Investment Property Valuation and Business Update

4 August 2021

Phoenix Spree Deutschland Limited

("PSD" or the "Company")

Investment property valuation and business update

Phoenix Spree Deutschland Limited (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 30 June 2021.

Further increase in portfolio value

The Berlin residential property market has remained stable in the first half of the financial year and, although transaction volumes remained below peak levels, investment demand observed by Jones Lang LaSalle GmbH, the Company's independent valuers, continues to support current pricing. 

As at 30 June 2021, the Portfolio was valued at €777.7 million (31 December 2020: €768.3 million). This represents a 1.2 per cent increase over the six-month period. On a like-for-like basis, excluding the impact of disposals, the Portfolio value increased by 2.5 per cent. This increase reflects an increase in market rents following the removal of the Mietendeckel, further progress in condominium splitting and improvements in the micro locations of certain Portfolio assets.

The valuation represents an average value per square metre of €4,075 (31 December 2020: €3,977), at a gross fully occupied yield of 2.9 per cent (31 December 2020: 2.4 per cent). Included within the Portfolio valuation are eight properties valued as condominiums, with an aggregate value of €43.4 million (31 December 2020: nine properties, aggregate value €52.4 million).

The December 2020 Portfolio valuation undertaken by JLL had assumed that the Mietendeckel would be fully implemented for its entire five-year lifespan and incorporated the associated impact on rental income. Following the ruling of the German Federal Court on 15 April 2021 that the Mietendeckel was not legal and thus void, the interim Portfolio valuation undertaken by JLL for the half-year ended 30 June 2021 now assumes market (as opposed to Mietendeckel) rents for the full DCF period. As with previous periods, the valuation is consistent with current comparable transaction values.

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 Company estimates that the amount of back-dated rent which could be claimed from tenants is approximately €2.1 million. As at 3 August, in excess of 89 per cent 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.

Condominium notarisations increase 45.1 per cent, and at a 25.4 per cent premium to book value.

During the first half of 2021, 13 condominiums units were notarised for sale for an aggregate value of €4.3 million, representing a 45.1 per cent increase versus the first half of the prior year (H1 2020: €3.0 million). The average achieved notarised value per sqm for the residential units was €4,821, representing a 25.4 per cent premium to book value and a 15.9 per cent premium to the average Berlin residential portfolio value as at 30 June 2021.

As at 30 June 2021, 74 per cent of the Portfolio had been registered as condominiums, providing opportunities for the implementation of further projects where appropriate.  A further 11 per cent are in application, over half of which are in the final stages of the process.

Condominium notarisations during the second quarter of 2021 were impacted by COVID-19 restrictions which made the viewing of occupied apartments more difficult. The Mietendeckel caused record low vacancy rates in Berlin, reducing the number of vacant apartments available for sale. As the German COVID vaccination programme continues to progress, and the effects of the Mietendeckel on vacancy begin to unwind, it is anticipated that the pace of condominium sales will recover.

Interim results

The Company intends to publish its interim results for the six months to 30 June 2021 on 24 September 2021.

Robert Hingley, Chairman of Phoenix Spree Deutschland commented:

"The first six months of the financial year were characterised by significant market disruption caused by the combined effects of COVID-19, the Mietendeckel and its subsequent reversal. It is therefore pleasing that the Portfolio was able to deliver further valuation gains.

Berlin market dynamics remain attractive, particularly in the light of the recent legal ruling against the Mietendeckel, and affordability comparisons with other German cities are still favourable. It is expected that Berlin demographic trends, particularly net inward migration, will further strengthen when restrictions associated with COVID-19 are permanently removed, providing further support for PSD's reversionary strategies which have historically served investors well."

Legal Entity Identifier: 213800OR6IIJPG98AG39

For further information, please contact: