REG - Phoenix SpreeDeutsch - Portfolio valuation as at 30 June 2022

Phoenix Spree DeutschlandAnnouncement

04/08/2022 07:15

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RNS Number : 8567U  Phoenix Spree Deutschland Limited  04 August 2022

4 August 2022

Phoenix Spree Deutschland Limited

("PSD" or the "Company")

Investment property valuation and business update

 

Phoenix Spree Deutschland Limited (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 2022.

 

Financial performance

 

·    Portfolio value increased by 1.4 percent to €812.4 million (31
December 2021: €801.5 million)

·    9 condominiums units notarised for sale for an aggregate value of
€3.0 million, representing a 20 percent premium to book value

·    A further 0.9 percent of the ordinary share capital bought back for a
total consideration of £4.0 million at an average 24.2 percent discount to
NAV

·    Strong balance sheet with net LTV of 37 percent

Portfolio valuation

Pricing in the Berlin residential property market has remained stable in the
first half of the financial year. Although there has been a deterioration in
buyer sentiment and, consequently, transaction volumes were significantly
below peak levels, investment demand observed by Jones Lang LaSalle GmbH, the
Company's independent valuers, continues to support current pricing.

As at 30 June 2022, the Portfolio was valued at €812.4 million (31 December
2021: €801.5 million). This represents a 1.4 percent increase over the
six-month period. On a like-for-like basis, excluding the impact of disposals,
the Portfolio value increased by 1.9 percent during the first half of the
financial year and 5.7 percent versus the first half of the prior year. This
reflects an increase in rental values, improvements in the micro locations of
certain Portfolio assets, investments in the Brandenburg asset and completion
of the condominium splitting process in one building. The property valuation
excludes the prepayment relating to the acquisition of Erkner which will be
held at cost of €5.55m.

The valuation represents an average value per square metre of €4,318
(31 December 2021: €4,225), at a gross fully occupied yield of 2.8 per
cent. (31 December 2021: 2.8 percent). Included within the Portfolio valuation
are six properties valued as condominiums, with an aggregate value of €32.8
million (31 December 2021: eight properties, aggregate value €38.8 million).

 

Condominium notarisations of €3.0 million, at a 20 percent premium to book
value.

During the first half of 2022, nine condominiums units were notarised for sale
for an aggregate value of €3.0 million (H1 2021: €4.3 million).

 

Condominium notarisations during the second quarter of 2022 have been
negatively impacted by concerns over increases in the cost of living, higher
borrowing costs and uncertainty surrounding the crisis in Ukraine which have
led to a deterioration in buyer sentiment and reduced investment volumes.

 

The average achieved notarised value per sqm for the residential units was
€5,291, representing a 20 percent premium to book value and a 25.2 percent
premium to PSD's average Berlin residential portfolio value as at 30 June
2022.

 

Share buybacks at a 24.2% discount to NTA

During six months ended 30 June 2022, the Company bought back a further
930,509 Ordinary Shares, representing 0.9 percent of the Ordinary Share
capital, for a total consideration of £4.0 million. The average price paid
represents a 24.2 percent discount to EPRA NTA per share as at 31 December
2021.

 

Since commencing its share buyback programme in September 2019, a total of
8,879,802 shares have been bought back, representing 8.8 percent of the issued
share capital of the Company, for a total consideration of £30.5 million. The
capital made available for the buyback programme has been funded through a
combination of existing cash balances, refinancing and condominium sale
proceeds.

 

Outlook

 

The last two months have seen a significant change in capital markets in
reaction to inflationary pressures, consequential interest rate rises and
expectations for future global central bank monetary policy. Investor and
consumer confidence has additionally been impacted by the ongoing conflict in
Ukraine. Although PSD's share price has significantly outperformed its listed
peers during the first half of the financial year, these circumstances have
created a degree of uncertainty across global equity markets from which PSD is
not immune. However, PSD remains well positioned to withstand any current
dislocations as they affect the Berlin residential real estate operating
environment.

 

With a net LTV of 37 percent, the Company's balance sheet remains
conservative, with an average remaining duration of the loan book exceeding
four years.  Its first loan is not due to reach maturity until September
2026. Moreover, following a transition away from negative rates, the Company's
interest rate hedging policy has seen cash borrowing costs decline, despite
rising long term rates.

 

The Board considers the current level of gearing and cash balances to be
appropriate at this stage in the real estate cycle and will not look to
increase debt levels until such time as the market outlook becomes more
stable. Accordingly, further buybacks will be dependent on condominium sales
and non-core asset disposals rather than refinancing. The Board keeps disposal
opportunities under regular review and, in view of the continuing significant
discount of PSD's share price to EPRA NTA per share, it remains the current
intention of the Board to deploy any proceeds over and above amounts required
to fund normal working capital requirements and payment of dividends in the
ordinary course to share buybacks.

 

Interim results

The Company intends to publish its interim results for the six months to 30
June 2022 in the final week of September 2022.

 

Robert Hingley, Chairman of Phoenix Spree Deutschland commented:

"The first six months of the financial year were characterised by significant
market disruption caused by the combined effects of global inflationary
pressures, rising interest rates and the ongoing conflict in Ukraine. Against
this backdrop, it is pleasing that the Portfolio was able to deliver further
valuation gains during the first half of the financial year.

Although financial market conditions have become more challenging, demographic
trends within the Berlin market remain positive, with a significant
undersupply of private rental property.  Affordability comparisons with other
German cities remain favourable and the reversionary potential that exists
within the Portfolio will continue to support rental values."

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 3100 2222

 David Benda

 Tulchan Communications (Financial PR)        +44 (0)20 7353 4200

 Elizabeth Snow

 Oliver Norgate

 

 

 

 

 

 

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