Phoenix Spree Deutschland Share Discussion Threads

[hpcg] 29/3/2021 11:14

There is upside optionality here with the Mietendeckel appeal, but even absent that NAV performance is perfectly acceptable and the well executed buyback keeps a floor under the price. That said I recently reduced here to put cash into other racier opportunities, but I will start accumulating spreadbets into the appeal given the safety factors. There is some interest rate risk, which I think is what has held the share price back, but that is perhaps only a US phenomenon and possibly comes with a weaker dollar.

[davebowler] 29/3/2021 10:25

Liberum;
Phoenix Spree Deutschland generated an 8.8% NAV total return in 2020. EPRA NAV was €5.28 per share at 31 December 2020 (31 December 2019: €4.92). NAV performance has been driven by a 6.3% like-for-like revaluation gain in the period. The portfolio valuation uplift was mainly due to yield compression. The valuation assumes the Mietendeckel (rent freeze) is in place for the full five year term.


The portfolio value per sqm was €3,977 at 31 December 2020 (December 2019: €3,741). Nine of the properties have been valued as condominiums, with a total value of €52m (7% of the portfolio). The gross fully occupied yield on the portfolio is 2.4% (2019: 2.9%) and the EPRA vacancy rate at the period end was a record low of 2.1%. The annualised rental income at December 2020 was €16.4m on the basis of the full implementation of the Mietendeckel regulations, representing a like-for-like decline of 15.8%. New lettings in the period were completed at an average 25% premium to passing rents (36% premium in 2019).

Rent collection has remained strong throughout the period with over 99% of residential and commercial rents collected, in line with 2019. Phoenix Spree Deutschland notarised €14.6m of condominium sales in 2020 with the occurring in the second half of the year. The average price achieved was €4,320 per sqm, representing a 19.2% premium to book value. An additional €2.9m of condominium have been sold in Q1 2021. 70% of the Berlin portfolio has been legally split into condominiums and applications are in progress for a further 15%.


In relation to the Berlin rent cap (Mietendeckel), PSDL's legal advice is that the rules are unconstitutional and the company is awaiting a ruling on the legality of the Mietendeckel. A decision is expected by the Federal Court in H1 2021. If it is successfully challenged, the negative impact on net income from the Mietendeckkel will be removed from the portfolio valuation.

Net LTV was relatively stable at 33.1% (32.6% at December 2019). The weighted average maturity of the company's debt is now 6.0 years with an average cost of 2.0%.

Liberum view

The majority of the key figures in today's report were included in the valuation update at the beginning of February. The 6% valuation gain is broadly in line with the trend indicated by the latest figures from CBRE on the Berlin residential market. Valuations have continued to increase despite the introduction of the Mietendeckel. Demand for condominiums remains relatively high in an under-supplied market. CBRE's figures indicate a 5% increase for multifamily prices and a 7% rise for condominiums in the 12-month period to 31 December 2020. In the rental market, the rent freeze has had a significant impact on availability and new lettings with CBRE reporting a 35% drop in rental offers in the year. Given the combination of the rent cap and the impact of Covid-19, it has been a robust year for PSDL with no impact on rent collection and a 9% NAV TR.


The company remains confident on the potential for the Mietendeckel to be challenged. The decision now rests with the Federal Court after a German constitutional court dismissed a motion to suspend the law in October. Even if the Mietendeckel remains in place, we believe PSDL is attractive at the current 27% discount. We would expect the company to accelerate the pace of condominium sales in the event that the Mietendeckel is not overturned. The proportion of the portfolio that can be sold as condominiums has steadily increased and debt refinancing has been agreed to provide enhanced flexibility. The price level achieved on the condominium sales gives comfort over the level of downside protection. We estimate the upside from the achieved condominium sale price in H2 2020 to the value of the portfolio implied by the market capitalisation to be over 30%.

[jeff h] 18/2/2021 12:38

A few pertinent points about charges at PSDL:-

"....For a trust such as Phoenix Spree Deutschland, however, it also includes a variety of other costs, said Mr Greenwood. “If you run an equity fund, there’s no maintenance needed. If you own a series of properties in Berlin, someone has to collect rent, someone has got to maintain them,” he said.

The fund manager’s fee accounted for 1.2 percentage points of Phoenix Spree’s 3.65pc ongoing charge. All of the rest was made up by other costs, including those involved in buying and selling properties, renovations, general upkeep and dealing with tenants.

Mr Greenwood argued some of these costs should not be seen in the same light as the fund manager’s charge. “Common sense would say any maintenance you do is part of the investment process, not part of the running costs of the fund,” he said...."

[hpcg] 04/2/2021 11:10

Just highlighting this from the valuation RNS today:


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 2020 will fall within a range of €5.27 - €5.33 (£4.75 - £4.81) (31 December 2019: €4.92 (£4.16)). This represents a Euro EPRA NAV per share total return with a range of 8.6 per cent to 9.9 per cent and a Sterling EPRA NAV per share total return within a range of 15.8 to 17.1 per cent for the financial year to 31 December 2020.

[davebowler] 04/2/2021 09:32

Liberum;
Phoenix Spree Deutschland

Yield compression drives 9% NAV TR in 2020

Mkt Cap £308m | Prem/(disc) -31.4% | Div yield 2.0%

Event

Phoenix Spree Deutschland's portfolio value rose by 6.3% on a like-for-like basis to €768.3m in the 12-month period to 31 December 2020. The valuation uplift is predominantly due to yield compression. The portfolio valuation assumes the Mietendeckel is in place for the full five year term.

The portfolio value per sqm was €3,977 at 31 December 2020 (December 2019: €3,741). Nine of the properties have been valued as condominiums, with a total value of €52m. The gross fully occupied yield on the portfolio is 2.4%.


EPRA NAV is projected to be in the range of €5.27-€5.33 (475p-481p) per share at 31 December 2020. We calculate a 9.3% NAV total return for 2020 in Euros based on the mid-point of the range.

Rent collection has remained strong throughout the period with over 99% of residential and commercial rents collected, in line with 2019. As previously reported, Phoenix Spree Deutschland has notarised a further 30 condominium sales since 30 June 2020 for a total of €10.5m. The average price achieved was €4,276 per sqm, representing a 20.2% premium to book value. An additional €1.2m of condominium revenues is guaranteed through the company's agreement with Accentro Real Estate for three unsold units. In total, €14.6m of sales were agreed in 2020. 70% of the Berlin portfolio has been legally split into condominiums and applications are in progress for a further 17%.


In relation to the Berlin rent cap (Mietendeckel), PSDL's legal advice is that the rules are unconstitutional and the company is awaiting a ruling on the legality of the Mietendeckel. A decision is expected by the Federal Court in H1 2021. If it is successfully challenged, the negative impact on net income from the Mietendeckkel will be removed from the portfolio valuation.

Liberum view

The 6% valuation gain is broadly in line with the trend indicated by the latest figures from CBRE on the Berlin residential market. Valuations have continued to increase despite the introduction of the Mietendeckel. Demand for condominiums remains relatively high in an under-supplied market. CBRE's figures indicate a 5% increase for multifamily prices and a 7% rise for condominiums in the 12-month period to 30 September 2020. Given the combination of the rent cap and the impact of Covid-19, it has been a robust year for PSDL with no impact on rent collection and a 9% NAV TR.


The company remains confident on the potential for the Mietendeckel to be challenged. The decision now rests with the Federal Court after a German constitutional court dismissed a motion to suspend the law in October. Even if the Mietendeckel remains in place, we believe PSDL is attractive at the current 31% discount. We would expect the company to accelerate the pace of condominium sales in the event that the Mietendeckel is not overturned. The proportion of the portfolio that can be sold as condominiums has steadily increased and debt refinancing has been agreed to provide enhanced flexibility. The price level achieved on the condominium sales gives comfort over the level of downside protection. We estimate the upside from the achieved condominium sale price in H2 2020 to the value of the portfolio implied by the market capitalisation to be 36%.

[stockstockham] 04/2/2021 08:20

Think as has been pointed out, valued as if The Mietendeckel is a lost cause, when they're confident it'll go their way. In meantime, there's natural NAV growth in part thanks to ZIRP, condiminium angle, and each buyback adds incrementally.

Struggling to see what's not to like with PSDL down here.

[jonesy100] 04/2/2021 08:16

Very encouraging update today. Discount to NAV looks far too wide / tempting, even given ongoing uncertainty

[hpcg] 01/2/2021 10:18

With the share buyback at 320p on Friday, I think we have the answer, the companies broker is handling the companies money with some skill.

[davebowler] 29/1/2021 16:07

Numis, according to David Stephenson -

Condominium Sales: Phoenix Spree Deutschland has announced that since 30 June a further 30 condominium units have been notarised for sale, for a total of €10.5m. Pricing has remained strong with an average price of €4,276 per sqm achieved, which represents a 20.2% premium to the book value of each property. The volume of sales increased markedly in the second half of the year when compared with the eight residential units and two attic spaces sold in H1 for an aggregate €3.0m. In line with the agreement with Accentro Real Estate the company is guaranteed a further €1.2m of condominium proceeds for the financial year to 31 December 2020 in relation to the three remaining unsold units at the Boxhagenerstrasse building. At 31 December, 70% of the portfolio had been legally split into condominiums with a further 17% in the application process.

Share Buybacks: The company resumed its share buyback programme following the release of its 30 June interim report in September, by which point it had become clear that the Covid-19 pandemic had not had a notable impact on the company’s rent collection and financial position. As at 5 January the company had bought back 4,733,500 shares (4.7% of share capital) for an aggregate consideration of £15.2m, with the average price paid equivalent to a 30% discount to the 30 June EPRA NAV.

Debt refinancing: The company has refinanced €21.4m of existing loans into a new debt facility which is non-amortising and benefits from more flexible terms to allow the sale of assets as condominiums. The new facility releases a further €8.1m of cash and has a maturity profile in line with both the replaced debt and the company’s existing facilities. The replaced debt incurred an amortisation cost of 1.5%.

Outlook: Management maintains its view that the “Mietendeckel” rent-cap is unconstitutional and notes that a final decision from the federal court is expected in the first the half of this year. The company continues to explore all options to “optimise strategic flexibility” within the existing portfolio including further condominium sales and share buybacks as well as continued caution over capex projects and new tenant contracts that provide for the retrospective collection of rent should the Mietendeckel be overturned.

Numis Views: Management had indicated in its interim results condominium sales were expected to accelerate in H2 following Covid-19 restrictions in Berlin being lifted. Reflecting this, as well the strategy to focus on condominium sales, the total of €14.6m notarised for sale in 2020 represents a 65% increase on the prior year. It will be interesting to see if the rate of sales is impacted should the current Covid-19 restrictions in Berlin that were re-introduced last month be extended beyond 31 January. The proactive approach of legally splitting further portions of the Berlin portfolio into condominiums will provide management with even greater flexibility to implement condominium projects if deemed appropriate and the significant premiums to book value that continue to be achieved on sales give comfort on the valuations. The company is expected to release its 31 December portfolio valuation in early February.

Phoenix Spree Deutchland delivered share price total returns of 2.2% in 2020 and the shares currently trade at a 31% discount to our estimated NAV (allowing for currency movements). The federal court’s final decision on the legality of the Mietendeckel is due in the first half of this year and could prove to be a meaningful catalyst for the company’s shares to rerate. Following the first announcement of the proposed rent caps in June 2019 the discount widened to 32% having traded at an average of c.7% over the preceding 12 months. In our view, it is positive for shareholders that the company continues to undertake share buybacks while the discount is wide, and we believe that the disposals at significant uplifts demonstrate the value in the portfolio. A number of other property ICs started share buyback programmes in the second half of 2020, including Schroder Real Estate and Standard Life Investment Property Income.

[hpcg] 28/1/2021 20:19

It could simply be cash management? Or, given the last purchase they made was on the 11th Jan and the share price moved up on the 12th of Jan that it moved outside of their metric for purchasing. Those purchases were at 321p so I guess we'll know if it was the latter if purchases resume.

[frazboy] 28/1/2021 18:05

Hpcg - the last RNS on the 12th Jan showed a tranche of 75,000 purchased at ~ 320p. There was no mention of this being a final purchase, so could be that they’ve paused whilst taking stock but I would have thought that would warrant an update. And from the business update on the 5th:

‘PSD has authority to buy back up to 10% of its ordinary share capital. Share buybacks were resumed following the release of the Company's interim results on 15 September 2020, by which time it had become clear that the financial impact of the COVID-19 pandemic 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.

As at 5 January 2021, the Company had bought back 4,733,500 ordinary shares, representing 4.7% of the ordinary share capital, for a total consideration of £15.2m. The average price paid represents a 30% discount to EPRA net asset value per share as at 30 June 2020.’

[hpcg] 28/1/2021 17:51

From the September report:

Given current high levels of rent collection, and the lifting of the majority of lock-down restrictions in Berlin, I am pleased to announce the resumption of share buy-backs.

So perhaps related to the reverse of the above. However i have a feeling they may have used up their mandate. What I can't find is any information relating to this year's AGM which would have had the limit. Having said that the 2019 annual report suggests plenty of headroom

Following the completion of a new €240 million loan facility on improved terms, the Company announced in September 2019 that it would consider buying back up to 10% of existing share capital in issue. The share buy-back programme commenced in mid-October and, as at 31 March 2020, the Company had purchased a total of 3.5 million shares (3.5% of the ordinary share capital) for a total consideration of £11.2 million. The average price paid represented a 23% discount to EPRA Net Asset Value per share as at 31 December 2019.

[frazboy] 28/1/2021 17:04

Do we know what happened to the share BB here?

[hpcg] 08/1/2021 13:44

Buying more here. Whilst I accept that there are potentially higher growth companies money here is so easy to sleep at night and will return more than enough for a satisfactory year.

[hpcg] 06/1/2021 13:13

Bought more. Beginning to care less and less about Mietendeckel. They can simply sell their city properties and buy back shares and or invest in the outskirts. We are trading below book as it is and that should sensibly be increased by circa 14%, maybe even the full 20%. Pricing to rental capacity is irrelevant when the direct sale price is under appreciated.

[cerrito] 06/1/2021 10:40

If we can get the Courts to rule on Mietendeckel in the next 6 months, that will be great.
No idea if you can appeal-I suspect not.

[hpcg] 10/12/2020 15:53

They'll keep converting and selling properties I would think.

[hiddendepths] 10/12/2020 08:48

Been in here before but sold out when it became clear that the Mietendeckel was coming in. Tempted to buy back in but am dithering. I think it will be repealed - but could take quite a while and I doubt they'll ever collect on the back rent.

[jonwig] 07/12/2020 06:56

Cerrito - a change of government is not enough; Basic Law (Grundgesetz, constitution) has to be amended. That needs a 2/3 majority in both houses. Not impossible, of course, but it essentially demands consensus.

[cerrito] 06/12/2020 18:26

The Edison report is a good and detailed read though it did not change my thinking about PSDL much-ie the odds are that eventually the legislation will be repealed but do not expect anything soon.
If there is a delay, one assumes there will be some difficulty in collecting the extra rent that would be due.
Of course one thing that could change is if there was a change of political control in Berlin. That said my understanding is that it is not really efficient to think in terms of a CDU/Liberal administration.
I see that PSDL dipped their toes into the landtag of Brandenburg where the SPD is the largest party and AFD the second largest but the make up of the parties seems quite messy and no doubt have other issues on their minds.
No desire at all to sell at these prices but have difficulty in knowing if I should buy more.

[jeff h] 04/12/2020 13:36

New Edison report:-

[cerrito] 25/11/2020 22:06

hxxps://www.deutschlandfunk.de/dauerstreit-um-mietendeckel-kampf-um-bezahlbares-wohnen.724.de.html?dram:article_id=487954#
Another article covering Berlin and Munich but not terribly well translated.
Reminded me that on November 23 the final phase of rent controls came in.This is what PSDL said in the interims
quote
Final phase of the Mietendeckel, due to come into force in November 2020, will materially impact collected rents in 2021 unless legal challenge is successful.
unquote
I did not get the impression from reading this article that anything on ther legal front will happen till Spring.

[pdriccio] 22/10/2020 17:23

Signs of damage being done to rental market with Berlin's Mietendeckel.

hxxps://www.focus.de/immobilien/mieten/mietendeckel-kein-vorbild-fuer-andere-grossstaedte-berliner-wohnungsmarkt-vor-dem-kollaps_id_12558106.html