REFIRE reported back in April on UK-listed Phoenix Spree Deutschland (PSD), a pure-play investor in Berlin residential housing, which had recently posted its full-year annual results for the year ended 31st December 2021. Those results saw saw it boosting its before-tax profit for the year by nearly 20%. Its gross rental income rose by 7.9%.
What is happening now? As a Berlin-focused investor, PSD can partly be viewed as a proxy for the Berlin residential market as a whole so it helps us to keep an eye on underlying market movements in the capital. While buyer sentiment has undoubtedly deteriorated over the past four months, JLL as an independent advisor to PSD has valued PSD's portfolio at €812.4m, up a slight 1.4% since the last valuation at 31st December, and 5.7% since a year ago.
This puts PSD's assets at an average value per sqm of €4,318 per sqm, generating a gross fully-occupied yield of 2.8%. On disposals made over the first half, the average value achieved was €5,291 per sqm, representing a 20% premium to book value and more than 25% above the company's average Berlin portfolio value.
PSD said that with a net LTV of 37%, the balance sheet remains conservative, with an average remaining duration of the loan book of more than four years. Its first loan is not due to reach maturity until September 2026. Moreover, following a transition away from negative rates, the company’s interest rate hedging policy has seen cash borrowing costs decline, despite rising long term rates.
The company has been engaged in a share buyback programme, buying back about 8.8% of its issue share capital since September 2019. This year alone it bought back a further 931,000 shares (0.9% of the share capital) for €4.0m. This has largely been funded by condominium sales and from existing cash balances, and any further buybacks will be dependent on more sales and non-core asset disposals, rather than refinancing with more expensive debt, said PSD.
PSD chairman Robert Hingley commented: "Although financial market conditions have become more challenging, demographic trends within the Berlin market remain positive, with a significant undersupply of private rental property. Affordability comparisons with other German cities remain favourable and the reversionary potential that exists within the Portfolio will continue to support rental values.”
