Business Update

06 January 2021

Phoenix Spree Deutschland Limited

("PSD" or the "Company")

Business Update

Phoenix Spree Deutschland Limited (LSE: PSDL.LN), the UK listed investment company specialising in German residential real estate, announces a further debt refinancing, together with an update on condominiums, share buybacks and equity research coverage.

Condominium notarisations at a 20% per cent premium to book value

Since the financial half year ended 30 June 2020, a further 30 condominium units were notarised for sale, with an aggregate value of €10.5 million. Condominium pricing has remained strong, with the average achieved residential value per sqm at €4,276, representing an average 20.2% premium to the book value of each property.

The Company is additionally guaranteed €1.2m of condominium revenues in relation to the current financial year through its agreement with Accentro Real Estate AG for 3 remaining unsold units at its Boxhagenerstrasse condominium project.

As at 31 December, 70% of the Berlin portfolio has been legally split into condominiums, providing opportunities for the implementation of further projects where appropriate. A further 17% are in application, over half of which are in the final stages of the process.

Continuation of share buybacks at a discount to NAV

PSD has authority to buy back up to 10% of its ordinary share capital. Share buybacks were resumed following the release of the Company's interim results on 15 September 2020, by which time it had become clear that the financial impact of the COVID-19 pandemic has been limited, with rent collection in the six months to 30 June 2020 broadly in line with the six months to 30 June 2019.

As at 5 January 2021, the Company had bought back 4,733,500 ordinary shares, representing 4.7% of the ordinary share capital, for a total consideration of £15.2m. The average price paid represents a 30% discount to EPRA net asset value per share as at 30 June 2020.

Debt refinancing

The Company is pleased to announce the refinancing of a €21.4m of existing loans. The new facility, agreed with Natixis Pfandbriefbank AG, is on more flexible terms, releases a further €8.1m of cash and has a maturity profile in line with the debt retired and the Company's existing debt facilities.

The new debt is non-amortising, whereas the debt it replaces incurred an amortisation cost of 1.5% per annum. Additionally, it allows the sale of assets as condominiums, offering more flexibility than the previous debt provider terms. 

Initiation of coverage by Edison Investment Research

As previously announced, Edison, the equity research company, has initiated coverage on the Company. 

Edison has been engaged to produce regular, in-depth research on PSD. The intention is to raise the visibility of the Company and enable investors to develop an improved understanding of the business. Edison's research is read on a free-to-access basis by individuals and institutions across the globe. A full copy of the research is available on the Company's website.

Berlin rent controls ("The Mietendeckel")

The Company and its legal advisors remain firmly of the view that the Berlin rent-cap is unconstitutional and it is anticipated that the Federal Court will reach a final decision on its legality in the first half of 2021.

Pending clarification of the legality of Mietendeckel rules, the Company continues to explore all options within the existing portfolio to optimise strategic flexibility. This includes condominium sales at a premium to book value, share buybacks at a discount to EPRA net asset value, careful monitoring of capex projects and new tenant contracts which allow the retrospective collection of market rents in the event that the Mietendeckel is ruled to be unlawful.

2020 Portfolio valuationThe Company intends to publish its 2020 portfolio valuation in early February 2021.

Robert Hingley, Chairman of Phoenix Spree Deutschland, commented: 

"Our ability to sell condominiums at a premium to book value underpins the strategic optionality and value within the portfolio and I am pleased that we have been able to accelerate these sales. This, combined with our ability to access funding on attractive terms, allows us to continue to deliver value to shareholders and buy back shares at a significant discount to Net Asset Value, pending a final legal ruling on the Berlin rent-cap expected in 2021."

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