18 January 2017

Phoenix Spree Deutschland Ltd

Investment Property Valuation & Portfolio Update

Phoenix Spree Deutschland (LSE: PSDL.LN), the UK listed investment company (the "Company") specialising in German residential real estate, announces the updated valuation for the portfolio of investment properties held by the Company and its subsidiaries (the "Portfolio"), together with an update on acquisitions, condominium sales and funding.

Highlights

·     Portfolio valuation, as at 31st December 2016, of € 423.8 million, a 49.9% increase (2015: €282.8m).

·     On a like-for-like basis, Portfolio value increased by 19.4% in the 12 month period.

·     Disposal of a non-core, mixed use property for €3.8m, an 18.8% premium to June 2016 book value.

·     Including €19.9m of acquisitions and €6.3m of disposals which were notarised in the period but are yet to complete, the portfolio value was €437.4m, with Berlin representing 76% by value.

·     Significant balance sheet developments, with new debt of €101.4million signed during H2 2016; average debt maturity extended to over 7 years; and the average interest rate reduced to below 2%. During the past 24 months, 98% of Fund's current debt has been refinanced.

·     Berlin residential market conditions remain favourable, underpinning a positive outlook for 2017.

Investment Property Valuation

As at 31st December 2016, the Portfolio was valued by Jones Lang LaSalle GmbH, the Company's external valuers, at €423.8 million (31st December 2015: €282.8 million). This represents an increase of 49.9% over the twelve-month period. The increase in valuation reflects: yield movement; adjustments due to improved property condition; rental income increases; market rent adjustments; and the net impact of acquisitions, disposals and condominium sales of €87.0 million.

On a like-for-like basis, the Portfolio valuation increased by 19.4% in the twelve months ended 31st December 2016. This compares to like-for-like growth of 10.7% for the year ended 31st December 2015.

All geographical markets registered valuation gains during the period, with Berlin seeing the largest like-for-like increase at 24.3%, followed by Nuremberg & Furth 12.0%, and Central & North Germany 10.4%.

The Portfolio valuation represents a value per square metre of €1,965 (31st December 2015 €1,635) and a gross initial rental yield of 4.8% (31st December 2015: 5.7%).

Acquisitions & Disposals

Since the last portfolio update on 14^th October 2016, the Company is pleased to announce that it has notarised the acquisition of a further three property packages in Berlin ("Acquisitions") for an aggregate purchase price of €19.9 million. Combined, they represent 102 residential and 9 commercial units, with a purchase price per square metre of €2,089. The Acquisitions are expected to complete in 1Q 2017, and it is anticipated they will increase the Fund's rental income by around 4.2 %.

The largest acquisition, which consists of 56 residential units and four commercial units, is located on the main shopping street in the Pankow district, Weißensee. Two further property acquisitions (one consisting of 23 residential units and one commercial unit, the other 23 residential and four commercial units) are located in Tempelhof district.

The Company has notarised for sale a mixed use property deemed to be non-core. This property has a high commercial component and is located in Teltow, Brandenburg. The sale proceeds of €3.8m represent a 18.8% premium to June 2016 book value.

Including acquisitions, disposals and condominium sales which were notarised, but not completed as at 31 December 2016 (and therefore excluded from the year-end portfolio valuation), the portfolio value as of 18 January was €437.4m, with Berlin representing 76% of the Portfolio by value.

Acquisitions completed or notarised since London Stock Exchange listing in June 2015 total €114.1m, and the Fund expects to deploy further capital during H1 2017.

Condominiums

Condominium sales have commenced at the Company's third project, Boxhagenerstrasse, which was acquired in late 2015. The first sales were made during Q4 2016 and the average value per sqm achieved was €4,110. This compares to the acquisition price of the property of €2,585 per sqm. 

During the year to 31^st December 2016 a total of 22 condominiums were sold or notarised for sale representing an aggregate sales value of €5.7m.  The average achieved price per square metre for these properties was €3,762, and represents a 91.4% premium to the average valuation per square metre for properties across the entire Portfolio.

Further condominium sales are anticipated during 2017 from projects already underway, and additional projects are being considered.

Funding

In March 2016, the Company successfully completed a £38m share placing, the proceeds of which are being used to fund further property acquisitions and to invest in the existing portfolio.

Since 30^th June 2016, loans amounting to €19.9million have been arranged to finance new property acquisitions, and a further €59.1million has been successfully refinanced. Additionally, an equity release from the portfolio of €22.3m has been agreed, of which €20.2m has been drawn. Taken together, and including drawdowns from existing facilities, total new debt of €103.5m has been committed or drawn during H2 2016.

At 30^th June 2016, the average loan maturity for the fund was 5.5 years. The actions taken since then have extended the average maturity to over 7 years, which is in line with the Fund's policy of increasing the debt maturity profile. The average interest rate of the Fund's debt has also modestly improved and is now just below 2%.  Active balance sheet management has resulted in 98% of the Fund's existing debt being refinanced in the past 24 months.

Robert Hingley, Chairman of Phoenix Spree Deutschland, commented:

"It is pleasing to see that our active asset management strategy, combined with strong market fundamentals in our core business, continue to drive the Portfolio valuation. 2016 has seen the Company successfully raise equity and debt finance and deploy this capital to increase its exposure to the Berlin residential market. The outlook for 2017 remains strong and we anticipate further growth in rents and property values from a combination of market factors and active asset management."

The Company expects to report its results for the twelve-month period ended 31^st December 2016 during April 2017.

Note: this announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

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