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Phoenix Spree Annual Report and Accounts 2021
Formerly PMM Group
Phoenix Spree
Deutschland Limited (‘PSD’)
is an Investment Company
founded in 2007 and listed
on the London Stock
Exchange. It is a long-term
investor in Berlin rental
property, committed to
improving the quality
of accommodation for
its customers.
Over the past 15 years, the Company has assembled
an attractive portfolio of real estate assets which the
Directors believe offers investors the potential for both
reliable income as well as capital growth.
QSix has acted as the Property Advisor since the
Company’s inception. It has an experienced team of
property professionals with long-standing experience
of the German residential property market.
Highlights of the Year
Gross rental income (million)
€25.8
Like-for-like rent per sqm growth
3.9%
Invested in modernisation (million)
€9.5
Profit before tax (million)
€45.3
Condominium sales notarised (million)
€15.2
Strategic Report
Highlights of the Year
At a Glance
Chairman’s Statement
Stakeholder Engagement
Board Decision-Making
Key Performance Indicators
Our Strategy
Our Business Model
Report of the Property Advisor
Corporate Responsibility
– Protecting Our Environment
– Respecting People
– Valuing Our Customers
– Investing in Our Communities
– Governing Responsibly
Principal Risks and Uncertainties
Directors’ Report
Board of Directors
Directors’ Report
Corporate Governance Statement
Audit Committee Report
Directors’ Remuneration Report
Statement of Directors’ Responsibilities
Financial Statements
Independent Auditor’s Report
Consolidated Statement
of Comprehensive Income
Consolidated Statement
of Financial Position
Consolidated Statement
of Changes in Equity
Consolidated Statement
of Cash Flows
Reconciliation of Net Cash Flow
to Movement in Debt
Notes to the Financial Statements
Professional Advisors
1
4
6
8
10
11
12
13
14
22
26
27
28
29
30
32
34
36
40
48
51
54
55
61
62
63
64
65
66
91
www.phoenixspree.com
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
1
Financial StatementsDirectors’ ReportStrategic Report Highlights of the Year continued
EPRA NTA growth underpinned by
significant condominium potential
• Record condominium notarisations of
€15.2 million (37 condominium units)
during the year to 31 December 2021.
• Average achieved value per sqm of
€5,031 for residential units, a 21.7%
premium to 31 December 2020 book
value of each property.
• Over 75% of Berlin portfolio legally split
into condominiums as at 31 December
2021, with a further 10% in application.
Continued strong demand for Berlin
residential property
• New leases in Berlin signed at an average
Outlook: Long-term Berlin demographic
trends expected to remain positive
• Decreased availability of rental
33.8% premium to passing rents.
• 240 new leases signed during the year,
with the average rent of all new lettings
increasing to €12.2 per sqm, a 4.4%
increase on the prior year.
stock, exacerbated by the recently-
removed Mietendeckel, continues
to support market rents and offers
significant potential in surrounding
‘Beltway’ area.
• €9.5 million invested across the Portfolio
(31 December 2020: €4.2m), allowing
the Company to continue improving the
quality of accommodation for its tenants.
• Net inward migration expected
to strengthen when restrictions
associated with COVID-19 are
permanently removed.
• Collection of backdated Mietendeckel
rents progressing well; as at
31 December 2021, in excess of 95% had
already been collected.
• A number of furnished apartments made
available for refugees impacted by the
Ukraine crisis for a rent-free period.
• Potential for further valuation creation
through condominium projects and
sales. Condominium pricing expected
to remain strong, particularly for centrally
located Berlin apartments.
• Significant reversionary potential
underpins future rental growth –
increased capital expenditure expected
to drive acceleration in reversionary
rental income growth.
• New debt facility provides scope for
further acquisitions, subject to strict
acquisition criteria and benchmarked
against alternative of share buybacks.
New loan facility and refinancing,
resumption of acquisitions
• New €60 million loan facility agreed with
Natixis and announced on 25 January
2022, offering flexibility to pursue
potential further acquisitions as well as
continued investment into existing
portfolio.
• Successful refinancing of €49.7 million of
Berliner Sparkasse debt, releasing a
further €14.9 million of cash.
• Net LTV remains conservative at 34.7%
(31 December 2020: 33.1%).
• First acquisition since removal of
Mietendeckel announced on 21 March
2022 – 17 semi-detached, residential
properties in Berlin beltway as a new
build, at a purchase price €18.5 million
and projected fully occupied rental
income of €652,670 p.a.
Continued value delivered through share
buybacks and dividend
• During the financial year ended
31 December 2021, the Company
bought back a further 4,514,788 Ordinary
Shares, representing 4.5% of the Ordinary
Share capital, for a total consideration of
£17.7 million.
• Average price paid represents a 17.8%
discount to the EPRA net tangible assets
per share as at 31 December 2020.
• Unchanged annual final dividend of
5.15c. Dividend increased or maintained
since listing in June 2015.
2
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
“I am pleased that the Company
has been able to deliver another
strong performance with
continued growth in property
values and overall Net Asset
Value. The reversionary
potential that existed within the
Portfolio before the introduction
of the Mietendeckel is again
evident following its withdrawal,
and the value within our
Portfolio has been further
underpinned by our ongoing
ability to sell condominiums at a
premium to book value.
Our new debt facility and
refinancing has strengthened
our balance sheet strength and
liquidity, and it is pleasing that
we have successfully
completed our first acquisition
since the removal of the
Mietendeckel.
We are confident in the ongoing
strength of the Berlin
residential market and remain
focused on continuing to deliver
value to shareholders through
further investment in our
Portfolio growth and quality.
Our thoughts are with those
impacted directly and
indirectly by the events that
are unfolding in Ukraine and I
am pleased to announce that
PSD has made available a
number of furnished
apartments on a rent-free basis
for refugees affected by the
crisis. Although PSD has no
direct exposure, we are
prepared for the possible
secondary effects in the form
of higher energy prices and
impact of inflation and
continue to prioritise the
wellbeing of our tenants.”
Robert Hingley,
Chairman of PSD
Highlights for the financial year ended 31 December 2021
Year to
31 December
2021
Year to
31 December
2020
2021 v 2020
% change
Income Statement
Gross rental income (€m)
Profit before tax (€m)
Dividend (€ c (£ p))
Balance Sheet
Portfolio valuation (€m)
Like-for-like valuation growth (%)
IFRS NAV per share (€)
IFRS NAV per share (£)1
EPRA NTA per share (€ c)2
EPRA NTA per share (£ p)1,2
EPRA NTA2 per share total return (€%)
Net LTV3 (%)
Operational Statistics
Portfolio valuation per sqm (€)
Annual like-for-like rent per sqm growth (%)
EPRA vacancy (%)
Condominium sales notarised (€m)
25.8
45.3
23.9
37.9
7.50 (6.30)
7.50 (6.62)
801.5
768.3
6.3
4.74
3.98
5.65
4.74
8.4
34.7
4,225
3.9
3.1
15.2
6.3
4.48
4.04
5.28
4.76
8.8
33.1
3,977
(15.8)
2.1
14.6
7.9
19.4
–
4.3
–
5.8
(1.5)
7.0
(0.4)
–
–
6.2
–
–
4.1
1 Calculated at FX rate Sterling/Euro 1:1.191 (2020: Sterling/Euro 1:1.11).
2 New EPRA Best Practice guidelines from October 2019 introduced three new measures of Net Asset Value:
EPRA Net Tangible Assets (NTA), EPRA Net Reinvestment Value (NRV) and EPRA Net Disposal Value (NDV).
EPRA NTA is calculated on the same basis as EPRA NAV, and is the most relevant measure for PSD and
therefore now acts as the primary measure of Net Asset Value. Further information can be found on page 85.
3 Net LTV uses nominal loan balances (note 22) rather than the loan balances on the Consolidated Statement
of Financial Position which include Capitalised Finance Arrangement Fees.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
3
Financial StatementsDirectors’ ReportStrategic Report At a Glance
PSD acquires and manages
Berlin residential property
Since 2008, the aggregate
value of the Portfolio has risen
from €168 million (including
the assets of then-sister fund
PSPF) to €801.5 million as at
31 December 2021, with each
year seeing an increase.
Since listing on the Main Market of the
London Stock Exchange in June 2015, the
Company has increased the Berlin focus
of the Portfolio through a combination of
carefully selected acquisitions and disposals,
effectively creating a pure-play Berlin fund.
The Portfolio mainly consists of classic
‘Altbau’ properties (older buildings) which
were built before 1914. Typically, these
five-storey buildings contain between 20
and 40 units, consisting of one to three-
bedroom apartments, often with shops on
the ground floor.
QSix Residential Limited (Formerly PMM
Partners (UK) Limited) has acted as Property
Advisor and has an experienced team of
property and investment professionals with
an established record in the German
residential property market.
Reported property Portfolio valuation
(€ million)
801.5
Like-for-like Portfolio growth 2020-2021
6.3%
Pure-play Berlin Portfolio – total properties
Berlin
Residential property
Commercial property
Reported Portfolio valuation 2010-2021 (€ million)
801.5
768.3
730.2
645.7
609.3
423.8
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
282.8
245.3
233.1
219.0
2011
190.3
2010
186.1
4
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Usable space (sqm thousands)
189.7
Residential units
2,569
Commercial units
138
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
5
Financial StatementsDirectors’ ReportStrategic Report Chairman’s Statement
“ I am pleased to report
that PSD has delivered
another strong
performance.”
Robert Hingley
Chairman
As at 31 December 2021, the Portfolio was
valued at €801.5 million by Jones Lang
LaSalle GmbH (‘JLL’), a like-for-like annual
increase of 6.3%. The Euro EPRA NTA total
return per share was 8.4% over the year and
the Sterling return was 1.0%, reflecting a rise
in the value of Sterling. The Company has
additionally delivered record condominium
sales and made further progress in
condominium splitting.
This result has been achieved despite
the full implementation of the Berlin rent
controls (the ‘Mietendeckel’), subsequent
reversal in April 2021 and the ongoing
impact that COVID-19 has had on the
German economy.
Although the Mietendeckel did not cause
transaction values in the Berlin residential
property market to fall during the period in
which it was in place, equity markets
attached a significant risk premium to the
valuation of listed Berlin residential property
businesses. The removal of the Mietendeckel
and the uncertainty it created, combined
with our share buyback programme (at an
average discount to 2020 year end NAV of
17.8%) and the notarisation of
condominiums at a premium to prevailing
book value, has underpinned a positive
share price performance for the Company.
During the financial year, PSD’s share price
significantly outperformed both the UK FTSE
All-Share index and its listed German
residential peers.
Further details relating to the Company’s
financial performance can be found in the
Report of the Property Advisor.
Working with our stakeholders
The Board recognises the importance of
operating with integrity, transparency and
clear accountability towards its
shareholders, tenants and other key
stakeholders. We understand that being a
responsible Company, balancing the
different interests of our stakeholders and
addressing our environmental and social
impacts, is intrinsically linked to the success
and sustainability of our business.
To this end, our ‘Better Futures’ Corporate
Responsibility (‘CR’) Plan provides a
framework to monitor existing activities better.
It has five key pillars that have been integrated
throughout our business operations:
Protecting our Environment; Respecting
People; Valuing our Tenants; Investing in our
Communities and Governance.
During what has been a period of significant
disruption caused by the dual impacts of
the Mietendeckel and COVID-19, the
Company’s overriding priority has been the
health and wellbeing of its tenants, work
colleagues and wider stakeholders. Where
necessary, the Company continues to
support its tenants, both residential and
commercial, through agreeing, on a
case-by-case basis, the payment of monthly
rents or deferring rental payments.
6
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
The Company will continue to carefully
monitor any future impacts that COVID-19
might have on our stakeholders and is
committed to acting responsibly at all times.
In recent weeks, we have witnessed scenes
of unimaginable suffering in Ukraine.
Western European nations, including
Germany, are already preparing for what
is likely to be the largest movement of
refugees since the end of the Second World
War. In recognition of this, I am pleased to
announce that our Board has taken the
decision to make available to Ukrainian
refugees a number of fully furnished
apartments from the PSD portfolio for
a rent-free period.
Improving our tenanted accommodation
The Company takes its responsibilities to
its tenants extremely seriously and, where
viable, invests heavily in improvements to
its properties. Following the removal of the
Mietendeckel, which specified rent levels
well below free market levels, the Company
has been able to resume its historically
high level of investment into the Portfolio.
During 2021, the Company invested over
37% of its gross revenue on improvement
programmes, and it is anticipated that this
high level of investment will continue during
the year ahead.
Governance and compliance
The Board recognises the importance of a
strong corporate governance culture and
maintains the principles of good corporate
governance, as set out in the Association of
Investment Companies Code of Corporate
Governance (‘AIC Code’). Further details of
how the Company has applied the
provisions of, and complied with, the AIC
Code can be found in the Directors’ Report.
During the year, the Company announced
that Monique O’Keefe has notified the
Board of her intention to step down as
Senior Independent Director in order to
take up a senior executive position at
another Company. Monique has made an
exceptional contribution in her four years as
a Director and the PSD Board would like to
wish her every success in her new role.
As previously announced, Isabel Robins
joined the Board of PSD as a Non-executive
Director with effect from 14 March 2022.
Isabel Robins has over 23 years’ experience
of complex offshore real estate structures,
encompassing a broad range of property
funds, investments, and developments. Her
real estate experience and insight will add a
valuable perspective to complement and
enhance the skill set of the Board.
Our charitable initiatives
PSD takes a strategic approach to its
charitable giving which is guided by our
Community Investment Policy and focuses
on supporting charities where there is a
connection with either ‘homelessness’ or
‘families’. Since February 2019, we have
provided support to a women’s refuge (The
Intercultural Initiative) that helps women
affected by domestic violence, providing
emergency shelter, advice and counselling
to the women and their children. I am
pleased to report that, during the first half
of 2021, PSD committed to supporting an
additional Berlin charity, Laughing Hearts.
This charity supports children living in
children’s homes and social care.
Protecting our environment
The Board believes that taking a sustainable
and socially responsible approach to our
business delivers long-term success and
benefits for all of our stakeholders. We
recognise that the nature of our business
has environmental and social impacts and
that we have a responsibility to consider
and minimise these impacts, where
possible. As a member of EPRA, we want
to contribute to greater transparency in
reporting and so, in 2020, we strengthened
our commitment to delivering against our
environmental and social impacts by
introducing EPRA’s Sustainability Best
Practices Recommendations (‘SBPR’) and
capturing our Environmental, Social, and
Governance (‘ESG’) measurements within
their framework.
I am therefore delighted to report that this
commitment has been recognised in the
EPRA Sustainability Awards 2021, with PSD
receiving both a Silver and Most Improved
award in recognition of the Company’s
commitment to best practice in its
reporting. This recognition further
encourages us to continue to approach
the future in a consistent, ethical, safe and
environmentally friendly way.
Outlook
We are deeply concerned at the tragic
humanitarian situation in Ukraine and our
thoughts remain with all those affected at
this time. Although PSD has no direct
exposure, we are prepared for the possible
secondary effects in the form of higher
energy prices, inflationary pressures and the
impact this may have on the outlook for
economic growth. At all times, we will
continue to prioritise the wellbeing of our
tenants and broader stakeholders.
The Company is well placed to resume its
reversionary rental strategy and the removal
of the Mietendeckel has allowed the
Company to restore the level of investment
into the Portfolio to pre-Mietendeckel levels.
The fact that new lettings in Berlin during
2021 were signed at an average premium of
33.8% to passing rents should underpin
rental growth in the medium term,
irrespective of market rental growth.
Uniquely among its listed peers, over 75% of
the Company’s Berlin portfolio has already
been legally split into condominiums. PSD
will continue with its strategy of crystallising
condominium reversionary value within the
Portfolio through the selective sale of
individual units as condominiums at a
premium to book value.
Our recently-completed loan facility and
refinancing provide scope for further
potential acquisitions in the event that
suitable opportunities can be sourced. Our
acquisition criteria remain strict and all
potential opportunities will continue to be
benchmarked against the alternative of
share buybacks.
Berlin market dynamics remain positive and
affordability comparisons with other
German cities are still favourable. Moreover,
it is expected that Berlin demographic
trends, particularly net inward migration, will
further strengthen when restrictions
associated with COVID-19 are permanently
removed. This will provide further support
for PSD’s reversionary strategy.
Robert Hingley
Chairman
29 March 2022
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
7
Financial StatementsDirectors’ ReportStrategic Report Stakeholder Engagement
Listening to our
Stakeholders
We believe that, to maximise value and secure our long-term
success, we must take account of what is important to all our
key stakeholders. These encompass our tenants, shareholders,
regulators, partners and local communities. This is best
achieved through proactive and effective engagement.
Section 172 of the Companies Act 2006
Although it is not a legal requirement for a
non-UK Company to comply with section
172 of the Companies Act 2006, there are
related corporate governance provisions in
the AIC Code which apply to the Company
on a ‘comply-or-explain’ basis.
The Board of Directors considers, both
individually and collectively, that they have
acted in the way they consider in good faith
will be most likely to promote the success
of the Company for the benefit of its
members as a whole (having regard to the
stakeholders and matters set out in section
172 of the Companies Act 2006) in the
decisions taken during the year.
The Board values the importance of
maintaining a high standard of business
conduct and stakeholder engagement and
ensuring a positive impact on the
environment in which the Company
operates. While the Board will engage
directly with stakeholders on certain issues,
stakeholder engagement will often take
place at an operational level, with the Board
receiving regular updates on stakeholder
views from the Property Advisor.
The table below aims to highlight how we
engage with our key stakeholders, why they
are important to us, and the impact they
have on our business, which we believe
helps to demonstrate the fulfilment of the
Board’s duties under section 172.
Additionally, there is more detail about how
PSD and its Property Advisor engage in the
Corporate Responsibility section of this
Report on page 22.
Tenants
Regulators
Shareholders
Key issues
Tenants
Taking good care of our tenants ultimately
results in taking good care of all stakeholders.
By gaining insight into the requirements of our
tenants, the Property Advisor is able to ensure
a high retention rate and stable income stream
from our assets.
The COVID-19 pandemic together with the
introduction and subsequent withdrawal
of the Mietendeckel has presented a period of
unprecedented disruption and the Company’s
overriding priority is the health and wellbeing
of its tenants.
Shareholders
The engagement of our shareholders is
important to the future success of our business.
The Property Advisor has a productive dialogue
with both large investors and retail
shareholders.
Partners
PSD and its Property Advisor respect and value
our partners, treating them fairly at all times, so
they in turn can deliver the best service to our
tenants and investors.
People
PSD pays particular attention to the
employment practices of the Property Advisor,
its principal partner.
Having people who bring a diverse range of
talents and perspectives, and who feel engaged
in their roles, is fundamental to the long-term
success of the Property Advisor’s business. It is
crucial that the Property Advisor, and PSD,
understand their values and what motivates
them – and reflect this in the way the Property
Advisor operates.
Local communities
Through responsible investing, the Company
can ensure the long-term success of not only
itself, but also that of the environment within
which it operates.
Local
communities
Partners
People
Regulators
PSD is committed to operating within the
relevant regulatory and planning frameworks.
We observe all Berlin tenant laws, building and
other relevant regulations.
8
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
How the Company engages
Highlights
• The Property Advisor partners with, and monitors the activities of,
• The Property Advisor conducted its 2021 Tenant Survey for
Core Immobilien (‘Core’), who have the responsibility of interacting
incoming tenants to gain better insight on the issues that they
with and managing the tenants.
regard as important to them.
• By interacting in the day-to-day business with tenants, Core builds
• The Company incurred capital expenditure of €9.5 million during
up a picture of relevant issues and concerns that tenants wish us to
2021 to enhance properties within Portfolio.
consider. These are reported to the PSD Board via the Property Tenant
• The Company has supported its tenants, both residential and
Survey issued by Core to invite constructive feedback.
• Health and Safety is central to all our business activities. It is our
responsibility to ensure that we provide and promote a healthy,
safe and secure environment for our tenants.
• The Property Advisor has introduced and monitors a Vulnerable
Tenant Policy to provide procedures to assist tenants who may
require additional protection.
commercial, throughout the COVID-19 pandemic. Where necessary,
it has agreed, on a case-by-case basis, the payment of monthly
rents or deferring rental payments.
• Following the withdrawal of the Mietendeckel; where back dated
rents became payable, the Company has worked on a case-by-case
basis with any tenants suffering hardship as it collects the remainder
of back dated rents due.
The Company engages directly with shareholders in the following manner:
•
In addition to Numis, the Company Broker, Edison have been
• Through our investor relations programme with regular written
updates, meetings and roadshows.
• Through our Annual General Meeting (‘AGM’), to which all investors are
engaged to produce regular, in-depth research on the Company.
The intention is to raise the visibility of the Company and enable
investors to develop an improved understanding of the business.
invited; investors are updated on the Company and encouraged
• The Company has provided shareholders with reassurance
• The Company provides relevant, timely communications on its
• The Property Advisor conducted over 50 investor conference
in relation to the impact of COVID-19 on the business.
calls in 2021.
• The Property Advisor regularly attends industry conferences and
participates in industry webcasts in instances where COVID-19
restrictions have prevented face-to-face participation.
to share their views.
Company website.
• The Property Advisor’s Investor Relations department is always
on hand to deal with investor queries.
The Property Advisor, subject to COVID-19 related travel restrictions,
organises bespoke investor trips to Berlin to view PSD’s portfolio
of assets, meet regulators and valuers and other industry practitioners.
• The Property Advisor has a close working relationship with all of the
• The Board, at its meeting held on 14 March 2022, reviewed
Company’s business partners and advisors and regularly engages with
the performance, and considered the continued appointment,
all parties.
of the Company’s service providers.
• The PSD Board regularly monitors the performance and reviews the
• The continued appointment of all service providers was approved
terms of each service contract.
by the Board.
• The Property Advisor ensures suppliers meet the Company’s high level
of conduct. All suppliers are required to confirm on an annual basis,
in the form of a questionnaire, that they have adequate policies and
procedures in place to align their values with that of the Company.
• Affirmation letters requesting confirmation of alignment with PSD’s key
policies and standards signed by key partners of PSD and by the Property
Advisor are obtained by the Board.
• Our Company Values (Responsible, Fair, Excellent, Respectful) underpin
• The Property Advisor runs weekly online employee town hall meetings to
our commitment to acting responsibly. They set guidelines for the way
we conduct our business. The Property Advisor has also committed to
PSD’s values.
update on the business and share its culture and values. Results from the
Property Advisor’s 2021 employee survey suggest that the employees are
treated with respect and are provided with equal opportunities. 94% of
• The Property Advisor is committed to having an inclusive working
employees rate QSix as an excellent/good employer.
environment. Employees are offered a variety of training programmes
• The Property Advisor has adapted to accommodate COVID-19
to develop personally and professionally.
• The Property Advisor is committed to rewarding performance, offering
competitive base salaries and benefit packages. Its reward philosophy
is based on team performance and its incentive schemes aim to focus
everyone on the achievement of its strategic objectives.
• The Property Advisor provides leading health and welfare benefits
including access to medical advice.
restrictions, with extra health and safety measures put in place in
their offices, systems set up to accommodate employees working
from home and extra support and flexibility provided to employees
to help their productivity and wellbeing.
• Our ‘Better Futures’ CR plan has structured our charitable giving through
•
In 2021, PSD’s support to the Intercultural Initiative helped with
our Community Policy.
• PSD provides financial support to two Berlin-focused charities,
The Intercultural Initiative and Laughing Hearts.
• The Intercultural Initiative is a Berlin refuge that helps women and
children affected by domestic violence. Laughing Hearts supports
children living in children’s homes and social care.
• The Property Advisor supports two charities in London, SPEAR and
SHP, working with homeless people.
• Funding is given to SPEAR to run an outreach service, helping rough
the operational costs of a support apartment which provides
accommodation for families who no longer need to live in a refuge,
but still require protection and support to build an independent life.
We also helped fund education therapy sessions for children and
family counselling support.
• During 2021, PSD committed to supporting an additional Berlin
charity, Laughing Hearts. Our donations in 2021 helped fund the
purchase of sports and camping equipment for Summer school
activities and the provision of equipment for new school starters.
sleepers in the Wandsworth area into accommodation and helping
• The Property Advisor’s work with SPEAR provided assistance
them to address health and wider social care problems.
to 302 homeless people in Wandsworth during 2021.
• Funding provided to SHP supports an employability programme that
• The Property Advisor’s involvement with SHP during 2021 allowed
helps homeless people or those at high risk of becoming homeless
154 additional people to benefit from SHP’s employability programme.
to find a job and secure a sustainable income.
• The Property Advisor liaises with Non-Governmental Organisations
• The Company complied with, and fully implemented, the various
(NGOs) and industry bodies to enhance the positive impact we have
on the communities in which we operate.
• The Property Advisor takes a constructive, positive approach
to working with local authorities to ensure high quality planning
applications are submitted.
components of the Mietendeckel while in force. All tenants were
notified as to how they would be affected by the new rules and the
necessary rent reductions were implemented in accordance with
Mietendeckel rent tables.
• The Company remains fully committed to complying with
all relevant property legislation and regulation and acting in line
• On an ongoing basis, the Property Advisor has reviewed all relevant
tenant and property laws to ensure PSD continues to operate within
with best practice.
the regulatory framework.
Key issues
Tenants
Taking good care of our tenants ultimately
results in taking good care of all stakeholders.
By gaining insight into the requirements of our
tenants, the Property Advisor is able to ensure
a high retention rate and stable income stream
from our assets.
The COVID-19 pandemic together with the
introduction and subsequent withdrawal
of the Mietendeckel has presented a period of
unprecedented disruption and the Company’s
overriding priority is the health and wellbeing
of its tenants.
Shareholders
The engagement of our shareholders is
important to the future success of our business.
The Property Advisor has a productive dialogue
with both large investors and retail
shareholders.
Partners
PSD and its Property Advisor respect and value
our partners, treating them fairly at all times, so
they in turn can deliver the best service to our
tenants and investors.
People
PSD pays particular attention to the
employment practices of the Property Advisor,
its principal partner.
Having people who bring a diverse range of
talents and perspectives, and who feel engaged
in their roles, is fundamental to the long-term
success of the Property Advisor’s business. It is
crucial that the Property Advisor, and PSD,
understand their values and what motivates
them – and reflect this in the way the Property
Advisor operates.
Local communities
Through responsible investing, the Company
can ensure the long-term success of not only
itself, but also that of the environment within
which it operates.
Regulators
PSD is committed to operating within the
relevant regulatory and planning frameworks.
We observe all Berlin tenant laws, building and
other relevant regulations.
How the Company engages
Highlights
• The Property Advisor partners with, and monitors the activities of,
• The Property Advisor conducted its 2021 Tenant Survey for
Core Immobilien (‘Core’), who have the responsibility of interacting
with and managing the tenants.
• By interacting in the day-to-day business with tenants, Core builds
up a picture of relevant issues and concerns that tenants wish us to
consider. These are reported to the PSD Board via the Property Tenant
Survey issued by Core to invite constructive feedback.
• Health and Safety is central to all our business activities. It is our
responsibility to ensure that we provide and promote a healthy,
safe and secure environment for our tenants.
• The Property Advisor has introduced and monitors a Vulnerable
Tenant Policy to provide procedures to assist tenants who may
require additional protection.
incoming tenants to gain better insight on the issues that they
regard as important to them.
• The Company incurred capital expenditure of €9.5 million during
2021 to enhance properties within Portfolio.
• The Company has supported its tenants, both residential and
commercial, throughout the COVID-19 pandemic. Where necessary,
it has agreed, on a case-by-case basis, the payment of monthly
rents or deferring rental payments.
• Following the withdrawal of the Mietendeckel; where back dated
rents became payable, the Company has worked on a case-by-case
basis with any tenants suffering hardship as it collects the remainder
of back dated rents due.
The Company engages directly with shareholders in the following manner:
• Through our investor relations programme with regular written
updates, meetings and roadshows.
• Through our Annual General Meeting (‘AGM’), to which all investors are
invited; investors are updated on the Company and encouraged
to share their views.
• The Company provides relevant, timely communications on its
Company website.
• The Property Advisor’s Investor Relations department is always
on hand to deal with investor queries.
The Property Advisor, subject to COVID-19 related travel restrictions,
organises bespoke investor trips to Berlin to view PSD’s portfolio
of assets, meet regulators and valuers and other industry practitioners.
•
In addition to Numis, the Company Broker, Edison have been
engaged to produce regular, in-depth research on the Company.
The intention is to raise the visibility of the Company and enable
investors to develop an improved understanding of the business.
• The Company has provided shareholders with reassurance
in relation to the impact of COVID-19 on the business.
• The Property Advisor conducted over 50 investor conference
calls in 2021.
• The Property Advisor regularly attends industry conferences and
participates in industry webcasts in instances where COVID-19
restrictions have prevented face-to-face participation.
• The Property Advisor has a close working relationship with all of the
• The Board, at its meeting held on 14 March 2022, reviewed
Company’s business partners and advisors and regularly engages with
all parties.
the performance, and considered the continued appointment,
of the Company’s service providers.
• The PSD Board regularly monitors the performance and reviews the
• The continued appointment of all service providers was approved
terms of each service contract.
by the Board.
• The Property Advisor ensures suppliers meet the Company’s high level
of conduct. All suppliers are required to confirm on an annual basis,
in the form of a questionnaire, that they have adequate policies and
procedures in place to align their values with that of the Company.
• Affirmation letters requesting confirmation of alignment with PSD’s key
policies and standards signed by key partners of PSD and by the Property
Advisor are obtained by the Board.
• Our Company Values (Responsible, Fair, Excellent, Respectful) underpin
our commitment to acting responsibly. They set guidelines for the way
we conduct our business. The Property Advisor has also committed to
PSD’s values.
• The Property Advisor is committed to having an inclusive working
environment. Employees are offered a variety of training programmes
to develop personally and professionally.
• The Property Advisor is committed to rewarding performance, offering
competitive base salaries and benefit packages. Its reward philosophy
is based on team performance and its incentive schemes aim to focus
everyone on the achievement of its strategic objectives.
• The Property Advisor provides leading health and welfare benefits
including access to medical advice.
• The Property Advisor runs weekly online employee town hall meetings to
update on the business and share its culture and values. Results from the
Property Advisor’s 2021 employee survey suggest that the employees are
treated with respect and are provided with equal opportunities. 94% of
employees rate QSix as an excellent/good employer.
• The Property Advisor has adapted to accommodate COVID-19
restrictions, with extra health and safety measures put in place in
their offices, systems set up to accommodate employees working
from home and extra support and flexibility provided to employees
to help their productivity and wellbeing.
• Our ‘Better Futures’ CR plan has structured our charitable giving through
•
our Community Policy.
• PSD provides financial support to two Berlin-focused charities,
The Intercultural Initiative and Laughing Hearts.
• The Intercultural Initiative is a Berlin refuge that helps women and
children affected by domestic violence. Laughing Hearts supports
children living in children’s homes and social care.
• The Property Advisor supports two charities in London, SPEAR and
SHP, working with homeless people.
• Funding is given to SPEAR to run an outreach service, helping rough
sleepers in the Wandsworth area into accommodation and helping
them to address health and wider social care problems.
• Funding provided to SHP supports an employability programme that
helps homeless people or those at high risk of becoming homeless
to find a job and secure a sustainable income.
• The Property Advisor liaises with Non-Governmental Organisations
(NGOs) and industry bodies to enhance the positive impact we have
on the communities in which we operate.
• The Property Advisor takes a constructive, positive approach
to working with local authorities to ensure high quality planning
applications are submitted.
• On an ongoing basis, the Property Advisor has reviewed all relevant
tenant and property laws to ensure PSD continues to operate within
the regulatory framework.
In 2021, PSD’s support to the Intercultural Initiative helped with
the operational costs of a support apartment which provides
accommodation for families who no longer need to live in a refuge,
but still require protection and support to build an independent life.
We also helped fund education therapy sessions for children and
family counselling support.
• During 2021, PSD committed to supporting an additional Berlin
charity, Laughing Hearts. Our donations in 2021 helped fund the
purchase of sports and camping equipment for Summer school
activities and the provision of equipment for new school starters.
• The Property Advisor’s work with SPEAR provided assistance
to 302 homeless people in Wandsworth during 2021.
• The Property Advisor’s involvement with SHP during 2021 allowed
154 additional people to benefit from SHP’s employability programme.
• The Company complied with, and fully implemented, the various
components of the Mietendeckel while in force. All tenants were
notified as to how they would be affected by the new rules and the
necessary rent reductions were implemented in accordance with
Mietendeckel rent tables.
• The Company remains fully committed to complying with
all relevant property legislation and regulation and acting in line
with best practice.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
9
Financial StatementsDirectors’ ReportStrategic Report Board Decision-Making
Examples of topics where the Board considered the interests of its key stakeholders when
making decisions include rent collection during the COVID-19 pandemic, charitable giving,
environmental reporting, shareholder engagement and capital management.
Board decision-making and stakeholder considerations
Key decision / item
Stakeholder
Rent collection
during COVID-19
pandemic
Tenants
Tenants
Collection of
back dated rents
following
Mietendeckel
withdrawal
Charitable giving All
Stakeholders
How stakeholders’ views
were taken into account
Actions taken as a result
of this engagement
The Board has received
regular updates from the
Property Advisor on rent
arrears and tenants in
difficulty as a result of the
COVID-19 pandemic.
The Board has received
regular updates from the
Property Advisor on back
dated rent collection and
related arrears.
Through its Community
Investment Policy, the Board
is committed to supporting
charities where there is a
connection with either
‘homelessness’ or ‘families’.
Where necessary, the Company
provided support to its tenants, both
residential and commercial, through
agreeing, on a case-by-case basis, the
payment of monthly rents or deferring
rental payments.
Where necessary, the Company
provided support to its tenants, both
residential and commercial, through
agreeing, on a case-by-case basis, the
payment of monthly rents or deferring
rental payments.
In addition to continuing to support a
Berlin women and children’s refuge (The
Intercultural Initiative) that helps women
and children affected by domestic
violence, the Board approved financial
support to the Laughing Hearts charity
in 2021. This charity helps children living
in children’s homes and social care.
In response to the current crisis in
Ukraine, a number of furnished
apartments were made available for
refugees impacted by the Ukraine crisis
for a rent-free period.
Long term effects of decision
The Board better
understands adverse
circumstances as they
impact on tenants and
potential remedies.
The Board better
understands the impact
of regulatory change, its
impact on tenants and
potential remedies.
Breaking the cycle of
disadvantage by providing
support to women and
children affected by
domestic violence, and
broadening children’s
experiences to give them
a more positive outlook
for the future.
Environmental
reporting
All
Stakeholders
The Board has strengthened
the Company’s ESG
monitoring and reporting
by introducing EPRA’s SBPR
and capturing our ESG
measurements within
their framework.
The Company has started measuring
all buildings that use oil-based energy,
gas heating and district heating and will
increase coverage in the coming years
to include more buildings in the analysis.
Improved monitoring of the
Portfolio’s environmental
impact and future reduction
in the Company’s
environmental footprint.
Shareholder
engagement
Shareholders
The Board considered
feedback from shareholders,
the Property Advisor, and
the Company’s corporate
broker in relation to the level
of shareholder contact and
research coverage.
Edison, a respected equity research
Company, was engaged to produce
regular, in-depth research on PSD.
During 2021, Edison published several
research reports which were provided
to shareholders on a ‘free-to-read’ basis.
Share buybacks
Shareholders During the year, the
Chairman of the Company
undertook a number of
engagements to discuss
buyback policy and
provided investors with the
opportunity to share their
views.
Every quarter, the Board assessed
the continuation of the share buyback
programme. In June 2021, following
extensive consultation with
shareholders, the Company announced
it would make a further material
allocation of capital to the buyback
programme.
10
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Creating more attractive
homes for tenants, that
benefit the environment
and society as a whole.
Raising the visibility of
the Company to enable
investors to develop an
improved understanding
of the business.
Balanced capital
management in the light
of prevailing economic
and regulatory backdrop.
Key Performance Indicators
PSD has chosen a number of Key Performance Indicators (KPIs),
which the Board believes may help investors understand the performance
of the Company and the underlying property Portfolio.
• The value of the property
Like-for-like portfolio annual value growth
Like-for-like portfolio rent per sqm
Portfolio grew by 6.3% on a
like-for-like basis during the
financial year to 31 December
2021 (31 December 2020: 6.3%).
This increase reflects the
combined impact of increased
market rents, improvement in
the micro locations of certain
assets, and the further progress
of splitting certain assets at the
land registry.
6.3%
2021
2020
6.3
6.3
2019
7.1
14.0
2018
2017
+3.9%
2021
2020
2019
2018
2017
40.1
9.6
9.3
9.0
8.7
8.1
• Like-for-like Portfolio rent per
sqm increased by 3.9% in the
year (31 December 2020: 4.1%).
• The EPRA vacancy rate of
the Portfolio stood at 3.1%
as at 31 December 2021
(31 December 2020: 2.1%).
• The Company continued with
its targeted condominium sales
programme, notarising sales
of €15.2 million in the year to
31 December 2021 (31 December
2020: €14.6 million).
• EPRA NTA per share increased
by 7.0% to €5.65 as at
31 December 2021 (31 December
2020: €5.28).
• The total annual dividend for
the year 2021 was 7.5c (6.30p)
per share (2020: 7.5c £6.62p).
Condominium sales – notarised (millions)
EPRA vacancy
€15.2
3.1%
2021
2020
2019
2018
2017
15.2
14.6
2021
2020
2019
2018
2017
8.8
9.0
9.1
2.1
3.1
2.8
2.8
2.9
EPRA NTA per share
Dividend per share
€5.65
6.30p
2021
2020
2019
2018
2017
5.65
5.28
4.92
4.58
4.11
2021
2020
2019
2018
2017
6.30
6.62
6.30
6.73
6.40
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
11
Financial StatementsDirectors’ ReportStrategic Report
Our Strategy
An Active Approach to
Portfolio Management
Our strategy is to manage
and invest in our Portfolio
of properties to improve
the overall standard of
accommodation to our
tenants and deliver superior
risk-adjusted returns to our
investors.
To deliver on our strategic
objectives, it is imperative that
we work closely with all of our
key stakeholders. These
encompass tenants,
shareholders, regulators,
our partners and local
communities.
2021 gross rental income invested
in property enhancements
36.8%
New tenants surveyed in 2021
satisfied with their apartment
85.0%
Partners
We respect and value our partners, treating
them fairly, so they in turn can deliver the
best service to our tenants and investors.
Local communities
We aim to make a positive contribution to
the local environment in which our
properties are located, through improving
the external facades of the buildings and
supporting local charities.
Tenants
We aim to create for our tenants modern,
well-maintained homes at affordable rents.
Our key stakeholders
Shareholders
We aim to deliver superior risk-adjusted
returns to our shareholders through rental
income, growth in property values and
selective condominium sales.
Regulators
We always observe all Berlin tenant laws,
building and other relevant regulations.
Read more page 8
Tenants
Regulators
Shareholders
Local
communities
Partners
People
12
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Our Business Model
Underpinning our strategy is
a business model that involves
our Property Advisor’s active
management of the portfolio
of assets.
The key stages of this process
are: Acquire, Renovate,
Optimise, and Reinvest.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
13
Financial StatementsDirectors’ ReportStrategic ReportRenovateTargeted and value-added investment. Read more page 17OptimiseIncrease lettable area and rental income. Read more page 18ReinvestProperties revalued or sold as condominiums. Read more page 17AcquireProperties with potential in Berlin and surrounding areas. Read more page 17 Report of the Property Advisor
The Property Advisor’s priority throughout 2021 has been to protect and support the
Company’s tenants, colleagues and communities throughout the period of disruption
caused by the COVID-19 pandemic. Since the removal of the Berlin rent controls
(‘the Mietendeckel’), but subject to property and tenancy regulations which still apply,
the Property Advisor has also been proactively realigning the Company’s portfolio
and strategy to reflect the fact that rents can once again be set at free-market levels.
Prior to the Federal Court ruling, all rental
agreements had been structured to allow
for the back payment of higher rents now
legally due for the period during which the
Mietendeckel was in place. Tenants had
been advised by the Berlin government and
tenant organizations to set aside appropriate
reserves for this eventuality.
The Company estimated that the amount
of back dated rent which could be claimed
from tenants is approximately €2.1 million.
As at 31 December 2021, in excess of 95%
of this amount had already been collected.
The Company will continue to work
constructively with any tenants suffering
hardship as it collects the remainder of
back dated rents due.
Financial results
Revenue for the financial year to
31 December 2021 was €25.8 million
(31 December 2020: €23.9 million).
Profit before tax was €45.3 million
(31 December 2020: €37.9 million) which
was positively affected by a revaluation
gain of €38.0 million (31 December 2020:
€41.5 million).
The year-on-year rise in profit before tax
is driven by a gain on the interest swaps
during the year, offset by a smaller gain on
disposal of condominiums and a charge to
the Performance Fee due to the Property
Advisor, whereas the prior year fee was
a credit.
Financial highlights for the 12-month period to 31 December 2021
Federal Court rules against the legality
of the Berlin Mietendeckel in April 2021
Regulations introduced by the Berlin
Red-Red-Green coalition during 2020
to cap or reduce rents for private non-
subsidised rental properties aimed to
prevent rents being set at free-market levels.
This was despite the fact that Germany
already had in place, at the Federal level,
tenant protections which ranked amongst
the strongest in the Western world.
The Company and its legal advisors had
always been firmly of the opinion that the
Mietendeckel was unconstitutional, and that
State law could not supersede Federal law,
and, on 15 April 2021, the German Federal
Constitutional Court ruled that the
Mietendeckel was unlawful and thus void.
The Mietendeckel presented challenges
to the Company’s rental business model,
which had traditionally relied on re-letting
at market rates to justify the considerable
investment that significantly improves the
standard of accommodation available to
our tenants. During the period in which the
Mietendeckel was in place, the Company
reduced its programme of apartment
renovations and modernisations on the basis
that this investment could not be recouped
in the form of rent uplift on re-letting.
€ million
(unless otherwise stated)
Gross rental income
Investment property fair-value gain
Profit before tax (PBT)
Reported EPS (€)
Investment property value
Net debt (Nominal balances)1
The Portfolio continues to display significant
reversionary potential, as evidenced by the
fact that, during the current financial year,
new lettings in Berlin were signed at an
average premium of 33.8% to passing rents.
Reflecting this, and the fact that the
Mietendeckel is no longer in place, the
Company has been able to resume its
extensive capital expenditure programme.
Net LTV (%)
IFRS NAV per share (€)
IFRS NAV per share (£)2
EPRA NTA per share (€)3
EPRA NTA per share (£)2
Dividend per share (c)
Dividend per share (p)
€ EPRA NTA per share total return for period (%)
£ EPRA NTA per share total return for period (%)2
Year to
31 December
2021
Year to
31 December
2020
25.8
38.0
45.3
0.39
801.5
278.0
34.7
4.74
3.98
5.65
4.74
7.5
6.30
8.4
1.0
23.9
41.5
37.9
0.31
768.3
254.4
33.1
4.48
4.04
5.28
4.76
7.5
6.62
8.8
16.0
1 Nominal loan balances as per note 22 rather than the loan balances on the Consolidated Statement of
Financial Position which consider Capitalised Finance Arrangement Fees in the balance as per IAS 23.
2 Calculated at FX rate Sterling/Euro 1:1.191 (2020: Sterling/Euro 1:1.11).
3 Further EPRA Net Asset Measures can be found in note 30.
14
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Property expenses fell over the year,
reflecting improved service charge
recoveries in the year. Administration costs
and legal and professional fees remained
flat over the year. Reported earnings per
share for the period were 0.39c
(31 December 2020: 0.31c).
on the register at close of business on
13 May 2022, with an ex-dividend date
of 12 May 2022. Taking into account the
interim dividend paid in October 2021,
the total dividend for the financial year to
31 December 2021 is 7.5c per share (6.30p
per share) (31 December 2020: 7.5c, 6.62p).
Reported EPRA NTA per share rose by
7.0% in the period to €5.65 (£4.74)
(31 December 2020: €5.28 (£4.76)). After
accounting for dividends paid during 2021
of 7.5c (6.46p), which were paid in May and
October 2021, the Euro EPRA NTA total
return for the period was 8.4% (2020: 8.8%).
The Sterling EPRA NAV per share total return
was 1.0% (31 December 2020: 16.0%),
reflecting the strengthening of Sterling
versus the Euro during the financial year.
Dividend
The Board is pleased to declare an
unchanged final dividend of 5.15c per share
(4.32p per share) (31 December 2020: 5.15c,
4.45p). The dividend is expected to be paid
on or around 9 June 2022 to shareholders
Since listing on the London Stock Exchange
in June 2015 to 31 December 2021,
including the announced dividend for 2021
and bought-back shares held in treasury,
€85.4 million has been returned to
shareholders. The dividend is paid from
operating cash flows, including the disposal
proceeds from condominium projects, and
the Company will seek to continue to
provide its shareholders with a secure
dividend over the medium term, subject
to the distribution requirements for
Non-Mainstream Pooled Investments, and
after full consideration of any ongoing
impact associated with COVID-19 and the
geopolitical and economic impact of the
war in Ukraine.
Share buybacks at a discount to EPRA NTA
During the financial year ended
31 December 2021, the Company bought
back a further 4,514,788 Ordinary Shares,
representing 4.5% of the Ordinary Share
capital, for a total consideration of £17.7
million. The average price paid represents a
17.8% discount to EPRA NTA per share as at
31 December 2020.
The capital made available for the buyback
programme has been funded through a
combination of existing cash balances,
refinancing and condominium sale
proceeds. This allocation has been achieved
without compromising the organic growth
prospects of the Company, which are based
on reversionary re-letting, the preparation
and sale of new condominiums and the
construction of new attic living space.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
15
Financial StatementsDirectors’ ReportStrategic Report Report of the Property Advisor continued
Rental income and vacancy rate
Total sqm ('000)
Annualised Rental Income (€ million)
Gross in-place rent per sqm (€)
Like-for-like rent per sqm growth (%)
Vacancy (%)
EPRA Vacancy (%)
Year to
31 December
2021
Year to
31 December
2020
189.7
20.3
9.6
3.9
8.4
3.1
193.2
20.3
9.3
4.1
6.8
2.1
Like-for-like increase in Portfolio
valuation of 6.3%
The Berlin residential property market
has remained resilient during the financial
year, with transaction volumes and
investment demand observed by JLL, the
Company’s external valuers, recovering
significantly following a stabilising political
backdrop, namely the removal of the
Mietendeckel and the completion of the
German Federal Elections.
Like-for-like rental income per sqm
growth of 3.9%
After considering the impact of acquisitions
and disposals, like-for-like rental income
per sqm grew 3.9% compared with
31 December 2020. Like-for-like rental
income grew 1.3% over the same period.
Gross in-place rent was €9.6 per sqm as
at 31 December 2021, an increase of 3.7%
compared with 31 December 2020.
JLL has conducted a full RICS Red Book
property-by-property analysis, tied back
to comparable transactions in the Berlin
market, and have provided a portfolio
valuation on this basis.
As at 31 December 2021, the total Portfolio
was valued at €801.5 million by JLL, an
increase of 4.3% over the 12-month period
(31 December 2020: €768.3 million).
On a like-for-like basis, after adjusting for
the impact of acquisitions net of disposals,
the Portfolio valuation increased by 6.3% in
the year to 31 December 2021, and by 3.7%
in the second half of the financial year. This
increase reflects the combined impact of
increased market rents, improvement in the
micro locations of certain assets, and the
further progress of splitting certain assets at
the land registry.
The valuation as at 31 December 2021
represents an average value per sqm of
€4,225 (31 December 2020: €3,977) and
a gross fully occupied yield of 2.8%
(31 December 2020: 2.4%). Included within
the Portfolio are eight properties valued as
condominiums with an aggregate value
of €38.8 million, of which €5.7 million had
been notarised for sale by 31 December
2021. (31 December 2020: nine properties;
€52.4 million).
Limited impact from COVID-19 on rent
collection
The impact of COVID-19 on rent collection
continues to be limited, with over 97% of all
residential and commercial rents collected
in 2021, in line with rent collections in 2020.
Rent collection during the months of
January and February 2022 has also
remained stable.
The Company continues to monitor
carefully further developments concerning
the COVID-19 pandemic and will continue
to work with tenants in arrears because
of COVID-19 by agreeing workable
repayment schedules.
Portfolio valuation and breakdown
Total sqm ('000)
Valuation (€m)
Like-for-like valuation growth (%)
Value per sqm (€)
Fully occupied gross yield (%)
Number of buildings
Residential units
Commercial units
Total units
16
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Gross rental income (million)
€25.8
Profit before tax (PBT) (million)
€45.3
Investment property value (million)
€801.5
Dividend per share (£ pence)
6.3p
Year to
31 December
2021
Year to
31 December
2020
189.7
801.5
6.3
4,225
2.8
97
2,569
138
2,707
193.2
768.3
6.3
3,977
2.4
98
2,618
139
2,757
EPRA vacancy remains low
Reported vacancy at 31 December 2021
was 8.4% (31 December 2020: 6.8%).
On an EPRA basis, which adjusts for units
undergoing development, the vacancy rate
was 3.1% (31 December 2020: 2.1%).
The rise in EPRA vacancy versus the
half-year stage (30 June 2021: 1.3%) reflects
a significant increase in capital expenditure
during the second half of the year following
the removal of the Mietendeckel which,
in turn, has resulted in a higher number of
newly modernised apartments returning to
market for re-let.
Portfolio investment
During the year to 31 December 2021, a
total of €9.5 million was invested across the
Portfolio (31 December 2020: €4.2 million).
These items are recorded as capital
expenditure in the Financial Statements.
A further €1.7 million (31 December 2020:
€1.6 million) was spent on maintaining the
assets and is expensed through profit or
loss. The year-on-year increase in
investment reflects the intensification in
renovation activity resulting from the repeal
of the Mietendeckel in April 2021, alongside
increased renovation expenditure on the
asset in Brandenburg and further work on
bringing assets in a position to be sold as
condominiums as set out on page 18.
EPRA Net Initial Yield (NIY) and ‘Topped up’ Net Initial Yield (NIY)
All figures in € million unless otherwise stated
Investment property
Reduction for NCI share and property under development
Completed property portfolio
Estimated purchasers’ costs
Gross up completed property portfolio valuation
Annualised cash passing collected rental income
Property outgoings
Annualised collected net rents
Expected increase from Mietendeckel rent cap expiry1
‘Topped up’ Annualised net rents
EPRA NIY (%)
EPRA ‘Topped up’ NIY (%)
2021
801.5
(12.8)
788.7
65.1
853.8
20.3
(3.4)
16.8
–
16.8
2.0
2.0
2020
768.3
(11.3)
757.0
62.7
819.7
16.4
(2.8)
13.6
3.2
16.8
1.7
2.1
1 Under EPRA guidelines, legally allowed lease incentives and contracted step rents are included in the
‘Topped up’ yield calculation. Since the Mietendeckel was declared unconstitutional in April 2021, the
difference between annualised contracted rents and annualised collected rents for 2020 has been included
in this line.
Berlin reversionary re-letting premium
of 33.8%
During the year to 31 December 2021,
240 new leases were signed, representing
a letting rate of approximately 10.2% of
occupied units. The average rent achieved
on all new lettings was €12.2 per sqm, a
4.4% increase on the prior year, and an
average premium of 26.8% to passing rents.
This compares with a 25.2% premium in the
period to 31 December 2020.
The reversionary premium is negatively
impacted by the inclusion of re-lettings
from the acquisition in Brandenburg in
2021, where rents are lower than those
achieved in central Berlin. Looking solely
at the Berlin portfolio, which represents
91.4% of total lettable space, the
reversionary premium achieved was
33.8%, in line with the prior year (year to
31 December 2020: 33.9%).
Acquisition of portfolio of properties
under construction for €18.5 million
On 21 March 2022, the Company
announced that it has exchanged contracts
to acquire a portfolio of 17 new build,
semi-detached, residential properties
(34 houses) for a purchase price of
€18.5 million. This new build has been
forward-funded with construction expected
to complete in the second half of 2024.
It marks an important milestone for the
Company, representing the first acquisition
completed post the withdrawal of the
Mietendeckel.
The price paid of €4,323 per sqm represents
an estimated prospective gross yield of 3.5%
and the projected fully occupied rental
income generated by the property is
€652,670 p.a., representing 3.2% of the
Portfolio gross in-place rent as at
31 December 2021.
The acquisition will be financed using the
new loan facility recently agreed with
Natixis, announced in January 2022.
The Company will continue to review future
potential acquisition opportunities. These
will be pursued only in instances where
they meet the Company’s strict investment
return criteria and compare favourably
against the alternative of share buybacks.
Record condominium notarisations
at an 18.3% premium to book value
PSD’s condominium strategy involves the
division and resale of selected apartment
blocks as private units. This is subject to
regulatory approval and involves the legal
splitting of the freeholds in properties that
have been identified as being suitable for
condominium conversion.
Condominium price growth across all major
German cities has remained robust during
2021, having been largely unaffected by
COVID-19. Industry data shows that average
prices in Berlin increased by approximately
10% versus the same period in 2020.
In total, the Company notarised for sale
condominiums with an aggregate value
of €15.2 million during the year to
31 December 2021, a record high and
a 4.1% increase compared with the prior
year. A total of 37 residential and
commercial condominium units were
notarised (31 December 2020: 41 units)
with an average achieved notarised value
per sqm of €4,988, representing a 18.3%
premium to 31 December 2020 assessed
book value of each property. Residential
condominiums were notarised at a 21.7%
premium to 31 December 2020 book value.
Condominium sales for the second half of
the financial year were particularly strong,
with 24 condominium units being notarised
for an aggregate value of €10.9 million.
These sales represent a significant increase
compared with the first half of the financial
year, during which 13 residential units were
notarised for sale, with an aggregate value
of €4.3 million.
As at 31 December 2021, over 75% of the
Berlin portfolio had been legally split into
condominiums, providing opportunities for
the implementation of further condominium
sales projects where appropriate. A further
10% are in application, over half of which are
in the final stages of the process.
The Company notes that new Federal
Government legislation is likely to limit the
ability of landlords to split their properties
into condominiums in the future. Although
17
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Financial StatementsDirectors’ ReportStrategic Report Report of the Property Advisor continued
this legislation is not retrospective and does
not impact assets that have already been
split into condominiums, it does have the
potential to impact applications which
are currently in process. These measures
will inevitably increase the scarcity of
condominiums available for sale in the
future, further exacerbating the supply-
demand imbalance which currently exists.
The Company, therefore, believes the
valuation impact on the Portfolio is likely
to be positive given the high proportion
of properties that have already legally split
into condominiums.
Condominium construction
Prior to the removal of the Mietendeckel,
the Property Advisor had completed an
exercise to examine the financial viability
of the creation of new condominium units
within the footprint of the existing Portfolio.
After the overturning of the Mietendeckel,
a condominium construction project
commenced in an existing asset bought in
2007. The project involves building out the
attic and renovating existing commercial
units to create seven new residential units.
Construction on this project started in the
second half of 2021, and the first units are
projected to be available for sale or rental
in the second half of 2022. The total
construction budget for this project is
€3.9 million.
Debt and gearing1
As at 31 December 2021, PSD had nominal
borrowings of €288.4 million (31 December
2020: €291.4 million) and cash balances of
€10.4 million (31 December 2020: €37.0
million), resulting in net debt of €278.0
million (31 December 2020: €254.4 million)
and a net loan-to-value on the Portfolio of
34.7% (31 December 2020: 33.1%).
On 29 December 2021, the Company
signed a new €60 million facility with its
lending partner, Natixis Pfandbriefbank AG,
which comprises two components: a €45
million Acquisition Facility (the ‘Acquisition
Facility’) and a €15 million Capital
Expenditure Facility (the ‘Capex Facility’).
The new facility matures alongside the existing
Natixis facility, in September 2026, and carries
an interest rate of 1.15% over three-month
Euribor. It can be used to finance up to 100%
of the total cost of both acquisitions and
capital expenditure. When drawn, it is
non-amortising and terms to protect against
future adverse interest rate movements
have been agreed. As at 31 December 2021,
€0.9 million of this facility had been drawn.
The Acquisition Facility provides the
Company with additional flexibility to
pursue potential future acquisitions if
suitable opportunities, which offer clear
value for shareholders, arise.
The Company also has building permits to
renovate attics in 19 existing assets to create
a further 45 units for sale as condominiums
or as rental stock.
The Capex Facility will allow the Company
to continue to undertake its extensive
capital expenditure programme. The
Company remains committed to improving
living standards for its tenants and fulfilling
its environmental obligations and, following
the overturning of the Mietendeckel, has
been able to resume its comprehensive
programme of vacant apartment
renovations and modernisations.
In January 2022 the Company signed
contracts to refinance existing debt
provided by Berliner Sparkasse. The
refinancing leverages the increase in
valuation of certain underlying assets within
the Portfolio, releasing a further €14.9
million of equity. Following completion,
the total value of the loans that have been
refinanced is €49.7 million and the
maturities remain unchanged at between
five and six years.
The interest rate payable on these loans is
lower than the current portfolio average and
no additional hedging instruments for
adverse interest rate movements are
required. The debt is being drawn down in
three instalments, of which €9.9 million was
drawn in February 2022, and the remainder
is expected to be drawn in the first half of
the year.
The equity released by the refinancing can
be reinvested into the Portfolio, including
future potential share buybacks.
The decrease in gross debt in the period
partly results from the repayments of debt
on sale of condominiums alongside
amortisation of the debt held with Berliner
Sparkasse, offset slightly by the drawdown
of the debt from the newly signed facility
with Natixis.
18
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Nearly all PSD’s debt effectively has a fixed
interest rate through hedging. As at
31 December 2021, the blended interest rate
of PSD’s loan book was 2.0% (31 December
2020: 2.0%). The average remaining
duration of the loan book at 31 December
2021 had decreased to 4.9 years
(31 December 2020: 6.0 years).
1 Section uses nominal loan balances as per note
16 rather than the loan balances on the
Consolidated Statement of Financial Position
which take account of Capitalised Finance
Arrangement Fees in the balance.
EPRA best practice reporting metrics
In October 2019, the European Public Real
Estate Association (‘EPRA’) published new
best practice recommendations (‘BPR’) for
financial disclosures by public real estate
Companies. PSD supports this reporting
standardisation approach designed to
improve the quality and comparability
of information for investors.
The following table sets out PSD’s EPRA KPIs
from the released BPR, and references
where more detailed calculations supporting
the KPIs can be found in the Report.
Statement on Ukraine and Russia
We are deeply concerned and profoundly
saddened at the tragic humanitarian toll
caused by the deplorable Russian military
invasion of Ukraine. Whilst PSD’s business is
not directly affected, it is possible that there
will be second derivative consequences on
the global economy following the
unprecedented package of sanctions
imposed by the West. These include the
possible effects of higher energy prices, the
risk of supply shortages in basic materials, the
possible knock-on impact of inflation leading
to higher interest rates, changes to consumer
behaviour and demographic changes as
Western European countries seek to
accommodate the growing Ukrainian refugee
crisis. These circumstances have created a
degree of uncertainty across global equity
markets from which PSD is not immune.
We will, of course, take into account all the
relevant implications of this crisis into our
forward planning as events unfold.
Unsurprisingly, given the extraordinary fiscal
stimulus response to the pandemic, global
inflationary pressures have built up, a trend
which is likely to be exacerbated in the light
of supply-side constraints caused by the
Ukrainian crisis. Germany has been no
EPRA metrics
Metric
EPRA Earnings (€m)
EPRA Net Tangible Assets / share (NTA) (€)
EPRA Net Reinvestment Value / share (NRV) (€)
EPRA Net Disposal Value / share (NRV) (€)
EPRA Capital Expenditure (€m)
EPRA Net Initial Yield (%)
EPRA ‘Topped up’ Yield (%)
EPRA Vacancy (%)
EPRA Like-for-Like rental income growth (%)
EPRA Capital Expenditure
All figures in €’000 unless otherwise stated
Acquisitions
Like-for-like portfolio
Development
Other
Total Capital Expenditure
Balance Page reference Note reference
(0.8)
5.65
6.35
4.77
9.5
2.0
2.0
3.1
3.9
84
85
85
85
19
17
17
16
16
29
30
30
30
N/A
N/A
N/A
N/A
N/A
31 December
2021
31 December
2020
0
4,674
4,406
397
9,477
0
3,645
274
252
4,171
exception, with inflation reaching 5.3% by
the end of 2021. However, the risk of a
major fiscal tightening, as happened in the
aftermath of the 2008−09 financial crisis,
is low and financing conditions are likely
to stay relatively benign. After such a deep
recession, central banks are expected to
proceed with caution as they withdraw
pandemic support. Notwithstanding this,
equity markets have reacted cautiously
to the prospect of rising rates, attaching
a significant risk premium to valuations of
listed residential real estate Companies,
all of which are currently valued at a discount
to their Net Asset Value. This phenomenon is
not new and is cyclical in nature.
Update on German political backdrop and
continued housing shortage
There have been a number of supportive
political developments including the
Mietendeckel being declared void and the
new Federal government consisting of
the SPD, Greens and FDP which holds out
the prospect of a more stable framework
for the foreseeable future.
Although the general direction of new
government policy initiatives will continue
to be towards tightening tenant protections,
particularly in areas with overstretched
housing markets, there now appears to be
broad political recognition that blunt policy
instruments, such as the Mietendeckel, are
not the best way to address housing market
imbalances. Sensibly, the new government
appears to be shifting its focus towards
increasing the supply of housing and, with
a target of 400,000 new homes per year,
the new coalition is ahead of the previous
government’s goals.
Whilst we consider increasing the supply of
housing to be the correct policy response,
it will take many years to address the chronic
shortage of affordable German housing,
particularly in Berlin, where there are
currently 174 applicants per rental flat and
with last year’s building permits accounting
for less than 1% of Berlin housing stock. In
the event that net inward migration, which
had ceased during the pandemic, begins
to feature again, the shortage of available
housing stock could be exacerbated
still further.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
19
Financial StatementsDirectors’ ReportStrategic Report Report of the Property Advisor continued
A major reason for low supply is the
persistent large discount of the cost of
existing housing stock to replacement cost.
In Berlin, where prices have increased the
most (from a significantly lower level than
other German cities), the discount to
replacement cost remains. Given significant
increases in material costs, labour shortages
and the additional cost of new green
initiatives that the construction industry will
seek to pass on to end-buyers, the relative
attractiveness to investors of existing stock
versus new build is expected to endure.
Tenant location decisions within Berlin’s
private rental market have also shown some
signs of change in the wake of COVID-19.
Scarcity of supply of affordable rental
property, coupled with a growing realisation
that working remotely is a viable alternative
to a daily, city-centre commute, have begun
to impact tenant settlement choices. Less
densely populated areas in the greener
suburban areas of Berlin, where supply is
less constrained, with more affordable rents
and strong commuter links, now hold
increasing appeal for tenants seeking to
relocate, particularly in areas where new
employers are expanding or relocating. This
trend has been particularly evident in certain
micro locations such as Erkner, where the
Company recently announced its first
acquisition since 2019.
A lack of available central Berlin rental
properties, coupled with favourable
mortgage-versus-market rent dynamics,
has also provided a favourable tailwind for
condominium pricing. 2021 saw double
digit increases in condominium prices,
a trend that was evident in PSD’s own
portfolio, and further price inflation is
anticipated in the year ahead. Recent federal
policy initiatives have further empowered
state governments to restrict condominium
splitting in the future and it is anticipated
that the Berlin authorities will take
advantage of these new powers. This will
serve to compound further the supply-
demand imbalance. With over three
quarters of PSD’s portfolio already legally
split into condominiums, it is expected that
the valuation impact on the Portfolio
will be positive.
Focus on sustainability
An increasingly-important theme during
recent years has been the focus on
providing more sustainable, socially and
environmentally friendly accommodation.
The Europe-wide drive towards climate
neutrality by 2050 has ensured that ESG
considerations are now a core part of
investment decision making among real
estate investors and landlords alike. This
trend will continue to gather pace in the
years ahead.
Gross borrowings (million)
€288.4
Cash balances (million)
€10.4
Net loan-to-value on the Portfolio
34.7%
20
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Whilst an increasing number of landlords and
investors are bolstering their environmental
credentials, the full scope of prescribed ESG
criteria is not yet fully known. Currently, the
direction of travel appears to be driving
investment strategy towards new build as
opposed to the refurbishment of existing
properties on the basis that the reduction of
emissions is focused on the operational (as
opposed to building) phase. However, the
refurbishment and modernisation of existing
buildings, which is a central pillar of PSD’s
strategy, is widely regarded as more
sustainable than the alternative of new build.
This is because the CO2 emissions produced
during demolition, construction and the
production of building materials (embedded
carbon) represents over three quarters of all
emissions across the entire life cycle of a new
build completed to modern efficiency
standards. In addition, embedded carbon
is released almost entirely during the
demolition and construction phases, with
an immediate impact on the environment.
This contrasts with long-term existing stock
where the same emissions would have
already been depreciated.
A more considered approach is required, one
which fully recognises the role of embedded
carbon as the largest source of emissions
throughout the life cycle of a building. Should
the road ahead include the introduction of a
comprehensive CO2 tax inclusive of
embedded carbon generated during the
construction phase, refurbishments of
existing property would become relatively
more attractive versus the alternative of new
construction, which would have to absorb a
proportionately higher proportion of
emission costs. Currently, it is uncertain
as to whether future policy initiatives will shift
in this direction although it is encouraging
that the new German federal coalition
government has already declared its intention
to look more closely at the use, impact and
measurement of embedded carbon.
What is clear is that the potential
consequences of ESG regulation on the
investment markets will be an enduring
theme for years to come. PSD recognises
this and will continue to monitor and report
on its ESG activities. For the financial year
ended 2021, the Company intends to report
on its ESG emissions and strategy in a
separate Report, compliant with EPRA ESG
reporting standards.
Outlook
Finally, looking specifically at PSD, the
Property Advisor looks to the year ahead
with optimism. Following the removal of the
Mietendeckel, the Company is well placed
to resume its reversionary rental strategy. This
will support future rental growth across the
Portfolio irrespective of market rental growth.
The Company believes it can continue to
provide capital growth and income to its
investors through a disciplined approach to
reinvestment into the existing portfolio,
condominium sales at a premium to NAV,
share buybacks at a discount to NAV and
acquisitions if, and only if, they screen
favourably versus alternative uses of capital.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
21
Financial StatementsDirectors’ ReportStrategic Report Corporate Responsibility
Committed to
Acting Responsibly
The Company believes that taking a sustainable and socially
responsible approach to our business delivers long-term
success and benefits for all of our stakeholders.
Our approach to corporate responsibility
The Board recognises the importance of a
strong corporate governance structure and
operating with integrity, transparency and
clear accountability towards its tenants,
shareholders and other key stakeholders.
To secure our long-term success, we are
committed to taking account of what is
important to all of our key stakeholders,
balancing these different interests and
addressing our environmental and social
impacts. This commitment is captured
within our Company Values, business
model and ‘Better Futures’ CR Plan.
As a member of EPRA, we want to
contribute to greater transparency in
reporting. We have introduced EPRA’s SBPR
and capture our ESG measurements within
their framework. This commitment has
been recognised at the EPRA Sustainability
Awards 2021, with PSD receiving both
a Silver and Most Improved award in
recognition of the Company’s commitment
to best practice in its reporting.
commercial), on a case-by-case basis,
agreeing with them the payment of monthly
rents, deferring rental payments and
agreeing workable repayment schedules.
Our Company Values
Our Company Values mirror our CR Plan
and underpin our commitment to acting
responsibly. They set guidelines for our
behaviours to make good commercial and
ethical decisions. We share these with our
key business partners who undertake many
of the day-to-day business operations for
PSD to ensure that their own values and
behaviours are consistent with ours.
Stakeholder engagement
We proactively engage with our
stakeholders to ensure we understand
their differing viewpoints and take these
into consideration when making business
decisions. We strive to strike a meaningful
balance between providing a return to our
investors and addressing our social and
environmental impacts.
Due to the COVID-19 pandemic continuing
to affect many of our stakeholders’ lives in
2021, the Company’s overriding priority
continued to be the health and wellbeing
of our tenants, work colleagues and wider
stakeholders. Where required we continued
to support tenants (both residential and
22
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Our Company Values
Responsible
We act responsibly at all times and expect a high
level of integrity from all our partners and their
employees. That means we treat our tenants,
suppliers and investors with the highest ethical
standards.
Fair
We are fair to all our stakeholders, whether
employees, partners, investors or tenants and
endeavour to balance their different needs.
Where financially viable, we seek to improve the
overall standard of our accommodation whilst
investing responsibly for our investors and
addressing environmental and social impacts.
Excellence
We strive for excellence and continuous
improvement. We carefully select our business
partners based on their strong industry
experience and take a rigorous approach to
managing our business and executing our
strategy to deliver outstanding results.
Respectful
We respect and value our partners and the
people who work for them as they are at the
heart of our business success and the face of our
Company with tenants and investors. We believe
this will ultimately deliver a better service to our
tenants and results for our investors.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
23
Financial StatementsDirectors’ ReportStrategic Report Corporate Responsibility continued
Our ‘Better Futures’
Corporate Responsibility (‘CR’) Plan
Our ‘Better Futures’ Plan provides a framework to guide our activities and improve
our overall sustainability by being integrated throughout our business operations.
Our CR pillars align with EPRA’s ESG reporting.
24
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Environmental (E)
Protecting our environment
We strive to reduce our environmental impact by minimising the waste during the property
refurbishment process, using products and materials that have a low environmental impact
and encourage tenants to minimise their utility use.
Read more page 26
Social (S)
Respecting people
Our partners and their employees are at the heart of our business’s success and are the face
of our Company with tenants and investors. Our key partner, QSix, is committed to hiring,
developing and retaining highly-experienced people.
Read more page 27
Valuing our customers
Working together with our partners, we provide good-quality affordable homes with a reliable
friendly rental service for our tenants and a highly professional service for our investors.
Read more page 28
Investing in our communities
By investing in the housing stock and supporting local charities, we help contribute to thriving
and sustainable communities.
Read more page 29
Governance (G)
Governing responsibly
By ensuring we have a strong corporate governance culture and the appropriate policies and
structures in place, we aim to deliver sustainable benefits to all of our key stakeholders.
Read more page 30
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
25
Financial StatementsDirectors’ ReportStrategic Report Corporate Responsibility continued
Environmental
Protecting our Environment
We aim to reduce our environmental impact during the property refurbishment
process, encourage our tenants to minimise their utility use and continue
to improve our measurement and reporting.
We acknowledge that the German property
sector needs to play a major role in
Germany achieving its target of climate
neutrality by 2045. We recognise that the
nature of our business has environmental
and social impacts and that we have a
responsibility to consider and minimise
these impacts where possible. Our
Environment Policy sets guidance as to how
PSD, our Property Advisor (QSix) and other
key suppliers should operate to reduce this
impact. We also recognise that measuring
our impacts and transparent reporting are
important elements in our journey to
reduce our ESG impacts. Therefore in 2021,
we continued to evolve our measurement
and reporting of our building portfolio, in
line with EPRA’s SBPR framework.
Improving the sustainability of good
housing stock through renovation lies at the
core of our business. Bringing valuable
housing stock back into good repair extends
the life of the building and makes it available
to the public for future use. Throughout the
property refurbishment process, we work
with our contractors to minimise the
amount of waste by re-using materials,
where feasible and ensure that all
construction works are carried out in line
with local health and safety regulations. In
line with our Sustainable Procurement
Policy, we aim to use products and
materials that have a low environmental
impact, so long as their technical
performance meets the required standards,
and they are economically viable for
refurbished properties.
Although the core of our business consists
of upgrading older buildings, where we do
develop new builds, we operate to high
environmental standards. We have recently
purchased a site in Erkner, in the outskirts
of Berlin, where we are developing 34
single family houses. Each unit will have
an electric car charging point and triple
glazing as standard and heating will use
a combination of hybrid solar collectors and
brine/water heat pumps. These energy-
saving measures have led to the asset being
given a pro forma KfW 55 energy efficiency
rating, one of the highest ratings that new
builds can be given. The energy-efficient
nature of the acquisition highlights the
Company’s commitment to ensuring that
new build acquisitions are fully compliant
with the highest efficiency standards.
However, the greatest environmental impact
from our property portfolio is from the
utilities used by our tenants in their homes.
As a landlord, we do not have direct control
over the majority of the utility usage since it
is up to tenants how much they consume in
their homes. However, where we can, we
encourage our tenants to reduce their utility
usage by providing them with helpful hints
and advice and we ensure that increasing
volumes of the electricity supplied to our
buildings is from renewable sources. In 2021
we modernised the heating system in 4% of
our portfolio, improving their environmental
impact by approximately 10%.
To better manage tenants’ waste, we ensure
that tenants are kept well informed about
how to properly recycle their rubbish and
we work with our waste providers on the
disposal routes. Many of our properties have
been awarded recycling awards.
Given the majority of the day-to-day
running of PSD’s operations is undertaken
by our Property Advisor and PSD itself does
not have offices, we encourage QSix to
minimise their environmental impact.
Both QSix’s Berlin and London offices are
fitted with energy-saving products, and they
have an Environment Champion for each
office to encourage employees to reduce
their utility usage, improve recycling and
reduce the amount of paper used within
the business.
Notwithstanding that we have no direct
control over the majority of the utility
usage in our properties and that our visibility
and oversight is limited due to the majority
of our tenants having a direct contract with
the electricity provider, we have continued
to strengthen our ESG monitoring and
reporting across 2021 in line with EPRA’s
SBPR framework. In addition to measuring
the buildings that use oil and district heating
energy, in 2021, we have added in some of
our buildings using gas heating. This has
increased the percentage of our building
portfolio being measured.
Given QSix is a separate legal Entity, their
office impact is not included within our
EPRA ESG reporting. For more details
on our ESG performance see our EPRA
SBPR Reports 2020 and 2021.
26
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Social
Respecting People
The success of our business is based on the expertise, experience and dedication
of our partners’ employees who undertake the day-to-day operations for PSD.
Our Property Advisor, QSix, is our key
partner and has an experienced team of
property professionals with long-standing
experience of the German residential
property market and is de facto the face of
PSD. We therefore believe it is important that
QSix’s and PSD’s Company Values are
aligned and how QSix treats their employees
is consistent with our People Policy.
QSix is committed to having an inclusive
working environment that encourages all
employees to develop both personally and
professionally through having access to a
variety of training programmes, receiving
on-the-job support and coaching and
having annual Development Reviews. The
culture is to have a strong work-life balance,
with the Company and QSix being
committed to the health and wellbeing
of all employees. Leading health and
welfare benefits are provided, including
access to medical and legal advice.
QSix continued to put in place extra health
and safety measures in their offices and
set up systems to accommodate employees
working from home during 2021 due
to the continued COVID-19 restrictions
and challenges. They undertook an
employee survey to engage employees
in managing the working environment
during this challenging time to ensure
productivity remained high whilst
balancing employees’ concerns.
Although PSD does not have its own
full-time employees, it does invest
in the development of its Non-executive
Board, with each Board Member being
required to undertake professional training
throughout the year. This training is often
provided by external third parties with
experience in the area in question, the
Property Advisor or other service providers.
Each member of the Board also undertakes
an annual appraisal.
Employees who are satisfied with QSix’s
response to the Coronavirus situation
90%
Neither PSD nor QSix meets the criteria
requiring publication of a Modern Slavery
Statement. Nevertheless, both Companies
fully support the intentions of the Act and are
committed to implementing systems and
controls aimed at minimising the risk of
modern slavery taking place anywhere within
our organisations or in our supply chains. We
have an Anti-Slavery and Human Trafficking
Policy which is shared with key business
partners, who are asked to verify that they
have acted in accordance with the Policy.
“I started as a Receptionist for QSix in their London
office in December 2020. My manager was very
supportive and gave me numerous projects to help
me develop my skills and in April 2021, I was
promoted to the role of HR Administrator.
During 2021, I worked towards gaining my CIPD
Foundation Certificate in People Practice, which
QSix funded. They gave me time off to study and
take the assessments.
I have used many of the things I learned on my
course in my day-to-day job and continue to be
given challenging new projects to develop my
skills further and gain more experience.”
Katarzyna Araszkiewska HR Administrator, QSix
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
27
Financial StatementsDirectors’ ReportStrategic Report Corporate Responsibility continued
Social
Valuing our Customers
We are committed to providing good-quality affordable homes with a reliable,
friendly rental service to our tenants and a professional service to our investors.
arrange investor visits to Berlin to allow
investors to view the portfolio, meet
members of the Berlin team and discuss
industry trends with external experts.
Working with the right partners is key to
ensuring we deliver the best results for
our tenants and investors. We require our
partners to share our commitment to high
standards of responsibility and treating
customers fairly, as outlined in our Suppliers
Code of Conduct. Our key policies and
Company Values are shared with our
business partners annually and they are
asked to affirm that they are operating
in a manner consistent with them.
Percentage of new tenants who said they
were satisfied with the rental process
88%
With the continuation of the COVID-19
pandemic in 2021 and the German Federal
Constitutional Court ruling that the
Mietendeckel legislation in Berlin was
unlawful resulting in many tenants having
to pay back dated rents, the Company
has engaged with tenants on a responsible
basis, deferring rental payments if they
would cause unnecessary hardship.
We also recognise that some tenants may
be more vulnerable than others and our
Vulnerable Tenant Policy provides guidance
on procedures that should be followed
when dealing with tenants who are
particularly vulnerable to provide them
with additional protection.
We are committed to providing a highly
professional service to our investors through
strong corporate governance and providing
timely, frequent and clear business updates.
We have a dedicated investor resource
available to address investor questions
and, subject to COVID-19 restrictions,
Percentage of new tenants who said they
were satisfied with their apartment
85%
Providing people with homes is a basic
human need and therefore our tenants
are at the centre of our business activity.
PSD focuses on providing homes for people
that are both comfortable and affordable.
We aim to make a positive contribution to
our tenants’ living standards and to ensure
that their apartment is a place in which they
enjoy living. In 2021, we have continued
to make improvements in our buildings
for the enjoyment of our tenants with
renovating common areas such as
staircases and elevators and providing bike
storage. The topic of affordable housing
has dominated public debate in recent years
and PSD seeks to help with this challenge
via providing more renovated apartments
at pricing that is transparent and fair.
Providing a reliable friendly rental service
and responding to any concerns in a timely
manner are important to building our tenant
satisfaction and long-term tenant loyalty,
which ultimately safeguards our long-term
commercial success. Through the close
contact our Management Agent has with
our tenants and tenant surveys, we are able
to build a clear picture of what is important
to our tenants so that we can deliver a high
standard of service.
The annual tenant satisfaction survey that
was conducted for 2021 by the Property
Advisor, showed that 85% of new tenants
were satisfied with their apartment and
88% were satisfied with the rental process.
We seek to provide a healthy, safe and
secure environment for our tenants and
improve the standard of accommodation
through renovation and regular inspections
to ensure that we identify and eliminate
any hazards. In 2021 we have continued
to have no major health and safety incidents
reported across our building portfolio.
28
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Social
Investing in our Communities
We help contribute to thriving communities by investing
in homes for people and supporting local charities.
QSix, our key partner, continued to support
SPEAR and SHP for a third year. The two
charities work with homeless people or
those at risk of becoming homeless in
Greater London. The funding with SHP
supports an employability programme that
helps homeless people or those at high risk
of becoming homeless to find a job and
secure a sustainable income that enables
them to afford housing. In 2021, 180 people
participated in the programme. Funding is
given to SPEAR to run an outreach service,
helping rough sleepers in the Wandsworth
area secure accommodation and helping
them to address health and wider social
care problems. In 2021, this helped 302
homeless people in Wandsworth.
break the cycle of disadvantage and
broaden the children’s experiences and
give them a more positive outlook for the
future. Our donations in 2021 helped fund
the purchase of sports and camping
equipment for Summer school activities
that were being run for the children.
The children being able to participate in
such activities was more important than
ever in 2021, after the COVID-19 lockdown
restrictions they had experienced. We also
provided 150 school cones containing
equipment for new school starters that
the charity donated as part of a German
tradition.
“Laughing Hearts are very
pleased that PSD is helping fund
some of our activities with the
children we support. Their help
has enabled us to provide these
children growing up in care,
with experiences and
opportunities that they
otherwise would not have
received – making a positive
difference to their lives.”
Dr Mention Nidal Al-Saadi
(Laughing Hearts Club President)
In addition to investing in communities
by providing homes that people want
to live in at affordable rents, we look to
improve the external façade of the buildings
and other outdoor areas. For our tenants,
the look and feel of a neighbourhood
plays an important role in how they feel
about their home and the community
they live in. In 2021, €9.5 million was
reinvested in building improvement
programmes across the portfolio.
PSD are committed to being good
corporate citizens and we take a strategic
approach to our charitable giving which
is guided by our Community Investment
Policy and focuses on supporting charities
where there is a connection with either
‘homelessness’ or ‘families’.
For the third year, we have continued
to support The Intercultural Initiative,
a women’s refuge that helps women
affected by domestic violence by
providing emergency shelter and advice
and counselling to the women and their
children. 2021 was a challenging year
for the charity due to ongoing COVID-19
disruptions, with higher reported cases
of domestic violence. PSD’s donation
continued to help fund the operational
costs of a support apartment, which
provides accommodation for families
who no longer need to live in the refuge,
but still require protection and support
as they adjust to a new independent life
and build the necessary skills and
confidence. We also helped fund early
intervention services for the women and
their children around mental health and
other health matters.
PSD also began supporting The Laughing
Hearts charity, which supports children
living in children’s homes and social
care. The charity aims to provide the
children with cultural, sport and art activities
and social events that they otherwise
would not have access to. The aim is to
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
29
Financial StatementsDirectors’ ReportStrategic Report Corporate Responsibility continued
Governance
Governing Responsibly
Having a strong corporate governance culture and appropriate policies and
structures in place will deliver sustainable benefits to all of our key stakeholders.
Structurally, QSix has an ESG Task Force
that oversees the implementation of the
plan across the business. This Task Force
reports the progress on the CR Plan, at a
minimum of twice a year, to PSD’s ESG
Sub-Committee, which in turn reports
into the Company’s Board.
Additional information on our governance is
contained within our EPRA SBPR reporting.
The Board recognises the importance
of a strong corporate governance structure
and operating with integrity, accountability
and transparency across the business.
To ensure the successful delivery of our
‘Better Futures’ CR Plan, we have policies
for each of the pillars, a measurement
framework to monitor progress and a
governance structure to ensure robust
oversight.
We share the relevant policies with QSix,
which in turn has created its own policies
that are aligned with ours. We request that
QSix periodically verifies that it has acted in
accordance with the policies. Where QSix
outsources any key functions to other
business partners, it has likewise shared the
policies with them and requested that they
periodically verify that they have acted
within the spirit of the relevant policies.
30
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
31
Financial StatementsDirectors’ ReportStrategic Report Principal Risks and Uncertainties
Key:
Increasing
Unchanged
Decreasing
The Board recognises that effective risk evaluation and management needs to be foremost in the strategic planning and the decision-
making process. In conjunction with the Property Advisor, key risks and risk mitigation measures are reviewed by the Board on a regular
basis and discussed formally during Board meetings.
Risk
Impact
Conflict in
Ukraine
The current Russian invasion of Ukraine does not yet appear to have any direct impact on
PSD; however, the secondary effects of the conflict may have significant adverse effects.
The conflict may raise the risk to the Company in the following areas.
NEW
Cyber risk – The Russian state has been linked to cyber-attacks on Government and
international infrastructure and the risk of an increase in these attacks is highly likely
now that the Russian state is subject to sanctions from countries in Western Europe
and the USA.
Financial risk – The likely deterioration in the macro-economic environment may lead
to a more ‘wait-and-see’ attitude from investors and financial institutions which may lead
to an inability for the Company to refinance its debt. The rise in inflation may also lead
to an increase in interest rates, causing the cost of refinancing its debt to rise.
Market risk – The conflict is likely to affect investor sentiment across Europe, convincing
financial institutions and other Companies to operate a ‘wait-and-see’ approach to their
cash reserves rather than investing them, potentially affecting economic growth
prospects. Furthermore, as with supply chain risk below, the sanctions imposed on the
Russian Government are likely to push up prices of energy raw materials as they become
more difficult to obtain. The increase in prices of raw materials is likely to lead to increased
inflation across Europe.
Supply chain risk – The German Government and German Companies have procured
significant amounts of fuel and raw materials from Russia over the previous years. With
the advent of significant sanctions on the Russian Government, the availability of these is
likely to be significantly reduced, potentially harming the Company’s ability to source raw
materials to aid its refurbishment and construction programmes.
Vulnerable tenants – The economic dislocation caused by the Ukraine conflict is likely to
cause an increase in the number of vulnerable tenants in Company units as rising inflation
and unemployment could lead to tenants being unable to meet their rent payments as
they fall due. An increase in the number of vulnerable tenants may increase the scrutiny
on the Company should these tenants not be treated in a fair manner.
Risk
Impact
Mitigation
Mitigation
Cyber risk – The mitigation of this risk is
addressed in the Cyber risk section
below on page 33.
Financial risk – The mitigation of this risk is
addressed in the Financial risk section
below on page 33.
Market risk – The mitigation of this risk is
addressed in the Market risk section
below on page 32.
Supply chain risk – The Company has operated
in the German market since 2007 and has
developed a diversified supply chain across
Germany in both Berlin and the cities in which
it used to operate; the Company would be able
to source raw materials from these suppliers
should they be required.
Vulnerable tenants – The Company has a
policy of engaging directly with vulnerable
tenants through its Vulnerable Tenant Policy
which sets out procedures to follow to assist
tenants who may require additional protection.
Tenant /
letting and
political risk
Property laws remain under constant review by both
the ‘Red-Red-Green’ coalition government in Berlin and
the recently-elected ‘Traffic Light Coalition’ Federal
Government.
Market risk
The new Federal Government has issued its coalition
intentions paper ‘Koalitionsvereinbarung’ (coalition
agreement) and, while no policies have been brought
into law yet, the intentions paper indicates that the new
government is looking at nationwide rent moratoriums,
caps on permitted rent increases and tightening of
rental brakes.
Economic, political, fiscal and legal issues can have a
negative effect on property valuations. A decline in
Group property valuations could negatively impact
the ability of the Group to sell properties within the
Portfolio at valuations which satisfy the Group’s
investment objective.
The rapidly-developing situation in Ukraine has the
possibility to impact negatively gas, energy and raw
material supplies to Germany and the rest of Europe.
This could lead to rises in overall costs both for the
Company and its tenants.
COVID-19 remains prevalent in Germany and potential
restrictions to work and assembly have the possibility
of negatively impacting the Company’s operations and
tenants’ ability to pay rents as they fall due.
The Federal Government is currently considering
introducing new laws which would allow States
to block the partitioning of apartment blocks into
condominiums. The Berlin Government has recently
adopted similar proposals.
32
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
The Property Advisor regularly monitors the impact that existing and
proposed laws or regulations could have on future rental values and property
planning applications.
The Property Advisor considers that the Company has a flexible business
model, which should enable it to adapt to any new rent regulations proposed
by the Federal Government. Furthermore, to a significant extent, the proposals
of the new Federal Government are similar to rules already in place in the
State of Berlin and, therefore, there is not expected to be a significant impact on
the Company’s operations from these proposed regulations.
Although the Board and Property Advisor cannot control external macro-
economic risks, economic indicators are constantly monitored by both the
Board and Property Advisor and Company strategy is tailored accordingly.
The Board and the Property Advisor are continuing to monitor the deteriorating
situation in Ukraine. While it is not clear as yet what effect the announced
sanctions from the German and other European governments
on the Russian Government are likely to have on the Company’s finances
and operations, the Company has been able to operate in unfavourable
economic environments before, including the COVID-19 pandemic and
the Mietendeckel.
The effects of COVID-19 on the Company’s operations and finances have been
limited, with strong rent collection during 2021. Its outsourced service providers
have also managed to continue operating with limited disruption.
The blocking of the ability for landlords to split assets at the land registry
would likely be a net positive for the Company since the supply of
condominiums would be materially reduced, increasing the value
of the stock of over 1,700 units already split owned by the Company.
Risk
Impact
Mitigation
Financial risk
A fall in revenues could result in the Group
breaching financial covenants of a lender, and also
lead to the inability to repay any debt and related
borrowing costs. A fall in revenue or
asset values could also lead to the Company being
unable to maintain dividend payments
to investors.
The current situation in Ukraine may lead to
financial institutions operating a ‘wait-and-see
approach’ to lending and investing, which may lead
to an inability for the Company to refinance its
Portfolio in the future. The potential for interest rate
rises in response to rising inflation could also lead
to increasing interest costs for the Company.
IT and cyber
security risk
The Company is dependent on network and
information systems of various service providers
– mainly the Property Advisor, Property Manager
and Administrator, and is therefore exposed to the
risk of cyber-crimes and loss of data.
As cyber-crime remains prevalent across Europe,
this is considered a significant risk by the Group.
A breach could lead to the illegal access of
commercially-sensitive information and the
potential to impact investor, supplier and tenant
confidentiality and to disrupt the business
of the Company.
The Russian state has been linked to cyber-attacks
on Government and international infrastructure
and the risk of an increase in these attacks is highly
likely now that the Russian state is subject to
sanctions from countries in Western Europe and
the USA.
Lack of
investment
opportunity
Availability of potential investments which meet the
Company’s investment objective can be negatively
affected by supply and demand dynamics within
the market for German residential property and the
state of the German economy and financial
markets more generally.
Outsourcing
risk
The Group’s future performance depends on the
success of its outsourced third-party suppliers,
particularly the Property Advisor, QSix, but also its
outsourced property management, International
Financial Reporting Standards (‘IFRS’) and German
GAAP accountants and its administrative functions.
The departure of one or more key third-party
providers may have an adverse effect on the
performance of the Group.
The Group took on new covenants when signing its facility with Natixis: Interest
coverage ratio (ICR), debt yield and loan-to-value covenants. Only the debt yield and
ICR covenants are ‘hard’ covenants, resulting in an event of default in case of
breach. The loan-to-value covenant is a ‘cash trap’ covenant alone (the requirement
to hold all related rental income in Natixis Accounts until sufficient debt is repaid to
return to with the covenant level), with no event of default. The Company carried
out extensive sensitivity analysis prior to signing the facility and, even in the most
stressed rent scenarios, no covenants were breached.
The Property Advisor continues to model expected revenues and covenant levels,
and these are reported to the Board as part of its Viability Assessment which can be
seen on page 38.
If rent levels or property values were to fall to a point where the covenants were in
danger of being affected, the Company expects to use its surplus cash flow and
cash reserves to pay down debt balances to rectify the situation. At the most recent
covenant test date, in January 2022, all covenants were cleared.
The Company also continues to monitor its balance sheet and to review potential
refinancing opportunities as part of its day-to-day operations. However,
opportunities in these areas may become limited due to current uncertain
macro-economic environment stemming from the economic dislocation caused
by Russian military action in Ukraine. The Property Advisor will look to accelerate or
delay, as appropriate, potential refinancing opportunities in response to the
changing macro-economic environment.
There is a constant review of IT systems and infrastructure in place for the
Company to ensure these are as robust as possible. Service providers are required
to report to the Board on request, and at least annually, on their financial controls
and procedures.
A detailed review has been undertaken during the year of the cyber security
of the Company and its outsourced processes. From this review, the Company has
required all its key service providers to report to the Company their procedures and
protocols around cyber security on an annual basis. Additionally, the Company has
requested that all service providers carry out cyber penetration testing and report
back to the Board with any significant observations.
Service providers are also required to hold detailed risk and controls registers
regarding their IT systems. The Property Advisor and the Board reviews service
organisations’ IT reports as part of Board meetings each year.
The Board believes that, while the risk of cyber-attacks has increased due to the
sanctions imposed on the Russian Government, the risk to its service providers
directly remains relatively low. The secondary risk from cyber-attacks on digital
infrastructure, such as payment systems, remains high and the Board, and the
Property Advisor, will continue to monitor the situation.
The Property Advisor has been active in the German residential property market
since 2006. It has specialised acquisition personnel and an extensive network of
industry contacts, including property agents, industry consultants and the principals
of other investment funds. It is expected that future acquisitions will be sourced
from these channels.
Since the overturning of the Mietendeckel in April 2021, regulation has focused
more on slowing down the market by extension of Milieuschutz areas and the
prohibition of splitting assets at the land registry. The Property Advisor believes that
this attempt to slow down the market will create other opportunities, including
densification projects within the current Portfolio and acquiring in the suburbs of
Berlin, outside the scope of these regulations, where the growth potential is more
promising. An example of this being the recently-signed forward funding acquisition
in Erkner, which is detailed on page 17.
Since the Company listed on the London Stock Exchange, the Property Advisor has
expanded headcount through the recruitment of several additional experienced
London and Berlin-based personnel. Additionally, senior Property Advisor personnel
and their families retain a stake in the Group, aligning their interests with other
key stakeholders.
The key third parties responsible for property management, accounting and
administration are continually monitored by the Property Advisor and must
provide responses annually to a Board assessment questionnaire regarding their
internal controls and performance. These questionnaires are reviewed annually
by the Board.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
33
Financial StatementsDirectors’ ReportStrategic Report Board of Directors
The Company has an experienced Non-executive Board, chaired by
Robert Hingley. The Directors have a wealth of experience in real
estate, corporate finance, investment funds and capital markets.
Monique O’Keefe
Independent Non-executive Director,
Senior Independent Director and
Chair of the ESG Committee and
the Remuneration Committee1
Monique, a Jersey resident, runs an
investment consultancy business and sits
on a number of boards including a hedge
fund, a solar energy Company, a non-
performing credit fund and a digital
infrastructure Company. She also serves
as a Commissioner with the Jersey Financial
Services Commission and has recently been
appointed to the Board of the Jersey
Resolution Authority (‘JFSC’). Prior to
moving to Jersey, Monique was an
investment banker at Goldman Sachs and
Merrill Lynch and a structured finance
lawyer at Clifford Chance and Minter
Ellison. Monique is regulated by the JFSC
to act as a Company Director (Class G)
and is registered with the Cayman Islands
Monetary Authority. Monique was
appointed to the Board on 17 April 2018.
Robert Hingley
Independent Non-executive Director,
Chairman and Chair of the
Nomination Committee
Jonathan Thompson
Independent Non-executive Director
and Chair of the Audit Committee
Jonathan is the Non-executive Chairman
of the Argent Group of real estate
regeneration, development and investment
businesses. He is also a Non-executive
Director and Chair of the Audit Committee
at Schroders European Real Estate
Investment Trust Plc, a Non-executive
Director and Chair of the Audit and Risk
Committee at The Government Property
Agency and an Independent Member of
the investment advisory Board to a family
wealth fund. He is a past Chair of the
Investment Property Forum and a past
member of the Board of the British Property
Federation. An accountant by background,
he spent 32 years at KPMG, including 12 as
Chair of its International Real Estate and
Construction practice. He is a member of
the Institute of Chartered Accountants and
an Honorary Fellow of the Royal Institute
of Chartered Surveyors. Jonathan was
appointed to the Board on 24 January 2018.
Robert, a UK resident, acts as an
Independent Non-executive Director and
Chairman of the Company. He is Chairman
of Euroclear UK & International Limited and
The Law Debenture Corporation Plc and
a Director of Marathon Asset Management
Limited. He had over 30 years’ experience
as a corporate finance advisor, retiring as a
Partner at Ondra Partners LLP in 2017. He
joined the Association of British Insurers
(‘ABI’) as Director, Investment Affairs in
September 2012 and, following the merger
of ABI’s Investment Affairs with the
Investment Management Association (‘IMA’),
acted as a consultant to the enlarged IMA
until the end of 2014. From 2010 until 2015,
he was a Managing Director, and later
Senior Advisor, at Lazard. He was previously
Director General of The Takeover Panel
from 2007, on secondment from Lexicon
Partners, where he was Vice Chairman.
Prior to joining Lexicon Partners in 2005,
he was Co-Head of the Global Financial
Institutions Group and Head of German
Investment Banking at Citigroup Global
Capital Markets, which acquired the
investment banking business of Schroders
in 2000. He joined Schroders in 1985 after
having qualified as a solicitor with Clifford
Chance in 1984. Robert was appointed to
the Board on 15 June 2015.
34
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
1 Resigned on 3 December 2021 with final
resignation date being 31 March 2022.
Antonia Burgess
Greg Branch
Isabel Robins
Independent Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
and Chair of the Risk Committee
and Chair of the Property Valuation
Committee
Antonia has nearly 30 years’ experience
Greg is a Jersey-resident independent
Isabel has been a member of The Royal
working in the legal and financial services
Non-executive Director with over 30 years’
Institution of Chartered Surveyors since
sectors. She is a Jersey-resident
experience working in the financial services
1993 and received a BSc (Hons) Valuation
Independent Non-executive Director
and real estate sectors. He has considerable
and Estate Management degree from the
with considerable experience working
experience working with complex business
University of the West of England (1991). She
with leading institutional real estate fund
structures and has a broad understanding
holds several Non-executive roles, including
managers and investment Companies and
of risk management and the valuation of
with EcoWorld Ballymore, and as Director of
has an in-depth understanding of real estate
unlisted assets. Greg received a Bachelor
a regulated Guernsey Manager investing in
investment transactions and structuring.
of Science in monetary economics, is ACA
real estate and private equity for high-net-
Antonia qualified as a solicitor in England
qualified and was previously Senior Partner
worth individuals. Isabel has over 23 years’
and Wales in 1995, and prior to relocating
at Deloitte LLP in Jersey. He holds a number
experience running complex offshore real
to Jersey, where she led Mourant’s
of Non-executive roles, including with Royal
estate structures, encompassing a broad
European real estate fund administration
Bank of Scotland International Limited and
range of property funds, investments, and
business (subsequently acquired by State
Saltgate Limited. Greg was appointed to the
developments, including working with
Street), she was a real estate lawyer at
Board on 1 September 2020.
Hogan Lovells in London. She holds a
number of Non-executive roles, including
with Oxford Properties and also in fund
entities managed by Signal Capital Partners.
She is regulated by the JFSC and is a
member of the Institute of Directors.
Antonia was appointed to the Board on
12 August 2020.
Schroders and Abdn. She is a Jersey-
resident Independent Non-executive
Director and is regulated by the JFSC and
is a member of the Institute of Directors.
On appointment to the Board on 14 March
2022, Isabel Robins was appointed to the
Audit Committee, the Property Valuation
Committee, the Risk Committee, the
Nomination Committee and as Chair of the
ESG Committee.
Robert Hingley
Jonathan Thompson
Monique O’Keefe
Independent Non-executive Director,
Independent Non-executive Director
Independent Non-executive Director,
and Chair of the Audit Committee
Senior Independent Director and
Chairman and Chair of the
Nomination Committee
Chair of the ESG Committee and
the Remuneration Committee1
Antonia Burgess
Independent Non-executive Director
and Chair of the Risk Committee
Greg Branch
Independent Non-executive Director
and Chair of the Property Valuation
Committee
Isabel Robins
Independent Non-executive Director
Robert, a UK resident, acts as an
Jonathan is the Non-executive Chairman
Monique, a Jersey resident, runs an
Independent Non-executive Director and
of the Argent Group of real estate
investment consultancy business and sits
Chairman of the Company. He is Chairman
regeneration, development and investment
on a number of boards including a hedge
of Euroclear UK & International Limited and
businesses. He is also a Non-executive
fund, a solar energy Company, a non-
The Law Debenture Corporation Plc and
Director and Chair of the Audit Committee
performing credit fund and a digital
a Director of Marathon Asset Management
at Schroders European Real Estate
infrastructure Company. She also serves
Limited. He had over 30 years’ experience
Investment Trust Plc, a Non-executive
as a Commissioner with the Jersey Financial
as a corporate finance advisor, retiring as a
Director and Chair of the Audit and Risk
Services Commission and has recently been
Partner at Ondra Partners LLP in 2017. He
Committee at The Government Property
appointed to the Board of the Jersey
joined the Association of British Insurers
Agency and an Independent Member of
Resolution Authority (‘JFSC’). Prior to
(‘ABI’) as Director, Investment Affairs in
the investment advisory Board to a family
moving to Jersey, Monique was an
September 2012 and, following the merger
wealth fund. He is a past Chair of the
investment banker at Goldman Sachs and
of ABI’s Investment Affairs with the
Investment Property Forum and a past
Merrill Lynch and a structured finance
Investment Management Association (‘IMA’),
member of the Board of the British Property
lawyer at Clifford Chance and Minter
acted as a consultant to the enlarged IMA
Federation. An accountant by background,
Ellison. Monique is regulated by the JFSC
until the end of 2014. From 2010 until 2015,
he spent 32 years at KPMG, including 12 as
to act as a Company Director (Class G)
he was a Managing Director, and later
Chair of its International Real Estate and
and is registered with the Cayman Islands
Senior Advisor, at Lazard. He was previously
Construction practice. He is a member of
Monetary Authority. Monique was
Director General of The Takeover Panel
the Institute of Chartered Accountants and
appointed to the Board on 17 April 2018.
from 2007, on secondment from Lexicon
an Honorary Fellow of the Royal Institute
Partners, where he was Vice Chairman.
of Chartered Surveyors. Jonathan was
Prior to joining Lexicon Partners in 2005,
appointed to the Board on 24 January 2018.
he was Co-Head of the Global Financial
Institutions Group and Head of German
Investment Banking at Citigroup Global
Capital Markets, which acquired the
investment banking business of Schroders
in 2000. He joined Schroders in 1985 after
having qualified as a solicitor with Clifford
Chance in 1984. Robert was appointed to
the Board on 15 June 2015.
Greg is a Jersey-resident independent
Non-executive Director with over 30 years’
experience working in the financial services
and real estate sectors. He has considerable
experience working with complex business
structures and has a broad understanding
of risk management and the valuation of
unlisted assets. Greg received a Bachelor
of Science in monetary economics, is ACA
qualified and was previously Senior Partner
at Deloitte LLP in Jersey. He holds a number
of Non-executive roles, including with Royal
Bank of Scotland International Limited and
Saltgate Limited. Greg was appointed to the
Board on 1 September 2020.
Antonia has nearly 30 years’ experience
working in the legal and financial services
sectors. She is a Jersey-resident
Independent Non-executive Director
with considerable experience working
with leading institutional real estate fund
managers and investment Companies and
has an in-depth understanding of real estate
investment transactions and structuring.
Antonia qualified as a solicitor in England
and Wales in 1995, and prior to relocating
to Jersey, where she led Mourant’s
European real estate fund administration
business (subsequently acquired by State
Street), she was a real estate lawyer at
Hogan Lovells in London. She holds a
number of Non-executive roles, including
with Oxford Properties and also in fund
entities managed by Signal Capital Partners.
She is regulated by the JFSC and is a
member of the Institute of Directors.
Antonia was appointed to the Board on
12 August 2020.
Isabel has been a member of The Royal
Institution of Chartered Surveyors since
1993 and received a BSc (Hons) Valuation
and Estate Management degree from the
University of the West of England (1991). She
holds several Non-executive roles, including
with EcoWorld Ballymore, and as Director of
a regulated Guernsey Manager investing in
real estate and private equity for high-net-
worth individuals. Isabel has over 23 years’
experience running complex offshore real
estate structures, encompassing a broad
range of property funds, investments, and
developments, including working with
Schroders and Abdn. She is a Jersey-
resident Independent Non-executive
Director and is regulated by the JFSC and
is a member of the Institute of Directors.
On appointment to the Board on 14 March
2022, Isabel Robins was appointed to the
Audit Committee, the Property Valuation
Committee, the Risk Committee, the
Nomination Committee and as Chair of the
ESG Committee.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
35
Financial StatementsDirectors’ ReportStrategic Report Directors’ Report
The Directors are pleased to present their Annual Report and the audited Consolidated Financial Statements for the year ended
31 December 2021.
Corporate Governance
The Corporate Governance Statement on pages 40 to 47 forms part of this Directors’ Report, which, together with the Strategic Report
set out on pages 2 to 31 form the Management Report for the purposes of Disclosure Guidance and Transparency Rule (‘DTR’) 4.1.5R.
The Corporate Governance Statement details how the ‘AIC Code’ has been applied.
General information
The Company is a Public Limited Company incorporated in Jersey, Channel Islands, under the Companies (Jersey) Law 1991. The
Company has a premium listing on the Official List of the Financial Conduct Authority (‘FCA’) and was admitted to the premium segment
of the Main Market of the London Stock Exchange on 15 June 2015.
The Group’s objective is to generate an attractive return for shareholders through the acquisition and active management of high-quality
pre-let properties in Germany. The Group is primarily invested in the residential market in Berlin, supplemented with selective investments
in commercial property. The majority of commercial property within the portfolio is located within residential and mixed-use properties.
Dividends
The Directors have declared a final dividend of 5.15c (2020: 5.15c) per Ordinary Share for the period 1 July 2021 to 31 December 2021 to be
paid on or around 9 June 2022 to Ordinary Shareholders on the register on 13 May 2022.
The Directors declared a dividend of 5.15c per Ordinary Share for the period 1 July 2020 to 31 December 2020, paid on 7 June 2021 to
Ordinary Shareholders on the register on 14 May 2021 and a further dividend of 2.35c per Ordinary Share for the period 1 January 2021 to
30 June 2021, paid on 29 October 2021 to Ordinary Shareholders on the register on 8 October 2021.
Directors
The Directors in office as of 31 December 2021, and subsequently, and their biographical details are shown on pages 34 to 35.
The Company has made third-party indemnity provisions for the benefit of its Directors which were in place throughout the year and
remain in force at the date of this Report. The Company maintains directors’ and officers’ liability insurance for its Directors and Officers.
The terms and conditions of appointment of the Directors are formalised in letters of appointment, copies of which are available for
inspection at the Company’s registered office. None of the Directors have a contract of service with the Company nor has there been any
other contract or arrangement between the Company and any Director at any time during the year.
During the year, none of the Directors or any persons closely associated to them had a material interest in the Company’s transactions or
agreements.
The Board, through the Company Secretary, maintains a register of conflicts which is reviewed quarterly at Board meetings, to ensure that
any conflicts remain appropriate and to confirm whether there have been any changes.
It is the Directors’ duty to avoid situations where they have, or could have, a direct or indirect interest that conflicts, or possibly could
conflict, with the Company’s interests. Any Directors who have a material interest in the matter being considered will not be able to
participate in the Board approval process.
The Board believes that its procedures regarding conflicts of interest have operated effectively. At 31 December 2021, the interests of the
Directors in the Ordinary Shares of the Company are as follows:
Quentin Spicer*
Robert Hingley
Jonathan Thompson
* Quentin Spicer retired with effect from 8 June 2021.
31 December 2021
Number of shares
31 December 2020
Number of shares
N/A
5,150
7,337
39,600
5,150
7,337
There has been no change to the interests of each Director between 31 December 2021 and the date of this Report.
The Board has adopted the policy of maintaining a gifts and hospitality register to record all gifts and hospitality in excess of £250 accepted
by the Directors from the Company’s service providers or other third parties. All gifts and hospitality in excess of £500 require pre-approval
from the Board.
36
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Share capital
No shares were issued by the Company during the year.
At the year end, the issued share capital of the Company comprised 100,751,410 Ordinary Shares of which 7,949,293 were held in treasury.
At general meetings of the Company, Ordinary Shareholders are entitled to one vote on a show of hands and, on a poll, to one vote for
every Ordinary Share held. At 31 December 2021, the total voting rights of the Company were 92,802,117, and as at the date of this Report
are 92,802,117, being the issued share capital minus shares held in treasury.
On 8 June 2021, the Company obtained shareholder approval permitting it to issue up to 10,075,141 Ordinary Shares for cash on a
non-pre-emptive basis, representing 10% of the Ordinary Shares then in issue. The Directors are proposing that this shareholder approval
be renewed at the forthcoming 2022 AGM.
Share repurchases
In accordance with the Company’s Articles of Association and the Companies (Jersey) Law 1991, the Company may hold any Ordinary
Shares that it repurchases in treasury or cancel them. Authority for the Company to make market purchases of and to cancel or hold in
treasury up to 14,514,054 of its Ordinary Shares (representing approximately 14.99% of the Ordinary Shares in issue) is sought from
shareholders at each AGM, with the latest authority granted on 8 June 2021.
At 31 December 2021, 7,949,293 shares, representing 7.9% of shares in issue, have been repurchased at an average price of £3.42 per share
and an average discount to December 2021 EPRA NTA of 27.9%. At 31 December 2021, all the repurchased shares were held in treasury.
During the year, the Company transferred 1,193,995 Treasury Shares, with value €6,304,291, to QSix Residential Limited in settlement of the
Performance Fee due to the Property Advisor for the three-year performance period to December 2020. This represented 1.2% of shares in
issue.
As of 29 March 2022, the Company has repurchased a further 240,463 shares representing 0.2% of Ordinary Shares which are also held in
treasury.
Holding the shares purchased in treasury gives the Company the ability to re-sell or transfer them quickly and cost effectively and provides
the Company with additional flexibility in the management of its capital base.
Substantial shareholdings
At 31 December 2021, the Company had been informed of the following holdings representing more than 5% of the voting rights of the
Company:
Name of holder
Thames River Capital
Bracebridge Capital
Percentage of
voting rights
No. of Ordinary
Shares
15.81%
14.29%
14,675,087
13,259,275
The following changes have been notified to the Company between 31 December 2021 and the date of this Report:
Name of holder
Thames River Capital
Bracebridge Capital
Percentage of
voting rights
No. of Ordinary
Shares
16.22%
14.29%
15,066,628
13,259,275
Requirements of the Listing Rules
Listing Rule 9.8.4 requires the Company to include specified information in a single identifiable section of the Annual Report or a cross-
reference table indicating where the information is set out. The Directors confirm that there are no disclosures required in relation to Listing
Rule 9.8.4.
Financial risk management
Details of the financial risk management objectives and policies adopted by the Directors, and the exposure of the Company to price,
credit, liquidity and cash-flow risk can be found in note 3 to the Consolidated Financial Statements.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
37
Financial StatementsDirectors’ ReportStrategic Report Directors’ Report continued
Events after the reporting date
• The Company had exchanged contracts for the sale of 10 residential units and one attic unit in Berlin with aggregated consideration
•
•
•
of €5.7 million prior to the reporting date. The sale of these units subsequently completed in Q1 2022.
In Q1 2022 the Company exchanged contracts for the sale of six condominiums in Berlin for an aggregate consideration of €2.1 million.
Completion of these contracts is expected in Q2 2022.
In Q1 2022, 240,463 of the Company’s shares were bought back with average price paid of £3.87, an 18.4% discount to December 2021
EPRA NTA per share of £4.76.
In March 2022, the Company exchanged contracts to acquire a portfolio of 17 new build, semi-detached, residential properties (34
houses) for a purchase price of €18.5 million. Further information can be found on page 17.
Auditor
Each of the Directors at the date of approval of this Annual Report has taken all the steps that he or she ought to have taken as a Director in
order to make him or herself aware of any relevant audit information and to establish that the Group’s Auditor is aware of that information.
The Directors are not aware of any relevant audit information which has not been disclosed to the Auditor.
RSM UK Audit LLP has expressed its willingness to continue in office as Auditor and a resolution to reappoint them will be proposed at the
forthcoming AGM.
Going concern
The Directors have reviewed projections for the period up to March 2023, using assumptions which the Directors consider to be
appropriate to the current financial position of the Group with regard to revenues, its cost base, the Group’s investments, borrowing and
debt repayment plans. These projections show that the Group should be able to operate within the level of its current resources and
expects to manage all debt covenants for a period of at least 12 months from the date of approval of the Financial Statements. The Group’s
business activities together with the factors likely to affect its future development and the Group’s objectives, policies and processes from
managing its capital and its risks are set out in the Strategic Report. After making enquiries and having regard to Financial Reporting Council
(‘FRC’) Guidance for Companies on COVID-19 issued on 4 December 2020, the Directors have a reasonable expectation that the Group
has adequate resources to continue in operational existence for the foreseeable future, and, therefore, continue to adopt the going-
concern basis in the preparation of these Financial Statements.
Viability Statement
The Directors have assessed the viability of the Group over a three-year period to February 2025. The Directors have chosen three years
because that is the period that broadly fits within the strategic planning cycle of the business. The Viability Statement is based on a robust
assessment of those risks that would threaten the business model, future performance, solvency or liquidity of the Group, as set out in
the assessment of principal risks in this document on pages 32 to 33. For the purposes of the Viability Statement the Directors have
considered, in particular, the impact of the following factors affecting the projections of cash flows for the three-year period ending
28 February 2025:
a) the potential operating-cash-flow requirement of the Group;
b) seasonal fluctuations in working-capital requirements;
c) property vacancy rates;
d) rent arrears and bad debts;
e) capital and administration expenditure (excluding potential acquisitions as set out below) during the period;
f) condominium sales proceeds;
g) expected debt releases;
h) the potential impact of COVID-19;
i)
j) asset construction development costs.
the potential impact of the war in Ukraine; and
Under normal scenarios, this base case model assumes stresses to each of a) through to g) in the above list. However, this year the Group
has additionally considered points h, i and j.
The effect of COVID-19 and its associated restrictions, as they relate to the Company, were assessed by the Board as part of this Viability
Statement. The Board considers that it is not necessary to model any adverse assumptions with respect to the impact of further COVID-19
restrictions as the Company believes it has demonstrated throughout the pandemic that its financial and operational results have remained
robust and that it is able to operate effectively in the most difficult of environments. Furthermore, it is increasingly evident that there is little
appetite in Germany, and throughout Europe for a return to restrictions to try and stem the spread of COVID-19, and the focus appears to
be towards ‘living with’ the virus as it becomes endemic. Therefore, on this basis it is appropriate not to model separately any adverse
effects on viability due to COVID-19.
The rapidly-developing situation in Ukraine has the possibility to affect negatively gas and energy supplies to Germany and the rest of
Europe. This could, in turn, lead to rises in overall property and corporate costs both for the Company and its tenants. The effect on the
Company’s business and viability is extremely difficult to determine at this early stage, but the Directors believe that the stress testing set
out below would accurately reflect a reasonable ‘worst-case’ scenario that may arise as a result of the current position.
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Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Financial modelling and stress testing was carried out on the Group’s cash flows taking into account the following assumptions, which the
Directors believe to reflect the conditions present in a ‘worst-case’ scenario:
•
increased regulation of rent levels of tenancies in the Berlin and Brandenburg markets leads to a fall in rental income of 20% over the
forecast period;
• a fall in asset values due to an external market shock leading to an inability to refinance properties over the forecast period;
• projected condominium sales are reduced by 20% as a response to the Berlin and/or Federal authorities attempting to slow down the
condominium sales;
• changes in ESG regulations lead to a mandated 20% increase in capital expenditure to reach the required regulatory level. This includes
a 20% increase in the costs of the forward-funding acquisition in Erkner as described on page 17; and
• a cyber-attack on the Company which leads to a General Data Protection Regulation (‘GDPR’) data-breach fine of 4% of annual revenue
in 2023.
After applying the assumptions above, individually and collectively, there was no scenario by which the viability of the Company over the
next 12 months was brought into doubt from a cash-flow perspective. Under the stresses set out above, cash-flow mitigation may be
required in 2023 and headroom could be obtained in the following ways:
•
• cancellation of larger capital expenditure projects; and
• selling individual assets, or condominiums to release cash.
reducing the dividend to preserve cash;
Under these stressed assumptions used to assess viability, the Group is able to manage all banking covenant obligations during the period
using the available liquidity to reduce debt levels, as appropriate.
The projection of cash flows includes the impact of further potential property acquisitions in order to draw the full acquisition facility
signed with Natixis in December 2021. However, as the facility is a 100% loan-to-cost then the impact on the cash flows is limited to a rise
in the interest paid on the loan balance over the forecast period. Furthermore, the Directors complete a formal review of the working
capital headroom of the Group for material acquisitions.
Directors’ confirmations
In accordance with the FCA’s DTRs, each of the Directors, whose names are set out on pages 34 to 35, confirms that to the best of his
or her knowledge:
•
the Annual Report and Financial Statements have been prepared in accordance with IFRS and UK AIS, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company; and
the Annual Report, including the Directors’ Report, includes a fair and balanced review of the development and performance of the
business, and the financial position of the Company, together with a description of the principal risks and uncertainties that the
Company faces.
•
The Directors confirm that they have complied with the above requirements in preparing the Financial Statements.
The Annual Report and Financial Statements, taken as a whole, are considered by the Board to be fair, balanced and understandable
and provide the information necessary for shareholders to assess the Company’s position, performance, business model and strategy.
On the basis of the above, and assuming the principal risks are managed or mitigated as expected, the Directors have a reasonable
expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period of their
assessment.
The Directors’ Report was approved by the Board of Directors and authorised for issue and signed as follows:
On behalf of the Board
Robert Hingley
Chairman
29 March 2022
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
39
Financial StatementsDirectors’ ReportStrategic Report Corporate Governance Statement
Board leadership and purpose
This Corporate Governance Statement comprises pages 40 to 47 and forms part of the Directors’ Report.
Introduction from Chairman
I am pleased to introduce this year’s Corporate Governance Statement. In this Statement, the Company reports on its compliance with the
AIC Code, sets out how the Board and its Committees have operated during the past year and describes how the Board exercises effective
oversight over the Group’s activities in the interests of shareholders.
The Board recognises the importance of a strong corporate governance culture and has established a framework for corporate governance
which it considers to be appropriate to the business of the Company and the Group as a whole.
The AIC Code
As a member of the AIC, the Company reports against the Principles and Provisions of the AIC Code. The AIC Code addresses the
Principles and Provisions set out in the UK Corporate Governance Code (the ‘UK Code’) as well as setting out additional Provisions
on issues that are of specific relevance to Investment Companies. The AIC Code can be found on the AIC website (www.theaic.co.uk).
It includes an explanation of how the AIC Code adapts the Principles and Provisions set out in the UK Code to make them relevant for
Investment Companies. The UK Code is available on the FRC website (www.frc.org.uk).
The Board considers that reporting against the Principles and Provisions of the AIC Code, which has been endorsed by the FRC and
supported by the JFSC, provides more relevant information to shareholders.
The Board has made the appropriate disclosures in this Report to ensure that the Company meets its continuing obligations. It should be
noted that, as an investment Company, most of the Company’s day-to-day responsibilities are delegated to third-party service providers.
The Company has no executive employees and the Directors are all Non-executive Directors, therefore, not all of the Provisions of the
UK Code are directly applicable to the Company.
The Board considers that the Company has complied with the recommendations of the AIC Code.
Board leadership, purpose and culture
At 31 December 2021, the Board comprised five Directors. Their biographical details are shown on pages 34 to 35. The Board considers all
Directors to be independent and that there are no relationships or circumstances that are likely to affect their independence. Further details
can be found in the Nomination Committee Report on page 46. The interests that some of the Directors hold in the Company, as set out
on page 36 of this Report, are not considered significant so as to bring their independence into question.
The Board has overall responsibility for maximising the Group’s long-term success by directing and supervising the affairs of the business
and meeting the appropriate interests of shareholders and relevant stakeholders, while enhancing the value of the Group and ensuring
protection of investors.
the interim and annual Financial Statements;
Within the Annual Report and Financial Statements, the Directors have set out the Group’s investment objective and policy, which as per the
2015 listing prospectus is to deliver both stable income returns, as well as capital growth through investment in German real estate, centred
on Berlin residential real estate. Its investment objective and policy are set out on pages 2 to 21 of the Annual Report. The Directors have
reported how the Board and its delegated Committees operate and how the Directors consider and address the opportunities and risks
to the future success of the Company, along with the sustainability of the Company’s business model and how its governance contributes
to the delivery of its strategy. The Board has approved a formal schedule of matters reserved for its approval which is available on the
Company’s website and upon request from the Company Secretary. The principal matters considered by the Board during the year included:
• Mietendeckel response;
•
• declaration of dividends;
•
• share buybacks;
• ordinary winding up of four special purpose vehicles;
•
• sale of non-core assets;
• consideration of intercompany loans;
• standard and non-standard capital expenditure projects;
• consideration of new investment proposals received from its Property Advisor;
•
•
• annual review of service providers.
refinances;
recommendations from the Company’s respective Committees; and
renewal of Master Power of Attorney delegating a number of administrative matters to the Property Advisor;
issuance of Ordinary Shares as satisfaction of the Property Advisor’s Performance Fee;
40
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
The Company has no direct employees therefore is not required to monitor culture in this respect. However, the Board recognises its wider
responsibility to demonstrate to shareholders that it is operating responsibly and managing its social and environmental impacts for the
benefit of all stakeholders. Following a thorough review of how sustainability is managed within the Company, a ‘Better Futures’ CR Plan
has been developed. This provides a framework to measure existing activities better while adding new initiatives to improve overall
sustainability.
Additionally, the Board continuously monitors its policies, practices and behaviours and undertakes a rigorous evaluation of its own
performance and that of its key service providers on an annual basis to ensure their culture is aligned with the Company’s purpose, values,
and strategy. Details on the Board evaluation and the Annual Service Provider Review can be found on pages 46 and 43, respectively.
Where the Board is not satisfied, it will seek assurance from key service providers that Management have taken corrective action.
Stakeholder engagement
Details of how the Directors have engaged with the Company’s key stakeholders is set out in the Stakeholder Engagement section and
Corporate Responsibility Report within the Strategic Report on pages 22 to 31 respectively.
The Board believes that the maintenance of good relations with both institutional and retail shareholders is important for the long-term
prospects of the Group. The Board receives feedback on the views of shareholders from its corporate broker and the Property Advisor.
Through this process the Board seeks to monitor the views of shareholders and to ensure an effective communication programme. The
Board seeks to utilise stakeholder communication to inform them of the decisions that the Company takes, whether about the products
or services it provides, or about its strategic direction, its long-term health, and the society in which it operates. The Board agrees that
stakeholder engagement strengthens the business and promotes its long-term success to the benefit of stakeholders and shareholders
alike. As set out in more detail on pages 8 to 9 of the Strategic Report, during the period, the Company engaged with shareholders in
relation to the change to the Company’s strategy as a result of removal of the Mietendeckel, the share buyback programme and how the
Company monitors its environmental impact.
The Chair is open to discussions on governance and strategy with major shareholders and the other Directors are provided with the
opportunity to attend these meetings.
The Board believes that the AGM provides an appropriate forum for investors to communicate with the Board and encourages participation.
The Group regularly reviews its shareholder profile through Reports prepared by its corporate broker. Shareholders may contact the
Company directly through the investor section of the Company’s website www.phoenixspree.com.
2021 AGM
The 2021 AGM of the Company was held on 8 June 2021. Resolutions 1 to 9 related to ordinary business and resolutions 10 and 11 related
to the following special business:
•
to authorise the Company to make market purchases of and to cancel or hold in treasury up to 14,514,054 of its shares (representing
approximately 14.41% of its issued shares capital at the date of the AGM notice); and
to authorise the Directors to issue up to 10,075,141 shares (representing approximately 10% of the Company’s issued shares capital at the
date of the AGM notice) for cash as if the pre-emption rights contained in the Articles of Association did not apply.
•
All resolutions put to shareholders were passed with in excess of 99% of votes cast in favour.
2022 AGM
The 2022 AGM will be held on 15 June 2022 at the registered office of the Company: 12 Castle Street, St Helier, Jersey JE2 3RT.
A separate notice convening the AGM will be distributed to shareholders with the Annual Report and Financial Statements on or around
16 May 2022, which includes an explanation of the items of business to be considered at the meeting. A copy of the notice will also be
published on the Company’s website.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
41
Financial StatementsDirectors’ ReportStrategic Report Corporate Governance Statement continued
Division of Responsibilities
Board and Committee composition at 31 December 2021
Board
• Robert Hingley (Chairman)
• Monique O’Keefe (Senior Independent Director)
• Jonathan Thompson
• Antonia Burgess
• Greg Branch
Committees
Nomination
Remuneration
Audit
Risk
ESG
Market Abuse
Regulation
Property
Valuation
• Robert
Hingley
(Chair)
• Monique
O’Keefe
• Antonia
Burgess
• Monique
O’Keefe
(Chair)
• Greg Branch
• Antonia
Burgess
• Jonathan
Thompson
(Chair)
• Greg Branch
• Monique
O’Keefe
• Antonia
Burgess
(Chair)
• Jonathan
Thompson
• Monique
O’Keefe
• Greg Branch
• Monique
O’Keefe
(Chair)
• Antonia
Burgess
• Greg Branch
• Any two
• Greg Branch
Independent
Non-
executive
Directors
(Chair)
• Jonathan
Thompson
• Antonia
Burgess
At 31 December 2021, the Board comprised five Non-executive Directors. Their biographical details are on pages 34 to 35.
Changes to the composition of the Committees during the year are described in the Nomination Committee Report on page 46.
Chairman and Senior Independent Director
The Chairman, Robert Hingley, is responsible for the leadership of the Board’s business and setting its agenda, together with the promotion
of a culture of openness and debate, for ensuring that the Directors receive accurate, timely, and clear information and that there is
adequate time available for the discussion of agenda items at each Board meeting. The Chairman is deemed by his fellow Board members
to be independent in character and judgement and free of any conflicts of interest. He considers himself to have sufficient time to spend
on the affairs of the Company. He has no significant commitments other than those disclosed in his biography on page 34.
Monique O’Keefe was appointed Senior Independent Director on 29 May 2020 following Charlotte Valeur’s retirement from the Board. The
Senior Independent Director works closely with the Chairman, acting as a sounding board when necessary and serves as an intermediary
for the other Directors and shareholders, and takes the lead in the annual evaluation of the Chairman by the Directors. Monique O’Keefe
resigned on 3 December 2021 with final termination date being 31 March 2022. On the 14 March 2022, Antonia Burgess was appointed as
Senior Independent Director to replace Monique O’Keefe.
A schedule of responsibilities of the Chairman and the Senior Independent Director is available on the Company’s website.
Committees of the Board
At year end, the structure included an Audit Committee, a Risk Committee, a Property Valuation Committee, a Remuneration Committee,
a Nomination Committee, an ESG Committee and a Market Abuse Regulation Committee.
Quentin Spicer, who retired on 8 June 2021, was not a member of any Board Committee due to his length of service exceeding nine years
and the Board therefore considered him non-independent.
The terms of reference for the Board Committees, including their duties, are available on the Company website at www.phoenixspree.com.
The terms of reference are reviewed annually by the respective Committee, with any changes recommended to the Board for approval.
Property Valuation Committee
The Property Valuation Committee is responsible for reviewing the property valuations prepared by the Valuation Agent and any further
matters relating to the valuation of the Portfolio. The Property Valuation Committee met twice during the year with the Valuation Agent
and the Property Advisor in attendance to review the outcomes of the valuation process throughout the year and discuss:
•
•
•
the valuation methodology;
the sociodemographic and residential market overview; and
the detail of each semi-annual valuation.
42
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
The Committee reported to the Board its findings on the property valuation and the Committee was satisfied with the Independent
Valuation Report and values associated with all properties of the Group.
ESG Committee
The ESG Committee meets no less than twice a year. It is responsible for approving a strategy for discharging the Company’s ESG
Strategy, overseeing the creation of appropriate policies and supporting measures along with monitoring compliance with such policies.
The Committee also ensures that the policies are regularly reviewed and updated in line with national and international regulations.
The ESG Committee has responsibility for deciding upon which environmental guidelines to follow and report against, with the Audit
Committee overseeing how this is reported upon in the Annual Report and Financial Statements.
The Board has appointed Good Values Limited as an independent ESG consultant to support the Company in implementing its ESG
Policy and Strategy. Further details on the Company’s ESG Policy and Strategy can be found in the Corporate Responsibility Report on
pages 22 to 31.
General Board matters
Post-year end in March 2022, the Board reviewed the overall performance of the Property Advisor and the terms of the Property Advisory
Agreement, as set out in note 26, and, based on the results, the continued appointment of the Property Advisor is considered to be in the
best interests of the shareholders as a whole. It was approved by the Board that QSix Residential be retained as Property Advisor under the
terms of the agreement.
In addition, the continued engagement of all third-party service providers whom the Board independently evaluate was approved by
the Board.
Risk Committee
The Risk Committee is comprised of Independent Non-executive Directors and meets no less than twice a year and, if required, meetings
can also be attended by the Property Advisor. The Risk Committee is responsible for advising the Board on the Company’s overall risk
appetite, tolerance and strategy. The Risk Committee oversees and advises the Board on the current risk-assessment processes, ensuring
that both qualitative and quantitative metrics are used.
The Committee, in conjunction with the Property Advisor, which also carries out its own service provider evaluation, reviews the adequacy
and effectiveness of the Group’s (and its service providers’) internal financial controls and internal control and risk management systems
and reviews and approves the Statements to be included in the Annual Report concerning internal controls and risk management.
During the year, the Committee reviewed Reports from the Company’s service providers in respect of their policies on the prevention of
market abuse, cyber-crime, anti-bribery, GDPR, whistleblowing and their compliance with the Criminal Finances Act 2017.
The Committee is also responsible for oversight and advice to the Board on the current risk exposures and future risk strategy of the
Company. The Company has in place a risk register to manage and track identified risks and uncertainties and potential emerging risks
that the Committee believes the Company is exposed to. For each risk, the Committee considers, inter alia, their impact on the Company
achieving its investment policy along with the nature and extent of the risk, their mitigants and any driving factors which may increase
the risk.
The level of residual risk determined as part of this analysis assists the Board (on the Risk Committee’s recommendation) to determine
whether it is within the Company’s appetite and any actions needed to be taken. The register is reviewed at least twice a year by the
Committee and serves as a useful component in tracking the principal and emerging risks of the Company.
During the year, the Committee carried out a robust assessment of the principal risks, emerging risks and principal uncertainties facing
the Group, including those that would threaten its business model, future performance, solvency or liquidity. The result of this review, the
potential impact of each type of risk identified and the mitigants put in place are set out in the ‘Principal Risks and Uncertainties’ section
of the Annual Report on pages 32 to 33.
The Committee also reviewed the appropriateness of risk-related matters in the Annual Report and Financial Statements.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
43
Financial StatementsDirectors’ ReportStrategic Report Corporate Governance Statement continued
Division of Responsibilities
Audit Committee
The membership and activities of the Audit Committee are described in its Report on pages 48 to 50.
Nomination Committee
The membership and activities of the Nomination Committee are described in this Report on pages 46 to 47.
Remuneration Committee
The Remuneration Committee deals with matters of Directors’ remuneration. In particular, the Committee reviews and makes
recommendations to the Board regarding the ongoing appropriateness and relevance of the Remuneration Policy and Directors’ fee levels
and considers the need to appoint external remuneration consultants.
Further details about the Remuneration Committee are remuneration matters are set out in the Directors’ Remuneration Report and Policy
on pages 51 to 53.
Market Abuse Regulation Committee
The Market Abuse Regulation Committee comprises any two Directors and its responsibilities are to identify inside information when it
arises, understand and ensure compliance with the Company’s disclosure obligations in respect of such inside information, understand
and ensure compliance with the record-keeping and notification obligations of the Company in respect of inside information and take
reasonable steps to ensure that individuals on the insider list are aware of their legal obligations in respect of insider dealing, unlawful
disclosure and market manipulation.
Board and Committee meetings
The Company holds a minimum of four Board meetings per year to discuss general management, structure, finance, corporate
governance, marketing, risk management, compliance, asset allocation and gearing, contracts and performance. The Reports provided
by the Company’s service providers are the principal source of regular information for the Board enabling it to determine policy and
to monitor performance, compliance and controls, which are supplemented by communication and discussions throughout the year.
Representatives of the service providers, including the Property Advisor, attend each quarterly Board meeting to present their Reports
to the Directors.
The table below sets out the number of scheduled meetings of the Board and Committee held during the year ended 31 December 2021
and the attendance of individual Directors.
R Hingley
Q Spicer*
J Thompson
M O’Keefe
A Burgess
G Branch
R Hingley
Q Spicer*
J Thompson
M O’Keefe
A Burgess
G Branch
Quarterly Board
Audit
Number
entitled
to attend
Number
attended
Number
entitled
to attend
Number
attended
Risk
Number
entitled
to attend
Number
attended
4
1
4
4
4
4
4
1
4
4
4
4
–
–
5
5
–
5
–
–
5
5
–
4
–
–
2
2
2
2
–
–
2
2
2
2
Property Valuation
Number
entitled
to attend
Number
attended
Nomination
Number
entitled
to attend
Number
attended
ESG
Number
entitled
to attend
Number
attended
–
–
4
–
4
4
–
–
4
–
4
4
1
–
–
1
1
–
1
–
–
1
1
–
–
–
–
3
3
3
–
–
–
3
3
3
44
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
R Hingley
Q Spicer*
J Thompson
M O’Keefe
A Burgess
G Branch
Remuneration
Market Abuse Regulation
(any 2 Non-executive Directors)
Number
entitled
to attend
Number
attended
Number
entitled
to attend
Number
attended
–
–
–
1
1
1
–
–
–
1
1
1
3
2
3
3
4
3
3
2
3
3
4
3
* Quentin Spicer retired from the Board at the AGM held on 8 June 2021.
During the year, 10 additional Board meetings were held. These meetings were in respect of refinancing debt, the approval and execution
of engagement letters and powers of attorney, share buybacks, the approval of the annual Financial Statements and Committee
recommendations.
Information and support for Directors
The Chairman, in conjunction with the Company Secretary, ensures that all new Directors receive a full, formal and tailored induction on
joining the Board in order to further inform them of the Group’s activities and structure.
Upon appointment, new Directors are briefed about their responsibilities and duties and provided with an induction pack containing
relevant information about the Company, its constitutional documents, terms of reference, policies, processes and procedures.
New Directors are also provided with an opportunity to observe a Board meeting before their appointment and meet representatives of the
Property Advisor and administrator of the Company.
The Board has a continued professional development programme to assist the Directors in complying with mandatory requirements set by
the JFSC. This programme entails the Company’s service providers presenting to the Directors on key topics such as:
• Directors’ continuing obligations under the Listing Rules;
• Economic substance;
• The Criminal Finances Act;
• GDPR and cyber security;
• Jersey anti-money laundering and combating the financing of terrorism legislation; and
• German residential law and regulation.
The Directors are also encouraged to attend industry and other seminars covering issues and developments relevant to Investment
Companies, and Board meetings regularly include agenda items on recent developments in governance and industry issues.
All Directors can take independent professional advice at the Group’s expense in the furtherance of their duties, if necessary.
Company Secretary
All Directors have direct access to the advice of the Company Secretary. The Company Secretary is responsible for supporting the Board to
ensure it has the policies, processes, information, time and resources it needs to function effectively and efficiently and for ensuring that
such policies and procedures are followed. Under the guidance of the Chairman, the Company Secretary ensures that appropriate and
timely information flows between the Board, the Committees and the Directors. It facilitates inductions to new Directors and the provision
of additional information where required and appropriate.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
45
Financial StatementsDirectors’ ReportStrategic Report Corporate Governance Statement continued
Composition, Succession and Evaluation
Nomination Committee Report
The Nomination Committee is responsible for a number of matters pertaining to the structure, size and composition of the Board,
succession planning in respect of Board Members and performance evaluation of the Board, its Committees and Board members.
Composition
The Nomination Committee is chaired by Robert Hingley with Monique O’Keefe and Antonia Burgess as members, all of whom are
considered independent. The Board is satisfied that the Chair of the Committee has relevant experience and understanding of the
Company. Robert Hingley does not chair the Committee when it is dealing with his succession.
Diversity
As at the year end there were five Directors, three of whom are male and two are female. The Board has adopted a diversity policy
which sets out the Board’s approach to diversity in Board composition confirming that all appointments of Directors are made on merit,
regardless of gender, ethnicity or disability, taking account of the specific skills, experience, independence and knowledge needed to
ensure a balanced Board and the benefits each candidate can bring to overall Board composition.
Tenure and succession planning
The Board’s policy regarding tenure of service, including in respect of the Chair, is that any decisions regarding tenure will balance the
need to provide and maintain continuity, knowledge, experience and independence, against the need to periodically refresh the Board
composition in order to maintain an appropriate mix of the required skills, experience, age and length of service.
The Board does not consider that lengthy service in itself necessarily undermines a Director’s independence nor that each Director,
including the Chair, should serve for a finite fixed period. In particular, given the long-term nature of the Company’s assets, the Board may
regard a longer tenure of service as being necessary and desirable. However, a succession plan is in place to allow, subject to re-election,
for a staged rotation of Directors to ensure the continuity and stability of experience remains.
In line with corporate governance best practice as set out in the AIC Code, all Directors seek annual re-election at the Company’s Annual
General Meetings.
On an annual basis, the Nomination Committee reviews the composition of the Board and its Committees taking into account the
above-mentioned needs and each Director’s performance and ability to meet the ongoing commitments of the Company. This Review is
balanced against the succession plan of the Company to enable the Board to make the appropriate recommendation for each Director’s
re-election to the Board and Committees.
Prior to appointment to the Board, a director must disclose existing significant commitments and confirm that they are able to allocate
sufficient time to the business of the Company. In addition, a director must consult with the Chairman or Senior Independent Director from
time to time prior to taking on any new listed, conflicted, time-consuming or otherwise material Board appointments and promptly notify
the Company Secretary of any new Board appointments which they take on. On an annual basis, through the Board’s internal evaluation,
as described below, each Director’s continuing ability to meet the time requirements of the role is assessed by considering, amongst other
things, their attendance at Board, Committee and other ad hoc meetings and events of the Company held during the year as well as the
nature and complexity of other, both public and private, roles held.
Directors’ attendance at all Board and Committee meetings held during the year is detailed on pages 44 to 45. None of the Directors holds
an executive position of a Public Company or chairs a Public Operating Company.
The Committee believes all the Directors have sufficient time to meet their Board responsibilities.
Board evaluation
Pursuant to the AIC Code, all FTSE 350 Companies should conduct an external Board evaluation at least every three years. Although the
Company is not an FTSE 350 Company, the Board believes it is best practice for the Company to follow this provision. In the intervening
years, internal performance evaluations are carried out by the means of questionnaires. The aim of the evaluation is to recognise the
strengths, address any weaknesses and consider improvements to the Board process. The evaluation is designed to ensure that the Board
meets its objectives and effectiveness is maximised.
the frequency of meetings and the business transacted;
the workload of each forum;
The evaluations focus on the following issues:
•
•
• diversity and how effectively members work together to achieve objectives;
•
•
•
the timing, level of detail and appropriateness of information put before meetings;
the reporting process from Committees to the Board and the delegation process itself;
the levels of expertise available within the membership of the Committees and the need for selection of and the use of external
consultants; and
the effectiveness of internal controls following the Review and Report of the Audit Committee.
•
46
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
The Chairman acts on the results of the evaluation by recognising the strengths and addressing any weaknesses of the Board. Each
Director engages with the process and takes appropriate action where development needs have been identified.
During the final quarter of 2021, the Directors participated in an external Board evaluation process, conducted by independent, external
consultant, Value Alpha. Value Alpha provides no other services to the Company. The evaluation focused on Board composition, including
Directors’ skills, experience and behaviours, Board processes and decision-making mechanisms. The findings of the evaluation were
presented to and discussed with the Board in January 2022.
The evaluation concluded that the Board is performing strongly and represents a healthy platform for the next stage of the Board’s and
Company’s evolution. Behaviours are appropriate, commitment is high and Board meetings are effective.
The following actionable recommendations were made:
• consider ways to strengthen the relationship further with key service providers, in particular QSix and Apex, and ensure clarity of roles
concerning strategy, governance and resources;
• consider recompensing Jersey-based Directors for the extra work involved in administration;
• devise succession planning for the Board which sees critical roles become Jersey-based;
• monitor the issue of diversity;
• consider, with QSix and Apex, ways to improve the quality of the Board packs; and
• prioritise getting together socially as soon as pandemic conditions permit.
Actions against each of these recommendations are currently under way. The Board will continue to conduct an externally facilitated
performance evaluation every three years and internal evaluations in the intervening years.
The shareholder engagement plan, the link between the AGM and the annual shareholder presentation and the annual schedule of
meetings with key service providers were put on hold as a result of travel restrictions caused by the COVID-19 pandemic. All other actions
were implemented during the year.
Re-election
All newly appointed Directors stand for election by the shareholders at the next AGM following their appointment. There are provisions in
the Company’s Articles of Association which require Directors to seek re-election at the AGM held in the third calendar year following the
year in which they were elected or last re-elected. Beyond these requirements, the Board has agreed a policy whereby all Directors will
seek annual re-election at the Company’s AGM, in accordance with the AIC Code. The AGM circular issued to shareholders will set out
sufficient biographical details and specific reasons why each Director’s contribution is, and continues to be, important to the Company’s
long-term sustainable success in order to enable shareholders to make an informed decision.
Monique O’Keefe resigned on 3 December 2021 with final termination date being 31 March 2022. In seeking a replacement for Monique
O’Keefe, a shortlisted candidate, Isabel Robins, who had been identified by the independent external recruitment Company Thomas &
Dessain Executive Recruitment during the Company’s 2020 recruitment process, was approached. The Company had already followed the
recommended recruitment procedure during 2020 in identifying Isabel Robins and so, it was not necessary to initiate a new recruitment
process. Accordingly, Isabel Robins joined the Board on 14th March 2022.
On appointment to the Board, Isabel Robins was appointed to the Audit Committee, the Property Valuation Committee, the Risk
Committee, the Nomination Committee and as Chair of the ESG Committee.
Taking into account matters considered above, the Board strongly recommends the election/re-election of each Director standing for
election/re-election on the basis of their experience and expertise, their independence, capacity and continuing effectiveness and
commitment to the Company.
Audit, risk and internal control
The Company’s approach to compliance with the AIC Code in respect of audit is set out in the Audit Committee Report on page 48.
The Company’s approach to compliance with the AIC Code in respect of risk and internal control is described under ‘Division of
Responsibilities, Risk Committee’ on page 43.
Remuneration
The Company’s approach to compliance with the AIC Code in respect of remuneration is set out in the Directors’ Remuneration Report
on page 52.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
47
Financial StatementsDirectors’ ReportStrategic Report Audit Committee Report
Audit, Risk and Internal Control
This Report provides details of the role of the Audit Committee and the duties it has undertaken during the year under review.
Composition of the Audit Committee
The Audit Committee is chaired by Jonathan Thompson with Greg Branch and Monique O’Keefe as members. Jonathan Thompson was
appointed Chair of the Committee upon his appointment to the Board on 24 January 2018, Monique O’Keefe became a member upon her
appointment to the Board on 17 April 2018 and Greg Branch became a member on 14 September 2020. The qualifications and experience
of the members of the Audit Committee during the financial year are set out in their biographical details on pages 34 to 35. The Board
considers that the Committee Chair, a chartered accountant, has recent and relevant experience as required by the provisions of the AIC
Code.
Meetings
The Audit Committee is scheduled to meet no less than twice a year and, if required, meetings can also be attended by the Property
Advisor, the Company Secretary and the external Auditor. The external Auditor is not present when their performance and/or remuneration
is discussed. The number of Committee meetings held, and attendance of the members is detailed on pages 44 to 45.
Summary of the role of the Audit Committee
The Audit Committee is responsible for reviewing the half-year and annual Financial Statements and recommends them to the Board for
approval. The role of the Audit Committee includes:
• Monitoring the integrity of the Annual Report and Financial Statements of the Group, covering:
– formal announcements relating to the Group’s financial performance;
– significant financial reporting issues and judgements;
– review of the Company’s Going Concern and Viability Statements;
– matters raised by the external Auditors; and
– the appropriateness of accounting policies and practices.
• Reviewing and considering the AIC Code and FRC Guidance with respect to the Financial Statements.
• Monitoring the quality and effectiveness of the independent external Auditor, which includes:
– meeting regularly to discuss the audit plan and the subsequent Audit Report;
– developing a policy on the engagement of the external Auditor to supply non-audit services and considering the level of fees for
both audit and non-audit services;
– reviewing independence, objectivity, expertise, resources and qualification; and
– conducting the tender process and making recommendations to the Board on the appointment, reappointment, replacement and
remuneration of the external Auditors.
• Reviewing the Group’s procedures for prevention, detection and reporting of fraud, bribery and corruption.
• Monitoring and reviewing, in conjunction with the Risk Committee, the internal control and risk management systems of the service
providers; and
• Monitoring the continuing Government response to the COVID-19 pandemic and its effects on the Company as well as its third-party
service providers.
The ESG Committee has responsibility for deciding upon which environmental guidelines to follow and report against and the Audit
Committee oversees how this is reported upon in the Annual Report and Financial Statements.
The Audit Committee’s full terms of reference can be obtained from the Company’s website www.phoenixspree.com.
Financial reporting
The Audit Committee reviewed the Company’s Annual Report and Financial Statements to conclude whether it is fair, balanced,
understandable, comprehensive, consistent with prior years and how the Board assesses the performance of the Company’s business
during the financial year, as required by the AIC Code.
As part of this review, the Committee considered if the Annual Report and Financial Statements provided the information necessary to
shareholders to assess the Company’s position and performance, strategy and business model, and reviewed the description of the
Company’s key performance indicators as well as updating the governance section of the Annual Report.
The Committee presented its recommendations to the Board and the Board concluded that it considered the Annual Report and Financial
Statements, taken as a whole, to be fair, balanced and understandable and to provide the information necessary for shareholders.
48
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Monitoring the significant issues related to the Financial Statements, Viability and Going Concern
After discussions with the Property Advisor and the external Auditor, the Committee determined that the key risk of material misstatement
of the Company’s Financial Statements was in relation to the valuation of investment property.
Valuation of investment property
Mitigation
A significant focus for the Audit Committee is the
valuation of the Group’s property portfolio carried
out at half year in June and at the financial year end
in December each year, as this is a key determinant
of the Group’s IFRS NAV, EPRA NTA, its profit or loss
and the Property Advisor’s remuneration.
The Group has appointed JLL to act as the Independent Property Valuer (‘the valuer’). The Audit Committee
is satisfied that the valuer is independent and that it conducts its work in accordance with the Royal
Institution of Chartered Surveyors Valuation Standards (RICS).
The Property Valuation Committee reviews the Valuer’s Report, the methodology adopted and the
assumptions incorporated to assess the adequacy of the valuation. They also meet the independent valuers
JLL as part of the Valuation Review.
External audit
Assessing the effectiveness of the external audit process
The Audit Committee reviews the effectiveness of the external audit carried out by the Auditor on an annual basis, considering
performance, objectivity, independence, relevant experience and materiality. To assess the effectiveness of the external Auditor,
the Committee considered:
•
•
•
the external Auditor’s fulfilment of the agreed audit plan and variations from it, if any;
the external Auditor’s Report to the Committee highlighting any issues that arose during the audit; and
feedback from the Property Advisor, accountants and Administrator evaluating the performance of the audit team.
Auditors are subject to mandatory rotation every five years. As RSM UK Audit were appointed in 2014, a new Auditor, Graham Ricketts, was
introduced for the 2019 Financial Statement audit process.
The Chair of the Committee maintained regular contact with the Company’s Auditor throughout the year and met him prior to the
finalisation of the audit of the 2021 Annual Financial Statements, without the Property Advisor present, to discuss how the external audit
was carried out; the findings from the audit and whether any issues had arisen from the Auditor’s interaction with the Company’s various
service providers.
In addition, the Auditor attended Audit Committee meetings throughout the year, which allowed the Auditor the opportunity to challenge
management’s judgement and discuss any matters it wished to raise. During these meetings, the Auditor demonstrated its understanding
of the Company’s business risks and the consequential impact on the risks included in the Financial Statements.
As part of the audit planning process the Auditor met with the Audit Committee Chair and the Property Advisor to discuss the risk profile of
the business. The audit plan was presented to and approved by the Audit Committee in January 2022. The Auditor met again with the Chair
of the Audit Committee in March 2022 to discuss their draft Audit Report and Opinion prior to the release of the Accounts.
Audit and non-audit fees
The following table summarises the remuneration paid to RSM UK Audit LLP for audit and non-audit related services during the year ended
31 December 2021:
Audit
Agreed upon procedures – Interim Report
Agreed upon procedures – performance fee
Total
2021
£
199,000
26,000
–
225,000
2020
£
177,000
25,000
10,000
212,000
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
49
Financial StatementsDirectors’ ReportStrategic Report Audit Committee Report continued
Audit, Risk and Internal Control
Independence and objectivity
The Audit Committee has considered the independence and objectivity of the Auditor and has conducted a review of non-audit services
which the Auditor has provided during the year under review. The Audit Committee receives an annual assurance from the Auditor that its
independence is not compromised by the provision of such non-audit services.
The Audit Committee is satisfied that the Auditor’s objectivity and independence is not impaired by the performance of these non-audit
services and that the Auditor has fulfilled its obligations to the Company and its shareholders.
Audit tendering
The Committee considered whether the audit appointment should be put out to tender. In doing so, it considered both the performance of
the current Auditor and the likely costs and potential benefits of change.
Following consideration of the performance of the Auditor, the services provided during the year and a review of its independence and
objectivity, the Audit Committee has concluded that the audit was effective and has recommended to the Board the reappointment of RSM
UK Audit as Auditor of the Company.
Going forward, the Committee will continue to keep the audit appointment under review, having regard to requirements for audit
tendering.
Group policy on the provision of non-audit services by the Auditor
The Committee has an established policy for the commission of non-audit work from the Group’s Auditor.
The external Auditor is excluded from providing non-audit services to the Group where the objectives of such assignments are inconsistent
with the objectives of the audit. No work is awarded to the Auditor which would result in an element of self-review, either during the work
or via the audit itself. Additionally, the external Auditor is excluded from providing any services to the Property Advisor.
The Committee will continue to approve all non-audit fees prior to the work commencing and review the non-audit fees in aggregate for
the year.
Risk management and internal control
Details of how the Risk Committee oversees and advises the Board on the current risk assessment processes is set out on page 43 and of
its assessment of the principal and emerging risks is set out on pages 32 to 33.
Jonathan Thompson
Chair of the Audit Committee
29 March 2022
50
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Directors’ Remuneration Report
Remuneration
Statement from the Chair of the Remuneration Committee
As set out on page 42 of the Corporate Governance Statement, the Remuneration Committee comprised Monique O’Keefe (Chair), Antonia
Burgess and Greg Branch. The Committee is responsible for setting the Directors’ remuneration levels, including in respect of the
Chairman, with consideration of the following:
•
• Non-executive Directors’ remuneration should not include share options or other performance-related elements;
• careful consideration should be given to what compensation commitments entail in the event of early termination of a Director’s
levels of Directors’ remuneration should reflect the time commitment and responsibilities of the role;
appointment;
• notice of contract periods should be set at one year or less;
• no Director should be involved in deciding his or her own remuneration;
• consideration of remuneration in other Companies of comparable scale and complexity; and
•
independent judgement and discretion should be exercised when authorising remuneration outcomes, taking account of Company and
individual performance and wider circumstances.
The Committee reviews Directors’ fees on an annual basis. In the year under review, no changes were proposed by the Committee.
As detailed in its terms of reference, a copy of which is available on the Company’s website, the Committee has full authority to appoint
remuneration consultants and to commission or purchase any reports, surveys or information which it deems necessary at the expense of the
Company. The Committee is also responsible for reviewing the ongoing appropriateness and relevance of the Director’s Remuneration Policy.
The Directors’ Remuneration Report provides details on remuneration in the year. Although it is not a requirement under Companies (Jersey)
Law 1991 to have the Directors’ Remuneration Report or the Directors’ Remuneration Policy approved by shareholders, the Board believes
that as a Company whose shares are listed on the London Stock Exchange, it is good practice for it to do so. The Directors’ Remuneration
Policy will be put to shareholder vote at least once every three years and in any year if there is to be a change in the Directors’ Remuneration
Policy. The Remuneration Policy was approved by shareholders in 2020 and as there will be no change in the way in which the Policy will be
implemented during the next financial year, there is no requirement for it to be put to shareholders at this year’s AGM.
A resolution will be put to shareholders at the Company’s upcoming AGM to be held on 15 June 2022 to receive and approve the Directors’
Remuneration Report.
This Report is not subject to audit.
Voting at AGM
The Directors’ Remuneration Report for the year ended 31 December 2020 was approved by shareholders at the AGM held on 8 June
2021. The votes cast by proxy were as follows:
For
Against
At Chairman’s discretion
Total votes cast
Number of votes withheld
Directors’ Remuneration Report
Number of
votes cast
43,392,766
23,123
–
43,415,889
6,500
% of
votes cast
99.95%
0.05%
0%
100%
–
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
51
Financial StatementsDirectors’ ReportStrategic Report Directors’ Remuneration Report continued
Remuneration
Directors’ remuneration for the year ended 31 December 2021
The fees paid to the Directors for the year ended 31 December 2021 (and prior year) are set out below:
Audited
R Hingley
M O’Keefe
Q Spicer*
C Valeur**
J Thompson
A Burgess**
G Branch**
Total
Director’s fee
£
2021
Expenses
£
Total
£
Director’s fee
£
2020
Expenses
£
50,000
40,000
17,562
–
45,000
40,000
40,000
232,562
–
–
–
–
415
–
–
415
50,000
40,000
17,562
–
45,415
40,000
40,000
50,000
40,000
40,000
16,329
45,000
15,452
13,260
95
652
–
–
255
–
–
Total
£
50,095
40,652
40,000
16,329
45,255
15,452
13,260
232,977
220,041
1,002
221,043
* Quentin Spicer retired from the Board at the AGM on 8 June 2021;
** Charlotte Valeur resigned from the Board at the AGM on 29 May 2020 and Antonia Burgess and Greg Branch were appointed to the Board on 12 August 2020 and
1 September 2020, respectively.
Relative importance to spend on pay
The table below sets out, in respect of the year ended 31 December 2021:
a) the remuneration paid to the Directors; and
b) the distributions made to Directors by way of dividend.
Directors’ remuneration
Dividends paid to Directors
31 December
2021
£’000
31 December
2020
£’000
233
3
221
3
Change
%
5.2
–
Directors’ interests
There is no requirement under the Company’s Articles of Association for the Directors to hold shares in the Company. At 31 December
2021, the interest of the Directors in the Ordinary Shares of the Company are set out below:
Quentin Spicer*
Robert Hingley
Jonathan Thompson
* Quentin Spicer retired with effect 8 June 2021.
31 December
2021
31 December
2020
N/A
5,150
7,337
39,600
5,150
7,337
There have been no changes to the interests of the existing Directors between 31 December 2021 and the date of this Report.
Remuneration Policy
A resolution to approve the Directors’ Remuneration Policy was proposed and passed at the Company’s AGM held on 29 May 2020. The
Remuneration Policy provisions set out below will apply until they are next put to shareholders for renewal of that approval which, as
explained above, will take place in any year where there is to be a change to the Policy and, in any event, at least once every three years.
In accordance with the AIC Code, no Director is involved in deciding his/her own remuneration.
The Group’s Policy, designed to support strategy and promote long-term sustainable success of the Company, is that the remuneration of
the Directors should reflect the experience of the Board as a whole, the time commitment required, and be fair and comparable with that
of other similar Companies. Furthermore, the level of remuneration should be sufficient to attract and retain the Directors needed to
oversee the Group properly and to reflect its specific circumstances. There were no changes to the Policy during 2021, but at the Board
meeting on 14 March 2022 it was approved that the three Jersey-based Non-executive Directors would receive a £5,000 fee increase to
better reflect their workload. This was effective from 1 January 2022.
52
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
The aggregate of all the Directors’ remuneration is subject to an annual cap of £400,000 or such higher amount as may from time to time
be determined by ordinary resolution of the Company in accordance with the Company’s Articles of Association and shall be reviewed
annually.
Any Director or any Subsidiary of the Company (including for this purpose the Office of Chairman and Deputy Chairman whether or not
such office is held in an executive capacity), or who serves on any Committee of the Directors, or who is involved in ad hoc duties beyond
those normally expected as part of their appointment, may be paid such extra remuneration by way of salary, commission or otherwise or
may receive such other benefits as the Directors may determine. Any additional remuneration will not be ‘variable’ in that it will not be
linked to the performance of the Company.
The Company may pay on behalf of, or repay to, any Director all such reasonable expenses as he/she may incur in attending and returning
from meetings of the Directors or of any Committee of the Directors or Shareholders’ meetings or otherwise in connection with the
business of the Company.
Directors’ fee levels
The Board has set three levels of fees: one for the Chairman, one for the Directors, and an additional fee that is paid to the Director who
chairs the Audit Committee. Fees are reviewed annually in accordance with the above Policy. The fee for any new Director appointed will
be determined on the same basis. The basic and additional fees payable to Directors in respect of the year ended 31 December 2021 and
the expected fees payable in respect of the year ending 31 December 2022 are set out in the table below:
Chairman
Chair of the Audit Committee
Non-executive Directors
Additional Jersey-resident Director’s fee
Total remuneration paid to Directors
Approval
The Directors’ Remuneration Report was approved by the Board and signed on its behalf by:
Expected annual fee
for the year to
31 December 2022
£
Annual fees
for the year to
31 December 2021
£
50,000
45,000
40,000
5,000
230,000
50,000
45,000
40,000
–
215,000
Monique O’Keefe
Chair of the Remuneration Committee
29 March 2022
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
53
Financial StatementsDirectors’ ReportStrategic Report Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Strategic Report, the Directors’ Report, the Directors’ Remuneration Report and the
Financial Statements in accordance with applicable law and regulations.
Jersey company law requires the Directors to prepare Group Financial Statements for a period of not more than 18 months in accordance
with generally accepted accounting principles. The Directors have elected under Jersey company law to prepare the Group Financial
Statements in accordance with IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and are
required under the Listing Rules of the FCA to prepare the Group Financial Statements in accordance with UK-adopted International
Accounting Standards (‘IAS’).
The Financial Statements of the Group are required by law to give a true and fair view of the state of the Group’s affairs at the end of the
financial period and of the profit or loss of the Group for that period and are required by IFRS adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union and UK-adopted IAS to present fairly the financial position and performance of the Group.
In preparing the Group Financial Statements, the Directors should:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether they have been prepared in accordance with IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union and UK-adopted IAS;
• prepare the Financial Statements on the going-concern basis unless it is inappropriate to presume that the Group will continue in
business.
The Directors are responsible for keeping accounting records which are sufficient to show and explain the Group’s transactions and are
such as to disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the Group
Financial Statements comply with the requirements of the Companies (Jersey) Law 1991, IFRS adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union, and UK-adopted IAS. They are also responsible for safeguarding the assets of the Group
and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Directors’ Statement pursuant to the Disclosure and Transparency Rules
Each of the Directors, whose names and functions are listed on pages 34 to 35 confirm that, to the best of each person’s knowledge:
a) the Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit of the Group; and
b) the Strategic Report contained in the Annual Report includes a fair review of the development and performance of the business and the
position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the PSD Ltd website.
Legislation in Jersey governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.
Approval
The Statement of Directors’ Responsibilities was approved by the Board and signed on its behalf by:
Monique O’Keefe
Chair of the Remuneration Committee
29 March 2022
54
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Independent Auditor’s Report
to the Members of Phoenix Spree Deutschland Limited
Opinion
We have audited the Financial Statements of Phoenix Spree Deutschland Limited and its Subsidiaries (the ‘Group’) for the year ended
31 December 2021 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial
Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and Notes to the Financial
Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their
preparation is applicable law and IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
In our opinion, the Financial Statements:
• give a true and fair view of the state of the Group’s affairs as at 31 December 2021 and of the Group’s profit for the year then ended;
• have been properly prepared in accordance with IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European
Union; and
• have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
Separate opinion in relation to UK-adopted IAS
As explained in note 2.1 to the Financial Statements, the Group in addition to complying with its legal obligation to apply IFRS adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, has also applied UK-adopted IAS.
In our opinion the Financial Statements give a true and fair view of the Consolidated Financial Position of the Group as at 31 December
2021 and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with
UK-adopted IAS.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Statements section of our Report.
We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the Financial Statements in
the UK, including the FRC’s Ethical Standard as applied to listed public interest entities and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Summary of our audit approach
Key audit matter
Materiality
Valuation of investment property
Overall materiality: €8,010,000 (2020: €7,680,000)
Performance materiality: €6,010,000 (2020: €5,760,000)
Scope
Our audit procedures covered 100% of revenue, total assets and profit before tax
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Group Financial
Statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
we identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit and
directing the efforts of the engagement team. These matters were addressed in the context of our audit of the Group Financial Statements
as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
55
Financial StatementsDirectors’ ReportStrategic Report Independent Auditor’s Report continued
to the Members of Phoenix Spree Deutschland Limited
Valuation of investment properties held by the Group
Key audit matter description The Group owns a portfolio of residential and commercial investment properties. The total value of the
portfolio reported in the Financial Statements at 31 December 2021 was €759.8 million (2020: €749.0
million), including properties designated as held for sale. These properties are all in Germany and
predominately in Berlin.
The accounting policy in respect of investment properties is to hold them at fair value in the Financial
Statements, and to recognise the movement in the value in the accounting period in the Income
Statement. The Group has appointed an independent valuation expert (‘the valuer’) in determining
the fair value of the investment properties at 31 December 2021.
The valuation of investment properties involves the use of assumptions and judgements and the Group’s
approach to the risks associated with valuation of investment properties is detailed in the Audit Committee
Report on pages 48 to 50; the significant accounting judgements and estimates on pages 72 to 73; significant
accounting policies on pages 66 to 71 and notes 16 and 17 to the Financial Statements on pages 77 to 79.
The audit risk relating to the valuation of investment properties at the year end date is considered to be
one of most significance in the audit and was therefore determined to be a key audit matter due to the
magnitude of the total amount, the potential impact of the movement in value on the reported results,
and the subjectivity of the valuation process.
How the matter was
addressed in the audit
Our audit work included:
• Assessing the valuer’s qualifications, expertise and terms of engagement and assessing their
independence and objectivity.
• Auditing on a sample basis the inputs provided by the Property Advisor to the valuer and checking that
these were consistent with the underlying accounting records.
• Assessing the challenge provided by the Valuation Committee of the Board to the valuation.
• Obtaining a confirmation and land registry documents from the Group’s solicitors to confirm the
•
existence and ownership of all properties.
Identifying the largest properties by value, and the properties where there were unusual movements in
value compared with the average or the previous year and discussing and challenging the valuation of
these properties with the valuer, as well as obtaining evidence to support the explanations received.
• Challenging the valuer on the appropriateness of key assumptions in the valuation, including specific
discussion of increases in value outside of an average range, reductions in property values, uplifts for
condominiumisation and densification.
• Engaging an independent auditor’s expert to assist us in challenging assumptions made by the valuer in
respect of the Berlin property market.
Key observations
Disclosure of the impact of the key judgements and estimates applied in respect of the valuation of
investment properties are disclosed in note 4 to the Financial Statements. Based on the results of the
audit procedures outlined above, we have no observations to report.
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and extent of our audit
procedures. When evaluating whether the effects of misstatements, both individually and on the Financial Statements as a whole, could
reasonably influence the economic decisions of the users we take into account the qualitative nature and the size of the misstatements.
Based on our professional judgement, we determined materiality as follows:
Overall materiality
€8,010,000 (2020: €7,680,000)
Basis for determining overall materiality
1% of property valuation (2020: 1% of property valuation)
Rationale for benchmark applied
We determined that key users of the Group’s Financial Statements
are primarily focused on the valuation of the Group’s investment
properties
Performance materiality
€6,010,000 (2020: €5,760,000)
Basis for determining performance materiality
75% of overall materiality (2020: 75% of overall materiality)
Reporting of misstatements to the Audit Committee
Misstatements in excess of €200,000 (2020: €192,000) and
misstatements below that threshold that, in our view, warranted
reporting on qualitative grounds
56
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
An overview of the scope of our audit
Our audit scope covered 100% of Group revenue, Group profit and total Group assets and was performed to the materiality levels set out above.
All audit work was completed by the Group audit team and no component auditors were used in our audit.
Conclusions relating to going concern
In auditing the Financial Statements, we have concluded that the Directors’ use of the going-concern basis of accounting in the preparation
of the Financial Statements is appropriate. Our evaluation of the Directors’ assessment of the Group’s ability to continue to adopt the
going-concern basis of accounting included:
• obtaining an understanding of Management’s going-concern evaluation;
• assessing the information used in the going-concern assessment for consistency with Management’s plans and information obtained
through our other audit work;
• challenging the major assumptions in Management’s forecasts, being the level of rents receivable, expenses, capital expenditure,
dividends and sales of condominiums;
• checking the integrity and mathematical accuracy of the forecasts;
• evaluating Management’s sensitivity analysis; and
•
reviewing the appropriateness of disclosures in respect of the going-concern basis, including in the Viability Statement.
Our evaluation of the Directors’ assessment of the Group’s ability to continue to adopt the going-concern basis of accounting included
gaining an understanding of their assessment of the underlying risks relating to going concern, the key facts and variables within that
assessment, and the judgements they applied in reaching their conclusion. We concluded that the Directors’ assessment was appropriate
in the circumstances.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Group’s ability to continue as a going concern for a period of at least 12 months from
when the Financial Statements are authorised for issue.
In relation to Entities reporting on how they have applied the AIC Code, we have nothing material to add or draw attention to in relation
to the Directors’ Statement in the Financial Statements about whether the Directors considered it appropriate to adopt the going-concern
basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this Report.
Other information
The other information comprises the information included in the Annual Report other than the Financial Statements and our Auditor’s
Report thereon. The Directors are responsible for the other information contained within the Annual Report. Our opinion on the Financial
Statements does not cover the other information and, except to the extent otherwise explicitly stated in our Report, we do not express any
form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with
the Financial Statements, or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material
misstatement in the Financial Statements themselves. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies (Jersey) Law 1991 requires us to report
to you if, in our opinion:
• proper accounting records have not been kept by the Company, or proper returns adequate for our audit have not been received from
branches not visited by us; or
the Financial Statements are not in agreement with the accounting records and returns; or
•
• we have failed to receive all the information and explanations which, to the bast of our knowledge and belief, was necessary for our audit.
Corporate Governance Statement
The Listing Rules require us to review the Directors’ Statement in relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the Company’s compliance with the provisions of the AIC Code specified for our review.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
57
Financial StatementsDirectors’ ReportStrategic Report Independent Auditor’s Report continued
to the Members of Phoenix Spree Deutschland Limited
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the Financial Statements, or our knowledge obtained during the audit:
• Directors’ Statement with regards the appropriateness of adopting the going-concern basis of accounting and any material uncertainties
identified set out on page 38;
• Directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why this period is
appropriate set out on pages 38 to 39;
• Directors’ Statement on fair, balanced and understandable set out on page 39;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 32 to 33;
• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems set out on
page 43; and
• The section describing the work of the Audit Committee set out on pages 48 to 50.
Responsibilities of Directors
As explained more fully in the Directors’ Responsibilities Statement set out on page 54, the Directors are responsible for the preparation of
the Financial Statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is
necessary to enable the preparation of Financial Statements that are free from material misstatement, whether
due to fraud or error.
In preparing the Financial Statements, the Directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going-concern basis of accounting unless the Directors either
intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these Financial Statements.
The extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities are instances of non-compliance with laws and regulations. The objectives of our audit are to obtain sufficient appropriate
audit evidence regarding compliance with laws and regulations that have a direct effect on the determination of material amounts and
disclosures in the Financial Statements, to perform audit procedures to help identify instances of non-compliance with other laws and
regulations that may have a material effect on the Financial Statements, and to respond appropriately to identified or suspected non-
compliance with laws and regulations identified during the audit.
In relation to fraud, the objectives of our audit are to identify and assess the risk of material misstatement of the Financial Statements due to
fraud, to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud through designing
and implementing appropriate responses and to respond appropriately to fraud or suspected fraud identified during the audit.
However, it is the primary responsibility of Management, with the oversight of those charged with governance, to ensure that the Entity’s
operations are conducted in accordance with the provisions of laws and regulations and for the prevention and detection of fraud.
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud, the Group audit engagement team:
• obtained an understanding of the nature of the industry and sector, including the legal and regulatory frameworks that the Group
•
operates in and how the Group is complying with the legal and regulatory frameworks;
inquired of management, and those charged with governance, about their own identification and assessment of the risks of
irregularities, including any known actual, suspected, or alleged instances of fraud;
• discussed matters about non-compliance with laws and regulations and how fraud might occur including assessment of how and where
the Financial Statements may be susceptible to fraud having obtained an understanding of the effectiveness of the control environment.
58
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
The most significant laws and regulations were determined as follows:
Legislation / Regulation
Additional audit procedures performed by the Group audit engagement team included:
IFRS and Companies (Jersey) Law 1991;
AIC Code;
Listing and Transparency Rules
• Review of the Financial Statement disclosures and testing to supporting documentation.
• Completion of disclosure checklists to identify areas of non-compliance.
• Review of the Financial Statement disclosures by a specialist in Jersey company law.
Tax compliance regulations
The Codes of Practice for Certified Funds
in Jersey
•
•
Inspection of advice received by the Group from its tax advisors.
Inspection of correspondence with tax authorities in the jurisdictions in which the
Group operates.
• Review by a specialist in Jersey regulatory compliance of the Company’s compliance
with local regulatory requirements in its country of incorporation, Jersey, specifically
The Codes of Practice for Certified Funds. The review covered correspondence with the
JFSC; the breaches, errors and complaints registers; compliance with CPD
requirements; and the quarterly Reports made by the Compliance Officer to the Board.
The areas that we identified as being susceptible to material misstatement due to fraud were:
Risk
Audit procedures performed by the audit engagement team:
Management override of controls
• Testing the appropriateness of journal entries and other adjustments;
• Assessing whether the judgements made in making accounting estimates, in particular
in respect of investment property valuations, are indicative of a potential bias; and
• Evaluating the business rationale of any significant transactions that are unusual or
outside the normal course of business.
A further description of our responsibilities for the audit of the Financial Statements is included in Appendix 1 of this Auditor’s Report.
This description, which is located on page 60, forms part of our Auditor’s Report.
Other matters which we are required to address
Following the recommendation of the Audit Committee, we were appointed by the Directors on 16 December 2014 to audit the Financial
Statements for the year ending 31 December 2014 and subsequent financial periods.
The period of total uninterrupted consecutive appointment is eight years, covering the years ending 31 December 2014 to 31 December
2021.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group and we remain independent of the Group
in conducting our audit.
Our audit opinion is consistent with the additional Report to the Audit Committee.
Use of our Report
This Report is made solely to the Company’s members, as a body, in accordance with Article 113A of the Companies (Jersey) Law 1991.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in
an Auditor’s Report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a body, for our audit work, for this Report, or for the opinions we have formed.
Graham Ricketts
For and on behalf of RSM UK Audit LLP
Auditor
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
28 March 2022
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
59
Financial StatementsDirectors’ ReportStrategic Report
Independent Auditor’s Report continued
to the Members of Phoenix Spree Deutschland Limited
Appendix 1: Auditor’s responsibilities for the audit of the Financial Statements
As part of an audit in accordance with ISAs (UK), we exercise professional judgement and maintain professional scepticism throughout the
audit. We also:
•
Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made
by the Directors.
• Conclude on the appropriateness of the Directors’ use of the going-concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our Auditor’s Report
to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our Auditor’s Report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial
Statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to
express an opinion on the Consolidated Financial Statements. We are responsible for the direction, supervision and performance of the
Group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a Statement that we have complied with relevant ethical requirements regarding
independence, including the FRC’s Ethical Standard as applied to listed public interest Entities, and communicate with them all relationships
and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the
audit of the Consolidated Financial Statements of the current period and are therefore the key audit matters. We describe these matters in
our Auditor’s Report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our Report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
60
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
Continuing operations
Revenue
Property expenses
Gross profit
Administrative expenses
Gain on disposal of investment property (including investment property held for sale)
Investment property fair-value gain
Performance Fee due to Property Advisor
Operating profit
Net finance charge (before gain/(loss) on interest-rate swaps)
Gain / (loss) on interest-rate swaps
Profit before tax
Income tax expense
Profit after tax
Other comprehensive income
Total comprehensive income for the year
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
Earnings per share attributable to the owners of the Parent:
From continuing operations
Basic (€)
Diluted (€)
Year ended
31 December
2021
€’000
Year ended
31 December
2020
€’000
Notes
6
7
8
10
11
26
12
12
13
29
29
25,790
(16,082)
9,708
(3,447)
1,518
37,983
(343)
45,419
(7,482)
7,313
45,250
(7,882)
37,368
23,899
(16,437)
7,462
(3,263)
2,178
41,458
439
48,274
(8,199)
(2,218)
37,857
(7,550)
30,307
–
–
37,368
30,307
37,311
57
37,368
0.39
0.39
29,788
519
30,307
0.31
0.30
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
61
Financial StatementsDirectors’ ReportStrategic Report Consolidated Statement of Financial Position
At 31 December 2021
ASSETS
Non-current assets
Investment properties
Property, plant and equipment
Other financial assets at amortised cost
Deferred tax asset
Current assets
Investment properties – held for sale
Trade and other receivables
Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES
Current liabilities
Borrowings
Trade and other payables
Current tax
Non-current liabilities
Borrowings
Derivative financial instruments
Deferred tax liability
Total liabilities
Equity
Stated capital
Treasury Shares
Share-based payment reserve
Retained earnings
Equity attributable to owners of the parent
Non-controlling interest
Total equity
Total equity and liabilities
As at
31 December
2021
€’000
As at
31 December
2020
€’000
Notes
16
18
19
13
17
20
21
22
23
13
22
24
13
27
27
26
28
759,830
20
926
1,722
762,498
41,631
11,699
10,441
63,771
826,269
922
11,893
512
13,327
283,233
10,884
75,198
369,315
382,642
196,578
(33,275)
343
276,394
440,040
3,587
443,627
826,269
749,008
42
901
2,880
752,831
19,302
8,414
36,996
64,712
817,543
1,018
9,018
550
10,586
286,531
18,197
68,273
373,001
383,587
196,578
(17,206)
6,369
244,685
430,426
3,530
433,956
817,543
The consolidated Financial Statements on pages 61 to 90 were approved and authorised for issue by the Board of Directors and were
signed on its behalf by:
Robert Hingley
Chairman
29 March 2022
Jonathan Thompson
Director
29 March 2022
62
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Attributable to the owners of the parent
Stated capital
€’000
Treasury Shares
€’000
Share-based
payment
reserve
€’000
196,578
(11,354)
6,808
–
–
–
–
–
–
–
–
–
–
–
(5,852)
–
–
–
–
(439)
–
Retained
earnings
€’000
221,859
29,788
–
Total
€’000
413,891
29,788
–
29,788
29,788
(6,962)
–
–
(6,962)
(439)
(5,852)
Non-controlling
interest
€’000
Total equity
€’000
3,011
416,902
519
–
519
–
–
–
30,307
–
30,307
(6,962)
(439)
(5,852)
196,578
(17,206)
6,369
244,685
430,426
3,530
433,956
Balance at 1 January 2020
Comprehensive income:
Profit for the year
Other comprehensive income
Total comprehensive income for
the year
Transactions with owners –
recognised directly in equity:
Dividends paid
Performance Fee
Acquisition of Treasury Shares
Balance at 31 December 2020
Comprehensive income:
Profit for the year
Other comprehensive income
Total comprehensive income for
the year
Transactions with owners –
recognised directly in equity:
Dividends paid
Performance Fee
Settlement of Performance Fee
using Treasury Shares
Acquisition of Treasury Shares
–
–
–
–
–
–
–
Balance at 31 December 2021
196,578
–
–
–
–
–
4,536
(20,605)
(33,275)
–
–
–
–
343
(6,369)
–
343
37,311
–
37,311
–
37,311
37,311
(7,435)
–
1,833
–
(7,435)
343
–
(20,605)
57
–
57
–
–
–
–
37,368
–
37,368
(7,435)
343
–
(20,605)
276,394
440,040
3,587
443,627
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
63
Financial StatementsDirectors’ ReportStrategic Report Consolidated Statement of Cash Flows
For the year ended 31 December 2021
Profit before tax
Adjustments for:
Net finance charge
Gain on disposal of investment property
Investment property revaluation gain
Depreciation
Performance Fee due to Property Advisor (share-based payment)
Operating cash flows before movements in working capital
(Increase) / decrease in receivables
Increase in payables
Cash generated from operating activities
Income tax received / (paid)
Net cash generated from operating activities
Cash flow from investing activities
Proceeds on disposal of investment property (net of disposal costs)
Interest received
Capital expenditure on investment property
Put option settlement
Repayment of shareholder loans
Disposals to property, plant and equipment
Net cash generated from (used in) investing activities
Cash flow from financing activities
Interest paid on bank loans
Repayment of bank loans
Drawdown on bank loan facilities
Dividends paid
Acquisition of Treasury Shares
Net cash (used in) financing activities
Net (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange gains on cash and cash equivalents
Cash and cash equivalents at end of year
Year ended
31 December
2021
€’000
Year ended
31 December
2020
€’000
45,250
37,857
169
(1,518)
(37,983)
8
343
6,269
(1,320)
2,875
7,824
163
7,987
13,758
1
(9,477)
–
–
14
4,296
(7,743)
(4,059)
900
(7,435)
(20,501)
(38,838)
(26,555)
36,996
–
10,441
10,417
(2,178)
(41,458)
8
(439)
4,207
2,071
1,782
8,060
(1,316)
6,744
7,213
19
(4,171)
(7,542)
1,622
4
(2,855)
(7,541)
(38,845)
50,000
(6,962)
(5,956)
(9,304)
(5,415)
42,414
(3)
36,996
64
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Reconciliation of Net Cash Flow to Movement in Debt
For the year ended 31 December 2021
Cash flow from (decrease) / increase in debt financing
Non-cash changes from (decrease) / increase in debt financing
Change in net debt resulting from cash flows
Movement in debt in the year
Debt at the start of the year
Debt at the end of the year
Year ended
31 December
2021
€’000
Year ended
31 December
2020
€’000
Notes
(3,159)
(235)
(3,394)
(3,394)
287,549
284,155
11,155
140
11,295
11,295
276,254
287,549
22
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
65
Financial StatementsDirectors’ ReportStrategic Report Notes to the Financial Statements
For the year ended 31 December 2021
1. General information
The Group consists of a Parent Company, Phoenix Spree Deutschland Limited (‘the Company’), incorporated in Jersey, Channel Islands and
all its Subsidiaries, which are incorporated and domiciled in and operate out of Jersey and Germany. Phoenix Spree Deutschland Limited is
listed on the premium segment of the Main Market of the London Stock Exchange.
The Group invests in residential and commercial property in Berlin, Germany.
The registered office is at 12 Castle Street, St Helier, Jersey, JE2 3RT, Channel Islands.
2. Summary of significant accounting policies
The principal accounting policies adopted are set out below.
2.1 Basis of preparation
The Consolidated Financial Statements have been prepared in accordance with IFRS adopted pursuant to Regulation (EC) No 1606/2002 as
it applies in the European Union and UK-adopted IAS.
The Consolidated Financial Statements are presented to the nearest €1,000.
The Group has adopted all of the new and revised standards and interpretations issued by the International Accounting Standards Board
(‘IASB’) and the International Financial Reporting Interpretations Committee (‘IFRIC’) of the IASB, as they have been adopted by the
European Union and United Kingdom, that are relevant to its operations and effective for accounting periods beginning on 1 January 2021.
The Consolidated Financial Statements have been prepared on a going-concern basis under the historical cost convention as modified by
the revaluation of investment property and financial assets and liabilities at fair value through profit or loss.
The preparation of the Consolidated Financial Statements requires Management to exercise its judgement in the process of applying
accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions or estimates are
significant to the Consolidated Financial Statements are disclosed in note 4.
2.2 Going concern
The Directors have prepared projections for three years to February 2025, which include the going-concern assessment period to
31 March 2023. These projections have been prepared using assumptions which the Directors consider to be appropriate to the current
financial position of the Group as regards to current expected revenues and its cost base and the Group’s investments, borrowing and debt
repayment plans and show that the Group should be able to operate within the level of its current resources and expects to comply with
all covenants for the foreseeable future. The Group’s business activities together with the factors likely to affect its future development and
the Group’s objectives, policies and processes for managing its capital and its risks are set out in the Strategic Report and in notes 3 and 31.
After making enquiries the Directors have a reasonable expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. The Group has considered the current economic environment alongside its principal risks in its going
concern assessment. Further information can be found in the Viability Statement on page 38. The Group therefore continues to adopt the
going-concern basis in preparing its Consolidated Financial Statements.
2.3 Basis of consolidation
The Consolidated Financial Statements incorporate the Financial Statements of the Company and entities controlled by the Company (its
Subsidiaries). The Company controls an Entity when the Group is exposed to, or has rights to, variable returns through its power over the
Entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the
date that control ceases.
Profit or loss and each component of other comprehensive income are attributable to the owners of the Company and to the non-controlling
interests. Total comprehensive income of the Subsidiaries is attributable to the owners of the Company and to the non-controlling interests
even if this results in the non-controlling interests having a deficit balance.
Accounting policies of Subsidiaries which differ from Group accounting policies are adjusted on consolidation. All intra-Group transactions,
balances, income and expenses are eliminated on consolidation.
Non-controlling interests in Subsidiaries are identified separately from the Group’s equity therein. Those interests of non-controlling
shareholders that present ownership interests entitling their holders to a proportionate share of net assets upon liquidation may initially be
measured at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. The
choice of measurement is made on an acquisition-by-acquisition basis. Other non-controlling interests are initially measured at fair value.
Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the
non-controlling interests’ share of subsequent changes in equity.
Changes in the Group’s interests in Subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying
amount of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the
Subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration
paid or received is recognised directly in equity and attributed to the owners of the Company.
66
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
2.4 Revenue recognition
Revenue includes rental income, service charges and other amounts directly recoverable from tenants. Rental income and service charges
from operating leases are recognised as income on a straight-line basis over the lease term. When the Group provides incentives to its
tenants, the cost of incentives are recognised over the lease term, on a straight-line basis, as a reduction of rental income.
2.5 Foreign currencies
(a) Functional and presentation currency
The currency of the primary economic environment in which the Group operates (‘the functional currency’) is the Euro (€). The
presentational currency of the Consolidated Financial Statements is also the Euro (€).
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates
prevailing at that date. Foreign exchange gains and losses resulting from such transactions are recognised in the Consolidated Statement
of Comprehensive Income.
Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when
the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
2.6 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating-Decision Maker. The
Chief Operating-Decision Maker, who is responsible for allocating resources and assessing performance of the operating segments, has
been identified as the Board of Directors. The Board has identified the operations of the Group as a whole as the only operating segment.
2.7 Operating profit
Operating profit is stated before the Group’s gain or loss on its financial assets and after the revaluation gains or losses for the year in
respect of investment properties and after gains or losses on the disposal of investment properties.
2.8 Administrative and property expenses
All expenses are accounted for on an accruals basis and are charged to the Consolidated Statement of Comprehensive Income in the
period in which they are incurred. Service charge costs, to the extent that they are not recoverable from tenants, are accounted for on an
accruals basis and included in property expenses.
2.9 Separately disclosed items
Certain items are disclosed separately in the Consolidated Financial Statements where this provides further understanding of the financial
performance of the Group, due to their significance in terms of nature or amount.
2.10 Property Advisor fees
The element of Property Advisor fees for management services provided are accounted for on an accruals basis and are charged to the
Consolidated Statement of Comprehensive Income. These fees are detailed in note 7 and classified under ‘Property Advisors’ fees and
expenses. The settlement of the Property Advisor Performance Fees is detailed in note 26. Due to the nature of the settlement of the
Performance Fee, any movement in the amount payable at the year end is reflected within the share-based payment reserve in the
Consolidated Statement of Financial Position.
2.11 Investment property
Property that is held for long-term rental yields or for capital appreciation, or both, which is not occupied by the Group, is classified as
investment property.
Investment property is measured initially at cost, including related transaction costs. After initial recognition, investment property is carried
at fair value, based on market value.
The change in fair values is recognised in the Consolidated Statement of Comprehensive Income for the year.
A valuation exercise is undertaken by the Group’s independent valuer, JLL, at each reporting date in accordance with the methodology
described in note 16 on a building-by-building basis. Such estimates are inherently subjective and actual values can only be determined in a
sales transaction. The valuations have been prepared by JLL on a consistent basis at each reporting date.
Subsequent expenditure is added to the asset’s carrying amount only when it is probable that future economic benefits associated with
the item will flow to the Group and the cost of the item can be measured reliably. Repairs and maintenance costs are charged to the
Consolidated Statement of Comprehensive Income during the financial period in which they are incurred. Changes in fair values are
recorded in the Consolidated Statement of Comprehensive Income for the year.
Purchases and sales of investment properties are recognised on legal completion.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
67
Financial StatementsDirectors’ ReportStrategic Report Notes to the Financial Statements continued
For the year ended 31 December 2021
2. Summary of significant accounting policies (continued)
2.11 Investment property (continued)
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future
economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference
between the net disposal proceeds and the carrying amount of the asset, where the carrying amount is the higher of cost or fair value) is
included in the Consolidated Statement of Comprehensive Income in the period in which the property is derecognised.
2.12 Current assets held for sale – investment property
Current assets (and disposal groups) classified as held for sale are measured at the most recent valuation.
Current assets (and disposal groups) are classified as held for sale if their carrying amount will be recovered through a sale transaction
rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal
group) is available for immediate sale in its present condition. Management must be committed to the sale which should be expected
to qualify for recognition as a completed sale within one year from the date of classification.
The Group recognises an asset in this category once the Board has committed to the sale of an asset and marketing has commenced.
When the Group is committed to a sale plan involving loss of control of a Subsidiary, all of the assets and liabilities of that Subsidiary are
classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest
in its former Subsidiary after the sale.
If an asset held for sale is unsold within one year of being classified as such, it will continue to be classified as held for sale if:
• at the date the Company commits itself to a plan to sell a non-current asset (or disposal group) it reasonably expects that others (not
a buyer) will impose conditions on the transfer of the asset that will extend the period required to complete the sale, and actions
necessary to respond to those conditions cannot be initiated until after a firm purchase commitment is obtained, and a firm purchase
commitment is highly probable within one year;
the Company obtains a firm purchase commitment and, as a result, a buyer or others unexpectedly impose conditions on the transfer of
a non-current asset (or disposal group) previously classified as held for sale that will extend the period required to complete the sale, and
timely actions necessary to respond to the conditions have been taken, and a favourable resolution of the delaying factors is expected;
•
• during the initial one-year period, circumstances arise that were previously considered unlikely and, as a result, a non-current asset
previously classified as held for sale is not sold by the end of that period, and during the initial one-year period the Company took action
necessary to respond to the change in circumstances, and the non-current asset is being actively marketed at a price that is reasonable,
given the change in circumstances, and the criteria above are met;
• otherwise it will be transferred back to investment property.
2.13 Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation.
Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its
intended use. Depreciation is charged so as to write off the costs of assets to their residual values over their estimated useful lives, on the
following basis:
Equipment – 4.50% to 25% per annum, straight line.
The gain or loss arising on the disposal of an asset is determined as the difference between the sales proceeds and the carrying amount
of the asset and is recognised in the Consolidated Statement of Comprehensive Income.
2.14 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily
take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the
assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the Consolidated Statement of Comprehensive Income in the period in which they are
incurred.
2.15 Tenants’ deposits
Tenants’ deposits are held off the Consolidated Statement of Financial Position in a separate bank account in accordance with German
legal requirements, and the funds are not accessible to the Group. Accordingly, neither an asset nor a liability is recognised.
68
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
2.16 Financial instruments
Financial assets and financial liabilities are recognised in the Group’s Statement of Financial Position when the Group becomes a party to
the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition
or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are
added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs
directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately
in profit or loss.
Trade and other receivables
Trade receivables are amounts due from tenants for rents and service charges and are initially recognised at the amount of the
consideration that is unconditional and subsequently carried at amortised cost as the Group’s business model is to collect the contractual
cash flows due from tenants. Provision is made based on the expected credit loss model which reflects the Company’s historical credit loss
experience over the past three years but also reflects the lifetime expected credit loss.
Cash and cash equivalents
Cash and cash equivalents are defined as cash and short-term deposits, including any bank overdrafts, with an original maturity of three
months or less, measured at amortised cost.
Trade and other payables
Trade payables are recognised and carried at their invoiced value inclusive of any VAT that may be applicable, and subsequently at
amortised cost using the effective interest method.
Borrowings
All loans and borrowings are initially measured at fair value less directly attributable transaction costs. After initial recognition, all interest-
bearing loans and borrowings are subsequently measured at amortised cost, using the effective interest method.
The interest due within the next 12 months is accrued at the end of the year and presented as a current liability within trade and
other payables.
Treasury Shares
When shares recognised as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is
recognised as a deduction from equity at the weighted average cost of Treasury Shares up to the date of repurchase. Repurchased shares
are classified as Treasury Shares and are presented in the Treasury Share reserve. When Treasury Shares are sold or reissued subsequently,
the amount received is recognised as an increase in equity and the resulting surplus or deficit on the transaction is presented within
retained earnings.
Interest-rate swaps
The Group uses interest-rate swaps to manage its market risk. The Group does not hold or issue derivatives for trading purposes.
The interest-rate swaps are recognised in the Consolidated Statement of Financial Position at fair value, based on counterparty quotes.
The gain or loss on the swaps is recognised in the Consolidated Statement of Comprehensive Income and detailed in note 12.
2.17 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the Consolidated Statement of Comprehensive
Income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In that case, the tax
is also recognised in other comprehensive income or directly in equity, respectively.
(a) Current tax
The current tax charge is based on taxable profit for the year. Taxable profit differs from net profit reported in the Consolidated Statement
of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted
or substantively enacted by the accounting date.
(b) Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the
Financial Statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Deferred tax is charged or credited in the Consolidated Statement of Comprehensive Income except when it relates to items credited
or charged directly in equity, in which case the deferred tax is also dealt with in equity.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
69
Financial StatementsDirectors’ ReportStrategic Report Notes to the Financial Statements continued
For the year ended 31 December 2021
2. Summary of significant accounting policies (continued)
2.17 Current and deferred income tax (continued)
Deferred tax is calculated at the tax rates and laws that are expected to apply to the period when the asset is realised or the liability is settled
based upon tax rates that have been enacted or substantively enacted by the accounting date.
The carrying amount of deferred tax assets is reviewed at each accounting date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset to be recovered.
2.18 New standards and interpretations
The following relevant new standards, amendments to standards and interpretations have been issued, and are effective for the financial
year beginning on 1 January 2021, as adopted by the European Union and United Kingdom:
Title
As issued by the IASB, mandatory for accounting periods starting on or after
Interest Rate Benchmark Reform Phase 2 (Amendments to IFRS 9,
IAS 39 and IFRS 7)
Accounting periods beginning on or after 1 January 2021
Amendments to IFRS 4 Insurance contracts – deferral of IFRS 9
Accounting periods beginning on or after 1 January 2021
Amendments to IFRS 16 Leasing – COVID-19 Related
Rent Concessions
Accounting periods beginning on or after 1 April 2021
Interest Rate Benchmark Reform Phase 2 (Amendments to IFRS 9, IAS 39 and IFRS 7)
In September 2020, the IASB published Interest Rate Benchmark Reform Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16),
finalising its response to the ongoing reform of interest rate benchmarks around the world. The amendments aim to assist reporting entities
to provide investors with useful information about the effects of the reform on their Financial Statements.
This second set of amendments focus on issues arising post-replacement, i.e., when the existing interest rate benchmark is actually
replaced with alternative benchmark rates.
The amendments do not impact on the current Financial Statements as they are related to amendments to hedge accounting requirement
which are not relevant to the Group.
Amendments to IFRS 4 Insurance contracts – deferral of IFRS 9
IFRS 9 addresses the accounting for financial instruments and is effective for annual reporting periods beginning on or after 1 January 2018.
However, for insurers meeting the eligibility criteria, IFRS 4 provides a temporary exemption which permits them to continue to apply IAS
39 Financial Instruments: Recognition and Measurement rather than implement IFRS 9.
This temporary exemption was applicable to annual periods beginning before 1 January 2021. In June 2020 the IASB published an
amendment to IFRS 4 to extend the temporary exemption from applying IFRS 9 until annual periods beginning before 1 January 2023.
This amendment maintains the alignment of the effective dates of IFRS 9 and IFRS 17.
The amendments do not impact on the current Financial Statements as they are related to insurance contracts which are not relevant to
the Group.
Amendments to IFRS 16 Leasing – COVID-19 Related Rent Concessions
In May 2020, the IASB issued COVID-19-Related Rent Concessions (Amendment to IFRS 16). The pronouncement amended IFRS 16 Leases
to provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. On issuance, the
practical expedient was limited to rent concessions for which any reduction in lease payments affects only payments originally due on or
before 30 June 2021.
An extension was issued on 31 March 2021 which permits a lessee to apply the practical expedient regarding COVID-19-related rent
concessions to rent concessions for which any reduction in lease payments affects only payments originally due on or before 30 June
2022 (rather than only payments originally due on or before 30 June 2021).
The amendments do not impact on the current Financial Statements as no COVID-19-related rent concessions have been recognised.
70
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
New and revised IFRS Standards in issue but not yet effective
The following standards have been issued by the IASB and adopted by the EU:
Title
As issued by the IASB, mandatory for accounting periods starting on or after
Amendments to IFRS 3 Business Combinations Reference to the
Conceptual Framework
Amendments to IAS 16 Property, Plant and Equipment – Proceeds
before Intended Use
Accounting periods beginning on or after 1 January 2022
Accounting periods beginning on or after 1 January 2022
Amendments to IAS 37 Provisions, Contingent Liabilities,
Contingent Assets Onerous Contracts – Cost of Fulfilling a Contract
Accounting periods beginning on or after 1 January 2022
Annual Improvements 2018-2020
Accounting periods beginning on or after 1 January 2022
There are no anticipated material impacts to the Group from the above new and revised IFRS Standards.
3. Financial risk management
3.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group’s overall risk
management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects
on the Group’s financial performance.
Risk management is carried out by the Risk Committee under policies approved by the Board of Directors. The Board provides principles
for overall risk management, as well as policies covering specific areas, such as interest rate risk, credit risk and investment of excess
liquidity.
3.2 Market risk
Market risk is the risk of loss that may arise from changes in market factors such as foreign exchange rates, interest rates and general
property market risk.
(a) Foreign exchange risk
The Group operates in Germany and is exposed to foreign exchange risk arising from currency exposures, primarily with respect to Sterling
against the Euro arising from the costs which are incurred in Sterling. Foreign exchange risk arises from future commercial transactions,
and recognised monetary assets and liabilities denominated in currencies other than the Euro.
The Group’s policy is not to enter into any currency hedging transactions, as the majority of transactions are in Euros, which is the primary
currency of the environment in which the Group operates. Therefore any currency fluctuations are minimal.
(b) Interest rate risk
The Group has exposure to interest rate risk. It has external borrowings at a number of different variable interest rates. The Group is also
exposed to interest rate risk on some of its financial assets, being its cash at bank balances. Details of actual interest rates paid or accrued
during each period can be found in note 22 to the Consolidated Financial Statements.
The Group’s policy is to manage its interest rate risk by entering into a suitable hedging arrangement, either caps or swaps, in order to limit
exposure to borrowings at variable rates.
(c) General property market risk
Through its investment in property, the Group is subject to other risks which can affect the value of property. The Group seeks to minimise
the impact of these risks by review of economic trends and property markets in order to anticipate major changes affecting property values.
(d) Market risk – rent legislation
Through its policy of investing in Berlin, the Group is subject to the risk of changing rental legislation which could affect both the rental
income, and the value of property. The Group seeks to mitigate any effect of the changing legislations using strategies set out in the
principal risks and uncertainties on pages 32 to 33.
(e) Market risk – Ukraine
Although the Company has no direct exposure to either Russia or Ukraine, it is expected that the continuing conflict will cause an impact
on the global economy. These include the possible effects of higher energy prices, the possible knock-on impact of inflation, recession
and increasing cyber-attacks. Additionally, These circumstances have created a degree of uncertainty across global equity markets. The
conflict in Ukraine, and the introduction of sanctions against Russia and Belarus, as well as possible second derivative impacts are being
closely monitored by the Board and the Property Advisor. Further information regarding the risk to the Company from the crisis in Ukraine
can be found in the principal risks and uncertainties on page 32.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
71
Financial StatementsDirectors’ ReportStrategic Report Notes to the Financial Statements continued
For the year ended 31 December 2021
3. Financial risk management (continued)
3.3 Credit risk
The risk of financial loss due to counterparty’s failure to honour their obligations arises principally in connection with property leases and
the investment of surplus cash.
The Group has policies in place to ensure that rental contracts are made with customers with an appropriate credit history. Tenant rent
payments are monitored regularly and appropriate action taken to recover monies owed, or if necessary, to terminate the lease.
Cash transactions are limited to financial institutions with a high credit rating.
3.4 Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans secured on
the Group’s properties. The terms of the borrowings entitle the lender to require early repayment should the Group be in default with
significant payments for more than one month.
3.5 Capital management
The prime objective of the Group’s capital management is to ensure that it maintains the financial flexibility needed to allow for value-
creating investments as well as healthy balance sheet ratios.
The capital structure of the Group consists of net debt (borrowings disclosed in note 22 after deducting cash and cash equivalents) and
equity of the Group (comprising stated capital (excluding Treasury Shares), reserves and retained earnings).
In order to manage the capital structure, the Group can adjust the amount of dividend paid to shareholders, issue or repurchase shares
or sell assets to reduce debt.
When reviewing the capital structure the Group considers the cost of capital and the risks associated with each class of capital. The Group
reviews the gearing ratio which is determined as the proportion of net debt to equity. In comparison with comparable Companies
operating within the property sector the Board considers the gearing ratios to be reasonable.
The gearing ratios for the reporting periods are as follows:
Borrowings
Cash and cash equivalents
Net debt
Equity
Net debt to equity ratio
As at
31 December
2021
€’000
As at
31 December
2020
€’000
(284,155)
10,441
(287,549)
36,996
(273,714)
(250,553)
443,627
62%
433,956
58%
4. Critical accounting estimates and judgements
The preparation of Consolidated Financial Statements in conformity with IFRS requires the Group to make certain critical accounting estimates
and judgements. In the process of applying the Group’s accounting policies, Management has decided the following estimates and
assumptions have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the financial year:
i) Estimate of fair value of investment properties
The valuation of the Group’s property portfolio is inherently subjective due to, among other factors, the individual nature of each property,
its location and condition, and expected future rentals. The valuation as at 31 December 2021 is based on the rules, regulations and market
as at that date. The fair value estimates of investments properties are detailed in note 16.
The best evidence of fair value is current prices in an active market of investment properties with similar leases and other contracts. In the
absence of such information, the Group determines the amount within a range of reasonable fair-value estimates. In making its estimate,
the Group considers information from a variety of sources, including:
• Discounted cash-flow projections based on reliable estimates of future cash flows, derived from the terms of any existing lease and other
contracts, and (where possible) from external evidence such as current market rents for similar properties in the same location and
condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows.
• Current prices in an active market for properties of different nature, condition or location (or subject to different lease or other
contracts), adjusted to reflect those differences.
• Recent prices of similar properties in less active markets, with adjustments to reflect any changes in economic conditions since the date
of the transactions that occurred at those prices.
72
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
The Directors remain ultimately responsible for ensuring that the valuers are adequately qualified, competent and base their results on
reasonable and realistic assumptions. The Directors have appointed JLL as the real estate valuation experts who determine the fair value
of investment properties using recognised valuation techniques and the principles of IFRS 13. Further information on the valuation process
can be found in note 16.
ii) Judgement in relation to the recognition of assets held for sale
Management has made an assumption in respect of the likelihood of investment properties – held for sale, being sold within 12 months, in
accordance with the requirement of IFRS 5. Management considers that based on historical and current experience that the properties can
be reasonably expected to sell within 12 months.
5. Segmental information
The Group’s principal reportable segments under IFRS 8 were as follows:
• Residential; and
• Commercial.
The Group is required to report financial and descriptive information about its reportable segments. Reportable segments are operating
segments or aggregations of operating segments that meet the following specified criteria:
•
its reported revenue, from both external customers and intersegment sales or transfers, is 10% or more of the combined revenue,
internal and external, of all operating segments; or
the absolute measure of its reported profit or loss is 10% or more of the greater, in absolute amount, of (i) the combined reported profit
of all operating segments that did not report a loss and (ii) the combined reported loss of all operating segments that reported a loss; or
its assets are 10% or more of the combined assets of all operating segments.
•
•
Management have applied the above criteria to the commercial segment and the commercial segment is not more than 10% of any of the
above criteria. The Group does not own any wholly commercial buildings nor does Management report directly on the commercial results.
The Board considers that the non-residential element of the portfolio is incidental to the Group’s activities. Therefore, the Group has not
included any further segmental analysis within these Consolidated Audited Financial Statements.
6. Revenue
Rental income
Service charge income
The total future annual minimum rentals receivable under non-cancellable operating leases are as follows:
Within one year
One to two years
Two to three years
Three to four years
Four to five years
Later than five years
31 December
2021
€’000
31 December
2020
€’000
20,624
5,166
25,790
19,055
4,844
23,899
31 December
2021
€’000
31 December
2020
€’000
1,224
1,177
979
875
663
562
5,480
1,267
1,217
925
703
627
437
5,176
Revenue comprises rental income earned from residential and commercial property in Germany. There are no individual tenants that
account for greater than 10% of revenue during any of the reporting periods.
The leasing arrangements for residential property are with individual tenants, with one month’s notice from tenants to cancel the lease in
most cases.
The commercial leases are non-cancellable, with an average lease period of three years.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
73
Financial StatementsDirectors’ ReportStrategic Report Notes to the Financial Statements continued
For the year ended 31 December 2021
7. Property expenses
Property management expenses
Repairs and maintenance
Impairment charge – trade receivables
Service charges paid on behalf of tenants
Property Advisors’ fees and expenses
8. Administrative expenses
Secretarial and administration fees
Legal and professional fees
Directors’ fees
Bank charges
Loss on foreign exchange
Depreciation
Other income
Further details of the Directors’ fees are set out in the Directors’ Remuneration Report on pages 51 to 53.
9. Auditor’s remuneration
An analysis of the fees charged by the Auditor and its associates is as follows:
Fees payable to the Group’s Auditor and its associates for the audit of the Consolidated Financial Statements:
Fees payable to the Group’s Auditor and its associates for other services:
– Agreed upon procedures – half-year Report
– Agreed upon procedures – Performance Fee
10. Gain on disposal of investment property (including investment property held for sale)
Disposal proceeds
Book value of disposals
Disposal costs
31 December
2021
€’000
31 December
2020
€’000
1,195
1,731
420
6,014
6,722
16,082
1,143
1,553
160
7,137
6,444
16,437
31 December
2021
€’000
31 December
2020
€’000
609
2,405
287
62
82
8
(6)
3,447
589
2,364
248
32
69
8
(47)
3,263
31 December
2021
€’000
31 December
2020
€’000
237
31
–
268
197
28
11
236
31 December
2021
€’000
31 December
2020
€’000
16,667
(14,309)
(840)
1,518
9,998
(7,479)
(341)
2,178
12 residential units and eight parking spaces with a value of €5.2 million were notarised in 2020 and completed in 2021, the book value of
these units in December 2020 reflected their notarised value. 34 units notarised and completed in 2021, achieving a gross premium to
book value of 25.4%, and a premium to book value of 18.8% net of disposal costs.
11. Investment property fair-value gain
Investment property fair-value gain
Further information on investment properties is shown in note 16.
74
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
31 December
2021
€’000
31 December
2020
€’000
37,983
41,458
12. Net finance charge
Interest income
Interest from related party loans
Change in put option liability arising on settlement
Finance expense on bank borrowings
Net finance charge before (gain) / loss on interest-rate swap
(Gain) / loss on interest-rate swap
31 December
2021
€’000
31 December
2020
€’000
(26)
–
–
7,508
7,482
(7,313)
169
6
(57)
591
7,659
8,199
2,218
10,417
Finance expense on bank borrowings for the prior period includes a total of €383,000 in respect of loan breakage fees incurred due to the
loan refinancing carried out during the year (2021: Nil).
13. Income tax expense
The tax charge for the period is as follows:
Current tax (credit) / charge
Deferred tax charge – origination and reversal of temporary differences
31 December
2021
€’000
31 December
2020
€’000
(201)
8,083
7,882
453
7,097
7,550
The tax charge for the year can be reconciled to the theoretical tax charge on the profit in the Consolidated Statement of Comprehensive
Income as follows:
Profit before tax
Tax at German income tax rate of 15.8% (2020: 15.8%)
Income not taxable
Losses carried forward not recognised
Total tax charge for the year
Reconciliation of current tax liabilities
Balance at beginning of year
Tax received / (paid) during the year
Current tax (credit) / charge
Balance at end of year
Reconciliation of deferred tax
Balance at 1 January 2020
Charged to the Statement of Comprehensive Income
Deferred tax (liability) / asset at 31 December 2020
Charged to the Statement of Comprehensive Income
Deferred tax (liability) / asset at 31 December 2021
31 December
2021
€’000
31 December
2020
€’000
45,250
7,150
(240)
972
7,882
37,857
5,981
(344)
1,913
7,550
31 December
2021
€’000
31 December
2020
€’000
550
163
(201)
512
1,413
(1,316)
453
550
Capital gains
on properties
€’000
(Liabilities)
Interest-rate
swaps
€’000
Asset
Total
€’000
(Net liabilities)
(60,825)
(7,448)
(68,273)
(6,925)
(75,198)
2,529
351
2,880
(1,158)
1,722
(58,296)
(7,097)
(65,393)
(8,083)
(73,476)
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
75
Financial StatementsDirectors’ ReportStrategic Report Notes to the Financial Statements continued
For the year ended 31 December 2021
13. Income tax expense (continued)
Jersey income tax
The Group is liable to Jersey income tax at 0%.
German tax
As a result of the Group’s operations in Germany, the Group is subject to German Corporate Income Tax (‘CIT’) – the effective rate for
Phoenix Spree Deutschland Limited for 2021 was 15.8% (2020: 15.8%).
Factors affecting future tax charges
The Group has accumulated tax losses of approximately €35 million (2020: €30.0 million) in Germany, which will be available to set against
suitable future profits should they arise, subject to the criteria for relief. These losses are offset against the deferred taxable gain to give the
deferred tax liability set out above.
14. Dividends
Amounts recognised as distributions to equity holders in the period:
Interim dividend for the year ended 31 December 2021 of 2.35c (2.02p) declared 24 September 2021, paid 29 October 2021
(2020: 2.35c (2.1p)) per share.
Dividend for the year ended 31 December 2020 of 5.15c (4.65p) declared 29 March 2021, paid 7 June 2021 (2020: 5.15c (4.4p))
per share.
15. Subsidiaries
31 December
2021
€’000
31 December
2020
€’000
2,228
5,207
2,229
4,733
The Group consists of a Parent Company, Phoenix Spree Deutschland Limited, incorporated in Jersey, Channel Islands and a number of
Subsidiaries held directly by Phoenix Spree Deutschland Limited, which are incorporated in and operated out of Jersey and Germany.
Further details are given below:
Phoenix Spree Deutschland I Limited
Phoenix Spree Deutschland II Limited (Liquidated on 30 December 2021)
Phoenix Spree Deutschland III Limited
Phoenix Spree Deutschland IV Limited (Liquidated on 30 December 2021)
Phoenix Spree Deutschland V Limited (Liquidated on 30 December 2021)
Phoenix Spree Deutschland VII Limited
Phoenix Spree Deutschland IX Limited (Liquidated on 30 December 2021)
Phoenix Spree Deutschland X Limited
Phoenix Spree Deutschland XI Limited
Phoenix Spree Deutschland XII Limited
Phoenix Property Holding GmbH & Co KG
Phoenix Spree Mueller GmbH
Phoenix Spree Gottlieb GmbH
PSPF Holdings GmbH
Jühnsdorfer Weg Immobilien GmbH
Phoenix Spree Property Fund Ltd & Co KG (PSPF)
PSPF General Partner (Jersey) Limited
Country of
incorporation
% holding
Nature of business
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Germany
Germany
Germany
Germany
Germany
Germany
Jersey
100
100
100
100
100
100
100
100
100
100
100
94.9
94.9
100
94.9
100
100
Investment property
Liquidated
Investment property
Liquidated
Liquidated
Investment property
Liquidated
Finance vehicle
Investment property
Investment property
Holding Company
Investment property
Investment property
Holding Company
Investment property
Investment property
Management of PSPF
76
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
16. Investment properties
Fair value
At 1 January
Capital expenditure
Property additions
Disposals
Fair-value gain
Investment properties at fair value – as set out in the Report by JLL
Assets classified as ‘Held for Sale’ (Note 17)
At 31 December
2021
€’000
768,310
9,477
–
(14,309)
37,983
801,461
(41,631)
759,830
2020
€’000
730,160
4,171
–
(7,479)
41,458
768,310
(19,302)
749,008
The property Portfolio was valued at 31 December 2021 by JLL, in accordance with the methodology described below. The valuations
were performed in accordance with the current Appraisal and Valuation Standards, 8th edition (the ‘Red Book’) published by the Royal
Institution of Chartered Surveyors (RICS).
The valuation is performed on a building-by-building basis from source information on the properties including current rent levels, void
rates, capital expenditure, maintenance costs and non-recoverable costs provided to JLL by the Property Advisors QSix Residential Limited.
JLL use their own assumptions with respect to rental growth, and adjustments to non-recoverable costs. JLL also uses data from
comparable market transactions where these are available alongside their own assumptions.
The valuation by JLL uses the discounted cash flow methodology. Such valuation estimates using this methodology, however, are
inherently subjective and values that would have been achieved in an actual sales transaction involving the individual property at the
reporting date are likely to differ from the estimated valuation.
All properties are valued as Level 3 measurements under the fair-value hierarchy (see note 31) as the inputs to the discounted cash flow
methodology which have a significant effect on the recorded fair value are not observable. Additionally, JLL perform reference checks back
to comparable market transactions to confirm the valuation model.
The unrealised fair-value gain in respect of investment property is disclosed in the Consolidated Statement of Comprehensive Income as
‘Investment property fair-value gain’.
Valuations are undertaken using the discounted cash flow valuation technique as described below and with the inputs set out below.
Discounted cash flow methodology (‘DCF’)
The fair value of investment properties is determined using the DCF methodology.
Under the DCF method, a property’s fair value is estimated using explicit assumptions regarding the benefits and liabilities of ownership
over the asset’s life including an exit or terminal value. The DCF valuation by JLL used ten-year projections of a series of cash flows of each
property interest. The cash flows used in the valuation reflect the known conditions existing at the reporting date.
To this projected cash flow series, an appropriate, market derived discount rate is applied to establish the present value of the cash flows
associated with each property. The discount rate of the individual properties is adjusted to provide an individual property value that is
consistent with comparable market transactions. For properties without a comparable market transaction JLL use the data from market
transactions to adjust the discount rate to reflect differences in the location of the property, its condition, its tenants and rent.
The duration of the cash flow and the specific timing of inflows and outflows are determined by events such as rent reviews, lease renewal
and related lease-up periods, re-letting, redevelopment, or refurbishment.
Periodic cash flow includes cash flows relating to gross income less vacancy, non-recoverable expenses, collection losses, lease incentives,
maintenance costs, agent and commission costs and other operating and management expenses. The series of periodic net operating
cash flows, along with an estimate of the terminal value anticipated at the end of the ten-year projection period, is then discounted.
Where an individual property has the legal and practical ability to be converted into individual apartments (condominiums) for sale as a
condominium, dependent upon the stage of the legal permissions, the additional value created by the conversion is reflected via a lower
discount rate applied.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
77
Financial StatementsDirectors’ ReportStrategic Report Notes to the Financial Statements continued
For the year ended 31 December 2021
16. Investment properties (continued)
The principal inputs to the valuation are as follows:
Residential properties
Market rent
Rental value (€ per sqm per month)
Stabilised residency vacancy (% per year)
Tenancy vacancy fluctuation (% per year)
Commercial properties
Market rent
Rental value (€ per sqm per month)
Stabilised commercial vacancy (% per year)
Estimated Rental Value (‘ERV’)
ERV per year per property (€’000)
ERV (€ per sqm)
Financial rates – blended average
Discount rate (%)
Portfolio yield (%)
Year ended
31 December
2021
Range
Year ended
31 December
2020
Range
9.25-14.75
1-3
4-9.5
4.6-34
0-67
10-15
1-4
5-8
2-33
1-3
23-2,366
9.25-14.75
64-2,278
9-15
3.1
2.4
3.1
2.2
Having reviewed the JLL Report, the Directors are of the opinion that this represents a fair and reasonable valuation of the properties and
have consequently adopted this valuation in the preparation of the Consolidated Financial Statements.
The valuations have been prepared by JLL on a consistent basis at each reporting date and the methodology is consistent and in
accordance with IFRS which requires that the ‘highest and best use’ value is taken into account where that use is physically possible, legally
permissible and financially feasible for the property concerned, and irrespective of the current or intended use.
Sensitivity
Changes in the key assumptions and inputs to the valuation models used would impact the valuations as follows:
Vacancy: A change in vacancy by 1% would not materially affect the investment property fair value assessment.
Discount rate: An increase of 0.25% in the discount rate would reduce the investment property fair value by €76.1 million, and a decrease in
the discount rate of 0.25% would increase the investment property fair value by €94.7 million.
There are, however, inter-relationships between unobservable inputs as they are determined by market conditions. The existence of an
increase of more than one unobservable input could amplify the impact on the valuation. Conversely, changes on unobservable inputs
moving in opposite directions could cancel each other out or lessen the overall effect.
The Group values all investment properties in one of three ways;
Rental scenario
Where properties have been valued under the DCF methodology and are intended to be held by the Group for the foreseeable future, they
are valued under the ‘rental scenario’.
Condominium scenario
Where properties have the potential or the benefit of all relevant permissions required to sell apartments individually (condominiums) then
we refer to this as a ‘condominium scenario’. Properties expected to be sold in the coming year from these assets are considered held for
sale under IFRS 5 and can be seen in note 17. The additional value is reflected by using a lower discount rate under the DCF methodology.
Properties which do not have the benefit of all relevant permissions are described as valued using a standard rental scenario. Included in
properties valued under the condominium scenario are properties not yet released to ‘held for sale’ as only a portion of the properties are
forecast to be sold in the coming 12 months.
78
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Disposal scenario
Where properties have been notarised for sale prior to the reporting date but have not completed; they are held at their notarised disposal
value. These assets are considered held for sale under IFRS 5 and can be seen in note 17.
The table below sets out the assets valued using these three scenarios:
Rental scenario
Condominium scenario
Disposal scenario
Total
31 December
2021
€’000
31 December
2020
€’000
762,690
33,050
5,721
801,461
715,870
45,264
7,176
768,310
The movement in the fair value of investment properties is included in the Consolidated Statement of Comprehensive Income as
‘investment property fair value gain’ and comprises:
Investment properties
Investment properties held for sale (see note 17)
17. Investment properties – held for sale
Fair value – held for sale investment properties
At 1 January
Transferred from investment properties
Capital expenditure
Properties sold
Valuation gain on apartments held for sale
At 31 December
31 December
2021
€’000
31 December
2020
€’000
37,817
166
37,983
2021
€’000
19,302
35,886
586
(14,309)
166
41,631
40,633
825
41,458
2020
€’000
10,639
15,004
313
(7,479)
825
19,302
Investment properties are re-classified as current assets and described as ‘held for sale’ in three different situations: properties notarised for
sale at the reporting date, properties where at the reporting date the Group has obtained and implemented all relevant permissions
required to sell individual apartment units, and efforts are being made to dispose of the assets (condominium); and properties which are
being marketed for sale but have currently not been notarised.
Properties which no longer satisfy the criteria for recognition as held for sale are transferred back to investment properties at fair value.
Properties notarised for sale by the reporting date are valued at their disposal price (disposal scenario), and other properties are valued
using the rental or condominium scenario (see note 16) as appropriate.
Investment properties held for sale are all expected to be sold within 12 months of the reporting date based on management knowledge
of current and historic market conditions. While whole properties have been valued under a condominium scenario in note 16, only the
expected sales have been transferred to assets held for sale.
The investment properties held for sale have debt of €13.0m (2020: €2.7m) that is repayable upon sale of those investment properties.
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
79
Financial StatementsDirectors’ ReportStrategic Report Notes to the Financial Statements continued
For the year ended 31 December 2021
18. Property, plant and equipment
Cost or valuation
As at 1 January 2020
Disposals
As at 31 December 2020
Disposals
As at 31 December 2021
Accumulated depreciation and impairment
As at 1 January 2020
Charge for the year
As at 31 December 2020
Charge for the year
As at 31 December 2021
Carrying amount
As at 31 December 2020
As at 31 December 2021
19. Other financial assets at amortised cost
Current
At 1 January
Accrued interest
Loan repayment
At 31 December
Non-current
At 1 January
Accrued interest
At 31 December
Equipment
€’000
127
(4)
123
(14)
109
73
8
81
8
89
42
20
31 December
2021
€’000
31 December
2020
€’000
–
–
–
–
1,590
32
(1,622)
–
31 December
2021
€’000
31 December
2020
€’000
901
25
926
876
25
901
The Company entered into a loan agreement with the minority interest of Accentro Real Estate AG. This loan bears interest at 3% per
annum.
These assets are considered to have low credit risk and any loss allowance would be immaterial.
20. Trade and other receivables
Current
Trade receivables
Less: impairment provision
Net receivables
Prepayments and accrued income
Investment property disposal proceeds receivable
Service charges receivable
Prepaid Treasury Shares
Other receivables
80
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
31 December
2021
€’000
31 December
2020
€’000
827
(315)
512
514
4,513
5,562
–
598
11,699
707
(222)
485
16
2,444
4,895
104
470
8,414
Ageing analysis of trade receivables
Up to 12 months
Between 1 year and 2 years
Over 3 years
31 December
2021
€’000
31 December
2020
€’000
511
–
1
512
482
3
–
485
Impairment of trade and service charge receivables
The Group calculates lifetime expected credit losses for trade and service charge receivables using a portfolio approach. Receivables are
grouped based on the credit terms offered and the type of lease. The probability of default is determined at the year end based on the
aging of the receivables, and historical data about default rates. That data is adjusted if the Group determines that historical data is not
reflective of expected future conditions due to changes in the nature of its tenants and how they are affected by external factors such as
economic and market conditions.
On this basis, the loss allowance as at 31 December 2021, and on 31 December 2020 was determined as set out below.
The Group applies the following loss rates to trade receivables.
As noted below, a loss allowance of 50% (2020: 50%) has been recognised for trade receivables that are more than 60 days past due except
for any receivables relating to the Mietendeckel which are expected to be recovered in full. Any receivables where the tenant is no longer
resident in the property are provided for in full.
Trade receivables:
Expected loss rate (%)
Gross carrying amount (€’000)
Loss allowance provision (€’000)
Trade receivables:
Expected loss rate (%)
Gross carrying amount (€’000)
Loss allowance provision (€’000)
0-60 days
Aging
Over 60 days
Non-current
tenant
0%
274
–
36%
371
(133)
100%
182
(182)
0-60 days
Aging
Over 60 days
Non-current
tenant
0%
352
–
50%
267
(134)
100%
88
(88)
Total
2021
827
(315)
Total
2020
707
(222)
Movements in the impairment provision against trade receivables are as follows:
Balance at the beginning of the year
Impairment losses recognised
Amounts written off as uncollectable
Balance at the end of the year
All impairment losses relate to the receivables arising from tenants.
21. Cash and cash equivalents
Cash at bank
Cash at agents
Cash and cash equivalents
31 December
2021
€’000
31 December
2020
€’000
222
420
(327)
315
223
160
(161)
222
31 December
2021
€’000
31 December
2020
€’000
9,120
1,321
10,441
35,971
1,025
36,996
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
81
Financial StatementsDirectors’ ReportStrategic Report
Notes to the Financial Statements continued
For the year ended 31 December 2021
22. Borrowings
Current liabilities
Accrued interest – NATIXIS Pfandbriefbank AG
Bank loans – Berliner Sparkasse
Non-current liabilities
Bank loans – NATIXIS Pfandbriefbank AG
Bank loans – Berliner Sparkasse
31 December 2021
31 December 2020
Nominal value
€’000
Book value
€’000
Nominal value
€’000
Book value
€’000
1,026
801
1,827
237,678
48,905
286,583
288,410
121
801
922
234,328
48,905
283,233
284,155
901
801
1,702
240,000
49,742
289,742
291,444
217
801
1,018
236,789
49,742
286,531
287,549
The Group has complied with the financial covenants of its borrowing facilities during the 2021 and 2020 reporting periods.
The difference between book values and nominal values in the table above relates to unamortised transaction costs.
All borrowings are secured against the investment properties of the Group. As at 31 December 2021, the Group had an undrawn debt
facilities of €59.1m (2020: €Nil).
23. Trade and other payables
Trade payables
Accrued liabilities
Service charges payable
Advanced payment received on account
Deferred income
31 December
2021
€’000
31 December
2020
€’000
2,758
1,472
5,203
2,437
23
11,893
1,410
2,463
5,145
–
–
9,018
Advanced payment received on account relates to disposal proceeds received prior to the balance sheet date for units that proceeded to
change ownership in the first quarter of 2022.
24. Derivative financial instruments
Interest-rate swaps – carried at fair value through profit or loss
Balance at 1 January
Fair value movement through profit or loss
Balance at 31 December
31 December
2021
€’000
31 December
2020
€’000
18,197
(7,313)
10,884
15,979
2,218
18,197
The notional principal amounts of the outstanding interest-rate swap contracts at 31 December 2021 were €204,269,000 (2020:
€204,269,000). At 31 December 2021 the fixed interest rates vary from 0.775% to 1.24% (2020: 0.24% to 1.07%) above the main factoring
Euribor rate, and mature between September 2026 and February 2027.
Maturity analysis of interest-rate swaps
Less than 1 year
Between 1 and 2 years
Between 2 and 5 years
More than 5 years
82
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
31 December
2021
€’000
31 December
2020
€’000
–
–
10,405
479
10,884
–
–
–
18,197
18,197
25. Other financial liabilities
Current
Balance at beginning of year
Change in put option liability on settlement
Exercise of put option
Balance at end of year
26. Share-based payment reserve
Balance at 1 January 2020
Fee credit for the period
Balance at 31 December 2020
Fee charge for the year
Settlement of Performance Fee
Balance at 31 December 2021
31 December
2021
€’000
31 December
2020
€’000
–
–
–
–
6,951
591
(7,542)
–
Performance
Fee
€’000
6,808
(439)
6,369
343
(6,369)
343
The share-based payment reserve was established in relation to the issue of shares for the payment of the Performance Fee to the
Property Advisor.
Property Advisor performance fee
The Property Advisor is entitled to an asset and estate management performance fee, measured over consecutive three-year periods,
equal to 15% of the excess by which the annual EPRA NTA total return of the Group exceeds 8% per annum, compounding (the
‘Performance Fee’). The Performance Fee is subject to a high watermark, being the higher of:
(i) EPRA NTA per share at 1 January 2021; and
(ii) the EPRA NTA per share at the end of a Performance Period in relation to which a performance fee was earned in accordance with
the provisions contained with the Property Advisor and Investor Relations Agreement.
Should a fee be due, the fee will be settled shortly after the release of the 2023 annual report in shares of the Company and, being
determined by reference to an equity-based formula, meets the definition of a share based payment arrangement. The 2020 fee was
settled during the year and the 2021 fee will be settled in 2023.
27. Stated capital
Issued and fully paid:
At 1 January
At 31 December
31 December
2021
€’000
31 December
2020
€’000
196,578
196,578
196,578
196,578
The number of shares in issue at 31 December 2021 was 100,751,410 (31 December 2020: 100,751,410).
Treasury Shares
The reserve for the Company’s Treasury Shares comprises the cost of the Company’s shares held by the Group. At 31 December 2021,
the Group held 7,949,293 of the Company’s shares (2020: 4,628,500). During the year a further 4,514,788 shares were purchased in the
market, and 1,193,995 was issued out of shares held in treasury in settlement of the Performance Fee due to the Property Advisor for the
Performance Period ended December 2020.
28. Non-controlling interests
Phoenix Spree Mueller GmbH
Phoenix Spree Gottlieb GmbH
Jühnsdorfer Weg Immobilien GmbH
Non-controlling
interest
%
31 December
2021
€’000
31 December
2020
€’000
5.1%
5.1%
5.1%
1,475
1,342
770
3,587
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
1,329
1,250
951
3,530
83
Financial StatementsDirectors’ ReportStrategic Report
Notes to the Financial Statements continued
For the year ended 31 December 2021
29. Earnings per share and EPRA earnings per share
Earnings per share
Earnings for the purposes of basic earnings per share being net profit attributable to owners of the parent (€’000)
Weighted average number of Ordinary Shares for the purposes of basic earnings per share (Number)
Effect of dilutive potential Ordinary Shares (Number)
Weighted average number of Ordinary Shares for the purposes of diluted earnings per share (Number)
Earnings per share (€)
Diluted earnings per share (€)
EPRA earnings per share
Earnings for the purposes of basic earnings per share being net profit attributable to owners of the parent (€’000)
Changes in value of investment properties
Profit or loss on disposal on investment properties
Changes in fair value of financial instruments
Deferred tax adjustments
Change in Non-controlling interest
EPRA Earnings
Weighted average number of Ordinary Shares for the purposes of basic earnings per share (Number)
EPRA Earnings per Share (€)
Diluted EPRA Earnings per Share (€)
30. Net Asset Value per share and EPRA Net Asset Value
Net assets (€’000)
Number of participating Ordinary Shares
Net Asset Value per share (€)
31 December
2021
31 December
2020
37,311
94,973,655
72,433
29,788
97,136,617
1,806,285
95,046,088
98,942,902
0.39
0.39
0.31
0.30
37,311
(37,983)
(1,518)
(6,970)
8,083
240
(837)
29,788
(41,458)
(2,178)
1,779
7,097
498
(4,474)
94,973,655
(0.01)
(0.01)
97,136,617
(0.05)
(0.05)
31 December
2021
31 December
2020
440,040
92,802,117
4.74
430,426
96,122,909
4.48
According to the EPRA Best Practices Recommendations published in October 2019, three new Net Asset Value measures have been
introduced for ongoing financial years from 1 January 2020.
EPRA NRV (Net Reinstatement Value) – this includes transfer duties of the property assets.
EPRA NTA (Net Tangible Assets) – the Company buys and sells assets leading to taking account of certain liabilities.
EPRA NDV (Net Disposal Value) – the value for the shareholder in the event of a liquidation.
The Net Asset Value calculation is based on the Group’s shareholders’ equity which includes the fair value of investment properties,
properties held for sale as well as financial instruments.
The number of diluted shares does not include Treasury Shares.
84
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
At 31 December 2021
IFRS Equity attributable to shareholders
Include / Exclude*:
Hybrid instruments
Diluted NAV
Include*:
Revaluation of investment property
Revaluation of investment property under construction
Revaluation of other non-current investments
Revaluation of tenant leases held as finance leases
Revaluation of trading properties
Diluted NAV at fair value
Exclude*:
Deferred tax in relation to fair-value gains of investment property
Fair value of financial instruments
Goodwill as a result of deferred tax
Goodwill as per the IFRS balance sheet
Intangibles as per the IFRS balance sheet
Include*:
Fair value of fixed interest rate debt
Revaluation of intangibles to fair value
Real estate transfer tax
NAV
Fully diluted number of shares
NAV per share (€)
At 31 December 2020
IFRS Equity attributable to shareholders
Include / Exclude:
Hybrid instruments
Diluted NAV
Include*:
Revaluation of investment property
Revaluation of investment property under construction
Revaluation of other non-current investments
Revaluation of tenant leases held as finance leases
Revaluation of trading properties
Diluted NAV at fair value
Exclude:
Deferred tax in relation to fair-value gains of investment property
Fair value of financial instruments
Fair value of fixed interest rate debt
Real estate transfer tax
NAV
Fully diluted number of shares
NAV per share (€)
EPRA NRV
€’000
EPRA NTA
€’000
EPRA NDV
€’000
440,040
440,040
440,040
(343)
(343)
(343)
439,697
439,697
439,697
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
439,697
439,697
439,697
73,476
10,884
–
–
–
–
65,072
73,476
10,884
–
–
–
–
–
–
–
3,051
589,129
524,057
442,748
92,802,117
6.35
92,802,117
5.65
92,802,117
4.77
EPRA NRV
€’000
EPRA NTA
€’000
EPRA NDV
€’000
430,426
430,426
430,426
(6,369)
424,057
(6,369)
424,057
(6,369)
424,057
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
424,057
424,057
424,057
65,393
18,197
62,721
570,368
65,393
18,197
–
2,946
507,647
427,003
96,122,909
5.93
96,122,909
5.28
96,122,909
4.44
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
85
Financial StatementsDirectors’ ReportStrategic Report Notes to the Financial Statements continued
For the year ended 31 December 2021
31. Financial instruments
The Group is exposed to the risks that arise from its use of financial instruments. This note describes the objectives, policies and processes
of the Group for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is
presented throughout the Consolidated Financial Statements.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
• Cash and cash equivalents
• Trade and other receivables
• Other financial assets
• Trade and other payables
• Borrowings
• Derivative financial instruments
The Group held the following financial assets at each reporting date:
At amortised cost
Trade and other receivables – current
Cash and cash equivalents
Other financial assets at amortised cost
The Group held the following financial liabilities at each reporting date:
Held at amortised cost
Borrowings payable: current
Borrowings payable: non-current
Trade and other payables
Fair value through profit or loss
Derivative financial liability – interest rate swaps
31 December
2021
€’000
31 December
2020
€’000
11,185
10,441
926
22,552
8,294
36,996
901
46,191
31 December
2021
€’000
31 December
2020
€’000
922
283,233
11,893
296,048
10,884
10,884
1,018
286,531
9,018
296,567
18,197
18,197
306,932
314,764
Fair value of financial instruments
The fair values of the financial assets and liabilities are not materially different to their carrying values due to the short-term nature of the
current assets and liabilities or due to the commercial variable rates applied to the long-term liabilities.
The interest-rate swap was valued by the respective counterparty banks by comparison with the market price for the relevant date.
The interest-rate swaps are expected to mature between September 2026 and February 2027.
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2:
other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or
indirectly; and
techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
Level 3:
During each of the reporting periods, there were no transfers between valuation levels.
86
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Group fair values
Financial assets/ (liabilities)
Interest rate swaps – Level 2 – current
Interest rate swaps – Level 2 – non-current
Interest rate risk
Financial risk management
The Group is exposed through its operations to the following financial risks:
•
• Foreign exchange risk
• Credit risk
• Liquidity risk
The Group’s policies for financial risk management are outlined below.
31 December
2021
€’000
31 December
2020
€’000
(10,405)
(479)
(10,884)
–
(18,197)
(18,197)
Interest rate risk
The Group’s interest rate risk arises from certain of its borrowings. Borrowings issued at variable rates expose the Group to cash flow
interest rate risk. Borrowings issued at fixed rates expose the Group to fair-value interest rate risk. The Group is also exposed to interest rate
risk on cash and cash equivalents.
Under interest-rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts
calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the
cash flow exposures on the issued variable rate debt held.
Sensitivity analysis has not been performed as all variable rate borrowings have been swapped to fixed interest rates, and potential
movements on cash at bank balances are immaterial.
The Group gives careful consideration to interest rates when considering its borrowing requirements and where to hold its excess cash.
The Directors believe that the interest rate risk is at an acceptable level.
Foreign exchange risk
The Group is exposed to foreign exchange risk on sales, purchases, and translation of assets and liabilities that are in a currency other than
the functional currency (Euros).
The Group does not enter into any currency hedging transactions and the Directors believe that the foreign exchange rate risk is at an
acceptable level.
The carrying amount of the Group’s foreign currency (non-Euro) denominated monetary assets and liabilities are shown below, all the
amounts are for Sterling balances only:
Financial assets
Cash and cash equivalents
Financial liabilities
Trade and other payables
Net position
31 December
2021
€’000
31 December
2020
€’000
563
(494)
69
174
(408)
(234)
At each reporting date, if the Euro had strengthened or weakened by 10% against Sterling with all other variables held constant, post-tax
profit for the year would have increased/(decreased) by:
Weakened by 10% increase/
(decrease) in post-tax profit and
impact on equity
€’000
Strengthened by 10% increase/
(decrease) in post-tax profit and
impact on equity
€’000
31 December 2021
31 December 2020
7
(23)
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
(7)
23
87
Financial StatementsDirectors’ ReportStrategic Report Notes to the Financial Statements continued
For the year ended 31 December 2021
31. Financial instruments (continued)
Credit risk management
Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk
arises principally from the Group’s trade and other receivables and its cash balances. The Group gives careful consideration to which
organisations it uses for its banking services in order to minimise credit risk. The Group has an established credit policy under which each
new tenant is analysed for creditworthiness and each tenant is required to pay a two-month deposit.
At each reporting date the Group had no tenants with outstanding balances over 10% of the total trade receivables balance.
The Group holds cash at the following banks: Barclays Private Clients International Jersey Ltd, Deutsche Bank AG, Berliner Sparkasse and
Hausbank. The split of cash held at each of the banks respectively at 31 December 2021 was 26% / 57% / 10% / 7% (31 December 2020:
Barclays Private Clients International Jersey, Deutsche Bank AG, Berliner Sparkasse and Mittelbrandenburgische Sparkasse the split was
34% / 59% / 3% / 2%). Barclays and Deutsche Bank have credit ratings of A and A- respectively, Berliner Sparkasse and Mittelbrandenburgische
Sparkasse have a credit rating of A+.
The Group holds no collateral as security against any financial asset. The carrying amount of financial assets recorded in the financial
information, net of any allowances for losses, represents the Group’s maximum exposure to credit risk.
Details of receivables from tenants in arrears at each reporting date can be found in note 20 as can details of the receivables that were
impaired during each period.
An allowance for impairment is made using an expected credit loss model based on previous experience. Management considers the
above measures to be sufficient to control the credit risk exposure.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings
assigned by international credit-rating agencies.
The carrying amount of financial assets recorded in the Financial Statements, which is net of impairment losses, represents the Group’s
maximum exposure to credit risk as no collateral or other credit enhancements are held.
Liquidity risk management
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing
liquidity risk is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or damage to the Group’s reputation.
The Directors manage liquidity risk by regularly reviewing cash requirements by reference to short-term cash flow forecasts and medium-
term working capital projections prepared by Management.
The Group maintains good relationships with its banks, which have high credit ratings.
The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed maturity periods.
The table has been drawn up based on the undiscounted cash flows of the financial liabilities based on the earliest date on which the
Group can be required to pay. The tables include both interest payable and principal cash flows.
Maturity analysis for financial liabilities
At 31 December 2021
Borrowings payable: current
Borrowings payable: non-current
Other financial liabilities
Trade and other payables
Less than
one year
€’000
Between one to
two years
€’000
Between two
to five years
€’000
More than
five years
€’000
922
–
–
11,893
12,815
–
–
–
–
–
–
–
–
–
–
–
283,233
–
–
283,233
Total
€’000
922
283,233
–
11,893
296,048
88
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
At 31 December 2020
Borrowings payable: current
Borrowings payable: non-current
Trade and other payables
32. Capital commitments
Contracted capital commitments at the end of the year
Less than
one year
€’000
Between one to
two years
€’000
Between two to
five years
€’000
More than
five years
€’000
1,018
–
9,018
10,036
–
–
–
–
–
–
–
–
–
286,531
–
286,531
Total
€’000
1,018
286,531
9,018
296,567
31 December
2021
€’000
31 December
2020
€’000
–
2,783
Capital commitments include contracted obligations in respect of the enhancement and repair of the Group’s properties.
33. Related party transactions
Related party transactions not disclosed elsewhere are as follows:
Property Advisor Fees
In November 2018 the Company signed a new contract with the Property Advisor, which superseded the previous Property Advisor
agreement. Under the Property Advisory Agreement for providing Property Advisory services, the Property Advisor will be entitled to a
Portfolio and Asset Management Fee as follows:
• 1.2% of the EPRA NTA of the Group where EPRA NTA of the Group is equal to or less than €500 million; and
• 1% of the EPRA NTA of the Group greater than €500 million.
The Property Advisor is entitled to receive a finance fee equal to:
• 0.1% of the value of any borrowing arrangement which the Property Advisor has negotiated and/or supervised; and
• a fixed fee of £1,000 in respect of any borrowing arrangement which the Property Advisor has renegotiated or varied.
The Management Fee will be reduced by the aggregate amount of any transaction fees and finance fees payable to the Property Advisor in
respect of that calendar year.
The Property Advisor is entitled to a capex monitoring fee equal to 7% of any capital expenditure incurred by any Subsidiary which the
Property Advisor is responsible for managing.
The Property Advisor is entitled to receive a transaction fee fixed at £1,000 in respect of any acquisition or disposal of property by any Subsidiary.
The Property Advisor is entitled to a letting fee equal to between one and three month’s net cold rent (being gross rents receivable less
service costs and taxes) for each new tenancy signed by the Company where the Property Advisor has sourced the relevant tenant.
The Property Advisor shall be entitled to a fee for Investor Relations Services at the annual rate of £75,000 payable quarterly in arrears.
QSix Residential Limited was the Group’s appointed Property Advisor. Partners of QSix Residential formerly sat on the Board of Phoenix
Spree Deutschland Limited and retain a shareholding in the Group. During the year ended 31 December 2021, an amount of €6,722,029
(€6,653,493 Management Fees and €90,437 Other expenses and fees) (2020: €6,443,811 (€6,295,082 Management Fees and €148,729
Other expenses and fees)) was payable to QSix Residential. At 31 December 2021 €977,260 (2020: €336,251) was outstanding. Fees payable
to the Property Advisor in relation to overseeing capital expenditure during the year were €397,440 (2020: €252,000).
The Property Advisor is also entitled to an asset and estate management Performance Fee. The charge for the period in respect of the
Performance Fee was €343,000 (2020: Credit of €439,000). Please refer to note 26 for more details.
The Property Advisor has a controlling stake in IWA Real Estate GmbH & Co KG who are contracted to dispose of condominiums in Berlin
on behalf of the Company. During the period, fees of €639,000 were charged (2020: €nil).
Apex Financial Services (Alternative Funds) Limited, the Company’s administrator provided administration and company secretarial services.
During the period, fees of €609,000 were charged (2020: €592,000) with €154,000 (2020: €nil) outstanding.
33. Related party transactions (continued)
In March 2015 the Group entered into a five-year option agreement to acquire the remaining 5.2% interest in Phoenix Spree Property Fund
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
89
Financial StatementsDirectors’ ReportStrategic Report Notes to the Financial Statements continued
For the year ended 31 December 2021
Ltd & Co KG (PSPF) from the limited partners M Hilton and P Ruddle, both then Directors of PMM Partners (UK) Limited. The options were
exercised three months after the fifth anniversary of the majority-interest acquisition, on 1 July 2020. The option was settled for €7,542,000
and was settled in cash for €5,920,000 net of initial loans to the limited partners of €1,622,000. €7,542,000 being 5.2% of the Net Asset
Value of PSPF at the time of settlement, as set out in the original 2015 agreement. For their role as limited partners in PSPF & Co KG up to
their date of exit, they were paid €30,000.
Fees payable to Directors during the year amounted to €287,000 (2020: €248,000).
Dividends paid to Directors in their capacity as a shareholder amounted to €2,976 (2020: €3,494).
34. Events after the reporting date
The Company had exchanged contracts for the sale of 10 residential units and one attic unit in Berlin with aggregated consideration
of €5.7 million prior to the reporting date. The sale of these units subsequently completed in Q1 2022.
In Q1 2022 the Company exchanged contracts for the sale of six condominiums in Berlin for an aggregate consideration of €2.1 million.
Completion of these contracts is expected in Q2 2022.
In Q1 2022, 240,463 of the Company’s shares were bought back with average price paid of £3.87, an 18.4% discount to
December 2021 EPRA NTA per share of £4.76.
In March 2022, the Company exchanged contracts to acquire a portfolio of 17 new build, semi-detached, residential properties (34 houses)
for a purchase price of €18.5 million. Further information can be found on page 17.
90
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
Professional Advisors
Property Advisor
Administrator, Company Secretary and Registered Office
QSix Residential Limited
54-56 Jermyn Street
London SW1Y 6LX
Apex Financial Services (Alternative Funds) Limited
12 Castle Street
St Helier
Jersey JE2 3RT
Registrar
Principal Banker
UK Legal Advisor
Jersey Legal Advisor
German Legal Advisor
as to property law
German Legal Advisor as
to German partnership law
Sponsor and Broker
Independent Property Valuer
Auditor
Link Asset Services (Jersey) Limited
12 Castle Street
St. Helier
Jersey JE2 3RT
Barclays Bank Plc, Jersey Branch
13 Library Place
St. Helier
Jersey JE4 8NE
Stephenson Harwood LLP
1 Finsbury Circus
London EC2M 7SH
Mourant
22 Grenville St.
St. Helier
Jersey JE4 8PX
Mittelstein Rechtsanwälte
Alsterarkaden 20
20354 Hamburg
Germany
Taylor Wessing Partnerschaftsgesellschaft mbB
Thurn-und-Taxis-Platz 6
60313 Frankfurt a.M.
Germany
Numis Securities Limited
45 Gresham Street
10 Paternoster Square
London
EC2V 7BF
Jones Lang LaSalle GmbH
Rahel-Hirsch-Strasse 10
10557 Berlin
Germany
RSM UK Audit LLP
25 Farringdon Street
London EC4A 4AB
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
91
Financial StatementsDirectors’ ReportStrategic Report Notes
92
Phoenix Spree Deutschland Limited Annual Report and Accounts 2021
P
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Phoenix Spree Deutschland Limited
12 Castle Street
St. Helier
Jersey
JE2 3RT
www.phoenixspree.com