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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Phoenix Spree Deutschland Limited | LSE:PSDL | London | Ordinary Share | JE00B248KJ21 | SHS NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 1.50 | 1.07% | 142.00 | 139.50 | 144.50 | 142.00 | 142.00 | 142.00 | 70 | 16:35:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Investment Trust | 26.29M | -15.44M | -0.1681 | -8.45 | 130.39M |
From Apr 2019 to Apr 2024
TIDMPSDL
RNS Number : 7003N
Phoenix Spree Deutschland Limited
26 September 2019
Phoenix Spree Deutschland Limited
(the "Company" or "PSD")
Interim Results for the half year to 30 June 2019
CONTINUED STRONG PERFORMANCE - FLEXIBILITY TO RESPOND TO PROPOSED REGULATORY CHANGES
Phoenix Spree Deutschland (LSE: PSDL.LN), the UK listed investment company specialising in German residential real estate, announces its Interim Results for the six months ended 30 June 2019.
Financial Highlights
Hot Features
Premium
Six months Six months Year to 31 H1 2018 v
to June 2019 to June December 2018 H1 2019 %
2018 change
Reported gross
rental income(1) EUR10.8m EUR11.9m EUR22.7m (9.5%)
-------------- ------------- --------------- -----------
Annual like-for-like
rent per sqm growth 5.2% 9.9% 7.4% -
-------------- ------------- --------------- -----------
EPRA NAV per share
(EUR) EUR4.73 EUR4.23 EUR4.58 11.8%
-------------- ------------- --------------- -----------
EPRA NAV per share
(GBP) GBP4.24 GBP3.74 GBP4.11 13.4%
-------------- ------------- --------------- -----------
EPRA NAV per share
total return 4.4% 4.1% 13.2% -
-------------- ------------- --------------- -----------
Profit before
tax(2) EUR12.0m EUR19.4m EUR56.4m (37.8%)
-------------- ------------- --------------- -----------
Net LTV 26.8% 25.8% 26.1% -
-------------- ------------- --------------- -----------
Dividend EUR /
(GBP) 2.35c (2.1p) 2.35c (2.1p) 7.50c (6.7p) 0%
-------------- ------------- --------------- -----------
(1) June 2018 reported Gross rental income is restated due to a change in accounting policies (IFRS 15)
(2) PBT decline reflects movement in the mark-to-market of interest rate hedges during the period.
Operational Highlights
-- Portfolio performed well, reflecting modest rental growth
and active management of the Portfolio:
o Like-for-like Portfolio value, adjusted for acquisitions
and disposals, increased by 3.9%.
o Aggregate reported Portfolio value increased by 3.0%
to EUR665.2 million (31 December 2018: EUR645.7 million).
-- EPRA vacancy declined to 2.5% (31 December 2018: 2.8%).
-- New leases in Berlin signed at an average 39.9% premium
to passing rents in H1 2019.
-- NAV underpinned by condominium potential; average achieved
value per sqm on sold condominium units of EUR4,334, a
16.7% premium to Portfolio average value per sqm at 30
June 2019:
o Four condominium notarisations during the period
totalling EUR2.5 million (H1 2018: EUR6.1 million).
o Seven condominium sale completions during H1 2019
totalling EUR3.8 million (H1 2018: EUR5.7 million).
o A further EUR3.9 million has been notarised for sale
since 30 June 2019.
Update on Mietendeckel - proposed new Berlin rent controls
-- First draft of proposals was presented to the Berlin Senate
on 30 August 2019, with the aim of preventing private
residential rents being set at free market levels.
-- Consultation process underway, with final draft expected
in October. Implementation planned from January 2020,
with retrospective effect to 18 June 2019.
-- There remains considerable uncertainty surrounding the
content, timing, legality and implementation of the new
rental proposals.
-- Expect short-term impact on transaction volumes and potentially
values for apartment blocks.
-- Continued supply/demand imbalance expected, driven by
strong job creation, population growth.
-- Proposed rent cap likely to affect adversely new construction,
exacerbating shortage of available rental stock.
-- Evidence from other cities where similar rent controls
have been introduced suggests condominium prices likely
to benefit in the medium term, in the event the proposed
new rules remain in place.
Proactive strategic response to evolving regulatory environment
PSD is well placed to respond to regulatory changes, with considerable strategic flexibility, pending clarity on legality of new rent law proposals:
-- Condominium strategy being actively pursued:
o Currently 55 assets out of 97 in the portfolio are
legally registered as condominiums (55% of units),
with a further 29 in the planning stage (35% of units).
o New agreement with Accentro Real Estate AG, one of
Germany's leading condominium sales platforms, which
provides scope for a significant acceleration of
condominium sales.
-- New re-letting strategy for vacated rental units; with
increased focus on short term furnished apartments, optimising
strategic flexibility pending clarification of legality
of Mietendeckel rules.
-- Planned co-ordinated legal response to Mietendeckel proposal
via homeowner associations.
-- Completion in September 2019 of new EUR240 million term
loan on improved terms offers the ability to:
o Pursue any opportunities as a result of market uncertainty.
o Take advantage of any exceptional weakness in the
share price - buy-back of up to 10% of shares is
under consideration.
Robert Hingley, Chairman, commented:
"I am pleased with the continued strong performance in the first half of this year. However, the new rental laws proposed by the Berlin Senate have created significant market uncertainty which has been reflected in PSD's share price. Although there are serious concerns regarding their legality and constitutionality, we have taken steps to mitigate any short-term impact on the portfolio while ensuring we maintain our strategic optionality in the event the proposals are found to be unconstitutional. I am confident that our condominium and new re-letting strategies, together with the strength of our balance sheet, mean we are well placed to respond to regulatory changes."
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
CHAIRMAN'S STATEMENT
I am pleased to report that, during the first half of the financial year, PSD has delivered another resilient performance. As at 30 June 2019, the Portfolio was valued at EUR665.2 million by Jones Lang LaSalle GmbH, a like-for-like increase of 3.9% since 31 December 2018, driven by modest yield compression and an increase in like-for-like average rents. The EPRA NAV total return per share was 4.4% over the same period.
Notwithstanding the fact that our financial results have demonstrated further progress, the rent controls proposed by the Berlin Senate (the "Mietendeckel") have created significant uncertainty. This has been reflected in PSD's share price and has resulted in the shares trading at 34% discount to EPRA Net Asset Value as at 30 June 2019. The share price weakness and valuation discount are in line with Berlin-focussed listed peers.
The principal aim of the Mietendeckel is to prevent rents for private non-subsidised rental properties being set at free market levels, despite the fact that Germany and Berlin already have in place tenant protections which rank amongst the strongest in the Western world.
The first draft of these proposals was presented to the Berlin Senate at the end of August and the consultative process, involving experts, owners and trade associations, is ongoing. A Berlin Senate resolution on the final draft is currently scheduled to take place in mid-October, with implementation of the new rules by Berlin's parliament expected during January 2020, with retrospective effect to 18 June 2019.
There remains considerable uncertainty surrounding the content, timing, legality and implementation of the new rental proposals. PSD, and its legal advisors remain firmly of the opinion that the rent proposals are unconstitutional and that State law cannot supersede Federal law. We expect a number of legal challenges should the Berlin Senate pass the bill into law.
Our main priority for the remainder of 2019 is to ensure that PSD optimises its strategic response and significant preparatory work has already taken place. More detail on the Mietendeckel and our strategic response is provided within this statement.
PSD has also recently secured more flexible and cost-efficient financing to support the medium and long-term strategic objectives of the business. It provides liquidity in order to take advantage of opportunities arising from market disruption caused by changes to the rent laws, as well as weaknesses in the share price. We are therefore considering plans to repurchase up to 10% of shares currently in issue.
Since the launch of PSD over 12 years ago, tenant law has continually changed, and we have successfully evolved within the changing regulatory framework. I am confident that this will continue to be the case and our commitment to delivering the best possible service to our tenants remains undiminished. Our "Better Futures" Corporate Responsibility Plan balances the different interests of all our stakeholders, recognising that our environmental and social impact is intrinsically linked to the success and sustainability of our business. The Board is pleased to declare an unchanged dividend of 2.35 cents (2.1 pence) per share for the first half of the year, which is expected to be paid on or around 25 October 2019 to shareholders on the register on 11 October 2019.
STATEMENT ON THE PROPOSED BERLIN RENT CAP
Backdrop
During the past decade, Berlin's economy has flourished and this economic renaissance has been supported by high levels of net inward migration. Between 2013 and 2017, the number of inhabitants grew by between 40,000 and 60,000 per year, increasing by a further 31,000 in 2018. Currently, the City of Berlin estimates the requirement for new housing will be 194,000 units by 2030, and that over 20,000 new housing units will need to be constructed annually to satisfy demand. However, in recent years, the number of building permits and completions has fallen well short of this target and it remains the case that the cost of new-build generally exceeds the cost of acquiring existing rental stock.
It is against this demographic backdrop that the new Berlin rental laws have been proposed. These rules seek to address the effects of housing shortage rather than addressing the cause. PSD believes that the long-term solution to the housing shortage and rent-price inflation lies with incentivising increased supply, which the current proposals fail to address.
Outline of the proposed new rules
The key elements of the new proposals as currently drafted are as follows:
-- for new leases, a range of upper limits or "Permissible Rents" or "Permissible Level" depending on building age, rather than location or condition
-- any in-place rent above this level is frozen for five years
-- provided that the Permissible Level is not exceeded, annual rent increases of 1.3% are allowed and the Permissible Level could be raised to take into account annual price inflation
-- the Permissible Rent limits can be increased by up to EUR1.40 per sqm if the apartment has been modernised during the last 15 years
-- rental uplifts on future modernisations are limited to EUR1.00 per sqm -- the rent cap rules also apply to furnished apartments
-- for existing tenants, any rent over the Permissible Level can be lowered, subject to appeal, if the tenant can demonstrate that their in-place rent is more than 30% of net household income
-- for existing tenants applying for relief under the 30% rule, the rent cap is subject to the size of the property, limiting any reduction to a specified square meterage linked to individual household size
-- properties built after 2014 are excluded from these proposals.
Legality of the new rules
PSD and its legal advisors remain firmly of the view that the rent proposals as currently drafted are not lawful and are unconstitutional. In Germany, residential tenant law is governed by the German Civil Code and is therefore a matter for the Federal and not State Government. There is mounting legal opinion supporting this view, including the legal research department of the Bundestag, the Federal Housing Minister and the former head of the Federal Constitutional Court.
Timing of the new rules
Following the publication of the draft law for the introduction of the local Berlin rent freeze, relevant interest groups were able to submit their objections until 13 September. On 15 October, the Berlin Senate has stated it will decide on the final version of the law, which will be followed by two readings and votes in the Berlin parliament on 31 October and 12 December. The implementation of the rent freeze is scheduled for 11 January 2020, effective retroactively to 18 June 2019.
Likely impact of the new rules on the Berlin rental market
There is a significant body of evidence from other markets, including Stockholm, San Francisco and Vienna, that the effect of stringent rent controls which seek to limit rent levels to below those set by the market, has been to reduce the supply of quality rental property rather than grow it.
The impact in these markets has been:
-- to reduce the construction of new-build rental apartments -- lower levels of tenant churn, which reduces choice for tenants -- an increase in the number of rental apartments sold to owner occupiers as condominiums -- a reduction in the existing stock of rental properties -- the creation of waiting lists for available rental properties
-- rising demand for condominiums, short-term lets and illegal subletting as a direct consequence of a reduction of available rental stock
PSD believes that should the new Berlin rental regulations proceed, many of these themes will be repeated in Berlin. Developers could be reluctant to commit to new-build in an environment where future rental streams and returns are uncertain. Smaller landlords may seek to exit the housing market and sell apartments to owner occupiers, further reducing the supply of rental apartments. Property owners will also become reluctant to invest in the fabric of existing properties, resulting in an overall deterioration in the quality of housing stock at a time when the need for sustainable, environmentally friendly housing has become ever more apparent. The renovations, modernisations and improvements that have transformed the quality of housing stock in Berlin during the past decade were made possible because they were financially viable in an environment where rents for newly modernised apartments were set at free market levels.
As existing tenants realise that rent controls worsen rather than alleviate the housing shortage, it is likely that fewer properties will be returned to the rental market, further exacerbating the supply shortage. Meanwhile demand is forecast to continue to increase given continued expected inward migration to the City. This has the potential to discriminate against the most vulnerable tenants, an issue that has already been raised by Berlin's cooperative housing associations and municipal housing companies.
Faced with an acute shortage of rental accommodation, and with interest rates at or near record lows, demand for condominiums is likely to rise.
Impact of new rental laws for PSD
There remains considerable uncertainty surrounding the implementation of the proposed new rules. Moreover, likely tenant behaviour in the event the new rent proposals are introduced is difficult to predict. Given the possible range of outcomes, it is likely that PSD will be in a better position to assess accurately the impact of the proposed law on rental income by the middle of 2020. However, based on the proposals as they currently stand, the Property Advisor considers likely consequences are as follows:
-- PSD will lose the ability to obtain step rents or Mietspiegel rent increases for over half of existing tenants
-- the Permissible Rent will effectively cap rents for new lettings at levels below currently market levels, ending PSD"s ability to pursue its current reversionary rent strategy
-- theoretically, most tenants who occupied their unit in the last three or four years will have an incentive to give notice and seek a cheaper apartment. However, the lack of available supply post the implementation of the new rules is likely to make this very difficult in practice
-- tenants will be entitled to make an application to the District Office for a rent reduction in circumstances where their rent is above the Permissible Level and where net cold rent represents more than 30% of household net income. PSD has historically set stringent rent multiple limits for new tenants at the time of application, significantly reducing the risk of rent reduction claims. The fact that the amount of relief is limited by the size of the property further mitigates the impact.
PSD STRATEGIC RESPONSE
Although the new rules will almost certainly be subject to legal challenge, it is likely that, even if successfully repealed, there will be a period during which PSD will have to work within the regulatory framework that is currently being proposed. During the period of challenge, which is expected to last until at least early 2021, PSD intends to modify its strategy.
Acquisitions
Notwithstanding the fact that PSD has the financial capacity to acquire and will keep opportunities under close review, it is expected that future acquisitions will be limited until the impact of the proposals on tenant behaviour and market values is clearer.
Renovation Expenditure
PSD remains committed to maintaining a portfolio of homes for tenants that are both comfortable and compliant with all health and safety standards. However, in the light of the proposed new rental laws, careful consideration is being given to certain elements of discretionary capital expenditure that are no longer financially justifiable. It is therefore expected that the strategy of renovating vacant apartments to current market standards will be reviewed. Regrettably, the maximum EUR1 rent per sqm premium (EUR600-700 per annum) on future modernisations that the new rules permit will not justify the typical investment of EUR20-30k that was possible when reletting was permissible at free market levels. This may reduce planned capital expenditure by up to EUR5 million per annum.
New Condominium Construction
PSD has building permits approved, or in process, for around 100 units. Approximately 76% of these units are attic conversions with the remainder representing a new apartment block in the footprint of an existing property. PSD believes future construction costs could decline, reflecting lower levels of reinvestment into the fabric of existing properties across Berlin. This has the potential to create near-term overcapacity in the construction sector, which in turn could be reflected in lower labour and material costs. The Property Advisor intends to appraise future projects on the basis of condominiums for sale, as opposed to rental properties.
Furnished Lettings
Notwithstanding the fact that the new rent laws prohibit charging a premium for furniture, it is expected that new lettings by PSD could be offered as short-term furnished apartments until the legal question surrounding the new law is resolved. The rules permit short-term lettings (for example up to 12 months) where tenants are required to work or study in Berlin, a demographic that complements PSD's reletting activity in recent years. If, as expected, the law is overturned, PSD will be able to re-let these apartments, thereby avoiding establishing open ended tenancies at potentially sub-market levels. Should the law remain in place for the longer term, PSD will retain the option to sell these apartments as vacant condominiums.
Condominiums
PSD believes that there is significant unlocked value within PSD's potential condominium portfolio and intends to increase condominium sales activities during 2020.
In order to ensure strategic flexibility, PSD has sought to split as many multi-family properties as possible into individual condominium units at the Land Registry, a prerequisite to selling each apartment separately. As at 25 September, 55% of all units had been registered as condominiums. Applications are underway for a further 35% and, by the end of 2019, it is expected that approximately 70% could be registered as condominiums. Four buildings are actively being marketed for sale. Until they are actively marketed, those properties split into condominiums are still valued on a multi-family rental basis, which has typically been around 15-20% lower than the expected condominium sales value.
The Property Advisor has an in-house capability for condominiums which focusses on selling vacant units, rather than occupied units. Occupied units are typically acquired by investors seeking income or by buyers prepared to wait before taking possession (and in the meantime benefiting from rental income). In order to sell occupied units in volume, PSD has extended the scope of its agreement with Accentro, one of Germany's leading condominium sales platforms. This had previously been limited to the remaining unsold units of a single building, Boxhagener Strasse.
The new Cooperation Agreement with Accentro potentially covers the entire portfolio of condominium projects owned by PSD. The key features of this agreement are:
-- PSD can, at its discretion, offer properties for sale as condominiums to Accentro to market and sell at an agreed minimum price per condominium unit
-- on acceptance, Accentro will have an exclusivity period of 18 to 24 months during which they will be eligible to receive commission for completed sales
-- the amount of commission is to be negotiated between the parties and will, in principle, be based on additional proceeds from the sale in excess of the minimum price
-- for condominiums not sold by Accentro during the exclusivity period, Accentro will make PSD an irrevocable offer to conclude a purchase agreement corresponding to the previously assigned minimum purchase price.
This Cooperation Agreement provides access to a successful, European-wide, distribution platform which should allow PSD to accelerate significantly sales of apartments. Additionally, key benefits for PSD include:
-- a guaranteed minimum value for the assets
-- a guaranteed sale of all condominiums within a building regardless of how difficult they might be to sell
-- no obligation on PSD to sell condominiums through Accentro or to accept any particular offer on a condominium sale
-- Accentro markets the properties at its own expense -- PSD retains all rights and benefits of the condominium assets while they remain unsold.
Share Buybacks
Following a strategic review of PSD's liability structure, a new EUR240 million term loan on improved terms was completed on 12 September 2019. This has provided significant additional liquidity while retaining a prudent gross loan to value of 39.2% or 28.6% when taking into account cash balances. The additional liquidity of approximately EUR70 million could be further supplemented by the proceeds of condominium sales.
Since the new rent proposals were announced PSD's share price has declined by 16%, valuing the shares at a 30% discount to the EPRA Net Asset Value as at 30 June 2019. The current share price therefore implies a 19% decline in the portfolio value.
Given the current valuation discount, PSD is considering acquiring up to 10% of its shares in issue.
FINANCIAL HIGHLIGHTS FOR THE SIX-MONTH PERIOD TO 30 JUNE 2019
EUR million (unless otherwise 6 months 6 months Year to
stated) to to
-------------------------------
30-Jun-19 30-Jun-18 31-Dec-18
------------------------------- ---------- ---------- ----------
Gross rental income (1) 10.8 11.9 22.7
---------- ---------- ----------
Investment property fair
value gain 21.6 21.7 66.1
---------- ---------- ----------
Profit before tax (PBT) 12.0 19.4 56.4
---------- ---------- ----------
Reported EPS (EUR) 0.11 0.16 0.46
---------- ---------- ----------
Investment property value 665.2 583.7 645.7
---------- ---------- ----------
Net debt 178.0 150.5 168.4
---------- ---------- ----------
Net LTV (%) 26.8 25.8 26.1
---------- ----------
IFRS NAV per share (EUR) 4.11 3.74 4.05
---------- ----------
IFRS NAV per share (GBP) 3.68 3.31 3.54
---------- ----------
EPRA NAV per share (EUR) 4.73 4.23 4.58
---------- ---------- ----------
EPRA NAV per share (GBP) 4.24 3.74 4.11
---------- ---------- ----------
Dividend per share (EUR
cents) 2.35 2.35 7.5
---------- ---------- ----------
Dividend per share (GBP
pence) 2.1 2.1 6.7
---------- ---------- ----------
EPRA NAV per share total
return for period (EUR%) 4.4 4.1 13.2
---------- ---------- ----------
EPRA NAV per share total
return for period (GBP%) 4.3 3.8 11.4
---------- ---------- ----------
(1) June 2018 reported Gross rental income was restated due to change in accounting policies (IFRS 15)
Financial results
Reported revenue for the six-month period was EUR10.8 million (six months to 30 June 2018 (restated): EUR11.9 million). Profit before taxation was EUR12.0 million (six months to 30 June 2018: EUR19.4 million) which was positively affected by a revaluation gain of EUR21.6 million (30 June 2018: EUR21.7 million). The fall in profit before tax reflects the movement in mark-to-market on the interest rate hedges. Reported earnings per share for the period were 11 cents (six months to 30 June 2018: 16 cents).
Reported EPRA NAV per share rose by 3.3% in the first half of 2019 to EUR4.73 (GBP4.24) (31 December 2018: EUR4.58 (GBP4.11)). After taking into account the 2018 final dividend of 5.15 cents (4.6 pence), which was paid in June 2019, the EPRA NAV total return in the first half of 2019 was 4.4% (H1 2018: 4.1%).
The Board is pleased to declare an unchanged interim dividend 2.35 cents per share (2.1 pence per share) for the first half of the year (six months to 30 June 2018: 2.35 cents, 2.1 pence). The dividend is expected to be paid on or around 25 October 2019 to shareholders on the register at close of business on 11 October 2019, with an ex-dividend date of 10 October 2019.
Portfolio breakdown
30 June 2019 30 June 2018
Buildings 96 93
------------- -------------
Residential units 2,378 2,322
------------- -------------
Commercial units 143 152
------------- -------------
Total units 2,521 2,474
------------- -------------
Like-for-like portfolio value increase of 3.9%
30 June 2019 30 June 2018 31 December
2018
Valuation (EURm) 665.2 583.7 645.7
------------- ------------- ------------
Value per sqm (EUR) 3,716 3,275 3,527
------------- ------------- ------------
Like-for-like valuation
growth (%) 3.9 5.4 14.0
------------- ------------- ------------
Fully occupied gross
yield (%) 2.9 3.1 3.0
------------- ------------- ------------
As at 30 June 2019, the Portfolio was valued at EUR665.2 million (31 December 2018: EUR645.7 million) by Jones Lang LaSalle GmbH. This represents a 3.0% increase over the six-month period.
On a like-for-like basis, excluding the impact of acquisitions net of disposals, the Portfolio value increased by 3.9% in the six-month period. This increase reflects modest market growth in rental values, assisted by PSD's active asset management strategy.
The valuation as at 30 June 2019 represents an average value per square metre of EUR3,716 (31 December 2018: EUR3,527), a gross fully occupied yield of 2.9% (31 December 2018: 3.0%) and a net yield, using EPRA methodology, of 2.5% (31 December 2018: 2.4%). Included within the Portfolio are condominium properties with an aggregate value of EUR19.0 million (31 December 2018: EUR22.3 million).
Strong rental growth, falling vacancy
30 June 2019 30 June 2018 31 December
2018
Total sqm ('000) 179.4 178.2 183.1
------------- ------------- ------------
Gross in place rent per
sqm(1) (EUR) 8.7 8.4 8.6
------------- ------------- ------------
Like-for-like rent per
sqm growth 5.2% 9.9% 7.4%
------------- ------------- ------------
Vacancy % 4.2 5.6 4.8
------------- ------------- ------------
EPRA Vacancy % 2.5 2.8 2.8
------------- ------------- ------------
(1) Gross in place rent per sqm was EUR8.3 for the Berlin portfolio as at 30 June 2018.
After considering the impact of acquisitions and disposals, like for like rental income per square metre grew 5.2% compared with 30 June 2018. Like-for-like rental income grew 5.8% over the same period, reflecting the fall in vacancy over the year.
Gross in-place rent was EUR8.7 per sqm as at 30 June 2019, an increase of 4.8% compared with 30 June 2018 for the Berlin portfolio.
Reported vacancy at 30 June 2019 was 4.2% (30 June 2018: 5.6%). On an EPRA basis, which adjusts for units undergoing development and made available for sale, the vacancy rate was 2.5% (30 June 2018: 2.8%).
During the first six months of 2019, 144 new leases were signed, representing a first-half letting rate of approximately 6% of units. The average rent achieved on new lettings was EUR12.2 per sqm, a 4.3% increase on the same period in 2018.
PSD was able to re-let units at levels set by the free market. During the first six months of 2019, new leases were signed at an average premium of 39.9% to passing rents. The proposed Berlin rent-cap did not affect the first half reversionary re-letting premium.
Acquisitions & Disposals
During the first six months of 2019, two buildings with an aggregate valuation of EUR5.5 million were notarised for acquisition. In total, these buildings represent 26 units (23 residential and 3 commercial), at an average price per sqm of EUR2,987. The acquired properties complement the existing Portfolio, adding an initial 1% to rental income.
Acquisitions have been financed using a combination of debt and equity, with an achieved loan-to-value ratio of approximately 50%.
Portfolio enhancements
During the first half of 2019, a total of EUR3.0 million was invested across the Portfolio (H1 2018 EUR3.4 million). These items are recorded as capital expenditure in the Financial Statements and a further EUR0.8 million incurred on repairs and maintenance has been expensed through the profit and loss account.
Condominium sales
PSD's condominium strategy involves the division and resale of selected apartment blocks as private units. This is subject to full regulatory approval and involves the legal splitting of the freeholds in properties that have been identified as being suitable for condominium conversion.
During the first half of 2019, four condominiums units were notarised for sale totalling EUR2.5 million (H1 2018: EUR6.1 million). Seven unit sales completed, with an aggregate value of EUR3.8 million (30 June 2018: EUR5.7 million). The average achieved value per sqm for the residential units was EUR4,334, representing a 16.7% premium to the average 30 June 2019 residential portfolio value.
Since June 2019, ten additional apartments have been notarised for sale for an aggregate value of EUR3.9 million.
As at 25 September 2019, 55% of the Portfolio had been registered as condominiums, providing opportunities for the implementation of further projects where appropriate. Planning applications for a further 35% of the portfolio are at varying stages of completion.
Condominium agreement with Accentro Real Estate AG to sell remaining Boxhagener Strasse units
Since the start of sales in Boxhagener Strasse, PSD's largest condominium project to date, PSD has successfully sold a total of 42 residential units and 4 commercial units to owner-occupiers, tenants and investors. The remaining 21 units are currently occupied, five of which are currently notarised for disposal.
In order to accelerate the sales process of the remaining Boxhagener Strasse units, as previously announced, PSD concluded an agreement in August with Accentro Real Estate AG, one of Germany's 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 PSD. After 18 months, Accentro is contracted to purchase any unsold units from the fund for a cash consideration, guaranteeing revenues on completion of contract.
Debt and gearing
As at 30 June 2019, PSD had gross borrowings of EUR190.4 million (31 December 2018: EUR195.3 million) and cash balances of EUR12.4 million (31 December 2018: EUR26.9 million), resulting in net debt of EUR178.0 million (31 Dec 2018: EUR168.4m) and a net loan to value on the portfolio of 26.8% (31 December 2018: 26.1%).
The decrease in gross debt in the period partly results from debt repayments of EUR3.8 million associated with the sale of condominiums in the first half of the year, the remainder being amortisation repayments. This was offset by the disbursement of EUR0.9 million of debt secured against new acquisitions. The decrease in cash balances, and resulting rise in net loan to value, arise from acquisitions during the first half of the year, alongside payment of dividends.
Nearly all PSD's debt has interest rates which have been fixed through hedging and, as at 30 June 2019, the blended interest rate of PSD's loan book was 2.1% (30 June 2018: 2.1%). The average remaining duration of the loan book at 30 June 2019 had decreased to 7.2 years (30 June 2018: 8.1 years).
Following a strategic review of PSD's liability structure, a new EUR240 million term loan on improved terms was completed on 12 September. The new facility was agreed with Natixis Pfandbriefbank AG and comprises of two tranches, being a refinancing facility for EUR190 million and a further facility for EUR50 million. As well as increasing the gross loan-to-value on the Portfolio to a level closer to the stated goal in the listing prospectus, the refinancing provides more flexibility.
The Refinancing Facility, which was partly used to refinance existing indebtedness of c. EUR119 million, is a seven-year, interest-only loan (eliminating the previous amortisation obligations) with a margin of 115bp over 3-month Euribor, floored at zero. The outstanding swap portfolio was restructured to provide interest rate hedging to match the new loan maturity. This facility was drawn on 13 September 2019, after which PSD's gross Loan to value (excluding cash held on balance sheet) increased from 28.6% to 39.2%, while the overall cost of the refinanced debt decreased from 2.19% to 2.13%. The weighted average financing term remained unchanged at c.7 years. The remainder of the Refinancing Facility will be used to fund working capital, capital expenditure, potential opportunities that may arise from any market dislocation and potential share buy-backs.
The additional EUR50 million facility is available for drawdown over a period of 24 months and carries a commitment fee of 57.5bp. On utilisation, the drawn amounts will be subject to the same terms as the Refinancing Facility.
Outlook
Changes to rental regulations are not a new phenomenon but the Mietendeckel proposals have very wide-ranging implications, as discussed above.
The new proposals will be legally challenged and PSD believes they are likely to be proven to be unlawful. However, in the near term the uncertainty surrounding the current proposals will inevitably affect market dynamics as owners prepare for the new regulatory environment. Notwithstanding the fact that there was no discernible slowdown in market transactions in the first six months of 2019, there has been a reduction in transaction activity in the second half as investors wait for more clarity on potential investment returns. Equity markets have also placed a significant discount on the valuations of listed Berlin residential businesses, reflecting current uncertainty, much of which should be removed in the event that the new rules are successfully challenged.
PSD has taken proactive steps as part of its strategic response to these changes as described above. These actions will help alleviate the short-term impact of the new rental laws if they are introduced, whilst maintaining strategic optionality within the portfolio if they fail to take effect or are subsequently repealed.
Pending finalisation and implementation of the proposed new rent proposals, the industry-wide response of property owners and tenants remains uncertain. However, although further growth in rental income will be difficult to achieve, PSD considers it unlikely that there will be a material adverse impact on total rental income in 2020.
Key Performance Indicators
PSD has chosen a number of Key Performance Indicators (KPI's), which the Board believes may help investors understand the performance of the Company and the underlying property portfolio.
-- The value of the property portfolio grew by 3.9% on a like-for-like for basis. This increase was driven by modest yield compression and an increase in like-for-like average rent per let sqm of 5.2% (H1 2018: 9.9%).
-- The EPRA vacancy of the Portfolio stood at 2.5% (30 June 2018: 2.8%).
-- The Group continued with its targeted condominium programme, agreeing sales of EUR2.5 million in the half year to 30 June 2019 (H1 2018: EUR6.1 million).
-- EPRA NAV per share increased by 3.3% to EUR4.73 as at 30 June 2019 (31 December 2018: EUR4.58).
-- The declared dividend for the half year 2019 was EUR2.35 cents (GBP2.1 pence) per share.
Change of administrator
With effect from on or around 4 October 2019, the fund administrator will change from Estera Fund Administrators (Jersey) Limited to Apex Financial Services (Alternative Funds) Limited.
Forward looking statements
The interim management report contains certain forward looking statements in respect of Phoenix Spree Deutschland Limited and the operation of its subsidiaries. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that may or may not occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. Nothing in this announcement should be construed as a profit forecast.
Responsibility statement
We confirm that to the best of our knowledge;
(a) the condensed set of financial statements gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, included in the consolidation as a whole as required by DTR 4.2.4R;
(b) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';
(c) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and their impact on the condensed set of financial statements and description of principal risks and uncertainties for the remaining six months of the year); and
(d) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).
By order of the Board of Directors
Condensed Consolidated Statement of
Comprehensive Income
For the period from 1 January 2019 to
30 June 2019
Six months Six months Year ended
ended ended
Notes 30 June 30 June 2018 31 December
2019 2018
(restated)
(unaudited) (unaudited) (audited)
EUR'000 EUR'000 EUR'000
Continuing Operations
Revenue 10,767 11,900 22,681
Property expenses 5 (7,476) (7,294) (15,763)
Gross profit 3,291 4,606 6,918
Administrative expenses 6 (1,483) (1,315) (3,194)
Gain on disposal
of investment property
(including investment
property held for
sale) 8 202 592 1,026
Investment property
fair value gain 11 21,648 21,677 66,146
Performance fee
due to property
advisor 21 (719) (103) (4,010)
Non-recurring
costs 7 (278) (785) (966)
Operating profit 22,661 24,672 65,920
Net finance
charge 9 (10,620) (5,314) (9,491)
Gain on financial 14 - -
assets
Profit before
taxation 12,041 19,358 56,429
Income tax expense 10 (979) (3,861) (11,071)
Profit after
taxation 11,062 15,497 45,358
Other comprehensive income - - -
Total comprehensive
income for the period 11,062 15,497 45,358
============= ============== =============
Total comprehensive income
attributable to:
Owners of the
parent 10,923 15,352 45,094
Non-controlling
interests 139 145 264
--------------
11,062 15,497 45,358
============= ============== =============
Earnings per share attributable to the owners
of the parent:
From continuing operations
Basic (EUR) 23 0.11 0.16 0.46
Diluted (EUR) 23 0.11 0.16 0.46
============= ============== =============
Condensed Consolidated Statement of
Financial Position
At 30 June 2019
As at As at As at
Notes 30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
EUR'000 EUR'000 EUR'000
ASSETS
Non-current
assets
Investment
properties 13 654,229 557,930 632,933
Property, plant
and equipment 66 96 88
Deferred tax
asset 10 2,206 708 948
Other financial
assets
at amortised
cost 15 865 2,380 2,406
657,366 561,114 636,375
Current Assets
Investment
properties
- held for sale 14 10,981 25,740 12,747
Other financial
assets
at amortised
cost 15 1,563 - -
Trade and other
receivables 16 12,079 12,697 7,531
Cash and cash
equivalents 12,416 40,872 26,868
37,039 79,309 47,146
Total assets 694,405 640,423 683,521
============== ============= ================
EQUITY AND
LIABILITIES
Current
liabilities
Borrowings 17 3,325 3,115 3,642
Trade and other
payables 18 9,092 7,513 10,429
Derivative
financial
instruments 19 - - 1,354
Current tax 10 1,406 2,874 1,387
Other financial
liabilities 20 7,490 - -
21,313 13,502 16,812
Non-current
liabilities
Borrowings 17 187,103 188,247 191,632
Derivative
financial
instruments 19 13,935 4,474 4,637
Other financial
liabilities 20 - 6,509 7,135
Non-current tax 10 - 3,721 -
Deferred tax
liability 10 55,666 45,472 53,458
256,704 248,423 256,862
Total
liabilities 278,017 261,925 273,674
============== ============= ================
Equity
Stated capital 22 196,578 196,578 196,578
Share based
payment reserve 21 4,729 103 4,010
Retained
earnings 212,953 179,947 207,270
Equity attributable to owners
of the parent 414,260 376,628 407,858
Non-controlling
interest 2,128 1,870 1,989
Total equity 416,388 378,498 409,847
-------------- ------------- ----------------
Total equity and
liabilities 694,405 640,423 683,521
============== ============= ================
Condensed Consolidated Statement of
Changes in Equity
For the period from 1 January 2019
to 30 June 2019
Attributable to the owners
of the parent
Stated Share Retained Total Non-controlling Total
capital based earnings interest equity
payment
reserve
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Balance at 1
January 2018 162,630 33,953 169,634 366,217 1,725 367,942
Comprehensive
income:
Profit for the
period - - 15,352 15,352 145 15,497
Other - - - - - -
comprehensive
income
Total
comprehensive
income
for the period - - 15,352 15,352 145 15,497
Transactions
with owners
-
recognised
directly in
equity:
Issue of shares 33,948 (33,948) - - - -
Dividends paid - - (5,039) (5,039) - (5,039)
Performance fee - 103 - 103 - 103
Adjustment to
performance
fee - (5) - (5) - (5)
Balance at 30
June 2018
(unaudited) 196,578 103 179,947 376,628 1,870 378,498
Comprehensive
income:
Profit for the
period - - 29,742 29,742 119 29,861
Other - - - - - -
comprehensive
income
Total
comprehensive
income
for the period - - 29,742 29,742 119 29,861
Transactions
with owners
-
recognised
directly in
equity:
Dividends paid - - (2,419) (2,419) - (2,419)
Performance fee - 3,907 - 3,907 - 3,907
Balance at 31
December
2018 (audited) 196,578 4,010 207,270 407,858 1,989 409,847
Comprehensive
income:
Profit for the
period - - 10,923 10,923 139 11,062
Other - - - - - -
comprehensive
income
Total
comprehensive
income
for the period - - 10,923 10,923 139 11,062
Transactions
with owners
-
recognised
directly in
equity:
Dividends paid - - (5,240) (5,240) - (5,240)
Performance fee - 719 - 719 - 719
Balance at 30
June 2019
(unaudited) 196,578 4,729 212,953 414,260 2,128 416,388
============ ============== ============= ========= ================ =========
The share based payment reserve had been established in relation
to the issue of shares for the payment of the performance fee of
the property advisor.
Condensed Consolidated Statement of Cash Flows
For the period from 1 January 2019 to 30 June 2019
Six months Six months Year ended
ended ended
30 June 2019 30 June 31 December
2018 2018
(unaudited) (unaudited) (audited)
EUR'000 EUR'000 EUR'000
Profit before taxation 12,041 19,358 56,429
Adjustments for:
Net finance charge 10,620 5,314 9,491
Gain on disposal of investment
property (202) (592) (1,026)
Investment property revaluation
gain (21,648) (21,677) (66,146)
Depreciation 8 8 16
Performance fee charge 719 103 4,010
-------------
Operating cash flows before movements
in working capital 1,538 2,514 2,774
(Increase) / decrease in receivables (4,548) (4,710) 6,492
(Decrease) / increase in payables (1,337) 5,421 3,908
-------------
Cash (used in)/generated from operating
activities (4,347) 3,225 13,174
Income tax
paid (10) (6) (4,678)
-------------
Net cash (used in)/generated from
operating activities (4,357) 3,219 8,496
Cash flow from investing activities
Proceeds on disposal of investment
property 7,574 84,263 86,021
Interest received 38 - 54
Capital expenditure on investment
property (3,029) (3,403) (7,943)
Property additions (2,225) (31,180) (47,329)
Disposals of property, plant and
equipment 14 (12) (12)
Net cash used in investing activities 2,372 49,668 30,791
Cash flow from financing activities
Interest paid on bank loans (2,381) (3,221) (5,118)
Repayment of bank loans (5,772) (50,723) (54,680)
Drawdown on bank loan facilities 926 19,791 27,660
Dividends paid (5,240) (5,039) (7,458)
-------------
Net cash generated from financing
activities (12,467) (39,192) (39,596)
Net increase in cash and cash equivalents (14,452) 13,695 (309)
Cash and cash equivalents at beginning
of period/year 26,868 27,182 27,182
Exchange losses on cash and cash
equivalents - (5) (5)
Cash and cash equivalents at end
of period/year 12,416 40,872 26,868
============= ============= ============
Reconciliation of Net Cash Flow
to Movement in Debt
Six months Six months Year ended
ended ended
30 June 2019 30 June 31 December
2018 2018
EUR'000 EUR'000 EUR'000
Cashflow from decrease in debt
financing (4,846) (30,932) (27,020)
Change in net debt resulting from
cash flows (4,846) (30,932) (27,020)
------------- ------------- ------------
Movement in debt in the
period/year (4,846) (30,932) (27,020)
Debt at the start of the period/year 195,274 222,294 222,294
Debt at the end of the period/year 190,428 191,362 195,274
============= ============= ============
Dividends paid during the six months to 30 June 2019 represent the
final year dividend relating to the year end 2018.
Notes to the Condensed Consolidated
Financial Statements
For the period from 1 January 2019
to 30 June 2019
1. General information
The Group consists of a Parent Company, Phoenix Spree Deutschland
Limited ('the Company'), incorporated in Jersey, Channel Islands
and all its subsidiaries ('the Group') which are incorporated and
domiciled in and operate out of Jersey, Guernsey and Germany. Phoenix
Spree Deutschland Limited is listed on the premium segment of the
Main Market of the London Stock Exchange.
The Group invests in residential and commercial property in Germany.
The registered office is at 13-14 Esplanade, St Helier, Jersey, JE1
1EE, Channel Islands.
2. Basis of
preparation
The interim set of condensed consolidated financial statements has
been prepared in accordance with the Disclosure and Transparency
Rules of the Financial Conduct Authority and with IAS 34 Interim
Financial Reporting as adopted by the European Union.
The interim condensed consolidated financial statements do not include
all the information and disclosures required in the annual financial
statements, and should be read in conjunction with the Group's annual
financial statements for the year ended 31 December 2018.
As required by the Disclosure and Transparency Rules of the Financial
Conduct Authority, the financial statements have been prepared applying
the accounting policies and presentation that were applied in the
preparation of the Company's published consolidated financial statements
for the year ended 31 December 2018.
The comparative figures for the financial year ended 31 December
2018 are extracted from but do not comprise, the Group's annual financial
statements for that financial year. The auditor's report on those
financial statements was unqualified and did not contain statements
where the auditor is required to report by exception
The interim condensed consolidated financial statements were authorised
and approved for issue on 25 September 2019.
The interim condensed consolidated financial statements are neither
reviewed nor audited, and do not constitute statutory accounts within
the meaning of Section 105 of the Companies (Jersey) Law 1991.
2.1 Change of
accounting
policy
In 2018, the Group has carried out a review of IFRS 15, Revenue from
Contracts with Customers, which is effective from 1 January 2018.
The main outcome of the review is to recognise service charges to
tenants as revenue, and service costs recharged to tenants as property
costs, whereas in prior years, service charges incurred on the properties
were offset against service charge income. In accordance with the
transition provisions of IFRS 15, the Group has adopted the new rules
retrospectively and has restated comparatives from the 2018 interim
period onward. For the 2018 interim period the effect has been to
recognise service charge revenue of EUR2.772 million, and property
expenses of EUR2.772 million, and to increase trade and other receivables,
and therefore assets, by EUR5,178 million, and service charges payable,
and therefore liabilities, by EUR5.178 million. The change of policy
has no effect on reported profit or net assets.
2.2 Going concern
The interim condensed consolidated financial statements have been
prepared on a going concern basis which assumes the Group will be
able to meet its liabilities as they fall due for the foreseeable
future. The Directors have prepared cash flow forecasts which show
that the cash generated from operating activities will provide sufficient
cash headroom for the foreseeable future.
2.3 New standards and
interpretations
The following new standards, amendments or interpretations effective
for annual periods beginning on or after 1 January 2019 have been
adopted and had no impact on the Group;
Title
IFRS 16 - Leases
IFRIC Interpretation 23 Uncertainty over Income Tax Treatment
Amendments to IFRS 9: Prepayment Features with Negative Compensation
Amendments to IAS 19: Plan Amendment, Curtailment or Settlement
Amendments to IAS 28: Long-term interests in associates and joint
ventures
Annual Improvements 2015-2017 Cycle
3. Critical accounting estimates and judgements
The preparation of condensed consolidated financial statements in
conformity with IFRS requires the Group to make certain critical
accounting estimates and judgements. In the process of applying the
Group's accounting policies, management has decided the following
estimates and assumptions have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the financial period;
i) Estimate of fair value of investment properties
The best evidence of fair value is current prices in an active market
of investment properties with similar leases and other contracts.
In the absence of such information, the Group determines the amount
within a range of reasonable fair value estimates. In making its
judgement, the Group considers information from a variety of sources,
including:
a) Discounted cash flow projections based on reliable estimates of
future cash flows, derived from the terms of any existing lease and
other contracts, and (where possible) from external evidence such
as current market rents for similar properties in the same location
and condition, and using discount rates that reflect current market
assessments of the uncertainty in the amount and timing of the cash
flows.
b) Current prices in an active market, and its third party independent
experts, for properties of different nature, condition or location
(or subject to different lease or other contracts), adjusted to reflect
those differences.
c) Recent prices of similar properties in less active markets, with
adjustments to reflect any changes in economic conditions since the
date of the transactions that occurred at those prices.
For further information with regard to the movement in the fair value
of the Group's investment properties, refer to the management report
on page 9.
ii) Judgment in relation to the recognition of assets held for sale
Management has assumed the likelihood of investment properties -
held for sale, being sold within 12 months, in accordance with the
requirement of IFRS 5. Management considers that based on historical
and current experience that the properties can be reasonably expected
to sell within 12 months.
4. Segmental information
In prior periods, information reported to the Board of Directors,
the chief operating decision maker, for the purposes of resource
allocation and assessment of segment performance was focussed on
the different revenue streams that existed within the Group. In these
periods the Group's principal reportable segments under IFRS 8 were
as follows:
- Residential; and
- Commercial.
The Group is required to report financial and descriptive information
about its reportable segments. Reportable segments are operating
segments or aggregations of operating segments that meet the following
specified criteria:
-- its reported revenue, from both external customers and intersegment
sales or transfers, is 10 per cent or more of the combined revenue,
internal and external, of all operating segments, or
-- the absolute measure of its reported profit or loss is 10 per
cent or more of the greater, in absolute amount, of (i) the combined
reported profit of all operating segments that did not report a loss
and (ii) the combined reported loss of all operating segments that
reported a loss, or
-- its assets are 10 per cent or more of the combined assets of all
operating segments.
Management have applied the above criteria to the commercial segment
which has resulted in the commercial segment not being more than
10% of any specific requirements as set out therein. The Group does
not own any commercial buildings nor does it report directly on the
commercial results. Therefore, the Group has not included any further
segmental analysis within these condensed consolidated unaudited
interim financial statements.
5. Property
expenses
30 June 30 June 31 December
2019 2018 2018
(restated)
(unaudited) (unaudited) (audited)
EUR'000 EUR'000 EUR'000
Property
management
expenses 551 517 1,024
Repairs and
maintenance 831 897 1,710
Impairment charge
-
trade receivables 44 101 29
Other property
expenses
(restated - see
note
2.1) 3,096 3,050 7,053
Property advisors'
fees and expenses 2,954 2,729 5,947
7,476 7,294 15,763
============================ ======================== ====================================
6. Administrative
expenses
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
EUR'000 EUR'000 EUR'000
Secretarial &
administration
fees 369 402 880
Legal &
professional
fees 612 658 1,160
Costs associated with refinancing 250 - -
Directors' fees 123 88 300
Audit and
accountancy
fees 208 231 840
Bank charges 9 10 54
Profit / (loss) on foreign
exchange (16) 1 133
Depreciation 8 8 16
Other income (80) (83) (189)
1,483 1,315 3,194
============================ ======================== ====================================
Costs associated with the refinancing have arisen due to a valuation
undertaken by a prospective financing candidate. The candidate was
not subsequently chosen as the preferred lender
7. Non-recurring
costs
Non-recurring costs relate to legal and professional fees incurred
during a significant transaction which was considered by the Board
but not pursued totalling EUR278,000 (December 2018: EUR966,000,
June 2018: EUR785,000).
8. Gain on disposal of investment
property (including investment property
held for sale)
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
EUR'000 EUR'000 EUR'000
Net proceeds 7,687 82,707 86,959
Book value of
disposals (7,372) (81,847) (84,995)
Disposal costs (113) (268) (938)
202 592 1,026
============================ ======================== ====================================
Net proceeds relating to condominium sales amount to EUR3,766,900
and it includes a sale of a large commercial unit in Boxhagener str
for its book value before disposal cost. Sales of residential condominiums
resulted in a profit over the average value per square metre for
the buildings of EUR402,000 before transaction costs.
The net book value of the asset sold is calculated on a per square
metre rate, based on the prior period valuation.
9. Net finance
charge
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
EUR'000 EUR'000 EUR'000
Interest income (38) (27) (54)
Interest from
partners'
loans (22) (57) (83)
Loss on interest
rate
swap 7,944 1,141 2,658
Interest payable
on
bank borrowings 2,381 3,221 5,118
Finance
arrangement
fee amortisation - 190 381
Finance charge on
redemption
liability 355 846 1,471
10,620 5,314 9,491
============================ ======================== ====================================
10. Income tax
expense
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
The tax charge for the period
is as follows: EUR'000 EUR'000 EUR'000
Current tax charge 29 3,687 3,151
Adjustment in - - -
respect
of prior year
Deferred tax
charge
- origination and
reversal
of temporary
differences 950 174 7,920
979 3,861 11,071
============================ ======================== ====================================
The tax charge for the year can be reconciled to the theoretical
tax charge on the profit in the income statement as follows:
30 June 30 June 31 December
2019 2018 2018
EUR'000 EUR'000 EUR'000
Profit before tax
on
continuing
operations 12,041 19,358 56,429
Tax at German
income
tax rate of 15.8%
(2018:
15.8%) 1,902 3,059 8,916
Income not taxable (31) (94) (162)
Tax effect of (1,258) - -
losses
brought forward
Tax effect of
expenses
that are not
deductible
in determining
taxable
profit 366 896 2,317
Total tax charge
for
the period/year 979 3,861 11,071
============================ ======================== ====================================
Reconciliation of
current
tax liabilities
30 June 30 June 31 December
2019 2018 2018
EUR'000 EUR'000 EUR'000
Balance at
beginning
of period/year 1,387 2,914 2,914
Tax paid during
the
period/year (10) (6) (4,678)
Current tax charge 29 3,687 3,151
Balance at end of
period/year 1,406 6,595 1,387
============================ ======================== ====================================
Reconciliation of
deferred
tax
Capital Interest Total
gains on rate swaps
properties
EUR'000 EUR'000 EUR'000
Asset Asset
Balance at 1
January
2018 (45,117) 527 (44,590)
Charged to the statement of comprehensive
income (355) 181 (174)
Deferred tax (liability) / asset
at 30 June 2018 (45,472) 708 (44,764)
Charged to the statement of comprehensive
income (7,986) 240 (7,746)
Deferred tax (liability) / asset at
31 December 2018 (53,458) 948 (52,510)
---------------------------- ------------------------ ------------------------------------
Charged to the statement of comprehensive
income (2,208) 1,258 (950)
Deferred tax (liability) / asset
at 30 June 2019 (55,666) 2,206 (53,460)
============================ ======================== ====================================
11. Investment property fair
value gain
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
EUR'000 EUR'000 EUR'000
Investment
property
fair value gain 21,648 21,677 66,146
============================ ======================== ====================================
Further information on investment properties is shown in note 13.
12. Dividends
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
EUR'000 EUR'000 EUR'000
Dividends on participating shares
proposed for approval (not
recognised
as a liability at 30 June 2019)
Proposed interim dividend for
the year ended 31 December 2019
of EUR2.35 cents (2.10p) (2018:
EUR2.35c (2.10p)) per share 2,368 2,368 -
Proposed final dividend for
the year ended 31 December 2018
of EUR5.15 cents (4.62p) (2017:
EUR5.0 cents (4.4p)) per share - - 5,189
============================ ======================== ====================================
Amounts recognised as distributions to equity
holders in the period:
Interim dividend for the year
ended 31 December 2018 of EUR2.35
cents (2.1p) (2017: EUR1.9 cents
(1.6p)) per share - - 2,420
Final dividend for the year
ended 31 December 2018 of
EUR5.15c
(4.62p) (2017: EUR5.00c (4.4p))
per share 5,189 5,039 -
============================ ======================== ====================================
The proposed dividend has not been included as a liability in these
condensed consolidated financial statements. The proposed dividend
is payable to all shareholders on the Register of Members on 11 October
2018. The total estimated dividend to be paid is 2.1p per share.
The payment of this dividend will not have any tax consequences for
the Group.
13. Investment
properties
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
Fair Value EUR'000 EUR'000 EUR'000
Balance at
beginning
of period/year 645,680 609,257 609,257
Capital
expenditure 3,029 3,403 7,943
Property additions 2,225 31,180 47,329
Disposals (7,372) (81,847) (84,995)
Fair value gain 21,648 21,677 66,146
---------------------------- ------------------------ ------------------------------------
Investment properties at fair
value - as set out in the report
by JLL 665,210 583,670 645,680
Assets considered
as
"Held for Sale"
(Note
14) (10,981) (25,740) (12,747)
Balance at end of
period/year 654,229 557,930 632,933
============================ ======================== ====================================
The property portfolio was valued at 30 June 2019 by the Group's
independent valuers, Jones Lang LaSalle GmbH ('JLL'), in accordance
with the methodology described below. The valuations were performed
in accordance with the current Appraisal and Valuation Standards,
8th edition (the 'Red Book') published by the Royal Institution of
Chartered Surveyors (RICS).
The valuation is performed on a building-by-building basis and the
source information on the properties including current rent levels,
void rates and non-recoverable costs was provided to JLL by the Property
Advisors PMM Partners (UK) Limited. Assumptions with respect to rental
growth, adjustments to non-recoverable costs and the future valuation
of these are those of JLL. Such estimates are inherently subjective
and actual values can only be determined in a sales transaction.
Having reviewed the JLL report, the Directors are of the opinion
that this represents a fair and reasonable valuation of the properties
and have consequently adopted this valuation in the preparation of
the condensed consolidated financial statements.
The valuations have been prepared by JLL on a consistent basis at
each reporting date and the methodology is consistent and in accordance
with IFRS which requires that the 'highest and best use' value is
taken into account where that use is physically possible, legally
permissible and financially feasible for the property concerned,
and irrespective of the current or intended use.
All properties are valued as Level 3 measurements under the fair
value hierarchy (see note 25) as the inputs to the discounted cash
flow methodology which have a significant effect on the recorded
fair value are not observable.
The unrealised fair value gain in respect of investment property
is disclosed in the condensed consolidated statement of comprehensive
income as 'Investment property fair value gain'.
Valuations are undertaken using the discounted cash flow valuation
technique as described below and with the inputs set out as follows:
Discounted cash flow methodology (DCF)
The fair value of investment properties is determined using discounted
cash flows.
Under the DCF method, a property's fair value is estimated using
explicit assumptions regarding the benefits and liabilities of ownership
over the asset's life including an exit or terminal value. As an
accepted method within the income approach to valuation the DCF method
involves the projection of a series of cash flows on a real property
interest. To this projected cash flow series, an appropriate, market-derived
discount rate is applied to establish the present value of the income
stream associated with the real property.
The duration of the cash flow and the specific timing of inflows
and outflows are determined by events such as rent reviews, lease
renewal and related lease up periods, re-letting, redevelopment,
or refurbishment. The appropriate duration is typically driven by
market behaviour that is a characteristic of the class of real property.
Periodic cash flow is typically estimated as gross income less vacancy,
non-recoverable expenses, collection losses, lease incentives, maintenance
cost, agent and commission costs and other operating and management
expenses. The series of periodic net operating incomes, along with
an estimate of the terminal value anticipated at the end of the projection
period, is then discounted.
The Group categorises all investment properties
in the following three ways;
Rental Scenario
Where properties have been valued under the "Discounted Cashflow
Methodology" and are intended to be held by the Group for the foreseeable
future, they are considered valued under the "Rental Scenario" This
will equal the "Investment Properties" line in the Non-Current Assets
section of the condensed consolidated statement of financial position.
Condominium
scenario
Where properties have the potential or the benefit of all relevant
permissions required to sell apartments individually (condominiums)
then we refer to this as a 'condominium scenario'. Expected sales
in the coming year from these assets are considered held for sale
under IFRS 5 and can be seen in note 14. The additional value is
reflected by using a lower discount rate under the DCF Methodology.
Properties which do not have the benefit of all relevant permissions
are described as valued using a standard 'rental scenario'. Included
in properties valued under the condominium scenario are properties
not yet released to held for sale as only a portion of the properties
are forecast to be sold in the coming 12 months.
Disposal Scenario
Where properties have been notarised for sale prior to the reporting
date, but have not completed; they are held at their notarised disposal
value. These assets are considered held for sale under IFRS 5 and
can be seen in note 14.
The table below sets out the assets valued
using these 3 scenarios:
30 June 30 June 31 December
2019 2018 2018
EUR'000 EUR'000 EUR'000
Rental scenario 646,210 557,930 619,430
Condominium
scenario 19,000 25,740 22,330
Disposal scenario - - 3,920
Total 665,210 583,670 645,680
============================ ======================== ====================================
14. Investment properties -
held for sale
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
EUR'000 EUR'000 EUR'000
Fair value - held for sale investment properties
At beginning of
period/year 12,747 106,897 106,897
Transferred from investment
properties 5,048 - 5,850
Transferred (to) investment
properties - - (15,434)
Capital
expenditure 267 - -
Properties sold (7,372) (81,846) (84,995)
Valuation gain/(loss) on
apartments
held for sale 291 689 429
At end of
period/year 10,981 25,740 12,747
============================ ======================== ====================================
Investment properties are re-classified as current assets and described
as 'held for sale' in three different situations: properties notarised
for sale at the reporting date, properties where at the reporting
date the Group has obtained and implemented all relevant permissions
required to sell individual apartment units, and efforts are being
made to dispose of the assets ('condominium'); and properties which
are being marketed for sale but have currently not been notarised.
Properties notarised for sale by the reporting date are valued at
their disposal price (disposal scenario), and other properties are
valued using the condominium or rental scenarios (see note 13) as
appropriate. The table below sets out the respective categories:
30 June 30 June 31 December
2019 2018 2018
EUR'000 EUR'000 EUR'000
Rental scenario 1,930 - 1,931
Condominium
scenario 9,051 25,740 6,896
Disposal scenario - - 3,920
10,981 25,740 12,747
============================ ======================== ====================================
Investment properties held for sale are all expected to be sold within
12 months of the reporting date based on Management knowledge of
current and historic market conditions.
15. Other financial assets at
amortised cost
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
EUR'000 EUR'000 EUR'000
Current
Balance at - - -
beginning
of period/year
Accrued interest - - -
Transferred from
non-current
assets 1,563 - -
Balance at end of 1,563 - -
period/year
============================ ======================== ====================================
Non-current
Balance at
beginning
of period/year 2,406 2,323 2,323
Accrued interest 22 57 83
Transferred to (1,563) - -
current
assets
Balance at end of
period/year 865 2,380 2,406
============================ ======================== ====================================
The Group entered into loan agreements with Mike Hilton and Paul
Ruddle, then Directors of PMM Partners (UK) Limited, in connection
with the acquisition of PSPF. The loans bear interest at 4% per annum
and has a maturity of less than one year at 30 June 2019 and were
transferred to current assets during the period. Mike Hilton remains
a Director of PMM Residential Limited.
The Group also entered into a loan agreement with the minority interest
of Accentro Real Estate AG (formerly Blitz B16 - 210 GmbH) in relation
to the acquisition of the assets as share deals. This loan bears
interest at 3% per annum.
These assets are considered to have low credit risk and any loss
allowance would be immaterial.
None of the loans and receivables were either past due or impaired
in the prior year.
16. Trade and
other
receivables
30 June 30 June 31 December
2019 2018 2018
(restated)
(unaudited) (unaudited) (audited)
EUR'000 EUR'000 EUR'000
Current
Trade receivables 651 464 1,045
Less: impairment
provision (357) (241) (313)
---------------------------- ------------------------ ------------------------------------
Net receivables 294 223 732
Prepayments and
accrued
income 3,923 4,130 549
Investment
property
disposal proceeds
receivable 490 408 1,167
Service charges
receivable
(30 June 2018
restated
- see note 2.1) 6,372 7,078 4,766
Other receivables
(30
June 2018
restated
- see note 2.1) 1,000 858 317
12,079 12,697 7,531
============================ ======================== ====================================
17. Borrowings
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
EUR'000 EUR'000 EUR'000
Current
liabilities
Bank loans - Deutsche
Genossenschafts-Hypothekenbank
AG 2,150 2,134 2,596
Bank loans - Berliner Sparkasse 1,175 981 1,046
------------------------ ------------------------------------
3,325 3,115 3,642
Non-current
liabilities
Bank loans - Deutsche
Genossenschafts-Hypothekenbank
AG 117,283 124,578 122,054
Bank loans - Berliner Sparkasse 69,820 63,669 69,578
187,103 188,247 191,632
190,428 191,362 195,274
============================ ======================== ====================================
For further information on borrowings, refer to the management report
on page 11.
18. Trade and
other
payables
30 June 30 June 31 December
2019 2018 2018
(restated)
(unaudited) (unaudited) (audited)
EUR'000 EUR'000 EUR'000
Trade payables (30 June 2018
restated - see note 2.1) 247 1,805 1,808
Accrued liabilities 2,517 530 4,592
Service charges payable (30
June 2018 restated - see note
2.1) 6,328 5,178 4,028
Deferred income - - 1
9,092 7,513 10,429
============================ ======================== ====================================
19. Derivative financial
instruments
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
EUR'000 EUR'000 EUR'000
Interest rate swaps - carried at fair
value through profit or loss
At beginning of
period/year 5,991 3,333 3,333
Loss in movement in fair value
through profit or loss 7,944 1,141 2,658
At end of
period/year 13,935 4,474 5,991
============================ ======================== ====================================
The notional principal amounts of the outstanding interest rate swap
contracts at 30 June 2019 were EUR207,559,000 (December 2018: EUR206,690,000,
June 2018: EUR200,165,000). At 30 June 2019 the fixed interest rates
vary from 0.625% to 1.01% (December 2018: 0.625% to 1.07%, June 2018:
0.402% to 1.07%) above the main factoring Euribor rate.
Maturity analysis of interest rate
swaps
30 June 30 June 31 December
2019 2018 2018
EUR'000 EUR'000 EUR'000
Less than 1 year - - 1,354
Between 1 and 2 - - -
years
Between 2 and 5 - - -
years
More than 5 years 13,935 4,474 4,637
13,935 4,474 5,991
============================ ======================== ====================================
20. Other
financial
liabilities
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
EUR'000 EUR'000 EUR'000
Current
Balance at - - -
beginning
of period/year
Transferred from non-current liabilities 7,490 - -
Balance at end of 7,490 - -
period/year
============================ ======================== ====================================
Non-current
Balance at
beginning
of period/year 7,135 5,663 5,663
Profit share attributable to
NCI in PSPF 355 846 1,472
Transferred to (7,490) - -
current
liabilities
Balance at end of
period/year - 6,509 7,135
============================ ======================== ====================================
The redemption liability relates to the put option held by the minority
shareholders of PSPF for the purchase of the minority interest in
PSPF. The option period starts on 6 June 2020. The amount of the
purchase price will be based on the EPRA NAV on the consolidated
statement of financial position date as well as the movement in the
EPRA NAV during the year and the proportion of EPRA NAV attributable
to the non-controlling interest in PSPF.
A portion of the liability (EUR1,175k, December 2018: (EUR1,124k),
June 2018: (EUR980k)) is recognised to cover the tax charge of the
minority in PSPF on the proceeds received if the put option is exercised.
The recognition of the redemption liability has been accounted for
as a reduction in the Non-Controlling Interest with the remainder
of the recognition against the Group's retained earnings. Also see
the condensed consolidated statement of changes in equity for the
recognition accounting.
21. Share based payment reserve
Performance
fee
EUR'000
Balance at 1
January
2018 33,953
Transfer to stated capital - settled
by issue of shares (33,948)
Adjustment to
performance
fee (5)
Fee charge for the
period 103
------------------------------------
Balance at 30 June
2018 103
Fee charge for the
period 3,907
------------------------------------
Balance at 31
December
2018 4,010
Fee charge for the
period 719
Balance at 30 June
2019 4,729
====================================
Property Advisor Fees (from
1 January 2019)
On 1 January 2019, PMM Partners (UK) Limited was replaced as Property
Advisor by PMM Residential Limited. A Property Advisor and Investors
Relations agreement was entered in to between the Group and PMM Residential
Limited also with an effective date of 1 January 2019.
Under the new Property Advisory Agreement for providing property
advisory services, the Property Advisor will be entitled to a Portfolio
and Asset Management Fee as follows:
(i) 1.20% of the EPRA NAV of the Group where the EPRA
NAV of the Group is equal to or less than EUR500 million;
and
(ii) 1% of the EPRA NAV of the Group greater than EUR500
million.
The Property Advisor is entitled to a capex monitoring fee equal
to 7% of any capital expenditure incurred by any Subsidiary which
the Property Advisor is responsible for managing.
The Property Advisor is entitled to receive a finance
fee equal to:
(i) 0.1% of the value of any borrowing arrangement which
the Property Advisor has negotiated and/or supervised;
and
(ii) a fixed fee of GBP1,000 in respect of any borrowing
arrangement which the Property Advisor has renegotiated
or varied.
The Property Advisor is entitled to receive a transaction fee fixed
at GBP1,000 in respect of any acquisition or disposal of property
by any Subsidiary.
The Property Advisor shall be entitled to a fee for
Investor Relations Services at the annual rate of GBP75,000
payable quarterly in arrears.
The management fee will be reduced by the aggregate amount of any
transaction fees and finance fees payable to the Property Advisor
in respect of that calendar year.
Performance Fee (from 1 January
2019)
The Property Advisor is entitled to an asset and estate management
performance fee, measured over consecutive three year periods, equal
to 15% of the excess (or in the case of the initial performance period
ending prior to 31 December 2020, 16%) by which the annual EPRA NAV
total return of the Group exceeds 8% per annum, compounding (the
'Performance Fee'). The Performance Fee is subject to a high watermark,
being the higher of:
(i) EPRA NAV per share at 1 July 2018; and
(ii) the EPRA NAV per share at the end of a Performance Period in
relation to which a performance fee was earned in accordance of the
provisions continued with the Property Advisor and Investor Relations
Agreement.
The Company's EPRA NAV performance for the three year's ending 31
December 2017 had resulted in a performance fee due under the Property
Advisory Agreement to the Property Advisor of EUR33.948 million.
The parties agreed that this performance fee (but not any further
performance fees that may become due) shall be settled through the
issuance by the Company to the Property Advisor of 8,260,065 new
shares in the Company at EPRA NAV per share. 50% of the shares issued
in settlement of this fee are subject to a 12-month restriction on
disposal. The shares were admitted to trading on the premium segment
of the Official List and to trading on the Main Market of the London
Stock Exchange on 4 May 2018.
(i) 1.50% of the EPRA NAV of the Group where the EPRA NAV of the
Group is equal to or less than EUR250 million; and
(ii) 1.25% of the EPRA NAV of the Group between EUR250 million and
EUR500 million; and
(iii) 1% of the EPRA NAV of the Group greater than EUR500 million.
The performance fee is reduced by the aggregate amount of any transaction
fees and finance fees payable to the Property Advisor in respect
of that calendar year.
The Property Advisor is entitled to a capex monitoring fee equal
to 7% of any capital expenditure incurred by any subsidiary which
the Property Advisor is responsible for managing (the 'Capex Monitoring
Fee').
The Property Advisor is entitled to receive a finance fee equal to:
(i) 0.1% of the value of any borrowing arrangement which the Property
Advisor has negotiated and/or supervised; and
(ii) a fixed fee of GBP1,000 in respect of any borrowing arrangement
which the Property Advisor has renegotiated or varied.
The Property Advisor is entitled to receive a transaction fee fixed
at GBP1,000 in respect of any acquisition or disposal of property
by any subsidiary.
Details of the fees paid to the Property Advisor are set out in note
26.
22. Stated capital
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
EUR'000 EUR'000 EUR'000
Issued and fully
paid:
At 1 January 196,578 162,630 162,630
Issued during the period/year at EUR4.11
per share - 33,948 33,948
196,578 196,578 196,578
============================ ======================== ====================================
The number of shares in issue at 30 June 2019 was 100,751,409 (31
December 2018: 100,751,409, 30 June 2018: 100,751,409).
23. Earnings per
share
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
Earnings for the purposes of
basic earnings per share being
net profit attributable to owners
of the parent (EUR'000) 10,923 15,352 45,094
Weighted average number of
ordinary
shares for the purposes of basic
earnings per share (Number) 100,751,409 95,046,876 97,945,250
Effect of dilutive potential
ordinary shares (Number) 1,159,594 26,421 1,014,078
Weighted average number of
ordinary
shares for the purposes of
diluted
earnings per share (Number) 101,911,003 95,073,297 98,959,328
============================ ======================== ====================================
Earnings per
share
(EUR) 0.11 0.16 0.46
Diluted earnings
per
share (EUR) 0.11 0.16 0.46
============================ ======================== ====================================
24. Net asset value per share and
EPRA net asset value
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
Net assets
(EUR'000) 414,260 376,628 407,858
Number of participating ordinary shares 100,751,409 100,751,409 100,751,409
Net asset value
per
share (EUR) 4.11 3.74 4.05
============================ ======================== ====================================
EPRA net asset
value
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
Net assets
(EUR'000) 414,260 376,628 407,858
Add back deferred tax assets
and liabilities, derivative
financial instruments and share
based payment reserves (EUR'000) 62,666 49,135 53,137
EPRA net asset
value
(EUR'000) 476,926 425,763 460,995
EPRA net asset
value
per share (EUR) 4.73 4.23 4.58
25. Financial
instruments
The Group is exposed to the risks that arise from its use of financial
instruments. This note describes the objectives, policies and processes
of the Group for managing those risks and the methods used to measure
them. Further quantitative information in respect of these risks
is presented throughout the condensed consolidated financial statements.
Principal financial instruments
The principal financial instruments used by the Group, from which
financial instrument risk arises, are as follows:
-- financial assets
-- cash and cash equivalents
-- trade and other receivables
-- trade and other payables
-- borrowings
-- derivative financial instruments
The Group held the following financial assets at each reporting date:
30 June 30 June 31 December
2019 2018 2018
(restated)
(unaudited) (unaudited) (audited)
EUR'000 EUR'000 EUR'000
Loans and
receivables
Trade and other receivables
- current (30 June 2018 restated
- see note 2.1) 8,156 8,567 6,982
Cash and cash
equivalents 12,416 40,872 26,868
Loans and
receivables 2,428 2,380 2,406
23,000 51,819 36,256
---------------------------- ------------------------ ------------------------------------
The Group held the following financial liabilities at each reporting
date:
30 June 30 June 31 December
2019 2018 2018
(restated)
(unaudited) (unaudited) (audited)
EUR'000 EUR'000 EUR'000
Held at amortised
cost
Borrowings
payable:
current 3,325 3,115 3,642
Borrowings
payable:
non-current 187,103 188,247 191,632
Other financial
liabilities - 6,509 7,135
Trade and other payables (30
June 2018 restated - see note
2.1) 9,092 7,513 10,429
199,520 205,384 212,838
---------------------------- ------------------------ ------------------------------------
Fair value through
profit or loss
Derivative
financial
liability -
interest
rate swaps 13,935 4,474 4,637
Excess hedge due
to
property disposal - - 1,354
13,935 4,474 5,991
---------------------------- ------------------------ ------------------------------------
213,455 209,858 218,829
============================ ======================== ====================================
Fair value of financial
instruments
With the exception of the variable rate borrowings, the fair values
of the financial assets and liabilities are not materially different
to their carrying values due to the short term nature of the current
assets and liabilities or due to the commercial variable rates applied
to the long term liabilities.
The interest rate swap was valued externally by the respective counterparty
banks by comparison with the market price for the relevant date.
The interest rate swaps are expected to mature between February 2025
and March 2028.
The Group uses the following hierarchy for determining and disclosing
the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical
assets or liabilities;
Level 2: other techniques for which all inputs which have a significant
effect on the recorded fair value are observable, either directly
or indirectly; and
Level 3: techniques which use inputs which have a significant effect
on the recorded fair value that are not based on observable market
data.
During each of the reporting periods, there were no transfers between
valuation levels.
Group Fair Values
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
EUR'000 EUR'000 EUR'000
Financial
liabilities
Interest rate
swaps
- Level 2 -
current - - (1,354)
Interest rate
swaps
- Level 2 -
non-current (13,935) (4,474) (4,637)
(13,935) (4,474) (5,991)
============================ ======================== ====================================
The valuation basis for the investment properties is disclosed in
note 13.
26. Statement of voting at the Annual General Meeting on 21 June
2019
The Company remains committed to ongoing shareholder dialogue and
takes an active interest in voting outcomes. The following table
sets out actual voting in respect of the AGM Resolutions at the AGM
held on Friday 21 June 2019.
Votes For/
AGM Resolutions % of
Discretionary Vote Against % of Vote Withheld
------------------- -------------- ------ ------------------------ ------------------------------------
Ordinary
Resolution
1 43,911,236 99.89 0 0.00 0
To receive the
report
of the directors
and
the financial
statements
for the year end
31
December 2018,
together
with the report of
the auditors
------------------- -------------- ------ ------------------------ ------------------------------------
Ordinary
Resolution
2 36,441,755 82.90 7,469,480 16.99 0
To approve the
Directors'
Remuneration
Report
------------------- -------------- ------ ------------------------ ------------------------------------
Ordinary
Resolution
3 43,911,236 99.89 0 0.00 0
To declare a final
dividend of
EUR5.15
cents (GBP: 4.62p)
per share
------------------- -------------- ------ ------------------------ ------------------------------------
Ordinary
Resolution
4 36,345,109 86.66 5,544,657 13.22 2,021,469
To re-elect Robert
Hingley as a
director
------------------- -------------- ------ ------------------------ ------------------------------------
Ordinary
Resolution
5 32,580,546 74.15 11,308,189 25.74 22,500
To re-elect
Quentin
Spicer as a
director
------------------- -------------- ------ ------------------------ ------------------------------------
Ordinary
Resolution
6 33,956,368 79.17 8,881,748 20.71 1,073,119
To re-elect
Charlotte
Valeur as a
director
------------------- -------------- ------ ------------------------ ------------------------------------
Ordinary
Resolution
7 33,957,055 79.17 8,881,061 20.71 1,073,119
To re-elect
Jonathan
Thompson as a
director
------------------- -------------- ------ ------------------------ ------------------------------------
Ordinary
Resolution
8 33,957,055 79.17 8,881,061 20.71 1,073,119
To re-elect
Monique
O'Keefe as a
director
------------------- -------------- ------ ------------------------ ------------------------------------
Ordinary
Resolution
9 43,886,243 99.89 0 0.00 24,993
To resolve that
RSM
UK Audit LLP be,
and
is hereby,
re-appointed
auditors of the
Company
to hold office
until
the conclusion of
the
next general
meeting
at which accounts
are
laid before the
Company
------------------- -------------- ------ ------------------------ ------------------------------------
Ordinary
Resolution
10 43,891,243 99.89 0 0.00 19,993
To resolve that
the
Audit Committee
determine
the remuneration
of
the auditors on
behalf
of the Board
------------------- ------ ---------------------------- ------------------------ ------------------------------------
Special Resolution
11 43,349,306 98.66 542,062 1.23 19,868
To resolve that
the
Company be
authorised
to make market
purchases
of up to
15,112,711
of its shares
------------------- ------ ---------------------------- ------------------------ ------------------------------------
Special Resolution
12 31,441,935 78.98 8,316,137 20.89 4,153,163
To resolve that
the
Directors be
empowered
to issue up to
10,075,141
shares for cash
as
if the members'
pre-emption
rights contained
in
the Articles of
Association
did not apply to
any
such issue
------------------- ------ ---------------------------- ------------------------ ------------------------------------
All resolutions were passed by the requisite majority, although the
Board notes that Resolutions 5, 6, 7, 8 and 12 have been passed with
more than 20% of votes cast against. In accordance with the AIC 2019
Code requirement, the Company has actively sought to engage with
significant shareholders who voted against these resolutions. This
dialogue has been initiated in order to better understand their voting
decision.
The Board understands that the main issue of concern which ultimately
led some investors to vote against resolutions 5,6,7 and 8 related
to the levels of disclosure surrounding the variable component of
Director remuneration as set out in the 2018 Annual Report. Following
productive and positive engagement, the Board is reassured that the
same vote would not have breached the 20% threshold now that it has
had the opportunity to more fully engage with shareholders.
With respect to resolution 12 (disapplication of pre-emption rights
for the issuance of up to 10% of issued share capital) the feedback
received indicated that some investors, as a matter of principle,
consider that a share issue greater than 5% involving the disapplication
of pre-emption rights should be the subject of shareholder consultation
and approval on a case-by-case basis. The Board has considered this
feedback and reiterates that, in accordance with the commitment set
out in the listing prospectus, the Company is not permitted to issue
share capital at a discount to Net Asset Value without prior shareholder
approval.
The Board appreciates the feedback it has received to date on the
above matters and will continue its policy of proactive engagement
with its shareholders. In line with the UK Corporate Governance Code,
a final summary of the Board's response to the AGM results will be
set out in the FY 2019 Annual Report and Accounts.
27. Related party
transactions
Related party transactions not disclosed elsewhere are as follows:
During the six month period ended 30 June 2019, an amount of EUR369,000
(December 2018: EUR973,000, June 2018: EUR402,000) was payable to
Estera Fund Administrators (Jersey) Limited and Estera Trust (Guernsey)
Limited for accounting, administration and secretarial services.
At 30 June 2019, EUR178,000 (December 2018: EUR134,000, June 2018:
EUR189,000) Estera Fund Administrators (Jersey) Limited only) was
outstanding.
During 2019, PMM Residential Limited (Formerly PMM Partners (UK)
Limited) acted as the Property Advisor to the Company. For the six
month period ended 30 June 2019, an amount of EUR2,954,000 (EUR2,871,000
Management Fees and EUR83,000 Other expenses and fees) (December
2018: EUR5,947,000 (EUR5,858,000 Management fees and EUR88,000 Other
expenses and fees), June 2018: EUR2,963,000 (EUR2,467,000 Management
fees and EUR496,000 Other expenses and fees)) was payable to PMM
Residential Limited. At 30 June 2019 EURnil (December 2018: EUR7,450,
June 2018: EURnil) was outstanding.
The Property Advisor is also entitled to an asset and estate management
performance fee. The charge for the period in respect of the performance
fee was EUR719,000 (December 2018: EUR3,995,000, June 2018: EUR103,000).
Please refer to note 21 for more details.
The Property Advisor has a controlling stake in IWA Real Estate Gmbh
& Co. KG who are contracted to dispose of condominiums in Berlin
on behalf of the Company. IWA does not receive a fee from the Company
in providing this service.
In March 2015 the Group entered into an option agreement to acquire
the remaining 5.2% interest in Phoenix Spree Property Fund GmbH &
Co.KG from the Limited Partners, M Hilton, a director of PMM Residential
Limited and P Ruddle. The options are to be exercised on the fifth
anniversary of the majority interest acquisition for a period of
three months thereafter at the fair value of the remaining interest.
The Group entered into an unsecured loan agreement with M Hilton
and P Ruddle in connection with the acquisition of PSPF. At the period
end an amount of EUR781,500 (December 2018: EUR768,195, June 2018:
EUR770,119) each was owed to the Group. The loans bear interest of
4% per annum.
Dividends paid to Directors in their capacity as a shareholder amounted
to EUR1,195 (December 2018: EUR1,740, June 2018: EUR1,160).
28. Events after the reporting
date
During the first half of 2019, the Company exchanged contracts for
the acquisition of two properties in Berlin for the purchase price
of EUR5.5 million neither of which had completed at the balance sheet
date. Both transactions have subsequently completed in July and August
respectively.
In August 2019 the Company exchanged contracts for the sale of one
property in the outer Berlin suburb of Eichwalde with proceeds of
EUR2 million. The transaction is still awaiting completion.
The Company had exchanged contracts for the sale of one condominium
in Berlin for the proceeds of EUR0.1 million prior to the reporting
date. The sale of that unit subsequently completed in Q3 2019.
In Q3 2019 the Company exchanged contracts for the sale of ten condominiums
in Berlin for the aggregated consideration of EUR3.9million. The
transactions are still awaiting completion.
In August, the Company concluded an agreement with Accentro Real
Estate AG, one of Germany's 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.
In September 2019 the Company announced the signing of a new EUR240
million facility with Natixis Pfandbriefbank AG, repaying the EUR119
million facility held with DZ Hyp. The facility comprises two tranches,
one being for EUR190 million (the "Refinancing Facility") and the
other for EUR50 million (the "Additional Facility").
The Refinancing Facility is a seven-year, interest-only loan with
a margin of 115bp over 3-month Euribor, floored at zero. The outstanding
swap portfolio was restructured to provide interest rate hedging
to match the new loan maturity. The Company's LTV (excluding cash
held on balance sheet) following drawdown increased from 28.6% to
39.2%, while the overall cost of financing decreased from 2.19% to
2.13%.
The Additional Facility is available for drawdown over a period
of 24 months and carries a commitment fee of 57.5bp. On utilisation,
the drawn amounts will be subject to the same terms as the Refinancing
Facility.
With effect from on or around 4 October 2019, the fund administrator
will change from Estera Fund Administrators (Jersey) Limited to Apex
Financial Services (Alternative Funds) Limited.
Professional
Advisors
Property Advisor PMM Partners (UK)
Limited
54-56 Jermyn Street
London SW1Y 6LX
Administrator Estera Fund Administrators (Jersey)
Limited
Company Secretary Estera Secretaries (Jersey) Limited
and Registered 13-14 Esplanade
Office
(To 4th October St. Helier
2019)
Jersey JE1 1EE
Administrator Apex Financial Services (Alternative
Funds) Limited
Company Secretary 12 Castle Street
and Registered St Helier
Office
(From 4th October Jersey JE2 3QA
2019)
Registrar Link Market Services (Jersey)
Limited
12 Castle Street
St. Helier
Jersey JE2 3RT
Principal Banker Barclays Private Clients International
Limited
13 Library Place
St. Helier
Jersey JE4 8NE
English Legal Stephenson Harwood LLP
Advisor
1 Finsbury Circus
London EC2M 7SH
Jersey Legal Appleby
Advisor
13-14 Esplanade
St. Helier
Jersey JE1 1BD
German Legal
Advisor Mittelstein Rechtsanwälte
as to property law Alsterarkaden 20
Hamburg 20354
Germany
German Legal
Advisor Taylor Wessing Partnerschaftsgesellschaft
as mbB
to German
partnership Thurn-und-Taxis-Platz
law 6
60313 Frankfurt
a.M.
Germany
Numis Securities
Sponsor and Broker Limited
10 Paternoster Square
London EC4M 7LT
Independent
Property
Valuer Jones Lang LaSalle
Rahel-Hirsch-Strasse
10
10557 Berlin
Germany
Auditor RSM UK Audit LLP
25 Farringdon Street
London EC4A 4AB
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR MMGZLNKKGLZM
(END) Dow Jones Newswires
September 26, 2019 02:01 ET (06:01 GMT)
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