Phoenix Spree Deutschland Share Discussion Threads

[spectoacc] 19/4/2021 14:05

Interesting, tho disagree with almost everything in it. If anything, Berlin renters have enjoyed an interest-free loan, based on legislation that has itself turned out to be illegal.

[apollocreed1] 19/4/2021 13:19

hxxps://christopherward.medium.com/the-mietendeckel-rent-cap-may-have-been-illegal-but-those-celebrating-its-demise-are-in-for-a-8b2eb0384b35

[jeff h] 16/4/2021 10:45

Stuart Young got back to me regarding the EGM. Here is a recent interview with him including an extensive Q&A:-

[davebowler] 15/4/2021 14:31

Zoom presentation is on at the moment hosted by PSDL.

[cerrito] 15/4/2021 13:51

The point in the last para of the RNS concerning a possible change of government after the September elections leading to a change in Federal law, especially if the Greens do as well as current indications suggest they will is well taken...but as they PSDL say they have been able to ride the waves.

[jeff h] 15/4/2021 09:25

Does anyone know the details behind the forthcoming EGM?...resolution appears to be:-

THAT THE ARTICLES PRODUCED TO THE EGM AND SIGNED BY THE CHAIR FOR THE PURPOSES OF IDENTIFICATION, BE APPROVED AND ADOPTED AS THE NEW ARTICLES OF THE COMPANY IN SUBSTITUTION FOR, AND TO THE EXCLUSION OF, THE EXISTING ARTICLES, WITH EFFECT FROM THE CONCLUSION OF THE MEETING.

Why the change in articles?

[davebowler] 15/4/2021 08:48

.........The latest portfolio valuation assumes the Mietendeckel is in place for the full five years.
i.e. The portfolio valuation and therefore NAV is too low.

[davebowler] 15/4/2021 08:46

Liberum;
Phoenix Spree Deutschland

Mietendeckel declared unconstitutional by Federal Court

Mkt Cap £361m | Prem/(disc) -18.1% | Div yield 1.7%

Event

Germany's Federal Constitutional Court has ruled that Berlin's rent freeze is unconstitutional. The rent freeze (Mietendeckel) came into law last year and has been the subject of a number of challenges. Doubts have consistently been expressed over the State of Berlin's ability to pass local rent legislation, given the differences from existing federal law. In Bavaria, a similar six-year rent freeze was blocked by the Bavarian Constitutional Court in July 2020.

Liberum view

Phoenix Spree has maintained throughout the process that there was a high likelihood that the rent freeze would be successfully challenged. The company has sought to maximise flexibility due to the uncertainty caused by the new legislation. New re-letting contracts include clauses to enable the company to charge rent permissible under the previous system in the event that the Mietendeckel is voided. We note Vonovia has stated that it will not seek to claw back any of the foregone rents in the period since the Mietendeckel has been in place.

PSDL's shares have risen by c.9% since the announcement this morning and we expect further upside in the near term. The removal of the rent freeze should lead to a strong upturn in investor sentiment towards the sector. The Mietendeckel would have had a material impact on earnings as it was expected to reduce like-for-like income by 16%. The latest portfolio valuation assumes the Mietendeckel is in place for the full five years.

[jeff h] 15/4/2021 08:26

Berlin, 15 April 2021

Federal Constitutional Court considers rent cap incompatible with basic law
The 2nd Senate of the Federal Constitutional Court has today ruled that the provisions of the Law on Rent Limitation in Housing in Berlin (MietenWoG Bln) are incompatible with the Basic Law and are therefore void. This decision is based on a review of the standards of several members of the Bundestag factions of the CDU/CSU and the FDP as well as on two proposals from the Landgericht Berlin and the District Court of Mitte.

In the opinion of the Federal Constitutional Court, the provisions of MietenWoG Bln are to be classified under civil law and are thus subject to civil law, for which the Federal Legislature has already finally exercised its legislative competence under Article 74 paragraph 1 (1) (1) of the Basic Law by means of the provisions of Sections 556 to 561 of the German Civil Code (BGB). In the opinion of the Federal Constitutional Court, the Federal Constitutional Court therefore prohibits the legal competence of the Länder.

Sebastian Scheel, Senator for Urban Development and Housing: "The Federal Constitutional Court has denied the Land of Berlin legislative competence for a public-law tenancy law. This blocks the way for national rental price regulation. We had entered new territory with the rent cap and expected a different decision. For good reason: competence for housing has been the sole responsibility of the Länder since the federalism reform in 2006. Social peace is threatened by rising rents and the associated displacement. It is the central task of politics not to stand idly by. The last few months have shown that the rent cap is a suitable instrument for this. It is now the task of the federal government either to create an effective rental price law that secures the social mix in cities or to give the Länder the competence to do so."

According to the decision of the Federal Constitutional Court, the provisions of MietenWoG Bln are null and void from the date of their entry into force. For the tenants, this means that they have to pay the rents agreed with their landlords on the basis of the BGB and, if necessary, also pay the difference between the rent cap rent and the contract rent.

Sebastian Scheel, senator for urban development and housing: "In the Senate we will discuss the consequences of the ruling on Tuesday. The Senate also sees itself as an obligation to develop socially acceptable solutions for tenants."

[jonwig] 15/4/2021 08:07

I'm blanked out of the link after a few seconds, but I've managed to copy:

Berliners will be holding their breath as a ruling on whether a controversial 'Mietendeckel' (rental cap law) will stay in place is expected on Thursday.

The sudden announcement was made by judges at Germany’s Constitutional Court in Karlsruhe on Wednesday, who said they expect to publish a written decision by 9:30am on Thursday.

With its unique statewide rent cap, the first of its kind across Germany, the Berlin Senate brought it in to slow down the increase in rental costs in the capital.

Since February 23th 2020, rents for 1.5 million apartments have been frozen at the June 2019 level. From 2022, they can rise by no more than 1.3 percent a year under the law.

If an apartment is rented out, the landlord must adhere to new caps set by the state and the last rent charged. On November 23rd 2020, the second part of the act went into effect: rents that were more than 20 percent above the upper limits became prohibited by law.

The regulation is limited to five years. Newly built apartments (Neubauten) that were ready for occupancy from January 1st 2014 are among those exempted.

Rental prices in many of Berlin’s trendiest neighbourhoods have more than doubled since 2009 – although they were down by 6.5 percent in 2020.


Why did the law go to court?

In May 2020, the liberal Free Democrats (FDP) and centre-right CDU/CSU parliamentary groups submitted a petition for a review to constitutional judges in Karlsruhe.

The total of 284 members of parliament believe that the city-state of Berlin has exceeded its powers – and that rental law is a matter for federal legislature.

The federal judges are now set to rule on the petition, as well as on two submissions by the Berlin Regional Court and a local court in the district of Mitte.

The Berlin Constitutional Court had suspended its own proceedings in October to await the Karlsruhe decision.

Germany’s real estate industry has also criticised Berlin’s law and fears negative effects, among other things, on housing construction and on investments such as modernization.

Germany’s Tenants’ Association (Mietverein), on the other hand, said that the legislation represented an historic opportunity to secure affordable rents for the majority of the population.
Is confidence of a favourable outcome so certain?

[spectoacc] 15/4/2021 07:39

Surely not out this early? Tho buyers at 380 so maybe it is. The 40k shares the co bought back at 335p yesterday are looking good :)

[frazboy] 15/4/2021 07:37

I guess it was positive

hxxps://www.thelocal.de/20210414/germany-to-rule-on-legality-of-berlins-rental-cap-law-on-thursday/

[spectoacc] 15/4/2021 07:28

Breakout & well bought, any news from Germany?

[hpcg] 29/3/2021 10:14

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 09:25

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.