not expected to crystallise in a long term 
property business model

95.8p per share

98.3p per share

EPRA  
Cost Ratio

Administrative & operating costs (including & 
excluding costs of direct vacancy) divided by 
gross rental income

For the year to 30 June 
2019 the administrative 
and operating costs 
were higher than the 
rental income

For the period from 31 
May 2017 to 30 June 
2018 the administrative 
and operating costs 
were higher than the 
rental income.

IFRS EPS  
(see note 14)

EPRA EPS  
(see note 14)

Unadjusted earnings per share

2.9p per share

1.0p per share

Earnings per share excluding investment 
property revaluations, gains and losses 
on disposals, changes in the fair value of 
financial instruments and associated close 
out costs and their related taxation

0.2p loss per share

0.7p loss per share

9    The PRS REIT plc     Annual Report & Financial Statements 2019

Market Dynamics

The number of households in the private 
rented sector is now 4.5 million, approximately 
25% of all households in UK. The build to 
rent (“BTR”) sector currently accounts for 
approximately 32,000 completed units with 
approximately the same under construction. 

Source: English Housing Survey 2018 (“EHS”), British Property 

Federation (“BPF”)/ Savills Build To Rent (“BTR” data).

Private Renters spend on average 33%  
of their household income on rent. 

Source: EHS

42% of private renters are likely to stay in 
rented housing as they cannot afford to buy. 
11% of renters have moved in the last 3 years 
because they have been forced to do so by 
their landlord.

Source: EHS

The Company has completed over 1,200 
completed homes with a further 4,200 either 
in construction or in the pipeline. 

The Company’s tenants’ average household 
income is c.£42,000 per annum* and their 
average monthly rental cost is £761** which 
would be just 21.7% of their overall salary.

*Based on all approved application for the Simple Life 
portfolio over the last 12 months (July 2018-end of June 
2019) **Based on all active tenancies end of June 2019.

The Company provides homes where our 
tenants can stay for as long as they like without 
fear of the landlord selling their home. We have 
just c.2.3%* on average re-letting churn on our 
properties per month. 9% of our movers within 
the last 12 months, have actually decided to 
stay with us and move to another home or 
location within our portfolio.**

*Based on full Simple Life PRS REIT portfolio, as at June 
2019 **Based on internal data as at August 19. 

Average age of private renters is 40.

Our average tenant age is 35 across portfolio.*

Source: EHS

*Based on all Simple Life PRS REIT portfolio application 
data from July 2018 to June 2019.

22% of the Private Rented Sector is families.

Source: EHS

The Company’s Simple Life portfolio 
comprises approx. 57%*, supporting our 
strategy of providing homes suitable for 
families, whilst also being appropriate  
for couples and single occupiers.

*Based on all Simple Life PRS REIT portfolio application 
data from July 2018 to June 2019.

32% of renters in the PRS had tenancy 
lengths of 6 months, 50% had tenancy length 
of 12 months.

100% of our tenants have 12 month initial 
leases and we are happy to offer longer if  
a customer wishes.

Source: EHS 2018

The PRS REIT plc   Annual Report & Financial Statements 2019   10

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Market Dynamics (continued)

Household Moves by Tenure 2017-18

70,000
new households

29,000
new households

Social  
Renters
(4m)

139,000
moves within 
sector

65,000

Owner occupiers
(14.8m)

319,000
moves within 
sector

18,000

11,000

208,000

55,000

98,000

860,000
moves within sector

Private  
Renters
(4.5m)

219,000
new households

Figures and arrows indicate the 
number of households moving into, 
out of, and within each sector in the 
12 months before interview.

These figures only relate to 
households that moved from one 
property to another. They do not 
include sitting tenant purchases.

Source: EHS 2018

In its analysis of housing occupation 
the EHS shows the private rented 
sector as second in size only to 
that of owner occupation. In the 
2017/18 period over 219,000 new 
households entered the sector, in 
addition to the c.100,000 moving 
from owner occupation and 55,000 

from social provision. In all, the net 
inflow was 99,000 new households 
in the period demonstrating the 
vibrancy of the sector, as well as 
a significant amount of occupiers 
moving out of home ownership and 
into private rented accommodation.

11  The PRS REIT plc   Annual Report & Financial Statements 2019
11    The PRS REIT plc     Annual Report & Financial Statements 2019

Portfolio Analysis 

As at 30 June 2019, the valuation of 
the Group’s property portfolio was 
£362,275,000 with an Investment 
Value on completion of all sites 
of £551,985,000 and ERV on 
completion of £32,687,200. 

Property Portfolio by Regional 
Split – at 30 June 2019

>  The regional split by investment 

value is – North West (NW) 70.2%, 
Yorkshire (Y) 9.4% and West 
Midlands (WM) 20.4%.

>  Majority of the portfolio continues 
to be located in the North West 
with the West Midlands increasing 
significantly in size. Future 
developments will see increase 
diversification as we move into the 
East Midlands, South Midlands 
and North East as well as further 
developments in existing regions.

Other Metrics  
– at 30 June 2019

>  Forecast average rent across the 
current portfolio when complete 
is £8,953 per annum (£746 per 
month).

Age Bracket

Around 60% of our tenants are 
aged between 26-45 demonstrating 
our core young family market. We 
are, however, seeing an increase 
in young professional tenants aged 
under 25, plus a very small but 
steady increase in 56+ ‘early retiree 
market’.

Age Bracket - %

1. Under 25

2. 26–35

3. 36-45

4. 46-55

5. 56-65

>  Average site size is 85 housing 

6. 66+

units.

>  The split between 1, 2, 3 and 4 
bed properties is approximately 
5%, 25%, 60% and 10% 
respectively.

>  Contractor split – Countryside 

83.6%; Engie 11.0%; Keepmoat 
Homes 4.2% and Galliford Try 1.2%.

>  Current deduction from gross to 

net rent across the portfolio at 30 
June 2019 is 17.6%.

>  Bad debts and bad debt provision 

- £13,000.

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21.55%

42.50%

19.04%

10.20%

5.29%

1.42%

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The PRS REIT plc     Annual Report & Financial Statements 2019     12

 
 
 
 
 
 
 
Portfolio Analysis (continued)

Income Bracket

Income Bracket - per Household % 

A large proportion of our tenants 
have a household income between 
£25k - £45k, accounting for around 
42%. In correlation with the increase 
in young professional tenants, 
we have also seen an increase in 
tenants earning under £25k.  
Around 17% of tenants are in the 
upper ranges, evidencing that our 
homes are attracting a wide range  
of customer demographics.

1. Under £25K

2. £25K–£35K

3. £35K–£45K

4. £45K–£55K

5. £55K–£65K

6. £65K+ 

25.69%

22.44%

20.28%

13.98%

7.58%

10.04%

Tenancies with Children

Child Brackets - %

Tenancies with and without children 
appear to consistently remain around 
the 50:50 mark. Over the last 12 
months there has been a small 
increase in percentages of tenants 
with children at around 57%.

None - 438 (43.11%)
One Child - 203 (19.98%)
Two Children - 211 (20.77%)
Three Children - 91 (8.96%)
Four or more Children - 73 (7.19%)

Distance Travelled

Distance Travelled - per Applicant

The data displaying distance 
travelled is very evenly split between 
people already living very locally, to 
those willing to move further afield to 
rent a quality rental home.

< 3 Miles (28.21%)
3 - 10 Miles (29.73%)
10 - 50 Miles (22.91%)
> 50 Miles (19.15%)

All stats based on all successful Simple Life applications referenced between June 2018 and June 2019

13    The PRS REIT plc     Annual Report & Financial Statements 2019

 
 
 
 
 
 
 
 
 
What does our target market 
look like?

2019 will see us complete a very 
large consumer research project 
which will help us to identify the 
different personas Simple Life 
homes would potentially appeal 
to. The research will not consist of 
Simple Life customers, but will tap in 
to the current rental market and we 
will be identifying ‘personas’ based 
on their attitudes to renting and their 
needs and wants. The research is 
extremely in depth and includes 
a range of techniques to gather a 
broad range of both qualitative and 
quantitative data including: online 
surveys, online community forums, 
in-home immersions and focus groups.

This project will allow us to better 
understand our market in order to 
inform our marketing and messaging 
and our product, specification and 
service. This proactive approach 
will keep us at the forefront of the 
market and give us the insights we 
need to future proof our business 
and avoid becoming stagnant.

Our initial findings has identified four key personas:

Happy Home Birds

Quite happy renting, don’t 
necessarily see it as temporary. 
Like a nice house for their family 
and friends. Happy Home Birds 
made up 34% of our initial survey.

34%

Relaxed Renters 

Very happy renting and see it as 
less hassle than owning. Relaxed 
renters made up 19% of our initial 
survey.

19%

Functional Renters 

Quite happy renting, but their 
home is less important to them. 
Functional renters made up 17% of 
our initial survey.

17%

Ambitious Strivers 

Unhappy renting, see it as temporary 
and dream of owning a home. 
Ambitious strivers made up 26% of 
our initial survey.

26%

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Portfolio Analysis (continued)

Property Portfolio

Location key:
NW= North West  
Y = Yorkshire 
WM = West Midlands

Location

Units

Baytree Lane, Middleton

% of  
Portfolio by 
Investment 
Value

Value of the 
Property at  
30 June 2019

Investment 
Value of the 
Property at  
30 June 2019

Area  
(sq ft)

Capital  
Rate  
psf

Market  
Rental  
Value at  
30 June 2019

Rental  
Rate  
psf

NW

110

98,346

3.25%

£17,930,000

£17,930,000

£182.32

£1,065,180

£10.83

The Property comprises a completed site of 110 units with a mix of two, three and four bedroom houses.

Durban Mill, Oldham

NW

80

69,425

2.18%

£12,050,000

£12,050,000

£173.57

£723,960

£10.43

The Property comprises a completed development of 80 houses, with a mix of two, three and four bedrooms. 

Coral Mill, Newhey, Rochdale

NW

69

54,282

1.86%

£10,260,000

£10,260,000

£189.01

£599,880

£11.05

The Property comprises a completed development of 45 houses with a mix of three and four bedroom houses as well as 24 two bedroom low rise apartments and 
therefore will provide a total of 69 units.

Mackets Lane, Halewood, Liverpool

NW

50

40,540

1.38%

£7,620,000

£7,620,000

£187.96

£462,700

£11.41

The Property comprises a completed development of 50 houses with a mix of two, three and four bedroom houses.

Woodford Lodge, Winsford (Phase 1 & 2)

NW

54

45,505

1.48%

£8,180,000

£8,180,000

£179.76

£485,820

£10.68

The Property comprises a completed site of 54 houses with a mix of two, three and four bedrooms.

Tintern Avenue, Middleton

NW

88

74,322

2.35%

£12,990,000

£12,990,000

£174.78

£771,720

£10.38

The subject property comprises a completed site of 88 houses with a mix of two, three and four bedroom houses.

Howe Bridge Mill, Atherton

NW

59

51,106

1.70%

£9,405,000

£9,405,000

£184.03

£543,720

£10.64

The Property comprises a completed site of 59 units made up of two, three and four bedroom houses. 

Silkin Green, Telford

WM

78

67,266

2.30%

£12,685,000

£12,685,000

£188.58

£720,120

£10.71

The Property comprises a completed development of 78 two, three and four bedroom houses.

15  The PRS REIT plc   Annual Report & Financial Statements 2019

 
 Location

Units

Mafeking Road, Smethwick

% of  
Portfolio by 
Investment 
Value

Value of the 
Property at  
30 June 2019

Investment 
Value of the 
Property at  
30 June 2019

Area  
(sq ft)

Capital  
Rate  
psf

Market  
Rental  
Value at  
30 June 2019

Rental  
Rate  
psf

WM

63

52,874

1.92%

£10,580,000

£10,580,000

£200.10

£600,600

£11.36

The Property comprises a completed development of 63 two, three and four bedroom houses.

Our Lady’s School, Little Hulton

NW

73

62,703

2.15%

£11,890,000

£11,890,000

£189.62

£674,820

£10.76

The Property comprises a completed development of 73 two, three and four bedroom houses.

Leach Lane, St Helens

NW

55

46,303

1.54%

£8,500,000

£8,500,000

£183.57

£482,520

£10.42

The Property comprises a completed development of 55 houses with a mix of two and three bedroom homes.

Yew Gardens, Granby Road, Doncaster

Y

53

42,010

1.17%

£6,435,000

£6,435,000

£153.18

£411,300

£9.79

The Property comprises a completed development of 53 houses with a mix of two and three bedroom houses.

Norfolk Park, Park Grange Road, Sheffield

Y

24

18,447

0.59%

£3,240,000

£3,240,000

£175.64

£207,840

£11.27

The Property comprises a completed development of 24 two bedroom apartments. 

Monkswood Crescent, Coventry

WM

29

27,522

0.91%

£5,005,000

£5,005,000

£181.85

£284,100

£10.32

The Property comprises a completed development of 29 houses with a mix of three and four bedroom houses.

Milverton Crescent, Coventry

WM

20

17,140

0.62%

£3,410,000

£3,410,000

£198.95

£194,220

£11.33

The Property comprises a completed development of 20 houses with a mix of three and four bedroom houses. 

Tower Hill 2, Knowsley 

NW

42

37,247

1.12%

£6,155,000

£6,155,000

£165.25

£371,820

£9.98

The Property comprises a completed development of 42 units with a mix of three and four bedroom houses.

Chase Park, Ellesmere Port

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40

40,126

1.18%

£6,495,000

£6,495,000

£161.87

£385,920

£9.62

The Property comprises a completed development of 40 houses, with a mix of two, three and four bedroom houses. 

Manor Top (Phase 1), Sheffield

Y

78

78,628

2.17%

£11,975,000

£11,975,000

£152.30

£735,000

£9.35

The Property forms part of a wider development site with 78 units, being a mix of three and four bedroom houses. Construction works are well progressed and 
construction is due to complete in October 2019.

Carr Lane, Prescot

NW

140

116,016

3.97%

£20,485,000

£21,920,000

£188.94

£1,277,280

£11.01

The Property comprises a part completed development, which comprises 24 one and two bedroom apartments and 116 houses, with a mix of three and four 
bedroom homes. Construction works are well progressed and construction is due to complete in November 2019.

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Portfolio Analysis (continued)

Location

Units

Earle Street, Newton-le-Willows

% of  
Portfolio by 
Investment 
Value

Value of the 
Property at  
30 June 2019

Investment 
Value of the 
Property at  
30 June 2019

Area  
(sq ft)

Capital  
Rate  
psf

Market  
Rental  
Value at  
30 June 2019

Rental  
Rate  
psf

NW

97

80,451

2.64%

£14,092,500

£14,565,000

£181.04

£868,020

£10.79

The Property comprises a part completed development of 24 one and two bedroom apartments and 73 houses, with a mix of three and four bedroom homes. 
Construction works are well progressed and construction is due to complete in September 2019.

East Bank Road, Sheffield

Y

58

59,217

1.78%

£8,897,500

£9,835,000

£166.08

£593,820

£10.03

The property comprises a part completed development of 58 units being a mix of three and four bedroom houses. Development works have commenced and 
construction is due to complete in February 2020.

Romanby Shaw, Bradford

Y

47

39,612

1.31%

£6,790,000

£7,225,000

£182.39

£420,960

£10.63

The Property comprises a part completed development of 47 houses, with a mix of two, three and four bedroom houses. Construction works are well progressed 
and construction is due to complete in December 2019.

Manor Top (Phase 2), Sheffield

Y

85

89,916

2.41%

£8,770,000

£13,310,000

£148.03

£816,900

£9.09

The Property forms part of a wider development site with 85 units, being a mix of three and four bedroom houses. Construction is due to complete in April 2020.

Heathfield Lane – Phase 1

WM

51

40,588

1.38%

£12,900,000

£7,615,000

£187.62

£449,460

£11.07

The Property comprises a part completed development which proposes 8 one bedroom apartments and 43 two, three and four bedroom houses. Construction 
works are well progressed and construction is due to complete in April 2020.

Heathfield Lane – Phase 2 

WM

58

45,906

1.58% Figure as above

£8,710,000

£189.74

£510,540

£11.12

The Property comprises a part completed development which proposes 8 one bedroom apartments and 50 two, three and four bedroom houses. Construction 
works are well progressed and construction is due to complete in April 2020.

Whitworth Way, Wigan 

NW

145

118,888

4.10%

£15,030,000

£22,640,000

£190.43

£1,307,820

£11.00

The Property comprises a part completed development which proposes 24 two bedroom apartments and 121 two, three and four bedroom houses. Construction 
works are well progressed and construction is due to complete in July 2020.

Cable Street, Wolverhampton

WM

164

136,910

4.73%

£17,367,500

£26,115,000

£190.75

£1,551,180

£11.33

The Property comprises a part completed development which proposes 164 two, three and four bedroom houses. Construction works are well progressed and 
construction is due to complete in October 2020.

Reginald Road, St Helens

NW

102

88,111

2.90%

£11,877,500

£15,995,000

£181.53

£907,980

£10.30

The Property comprises a part completed development which proposes 102 two, three and four bedroom houses. Construction has started on site and is due to 
complete in April 2020.

Riverside College, Runcorn

NW

83

64,513

2.20%

£6,192,500

£12,170,000

£188.64

£698,280

£10.82

The Property comprises a part completed development which proposes 32 two bedroom apartments and 51 two, three and four bedroom houses. Construction 
has started on site and is due to complete in May 2020.

17    The PRS REIT plc     Annual Report & Financial Statements 2019

Location

Units

Chadwick Street, Hilton Park, Leigh

% of  
Portfolio by 
Investment 
Value

Value of the 
Property at  
30 June 2019

Investment 
Value of the 
Property at  
30 June 2019

Area  
(sq ft)

Capital  
Rate  
psf

Market  
Rental  
Value at  
30 June 2019

Rental  
Rate  
psf

NW

103

80,108

2.72%

£3,480,000

£15,035,000

£187.68

£893,160

£11.15

The Property comprises a part completed development which proposes 8 one bedroom apartments and 95 two, three and four bedroom houses. Construction 
has started on site and is due to complete in April 2021. 

Whitworth Way, Wigan 

NW

145

118,888

4.10%

£15,030,000

£22,640,000

£190.43

£1,307,820

£11.00

The Property comprises a part completed development which proposes 24 two bedroom apartments and 121 two, three and four bedroom houses. Construction 
works are well progressed and construction is due to complete in July 2020.

Sutherland School, Trench

WM

123

106,521

3.73%

£6,252,500

£20,570,000

£193.11

£1,169,820

£10.98

The Property comprises a part completed development which proposes 123 two, three and four bedroom houses. Construction has started on site and is due to 
complete in March 2021. 

Newhaven Business Park 

NW

84

63,423

2.30%

£6,387,500

£12,720,000

£200.56

£733,320

£11.56

The Property comprises a part completed development which proposes 48 one and two bedroom apartments and 36 three and four bedroom houses. 
Construction has started on site and is due to complete in August 2020. 

Bilston Urban Village

WM

123

95,251

3.25%

£6,675,000

£17,945,000

£188.40

£1,077,240

£11.31

The Property comprises a part completed development which proposes 48 two bedroom apartments and 75 two, three and four bedroom houses. Construction 
has started on site and is due to complete in April 2021.

Eaton Works, Walkden

NW

148

122,761

4.02%

£7,590,000

£22,210,000

£180.92

£1,333,200

£10.86

The Property comprises a part completed development which proposes 62 one and two bedroom apartments and 86 two, three and four bedroom houses. 
Construction has started on site and is due to complete in August 2021.

Durham Street, Rochdale

NW

38

30,465

1.02%

£1,865,000

£5,640,000

£185.13

£321,360

£10.55

The Property comprises a part completed development which proposes 38 two and three bedroom houses. Construction has started on site and is due to 
complete in July 2020.

Entwisle Road, Rochdale

NW

54

45,001

1.49%

£3,590,000

£8,200,000

£182.22

£465,360

£10.34

The Property comprises a part completed development which proposes 54 two and three bedroom houses. Construction has started on site and is due to 
complete in June 2020.

Norwich Street, Rochdale 

NW

70

57,166

1.90%

£4,687,500

£10,515,000

£183.94

£596,700

£10.44

The Property comprises a part completed development which proposes 70 two, three and four bedroom houses. Construction has started on site and is due to 
complete in June 2020. 

Roch Street, Rochdale

NW

102

74,364

2.49%

£4,212,500

£13,740,000

£184.77

£805,080

£10.83

The Property comprises a part completed development which proposes 48 one and two bedroom apartments and 54 two, three and four bedroom houses. 
Construction has started on site and is due to complete in September 2020.

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Portfolio Analysis (continued)

Location

Units

Bombardier, Crewe

% of  
Portfolio by 
Investment 
Value

Value of the 
Property at  
30 June 2019

Investment 
Value of the 
Property at  
30 June 2019

Area  
(sq ft)

Capital  
Rate  
psf

Market  
Rental  
Value at  
30 June 2019

Rental  
Rate  
psf

NW

131

110,875

3.54%

£1,500,000

£19,535,000

£176.19

£1,165,920

£10.52

The Property comprises a part completed development which proposes 24 two bedroom apartments and 107 three and four bedroom houses. Construction has 
started on site and is due to complete in August 2021. 

Beehive Mill, Bolton 

NW

121

99,167

3.32%

£4,110,000

£18,340,000

£184.94

£1,077,240

£10.86

The Property comprises a part completed development which proposed 121 two, three and four bedroom houses. Construction has started on site and is due to 
complete in December 2021. 

Queen Victoria Street

NW

68

56,805

1.77%

£1,530,000

£9,750,000

£171.64

£579,240

£10.20

The Property comprises a part completed development which proposes 68 two, three and four bedroom houses. Construction has started on site and is due to 
complete in June 2020.

Lower Broughton – Phase 5

NW

299

182,077

7.36%

£17,642,500

£40,625,000

£223.12

£2,604,300

£14.30

The Property comprises a part completed development which proposes 299 one, two and three bedroom apartments. Construction has started on site and is due 
to complete in September 2020.

Tower Hill 3, Knowsley

NW

92

73,011

2.22%

£5,545,000

£12,255,000

£167.85

£741,780

£10.16

The Property forms part of a wider development site and comprises 92 units, being a mix of two and three bedroom houses. Development works have recently 
commenced on site and construction is due to complete in March 2020.

TOTAL

3,651

3,000,915

100% £362,275,000

£551,985,000

£183.94

£32,687,200

£10.89

19  The PRS REIT plc   Annual Report & Financial Statements 2019

 
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Portfolio Analysis (continued)

Featured Developments

Earle Street 
Newton-le-Willows,  
Merseyside

97 units comprising of  
2 bedroom apartments and  
3 and 4 bedroom houses

Rent: c. £868,000 p.a

From the development, Earlestown train station is just a 15 minute walk, 
offering direct services to Liverpool, Chester, Warrington and Manchester.  
If travelling by car, the M6 is only 4 miles away.

The area has a small, yet busy town centre with an array of good local 
amenities, including a large Tesco superstore, a medical centre, post office, 
local market and other popular high street shops, pubs and restaurants. 
Earlestown is also home to its local favourite, ‘curry quarter-of-the-mile’, 
which offers a selection of Indian and Tandoori restaurants.

Sankey Valley Park is situated only 2 miles away from the development –  
the perfect peaceful setting for an afternoon stroll.

For families, the area holds the key to excellent education (and a wide choice 
at that!), with 39 primary and secondary schools boasting an ‘Outstanding’  
or ‘Good’ Ofsted rating, all within a 3 mile radius of our development.

Prince’s Gardens  
(Manor Top 1  
and Manor Top 2) 
Sheffield, South 
Yorkshire

163 units comprising of 3 and 
4 bedroom houses

Rent: c.£1,552,000 p.a.

Prince’s Gardens is situated only 2.5 miles away from Sheffield city centre. 
0.25 miles away, there is a regular tram and bus service from Manor Top to 
Sheffield, with one or the other leaving every 5 minutes. The A57 is just over 
a mile away, giving easy access to the M1.

The site is close to Manor Top, a local shopping and amenity centre and 
there’s also a ready supply of good primary schools and nurseries nearby 
including St Theresa’s Catholic Primary School directly next-door to the 
development and Prince Edwards also within very close proximity of the 
site. A flower-filled park, situated at the back of the site, is a beautiful 
feature of this development. Along with the leafy, tree-lined streets, this 
development will boast a very picturesque setting.

21  The PRS REIT plc   Annual Report & Financial Statements 2019

Silkin Green 
Telford, Shropshire

78 units comprising of 2, 3 and 
4 bedroom houses

Rent: c.£720,000 p.a

Juniper Grove  
(Leach Lane) 
St Helens, Merseyside

55 units comprising of 2 and  
3 bedroom houses

Rent: c.£482,000 p.a.

Silkin Green is less than a mile away from Telford Town Centre and is within 
walking distance of Stirchley Village and Dawley. Thanks to the M54 the site 
has excellent transport links with Shrewsbury 24km (15 mile) to the West 
and Birmingham and Wolverhampton within easy commutable distance at 
around 48km (30 miles) to the South East.

This site is perfectly situated, in an area within walking distance to all the 
new shopping and leisure facilities of Telford, but in an area with lovely 
views, adjacent to the Town Park, giving the location a rural feel, yet close  
to the motorway networks, all the necessary amenities.

The nearby shopping centre includes a Cineworld cinema, and many bars 
and restaurants. The Telford Forge Retail Park also includes a Sainsbury’s 
Supermarket and a Tesco Extra.

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Nestled in the area of Sutton, Juniper Grove has a lovely balance of lively 
bars, shops and restaurants, as well as quiet green spaces and parks all 
within easy reach of your front door.

The site is perfectly situated for easy access to both Manchester and Liverpool 
with two train stations within the local area. For those who enjoy a bit of night-life, 
St Helens has it down to a tee with plenty of places to eat and drink.

Families and children would quickly feel at home at Juniper Grove, plenty of 
things to keep the kids entertained with locally, as well as a wide choice of 
Ofsted rated ‘Good’ local schools, including Sherdley Primary School,  
St Anne’s Catholic Primary School and Willow Tree Primary School.

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Portfolio Analysis (continued)

Property Portfolio - Mix by Property Size

1 Bed

2 Bed

3 Bed

4 Bed

Site

Baytree Lane

Woodford 1

Woodford 2

Tintern Avenue

Howe Bridge Mill

Leach Lane

Yew Gardens

Monkswood Crescent

Milverton Crescent

Romanby Shaw

Chase Park

Carr Lane

Earle Street

East Bank Road

Mackets Lane

Norfolk Park

Tower Hill 2

Manor Top 1

Manor Top 2

Durban Mill

Coral Mill

Mafeking

Silkin Park

Our Lady’s

Heathfield Lane 1

Heathfield Lane 2

Whitworth Way

Cable Street

Reginald Road

Riverside College

Hilton Park

Sutherland School

Newhaven

Bilston Urban Village

Eaton Works

Durham Street

Entwhistle Road

Norwich Street

Roch Street

Bombardier

Beehive

Queen Victoria

Lower Broughton 5

Tower Hill 3

0

0

0

0

0

0

0

0

0

0

0

6

6

0

0

0

0

0

0

0

0

0

0

0

8

8

0

0

0

0

8

0

24

0

4

0

0

0

12

0

0

0

100

0

176

Total

8

4

4

10

10

12

9

0

0

7

3

18

18

0

12

24

0

0

0

8

24

11

11

5

12

12

39

40

14

40

23

18

24

57

65

10

11

17

42

24

36

17

189

28

916

82

8

33

76

41

43

44

27

19

33

23

107

58

35

38

0

34

58

54

64

39

46

59

62

22

31

92

105

78

37

68

81

26

50

59

28

43

53

44

93

78

47

10

64

20

2

3

2

8

0

0

2

1

7

14

9

15

23

0

0

8

20

31

8

6

6

8

6

9

7

14

19

10

6

4

24

10 

16

20

0

0

0

4

14

7

4

0

0

Total

110

14

40

88

59

55

53

29

20

47

40

140

97

58

50

24

42

78

85

80

69

63

78

73

51

58

145

164

102

83

103

123

84

123

148

38

54

70

102

131

121

68

299

92

%

4.82%

25.09%

60.04%

10.05%

100.00%

23    The PRS REIT plc     Annual Report & Financial Statements 2019

2192

367

3651

Property Portfolio - Map

Bradford

Leeds

Liverpool

Manchester

Sheffield

Doncaster

Completed
Contracted
Committed

Crewe

Telford

Wolverhampton

Nottingham

Peterborough

Birmingham

Coventry

Milton Keynes

Bristol

LONDON

Exeter

Southampton

Brighton

The PRS REIT plc   Annual Report & Financial Statements 2019   24
The PRS REIT plc     Annual Report & Financial Statements 2019     24

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Large Development of 
the Year: Winner

Landlord of the Year: 
Highly Commended

A Winning 
Strategy

2018

W I N N E R

Investment strategy  
& business model 

Business Model

It is widely recognised that the UK 
housing market has significant 
supply side and affordability 
issues, with many reports citing 
that millennials have either no 
intention or little prospect of ever 
owning a home. It is similarly 
acknowledged that the UK needs 
to deliver between 240,000 and 
340,000 new dwellings per annum 
to take account of both demand 
and population change, but supply 
has continually fallen well short of 
this target. The inevitable affect 
has been to create a significant 
supply side deficit which has merely 
exacerbated the issues already 
apparent. Any imbalance in the 
supply and demand dynamic only 
serves to have an inflationary effect 
on house prices, testing already 
stretched affordability, created by 
the need to save for large deposits 
and the impacts of the Mortgage 
Market Review which placed 
controls on loan to value ratios, 
further exacerbating the issue. It is 
in this context that the Company 

is providing an alternative for those 
disenfranchised by these factors 
in the creation of a portfolio of 
accessible quality family homes to rent.

The Company has developed  
a repeatable business model 
through use of the Investment 
Adviser’s platform which delivers 
brand new houses through its 
construction partners. The homes 
are from the housebuilders’ standard 
range of house types which have 
been carefully selected and have  
a consistent specification alongside 
known delivery metrics including 
above ground cost and construction 
time. This consistency of approach 
is designed to improve the 
predictability of total delivery costs 
and to reduce the long term asset 
management costs of the homes 
by homogenising the house types 
at a portfolio level and the internal 
specification at the dwelling level. 
By the use of fixed price design 
and build contracts on sites which 
have detailed planning consent, the 
Company exposes itself to minimal 
development risk. Our development 

partners, meanwhile look to maximise 
their return on capital by building 
the housing at construction pace 
rather than at a pace for sale, which 
is at least four times quicker, thus 
allowing income flow to occur more 
quickly during the construction 
phase. The advent of modern 
methods of construction, employed 
by some of the construction 
partners, will only serve to increase 
this delivery further. In a time of low 
housing delivery and government 
focus on the housing crisis, this 
delivery methodology is extremely 
attractive to the councils and local 
authorities we talk to and work with, 
not only for accelerated Council 
Tax receipts, New Homes Bonus 
and accelerated regeneration effect 
but also the ability to offer a new 
managed tenure for their constituents 
which currently does not exist in any 
scale outside the Company.

The active management of our 
developments and the creation of 
communities is key to the long term 
success of the Company and all of 
the assets are managed under the 

25    The PRS REIT plc     Annual Report & Financial Statements 2019

brand ‘Simple Life.’ All customer 
contact is made through this brand 
which as the portfolio grows is 
becoming increasingly familiar to the 
wider market and instils confidence 
in prospective customers that by 
renting through the brand they 
will be living in a desirable, well 
maintained dwelling managed by  
a responsible, professional landlord. 
Regular communication and customer 
events foster the creation of functional 
neighbourhoods, greater customer 
satisfaction and thereby promoting 
longer tenancies. 

When planning the developments 
our research dictates the mix and 
types of houses we employ, making 
provision for those starting out with 
a first move from home, through our 
main target demographic of young 
families, but ensuring there are 
sufficient larger houses on site for 
more mature families as well. This 
range of housing provides choice, 
which allows for a broader range 
of potential customers, as well as 
allowing those already living with us 
to have options to move to different 
house types at different life stages. 
It is this diversity of customer which 
creates a functional community, 
whilst mitigating letting and void risk. 

The Company’s approach to its 
operational geography as well as 
its focus on houses, rather than 
apartment blocks, provides further 
risk mitigation. By expanding the 
number of locations where we 
create communities we minimise 
the risks from local factors, such 
as the failure of major employers. 
Developments are relatively small 
by comparison to the portfolio, 
and critically the granularity of our 
customer base provides particularly 
low income volatility, especially as 
we expect our average tenancy 
to last for 3 years. Furthermore 
the targeted expansion of the 
Company’s geography creates a 
good mix of sites which, once built, 
demonstrate both higher yielding 
profiles (predominantly those in the 

north) and developments where 
there is significant headroom 
between the delivery cost and 
market value. 

This approach has created a robust 
business which answers both a social 
need whilst providing investors with 
an attractive level of income and the 
potential for capital growth.

Investment Objectives

The Company will seek 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 to deliver, on 
a fully invested and geared basis a 
targeted dividend yield of 5.5% and 
total returns of 10% plus per annum 
which is expected to broadly rise 
with inflation.

Investment Policy

The Company’s investment policy is 
to pursue its investment objective by 
investing in PRS Units in towns and 
cities in the UK.

The Company is focused on 
creating a portfolio of homes 
targeted at the family market, the 
largest cohort within the private 
rented sector and will, therefore, 
invest 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 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, the 
delivery process being 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 and the 
construction risk is mitigated with 
standard design and build contracts 
with liquidated damages 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. The 
Company will source approximately 
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 Sigma Capital Group plc 
(“SCG”), 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.

The PRS REIT plc     Annual Report & Financial Statements 2019     26

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Investment Strategy and Business Model (continued)

27  The PRS REIT plc   Annual Report & Financial Statements 2019

Investment Restrictions

The Company’s portfolio of 
completed PRS sites acquired from 
the SCG and PRS Development 
Sites will be invested and managed 
with the objective of delivering a 
high quality, diversified portfolio 
through the following investment 
restrictions: 

>   The Company will only invest in 
private rented residential houses 
and apartments located in the 
UK (predominantly in England);

>   No investment in the Company 
in any completed PRS site or 
PRS Development Site shall 
exceed 20 per cent of the 
aggregate value of total assets 
of the Company at the time of 
commitment as determined in 
accordance with the accounting 
principles adopted by the 
Company from time to time (the 
‘Gross Asset Value’);

>   The Company will not invest 

in other alternative investment 
funds or closed ended 
investment companies.

Debt Financing  
& Gearing

The PRS REIT will seek to use 
gearing to enhance equity returns. 
The level of borrowing will be on  
a prudent basis for the asset class, 
whilst maintaining flexibility in the 
underlying security requirements 
and the structure of both the PRS 
Portfolio and the Group. The Group 
may raise debt from banks, Homes 
England and/or the capital markets 
and the aggregate borrowings of 
the Group will always be subject to 
an absolute maximum, calculated 
at the time of drawdown of the 
relevant borrowings, of not more 
than 45 per cent of the Gross Asset 
Value (although the Investment 
Adviser expects actual gearing to 
settle to below 40 per cent following 
stabilisation of the PRS Portfolio).  

At the end of June 2019, the Group 
agreed further term debt facilities 
of £150m with Scottish Widows. 
The facility is a 25 year fixed rate 
term loan. Interest was fixed at the 
relevant swap rate of 1.164% plus a 
margin. It will be drawn on fixed dates 
between April and October 2020. 

The total facilities available to the 
Group at 30 June 2019 comprise 
£100m revolving credit facility with 
LBG; and two fixed rate term loans 
with Scottish Widows for £100m 
and £150m respectively.

The Group has credit approval to 
increase the existing revolving credit 
facility to £150m which will bring the 
total facilities available to the Group 
to £400m. 

Derivatives

The PRS REIT may utilise derivatives 
for efficient portfolio management. 
In particular, the Company may 
engage in full or partial interest 
rate hedging or otherwise seek 
to mitigate the risk of interest rate 
increases on borrowings incurred in 
accordance with the gearing limits 
as part of the management of the 
PRS Portfolio.

REIT Status

The Company will at all times 
conduct its affairs so as to enable 
it to remain qualified as a REIT 
for the purposes of Part 12 of the 
Corporation Tax Act 2010 (and the 
regulations made thereunder).

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The PRS REIT plc   Annual Report & Financial Statements 2019   28

 
 
 
 
 
 
 
 
Investment Adviser’s Report

Sigma PRS Management Ltd (“Sigma 
PRS”), a wholly-owned subsidiary 
of Sigma Capital Group plc, is the 
Company’s Investment Adviser, and is 
pleased to provide a report on the PRS 
REIT’s activities and progress for the 
year ending 30 June 2019.

Graham Barnet, 
CEO, Sigma Capital Group plc

Business Activities

The PRS REIT plc is a public limited 
company incorporated in England 
on 24 February 2017. Together 
with its subsidiaries, it is the first 
quoted Real Estate Investment Trust 
(“REIT”) to focus on the Private 
Rented Sector (“PRS”).

On 31 May 2017, the Company 
completed its IPO raising initial 
gross proceeds of £250m through 
the issue of 250 million ordinary 
shares of one pence each. The shares 
were admitted to trading on the 
Specialist Fund Segment of the 
Main Market of the London Stock 
Exchange. On completion of the 
IPO, Sigma PRS was appointed as 
Investment Adviser to the Company. 
The Company has since raised 
additional funds, through a further 
placing and through gearing, which 
has taken its total resource to 
£900m (gross). 

Investment Objective and 
Business Model

The PRS REIT is seeking to provide 
investors with an attractive level of 
income, together with the prospect 
of income and capital growth, 
through investment in newly-
constructed residential private 
rented sector sites of multiple units, 
comprising mainly family homes.  

The homes are let on Assured 
Shorthold Tenancies (as defined in 
the Housing Act 1988) to qualifying 
tenants. 

The Company is investing in 
multiple sites in cities and towns 
across the UK, mainly targeting  
the largest employment centres  
in England, outside of London. 
The locations closely follow the 
main rail and road infrastructure, 
and rental homes, being newly-
built, come with the benefit of 
10 year National House Building 
Council or equivalent warranties. 

The Company is concentrating on 
traditional housing, which has a 
broad spectrum of demand, with 
differing house types for different 
life stages, including smaller houses 
for young couples and families, and 
larger houses for growing families. It 
also invests in some low rise flats in 
appropriate locations to broaden its 
rental offering. 

The PRS REIT is building its portfolio 
of PRS assets in two ways:

>   by acquiring residential 

development opportunities, with 
these development sites sourced 
and managed by Sigma PRS 
(or another member of Sigma 
Capital Group plc acting as 
development manager). When 

completed, homes on these sites 
are subsequently let to individual 
qualifying tenants. The PRS REIT 
aims to fund a minimum of two-
thirds of the new properties this 
way.

>   by acquiring already completed 
and let PRS sites that fulfil 
the Company’s investment 
objectives, including return and 
occupancy hurdles. Completed 
sites are acquired from Sigma 
Capital Group plc, pursuant to 
a forward purchase agreement 
between the PRS REIT and 
Sigma Capital Group plc. Should 
the opportunity arise, the PRS 
REIT may acquire newly-built 
PRS assets, from third party 
vendors. The Company has the 
ability to fund up to a maximum 
of one third of new properties in 
this manner.

The PRS REIT retains the right of 
first refusal to acquire and develop 
any sites sourced by Sigma PRS 
that meets its investment objective 
and policy. 

There are certain restrictions in 
the PRS REIT’s investment policy, 
for instance the PRS REIT will not 
invest in other alternative investment 
funds or closed-end investment 
companies. 

29    The PRS REIT plc     Annual Report & Financial Statements 2019

Graham Barnet, 

CEO, Sigma Capital Group plc

PRS site or PRS development site 
that exceeds 20 per cent of the 
aggregate value of the total assets 
of the Company at the time of 
commitment.

Achieving Scale and 
Reducing Risk 

The Sigma PRS Platform
The Investment Adviser is utilising 
Sigma Capital Group plc’s well-
established PRS delivery platform 
(“Sigma PRS Platform”) to help 
the PRS REIT achieve scale and 
to minimise development and 
operational risk. It plays the central 
role in sourcing and developing 
investment opportunities. 

The Sigma PRS Platform comprises 
relationships with construction 
partners, central government, and 
local authorities. Key construction 
partners include Countryside 
Properties, which is the primary 
partner, Engie, and Galliford Try. 
Homes England, an executive non-
departmental public body sponsored 
by the Ministry of Housing, 
Communities & Local Government, 
works closely with Sigma in the 
common goal of accelerating new 
housing delivery in England. 

All pre-development risks are 
identified and underwritten by 
Sigma Capital Group plc and its 
partners, and development sites 
will have an appropriate certificate 
of title, detailed planning consent 
and a fixed price design and build 

contract with one of Sigma Capital 
Group plc’s housebuilding partners. 
During the construction phase, 
many of the properties are pre-let 
and subsequently occupied as 
they complete.

Through its wide network of 
relationships, the Sigma PRS 
Platform is a very good source of 
land for development sites, and is 
also able to deliver a variety of high-
quality house types efficiently and 
in volume. This underpins the PRS 
REIT’s objective to build at scale and 
across multiple geographies. 

Multiple Geographies
By creating assets across multiple 
locations and regions, we aim 
to minimise the PRS REIT’s 
concentration risk. 

We are targeting a mix of locations 
that demonstrate both higher 
yielding profiles (predominantly 
those in the North of England) and 
developments where there is greater 
potential for capital appreciation 
(often in our Southern opportunities). 
Proximity to good primary schools is 
also a key factor for us since we are 
focused on the family rental market.

In addition, no investment will be 
made in any single completed 

The PRS REIT plc     Annual Report & Financial Statements 2019     30

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Investment Adviser’s Report (continued)

‘Simple Life’ Brand 
Our rental homes are marketed 
under the dedicated ‘Simple 
Life’ brand. As well as providing 
well-designed, quality homes, it 
is important to us that tenants 
benefit from high customer service 
levels. The creation of the ‘Simple 
Life’ brand helps to identify our 
product to potential customers and, 
over time, we would like it to be 
recognised as a ‘gold standard’ for 
the tenant experience.

We believe that the long term 
nature of the REIT’s approach to 
the ownership of its assets helps 
to promote a sense of tenant 
security, and that the neighbourhood 
initiatives we sponsor will also help 
to foster a sense of community 
within our developments. 

Financing Resource

Equity Placing Programme
Two tranches of equity have been 
raised to date, £250m (gross) at 
the Company‘s IPO on 31 May 
2017, and a further £250m (gross) 
in February 2018. Homes England 
participated in both fundraisings, 
taking its direct investment in the 
Company to a total of c.£30m.

Debt Facilities
The Company is using gearing to 
enhance equity returns, and in June 
2019 it agreed terms to increase its 
total debt facilities to £400m. These 
facilities are with Scottish Widows 
and Lloyds Banking Group, and 
further details can be found in the 
‘Financial Results’ segment of this 
report. The PRS REIT’s aggregate 
borrowings will always be subject to 
an absolute maximum, calculated at 
the time of drawdown of the relevant 
borrowings, of not more than 45 per 
cent of the value of the assets. 

Operational Review

Development Activity & 
Acquisitions
As previously reported, some 
planning approval delays affected 
construction schedules over 
the year. Even so, by the end of 
June 2019, the total number of 
sites either completed or under 
construction increased to 54 
compared to 22 sites at the same 
point in 2018. The new sites that 
started over the year have expanded 
the portfolio’s geographic spread, 
which now covers the North West, 
North East, Yorkshire, the Midlands, 
South East and the East of England. 

Over the year, we delivered 768 
completed homes taking the total 
number of completed homes to 
1,173 at the end of June 2019. 
This compares to 405 homes at the 
end of June 2018. The annualised 

estimated rental income at the 
end of 2019 stood at £10.7m, a 
significant uplift on the £3.6m of 
annualised rental income at the 
same point in 2018. 

Alongside self-developed assets, 
the Company acquired three fully 
developed and let sites, comprising 
185 homes from Sigma Capital 
Group plc. As with previous sites 
acquired from Sigma Capital Group 
plc, each site was independently 
assessed by Savills before 
acquisition. The sites were located 
in the West Midlands, Salford and 
Telford and provide an ERV of 
£1.75m per annum. 

The table below provides further 
detail in summarised form of our 
development activity in 2019.

Development Activity

At		

At	

30 June 2019	

30	June	2018

Number	of	completed	homes		

1,173	

405

Estimated	rental	value	of	
completed	homes

£10.7m p.a.	

£3.6m	p.a.	

Completed	sites	

17	

5

GDC	of	completed	sites	

£145m	

£40.7m

Part-completed	sites	

Number	of	contracted	homes	

4	

3,196	

5

1,305

ERV	of	contracted	homes	

£30.5m p.a.	

£12.0m	p.a.

Sites	in	progress	

GDC	of	sites	in	progress	

37	

£517.0m	

17

£174m

31    The PRS REIT plc     Annual Report & Financial Statements 2019

	
	
Construction Resource
The construction resource provided 
by the Sigma PRS Platform now 
has national reach. It underpins 
the continued expansion of the 
Company to key population centres 
in England, supporting the creation 
of a geographically diverse portfolio. 

There are clear benefits for our 
construction partners in partnering 
with us, including strengthening 
their ability to bid for land with local 
councils and improving operational 
efficiencies with their own housing 
delivery. This partnership approach 
is working well and the model we 
operate of using standard family 
house types, fixed price design and 
build contracts, and standardised 
specification, helps to ensure that 
developments are built to budget 
and that our PRS assets can be 
maintained and managed efficiently. 

Countryside’s modular timber panel 
factory in Warrington in now fully 
operational and will be servicing 
some of our northern region 
construction, which will enhance 
build speed and quality control. 

Financial Results 

Income statement
The Company’s revenue for the year 
increased to £6.0m (2018: £1.8m), 
which was all derived from rental 
income. After the deduction of non-
recoverable property costs, the net 
rental income was £4.9m (2018: 
£1.5m). Administration expenses 
were higher at £5.9m (2018: 
£4.3m). The gain from the fair value 
adjustment on investment property 
increased to £15.6m (2018: £5.5m), 
reflecting the greater number of 
homes completed and increase in 
construction activity during the year. 
This resulted in increased operating 
profit of £14.6m (2018: £2.7m). 
Finance income for the period from 
short term deposits was £0.8m 

(2018: £0.6m), whilst finance costs 
were £0.9m (2018: £nil). The profit 
after finance income and taxation 
was £14.6m (2018: £3.2m).

The basic and fully diluted earnings 
per share on an IFRS basis for the 
year increased to 2.9p (2018: 1p). 

Dividends
The Company has declared and 
paid a total of 5p per ordinary share 
for the year under review, which 
comprised the following:

>   On 31 October 2018, the 
Company announced the 
declaration of a dividend of 
1.0 pence per Ordinary Share 
in respect of the period from 
1 July 2018 to 30 September 
2018, which was payable on 30 
November 2018 to shareholders 
on the register as at 9 November 
2018. 

>   On 31 January 2019, the 
Company announced the 
declaration of a dividend of 1.0 
pence per Ordinary Share in 
respect of the period from 1 
October 2018 to 31 December 
2018, which was payable on 28 
February 2019 to shareholders 
on the register as at 8 February 
2019. 

>   On 29 April 2019, the Company 
announced the declaration of 
a dividend of 1.0 pence per 
Ordinary Share in respect of 
the period from 1 January 2019 
to 31 March 2019, which was 
payable on 31 May 2019 to 
shareholders on the register as 
at 10 May 2019. 

>   On 31 July 2019, the Company 
announced the declaration of 
a dividend of 2.0 pence per 
Ordinary Share in respect of 
the period from 1 April 2019 
to 30 June 2019, which was 
payable on 30 August 2019 to 
shareholders on the register as 
at 9 August 2019.

Balance Sheet

The principal items on the balance 
sheet are investment property of 
£362.3m (2018: £121.1m), cash and 
cash equivalents of £229.9m (2018: 
£374.3m), long term loans of £100m 
(2018: £nil) and trade and other 
payables of £23.4m (2018: £13.3m).

The investment property includes 
completed assets and assets under 
construction at fair value. Trade and 
other payables includes £14.4m of 
development expenditure that was 
paid in July 2019.

Debt Financing
The PRS REIT has the following 
debt facilities:

>   £100m revolving credit facility 
with Lloyds Banking Group for 
an initial term of two years, which 
can be extended further for up 
to two years. Interest is based 
on three month LIBOR plus 
applicable margin and the loan 
is secured over assets allocated 
to Lloyds Banking Group. The 
Group has credit approval to 
extend this to £150m. This was 
undrawn at 30 June 2019;

>   £100m term loan of 15 years 
with Scottish Widows, which 
was drawn in two equal 
instalments in March and April 
2019. Interest is fixed at the 15 
year swap rate of 1.588% plus 
applicable margin and the loan is 
secured over assets allocated to 
Scottish Widows; and

>   £150m term loan for 15 years 
with Scottish Widows which 
will be drawn in two equal 
instalments in April and October 
2020. Interest was fixed at the 
relevant swap rate of 1.164% 
plus applicable margin and is 
secured over assets allocated to 
Scottish Widows.

The PRS REIT plc     Annual Report & Financial Statements 2019     32

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Investment Adviser’s Report (continued)

Key performance indicators
The Group’s key performance indicators (“KPI”) include:

KPI

Rental income (gross)

Average rent per month per tenant

Non-recoverable property costs as a percentage of gross rent 
(gross to net)

Fair value uplift on investment property

Operating profit

Dividends paid per share in relation to the period

Number of properties available to rent

All the KPIs are in line with management expectations.

June 2019

June 2018

£5,970,000

£1,765,000

£760

17.5%

£15,609,000

£14,646,000

5p

1,173

£741

15.5%

£5,515,000

£2,667,000

5p

405

Market Overview

An interim report of a study 
investigating housing supply 
requirement by Heriot-Watt University 
published in May 2018 suggested 
that the estimate of an additional 
300,000 new homes per annum 
to rebalance supply in England 
understated the problem. The report 
suggests that the total level of new 
housebuilding required is around 
340,000 per annum for England (and 
380,000 for Great Britain) until 2031, 
which represents a total requirement 
of over 4m new homes. 

Against that wider picture of 
undersupply, demand for rental 
homes is growing, fuelled by 
restricted access to other 
tenures, with affordability and 

mortgage availability limiting owner 
occupation and social rented 
funding constraining development 
and supply. After tax changes 
introduced in 2016 and 2017, there 
has been an exodus of typically 
small individual landlords from the 
buy-to-let sector, and the estimated 
resultant outflow of properties from 
the rental market over the last two 
years is put at 120,000. 

The build-to-rent market is growing 
steadily and investment in PRS 
in 2018 increased by 11% on 
the previous year to £2.6 billion. 
By the end of the first quarter of 
2019, there were approximately 
30,000 completed PRS homes in 
the UK. About half of this output 
was concentrated in London and 

33    The PRS REIT plc     Annual Report & Financial Statements 2019

almost all of the development 
comprised apartments. A similar 
number of PRS homes is currently 
under construction and a further 
70,000 or so homes are in planning. 
The vast majority of this delivery 
remains apartment schemes in 
urban centres. To place the scale 
of this PRS activity in context, it 
accounts for under 1% of the total 
value of the rental stock in the UK. 
By comparison, in more mature PRS 
markets, such as the United States, 
institutionally-owned properties 
represent nearly 50% of the total 
rental market. 

Approximately 91% of the Company’s 
total net funding has now been 
deployed and the balance is 
expected to be contracted over the 
coming months. The total portfolio is 
anticipated to comprise approximately 
5,400 new family homes.

According to Savills, at full maturity, 
the UK PRS market could be 
worth around £550 billion and 
encompass more than 1.7 million 
households. This indicates the scale 
of opportunity available to market 
participants, including the PRS REIT. 

Post Period Review

Progress since the start of the 
new financial year has continued 
positively, in line with management 
expectations. The number of 

completed homes as of 31 August 
2019 stood at 1,289, with their 
annualised rental value expected 
to be £11.8m. A further 3,429 
homes with an ERV of £34m per 
annum were in delivery at that 
point. The total estimated ERV of 
the homes under construction and 
those already delivered, together 
4,718 homes across 59 sites, 
amounted to £45.8m, and their 
gross development cost is £734m. 
The table below provides further 
information of delivery activity. 

Development Activity

At		

At	

31 August 2019	

30	June	2019

Number	of	completed	PRS	homes		

1,289	

1,173

Estimated	rental	value	of	
completed	homes

Completed	sites	

GDC	of	completed	sites	

Part-completed	sites	

Number	of	contracted	homes	

£11.8m p.a.	

£10.7m	p.a.	

17	

£145m	

8	

3,429	

17

£145m

4

3,196

ERV	of	contracted	homes	

£34.0m p.a.	

£30.5m	p.a.

Sites	in	progress	

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GDC	of	sites	in	progress	

£589.0m	

£517.0m

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Summary and Outlook

The growth opportunity available to 
the PRS REIT remains substantial, 
driven by the strong underlying 
supply and demand fundamentals 
in the housing market. We also 
believe that PRS housing (at scale) 
can play a part in accelerating the 

overall delivery of new homes, a key 
agenda with local authorities.  
In addition, the track record that we 
have established in delivering high 
quality new homes over multiple 
sites through our efficient supply 
chain platform places the Company 
in a strong position in the PRS 

market. Notwithstanding current 
political uncertainties, we believe 
that the Company remains firmly on 
track to invest its full available capital 
and associated gearing to time and 
budget, and to achieve its targeted 
dividend return of 5.5p per share at 
stabilisation in 2022.

The PRS REIT plc     Annual Report & Financial Statements 2019     34

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My	Simple	Life	Story...

Brian	Mace

"IT REALLY IS A LOVELY 
PEACEFUL AREA, 
SURROUNDED BY TREES  
AND GREENERY, YET I’M  
JUST ONE MILE FROM  
THE CITY CENTRE"

“I’m	really	happy	with	the	
maintenance	service	from	
Simple	Life.	If	I	need	anything	
fixing,	they	are	always	quick	to	
respond	and	get	things	fixed.	
I	don’t	have	the	means	to	buy	
a	house	and	one	real	positive	
about	renting	for	me	is	that	
if	anything	goes	wrong,	you	
aren’t	the	one	to	foot	the	bill!

“Everybody	is	impressed	with	
my	home	when	they	visit.	
When	speaking	to	my	son	
about	how	happy	I	am	with	my	
new	home,	he	said,	‘Perhaps,	
Dad,	you	deserve	it.’”

After	retirement,	Brian	who	
is	now	in	his	70s,	sold-up	and	
began	to	reap	the	benefits	
of	renting,	spending	17	years	
living	in	the	Lake	District.	In	
November	2017	he	moved	
into	his	Simple	Life	home,	
on	the	Park	Grange	House	
development	in	Sheffield,	to	
be	closer	to	family	and	a	city	
centre.

SIZE	WAS	IMPORTANT	
TO	ME…	

Brian	knew	that	as	a	single	
person	whose	children	no	
longer	live	at	home,	he	wanted	
a	place	that	was	the	right	size	
for	him	and	his	needs.

“I	knew	I	didn’t	want	a	
bungalow,	because	when	I	sold	
my	house,	I	also	got	rid	of	all	
the	gardening	equipment,	the	
lawnmower	etc,	and	I	knew	I	
didn’t	want	a	house	because	
that	would	be	too	big	for	me.	

“When	I	came	across	the	plans	
for	the	different	apartments	at	
Park	Grange	House,	I	spotted	the	
ground	floor	apartment.	It	was	
perfect	for	me	as	I	have	a	son,	
Andrew,	who	is	in	a	wheelchair,	
who	needs	plenty	of	space	to	get	
around.	In	fact,	one	of	his	friends	
visited	and	commented	that	the	
rooms	were	big	enough	to	do		
a	little	dance!

“The	building	also	has	
a	lift,	which	means	that	
all	apartments	are	easily	
accessible.”	

LOCATION,	LOCATION,	
LOCATION

“In	the	past,	this	area	of	
Sheffield	has	been	known	
to	be	one	of	the	rougher	
parts	of	town,	however	it	has	
undergone	a	regeneration,	
with	the	tower	blocks	being	
knocked	down	and	all	new	
developments	taking	their	
place.

“It	really	is	a	lovely	peaceful	
area,	surrounded	by	trees	and	
greenery,	yet	I’m	just	one	mile	
from	the	city	centre,	which	I	
walk	down	to	every	Sunday.

“It’s	also	a	relief	to	know	that	I	
have	people	close-by	if	I	need	
them	here	in	Sheffield.”

I	COULDN’T	BE	MORE	
CONTENT	WITH	MY	NEW	
HOME

“One	thing	I	really	noticed	is	the	
thermal	and	sound	insulation	
in	the	apartment	–	it	couldn’t	
be	improved!	The	flat	I	used	to	
live	in	is	approaching	its	100th	
birthday,	so	as	you	can	imagine,	
I’m	saving	around	£400	a	year	
on	electricity	and	gas.

35  The PRS REIT plc   Annual Report & Financial Statements 2019

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The PRS REIT plc   Annual Report & Financial Statements 2019   36

 
 
 
 
 
 
 
Corporate Social Responsibility

All social and community involvement is carried out 
by Sigma and includes such things as employment 
opportunities, a commitment to the local communities 
in which we build, charities (in particular homelessness), 
local schools, as well as continually looking to meet 
with local authority objectives when planning our 
developments. All of Sigma’s CSR contributions will also 
inherently benefit The PRS REIT plc.

Completed Projects 2018-2019

Local Charities
Loaves and Fishes 
Homeless Charity, 
Salford

Project:

Donation was used for exterior 
paving area to be used in Summer 
for BBQ events, a large gas BBQ, 
arts and craft equipment, relaxation 
therapy sessions.

37  The PRS REIT plc   Annual Report & Financial Statements 2019

Sponsorship
Sale Under 18’s 
Rugby Club, Greater 
Manchester

Project:

Donation was used to support  
Sale under 18’s team. We also 
supported their local schools 
scheme, which offers introductory 
Rugby lessons to children locally, 
with a focus on generating more 
interest amongst girls.

Schools, Education 
 & Careers
Monksdown Primary 
School, Merseyside

Project:

KS2 playground equipment 
including outdoor slides, benches 
and a water play area.

Schools, Education 
 & Careers
Mills Hill Primary 
School, Middleton

Project:

A scrap yard play shed and new 
play equipment for all school years.

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The PRS REIT plc   Annual Report & Financial Statements 2019   38

 
 
 
 
 
 
 
Corporate Social 
Responsibility (continued)

River View Primary 
School, Salford

Project: 

Outdoor reading 
greenhouse, complete 
with interiors and new 
books.

“One of our key focuses at the 
school is reading. We have 
a number of children from 
different ethnic backgrounds 
and English isn’t always 
their first language. Reading 
support isn’t always available 
at home and so it’s really 
important for us to encourage 
reading amongst the children.

“We’re really grateful for the 
donation from Simple Life; 
the outdoor greenhouse allows 
us to associate reading time 
within playtime and therefore 
it is viewed as a pleasure and 
not homework or a task.”

Claire Richmond 
River View Primary School

39  The PRS REIT plc   Annual Report & Financial Statements 2019

St Theresa’s Catholic 
Primary School, 
Sheffield

Project:

Brand new library with 
creative mezzanine 
area, books and 
electronic scanning in/
out system.

“The donation has been 
used to buy plenty of new 
books for all of the children, 
which is proving very 
popular. There is also a 
sensory roof, reading pods 
and a fantastic den and 
mezzanine area, which 
is being used creatively to 
replicate different parts of 
popular books, for example, 
at the moment it is taking 
the form of a magical 
castle. The money has also 
funded a barcode scanning 
and checking in system 
which is used to track the 
books.”

Mrs Joanne Cupitt 
Librarian at St Theresa’s School

“The library is my 
favourite place to 
be in school.”

Lulyana 
Pupil at St Theresa’s School

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The PRS REIT plc   Annual Report & Financial Statements 2019   40

 
 
 
 
 
 
 
Corporate Social Responsibility (continued)

Galton Valley Primary 
School, Smethwick

Project:

Books to support their birthday 
book scheme for all children and full 
school Christmas theatre trip.

Salford Foundation

Support:

Sigma staff involvement

Project:

Taking part in the ‘world of work’ 
career fair day held at Harrop Fold 
High School (local to Our Lady’s site 
in Little Hulton).

Regeneration Brainery

Project:

Supporting Regeneration Brainery 
events – helping young people 
interested in a career within the 
property and construction industry 
to learn and network.

Park Palace Ponies

Project:

Sponsoring a pony, Moses, at a 
local riding enterprise and gifting 
Monksdown School children with 
riding lessons.

41  The PRS REIT plc   Annual Report & Financial Statements 2019

New projects 2019-2020

Investing in our people

Local Charities

Continuing to support Loaves and 
Fishes. Project:

Supporting local foodbanks in 4 
areas:

>  The Big Help in Knowsley

>  Atherton and Leigh Foodbank

> Coventry Foodbank

>  The Well in Wolverhampton

Additionally will be supporting new 
schools:

>  Bilston C of E Primary School in 

Wolverhampton

>  Mesne Lea Primary in Walkden

>  Moat House Primary School in 

Coventry

This year will see Sigma help 
to develop a number of team 
members, supporting them through 
new qualifications:

>  Jack Barnet 

RICS Chartered Surveyor 
Qualification

>  Tiffany Chevis 

>  St Peter and Pauls Royal Catholic 

Primary School in Tower Hill, 
Knowsley

 Diploma in Professional Marketing 
with the Chartered Institute of 
Marketing

Schools, Education and 
Careers

Supporting existing schools, Mills 
Hill, St Theresa’s, River View, Galton 
Valley again this year. Galton Valley 
Nursery will also receive a donation 
to revamp their indoor and outdoor 
space.

Supporting Monksdown/Park 
Palace Ponies with further riding 
lessons for the students.

>  St Richards Roman Catholic 
Primary School in Atherton

We are going to be taking part 
in Salford Foundation’s Take 5 
programme which will be taking 
place across high schools in Greater 
Manchester area. This will include:

>  CV creating

>  Mock interviews

> World of work days

> Tycoon launches

>  Personal branding

>  Adam Freeland 

RICS Chartered Surveyor 
Qualification

>  Leanne McBurney 

Institute of Chartered Secretaries 
and Administrators (ICSA) 
Qualification

We are offering 2 paid work 
placements for a 3-month term 
in our Manchester office. These 
placements are in our Finance 
Team and our Project/Development 
Management Team.

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Image provided by Regeneration Brainery

The PRS REIT plc   Annual Report & Financial Statements 2019   42

 
 
 
 
 
 
 
Corporate Social Responsibility (continued)

developments which attract a 
broad range of tenants and offer 
occupants house types which 
provide the opportunity to move 
either up or down the housing 
ladder dependent upon life stage. 
In their construction, our delivery 
partners ensure that the properties 
are delivered in an environmentally 
responsible, ethical, safe and 
sustainable manner, which includes 
adherence to relevant social and 
environmental legislation and codes 
of practice.

Human Rights

The Company does not fall within 
the purview of The Modern Slavery 
Act 2015 (the “Act”) as it has not 
exceeded the turnover threshold 
necessary for it to make a slavery 
statement.

To the best of its knowledge 
the Company is satisfied that its 
principal suppliers and advisors 
comply with the provisions of the 
Act. 

Environmental

The Company funds the delivery of 
quality new homes for rent and as 
such recognises that its activities 
and those of its construction 
partners will change the nature of 
the locations in which we operate. 
Our aim is to change them and 
the people’s lives who live in them, 
for the better. The Company pays 
particular attention to two key 
areas of its activities, namely the 
construction and subsequent 
management of its properties. 

Regarding the construction of new 
homes the Company requires their 
construction partners to adhere to 
all relevant environmental legislation 
and codes of practice, specifically 
that the approach to planning 
and design has as little impact as 
possible on the immediate and wider 
surroundings; that the approach 
to construction is undertaken 
considerately and that the process 
is effectively managed to reduce the 
risk of pollution; and that the use 
of resources is done so efficiently 
with regard to the principles of 
recycling and encourage the use 
of materials which are produced in 
an environmentally less impactful 
manner. 

The Company has a defined 
portfolio of house types, all of 
which are built to relevant building 

regulations and perform well with 
regard to their energy performance 
ratings. The ongoing management 
of the portfolio’s environmental 
impact is inherent in the design 
of the houses, but the Company 
maintains an eye on areas where 
improvements can be made to the 
running of the properties through an 
active asset management system.

Sustainability

As a long term investor in property, 
the Company is committed to a 
sustainable approach to all areas 
of the business. In its creation of 
communities, it strives to design 

43  The PRS REIT plc   Annual Report & Financial Statements 2019

Additional 
Environmental 
initiatives

Modular Construction

Working with housebuilders to increase 
modular construction on our sites

>  Increasing quality of build

> Reducing waste on site

> Increasing on-site efficiencies 

>  Reducing our carbon footprint due to less site deliveries

> Sigma has committed to  
   planting 1,000 trees        
   across all developments.

>  We are installing White 
Rose Clothes Banks 
across all apartment 
schemes. All clothes are 
either upcycled, sold 
or recycled in aid of 
Aegis Trust. White Rose 
supports ‘Green Fashion’ 
– currently we use 5,000 
litres of water to make 
just one pair of jeans!

>  Increasing use of modular 

construction which 
will increase on-site 
efficiencies and decrease 
build period. This will 
ultimately reduce waste 
on site and reduce our 
carbon footprint due 
to a reduction in site 
deliveries.

>  Green additions to our 

customer welcome boxes 
including re-usable, 
branded shopping bags 
and reusable branded 
flasks.

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The PRS REIT Pl   Annual Report and financial statements 2019   44

 
 
 
 
 
 
 
Corporate Social Responsibility (continued)

Creating Good Old Fashioned Neighbourhoods

All homes built for The PRS REIT 
plc portfolios are taken to market 
through Sigma’s consumer build 
to rent brand, Simple Life. Simple 
Life homes puts customers and the 
local community at the heart of its 
proposition.

Whilst we are unable to 
force a community within our 
neighbourhoods, we can do our 

part by offering a platform for a 
community to blossom. One of the 
ways in which we encourage this 
is by holding on-site social events, 
allowing our neighbours to get to 
know one another.

Summer ice cream dashes, Autumn 
wood fired pizza oven evenings and 
a visit from Santa, his elves and 
reindeer at Christmas. All of these 
events are completely free for our 
tenants.

Both 2018 and 2019, has seen 
us hold a variety of events across 
all our completed Simple Life 
sites including: Easter egg hunts, 

45    The PRS REIT plc     Annual Report & Financial Statements 2019

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BRAND VALUES

A NEW STANDARD OF RENTING

Simple Life aims to give residents unrivalled customer 
satisfaction. Previously, people wanting to rent a house, had 
very limited high-quality, professional options. Simple Life fulfils 
that demand. People can benefit from the flexibility of renting, 
whilst being safe in the knowledge that their home will not be 
sold from beneath their feet.

TOTAL PEACE OF MIND

Simple Life customers can rest assured that all the little details 
are taken care of by renting from a professional landlord they 
can trust, with a 24/7 customer service team and dedicated 
handymen. It’s the simple things we do that makes life easy for 
our tenants – we even cut their front lawn!

GOOD OLD-FASHIONED 
NEIGHBOURHOODS

Like the good old days, where neighbours chat over fences 
and borrow cups of sugar! Simple Life customers can expect to 
feel like their Simple Life neighbourhood is where they belong. 
Nurturing our customer and injecting a sense of community will 
always be at the heart of the Simple Life brand.

 INVESTING IN THE LOCAL COMMUNITY

We build communities, not just developments, and with a 
heritage in regeneration, this means that we have a vested 
interest in to looking after the wider communities to which we 
develop, for the long term.

The PRS REIT Pl   Annual Report and financial statements 2019   46
The PRS REIT plc     Annual Report & Financial Statements 2019     46

 
 
 
 
 
 
 
Corporate Social Responsibility (continued)

What Our Tenants Have To Say…
All tenants receive an automated tenant 
satisfaction survey email 1 week into 
their tenancy and 10 months into their 
tenancy. This helps us to monitor the 
tenant experience with our lettings 
and move in team and then later their 

experience as one of our customers. 
The following stats are based on tenant 
satisfaction results for a 6 month period 
from December 2018 – end of May 
2019.

Move in Survey

91.5%

of tenants said the team made it  
easy to apply  
(based on responses neutral to strongly agree)

 85.5%

of tenants said that their house  
met with their expectations  
(based on responses from neutral to strongly agree)

84.0%

of tenants said that they  
would recommend  
Simple Life to a friend  
(based on responses neutral to extremely likely)

47  The PRS REIT plc   Annual Report & Financial Statements 2019
47    The PRS REIT plc     Annual Report & Financial Statements 2019

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10 Month Survey

98.5%

of tenants said that they 
are happy with their home  
(based on responses neutral to strongly agree)

92.0%

of tenants said that they  
feel part of a community 
(based on responses from neutral to strongly agree)

87.5%

of tenants said that the   
communal areas are  
well maintained   
(based on responses neutral to strongly agree)

92.0%

of tenants said that they  
would recommend  
Simple Life to a friend 
(based on responses neutral to extremely likely)

The PRS REIT Pl   Annual Report and financial statements 2019   48
The PRS REIT plc     Annual Report & Financial Statements 2019     48

 
 
 
 
 
 
 
49  The PRS REIT plc   Annual Report & Financial Statements 2019

Principal Risks & Uncertainties

The Board of Directors recognise that there are a 
number of risks which could have an impact on the 
Company’s strategy and investment objectives.

The prospectus issued in May 2017, 
which is available to download on  
the Company’s website at: 
www.theprsreit.com, includes details 
of what the Company and the 
Directors consider to be the principal 
risks and uncertainties. Additional 
risks and uncertainties relating to the 
REIT Group that are not currently 
known to it or the Directors or the 
Company does not consider to be 
material may also have a material 
effect on the REIT Group.

The below list sets out the current 
identifiable principal risks and 
uncertainties which the Board are 
monitoring:

Strategic Risk

The Company’s targeted 
returns are based on estimates 
and assumptions that are 
inherently subject to significant 
uncertainties and contingencies, 
and the actual rate of return 
may be materially lower than the 
targeted returns.

The Company’s targeted returns 
as set out in the IPO Prospectus 
are targets only and are based on 
estimates and assumptions about a 
variety of factors including, without 
limitation, purchase price, yield and 
performance of the Company’s 
investments, which are inherently 
subject to significant business, 
economic and market uncertainties 
and contingencies, all of which are 
beyond the Company’s control 
and which may adversely affect 
the Company’s ability to achieve 
its targeted returns. The Company 
may not be able to implement its 

investment objective and investment 
policy in a manner that generates 
returns in line with the targets. 
Furthermore, the targeted returns 
are based on the market conditions 
and the economic environment at 
the time of assessing the targeted 
returns, and are therefore subject to 
change. In particular, the targeted 
returns assume no material changes 
occur in Government regulations or 
other policies, or in law and taxation, 
and that the Company is not affected 
by natural disasters, terrorism, 
social unrest or civil disturbances or 
the occurrence of risks described 
elsewhere in this document. There 
is no guarantee that actual (or any) 
returns can be achieved at or near 
the levels set out in this document. 
Accordingly, the actual rate of return 
achieved may be materially lower 
than the targeted returns, or may 
result in a partial or total loss, which 
could have a material adverse effect 
on the Company’s profitability, the 
Net Asset Value and the price of the 
Ordinary Shares.

Risks Relating to Investment 
Decisions
There is a risk that investment 
decisions are made that deviate 
from the investment strategy 
and investment objectives that 
may result in lower rental income 
and capital growth returns to 
shareholders.

This risk is mitigated by a regular 
review by the Board of the Company 
with regard to investment strategy 
and investment decisions. The 
Investment Adviser has a defined 
investment appraisal process which 
is authorised by key personnel. In 

addition the investment in multiple 
geographical areas of the UK 
mitigates concentration risk and 
provides a balanced portfolio.

Risk Relating to the Company’s 
Ability to Deploy Capital 
Effectively
There is strong competition in the 
housing market for the supply 
of land across all tenures which 
may affect the Company’s ability 
to deploy capital in a timely and 
effective manner which could 
adversely affect the returns to 
shareholders.

This risk is mitigated due to the 
strong links that the Company and 
Investment Adviser has with its house 
building partners across the various 
regions and conurbations across the 
UK. There is a significant pipeline 
of future development sites and the 
Board reviews this on a regular basis.

Political Risk

Risks relating to the UK’s 
proposed exit from the 
European Union
On 23 June 2016, the United 
Kingdom held a referendum on 
the United Kingdom’s continued 
membership of the European Union. 
This resulted in a vote for the United 
Kingdom to exit the European 
Union (“Brexit”). There are significant 
uncertainties in relation to the terms 
and time frame within which such 
an exit will be effected, and there 
are significant uncertainties as to 
what the impact will be on the fiscal, 
monetary, legal and regulatory 
landscape in the UK. The extent 

The PRS REIT plc   Annual Report & Financial Statements 2019   50

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Principle Risks & Uncertainties (continued)

of the impact on the Company will 
depend in large part on the nature 
of the arrangements that are put in 
place between the United Kingdom 
and the European Union following 
Brexit. Although it is not possible 
to predict fully the effects of the 
exit of the United Kingdom from 
the European Union, any of these 
risks, taken singularly or in the 
aggregate, could have a material 
adverse effect on the Company and 
its opportunities for investments. In 
addition, it could potentially make 
it more difficult for the Company to 
raise capital.

The Board mitigates this risk by 
keeping up to date on the UK’s 
current position on its exit from the 
European Union whilst also taking 
advice from the Investment Adviser 
and other Advisers. The Board 
acts on this advice accordingly. In 
addition, the Company is operating 
in the residential property market 
where current demand is high and 
expects this to continue for the 
foreseeable future.

Operational Risk

Risks relating to the Company’s 
reliance on the Investment 
Adviser
The Company has the benefit 
of access to the Sigma PRS 
platform through the Investment 
Adviser. If the Investment Advisory 
Agreement is terminated it is likely 
that the Company will cease to 
have access to the platform and to 
the relationships and contractual 
frameworks with Approved 
Contractors, Local Authorities and 
the Approved Letting Agent and 
favourable terms and economies 
of scale that have taken years to 
establish. The Company would 
also need to identify replacement 
sources of PRS Development Sites 
and Completed PRS Sites.

In accordance with the Investment 
Advisory Agreement, the Investment 
Adviser is responsible for providing 
certain management and investment 
advisory services to the Company. 
Accordingly, the Company will be 
reliant upon, and its success will 
depend on, the Investment Adviser 
and its key personnel, services and 
resources.

Consequently, the future ability 
of the Company to successfully 
pursue its investment objective 
and investment policy may, among 
other things, depend on the ability 
of the Investment Adviser to retain 
its existing staff and/or to recruit 
individuals of similar experience 
and calibre. Whilst the Investment 
Adviser has endeavoured to ensure 
that the principal members of its 
management team are suitably 
incentivised, the retention of key 
members of the team cannot 
be guaranteed. Furthermore, in 
the event of a departure of a key 
employee of the Investment Adviser, 

51    The PRS REIT plc     Annual Report & Financial Statements 2019

there is no guarantee that the 
Investment Adviser would be able 
to recruit a suitable replacement or 
that any delay in doing so would not 
adversely affect the performance of 
the Company. Events impacting but 
not entirely within the Investment 
Adviser’s control, such as its 
financial performance, it being 
acquired or making acquisitions or 
changes to its internal policies and 
structures, could in turn affect its 
ability to retain key personnel.

Under the terms of the Investment 
Advisory Agreement, the 
Investment Adviser is required 
to devote such time and have all 
necessary competent personnel 
and equipment as may be required 
to enable the Investment Adviser 
to carry out its obligations properly 
and efficiently. However, if the 
Investment Adviser fails to allocate 
the appropriate time or resources 
to the Company’s investments, 
the Company may be unable to 
achieve its investment objectives.  
In addition, although the Investment 
Advisory Agreement requires the 
Investment Adviser to dedicate 
competent personnel to the 
Company’s business they may not 
be able to do so.

The Board mitigates these risks by 
holding regular Board meetings (at 
least four times per financial period) 
whilst also having regular informal 
meetings with the key members of 
the Investment Adviser on a more 
regular basis. The Board actively 
engages with key personnel of the 
Investment Adviser and assesses 
its key man risks to ensure that it 
is adequately staffed with suitably 
qualified personnel and that 
succession planning is in place. 

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Risks relating to tenant default
Dividends payable by the Company 
will be dependent on the income 
from the Completed PRS Sites it 
owns. Failure by tenants to comply 
with their rental obligations could 
affect the ability of the Company to 
pay dividends to shareholders.

The Company develops private 
rented sector residential housing 
across multiple sites and across 
multiple locations across the UK 
and therefore some of this risk is 
mitigated. A rigorous tenant vetting 
process has been implemented and, 
in addition, the Investment Adviser 
holds regular weekly meetings 
focusing on lettings and outstanding 
debtors. The letting agent is 
compensated only when rent has 
been received.

Economic Environment

Risks relating to the economic 
environment
Global market uncertainty and, in 
particular, the restricted availability 
of credit, may reduce the value of 
the Company’s portfolio once it has 
been acquired, and may reduce 
liquidity in the real estate market. 
The performance of the Company 
would be adversely affected by  
a downturn in the property market 
in terms of market value or a 
weakening of rental yields.

The Company mitigates this risk by 
building a high quality portfolio of 
residential assets across multiple 
locations of the UK where there 
is demand and a requirement for 
housing which provides access 
to strong travel links and good 
educational facilities. 

Business disruption relating 
to the Investment Adviser and 
its Information Technology 
Environment
There is risk associated and the 
potential of business disruption in 
relation to the IT systems utilised by 
the Investment Adviser which are 
hosted off-site by a third party.

The third party IT provider are Cyber 
Essential Certified and have been 
utilised by the Investment Adviser 
since 2015 for maintaining all 
hardware, software and backups. 
There has been limited downtime 
during normal working hours.

The third party provider has 
significant controls in place in 
respect of the IT environment 
including that of physical security, 
site availability, network security, 
backups and disaster recovery and 
the monitoring of IT systems.

The Investment Adviser employs an 
IT Manager who is in regular contact 
with the third party and ensures 
compliance. 

The PRS REIT plc     Annual Report & Financial Statements 2019     52

 
 
 
 
 
 
 
Principle Risks & Uncertainties (continued)

Financial Risk

Risks relating to the REIT status 
of the REIT Group
There is a risk that the Company 
may fail to remain qualified as a 
REIT and therefore its rental income 
and capital gains will be subject to 
UK corporation tax. Any change 
in the tax status of the Company 
or a change in tax legislation could 
adversely affect the investment return 
of the Company.The Company has 
been structured to be REIT compliant 

and the Board will continue to 
monitor the tax status using 
professional taxation advisers.

The Company is able to mitigate this 
risk by securing fixed design and 
build contracts before development 
commences.

Risks relating to the development 
costs of Investment properties 
under construction
There is a risk that the development 
costs of Investment properties under 
construction are higher than that 
originally forecast perhaps due to 
unforeseen costs or the availability  
of suitable labour.

By order of the Board.

Steve Smith 
Chairman

24 September 2019

53  The PRS REIT plc   Annual Report & Financial Statements 2019

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The PRS REIT plc   Annual Report & Financial Statements 2019   54

 
 
 
 
 
 
 
Corporate Governance

Directors

Stephen Smith,  
Non-Executive Chairman  
Age 65

Stephen Smith has over 40 years 
of experience in the real estate 
industry. Stephen is currently non-
executive Chairman of Starwood 
European Real Estate Finance 
Limited, non-executive Director 
of Gatehouse Bank Plc and non-
executive Chairman of AEW UK 
Long Lease REIT. Previously, he 
was the Chief Investment Officer 
of British Land Company PLC, the 
FTSE 100 real estate investment 
trust from January 2010 to March 
2013 with responsibility for the 
group’s property and investment 
strategy. 

Prior to joining British Land, 
Stephen was Global Head 
of Asset Management and 
Transactions at AXA Real Estate 
Investment Managers, where he 
was responsible for the asset 
management of a portfolio of more 
than €40 billion on behalf of life 
funds, listed property vehicles, 
unit linked and closed end funds. 
Before joining AXA in 1999, he 
was Managing Director at Sun Life 
Properties for five years. Steve has 
recently completed his time as non-
executive Director of Tritax Big Box 
REIT plc.

55    The PRS REIT plc     Annual Report & Financial Statements 2019

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Steffan Francis,  
Non-Executive Director  
Age 64

Roderick MacRae,  
Non-Executive Director  
Age 55

Steffan Francis has 40 years 
of experience in the real estate 
industry. Until early 2016, Steffan 
was a Director at M&G Real Estate 
where he was responsible for the 
£6 billion “Long Income” business. 
He also was involved in creating 
and ensuring the long term success 
of a number of real estate funds, 
including the M&G Secured Property 
Income Fund, which within 10 
years of being launched, became 
the largest property fund on the 
AREF/IPD UK quarterly Property 
Fund Index. Currently, Steffan is 
a non-executive Director of M&G 
(Guernsey) Limited and is also an 
independent adviser to the British 
Steel Pension Trustee.

Rod has over 20 years’ experience 
in the financial services sector. He 
was, until recently, an Executive 
Director at Aberdeen Asset 
Management PLC as the Group 
Head of Risk with responsibility 
for UK and Global operational risk 
and regulatory compliance. He was 
also Chairman of the Aberdeen 
group executive risk management 
committee, the senior risk oversight 
function of the group. He has 
extensive involvement in corporate 
activity including transformational 
acquisitions and defence strategies. 
Previously he was Chief Operating 
Officer at Edinburgh Fund 
Managers, which he joined in 1991 
and was acquired by Aberdeen 
in 2003. Rod is a member of the 
Institute of Chartered Accountants 
of Scotland having qualified with 
Coopers & Lybrand and is the 
Chairman of the Audit Committee.

Jim Prower,  
Non-Executive Director  
Age 64 
Appointed 20 May 2019

Jim, a Chartered Accountant, has 
over 30 years of experience in senior 
financial roles. For the major part of 
his career he was Group Finance 
Director at Argent Group plc, the 
UK-based property developer, 
then Finance Partner of Argent 
(Property Development) Services 
LLP and Argent Investments LLP, 
which specialise in mixed-use 
developments with a focus on 
placemaking and regeneration. Jim 
was involved in major development 
and regeneration projects in 
Manchester, Birmingham and the 
City of London, and from 2008 to 
2015 he worked on the King’s Cross 
Central joint venture, which was 
one of Europe’s largest regeneration 
projects. Prior to that, he was 
Group Finance Director at NOBO 
Group plc, a leading European 
manufacturer of visual presentation 
products and at Creston Land & 
Estates plc, the property developer. 
Jim is currently Senior Independent 
Director at Empiric Student Property 
plc and a non-executive Director at 
AEW UK Long Lease REIT plc. In 
addition until March 2019, Jim was 
Senior Independent Director at Tritax 
Big Box REIT plc. 

The PRS REIT plc     Annual Report & Financial Statements 2019     56

 
 
 
 
 
 
 
Advisers

Registered Office

Floor 3, 1 St. Ann Street 
Manchester 
M2 7LR

Company Secretary

Sigma Capital Property Ltd 
18 Alva Street 
Edinburgh 
EH2 4QG

Auditor

RSM UK Audit LLP 
25 Farringdon Street 
London 
EC4A 4AB

Financial Adviser and Broker

Nplus1 Singer Advisory LLP 
One Bartholomew Lane 
London  
EC2N 2AX

Financial PR

KTZ Communications 
No. 1 Cornhill 
London  
EC3V 3ND

Investment Adviser

Sigma PRS Management Ltd 
Floor 3, 1 St. Ann Street 
Manchester 
M2 7LR 

Legal and Tax Adviser

Dentons UK and Middle East 
LLP 
One Fleet Place 
London 
EC4M 7WS

Depository

Crestbridge Property 
Partnerships Limited 
8 Sackville Street 
London 
W1S 3DG

AIFM and Manager

G10 Capital Limited 
136 Buckingham Palace Road 
London 
SW1W 9SA

Valuers

Savills (UK) Limited 
33 Margaret Street 
London 
W1G 0JD

57  The PRS REIT plc   Annual Report & Financial Statements 2019
57    The PRS REIT plc     Annual Report & Financial Statements 2019

Report Of The Directors

The Directors present their annual report on the affairs 
of the Group, together with the audited financial 
statements and auditor’s report, for the period ended 
30 June 2019.

Principal Activity

The principal activity of the 
Company is the investment in and 
management of private rented 
sector residential housing which are 
located in the regions of England. 
The Company commenced trading 
on 31 May 2017 after the successful 
raising of £250m gross proceeds 
through its IPO. Its shares are listed 
on the Specialist Fund Segment 
of the Main Market of the London 
Stock Exchange.

Results and Dividends

The financial results for the period 
can be found in the Consolidated 
Statement of Comprehensive 
Income on page 91. The following 
dividends were paid during the year. 

Date

Per ordinary share

31 August 2018

30 November 2018

28 February 2019

31 May 2019

2.5p

1.0p

1.0p

1.0p

Since the period end, a dividend of 
2.0p per ordinary share was paid on 
30 August 2019.

Review of the Business and 
Future Developments

The Directors are required to present 
an extended business review 
reporting on the development and 
performance of the Group and the 
Company during the period and their 
positions at the end of the period. 
This requirement is met by the 
Strategic Report on pages 7 to 53.

Directors

The current Directors of the 
Company are listed on page 55 
to 56, all of whom held office 
throughout the period with the 
exception of Jim Prower who was 
appointed to the Board on 20 
May 2019. The Board consists 
solely of non-executive Directors 
each of whom is independent of 
the Investment Adviser and the 
Company. The Company therefore 
has no executive Directors or 
employees. The Board has no 
fixed policy for the length of tenure 
of Directors. In accordance with 
the articles of association, every 
person appointed as an additional 
director during the course of the 
year must stand for re-election at 

the next annual general meeting. 
Every other director must stand for 
re-election at the annual general 
meeting held in the third calendar 
year from the date he/she was 
appointed or last re-elected by the 
Company. Directors who have been 
appointed for a period of nine years 
require to stand for re-election at 
each annual general meeting. Going 
forward, it is the Board’s intention 
to follow the revised AIC Code of 
Corporate Governance that applies 
to financial periods commencing 
after 1 January 2019 and requires 
that all directors will stand for re-
election annually. The details of the 
Directors’ remuneration along with 
the Director’s beneficial interest 
in securities of the Company are 
given in the Director’s Remuneration 
Report on pages 81 to 83.

Directors’ Interests in Shares

The Directors’ interests in the 
Company’s shares are disclosed in 
the Directors’ Remuneration Report.

Directors’ Indemnity 
Insurance

The Group held a Directors and 
Officers insurance policy in place 
throughout the year and prior period 
in respect of the Company and the 
Group’s subsidiaries. 

The PRS REIT plc     Annual Report & Financial Statements 2019     58

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Report of DIrectors (continued)

Share Capital

250,000,000 ordinary shares of 1p 
each with an aggregate nominal 
value of £2,500,000 were issued 
under the IPO on 31 May 2017 
at a price of 100p per share. 
On 20 February 2018, a further 
243,902,440 ordinary shares of 1p 
each with an aggregate nominal 
value of £2,439,024 were issued 
under the Company’s placing 
programme at a price of 102.5p  
per share.

On 24 May 2017, 50,000 redeemable 
preference shares had been issued 
to the Company in consideration 
for an irrevocable undertaking by 
Sigma Capital Group plc to allow 
the Company to obtain a trading 
certificate pursuant to section 761 
of the Companies Act 2006. These 
shares were redeemed on 31 May 
2017 following admission of the 
Companies ordinary shares to the 
Specialist Fund Segment of the 
Main Market of the London  
Stock Exchange.

On 31 January 2018 and in 
accordance the Development 
Management Agreement with the 
Company’s Investment Adviser, 
Sigma PRS Management Ltd, 
pursuant to which the Investment 

Adviser subscribes bi-annually for 
new ordinary shares 1p each in 
the capital of the Company, the 
Company issued 445,578 ordinary 
shares to the Investment Adviser at 
a share price of 105p per share.

On 8 August 2018 and in 
accordance with the Development 
Management Agreement with the 
Company’s Investment Adviser, 
Sigma PRS Management Ltd, 
pursuant to which the Investment 
Adviser subscribes bi-annually for 
new ordinary shares 1p each in 
the capital of the Company, the 
Company issued 929,276 ordinary 
shares to the Investment Adviser at 
a share price of 104.5p per share.

At the annual general meeting held 
on 28 November 2018, the directors 
were authorised to issue securities 
up to an aggregate nominal amount 
of (i) £80,000 to the Investment 
Adviser in connection with the 
Investment Adviser’s obligation to 
re-invest up to 50% of its fees under 
the Development Management 
Agreement; and (ii) £1,570,924 
representing approximately 31.72% 
per cent of the Company’s issued 
share capital at the time of the 
annual general meeting.

The Company was also authorised 
to dis-apply pre-emption rights 
in respect of securities and to 
issue securities for cash up to an 
aggregate nominal amount equal 
to (i) £80,000 to the Investment 
Adviser in connection with the 
Investment Adviser’s obligation to 
re-invest up to 50% of its fees under 
the Development Management 
Agreement; and (ii) £247,639 which 
represented 5% of the Company’s 
issued share capital at that time.

At the annual general meeting 
held on 28 November 2018, the 
Company was also authorised 
to buy back up to 14.99% of the 
issued share capital of the Company 
at that time, provided the Directors 
believed it to be in the best interests 
of shareholders to where to do so 
would likely result in an increase in 
earnings per share.

As at 30 June 2019, the Company 
had 495,277,294 ordinary shares in 
issue, none of which were held  
in treasury.

59    The PRS REIT plc     Annual Report & Financial Statements 2019

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Substantial Shareholdings

As at 30 June 2019, the Company 
is aware of the following substantial 
shareholdings, which were directly 
or indirectly interested in 3% or 
more of the total voting rights in the 
Company’s issued share capital.

Investor

Number of  
ordinary shares

Invesco Perpetual High 
Income Fund

48,682,926

Invesco Perpetual 
Income Fund

Aviva Life and 
Pensions UK

47,026,819

31,186,991

Homes England

29,878,047

Percentage  
holding of issued 
share capital

9.83

9.50

6.30

6.03

Capital Reduction

As stated in the Company’s 
prospectus dated 4 May 2017 
(“Prospectus”), in order to increase 
the distributable reserves available 
to facilitate the payment of future 
dividends, the Company had 
resolved that, conditional upon 
First Admission and the approval 
of the Court, the amount standing 
to the credit of the share premium 
account of the Company immediately 
following completion of the Issue be 
cancelled and transferred to a special 
distributable reserve. Following the 
approval of the Court on 1 November 
2017 and the subsequent registration 
of the Court order with the Registrar 

of Companies on 2 November 
2017, the cancellation become 
effective. Accordingly, the amount 
of £242,500,000 previously held 
in the share premium account was 
cancelled and transferred to a special 
distributable reserve.

Restrictions on the Transfer 
of Shares

There are no restrictions on the 
transfer of securities in the Company, 
except as a result of:

>   the FCA’s Listing Rules, which 

require certain individuals to have 
approval to deal in the Company’s 
shares; and

>   the Company’s Articles of 

Association, which allow the 
Board to decline to register a 
transfer of shares or otherwise 
impose a restriction on shares, 
to prevent the Company or 
Investment Adviser breaching 
any law or regulation.

The Company is not aware of 
any agreements between holders 
of securities that may result in 
restrictions on transferring securities 
in the Company.

The PRS REIT plc     Annual Report & Financial Statements 2019     60

 
 
 
 
 
 
 
Report of DIrectors (continued)

Greenhouse gas emissions 
reporting

The Board has considered the 
requirement to disclose the 
Company’s measured carbon 
sources under the Companies 
Act 2006 (Strategic Report and 
Directors’ Report) Regulations 2013.

During the year ended 30 June 2019:

>   any emissions from the Group’s 
development of investment 
properties have been the 
contractors’ responsibility rather 
than the Group’s so the principle 
of operational control has been 
applied;

>   any emissions from the Group’s 
completed assets have been 
the tenants’ responsibility rather 
than the Group’s so the principle 
of operational control has been 
applied;

>   any emissions from the 

Company’s registered office 
or from offices used to 
provide administrative support 
are deemed to fall under 
the Investment Adviser’s 
responsibility; and

>   the Group does not lease or own 
any vehicles which fall under 
the requirements of Mandatory 
Emissions reporting.

As such, the Board believes that 
the Company has no reportable 
emissions for the year ended 30 
June 2019.

Management Arrangements

Investment Adviser
The Board appointed Sigma PRS 
Management Ltd as the Company’s 
Investment Adviser (“Sigma PRS”). 
Sigma PRS will be responsible for 
the management of the assets of 
the Company and will advise the 
Company on a day-to-day basis in 

accordance with the Company’s 
investment policy. Sigma PRS may 
transact on the Company’s behalf 
in relation to the acquisition of PRS 
Development sites and Completed 
PRS sites in accordance with the 
Company’s investment object and 
investment policy. The Investment 
Advisory Agreement is terminable 
on 12 months’ written notice, 
which can be served at any time 
after the fifth anniversary of First 
Admission. The Agreement may 
be terminated by the Company 
and the AIFM immediately if the 
Investment Adviser is in material 
breach of the Agreement or is the 
subject of insolvency proceedings. 
The fee arrangement in respect of 
Sigma PRS is shown in note 9 of the 
financial statements.

AIFM
G10 Capital Limited (“AIFM”) has 
been appointed as the Company’s 
Alternative Investment Fund 
Manager with overall responsibility 
for the portfolio management and 
providing alternative investment 
fund manager services ensuring 
compliance with requirements of 
AIFMD, risk management of the 
REIT Group’s investments subject 
to the overall supervision of the 
Directors. The AIFM manages 
the REIT Group’s investments 
in accordance with the policies 
laid down by the Board and in 
accordance with the investment 
restrictions referred to in the AIFM 
agreement. The AIFM Agreement 
provides that the Company will pay 
to the AIFM an asset management 
fee as follows:

(a   an initial one off fee of £12,000;

(b  a monthly fee of £6,000;

(c)   £1,000 per investment 
committee meeting; and

(d) Ad-hoc work as required.

61    The PRS REIT plc     Annual Report & Financial Statements 2019

The AIFM Agreement is terminable 
by any of the parties to them on six 
months’ written notice. The AIFM 
Agreement may be terminated by the 
Company immediately if the AIFM 
ceases to maintain its alternative 
investment fund manager permission 
or fails to notify the Company of 
a regulatory investigation which 
is relevant to the AIFM’s ongoing 
appointment as alternative 
investment fund manager, is in 
material breach of the agreement 
or is the subject of insolvency 
proceedings. The AIFM Agreement 
may be terminated immediately if a 
member of SCG is directly appointed 
as alternative investment fund 
manager of the Company.

Depositary
Crestbridge UK Limited (formerly 
Kingfisher Property Partnerships 
Limited) are the appointed 
Company’s depositary for the 
purposes of the AIFMD. Under the 
terms of the Depositary Agreement, 
the Depositary was paid an initial 
one off fee of £5,000. Provided that 
the assets under management of 
the Company exceed £100 million, 
the Company shall also pay the 
Depositary an annual fee. The 
annual fee shall start at £20,000 
per annum with an additional fee of 
0.667 basis points of any increase 
above £100 million, subject always 
to a maximum fee of £40,000 per 
annum. The Company’s assets 
under management is reviewed 
quarterly. The Depositary is entitled 
to be reimbursed by the Company 
for all costs and expenses properly 
and reasonably incurred in the 
performance of duties under the 
Depositary Agreement.

 
Administration and Secretarial 
Services
Sigma Capital Property Ltd are 
appointed as the Company’s 
administrator to provide day-to-day 
administration of the Company and 
acts as secretary and administrator 
to the Company development and 
production of statutory annual 
accounts, interim accounts and 
reports to shareholders of the 
Company in accordance with IFRS 
and EPRA. The administrator is also 
responsible for calculating the Net 
Asset Value of the Ordinary Shares 
based on information provided to 
the Administrator by Sigma PRS. 
The Administration and Secretarial 
Agreement provides that the 
Company will pay the Administrator 
an annual fee of £90,000 plus VAT, 
payable monthly in arrears.

Financial Risk Management

The principal risks and uncertainties 
faced by the Company and the 
Group are set out on pages 50 to 
53. Information on the financial risk 
management objectives and policies 
relating to market risk, credit risk 
and liquidity risk is provided in note 
2 to the financial statements. 

Treasury activities & financial 
instruments

The Group’s financial instruments 
comprise cash, equity investments 
plus other items such as trade 
debtors and trade creditors that 
arise directly from its operations. 
At 30 June 2019, the Group 
had positive cash balances of 
£229,946,000.

The Group’s policy is to keep 
surplus funds on short term and 
instant access deposit to earn the 
prevailing market rate of interest. 
At 30 June 2019, the Group had 
borrowings of £100,000,000 with 

Scottish Widows and an undrawn 
revolving credit facility with Lloyds 
Banking Group of £100,000,000. 
In addition, the Group has secured 
a further £150,000,000 term loan 
with Scottish Widows and has 
credit approval to increase the 
existing revolving credit facility to 
£150,000,000. Further information 
with regard to the Group’s cash and 
cash equivalents is provided in note 
19 of the financial statements.

Political donations

No political contributions were made 
during the period.

Going concern

The Board confirms that it has a 
reasonable expectation that the 
Company and the Group have 
adequate resources to manage 
its business risks successfully, 
allow it to continue in operational 
existence for the foreseeable future 
and for a period of at least twelve 
months from the date of this report. 
Accordingly, the Board of Directors 
consider that it is appropriate to 
adopt the going concern basis of 
accounting in preparing the annual 
report and financial statements.

Viability statement

The Directors have assessed the 
prospects of the Group and future 
viability over a three year period, 
being longer than the twelve months 
required by the going concern 
provision.

The Board confirms that it has a 
reasonable expectation that the 
Group will continue to operate and 
meet its liabilities as they fall due over 
the next three years, taking account of 
the principal risks and uncertainties as 
set out on pages 50 to 53.

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The three year period chosen by the 
Board is based upon the Group’s 
detailed forecasting model which 
shows that within three years all 
investment property acquisitions 
have been completed, all assets 
under construction have been 
developed and rent stabilisation has 
been achieved.

The Board’s expectation is further 
underpinned by regular dialogue 
with the Investment Adviser which 
consider market conditions, 
the availability of investment 
opportunities, principal risks and 
uncertainties and any change in the 
regulatory framework. The principal 
risks and uncertainties continue to 
be monitored closely by the Board.

Corporate, Social and 
Environmental Responsibility

The Board’s report on Corporate, 
Social and Environmental 
Responsibility is on pages 37 to 48.

Corporate Governance 
Statement

The corporate governance statement 
is set out on pages 67 to 73.

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The PRS REIT plc     Annual Report & Financial Statements 2019     62

 
 
 
 
 
 
 
Report of DIrectors (continued)

Diversity

The Company does not have any 
employees. In respect of the Board 
of Directors, we consider that each 
candidate should be appointed 
on merit to make sure the best 
candidate for the role is appointed 
every time. We support diversity 
at Board level and encourage 
candidates from all educational 
backgrounds and walks of life. What 
is important to us is professional 
achievement and the ability to be a 
successful non-executive Director 
based on the individuals skills set 
and experience. Qualifications are 
considered when necessary to 
ensure compliance with regulation 
such as in relation to the Audit 
Committee. We regularly review the 
Company’s policy on diversity and 
consider the Board of Directors has 
a balance of skills, qualifications and 
experience which are relevant to the 

Company. We value the importance 
of diversity in the boardroom but we 
do not consider it appropriate or in 
the interests of the Company and 
its Shareholders, to set prescriptive 
diversity targets for the Board.

a Director to make himself aware of 
any relevant audit information and to 
establish the Company’s Auditor are 
aware of that information. 

Post Balance Sheet Events

Details of any significant post 
balance sheet events are detailed 
on page 119 of these financial 
statements.

By order of the Board.

Steve Smith 
Director

24 September 2019

Auditor

A resolution to reappoint RSM 
UK Audit LLP as auditors will be 
proposed at the Annual General 
Meeting.

Audit Information

The Directors who held office at 
the date of approval of this Report 
of the Directors confirm that, so 
far as they are aware, there is no 
relevant audit information of which 
the Company’s Auditor are unaware 
and each Director has taken all the 
steps that he ought to have taken as 

63    The PRS REIT plc     Annual Report & Financial Statements 2019

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My	Simple	Life	Story...

Jeanie	Logan

Jeanie	Logan	lives	with	her	
husband,	their	young	son	and	
‘four-legged	friend’	at	Simple	
Life’s	Baytree	Lane,	Middleton.	
After	years	of	bad	rental	
experiences	and	the	financial	ties	
of	home	ownership,	Jeanie	and	
her	family	sought	a	life	with	more	
freedom.

AFFORDING	FLEXIBILITY	

“My	husband	and	I	had	owned	
a	home	for	the	last	13	years.	We	
wanted	a	change	but	didn’t	want	
to	commit	to	owning	a	second-
hand	home	or	rush	into	buying	
again”,	Jeanie	explained.	

“Things	were	going	wrong	with	
our	home,	such	as	leaking	pipes,	
and	it	was	costing	a	fortune.	We	
needed	a	home	that	was	worry-
free	and	gave	us	more	freedom	to	
enjoy	to	life.”	

After	searching	for	a	more	
flexible	alternative,	Jeanie’s	
husband	suggested	renting.	
“I	was	a	little	apprehensive	at	
first”,	Jeanie	admits,	“as	I’d	
lived	in	rented	accommodation	
in	the	past	and	had	some	
problems	with	stolen	post	and	
poor-quality,	unsafe	appliances.	
However,	after	searching	on	the	
internet,	we	came	across	Simple	
Life	and	its	brand-new	rental	
homes.	It	just	seemed	perfect.”	

A	SIMPLE	SOLUTION

Jeanie	and	her	family	decided	
to	rent	a	four-bedroom,	semi-
detached	home	at	Baytree	
Lane.	Their	home	has	three	
bathrooms,	including	an	en-
suite,	a	garden	and	large	
storage	spaces.	

“I’m	used	to	rental	homes	being	
low-quality,	but	everything	
here	is	high-spec	and	brand	
new.	We’ve	got	high-quality	
integrated	appliances	and	soft	
grey	carpets.	We	all	love	it”.	

“Simple	Life	has	been	great	
at	every	stage	and	the	move	
was	just	so	easy.	They	really	
seem	to	care.	We	even	received	
a	welcome	pack	with	all	the	
essentials	-	it’s	the	little	things	
like	that	make	all	the	difference.

Baytree	Lane	is	located	within	
walking	distance	of	Middleton	
town	centre,	close	to	amenities	
such	as	grocery	shops,	local	
swimming	pool	and	Ofsted	
rated	‘outstanding’	and	‘good’	
schools.	

Tandle	Hill	Country	Park	is	one	
of	the	many	green	spaces	close	
by,	as	well	North	Manchester	
Golf	Club	and	Radclyffe	
Athletics	Centre.

BETTER	LIVES	WITH		
SIMPLE	LIFE	

“The	local	area	and	location	of	
our	home	is	brilliant”,	Jeanie	
added.	“In	fact,	it’s	even	made	
me	more	active.	As	we’re	so	
close	to	the	train	station,	I’m	
walking	and	getting	the	train	
to	work,	which	means	no	more	
stressful	traffic.	With	the	area	
being	so	pleasant,	and	the	
canal	just	near	our	street,	I’ve	
also	started	running	too!”	

With	a	12-month	lease	on	her	
Simple	Life	property,	Jeanie	
and	her	family	have	the	peace	
of	mind	that	their	home	
won’t	be	sold.	Knowing	that	a	
maintenance	team	is	on	hand	if	
anything	goes	wrong.	

“We	no	longer	have	the	worry	
of	something	costly	happening	
and	this	has	changed	our	lives.	
We	initially	planned	to	rent	for	
12	months	but	we’ve	already	
extended	this	to	three	years.	
Renting	a	new	home	with	
Simple	Life	has	given	us	the	
flexibility	we	need	to	be	able	
to	do	things	like	travel	with	our	
son.	We	can	truly	enjoy	our	lives	
now.”

The PRS REIT plc   Annual Report & Financial Statements 2019   64

 
 
 
 
 
 
 
65  The PRS REIT plc   Annual Report & Financial Statements 2019
65    The PRS REIT plc     Annual Report & Financial Statements 2019

Statement Of Directors’ 
Responsibilities

The Directors are responsible for 
preparing the Strategic Report, the 
Report of the Directors’ and the 
Directors’ Remuneration Report, the 
Corporate Governance Statement 
and the financial statements in 
accordance with applicable law and 
regulations.

Company law requires the Directors 
to prepare financial statements for 
each financial period. Under that 
law, the Directors have prepared 
the Group financial statements 
in accordance with International 
Financial Reporting Standards 
(“IFRSs”) as adopted by the 
European Union (“EU”) and have 
elected under company law to 
prepare the Company financial 
statements in accordance with IFRS 
as adopted by the EU. 

The financial statements are required 
by law and IFRS adopted by the EU 
to present fairly the financial position 
of the Group and the Company 
and the financial performance of 
the Group. The Companies Act 
2006 provides in relation to such 
financial statements that references 
in the relevant part of that Act to 
financial statements giving a true 
and fair view are references to their 
achieving a fair presentation.

Under company law, the Directors 
must not approve the financial 
statements unless they are satisfied 
that they give a true and fair view 
of the state of affairs of the Group 
and Company and of the profit or 
loss of the Group for that period. In 
preparing the financial statements, 
the Directors are required to:

>  select suitable accounting policies 
and then apply them consistently;

>  state whether they have been 
prepared in accordance with 
IFRS’s adopted by the EU; 

>  make judgements and accounting 
estimates that are reasonable and 
prudent; and

>  prepare the financial statements 

on the going concern basis unless 
it is inappropriate to presume 
that the Group and Company will 
continue in business. 

The Directors’ are responsible 
for keeping adequate accounting 
records that are sufficient to 
show and explain the Group and 
Company’s transactions and disclose 
with reasonable accuracy at any time 
the financial position of the Group 
and Company and enable them to 
ensure that the financial statements 
and Directors Remuneration Report 
comply with the Companies Act 
2006 and, as regards the Group 
financial statements, Article 4 of the 
IAS Regulation.

The Directors’ are also responsible 
for safeguarding the assets of the 
Group and Company and hence 
for taking reasonable steps for the 
prevention and detection of fraud 
and other irregularities. 

Each of the Directors, whose names 
and functions are listed in the 
Corporate Governance section of 
the Annual Report confirm that, to 
the best of their knowledge:

>  the financial statements, prepared in 
accordance with the applicable set 

of accounting standards. Give a true 
and fair view of the assets, liabilities, 
financial position and profit of the 
Company and the undertakings 
included in the consolidation taken 
as a whole; and

>  the Strategic Report contained in 
the Annual Report includes a fair 
review of the development and 
performance of the business and 
the position of the Company and 
the undertakings included in the 
consolidation taken as a whole, 
together with a description of the 
principal risks and uncertainties that 
it faces.

The Directors are responsible for 
the maintenance and integrity of the 
corporate and financial information 
included on the PRS REIT website.

Legislation in the United Kingdom 
governing the preparation and 
dissemination of financial statements 
may differ from legislation in other 
jurisdictions.

Approval

This Statement of Directors’ 
Responsibilities was approved by the 
Board and signed on its behalf by:

Steve Smith 
Chairman

24 September 2019

The PRS REIT plc     Annual Report & Financial Statements 2019     66

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Corporate 
Governance 
Statement

Statement of Compliance

The Board has considered the 
principles and recommendations of 
the 2016 AIC Code of Corporate 
Governance (“AIC Code”) by 
reference to the AIC Corporate 
Governance Guide for Investment 
Companies (“AIC Guide”). The AIC 
Code, as explained by the AIC 
Guide, addresses all the principles 
set out in the 2016 UK Corporate 
Governance Code (“Code”) as well 
as setting out additional principles 
and recommendations on issues 
that are of specific relevance to 
the Company. By applying the 
AIC Code, the Group is voluntarily 
adhering to the principles and 
recommendations of the Code.

The Board considers that reporting 
against the principles and 
recommendations of the AIC Code 
and by reference to the AIC Guide 
(which incorporates the Code) 
will provide better information to 
Shareholders.

During February 2019, the AIC 
issued a revise Code of Corporate 
Governance (“Revised AIC Code”) 
that is to apply to financial periods 
commencing after 1 January 2019. 
The Company will be required to 
report against the Revised AIC Code 
in next year’s annual report and 
financial statements.

For the year ended 30 June 2019, 
the Company has complied with 
the recommendations of the AIC 
Code (except as set out below) and 

the relevant provisions of the Code 
other than those relating to:

1.   the role of the Chief Executive;

internal operations. The Company 
has therefore not reported further in 
respect of these provisions.

2.   executive Directors’ 
remuneration; and

3.   the need for an internal audit 

function.

The Board considers these 
provisions are not relevant to the 
position of the Company, being 
an externally managed investment 
company. In particular, all of the 
Company’s day-to-day management 
and administrative functions are 
outsourced to third parties. As 
a result, the Company has no 
executive Directors, employees or 

Responsibilities

The Board is responsible for 
ensuring compliance with the 
Group’s investment policy and has 
oversight of the management and 
conduct of the Group’s business, 
strategy and development. 

The Board is also responsible for the 
control and supervision of the AIFM 
and the Investment Adviser and 
compliance with the principles and 
recommendations of the AIC Code. 
The Board ensures the maintenance 
of a sound system of internal 

67    The PRS REIT plc     Annual Report & Financial Statements 2019

with the Group’s investment 
policy) and risk management of 
the Group pursuant to the AIFMD, 
including the implementation 
and review of adequate risk 
management systems. The AIFM 
has delegated the day-to-day 
portfolio management of the Group 
to the Investment Adviser, including 
the acquisition of PRS Development 
Sites and Completed PRS Sites 
and appointing and liaising with 
third parties providing services to 
the Group. The Investment Adviser 
also provides certain development 
management services to the Group, 
in connection with the construction 
and delivery of new PRS Units. 

The key matters reserved to the 
Board are:

>   board membership and powers 
including the appointment and 
removal of Board members;

>   establishing the overall control 

framework, Stock Exchange related 
matters, including the approval 
of communications to the Stock 
Exchange, and communications 
with shareholders, other than 
announcements of a routine nature;

>   the appointment, termination, 
and regular assessment of the 
performance of the principal 
advisers, including the AIFM, 
Investment Adviser, Legal and 
Tax Advisers, Administrator, 
Valuer, Financial Adviser and 
Broker, Registrar and Auditor;

>   the approval of annual and 
half yearly financial reports, 
to 31 December and 30 
June respectively, dividends, 
accounting policies and 
significant changes in accounting 
practices;

>   the review of the adequacy 
of corporate governance 
procedure;

>   the review of the risk inventory 

and the effectiveness of internal 
controls;

>   approval of changes to the 
Group’s capital structure, 
dividend policy, treasury policy, 
borrowing facilities and any 
banking relationships;

>   approval of any related party 

transactions subject to further 
regulatory requirements; and 

>   oversight of the Group’s 

operations ensuring compliance 
with statutory and regulatory 
obligations.

The Board has carried out a robust 
assessment of the principal risks 
affecting the business, including 
those which would threaten its 
business model, future performance, 
solvency or liquidity. Details of these 
risks and their management are set 
out in this report on page 50 to 53.

The Board has reviewed the 
effectiveness of the AIFM and 
Investment Adviser’s compliance 
and control systems in operation 
insofar as they relate to the affairs of 
the Group and further reviews the 
arrangements with the Depository 
to ensure the safeguarding of the 
Company’s assets and security 
of the shareholders’ investment is 
being maintained.

As the Company principally invests 
in property assets, the Board does 
not consider that there is any need 
to determine a separate remit for the 
Investment Adviser regarding voting 
and corporate governance issues 
in respect of investee companies. 
While the Company has a number 
of subsidiary undertakings these are 
all special purpose vehicles set up 
for the purposes of holding property 
assets and are all 100% owned/
controlled by the Company.

The PRS REIT plc     Annual Report & Financial Statements 2019     68

controls and risk management 
(including financial, operational and 
compliance controls) and reviews 
the overall effectiveness of the 
systems in place throughout the 
year and no problems have been 
identified. The Board is responsible 
for approval of any changes to 
the capital, corporate and/or 
management structure of the Group. 

The Board’s main focus is the 
sustainable long-term success 
of the Group to deliver value for 
shareholders. The Board does not 
routinely involve itself in day-to-day 
business decisions. 

The AIFM is responsible for portfolio 
management (including compliance 

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Corporate Governance Statement (continued)

Investment Adviser

The Board has appointed the 
Investment Adviser, Sigma PRS 
Management Ltd, to provide 
investment advice and to manage 
the property portfolio and the 
associated day-to-day activities 
of the Company. The Investment 
Adviser is part of Sigma Capital 
Group, a leading provider of 
PRS properties in the UK. As a 
wholly owned subsidiary of Sigma 
Capital Group, the Investment 
Adviser benefits from the extensive 
experience and expertise of Sigma 
Capital Group with access to its 
PRS property platform to source 
investment opportunities that 
meet the investment objectives of 
the Company, management of all 
properties within the portfolio and 
providing marketing and investor 
relations services to the Company. 

The agreement with the Investment 
Adviser is terminable on not less 
than 12 months’ notice by either 
party, such notice not to expire 

Board Membership and 
Meeting Attendance

During the year to 30 June 2019, 
the number of scheduled Board 
meetings attended by each 
Director was as follows:

earlier than 31 May 2023. The 
performance of the Investment 
Adviser has been reviewed on 
an ongoing basis throughout the 
period by the Board at its quarterly 
meetings. The Board considers 
a number of factors including 
investment performance, the skills 
and experience of key staff and 
the capability and resources of 
the Investment Adviser to deliver 
satisfactory performance for the 
Company in accordance with its 
Investment Objective. The Board is 
satisfied with the performance of the 
Investment Adviser and considers its 
continued appointment to be in the 
best interests of the Company and 
its shareholders. 

Annual Report and Financial 
Statements

The Directors have responsibility 
for preparing the annual report 
and financial statements. Each 
of the Directors considers that, 
taken as a whole, the annual report 
and financial statements are fair, 
balanced and understandable and 
provide the information necessary 
for shareholders to assess the 
Group’s position and performance, 
business model and strategy.

The Board has a reasonable 
expectation that the Group and the 
Company will be able to continue 
in operation and meet its liabilities 
as they fall due over the next twelve 
months from the date of this report. 
The going concern and viability 
statements of the Group are set out 
on page 62.

Director

Attendance* Date of Appointment

Length of Service at 
30 June 2019

Stephen Smith

6/6 24 April 2017

26 months

David Steffan 
Francis

Roderick 
MacRae

6/6 24 April 2017

26 months

6/6 24 April 2017

26 months

Jim Prower

N/A 20 May 2019

1 month

*  Number of scheduled meetings attended/maximum number of meetings that the Director 

could have attended.

69    The PRS REIT plc     Annual Report & Financial Statements 2019

 
Composition

The Group has a non-executive 
Chairman and three other non-
executive Directors all of whom 
were considered independent on 
and since their appointment. All of 
the Directors are independent of the 
Investment Adviser and the AIFM. 
Jim Prower was appointed as an 
additional non-executive director 
in May 2019. No external search 
consultancy or open advertising 
was used as the candidate had 
already been identified and was 
considered appropriate for the role. 
A rigorous on-boarding process was 
undertaken prior to his appointment.

Stephen Smith is the Chairman 
of the Company. The Chairman 
is responsible for leadership and 
oversight of the Board to ensure 
that it functions effectively. Stephen 
ensures that accurate, timely and 
clear information is received and 
sufficient time is given in meetings to 
review all agenda items thoroughly. 
He promotes constructive debate 
and facilitates a supportive, co-
operative and open environment 
between the Investment Adviser and 
the Directors. He is also responsible 
for ensuring that the Company’s 
obligations to its shareholders are 
understood and met.

The non-executive Directors hold, or 
have held senior positions in industry 
and commerce and contribute a 
wide range of skills, experience and 
objective perspective to the Board. 
Through the Board committees, 
the non-executive Directors bring 
focus and independence to strategy, 
governance, internal controls and 
risk management.

During the year, the Board was 
satisfied that all Directors were 
able to commit sufficient time to 
discharge their responsibilities 
effectively having given due 
consideration to the Directors’ 
external appointments. The 
Directors were advised on 
appointment of the expected time 
required to fulfil their roles and 
have confirmed that they remain 
able to make that commitment. All 
material changes in any Director’s 
commitments outside the Group 
are required to be, and have been, 
disclosed prior to the acceptance of 
any such appointment.

Directors are selected and 
appointed by the Board as a 
whole. There is no separate 
nomination committee as the 
Board is considered small relative 
to listed trading companies. The 
Directors are therefore responsible 

for reviewing the size, structure and 
skills of the Board and considering 
whether any changes are required 
or new appointments are necessary 
to meet the requirements of the 
Company’s business or to maintain 
a balanced Board.

The Articles of Association require 
that Directors submit themselves for 
re-election at least every three years, 
apart from those Directors who are 
appointed in the current financial 
year who automatically stand 
for election at the next AGM. In 
addition, the Board has agreed that 
any Director with more than nine 
years’ service will be required to 
stand for re-election at each annual 
general meeting in accordance 
with the recommendations of 
the AIC Code. Jim Prower was 
appointed during the current year 
and in accordance with the Articles 
of Association will stand for re-
election at the upcoming AGM. The 
Board believes that Jim Prower 
has made a valuable contribution 
since his appointment and remains 
committed to the role. The Board 
therefore recommends that 
shareholders re-elect Jim Prower at 
the forthcoming AGM. 

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The PRS REIT plc     Annual Report & Financial Statements 2019     70

 
 
 
 
 
 
 
Corporate Governance Statement (continued)

Board Committees

The Board has established 
a management engagement 
committee and an audit committee. 
Given that the Company has 
no executive Directors or other 
employees; the Board does not 
consider it necessary to establish  
a separate remuneration committee. 

The Audit Committee meets at 
least twice a year and reviews the 
scope and results of the external 
audit, its cost effectiveness and 
the independence and objectivity 
of the external auditors, including 
the provision of non-audit services. 
The Audit Committee comprises all 
the non-executive Directors given 
the size of the Board and to benefit 
from the broad range of financial, 
commercial and property sector 
experience which enables them to 
provide better oversight of financial 
and risk matters. Rod MacRae is 
Chairman of the Audit Committee. 

The management engagement 
committee comprises the full 
board and keeps the terms of 
engagement with the AIFM and 
Investment Adviser under review 
and examines the effectiveness 
of the Company’s internal control 
systems and the performance 
of the AIFM, Investment Adviser, 
Administrator, Depositary, Company 
Secretary, Valuer and other service 
providers. The Management 
Engagement Committee comprises 
each of the Directors given 
the size of the Board but each 
member is independent of the 
AIFM and the Investment Adviser. 
Stephen Smith is the Chairman 
of the Management Engagement 
Committee. The Management 
Engagement Committee receives 
reports and analyses from each 
of the Investment Advisor and 
AIFM and reviews these, making 
recommendations for change or 

requests for additional information 
where appropriate to ensure 
ongoing performance under the 
terms of their respective contractual 
arrangements.

The Board has appointed the 
Investment Adviser, Sigma PRS 
Management Ltd, to provide 
investment advice and to manage 
the property portfolio and the 
associated day-to-day activities 
of the Company. The Investment 
Adviser is part of Sigma Capital 
Group, a leading provider of 
PRS properties in the UK. As a 
wholly owned subsidiary of Sigma 
Capital Group, the Investment 
Adviser benefits from the extensive 
experience and expertise of Sigma 
Capital Group with access to its 
PRS property platform to source 
investment opportunities that 
meet the investment objectives of 
the Company, management of all 
properties within the portfolio and 
providing marketing and investor 
relations services to the Company. 

The agreement with the Investment 
Adviser is terminable on not less 
than 12 months’ notice by either 
party, such notice not to expire 
earlier than 31 May 2023. The 
performance of the Investment 
Adviser has been reviewed on 
an ongoing basis throughout the 
period by the Board at its quarterly 
meetings. The Board considers 
a number of factors including 
investment performance, the skills 
and experience of key staff and 
the capability and resources of 
the Investment Adviser to deliver 
satisfactory performance for the 
Company in accordance with its 
Investment Objective. The Board is 
satisfied with the performance of the 
Investment Adviser and considers its 
continued appointment to be in the 
best interests of the Company and 
its shareholders.

Board Meetings

During a full financial period, the 
Board will meet formally at least 
on a quarterly basis with additional 
meetings as the Board may decide 
from time to time dedicated to 
specific events. There were seven 
meetings during the year, attended 
by those Directors available at the 
time. The additional meetings in the 
year were in connection with the 
approval of the 2018 Annual Report 
and Financial Statements, the debt 
facilities with Scottish Widows 
Limited and the appointment of Jim 
Prower to the Board.

Board papers are circulated by 
the Investment Adviser prior to 
each meeting to ensure that the 
Directors receive accurate, clear 
and timely information to help 
them to discharge their duties. For 
this purpose, the Board receives 
periodic reports from the AIFM and 
the Investment Adviser detailing 
the performance of the Group. The 
primary focus at the meetings are a 
review of investment opportunities, 
investment performance and 
associated matters such as 
gearing, asset allocation, level of the 
share price discount or premium, 
marketing and investor relations and 
industry issues. 

Discussions of the Board

During the year the Board spent 
time discussing the following items:

>   health and safety;

>   the approval of debt facilities 

with Lloyds Bank and Scottish 
Widows;

>   the Group’s corporate structure;

>   the Group’s communication 

strategy;

>   the key performance indicators 
by which the Group measures 
success;

71    The PRS REIT plc     Annual Report & Financial Statements 2019

>   updates on relevant government 
or regulatory developments; 

>   review of quarterly management 

accounts;

>   review of the Company’s share 
price rating, performance 
and trading the Group’s NAV 
performance;

>   analysis of the Company’s 

shareholder register;

>   review of corporate governance 
compliance, Group subsidiary 
activity and depositary report.

The Investment Adviser attends the 
Board meetings. Representatives from 
the AIFM and the Company’s other 
advisers are also invited to attend 
Board meetings from time to time.

Performance Evaluation

The Directors recognise that the 
evaluation process is a significant 
opportunity to review the practices 
and performance of the Board, 
its committees and its individual 
Directors and to implement actions 
to improve the Board’s focus and 
effectiveness which contribute to the 
Group’s success. 

The Board has undertaken an 
internal performance evaluation by 
way of a questionnaire designed 
to assess the strengths and 
effectiveness of the Board and 
its committees. The evaluation 
considered (amongst other things) 
the composition, balance and 
effectiveness of the Board, the 
quality of management information, 
the independence and the overall 
performance of the Board and its 
Committees. Each of the Directors 
completed a questionnaire which 
was then used to hold constructive 
discussions led by the Chairman. 

Having conducted the evaluation, 
the Board considers that it has 
performed effectively and that it 
demonstrates a good balance of 
skills, performance and knowledge. 
The Board is also satisfied that the 
Chairman remains independent 
of the Investment Adviser and the 
AIFM and has exhibited a good 
leadership style, promoting effective 
decision making, constructive 
debate and ensuring the board 
functions well as a unit. Whilst the 
Board recognises it could be more 
diverse, it does not consider it is in 
the best interests of shareholders 
to force diversity by imposing fixed 
criteria or quotas. The Board will 
continue to make appointments 
based on merit, having regard to a 
number of factors including gender, 
ethnicity, skills and experience. The 
Board will continue to monitor and 
encourage diversity.

Conflicts of Interest

The Group operates a conflicts 
of interest policy that has been 
approved by the Board and sets out 
the approach to be adopted and 
procedures to be followed where a 
Director, or such other persons to 
whom the Board has determined 
the policy applies, has an interest 
which conflicts, or potentially may 
conflict, with the interests of the 
Group. Under the policy and the 
Company’s Articles of Association, 
the Board may authorise potential 
conflicts that may arise, subject 
to imposing limits or conditions 
when giving authorisation if this is 
appropriate.

The Group reserves the right to 
withhold information relating, or 
relevant, to a conflict matter from 
the Director concerned and/or  

to exclude the Director from any 
Board information, discussions or 
decisions which may or will relate 
to that matter of conflict or where 
the Chairman considers the it would 
be inappropriate for a Director to 
take part in such discussion or 
decision or receive such information. 
Procedures have been established 
to monitor actual and potential 
conflicts of interest on a regular 
basis and the Board is satisfied 
that these procedures are working 
effectively.

The AIFM and Investment Adviser 
maintain a policy to avoid and 
manage any conflicts of interest 
that may arise between themselves 
and the Group. The Investment 
Adviser has established a clear and 
robust framework to ensure that any 
conflicts of interest are appropriately 
governed that includes:

>   the Investment Adviser’s 

obligation to provide the Group 
with a right of first refusal on 
every investment opportunity 
meeting the Group’s investment 
policy with the intention that 
the Group undertakes not 
less than two-thirds of all 
such opportunities with the 
balance being developed by the 
Investment Adviser and forward 
sold to the Group;

>   the Investment Adviser’s 

obligation to sell all stabilised 
investments assets to the 
Group on pre-agreed terms at a 
price equal to the market value 
determined by an independent 
valuation expert;

> 

 other conflict matters, in particular 
regarding the value, quality 
or other terms relating to the 
acquisition of assets by the Group.

The PRS REIT plc     Annual Report & Financial Statements 2019     72

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Corporate Governance Statement (continued)

Professional Development

All Directors received a 
comprehensive induction 
programme on joining the Board 
that covered the Investment 
Adviser’s investment approach, 
the role and responsibilities of a 
Director and guidance of corporate 
governance and applicable 
regulatory and legislative landscape. 
The Chairman regularly reviews and 
discusses the development needs 
with each Director. Each Director 
is fully aware that he should take 
responsibility for his own individual 
development needs and take the 
necessary steps to ensure he is 
wholly informed of regulatory and 
business developments. 

Health and Safety

Health and safety is of prime 
importance to the Group and is 
considered equally with all other 
business management activities to 
ensure protection of stakeholders, 
be they tenants, advisers, suppliers, 
visitors or others. The Board 
regularly discusses health and 
safety issues with the Investment 
Adviser. The Group is committed 
to fostering the highest standards 
in health and safety as it believes 
that all unsafe acts and unsafe 
conditions are preventable. All our 
stakeholders have a responsibility 
to support the aim of ensuring a 
secure and safe environment, and 
all our stakeholders are tasked 
with responsibility for achieving this 
commitment.

Transparency

The Company aims to be transparent, 
and to ensure that it communicates 
with its shareholders and other 
stakeholders in a manner that 
enhances their understanding of  
its business.  

The Company maintains accounting 
documentation that clearly identifies 
the true nature of all business 
transactions, assets and liabilities, 
in line with the relevant regulatory, 
accounting, and legal requirements. 
No record or entry is knowingly 
false, distorted, incomplete, 
or suppressed. All reporting is 
materially accurate and complete 
and in compliance in all material 
respects with stated accounting 
policies and procedures.

The Investment Adviser and the 
Group’s joint financial advisers 
regularly meet and receive calls 
from shareholders and analysts 
in order to understand their 
views, and the Group’s broker 
speaks to shareholders regularly, 
ensuring shareholder views are 
communicated to the Board. The 
Board takes responsibility for, 
and has a direct involvement in, 
the content of communications 
regarding major corporate issues.

The Company does not knowingly 
misstate or misrepresent 
management information for any 
reason, and the Company expects 
the same to apply to its suppliers. 
The Company may be required to 
make statements or provide reports 
to regulatory bodies, government 
agencies or other government 
departments, as well as to the 
media. The Company ensures that 
such statements or reports are 
correct, timely, and not misleading, 
and that they are delivered through 
the appropriate channels. The 
Company provides through its 
website, its Annual Report, other 
statements and any appropriate 
information to enable shareholders 
and stakeholders to assess the 
performance of its business. 
The Company complies with the 
applicable laws and regulations 
concerning the disclosure of 
information relating to the Company.

Shareholder Engagement

The Group encourages active 
interest and contribution from 
both its institutional and private 
investors and responds promptly to 
all queries received by the Group. 
The Board recognises the importance 
of maintaining strong relationships 
with shareholders, and the Directors 
place a great deal of importance on 
understanding shareholder sentiment.

Shareholders are encouraged to 
attend and vote at the Company’s 
shareholder meetings, so they can 
discuss governance and strategy 
and the Board can enhance its 
understanding of shareholder views. 
The Board attends the Company’s 
shareholder meetings to answer 
any shareholder questions and the 
Chairman makes himself available, 
as necessary, outside of these 
meetings to speak to shareholders. 

The Board believes that sufficient 
information is available to 
shareholders to understand the 
balance of risk and reward to which 
they are exposed by holding shares 
in the Company. The publication 
of the Key Information Document 
on the Company’s website, which 
is prepared by the AIFMD in 
conjunction with the Investment 
Adviser, provides the nature and 
key risks of the Company to 
shareholders.

The Board is committed to 
providing investors with regular 
announcements of significant events 
affecting the Group and all investor 
documentation is available on the 
Group’s website:  
www.theprsreit.com.

73    The PRS REIT plc     Annual Report & Financial Statements 2019

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The PRS REIT plc     Annual Report & Financial Statements 2019     74

 
 
 
 
 
 
 
 
75  The PRS REIT plc   Annual Report & Financial Statements 2019
75    The PRS REIT plc     Annual Report & Financial Statements 2019

Audit Committee Report

I am pleased to present the 
Audit Committee report of 
The PRS REIT plc covering 
the financial year ended 30 
June 2019.

The Committee, which reports 
to the Board, has governance 
responsibilities to oversee the 
Company’s financial reporting 
processes which include the risk 
management and internal financial 
controls of the Investment Adviser.

The Committee members consists 
of three Board Directors and 
between them they have a broad 
range of financial, commercial and 
property sector expertise which 
enables them to provide oversight of 
both financial and risk matters.

Role of the Audit Committee

The principal duties of the Audit 
Committee are:

Financial Reporting
>   consider the integrity of the 
interim and full year financial 
statements which includes the 
preliminary results announcement 
of the Company;

>   report to the Board on any 

significant financial reporting 
issues and judgments 
having regard to any matters 
communicated to it by the 
Auditor; and

>   as requested by the Board, to 

review the contents of the Annual 
Report and financial statements 
and advise the Board on 
whether the report and financial 
statements are a true and fair 
view of the Company’s financial 
position as at 30 June 2019 and 
further provides shareholders 
sufficient information to assess 
the Company’s and Groups 

position and the Group’s 
performance, investment strategy 
and investment objectives.

Risk Management and Control
>   review the adequacy of the 
internal controls and risk 
management systems of the 
Company’s Investment Adviser; 
and

>   report to the Board on the 
Company’s procedures for 
detecting fraud.

External Audit
>   to manage the relationship with 
the Company’s external Auditor, 
including reviewing the Auditor’s 
remuneration, independence 
and performance and making 
recommendations to the Board 
as appropriate;

Matters considered by the 
Audit Committee 

There are at least two scheduled 
Audit Committee meetings per 
any financial period. For the period 
from 1 July 2018 to 24 September 
2019, the audit committee has met 
five times. The attendance at these 
meetings was as follows:

Rod MacRae (Chairman)

5/5

Steve Smith

Steffan Francis

5/5

4/5

At these meetings, the Audit 
Committee has:

>   reviewed the internal controls 

>   to review the policy on the 

engagement of the Auditor; and

and risk management systems of 
the Company;

>   to safeguard the Auditor’s 

>   reviewed financial results;

independence and objectivity.

External Property Valuation
>   to review the quality and 

appropriateness of the half-yearly 
and full year external valuations 
of the Group’s property portfolio.

Other
>   review the Committee’s terms 
of reference and performance 
effectiveness.

The Audit Committee is to meet 
at least twice annually and its 
quorum is two members. The audit 
committee reports and makes 
recommendations to the Board, 
after each meeting.

>   agreed the audit plan with the 

Auditor, including the agreement 
of the audit fee;

>   reviewed the annual valuation 
reports from the independent 
valuation expert, Savills (UK) 
Limited;

>   reviewed the provision of non-
audit services by the Auditor;

>   reviewed the independence of 

the Auditor; and

>   reviewed the Group’s Financial 
Statements and advised the 
Board accordingly.

The Company’s principal risks can 
be found on pages 50 to 53. The 
Administrator and the Investment 
Adviser update the Audit Committee 
on changes to accounting 
policies, risk, legislation and areas 
of significant judgment by the 
Investment Adviser.

The PRS REIT plc     Annual Report & Financial Statements 2019     76

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Audit Committee Report (continued)

Significant Matters 
Considered by the Audit 
Committee in the Year

Acquisition of Subsidiaries

During the period the Group 
acquired ten property owning 
special vehicles. The Directors 
considered whether these 
acquisitions met the definition of 
a business or the acquisition of 
a group of assets and liabilities. 
It was concluded that five of the 
subsidiaries met the criteria for the 
acquisition of business as outlined 
in IFRS 3 whilst the remaining five 
subsidiaries met the criteria for the 
acquisition of a group of assets 
and liabilities as outlined in IFRS 3. 
The Audit Committee considered 
the accounting treatment of the 
acquisitions of these property 
owning special purpose vehicles. 
The Administrator and the 
Investment Adviser provided advice 
to the Audit Committee in this 
regard. The Audit Committee was 
satisfied that these acquisitions were 
appropriately treated as business 
combinations or asset acquisitions.

Property Portfolio Valuation
Investment property is held in the 
financial statements at fair value. 
There are independent valuations 
which are carried out by a qualified 
independent valuation expert. The 
valuations depend on some data 
provided by the Investment Adviser 
and the independent valuation 
expert makes decisions and 
assumptions on criteria some of 
which is subjective. As the valuation 
of the properties within the Group’s 
portfolio is central to the Company’s 
business the Directors consider that 
the value of investment properties 
is considered a significant risk 
due to the magnitude of the total 
amount, the potential impact on the 
movement in value on the reported 

results and the subjectivity of the 
valuation process.

The investment properties are 
independently valued by an external 
valuation expert, Savills (UK) 
Limited. The valuations are prepared 
in accordance with RICS Valuation 
Professional Standards 2014. 
The valuations are compliant with 
International Valuation Standards. 
The Investment Adviser has held 
open discussions with the valuers 
throughout the period on the 
valuation process to discuss various 
elements of the property valuations 
and the auditor also has direct 
access to them as part of the audit 
process. Since the year end, the 
Audit Committee has reviewed the 
valuation reports and has discussed 
these reports with the Investment 
Adviser and the Auditor. The Audit 
Committee were satisfied with the 
valuation reports.

External Audit Process
Before the commencement of the 
audit, the audit committee met with 
the Auditor, to discuss the scope of 
the audit plan. After completion of 
the external audit, the committee 
met again with the Auditor to 
discuss the findings of the external 
audit and consider and evaluate 
any findings. After the consideration 
of the above matters and detailed 
review, the audit committee was 
of the opinion that the Annual 
Report and financial statements, 
represent a true and fair view of the 
Company as a whole and in addition 
provides the information necessary 
for shareholders to assess the 
Company’s performance, strategy 
and investment objectives.

Audit Fees and Non-Audit 
Services
An audit fee of £80,000 has been 
agreed in respect of the audit of 

the Company for the year ended 
30 June 2019 (2018: £70,000). 
The audit fees of the Group for the 
period ended 30 June 2019 totalled 
£130,000 (2018: £91,000).

The cost of non-audit services 
provided by the auditor to the 
Company for the financial period 
ended 30 June 2019 was £18,000 
(2018: £53,000) of which £18,000 
related to the interim accounts 
(2018: £18,000). The balance of 
£35,000 in the prior year related to 
work undertaken by RSM Corporate 
Finance LLP, a separate corporate 
body to that of the Auditor (RSM UK 
Audit LLP) in respect of corporate 
finance services as a result of the 
IPO. BDO LLP have been engaged 
to advise on taxation compliance 
matters. 

Independence and Objectivity 
of the Auditor
RSM UK Audit LLP (“RSM”) 
were appointed as auditor to the 
Company since IPO on 31 May 
2017, during which time Mr Euan 
Banks, Partner at RSM, has been 
the audit partner on the audit. 
No tender for the audit of the 
Company has been undertaken. In 
evaluating RSM’s performance, the 
Audit Committee considered the 
effectiveness of the audit process, 
quality of delivery, staff expertise, 
audit fees and the auditor’s 
independence, along with matters 
raised during the audit. The Audit 
Committee received confirmation 
from RSM that they maintain 
appropriate internal safeguards in 
line with applicable professional 
standards. In accordance with 
new requirements relating to 
the appointment of auditors, the 
Company will need to conduct an 
audit tender no later than for the 
accounting period beginning  
1 June 2026. Having considered the 

77    The PRS REIT plc     Annual Report & Financial Statements 2019

Internal Audit
The audit committee has determined 
that there is no need for an internal 
audit function given the limited size 
and complexity of the Company and 
its business.

Rod MacRae 
Audit Committee Chairman

24 September 2019

auditor’s independence in respect of 
the year ended 30 June 2019, the 
Audit Committee is satisfied with the 
Auditor’s performance, objectivity 
and independence.

Review of Auditor Appointment

Following consideration of the 
performance of the Auditor, the 
service provided during the year 
and a review of their independence 
and objectivity, the Audit Committee 
has recommended to the Board 
the continued appointment of RSM 
UK Audit LLP as the Company’s 
external independent auditor.

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The PRS REIT plc     Annual Report & Financial Statements 2019     78

 
 
 
 
 
 
 
Directors’ Remuneration Policy

The remuneration policy of 
the Company is set by the 
Board. A resolution to approve 
this Remuneration Policy was 
approved at the last AGM. The 
policy provisions set out below 
will apply until they are next put to 
shareholders for renewal of that 
approval, which must be at intervals 
of not more than three years, or 
if proposals are made to vary the 
policy. The Remuneration Policy is 
binding and sets the parameters 
within which Directors’ remuneration 
may be set.

The remuneration policy of the 
Company is to pay its non-executive 
Directors fees that are appropriate 
for the role and the amount of time 

spent in discharging their duties, 
that are broadly in line with those of 
comparable real estate investment 
companies and that are sufficient to 
attract and retain suitably qualified 
and experienced individuals.

The fees paid will be reviewed on 
an annual basis and may also be 
reviewed when new non-executive 
Directors are recruited to the Board. 
The Directors of the Company are 
entitled to such rates of annual 
fees as the Board at its discretion 
shall from time to time determine. 
The Chairman of the Board and 
the Audit Committee Chairman 
are entitled to receive fees at a 
higher level than those of the other 
Directors, reflecting their additional 

duties and responsibilities. Annual 
fees are pro-rated where a change 
takes place during the financial year.

In addition to the annual fee, 
under the Company’s Articles 
of Association, if any Director is 
requested to perform any special 
duties or services outside his 
ordinary duties as a Director, he may 
be paid such reasonable additional 
remuneration as the Board may 
from time to time determine.

Directors’ Remuneration Components

Component

Director

Annual Fee

Purpose of Remuneration

Annual fee

Chairman

£45,000

Commitment as Chairman of  
a public company

Annual fee

Non-Executive Directors

£30,000

Commitment as non-executive Directors 
of a public company

Additional fee

Chairman of the  
Audit Committee

£5,000

For additional responsibilities  
and time commitment

Additional fee

All Directors

Discretionary

For extra or special services performed 
in their role as a Director

Expenses

All Directors

n/a

Reimbursement of expenses  
incurred in the performance of duties as 
a Director

Directors’ and Officers’ liability 
insurance cover is maintained by the 
Company on behalf of the Directors.

meetings or otherwise in or with 
a view to the performance of their 
duties.

Directors are entitled to be paid 
all expenses properly incurred in 
attending Board or shareholder 

As all Directors are non-executive 
and there are no employees, 
the Company does not operate 

any share option or other long-
term incentive schemes and the 
Directors’ fees are not subject 
to any performance criteria. No 
pension or other retirement benefits 
schemes are operated by the 
Company for any of its Directors.

79    The PRS REIT plc     Annual Report & Financial Statements 2019

Views of Shareholders

Any views expressed by 
shareholders on the fees being paid 
to Directors would be taken into 
consideration by the Board when 
reviewing levels of remuneration. 

Approach to Recruitment 
Remuneration

The remuneration package for any 
new Chairman or non-executive 
Director will be the same as the 
prevailing rates determined on the 
bases set out above. The Board 
will not pay any introductory fee or 
incentive to any person to encourage 
them to become a Director, but 
may pay the fees of search and 
recruitment specialists in connection 
with the appointment of any new 
non-executive Director. 

Service Contracts

No Director has a service contract 
with the Company. The Directors 
are appointed under letters of 
appointment. Their appointment 
and any subsequent termination or 
retirement is subject to the Articles 
of Association. The Directors’ 
letters of appointment provide that, 
upon the termination of a Director’s 
appointment, that Director must 
resign in writing and all records 
remain the property of the Company. 
The Director’s appointment can be 
terminated in accordance with the 
Articles of Association and without 
compensation. There is no notice 
period specified in the Articles 
of Association for the removal 
of Directors and all Directors are 
subject to annual re-election by 
shareholders.

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The PRS REIT plc     Annual Report & Financial Statements 2019     80

 
 
 
 
 
 
 
Directors’ Remuneration Report

The Board presents its Directors’ 
Remuneration Report in respect 
of the year ended 30 June 2019. 
The Board has prepared this report 
in accordance with the Large and 
Medium-Sized Companies and 
Groups (Accounts and Reports) 
(Amendment) Regulations 2008 (as 
amended). An ordinary resolution 
for the approval of the Directors’ 
Remuneration Report will be put to 
shareholders at the next AGM of the 
Company.

The law requires the Company’s 
Auditor to audit certain of the 
disclosures required. Where 
disclosures have been audited, they 
are indicated as such. The Auditor’s 
opinion is included in the Auditor’s 
report on pages 85 to 90.

Annual Statement from the 
Chairman

I am pleased to present the Directors’ 
Remuneration Report for the financial 
year ended 30 June 2019.

As the Board has no executive 
Directors, it does not consider it 
necessary to establish a separate 
Remuneration Committee.  

The Board as a whole is therefore 
responsible for decisions regarding 
remuneration. The Board consists 
entirely of non-executive Directors 
and the Company has no employees.

Companies are required to seek 
shareholder approval of the 
remuneration report each year and 
of the Directors’ Remuneration 
Policy on at least a three-yearly 
basis. The vote on the Directors’ 
Remuneration Report is an 
advisory vote, whilst the Directors’ 
Remuneration Policy is subject to  
a binding vote. Resolutions to 
approve the Remuneration Policy, as 
outlined on page 80 of this report, 
and the Directors’ Remuneration 
Report will be put before 
shareholders at the forthcoming 
AGM of the Company. Any change 
to the Directors’ Remuneration 
Policy following its approval would 
require shareholder approval. There 
will be no significant change in the 
way the Remuneration Policy will be 
implemented in the course of the 
next financial year.

The Directors are remunerated for 
their services at such rate as the 
Directors shall from time to time 

Directors’ Fees for the Period (audited)

The Directors who served during the year and prior period received the 
following emoluments:

Year ended 30 
June 2019 
£’000

Period from 31 May 2017 
to 30 June 2018 
£’000

Steve Smith (Chairman)

Steffan Francis

Rod MacRae  
(Audit Committee Chairman)

Jim Prower
(appointed 20 May 2019)

45

30

35

4

114

26

18

20

-

64

81    The PRS REIT plc     Annual Report & Financial Statements 2019

determine. The Board has set 
three levels of fees: one for the 
Chairman, one for other Directors, 
and an additional fee that is paid to 
the Director who chairs the Audit 
Committee. Fees are reviewed 
annually in accordance with the 
Remuneration Policy. The fee for 
any new Director appointed will be 
determined on the same basis. 

The Directors’ fees have been set 
at a rate of £45,000 per annum 
in respect of the Chairman and 
£30,000 per annum in respect of the 
other Directors, with an additional 
£5,000 to the Chairman of the Audit 
Committee. No person provided 
advice or services to the Board 
in respect of the consideration of 
Directors’ remuneration.

Following a review of Directors’ 
fees subsequent to the year end, 
no changes are currently being 
proposed. There were no other 
payments for extra services in the 
period ended 30 June 2019  
(2018: £nil).

The Directors received no 
remuneration from the date of the 
IPO to 30 November 2017.

During the year and prior period no 
taxable benefits were received by 
any of the Directors.

The amounts paid to the Directors 
were for services as non-executive 
Directors. 

Under the Company’s Articles of 
Association, the total aggregate 
remuneration and benefits in kind 
of the Directors of the Company is 
subject to a maximum of £300,000 in 
any financial year. Any change to this 
would require shareholder approval.

Total Shareholder Return

Relative importance of spending on pay

The graph below shows the total 
shareholder return (as required by 
company law) of the Company’s 
Ordinary Shares relative to a return 
on a hypothetical holding over the 
same period in the FTSE 250, FTSE 
All Share REITS and FTSE 350 
REITS. Total shareholder return is 
the measure of returns provided 
by a Company to shareholders 
reflecting share price movements and 
assuming reinvestment of dividends.

Year ended 30 
June 2019 £’000

Period from 31 May 2017 
to 30 June 2018 £’000

Directors’ remuneration

114

64

Dividends paid to all  
shareholder*

24,765

21,082

*includes all dividends paid in relation to the year ended 30 June 2019 and period ended 30 June 2018

1,100

1,050

1,000

950

900

850

Jun - 18

Jul - 18

A u g - 18

S e p - 18

O ct - 18

N ov - 18

D ec - 18

Jan - 19

Fe b - 19

M ar - 19

A pr - 19

M ay - 19

Jun - 19

PRS REIT

FTSE 250

FTSE ALL SHARE REITS

FTSE 350 REITS

Loss of Office

The Directors do not have service 
contracts with the Company but are 
engaged under letters of appointment 
under which there is no entitlement to 
compensation for loss of office. 

As at 30 June 2019, the following Directors (including their connected 
persons) had beneficial interests in the following number of shares in the 
Company:

Ordinary Shares 2019 Ordinary Shares 2018

Directors’ Interests

Steffan Francis

50,000

Steve Smith (Chairman)

80,000

There is no requirement under the 
Company’s Articles of Association 
or the terms of their appointment 
for Directors to hold shares in the 
Company.

Rod MacRae  
(Audit Committee Chairman)

100,000

80,000

30,000

100,000

The PRS REIT plc     Annual Report & Financial Statements 2019     82

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Directors’ Remuneration Policy (continued)

There have been no changes to 
Directors’ share interest between 
30 June 2019 and the date of this 
report.

The shareholdings of the Directors 
are not significant and therefore do 
no compromise their independence.

None of the Directors or any 
person connected with them has a 
material interest in the Company’s 
transactions, arrangements or 
agreements during the year.

The Company maintains Directors 
and Officers liability insurance cover, 
at its expense, on the Directors’ 
behalf.

Statement of voting at 
general meetings

The Company is committed to 
ongoing shareholder dialogue 
and takes an active interest in 
voting outcomes. Where there 
are substantial votes against 
resolutions in relation to Directors’ 
remuneration, the Company will 
seek the reasons for any such vote 
and will detail any resulting actions 
in an announcement.

The Company’s forthcoming 
AGM will be an opportunity for 
shareholders to vote on the 
Directors’ Remuneration Policy and 
the Directors’ Remuneration Report.

Approval

The Directors’ Remuneration Report 
was approved by the Board on 24 
September 2019.

On behalf of the Board.

Steve Smith  
Chairman

24 September 2019

83  The PRS REIT plc   Annual Report & Financial Statements 2019

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The PRS REIT plc   Annual Report & Financial Statements 2019   84

 
 
 
 
 
 
 
Independent Auditors Report  
to the Members of The PRS REIT plc

Opinion

In Our Opinion:

Basis for Opinion

We have audited the financial 
statements of The PRS REIT 
plc (the “parent company”) and 
its subsidiaries (the “group”) for 
the year ended 30 June 2019 
which comprise the Consolidated 
Statement of Comprehensive 
Income, Consolidated and 
Company Statements of Financial 
Position, Consolidated and 
Company Statements of Changes 
in Equity and Consolidated and 
Company Statements of Cash 
Flows and notes to the financial 
statements, including a summary of 
significant accounting policies. The 
financial reporting framework that 
has been applied in their preparation 
is applicable law and International 
Financial Reporting Standards 
(IFRSs) as adopted by the European 
Union and, as regards the parent 
company financial statements, as 
applied in accordance with the 
provisions of the Companies Act 
2006.

>   the financial statements give a 

true and fair view of the state of 
the group’s and of the parent 
company’s affairs as at 30 June 
2019 and of the group’s profit for 
the year then ended;

>   the group financial statements 
have been properly prepared 
in accordance with IFRSs as 
adopted by the European Union;

>   the parent company financial 

statements have been properly 
prepared in accordance with 
IFRSs as adopted by the 
European Union and as applied 
in accordance with the provisions 
of the Companies Act 2006; and

>   the financial statements have 
been prepared in accordance 
with the requirements of the 
Companies Act 2006 and, as 
regards the group financial 
statements, Article 4 of the IAS 
Regulation.

We conducted our audit in 
accordance with International 
Standards on Auditing (UK) 
(ISAs (UK)) and applicable law. 
Our responsibilities under those 
standards are further described in 
the Auditor’s responsibilities for the 
audit of the financial statements 
section of our report. We are 
independent of the group and 
parent company in accordance with 
the ethical requirements that are 
relevant to our audit of the financial 
statements in the UK, including the 
FRC’s Ethical Standard as applied 
to listed public interest entities, and 
we have fulfilled our other ethical 
responsibilities in accordance with 
these requirements. We believe that 
the audit evidence we have obtained 
is sufficient and appropriate to 
provide a basis for our opinion.

85    The PRS REIT plc     Annual Report & Financial Statements 2019

Key Audit Matters

Key audit matters are those matters 
that, in our professional judgment, 
were of most significance in our 
audit of the group and parent 
company financial statements of the 
current period and include the most 
significant assessed risks of material 
misstatement (whether or not due 
to fraud) that we identified. These 
matters included those which had 
the greatest effect on: the overall 
audit strategy, the allocation of 
resources in the audit; and directing 
the efforts of the engagement team. 
These matters were addressed 
in the context of our audit of the 
group and parent company financial 
statements as a whole, and in 
forming our opinion thereon, and we 
do not provide a separate opinion 
on these matters.

Conclusions Relating to 
Principal Risks, Going Concern 
and Viability Statement

We have nothing to report in respect 
of the following information in the 
annual report, in relation to which 
the ISAs (UK) require us to report 
to you whether we have anything 
material to add or draw attention to:

>   the disclosures in the annual 

report set out on pages 50 to 53 
that describe the principal risks 
and explain how they are being 
managed or mitigated;

>   the Directors’ confirmation set 
out on page 68 in the annual 
report that they have carried 
out a robust assessment of the 
principal risks facing the group, 
including those that would 
threaten its business model, 
future performance, solvency or 
liquidity;

>   the Directors’ statement set 

out on page 62 in the financial 
statements about whether 
the Directors considered it 
appropriate to adopt the going 
concern basis of accounting 
in preparing the financial 
statements and the Directors’ 
identification of any material 

uncertainties to the group and 
the parent company’s ability to 
continue to do so over a period 
of at least twelve months from 
the date of approval of the 
financial statements;

>   whether the Directors’ statement 

relating to going concern 
required under the Listing Rules 
in accordance with Listing 
Rule 9.8.6R(3) is materially 
inconsistent with our knowledge 
obtained in the audit; or

>   the Directors’ explanation set 
out on page 62 in the annual 
report as to how they have 
assessed the prospects of 
the group, over what period 
they have done so and why 
they consider that period to be 
appropriate, and their statement 
as to whether they have a 
reasonable expectation that the 
group will be able to continue in 
operation and meet its liabilities 
as they fall due over the period 
of their assessment, including 
any related disclosures drawing 
attention to any necessary 
qualifications or assumptions.

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The PRS REIT plc     Annual Report & Financial Statements 2019     86

 
 
 
 
 
 
 
Independent Auditors Report To The Members Of The Prs Reit plc (continued)

Valuation of Investment 
Properties

This is detailed in the Audit 
Committee report on pages 76 
to 78; the significant accounting 
judgements and estimates on pages 
102 to 103; significant accounting 
policies on pages 100 to 103 and 
notes to the financial statements on 
pages 110 and 111. 

Risk of material mis-statement
The group owns or controls 
through a portfolio of Special 
Purpose Vehicles (SPV’s) a portfolio 
of investment properties which 
includes residential properties only. 
The total value of the portfolio at 30 
June 2019 was £362m. The group 
either acquires completed sites or 
sites that are ready to develop with 
full planning consent having been 
granted, the latter form investment 
properties under construction and 
have been valued at fair value 
using the basis as set out in the 
accounting policies on page 103, 
at 30 June 2019 these were valued 
at £209m. The properties are 
predominately located in the north  
of England and the Midlands.

The Directors’ assessment of the 
value of the investment properties at 
year end date, is considered a key 
audit matter due to the magnitude 
of the total amount, the potential 
impact of the movement in value 
on the reported results, and the 
subjectivity and complexity of the 
valuation process.

The valuation is carried out by 
external valuers, Savills (UK) Ltd, in 
line with the methodology set out in 
note 16.

Audit approach adopted
We audited the independent 
valuations of investment properties 
to ensure that where appropriate 
they had been prepared on a 
consistent basis for all properties, 
including those under construction, 
and in accordance with RICs 
standards and are considered 
to be appropriate and correctly 
recorded in the financial statements 
and in line with the Accounting 
Standards. We assessed the 
external valuers qualifications and 
expertise and considered their terms 
of engagement, we also considered 
their objectivity and any other 
existing relationships with the group 
and concluded that there was no 
evidence that the valuers objectivity 
had been compromised.

We discussed with the asset 
manager and the valuer the overall 
movement in property values 
giving consideration to whether 
properties were fully developed or 
under construction and recognizing 
the similarity of tenant profiles. 
We also specifically discussed 
any properties whose movement 
was not consistent with overall 
movements of the entire portfolio to 
gain an understanding of why these 
exceptions were reasonable.

Completed sites were valued 
at fair value whilst assets under 
construction were valued at fair 
value using a methodology agreed 
with Savills (UK) Ltd following the 
interim review. We discussed both 
methodologies with the asset 
manager and the valuer to ensure 
these were the most appropriate 
valuation methodologies for each 
property type.

For assets under construction we 
assessed the stage of development 
by reference to the stage of 
works completed to date and the 
amount still to be completed to 
the underlying documentation and 
forecasts.

We tested inputs provided by 
the asset manager to the valuer 
to ensure these reflected the key 
unobservable inputs for each 
property and considered whether 
market data for a sample of 
properties was consistent with the 
valuation report.

Key observations
We concluded that the fair values 
of the investment properties 
being adopted by the group were 
appropriate.

Our Application of Materiality

When establishing our overall audit 
strategy, we set certain thresholds 
which help us to determine the 
nature, timing and extent of our 
audit procedures. When evaluating 
whether the effect of misstatements, 
both individually and on the financial 
statements as a whole, could 
reasonably influence the economic 
decisions of users we take into 
account the qualitative nature and 
size of the misstatements. During 
planning materiality for the Group 
financial statements as a whole 
was calculated as £4,459,000, 
which was revised to £4,490,000 
during the course of our audit. 
Materiality for the Parent Company 
financial statements as a whole was 
calculated at £3,152,000, which 
was not significantly changed during 
the course of our audit. We agreed 

87    The PRS REIT plc     Annual Report & Financial Statements 2019

with the Audit Committee that we 
would report to them all unadjusted 
differences in excess of £50,000, 
as well as differences below 
those thresholds that, in our view, 
warranted reporting on qualitative 
grounds.

An Overview of the Scope of 
Our Audit

Our audit scope covered 100% of 
group rental income, group profit 
and total group assets, and was 
performed to the materiality levels 
set out above. The key audit matters 
were audited as noted above.

Other Information

The other information comprises the 
information included in the annual 
report set out on pages 3 to 83, 
other than the financial statements 
and our auditor’s report thereon. 
The Directors are responsible for the 
other information.

Our opinion on the financial 
statements does not cover the 
other information and, except to the 
extent otherwise explicitly stated 
in our report, we do not express 
any form of assurance conclusion 
thereon. In connection with our 
audit of the financial statements, 
our responsibility is to read the 
other information and, in doing 
so, consider whether the other 
information is materially inconsistent 
with the financial statements or our 
knowledge obtained in the audit or 
otherwise appears to be materially 
misstated. If we identify such 
material inconsistencies or apparent 

material misstatements, we are 
required to determine whether 
there is a material misstatement 
in the financial statements or a 
material misstatement of the other 
information.

If, based on the work we have 
performed, we conclude that there 
is a material misstatement of the 
other information, we are required to 
report that fact. We have nothing to 
report in this regard.

In this context, we also have 
nothing to report in regard to 
our responsibility to specifically 
address the following items in the 
other information and to report as 
uncorrected material misstatements 
of the other information where we 
conclude that those items meet the 
following conditions:

>   Fair, balanced and 

understandable set out on 
page 69, the statement given 
by the Directors that they 
consider the annual report and 
financial statements taken as 
a whole is fair, balanced and 
understandable and provides 
the information necessary for 
shareholders to assess the 
group’s performance, business 
model and strategy, is materially 
inconsistent with our knowledge 
obtained in the audit; or

>   Audit committee reporting 
set out on pages 76 to 78, 
describing the work of the 
audit committee does not 
appropriately address matters 
communicated by us to the audit 
committee; or

>   Directors’ statement of 

compliance with the UK 
Corporate Governance Code 
set out on page 67, the parts of 
the Directors’ statement required 
under the Listing Rules relating 
to the company’s compliance 
with the UK Corporate 
Governance Code containing 
provisions specified for review by 
the auditor in accordance with 
Listing Rule 9.8.10R(2) do not 
properly disclose a departure 
from a relevant provision of 
the UK Corporate Governance 
Code.

Opinions on Other Matters 
Prescribed by the Companies 
Act 2006

In our opinion, the part of the 
Directors’ remuneration report to be 
audited has been properly prepared 
in accordance with the Companies 
Act 2006.

In our opinion, based on the work 
undertaken in the course of the 
audit:

>   the information given in the 

strategic report and the report 
of the Directors’ for the financial 
year for which the financial 
statements are prepared is 
consistent with the financial 
statements; and

>   the strategic report and the 

report of the Directors have been 
prepared in accordance with 
applicable legal requirements.

The PRS REIT plc     Annual Report & Financial Statements 2019     88

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Independent Auditors Report To The Members Of The Prs Reit plc (continued)

Responsibilities of Directors

As explained more fully in the 
Directors’ responsibilities statement 
set out on page 66, the Directors 
are responsible for the preparation 
of the financial statements and for 
being satisfied that they give a true 
and fair view, and for such internal 
control as the Directors determine is 
necessary to enable the preparation 
of financial statements that are free 
from material misstatement, whether 
due to fraud or error.

In preparing the financial 
statements, the Directors are 
responsible for assessing the 
group’s and the parent company’s 
ability to continue as a going 
concern, disclosing, as applicable, 
matters related to going concern 
and using the going concern basis 
of accounting unless the Directors 
either intend to liquidate the group 
or the parent company or to cease 
operations, or have no realistic 
alternative but to do so.

Matters on which we 
are required to report by 
exception

In the light of the knowledge and 
understanding of the group and 
the parent company and their 
environment obtained in the course 
of the audit, we have not identified 
material misstatements in the 
strategic report or the report of the 
Directors.

We have nothing to report in respect 
of the following matters in relation 
to which the Companies Act 2006 
requires us to report to you if, in our 
opinion:

>   adequate accounting records 

have not been kept by the parent 
company, or returns adequate for 
our audit have not been received 
from branches not visited by us; 
or

>   the parent company financial 

statements and the part of the 
Directors’ remuneration report to 
be audited are not in agreement 
with the accounting records and 
returns; or

>   certain disclosures of Directors’ 
remuneration specified by law 
are not made; or

>   we have not received all the 

information and explanations we 
require for our audit.

Auditor’s responsibilities 
for the audit of the financial 
statements

Our objectives are to obtain 
reasonable assurance about 
whether the financial statements 
as a whole are free from material 
misstatement, whether due to 
fraud or error, and to issue an 
auditor’s report that includes our 
opinion. Reasonable assurance 
is a high level of assurance, but 
is not a guarantee that an audit 
conducted in accordance with ISAs 
(UK) will always detect a material 
misstatement when it exists. 
Misstatements can arise from fraud 
or error and are considered material 
if, individually or in the aggregate, 
they could reasonably be expected 
to influence the economic decisions 
of users taken on the basis of these 
financial statements.

As part of our audit, we will consider 
the susceptibility of the group and 
parent company to fraud and other 
irregularities, taking account of the 
business and control environment 
established and maintained by the 
Directors, as well as the nature of 
transactions, assets and liabilities 
recorded in the accounting records. 
Owing to the inherent limitations of 
an audit, there is an unavoidable risk 
that some material misstatements 
of the financial statements may 
not be detected, even though 
the audit is properly planned and 
performed in accordance with 
the ISAs. However, the principal 
responsibility for ensuring that the 
financial statements are free from 
material misstatement, whether 
caused by fraud or error, rests with 

89    The PRS REIT plc     Annual Report & Financial Statements 2019

management who should not rely 
on the audit to discharge those 
functions.

A further description of our 
responsibilities for the audit of the 
financial statements is located on 
the Financial Reporting Council’s 
website at: http://www.frc.org.
uk/auditorsresponsibilities. This 
description forms part of our 
auditor’s report.

Other matters which we are 
required to address

Following the recommendation 
of the audit committee, we 
were appointed by the Board of 
Directors on 25 April 2017 to audit 
the financial statements for the 
period ending 30 June 2018 and 
subsequent financial periods.

Use of our report

This report is made solely to the 
company’s members, as a body, in 
accordance with Chapter 3 of Part 
16 of the Companies Act 2006. Our 
audit work has been undertaken 
so that we might state to the 
company’s members those matters 
we are required to state to them 
in an auditor’s report and for no 
other purpose. To the fullest extent 
permitted by law, we do not accept 
or assume responsibility to anyone 
other than the company and the 
company’s members as a body, for 
our audit work, for this report, or for 
the opinions we have formed.

Euan Banks  
(Senior Statutory Auditor)

For and on behalf of RSM UK Audit LLP, 
Statutory Auditor 
Chartered Accountants

The period of total uninterrupted 
engagements is two years covering 
the period ended 30 June 2018 and 
year ended 30 June 2019.

25 Farringdon Street 
London  
EC4A 4AB

24 September 2019

The non-audit services prohibited 
by the FRC’s Ethical Standard were 
not provided to the group or the 
parent company and we remain 
independent of the group and the 
parent company in conducting our 
audit.

Our audit opinion is consistent with 
the additional report to the audit 
committee.

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The PRS REIT plc     Annual Report & Financial Statements 2019     90

 
 
 
 
 
 
 
Financial Statements

Consolidated Statement of Comprehensive Income 
for the year ended 30 June 2019

Rental Income

Non-recoverable property costs

Net rental income

Administrative Expenses

Directors’ remuneration

Investment advisory fee

Other administrative expenses

Total administrative expenses

Gain from fair value adjustment on investment property

Operating profit

Finance income

Finance cost

Profit before taxation

Taxation

Total comprehensive income for the year/period  
attributable to the equity holders of the Company 

Earnings per share attributable to the equity  
holders of the Company:

Notes

5

6

7

9

10

16

11

12

13

Year ended 
30 June 2019 
£’000

31 May 2017 
to 30 June 2018 
£’000

5,970

(1,054)

4,916

(123)

(4,402)

(1,354)

(5,879)

15,609

14,646

789

(864)

14,571

-

1,765

(274)

1,491

(67)

(3,295)

(977)

(4,339)

5,515

2,667

570

-

3,237

-

14,571

3,237

IFRS earnings per share (basic and diluted)

14

2.9p

1.0p

All of the Group activities are classed as continuing and there were no comprehensive gains or losses in the period other than 
those included in the statement of comprehensive income.

91    The PRS REIT plc     Annual Report & Financial Statements 2019

Consolidated Statement of Financial Position
Company No. 10638461
As at 30 June 2019

At 
30 June 2019 
£’000

At 
30 June 2018 
£’000

Notes

ASSETS

Non-current assets

Investment property

Current assets

Trade receivables

Other receivables

Cash and cash equivalents

Total assets

LIABILITIES

Non-current liabilities

Accruals and deferred income

Interest bearing loans and borrowings

Current liabilities

Trade and other payables

Total liabilities 

Net assets

EQUITY

Called up share capital

Share premium account 

Capital reduction reserve

Redeemable preference shares

Retained earnings

Total equity attributable to the equity holders of the Company 

IFRS net asset value per share (basic and diluted) 

16

18

18

19

20

21

20

22

23

24

25

26

362,275

362,275

89

5,379

229,946

235,414

597,689

2,954

100,000

102,954

20,410

123,364

474,325

4,953

245,005

206,559

-

17,808

474,325

121,109

121,109

28

3,786

374,339

378,153

499,262

961

-

961

12,296

13,257

486,005

4,943

244,025

233,800

-

3,237

486,005

95.8p

98.3p

As at 30 June 2019, there is no difference between IFRS NAV per share and the EPRA NAV per share. These consolidated 
group financial statements were approved by the Board of Directors and authorised for issue on 24 September 2019 and signed 
on its behalf by:

Steve Smith 
Chairman

24 September 2019

The PRS REIT plc     Annual Report & Financial Statements 2019     92

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Consolidated Statement of Changes in Equity 
for the year ended 30 June 2019

Attributable to equity holders of the Company

Share 
capital 
£’000

Share 
premium 
account 
£’000

Capital 
reduction  
reserve 
£’000

Redeemable  
preference 
shares 
£’000

Retained 
earnings 
£’000

Share capital issued in the period

4,943

495,524

Share capital issue costs

Cancellation of share premium

Share capital redeemed in the period

Dividend paid

Profit for the period

At 30 June 2018

Share capital issued in the period

Share capital issue credit

Dividend paid

Profit for the year

At 30 June 2019

-

-

-

-

-

-

(8,999)

(242,500)

242,500

-

-

-

-

(8,700)

-

4,943

244,025

233,800

10

-

-

-

961

19

-

-

-

-

(27,241)

-

4,953

245,005

206,559

Total 
equity 
£’000

500,517

(8,999)

-

(50)

(8,700)

3,237

486,005

971

19

(27,241)

-

-

-

-

3,237

3,237

-

-

-

14,571

14,571

17,808

474,325

50

-

-

(50)

-

-

-

-

-

-

-

-

93    The PRS REIT plc     Annual Report & Financial Statements 2019

Consolidated Statement of Cash Flows 
for the year ended 30 June 2019

Cash flows from operating activities

Profit before tax

Finance Income

Finance costs

Fair value adjustment on investment property

Cash used in operations

Increase in trade and other receivables

Increase in trade and other payables

At  
30 June 2019 
£’000

At  
 30 June 2018 
£’000

Note

14,571

(789)

864

(15,609)

(963)

(1,684)

3,026

3,237

(570)

-

(5,515)

(2,848)

(3,748)

1,708

Net cash generated from/(used) in operating activities

379

(4,888)

Cash flows from investing activities

Acquisition of subsidiaries

Purchase of investment property at fair value through profit and loss

Finance income

(34,665)

(181,627)

823

(40,770)

(63,451)

504

Net cash used in investing activities 

(215,469)

(103,717)

Cash flows from financing activities

Bank and other loans

Finance costs

Issue of shares

Cost of share issue

Redeemable preference shares

Dividends paid

Net cash generated from financing activities

Net (decrease)/increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

100,000

(2,877)

971

(156)

-

(27,241)

70,697

(144,393)

374,339

-

-

500,467

(8,823)

-

(8,700)

482,944

374,339

-

Cash and cash equivalents at end of year/period

19

229,946

374,339

The accompanying notes are an integral part of this cash flow statement.

The PRS REIT plc     Annual Report & Financial Statements 2019     94

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Company Statement of Financial Position 
for the year ended 30 June 2019

ASSETS

Non-current assets

Investment in subsidiaries

Current assets

Other receivables

Cash and cash equivalents

Total assets

Current liabilities

Trade and other payables

Total liabilities

Net assets

EQUITY

Called up share capital

Share premium account 

Capital reduction reserve

Redeemable preference shares

Retained earnings

Total equity attributable to the equity holders of the Company

At  
30 June 2019 
£’000

At  
30 June 2018 
£’000

Note

17

18

19

20

22

23

24

25

325,701

325,701

34,317

88,945

123,262

448,963

647

647

104,273

104,273

29,724

346,614

376,338

480,611

1,312

1,312

448,316

479,299

4,953

245,005

206,559

-

(8,201)

448,316

4,943

244,025

233,800

-

(3,469)

479,299

The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not 
presented its own profit and loss account in these financial statements. The loss attributable to the Parent Company for the year 
ended 30 June 2019 amounted to £4.7m (period ended 30 June 2018: loss of £3.5m).

These financial statements were approved by the Board of Directors on 24 September 2019 and signed on its behalf by:

Steve Smith 
Chairman 

95    The PRS REIT plc     Annual Report & Financial Statements 2019

Company Statement of Changes in Equity 
for the year ended 30 June 2019

Share 
capital 
£’000

Share 
premium 
account 
£’000

Capital 
reduction  
return 
£’000

Redeemable  
preference 
shares 
£’000

Retained 
earnings 
£’000

Share capital issued in the period

4,943

495,524

Share capital issue costs

Cancellation of share premium

Share capital redeemed in the period

Dividends paid

Loss for the period

At 30 June 2018

Share capital issued in the year

Share capital issue credit

Dividends paid

Loss for the period

At 30 June 2019

-

-

-

-

-

-

(8,999)

(242,500)

242,500

-

-

-

-

(8,700)

-

4.943

244,025

233,800

10

-

-

-

961

19

-

-

-

-

(27,241)

-

4,953

245,005

206,559

Total 
equity 
£’000

500,517

(8,999)

-

(50)

(8,700)

(3,469)

-

-

-

-

(3,469)

(3,469)

479,299

-

-

-

971

19

(27,241)

(4,732)

(4,732)

(8,201)

448,316

50

-

-

(50)

-

-

-

-

-

-

-

-

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Company Statement of Cash Flows  
for the year ended 30 June 2019

Cash flows from operating activities

Loss before tax

Finance Income

Cash used in operations

Increase in trade and other receivables

(Decrease)/ Increase in trade and other payables

Year ended  
30 June 2019  
£’000

31 May 2017  
to 30 June 2018 
£’000

Note

(4,732)

(686)

(5,418)

(4,638)

(489)

(3,469)

(570)

(4,039)

(29,658)

1,136

Net cash used in operating activities

(10,545)

(32,561)

Cash flows from investing activities

Investment in subsidiaries

Finance income

Net cash used in investing activities 

Cash flows from financing activities

Issue of shares

Cost of share issue

Dividends paid

Net cash (used in)/generated from financing activities

Net (decrease)/increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

(221,429)

(104,273)

731

504

(220,698)

(103,769)

971

(156)

(27,241)

(26,426)

(257,669)

346,614

500,467

(8,823)

(8,700)

482,944

346,614

-

Cash and cash equivalents at end of year/period

19

88,945

346,614

97    The PRS REIT plc     Annual Report & Financial Statements 2019

Notes To The Financial Statements

1.  General Information

The PRS REIT plc (the “Company”) 
is a public limited company 
incorporated on 24 February 2017 
in England and having its registered 
office at Floor 3, 1 St. Ann Street, 
Manchester, M2 7LR with Company 
Number 10638461. The Company 
did not commence trading until 
31 May 2017 when the IPO was 
completed. The Company is quoted 
on the Specialist Fund Segment 
of the Main Market of the London 
Stock Exchange. The nature of 
the Group’s operations and its 
principle activities are set out in the 
Chairman’s statement.

2.  Financial Risk Management 

The Group is exposed to market 
risk, interest rate risk, credit risk and 
liquidity risk in the current and future 
periods. The Board of Directors 
oversees the management of 
these risks. The Board of Directors 
reviews and agrees policies for 
managing each of these risks that 
are summarised below.

Market Risk

Risk relating to Investment 
Property
Investment in property is subject 
to varying degrees of risk. Some 

factors that affect the value of the 
investment in property include:

>   changes in the general economic 

climate;

>   competition from available 

properties; and

>   government regulations, 

including planning, environmental 
and tax laws.

Interest Rate Risk
The Group has limited interest 
rate risk on its loan from Scottish 
Widows. At 30 June 2019, the 
amount of loan drawn amounted 
to £100m and carries a fixed rate 
interest of 3.138%. From time to 
time, certain of the Group’s cash 
resources are placed on short term 
fixed deposits or on short term 
notice accounts to take advantage 
of preferential rates otherwise 
cash resources are held in current, 
floating rate accounts.

Credit Risk

Credit risk is that a counterparty 
will not meet its obligations under 
a financial instrument or customer 
contract leading to a financial loss. 
The Group is exposed to credit risk 
both from its property activities and 
financing activities.

Credit risk relating to property 
activities
The Group receives property rental 
income from its investments in PRS 
assets. Risk is mitigated as PRS 
assets consist of residential family 
housing with multiple tenants in 
multiple locations. Rental income 
is paid monthly in advance. Rental 
income outstanding and due to 
the Company as at 30 June 2019 
amounted to £89,000 (2018: 
£28,000).

Credit risk arising related to 
financial instruments including 
cash deposits
Risk arises as a result of the cash 
deposits with banks and financial 
institutions. The Board of Directors 
believe the credit risk on short 
term deposits and current account 
balances are limited as they are 
held with banks with high credit 
ratings. As at 30 June 2019, short 
term deposits and current account 
balances were held with the 
following banks:

Royal Bank of Scotland plc 
Investec Bank plc 
Barclays Bank plc 
Lloyds Banking Group

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Liquidity Risk

The Group seeks to manage liquidity risk to ensure 
sufficient liquidity is available to meet the requirements 
of the business and to invest cash assets safely and 
profitably. The Board reviews regularly available cash 
to ensure that there are sufficient resources for capital 
expenditure and working capital requirements.  

As at 30 June 2019, the Group’s amount of current 
financial assets was in excess of its financial liabilities by 
£112,000,000 (2018: £365,000,000). The table below 
summarises the maturities of the Group’s non-derivative 
financial liabilities as at 30 June 2019:

Less than one year

1 - 3 years

Greater than 3 years

£’000

2019

£’000

2018

Trade and other payables

20,410

12,296 

Bank loans

  - 

  - 

£’000

2019

2,954 

  - 

£’000

2018

961 

£’000

2019

- 

  - 

100,000 

£’000

2018

- 

- 

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Notes to the Financial Statements (continued)

3.  Basis of Preparation

The financial statements of the 
Group have been prepared in 
accordance with International 
Financial Reporting Standards 
(IFRS) as adopted for use in the 
European Union. The Company has 
prepared its financial statements in 
accordance with IFRS as adopted 
for use in the European Union and 
as applied in compliance with the 
provisions of the Companies Act 
2006.

The financial statements have been 
prepared on the historical cost 
basis, except where IFRS requires 
an alternative treatment. The 
principal variations from historical 
cost relate to financial instruments 
(IFRS9) and investment properties 
(IAS40) which are measured as fair 
value through profit and loss.

The financial information is 
presented in Pounds Sterling, which 
is also the functional currency, and 
all values are rounded to the nearest 
thousand pounds except where 
otherwise stated.

3.1 Going Concern
The financial statements have 
been prepared on a going concern 
basis. The Group’s cash balances 
at 30 June 2019 were £230m of 
which £78m was readily available. 
The Group has debt borrowing as 
at 30 June 2019 of £100m, has 
secured further facilities of £250m 
and credit approval for an additional 
£50m. As a consequence, the 
Directors believe the Group is well 
placed to manage its business risks 
successfully. After making enquiries, 
the Directors have a reasonable 
expectation that the Group have 
adequate resources to continue 
in operational assistance for the 

foreseeable future and for a period 
of at least 12 months from the 
date of the approval of the Group’s 
financial statements for the year 
ended 30 June 2019. The Board 
is therefore of the opinion that the 
going concern basis adopted in 
the preparation of the financial 
statements for the year ended 30 
June 2019 is appropriate.

3.2 Business Combinations 
The Group acquires subsidiaries 
that own investment properties. At 
the time of acquisition, the Group 
consider whether each acquisition 
represents the acquisition of a 
business or the acquisition of 
an asset. The Group accounts 
for an acquisition as a business 
combination where an integrated set 
of activities is acquired in addition to 
the property.

Where such acquisitions are not 
judged to be the acquisition of a 
business, they are not treated as 
business combinations. Rather, the 
cost to acquire the corporate entity 
is allocated between the identifiable 
assets and liabilities of the entity 
based upon their relative fair values 
at the acquisition date. Accordingly, 
no goodwill or additional deferred 
tax arises.

3.3  Adoption of New and 
Revised Standards
Other than as disclosed below, 
the accounting policies applied are 
the same as those applied in the 
financial statements for the period 
ended 30 June 2018. Except for 
some additional disclosures under 
IFRS 9, new standards introduced 
during the year had no material 
impact on the results or net assets 
of the Company or the Group.

IFRS 2 – Classification and 
measurement of share-
based payment transactions 
(Amendment)
The standard is effective for periods 
beginning on or after 1 January 2018.

The Group does not currently or 
anticipate any share-based payment 
transactions and therefore this 
amendment will have no impact on 
the financial statements of the Group.

IFRS 9 Financial Instruments 
The standard is effective for periods 
beginning on or after 1 January 2018.

The standard makes substantial 
changes to the classification of 
financial assets. There will only 
be three categories of financial 
assets whereby financial assets 
are recognised at either fair value 
through profit and loss, fair value 
through other comprehensive 
income or measured at amortised 
cost. Classification of financial 
assets is based on whether the 
business model is to collect the 
contractual cashflows, sell the 
financial assets, or both, and 
whether the contractual cashflows 
are solely payments of principal 
and interest. The impact is that 
impairments are recognised on an 
expected cost basis instead of the 
previous incurred loss approach. 
As such where there are expected 
to be credit losses there are 
recognised in the profit and loss. 
The Group’s assessment of this new 
standard is that it does not give rise 
to any significant adjustments either 
in the group financial statements 
relating to the rent arrears balances 
or in the parent company financial 
statements in respect of group 
balances.

99    The PRS REIT plc     Annual Report & Financial Statements 2019

IFRS 15 – Revenue from 
contracts with customers
The standard is effective for periods 
beginning on or after 1 January 2018.

The standard has been developed 
to provide a comprehensive set of 
principles in presenting the nature, 
amount, timing and uncertainty 
of revenue and cash flows arising 
from a contract with a customer. 
The standard is based around 
the following steps in recognising 
revenue:

>   Identify the contract with the 

customer;

>   Identify the performance 

obligations in the contract; 

>   Determine the transaction price;

>   Allocate the transaction price; 

and

>   Recognise revenue when a 
performance obligation is 
satisfied.

The Group rents residential housing 
to individual tenants who are 
invoiced monthly in advance based 
on an agreed assured shorthold 
tenancy which lasts for a period of 
twelve months. This is the Group’s 
only source of income and rental 
income is not impacted covered by 
IFRS 15.

IAS 40 – Investment Property 
(Amendment) 
The standard is effective for periods 
beginning on or after 1 January 
2018.

Under this amendment, an entity 
will transfer a property to or from 
investment property when there 
is evidence of a change of use. A 
change of use occurs if a property 

meets or ceases to meet the 
definition of an investment property. 
The Directors have concluded 
that all property held by the Group 
continues to meet the definition of 
an investment property.

be recognised as finance costs. 
Under IFRS 16, comparative 
information is not required to be 
restated upon adoption if the 
‘modified retrospective’ approach is 
applied.

IFRS 16 – Leases 
The standard is effective for periods 
beginning on or after 1 January 2019.

Under IFRS 16, most leased assets 
are capitalised as ‘right-to-use 
assets’ by recognising the present 
value of lease payments as an asset 
and a financial liability representing 
the obligation to make future lease 
payments. This is a significant change 
for the lessee, however IFRS 16 
substantially carries forward existing 
lessor accounting from IAS 17.

The Directors anticipate the value 
of the right to use asset and the 
financial liability at 30 June 2019 
are £7,583,000 and £7,583,000 
respectively so the overall impact 
on net assets will be negligible. The 
overall impact on profits will also 
be negligible. However instead of 
costs of approximately £30,000 per 
annum being recognised in non-
recoverably property costs, these 
amounts will be recognised within 
unrealised gains and finance costs.

The Group has a small number 
of operating leases concerning 
the long term lease of land 
associated with the long leasehold 
of investment properties. At 30 
June 2019 there was ground rent 
committed under these leases. 
Under IFRS 16 the Group will 
recognise the right-to-use asset 
in the Consolidated Statement 
of Financial Position and this will 
be valued at fair value. Changes 
in fair value will be recognised 
in the Consolidated Statement 
of Comprehensive Income. In 
addition, a financial liability will be 
recognised in the Consolidated 
Statement of Financial Position 
which will be valued at the present 
value of the future lease payments. 
Lease payments (also known as 
ground rent) which are currently 
recognised within non-recoverably 
property costs will instead reduce 
the financial liability and any further 
changes to the financial liability will 

4.   Summary of Significant 
Accounting Policies 

Basis of Consolidation
The financial statements comprise 
of the financial information of The 
PRS REIT plc and its subsidiary 
undertakings. Subsidiaries are all 
entities over which the Group has 
control. The financial information 
of the subsidiaries are included 
in the consolidated financial 
statements from the date that 
control commences. All intra group 
transactions are eliminated on 
consolidation.

Segmental Reporting
For the current year and prior 
period, the Directors regard the 
Group as having just one reportable 
segment, Property, and the business 
only operates in the United Kingdom 
therefore segmental information 
is not disclosed in these financial 
statements.

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Notes to the Financial Statements (continued)

Investment Property
Property that is held for long-
term rental yields or for capital 
appreciation or both is classified as 
investment property under IAS 40. 
Investment property, is measured 
initially at its cost including related 
transactions costs. After initial 
recognition, investment property 
is carried at fair value. Investment 
properties under construction 
are initially recognised at cost 
including related transaction costs. 
Subsequently, the assets are 
re-measured at fair value at each 
reporting date by where:

>   Fair value (at the date of 

valuation) = total development 
cost plus expected final uplift in 
valuation multiplied by % of site 
development completed; where

>   Expected final uplift = Expected 
Investment value on completion 
less gross development cost

This method of valuation is different 
to that as reported at 30 June 2018 
but the Board believes is a much 
simpler and transparent method of 
valuation than the residual approach 
previously adopted and importantly 
provides a true worth and fair value 
of the assets during the construction 
phase. The investment properties 
are externally valued by Savills. 
Savills are qualified external valuers 
who hold a recognised and relevant 
professional qualification. Gains or 
losses arising from changes in the 
fair value of the Group’s investment 
properties are included in profit from 
operations in the income statement 
of the period in which they arise. 
Investment property falls within 
level 3 of the fair value hierarchy as 
defined by IFRS 13. Further details 
are provided in note 16.

Trade and Other Receivables
Trade and other are recognised 
initially at fair value and 

subsequently carried at amortised 
cost less provision for impairment. 
Where the time value of money is 
material, receivables are carried at 
amortised cost using the effective 
interest method. Impairment 
provisions are recognised based 
on the expected credit loss model 
detailed within IFRS 9. The excepted 
credit losses on financial assets are 
estimated based on the Group’s 
historical credit loss experience 
adjusted for factors that are specific 
to the debtors, general economic 
conditions and assessment of both 
the current and forecast direction of 
conditions at the reporting date. As 
at 30 June 2019 the Group’s loss 
allowance for expected credit losses 
on trade receivables was £nil. 

Operating Leases
Rental income charge to tenants 
from operating leases is recognised 
on a straight line basis over the 
term of the relevant lease. Tenant 
lease incentives are recognised as 
a reduction of rental income when 
they arise. Amounts received from 
tenants to terminate leases or to 
compensate for dilapidations are 
recognised in the profit and loss 
account when the right to receive 
them arises.

Cash
Cash and cash equivalents 
comprise cash in hand, cash at 
bank, cash held in treasury deposits 
and restricted cash. Further details 
are provided in note 19.

Trade and Other Payables
Trade and other payables are not 
interest bearing and are stated at 
their amortised cost.

and deferred tax. Tax is recognised 
in the Consolidated Statement of 
Comprehensive Income except to 
the extent that it relates to items 
recognised as a direct movement in 
equity, in which case it is recognised 
as a direct movement in equity. 
Current tax is expected tax payable 
on any non REIT taxable income for 
the period, using tax rates enacted 
or substantively enacted at the 
reporting date. 

Deferred tax is accounted for using 
the balance sheet liability method 
in respect of temporary differences 
arising from differences between 
the carrying amount of assets and 
liabilities in the financial statements 
and the corresponding tax basis 
used in the computation of taxable 
profit. In principle, deferred tax 
liabilities are recognised for all 
taxable temporary differences and 
deferred tax assets are recognised 
to the extent that it is probable 
that taxable profits will be available 
against which deductible temporary 
differences can be recognised. 

Deferred tax is calculated at the 
rates that are expected to apply 
when the asset or liability is settled. 
Deferred tax is charged or credited 
in the consolidated statement of 
comprehensive income, except 
when it relates to items credited or 
charged directly to equity, in which 
case the deferred tax is also dealt 
with in equity.

Deferred tax assets and liabilities are 
offset when they relate to income 
taxes levied by the same taxation 
authority and the Group intends 
to settle its current tax assets and 
liabilities on a net basis.

Taxation
Taxation on the profit or loss for the 
period not exempt under UK REIT 
regulations is comprised of current 

Revenue Recognition
Rental income arises from assured 
shorthold tenancies on investment 
properties with a period no longer 

101    The PRS REIT plc     Annual Report & Financial Statements 2019

than 12 months and is accounted 
for on an accruals basis.

Expenses
All expenses are recognised in the 
Condensed Consolidated Statement 
of Comprehensive Income on an 
accruals basis.

Costs of Borrowing
Borrowing costs including legal and 
professional fees are capitalised and 
are amortised over the debt term.

Share Issue Costs
The costs of issuing equity 
instruments are accounted for as a 
deduction from equity.

Finance Income
Finance income is recognised as 
it accrues on cash balances and 
treasury deposits held by the Group.

Finance Costs
Interest is charged as it accrues on 
bank loans held by the Group.

Significant Accounting 
Judgements, Estimates and 
Assumptions
The preparation of the Group’s 
financial information requires the 
Directors to make judgements, 
estimates and assumptions that 

affect the reported amounts of 
revenues, expenses, assets and 
liabilities and the disclosure of 
contingent liabilities at the reporting 
date. However, uncertainty about 
these assumptions and estimates 
could result in outcomes that require 
a material adjustment to the carrying 
amount of the asset or liability 
affected in future periods.

In the process of applying the 
Group’s accounting policies, the 
Directors have made the following 
judgements which have the most 
significant effect on the amounts 
recognised in the consolidated 
financial statements:

 Acquisition of subsidiaries – as a business

(i) 
During the period, the Group acquired five property owning special purpose vehicles. The Directors considered 
whether these acquisitions met the definition of the acquisition of a business or the acquisition of a group of assets 
and liabilities. It was concluded that these acquisitions met the criteria for the acquisition of a business as outlined 
in IFRS 3 as the acquisitions were conditional on the IPO proceeding. All assets acquired and liabilities assumed in 
a business combination are measured at acquisition date fair value. The fair value of the assets and liabilities as at 
the date of the acquisitions were as follows:

Sigma PRS 
Investments IV & V 
Limited 
£’000

Sigma PRS 
Investments  
(Our Lady’s) Limited 
£’000

Sigma PRS 
Investments VIII 
& IX Limited 
£’000

Investment properties acquired

10,320

11,660

12,685

Other receivables

Other payables

13

(19)

13

(29)

21

(32)

Total 
£’000

34,665

47

(80)

Total consideration paid

10,314

11,644

12,674

34,632

>   Investment property is measured at fair value as at the date of the acquisition of the subsidiary by an 

independent valuation expert.

>   Other receivables are taken as being the value recorded in the accounts of the Company acquired, being the 

best estimate of their fair value.

>   Other creditor balances are measured at the amounts actually payable.

>   The total consideration paid was cash settled and no goodwill arose on acquisition.

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Notes to the Financial Statements (continued)

  Acquisition of subsidiaries – as a group of assets and liabilities

(ii) 
During the period, the Group acquired a further five property owning special purpose vehicles. The Directors 
considered whether these acquisitions meet the definition of the acquisition of a business or the acquisition of a 
group of assets and liabilities. It was concluded that acquisitions did not meet the criteria for the acquisition of a 
business as outlined in IFRS 3 as they did not have an integrated set of activities and assets that were capable of 
being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or other 
economic benefits directly to investors. Furthermore, a business consists of inputs and process applied to those 
inputs that have the ability to create outputs. The fair value of identifiable assets and liabilities is allocated on the 
basis of their relative fair values at the date of purchase. The Directors have reviewed the fair value of the assets and 
liabilities as at the date of the acquisitions which were as follows:

Sigma PRS 
Investments 
(Cable Street 
II) Limited 
£’000 

Sigma PRS 
Investments  
(Our Lady’s) 
Limited 
£’000

Sigma PRS  
Investments  
(DarlastonII)  
Limited 
£’000

Sigma PRS  
Investments  
(Darlaston  
Phase 2 II)  
Limited 
£’000

Sigma PRS  
Investments  
(Sutherland  
School II)  
Limited 
£’000

Total 
£’000

Investment properties acquired

Other receivables

Total consideration paid

2,862

-

2,862

2,519

474

2,993

1,755

1,746

2,905

11,787

-

-

528

1,002

1,755

1,746

3,433

12,789

>   Investment property is measured at fair value as at the date of the acquisition of the subsidiary by an 

independent valuation expert.

>   Other receivables are taken as being the value recorded in the accounts of the Company acquired, being the 

best the amounts actually recoverable.

  Fair value of investment property

(iii) 
The fair value of any property, including investment property under construction is determined by an independent 
property valuation expert to be the estimated amount for which a property should exchange on the date of the 
valuation in an arm’s length transaction. The valuation experts use recognised valuation techniques applying 
principles of both IAS40 and IFRS13. 

The key assumptions that are used in fair value assessment of completed assets are net investment yield and gross 
to net assumption. The key assumptions that are used in the fair value assessment of assets under construction are 
investment value on completion, gross development costs, construction costs spend to date and estimated profit 
on completion. 

The valuations are prepared in accordance with the Royal Institution of Chartered Surveyors (“RICS”) Valuation – 
Professional Standards January 2014 (“Red Book”).

There were no estimates impacting the business.

103    The PRS REIT plc     Annual Report & Financial Statements 2019

5.  Rental Income

Gross rental income from investment property

Year ended  
30 June 2019 
£’000

31 May 2017 to  
30 June 2018 
£’000

5,970

5,970

1,765

1,765

The Group’s investment property consists of residential housing for the private rented sector and therefore has 
multiple tenants and as a result does not have any significant customers.

6.  Non-recoverable Property Costs

Other property expenses and irrecoverable costs

Year ended  
30 June 2019 
£’000

31 May 2017 to  
30 June 2018 
£’000

1,054

1,054

274

274

Non-recoverable property costs represent direct operating expenses in relation to rental income arising on 
investment properties.

7.  Directors’ Remuneration

Directors’ emoluments

Year ended  
30 June 2019 
£’000

31 May 2017 to  
30 June 2018 
£’000

123

123

67

67

The Directors are remunerated for their services at such rate as the Directors shall from time to time determine. 
The Chairman receives a Director’s fee of £45,000 per annum, and the other Directors of the Board receive a fee of 
£30,000 per annum (with the exception of the Chairman of the Audit Committee who receives an additional fee of 
£5,000 per annum).

8.  Particulars of Employees

The Group had no employees during the year or prior period other than the Directors.

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Notes to the Financial Statements (continued)

9.  Investment Advisory Fees

Advisory Fee

Year ended  
30 June 2019 
£’000

31 May 2017 to  
30 June 2018 
£’000

4,402

4,402

3,295

3,295

Sigma PRS Management Ltd is appointed is the Investment Adviser of the Company. Under the current Investment 
Management Agreement, the Advisory Fee shall be an amount calculated in respect of each month, in each case based 
upon the Adjusted Net Asset Value on the following basis:

(a) 

(b) 

(c) 

 1 per cent per annum of the Adjusted Net Asset Value up to, and including, £250 million;

 0.90 per cent per annum of the Adjusted Net Asset Value in excess of £250 million and up to, and including, 
£500 million;

 0.80 per cent per annum of the Adjusted Net Asset Value in excess of £500 million and up to, and including,  
£1 billion; and

(d) 

 0.70 per cent per annum of the Adjusted Net Asset Value in excess of £1 billion.

The appointment of the Investment Adviser shall continue in force unless and until terminated by either party giving to the 
other not less than 12 months’ written notice, such notice not to expire earlier than 31 May 2023.

10. Administrative Expenses

Legal and professional fees

Administration and secretarial fees

Audit and tax fees

Valuation fees

Depositary fees

Financial adviser and broker

Insurance

Public relations

Regulatory fees

Sundry expenses

Subscriptions

Bad debt provision

Costs of acquisition of subsidiaries

Disallowed VAT

105    The PRS REIT plc     Annual Report & Financial Statements 2019

Year ended  
30 June 2019 
£’000

31 May 2017 to  
30 June 2018 
£’000

210

151

157

227

43

60

27

66

169

12

26

13

28

165

1,354

91

123

134

156

56

66

20

41

134

5

-

-

24

127

977

Services provided by the Group’s Auditors and its associates 

The Group has obtained the following services from its Auditor and its associates:

Audit of the Group financial statements 

Audit of the subsidiary financial statements

Review of the half year financial statements

Corporate services relating to the initial launch

11. Finance Income

Interest on short term deposits 

12. Finance Cost

Amortisation of debt legal costs and arrangement fees

Interest on bank loans

Year ended  
30 June 2019 
£’000

31 May 2017 to  
30 June 2018 
£’000

80

50

18

148

70

21

18

35

144

Year ended  
30 June 2019 
£’000

31 May 2017 to  
30 June 2018 
£’000

789

789

570

570

Year ended  
30 June 2019 
£’000

31 May 2017 to  
30 June 2018 
£’000

69

795

864

-

-

-

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The PRS REIT plc     Annual Report & Financial Statements 2019     106

 
 
 
 
 
 
 
Notes to the Financial Statements (continued)

13.Taxation

As a UK REIT, the Group is exempt from corporation tax on the profits and gains from its property investment 
business, provided it meets certain conditions as set out in the UK REIT regulations. For the current year and prior 
period, the Group did not have any non-qualifying profits and accordingly there is no tax charge in the period. If 
there were any non-qualifying profits and gains, these would be subject to corporation tax.

It is assumed that the Group will continue to be a UK REIT for the foreseeable future, such that deferred tax has not 
been recognised on temporary differences relating to the property rental business. No deferred tax asset has been 
recognised in respect of the unutilised residual current period losses as it is not anticipated that sufficient residual 
profits will be generated in the future.

Current and deferred tax

Corporation tax charge/(credit) for the period

Total current income tax charge/(credit) in the income statement

Year ended  
30 June 2019 
£’000

31 May 2017 to  
30 June 2018 
£’000

-

-

-

-

The tax charge for the year/period is less than the standard rate of corporation tax in the UK of 19 per cent. The 
differences are explained below.

Profit before tax

Tax at UK corporation tax standard rate of 19% 

Change in value of exempt investment properties

Exempt REIT income

Amounts not deductible for tax purposes

Unutilised residual current period tax losses not recognised in 
deferred tax

Difference in deferred tax rates

Year ended  
30 June 2019 
£’000

31 May 2017 to  
30 June 2018 
£’000

14,571

2,768

(2,966)

(719)

5

816

96

-

3,237

615

(1,048)

(232)

14

582

69

-

The standard rate of corporation tax in the UK for the period from incorporation to 31 March 2017 was 20%. 
 From 1 April 2017 to 30 June 2019, the standard rate of corporation tax in the UK was 19%.

REIT exempt income includes property rental income that is exempt from UK Corporation Tax in accordance with 
Part 12 of CTA 2010.

107    The PRS REIT plc     Annual Report & Financial Statements 2019

14. Earnings per Share 

Earnings per share (EPS) amounts are calculated by dividing profit for the period attributable to ordinary equity 
holders of the Company by the weighted average number of Ordinary Shares in issue during the period. As there 
are no dilutive instruments, only basic earnings per share is quoted below.

The calculation of basic earnings per share is based on the following:

Net profit attributable to ordinary shareholders

EPRA adjustments: 
Changes in value of investment properties

EPRA Net loss attributable to ordinary shareholders

Year ended  
30 June 2019 
£’000

14,571

(15,609)

(1,038)

31 May 2017 to  
30 June 2018 
£’000

3,237

(5,515)

(2,278)

Weighted average number of ordinary shares

495,180,547

330,854,803

Earnings per share (pence)

EPRA loss per share (pence)

2.9

(0.2)

1.0

(0.7)

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The PRS REIT plc     Annual Report & Financial Statements 2019     108

 
 
 
 
 
 
 
Notes to the Financial Statements (continued)

15. Dividends

The following dividends were paid during the current year and prior period:

Dividend of 1.5p for the 7 months to 31 December 2017

Dividend of 1.0p for the 3 months to 31 March 2018

Dividend of 2.5p for the 3 months to 30 June 2018

Dividend of 1.0p for the 3 months to 30 September 2018

Dividend of 1.0p for the 3 months to 31 December 2018

Dividend of 1.0p for the 3 months to 31 March 2019

Year ended  
30 June 2019 
£’000

31 May 2017 to  
30 June 2018 
£’000

-

-

12,382

4,953

4,953

4,953

27,241

3,757

4,943

-

-

-

-

8,700

On 31 January 2018, the Company announced the declaration of a dividend in respect of the period from 31 
May 2017 to 31 December 2017 of 1.5 pence per Ordinary Share, which was payable on 16 March 2018 to 
shareholders on the register as at 16 February 2018.

On 30 April 2018, the Company announced the declaration of a dividend in respect of the period from 1 January 
2018 to 31 March 2018 of 1.0 pence per Ordinary Share which was payable on 31 May 2018 to shareholders on 
the register as at 11 May 2018.

On 31 July 2018, the Company announced the declaration of a dividend in respect of the period from 1 April 2018 
to 30 June 2018 of 2.5 pence per Ordinary Share which was payable on 31 August 2018 to shareholders on the 
register as at 10 August 2018. 

On 31 October 2018, the Company announced the declaration of a dividend in respect of the period from 1 
July 2018 to 30 September 2018 of 1.0 pence per Ordinary Share which was payable on 30 November 2018 to 
shareholders on the register as at 9 November 2018. 

On 31 January 2019, the Company announced the declaration of a dividend in respect of the period from 1 
October 2018 to 31 December 2018 of 1.0 pence per Ordinary Share which was payable on 28 February 2019 to 
shareholders on the register as at 8 February 2019. 

On 29 April 2019, the Company announced the declaration of a dividend in respect of the period from 1 January 
2019 to 31 March 2019 of 1.0 pence per Ordinary Share which was payable on 31 May 2019 to shareholders on 
the register as at 10 May 2019. 

A further dividend was paid during August 2019 which is detailed under note 33, Post Balance Sheet Events.

109    The PRS REIT plc     Annual Report & Financial Statements 2019

16. Investment Property

The freehold, leasehold and part freehold part leasehold interests in the properties held within the PRS REIT were 
independently valued as at 30 June 2019 by Savills (UK) Limited, acting in the capacity of External Valuers as 
defined in the RICS Red Book (but not for the avoidance of doubt as an External Valuer of the PRS REIT as defined 
by the Alternative Investment Fund Managers Regulations 2013). The valuations accord with the requirements of 
IFRS 13 and the Royal Institution of Chartered Surveyors’ (“RICS”) Valuation – Global Standards 2017 incorporating 
the IVSC International Valuation Standards (the “RICS Red Book”). The valuation basis conforms to International 
Valuation Standards and is based on market evidence of investment yields, expected gross to net income rates and 
actual and expected rental values.

The valuations are the ultimate responsibility of the Directors. Accordingly, the critical assumption used in 
establishing the independent valuation are reviewed by the Board.

Properties acquired on acquisition of subsidiaries

Property additions - subsequent expenditure

Change in fair value

Transfers to completed assets

At 30 June 2018 

Properties acquired on acquisition of subsidiaries

Property additions - subsequent expenditure

Change in fair value

Transfers to completed assets

At 30 June 2019

Completed  
Assets  
£’000

40,770

-

850

2,015

43,635

34,665

-

1,605

73,020

152,925

Assets under 
Construction 
£’000

10,640

64,184

4,665

(2,015)

77,474

11,787

179,105

14,004

(73,020)

209,350

Total 
£’000

51,410

64,184

5,515

-

121,109

46,452

179,105

15,609

-

362,275

The historic cost of completed assets and assets under construction as at 30 June 2019 was £341,151 (2018: £115,594).

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The PRS REIT plc     Annual Report & Financial Statements 2019     110

 
 
 
 
 
 
 
Notes to the Financial Statements (continued)

16. Investment Property (continued)

Fair Values
IFRS 13 sets out a three-tier hierarchy for financial assets and liabilities valued at fair value. These are as follows:

Level 1  quoted prices (unadjusted) in active markets for identical assets and liabilities;

Level 2  inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or 
indirectly; and

Level 3  unobservable inputs for the asset or liability.

Investment property falls within Level 3. The Investment valuations provided by the external valuation expert are 
based on RICS Professional Valuation Standards, but include a number of unobservable inputs and other valuation 
assumptions. The significant unobservable inputs and the range of values used are:

Type 

Investment yield 

Gross to net assumption 

Range

4.30% to 4.84%

22.5% to 25.0%

The impact of changes to the significant unobservable inputs are:

Improvement in yield by 0.125%

Worsening in yield by 0.125%

Improvement in gross to net by 1%

Worsening in gross to net by 1%

17. Investment in Subsidiaries 

Company

Cost at the start of the period 

Additions during the period

Cost at the end of the period

2019 
Impact on  
statement of 
comprehensive 
income

2019  
Impact on  
statement of  
financial  
position 

10,411

(9,934)

4,647

(4,742)

10,411

(9,934)

4,647

(4,742)

2018  
Impact on 
statement of 
comprehensive 
income 
£’000

5,400

(5,223)

2,412

(2,557)

2018  
Impact on 
statement of 
financial  
position 
£’000

5,400

(5,223)

2,412

(2,557)

Year ended  
30 June 2019 
£’000

31 May 2017 to  
30 June 2018 
£’000

104,273

221,428

325,701

-

104,273

104,273

111    The PRS REIT plc     Annual Report & Financial Statements 2019

The Group comprises a number of companies, all subsidiaries included within these financial statements are  
noted below:
% 

Ownership Name of Entity 

Principal Activity 

Country  
of Incorporation

The PRS REIT Development Company Limited

Property Investment

The PRS REIT Holding Company Limited

Investment Holding Company

The PRS REIT Investments LLP

The PRS REIT Memberco Limited

The PRS REIT (LBG) Borrower Limited

Property Investment

Property Investment

Property Investment

The PRS REIT (LBG) Holding Company Limited

Investment Holding Company

The PRS REIT (LBG) Investments LLP

The PRS REIT (LBG) Memberco Limited

The PRS REIT (SW) Borrower Limited

Property Investment

Property Investment

Property Investment

The PRS REIT (SW) Holding Company Limited

Investment Holding Company

The PRS REIT (SW) Investments LLP

The PRS REIT (SW) Memberco Limited

Property Investment

Property Investment

The PRS REIT (SW II) Holding Company Limited

Investment Holding Company

The PRS REIT (SW II) Borrower Limited

The PRS REIT (SW II) Memberco Limited

The PRS REIT (SW II) Investments LLP

Property Investment

Property Investment

Property Investment

England

England

England

England

England

England

England

England

England

England

England

England

England

England

England

England

Property Investment

Scotland

Sigma PRS Investments I Limited

Sigma PRS Investments II Limited

Sigma PRS Investments III Limited

Sigma PRS Investments VI Limited

Sigma PRS Investments VII Limited

Sigma PRS Investments IV Limited

Sigma PRS Investments V Limited

Sigma PRS Investments VIII Limited

Sigma PRS Investments IX Limited

Sigma PRS Investments (Baytree II) Limited

Property Investment

Property Investment

Property Investment

Property Investment

Property Investment

Property Investment

Property Investment

Property Investment

Property Investment

Sigma PRS Investments (Cable Street II) Limited

Property Investment

Sigma PRS Investments (Carr Lane II) Limited

Sigma PRS Investments (Darlaston II) Limited

Property Investment

Property Investment

Sigma PRS Investments (Darlaston Phase 2 II) Limited

Property Investment

Sigma PRS Investments (Newton Le Willows II) Limited

Property Investment

Sigma PRS Investments (Our Lady’s) Limited

Property Investment

Sigma PRS Investments (Sutherland School II) Limited

Property Investment

Sigma PRS Investments (Whitworth Way II) Limited

Property Investment

England

England

England

England

England

England

England

England

England

England

England

England

England

England

England

England

England

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

The registered office for the subsidiaries across the Group is at Floor 3, 1 St. Ann Street, Manchester, M2 7LR, 
except for Sigma PRS Investments I Limited whose registered office is at 18 Alva Street, Edinburgh, EH2 4QG.

The PRS REIT plc     Annual Report & Financial Statements 2019     112

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Notes to the Financial Statements (continued)

18. Trade Receivables and Other Current Assets

Trade receivables

Receivables from group undertakings

Accrued income

Social security and other taxes

Prepayments and other receivables

Group  
2019 
£’000

89

-

132

1,037

4,210

5,468

Company  
2019 
£’000

-

34,076

21

-

220

34,317

Group  
2018 
£’000

28

-

127

1,969

1,690

3,814

Company  
2018 
£’000

-

27,995

71

-

1,658

29,724

The Directors consider that the carrying amount of trade receivables approximates to their fair value. Debts provided 
for and written off are determined on an individual basis and included with administrative expenses in the financial 
statements. The Group’s maximum exposure on credit risk is fair value on trade receivables as presented above. As at 
30 June 2019, £55,000 of trade receivables are less than thirty days. The Group has no pledge as security on trade 
receivables.

19. Cash and Cash Equivalents

Treasury reserve deposits

Restricted cash

Cash held with solicitors

Cash at bank

Group  
2019 
£’000

-

125,000

7,569

97,377

229,946

Company  
2019 
£’000

-

-

-

88,945

88,945

Group  
2018 
£’000

50,000

25,000

-

299,339

374,339

Company  
2018 
£’000

50,000

-

-

296,614

346,614

Restricted cash comprises £125m (2018: £25m) in funds held in a bank account controlled by one of the Group’s 
lenders and are released to free cash once certain loan conditions are met.

Treasury reserve deposits refers to money held on deposit for a fixed term and fixed interest rate. At 30 June 2019, the 
Group held no treasury reserve deposits (2018: one).

113    The PRS REIT plc     Annual Report & Financial Statements 2019

20. Trade and Other Payables

Current Liabilities

Trade payables

Payables to group undertakings

Accruals and deferred income

Other creditors

Social security and other taxes

Non-Current Liabilities

Accruals and deferred income

Group  
2019 
£’000

Company  
2019 
£’000

12,953

-

7,438

14

5

20,410

2,954

23,364

499

-

141

2

5

647

-

647

Group  
2018 
£’000

5,022

-

7,265

5

4

Company  
2018 
£’000

27

611

665

5

4

12,296

1,312

961

13,257

-

1,312

21. Interest bearing loans and borrowings

Non-Current Liabilities

Bank loans

Group  
2019 
£’000

Company  
2019 
£’000

Group  
2018 
£’000

Company  
2018 
£’000

100,000

-

-

-

Through its subsidiaries the Company has granted fixed and floating charges to secure the loans. At 30 June 2019 
and 30 June 2018, the only asset secured was £25m of cash collateral.

The Group’s borrowing facilities are with Scottish Widows and Lloyds Bank plc. At 30 June 2019, these comprised 
two fixed-rate term facilities from Scottish Widows for an aggregate of £250m with a weighted average maturity of 
18.6 years and a revolving credit facility with Lloyds Bank for £100m. The Company has credit approval to increase 
the limit of the revolving credit facility to £150m. At 30 June 2019, the Company had drawn down £100m from 
the fixed rate term facilities with Scottish Widows which can be utilised when investment property is pledged as 
security. The Group’s maximum loan to value ratio can be no more than 45%. As the loan was not utilised as at  
30 June 2019 the Group’s loan to value was nil (2018: nil). 

The PRS REIT plc     Annual Report & Financial Statements 2019     114

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Notes to the Financial Statements (continued)

22.  Share capital 

Share capital represents the nominal value of consideration received by the Company for the issue of Ordinary 
Shares.

2019 
No. of Shares

2019 
Share Capital 
£’000

2018 
No. of Shares

2018 
Share Capital 
£’000

Group and Company

Balance at the beginning of period

494,348,018

4,943

-

Shares issued in relation to IPO

Shares issued in relation to management 
contract

-

929,276

-

10

250,000,000

445,578

Shares issued in relation to Placing 
Programme

-

-

243,902,440

Balance at end of period

495,277,294

4,953

494,348,018

-

2,500

4

2,439

4,943

The Company was admitted to the Specialist Fund Segment of the Main Market of the London Stock Exchange 
on 31 May 2017, raising £250m gross. In February 2018, the Company raised a further £250m gross through its 
placing programme.

23. Share Premium Reserve 

The share premium relates to amounts subscribed for share capital in excess of nominal value.

Group and Company

Balance at beginning of period

Share premium arising on shares issued in relation to IPO

Share issue expenses in relation to the IPO

Transfer to capital reduction reserve

Share premium arising on shares issued in relation to management contract

Share premium arising on shares issued in relation to Placing Programme

Share issue credit/(expense) in relation to the Placing Programme

Balance at end of period

2019 
£’000

2018 
£’000

244,025

-

-

-

-

961

-

19

245,005

247,500

(5,000)

(242,500)

463

247,561

(3,999)

244,025

As stated in the Company’s prospectus dated 4 May 2017, in order to increase the distributable reserves available 
to facilitate the payment of future dividends, the Company resolved that, conditional upon First Admission and 
approval of the Court, the amount standing to the credit of the share premium account as a result of the IPO be 
cancelled and transferred to a special distributable reserve.

The Company obtained court approval on 1 November 2017. An SH19 form was sent to Companies House with a 
copy of the court order on 1 November 2017 and the certificate of cancellation was issued by Companies House 
on 2 November 2017.

115    The PRS REIT plc     Annual Report & Financial Statements 2019

24. Capital Reduction Reserve

The capital reduction reserve is a distributable reserve to which the value of share premium, as a result of the IPO, 
has been transferred. Dividends can be paid from this reserve.

Balance at beginning of period

Transfer from share premium reserve

Dividend paid of 1.5p per share for the period ended 
31 December 2017

Dividend paid of 1.0p per share for the period ended  
31 March 2018

Dividend paid of 2.5p per share for the period ended  
30 June 2018

Dividend paid of 1.0p per share for the period ended  
30 September 2018

Dividend paid of 1.0p per share for the period ended  
31 December 2018

Dividend paid of 1.0p per share for the period ended  
31 March 2019

Balance at end of period

As at  
30 June 2019 
£’000

233,800

-

-

-

(12,382)

(4,953)

(4,953)

(4,953)

206,559

As at  
30 June 2018 
£’000

-

242,500

(3,757)

(4,943)

-

-

-

-

233,800

25.Redeemable Preference Shares

On 24 April 2017, the Company allotted 50,000 redeemable preference shares of £1 each to meet the minimum 
capital requirements. On 31 May 2017 and on completion of the IPO, the shares were redeemed at par value.

26. IFRS Net Asset Value per Share

Basic NAV per share is calculated by dividing net assets in the Statement of Financial Position attributable to 
ordinary equity holders of the parent by the number of Ordinary Shares outstanding at the end of the period.  
As there are no dilutive instruments, only basic NAV per share is quoted below.

Net asset values have been calculated as follows:

Net assets at end of period (£’000)

Shares in issue at end of period

Basic IFRS NAV per share (pence)

As at  
30 June 2019

As at  
30 June 2018

474,325

486,005

495,277,294

494,348,018

95.8

98.3

The NAV per share calculated on an EPRA basis is the same as the IFRS NAV per share for the year ended 30 June 
2019 and the period to 30 June 2018.

The PRS REIT plc     Annual Report & Financial Statements 2019     116

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Notes to the Financial Statements (continued)

27. Controlling Parties

As at 30 June 2019 and 30 June 2018, there is no ultimate controlling party.

28. Consolidated Entities

The Group consists of a parent company, The PRS REIT plc, incorporated in the UK and a number of subsidiaries 
held directly and indirectly by The PRS REIT plc, which operate and are incorporated in the UK.

The Group owns 100% equity shares of all subsidiaries as listed in note 17 and has the power to appoint and 
remove the majority of the Board of Directors of those subsidiaries. The relevant activities of the subsidiaries 
are determined by the Board of Directors based on simple majority votes. Therefore the Directors of the Group 
concluded that the Group has control over all these entities and all these entities have been consolidated within the 
financial statements.

29. Operating Leases

The future minimum lease payments receivable under non-cancellable operating leases in respect of the Group’s 
property portfolio are as follows:

Receivable within 1 year

Group  
2019 
£’000

5,352

5,352

Group  
2018 
£’000

1,854

1,854

The Group’s receivable leases are assured shorthold tenancies usually for periods for up to one year.

The future minimum lease payments payable under non-cancellable operating leases in respect of the Group’s 
property portfolio are as follows:

Payable within 1 year

Payable between 1 and 5 years

Payable greater than 5 years

30. Capital commitments

Group  
2019 
£’000

30

120

7,433

7,583

Group  
2018 
£’000

16

66

4,079

4,161

The Group have entered into contracts with unrelated parties for the construction of residential housing with a total 
value of £525,826,000 (2018: 206,991,000). As at 30 June 2019, £260,159,000 (2018: £128,871,000) of such 
commitments remained outstanding.

117    The PRS REIT plc     Annual Report & Financial Statements 2019

31.Related Party Disclosure 

The number of shares owned by the Directors of the Company as at 30 June 2019 along with dividends they 
received during the period is as follows:

Company  
Director

No. of  
shares held

Dividends  
Received

Roderick MacRae

Steffan Francis

Stephen Smith

Jim Prower

2019

100,000 

50,000 

80,000 

- 

2018

100,000 

30,000 

80,000 

- 

2019

£5,500

£1,650

£4,400

-

2018

£1,600

£750

£2,000

-

For the current year, Directors’ fees of £114,000 (2018: £64,000) were incurred.

32. Transactions with Investment Adviser

On 31 March 2017, Sigma PRS Management Ltd was appointed as the Investment Adviser of the Company.

For the year ended 30 June 2019, fees of £4,402,000 (2018: £3,295,000) were incurred and payable to Sigma 
PRS Management Ltd in respect of investment advisory services. At 30 June 2019, £362,000 (2018: £374,000) 
remained unpaid.

For the year ended 30 June 2019, development fees of £7,332,000 (2018: £2,878,000) were incurred and payable 
to Sigma PRS Management Ltd. At 30 June 2019, £706,000 (2018: £515,742) remained unpaid. 

For the year ended 30 June 2019, administration and secretarial services of £90,000 (2018: £97,500) were incurred 
and payable to Sigma Capital Property Ltd, a fellow subsidiary of the ultimate holding company of the Investment 
Adviser. At 30 June 2019, £22,500 (2018: £15,000) remained unpaid.

For the year ended 30 June 2019, Sigma PRS Management Ltd acquired 3,194,274 (2018: 445,578) shares in the 
Company. Of the 3,194,274 shares acquired in the year, 929,276 were new shares issued by the Company as a 
price of 104.5 pence per share. The remaining 2,264,998 shares acquired in the year were purchased in the market 
at an average price of 100 pence per share. All the shares acquired in the prior period were new shares issued 
by the Company at 105 pence per share. Subsequent to the year end, Sigma PRS Management Ltd acquired 
further shares of 750,000. Sigma PRS Management Ltd’s shareholding equates to 0.9% of the issued share capital 
in the Company. All the shares acquired in the year and prior period were in accordance with the Development 
Management Agreement between the Company and Sigma PRS Management Ltd.

For the year ended 30 June 2019, Sigma PRS Management Ltd received dividends from the Company of £99,000 
(2018: £11,000).

During the year, the Company acquired the following subsidiaries from Sigma Capital Group plc, the ultimate 
holding company of the Investment Adviser:

>   Sigma PRS Investments IV Limited and Sigma PRS Investments V Limited for a consideration of £10,314,000

>   Sigma PRS Investments VIII Limited and Sigma PRS Investments IX Limited for a consideration of £12,674,000

>  Sigma PRS Investments (Cable Street II) Limited for a consideration of £2,862,000

>  Sigma PRS Investments (Darlaston II) Limited for a consideration of £1,755,000

>  Sigma PRS Investments (Darlaston Phase 2 II) Limited for a consideration of £1,746,000

>  Sigma PRS Investments (Our Lady’s) Limited for a consideration of £11,644,000

>  Sigma PRS Investments (Sutherland School II) Limited for a consideration of £3,433,000

>  Sigma PRS Investments (Whitworth Way II) Limited for a consideration of £2,993,000

The PRS REIT plc     Annual Report & Financial Statements 2019     118

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Notes to the Financial Statements (continued)

33. Post Balance Sheet Events

Dividend
On 31 July 2019, the Company declared a dividend in respect of the period from 1 April 2019 to 30 June 2019 of 
2.0p per Ordinary Share totalling £9,905,546. The dividend was paid on 30 August 2019 to shareholders on the 
register at 9 August 2019. The ex-dividend date was the 8 August 2019.

Acquisition of Investment Properties
Since the year end and to the date of this report, the Company has acquired the following land for development of 
investment property:

>  Acquired a site in July 2019 located in Harlow, Essex for £5.6m

Acquisition of ordinary shares under Development Management Agreement
Subsequent to the year end and in accordance with the Development Management Agreement, Sigma PRS 
Management Ltd has acquired 750,000 ordinary shares in the Company at an average price of 94.9 pence per 
ordinary share.

119    The PRS REIT plc     Annual Report & Financial Statements 2019

The PRS REIT plc     Annual Report & Financial Statements 2019     120

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