Phoenix Spree Deutschland - To buy or to rent?

A trading update from Phoenix Spree Deutschland (PSD) shows that the core rental business remained strong in H123 although property values declined further, and transactions activity remains subdued. It notes some recent signs of improved buyer interest in the condominium market, but it remains too early to call a turn. We will review our estimates when interim results are released in late September. H123 rental growth is ahead of our expectations but revaluation indicates downwards pressure on

Phoenix Spree Deutschland - Stress-testing the challenges

Phoenix Spree Deutschland’s (PSD’s) core rental business continues to perform well as the demand-supply balance for Berlin rented residential accommodation remains tight. However, the challenging economic backdrop has negatively affected property values, NAV and condominium sales. While DPS has been paused to maintain cash flow for value-creating portfolio investment, PSD remains conservatively financed, with 83% of debt costs fixed/hedged and no debt maturities until 2026.

Phoenix Spree Deutschland - Valuation decline but sales premium continuing

While German macroeconomic conditions are challenging, the fundamental demand-supply balance for Berlin rented residential accommodation remains robust. Phoenix Spree’s (PSD’s) FY22 property values and NAV declined, but condominium sales continue to generate a strong premium to book value. We expect rental growth also when results are released in March, as the company continues to harvest strong rent reversion.

Phoenix Spree Deutschland - Well positioned for market turbulence

In a challenging environment, we expect Phoenix Spree Deutschland (PSD) to show continuing rental growth but weaker capital returns from slower condominium sales and market-wide yield widening. Demographic trends remain positive, and reversionary rent potential embedded within the portfolio remains strong. Gearing is modest and debt costs are fixed.

Phoenix Spree Deutschland - Progress in a more challenging environment

In an increasingly challenging environment, Phoenix Spree Deutschland (PSDL) has reported ongoing growth in rents and portfolio values for H122. Demographic trends within the Berlin residential market remain positive and the company continues to unlock reversionary rent potential. Rising interest rates and increased uncertainties have nonetheless slowed condominium notarisations. We will review our forecasts with the interim results that PSDL expects to release during the last week of September.

Phoenix Spree Deutschland - Positive return to core strategy

Driven by a continuing housing shortage, Berlin residential property rents and condominium prices have continued to increase over the past year. Having successfully weathered the now repealed rent restrictions, we expect Phoenix Spree Deutschland (PSD) to continue to extract the significant value embedded in its portfolio successfully despite the uncertainties of rising inflation and interest rates and war in Ukraine.

Phoenix Spree Deutschland - Delivering on reversion strategy

With rent restrictions (the ‘Mietendeckel’) repealed, the Berlin residential property market has remained robust, with free market rents and condominium prices increasing further amid a continuing housing shortage. FY21 performance for Phoenix Spree Deutschland (PSD) mirrors these trends and its extensive refurbishment programme targets further release of the strong rent reversion potential of its portfolio.

Phoenix Spree Deutschland - Good H1 growth and return to core strategy

Although rent controls (the ‘Mietendeckel’), ruled unlawful and repealed in April 2021, disrupted the Berlin residential property market, this has not prevented free market rents and condominium prices from increasing further amid a continuing housing shortage. Against this background, H121 results from Phoenix Spree Deutschland (PSD) showed good progress as it resumes its core rent reversion strategy.

Phoenix Spree Deutschland - Flexibility to extract value

The repeal of the Berlin rent cap (the ‘Mietendeckel’), ruled unconstitutional, is a significant positive for Phoenix Spree Deutschland (PSD). It allows a resumption of its core reversionary rent strategy, providing greater flexibility in the extraction of the value embedded in the portfolio. With a continuing discount to net assets, the board has stepped up the share repurchase programme, aiming to ensure that the share price better reflects its view of intrinsic value and the improved outlook.

Phoenix Spree Deutschland - Continuing strong returns despite rent cap

The Berlin rent cap has disrupted the market, but with a continuing housing shortage and new investment curtailed, free-market rents and condominium prices continued to increase in FY20, driving continuing strong returns for Phoenix Spree Deutschland (PSD). As discussed in detail in our December initiation note, pending a resolution of the rent cap legal challenge, PSD has sought to mitigate the effects while maintaining strategic flexibility; a resolution, which PSD expects by mid-year, will de

Phoenix Spree Deutschland - H220 valuation growth and NAV exceeds forecast

The Berlin residential property market remained resilient in H220 despite COVID-19 and introduction of the rent cap. Phoenix Spree Deutschland (PSD) saw a 6.3% like-for-like increase in FY20 valuations, supporting strong growth in EPRA NAV per share, above our forecast. As discussed in detail in our December initiation note, pending a resolution of the rent cap legal challenge, PSD has sought to mitigate the effects while maintaining strategic flexibility; a resolution, which PSD expects by mid-

Phoenix Spree Deutschland - Continuing to realise embedded value

H220 condominium sales increased strongly at a healthy c 20% average premium to book value and disposal proceeds have supported continuing share repurchases at a c 30% discount to net asset value (NAV), enhancing value creation. As discussed in detail in our December initiation note, pending a resolution of the rent cap legal challenge, so far Phoenix Spree Deutschland (PSD) has sought to mitigate the effects while maintaining strategic flexibility; a resolution, which PSD expects mid-year, will

Phoenix Spree Deutschland - Rent cap decision will determine strategy

Phoenix Spree Deutschland (PSD) is a pure play on Berlin residential property, where excess demand drives free market rent growth. H120 financial performance was robust despite the COVID-19 pandemic and the first effects of Berlin rent controls. Recent full implementation of the legislation will significantly reduce FY21 rental income and peg rents for five years, but it remains PSD’s firm view that the legislation will ultimately be ruled unconstitutional and overturned. Our central scenario (s

Winners and losers in September

There was an eclectic mix of property companies to feature in the top price movers for September. Top of the tree was private rented sector and residential development specialist Sigma Capital Group, with a 34.2% rise. The group launched a £1bn joint venture with EQT Real Estate, the real estate platform of global investment firm EQT, to deliver 3,000 private rental homes in Greater London. Micro-cap investor Panther Securities also hit double-digit gains, while Macau Property Opportunities saw

LIBERUM: Phoenix Spree Deutschland* - Continued momentum, 5% revaluation gain

NewRiver REIT+ (NRR, House Stock at 85p) - High quality earnings story – upgrade potential

DSW Capital+ (DSW, House Stock at 51p) - H1 results –promising outlook

Fund Insight: JPMorgan Global Growth & Income (JGGI) - All-Weather Approach

Our new Fund Insight report series breaks down the strategies and performance of listed funds. This investment trust research is available to all readers.

NextEnergy Solar Fund - H1/24 interim results and asset recycling update

NextEnergy Storage Fund now has 100 operational assets with a combined installed capacity of 933MW and exclusivity over, or ownership of the project rights for, most of its c£500m pipeline of domestic and international solar and energy storage assets. H1/24 performance was robust, with power generation in line with budget and the 36MW Whitecross solar farm energised. The first sale from the asset recycling programme has been completed post-period, with the proceeds being used to reduce short-ter

LIBERUM: New Energy Nuggets: Hydrogen - the future is green

Hardman & Co Research: Real Estate Credit Investments (RECI) - Portfolio management to optimise risk/reward

In previous notes, we have reviewed why we believe RECI has procedures and practices that limit downside losses to help ensure the resilience of the NAV. In this note, we explore further how portfolio management helps optimise risk/reward with a dynamic approach to bond portfolio allocation, leverage, top 10 concentrations, geographical sectors, and duration. RECI’s portfolio is not a static, long-duration, totally illiquid book. It is actively managed to the latest market opportunities, with an

Double win! Gold and rare earth resources both upgraded

Cobra has reported upgrades to both the gold and rare earth element (REE) Mineral Resource Estimates (MRE) at its Wudinna multi-mineral project located in South Australia’s Gawler Craton. Cobra moves another step closer to demonstrating the commercial opportunity of this unique multi-mineral occurrence in a Tier 1 jurisdiction.

Aberdeen Smaller Companies Income - Overview

Aberdeen Smaller Companies Income aims to generate an income and capital growth from investing predominantly in UK smaller company equities. The trust currently yields 3%, with a fully covered dividend. As well as an income, the trust’s portfolio offers high exposure to quality growth characteristics in pursuit of its capital growth objective. Since September the trust has been run by Abby Glennie, one of the two UK small cap managers in the Standard Life Smaller Companies team, which has an out

Income for the long haul

As the end of the financial year approaches, we enter ‘ISA season’. In the first of several articles on generating income for an ISA investment, we look at the advantages of investing in equity income trusts. We explain why investment trusts can be useful for long-term, income-hungry investors, and the myriad benefits that the closed ended structure offers. We also identify trusts that best exploit the tools that investment trusts have to offer to achieve their income objectives, and illustrate

Edinburgh Dragon Update - Overview

Edinburgh Dragon (EFM) aims to generate long-term capital returns by investing in Asia Pacific ex-Japan equities, with a focus on quality growth characteristics and a secondary focus on starting valuations. The management team, headed by Adrian Lim, aims to select world-class Asian companies with strong balance sheets that are transforming their sector and setting governance standards. The trust’s net asset value of £583m is the second largest in the AIC Asia Pacific peer group and makes it one

Of mice and men

An Englishman, an Irishman and a Scotsman walk into a bar. But they can’t get past the front door because it’s been boarded up. And then they get floored by a soldier in a hazmat suit who is now part of a unit patrolling London because there’s a ban on public gatherings. It’s funny because it’s true, right? We aren’t quite at the stage where troops are patrolling London’s streets, but back in January, when we published our ‘top picks for 2020’, nobody could’ve predicted that by now we’d be loc

Which alternative trusts could outperform equities?

Secular stagnation refers to the economic theory that growth will be persistently low for some time to come, due to an imbalance between savings and investment. If capital is saved rather than invested productive capacity lies idle, while the drag on consumption reduces demand in the economy. As a result GDP growth is reduced. As we have previously discussed, there is no historical evidence that GDP growth has a direct impact on stock market growth – in contradiction of the theorised linkage via

Safer harbour REITS: an update

A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REI

Moving up the league table

Whilst the ongoing trade dispute between the US and China creates a strong headwind for the region, this more challenging time is playing to Aberdeen New Dawn (ABD)’s strengths. Its focus on high-quality companies is being rewarded and it is climbing the performance league table once again. It is striking that, despite ABD’s improved relative performance and a low ongoing charges ratio (one of the lowest of its peers), ABD remains on one of the widest discounts versus its competitors.

Second Quarter of 2020

It was a remarkable second quarter with global markets staging the sort of comeback few would have thought plausible, at the end of March. With some countries still battling the first wave of infection and others seemingly headed to a second, not to mention what happens when governments start to remove direct stimulus measures, uncertainty still abounds.