REG - Phoenix SpreeDeutsch - Portfolio Valuation and Business Update

Phoenix Spree DeutschlandAnnouncement

07/02/2025 07:00

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RNS Number : 2545W  Phoenix Spree Deutschland Limited  07 February 2025

7 February 2025

Phoenix Spree Deutschland Limited

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

Portfolio Valuation and Business Update

Phoenix Spree Deutschland (LSE: PSDL.LN), the UK listed investment company
specialising in Berlin residential real estate, announces an update on its
condominium sales strategy since the financial year end and the valuation of
the portfolio of investment properties held by the Company and its
subsidiaries (the "Portfolio") as at 31 December 2024.

Highlights

 Portfolio valuation                     First increase since H1 2022, rising by 3.2% in H2 2024, on a like-for-like
                                         basis.
 Condominium sales                       Year-on-year increase of 31% in notarisations to €9.4 million, with vacant
                                         units achieving a 41% premium to December 2023 carrying value and an 87%
                                         premium to the Portfolio value implied by the current share price.
 Accelerated condominium sales strategy  Targeting annualised condominium sales of €50 million by end 2025, a
                                         five-fold increase from 2024.
 Balance sheet                           Following €76 million portfolio disposal in December 2024, pro forma Net LTV
                                         fell from 46.4% (30 June 2024) to 40.0% at year-end, with further reductions
                                         expected in 2025 and beyond.
 Debt refinancing                        Current debt facilities expected to be refinanced well ahead of maturity.
 Continuation Vote                       Brought forward, documents expected to be posted no later than 17 February
                                         2025.

 

Portfolio overview as of 31 December 2024

 

Condominium values remained resilient during the financial year and, for the
first time since the real estate decline began in 2022, PRS valuations have
begun to stabilise, albeit at lower levels than the peak.

 

Table: JLL Valuation summary

 

 Strategy                JLL Dec 24 (€m)    JLL June 24   JLL Dec 23    JLL Dec 24      Dec 24 Multiple (x)  LFL Change vs FY 23 (%)  LFL Change vs

(LFL, €m)
(LFL, €m)
per sqm (€)
H1 2024 (%)
 Condominium sales pool  278.0              253.1         255.1         3,641           34.1                 9.0%                     9.8%
 PRS                     274.8              282.7         293.2         3,277           28.1                 -6.3%                    -2.8%
 Total                   552.8              535.9         548.3         3,633           30.8                 0.8%                     3.2%

 

As at 31 December 2024, the total Portfolio value was €552.8 million, with
an average value of €3,633 per sqm and a gross fully occupied yield of 3.3%.
On a like-for-like basis (adjusted for disposals), the Portfolio value
increased by 0.8% during the year to 31 December 2024 and 3.2% in H2 2024,
marking the first like-for-like valuation increase since the German
residential market downturn began in 2022. The valuation for 2024 is after the
disposal of a portfolio of 16 properties which completed in late December
2024.

 

Reflecting the change in the Company's strategy, additional disclosure is
provided to reflect the constituent parts (PRS and Condominiums sales pool) of
the Portfolio.

 

Condominium sales portfolio value increase of 9.0 percent

 

As of 31 December 2024, the condominium sales pool (40 properties, 942 units)
was valued at €278.0 million (€3,641 per sqm). The value of these
properties increased by 9.0% during the year, driven by the transfer of PRS
buildings into the pool under the accelerated sales strategy, with the
valuation shifting from PRS rental to condominium value. In H2 2024, these
properties saw an average uplift of 11.9%.

 

PRS portfolio value stabilising

 

As at 31 December 2024, the PRS portfolio (34 properties, 1,219 units) was
valued at €274.8 million, with an average value of €3,277 per sqm. On a
like-for-like basis, its value declined by 6.3% over the year. However, the
2.8% decline in the second half was the smallest recorded since the market
downturn began in 2022, and we expect stable values for PRS properties in
2025.

 

2024 Condominium sales increase by 31%

 

Condominium sales accelerated in 2024, with 26 units notarised for a combined
value of €9.4 million, a 31% increase versus 2023 (€7.2 million). Of
these, 13 were vacant and 13 were occupied.

 

The average notarised price was €4,295 per sqm, a 21% premium to December
2023 carrying value. Vacant units sold for €5,027 per sqm (41% premium),
while occupied units sold for €3,430 per sqm (3% discount). These sales
accounted for 28% of the stock of condominiums available for sale at the start
of the year.

Since the financial year-end, 3 units with a combined sales value of
€625,000 have been notarised and the Company has outstanding reservations
for a further 5 units for an aggregate price of €1.2 million.

These sales do not include any benefit from the 10 additional properties
placed on the market at the end of 2024 and we therefore anticipate a
significant acceleration in reservations during 2025, reflecting the increase
in the supply of units available for sale.

Annualised condominium sales expected to accelerate significantly in 2025

Following the amendment of the Company's debt facility in December 2024, the
maximum number of buildings allowed in the condominium sales pool increased
from 6 to 40. Preparation for the first 10 buildings, comprising 258 units,
began in late 2024. These buildings were prioritised due to minimal capital
expenditure requirements and are now being actively marketed by Engel &
Völkers and Lübke Kelber. Tenants are initially offered the option to
purchase their units before wider sales begin. Interest from tenants has been
higher than expected and we expect to agree a number of sales during the first
half of the financial year.

Preparatory work on the next 20 buildings is underway. Capital expenditure
projects for 10 of these buildings (282 units) are expected to conclude by the
end of the first half of the financial year, enabling their marketing to
begin. The final 10 buildings (294 units), requiring more preparation, are
expected to be market-ready by Q3 2025.

By 2025 year-end, the total number of units available for sale is projected to
grow from 108 (prior to the addition of the first tranche of 10 buildings in
Q4 2024) to 942, with an annualised condominium sales rate exceeding €50
million.

Outlook

The market correction of the past two years seems to be ending. PRS building
prices are stabilising, and transaction volumes began recovering in late 2024,
albeit from low levels. However, any recovery will likely be gradual.

A clear divergence has emerged between demand and pricing trends for
single-unit condominiums and PRS properties. Condominium prices and
transaction volumes have remained resilient since the onset of the real estate
market decline, unlike PRS properties, which have seen steep declines in both
investor interest and valuations since the 2022 market peak. This bifurcated
market dynamic is expected to continue as investors in PRS continue to adjust
to the new market reality. This has shaped the Company's strategy, which now
prioritises single unit condominium sales.

Recent amendments to the Company's primary debt facility have paved the way
for a significant acceleration in condominium sales, with a target to increase
annualised sales five-fold by the end of 2025. Selling condominiums is
expected to generate considerably higher valuations compared to the
alternative of whole building disposals. This was evident in 2024, where the
per sqm value of condominiums sold by the Company was 68% higher than the per
sqm value of its PRS sales.

The portfolio disposal announced in December 2024 has already reduced
leverage, with further reductions expected from future condominium sales. Work
to refinance both of the Company's lending facilities is underway which, when
completed, should expedite distributions to shareholders.

Continuation Vote

The Company is required to propose a Continuation Vote by June 2025, as per
its Articles. However, following the strategic shift marked by the accelerated
condominium sales programme, and after consulting major shareholders with
combined holdings in excess of 50 percent of the ordinary share capital of the
Company, proposals to bring forward the Continuation Vote and amend the
Investment Objective and Policy were announced on 17 December 2024.

A circular with further details will be sent to shareholders no later than 17
February 2025.

Annual results

The Company intends to publish its full-year results for the twelve months to
31 December 2024 on 29 April 2025.

For Further Information, Please Contact:

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

Stuart Young

 

Deutsche Numis (Corporate Broker)
                                   +44 (0)
20 7260 1000

David Benda

 

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

Elizabeth Snow

Annushka Shivnani

 

 

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