Phoenix Spree Deutschland Limited (LSE: PSDL.LN), the UK main market listed investment company focused on Berlin residential real estate, announces the updated valuation for the portfolio of investment properties held by the Company and its subsidiaries (the “Portfolio”) as at 31st December 2018.
Significant Portfolio value and NAV gains
On a like-for-like basis, excluding the net impact of acquisitions and disposals, the Portfolio valuation increased by 14.0 per cent during the year ended 31st December 2018 as it continued to benefit from the strong market fundamentals in Berlin.
The total Portfolio was valued at €645.7 million by Jones Lang LaSalle GmbH, the Company’s external valuers, an increase of 6.0 per cent over the twelve-month period (31st December 2017: €609.3 million), reflecting the impact of non-Berlin disposals during year. The Portfolio valuation represents an average value per square metre of €3,527 (31st December 2017: €2,853) and a gross fully occupied rental yield of 3.0 per cent (31st December 2017: 3.4 per cent).
The Berlin portfolio was valued at €641.8m, an increase of 21.4 per cent year-on-year (31st December 2017: €528.5 million). Since the 2018 financial year-end, all residual non-Berlin assets have been sold, creating a fully focussed Berlin fund.
The increase in the Portfolio valuation was substantially driven by increased market rents and the Property Advisor’s active management of the portfolio, which combined to deliver like-for-like rental growth per sqm of 7.4 per cent for the year to 31st December 2018 (31st December 2017: 8.4 per cent).
Based on the Company’s year-end Portfolio valuation, it is expected that the reported EPRA NAV per share as at 31 December will fall within a range of €4.52 – 4.56 (£4.07 – 4.11*) (31 December 2017: €4.11 (£3.65)). This represents a Sterling EPRA NAV per share total return within a range of 13.3 to 14.4 per cent for the financial year to 31st December 2018.
Further targeted Berlin acquisitions
The Company has continued to grow in Berlin with a number of carefully targeted acquisitions in central locations which fulfil its strict acquisition criteria. In total, 222 units (210 residential and 12 commercial) were notarised during 2018 for an aggregate purchase price of €36.3 million, at an average price per sqm of €2,390, and annual fully occupied rent of €36.3 million.
Acquisitions have been financed using a combination of debt and equity, with a target net loan-to-value ratio of approximately 50%. The balance sheet remains strong, and the Company continues to review its debt structure with a view to creating significant additional capacity for further Berlin acquisition opportunities during the current financial year.
Portfolio investment reaches new high
The Company remains committed to improving living standards for its tenants and fulfilling its environmental obligations in areas where its properties are located. During 2018, the Company has invested its highest sum on record to further improve the overall quality of its accommodation and surroundings. This has created significant future embedded value within the Berlin Portfolio, as evidenced by 2018 new leases which, on average, were signed at a 39.7 per cent premium to passing rents, and by condominium sales which completed at a 29.5 per cent premium to the average valuation of the properties which are valued for rental purposes only as at 31st December 2018.
Robert Hingley, Chairman of Phoenix Spree Deutschland Limited, commented:
“After a record valuation uplift during 2017, I am delighted that the Portfolio has continued to deliver strong gains during the financial year to 31st December 2018.
Our carefully targeted acquisition and disposal strategy has created a fully-focused Berlin portfolio which continues to benefit from robust market conditions, underpinned by the significant undersupply of available rental property. This, combined with our ongoing reinvestment programme, has created significant embedded value within the Portfolio.
The Board continues to view the prospects for the Berlin property market with optimism and remains confident that the Company’s active asset management strategy will deliver further growth during the year ahead. We will continue to acquire rental properties in Berlin, where the market outlook remains strong and where we see potential for further value and rental growth through continued investment.
The Company expects to report its full results for the twelve-month period ended 31st December 2018 towards the end of April 2019.”