TIDMPSDL
RNS Number : 0813P
Phoenix Spree Deutschland Limited
07 February 2023
07 February 2023
Phoenix Spree Deutschland Limited
(the "Company" or "PSDL")
Investment property valuation and business update
Phoenix Spree Deutschland (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 31
December 2022 and an update on business activity.
Key highlights
-- Like-for-like Portfolio value, adjusted for acquisitions and
disposals, decreased by 3.1 per cent versus 2021, reflecting an
increase in market yields .
-- Including investment properties under construction valued at
EUR5.3 million, the Portfolio was valued at EUR775.9 million,
compared to EUR801.5 million as at 31 December 2021.
-- Condominiums notarised for sale during 2022 of EUR4.7 million, (2021 EUR15.2 million).
-- First condominium notarised in 2023 at a record value of
EUR7,551 per sqm, a 119.9 per cent premium to carry value, with a
further three reservations signed since the financial year end for
a total consideration of EUR0.8million.
-- Three properties sold or notarised for sale in the second
half of 2022 for a combined value of EUR12.1 million. Further
disposals planned for 2023.
-- Supply-demand imbalance for Berlin residential growing,
placing additional pressure on already low vacancy levels.
-- Future rent growth continues to be strongly underpinned,
significant reversionary rental potential across PSD's Portfolio
remains.
Portfolio valuation
As at 31 December 2022, the Portfolio, including investment
properties under construction, was valued at EUR775.9 million (31
December 2021: EUR801.5 million).
On a like-for-like basis, after adjusting for the impact of
acquisitions net of disposals, the Portfolio valuation declined by
3.1 per cent in the year to 31 December 2022, and by 5.2 per cent
in the second half of the financial year.
The valuation as at 31 December 2022 represents an average value
per square metre of EUR4,082 (31 December 2021: EUR4,225) and a
gross fully occupied yield of 3.0 per cent (31 December 2021: 2.8
per cent). Included within the Portfolio are six multi-family
properties valued as condominiums with an aggregate value of
EUR30.1 million (31 December 2021: eight properties; EUR38.8
million).
Condominium sales
Condominium sales during 2022 were impacted by increases in the
cost of living, higher borrowing costs and uncertainty surrounding
the macro-economic environment caused by the crisis in Ukraine.
These factors led to a deterioration in buyer sentiment and reduced
volumes.
During the financial year, 13 condominiums units were notarised
for sale for an aggregate value of EUR 4.7 million (2021: EUR15.2
million). The average achieved notarised value per sqm for the
residential units was EUR5,502, representing a gross premium of
22.4 per cent to carry value and 34.8 per cent to PSD's average
Berlin residential portfolio value as at 31 December 2022.
The Company recorded a valuation per sqm of EUR7,551 for its
first condominium notarisation of 2023, a small, fully refurbished
unit, at a premium of 119.9 per cent to the 31 December 2022 carry
value. Since then, reservations for a further three units have been
received and are pending notarisation. These have a combined value
of EUR0.8 million, representing a gross premium of 45.5 per cent to
carry value and 21.7 per cent to PSD's average Berlin residential
portfolio value as at 31 December 2022.
Portfolio management.
Since the half year ended 30 June 2022, the Company has
completed the sale of two non-core properties for an aggregate
consideration of EUR8.6 million. These buildings were acquired in
2008 and 2017, for an aggregate purchase price of EUR3.9 million
and had a carrying value of EUR8.9 million as at 30 June 2022.
The Company has also exchanged contracts to sell a further
property for EUR3.5 million. This building was acquired in 2008 for
a purchase price of EUR1.0 million and had a carry value of EUR3.9
million as at 30 June 2022.
No further acquisitions will be made pending an improvement in
market conditions and a narrowing of the Company's discount to EPRA
Net Tangible Assets.
Around EUR16 million of capital investment was made in the
Portfolio for refurbishment and in order to bring new residential
condominium projects to market. This investment is expected to be
reflected in 2023 through condominium sales and rental uplifts. It
is anticipated that total capital investment will be materially
lower in 2023.
EPRA net asset value guidance
Based on the Company's year-end Portfolio valuation, and
including the impact of share buybacks during the financial year,
it is expected that the reported EPRA NTA per share as at 31
December 2022 will be within a range of EUR5.09 - EUR5.14 (GBP4.51
- GBP4.56) (31 December 2021: EUR5.65 (GBP4.74)). This represents a
Euro EPRA NTA per share total return with a range of -8.2 per cent
to -7.3 per cent and a Sterling EPRA NTA per share total return
within a range of -3.4 per cent to -2.5 per cent for the financial
year to 31 December 2022.
Outlook
The economic outlook for Germany has been improving in recent
weeks, largely thanks to a significant reduction in energy prices
and the Government's fiscal support package. With natural gas
prices having fallen by more than half since early December and
inflation falling more rapidly than expected, the German economy is
now expected to avoid recession in 2023. Notwithstanding this, the
outlook for property values in 2023 is likely to remain challenging
and further declines in property values purely driven by macro
factors such as higher medium term interest rates cannot be
discounted.
Although there remains uncertainty about real asset values,
supply-demand imbalances within the Berlin PRS market remain firmly
supportive of rental values. Demand for rental properties continues
to rise as higher home ownership costs force potential buyers to
remain within the rental system for longer. Demand has been further
increased by inward migration of in excess of one million refugees
into Germany from Ukraine during 2022, placing further pressure on
residential vacancy levels which are already at historically low
levels.
At the same time, higher funding, labour and construction costs
present significant headwinds to new-build construction, limiting
the future supply of rental accommodation. Against an annual target
set by the Federal Government of 400,000 new completions per year,
only 280,000 are estimated to have completed in 2022, with
forecasts for 2023 and 2024 significantly lower still. Future rent
growth should therefore continue to be underpinned, and there
remains significant reversionary rental potential across PSD's
Portfolio.
Although it is too early to accurately predict a recovery in
buyer sentiment in the condominium market, 2023 has started
encouragingly. Longer term, Federal Government legislation enacted
in 2022 has placed significant restrictions on the ability of
landlords to split properties into condominiums, further
restricting supply. With in excess of 76 per cent of its
condominium portfolio already legally split in the land registry,
the Company is well placed to benefit from this trend.
The Company remains conservatively financed with no loans
maturing until September 2026. 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 seek to undertake further
acquisitions or increase debt levels until such time as the market
outlook becomes more stable. The Company will additionally continue
to review its portfolio of assets to ascertain the potential for
disposals that are deemed to be non-core.
Robert Hingley, Chairman of Phoenix Spree Deutschland,
commented:
"During 2022, the real estate industry has had to adjust to the
combined effects of global inflationary pressures and higher
interest rates. Although PSD has not been immune from these broader
trends, the Board considers the Company to be well positioned, with
a strong balance sheet and conservative financing. Whilst the speed
of recovery in transaction volumes and buyer sentiment is
uncertain, rental values remain well supported, reflecting the
positive demographic trends which remain in the Berlin residential
market."
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
Tulchan Communications (Financial
PR) +44 (0)20 3100 2222
Olivia Peters
James Anderson
Faye Callow +44 (0)20 7353 4200
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