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Phoenix Spree makes hay in Berlin

A chronic shortage of apartments in Berlin is driving rents through the roof
Phoenix Spree makes hay in Berlin

Residential landlord Phoenix Spree Deutschland (PSDL) says that around 85 per cent of its portfolio is now in Berlin, having sold its Nuremberg and Fürth assets for €35.2m (£31.0m), an 11 per cent premium to the December 2016 book value.

IC TIP: Buy at 319.75p

And it’s not hard to see why. Earlier restrictions on rents meant that new-build was largely uneconomical, leading to a significant supply/demand imbalance for apartments in Berlin. Current annual permits are running at around 16,000, while at least 20,000 new homes are needed each year, say bosses.

This has led to some astonishing increases in the value of existing assets and rents on new properties. New leases in Berlin in the first half of 2017 were being signed at a 44 per cent premium to passing rents, while annual rents grew by 5 per cent.

Phoenix is also generating revenue by selective sales of apartments situated in multi-storey blocks. Selling these individually will bring in more money than selling the block as a whole, and apartments were being sold in the first half at a 59.8 per cent premium to the portfolio average value.

Not surprisingly, adjusted net asset value increased by nearly a quarter to 334¢, helped by a portfolio valuation uplift of €70m compared with €21.7m a year earlier, and a 25 per cent jump in gross rental income.

PHOENIX SPREE DEUTSCHLAND (PSDL) 
ORD PRICE:320pMARKET VALUE:£296m
TOUCH:311.5-319p12-MONTH HIGH:320pLOW: 215p
DIVIDEND YIELD:1.8%TRADING PROP:€83.5m
PREMIUM TO NAV:1%   
INVESTMENT PROP:436mNET DEBT:56%
Half-year to 30 JunNet asset value (¢)Pre-tax profit (€m)Earnings per share (¢)Dividend per share (¢)
201622615.714.01.92
201731663.155.02.28
% change+40+303+293+19
Ex-div:05 Oct   
Payment:20 Oct   
£1=€1.1395