Phoenix Spree Deutschland Limited Portfolio Valuation and Condominium Agreement (2791I)
August 08 2019 - 2:00AM
UK Regulatory
TIDMPSDL
RNS Number : 2791I
Phoenix Spree Deutschland Limited
08 August 2019
8 August 2019
Phoenix Spree Deutschland Limited
(The "Company" or "PSDL")
Portfolio Valuation and Condominium Agreement
Berlin Investment property valuation increases 3.7% for the half
year to 30 June 2019
Phoenix Spree Deutschland (LSE: PSDL.LN), the UK listed
investment company specialising in Berlin residential real estate,
announces the interim valuation for the portfolio of investment
properties held by the Company and its subsidiaries (the
"Portfolio").
Increased portfolio value
As at 30 June 2019, the Portfolio was valued at EUR665.2 million
by Jones Lang LaSalle GmbH, the Company's external valuers (31
December 2018: EUR645.7 million).
On a like-for-like basis, after adjusting for the impact of
acquisitions net of disposals, the Portfolio valuation increased by
3.9 per cent in the six months ended 30 June 2019. This reflects
the combined impact of market rental growth and the active
management of the Portfolio.
New condominium agreement with Accentro Real Estate AG
Since the start of sales in Boxhagener Strasse, the Company's
largest condominium project to date, the Company has successfully
sold a total of 42 residential units and 3 commercial units to
owner-occupiers, tenants and investors. The majority of the
remaining 22 units are currently occupied.
In order to accelerate the sales process of the remaining
Boxhagener Strasse units, the Company has concluded an agreement
with Accentro Real Estate AG, one of Germanys leading condominium
sales platforms.
Under the terms of this agreement, Accentro will market the
remaining Boxhagener Strasse units through their extensive network
on behalf of PSDL. After 18 months, Accentro is contracted to
purchase any unsold units from the fund for a cash consideration,
guaranteeing revenues on completion of contract.
Update on proposed rent controls
The proposed new Berlin State rent controls continue to create
significant uncertainty which has negatively impacted the Company
share price, resulting in a valuation discount to EPRA Net Asset
Value as at 31 December 2018 of 28.6%. Both the share price decline
and the discount are in line with the Berlin focussed listed peer
group.
On June 2019, as expected, the Berlin Senate approved in
principle the draft term sheet for the proposed bill for new rent
controls. Although the proposed details and mechanisms are as yet
unclear, there remain serious concerns regarding the legality and
constitutionality of the draft proposal given that rental price
laws have always been determined under German federal
legislation.
A detailed analysis of the proposals will not be possible until
the draft is presented at the end of August, after which there will
be hearings from interested parties and experts and before entering
the legislative process in October.
The legal research department of the Bundestag, the German
Federal Parliament, issued a statement highlighting that the
proposals violate the German Constitution in a number of key
aspects and that there are numerous legal arguments to support the
view that State law cannot supersede Federal law. We would expect
an increasing number of legal challenges as details of the draft
bill are made public at the end of August.
Given the uncertainty about the legal validity of the proposed
rent controls, it is not yet clear what impact there could be on
future property prices at this time. However, the interim portfolio
valuation conducted by Jones Lang LaSalle GmbH does not factor in
any impact on property values.
Strategic flexibility
Since the launch of Phoenix Spree 12 years ago, the regulatory
environment has continually evolved. During this period the Company
has successfully delivered positive returns to shareholders.
The Board believes that the Company retains significant
flexibility to adapt its business model. As previously disclosed,
over half of the buildings owned by the Company are already split
into condominiums and the Company is in the process of completing a
major refinancing which will deliver sufficient liquidity in order
to take advantage of opportunities arising from market
uncertainty.
Robert Hingley, Chairman of Phoenix Spree Deutschland,
commented:
"It is pleasing that the Company has delivered another resilient
performance for the first six months of the financial year.
However, it is also clear that our main strategic priority for the
remainder of 2019 is to reassure investors that the company can
continue to adapt in the eventuality that the new Berlin rent
proposals are introduced. Significant preparatory work is already
underway, although there is still considerable opposition and
uncertainty on both the legality and content of these proposals. I
am confident that the Company will be well positioned to respond
when the regulatory environment becomes clearer."
The Company expects to report its interim results for the
six-month period ended 30 June 2019 towards the end of September
2019.
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 +44 (0)20 7353 4200
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END
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