REG - Phoenix SpreeDeutsch - Investment Property Valuation and Business Update

Phoenix Spree DeutschlandAnnouncement

03/08/2023 07:00

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RNS Number : 1261I  Phoenix Spree Deutschland Limited  03 August 2023

03 August 2023

 

Phoenix Spree Deutschland Limited

(the "Company", the "Group" or "PSD")

 

Portfolio valuation and business update for the six months ended 30 June 2023

 

Phoenix Spree Deutschland (LSE: PSDL.LN), the UK listed investment company
specialising in Berlin residential real estate, announces the valuation for
the portfolio of investment properties held by the Company and its
subsidiaries (the "Portfolio") as at 30 June 2023 and an update on business
activity.

Financial Summary:

 Financial metric:                                      30 June 2023  30 June 2022  31 December 2022
 Portfolio Valuation, as at (€ million)                 €714.3        €812.4        €775.9
 Valuation per square metre, as at (€)                  €3,808        €4,318        €4,082
 Condominium notarisations during period (€ million)    €2.0          €3.0          €4.7

 

Portfolio valuation impacted by interest rate rises and yield expansion

During the first half of the financial year, buyer sentiment and transaction
volumes within the Berlin residential market continued to be affected by
historically high inflation and interest rates. These weaker market conditions
have negatively impacted the valuation of the Portfolio.

 

As at 30 June 2023, the Portfolio, including investment properties under
construction valued at €4.3m, was valued at €714.3 million. This valuation
represents an average value per square metre of €3,808 and a gross fully
occupied yield of 3.3 per cent. Included within the Portfolio are seven
multi-family properties valued as condominiums, with an aggregate value of
€39.2 million (30 June 2022: six properties; €32.3 million).

On a like-for-like basis, after adjusting for the impact of acquisitions net
of disposals, the Portfolio valuation declined by 6.9 per cent during the half
year to 30 June 2023.

 

Rental market remains robust

Rental market conditions remain strong. During the first half of the financial
year, supply-demand imbalances within the Berlin PRS market have widened.
Further net inward migration and higher home ownership costs, which have
forced potential buyers to remain within the rental system for longer,
continue to increase demand. At the same time, supply continues to be
constrained by higher funding and construction costs. Against this backdrop,
new lettings in Berlin were signed at an average premium of 31 per cent to
passing rents.

The Company welcomed the release by The Senate Department for Urban
Development, Building and Housing of a new transitional Berlin Mietspiegel
(rent index). Announced on 15 June 2023, this replaces the previous rent index
of 2021 and applies until a new qualified rent index is published in the first
half of 2024. On average, the new index permits an increase in rental values
of 5.4 per cent versus 2021.

Where applicable, the Company has notified qualifying tenants of any
adjustments to future monthly rental payments, which will become effective
from October 2023. Although this is not the primary driver of PSD's rent
growth, it is anticipated that it will be accretive to rental income in the
second half of the financial year.

Upturn in condominium buyer interest

During the six months to 30 June 2023, eight condominium units were notarised
for sale for an aggregate value of €2.0 million (H1 2022: € 3.0 million).
The average achieved notarised value per sqm for the residential units was
€5,715, representing an average 68 per cent premium to 31 December 2022
carry value.

 

Since the half year end, the Company has notarised a further three
condominiums for €1.0m. The valuation represents a 2.2 per cent premium to
31 December 2022 carry value, reflecting the fact that these units were
occupied. June 2023 book values have been adjusted to reflect the agreed sales
prices.

 

Reservations on a further seven units have been received and are pending
notarisation. Combined, these have a value of €2.6 million, representing a
gross premium of 5.1% per cent to carry value as at 30 June 2023. Of the seven
reservations, three units are currently occupied and therefore carry lower
premiums.

 

Outlook

Against a backdrop of higher inflation and interest rates, rental yields in
the Berlin residential market have risen and values of rental properties have
correspondingly fallen. However, condominium values remain well supported, as
evidenced by the premia to carry values that the Company continues to achieve
on sales. Although 93 per cent of the Company's portfolio is currently valued
on a rental property basis, it has over 78 per cent of its properties split as
condominiums.

 

The Property Advisor has produced a detailed analysis of the entire Portfolio
of assets to identify individual properties, portfolios as well as additional
condominiums for sale and continues to actively market a wide range of
properties. Given that the Company's share price remains at a material
discount to NTA, disposals at a discount to current carry value are under
consideration. Any surplus cash generated over amounts required to reinstate
dividends on a sustainable basis will be returned to shareholders or used to
reduce debt levels.

Buyer interest in the condominium market has shown early signs of recovery and
supply-demand imbalances within the Berlin PRS market remain firmly supportive
of rental values. Given the strong rental market backdrop and the positive
effect of the new Mietspiegel, it is anticipated that annualised like-for-like
rental growth will accelerate from 5.5 per cent as a 30 June 2023 to
approximately 6.5 per cent over the next 12 months.

 

Interim results

The Company intends to publish its interim results for the six months to 30
June 2023 at the end of September 2023.

 

 

Legal Entity Identifier: 213800OR6IIJPG98AG39

For Further Information, Please Contact:

Phoenix Spree Deutschland Limited
 
+44 (0) 20 3937 8760

Stuart Young

 

Numis Securities Limited (Corporate Broker)
        +44 (0) 20 7260 1000

David Benda

 

Teneo (Financial PR)
                                  +44 (0) 20 7353 4200

Olivia Peters

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