TIDMPSDL
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 EUR812.4 million
(31 December 2021: EUR801.5 million)
-- 9 condominiums units notarised for sale for an aggregate
value of EUR3.0 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 GBP4.0 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 EUR812.4 million
(31 December 2021: EUR801.5 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 EUR5.55m.
The valuation represents an average value per square metre of
EUR4,318 (31 December 2021: EUR4,225), 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 EUR32.8 million (31
December 2021: eight properties, aggregate value EUR38.8
million).
Condominium notarisations of EUR3.0 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 EUR3.0 million (H1
2021: EUR4.3 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 EUR5,291, 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 GBP4.0
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 GBP30.5 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
Stuart Young +44 (0)20 3937 8760
Numis Securities Limited (Corporate Broker)
David Benda
+44 (0)20 3100 2222
Tulchan Communications (Financial PR)
Elizabeth Snow
Oliver Norgate +44 (0)20 7353 4200
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