REG - Phoenix SpreeDeutsch - Interim Results for the half-year to 30 June 2024
26/09/2024 07:00
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RNS Number : 7037F Phoenix Spree Deutschland Limited 26 September 2024
Phoenix Spree Deutschland Limited
(the "Company" or "PSD")
Interim Results for the half-year to 30 June 2024
ACCELERATED CONDOMINIUM SALES STRATEGY PROGRESSING
IMPROVING MARKET OUTLOOK
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 2024. The Company also provides an update on its strategy to
significantly accelerate condominium sales and reduce debt.
Financial and operational Summary
€ million (unless otherwise stated) Six months to June 2024 Six months to June 2023 12 months to December 2023 12 months to December 2022
Income Statement
Gross rental income 14.2 13.8 27.5 25.9
(Loss) before tax (24.1) (58.0) (118.8) (17.5)
Dividend per share in respect of the period - - - 2.35 (2.09)
(€ cents (£ pence))
Balance Sheet
Portfolio valuation(1) 646.4 714.3 675.6 775.9
Like-for-like valuation (decline) (%)(4) (3.3) (6.9) (11.9) (3.1)
EPRA NTA per share (€)(5) 3.68 4.46 3.96 5.10
EPRA NTA per share (£)(2,5) 3.12 3.83 3.43 4.52
EPRA NTA per share total return (€ %) (7.1) (12.5) (22.4) (8.4)
Net LTV (%)(3) 46.4 42.7 46.3 39.1
Operational
Portfolio valuation per sqm (€) 3,476 3,808 3,598 4,082
Annual like-for-like rent per sqm growth (%)(4) 3.2 3.8 4.1 3.9
Like-for-like rent growth (%)(4) 3.4 5.6 5.6 6.1
EPRA vacancy (%) 1.4 2.7 2.0 2.4
Condominium sales notarised 5.3 2.0 7.2 4.7
(1 - 2022 Portfolio valuation includes investment properties under
construction.)
(2 - Calculated at FX rate GBP/EUR 1:1.178 as 30 June 2024 (2023: GBP/EUR
1:1.153))
(3 - Net LTV uses nominal loan balances (note 22) rather than the loan
balances on the Consolidated Statement of Financial Position which include
Capitalised Finance Arrangement Fees.)
(4 - Like-for-like excludes the impact of acquisitions and disposals in the
period.)
(5 - EPRA metrics defined and calculated in note 21)
FINANCIAL AND OPERATIONAL SUMMARY:
Significant progress in strategy to accelerate condominium sales to €50m
annually
· Negotiations with the Company's main lender, Natixis Pfandbriefbank
AG ("Natixis"), to modify the Company's principal lending facility have
concluded successfully.
· This will increase the number of buildings that are permitted to be
sold as condominiums from 6 currently to 40, representing c.900 units.
· The Company is in advanced discussions to sell a portfolio of 16
rental buildings.
· The proceeds of the proposed portfolio sale will enable other debt to
be repaid in full which will allow additional property collateral to be
provided to Natixis, upon which the debt amendment is conditional, and will
release cash to fund capital expenditure to optimise the sale values of
condominium units designated for disposal.
· The company has engaged two leading Berlin condominium sales
platforms to facilitate the expected acceleration in condominium sales.
· 10 buildings have been earmarked for the first condominium sales
tranche, increasing the total number of condominiums that can be made
available for sale from c.75 units currently to c.250 units by year-end 2024,
with a further 24 properties expected to be made available for sale in H1
2025.
· Condominiums continue to sell at a significant premium per sqm to
equivalent single rental building valuations. During H1 2024, PSD notarised 15
condominiums for sale at an average price of €4,292 per sqm. This represents
a 23 per cent premium to the H1 2024 JLL Portfolio valuation and a 57(1) per
cent premium to the Portfolio value implied by the current share price.
1. Implied premium calculated using a share price of 175p and a Sterling/Euro
exchange rate of 1:1.20.
Decline in Portfolio valuation, although recent transaction activity showing
tentative signs of recovery
· As reported in the recent Portfolio update published in July, buyer
sentiment and transaction volumes remain subdued; the like-for-like Portfolio
value decreased by 3.3 per cent during H1 2024, reflecting a further increase
in market yields, partially offset by rental growth.
· The rate of decline in asset values since H1 2023 has slowed and
Berlin transaction volumes have shown tentative signs of recovery since the
half-year end.
Reversionary reletting premium remains high, reflecting ongoing shortage of
Berlin rental supply
· 120 new leases were signed during the six months to 30 June 2024. The
average premium to passing rents for residential re-lets was 33 per cent, or
€13.8 per sqm, a record high.
· EPRA vacancy of 1.4 per cent (H1 2023: 2.7 per cent), at a record
low.
· New rent table (Mietspiegel) released in May 2024 is expected to add
approximately 2 per cent to in-place rent growth on an annualised basis,
supporting rent growth in the second half.
Upturn in condominium buyer interest
· Fifteen condominium units notarised for sale for an aggregate value
of €5.3 million in H1 2024 (H1 2023: eight condominiums, €2.0 million).
· Since the half year end, four condominiums, with an aggregate sales
price of €1.2 million and one commercial unit with a sales price of €230k,
have been notarised. A further four condominium reservations are outstanding
with an aggregate value of €1.7million.
· First-half sales represent an annualised rate of 33 per cent of
available stock, (17 per cent in H1 2023).
· A new condominium sales project was recently launched with an
estimated aggregate sales value of €14 million. Initial levels of interest
have been encouraging.
Outlook
· Condominium sales prices are expected to remain at a significant
premium to both the average per sqm valuation across the Portfolio and
transaction values of rental buildings in the Berlin market, as well as to the
value of the PSD Portfolio implied by the current share price.
· Conditions in the investment market for single rental building and
portfolio sales have seen some tentative signs of improvement. The Portfolio
remains under continuous review for further disposals.
· Cash generated from all future asset sales will initially be used to
pay down debt and to provide capital for targeted investment in existing
condominium properties.
· It is the intention of the Company to refinance the Natixis debt
facility ahead of its expiry in September 2026, after which any surplus
capital from the condominium sales process is expected to be available for
distribution to shareholders. In the meantime, PSD is required to prioritise
the repayment of debt.
· The Company's rental business is expected to continue to perform
well, driven by growing structural imbalances and supplemented by the
introduction of the new Mietspiegel.
Robert Hingley, Chairman of Phoenix Spree Deutschland, commented:
"The ongoing supply-demand imbalances in the Berlin market continue to drive
rental growth, leading to record rents. Although buyer sentiment and
transaction volumes within the Berlin residential market have continued to be
negatively affected by historically high interest rates, the rate of decline
in asset values has slowed and we have started to see tentative signs of
recovery in Berlin transaction volumes.
"We have made significant progress in our strategy to take advantage of the
significant per square meter valuation gap between an apartment block as a
rental property compared to its condominium resale value. The recent agreement
with our lenders will, when completed, allow us to materially increase the
number of buildings that can be sold as condominiums at higher values. As
almost 80 per cent of the portfolio is already legally registered as
condominiums, the Company is well placed to accelerate condominium sales."
Half Year Report and Accounts
The full Half Year Report and Accounts will shortly be available to download
from the Company's webpage www.phoenixspree.com. The Company submits its Half
Year Report and Accounts to the National Storage Mechanism in the required
format, and it is available for inspection
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
For further information, please
contact:
Phoenix Spree Deutschland Limited +44 (0)20 3937 8760
Stuart
Young
Deutsche Numis (Corporate Broker) +44 (0)20 3100 2222
David Benda
Teneo (Financial PR) +44 (0)20 7353 4200
Lizzie Snow / Annushka Shivnani
CHAIRMAN'S STATEMENT
The long-term outlook for Berlin residential property remains strong
The considerable and sustained supply-demand imbalance in the Berlin rental
market continues to drive further growth in market rents. PSD's Berlin
residential Portfolio has seen new lettings signed at an average premium of 33
per cent to passing rents, and EPRA vacancy levels have reached an all-time
low. The condominium market has also shown clear signs of recovery and, during
the first six months of the financial year, the Company recorded a 161 per
cent increase in condominium notarisations compared to the same period last
year.
This remains in contrast to the market for multifamily rental properties,
where higher interest rates have continued to weigh on investor sentiment. As
a result, rental yields have increased further, and the Company has reported a
like-for-like decline in the value of its properties of 3.3 per cent for the
first half of the year. The rate of decline in asset values has slowed
materially, and this is the smallest decline since Berlin residential real
estate values peaked in H1 2022. Encouragingly, the Berlin market is now
beginning to show tentative signs of recovery in transaction volumes, albeit
from a low base. Nonetheless, pricing in the market for single rental
buildings and portfolios of rental buildings has remained subdued.
Adapting our strategy to maximise returns
Increasing asset sales and reducing debt remain the Company's priorities.
Reflecting the relative buoyancy of the condominium market versus the market
for sale of rental buildings, the Company continues to execute on its strategy
to significantly increase condominium sales.
The accelerated condominium sales strategy is conditional on amending the
terms of the Company's principal current debt arrangement, such that a greater
number of buildings can by placed in the condominium sales pool. I am
therefore pleased to report that agreement has recently been reached with our
primary lender, Natixis, to significantly increase the number of buildings
within the Portfolio that can be sold as condominiums.
To facilitate the Natixis debt amendment, the Company is in advanced
discussions to sell a portfolio of 16 rental buildings. The proposed sale will
release buildings to provide additional collateral to Natixis, upon which the
debt amendment is conditional. It will additionally release cash to fund
capital expenditure to optimise the sales values of condominium units
designated for disposal.
Our Property Advisor, QSix, is fully focussed on preparing for sale and
marketing the initial tranche of new condominium buildings. Assuming
successful implementation of the Natixis debt amendment, these are expected to
come on-stream by the fourth quarter of this year, and we are confident that
the Company can then reach its annualised condominium sales target of €50m
during 2025.
Further details of our strategy to accelerate condominium sales can be found
in the report of the Property Advisor.
Responsible business
As a housing provider, our tenants are at the core of what we do and we remain
strongly committed to their wellbeing and satisfaction. During the first half
of the year, we have continued to invest in our properties and we are proud to
report that our latest tenant satisfaction survey again demonstrated high
levels of satisfaction for both the quality of their apartments and the
efficiency of our rental process.
Environmental Stewardship also remains a priority, as we strive to minimise
our impact on the environment. The Company has outlined plans to strategically
invest in capital improvements aimed at reducing emissions, enhancing energy
efficiency and improving buildings and their surroundings. We have also
continued to develop the environmental measurement and reporting of our
Portfolio, in line with EPRA's sBPR framework. Our most recent EPRA
Sustainability report, for which the Company achieved a Gold Award, can be
viewed on the Company website.
Our commitment to being a responsible corporate citizen extends to our
charitable endeavours. We have a strategic approach to our charitable giving,
guided by our Community Investment Policy, with a focus on supporting
charities related to 'homelessness' or 'families'. By aligning our
philanthropic efforts within these areas, we aim to make a meaningful and
lasting difference in the lives of those in need within our communities.
In Berlin, PSD's support for The Intercultural Initiative and Laughing Hearts
helps provide crucial assistance to women, children, and those in social care.
In London, our Property Advisor's support for homeless charities SPEAR and SHP
(Single Homeless Project) is addressing the needs of homeless individuals
through accommodation, health support, and employability programmes.
Additionally, our Property Advisor's support for Home-Start is contributing to
the well-being of families with young children in the UK.
Property Advisor
In 2023, the Board and QSix, the Property Advisor, with shareholders'
approval, agreed to change the fees payable to the Property Advisor to further
align their incentives with the Company's short-term strategic priorities. The
key element of the new agreement was to incentivise the Property Advisor to
evaluate and implement a variety of disposal strategies, including condominium
sales, while reducing the level of annual management fees paid for the
12-month period to July 2024.
As previously announced, the Board and the Property Advisor have now agreed to
a permanent cap on the annual fees paid for management, capital expenditure
monitoring and investor relations of €4.3 million. This represents a 14 per
cent year-on-year reduction and a 40 per cent reduction compared to the
end-2022 run rate. Additionally, QSix has informed the Company that it will
use the post-tax proceeds of any future disposal fee received from the Company
to buy shares in PSD to further align their interests with shareholders.
In February 2024, QSix announced the appointment of Christian Daumann as Chief
Executive Officer of its German operations. Christian succeeds Jörg
Schwagenscheidt, who has been CEO of QSix Germany since 2015. Christian joined
QSix from Ivanhoé Cambridge, where he spent the previous four years as Head
of Investments, Germany. His appointment reflects QSix's commitment to
maintaining a strong leadership team and furthering the Company's strategic
objectives in the German market.
Outlook
The outlook for our rental business remains positive, driven by structural
imbalances that continue to grow. Moreover, following the introduction of the
new rental table (Mietspiegel), published in May 2024, further rent increases
for qualifying tenants are permissible, supporting in-place rental growth.
Buyer sentiment in the condominium market is robust, as evidenced by the
acceleration in PSD's condominium sales since the first half of 2024. Against
this market backdrop, the Company plans to significantly accelerate
condominium sales in the future.
REPORT OF THE PROPERTY ADVISOR - STRATEGY UPDATE
Market backdrop - condominium values significantly more resilient than rental
building values
Since the onset of the cyclical downturn in 2022, it has been evident that
PSD's share price has not reflected the inherent value of the condominium
potential within the Portfolio. With almost 80 per cent of the assets in the
Portfolio currently split in the land registry as condominiums, it is hoped
that an accelerated condominium sales strategy will help demonstrate this
value.
Although there is tentative evidence to suggest that transaction volumes for
Berlin PRS buildings have now begun to improve, values have yet to show any
meaningful signs of recovery. To maximise shareholder returns in the medium
term, the Board and QSix are therefore focused on taking advantage of the
significant valuation gap that currently exists between the average per sqm
value of an apartment block as a rental property (PRS) and the resale value
per sqm of an apartment to a private buyer as a condominium.
This was again demonstrated in the first half of 2024 by the significant
premia achieved on condominium sales. The average achieved price per sqm for
all residential condominium units notarised was €4,292 representing a:
· 23 per cent premium to the average per sqm valuation of the Portfolio
as a whole,
· 57 per cent premium to the valuation of the Portfolio implied by the
current share price, and a
· 92 per cent premium to the two PRS building sales that were notarised
during the first half of the year.
Proposed portfolio disposal and amendment of Natixis debt facility
To facilitate the Natixis debt amendment, the Company is in advanced
discussions to sell a portfolio of 16 rental buildings. It is expected that
the proposed sale will be structured as a share deal and represent a material
discount to the June 2024 carrying value of these buildings. However, the
proposed sale is an important step to securing the revised financing terms
with Natixis that will unlock a step-change in permitted condominium sales at
significantly higher values. More details on the terms of this transaction
will be announced post completion.
The debt secured on the portfolio of properties to be sold is provided by
Berliner Sparkasse. The proceeds of the proposed sale will allow all Berliner
Sparkasse debt to be repaid in full and, in addition to the 16 buildings sold,
a further two properties, against which the Berliner Sparkasse debt was
secured, will become unencumbered. These assets will be pledged as additional
collateral to Natixis, lowering the LTV and increasing the debt yield on the
current Natixis debt facility, thus allowing the increase in the number of
condominium buildings permitted to be sold at any one time from 6 to 40.
Although the Company does not rule out further rental building disposals, the
sharply contrasting pricing dynamics which currently exist in the condominium
and rental building markets indicate that a disposal process which is focussed
on condominium sales will ultimately return significantly more capital to
shareholders than the alternative of selling rental buildings.
Cash released for condominium capital expenditure
The proposed portfolio sale will additionally release sufficient cash to
implement capital expenditure to optimise the sales values of units designated
for disposal as condominiums. Shortlisted assets have been subjected to a
detailed technical assessment by our asset management team to identify capital
expenditure requirements and the time required to prepare units for sale.
Assets that are ready for sale have been prioritised. It is expected that,
following completion of the Natixis debt amendment, an additional 10
properties will be made available for sale during Q4 2024, with marketing of a
further 24 assets planned to start in H1 2025.
Engagement of leading condominium sales specialists to accelerate sales
process
Execution of the accelerated condominium sales plan will see a twelvefold
increase in the number of condominium units that can be made available for
sale to c.900. This will require a significant increase in resources to
prepare, market and sell units. To facilitate this, the Company plans to
partner with leading specialist condominium sales platforms. These platforms
will significantly broaden the market reach, particularly internationally, of
condominium marketing activities. In conjunction with the Property Advisor,
brokers have already completed site visits and provided an assessment of each
building's potential market price for vacant and let units. On average, it is
forecast that an average value per sqm of approximately €5,000 can be
achieved for vacant units and €3,500 for tenanted units.
Intention to refinance Natixis debt ahead of maturity in September 2026.
It is the intention of the Company to refinance the amended Natixis debt
facility ahead of its expiry in September 2026, after which surplus capital
from the condominium sales process is expected to be available for
distribution to shareholders. In the meantime, PSD is required to prioritise
the repayment of debt.
The reduction in overall leverage that will result as a consequence of
accelerated condominium sales should allow refinancing to take place on more
favourable terms than would be the case if the Company were to undertake a
full refinancing in the current market.
REPORT OF THE PROPERTY ADVISOR - FINANCIAL AND OPERATIONAL RESULTS
€ million (unless otherwise stated) 6 months to 30-Jun-24 6 months to 30-Jun-23 Year to Year to
31-Dec-23
31-Dec-22
Gross rental income 14.2 13.8 27.5 25.9
Investment property fair value (loss) (25.1) (57.3) (97.3) (42.2)
(Loss) before tax (PBT) (24.1) (58.0) (118.8) (17.5)
Reported EPS (€) (0.21) (0.51) (1.07) (0.17)
Investment property value 646.4 714.3 675.6 775.9
Net debt (Nominal balances)(1) 300.1 305.0 313.0 303.3
Net LTV (%)(1) 46.4 42.7 46.3 39.1
IFRS NAV per share (€) 3.22 3.99 3.43 4.50
IFRS NAV per share (£)(2) 2.73 3.43 2.97 3.99
EPRA NTA per share (€) 3.68 4.46 3.96 5.10
EPRA NTA per share (£)(2) 3.12 3.99 3.43 4.52
Dividend per share (€ cents) - - - 2.35
Dividend per share (£ pence) - - - 2.09
€ EPRA NTA per share total return for period (%) (7.1) (12.5) (22.4) (8.4)
£ EPRA NTA per share total return for period (%) (8.9) (15.2) (24.0) (3.2)
1. Net LTV and net debt uses nominal loan balances as per note
16 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. Calculated at FX rate GBP/EUR 1:1.178 as 30 June 2024
Revenue for the six-month period was €14.2 million (six months to 30 June
2023: €13.8 million). The Company recorded a loss before tax of €24.1
million (six months to 30 June 2023: loss before tax €58.0 million),
reflecting the non-cash impact of a revaluation loss of €25.1 million (six
months to 30 June 2023: revaluation loss of €57.3 million).
Property expenses fell by 13.1 per cent compared to the same period last year.
The primary driver of this was a 34 per cent decline in the Property Advisor's
fees and expenses. Reported loss per share for the period was €21 cents
(30 June 2023: €51 cents).
Reported EPRA NTA per share declined by 7 per cent in the first half of 2024
to €3.68 (£3.12) (31 December 2023: €3.96 (£3.43)). The € EPRA NTA
total return in the first half of 2024 was (7.1) per cent ((H1 2023: (12.5)
per cent)). The £ EPRA NTA total return for the same period was (8.9) per
cent, reflecting a strengthening of the £ against the € during the first
six months of the year.
Portfolio valuation and breakdown
30-Jun-24 30-Jun-23 31-Dec-23 31-Dec-22
Total sqm ('000) 186.0 186.5 187.8 188.8
Valuation (€m) 646.4 714.3 675.6 775.9
Like-for-like valuation (decline) / growth (%) (3.3) (6.9) (11.9) (3.1)
Value per sqm (€)(1) 3,480 3,808 3,598 4,082
Fully occupied gross yield (%) 3.5 3.3 3.3 3.0
Number of buildings 93 94 95 96
Residential units 2,472 2,477 2,489 2,553
Commercial units 138 137 140 135
Total units 2,610 2,614 2,629 2,688
1. Value per sqm provided by JLL based on portfolio valuation
excluding assets under construction of €5.3 million in 2022
Like-for-like decline in Portfolio valuation of 3.3 per cent
During the first half of the financial year, buyer sentiment and transaction
volumes within the Berlin residential market continued to be negatively
affected by a high interest rate backdrop. As at 30 June 2024, the Portfolio
was valued at €646.4 million, which represents an average value per sqm of
€3,480 and a gross fully occupied yield of 3.5 per cent. Included within the
Portfolio are six multi-family properties valued as condominiums, with an
aggregate value of €29.6 million (30 June 2023: seven properties; €39.2
million).
On a like-for-like basis, after adjusting for the impact of disposals, the
Portfolio valuation declined by 3.3 per cent during the half year to 30 June
2024, reflecting an increase in market yields, partially offset by rental
growth. This compares with a decline of 6.8 per cent in the first half of 2023
and a decline of 5.3 per cent second half of 2023. Cumulatively, the
like-for-like decline in the Portfolio valuation since the peak, of 30 June
2022, is 19.2 per cent.
Rental income and vacancy rate
30-Jun-24 30-Jun-23 31-Dec-23 31-Dec-22
Total sqm ('000) 186.0 186.5 187.8 188.8
Annualised Net Rental Income (€m) 22.4 21.7 22.3 21.4
Net Cold Rent per sqm (€) 10.5 10.2 10.4 10.0
Like-for-like rent growth (%) 3.4 5.6 5.6 6.1
Like-for-like rent per sqm growth (%) 3.2 3.8 4.1 3.9
Vacancy (%) 4.6 5.2 5.0 6.2
EPRA Vacancy (%) 1.4 2.7 2.0 2.4
Like-for-like rental income per sqm growth of 3.2 per cent
Annualised net rental income grew by 3.4 per cent to €22.4 million in the
twelve-month period to 30 June 2024. Adjusting for disposals, like-for-like
rental income grew over the same period by 3.4 per cent, driven by
like-for-like rental income per sqm growth of 3.2 per cent to €10.5 (30 June
2023: 3.8 per cent, €10.2), and a slight reduction in vacancies.
Following the release on 30 May 2024 of the new Berlin Mietspiegel (rent
table), it is expected that the impact on annualised like-for-like rent (per
sqm) across the entire Portfolio will be approximately 2 per cent. Where
applicable, the Company will notify qualifying tenants of any upward revisions
to future monthly rental payments, with increases expected to become effective
from September 2024, thereby contributing to rental growth in the second half
of the year and into 2025.
The Company has always managed rent-to-income multiples for new tenants
conservatively and, notwithstanding current cost of living pressures and the
weakness in the broader German economy, rent-to-income multiples have remained
stable.
Berlin residential reversionary re-letting premium steady at 33 per cent
Conditions across the Berlin rental market remain strong, with supply-demand
imbalances at their widest in recent memory, leading to record market rents.
During the six months to 30 June 2024, 120 new leases were signed,
representing a letting rate of approximately 4.7 per cent of rental units. The
average premium to passing rents for residential re-lets was 33.0 per cent, or
€13.8 per sqm, a new record high, and a 3.8 per cent increase versus H1
2023.
EPRA vacancy of 1.4 per cent at a record low
Reported vacancy as at 30 June 2024 was 4.6 per cent (30 June 2023: 5.2 per
cent). On an EPRA basis, which adjusts for units undergoing development and
made available for sale, the vacancy rate was 1.4 per cent (30 June 2023: 2.7
per cent). EPRA vacancy is expected to remain at historically low levels,
given the ongoing supply-demand imbalance for rental property in Berlin.
EPRA Net Initial Yield (NIY)
(All figures in € million unless otherwise stated)
30-Jun-24 30-Jun-23 31 Dec 2023 31 Dec 2022
Investment property 646.4 714.3 675.6 775.9
Reduction for NCI share and property under development (5.2) (5.7) (5.5) (12.3)
Completed property Portfolio 641.2 708.7 670.1 763.6
Estimated purchasers' costs 52.6 57.8 55.0 63.2
Gross up completed property Portfolio valuation 693.8 766.5 725.1 826.8
Annualised cash passing collected rental income 22.4 21.7 22.3 21.4
Property outgoings (3.8) (3.7) (3.8) (3.6)
Annualised collected net rents 18.6 18.0 18.6 17.8
EPRA NIY (%) 2.7 2.3 2.6 2.1
Investment in the Portfolio
During the first half of 2024, a total of €2.6 million was invested across
the Portfolio (H1 2023: €4.6 million) and this investment is recorded as
capital expenditure in the Financial Statements. A further €1.0 million (H1
2023: €0.9 million) was spent on maintaining the assets and is expensed
through the profit and loss account. The Company will continue to carefully
consider all elements of discretionary capital expenditure reflecting the
Company's stated intention to conserve cash.
EPRA Capital Expenditure
(All figures in €'million unless otherwise stated)
6 months to 30-Jun-24 6 months to Year to Year to
30-Jun-23
31-Dec-23
31-Dec-22
Acquisitions - - 5.6 11.6
Like-for-like Portfolio 2.3 2.2 5.9 7.4
Development - 2.2 3.0 8.5
Other 0.3 0.2 0.5 0.5
Total Capital Expenditure 2.6 4.6 15.0 28.0
Energy-focused capital expenditure to improve values of PRS properties
Properties not part of the condominium pool will continue to operate on a PRS
model, receiving targeted investment to improve their energy efficiency and
raise EPC ratings to a minimum of C in the medium term.
The Company's housing stock is primarily comprised of "Altbau" buildings,
notable for their pre-World War II origins, distinctive architectural
features, and historical importance. Environmental upgrades are made whilst
preserving these characteristics and are centred largely on improving the
efficiency of heating systems. For PSD, the solution currently offering the
most potential is heating-system balancing or optimisation. The Company is
planning to start testing the effectiveness of these systems in a number of
its buildings before the end of this year, the results of which will feed into
future refurbishment strategies.
In addition to the structural building improvements, measuring and reporting
on the buildings' utility-consumption is also important. Currently, data
collection is done using the physical utility invoices received for the
buildings, in combination with information from meter readings. The Company is
currently engaging with several smart metering suppliers to evaluate the
advantages of implementing a cost-effective smart-metering solution. This
initiative aims to enhance the existing manual utility-consumption
data-collection process and expand its coverage.
Landlords continue to await clarity from the German Government on financial
and logistical support for smart-metering systems. The Company will therefore
employ a cautious approach to committing significant capital expenditure to
smart-metering systems before having greater visibility over potential
subsidies and cost allocation.
Energy-focussed capital expenditure is expected to enhance property values,
lower running costs and, potentially, facilitate more favourable longer-term
financing. By improving energy performance of these buildings, the pool of
potential buyers, such as pension funds and insurance companies, should expand
as market conditions improve.
The Company's commitment to making environmental improvements is also
evidenced in its buildings' green electrical-supply source, and ongoing tenant
engagement. The Company's property manager provides tenants with general
recommendations on steps that can be taken to contribute to environmental
improvements, such as in recycling and in responsible behaviour with heating,
water, and electricity usage.
The evolution of regulations and targets related to carbon emissions and to
the environment remains dynamic, and the Company therefore ensures that it is
well positioned in its knowledge, via ad hoc updates from legal specialists
and informative sample projects for information. The Company also engages with
environmental consultants to remain abreast of regulatory changes and to
implement best practices in sustainability, to ensure compliance with the
latest environmental standards.
Whole building sales
As previously announced, during the first half of the financial year, the
Company notarised for sale two properties with a combined sales price of
€7.4 million. The Company marketed a significant proportion of its Portfolio
as single-building sales and portfolios of apartment blocks.
As stated above, to facilitate the amendment of the existing Natixis debt, the
Company is in advanced discussions to sell a portfolio of 16 rental buildings.
It is expected that the proposed sale will be structured as a share deal and
represent a significant discount to the June 2024 carrying value of these
buildings. However, the proposed sale is critical to securing the revised
refinancing that will unlock a step-change in permitted condominium sales.
More details of this transaction will be announced on completion.
The Company will continue to review the possible sale of rental properties and
portfolios at discounts to carrying value, where the board believes it is in
shareholders' interest to do so, particularly with the aims of i) reducing
overall debt levels and enhancing the Company's ability to obtain new
longer-term financing on acceptable terms; and ii) providing sufficient
capital for targeted investments in existing condominium properties to
optimise their values.
Upturn in condominium buyer interest
During the six months to 30 June 2024, 15 condominium units were notarised for
sale for an aggregate sales price of €5.3 million (30 June 2023: eight
condominiums, €2.0 million). The average achieved value per sqm for all
residential units notarised was €4,292, in line with 31 December 2023
carrying value. June 2024 book values for these properties have been adjusted
to reflect the agreed sales prices.
Of the 15 units notarised, eight were vacant and seven were occupied. The
average achieved notarised sales price per sqm for vacant units was €4,841
and the average achieved sales price for occupied units was €3,611. Of the
eight vacant units, seven were sold in either a bare shell or un-refurbished
condition.
Since the end of June, four residential units have been notarised with a
combined sales price of €1.2 million and a further four units, with a
combined sale price of €1.7 million, have been reserved by prospective
buyers. The average price for all condominiums notarised was at a 23 per cent
premium to the average per sqm valuation of the Portfolio as a whole as at 30
June 2024 and a 33 per cent premium to the valuation of the Portfolio implied
by the current share price. Vacant condominiums were notarised at a 39 per
cent premium to the average per sqm valuation of the Portfolio as a whole as
at 30 June 2024 and a 48(1) per cent premium to the valuation of the Portfolio
implied by the current share price. It is expected that vacant units will
continue to represent around 50 per cent of future sales.
1. Implied premium calculated using a share price of 175p and
a Sterling/Euro exchange rate of 1:1.20.
Debt and Gearing
The Company has loan facilities with two principal lenders, Natixis and
Berliner Sparkasse. The Company's interest rate hedging policy has largely
negated the impact of higher interest rates on our cash borrowing costs.
As at 30 June 2024, PSD had gross borrowings of €317.9 million (31 December
2023: €324.0 million) and cash balances of €17.8 million (31 December
2023: €11.0 million), resulting in net debt of €300.1 million (31 December
2023: €313.0 million) and a net loan-to-value ratio on the Portfolio of 46.4
per cent (31 December 2023: 46.3 per cent).
The change in gross debt during the period resulted from scheduled
amortisation and repayments due to condominium sales and the sale of two
rental properties.
While a significant portion of PSD's debt is managed through fixed rate loans
or hedging, a portion remains exposed to floating rates. As of 30 June 2024,
the blended interest rate of PSD's loan book was 2.6 per cent (31 December
2023: 2.5 per cent).
Outlook
While the rental market continues to benefit from high demand and limited
supply, higher interest rates and a weakening German economy are expected to
continue to impact Berlin rental property transaction values
By contrast, pricing in the condominium market is resilient. It is against
this backdrop that the Company plans to materially increase condominium sales
to unlock the inherent value within the Portfolio. The Company has over 1,900
units, representing almost 80 per cent of its Portfolio, already legally
classified as condominiums. Completion of the proposed portfolio sale and the
Natixis debt amendment will unlock a substantial increase in the number of
permitted condominium sales projects, thus allowing the Company to benefit
from this pricing trend. Our condominium sales preparatory work to date will
ensure that the Company is well positioned to rapidly accelerate condominium
sales.
The primary goals of the acceleration in condominium sales are to reduce
overall debt levels in order to enhance the Company's ability to refinance the
current Natixis debt facility before its maturity in September 2026 on
favourable terms and to provide capital for targeted investments into
properties in order to optimise their sales value. On completion of this
refinancing, surplus capital from the condominium sales process is expected to
be available for distribution to shareholders. In the meantime, PSD remains
required to prioritise the repayment of debt.
The Company will continue to explore the sale of whole rental properties and
portfolios of buildings at discounts to their carrying value when it is
considered to be in the best interests of shareholders.
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 declined by 3.3 per cent on a
like-for-like for basis for the first half of the year (H1 2023: 6.9 per cent
decline).
· Like-for-like Portfolio rent per sqm increased by 3.2 per cent in the
half-year to 30 June 2024 (H1 2023: 3.8 per cent).
· The EPRA vacancy of the Portfolio as at 30 June 2024 stood at 1.4 per
cent (30 June 2023: 2.7 per cent).
· The Group continued with its condominium sales programme, notarising
sales of €5.3 million during the half year to 30 June 2024 (H1 2023: €2.0
million).
· EPRA NTA per share declined by 7 per cent to €3.68 as at 30 June
2024 (31 December 2023: €3.96).
· No dividend was declared for H1 2024 (H1 2023 0.00 € cents 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 2023,
capital and investment markets have continued to react cautiously to
historically high interest rates and economic uncertainty more generally and
sentiment in the Berlin real estate market remains weak.
The Board is currently developing its risk framework to streamline and focus
the risk register. This will be explained at greater length in the forthcoming
annual report. Notwithstanding this work, the principal risks considered are
substantially unchanged since the date of the Annual Report for the year ended
31 December 2023, and continue to be as set out in that report. These include,
but are not limited to:
· Economic and geopolitical risk
· Financing and interest rate risk
· Valuation risk
· Inability to sell properties, including condominiums
· Share price discount to NAV
· Legal and regulatory risk
· Tenant and tenancy law risk
· IT and cyber security risk
· Outsourcing risk
· ESG 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
give 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 25 September
2024 and the above responsibility statement was signed on its behalf by:
Director
25 September 2024
Condensed Consolidated Statement of Comprehensive Income
For the period from 1 January 2024 to 30 June 2024
Six months ended Six months ended Year ended
Notes 30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Continuing operations
Revenue 14,179 13,827 27,454
Property expenses 5 (8,220) (9,455) (17,315)
Gross profit 5,959 4,372 10,139
Administrative expenses 6 (1,045) (1,467) (3,766)
Gain / (loss) on disposal of investment property (including investment 7 (536) 516 (4,282)
property held for sale)
Investment property fair value (loss) /gain 10 (25,148) (57,340) (97,298)
Operating loss (20,770) (53,919) (95,207)
Net finance charge (before gain on interest rate swaps) 8 (4,770) (4,470) (9,353)
Gain / (loss) on interest rate swaps 8 1,452 349 (7,240)
Loss before taxation (24,088) (58,040) (111,800)
Income tax credit / (expense) 9 3,876 11,012 13,045
Loss after taxation (20,212) (47,028) (98,755)
Other comprehensive income - - -
Total comprehensive loss for the period (20,212) (47,028) (98,755)
Total comprehensive income attributable to:
Owners of the parent (19,446) (46,614) (98,112)
Non-controlling interests (766) (414) (643)
(20,212) (47,028) (98,755)
Earnings per share attributable to the owners of the parent:
From continuing operations
Basic (€) 20 (0.21) (0.51) (1.07)
Diluted (€) 20 (0.21) (0.51) (1.07)
Condensed Consolidated Statement of Financial Position
At 30 June 2024
As at As at As at
Notes 30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
ASSETS
Non-current assets
Investment properties 12 525,008 704,644 614,973
Property, plant and equipment 10 11 11
Other financial assets at amortised cost 14 816 816 828
Derivative financial instruments 18 10,248 16,385 8,796
536,082 721,856 624,608
Current assets
Trade and other receivables 15 13,492 13,714 12,834
Cash and cash equivalents 18,253 13,059 10,998
31,745 26,773 23,832
Investment properties - held for sale 13 121,422 9,705 60,594
Total assets 689,249 758,334 709,034
EQUITY AND LIABILITIES
Current liabilities
Borrowings 16 1,371 1,029 1,432
Trade and other payables 17 21,698 13,568 11,990
Current tax 9 1,375 760 856
24,444 15,357 14,278
Non-current liabilities
Borrowings 16 314,474 313,815 319,811
Deferred tax liability 9 52,909 59,799 57,311
367,383 373,614 377,122
Total liabilities 391,827 388,971 391,400
Equity
Stated capital 19 196,578 196,578 196,578
Treasury shares (37,448) (37,448) (37,448)
Retained earnings 136,491 207,435 155,937
Equity attributable to owners of the parent 295,621 366,565 315,067
Non-controlling interest 1,801 2,798 2,567
Total equity 297,422 369,363 317,634
Total equity and liabilities 689,249 758,334 709,034
Condensed Consolidated Statement of Changes in Equity
For the period from 1 January 2024 to 30 June 2024
Attributable to the owners of the parent
Stated capital Treasury Shares Retained earnings Total Non-controlling interest Total equity
€'000 €'000 €'000 €'000 €'000 €'000
Balance at 1 January 2023 (audited) 196,578 (37,448) 254,049 413,179 3,212 416,391
Loss for the period - - (46,614) (46,614) (414) (47,028)
Other comprehensive income - - - - - -
Total comprehensive income for the period - - (46,614) (46,614) (414) (47,028)
Balance at 30 June 2023 (unaudited) 196,578 (37,448) 207,435 366,565 2,798 369,363
Loss for the period - - (51,498) (51,498) (229) (51,727)
Other comprehensive income - - - - - -
Total comprehensive income for the period - - (51,498) (51,498) (229) (51,727)
Balance at 31 December 2023 (audited) 196,578 (37,448) 155,937 315,067 2,567 317,634
Loss for the period - - (19,446) (19,446) (766) (20,212)
Other comprehensive income - - - - - -
Total comprehensive income for the period - - (19,446) (19,446) (766) (20,212)
Balance at 30 June 2024 (unaudited) 196,578 (37,448) 136,491 295,621 1,801 297,422
Treasury shares comprise the accumulated cost of shares acquired on-market.
Condensed Consolidated Statement of Cash Flows
For the period from 1 January 2024 to 30 June 2024
Notes Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Loss before taxation (24,088) (58,040) (111,800)
Adjustments for:
Net finance charge (before loss / (gain) on interest rate swaps) 8 4,770 4,470 9,353
Loss / (gain) on interest rate swaps 8 (1,452) (349) 7,240
Loss on disposal of investment property 7 536 (516) 4,282
Investment property revaluation loss / (gain) 10 25,148 57,340 97,298
Depreciation 25 31 55
Operating cash flows before movements in working capital 4,939 2,936 6,428
(Increase) / decrease in receivables (658) (3,646) 479
Increase in payables 2,210 (1,562) 456
Cash generated from / (used in) operating activities 6,491 (2,272) 7,363
Income tax paid (7) (157) (516)
Net cash generated from / (used in) operating activities 6,484 (2,429) 6,847
Cash flow from investing activities
Proceeds on disposal of investment property (net of disposal costs) 6,047 9,380 6,142
Proceeds on disposal received in advance 7,498 - 101
Interest received 41 36 55
Capital expenditure on investment property 12 (2,593) (4,649) (9,400)
Property additions - - (4,930)
(Acquisition) / disposals of property, plant and equipment (24) (30) (54)
Net cash generated from investing activities 10,969 4,737 (8,086)
Cash flow from financing activities
Interest paid on bank loans (4,359) (3,779) (8,008)
Repayment of bank loans (5,857) (4,821) (5,904)
Drawdown on bank loan facilities 18 6,866 13,664
Net cash (used in) financing activities (10,198) (1,734) (248)
Net increase in cash and cash equivalents 7,255 574 (1,487)
Cash and cash equivalents at beginning of period/year 10,998 12,485 12,485
Exchange gains on cash and cash equivalents - - -
Cash and cash equivalents at end of period/year 18,253 13,059 10,998
Reconciliation of Net Cash Flow to Movement in Debt
For the period from 1 January 2024 to 30 June 2024
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
€'000 €'000 €'000
Cashflow from increase in debt financing (5,839) 2,045 7,760
Non-cash changes from increase in debt financing 441 715 1,399
Change in net debt resulting from cash flows (5,398) 2,760 9,159
Movement in debt in the period/year (5,398) 2,760 9,159
Debt at the start of the period/year 321,243 312,084 312,084
Debt at the end of the period/year 16 315,845 314,844 321,243
Notes to the Condensed Consolidated Financial Statements
For the period from 1 January 2024 to 30 June 2024
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
Main Market of the London Stock Exchange.
The Group invests in residential and commercial property in Germany.
The registered office is at IFC 5, St Helier, Jersey, JE1 1ST, 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 2023.
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 2023.
The comparative figures for the financial year ended 31 December 2023 are
extracted from but do not comprise, the Group's annual consolidated financial
statements for that financial year.
The results presented in this report are unaudited and they have been prepared
in accordance with the recognition and measurement principles of UK-adopted
International Accounting Standards that are expected to be applicable to the
next set of financial statements and on the basis of the accounting policies
to be used in those financial statements.
The interim condensed consolidated financial statements do not include all of
the information required for full annual financial statements and accordingly,
whilst the interim condensed consolidated financial statements have been
prepared in accordance with the recognition and measurement principles of the
UK-adopted International Accounting Standards, it cannot be construed as being
in full compliance with the UK-adopted International Accounting Standards. The
financial information contained in this announcement does not constitute
statutory accounts as defined by the Companies (Jersey) Law 1991.
The interim condensed consolidated financial statements have not been audited
or reviewed in accordance with International Standard on Review Engagements
(UK) 2410. The consolidated financial statements for the period ended 31
December 2023 is based on the statutory accounts for the period ended 31
December 2023. The auditor reported on those accounts which were not
qualified.
The interim condensed consolidated financial statements have been prepared on
the basis of accounting policies applicable to a going concern. This basis
presumes that funds will be available to finance future operations and that
the realisation of assets and settlement of liabilities, will occur in the
ordinary course of business.
The interim condensed consolidated financial statements were authorised and
approved for issue on 26 September 2024.
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 have
prepared forecasts for the Company in light of the continuing global
inflationary pressures and rising interest rates, the conclusion of which was
that there were no concerns. 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 2024 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 2024,
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 Jones Lang LaSalle GmbH
('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 2024, 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 2024 to 30 June 2024
5. Property expenses
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Property management expenses 655 720 1,431
Repairs and maintenance 952 937 1,757
Impairment charge - trade receivables (63) (52) 952
Service charges paid on behalf of tenants 4,651 4,759 7,370
Property Advisors' fees and expenses 2,025 3,091 5,805
8,220 9,455 17,315
6. Administrative expenses
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Secretarial & administration fees 431 446 680
Legal & professional fees 487 913 2,872
Directors' fees 174 135 268
Bank charges 16 8 17
Loss on foreign exchange 9 (1) 9
Depreciation 25 31 55
Other income (97) (65) (135)
1,045 1,467 3,766
7. Gain / (loss) on disposal of investment property (including investment
property held for sale)
Notes 30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Disposal proceeds 6,664 9,514 14,229
Book value of disposals 12 (6,582) (8,864) (18,070)
Disposal costs (618) (134) (441)
(536) 516 (4,282)
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 / (income)
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Interest income (29) (24) (55)
Finance expense on bank borrowings 7,970 6,202 14,106
Net swap income (3,171) (1,708) (4,698)
4,770 4,470 9,353
Fair value (gain) / loss on interest rate swap (1,452) (349) 7,240
3,318 4,121 16,593
9. Income tax (credit) / expense
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
The tax (credit) / charge for the period is as follows: €'000 €'000 €'000
Current tax charge 526 109 564
Deferred tax credit - origination and reversal of temporary differences (4,402) (11,121) (13,609)
(3,876) (11,012) (13,045)
Notes to the Condensed Consolidated Financial Statements
For the period from 1 January 2024 to 30 June 2024
9. Income tax (credit) / 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 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Loss before tax on continuing operations (24,088) (58,040) (111,800)
Tax at German income tax rate of 15.8% (2023: 15.8%) (3,812) (9,185) (17,664)
Income not taxable 85 (82) 677
Tax effect of losses brought forward (149) (1,746) 3,943
Total tax (credit) for the period / year (3,876) (11,012) (13,045)
Reconciliation of current tax liabilities
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Balance at beginning of period/year 856 808 808
Tax paid (7) (157) (516)
Current tax charge 526 109 564
Balance at end of period/year 1,375 760 856
Reconciliation of deferred tax
Capital gains on properties Interest rate swaps Total
Liability Liability Net liabilities
€'000 €'000 €'000
Balance at 1 January 2023 (68,382) (2,538) (70,920)
Charged to the statement of comprehensive income 11,176 (55) 11,121
Deferred tax liability at 30 June 2023 (57,206) (2,593) (59,799)
Charged to the statement of comprehensive income 1,287 1,201 2,488
Deferred tax liability at 31 December 2023 (55,919) (1,392) (57,311)
Charged to the statement of comprehensive income 4,632 (230) 4,402
Deferred tax liability at 30 June 2024 (51,287) (1,622) (52,909)
10. Investment property fair value loss/gain
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Investment property fair value loss (25,148) (57,340) (97,298)
Further information on investment properties is shown in note 12.
11. Dividends
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Amounts recognised as distributions to equity holders in the period:
No interim dividend was paid for the year ended 31 December 2023 (2022: - - -
€2.35 cents (2.02p)) per share.
No final dividend was paid for the years ended 31 December 2023 and 31 - - -
December 2022.
The Board are not proposing to declare a dividend for the first half of the
year (six months to 30 June 2023: Nil cents, Nil pence).
12. Investment properties
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
Fair value €'000 €'000 €'000
Balance at beginning of period/year 675,567 775,904 775,904
Capital expenditure 2,593 4,649 9,400
Property additions - - 5,631
Disposals (6,582) (8,864) (18,070)
Fair value (loss) / gain (25,148) (57,340) (97,298)
Investment properties at fair value - as set out in the report by JLL 646,430 714,349 675,567
Assets considered as "Held for sale" (Note 13) (121,422) (9,705) (60,594)
Balance at end of period/year 525,008 704,644 614,973
The property portfolio was valued at 30 June 2024 by the Group's independent
valuers, 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).
Notes to the Condensed Consolidated Financial Statements
For the period from 1 January 2024 to 30 June 2024
12. Investment properties (continued)
The valuation of the property Portfolio 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 or loss in respect of investment property is
disclosed in the condensed consolidated statement of comprehensive income as
'Investment property fair value gain or loss'.
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
'Rental Scenario' properties have been valued under the Discounted Cashflow
Methodology and are included in the Investment properties line in the
Non-current assets section of the condensed consolidated statement of
financial position. In general, the market participants are willing to pay
higher prices for properties where physical and legal requirements are
fulfilled and it is financially feasible to sell units individually. In these
cases, the market values are still calculated on a rental basis but are
adjusted to reflect the described potential increase in value. JLL calculates
the market value of these assets in what is referred to as a 'Privatisation
potential', which includes a deduction to the rental scenario discount rate
for each completed step met when transitioning from the Rental Scenario to the
Condominium Scenario. Properties expected to be sold in the coming year from
these assets are considered held for sale under IFRS 5 and can be seen in note
13.
Condominium Scenario
Included in this valuation scenario are properties that have the potential or
the benefit of all relevant permissions required to sell apartments
individually (condominiums), and have been approved for sale by the Board.
Units expected to be sold in the coming year from these assets are considered
held for sale under IFRS 5 and can be seen in note 13. The market value of the
Privatisation potential of these assets is reported under this Condominium
Scenario.
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.
The table below sets out the assets valued using these 3 scenarios:
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Rental scenario 609,450 675,193 614,973
Condominium scenario 29,580 37,745 57,610
Disposal scenario 7,400 1,411 2,984
Total 646,430 714,349 675,567
13. Investment properties - Held for sale
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Fair value - held for sale investment properties
At beginning of period/year 60,594 14,527 14,527
Transferred from investment properties 108,312 3,650 58,496
Transferred to investment properties (38,800) - 0
Capital expenditure 304 558 481
Properties sold (6,582) (8,864) (12,767)
Valuation (loss) on assets held for sale (2,406) (166) (143)
At end of period/year 121,422 9,705 60,594
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.
Notes to the Condensed Consolidated Financial Statements
For the period from 1 January 2024 to 30 June 2024
14. Other financial assets at amortised cost
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Non-current
Balance at beginning of period/year 828 828 828
Repayment of loan interest (24) (24) (24)
Accrued interest 12 12 24
Balance at end of period/year 816 816 828
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.
15. Trade and other receivables
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Current
Trade receivables 716 827 759
Less: impairment provision (234) (321) (297)
Net receivables 482 506 462
Prepayments and accrued income 905 618 235
Service charges receivable 9,911 9,530 6,797
Other receivables 2,194 3,060 5,340
13,492 13,714 12,834
16. Borrowings
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Current liabilities
Bank loans - NATIXIS Pfandbriefbank AG* 343 228 405
Bank loans - Berliner Sparkasse 1,028 801 1,027
1,371 1,029 1,432
Non-current liabilities
Bank loans - NATIXIS Pfandbriefbank AG** 257,279 253,850 260,502
Bank loans - Berliner Sparkasse 57,195 59,965 59,309
314,474 313,815 319,811
315,845 314,844 321,243
* Nominal value of the borrowings as at 30 June 2024 was €1,355,000 (31
December 2023: €1,419,000, 30 June 2023: €1,240,000).
** Nominal value of the borrowings as at 30 June 2024 was €258,493,000 (31
December 2023: €262,218,000, 30 June 2023: €256,074,000).
For further information on borrowings, refer to the management report on page
10.
17. Trade and other payables
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Trade payables 3,004 3,868 4,033
Accrued liabilities 1,743 1,283 1,601
Service charges payable 9,453 8,417 6,255
Advanced payment received on account 7,498 - 101
21,698 13,568 11,990
Notes to the Condensed Consolidated Financial Statements
For the period from 1 January 2024 to 30 June 2024
18. Derivative financial instruments
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Interest rate swaps - carried at fair value through profit or loss
At beginning of period/year 8,796 16,036 16,036
(Loss) / gain in movement in fair value through profit or loss 1,452 349 (7,240)
At end of period/year 10,248 16,385 8,796
The notional principal amounts of the outstanding interest rate swap contracts
at 30 June 2024 were €230,683,750 (December 2023: €231,049,375, June 2023:
€230,098,750). At 30 June 2024 the fixed interest rates vary from 0.775% to
3.210% (December 2023: 0.775% to 3.210%, June 2023: 0.775% to 3.210%) above
the main factoring Euribor rate.
Maturity analysis of interest rate swaps
30 June 2024 30 June 2023 31 December 2023
€'000 €'000 €'000
Between 2 and 5 years 10,248 16,385 8,796
10,248 16,385 8,796
19. Stated capital
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Issued and fully paid:
At reporting date 196,578 196,578 196,578
196,578 196,578 196,578
The number of shares in issue at 30 June 2024 was 100,751,410 (including
8,924,047 as Treasury Shares), 31 December 2023: 100,751,410 (including
8,924,047 as Treasury Shares), 30 June 2023: 100,751,410 (including 8,924,047
as Treasury Shares).
20. Earnings per share
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
Earnings for the purposes of basic earnings per share being net profit (19,446) (46,614) (98,112)
attributable to owners of the parent (€'000)
Weighted average number of ordinary shares for the purposes of basic earnings 91,827,363 91,827,363 91,827,363
per share (Number)
Effect of dilutive potential ordinary shares (Number) - - -
Weighted average number of ordinary shares for the purposes of diluted 91,827,363 91,827,363 91,827,363
earnings per share (Number)
Earnings per share (€) (0.21) (0.51) (1.07)
Diluted earnings per share (€) (0.21) (0.51) (1.07)
21. Net asset value per share and EPRA Net Tangible Assets (NTA)
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
Net assets (€'000) 295,621 366,565 315,067
Number of participating ordinary shares 91,827,363 91,827,363 91,827,363
Net asset value per share (€) 3.22 3.99 3.43
EPRA NTA
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
Net assets (€'000) 295,621 366,565 315,067
Add back deferred tax assets and liabilities, derivative financial instruments 42,661 43,414 48,515
and share based payment reserves (€'000)
EPRA NTA (€'000) 338,282 409,979 363,582
EPRA NTA per share (€) 3.68 4.46 3.96
22. 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 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Held at amortised cost
Trade and other receivables - current 12,587 13,096 12,599
Cash and cash equivalents 18,255 13,061 10,998
Loans and receivables 816 816 828
31,658 26,973 24,425
Fair value through profit or loss
Derivative financial asset - interest rate swaps 10,248 16,385 8,796
10,248 16,385 8,796
41,906 43,358 33,221
Notes to the Condensed Consolidated Financial Statements
For the period from 1 January 2024 to 30 June 2024
22. Financial instruments (continued)
The Group held the following financial liabilities at each reporting date:
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Held at amortised cost
Borrowings payable: current 1,371 1,029 1,432
Borrowings payable: non-current 314,474 313,815 319,811
Trade and other payables 21,698 13,568 11,990
337,543 328,412 333,233
Fair value through profit or loss
Derivative financial liability - interest rate swaps - - -
- - -
337,543 328,412 333,233
Fair value of financial instruments
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 September 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 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Financial (liabilities) / assets
Interest rate swaps - Level 2 - current - - -
Interest rate swaps - Level 2 - non-current 10,248 16,385 8,796
10,248 16,385 8,796
The valuation basis for the investment properties is disclosed in note 12.
23. 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 2024, an amount of €2,019,859 (€2,016,817
Management Fees and €3,042 Other expenses and fees) (December 2023:
€5,805,068 (€5,720,759 Management fees and €84,309 Other expenses and
fees), June 2023: €3,262,874 (€3,219,011 Management Fees and €43,863
Other expenses and fees)) was payable to QSix Residential Limited. At 30 June
2024 €40,235 (December 2023: €1,259,889, June 2023: €1,315,162) was
outstanding.
Apex Financial Services (Alternative Funds) Limited, the Company's
administrator provided administration and company secretarial services to PSDL
and its subsidiaries in 2024. For the six month period ended 30 June 2024, an
amount of €335,467 (December 2023: €680,000, June 2023: €307,602) was
payable to Apex Financial Services (Alternative Funds) Limited. At 30 June
2024 €Nil (December 2023: €Nil, June 2023: €8.730) was outstanding.
Dividends paid to Directors in their capacity as a shareholder amounted to
€Nil (December 2023: €Nil, June 2023: €Nil).
24. Events after the reporting date
During the reporting period, the Company had exchanged contracts for the sale
of two residential buildings for a consideration of €7.4million, both have
subsequently completed in Q3 2024.
Since the reporting date, the Company has exchanged contracts for the sale of
four condominium units for a total value of €1.2 million and one commercial
unit with a value of €230k. Furthermore, the Company has completed the sale
of five residential units to the value of €1.4m.
Professional Advisors
Property Advisor QSix Residential Limited
54-56 Jermyn Street
London SW1Y 6LX
Administrator Apex Financial Services (Alternative Funds) Limited
Company Secretary IFC 5
and Registered Office St Helier
Jersey JE1 1ST
Registrar Link Asset Services (Jersey) Limited
IFC 5
St. Helier
Jersey JE1 1ST
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
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
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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