Press and Media

11 May 22

Phoenix Spree Deutschland: Annual Report and Accounts for 2021

Phoenix Spree Deutschland Limited (‘PSD’) is an Investment Company founded in 2007 and listed on the London Stock Exchange. It is a long-term investor in Berlin rental property, committed to improving the quality of accommodation for its customers.

Over the past 15 years, the Company has assembled an attractive portfolio of real estate assets which the Directors believe offers investors the potential for both reliable income as well as capital growth.

QSix has acted as the Property Advisor since the Company’s inception. It has an experienced team of property professionals with long-standing experience of the German residential property market.

Highlights of the Year

EPRA NTA growth underpinned by significant condominium potential

• Record condominium notarisations of €15.2 million (37 condominium units) during the year to 31 December 2021.
• Average achieved value per sqm of €5,031 for residential units, a 21.7% premium to 31 December 2020 book value of each property.
• Over 75% of Berlin portfolio legally split into condominiums as at 31 December 2021, with a further 10% in application.

New loan facility and refinancing, resumption of acquisitions

• New €60 million loan facility agreed with Natixis and announced on 25 January 2022, offering flexibility to pursue potential further acquisitions as well as continued investment into existing portfolio.
• Successful refinancing of €49.7 million of Berliner Sparkasse debt, releasing a further €14.9 million of cash.
• Net LTV remains conservative at 34.7% (31 December 2020: 33.1%).
• First acquisition since removal of Mietendeckel announced on 21 March 2022 – 17 semi-detached, residential properties in Berlin beltway as a new build, at a purchase price €18.5 million and projected fully occupied rental income of €652,670 p.a.

Continued value delivered through share buybacks and dividends

• During the financial year ended 31 December 2021, the Company bought back a further 4,514,788 Ordinary Shares, representing 4.5% of the Ordinary Share capital, for a total consideration of 17.7 million.
• Average price paid represents a 17.8% discount to the EPRA net tangible assets per share as at 31 December 2020. Unchanged annual final dividend of 5.15c. Dividend increased or maintained since listing in June 2015.

Continued strong demand for Berlin residential property

• New leases in Berlin signed at an average 33.8% premium to passing rents.
• 240 new leases signed during the year, with the average rent of all new lettings increasing to €12.2 per sqm, a 4.4% increase on the prior year.
• €9.5 million invested across the Portfolio (31 December 2020: €4.2m), allowing the Company to continue improving the quality of accommodation for its tenants.
• Collection of backdated Mietendeckel rents progressing well; as at 31 December 2021, in excess of 95% had already been collected.
• A number of furnished apartments made available for refugees impacted by the Ukraine crisis for a rent-free period.

Outlook: Long-term Berlin demographic trends expected to remain positive

• Decreased availability of rental stock, exacerbated by the recently removed Mietendeckel, continues to support market rents and offers significant potential in surrounding ‘Beltway’ area.
• Net inward migration expected to strengthen when restrictions associated with COVID-19 are permanently removed.
• Potential for further valuation creation through condominium projects and sales. Condominium pricing expected to remain strong, particularly for centrally located Berlin apartments.
• Significant reversionary potential underpins future rental growth increased capital expenditure expected to drive acceleration in reversionary rental income growth.
• New debt facility provides scope for further acquisitions, subject to strict acquisition criteria and benchmarked against alternative of share buybacks.

Highlights for the financial year ended 31 December 2021

^{1 – Calculated at FX rate Sterling/Euro 1:1.191 (2020: Sterling/Euro 1:1.11).
2 – New EPRA Best Practice guidelines from October 2019 introduced three new measures of Net Asset Value: EPRA Net Tangible Assets (NTA), EPRA Net Reinvestment Value (NRV) and EPRA NET Disposal Value (NDV). EPRA NTA is calculated on the same basis as EPRA NAV, and is the most relevant measure for PSD and therefore now acts as the primary measure of Net Asset Value. Further information can be found on page 85.
3 – Net LTV uses nominal loan balances (note 22) rather than the loan balance on the Consolidated Statement of Financial Position which include Capitalised Finance Arrangement Fees.}

Robert Hingley, Chairman of Phoenix Spree Deutschland, commented:

“I am pleased that the Company has been able to deliver another strong performance with continued growth in property values and overall Net Asset Value. The reversionary potential that existed within the Portfolio before the introduction of the Mietendeckel is again evident following its withdrawal, and the value within our Portfolio has been further underpinned by our ongoing ability to sell condominiums at a premium to book value.

Our new debt facility and refinancing has strengthened our balance sheet strength and liquidity, and it is pleasing that we have successfully completed our first acquisition since the removal of the Mietendeckel.

We are confident in the ongoing strength of the Berlin residential market and remain focused on continuing to deliver value to shareholders through further investment in our Portfolio growth and quality.

Our thoughts are with those impacted directly and indirectly by the events that are unfolding in Ukraine and I am pleased to announce that PSD has made available a number of furnished apartments on a rent-free basis for refugees affected by the crisis. Although PSD has no direct exposure, we are prepared for the possible secondary effects in the form of higher energy prices and impact of inflation and continue to prioritise the wellbeing of our tenants.”