TIDMPSDL
RNS Number : 7033V
Phoenix Spree Deutschland Limited
11 August 2020
11 August 2020
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 2020.
Further increase in portfolio value
The Berlin residential property market has remained stable in
the first half of the financial year and, although transaction
volume has reduced, investment demand observed by Jones Lang
LaSalle GmbH continues to support current pricing. JLL have
conducted a full RICS red book property-by-property analysis and
have provided a portfolio valuation, with no matters of concern or
material uncertainty raised. The methodology used by JLL assumes
that the Berlin rent cap ("the Mietendeckel") is fully implemented
by PSD and is in place for its five-year lifespan.
As at 30 June 2020, the Portfolio was valued at EUR746.7 million
(31 December 2019: EUR730.2 million). This represents a 2.3%
increase over the six-month period. On a like-for-like basis,
excluding the impact of disposals, the Portfolio value increased by
2.6% in the six-month period. This increase reflects the combined
impact of modest yield compression, supported by a decline in
interest rates, and the active management of the portfolio.
The valuation as at 30 June 2020 represents an average value per
square metre of EUR3,839 (31 December 2019: EUR3,741), a gross
fully occupied yield of 2.8% (31 December 2019: 2.9%) and a net
yield, using EPRA methodology, of 2.4% (31 December 2019: 2.3%).
Included within the Portfolio are 6 properties valued as
condominiums, with an aggregate value of EUR33.0 million (31
December 2019: 5 properties, aggregate value EUR26.5 million).
Limited impact from COVID-19
To date, the impact of the COVID-19 pandemic on rent collection
levels 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.
Residential rent collection has remained particularly resilient,
with 99.6% of rent collected during the first six months of 2020.
Germany's Hartz IV welfare programme includes help for rental
payments in instances of financial hardship and is available to
tenants impacted by the COVID-19 outbreak.
Commercial rents represent a small proportion of total rents,
accounting for only 11.6% of contracted rental income in the six
months to 30 June 2020. The COVID-19 restrictions initially
resulted in the temporary closure of many Berlin commercial
businesses, including several of our commercial tenants. Most
COVID-19 restrictions have now been lifted and businesses have now
reopened or are in the process of doing so. During the first six
months of the financial year, 96.2 % of commercial rents have been
collected, compared with 99.7% during the same period of 2019.
Where necessary, the Company continues to support its tenants,
both residential and commercial, through agreeing, on a
case-by-case basis, the payment of monthly rents or deferring
rental payments.
Update on proposed Berlin rent controls ("The Mietendeckel")
The board of PSD and its legal advisors remain of the view that
there is a high likelihood the Mietendeckel will be successfully
challenged. In particular, the new legislation raises concerns
about whether the state of Berlin is competent to pass local rent
legislation, as the provisions substantially deviate from existing
German federal law.
Recent legal developments challenging the legality of the
Mietendeckel have been positive. In May 2020, the opposition in the
Berlin House of Representatives and a quorum of Federal Parliament
MPs lodged cases at both Berlin's Regional Constitutional Court and
the Federal Constitutional Court. Additionally, in June 2020,
twelve constitutional complaints from private owners were filed
with the Federal Supreme Court.
In Bavaria, a similar move to introduce a six-year rent freeze
was blocked by the Bavarian Constitutional Court on July 16. The
ruling stated that a federal state may not issue its own
regulations that contradict federal rental laws. This ruling is
significant in the context of the Berlin Mietendeckel, as the basic
legal arguments against the imposition of a rent cap are the
same.
As previously reported, pending legal clarity on the
Mietendeckel, the company will continue to monitor capex carefully.
Regrettably, a number of renovation and modernisation projects
which would previously have been justified at free market rents
have been postponed or cancelled ahead of a final ruling.
Condominium notarisations at a 16 per cent premium to book
value
During the first half of 2020, eight condominium units were
notarised for sale, with an aggregate value of EUR2.5 million (H1
2019: EUR2.5 million). Condominium pricing has remained strong,
with the average achieved residential value per sqm at EUR4,392,
representing a 15.7% premium to book value and a 14.4% premium to
the average portfolio value per sqm as at 30 June 2020.
Additionally, undeveloped attic space with condominium permission
for a further two units was notarised for sale with a value of
EUR0.4m.
Following the relaxation of Berlin COVID-19 lockdown
restrictions, and conditional on these restrictions not being
re-imposed, it is anticipated that condominium sales will normalise
in the second half of the financial year. PSD's condominium sales
agreement with Accentro Real Estate AG guarantees further
condominium revenues of at least EUR4.5m in the second half of
2020.
As at 10 August 2020, 63% of the Portfolio had been registered
as condominiums, providing opportunities for the implementation of
further projects where appropriate. Applications representing a
further 22% of the portfolio are underway, with 10% of the
portfolio now in the final stage of the application process.
Interim results
The Company intends to publish its interim results for the six
months to 30 June 2020 in September 2020.
Robert Hingley, Chairman of Phoenix Spree Deutschland
commented:
"I am pleased that, to date at least, and, despite a reduced
level of market activity, COVID-19 and the Mietendeckel have not
had a significant impact on market values. Our condominium
potential continues to underpin our portfolio value and we are
focused on maintaining our strategic optionality pending
clarification of the legality of the Mietendeckel. I am confident
that our strategies, together with the strength of our balance
sheet, mean we are well placed for the longer-term."
This announcement contains inside information.
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 3100 2222
Tulchan Communications (Financial PR)
Elizabeth Snow
Amber Ahluwalia +44 (0)20 7353 4200
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END
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