Phoenix Spree Deutschland Share Discussion Threads

[cerrito] 23/9/2019 10:24

Thanks as always davebowler for posting that.
I have to confess that I have been very indecisive here and neither sold or bought since the rent freeze issue started.

[davebowler] 23/9/2019 08:48

Liberum;
Market transactions highlight institutional demand for Berlin residential remains

Mkt Cap £292m | Prem/(disc) -28.3% | Div yield 2.3%

Event

Adler Real Estate has agreed to acquire all the shares of ADO Group, an Israeli-listed holding company and shareholder in ADO Properties, a German-listed property company with a €4.4bn portfolio of residential properties in Berlin. Adler Real Estate will hold a 33% stake in ADO Properties following the transaction. The total consideration is €708m and the purchase price represents a 15% discount to the June 2019 EPRA NAV.

Adler Real Estate is one of Germany's largest residential property companies with a portfolio of 58,000 units (€5bn valuation). 2.9% of the company's current portfolio is in Berlin in addition to a large development project (7.9% of portfolio).

Separately, ADO Properties announced at the start of last week that it is in discussion to sell a portfolio of 5,800 units in Berlin (26% of total). The price has not been disclosed but we note commentary from Adler's statement today suggesting that it may be at a premium to book value.

Liberum view

The transactions indicate ongoing strong demand for Berlin residential assets from institutional investors seeking to capitalise on recent uncertainty in the market caused by proposed changes to rent laws. The draft bill for the Berlin residential rent price law has been published by the the Berlin Ministry for Housing. The proposals would implement a five-year rent freeze. The draft bill is undergoing a consultation period before entering the legislative process by 15 October. Under the proposals, the rent freeze would take effect from January 2020. There is still a lot of ambiguity about the proposals and we would expect several legal challenges to the rent freeze proposals.

Phoenix Spree is relatively well-positioned as it already has permission to convert over 50% of the portfolio to condominiums for sale and is in the process of seeking further approvals. Phoenix Spree has also recently completed a debt refinancing, providing significant firepower to take advantage of potential buying opportunities.

[alpal2] 18/9/2019 09:14

What will it take to get the share price back to the 350p+ price range? Is it purely the 'rent cap' holding the price down or other factors?

[davebowler] 16/9/2019 09:29

Might be good news for our Commercial values -153 units.

Liberum;

Funds managed by Blackstone have agreed an all-cash transaction to acquire all of Dream Global REIT's assets and subsidiaries for CAD$6.2bn. The price represents a 9.1% premium to the June 2019 EPRA NAV.

Dream Global REIT owns a portfolio of predominantly multi-tenanted office properties with a value of c.€4bn at 30 June 2019. The majority of the portfolio is located in the Top 7 German cities. The portfolio has a vacancy rate of 7.3%, a net initial yield of 4.7% and a weighted average unexpired lease term of 4.8 years.

Liberum view

The acquisition highlights the strength of investment demand for German commercial property. Total investment volumes for commercial properties in Germany totaled €24bn in H1 2019. This was slightly down on the prior year although is mainly due to a shortage of supply. Investor demand remains high due to positive market fundamentals. Yields for city fringe and secondary locations continue to compress due to a lack of supply of investment properties.

...............................
According to this;

As at 31 December 2018, the Portfolio consists of 96 properties containing 2,392 residential units and 153 COMMERCIAL units, with a total lettable area of around 183,100 square metres.

[davebowler] 12/9/2019 10:07

Liberum;
Refinancing increases acquisition capability

Mkt Cap £287m | Prem/(disc) -30.5% | Div yield 2.4%

Event

Phoenix Spree Deutschland has agreed a new €240m term loan facility to refinance existing debt of €119m. The new facility will comprise two tranches - a refinancing facility of €190m and an additional facility of €50m.

The refinancing facility is a seven-year loan with no amortisation requirements. The LTV ratio will rise from 28.6% to 39.2% upon drawdown of the €190m refinancing facility. The overall cost of debt will decline slightly from 2.19% to 2.13% following drawdown. The additional facility is available for drawdown for a two-year period.

Liberum view

The new debt facility provides Phoenix Spree with significant firepower to take advantage of potential buying opportunities given the uncertainty in the market from the current rent control proposals. The facility also improves cash flows given the removal of amortisation requirements.

The draft bill for the Berlin residential rent price law has been published by the the Berlin Ministry for Housing. The proposals would implement a five-year rent freeze. The rent ceiling ranges from €5.65 to €9.80 per sqm which was not as low as initially feared. The bill sets rent ceilings according to construction year, with the maximum assigned to buildings constructed or fully refurbished between 2003 and 2013. The rent ceiling does not apply to the limited amount of property constructed from 2014 onwards. In addition, there in an income threshold as it only applies to tenants who have to spend more than 30% of their disposable household income on rent. The draft law does allow for some uplift on properties that have been modernised over the last 15 years (potential €1.40 per sqm increase).

The draft bill is undergoing a consultation period before entering the legislative process by 15 October. Under the proposals, the rent freeze would take effect from January 2020. There is still a lot of ambiguity about the proposals and we would expect several legal challenges to the rent freeze proposals. Wide share price discounts to NAV discounts are likely to remain until there is greater clarity for the sector. A rent freeze would likely deter development of new rental housing in the city and would reduce supply. Phoenix Spree is relatively well-positioned as it already has permission to convert over 50% of the portfolio to condominiums for sale and is in the process of seeking further approvals. The current market cap implies a 23% discount on the June 2019 portfolio value. Assuming the company can achieve sale prices in line with the level achieved in 2018, the potential upside is c.60% above the value implied by the current share rating.

[davebowler] 02/9/2019 09:52

Interesting video from Vonovia - no resi bubble but hotspots in Munich and Frankfurt -

[nimbo1] 27/8/2019 10:33

i was stopped out here. but this looks like it could potentially turn into a very good opportunity.

[davebowler] 27/8/2019 08:59

SRE hit a 52 week high last week and traded at a 9% premium to NAV whereas PSDL and SMTP are at at a 30 odd % to NAV.

[apollocreed1] 22/8/2019 11:28

If I buy more of this stock with the pound GBP so low relative to the Euro, I'll take a spreadbet long GBP/EUR to hedge currency exposure.

[davebowler] 21/8/2019 09:45

Liberum
Phoenix Spree Deutschland

Confusion regarding court ruling leads to weakness for listed German residential sector

Mkt Cap £289m | Prem/(disc) -33.3% | Div yield 2.3%

Event

The German Federal Constitutional Court ruled yesterday that the 2015 rent cap is constitutional. A Berlin landlord that had set the rent too high had taken a complaint against the rent cap after being ordered to repay money to the tenant.

In 2015, the government passed legislation aimed at limiting rents charged on new tenancies in certain areas. The 2015 rent cap (Mietpreispremse) restricts the potential for rent increases upon re-letting to a maximum of 10% above the Mietspiegel or the level paid by the previous tenant. These do not apply to apartments that have been comprehensively refurbished and still allowed for recovery of modernisation costs. At the end of 2018, the Mietpreisbremse applied in 313 of 11,000 cities and municipalities in Germany

Liberum view

Yesterday's ruling is not related to the rent freeze proposals and should have no operational impact on the listed German landlords. Vonovia, the largest German landlord with a £41bn portfolio, confirmed as much in a statement yesterday afternoon. The majority of the sector sold off yesterday by c.3% following the announcement, which we believe is due to a misunderstanding that yesterday's ruling related to recent rent freeze proposals.

A draft bill for the rent freeze is due to be published by 31 August. This will be followed by a consultation period before entering the legislative process by 15 October. Under the proposals, the rent freeze would take effect from January 2020. We would expect several legal challenges to the rent freeze proposals. The legal department of the German parliament has already issued a report outlining that these are unconstitutional.

The uncertainty caused by the proposals has led to significant share price declines for the companies with Berlin exposure. Wide discounts are likely to remain until there is greater clarity for the sector. A rent freeze would likely deter development of new rental housing in the city and would reduce supply. We would expect much of the existing rental stock to be converted to condominiums by landlords with existing permissions. Phoenix Spree is well-positioned in this regard as it already has permission to convert over 50% of the portfolio to condominiums and is in the process of seeking further approvals. It also has a strong balance sheet (26% net LTV). The current market cap implies a 24% discount on the June 2019 portfolio value. Assuming the company can achieve sale prices in line with the level achieved in 2018, the potential upside is c.60% above the value implied by the current share rating.

[riverman77] 20/8/2019 18:02

Berlin residential property is in huge demand with very limited supply. My view is that scarce assets such as these will ultimately go up in value significantly, irrespective of any rent controls. Of course, it's unclear if the rent controls will even be implemented. Also, PSDL is quite flexible and is used to working round regulations, e.g. around half the portfolio is in condominiums.

On a 30% discount, I see this as a strong long-term buy, although I admit it is likely to be weak for some time, so don't expect any short term bounce.

[alpal2] 20/8/2019 17:52

The shares may have had a dead-cat bounce but they're right down again. Which is better value PSDL or Summit?

[davebowler] 20/8/2019 13:16

Nick Greenwood of MIGO commentary in July's factsheet-

Phoenix Spree Deutschland was the biggest riser in July returning 6.93%. Phoenix Spree
has been weak since the Berlin state coalition government announced a rent freeze for five years, however in July the Federal government advised it was unconstitutional. Although not unexpected, this gave investors some confidence and the shares bounced.

[davebowler] 08/8/2019 10:35

Discount looks to be 33% if my figures are correct.Of course it is not adjusted for the markdown of assets following the recent rent controls.

[davebowler] 08/8/2019 10:33

Unadjusted NAV must therefore be Euro 665.2m value less Euro 168.4 debt = Euro 496.8 / 100.75 m shares = Euro 4.93 per share = £ 4.52

[davebowler] 08/8/2019 10:04

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.

[davebowler] 16/7/2019 17:13

hTTps://www.theguardian.com/world/2019/jul/16/berlin-buys-670-flats-on-karl-marx-allee-from-private-owner

[nimbo1] 09/7/2019 16:21

nice to see this moving up a bit. hard work buying fear.

[cerrito] 04/7/2019 14:24

Questor in the Telegraph has a well reasoned article with a hold.

[nimbo1] 02/7/2019 12:46

looks like i could have been a little early...

[davebowler] 01/7/2019 09:59

For a copy of the recent presentation from Phoenix email- [e-mail]

[davebowler] 01/7/2019 09:56

Thanks.Its had the desired effect!

[nimbo1] 01/7/2019 09:15

Decided to buy some

[charlie153] 26/6/2019 14:25

i tend to agree with you although i make the yield more like 2.5% (last year's dividends totalled c6.7p)

also they say 60% of the portfolio has permission to be split up and sold and i think this would be at an uplift give the rental controls should ultimately lead to increased purchase prices if rental supply decreases forcing people to buy. And even if the 40% of the portfolio left were to dramatically fall in value then you are covered by the share price discount.