TIDMPSDL
RNS Number : 5533I
Phoenix Spree Deutschland Limited
27 November 2018
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) No 596/2014
("MAR"). Upon publication of this announcement, the inside
information is now considered to be in the public domain for the
purposes of MAR.
27 November 2018
Phoenix Spree Deutschland Limited
New Property Advisory and Investor Relations Agreement
Phoenix Spree Deutschland Limited (LSE: PSDL.LN, "PSDL" or "the
Company"), the UK premium-listed investment company specialising in
Berlin residential real estate, is pleased to announce that it has
entered into a new property advisory and investor relations
agreement (the "New PAIR") with PMM Residential Limited (the "New
Property Adviser"), a member of the PMM Group, conditional on
shareholder approval.
The New PAIR will replace the existing property advisory
agreement (the "Existing PAA") with PMM Partners (UK) Limited (the
"Existing Property Adviser").
Key information:
-- The New PAIR will reduce future management fees paid by the
Company and will, therefore, result in significant cost
savings:
o Based on the Company's EPRA NAV as at 30 June 2018, the New
PAIR represents an annual saving of EUR838k, when compared with the
Existing PAA, rising to EUR875k per annum should EPRA NAV reach
EUR500m.
o In respect of any finance fees and transaction fees, any
amounts paid under the New PAIR will be deducted from the
management fee. For the financial year ending 31 December 2018,
these fees are estimated to equal approximately EUR130k.
o For the period from 1 July 2018 to 31 December 2020, the
performance fee payable under the New PAIR will be reduced by 20%
compared with that payable under the Existing PAA and by 25% for
periods thereafter.
o The performance fee will now be satisfied entirely through the
issue of new PSDL shares at a price equal to the higher of EPRA NAV
per share or the then share price, rather than through the payment
of cash used to subscribe for new shares.
-- The New PAIR strengthens the long-term relationship between
the Company and its experienced property advisory team, which has
an excellent record: since June 2015 PSDL has delivered total EPRA
NAV shareholder returns of 115% and a 141% increase in share price.
The initial term of the New PAIR will be to 31 December 2022,
providing greater certainty and stability for shareholders.
-- The New Property Adviser expects to invest in infrastructure,
IT systems and personnel dedicated to servicing the Company's
requirements.
-- The types and levels of service provided to the Company by
the New Property Adviser will be substantially the same as has been
provided by the Existing Property Adviser, with, in fact, some
expansion of scope.
-- The property advisory team will remain substantially the
same, with the exception of Paul Ruddle, Co-Founder of PMM
Partners, who has decided to step back from an executive role
within the PMM Group and will not have a shareholding in the New
Property Adviser. Paul will act as a consultant to the New Property
Adviser for an initial 18-month period, ensuring that it continues
to benefit from his advice and support.
-- The Company will benefit from the deeper pool of resources
and expertise offered by the New Property Adviser, as part of the
PMM Group. The PMM Group is a diversified group with FCA-regulated
companies, and is larger and better capitalised than the Existing
Property Adviser.
-- The Existing Property Adviser, together with its associates,
is deemed to be a related party of the Company and the replacement
of the Existing PAA with the New PAIR is, therefore, subject to
PSDL shareholders (other than PMM Group and its associates)
approving by ordinary resolution PSDL's entry into the New PAIR at
an Extraordinary General Meeting of the Company, notice of which
will be announced shortly.
Robert Hingley, Chairman of PSDL, commented:
"This is an excellent outcome for the Company. We are very
pleased on behalf of shareholders to have secured PMM Group's
continued expertise as property adviser until at least the end of
2022, as well as to have reduced the fees paid by the Company as a
proportion of EPRA NAV for those services. We look forward to
building on this relationship over the coming years and continuing
our strong record of performance."
Mike Hilton, Director of PMM Residential Limited, commented:
"We are delighted to have agreed this extension to our
relationship with PSDL. This will provide improved security and
visibility for PSDL and its shareholders over the medium-term. We
will maintain our highly disciplined approach to active property
management in the Berlin market and continue to drive value for
PSDL shareholders."
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 7260 1000
Tulchan Communications (Financial PR)
Elizabeth Snow +44 (0)20 7353 4200
Amber Ahluwalia
Notes to Editors
About Phoenix Spree Deutschland
PSDL is an investment company founded in 2007 and listed on the
London Stock Exchange. It offers shareholders exposure to the
Berlin residential market. Since PSDL was incorporated in Jersey in
2007, the Company has assembled an attractive portfolio of German
real estate assets. As at 30 June 2018, the portfolio was valued at
EUR584 million and consisted of 93 properties containing 2,322
residential units and 152 commercial units, representing a total
lettable area of approximately 180,000 square metres. The primary
assets are multi-apartment residential buildings, mostly built
pre-1914 or post-1990, and 94 per cent. of the Company's portfolio
by total units relates to residential property, with the balance
being commercial property.
About PMM Group
PMM Partners was formed in 2006 by Mike Hilton, Paul Ruddle and
Matthew Northover to act as property adviser to the Company. An
affiliated and FCA-regulated entity, PMM Advisers LLP ("PMM
Advisers") was formed in 2007 and acts as an investment adviser on
a number of UK property and property-related debt funds. In 2015, a
new related company, the Existing Property Adviser, replaced PMM
Partners as property adviser to the Company.
As at 30 June 2018, the PMM Group had gross assets under
management of approximately EUR1.0 billion, employed over 50 staff,
and had four offices in London, Berlin, Dublin and Surrey. Its
interests cover German residential, UK specialist mortgages,
commercial property lending and loan servicing. The PMM Group
benefits from a robust operating platform which includes in-house
legal, finance, IT and compliance services.
Background to and rationale for the related party
transaction
Phoenix Spree Deutschland Limited is a closed-ended investment
company, incorporated in Jersey on 2 April 2007, which invests in
the German real estate market, particularly residential property in
Berlin. Since incorporation, it has been managed by various
entities associated with Mike Hilton, Paul Ruddle and Matthew
Northover. The Company appointed the Existing Property Adviser to
act as its property adviser pursuant to the Existing PAA prior to
the admission of the Company's shares to listing on the premium
segment of the Official List and to trading on the London Stock
Exchange's main market for listed securities (which occurred on 15
June 2015). Under the stewardship of the Existing Property Adviser,
the Company has experienced a successful period as a listed
company, delivering total EPRA NAV shareholder returns of 115% and
experiencing a 141% increase in share price.
The principals and shareholders of the Existing Property Adviser
have notified the Board of their intention to restructure their
business interests creating the PMM Group, with the aim of
consolidating their interests in four business areas: German
property; UK specialist mortgages; commercial property lending; and
mortgage servicing. As at 30 June 2018, the PMM Group had gross
assets under management in excess of EUR1.0 billion and employed 50
staff in its London, Berlin, Dublin and Surrey offices.
The restructuring of various business interests within the PMM
Group and the entry into the New PAIR with the New Property
Adviser, subject to PSDL shareholder approval, will mean PSDL is
able to benefit from the services of an FCA-regulated entity which
is part of a larger, more diversified group of companies. Moreover,
the new structure will enable the New Property Adviser to more
easily access shared PMM Group services such as finance, IT,
compliance and legal.
As part of the restructuring, Paul Ruddle has decided to step
back from an executive position within the PMM Group. As a result,
he will not be a shareholder in the new structure and will,
instead, provide consultancy services to the New Property Adviser
for an initial 18-month period. Mike Hilton, Matthew Northover,
Giles Avery and Jörg Schwagenscheidt (CEO of PMM Partners Germany
GmbH) will continue to manage the day-to-day operations of the New
Property Adviser. The New Property Adviser will also be able to
call on the resources of the broader PMM Group, which brings
significant additional expertise of relevance to PSDL's
operations.
The Company has, subject to PSDL shareholder approval, agreed
to: (i) enter into the New PAIR; and (ii) terminate the Existing
PAA. Further information on each of the New PAIR and the
Termination Agreement are set out below and in Appendix I.
Key differences between the Existing PAA and New PAIR
Set out in Appendix I are the fees to which the Existing
Property Adviser is entitled under the Existing PAA, as well as the
proposed amendments to these under the New PAIR. Except in relation
to a small fee payable for a service to be provided by the New
Property Adviser relating to investor relations, which itself
replaces an existing payment to an associated company of the
Existing Property Adviser, in each other case, the basis for
determining the ongoing fees payable by the Company under the New
PAIR will be either the same as or less than those that would be
incurred under the Existing PAA.
Based on the Company's EPRA NAV as at 30 June 2018 of EUR425.8
million, the New PAIR represents an annual saving of EUR838k when
compared with the Existing PAA, rising to EUR875k per annum should
the Company's EPRA NAV reach EUR500.0 million.
Furthermore, under the terms of the New PAIR, additional fees
relating to acquisitions and financing will now be deducted from
the management fees. In 2018, these additional fees are expected to
total approximately EUR130k.
The New PAIR also offers additional potential cost savings from
a reduced rate of performance fee compared to the Existing PAA: for
the period from 1 July 2018 to 31 December 2020, the performance
fee payable under the New PAIR will be reduced by 20% compared with
that payable under the Existing PAA and by 25% for periods
thereafter.
The Existing PAA can be terminated by either party on 12 months'
notice. In order to provide greater certainty and ongoing stability
for the Company, its shareholders and its property adviser, the New
PAIR has an initial minimum term ending on 31 December 2022 to
ensure that the Company secures the services of the PMM Group over
that period and to give the New Property Adviser the confidence to
further invest in infrastructure, IT systems and personnel
dedicated to servicing the Company's requirements. From 31 December
2021 and at any time thereafter, it may be terminated by either
party on 12 months' notice.
To ensure the interests of the Company and its shareholders are
aligned with the New Property Adviser, under the New PAIR, should
the Company be subject to: (i) a takeover offer becoming or being
declared wholly unconditional (a "Share Sale Exit"); or (ii) the
Company realising its portfolio for cash (either directly or
indirectly) pursuant to a single or linked series of transactions
with the Company having a bona fide intention of returning all or
substantially all of the proceeds in cash to shareholders (a
"Property Sale Exit"), the fees that the New Property Adviser will
be entitled to receive will be calculated as set out below.
In the event of a Share Sale Exit, the relevant performance
period will end on the date the takeover offer becomes or is
declared wholly unconditional (the "Share Sale Completion Date")
and the New Property Adviser will be entitled to receive a
performance fee calculated on the basis that the EPRA NAV per share
is equal to the offer price per share of such takeover offer (the
"Share Sale Fee"). The Share Sale Fee shall be satisfied by the
issue of new shares. The New Property Adviser will also be entitled
to an additional fee payable in cash equal to the full annual
Portfolio and Asset Management Fee that would be payable based on
the most recently published EPRA NAV immediately prior to the Share
Sale Completion Date. The entitlement to this fee under the New
PAIR replaces the existing requirement for the Company to serve 12
months' notice under the Existing PAA. The New PAIR will terminate
automatically on the Share Sale Completion Date.
In the event of a Property Sale Exit, the Board will convene an
extraordinary general meeting of the Company to put forward
proposals to shareholders to realise the Company's portfolio and
return all or substantially all of the proceeds in cash to
shareholders (the "Property Sale EGM"). If approved by
shareholders, the Board will proceed with a Property Sale Exit. The
New Property Adviser will be entitled to a performance fee (the
"Property Sale Performance Fee") equal to the amount that would
become payable as if the date on which more than 75 per cent. by
value of the Company's portfolio has completed (the "Property Sale
Trigger Date") was the end of a performance period, calculated on
the basis that the Company's EPRA NAV per share is equal to the
Directors' calculation of the estimated return per share to
shareholders. Payments to the New Property Adviser will be made at
the same time as distributions to shareholders and the estimated
return per share may be revised by the Directors with the result
that the Property Sale Fee may be recalculated accordingly. The
Property Sale Fee will be paid in cash. In addition to the Property
Sale Fee, the New Property Adviser will be entitled to a fee
payable in cash equal to the full annual portfolio and asset
management fee that would be payable based on the most recently
published EPRA NAV of the Company immediately prior to the Property
Sale EGM. This fee will be payable in four equal instalments paid
quarterly over the 12-month period following the Property Sale
Trigger Date. The entitlement to this fee under the New PAIR
replaces the existing requirement for the Company to serve 12
months' notice under the Existing PAA. In the event of a Property
Sale Exit, the New PAIR will terminate automatically without notice
on the liquidation of the Company.
The Company believes that these changes better align the
interests of the New Property Adviser and shareholders.
Lock-in arrangements
The Company has entered into a lock-in deed with the New
Property Adviser pursuant to which the New Property Adviser has
covenanted not to dispose of any interest in fifty per cent. of any
shares it receives pursuant to the New PAIR for a period (in each
case) of six months from the date of issue of the relevant shares.
The covenant would not apply in the event of a takeover offer for
the Company.
Under the existing lock-in deed dated 9 February 2015 between
the Company and the Existing Property Adviser as well as certain
members of the management team (together the "Covenantors"), the
Covenantors undertake not to dispose of fifty per cent. of any
shares they receive from the Company pursuant to the Existing PAA
for a period of twelve months from the date of issue.
As part of the restructuring of the PMM Group, the Existing
Property Adviser has asked that the proportion of shares subject to
the existing lock-in deed be reduced from 50% to 36% and that two
of the individual Covenantors, Paul Ruddle and Alex Easton, be
released from it entirely. The Company has agreed to this
request.
Extraordinary General Meeting
The Existing Property Adviser is a substantial shareholder of
the Company as it holds 10 per cent. of the voting rights able to
be cast at a general meeting of the Company. A substantial
shareholder and its associates are deemed to be related parties of
an issuer under the Listing Rules. The Existing Property Adviser
and the New Property Adviser (which is an associate of the Existing
Property Adviser) are, therefore, deemed to be related parties of
the Company.
The termination of the Existing Property Adviser's appointment
pursuant to a termination agreement and the appointment of the New
Property Adviser as the new property adviser to the Group pursuant
to the New PAIR will require PSDL shareholder approval.
The Directors are therefore convening an extraordinary general
meeting of the Company (the "EGM"), at which a resolution will be
proposed to approve the termination of the Existing PAA and to
approve the appointment of the New Property Adviser pursuant to the
terms and conditions of the New PAIR (the "Resolution"). Notice of
the EGM will be sent to shareholders shortly.
The Resolution will be proposed as an ordinary resolution. An
ordinary resolution requires a simple majority of members entitled
to vote and present in person or by proxy to vote in favour in
order for it to be passed.
The Existing Property Adviser has undertaken not to, and to
procure that its associates do not, exercise any rights to vote on
the Resolution in respect of shares in which they are
interested.
Compliance with the MAR
The person responsible for arranging the release of this
announcement for the purposes of MAR and its implementing
regulations is Robert Hingley, the Chairman of the Company.
Appendix I
Fee Existing PAA New PAIR Commentary
Portfolio The Existing Property Adviser The annual rate This amendment
and Asset is entitled to a fee for will be reduced will necessarily
Management the portfolio and asset as follows: result in a
Fee management services it provides * 1.20% of EPRA NAV where it is equal to or less than reduction in
to the Company and its subsidiaries EUR500 million; and fees payable
at the annual rate of: in all performance
* 1.50% of EPRA NAV where it is equal to or less than scenarios.
EUR250 million; * 1.00% of EPRA NAV greater than EUR500 million
* 1.25% of EPRA NAV between EUR250 million and EUR500
million; and
* 1.00% of EPRA NAV greater than EUR500 million
--------------------------------------------------------------- --------------------------------------------------------------- -------------------
Portfolio The Existing Property Adviser For the initial This amendment
and Asset is entitled to a performance period to 31 December will necessarily
Management fee of 20.0% of the excess 2020, the New Property result in a
Performance EPRA NAV total return per Adviser will be reduction in
Fee share at the end of the entitled to 16.0% fees payable
relevant three-year performance of the excess EPRA in all performance
period over a performance NAV total return scenarios.
hurdle of 8.0% per annum. per share at the
end of the performance
The performance fee will period over a performance
be satisfied through the hurdle of 8.0%
payment of cash by the Company per annum. This
provided always that the will fall to 15.0%
Existing Property Adviser for subsequent
uses this to subscribe for periods thereafter.
new shares.
Satisfied through
If the shares are trading the issue of shares
at a discount to EPRA NAV at a price equal
at the time that the performance to the higher of
fee is due, the Company EPRA NAV per share
shall use its reasonable or the share price.
endeavours to purchase shares
in the market to settle
the performance fee from
the sale of such shares
out of treasury at a price
equal to the amount paid
by the Company for such
purchase.
--------------------------------------------------------------- --------------------------------------------------------------- -------------------
Capital The Existing Property Adviser No change. No impact on
Expenditure is entitled to a capital fees payable
Monitoring expenditure monitoring fee in all performance
Fee equal to 7.0% of any capital scenarios.
expenditure the commissioning
and/or supervising of which
the Existing Property Adviser
is responsible.
--------------------------------------------------------------- --------------------------------------------------------------- -------------------
Finance Fee Where a subsidiary of the Calculated on the This amendment
Company receives finance same basis but will necessarily
services and a borrowing deducted from the result in a
arrangement is either (a) Portfolio and Asset reduction in
entered into or (b) renegotiated Management Fee. fees payable
or varied otherwise than in all performance
in any immaterial way, the scenarios.
subsidiary shall be liable
to pay a fixed fee of (i)
0.1% of the value of any
borrowing arrangement made
available to the subsidiary
pursuant to (a) and (ii)
GBP1,000 in respect of matters
covered by (b) to the Existing
Property Adviser.
--------------------------------------------------------------- --------------------------------------------------------------- -------------------
Transaction Where a subsidiary completes Calculated on the This amendment
Fee a transaction, it is liable same basis but will necessarily
to pay the Existing Property deducted from the result in a
Adviser a transaction fee Portfolio and Asset reduction in
equal to GBP1,000. Management Fee. fees payable
in all performance
scenarios.
--------------------------------------------------------------- --------------------------------------------------------------- -------------------
Letting Fee The Existing Property Adviser No change. No impact on
is entitled to a commission fees payable
of between one and three in all performance
months' net cold rent (being scenarios.
gross rents receivable less
service costs and taxes) The New Property
for each new tenancy signed Adviser must
by the Company where the seek Board approval
Existing Property Adviser if it wishes
has sourced the relevant to charge this
tenant. fee.
The Existing Property Adviser
has never charged this fee.
--------------------------------------------------------------- --------------------------------------------------------------- -------------------
Investor Under the New PAIR, the The New Property While this
Relations New Property Adviser will Adviser is entitled constitutes
Fee agree to provide investor to a fee for such an additional
relations support to the additional services fee with reference
Company. This is a new service. at an annual rate to the fees
No specific provision is of GBP75,000, while covered in the
made for an annual investor the existing charge Existing PAA,
relations fee in the Existing paid will cease. its inclusion
PAA, though an additional has no financial
annual fee of GBP75,000 impact since
has historically been charged the existing
by an associated company fee paid to
of the Existing Property the Existing
Adviser for this service. Property Adviser's
associated company
will cease.
--------------------------------------------------------------- --------------------------------------------------------------- -------------------
[1] Net asset value calculated in accordance with the Best
Practice Recommendations published by the European Public Real
Estate Association in November 2016.
[2] Calculated from 15 June 2015 to 30 June 2018.
[3] Calculated from 15 June 2015 to 1 November 2018.
[4] Calculated from 15 June 2015 to 30 June 2018.
[5] Calculated from 15 June 2015 to 1 November 2018.
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END
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