LONDON (Alliance News) - Sigma Capital Group PLC on Wednesday said it has raised GBP20 million before expenses in a share placing to allow the company to build its own portfolio of private rented sector assets.
The 26.7 million new shares are being sold at 75 pence per share, a 6.8% discount to the prior day's closing price. Sigma Capital shares were down 2.3% at 78.65p on Wednesday morning.
Sigma Capital, which calls itself a residential development and urban regeneration specialist, said a portfolio of its own private rented sector assets would complement the joint ventures it has with Gatehouse Bank PLC and Grainger PLC in the space.
Separately, Sigma said its main focus in the first half of 2015 was the the first phase of the roll-out of its private rented sector joint venture with Gatehouse, and that the delivery of the first phase of 927 new rental homes in the North West is ahead of schedule.
"Our PRS portfolio target with Gatehouse has now expanded to 10,000 new homes over the next five years. Complementing this, we are expecting to commence our first PRS site with Grainger in the second half," Sigma Chairman David Sigsworth said in a statement.
"Over the next twenty-four months or so, our goal is to deliver PRS sites throughout the major cities in England outside London, from the North to the Midlands and also in the Home Counties, giving us national coverage," Sigsworth added.
The chairman's comments came as Sigma Capital reported net assets per share of 16.7 pence at the end of June, down from 16.8p at the end of 2014. It made a GBP414,000 pretax loss in the six months to the end of June, compared with a GBP201,000 pretax loss in the corresponding half the prior year, as revenue fell to GBP1.0 million from GBP1.8 million.
"It is worth noting that the group only started generating income from its PRS activities in the last quarter of 2014 and that PRS income comprised the major part of first half revenues," the company said.
Sigma Capital said it expects its own portfolio of private rented sector assets to significantly improve returns and generate material long-term recurring income.
The housing they will deliver will have a gross development cost of GBP50 million in the first 18 to 24 months after the company deploys the funds from the placing, supplemented by cash resources, utilising "moderate leverage" of about 55% loan to value on completed assets that generate income.
"The initial focus will be on the development of family homes across up to eight sites, with the first sites to be delivered in the Greater Manchester and Liverpool regions. The commencement of construction is targeted for early 2016," Sigma Capital said.
The company expects the new rental homes to produce "net income in excess of GBP2 million per annum and an indicative GBP13 million of capital uplift".
"At the end of the development phase of these assets, the directors intend to recycle capital and income for further development opportunities," Sigma Capital said.
Chief Executive Graham Barnet said the fundraising was supported by new and existing investors, and that the move will enable Sigma Capital to "build our own substantial PRS portfolio, capitalising on the infrastructure and relationships we have spent the last three years putting in place for large scale PRS".
"We are already deploying this platform successfully with Gatehouse with the first phase of 927 PRS homes well underway. The development of our own portfolio will significantly enhance returns and generate additional material long-term recurring income," Barnet said.
"This has been a long term aim for Sigma and the placing marks an important step in the ongoing development of Sigma. There is an urgent need for new housing in the UK and we look forward to developing our own PRS assets as well as continuing to deliver new rental homes under our partnership model," Barnet added.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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