Build-to-rent housing specialist PRS Reit (PRSR ) has refinanced its £150m overdraft, reducing its exposure to rising interest rates and giving itself some flexibility to lock in lower rates if borrowing costs fall.

The £444m real estate investment trust (Reit) has replaced its £150m revolving credit facility from RBS and Lloyds that was about to expire with a new 15-year £102m fixed-rate facility at an interest rate of 6.04% a year from Legal & General Investment Management.

It has also secured a £75m two-year floating rate facility from RBS at a rate of 1.75% over the Sonia inter-bank lending rate, with a cap put in place on the floating rate to ‘hedge against downside risk on further interest rate movements’.

The company now has £352m of fixed-rate debt – equal to 82% of its total borrowings – spread over 16 years and costing a blended rate of 3.8%, which is below the 4.3% net interest yield from the portfolio.

Numis Securities analyst Andrew Rees said the company’s decision in February to defer the refinancing for five months had not paid off as borrowing rates increased. However, he said the new arrangement provided long-term security and visibility over finance costs.

PRS also said rents grew 6.5% over the 12 months to end of May, up from 5.7% in the 12 months to the end of March, which could bode well for efforts to strengthen the quaterly dividends behind its 5% yield that were only 0.8 times covered by earnings in the first half of its financial year.

Occupancy stood at 97% at 31 May, rising to 98% of applicants who passed referencing and paid rental deposits. Rent collection was 100% in the 11 months to the end of May, with total arrears at a ‘modest’ £600,000.

Sigma PRS Management’s Graham Barnet, who manages the real estate portfolio, said: ‘Affordability remains strong, with average rent as a proportion of household income at 25%.’

Barnet will deploy £115m immediately, taking £102m of fixed-rate debt and £13m of floating rate debt, to fund ‘already completed and stabilised sites’. The remaining cash will be used to fund sites before next year.

PRS shares slipped 2.2% or 1.8p to 79.1p, widening their discount to 33% below Numis’ estimate of 116.9p net asset value per share. Including dividends, the shares have dropped 21% in the past year. The company will publish its fourth quarter update later this month.