The following amendment has been made to the 'Investment Property Valuation and Business Update' announcement released on 8 February 2022 at 07:00am under RNS No 9454A.

'^' has been replaced with '€' throughout the announcement.

All other details remain unchanged.

The full amended text is shown below.

8 February 2022

Phoenix Spree Deutschland Limited
(the "Company" or "PSDL")

Investment property valuation and business update

Continued portfolio growth and development

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 2021 and an update on business activity in the second half of the financial year (H2)

Key Highlights

·    Total portfolio value of €801.5 million as at 31 December 2021, an increase of 4.3% from the equivalent period last year

·    Like-for-like Portfolio valuation increased by 6.3% in the year to 31 December 2021, and by 3.7% in H2 2021

·   Record condominium notarisations of €15.2 million during the financial year. 23 condominium units notarised for sale in H2 2021, with an aggregate value of €10.9 million, a 153% increase versus H1 2021

·    Condominium pricing remained strong during 2021, with an average premium to December 2020 book value of 19.1%

·    75% of Berlin portfolio legally split into condominiums as at 31 December 2021, with a further 10% in application, over half of which are in the final stages of the process

·   Total of 4,514,788 ordinary shares bought back during the financial year, representing 4.5% of the ordinary share capital, for a total consideration of £17.7 million

·    New €60 million loan facility and refinancing of €49.7 million of existing debt announced on 25 January, offering flexibility to pursue potential further acquisitions as well as continued investment into existing portfolio

Further increase in portfolio value

The Berlin residential property market has remained resilient during the financial year, with transaction volumes and investment demand observed by Jones Lang LaSalle GmbH ("JLL"), the Company's external valuers, recovering significantly following a stabilising political backdrop, namely the removal of the Mietendeckel and the completion of the German Federal Elections.

JLL have conducted a full RICS Red Book property-by-property analysis, tied back to available comparable transactions in the Berlin market, and have provided a portfolio valuation on this basis.

As at 31 December 2021, the total Portfolio was valued at €801.5 million by JLL, an increase of 4.3% over the twelve-month period (31 December 2020: €768.3 million).

On a like-for-like basis, after adjusting for the impact of acquisitions net of disposals, the Portfolio valuation increased by 6.3% in the year to 31 December 2021, and by 3.7% in the second half of the financial year. This increase reflects the combined impact of increased market rents, improvement in the microlocations of certain assets, and the further progress of splitting certain assets at the land registry.

The valuation as at 31 December 2021 represents an average value per square metre of €4,225 (31 December 2020: €3,977) and a gross fully occupied yield of 2.8% (31 December 2020: 2.4%). Included within the Portfolio are eight properties valued as condominiums with an aggregate value of €38.8 million (31 December 2020: nine properties, €52.4 million).

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 NAV per share as at 31 December 2021 will fall within a range of €5.60 - €5.66 (£4.70 - £4.75) (31 December 2020: €5.28 (£4.76)). This represents a Euro EPRA NAV per share total return with a range of 7.5% to 8.6% and a Sterling EPRA NAV per share total return within a range of 0.2% to 1.2% for the financial year to 31 December 2021.  

Record condominium notarisations at an 19.1% premium to book value

During the second half of the financial year, a further 23 condominium units were notarised for sale, with an aggregate value of €10.9 million. These sales represent a significant increase compared with the first half of the financial year, during which 13 residential units were notarised for sale, with an aggregate value of €4.3 million.

In total the Company has notarised for sale condominiums with an aggregate value of €15.2 million during the year to 31 December 2021, a record high and a 4.1% increase compared with the prior year.

Condominium pricing has remained strong during 2021, with the average achieved residential value per sqm at €5,031, representing an average 19.1% premium to the December 2020 book value of each property.

As at 31 December 2021, 75% of the Berlin portfolio had been legally split into condominiums, providing opportunities for the implementation of further condominium sales projects where appropriate. A further 10% are in application, over half of which are in the final stages of the process.

The Company notes that new Federal Government legislation is likely to limit the ability of landlords to split their properties into condominiums in the future. This legislation is not retrospective and does not impact assets that have already been split into condominiums. These measures are expected to increase the scarcity of condominiums available for sale in the future, further exacerbating the supply-demand imbalance which currently exists. The Company, therefore, believes the valuation impact on the Portfolio is likely to be positive given the high proportion of properties that have already legally split into condominiums. 

Share buybacks at a discount to NAV

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. The average price paid represents a 16% discount to EPRA net asset value per share as at 31 December 2021.

The capital made available for the buyback program has been funded through a combination of existing cash balances, refinancing and condominium sale proceeds. This allocation has been achieved without compromising the organic growth prospects of the company, which are based on reversionary re-letting, the preparation and sale of new condominiums and the construction of new attic living space.

New loan facility and refinancing of existing debt

As previously announced on 25 January 2022, the Company was pleased to complete a new €60 million loan facility with Natixis Pfandbriefbank AG and a further refinancing of existing debt with Berliner Sparkasse.

The new loan facility agreed with Natixis Pfandbriefbank AG on 29 December 2021 comprises two components: a €45 million Acquisition Facility and a €15 million Capex Facility.

The facility matures in September 2026 and it can be used to finance up to 100% of the total cost of both acquisitions and capex. When drawn, it is non-amortising and terms to protect against future adverse interest rate movements have been agreed.

The Acquisition Facility provides the Company with additional flexibility to pursue potential future acquisitions if suitable opportunities, which offer clear value for shareholders, arise.  

The Capex Facility will allow the Company to continue to undertake its extensive capex programme. The Company remains committed to improving living standards for its tenants and fulfilling its environmental obligations and, following the removal of the Berlin rent controls ("the Mietendeckel"), has been able to resume its comprehensive programme of vacant apartment renovations and modernisations.  

Separately, the refinancing of existing debt provided by Berliner Sparkasse was agreed on 17 January 2022, releasing a further €14.9 million of equity. The equity released by the Refinancing can be reinvested into the Portfolio as well as for future potential share buy-backs.

The Company remains committed to improving living standards for its tenants and fulfilling its environmental obligations. Following the removal of the Mietendeckel, the premium achieved on new letting prices when compared to in-place rents has re-emerged, with new leases signed during December 2021, on average, at a 28.2% premium to passing rents. This has enabled the resumption of a comprehensive ongoing programme of vacant apartment renovations and modernisations.

COVID-19 Update

The impact of COVID-19 on rent collection continues to be limited, with over 97% of all residential and commercial rents collected in 2021, in line with rent collections in 2020. Rent collection during January 2022 has also remained stable.

The Company continues to carefully monitor further developments concerning the COVID-19 pandemic.  Its overriding priority remains the health and wellbeing of its tenants, work colleagues and wider stakeholders and, where necessary, continues to support its tenants, through agreeing, on a case-by-case basis, the payment of monthly rents or deferring rental payments.

Collection of back-dated Mietendeckel rents progressing well.

Prior to the Federal Court ruling, all rental agreements had been structured to allow for the back-payment of higher rents now legally due for the period during which the Mietendeckel was in place. Tenants had been advised by the Berlin government to set aside appropriate reserves for this eventuality.

The amount of back-dated rent which can be claimed from tenants is approximately €2.1 million. As at 31 December 2021, in excess of 95% of this amount had already been collected. The Company will continue to work on a case-by-case basis with any tenants suffering hardship as it collects the remainder of back-dated rents due.

Robert Hingley, Chairman of Phoenix Spree Deutschland, commented: 

"I am pleased that the Company has been able to deliver further increases in property values and 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 balance sheet strength and liquidity remain strong, particularly in the light of our recently completed new debt facility with Natixis and refinancing with Berliner Sparkasse."

 Legal Entity Identifier: 213800OR6IIJPG98AG39

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