Press and Media

06 April 20

Phoenix Spree Deutschland: Annual Results for the year ended 31 December 2019

Phoenix Spree Deutschland Limited (LSE: PSDL.LN), the UK listed investment company specialising in German residential real estate, announces its full year audited results for the financial year ended 31 December 2019

Financial & Operational Highlights

• The Portfolio continued to perform well:
  • Aggregate Portfolio value increased by 13.1% to €730.2 million (31 December 2018: €645.7 million).
  • Like-for-like Portfolio value, adjusted for acquisitions and disposals, increased by 7.1%.
• Robust like-for-like rental income growth per sqm of 5.6% during the year.
• New leases signed at an average 36.4% premium to passing rents.
• Underlying EPRA vacancy remains low at 2.8% (31 December 2018: 2.8%).
• Contracts to acquire 286 units notarised during 2019, representing an aggregate purchase price of €49 million and an average cost per sqm of €2,706.
  • This includes an apartment complex in Brandenburg, an area within Greater Berlin that is unaffected by the Mietendeckel rent controls.
• Completion in September 2019 of new €190 million term loan on improved interest rate terms provides additional liquidity. A further €50 million acquisition facility is available.
• Potential scenarios associated with COVID-19 and the Mietendeckel have been rigorously stress tested.
• Unchanged dividend of €5.15 cents per share (GBP 4.4 pence per share).
• Share buy-backs at an average 22% discount to year-end 2019 EPRA Net Asset Value. As at 31 March 2020, 3.5% of the issued share capital had been repurchased. Buy-back programme suspended pending more clarity on the effects of COVID-19.

EPRA NAV underpinned by significant condominium potential

• 18 Condominium sale notarisations during 2019 with total proceeds of €8.8 million (2018: €9.0 million).
• Average achieved value per sqm on notarised residential condominium units of €4,711, a 25.9% premium to 2019 year-end Portfolio average value per sqm.
• New agreement with Accentro Real Estate AG, provides scope to accelerate condominium sales.
• 58% of Portfolio assets legally split into condominiums, and applications proceeding for a further 29%.

Timing, legality and implementation of new Berlin rent controls (“Mietendeckel”)

• Came into force on 23 February 2020. Legislation to be reviewed by Berlin’s Regional Constitutional Court and the Federal Constitutional Court.
• The Company has been advised that an injunction is likely to be sought. If obtained, it could create a moratorium on the implementation of the Mietendeckel, pending final ruling.
• In the absence of an injunction being obtained, aggregate rental income for 2020 is not likely to be significantly adversely affected by the Mietendeckel compared with 2019.
• Mietendeckel already impacting new construction, exacerbating shortage of available rental stock.
• Potential future impact after 2020 is dependent on duration of, and eventual outcome of, legal challenge.
• If the Mietendeckel continues throughout 2021, PSD estimates annual rental incomes could reduce by approximately 17%, which the Company would seek to mitigate by extending condominium sales.

Outlook

• The current COVID-19 pandemic presents a significant economic challenge to global economies:
  • PSD’s top priority remains the health, welfare and safety of its tenants and wider stakeholders.
  • Measures have already been taken in London and Berlin to mitigate disruption resulting from the COVID-19 outbreak.
  • PSD believes it is well positioned to withstand the current dislocations COVID-19 may cause, with a robust business model, a strong balance sheet and good levels of liquidity
• PSD retains strategic optionality in the likely event the Mietendeckel is found to be unconstitutional.
• Notwithstanding the near-term impact of COVID-19, long-term Berlin demographic trends likely to remain positive, driven by strong job creation and ongoing population growth.
• Availability of Berlin rental stock expected to decline.