REG - Phoenix SpreeDeutsch - Interim Results for 6 months ended 30 June 2022
29/09/2022 07:00
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RNS Number : 0734B Phoenix Spree Deutschland Limited 29 September 2022
Phoenix Spree Deutschland Limited
(the "Company" or "PSD")
Interim Results for the half-year to 30 June 2022
Phoenix Spree Deutschland (LSE: PSDL.LN), the specialist investor in Berlin
residential real estate, announces its Interim Results for the six months
ended 30 June 2022.
Financial Summary
€ million (unless otherwise stated) Six months to June 2022 Six months to June 2021 12 months to December 2021 12 months to December 2020
Gross rental income 13.0 12.9 25.8 23.9
Profit before tax 17.0 20.4 45.3 37.9
Dividend (€ cents (£ pence)) 2.35 (2.09) (1) 2.35 (2.02) 7.50 (6.30) 7.50 (6.62)
Portfolio valuation(2) 820.1 777.7 801.5 768.3
EPRA NTA per share (€) 5.72 5.42 5.65 5.28
EPRA NTA per share (£)(3) 4.92 4.66 4.74 4.76
EPRA NTA per share total return (€ per cent) 2.2 3.6 8.4 8.8
Net LTV (per cent)(4) 36.0 33.7 34.7 33.1
Portfolio valuation per sqm (€) 4,318 4,075 4,225 3,977
Annual like-for-like rent per sqm growth (per cent) 3.7 4.6 3.9 (15.8)
EPRA Vacancy (per cent) 2.5 1.3 3.1 2.1
Condominium sales notarised 3.0 4.3 15.2 14.6
(1-GBP:EUR FX rate locked in at 1:1.124 as at 28 September 2022.)
(2 -Portfolio valuation includes investment properties under construction.)
(3-GBP:EUR FX rate 1:1.162 as at 30 June 2022.)
(4- Net LTV uses nominal loan balances as per note 17 rather than the loan
balance on the Consolidated Statement of Financial Position which consider
Capitalised Finance Arrangement Fees in the balance.)
Further increase in rental and portfolio values during H1 2022
· EPRA NTA per share up 1.2 per cent in H1 2022 to €5.72; EPRA NTA per
share total return of 2.2 per cent.
· Including investment properties under construction worth €7.7m, the
Portfolio was valued at €820.1 million, a 2.3 per cent increase versus 31
December 2021.
· Like-for-like Portfolio value, adjusted for acquisitions and disposals,
increased by 2.2 per cent in H1 2022.
· Like-for-like rental income per sqm increased by 3.7 per cent versus
prior year, down from 4.6 per cent in H1 2021, mainly reflecting re-letting
mix effects, which have subsequently normalised.
Strong Balance Sheet, completion of new loan facility and refinancing
· Net LTV remains conservative at 36.0 per cent (31 December 2021: 34.7
per cent).
· New €60 million loan facility agreed with Natixis and announced on 25
January 2022.
· Successful refinancing of €49.7 million of Berliner Sparkasse debt,
with €13.7 million of cash released at 28 September 2022.
· Company's interest rate hedging policy has seen cash borrowing costs
decline, despite rising long term rates.
· Company's first loan maturity is not due until September 2026.
Continued strong demand for Berlin residential rental property
· 148 new leases in Berlin signed during H1 2022 at an average rent of
€13.2 per sqm and 33.7 per cent premium to passing rents.
· €6.2 million invested across the Portfolio (30 June 2021:
€2.7million), continuing to improve the quality of accommodation for tenants
and supporting reversionary rental strategy.
· EPRA vacancy of 2.5 per cent remains at historically low level,
reflecting ongoing structural undersupply of available rental property.
· All furnished apartments made available for refugees impacted by the
Ukraine crisis for a rent-free period have now been fully let.
Actively managing the Portfolio
· Forward purchase in H1 of 17 new-build, semi-detached, residential
properties (34 houses) for a total agreed purchase price of €18.5 million,
four multi-family houses consisting of 24 residential units for a purchase
price of €6.3million.
· Post-period end, acquisition of 25 residential units for a purchase
price of €4.9million.
· All acquisitions fully financed using Natixis acquisition facility.
· Since period-end, contracts notarised to sell two non-core properties
for an aggregate consideration of €8.6 million.
Condominium sales at a premium to book value
· Condominium sales notarised during H1 2022 of €3.0 million, (H1 2021
€4.3million).
· Average achieved value per sqm of €5,257 for residential units, a
gross premium of 19.2 per cent to the 31 December 2021 book value of each
property.
· 75.8 per cent of Portfolio assets legally split into condominiums as at
30 June 2022.
· Sales slowdown reflects increases in the cost of living, higher
borrowing costs and economic uncertainty.
Further value delivered through share buy-backs and dividend
· Unchanged interim dividend of €2.35 cents per share.
· During the half year ended 30 June 2022, the Company bought back a
further 930,509 ordinary shares, representing 0.9 per cent of the ordinary
shares in issue, for a total consideration of £3.3 million.
· Since share buybacks commenced in 2019, including the interim dividend
for 2022 and bought-back shares held in treasury, €63.4 million has been
returned to shareholders.
Outlook
· Supply-demand imbalances within the Berlin PRS provide support to
rental values:
o Rising cost of home ownership forcing potential buyers to remain within
the rental system for longer.
o Urban housing shortage further exacerbated by anticipated net inward
migration of almost one million from Ukraine to Germany.
o Rising cost of construction further limiting new-build completions.
· Reversionary potential within Portfolio underpins future rental growth:
o New letting rental values expected to remain at a significant premium to
average in-place rents across the Portfolio.
· Disposals and balance sheet
o The Company will continue to review its portfolio of assets to ascertain
the potential for disposals of condominiums and other buildings that are
deemed to be non-core.
o The Board considers the current level of gearing and cash balances to be
appropriate at this stage in the real estate cycle and does not intend to
materially increase debt levels until such time as the market outlook becomes
more stable.
o The Company will continue to keep its cash commitments under close review,
and will prioritise continued investment in the existing Portfolio, where
appropriate, and dividend payments to shareholders.
o To the extent that the Board considers it prudent to do so, any excess
proceeds from disposals will be made available for share buybacks.
Robert Hingley, Chairman of Phoenix Spree Deutschland commented:
"The first six months of the financial year were characterised by significant
market disruption caused by the combined effects of global inflationary
pressures, rising interest rates and the ongoing conflict in Ukraine. Against
this backdrop, it is pleasing that the Portfolio was able to deliver further
valuation gains during the first half of the financial year.
Although financial market conditions have become significantly more
challenging, demographic trends within the Berlin market remain positive, with
a significant undersupply of private rental property. Affordability
comparisons with other German cities remain favourable and the reversionary
potential that exists within the Portfolio should continue to support rental
values."
For further information, please contact:
Phoenix Spree Deutschland Limited +44 (0)20 3937 8760
Stuart Young
Numis Securities Limited (Corporate Broker) +44 (0)20 3100 2222
David Benda
Tulchan Communications (Financial PR) +44 (0)20 7353 4200
Elizabeth Snow
Laura Marshall
CHAIRMAN'S STATEMENT
I am pleased to report that, during the first half of the financial year, PSD
has delivered further increases in property and rental values. As at 30 June
2022, the Portfolio, excluding investment property under construction, was
valued at €812.4 million by Jones Lang LaSalle GmbH, a like-for-like
increase of 2.2 per cent since 31 December 2021. The Euro EPRA NTA total
return per share stood at 2.2 per cent with the sterling return at 4.8 per
cent.
The Board is pleased to declare an unchanged interim dividend of 2.35 cents
per share (2.09 pence per share) for the first half of the year (six months to
30 June 2021: 2.35 cents, 2.02 pence). The dividend is expected to be paid on
or around 28 October 2022 to shareholders on the register at the close of
business on 7 October 2022, with an ex-dividend date of 6 October 2022.
Working with our tenants
At times of economic stress, it is even more important that we work closely
with our tenants, just as we did during the dual challenges presented by the
COVID-19 pandemic and the Mietendeckel. Now, with inflationary pressures and a
rising cost of living impacting most European economies, the health and
wellbeing of our tenants remains foremost in our minds.
Our thoughts remain with those impacted by war in Ukraine. In response to the
humanitarian crisis the war has caused, PSD has made available a number of
furnished apartments on a rent-free basis for refugees and I am pleased to
report that these have now been fully let. We will continue to work
constructively with those in greatest need wherever we can.
Investing in our tenanted accommodation
Following the removal of the Mietendeckel, which specified rent levels well
below free market levels, the Company resumed its programme of investment to
improve the overall standard of our tenanted accommodation. During the first
half of the financial year 48.1 per cent of the Company's gross revenues were
reinvested into the Portfolio and it is anticipated that this high level of
investment will continue.
Protecting our environment
The Board recognises that the nature of our business has environmental and
social impacts and that we have a responsibility to consider and minimise
these impacts, where possible. As a member of EPRA, we want to contribute to
greater transparency in reporting. To this end, we have strengthened our
commitment to delivering against our environmental and social impacts by
introducing EPRA's Sustainability Best Practices Recommendations and capturing
our ESG measurements within their framework.
I am therefore delighted to report that this commitment has been recognised in
the EPRA Sustainability Awards 2022, with PSD receiving a Gold award in
recognition of the Company's commitment to best practice in its reporting.
This recognition further encourages us to continue to approach the future in a
consistent, ethical, safe and environmentally friendly way.
Our charitable initiatives
The Company has continued with its programme of financial support to two
Berlin focussed charities, The Intercultural Initiative and Laughing Hearts.
The Intercultural Initiative is a Berlin refuge that helps women and children
affected by domestic violence. Laughing Hearts supports children living in
children's homes and social care.
QSix, our Property Advisor, has also continued to support two charities in
London, SPEAR and SHP, both working with homeless people. Funding is given to
SPEAR to run an outreach service, providing accommodation to rough sleepers
and helping with their health and wider social care problems. SHP supports an
employability programme that assists homeless people or those at high risk of
becoming homeless with finding a job and securing a sustainable income.
Our Board
We are all deeply saddened by the recent death of Greg Branch, and I would
like to reiterate our sincere thanks for his exemplary service during his time
in office. Greg had served on the Company Board since 2020, bringing a wealth
of experience from a distinguished career spanning over 30 years in the
financial services and real estate sectors. He will be sorely missed as a
colleague and friend to the current and previous Directors of the
Company, investment professionals at QSix, and by those in the wider
business community who were privileged to work with him.
As previously announced, Isabel Robins joined the Board of PSD as a
non-executive Director with effect from 14 March 2022. Mrs Robins has over 23
years' experience of complex offshore real estate structures, encompassing a
broad range of property funds, investments, and developments. Her real estate
experience and insight will add a valuable perspective to complement and
enhance the skill set of the Board. Mrs Robins replaces Monique O'Keefe, who
stepped down as a Senior Independent Director to take up a senior executive
position at another company.
The Board is in the process of commissioning a search for a new Non-Executive
Director.
Disposals and balance sheet
With its strong balance sheet and conservative debt financing, PSD is well
positioned to withstand more challenging economic and financial market
conditions. Demographic trends within the Berlin market remain positive and
will continue to support future rental values. This, combined with a high
level of investment into our buildings, underpins the future reversionary
potential that exists within the Portfolio.
The Company recognises that PSD's share price remains at a material discount
to EPRA NTA and, since the commencement of the Company's share buyback
programme in October 2019, 8.9 per cent of ordinary shares in issue have been
repurchased. The Board considers the current level of gearing and cash
balances to be appropriate at this stage in the real estate cycle and will not
look to increase debt levels until such time as the market outlook becomes
more stable. The Company will continue to keep its cash commitments under
close review, and will prioritise continued investment in the existing
Portfolio, where appropriate, and dividend payments to shareholders. To the
extent that the Board considers it prudent to do so, any excess proceeds from
disposals will be made available for share buybacks.
REPORT OF THE PROPERTY ADVISOR
Financial results
Table: Financial highlights for the six-month period to 30 June 2022
€ million (unless otherwise stated) 6 months to 30-Jun-22 6 months to 30-Jun-21 Year to Year to
31-Dec-21
31-Dec-20
Gross rental income 13.0 12.9 25.8 23.9
Investment property fair value gain 11.4 16.0 38.0 41.5
Profit before tax (PBT) 17.0 20.4 45.3 37.9
EPS (€) 0.15 0.17 0.39 0.31
Investment property value 820.1 777.7 801.5 768.3
Net debt(1) 295.6 261.8 278.0 254.4
Net LTV (per cent)(1) 36.0 33.7 34.7 33.1
IFRS NAV per share (€) 4.84 4.54 4.74 4.48
IFRS NAV per share (£)(2) 4.17 3.90 3.98 4.04
EPRA NTA per share (€) 5.72 5.42 5.65 5.28
EPRA NTA per share (£)(2) 4.92 4.66 4.74 4.76
Dividend per share (€ cents) 2.35 2.35 7.5 7.5
Dividend per share (£ pence) (3) 2.09 2.02 6.27 6.75
EPRA NTA per share total return for period (€ per cent) 2.2 3.6 8.4 8.8
EPRA NTA per share total return for period (£ per cent) 4.8 (1.1) 1.0 16.0
(1 - Net LTV and net debt uses nominal loan balances as per note 17 rather
than the loan balances on the Consolidated Statement of Financial Position
which consider Capitalised Finance Arrangement Fees in the balance as per IAS
23.)
(2 - GBP:EUR FX rate 1:1.162 as at 30 June 2022)
(3 - GBP:EUR FX rate locked in at 1:1.124 as at 28 September 2022.)
Revenue for the six-month period was €13.0 million (six months to 30 June
2021: €12.9 million). Profit before taxation was €17.0 million (six months
to 30 June 2021: €20.4 million), the principal component of which was a
revaluation gain of €11.4 million (30 June 2021: €16.0 million).
Reported earnings per share for the period were 15 cents (six months to 30
June 2021: 17 cents).
Reported EPRA NTA per share rose by 1.2 per cent in the first half of 2022 to
€5.72 (£4.92) (31 December 2021: €5.65 (£4.74)). After taking into
account the 2021 final dividend of 5.15 cents (4.36 pence), which was paid in
June 2022, the € EPRA NTA total return in the first half of 2022 was 2.2 per
cent (H1 2021: 3.6 per cent). The £ EPRA NTA total return for the same period
was 4.8 per cent, reflecting the weakening of the £ against the € in the
first six months of the year.
Like-for-like portfolio value increase of 2.2 per cent
Pricing in the Berlin residential property market has remained broadly stable
in the first half of the financial year. The second half to date has seen a
material deterioration in buyer sentiment and, consequently, transaction
volumes. With financial markets experiencing record volatility, the outlook
for the German property market in the second half is uncertain.
As at 30 June 2022, the Portfolio, including investment properties under
construction, was valued at €820.1 million (31 December 2021: €801.5
million). This represents a 2.3 per cent increase over the six-month period.
On a like-for-like basis, excluding the impact of acquisitions and disposals,
the Portfolio value increased by 2.2 per cent during the first half of the
financial year and 6.0 per cent versus the first half of the prior year. This
reflects an increase in rental values, improvements in the micro locations of
certain Portfolio assets, investments in the Brandenburg asset and completion
of the condominium splitting process in one building.
Table: Portfolio valuation and breakdown
30-Jun-22 30-Jun-21 31-Dec-21 31-Dec-20
Total sqm ('000) 188.2 190.8 189.7 193.2
Valuation (€ million) 820.1 777.7 801.5 768.3
Like-for-like valuation growth (per cent) 2.2 2.5 6.3 6.3
Value per sqm (€)(1) 4,318 4,075 4,225 3,977
Fully occupied gross yield (per cent) 2.8 2.9 2.8 2.4
Number of buildings 95 97 97 98
Residential units 2,554 2,586 2,569 2,618
Commercial units 136 139 138 139
Total units 2,690 2,725 2,707 2,757
(1 - Excludes Investment property under construction.)
The valuation represents an average value per square metre of €4,318
(31 December 2021: €4,225), at a gross fully occupied yield of 2.8 per cent
(31 December 2021: 2.8 per cent). Included within the Portfolio valuation are
six properties valued as condominiums, with an aggregate value of €32.8
million (31 December 2021: eight properties, aggregate value €38.8 million).
Like-for-like rental income per square metre growth of 3.7 per cent
After considering the impact of acquisitions and disposals, like-for-like
rental income per square metre grew 3.7 per cent compared with 30 June 2021.
Gross in-place rent was €9.8 per sqm as at 30 June 2022, an increase of 3.5
per cent compared with 30 June 2021 and an increase of 1.9 per cent on 31
December 2021.
Table: Rental income and vacancy rate
30-Jun-22 30-Jun-21 31-Dec-21 31-Dec-20
Total sqm ('000) 188.1 190.8 189.7 193.2
Gross in place rent per sqm (€) 9.8 9.5 9.6 9.3
Like-for-like rent per sqm growth 3.7 4.6 3.9 4.1
Vacancy (per cent) 7.0 7.7 8.4 6.8
EPRA Vacancy per cent (per cent) 2.5 1.3 3.1 2.1
EPRA vacancy remains at historically low levels
Reported vacancy as at 30 June 2022 was 7.0 per cent (30 June 2021: 7.7 per
cent). On an EPRA basis, which adjusts for units undergoing development and
made available for sale, the vacancy rate was 2.5 per cent (30 June 2021: 1.3
per cent). The rise in vacancy was due to an increased number of newly
modernised apartments being made available for rental following the removal of
the Mietendeckel. Notwithstanding this increase, EPRA vacancy remains low from
a historical perspective and is likely to remain so given the ongoing supply
demand imbalance for rental property in Berlin.
Berlin reversionary re-letting premium of 33.7 per cent
During the six months to 30 June 2022, 174 new leases were signed,
representing a letting rate of approximately 7.3 per cent of occupied units.
The average rent achieved on all new lettings was €12.7 per sqm, an 8.5 per
cent increase on the prior year, and an average premium of 28.4 per cent to
passing rents. This compares to a 23.5 per cent premium in the six month
period to 30 June 2021.
The reversionary premium is negatively impacted by the inclusion of
re-lettings from the acquisition in Brandenburg in 2020, where rents are lower
than those achieved in central Berlin. Looking solely at the Berlin portfolio,
which represents 90.7 per cent of total residential lettable space, the
reversionary premium achieved was 33.7 per cent, down from 35.8 per cent in
the prior period.
Limited impact from COVID-19 on rent collection
The prolonged duration of the COVID-19 outbreak and the further restrictions
it has caused in early 2022 have had a limited impact on rent collection
levels with over 98.4 per cent of rents due collected during the first six
months of the financial year.
Where appropriate, PSD continues to support its tenants, both residential and
commercial, by agreeing, on a case-by-case basis, the payment of monthly rents
or deferring rental payments. In addition, PSD has in place a Vulnerable
Tenant Policy which it will continue to monitor and apply to relevant tenants.
Investment in the Portfolio
During the first half of 2022, a total of €6.2 million was invested across
the Portfolio (H1 2021: €2.7 million). These items are recorded as capital
expenditure in the Financial Statements. A further €0.9 million was spent on
maintaining the assets and is expensed through the profit and loss account.
The increase in capital expenditure reflects the ruling against the
Mietendeckel as projects which had been postponed or cancelled pending a final
ruling on the legality of the Mietendeckel are reinstated.
Table: EPRA Capital Expenditure
(All figures in €'000 unless otherwise stated)
30-Jun-22 30-Jun-21 31-Dec-21 31-Dec-20
Acquisitions 0 0 0 0
Like-for-like portfolio 1,769 2,486 4,674 3,645
Development 4,288 101 4,406 274
Other 178 143 397 252
Total Capital Expenditure 6,234 2,729 9,477 4,171
Acquisitions and disposals
On 21 March 2022, the Company announced that it has exchanged contracts to
forward fund 17 new-build, semi-detached, residential properties (34 units)
for a total agreed purchase price of €18.5 million, with construction
expected to complete in the second half of 2024. The price paid of €4,323
per sqm represents an estimated prospective gross yield of 3.5 per cent and
the projected fully occupied rental income generated by the property is
€652,670 per annum, equivalent to 3.2 per cent of the Portfolio gross
in-place rent as at 31 December 2021.
On 5 May 2022, the Company exchanged contracts to acquire four multi-family
houses consisting of 24 residential units for a purchase price of
€6.3million. These properties are located in Hoppegarten and Neuenhagen,
Berlin. Built in 1995 and 1998, they are in good technical condition and offer
significant reversionary potential, having benefited from recent positive
demographic changes.
On 22 September 2022, the Company exchanged contracts to acquire a
multi-family house with 22 residential units and 3 commercial units for
€4.9million. This property is located in Berlin-Neukölln, is well
maintained, and offers significant reversionary and attic potential.
All three acquisitions will be fully financed using the new loan facility
recently agreed with Natixis, announced in January 2022.
Since the beginning of the financial year, the Company has been actively
exploring options for the disposal of buildings deemed to be non-core.
Typically, these buildings will have a mature tenant structure with limited
scope for further capital expenditure and subsequent reversionary re-letting.
Since the half-year end, the Company has exchanged contracts to sell two
non-core properties for an aggregate consideration of €8.6million, a narrow
discount to last JLL valuation of €8.8million as at 30 June 2022. These
buildings were acquired in 2008 and 2017 respectively, for an aggregate
purchase price of €3.9million.
The first of the two properties is an existing Altbau building combined with
an ongoing construction project of an additional apartment block located
within its footprint. The existing building, which was fully split in the land
register, is located in a Milieuschutzgebiet area. The second property is a
smaller building, with a significant commercial component and mature
residential tenant structure.
Condominium sales at a 19.2 per cent premium to book value
PSD's condominium strategy involves the division and resale of selected
properties as single apartments. This is subject to full regulatory approval
and involves the legal splitting of the freeholds in properties that have been
identified as being suitable for condominium conversion.
During the first half of 2022, nine condominiums units were notarised for sale
for an aggregate value of €3.0 million (H1 2021: €4.3 million).
Condominium notarisations during the second quarter of 2022 have been
negatively impacted by concerns over increases in the cost of living, higher
borrowing costs and uncertainty surrounding the macro-economic environment,
including the impact of the crisis in Ukraine. These factors have led to a
deterioration in buyer sentiment and reduced investment volumes.
The average achieved notarised value per sqm for the residential units was
€5,257, representing a gross premium of 19.2 per cent to book value and 21.8
per cent to PSD's average Berlin residential portfolio value as at 30 June
2022.
Since the half year reporting date, the Company has notarised for sale a
further 2 condominium units with total value €1.0 million and at a price per
square metre of €6,236. This represents a gross premium of 33.0 per cent to
book value and 44.4 per cent to the average residential portfolio value as at
30 June 2022.
As at 28 September 2022, 75.8 per cent of the Portfolio had been registered as
condominiums, providing opportunities for the implementation of further sales
projects where appropriate. A further 9.5 per cent are in application, over
half of which are in the final stages of the process. This provides PSD with
additional strategic flexibility to respond to changes in market conditions.
Recent Federal Government legislation has placed significant restrictions on
the ability of landlords to split their properties into condominiums in the
future. Reflecting this, there can be no guarantee that applications which are
currently in process will complete. The legislation is, however, not
retrospective and does not impact assets that have already been split into
condominiums. Moreover, these measures will inevitably increase the scarcity
of condominiums available for sale in the future, further exacerbating the
supply-demand imbalance which currently exists.
Condominium construction
After the overturning of the Mietendeckel, a condominium construction project
commenced in an existing asset bought in 2007. The project involves building
out the attic and renovating existing commercial units to create seven new
residential units. Construction on this project started in the second half of
2021, and the first units are projected to be available in the second half of
2022. The total construction budget for this project is €3.8 million.
The Company also has building permits to renovate attics in 19 existing assets
to create a further 45 units for sale as condominiums or as rental stock.
Debt and gearing
As at 30 June 2022, PSD had nominal borrowings of €305.1 million (31
December 2021: €288.4 million) and cash balances of €9.6 million (31
December 2021: €10.4 million), resulting in net debt of €295.5 million (31
December 2021: €278.0 million) and a net loan to value on the Portfolio of
36.0 per cent (31 December 2021: 34.7 per cent).
The change in gross debt in the period results from the additional drawdown of
debt, including borrowings for further capex on existing and development
buildings plus a tranche of the new build acquisition, offset partly by
repayments of debt on the sale of condominiums alongside amortisation of debt
held with Berliner Sparkasse.
Nearly all PSD's debt effectively has a fixed interest rate through hedging.
As at 30 June 2022, the blended interest rate of PSD's loan book was 2.1 per
cent (31 December 2021: 2.0 per cent). The average remaining duration of the
loan book at 31 December 2021 had decreased to 4.3 years (31 December 2021:
4.9 years).
Outlook
During recent months there has been a significant change in investor and
consumer confidence in reaction to inflationary pressures, consequential
interest rate rises, expectations for future global central bank monetary
policy and economic growth. This has further been impacted by the ongoing
conflict in Ukraine. Although PSD's share price has significantly outperformed
its listed German residential peers during the first half of the financial
year, these circumstances have created a degree of uncertainty across global
equity markets from which PSD has not been immune.
Whilst rental values should continue to be supported by industry fundamentals,
there has been a material deterioration in buyer sentiment since the beginning
of the year. For PSD, this has been evident in condominium sales and, to the
extent that the key drivers of weaker buyer sentiment (higher mortgage rates,
and a higher cost of living) are unlikely to reverse during the second half of
the year, it is anticipated that condominium sales for the full year 2022 will
be materially lower than 2021.
At the institutional level, investor appetite for real assets has also
weakened. A higher cost of funding has seen a reduction in investor demand for
larger portfolio transactions, and there is sufficient anecdotal evidence to
suggest that pricing has weakened. In parallel with this, a number of larger
market participants are now net sellers of assets as they seek to reduce
leverage from levels that are currently significantly higher than at PSD.
Against this backdrop, PSD is well positioned to withstand more challenging
market conditions. With a net LTV of 36.0 per cent, the Company's balance
sheet remains strong, with an average remaining duration of the loan book
exceeding four years. None of the Company's debt reaches maturity until
September 2026. Moreover, following a transition away from negative rates, the
Company's interest rate hedging policy has seen cash borrowing costs decline,
despite rising long term rates.
The Company will continue to review the portfolio of assets to ascertain the
potential for disposals of buildings that are deemed to be non-core. Two
buildings have already been notarised for sale, and further potential non-core
disposals are currently under consideration.
Whilst there is now evidence of yields rising in certain segments of the
German residential market, supply-demand imbalances within the Berlin PRS
market should continue to support rental values. An increase in the cost of
home ownership is likely to place further pressure on the significant shortage
of housing that already exists in Berlin, as potential buyers remain within
the rental system for longer. This shortage has been further exacerbated by
the migration of almost one million refugees into Germany from Ukraine.
Additionally, higher funding, labour and construction costs present
significant headwinds to large-scale new-build construction, a trend which is
likely to further limit the future supply of rental accommodation. Future rent
growth should therefore continue to be underpinned, and there remains
significant future reversionary rental potential across PSD's portfolio of
buildings.
The Company recognises the challenges that its customers are facing as a
direct consequence of inflation. Notwithstanding current cost-of-living
pressures, year-to-date rent collection levels have remained stable. The
Company has always managed rent-to-income multiples for new tenants
conservatively and this customer demographic, combined with recent Federal
support initiatives to help mitigate the financial impact of rising fuel
costs, should ensure rent collection levels remain resilient.
Although the current economic backdrop presents near-term headwinds for the
German residential real estate industry, the Property Advisor remains
confident in the long-term outlook for PSD. Since its inception in 2006, PSD
has successfully adapted its business model to accommodate significant changes
to the economic and regulatory environment and will continue to respond to the
challenges presented by the current economic downturn.
Key Performance Indicators
PSD has chosen a number of Key Performance Indicators (KPIs), which the Board
believes will help investors understand the performance of PSD and the
underlying property Portfolio.
· The value of the Portfolio grew by 2.2 per cent on a like-for-like for
basis for the first half of the year (H1 2021: 2.5 per cent). This increase
was driven a like-for-like average rent per let sqm of 3.7 per cent (H1 2021:
4.6 per cent).
· The EPRA vacancy of the Portfolio stood at 2.5 per cent (31 December
2021: 1.3 per cent).
· The Group continued with its targeted condominium programme, notarising
sales of €3.0 million in the half year to 30 June 2022 (H1 2021: €4.3
million).
· EPRA NTA per share increased by 1.2 per cent to €5.72 as at 30 June
2022 (31 December 2021: €5.65).
· The declared dividend for the half year 2022 was €2.35 cents (£2.09
pence) per share.
Statement of Directors' responsibilities
The important events that have occurred during the period under review, the
key factors influencing the condensed consolidated financial statements and
the principal factors that could impact the remaining six months of the
financial year are set out in the Chairman's Statement and the Property
Advisor Report.
Since the date of the Annual Report for the year ended 31 December 2021,
capital and investment markets have reacted negatively to inflationary
pressures, rising interest rates and economic uncertainty more generally.
As stated above, there has been a material deterioration in sentiment in the
Berlin real estate market. Other principal risks considered are substantially
unchanged since the date of the Annual Report for the year ended 31 December
2021, and continue to be as set out in that report. These include, but are not
limited to:
· Financial and economic risk
· Market risk
· Inflationary risk
· Tenant, letting and political risk
· Outsourcing risk
· IT and Cyber Security risk
· Regulatory risk
The Directors confirm that, to the best of their knowledge:
· The condensed set of financial statements contained within this
half yearly financial report have been prepared in accordance with
International Accounting Standard ("IAS") 34 'Interim Financial Reporting' and
gives a true and fair view of the assets, liabilities, financial position and
profit of the Group; and
· The half yearly financial report includes a fair review of the
information required by the FCA's Disclosure and Transparency Rule 4.2.7R
being disclosure of important events that have occurred during the first six
months of the financial year, their impact on the condensed set of financial
statements and a description of the principal risks and uncertainties for the
remaining six months of the year; and
· The half yearly financial report includes a fair review of the
information required by the Disclosure and Transparency Rule 4.2.8R being
disclosure of related party transactions during the first six months of the
financial year, how they have materially affected the financial position of
the Group during the period and any changes therein.
The half yearly financial report was approved by the Board on 28 September
2022 and the above responsibility statement was signed on its behalf by:
Director
28 September 2022
Condensed Consolidated Statement of Comprehensive Income
For the period from 1 January 2022 to 30 June 2022
Six months ended Six months ended Year ended
Notes 30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Continuing operations
Revenue 12,972 12,925 25,790
Property expenses 5 (8,737) (7,391) (16,082)
Gross profit 4,235 5,534 9,708
Administrative expenses 6 (1,306) (1,586) (3,447)
Gain on disposal of investment property (including investment property held 7 88 577 1,518
for sale)
Investment property fair value gain 10 11,395 15,987 37,983
Performance fee due to Property Advisor 20 343 - (343)
Operating profit 14,755 20,512 45,419
Net finance charge (before gain / (loss) on interest rate swaps) 8 (3,892) (3,721) (7,482)
Gain / (loss) on interest rate swaps 8 6,089 3,643 7,313
Profit before taxation 16,952 20,434 45,250
Income tax expense 9 (2,981) (4,198) (7,882)
Profit after taxation 13,971 16,236 37,368
Other comprehensive income - - -
Total comprehensive income for the period 13,971 16,236 37,368
Total comprehensive income attributable to:
Owners of the parent 13,891 16,208 37,311
Non-controlling interests 80 28 57
13,971 16,236 37,368
Earnings per share attributable to the owners of the parent:
From continuing operations
Basic (€) 22 0.15 0.17 0.39
Diluted (€) 22 0.15 0.17 0.39
Condensed Consolidated Statement of Financial Position
At 30 June 2022
As at As at As at
Notes 30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
ASSETS
Non-current assets
Investment properties 12,14 779,290 763,960 759,830
Property, plant and equipment 18 31 20
Other financial assets at amortised cost 15 938 919 926
Deferred tax asset 9 759 2,303 1,722
781,005 767,213 762,498
Current assets
Investment properties - held for sale 13 40,804 13,720 41,631
Trade and other receivables 16 11,775 12,746 11,699
Cash and cash equivalents 9,550 28,393 10,441
62,129 54,859 63,771
Total assets 843,134 822,072 826,269
EQUITY AND LIABILITIES
Current liabilities
Borrowings 17 835 1,085 922
Trade and other payables 18 10,962 10,548 11,893
Current tax 9 1,296 513 512
13,093 12,146 13,327
Non-current liabilities
Borrowings 17 300,270 285,525 283,233
Derivative financial instruments 19 4,795 14,554 10,884
Deferred tax liability 9 76,413 71,897 75,198
381,478 371,976 369,315
Total liabilities 394,571 384,122 382,642
Equity
Stated capital 21 196,578 196,578 196,578
Treasury shares (37,111) (19,705) (33,275)
Share based payment reserve 20 - - 343
Retained earnings 285,429 257,519 276,394
Equity attributable to owners of the parent 444,896 434,392 440,040
Non-controlling interest 3,667 3,558 3,587
Total equity 448,563 437,950 443,627
Total equity and liabilities 843,134 822,072 826,269
Condensed Consolidated Statement of Changes in Equity
For the period from 1 January 2022 to 30 June 2022
Attributable to the owners of the parent
Stated capital Treasury Shares Share based payment reserve Retained earnings Total Non-controlling interest Total equity
€'000 €'000 €'000 €'000 €'000 €'000 €'000
Balance at 1 January 2021 196,578 (17,206) 6,369 244,685 430,426 3,530 433,956
Comprehensive income:
Profit for the period - - - 16,208 16,208 28 16,236
Other comprehensive income - - - - - - -
Total comprehensive income for the period - - - 16,208 16,208 28 16,236
Transactions with owners -
recognised directly in equity:
Issue of shares - - - - - - -
Dividends paid - - - (5,207) (5,207) - (5,207)
Performance fee - - - - - - -
Settlement of performance fee using treasury shares 4,536 (6,369) 1,833 - -
Acquisition of treasury shares - (7,035) - - (7,035) - (7,035)
Balance at 30 June 2021 (unaudited) 196,578 (19,705) - 257,519 434,392 3,558 437,950
Comprehensive income:
Profit for the period - - - 21,103 21,103 29 21,132
Other comprehensive income - - - - - - -
Total comprehensive income for the period - - - 21,103 21,103 29 21,132
Transactions with owners -
recognised directly in equity:
Dividends paid - - - (2,228) (2,228) - (2,228)
Performance fee - - 343 - 343 - 343
Acquisition of treasury shares - (13,570) - - (13,570) - (13,570)
Balance at 31 December 2021 (audited) 196,578 (33,275) 343 276,394 440,040 3,587 443,627
Comprehensive income:
Profit for the period - - - 13,891 13,891 80 13,971
Other comprehensive income - - - - - - -
Total comprehensive income for the period - - - 13,891 13,891 80 13,971
Transactions with owners -
recognised directly in equity:
Dividends paid - - - (4,856) (4,856) - (4,856)
Performance fee - - (343) - (343) - (343)
Acquisition of treasury shares - (3,836) - - (3,836) - (3,836)
Balance at 30 June 2022 (unaudited) 196,578 (37,111) - 285,429 444,896 3,667 448,563
The share based payment reserve had been established in relation to the issue
of shares for the payment of the performance fee of the property advisor.
Treasury shares comprise the accumulated cost of shares acquired on-market.
Condensed Consolidated Statement of Cash Flows
For the period from 1 January 2022 to 30 June 2022
Notes Six months ended Six months ended Year ended
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Profit before taxation 16,952 20,434 45,250
Adjustments for:
Net finance charge (2,197) 78 169
Gain on disposal of investment property (88) (577) (1,518)
Investment property revaluation gain (11,395) (15,987) (37,983)
Depreciation 8 8 8
Performance fee due to property advisor (343) - 343
Operating cash flows before movements in working capital 2,937 3,956 6,269
Increase in receivables (4,424) (4,332) (1,320)
(Decrease) / increase in payables (931) 1,530 2,875
Cash (used in) / generated from operating activities (2,418) 1,154 7,824
Income tax (paid) (19) (34) 163
Net cash (used in) / generated from operating activities (2,437) 1,120 7,987
Cash flow from investing activities
Proceeds on disposal of investment property (net of disposal costs) 11,244 10,198 13,758
Interest received 2 18 1
Capital expenditure on investment property (6,234) (2,729) (9,477)
Property additions (7,724) - -
(Acquisition) / disposals of property, plant and equipment (6) 3 14
Net cash (used in) / generated from investing activities (2,718) 7,490 4,296
Cash flow from financing activities
Interest paid on bank loans (3,687) (3,663) (7,743)
Repayment of bank loans (3,281) (1,308) (4,059)
Drawdown on bank loan facilities 20,012 - 900
Dividends paid (4,856) (5,207) (7,435)
Acquisition of treasury shares (4,001) (7,035) (20,501)
Net cash generated from / (used in) financing activities 4,187 (17,213) (38,838)
Net (decrease) in cash and cash equivalents (968) (8,603) (26,555)
Cash and cash equivalents at beginning of period/year 10,441 36,996 36,996
Exchange gains on cash and cash equivalents - - -
Cash and cash equivalents at end of period/year 9,550 28,393 10,441
Reconciliation of Net Cash Flow to Movement in Debt
For the period from 1 January 2022 to 30 June 2022
Six months ended Six months ended Year ended
30 June 2022 30 June 2021 31 December 2021
€'000 €'000 €'000
Cashflow from increase / (decrease) in debt financing 16,731 (1,308) (3,159)
Non-cash changes from increase in debt financing 219 369 (235)
Movement in debt in the period/year 16,950 (939) (3,394)
Debt at the start of the period/year 284,155 287,549 287,549
Debt at the end of the period/year 17 301,105 286,610 284,155
Dividends paid during the six months to 30 June 2022 represent the final
dividend relating to the year end 2021.
Notes to the Condensed Consolidated Financial Statements
For the period from 1 January 2022 to 30 June 2022
1. General information
The Group consists of a Parent Company, Phoenix Spree Deutschland Limited
('the Company'), incorporated in Jersey, Channel Islands and all its
subsidiaries ('the Group') which are incorporated and domiciled in and operate
out of Jersey and Germany. Phoenix Spree Deutschland Limited is listed on the
premium segment of the Main Market of the London Stock Exchange.
The Group invests in residential and commercial property in Germany.
The registered office is at 12 Castle Street, St Helier, Jersey, JE2 3RT,
Channel Islands.
2. Basis of preparation
The interim set of condensed consolidated financial statements has been
prepared in accordance with the Disclosure and Transparency Rules of the
Financial Conduct Authority and with IAS 34 Interim Financial Reporting as
adopted by the European Union and the United Kingdom.
The interim condensed consolidated financial statements do not include all the
information and disclosures required in the annual financial statements, and
should be read in conjunction with the Group's annual financial statements for
the year ended 31 December 2021.
As required by the Disclosure and Transparency Rules of the Financial Conduct
Authority, the financial statements have been prepared applying the accounting
policies and presentation that were applied in the preparation of the
Company's published consolidated financial statements for the year ended 31
December 2021.
The comparative figures for the financial year ended 31 December 2021 are
extracted from but do not comprise, the Group's annual consolidated financial
statements for that financial year.
The interim condensed consolidated financial statements were authorised and
approved for issue on 28 September 2022.
The interim condensed consolidated financial statements are neither reviewed
nor audited, and do not constitute statutory accounts within the meaning of
Section 105 of the Companies (Jersey) Law 1991.
2.1 Going concern
The interim condensed consolidated financial statements have been prepared on
a going concern basis which assumes the Group will be able to meet its
liabilities as they fall due for the foreseeable future. The Directors carried
out a thorough review of the viability of the Company in the light of the
continuing global inflationary pressures, rising interest rates and the
ongoing conflict in Ukraine, the conclusion of which was that there were no
concerns regarding the viability of the Company. These condensed consolidated
financial statements have therefore been prepared on a going concern basis.
2.2 New standards and interpretations
There are currently no new standards, amendments or interpretations effective
for annual periods beginning on or after 1 January 2022 that are required to
be adopted by the Group.
3. Critical accounting estimates and judgements
The preparation of condensed consolidated financial statements in conformity
with IFRS requires the Group to make certain critical accounting estimates and
judgements. In the process of applying the Group's accounting policies,
management has decided the following estimates and assumptions have a
significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the financial period;
i) Estimate of fair value of investment properties
The valuation of the Group's property portfolio is inherently subjective due
to, among other factors, the individual nature of each property, its location
and condition, and expected future rentals. The valuation as at 30 June 2022,
which has been used to prepare these financial statements is based on the
rules, regulations and market as at that date. The fair value estimates of
investments properties are detailed in note 12.
The best evidence of fair value is current prices in an active market of
investment properties with similar leases and other contracts. In the absence
of such information, the Group determines the amount within a range of
reasonable fair value estimates. In making its estimate, the Group considers
information from a variety of sources, including:
a) Discounted cash flow projections based on reliable estimates of future cash
flows, derived from the terms of any existing lease and other contracts, and
(where possible) from external evidence such as current market rents for
similar properties in the same location and condition, and using discount
rates that reflect current market assessments of the uncertainty in the amount
and timing of the cash flows.
b) Current prices in an active market for properties of different nature,
condition or location (or subject to different lease or other contracts),
adjusted to reflect those differences.
c) Recent prices of similar properties in less active markets, with
adjustments to reflect any changes in economic conditions since the date of
the transactions that occurred at those prices.
The Directors remain ultimately responsible for ensuring that the valuers are
adequately qualified, competent and base their results on reasonable and
realistic assumptions. The Directors have appointed JLL as the real estate
valuation experts who determine the fair value of investment properties using
recognised valuation techniques and the principles of IFRS 13. Further
information on the valuation process can be found in note 12.
For further information with regard to the movement in the fair value of the
Group's investment properties, refer to the management report on pages 6 to 7.
ii) Judgment in relation to the recognition of assets held for sale
In accordance with the requirement of IFRS 5, Management has made an
assumption in respect of the likelihood of investment properties - held for
sale, being sold within the following 12 months. Management considers that
based on historical and current experience of market since 30 June 2022, the
properties can be reasonably expected to sell within this timeframe.
4. Segmental information
Information reported to the Board of Directors, the chief operating decision
maker, relates to the Group as a whole. Therefore, the Group has not included
any further segmental analysis within these condensed consolidated unaudited
interim financial statements.
Notes to the Condensed Consolidated Financial Statements
For the period from 1 January 2022 to 30 June 2022
5. Property expenses
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Property management expenses 613 606 1,195
Repairs and maintenance 899 598 1,731
Cost incurred in splitting assets into condominiums at the land registry - 33 -
Impairment charge - trade receivables (66) 49 420
Service charges paid on behalf of tenants 3,862 2,761 6,014
Property Advisors' fees and expenses 3,429 3,344 6,722
8,737 7,391 16,082
6. Administrative expenses
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Secretarial & administration fees 318 386 609
Legal & professional fees 895 971 2,405
Directors' fees 152 158 287
Bank charges 41 53 62
(Profit) / loss on foreign exchange (105) 14 82
Depreciation 8 8 8
Other income (3) (4) (6)
1,306 1,586 3,447
7. Gain on disposal of investment property (including investment property
held for sale)
Notes 30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Disposal proceeds 7,314 10,323 16,667
Book value of disposals 12 (6,720) (9,346) (14,309)
Disposal costs (506) (400) (840)
88 577 1,518
Where there has been a partial disposal of a property, the net book value of
the asset sold is calculated on a per square metre rate, based on the December
valuation.
8. Net finance charge
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Interest income (14) (18) (26)
Fair value gain on interest rate swap (6,089) (3,643) (7,313)
Finance expense on bank borrowings 3,906 3,739 7,508
(2,197) 78 169
9. Income tax expense
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
The tax charge for the period is as follows: €'000 €'000 €'000
Current tax charge / (credit) 803 (3) (201)
Deferred tax charge - origination and reversal of temporary differences 2,178 4,201 8,083
2,981 4,198 7,882
Notes to the Condensed Consolidated Financial Statements
For the period from 1 January 2022 to 30 June 2022
9. Income tax expense (continued)
The tax charge for the year can be reconciled to the theoretical tax charge on
the profit in the condensed consolidated statement of comprehensive income as
follows:
30 June 2022 30 June 2021 31 December 2021
€'000 €'000 €'000
Profit before tax on continuing operations 16,952 20,434 45,250
Tax at German income tax rate of 15.8% (2021: 15.8%) 2,678 3,229 7,150
Income not taxable (14) (91) (240)
Tax effect of losses brought forward 316 1,061 972
Total tax charge for the period/year 2,981 4,198 7,882
Reconciliation of current tax liabilities
30 June 2022 30 June 2021 31 December 2021
€'000 €'000 €'000
Balance at beginning of period/year 512 550 550
Tax (paid) / received (19) (34) 163
Current tax charge / (credit) 803 (3) (201)
Balance at end of period/year 1,296 513 512
Reconciliation of deferred tax
Capital gains on properties Interest rate swaps Total
€'000 €'000 €'000
Liability Asset Net liabilities
Balance at 1 January 2021 (68,273) 2,880 (65,393)
Charged to the statement of comprehensive income (3,624) (577) (4,201)
Deferred tax (liability) / asset at 30 June 2021 (71,897) 2,303 (69,594)
Charged to the statement of comprehensive income (3,301) (581) (3,882)
Deferred tax (liability) / asset at 31 December 2021 (75,198) 1,722 (73,476)
Charged to the statement of comprehensive income (1,215) (963) (2,178)
Deferred tax (liability) / asset at 30 June 2022 (76,413) 759 (75,654)
10. Investment property fair value gain
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Investment property fair value gain 11,395 15,987 37,983
Further information on investment properties is shown in note 12.
11. Dividends
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Amounts recognised as distributions to equity holders in the period:
Interim dividend for the year ended 31 December 2021 of €2.35 cents (2.02p) - - 2,228
declared 24 September 2021, paid 29 October 2021 (2020: €2.35 cents (2.1p))
per share.
Final dividend for the year ended 31 December 2021 of 5.15 cents (€) (4.65 4,856 5,207 5,207
pence) paid 7 June 2022 (2020: 5.15 cents (€) (4.65 pence)) per share.
The Board is pleased to declare an unchanged interim dividend of 2.35 cents
per share (2.09 pence per share, GBP:EUR FX rate locked in at 1:1.124 as at 28
September 2022.) for the first half of the year (six months to 30 June 2021:
2.35 cents, 2.02 pence). The dividend is expected to be paid on or around 28
October 2022 to shareholders on the register at close of business on 7 October
2022, with an ex-dividend date of 6 October 2022.
The proposed dividend has not been included as a liability in these condensed
consolidated financial statements. The payment of this dividend will not have
any tax consequences for the Group.
Notes to the Condensed Consolidated Financial Statements
For the period from 1 January 2022 to 30 June
2022
12. Investment properties
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
Fair value €'000 €'000 €'000
Balance at beginning of period/year 801,461 768,310 768,310
Capital expenditure 6,234 2,729 9,477
Disposals (6,720) (9,346) (14,309)
Fair value gain 11,395 15,987 37,983
Investment properties at fair value - as set out in the report by JLL 812,370 777,680 801,461
Assets considered as "Held for sale" (Note 13) (40,804) (13,720) (41,631)
Assets considered as "Under construction" (Note 14) 7,724 - -
Balance at end of period/year 779,290 763,960 759,830
The property portfolio was valued at 30 June 2022 by the Group's independent
valuers, Jones Lang LaSalle GmbH ('JLL'), in accordance with the methodology
described below. The valuations were performed in accordance with the current
Appraisal and Valuation Standards, 8th edition (the 'Red Book') published by
the Royal Institution of Chartered Surveyors (RICS).
The valuation is performed on a building-by-building basis and the source
information on the properties including current rent levels, void rates and
non-recoverable costs was provided to JLL by the Property Advisors QSix
Residential Limited. Assumptions with respect to rental growth, adjustments to
non-recoverable costs and the future valuation of these are those of JLL. Such
estimates are inherently subjective and actual values can only be determined
in a sales transaction. JLL also uses data from comparable market transactions
where these are available alongside their own assumptions.
Having reviewed the JLL report, the Directors are of the opinion that this
represents a fair and reasonable valuation of the properties and have
consequently adopted this valuation in the preparation of the condensed
consolidated financial statements.
The valuations have been prepared by JLL on a consistent basis at each
reporting date and the methodology is consistent and in accordance with IFRS
which requires that the 'highest and best use' value is taken into account
where that use is physically possible, legally permissible and financially
feasible for the property concerned, and irrespective of the current or
intended use.
All properties are valued as Level 3 measurements under the fair value
hierarchy (see note 24) as the inputs to the discounted cash flow methodology
which have a significant effect on the recorded fair value are not observable.
Additionally, JLL perform reference checks back to comparable market
transactions to confirm the valuation model.
The unrealised fair value gain in respect of investment property is disclosed
in the condensed consolidated statement of comprehensive income as 'Investment
property fair value gain'.
Valuations are undertaken using the discounted cash flow valuation technique
as described below and with the inputs set out as follows:
Discounted cash flow methodology (DCF)
The fair value of investment properties is determined using discounted cash
flows.
Under the DCF method, a property's fair value is estimated using explicit
assumptions regarding the benefits and liabilities of ownership over the
asset's life including an exit or terminal value. As an accepted method within
the income approach to valuation the DCF method involves the projection of a
series of cash flows on a real property interest. To this projected cash flow
series, an appropriate, market-derived discount rate is applied to establish
the present value of the income stream associated with the real property.
The duration of the cash flow and the specific timing of inflows and outflows
are determined by events such as rent reviews, lease renewal and related lease
up periods, re-letting, redevelopment, or refurbishment. The appropriate
duration is typically driven by market behaviour that is a characteristic of
the class of real property.
Periodic cash flow is typically estimated as gross income less vacancy,
non-recoverable expenses, collection losses, lease incentives, maintenance
cost, agent and commission costs and other operating and management expenses.
The series of periodic net operating incomes, along with an estimate of the
terminal value anticipated at the end of the projection period, is then
discounted.
The Group categorises all investment properties in the following three ways;
Rental Scenario
Where properties have been valued under the "Discounted Cashflow Methodology"
and are intended to be held by the Group for the foreseeable future, they are
considered valued under the "Rental Scenario" This will equal the "Investment
Properties" line in the Non-Current Assets section of the condensed
consolidated statement of financial position.
Condominium scenario
Where properties have the potential or the benefit of all relevant permissions
required to sell apartments individually (condominiums) then we value these as
a 'condominium scenario'. Expected sales in the coming year from these assets
are considered held for sale under IFRS 5 and can be seen in note 13. The
additional value is reflected by using a lower discount rate under the DCF
Methodology. Properties which do not have the benefit of all relevant
permissions are described as valued using a standard 'rental scenario'.
Included in properties valued under the condominium scenario are properties
not yet released to held for sale as only a portion of the properties are
forecast to be sold in the coming 12 months.
Disposal Scenario
Where properties have been notarised for sale prior to the reporting date, but
have not completed; they are held at their notarised disposal value. These
assets are considered held for sale under IFRS 5 as set out in note 13.
Notes to the Condensed Consolidated Financial Statements
For the period from 1 January 2022 to 30 June 2022
12. Investment properties (continued)
The table below sets out the assets valued using these 3 scenarios:
30 June 2022 30 June 2021 31 December 2021
€'000 €'000 €'000
Rental scenario 779,540 734,240 762,690
Condominium scenario 32,318 42,294 33,050
Disposal scenario 512 1,146 5,721
Total 812,370 777,680 801,461
13. Investment properties - Held for sale
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Fair value - held for sale investment properties
At beginning of period/year 41,631 19,302 19,302
Transferred from investment properties 5,359 3,248 35,886
Capital expenditure 534 458 586
Properties sold (6,720) (9,346) (14,309)
Valuation gain on apartments held for sale - 58 166
At end of period/year 40,804 13,720 41,631
Investment properties are re-classified as current assets and described as
'held for sale' in three different situations: properties notarised for sale
at the reporting date, properties where at the reporting date the Group has
obtained and implemented all relevant permissions required to sell individual
apartment units, and efforts are being made to dispose of the assets
('condominium'); and properties which are being marketed for sale but have
currently not been notarised.
Properties notarised for sale by the reporting date are valued at their
disposal price (disposal scenario), and other properties are valued using the
condominium or rental scenarios (see note 12) as appropriate.
Investment properties held for sale are all expected to be sold within 12
months of the reporting date based on Management knowledge of current and
historic market conditions.
14. Investment properties - Under construction
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Fair value - under construction investment properties
At beginning of period/year - - -
Properties purchased 5,550 - -
Capital expenditure 2,174 - -
At end of period/year 7,724 - -
Investment properties are considered as under construction from the point of
completion of the acquisition of the property up until the completion of the
development, at which point the property will be transferred to investment
properties.
The directors consider the fair value of the current investment property under
construction to be the acquisition price plus any capital expenditure
incurred. Due to the acquisition occurring in May 2022 and the close
proximity to the reporting date, the directors consider this method represents
a fair and reasonable reflection of fair value.
15. Other financial assets at amortised cost
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Non-current
Balance at beginning of period/year 926 901 901
Accrued interest 12 18 25
Balance at end of period/year 938 919 926
The Group entered into a loan agreement with the minority interest of Accentro
Real Estate AG in relation to the acquisition of the assets as share deals.
This loan bears interest at 3% per annum.
These financial assets are considered to have low credit risk and any loss
allowance would be immaterial.
None of these financial assets were either past due or impaired.
Notes to the Condensed Consolidated Financial Statements
For the period from 1 January 2022 to 30 June 2022
16. Trade and other receivables
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Current
Trade receivables 1,061 920 827
Less: impairment provision (249) (138) (315)
Net receivables 812 782 512
Prepayments and accrued income 2,321 795 514
Investment property disposal proceeds receivable - 3,944 4,513
Service charges receivable 8,066 7,033 5,562
Other receivables 576 192 598
11,775 12,746 11,699
17. Borrowings
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Current liabilities
Bank loans - NATIXIS Pfandbriefbank AG* 34 284 121
Bank loans - Berliner Sparkasse 801 801 801
835 1,085 922
Non-current liabilities
Bank loans - NATIXIS Pfandbriefbank AG** 239,454 236,201 234,328
Bank loans - Berliner Sparkasse 60,816 49,324 48,905
300,270 285,525 283,233
301,105 286,610 284,155
* Nominal value of the borrowings as at 30 June 2022 was €986,000 (31
December 2021: €901,000, 30 June 2021: €977,000).
** Nominal value of the borrowings as at 30 June 2022 was €242,497,000 (31
December 2021: €240,000,000, 30 June 2021: €239,110,000).
For further information on borrowings, refer to the management report on page
10.
18. Trade and other payables
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Trade payables 609 1,155 2,758
Accrued liabilities 2,806 1,643 1,472
Service charges payable 5,769 7,750 5,203
Advanced payment received on account 1,778 - 2,437
Deferred income - - 23
10,962 10,548 11,893
19. Derivative financial instruments
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Interest rate swaps - carried at fair value through profit or loss
At beginning of period/year 10,884 18,197 18,197
Gain in movement in fair value through profit or loss (6,089) (3,643) (7,313)
At end of period/year 4,795 14,554 10,884
The notional principal amounts of the outstanding interest rate swap contracts
at 30 June 2022 were €204,269,000 (December 2021: €204,269,000, June 2021:
€204,269,000). At 30 June 2022 the fixed interest rates vary from 0.24% to
1.01% (December 2021: 0.24% to 1.07%, June 2021: 0.24% to 1.01%) above the
main factoring Euribor rate.
Maturity analysis of interest rate swaps
30 June 2022 30 June 2021 31 December 2021
€'000 €'000 €'000
Between 2 and 5 years 4,795 - 10,405
More than 5 years - 14,554 479
4,795 14,554 10,884
Notes to the Condensed Consolidated Financial Statements
For the period from 1 January 2022 to 30 June 2022
20. Share based payment reserve
Performance fee
€'000
Balance at 1 January 2021 6,369
Settlement of performance fee in shares (6,369)
Balance at 30 June 2021 -
Fee charge for the period 343
Balance at 31 December 2021 343
Fee charge for the period (343)
Balance at 30 June 2022 -
No performance fee has been recognised in the period because the performance
criteria were not met.
Performance Fee
The Property Advisor is entitled to an asset and estate management performance
fee, measured over consecutive three year periods, equal to 15% of the excess
(or in the case of the initial period or any performance period ending prior
to 31 December 2020, 16%) by which the annual EPRA NAV total return of the
Group exceeds 8% per annum, compounding (the 'Performance Fee'). As the EPRA
NAV measurement has been superseded by EPRA NTA (See note 23), future
performance fees will be calculated with respect to movements in EPRA NTA. The
Performance Fee is subject to a high watermark, being the higher of:
(i) EPRA NTA per share at 1 January 2021; and
(ii) the EPRA NTA per share at the end of a Performance Period in relation to
which a performance fee was earned in accordance of the provisions continued
with the Property Advisor and Investor Relations Agreement.
Other Property Advisor Fees
Under the Property Advisory Agreement for providing property advisory
services, the Property Advisor will be entitled to a Portfolio and Asset
Management Fee as follows:
(i) 1.2% of the EPRA NTA of the Group where EPRA NTA of the Group is equal to
or less than €500 million; and
(ii) 1% of the EPRA NTA of the Group greater than €500 million.
The Property Advisor is entitled to receive a finance fee equal to:
(i) 0.1% of the value of any borrowing arrangement which the Property Advisor
has negotiated and/or supervised; and
(ii) a fixed fee of £1,000 in respect of any borrowing arrangement which the
Property Advisor has renegotiated or varied.
The Property Advisor is entitled to a capex monitoring fee equal to 7% of any
capital expenditure incurred by any Subsidiary which the Property Advisor is
responsible for managing.
The Property Advisor is entitled to receive a transaction fee fixed at £1,000
in respect of any acquisition or disposal of property by any Subsidiary.
The Property Advisor is entitled to a letting fee equal to between one and
three month's net cold rent (being gross rents receivable less service costs
and taxes) for each new tenancy signed by the Company where the Property
Advisor has sourced the relevant tenant.
The Property Advisor shall be entitled to a fee for Investor Relations
Services at the annual rate of £75,000 payable quarterly in arrears.
The management fee will be reduced by the aggregate amount of any transaction
fees and finance fees payable to the Property Advisor in respect of that
calendar year.
Details of the fees paid to the Property Advisor are set out in note 26.
21. Stated capital
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Issued and fully paid:
At 1 January 196,578 196,578 196,578
196,578 196,578 196,578
The number of shares in issue at 30 June 2022 was 100,751,410 (including
8,879,802 as Treasury Shares) (31 December 2021: 100,751,410 (including
7,949,293 as Treasury Shares), 30 June 2021: 100,751,410 (including 5,057,849
as Treasury Shares)).
Notes to the Condensed Consolidated Financial Statements
For the period from 1 January 2022 to 30 June 2022
22. Earnings per share
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
Earnings for the purposes of basic earnings per share being net profit 13,891 16,208 37,311
attributable to owners of the parent (€'000)
Weighted average number of ordinary shares for the purposes of basic earnings 92,456,025 96,259,529 94,973,655
per share (Number)
Effect of dilutive potential ordinary shares (Number) - - 72,433
Weighted average number of ordinary shares for the purposes of diluted 92,456,025 96,259,529 95,046,088
earnings per share (Number)
Earnings per share (€) 0.15 0.17 0.39
Diluted earnings per share (€) 0.15 0.17 0.39
23. Net asset value per share and EPRA Net Tangible Assets (NTA)
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
Net assets (€'000) 444,896 434,392 440,040
Number of participating ordinary shares 91,871,607 95,693,560 92,802,117
Net asset value per share (€) 4.84 4.54 4.74
EPRA NTA
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
Net assets (€'000) 444,896 434,392 440,040
Add back deferred tax assets and liabilities, derivative financial instruments 80,449 84,148 84,017
and share based payment reserves (€'000)
EPRA NTA (€'000) 525,345 518,540 524,057
EPRA NTA per share (€) 5.72 5.42 5.65
24. Financial instruments
The Group is exposed to the risks that arise from its use of financial
instruments. This note describes the objectives, policies and processes of the
Group for managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented throughout the
condensed consolidated financial statements.
Principal financial instruments
The principal financial instruments used by the Group, from which financial
instrument risk arises, are as follows:
• financial assets
• cash and cash equivalents
• trade and other receivables
• trade and other payables
• borrowings
• derivative financial instruments
The Group held the following financial assets at each reporting date:
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Loans and receivables
Trade and other receivables - current 9,454 11,951 11,185
Cash and cash equivalents 9,552 28,393 10,441
Loans and receivables 938 919 926
19,944 41,263 22,552
Notes to the Condensed Consolidated Financial Statements
For the period from 1 January 2022 to 30 June 2022
24. Financial instruments (continued)
The Group held the following financial liabilities at each reporting date:
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Held at amortised cost
Borrowings payable: current 835 1,085 922
Borrowings payable: non-current 300,270 285,525 283,233
Trade and other payables 10,962 10,548 11,893
312,067 297,158 296,048
Fair value through profit or loss
Derivative financial liability - interest rate swaps 4,795 14,554 10,884
4,795 14,554 10,884
316,862 311,712 306,932
Fair value of financial instruments
With the exception of the variable rate borrowings, the fair values of the
financial assets and liabilities are not materially different to their
carrying values due to the short term nature of the current assets and
liabilities or due to the commercial variable rates applied to the long term
liabilities.
The interest rate swap was valued externally by the respective counterparty
banks by comparison with the market price for the relevant date.
The interest rate swaps are expected to mature between July 2026 and February
2027.
The Group uses the following hierarchy for determining and disclosing the fair
value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or
liabilities;
Level 2: other techniques for which all inputs which have a significant effect
on the recorded fair value are observable, either directly or indirectly; and
Level 3: techniques which use inputs which have a significant effect on the
recorded fair value that are not based on observable market data.
During each of the reporting periods, there were no transfers between
valuation levels.
Group fair values
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Financial liabilities
Interest rate swaps - Level 2 - current - - (10,405)
Interest rate swaps - Level 2 - non-current (4,795) (14,554) (479)
(4,795) (14,554) (10,884)
The valuation basis for the investment properties is disclosed in note 12.
25. Capital commitments
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Contracted capital commitments at the end of the year 12,950 - -
Capital commitments include contracted obligations in respect of the
construction, enhancement and repair of the Group's properties. The full
amount disclosed above, €12.95m relates to an asset under construction (see
note 14) and is matched 100% with secured debt finance.
26. Related party transactions
Related party transactions not disclosed elsewhere are as follows:
QSix Residential Limited is the Group's appointed Property Advisor. No
Directors of QSix Residential Limited currently sit on the Board of PSD,
although its Principals retain a shareholding in the Company. For the six
month period ended 30 June 2022, an amount of €3,429,000 (€3,384,000
Management Fees and €45,000 Other expenses and fees) (December 2021:
€6,722,029 (€6,653,493 Management fees and €90,437 Other expenses and
fees), June 2021: €3,344,000 (€3,298,000 Management fees and €46,000
Other expenses and fees)) was payable to QSix Residential Limited. At 30 June
2022 €839,000 (December 2021: €977,260, June 2021: €839,000) was
outstanding.
The Property Advisor is also entitled to an asset and estate management
performance fee. The charge for the period in respect of the performance fee
was credit €343,000 (December 2021: €343,000, June 2021: credit €nil).
Please refer to note 20 for more details.
Apex Financial Services (Alternative Funds) Limited, the Company's
administrator provided administration and company secretarial services to PSDL
and its subsidiaries in 2022. For the six month period ended 30 June 2022, an
amount of €289,000 (December 2021: €609,000, June 2021: €320,600) was
payable to Apex Financial Services (Alternative Funds) Limited. At 30 June
2022 €117,500 (December 2021: €154,000, June 2021: €nil) was
outstanding.
Dividends paid to Directors in their capacity as a shareholder amounted to
€643 (December 2021: €2,976, June 2021: €2,422).
Notes to the Condensed Consolidated Financial Statements
For the period from 1 January 2022 to 30 June 2022
27. Events after the reporting date
The Company exchanged contracts for the sale of two residential units in
Berlin for total proceeds of €0.5 million prior to the reporting date all of
which was received in Q3 2022.
In Q3 2022 the Company exchanged contracts for the sale of two condominiums in
Berlin for the aggregated consideration of €1.0 million. All the
transactions are expected to be completed in Q4 2022.
In Q3 2022 the Company exchanged contracts for the disposal of two non-core
Berlin property an aggregate consideration of €8.6million.
In Q3 2022 the Company exchanged contracts for the acquisition of one property
in Berlin with a purchase price of €4.9million. The purchase is expected to
complete in the first half of 2023.
Professional Advisors
Property Advisor QSix Residential Limited
54-56 Jermyn Street
London SW1Y 6LX
Administrator Apex Financial Services (Alternative Funds) Limited
Company Secretary 12 Castle Street
and Registered Office St Helier
Jersey JE2 3RT
Registrar Link Asset Services (Jersey) Limited
12 Castle Street
St. Helier
Jersey JE2 3RT
Principal Banker Barclays Private Clients International Limited
13 Library Place
St. Helier
Jersey JE4 8NE
UK Legal Advisor Stephenson Harwood LLP
1 Finsbury Circus
London EC2M 7SH
Jersey Legal Advisor Mourant Ozannes
22 Grenville Street
St. Helier
Jersey JE4 8PX
German Legal Advisor Mittelstein Rechtsanwälte
as to property law Alsterarkaden 20
20354 Hamburg
Germany
German Legal Advisor Mittelstein Rechtsanwälte
as to general matters Alsterarkaden 20
20354 Hamburg
Germany
German Legal Advisor as Taylor Wessing Partnerschaftsgesellschaft mbB
to German partnership law Thurn-und-Taxis-Platz 6
60313 Frankfurt a.M.
Germany
Sponsor and Broker Numis Securities Limited
45 Gresham Street
10 Paternoster Square
London
EC2V 7BF
Independent Property Valuer Jones Lang LaSalle GmbH
Rahel-Hirsch-Strasse 10
10557 Berlin
Germany
Auditor RSM UK Audit LLP
25 Farringdon Street
London EC4A 4AB
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