Final Results

RNS Number : 4744D

Phoenix Spree Deutschland Limited

27 April 2017

Phoenix Spree Deutschland Limited

(The "Group")

FINANCIAL RESULTS FOR YEAR ENDED 31 DECEMBER 2016

HIGHLIGHTS

2016 was the first full financial year since Phoenix Spree Deutschland successfully listed on the Main Market of the London Stock Exchange. The Group capitalised on the platform that this provided by issuing new equity, raising £38 million (before costs) in March 2016. The Group has been actively deploying the proceeds on selective acquisitions to grow its Portfolio of residential properties in Berlin, where the Board sees the most potential for future market rental growth and yield compression in the years ahead.

Strong Financial Performance

·	Pre-exceptional profit before tax up 148% to €48.9 million (31 December 2015: €19.7 million)
·	Portfolio value increased by 49.5% to €423.8 million during the year (31 December 2015: €283.6 million), or 19.4% on a like-for-like basis
·	EPRA NAV per share grew by 19.7% to €2.73 (£2.33) (31 December 2015: €2.28 (£1.67).
·	EPRA total return per share of 22.5%, (31 December 2015: 17.5%)
·	Strong letting performance, as rent per sqm increased by 1.4% to €7.6 (31 December 2015: €7.5) and 5.3% on a like-for-like basis
·	Rent on new lettings of €9.6 per sqm, a 7.8% increase over 2015, and a new Group record.
·	EPRA Vacancy reaches all-time low of 2.6% (31 December 2015 3.9%)
·	Final dividend per share of €4.3 cents (GBP: 3.7p), giving a total dividend per share of €6.3 cents (GBP: 5.3p) for the financial year 2016 (2015: €5.8 cents (GBP: 4.2 p))

Continued momentum in scale and quality of Portfolio

·	Share placing proceeds used to fund attractive pipeline of acquisition opportunities: Notarisation of 10 Berlin property packages during the year, for an aggregate consideration of €78.3 million. These are expected to increase the Group's rental income by c.17.5%
·	Active Portfolio management: Disposal of non-core properties during the year for aggregate consideration of €3.8 million
·	Significant non-core disposal post year-end: 17 properties located in Nuremberg and Fürth notarised for €35.25m, an 11% premium to the 31 December 2016 book value, increasing the pro-forma Berlin exposure to 81.9% of the Group's Portfolio by value
·	Substantial premium achieved on condominium sales: Third project, in Boxhagenerstrasse, commenced in Q4 2016, achieved an average value per sqm of €4,110, a 59.0% premium to the 2015 acquisition price of €2,585 per sqm
·	Active balance sheet management: New debt of €101.4 million signed during H2 2016. Overall average debt maturity now exceeds six years and average interest rate has been reduced to 2.0%. During past 24 months, over 90% of Fund's debt has been refinanced

Outlook

·	Outlook for the German residential market, particularly Berlin, remains positive with further scope for rental growth and yield compression
·	Rising demand for property expected to continue, driven by population growth, job creation and the ongoing process of urbanisation
·	Supply of Berlin rental housing expected to remain constrained by lack of land for development, limited number of building permits and high cost of construction relative to in-place housing stock
·	Strong reversionary rental potential embedded within Portfolio; Berlin new leases signed at 35.6% premium to in place rents
·	Further new condominium projects and sales are planned for the year ahead
·	Group continues to see attractive pipeline of acquisitions that meet its strict return criteria, and expects to deploy further capital during the remainder of 2017

Robert Hingley, Chairman of Phoenix Spree Deutschland commented

"I am delighted at the strong performance this year. We have continued to deliver against our strategy of actively managing and growing our high-quality portfolio. We have increased our presence in Berlin, where we continue to benefit from the significant undersupply of residential property and ongoing population growth, achieving higher letting prices and condominium sales at a premium. The strength of our balance sheet enables us to invest further in growing the portfolio and I am confident in our ability to continue to drive rental income and capital growth, so delivering value to shareholders."

Phoenix Spree Deutschland

Stuart Young

+44 (0)20 7292 7087

Liberum Capital Limited (Corporate Broker)

Richard Crawley

Christopher Britton

+44 (0)20 3100 2222

Bell Pottinger (Financial PR)

Nick Lambert

Elizabeth Snow

+44 (0)20 3772 2582

Note

This announcement is released by Phoenix Spree Deutschland Limited and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 ("MAR").

For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of the Company by Robert Hingley, Chairman.

CHAIRMAN'S STATEMENT

It is pleasing to see that, in its first full financial year since listing on London Stock Exchange, the Group has had another year of achievements and growth. It has continued to deliver on its strategy, having enhanced the portfolio through a significant programme of property acquisitions, concluded selective portfolio disposals, capitalised on the stock market listing through the issuance of new equity and delivered another positive set of financial results.

Financial results

The financial results for the year to 31 December 2016 reflect strong operating trends. Positive market fundamentals continued to drive growth in demand for rental apartments, while supply remained constrained. These trends, combined with our active asset management strategy, delivered growth in rents and property values. The portfolio value increased by 49.5% to €423.8 million, or 19.4% on a like-for-like basis excluding the impact of acquisitions and disposals, whilst EPRA NAV per share rose by 19.7% to €2.73. During the year, new leases were signed at an average 27.0% premium to in-place rents and this, combined with the significant premium achieved on our condominium sales, demonstrates the strong reversionary potential that exists within the Portfolio. The EPRA vacancy rate improved, ending the year well below 3%, and the period closed with a strong balance sheet, showing a net loan to value of 39.4% and cash balances of €18.5m.

Share price and dividend

The year to 31 December 2016 saw the share price rise from 156 to 232 pence per share, representing an increase of 49.5% during the period, significantly outperforming the FTSE All Share Index, into which the Company gained inclusion in May 2016. While no guarantees can be provided as to future share price performance, it is nonetheless pleasing to see shareholders rewarded for their support during a period which saw considerable economic and stock market uncertainty in the periods leading up to and after the Brexit vote in June 2016.

The Company aims to provide its shareholders with a secure and progressive dividend over the medium term, paid from recurring net operating cashflows, and subject to the distribution requirements pertaining to Non-Mainstream Pooled Investments. Accordingly, the Board is pleased to have declared a final dividend of €4.3 cents per share (GBP 3.7 pence per share), taking the full year dividend to €6.3 cents per share (GBP 5.3 pence per share), representing an 8.4% increase on the 2015 full year Euro denominated dividend. This is expected to be paid on or around 30 June 2017 to shareholders on the register at 9 June 2017.

Share placing and debt refinancing

The Stock Market listing has provided the Fund with better access to capital markets and the Group successfully issued new equity in March 2016 by way of an Offer for Subscription and Share Placing, raising a total of £38 million before costs. The Group has also been successful in securing new debt facilities during 2016 and continues to refinance existing debt on more favourable terms, thus reducing the overall interest rate, while simultaneously extending the maturity of the debt pool. Combined, these actions have provided the Group with the financial platform to grow the Portfolio through a series of carefully targeted acquisitions.

Acquisitions & disposals

The Group grew the Portfolio, having completed or notarised a further €78.3 million of acquisitions, all of which were located in Berlin. The criteria for new acquisitions are rigorous, and it is pleasing that the Group continues, in a competitive marketplace, to source acquisitions that are capable of meeting or exceeding the Group's target returns.

During the financial year, the Group successfully sold several properties outside Berlin that had been identified as non-core. In April 2017, a portfolio of 17 properties located in Nuremberg and Fürth was notarised for sale at a significant premium to book value. On completion, the combined impact of these transactions will increase the contribution of Berlin to 81.9% of the Portfolio by value, leaving the Group better positioned to capitalise on the relatively more favourable market dynamics that the Board believe Berlin offers.

Condominiums

The Group has also continued to divide and resell a small number of carefully selected apartment blocks as condominiums in order to monetise the arbitrage that exists between the value of an apartment block and the value of the same property sold as single apartments. During the year to 31 December 2016, the average achieved price per square metre for condominiums sold or notarised represented a 62% premium to the average valuation per square metre for the Fund's Berlin portfolio, demonstrating the potential that exists to unlock value by pursuing a targeted condominium strategy.

Property advisor

2016 has been another busy year for PMM Partners, the Group's Property Advisor. PMM Partners has combined its day-to-day asset management activities with a successful capital raising in the first quarter of the year, a busy acquisition and disposal pipeline, and a significant debt refinancing programme. The Board would like to thank PMM Partners for its ongoing contribution to the Group's performance.

Corporate governance

High standards of corporate governance are vital if the Group is to deliver its strategy and safeguard the interests of our shareholders and other valued stakeholders. The Directors are committed to ensuring that the Group complies with best practice standards for the business it carries out. As the shares are listed on the premium segment of the Official List, Listing Rule 9.8.6(5)R requires the Group to apply the provisions of the UK Corporate Governance Code (the 'Code').

The Board has considered the principles and recommendations of the Code and is pleased to confirm that the Group complies with the provisions of the Code where applicable.

Outlook

German residential market dynamics remain positive, particularly in Berlin, where demand for rental property continues to outstrip supply significantly, and prices of existing housing stock compare favourably with new-build construction costs. Berlin's population continues to rise and job creation trends remain strong, further adding to rental property demand. The Directors believe these market forces have the potential to deliver further rent growth and yield compression in the year ahead. Combined with the Property Advisor's active asset management strategies and additional condominium programmes that are either planned or underway, the outlook for 2017 remains positive.

OPERATIONAL REVIEW

Financial highlights

€ million (unless otherwise stated)	31 Dec 2016	31 Dec 2015
Gross rental income	15.9	12.1
Profit before tax	48.9	13.0
Pre-exceptional profit before tax	48.9	19.7
Reported EPS (€)	0.42	0.14
Investment property value	423.8	283.6
Net debt	167.1	121.0
Net LTV	39.4%	42.8%
EPRA NAV per share (€)	2.73	2.28
EPRA NAV per share (£)	2.33	1.67
Dividend per share (€ cents)	6.3	5.8
Dividend per share (£ pence)	5.3	4.2
EPRA NAV per share total return for period (€%)	22.5%	17.5%
EPRA NAV per share total return for period (£%)	41.7%	10.7%

Portfolio value rises by 19.4%

During 2016, the Portfolio value grew by 49.5% from €283.6 million to €423.8 million. On a like-for-like basis, property values rose by 19.4% (31 December 2015: 10.6%). The portfolio is now valued at €1,965 per sqm (31 December 2015: €1,635) which represents a gross fully occupied yield of 4.8% (31 December 2015: 5.7%) and a net yield, using EPRA methodology, of 4.2% (31 December 2015: 4.7%).

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

The principal drivers behind the like-for-like growth in the Portfolio value were:

·	strong growth in like-for-like rental income within the Portfolio;
·	a further decline in market yields, driven by the low interest rate environment;
·	continued high levels of investor interest in the Berlin property market; and
·	further development of the condominium market, with single apartment prices in Berlin experiencing another year of double digit growth, thus helping to drive prices for apartment blocks.

EPRA NAV increases by 19.7%

EPRA NAV per share increased by 19.7% in the period to €2.73 (£2.33) compared to €2.28 (£1.67) as at 31 December 2015. Taking into account the dividends paid during 2016, EPRA total return per share was 22%, approaching twice that achieved in 2015. The return for 2016 compares favourably to the Group's target return of 8-10% per annum. Non-recurring costs relating to the share placing in March 2016, reduced EPRA NAV by around 0.6%.

Rental income increased by 28%. Vacancy rate at an all-time low

Annual net rental income increased to €18.0 million in the period to 31 December 2016, an increase of 27.8% compared with the year to 31 December 2015. On a like-for-like basis, rental income grew by 5.2% compared with 2015. Headline average in place rent per sqm stood at €7.6 as at 31 December 2016, compared with €7.5 as at 31 December 2015. On a like-for-like basis, rent per sqm grew by 5.3% compared with 2015. Berlin saw a like-for-like increase in rent per sqm of 6.1%, compared to 4.4% in Central and North Germany, with Nuremberg and Fürth recording highs of 7.5%.

Reported vacancy as at 31 December 2016 stood at 9.1%, down from 10.1% as at 31 December 2015. On an EPRA basis, which adjusts for units undergoing redevelopment or reserved for resale, vacancy stood at an all-time low of 2.6% as at 31 December 2016, compared to 3.9% as at 31 December 2015. This reflects a strong rental market as well as efforts by the asset manager to reduce the time associated with re-letting.

Recent letting prices achieve new highs for the Group

The Group enjoyed another strong letting performance in 2016. A total of 437 new leases were signed, representing 14.5% of the average units owned during the period. In Berlin, average new letting prices grew by 3.1% to €10.6 per sqm (2015: €10.3 per sqm), while Nuremberg & Fürth also witnessed growth, with new letting prices rising by 7.0% to €9.5 per sqm.

Notwithstanding growth in rental prices, the Portfolio continues to demonstrate significant reversionary potential. During the final quarter of 2016, new lettings were signed at an average premium of 30.6% to passing rents and 36.8% in Berlin. The Group believes this reversionary gap should underpin rental growth in the medium term, providing a buffer against any potential slow-down in market rental growth.

Further investment in the portfolio

The Group continued with its programme of renovations and modernisations, investing €2.2 million during 2016 across 215 units, representing an average outlay of €232 per sqm. The average premium achieved on re-letting these units was 40.7%. Additionally, €2.0 million was invested in the infrastructure of properties for items such as heating system upgrades. All of these categories were recorded as capital expenditure. A further €1.1 million spent on repairs and maintenance was expensed through the profit and loss account, compared to €0.9 million in the period to 31 December 2015.

Targeted acquisitions

The Group has supplemented its organic growth with a number of targeted acquisitions. In total 634 units (596 residential and 38 commercial) were notarised during 2016 for an aggregate purchase price of €78.3 million, at an average value per sqm of €1,888 and annual fully occupied rent of €3.4 million. All the acquired properties are located in Berlin and complement the Group's existing portfolio. Combined, they will add 17.5% to rental income, and by value they increase exposure to the Berlin region from 70.5% to 76.3%. As at 31 December, 2016 €58.4 million of the notarised acquisitions had completed, with the remainder expected to complete in the first quarter of 2017. Acquisitions have been financed using a combination of debt and equity, with a target net loan to value ratio of approximately 50%.

In the 18 month period between listing on the London Stock Exchange in June 2015 and the December 2016 financial year-end, the Group has acquired properties with an aggregate valuation of €114.1 million. Properties that had completed by December 2016 were revalued by Jones Lang LaSalle ("JLL") in December 2016 at an average 18.6% premium to purchase prices.

The Group intends to continue with its strategy of growing the Portfolio through selective acquisitions and, as at 1 April 2017, a further 74 units in Berlin had been notarised for an aggregate value of €12.3 million, representing a value per sqm of €1,780.

Non-core disposals increase Berlin focus

The Group has also sold or notarised for sale a number of properties located outside Berlin which have been classified as non-core. These disposals represent a profitable exit and release capital which is expected to be re-deployed to increase exposure to the Berlin market.

In November 2016, the Group notarised for sale a mixed-use property which had a high commercial component and is located in Teltow, Brandenburg. The sale proceeds of €3.8 million represented an 18.8% premium to June 2016 book value. The sale completed in April 2017.

In April 2017, the Group notarised for sale a portfolio of 17 properties, located in Nuremberg and Fürth, for an aggregate consideration of €35.25 million. These properties were acquired in 2007 and 2008 for an aggregate purchase price of €13.9 million and the sale proceeds represent an 11% premium to the December 2016 book value. Following completion of this portfolio disposal, and including acquisitions and disposals which were notarized in 2016 but had yet to complete by the financial year end, Berlin will represent approximately 82% of the Group's portfolio value.

Condominium sales

During 2016, the Group continued with its strategy of crystallising the potential reversionary value within the portfolio through the selective sale of individual units as condominiums at significant premiums to book values. The Group's existing two sales programmes in Kreuzberg, Berlin were supplemented by the launch of a further sales programme in Friedrichshain, also in Berlin, in the final quarter of 2016.

A total of 22 individual units were notarised for sale in 2016, representing an aggregate sales value of €5.7 million, and an average of €3,874 per sqm. As at 31 December 2016, a total of 31 units, representing proceeds of €7.5 million, had completed since the condominium project began in mid-2015. The sales comprise a combination of vacant and occupied units. It is expected that all units in the two projects in Kreuzberg will be sold during 2017 and the Group expects to launch further condominium sales programmes in 2017.

Financial results

The financial results for 2016 are for the first full period of consolidation of Phoenix Spree Property Fund, which was acquired in March 2015. Reported revenue for the period was 32.0% higher at €15.9 million (31 December 2015: €12.1 million). Profit before taxation ('PBT') grew to €48.9 million (31 December 2015: €13.0 million). The results include a significant net valuation gain of €55.2 million (31 December 2015: €18.1 million). The costs of the share placing in 2016 totalled €1.6 million and have been charged to equity. Reported earnings per share for the period were €0.42c (31 December 2015: €0.14c).

The Board is pleased to have declared a final dividend of €4.3 cents per share (GBP 3.7 pence per share), (31 December 2015 €3.9 cents) (GBP 2.9 pence per share), which is expected to be paid on or around 30 June 2017 to shareholders on the register at close of business on 9 June 2017, with an ex-dividend date of 8 June 2017. Taking into account the interim dividend paid in October 2016, the declared dividend for the financial year to 31 December 2016 is €6.3 cents per share (GBP 5.3 pence per share), (31 December 2015 €5.8 cents per share) (GBP 4.2 pence per share).

Financing

As at 31 December 2016, the Group had gross borrowings of €185.6 million (31 December 2015: €133.8 million) and cash balances of €18.5 million (31 December 2015: €12.8 million) equating to a net debt of €167.1 million (31 December 2015: €121.0 million) and a net loan to value on the portfolio of 39.4%. These loans have fixed interest rates and, at 31 December 2016, the blended rate of all loans across the Portfolio was 2.0%. The average remaining duration of the loan book at 31 December 2016 was 6.3 years (31 December 2015 5.4 years). As of March 2017, over 90% of the Group's debt has been refinanced within the previous 24 months.

In January 2016, the Group entered into a €16.7 million six-year loan facility to finance newly acquired properties. As at 31 December 2016, the whole of this facility had been drawn. In August 2016, the Group entered into a €9.3 million ten-year loan facility, of which €1.0 million was undrawn as at 31 December 2016. The remaining €1.0 million was subsequently drawn in March 2017. In September 2016, the Group entered into an €81.5 million eight-year loan agreement. This facility refinanced existing debt, as well as releasing equity, which was applied to acquisitions and value added investment. As at 31 December 2016, €79.5 million of this facility had been drawn with the remaining €2.0 million also drawn in March 2017.

In July 2016, the Group acquired 94.8% of the shares in Laxpan and Invador, two companies owning properties in Berlin. The companies were acquired with existing debt in place and, as at 31 December 2016, this combined debt amounted to €11.3 million. In February 2017, the Group entered into a €17.5 million ten year loan facility to refinance this debt, the balance in excess of the debt repayment being an equity release to the Group.

In December 2016, the Group entered into a €10.6 million two-year loan facility. While none of the facility was drawn at 31 December 2016, €9.9 million was drawn in February 2017. This facility was used to finance newly acquired properties and is designed to improve lead-times to loan disbursements. In due course, this shorter duration loan will be refinanced into longer term debt.

The Group's strategy is to take advantage of current favourable debt markets to lock in lower rates of interest on its debt, while also extending the maturity of its loan book.

In March 2016, the Group successfully completed a share placing, issuing 22.6 million shares at a price of 168p, raising £38 million before costs. The proceeds of the placing were used to fund further property acquisitions and to invest in the existing portfolio.

Although currently well funded, the Group will continue to assess its funding options for growth, including further debt, equity and joint ventures.

Market outlook

Although German 10 year bund yields have again moved into positive territory, they remain at historically low levels and, with Eurozone growth forecast to remain below 2.0% for 2017-18, bond and interest rates are likely to remain low. The Directors believe that this provides a favourable backdrop for 2017.

Market dynamics remain particularly attractive in our core market, Berlin. Despite above trend rental growth in recent years, affordability comparisons with other German cities are still favourable, with Berlin ranking 13^th in terms of property prices, and outside the top 30 for rent levels. Positive demographic trends remain, with demand for housing stock significantly outstripping supply. Inward migration, high job creation levels, falling unemployment and growth in Berlin's tourist and technology industries continue to fuel population growth. Between 2010 and 2015, the population grew by an average of almost 50,000 inhabitants per annum, accelerating to 43,000 in the first half of 2016 alone, and the city forecasts further substantial population growth over the next decade. By contrast, supply of housing stock remains limited, constrained by lack of available land for development and new-build construction costs that exceed the value of existing housing stock in most locations.

These market tailwinds have been evident within the Group's own portfolio during 2016, with record property values, vacancy at an all-time low and new letting prices at an all-time high. High new letting prices create a significant reversionary opportunity for the future and, given that recent new leases in our Berlin portfolio have been signed at an average 35.6% premium to in-place rents, the Board believes that significant opportunity remains to improve rental incomes through active asset management strategies. The Board believes that this, combined with further carefully selected Portfolio acquisitions and a continuation of our condominium sales programme, leaves the Group well placed for the year ahead.

REGIONAL REVIEW

Table: Portfolio regional overview

Market	% of fund by value	Buildings	Resi units	Comm units	Total units	Total sqm ('000)	Total Gross rent (€m)	Valuation (€m)	Value per sqm (€)	Fully occupied gross yield %	Vacancy %	EPRA Vacancy %
Berlin (incl. Greater Area)	75%	69	1,773	129	1,902	137.4	11.6	318.7	2,320	4.1%	9.7%	2.2%
Central & North Germany	15%	42	805	46	851	50.3	4.0	63.3	1,259	6.8%	5.7%	3.6%
Nuremberg & Furth	7%	17	189	38	227	19.6	1.5	31.8	1,622	5.8%	14.7%	3.3%
Baden-Wurttemberg	3%	2	18	24	42	8.4	0.8	10.0	1,198	8.6%	5.1%	2.4%
Total	100%	130	2,785	237	3,022	215.7	17.9	423.8	1,965	4.8%	9.1%	2.6%

Berlin

· Like-for-like portfolio value growth 24.3%

· Like-for-like rent per sqm growth 6.1%

· EPRA vacancy rate 2.2%

The Berlin portfolio reported its best year to date. During 2016, the Berlin portfolio value grew by 24.3% on a like-for-like basis, an excellent rate of growth which demonstrates strong market fundamentals, underpinned by favourable demographics and a lack of new build supply. The lack of supply can be explained by a combination of factors including lack of available land, tight planning controls and market values which are still below construction costs.

In the eleven months to November 2016, building permits were issued for some 19,100 new-build apartments in Berlin and JLL estimate that the total number of permits issued in 2016 as a whole is expected to reach 21,000. However, construction activity remains well below the current demand for more than 20,000 residential units per annum. This is because a significant proportion of building permits do not lead to completions given uncertainty surrounding building and planning policies and the fact that approval processes can take several years to complete. To illustrate the disparity between building permits granted and units completed, in 2015, building permits were granted for almost 18,000 new residential units in Berlin, but the number of completions was only 8,700.

The Group's portfolio is valued at €2,320 per sqm on average. With all-in new-build construction costs averaging around €3,000 per sqm, the Board believes that property prices in Berlin have further to grow before the supply and demand imbalance is rectified.

The growth in property values was underpinned by further increases in rental levels and a reduction in voids. Like-for-like rental growth in the period was 6.1%, and new leases were signed at an average rent of €10.6 per sqm, a premium of 35.6% to the average in-place rent. Meanwhile, the EPRA vacancy rate fell to a new low of 2.2% compared with 3.4% in 2015.

In 2016, the asset manager focussed on integrating acquisitions made in the latter half of 2015 and during 2016. Business plans for these assets have been produced and a programme of investment and active asset management is underway which should yield increases in rents and property values during 2017.

Nuremberg & Fürth

· Like-for-like portfolio value growth 12.0%

· Like-for-like rent per sqm growth 7.5%

· EPRA vacancy rate 3.3%

The Nuremberg and Fürth region produced another year of pleasing performance in 2016. Rent per sqm saw a 7.5% like-for-like annual increase. This uplift was again driven by the significant premium achieved on new lettings, when compared to passing rents, of 27.8% in 2016. Property values also benefitted from strong market conditions, rising 12.0% during the year. EPRA vacancy increased slightly to 3.3% (31 December 2015: 1.5%).

The past 12 months have seen a significant increase in investor interest in the region and, following a strategic review of the Group's presence in Nuremberg and Fürth, it was announced in April 2017 that contracts had been exchanged to sell the entire portfolio of properties to a single buyer. These properties were acquired in 2007 and 2008 for an aggregate purchase price of €13.9m and the aggregate sale proceeds of €35.25m represent an 11% premium to the 31 December 2016 valuation.

Northern Germany

· Like-for-like portfolio value growth 10.4%

· Like-for-like rent per sqm growth 4.4%

· EPRA vacancy rate 3.6%

Growth in the Northern Germany portfolio, which consists of the cities and surrounding areas of Bremen, Hanover and Kiel, picked up significantly in 2016. Property values increased by 10.4%, up from 3.2% in 2015, while average rent per sqm rose by 4.4%. With EPRA vacancy at an all-time low of 3.6%, and a final quarter lettings' premium of 26.3% to passing rents, the Group hopes to continue 2016's positive trend in 2017.

ACQUISITIONS: GROWING THE BERLIN PORTFOLIO

During 2016, the Group grew its Berlin portfolio with a number of targeted acquisitions. In total, 596 residential and 38 commercial units were notarised during the period, for an aggregate purchase price of €78.3 million, and with annual fully occupied rent of €3.4 million. The majority of properties acquired were "Altbau", constructed at the turn of the 20^th century and located in developing areas of central Berlin. The properties were acquired in single asset deals or small packages of up to four buildings, in line with the Group's strategy of selectively acquiring buildings that meet its strict return criteria. The Group's external valuers, Jones Lang LaSalle ("JLL"), have since revalued acquisitions that had been notarised and completed during 2016 at an average premium of 15.1% to their original purchase price.

Including acquisitions that had been notarised but had yet to complete as at 31 December 2016, the percentage of the Group's assets located in Berlin is forecast to increase from 75.2% to 76.3%, rising to 81.9% of the Group's portfolio by value on completion of disposal of the Group's Nuremberg and Fürth portfolio, which was notarized after the financial year end.

During 2017, the Group intends to make further acquisitions in Berlin and, as of 31 March 2017, has notarised three further properties for an aggregate investment of €12.3m.

Table: Acquisition Summary

	2015 Notarisations	2016 Notarisations	Total Notarisations as at 31 December 2016
Purchase price	35,760,000	78,305,000	114,065,000
Sqm	18,217	41,481	59,698
Purchase price/sqm	1,963	1,888	1,911
Fully Occupied Yield	4.4%	4.3%	4.4%

CONDOMINIUMS

2016 saw the Group launch its third condominium sales project, for a property in Boxhagenerstrasse, in Berlin-Friedrichshain. Unlike the first two sales projects, where the assets had been owned by the Group for a decade, Boxhagenerstrasse was acquired in 2015. The project commenced during the fourth quarter 2016, achieving sales values averaging €4,110 per sqm, a 59% premium to the acquisition price of €2,585 per sqm. As at 31 March 2017, 9 units had been notarised for sale out of a total of 67 units.

Across the Group's three condominium projects, a total of 22 units were notarised for sale in 2016, with an aggregate sales value of €5.7 million, and representing a 30.3% premium to book value. This represents an average value per sqm of €3,762, or €3,874 excluding commercial units. The average price achieved per sqm for notarised condominiums represents a 62.2% premium to the average valuation per sqm for properties in the Berlin portfolio as at 31 December 2016.

As at 31 December 2016, 31 units representing proceeds of €7.5 million had completed since condominium sales commenced in mid-2015. These sales constitute a combination of vacant and occupied units. It is expected that the remaining units of the first two projects will be sold during 2017 and the Group will continue to identify and prepare additional properties suitable for future condominium sales projects.

KEY PERFORMANCE INDICATORS

The Group has chosen a number of Key Performance Indicators ('KPIs') which the Board believes are relevant to help investors understand the performance of both the Group and the underlying property portfolio

In 2016, the value of the property portfolio grew by 19.4% on a like-for-like for basis. This increase was driven by an increase in like-for-like average rent per let sqm of 5.3% (2015: 4.8%) and a decline in EPRA vacancy to 2.6% (2015: 3.9%).

The Group continued with its targeted condominium programme, agreeing sales of €5.7 million in the year to 31 December 2016 (2015: €4.7m). EPRA NAV per share increased by 19.7% to €2.73, while the declared dividend for the year 2016 was €6.3 cents per share (GBP 5.3 pence per share), an increase of 8.4% in Euro terms versus 2015.

Key Performance Indicator	2016	2015	2014

Like-for-like property portfolio value growth	19.4	10.7	8.6
Like-for-like portfolio rent per sqm (€)	8.0	7.4	7.1
EPRA Vacancy (%)	2.6	3.9	4.1
Condominium notarisations (€m)	5.7	4.7	0
EPRA NAV per share (€)	2.73	2.28	2.06
Dividend per Share (pence)	5.3	4.2	0

POST BALANCE SHEET EVENTS

The Group exchanged contracts for the acquisition of three properties in Berlin with an aggregate consideration of €12.3 million. These three properties are still awaiting completion.

The Group had exchanged contracts for the acquisition of three properties in Berlin with an aggregate purchase price of €19.9 million prior to the balance sheet date, which as at the balance sheet date had not yet completed. Two of these properties to the value of €15.4m completed in Q1 2017, and the third property with a purchase price €4.5 million is expected to complete in the second quarter.

The Group exchanged contracts for the sale of 11 condominiums in Berlin with an aggregate consideration of €2.4 million. Three of these condominium sales have subsequently completed at a value of €0.7 million. The remaining eight are expected to complete during the second quarter.

The Group had exchanged contracts for the sale of 10 condominiums in Berlin with an aggregate sales price of €2.9 million prior to the balance sheet date, which as at the balance sheet date had not yet completed. Eight of these condominium sales have subsequently completed in Q1 2017 at a value of €2.6 million. The remaining two are due to complete in Q2 2017.

The Group has notarised for sale all the properties held by a subsidiary fund, which are located in the Nürnberg and Furth area, for a gross consideration of €35.3 million. The initial approach was made by buyers in January 2017 and the transaction is expected to complete in July 2017.

The Group had notarised for sale a property in Teltow prior to the balance sheet date for €3.8 million which had yet to complete at the balance sheet date. It subsequently completed in April 2017.

In February 2017, the Group drew down €9.9 million euros of debt from a €10.6 million short term loan facility.

In February 2017, the Group refinanced the remaining €11.3 million of debt held against the buildings acquired as part of the Laxpan and Invador share deals in 2016. A new facility of €17.5 million was signed of which €9.6 million is currently drawn.

The Group drew down the final €1 million of the €9.3 million facility signed in August 2016 after exceeding a required annualised net rent of the properties secured under the loan.

The Group drew down the final €2.0 million of the €81.5 million facility signed in 2016 on two buildings in Kiel and Luneberg.

The Group has signed for a €13 million loan secured against the properties notarised for acquisition in 2017; €11.1 million of this loan has been dispersed.

DIRECTORS' REPORT

The Directors are pleased to present their report and the audited consolidated financial statements for the year ended 31 December 2016.

General information

The Company is a public limited company and incorporated in Jersey, Channel Islands under the Companies (Jersey) Law 1991. The Company 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, 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 recommend a final dividend of €4.3 cents (2015: €3.9 cents) per Ordinary Share to be paid on or around 30 June 2017 to ordinary shareholders on the register on 9 June 2017.

The Directors declared a dividend of €1.9 cents per share on 22 September 2016, paid on 10 October 2016 to ordinary shareholders on the register on 30 September 2016 (2015: €1.8 cents).

Auditor

Each of the Directors at the date of approval of this Annual Report has taken all the steps that he ought to have taken as a Director in order to make himself 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 their willingness to continue in office as auditor and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting.

Viability Statement

The Directors have assessed the viability of the Group over a three-year period, which is significantly longer than the 12-month period from the date of approval of the financial statements that was previously considered for going concern purposes. The Directors have chosen three years because that is the period over which the Group has sufficiently robust forecasts as part of its business plan. 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. 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 31 December 2019,

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; and

f) condominium sales proceeds.

The Directors recognise that the projections of cash flows do not include the impact of further potential property acquisitions over the three-year period as these acquisitions are ad hoc and discretionary in nature. In this respect, the Directors have resolved to complete a formal review of the working capital headroom of the Group for each potential acquisition.

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.

Registered office

13-14 Esplanade

St Helier

Jersey

JE1 1EE

Channel Islands

The Directors' Report was approved by the Board of Directors and authorised for issue and signed as follows:

On behalf of the Board

Richard Prosser

Director

26 April 2017

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Jersey company law requires the Directors to prepare financial statements for each financial year. The Directors are required under the Listing Rules of the Financial Conduct Authority to prepare the financial statements in accordance with International Financial Reporting Standards ('IFRS'), as adopted by the European Union ('EU').

The financial statements are required by law and IFRS as adopted by EU to present fairly the financial position of the Group.

Under Jersey company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that period.

In preparing the financial statements, the Directors are required to:

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 as adopted by the EU;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business.

The Directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Group and to enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors confirm that these financial statements comply with these requirements.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' Responsibility Statement

The Directors confirm that to the best of their knowledge:

the financial statements, prepared in accordance with the applicable set of accounting standards (as detailed above) and Company Law, give a true and fair view of the assets, liabilities, financial position and profit and loss of the issuer and the undertakings included in the consolidation taken as a whole;
the management report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face, as well as the business model and strategy of the group; and
the Annual Report and Accounts, as a whole, are fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position, performance, business model and strategy.

For and on behalf of the Board

Richard Prosser

Director

26 April 2017

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2016

	Notes	Year ended	Year ended
	Notes	31 December 2016	31 December 2015

Continuing Operations		€'000	€'000

Revenue	6	15,934	12,070
Property expenses	7	(13,351)	(7,258)
Gross profit		2,583	4,812

Administrative expenses	8	(2,977)	(2,149)
Gain on disposal of investment property (including investment property held for sale)	10	799	670
Investment property fair value gain	11	55,226	18,148
Operating profit before exceptional costs		55,631	21,481

Exceptional items - transaction costs	12	-	(2,256)
Exceptional items - impairment of goodwill		-	(4,493)
Operating profit		55,631	14,732

Net finance charge	13	(6,756)	(3,164)
Gain on financial asset	14	-	1,395
Profit before taxation		48,875	12,963

Income tax expense	15	(10,913)	(2,640)

Profit after taxation		37,962	10,323

Other comprehensive income		-	-

Total comprehensive income for the year		37,962	10,323

Total comprehensive income attributable to:
Owners of the parent		36,998	9,721
Non-controlling interests		964	602
		37,962	10,323
Earnings per share attributable to the owners of the parent:
From continuing operations
Basic (€)	32	0.42	0.14
Diluted (€)	32	0.40	0.14

	Notes	As at	As at
	Notes	31 December 2016	31 December 2015

		€'000	€'000
ASSETS

Non-current assets
Investment properties	19	395,829	283,554
Property, plant and equipment	21	40	30
Deferred tax asset	15	770	296
Loans and receivables	22	2,253	1,382
		398,892	285,262
Current assets
Investment properties - held for sale	20	27,970	-
Trade and other receivables	23	7,503	2,286
Cash and cash equivalents	24	18,450	12,757
		53,923	15,043

Total assets		452,815	300,305

EQUITY AND LIABILITIES

Current liabilities
Borrowings	25	9,169	11,523
Trade and other payables	26	1,331	2,684
Derivative financial instruments	27	392	-
Current tax	15	24	-
		10,916	14,207

Non-current liabilities
Borrowings	25	176,423	122,278
Derivative financial instruments	27	4,477	1,869
Other financial liabilities	28	3,590	-
Deferred tax liability	15	22,150	10,786
		206,640	134,933

Total liabilities		217,556	149,140

Equity

Stated capital	30	162,630	115,150
Share based payment reserve	29	7,614	1,264
Retained earnings		64,074	32,125
Equity attributable to owners of the parent		234,318	148,539

Non-controlling interest	31	941	2,626

Total equity		235,259	151,165

Total equity and liabilities		452,815	300,305

Consolidated Statement of Changes in Equity

For the year ended 31 December 2016

	Attributable to the owners of the parent
	Stated capital	Share based payment reserve	Retained earnings	Total	Non-controlling interest	Total equity
	€'000	€'000	€'000	€'000	€'000	€'000

Balance at 1 January 2015	67,708	8,949	23,640	100,297	(4)	100,293
Comprehensive income:
Profit for the period	-	-	9,721	9,721	602	10,323
Other comprehensive income	-	-	-	-	-	-
Total comprehensive income for the period	-	-	9,721	9,721	602	10,323

Transactions with owners - recognised directly in equity:
Issue of share capital	39,052	-	-	39,052	-	39,052
Dividends paid	-	-	(1,236)	(1,236)	-	(1,236)
Performance fee	8,390	(7,685)	-	705	-	705
Acquisition of subsidiary	-	-	-	-	2,028	2,028
Balance at 31 December 2015	115,150	1,264	32,125	148,539	2,626	151,165

Comprehensive income:
Profit for the period	-	-	36,998	36,998	964	37,962
Other comprehensive income	-	-	-	-	-	-
Total comprehensive income for the period	-	-	36,998	36,998	964	37,962

Transactions with owners - recognised directly in equity:
Issue of share capital	49,080	-	-	49,080	-	49,080
Dividends paid	-	-	(5,049)	(5,049)	-	(5,049)
Performance fee	-	6,350	-	6,350	-	6,350
Recognition of redemption liability	-	-	-	-	(3,590)	(3,590)
Acquisition of subsidiaries	-	-	-	-	941	941
Cost related to share placing	(1,600)	-	-	(1,600)	-	(1,600)
Balance at 31 December 2016	162,630	7,614	64,074	234,318	941	235,259

The share based payment reserve has been established in relation to the future issue of shares for the payment of the performance bonus of the property manager.

Retained earnings are the undistributed reserves to be either reinvested within the Group or distributed to shareholders as dividends.

Consolidated Statement of Cash Flows

For the year ended 31 December 2016

	Year ended	Year ended
	31 December 2016	31 December 2015
	€'000	€'000

Profit before tax	48,875	12,963

Adjustments for:
Net finance charge	6,756	3,164
Gain on disposal of investment property	(799)	(670)
Investment property revaluation gain	(55,226)	(18,148)
Gain on financial asset	-	(1,395)
Depreciation	12	6
Performance fee charge	6,350	1,264
Impairment of goodwill	-	4,493
Operating cash flows before movements in working capital	5,968	1,677

(Increase)/Decrease in receivables	(3,808)	1,807
(Decrease)/Increase in payables	(1,353)	1,250
Cash generated from operating activities	807	4,734
Income tax received	-	5
Net cash generated from operating activities	807	4,739

Cash flow from investing activities
Proceeds on disposal of investment property	4,250	5,502
Acquisition of subsidiary	-	1,165
Interest received	168	6
Capital expenditure on investment property	(4,189)	(3,934)
Property additions	(72,808)	(17,413)
Additions to property, plant and equipment	(22)	(23)
Loans to partners	-	(1,365)
Loans issued to minority shareholders	(806)	-
Net cash used in investing activities	(73,407)	(16,062)

Cash flow from financing activities
Interest paid on bank loans	(3,173)	(3,978)
Repayment of bank loans	(6,040)	(46,000)
Drawdown on bank loan facilities	45,394	72,266
Share issue	47,480	-
Cash settled Synthetic equity fee	-	(559)
Dividends paid	(5,049)	(1,236)
Net cash generated from financing activities	78,612	20,493

Net increase in cash and cash equivalents	6,012	9,170

Cash and cash equivalents at beginning of period	12,757	3,583
Exchange (losses)/gains on cash and cash equivalents	(319)	4

Cash and cash equivalents at end of period	18,450	12,757

Property additions amounting to €84,235,000 (see note 19) are disclosed within Cash flow from investing activities as €72,808,000 having been adjusted for non-cash flow items of €11,427,000 relating to the acquisition of the loans associated with properties within Laxpan Muller GmbH and Invador Grundbesitz GmbH. This reduced cash on drawdown on bank loan facilities, as well as reduced the cash outflows on property additions.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2016

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 ('the Group') 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 Germany and, during the year, acquired Invador Grundbesitz GmbH and Laxpan Mueller GmbH, companies with the same activities.

The registered office is at 13-14 Esplanade, St Helier, Jersey, JE1 1EE, 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 International Financial Reporting Standards, International Accounting Standards and interpretations (collectively, 'IFRS'), International Financial Reporting Interpretation Committee ('IFRIC') interpretations, as adopted by the European Union ('IFRS as adopted by the EU').

In accordance with Section 105 of The Companies (Jersey) Law 1991, the Group confirms that the financial information for the year ended 31 December 2016 are derived from the Group's audited financial statements and that these are not statutory accounts and, as such, do not contain all information required to be disclosed in the financial statements prepared in accordance with International Financial Reporting Standards ("IFRS").

The statutory accounts for the year ended 31 December 2016 have been audited and approved, but have not yet been filed.

The Group's audited financial statements for the period ended 31 December 2016 received an unqualified audit opinion and the auditor's report contained no statement under section 113B (3) and (6) of The Companies (Jersey) Law 1991.

The financial information contained within this preliminary statement was approved and authorised for issue by the Board on 26 April 2017.

2.2 Going concern

The Directors have prepared projections for the period to 31 December 2019. 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 from managing its capital and its risks are set out in the Strategic Report. 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 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. The non-controlling interest is computed on an EPRA basis.

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.

2.4 Business combinations

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred to the Group, the liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of the acquiree's identifiable net assets.

Acquisition-related costs are expensed in profit or loss as incurred.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date; any gains or losses arising from such remeasurement are recognised in profit or loss.

Goodwill is measured as the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in profit or loss as a bargain purchase gain.

2.5 Asset acquisition

The Group applies the acquisition method to account for asset acquisitions. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred to the Group, the liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in an asset acquisition are measured initially at their fair values at the acquisition date.

Acquisition-related costs are expensed in profit or loss as incurred.

No goodwill is recognised on asset acquisitions where the nature of the acquisition on the subsidiary is to acquire the property held in the entity. The consideration for the asset acquisition is attributed to the property as fair value at the acquisition date.

2.6 Revenue recognition

Revenue includes rental income and excludes service charges and other amounts directly recoverable from tenants. Rental income from operating leases is recognised in 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.

2.7 Foreign currencies

(a) Functional and presentation currency

The currency of the primary economic environment in which the Company operates ('the functional currency') is the Euro (€). The presentational currency of the 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.

2.8 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.

2.9 Operating profit

Operating profit is stated before the Group's gain on its financial assets and after the revaluation gains for the year in respect of investment properties and after gains or losses on the disposal of investment properties.

2.10 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.

2.11 Exceptional items

Exceptional items are disclosed separately in the financial statements where this provides further understanding of the financial performance of the Group, due to their significance in terms of nature or amount.

2.12 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 as property expenses in the period in which they are incurred. Property Advisor performance fees which are settled in shares are accounted for in accordance with the requirements of IFRS 2 Share Based Payments.

2.13 Investment property

Property that is held for long-term rental yields or for capital appreciation, or both, and that 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 profit or loss for the year.

A valuation exercise is undertaken by the Group's independent valuer, Jones Lang LaSalle GmbH ('JLL'), at each reporting date in accordance with the methodology described in note 19 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 profit or loss for the year.

Purchases and sales of investment properties are recognised on legal completion.

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 profit or loss in the period in which the property is derecognised.

2.14 Non-current assets held for sale

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.

Non-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 will recognise an asset in this category once the Board has committed 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.

When the Group is committed to a sale plan involving disposal of an investment in an associate or, a portion of an investment in an associate, the investment, or the portion of the investment in the associate that will be disposed of is classified as held for sale when the criteria described above are met, and the Group discontinues the use of the equity method in relation to the portion that is classified a held for sale. Any retained portion of an investment in an associate that has not been classified as held for sale continues to be accounted for using the equity method. The Group discontinues the use of the equity method at the time of disposal when the disposal results in the Group losing significant influence over the associate.

After the disposal takes place, the Group accounts for any retained interest in the associate in accordance with IAS 39 unless the retained interest continues to be an associate, in which case the Group uses the equity method (see the accounting policy regarding investments in associates above).

2.15 Goodwill

Goodwill is the difference between the amount paid on the acquisition of the subsidiary undertakings and the aggregate fair value of their separable identifiable assets acquired and liabilities assumed. Goodwill is capitalised as an intangible asset and in accordance with IAS 36 'Impairments of Assets' is not amortised but tested for impairment annually and when there are any indications that its carrying value is not recoverable. As such, goodwill is stated at cost less any provision for impairment in value. For impairment testing purposes, goodwill is allocated to cash-generating units ('CGUs'). If a subsidiary undertaking is subsequently sold, goodwill arising on acquisition is taken into account in determining the profit or loss on sale.

2.16 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, fixtures and vehicles - 4.50% - 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 profit or loss.

2.17 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 profit or loss in the period in which they are incurred.

2.18 Tenant deposits

Tenant deposits are held off balance sheet 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.

2.19 Financial instruments

Financial assets and financial liabilities are recognised in the Group's consolidated statement of financial position when the Group becomes party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire or when the contractual rights to those assets are transferred. Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expired.

The Group classifies its financial assets as held at fair value through profit or loss, or loans and receivables. The classification depends on the purpose for which the financial assets were acquired, and is determined at initial recognition.

(a) Financial assets at fair value through profit or loss ('FVTPL')

Financial assets are classified as FVTPL when the financial asset is designated as FVTPL. A financial asset may be designated as FVTPL upon initial recognition if:

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• the financial asset forms part of a group of financial assets or financial liabilities, or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management strategy, and information about the grouping is provided internally on that basis.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognised in profit or loss. Fair value is determined in the manner described in note 34.

(b) Loans and receivables

The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents. Loans and receivables are recognised initially at fair value and subsequently at amortised cost using the effective interest method.

(i) Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less provision for impairment. Appropriate provisions for estimated irrecoverable amounts are recognised in the consolidated statement of comprehensive income when there is objective evidence that the assets are impaired. Interest income is recognised by applying the effective interest rate, except for short-term trade and other receivables when the recognition of interest would be immaterial.

Service charges receivable from tenants are presented net of amounts paid on account by tenants.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due. For trade and other receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being recognised within property expenses in the consolidated statement of comprehensive income. On confirmation that the trade and other receivables will not be collectable, the gross carrying value of the asset is written off against the associated provision.

(ii) Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, cash at agents, demand deposits, and other short-term highly liquid investments that have maturities of three months or less from inception, are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

(d) Trade and other payables

Trade payables are initially measured at their fair value and are subsequently measured at their amortised cost using the effective interest method; this method allocates interest expense over the relevant period by applying the 'effective interest rate' to the carrying amount of the liability.

(e) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated statement of comprehensive income over the period of the borrowings using the effective interest method.

(f) Leases

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.

2.20 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 this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

(a) Current tax

The tax currently payable 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.

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.

2.21 New standards and interpretations

No new standards, amendments or interpretations effective for annual periods beginning on or after 1 January 2016 have had an impact on the Group.

The following relevant new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning on 1 January 2016, as adopted by the European Union, and have not been early adopted:

Title	As issued by the IASB, mandatory for accounting periods starting on or after
IFRS 15 Revenue from Contracts with Customers	Accounting periods beginning on or after 1 January 2018
IFRS 16 Leases	Accounting periods beginning on or after 1 January 2019

The Directors anticipate that the adoption of these standards and interpretations in future periods will have no material impact on the financial statements of the Group when the relevant standards and interpretations come into effect as a result of being a lessor of rental property and its revenue recognition not having to take into account any bundled sales.

The following standards have been issued by the IASB but have not yet been adopted by the EU:

Title	As issued by the IASB, mandatory for accounting periods starting on or after
Disclosure Initiative (Amendments to IAS 7)	Accounting periods beginning on or after 1 January 2017
Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)	Accounting periods beginning on or after 1 January 2017
IFRS 9 - Financial Instruments	Accounting periods beginning on or after 1 January 2018
Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2)	Accounting periods beginning on or after 1 January 2018

While the above standards have not yet been adopted by the EU, the Group is currently assessing their impact.

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 Audit and 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.

(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 27 to the financial statements.

The Group's policy is to manage its interest rate risk by entering into interest rate swaps in order to limit exposure to borrowings at variable rates.

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.

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 25 after deducting cash and cash equivalents) and equity of the Group (comprising stated capital, reserves and retained earnings).

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:

	As at 31 December 2016	As at 31 December 2015
	€'000	€'000

Borrowings	(185,592)	(133,801)
Cash and cash equivalents	18,450	12,757
Net debt	(167,142)	(121,044)

Equity	235,259	151,165
Net debt to equity ratio	71%	80%

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 recognised in the consolidated financial statements.

i) Estimate of fair value of investment properties

The best evidence of fair value is current prices in an active market for similar lease 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 judgement, the Group considers information from a variety of sources, including:

a) Current prices in an active market, and its third party independent experts, for properties of different nature, condition or location (or subject to different lease or other contracts), adjusted to reflect those differences.

b) 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.

c) 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.

ii) Accounting for acquisitions as either business combination or asset purchase

The estimates and judgements inherent in accounting for acquisitions are to define if the acquisition is either a business combination or asset purchase. The Group determines whether an acquisition is a business combination or asset acquisition based on the nature of the acquisition. The judgement is made based on the level of assets and liabilities with in the acquisition and if the business is being acquired as going concern or only to acquire the property asset within the asset.

5. Segmental information

Information reported to the Board of Directors, which is the chief operating decision maker, for the purposes of resource allocation and assessment of segment performance is focussed on the different revenue streams that exist within the Group. The Group's principal reportable segments under IFRS 8 are therefore as follows:

‑ Residential

‑ Commercial

All revenues are earned in Germany with property and administrative expenses incurred in Jersey and Germany.

31 December 2015
	Residential	Commercial	Unallocated	Total
	€'000	€'000	€'000	€'000
Goodwill	-	-	-	-
Investment property	235,350	48,204	-	283,554
Loans and receivables	-	-	1,382	1,382
Other assets	12,486	2,557	326	15,369
Liabilities	(113,283)	(23,202)	(12,655)	(149,140)
Net assets	134,553	27,559	(10,947)	151,165

	Residential	Commercial	Unallocated	Total
	€'000	€'000	€'000	€'000
Revenue	10,018	2,052	-	12,070
Property expenses	(6,024)	(1,234)	-	(7,258)
Administrative expenses	-	-	(2,149)	(2,149)
Gain on disposal of investment property	670	-	-	670
Investment property fair value gain	15,062	3,086	-	18,148
Operating profit	19,726	3,904	(2,149)	21,481
Exceptional costs				(2,256)
Impairment of goodwill				(4,493)
Net finance charge				(3,164)
Gain on financial asset				1,395
Income tax expense				(2,640)
Profit for the year				10,323

31 December 2016
	Residential	Commercial	Unallocated	Total
	€'000	€'000	€'000	€'000
Goodwill	-	-	-	-
Investment property	332,496	63,333	-	395,829
Loans and receivables	-	-	2,253	2,253
Assets held for sale	23,495	4,475	-	27,970
Other assets	22,447	4,276	40	26,763
Liabilities	(179,711)	(34,231)	(3,614)	(217,556)
Net assets	198,727	37,853	(1,321)	235,259

	Residential	Commercial	Unallocated	Total
	€'000	€'000	€'000	€'000
Revenue	13,385	2,549	-	15,934
Property expenses	(11,215)	(2,136)	-	(13,351)
Administrative expenses	-	-	(2,977)	(2,977)
Gain on disposal of investment property	799	-	-	799
Investment property fair value gain	46,390	8,836	-	55,226
Operating profit	49,359	9,249	(2,977)	55,631
Net finance charge				(6,756)
Income tax expense				(10,913)
Profit for the period				37,962

6. Revenue

	31 December 2016	31 December 2015
	€'000	€'000

Rental income	15,934	12,070

The total future aggregated minimum rentals receivable under non-cancellable operating leases are as follows:

	31 December 2016	31 December 2015
	€'000	€'000

Not later than one year	309	119
Later than one year but not later than five years	3,171	1,036
Later than five years	2,605	583
	6,085	1,738

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 notice for cancellation of the lease in most cases.

The commercial leases are non-cancellable, with an average lease period of 3 years.

7. Property expenses

	31 December 2016	31 December 2015
	€'000	€'000

Property management expenses	1,100	942
Repairs and maintenance	1,102	921
Impairment charge - trade receivables	88	153
Other property expenses	1,324	1,404
Property advisors' fees and expenses	3,387	2,574
Property advisors' performance accrued fee (note 29)	6,350	1,264
	13,351	7,258

8. Administrative expenses

	31 December 2016	31 December 2015
	€'000	€'000

Secretarial & administration fees	658	400
Legal & professional fees	1,494	1,386
Directors' fees	150	108
Accountancy fees	445	319
Fees paid to the auditors	141	156
Bank charges	32	39
Loss/(profit) on foreign exchange	319	(4)
Depreciation	12	6
Other income relating to cost recovery	(274)	(261)
	2,977	2,149

The Group did not have any employees during any of the reporting periods and Directors do not receive any other emoluments.

Key management compensation - the functions of management are undertaken by external providers of professional services, as set out in note 35.

Further details of the Directors' fees are set out in the Directors' Remuneration Report on page 38.

9. Auditor's remuneration

An analysis of the fees charged by the auditor and its associates is as follows:

	31 December 2016	31 December 2015
	€'000	€'000

Fees payable to the Group's auditor and its associates for the audit of the consolidated financial statements:	141	156

Fees payable to the Group's auditor and its associates for other services:
- Corporate finance	150	299
- Audit-related assurance services	25	34
	316	489

The non-audit fees for work performed in relation to the share placing amounting to €150,000 has been deducted from stated capital.

10. Gains on disposal of investment property (including investment property held for sale)

	31 December 2016	31 December 2015
	€'000	€'000

Net proceeds	4,250	5,502
Book value of disposals	(3,405)	(4,832)
Disposal costs	(46)	-
	799	670

Where there has been a partial disposal of a property, the net book value of the asset sold is calculated on a per square meter rate, based on the prior period valuation.

11. Investment property fair value gain

	31 December 2016	31 December 2015
	€'000	€'000

Investment property fair value gain	55,226	18,148

Further information on investment properties is shown in note 19.

12. Exceptional items

	31 December 2016	31 December 2015
	€'000	€'000



Professional fees associated with stock market listing and acquisition of subsidiaries	-	2,256
	-	2,256

Exceptional costs have been defined as those costs directly attributable to the listing on the London Stock Exchange and any costs directly associated with the acquisition of subsidiaries.

13. Net finance charge

	31 December 2016	31 December 2015
	€'000	€'000


Interest income	(113)	(6)
Interest from partners' loans	(55)	-
Loss/(gain) on interest rate swap	3,000	(808)
Interest payable on bank borrowings	3,924	3,978
	6,756	3,164

14. Financial assets at fair value through profit or loss

	31 December 2016	31 December 2015
	€'000	€'000

Equity interest in Phoenix Spree Property Fund GmbH and Co.KG:
Balance at the beginning of the year	-	36,859
On acquisition of subsidiary	-	(38,254)
Gain on financial asset	-	1,395
	-	-

Phoenix Spree Property Fund GmbH & Co.KG ('PSPF') is a partnership established in the form of a limited partnership which is subject to the German Commercial Code and its principal activity is the holding of German investment properties until PSPF was acquired on 9 March 2015. The Company's interest in PSPF comprises two elements, i) an equity interest, and ii) a Variable Rate Loan ('VRL') capital sum.

The equity interest arose in 2013 when the Company obtained an equity interest in PSPF by becoming a limited partner for an initial contribution of €100 and a capital contribution of €9,900. The initial contribution represented 0.03% of voting rights in PSPF. Up until 9 March 2015, PSPF was subject to independent management and effective control and was not consolidated as part of the Group for the full year.

The purpose of putting in place the VRL was to implement the first step of equalising the two fund NAVs as a precursor to amalgamation of the entities, which was completed by virtue of the acquisition PSPF.

The VRL capital loan amounting to €0.3 million (2015: €0.3 million) between the Company and PSPF was initially advanced in June 2009 as unsecured and non-interest bearing. In accordance with the terms of the VRL, the Company revalued the loan at each reporting date such that the ratio of the NAVs of the two entities (the Company and PSPF) was equal to their share of the combined NAV at the reporting date. The movement required on the VRL in order to maintain this ratio is defined as the gain on the financial asset in the consolidated statement of comprehensive income.

On acquisition of PSPF on 9 March 2015 the value of the VRL was determined to be €38,254,000 resulting in a fair value gain of €1,395,000 in respect of the period 1 January 2015 to 9 March 2015, which has been recognised in the consolidated statement of comprehensive income. The respective asset and liability recognised by the Company and by PSPF is eliminated on consolidation as at 31 December 2016.

15. Income tax expense

	31 December 2016	31 December 2015
	€'000	€'000
The tax charge for the period is as follows:

Current tax charge	24	(24)
Adjustment in respect of prior year	(1)	-
Deferred tax charge - origination and reversal of temporary differences	10,890	2,664

Total tax charge on profit on ordinary activities	10,913	2,640

The tax charge for the year can be reconciled to the theoretical tax charge on the profit in the income statement as follows:

	31 December 2016	31 December 2015
	€'000	€'000

Profit before tax on continuing operations	48,875	12,963

Tax at the German income tax rate of 15.8% (2015: 15.8%)	7,722	2,048
Income not taxable	(126)	(220)
Recognition of timing differences on acquisition	1,686	-
Tax effect of expenses that are not deductible in determining taxable profit	1,631	812

Total tax charge for the year	10,913	2,640

Reconciliation of current tax liabilities
	31 December 2016	31 December 2015
	€'000	€'000

Balance at beginning of year	-	19
Tax received during the year	-	5
Current tax charge/(credit)	24	(24)
Balance at end of year	24	-

Reconciliation of deferred tax

	Capital gains on properties	Interest rate swaps	Total
	€'000 (Liability)	€'000 Asset	€'000 (Net liability)

Balance at 1 January 2015	(3,211)	237	(2,974)

Acquisition of subsidiary	(5,011)	159	(4,852)
Charged to the statement of comprehensive income	(2,564)	(100)	(2,664)
Deferred tax (liability)/asset at 31 December 2015	(10,786)	296	(10,490)

Charged to the statement of comprehensive income	(11,364)	474	(10,890)
Deferred tax (liability)/asset at 31 December 2016	(22,150)	770	(21,380)

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') - effective rate for Phoenix Spree Deutschland Limited for 2016 was 15.8% (2015: 15.8%).

Factors affecting future tax charges

The Group has accumulated tax losses of approximately €23.6 million (2015: €22.9 million) in Germany, which will be available to set against suitable future profits should they arise, subject to the criteria for relief. No deferred tax asset is recognised in respect of losses of €2.2 million (2015: €Nil) as there is insufficient certainty the losses can be utilised by Group entities.

16. Dividends

	31 December 2016	31 December 2015
	€'000	€'000

Amounts recognised as distributions to equity holders in the period:
Interim dividend for the year ended 31 December 2016 of €1.9 cents (1.6p) (2015: €1.8 cents (1.3p)) per share	1,635	1,236
Proposed final dividend for the year ended 31 December 2016 of €4.3 cents (3.7p) (2015: €3.9 cents (2.9p)) per share	3,977	3,414

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. The proposed dividend is payable to all shareholders on the Register of Members on 9 June 2017. The total estimated dividend to be paid is 3.7p per share. The payment of this dividend will not have any tax consequences for the Group.

17. Goodwill

				€'000
Cost:

1 January 2015				193
Acquisition of subsidiary				4,493
At 31 December 2015 and 31 December 2016				4,686

Accumulated impairment losses:

At 1 January 2015				(193)
Impairment charge for the year - exceptional item				(4,493)
At 31 December 2015				(4,686)
Impairment charge for the year
At 31 December 2016				(4,686)

Carrying amount:
At 31 December 2015				-
At 31 December 2016				-

18. Subsidiaries

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:
	Country of incorporation	% Holdings	Nature of business
Phoenix Spree Deutschland I Limited	Jersey	100	Investment property
Phoenix Spree Deutschland II Limited	Jersey	100	Investment property
Phoenix Spree Deutschland III Limited	Jersey	100	Investment property
Phoenix Spree Deutschland IV Limited	Jersey	100	Investment property
Phoenix Spree Deutschland V Limited	Jersey	100	Investment property
Phoenix Spree Deutschland VII Limited	Jersey	100	Investment property
Phoenix Spree Deutschland IX Limited	Jersey	100	Investment property
Phoenix Spree Deutschland X Limited	Jersey	100	Finance vehicle
Phoenix Spree Deutschland XI Limited	Jersey	100	Investment property
Phoenix Property Holding GmbH & Co.KG	Germany	100	Holding Company
Laxpan Mueller GmbH	Germany	94.9	Investment property
Invador Grundbesitz GmbH	Germany	94.9	Investment property
PSPF Holdings GmbH	Germany	100	Holding Company
PSPF General Manager GmbH	Germany	100	Management of PSPF
PSPF Acquisition Vehicle GmbH	Germany	99.64	Acquisition vehicle
PSPF Property GmbH & Co. KG	Germany	94	Investment property
Phoenix Spree Property Fund Ltd & Co. KG	Germany	94.8	Investment property
PSPF General Partner Limited	UK	100	Management of PSPF

The investments in PSPF General Manager GmbH, PSPF Acquisition Vehicle GmbH & Co. KG are all held via the investment is PSPF Holdings GmbH, which was acquired on 7 September 2007. The other subsidiaries are held directly.

During the current year Laxpan Mueller GmbH and Invador Grundbesitz GmbH were acquired, the acquisitions were recognised as asset acquisitions.

19. Investment properties

				€'000
Fair Value

At 1 January 2015				115,192
Capital expenditure				3,934
Property additions				17,413
Additions on acquisition				132,907
Disposals				(4,832)
Fair value gain				18,148
Investment properties at fair value - as set out in the report by JLL				282,762
Properties notarised for sale not completed at year end				792
At 31 December 2015				283,554

Capital expenditure				4,189
Property additions				84,235
Reclassified as investment properties - held for sale				(27,970)
Disposals				(3,405)
Fair value gain				55,226
At 31 December 2016				395,829

The property portfolio was valued at 31 December 2016 by the Group's independent valuers, Jones Lang LaSalle GmbH ("JLL"), in accordance with the methodology described below.

The valuation is performed on a building-by-building basis and the source information on the properties including current rent levels, void rates and non-recoverable costs was provided to JLL by the Property Advisors PMM Partners (UK) Limited. Assumptions with respect to rental growth, adjustments to non-recoverable costs and the future valuation of these are those of JLL. Such estimates are inherently subjective and actual values can only be determined in a sales transaction.

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 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.

All properties are valued as Level 3 measurements under the fair value hierarchy (see note 34) as the inputs which have a significant effect on the recorded fair value are not observable for the discounted cash flow method.

The unrealised fair value gain in respect of investment property is disclosed in the Income Statement as 'Investment Property fair value gain'.

Valuations are undertaken using the discounted cash flow valuation technique as described below and with the following inputs.

Discounted cash flow method (DCF)

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. As an accepted method within the income approach to valuation the DCF method involves the projection of a series of cash flows on a real property interest. To this projected cash flow series, an appropriate, market-derived discount rate is applied to establish the present value of the income stream associated with the real property.

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. The appropriate duration is typically driven by market behaviour that is a characteristic of the class of real property. Periodic cash flow is typically estimated as gross income less vacancy, non-recoverable expenses, collection losses, lease incentives, maintenance cost, agent and commission costs and other operating and management expenses. The series of periodic net operating incomes, along with an estimate of the terminal value anticipated at the end of the projection period, is then discounted.

The frequency of inflows and outflows (monthly, quarterly, annually) are contract and market-derived.

An appropriate discount rate is then applied to the cash flow. If the frequency of the time points selected for the cash flow is, for example, quarterly, the discount rate must be the effective quarterly rate and not a nominal rate. The DCF method assumes that cash outflows occur in the same period that expenses are recorded. The exit yield is normally separately determined and differs from the discount rate.

	Year ended 31 December 2016	Year ended 31 December 2015
Input	Range	Range
Market Rent
Residential (€ per sqm. p.m.)	5 - 13	6 - 12
Commercial (€ per sqm. p.m.)	1 - 29	1 - 25
Parking (€ per unit p.m.)	10 - 80	16 - 92
Indexation (%)	0 - 2	0 - 2
Estimated Rental Value (ERV)
ERV per year (€'000)	25 - 1,014	33 - 907
ERV (€ per sqm.)	5 - 13	1 - 12
Costs
Management (€ per unit/year)	250	240 - 280
Management indexation (%)	1.39	1.39
Maintenance (€ per sqm. p.a.)	2 - 9	2 - 9
Maintenance indexation (%)	2.38	2.18
Capital expenditure (€'000)	0 - 266	0 - 500
Vacancy
Tenancy fluctuation (% per year)	10	10
Stabilised residency vacancy (% per year)	2	2
Stabilised commercial vacancy (% per year)	0 - 4	0 - 4
Stabilised parking vacancy (% per year)	0 - 4	0 - 5
Financial Rates
Discount rate (%)	4 - 8	5 - 8
Capitalisation rate (%)	3 - 8	4 - 8

The properties held for sale are also valued with the DCF method, but with a sales scenario (sale of all units within a defined period of time) based on comparable sales prices for condominiums. The properties with the sales potential are valued using the same DCF method as with a rental scenario, however, the sales potential is considered with a lower discount rate.

The total of properties under a sales scenario will not equal Investment property - held for sale due to the fact a property is being valued under this scenario but will not be sold in the next 12 months.

The table below sets out the assets valued using both the discounted cash flow method using both scenarios:

	31 December 2016	31 December 2015
	€'000	€'000
Rental scenario	388,509	269,842
Sales scenario	35,290	12,920
Total	423,799	282,762

The directors consider that the variable with the greatest potential impact on the valuation of investment property is the discount rate. The impact on the valuation of the investment properties of a change in the discount rate of 0.5% (increase and decrease) is as follows:

	Increase of 0.5% in the discount rates used	Decrease of 0.5% in the discount rates used
	31 December 2016	31 December 2015
	€'000	€'000
Investment properties - adjusted market value	382,701	475,501
Percentage impact on reported fair value	(9.7%)	12.2%

20. Investment properties - held for sale

	2016	2015
	€'000	€'000
Fair Value - held for sale investment properties

At 1 January	-	-
Reclassified from investment properties	27,970	-

At 31 December	27,970	-

Investment properties are re-classified as current assets, and described as 'held for sale' when at the balance sheet date the group has obtained and implemented all relevant permissions required to sell individual units, and efforts are being made to dispose of the assets. The assets held for sale are disclosed in the Segmental Information note 5.

Investment properties - held for sale are all expected to be sold within 12 months of the reporting date.

21. Property, plant and equipment

				€'000
Cost or valuation
As at 1 January 2015				-
Acquisition of subsidiary				13
Additions				23
As at 1 January 2016				36
Additions				22
As at 31 December 2016				58

Accumulated depreciation and impairment
As at 1 January 2015				-
Charge for the year				6
As at 1 January 2016				6
Charge for the year				12
As at 31 December 2016				18

Carrying amount
As at 31 December 2015				30
As at 31 December 2016				40

22. Loans and receivables

	31 December 2016	31 December 2015
	€'000	€'000

At 1 January	1,382	-
Loans issued - initial recognition at fair value		1,338
Loans issued to minority interest - initial recognition at fair value	806	-
Accrued interest	65	44
At 31 December	2,253	1,382

The Group entered into loan agreements with Mike Hilton and Paul Ruddle in connection with the acquisition of PSPF. The loans bear interest at 4% per annum, and have a maturity of less than five years.

The group also entered into a loan agreement with the minority interest (Blitz B16 - 210 GmbH) in relation to the acquisition of the assets as share deals. This loan bears interest at 3% per annum, and was repaid in full in January 2017.

23. Trade and other receivables

	31 December 2016	31 December 2015
	€'000	€'000
Current
Trade receivables	1,344	1,015
Less: Impairment provision	(383)	(295)
Net receivables	961	720
Prepayments and accrued income	6,050	1,566
Investment property disposal proceeds receivable	21	-
Sundry receivables	471	-
	7,503	2,286

Aging analysis of trade receivables
	31 December 2016	31 December 2015
	€'000	€'000

Up to 12 months	902	693
Between 1 year and 2 years	40	27
Over 3 years	19	0
	961	720

Movements in the impairment provision against trade receivables are as follows

	31 December 2016	31 December 2015
	€'000	€'000
Balance at the beginning of the year	295	325
Impairment losses recognised	319	123
Utilisation of provision	(231)	(153)
Balance at the end of the year	383	295

24. Cash and cash equivalents

	31 December 2016	31 December 2015
	€'000	€'000

Cash at bank	17,107	11,772
Cash at agents	1,343	985
Cash and cash equivalents	18,450	12,757

25. Borrowings

	31 December 2016	31 December 2015
	€'000	€'000

Current liabilities
Bank loans - Kreissparkasse Boblingen District Savings Bank	2,869	-
Bank loans - EuroHypo AG	-	2,978
Bank loans - Deutsche Hypothekenbank AG	-	8,545
Bank loans - Sparkasse Langenfeld	6,300	-
	9,169	11,523
Non-current liabilities
Bank loans - Deutsche Genossenschafts-Hypothekenbank AG	171,418	119,262
Bank loans - Kreissparkasse Boblingen District Savings Bank	-	3,016
Bank loans - HypoVereinsbank	5,005	-
	176,423	122,278

	185,592	133,801

All borrowings are secured against the investment properties of the Group. As at the year end an amount of €13.6 million is available to be drawn down, from three separate loan facilities. €2.0 million from a €81.5 million facility with interest rate 1.4%, €1 million from a €9.3 million facility with interest rate 1.34%, and €10.6 million undrawn, from a €10.6 million facility with interest rate 1.75%.

26. Trade and other payables

	31 December 2016	31 December 2015
	€'000	€'000
Trade payables	791	1,584
Other payables	-	373
Other provisions and accrued liabilities	533	459
Deferred income	7	214
VAT	-	54
	1,331	2,684

27. Derivative financial instruments

	31 December 2016	31 December 2015
	€'000	€'000

Interest rate swaps - carried at fair value through profit or loss
Balance at start of period	1,869	1,496
Additions on acquisition	392	1,181
Loss/(gain) in movement in fair value through profit or loss	2,608	(808)
Balance at end of period	4,869	1,869

The notional principal amounts of the outstanding interest rate swap contracts at 31 December 2016 were €175,932,000 (2015: €120,007,000). At 31 December 2016 the fixed interest rates vary from 0.040% to 0.705% (2015: 0.040% to 0.895%) above the main factoring Euribor rate.

Maturity analysis of interest rate swaps

	31 December 2016	31 December 2015
	€'000	€'000

Less than 1 year	392	-
Between 1 and 2 years	-	-
Between 2 and 5 years	-	1,102
More than 5 years	4,477	767
	4,869	1,869

28. Other financial liabilities

	31 December 2016	31 December 2015
	€'000	€'000

Balance at start of period	-	-

Recognition of redemption liability	2,626	-
Increase in profit attributable to NCI	964	-
Balance at end of period	3,590	-

The redemption liability relates to the put option held by the minority shareholders of PSPF for the purchase of the minority interest in PSPF. The option period starts on 6 June 2020. The amount of the purchase price will be based on the EPRA NAV on the balance sheet date as well as the movement in the EPRA NAV during the year and the proportion of EPRA NAV attributable to the non-controlling interest in PSPF. A portion of the liability (€378k) is recognised to cover the tax charge of the minority in PSPF on the proceeds received if they choose to exercise their put option.

The recognition of the redemption liability has been accounted for as a reduction in the Non-Controlling Interest with the remainder of the recognition against the Group's retained earnings. Also see the Consolidated Statement of Changes in Equity for the recognition accounting.

Further information on the redemption liability treatment in the prior year can be seen in note 31.

29. Share-based payment reserve


	Synthetic equity fee	Performance fee	Share based payment total
	€'000	€'000	€'000

Balance at 1 January 2015	559	8,390	8,949

Fee charge for the period	-	1,264	1,264
Equity settled during the period	-	(8,390)	(8,390)
Cash settled during the period	(559)	-	(559)
Balance at 31 December 2015	-	1,264	1,264

Fee charge for the period	-	6,350	6,350
Balance at 31 December 2016	-	7,614	7,614

Property Advisor Fees

The Property Advisor is entitled to an asset and estate management performance fee, measured over consecutive three year periods, equal to 20% of the excess by which the annual EPRA NAV 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) the most recently published EPRA NAV on 4 March 2016; and

(ii) the highest previously recorded EPRA NAV total return at the end of a performance period

The Performance Fee will be settled through the payment of cash by the Group which then has to be used to subscribe for shares at the EPRA NAV price per share.

Under the Property Advisory Agreement for providing property advisory services, the Property Advisor is also entitled to a Portfolio and Asset Management Fee as follows:

(i) 1.50% of the EPRA NAV of the Group where the EPRA NAV of the Group is equal to or less than €250 million; and

(ii) 1.25% of the EPRA NAV of the Group between €250 million and €500 million; and

(iii) 1% of the EPRA NAV of the Group greater than €500 million.

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 'Capex Monitoring Fee').

The Property Advisor is entitled to receive a finance fee equal to:

(i) 0.1% of the value of any borrowing arrangement which the Property Advisor has negotiated and/or supervised; and

(ii) a fixed fee of £1,000 in respect of any borrowing arrangement which the Property Advisor has renegotiated or varied.

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.

Details of the fees paid to the Property Advisor are set out in note 35.

30. Stated capital

	31 December 2016	31 December 2015
	€'000	€'000
Issued and fully paid:
40,522,364 participating shares of no par value, issued at a consideration of GBP1 each	60,027	60,027
5,896,369 participating shares of no par value, issued at a consideration of GBP1.11 each	7,681	7,681
19,237,484 participating shares of no par value, issued at a consideration of GBP1.46 each	39,052	39,052
4,216,080 participating shares of no par value, issued at a consideration of GBP1.44 each	8,390	8,390
22,619,047 participating shares of no par value, issued at a consideration of GBP1.68 each on 4 March 2016, less costs of €1.6 million associated with placing.	47,480	-
	162,630	115,150

The number of shares in issue at 31 December 2016 was 92,491,344 (31 December 2015: 69,872,297)

31. Non-controlling Interest

		31 December 2016	31 December 2015
	Non-controlling interest %
		€'000	€'000
PSPF Property GmbH & Co. KG	5.2%	-	2,626
Invador Grundbesitz GmbH	5.1%	467	-
Laxpan Mueller GmbH	5.1%	474	-
		941	2,626

The non-controlling interest relates to the subsidiaries Invador Grundbesitz GmbH and Laxpan Mueller GmbH.

During the current year the certainty over the put option crystallisation has increased to a level were the Directors has derecognised the NCI associated with the option and recognised a financial liability to purchase the remaining 5.2% in PSPF Property GmbH & Co. KG.

32. Earnings per share

	31 December 2016	31 December 2015


Earnings for the purposes of basic earnings per share being net profit attributable to owners of the parent (€'000)	36,998	9,721
Weighted average number of ordinary shares for the purposes of basic earnings per share (Number)	88,587,235	69,872,297
Effect of dilutive potential ordinary shares (Number)	2,829,885	638,818
Weighted average number of ordinary shares for the purposes of diluted earnings per share (Number)	91,471,120	70,511,115

Earnings per share (€)	0.42	0.14
Diluted earnings per share (€)	0.40	0.14

33. Net assets value per share and EPRA net asset value

	31 December 2016	31 December 2015


Net assets (€'000)	234,318	148,539
Number of participating ordinary shares	92,491,344	69,872,298

Net asset value per share (€)	2.53	2.13

EPRA net asset value	31 December 2016	31 December 2015


Net assets (€'000)	234,318	148,539
Add back deferred tax assets and liabilities, derivative financial instruments, goodwill and share based payment reserves	18,635	11,095

EPRA net asset value (€'000)	252,953	159,634
EPRA net asset value per share (€)	2.73	2.28

34. 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 this financial information.

Principal financial instruments

The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:

· Financial assets

· Cash and cash equivalents

· Trade and other receivables

· Trade and other payables

· Borrowings

· Derivative financial instruments

The Group held the following financial assets at each reporting date:

	31 December 2016	31 December 2015
	€'000	€'000

Loans and receivables:
Trade and other receivables: current	1,453	720
Cash and cash equivalents	18,450	12,757
Loans and receivables	2,253	1,382
	22,156	14,859

The Group held the following financial liabilities at each reporting date:
	31 December 2016	31 December 2015
	€'000	€'000

Held at amortised cost:
Borrowings payable: current	9,169	11,523
Borrowings payable: non-current	176,423	122,278
Other financial liabilities	3,590	-
Trade and other payables	1,331	2,630
	190,513	136,431

Fair value through profit or loss:
Derivative financial liability - interest rate swaps	4,869	1,869
	4,869	1,869
	195,382	138,300

Fair value of financial instruments

With the exception of the variable rate borrowings, 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 externally by the respective counterparty banks by comparison with the market price for the relevant date.

The interest rate swaps are expected to mature between November 2017 and August 2026.

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

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

During each of the reporting periods, there were no transfers between valuation levels.

Group - Fair Values
	31 December 2016	31 December 2015
	€'000	€'000
Financial liabilities
Interest rate swaps - Level 2	(4,869)	(1,869)

The valuation basis for the investment properties is disclosed in note 19.

Financial risk management

The Group is exposed through its operations to the following financial risks:

· Interest rate risk

· Foreign exchange risk

· Credit risk

· Liquidity risk

The Group's policies for financial risk management are outlined below.

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 balance only:

	31 December 2016	31 December 2015
	€'000	€'000

Financial assets
Cash and cash equivalents	553	3,191
Financial liabilities
Trade and other payables	(204)	(156)
Net position	349	3,035

At each reporting date, if the Euro had strengthened or weakened by 10% against GBP with all other variables held constant, post-tax loss for the year would have increased/(decreased) by:

	Weakened by 10% Increase/(decrease) in post-tax loss and impact on equity	Strengthened by 10% Increase/(decrease) in post-tax loss and impact on equity

31 December 2016	35	(35)
31 December 2015	251	(251)

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 uses the following banks: Barclays Private Clients International Jersey Ltd, Barclays Bank Plc Frankfurt and Deutsche Bank. The split of cash held at each of the banks respectively at 31 December 2016 was 19%/63%/16% (December 2015: 28%/33%/39%) Barclays and Deutsche Bank have A credit ratings.

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 can be found in note 23 as can details of the receivables that were impaired during each period.

An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows. 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 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:

	Less than 1 year	Between 1 and 2 years	Between 2-5 years	More than 5 years	Total
	€'000	€'000	€'000	€'000	€'000
At 31 December 2016


Borrowings: current	9,169	-	-	-	9,169
Borrowings: non-current	-	-	-	176,423	176,423
Other financial liabilities	-	-	3,590	-	3,590
Trade and other payables	1,331	-	-	-	1,331
	10,500	-	3,590	176,423	190,513

	Less than 1 year	Between 1 and 2 years	Between 2-5 years	More than 5 years	Total
	€'000	€'000	€'000	€'000	€'000
At 31 December 2015

Borrowings: current	11,523	-	-	-	11,523
Borrowings: non-current	-	3,016	38,612	80,650	122,278
Trade and other payables	2,630	-	-	-	2,630
	14,153	3,016	38,612	80,650	136,431

35. Related party transactions

Related party transactions not disclosed elsewhere are as follows:

R Prosser is a director of Estera Fund Administrators (Jersey) Limited and Estera Trust (Guernsey) Limited, both of which provide administration services to the Group.

A Weaver is a partner of the Jersey law firm, Appleby which provides legal services to the Group and a member of Appleby group.

During the year ended 31 December 2016, an amount of €657,751 (2015: €718,721) was payable to Estera Fund Administrators (Jersey) Limited and Estera Trust (Guernsey) Limited for accounting, administration and secretarial services. At December 2016, €187,515 (2015: €125,671 Estera Fund Administrators (Jersey) Limited only) was outstanding.

During the year ended 31 December 2016, an amount of €60,337 (2015: €375,595) was payable to Appleby, law firm for legal and professional services. At December 2016 €9,495 (2015: €11,352) was outstanding.

M Northover is a Director and shareholder of PMM Partners (UK) Limited, the Group's appointed Property Advisor. During the year ended 31 December 2016, an amount of €3,387,000 (2015: €2,574,000) was payable to PMM Partners (UK) Limited. At December 2016 €Nil (2015: €Nil) was outstanding.

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 €6,350,000 (2015 €1,264,000). The fee is payable contingent on the Group achieving an 8% total return to the shareholders per annum.

In March 2015, the Group also entered into an option agreement to acquire the remaining 5.2% interest in Phoenix Spree Property Fund GmbH & Co.KG from the remaining partners being M Hilton and P Ruddle both Directors of PMM Partners (UK) Limited, the options are to be exercised on the fifth anniversary of the majority interest acquisition for a period of three months thereafter at the fair value of the remaining interest.

The Group entered into an unsecured loan agreement with M Hilton and P Ruddle in connection with the acquisition of PSPF. At the period end an amount of €704,500 (2015: €691,000) each was owed to the Group. The loans bear interest of 4% per annum.

36. Events after the reporting date

The Group exchanged contracts for the acquisition of three properties in Berlin with an aggregate consideration of €12.3 million. These three properties are still awaiting completion.

The Group has notarised for sale all the properties held by a subsidiary fund, which are located in the Nurnberg and Furth area, for a gross consideration of €35.3 million. The initial approach was made by buyers in January 2017 and the transaction is expected to complete in July 2017.

The Group had notarised for sale a property in Teltow prior to the balance sheet date for €3.8 million which had yet to complete at the balance sheet date. It subsequently completed in April 2017.

In February 2017, the Group drew down €9.9 million euros of debt from a €10.6 million short term loan facility.

The Group drew down the final €1 million of the €9.3 million facility signed in August 2016 after exceeding a required annualised net rent of the properties secured under the loan.

The Group drew down the final €2.0 million of the €81.5 million facility signed in 2016 on two buildings in Kiel and Luneberg.

The Group has signed for a €13 million loan secured against the properties notarised for acquisition in 2017; €11.1 million of this loan has been dispersed.

PROFESSIONAL ADVISORS

Property Advisor	PMM Partners (UK) Limited 47-48 Piccadilly London W1J 0DT

Administrator Company Secretary and Registered office	Estera Fund Administrators (Jersey) Limited Estera Secretaries (Jersey) Limited 13-14 Esplanade St Helier Jersey JE1 1EE

Registrar	Capita Registrars (Jersey) Limited 12 Castle Street St Helier Jersey JE2 3RT

Principal Banker	Barclays Private Clients International Limited 13 Library Place St Helier Jersey JE4 8NE

English Legal Advisor	Stephenson Harwood LLP 1 Finsbury Circus London EC2M 7SH

Jersey Legal Advisor	Appleby 13-14 Esplanade St Helier Jersey JE1 1BD

German Legal Advisor as to German property law	Mittelstein Rechtsanwälte Alsterarkaden 20 Hamburg 20354 Germany

German Legal Advisor as to German partnership law	Hogan Lovells International LLP Untermainanlage 1 Frankfurt am Main 60329 Germany

Sponsor and Broker	Liberum Capital Limited Ropemaker Place 25 Ropemaker Street London EC2Y 9LY

Independent Property Valuer	Jones Lang LaSalle Rahel-Hirsch-Strasse 10 Berlin D-10557 Germany

Auditor	RSM UK Audit LLP 25 Farringdon Street London EC4A 4AB

This information is provided by RNS

The company news service from the London Stock Exchange

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