Phoenix Spree Deutschland Share Discussion Threads

[davebowler] 11/8/2017 10:14

Liberum;
Phoenix Spree Deutschland (Mkt Cap £275m)
Positive read-across from Deutsche Wohnen's H1 results

Event
Deutsche Wohnen has reported positive results for the period to June 2017. Deutsche Wohnen is a German residential property company with a €17 billion portfolio of which 77% (115,492 units) is located in Berlin.

Highlights of today's interim results include:

5.6% revaluation uplift for the overall portfolio in H1 2017 including an 8.3% increase in the average value per sqm of the Berlin assets.
Like-for-like rental growth of 3.6% in 12 months to June 2017. Management have increased guidance for rental growth in 2017 to 5% (previously 3.5%) partly due to higher than anticipated growth in the Berlin rent table (Mietspiegel). .
New letting rents have grown much faster than regulated in-place rents which has significantly increased the rent potential.
Deutsche Wohnen has also highlighted the widening spread between in-place and market-rent multiples which suggests further potential for NAV growth. New letting rents continue to outpace growth for in-place rents.


Liberum view
Deutsche Wohnen's results illustrate several trends that are occurring in the Berlin residential market as the supply demand imbalance has widened. There is no sign of a reversal as new construction remains relatively low partly as a result of asset values being below replacement cost. Completions are approximately 50% of the required 20,000 units pa. Phoenix Spree trades on a 1.3% premium to our estimate of the June 2017 NAV and we regard it as attractive given the favourable fundamentals and prospect of long-term NAV growth.

[cerrito] 19/7/2017 12:37

Continued thanks davebowler for sharing this and I am glad I have resisted the temptation to sell during the last few weeks

[davebowler] 19/7/2017 10:25

Liberum;
Phoenix Spree's portfolio valuation rose by 15.6% in H1 2017 with the Berlin assets experiencing an 18.2% uplift for the period. We calculate a like-for-like revaluation gain of 14.8% for the portfolio after adjusting for capex. We estimate a c.20% NAV total return in H1 2017 which is materially ahead of our prior forecasts for FY2017. We believe yield compression contributed two-thirds of the valuation growth in the period. The outlook for rental growth remains robust with favourable long-term market dynamics in addition to near-term support from the recent publication of Berlin's Mietspiegel (rent reference index) which was higher than anticipated at 9.6%.

15.6% revaluation gain

Phoenix Spree Deutschland's portfolio valuation at 30 June 2017 was €519.7m which reflects an increase of 22.6% over the half year. After adjusting for acquisitions and disposals, the increase was 15.6% (H1 2016: 9.8%; FY2016: 19.4%) with the Berlin assets rising 18.2%. We estimate a like-for-like revaluation gain of 14.8% for the half year after making further adjustments for capex.

The revaluation increase is slightly ahead of the 14.1% rise reported by peer Taliesin Property Fund over the same period. However, we estimate the average value per sqm of Phoenix Spree's Berlin assets is still c.11% below Taliesin's valuation.

Material outperformance in H1

We estimate a portfolio revaluation surplus of c.€63m in H1 2017 and an EPRA NAV of €3.23 per share (286p based on current FX rate) at 30 June 2017. This equates to a NAV total return of 19.6% for H1 2017 (H1 2016: 7.8% FY2016: 22.3%) which is comfortably ahead of our 11.5% forecast for the full year.

Estimated H1 NAV return


€m
Shares
Per share
EPRA NAV at 31 December 2016
253.0
92.5
2.73




H1 2017 Adjustments



Revaluation uplift
62.8


Recurring PBT
1.3


Dividends paid
-4.0


Other
-14.5


Total adjustments
45.6






H1 2017 NAV estimate
298.6
92.5
3.23




Dividends paid


0.043




H1 2017 NAV TR


19.6%


Source: Liberum estimates

Structural drivers remain in place

Phoenix Spree is currently trading on a 1.4% premium to our pro-forma June 2017 EPRA NAV estimate. The outlook for sustainable double-digit NAV returns remains robust with high occupational demand and a strong investment market.

We believe the Berlin residential market offers one of the most compelling long-term investment propositions in combination with downside protection provided by current values (versus replacement cost). We maintain our BUY rating and we are placing our 275p TP under review (until the publication of the upcoming interim results) following the significant level of outperformance in H1 2017 versus our forecasts and recent Euro strength.

[jonwig] 19/7/2017 07:41

Portfolio revaluation:



Like-for-like increase in values of 15.6%.

[riverman77] 14/7/2017 08:47

Thanks Jonwig. If I read that correctly, their argument seems to hinge on the fact that psdl grew by 49% last year and maintaining that rapid growth. However, like for like growth was only 19%, surely the relevant measure? I still think psdl could be better value but not sure I agree with their reasoning.

[jonwig] 14/7/2017 07:03

It's based on premium to last stated NAV. The relevant passage:

The share price today of 290p translates into €3.27, suggesting shares are trading at a premium to net asset value of around 18pc. That sounds very far from bargain territory.

However, the underlying value of Phoenix Spree's portfolio is growing staggeringly fast: it registered growth of 49.5pc during 2016, its first full year listed on the main London market.

Previous years' growth were 16pc (2015) and 5pc (2014). If growth in 2017 has continued at its breakneck 2016 rate, today's share price - which looks rich on the €2.73 valuation - would in fact represent a discount.

There is another, better-known, London-listed company investing in German residential property: the £187m Taliesin Property Fund. This gives us some benchmark of value.

Its latest NAV figure - again from the end of December 2016 - is some 10pc below the estimated NAV, according to data provided by broker Hargreaves Lansdown.

On the latest estimated NAV, Taliesin currently trades at a pc premium. On its December 2016 NAV, Taliesin is on a premium of 20pc.

This comparison suggests Phoenix is cheaper - irrespective of any growth since the latest official valuation.

[riverman77] 13/7/2017 10:28

Tipped by today's questor column in the Telegraph. By their measure they think psdl is now cheaper than tpf, they might be right although I didn't quite understand their logic for that assessment

[tigerbright] 04/7/2017 12:19

Yet strangely enough, the share price for TPF and PSDL seem subdued today. Buy the rumour, sell the fact? I'll be buying more soon. News bullitins here in Germany say the economy is going from strength to strength and a real baby boom as well. I don't think the market is going down anytime soon.

[davebowler] 04/7/2017 10:27

Liberum;
Event
Taliesin Property Fund has reported a 14.1% increase in its portfolio value for the 6 months ended 30 June 2017 after adjusting for sales . The portfolio value at the end of December was €359.7m (December: €318m) with an average value per square metre of €3,070 (June 2016: €2,700).

Liberum view
The 14% portfolio revaluation follows a 16.6% like-for-like uplift in FY 2016 and we calculate the NAV uplift in H1 will be c.19% after adjusting for the performance fee accrual. We believe the latest portfolio valuation reflects an increased share of the privatisation potential of the portfolio and ongoing yield compression.

The outlook for long-term rental growth in the Berlin residential market is underpinned by market dynamics with demand well ahead of supply.In the short-term, rental growth has also been supported by the announcement of Berlin's Mietspiegel (rent reference index) in May which was higher than anticipated at 9.4% versus the 5-6% that was widely expected in the market.

Taliesin's latest portfolio valuation per square metre of €3,070 is 32% higher than Phoenix Spree Deutschland's Berlin portfolio value at 31 December 2016. Our forecasts for Phoenix Spree imply a revaluation gain of 6% for FY 2017 and there is potential for a valuation uplift ahead of our numbers. Additionally, Phoenix Spree has a more shareholder-friendly fee structure with an 8% performance fee hurdle, compared to a hurdle of Euribor plus 1% for Taliesin. The attractiveness of the sector is reflected in the shares' premium rating, with Phoenix Spree currently trading on a 20.8% premium to its December 2016 NAV following its inclusion in the EPRA Index. Taliesin currently trades on a 3.9% discount to our pro-forma estimate of the June 2017 NAV.

Direct Lending

[cerrito] 04/7/2017 07:15

I see that TPF have announced a 14pc increase in Property valuation on H1 adjusted for sales

[yieldsearch] 15/6/2017 23:17

yes indeed interesting and much appreciated, tks

[cerrito] 15/6/2017 17:55

Thanks davebowler for that v interesting find
It could explain the recent share price increase-especially this pm- as may be the fact that the Euro is at 0.87£

[davebowler] 13/6/2017 14:59

Extract from British Empire Securities -BTEM's monthly commentary;




Adler Real Estate, the owner of 50,000 German residential units, was one of
our largest contributors. The discount narrowed to 12%, still wider than its
peers, as the German real estate sector rose on the back of potential
changes in stamp duty transfer taxes. At present, stamp duty is only
payable in Germany when an acquirer buys more than 95% of a company’s
shares, but it has been proposed that this be reduced to 75%. This brings
forward the prospect of further M&A transactions in the German residential
space, as potential acquirers may look to do deals ahead of this proposed
change (the timing of which is uncertain at this stage).
At the beginning of the month, an all-share takeover bid for WCM
Beteiligungs was lodged by TLG Immobilien. Our position in DIC Asset, a
German commercial real estate company, benefitted as DIC accepted the
bid for its 26% stake in WCM. Coming at an 18% premium to its EPRA
NAV, the bid for WCM was a good outcome for DIC Asset particularly given
that a property deal between the two had hit an impasse and there was
uncertainty as to how DIC would extricate itself from the stake. DIC’s share
price rose 6% in May, and we realised part of our holding at elevated levels.

[tigerbright] 11/5/2017 09:50

I'm still fully invested in both tpf and psdl. No signs of a slow down here in Germany as of yet and the capital is still cheap relative to its European peers.

[jonwig] 06/5/2017 08:58

From IC via FT:

Buy: Phoenix Spree Deutschland (PSDL)

Shares in Phoenix Spree Deutschland are up sharply since 2015 yet still trade at a slight discount to forecast net asset value, writes Jonas Crosland.

Property investor Phoenix Spree Deutschland joined the London Stock Exchange in June 2015, so the latest results are for the first full year of trading as a listed company. Progress has been little short of meteoric, with funds raised at flotation and a £38m placing in March 2016 used to build a portfolio of residential properties in Berlin.

Adjusted net asset value rose by nearly a fifth to €2.73, while on a like-for-like basis rent per square metre rose by 5.3 per cent. Even better, rents on new lettings were up by 7.8 per cent. This helped to lift gross rental income by nearly a third to €15.9m (£13.5m), and the €78.3m spent during the year on 10 Berlin property assets — typically apartment buildings — is expected to boost rental income by about 17.5 per cent. There is also a strong reversionary element, with new leases signed at a 27 per cent premium to in-place rents, while continued demand pushed the vacancy rate down to an all-time low of 2.6 per cent.

The group is also monetising the arbitrage that exists between the value of an apartment block and the value of the individual apartments within it. These are being sold off at an average premium of 62 per cent to the value as part of the apartment block. And more blocks are being acquired with a view to crystallising further gains.

Analysts at Liberum are forecasting adjusted net asset value per share at the December 2017 year-end of €2.98.

[cerrito] 01/5/2017 14:29

Just read the Prelims.
I did buy a very few more after reading them and now feel I have enough certainly until I understand better the political and market dynamics of the Berlin property market.
Interested and indeed surprised that unlike TPF they did not mention the restrictions on privatizations/condominium sales. I will await the publication of the Annual Report and the discussion on key risks and see what they say on this and indeed other planning permission issues in Berlin. It may well be that all their properties are in parts of Berlin which do not have these restrictions but I would have expected them to have mentioned it.
Read the section on condominium sales-and see that progress can be slow in that some have vacant possession; I could not work out how many sales had been completed rather than notarized-also could not find the accounting policy of when they recognize a sale-ie on notarization or on actual completion. I mention this as the figures in Note 10-Gains on disposal for Investment property-are much less than the figures they bandy around in the section on condominium sales.
Interested the read that Berlin has the English disease on many planning permissions not being activated and also the Chairman Prosser must be a busy boy as I just read he interims of ALAI where he is also Chairman

[jonwig] 27/4/2017 10:17

Thanks Dave. Progress is focussed more on where they can develop their own local knowledge and less on places where they have to delegate.

Tigerbright - I agree about Berlin, though it's a cultural desert in summer! I read that some London banks were moving part of operations to Berlin rather than Frankfurt.

[davebowler] 27/4/2017 10:03

Liberum;
Phoenix Spree Deutschland (Mkt Cap £218m)
22% NAV return in 2016

Event
Phoenix Spree has generated a 22.3% NAV total return in 2016 with the EPRA NAV at 31 December 2016 of €2.73 per share. NAV performance has been driven by a strong letting performance and yield shift across the portfolio.

As previously announced, the portfolio valuation at 31 December 2016 was €423.8m which reflects a like-for-like increase of 19% over the year. This compares to a figure of 8.1% (our calculation) in 2015. Berlin was the strongest performing region in the portfolio with an uplift of 24% followed by Nuremberg and Furth (+12%) and Central and North Germany (+10%).

The fully occupied gross yield on the portfolio has tightened by c.90bps in 2016 to 4.8% (2015: 5.7%) although this is not strictly like-for-like, as part of the yield movement is due to acquisitions. The portfolio value per sqm is now €1,965 (€2,320 in Berlin) which remains well below replacement cost.

Rent per sqm rose by 5.3% across the portfolio on a like-for-like basis (Berlin +6.1%, Nuremberg and Furth +7.5% and Central and North Germany +4.4%). New lettings were signed at an average premium of 30.6% to passing rents and 36.8% in Berlin. Portfolio vacancy is at an all-time low of 2.6% after adjusting for units undergoing refurbishment.

The company has increased the focus on the high-growth Berlin market through acquisitions and a recent €35m disposal of the Nuremberg and Furth assets at an 11% premium to NAV. Berlin now accounts for 82% of the portfolio. €78m of new assets were agreed at an average value of €1,888 per sqm. The assets acquired during 2016 have been revalued upwards by 15% at December, more than offsetting the transaction costs. The average price achieved on condominium sales was €3,874 per sqm (67% ahead of current Berlin portfolio value).

Net LTV at 31 December 2016 was 39.4% (2015: 42.8%) and this should increase slightly as new acquisitions are likely to be funded with debt.

The company has also announced a final dividend of €0.043 per share (3.7p). Total declared dividends for the year are €0.063 (5.3p) which is 9% ahead of last year.

Liberum view
This is another excellent set of results from Phoenix Spree with the company's NAV coming in 9% ahead of our forecasts at the time of the interim results in September. The company's strategy of avoiding portfolio transactions and acquiring assets on a piecemeal basis is paying off given the attractive purchase price that has been achieved. The success of condominium sales at Boxhagenerstrasse is evidence of this with initial sales achieving €4,110 per sqm (59% ahead of July 2015 acquisition price).

The average price of the portfolio remains well below estimates of replacement cost. The company's Berlin assets are valued at €2,320 per sqm which is c.27% below replacement cost of €3,200 per sqm (including land). Replacement cost is being driven up by rising construction costs and scarcity of land. The market for single apartments (condominiums) remains very strong which is helping to drive demand for multi-family apartment blocks.


Phoenix Spree trades on a 2% premium to NAV compared to 16% for Taliesin and 8% for the listed German property companies. We believe that the opportunity remains compelling with the outlook for future returns supported by a highly reversionary portfolio and favourable demographic drivers.

Renewable Infrastructure

[tigerbright] 25/4/2017 06:59

Hi Dave. Yes, Munich and Hamburg are the two most expensive cities in Germany.The average price in Munich is now around 6000 Euros per square metre which is nowhere near the prices in Berlin. Therefore, as a capital city of the strongest economy in Europe, I'm betting Berlin prices will continue to rise. Far more people are arriving in Berlin every day than leaving. Usual caveats apply though - Berlin has a much higher ethnic population than Munich for example, who tend to be less well educated and hence earn less money. Also, Germany is a lot less centralised than other European countries where wealth tends to congregate around the capitals ie London, Paris etc. Thirdly, Germans are still on the whole very loathe to take on a lot of debt. The concept of a property ladder doesn't really exist here but that is slowly changing. All in all, the demographics (Germany is currently experiencing a baby boom) , strength of the German economy, low valuations compared to other major cities, and the low interest rates, makes me quite bullish about Berlin property.

[jonwig] 18/4/2017 19:59

Clausentum - if the assets can be sold above book value, the company's value will increase. (And this seems to be generally what's happening.) Cash flow (from rents) could actually fall if they're buying properties on lower yields, but this is less important than selling properties for capital gain.