Press and Media

29 September 22

Phoenix Spree Deutschland: Interim Results for the half-year to 30 June 2022

Phoenix Spree Deutschland (LSE: PSDL.LN), the specialist investor in Berlin residential real estate, announces its Interim Results for the six months ended 30 June 2022.

Financial Summary

^{1-GBP:EUR FX rate locked in at 1:1.124 as at 28 September 2022.}

^{2 -Portfolio valuation includes investment properties under construction.}

^{3-GBP:EUR FX rate 1:1.162 as at 30 June 2022.}

^{4- Net LTV uses nominal loan balances as per note 17 rather than the loan balance on the Consolidated Statement of Financial Position which consider Capitalised Finance Arrangement Fees in the balance.}

Further increase in rental and portfolio values during H1 2022

• EPRA NTA per share up 1.2 per cent in H1 2022 to €5.72; EPRA NTA per share total return of 2.2 per cent.
• Including investment properties under construction worth €7.7m, the Portfolio was valued at €820.1 million, a 2.3 per cent increase versus 31 December 2021.
• Like-for-like Portfolio value, adjusted for acquisitions and disposals, increased by 2.2 per cent in H1 2022.
• Like-for-like rental income per sqm increased by 3.7 per cent versus prior year, down from 4.6 per cent in H1 2021, mainly reflecting re-letting mix effects, which have subsequently normalised.

Strong Balance Sheet, completion of new loan facility and refinancing

• Net LTV remains conservative at 36.0 per cent (31 December 2021: 34.7 per cent).
• New €60 million loan facility agreed with Natixis and announced on 25 January 2022.
• Successful refinancing of €49.7 million of Berliner Sparkasse debt, with €13.7 million of cash released at 28 September 2022.
• Company’s interest rate hedging policy has seen cash borrowing costs decline, despite rising long term rates.
• Company’s first loan maturity is not due until September 2026.

Continued strong demand for Berlin residential rental property

• 148 new leases in Berlin signed during H1 2022 at an average rent of €13.2 per sqm and 33.7 per cent premium to passing rents.
• €6.2 million invested across the Portfolio (30 June 2021: €2.7million), continuing to improve the quality of accommodation for tenants and supporting reversionary rental strategy.
• EPRA vacancy of 2.5 per cent remains at historically low level, reflecting ongoing structural undersupply of available rental property.
• All furnished apartments made available for refugees impacted by the Ukraine crisis for a rent-free period have now been fully let.

Actively managing the Portfolio

• Forward purchase in H1 of 17 new-build, semi-detached, residential properties (34 houses) for a total agreed purchase price of €18.5 million, four multi-family houses consisting of 24 residential units for a purchase price of €6.3million.
• Post-period end, acquisition of 25 residential units for a purchase price of €4.9million.
• All acquisitions fully financed using Natixis acquisition facility.
• Since period-end, contracts notarised to sell two non-core properties for an aggregate consideration of €8.6 million.

Condominium sales at a premium to book value

• Condominium sales notarised during H1 2022 of €3.0 million, (H1 2021 €4.3million).
• Average achieved value per sqm of €5,257 for residential units, a gross premium of 19.2 per cent to the 31 December 2021 book value of each property.
• 75.8 per cent of Portfolio assets legally split into condominiums as at 30 June 2022.
• Sales slowdown reflects increases in the cost of living, higher borrowing costs and economic uncertainty.

Further value delivered through share buy-backs and dividend

• Unchanged interim dividend of €2.35 cents per share.
• During the half year ended 30 June 2022, the Company bought back a further 930,509 ordinary shares, representing 0.9 per cent of the ordinary shares in issue, for a total consideration of £3.3 million.

• Since share buybacks commenced in 2019, including the interim dividend for 2022 and bought-back shares held in treasury, €63.4 million has been returned to shareholders.

Outlook

• Supply-demand imbalances within the Berlin PRS provide support to rental values:
  • Rising cost of home ownership forcing potential buyers to remain within the rental system for longer.
  • Urban housing shortage further exacerbated by anticipated net inward migration of almost one million from Ukraine to Germany.
  • Rising cost of construction further limiting new-build completions.

• Reversionary potential within Portfolio underpins future rental growth:
• New letting rental values expected to remain at a significant premium to average in-place rents across the Portfolio.

• Disposals and balance sheet
• The Company will continue to review its portfolio of assets to ascertain the potential for disposals of condominiums and other buildings that are deemed to be non-core.
• The Board considers the current level of gearing and cash balances to be appropriate at this stage in the real estate cycle and does not intend to materially increase debt levels until such time as the market outlook becomes more stable.
• The Company will continue to keep its cash commitments under close review, and will prioritise continued investment in the existing Portfolio, where appropriate, and dividend payments to shareholders.
• To the extent that the Board considers it prudent to do so, any excess proceeds from disposals will be made available for share buybacks. 

Robert Hingley, Chairman of Phoenix Spree Deutschland commented:

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

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

To read the full report click here: Phoenix Spree Deutschland Interim Results

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