Final Results for the year ended 31 December 2019

RNS Number : 8175I

Phoenix Spree Deutschland Limited

06 April 2020

 

Phoenix Spree Deutschland Limited 
(the "Company" or "PSD")

Financial results for the year ended 31 December 2019

Phoenix Spree Deutschland Limited (LSE: PSDL.LN), the UK listed investment company specialising in German residential real estate, announces its full year audited results for the financial year ended 31 December 2019. 

Highlights for the financial year ended 31 December 2019

	Year to 31 December 2019	Year to 31 December 2018	2018 v 2019 % change
Income Statement
Reported gross rental income (€m)	22.6	22.7	(0.4%)
Profit before tax (€m)	28.6	56.4	(49.3%)
Dividend (€ cents (£ pence))1	7.50 (6.3)	7.50 (6.7)	0%
Balance Sheet
Portfolio valuation (€m)	730.2	645.7	13.1%
IFRS NAV per share (€ cents)	4.23	4.05	4.4%
IFRS NAV per share (£ pence)	3.58	3.64	(1.6%)
EPRA NAV per share (€ cents)	4.92	4.58	7.4%
EPRA NAV per share (£ pence)	4.16	4.11	1.2%
EPRA NAV per share total return (€%)	9.1	13.2	-
Net LTV2 (%)	32.6	26.1	-
Operational Statistics
Portfolio valuation per sqm (€)	3,741	3,527	6.1%
Annual like-for-like rent per sqm growth (%)	5.6	7.4	-
EPRA Vacancy (%)	2.8	2.8	-
Condominium sales notarised (€m)	8.8	9.0	(2.2%)

^{1 FX rate GBP/EUR 1:1.18} 

^{2  Net LTV uses nominal loan balances as per note 23 rather than the loan balances on the Consolidated Statement of Financial Position which take into account Capitalised Finance Arrangement Fees in the balance.}

Financial & Operational Highlights  

· The Portfolio continued to perform well:

o  Aggregate Portfolio value increased by 13.1% to €730.2 million (31 December 2018: €645.7 million). 

o  Like-for-like Portfolio value, adjusted for acquisitions and disposals, increased by 7.1%.

· Robust like-for-like rental income growth per sqm of 5.6% during the year.

· New leases signed at an average 36.4% premium to passing rents.

· Underlying EPRA vacancy remains low at 2.8% (31 December 2018: 2.8%).

·   Contracts to acquire 286 units notarised during 2019, representing an aggregate purchase price of €49  million and an average cost per sqm of €2,706. 

o  This includes an apartment complex in Brandenburg, an area within Greater Berlin that is unaffected by the Mietendeckel rent controls.

·   Completion in September 2019 of new €190 million term loan on improved interest rate terms provides additional liquidity. A further €50 million acquisition facility is available.

· Potential scenarios associated with COVID-19 and the Mietendeckel have been rigorously stress tested.

· Unchanged dividend of €5.15 cents per share (GBP 4.4 pence per share).

· Share buy-backs at an average 22% discount to year-end 2019 EPRA Net Asset Value. As at 31 March 2020, 3.5% of the issued share capital had been repurchased. Buy-back programme suspended pending more clarity on the effects of COVID-19.

EPRA NAV underpinned by significant condominium potential

· 18 Condominium sale notarisations during 2019 with total proceeds of €8.8 million (2018: €9.0 million).

· Average achieved value per sqm on notarised residential condominium units of €4,711, a 25.9% premium to   2019 year-end Portfolio average value per sqm.

· New agreement with Accentro Real Estate AG, provides scope to accelerate condominium sales.

· 58% of Portfolio assets legally split into condominiums, and applications proceeding for a further 29%.

Timing, legality and implementation of new Berlin rent controls ("Mietendeckel")  

·     Came into force on 23 February 2020. Legislation to be reviewed by Berlin's Regional Constitutional Court and the Federal Constitutional Court.

·   The Company has been advised that an injunction is likely to be sought. If obtained, it could create a moratorium on the implementation of the Mietendeckel, pending final ruling.  

·     In the absence of an injunction being obtained, aggregate rental income for 2020 is not likely to be significantly adversely affected by the Mietendeckel compared with 2019.

· Mietendeckel already impacting new construction, exacerbating shortage of available rental stock.

· Potential future impact after 2020 is dependent on duration of, and eventual outcome of, legal challenge.

·   If the Mietendeckel continues throughout 2021, PSD estimates annual rental incomes could reduce by approximately 17%, which the Company would seek to mitigate by extending condominium sales.

 Outlook

· The current COVID-19 pandemic presents a significant economic challenge to global economies:

o  PSD's top priority remains the health, welfare and safety of its tenants and wider stakeholders.

o  Measures have already been taken in London and Berlin to mitigate disruption resulting from the COVID-19 outbreak.

o  PSD believes it is well positioned to withstand the current dislocations COVID-19 may cause, with a robust business model, a strong balance sheet and good levels of liquidity

· PSD retains strategic optionality in the likely event the Mietendeckel is found to be unconstitutional. 

· Notwithstanding the near-term impact of COVID-19, long-term Berlin demographic trends likely to remain positive, driven by strong job creation and ongoing population growth.

· Availability of Berlin rental stock expected to decline.

Robert Hingley, Chairman of Phoenix Spree Deutschland, commented:

"I am pleased to report another resilient performance with significant progress achieved in adapting our strategy in preparation for the new Berlin rent rules. As we await a successful challenge of this new regulation, we are well positioned to mitigate any short-term impact, supported by our strong balance sheet and good liquidity, all the while maintaining our strategic optionality in the event the rules are found illegal. Despite the impact COVID-19 is having on the German economy, we continue to be confident, in the longer-term, in the strength of demand for rental housing in Berlin and in our ability to create value for all of our stakeholders through the continued active management of our portfolio."

For further information, please contact:

Phoenix Spree Deutschland Limited Stuart Young	[phone]
Numis Securities Limited (Corporate Broker) David Benda	[phone]
Tulchan Communications (Financial PR) Elizabeth Snow Amber Ahluwalia	[phone]

Notes to the preliminary announcement

This announcement has been extracted from the annual report and financial statements for the year ended 31 December 2019 (the "Annual Report"), which will be available on the Company's website, www.phoenixspree.com/investors today.  The Annual Report has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM .  Printed copies of the Annual Report will be distributed to shareholders on or around 27 April 2020.

CHAIRMAN'S STATEMENT  

I am pleased to report that PSD has delivered another resilient performance. As at 31 December 2019, the Portfolio was valued at €730.2 million by Jones Lang LaSalle GmbH, a like-for-like increase of 7.1%, primarily driven by an increase in like-for-like average rents. The EPRA NAV total return per share was 9.1% over the same period.  

Notwithstanding these results, the Company's share price has been affected by regulatory uncertainty and, more recently, the broader impact of the COVID-19 pandemic, which has negatively affected global equity markets more generally. This has been reflected in the current valuation discount to year-end EPRA Net Asset Value, which is broadly in line with its listed peer group.

The Company enters this period with a robust business model, a strong balance sheet and good levels of liquidity. After fully considering the potential impact of both the Berlin Mietendeckel and COVID-19, the Board is pleased to recommend an unchanged dividend of €5.15 cents per share (GBP 4.4 pence per share), taking the full year dividend to €7.5 cents per share (GBP 6.3 pence per share). Future dividend payments will be considered in the light of any prevailing market disruptions.

Reflecting current market volatility associated with the COVID-19 pandemic, the Board believes that it is prudent, for the time being, to suspend the Company's share buy-back programme pending more clarity.

The Berlin Mietendeckel

The political moves by the Berlin Red-Red-Green coalition to cap statutorily or reduce rents for private non-subsidised rental properties aim to prevent rents being set at free market levels. This is despite the fact that Germany already has in place, at the federal level, tenant protections which rank amongst the strongest in the Western world. These measures have presented challenges to the Company's rental business model, which has traditionally relied on re-letting at market rates to justify the considerable investment that significantly improves the standard of accommodation available to our tenants.

PSD and its legal advisors remain of the view that the Mietendeckel is unconstitutional. The new rules seek to address the effects of a housing shortage rather than addressing the cause. PSD believes that the long-term solution to the housing shortage and rent-price inflation lies with incentivising increased supply, which the current rules fail to address. 

Adapted strategy

The Company set out in September 2019 how it intends to adapt its strategy during the period in which the Mietendeckel is in force, so as to mitigate any short-term impact on the Portfolio, while ensuring it maintains maximum strategic optionality in the event the Mietendeckel law is found to be unconstitutional.

Good progress has already been made, including condominium splitting and sales, as well as selective acquisitions in areas within Greater Berlin that are not affected by the Mietendeckel. These measures are explained in more detail in this announcement. The Company has also secured more flexible and cost-efficient financing to support the medium and long-term strategic objectives of the business.

COVID-19
The unprecedented and rapidly changing circumstances surrounding the COVID-19 coronavirus outbreak provide an uncertain economic landscape and increased risk aversion in the financial markets. Whilst it is difficult to predict accurately the potential long-term consequences, we remain vigilant and, in common with all businesses, are closely monitoring the situation. The wellbeing of our tenants and the employees of our service providers is our overriding priority.

PSD's Property Advisor has a strong business platform and has instituted measures in London and Berlin to ensure its people can work remotely, ensuring the continuity of the business. The Property Advisor has rigorously stress tested PSD's financial forecasts for a range of potential outcomes associated with COVID-19 and is confident that the Company is well positioned to withstand any negative impact. To date, there has been no material effect on PSD and the Company enters this period in a position of robust financial health, with a strong balance sheet and a good level of liquidity.

Governance and compliance

The Board recognises the importance of a strong corporate governance culture and maintains the principles of good corporate governance as set out in the Association of Investment Companies Code of Corporate Governance ("AIC Code"), as set out in the Corporate Governance Statement in the Annual Report.

Corporate Responsibility

The Board recognises the importance of operating with integrity, transparency and clear accountability towards its shareholders, tenants and other key stakeholders. We understand that being a responsible Company, balancing the different interests of our stakeholders and addressing our environmental and social impacts, is intrinsically linked to the success and sustainability of our business.

To this end, our 'Better Futures' Corporate Responsibility ('CR') Plan provides a framework to monitor existing activities better. It has four key pillars that have been integrated throughout our business operations: Protecting our Environment; Respecting People; Valuing our Tenants and Investing in our Communities. Our CR initiatives are reported in more detail in the Annual Report.

Outlook

In addition to the Mietendeckel, the COVID-19 outbreak presents an additional challenge for PSD and, whilst the ultimate impact on the Berlin real estate market and property valuations is unclear, PSD and its Property Advisor have a platform that, if required, can accommodate an extended period of disruption. Our top priority remains the health, welfare and safety of PSD's tenants and wider stakeholders.

Although there currently remains additional uncertainty surrounding the legality of the new Mietendeckel and the duration of legal challenges, PSD is well positioned to mitigate the financial impact pending legal clarification.

Since the launch of PSD over 13 years ago, tenant law has continually changed and PSD has successfully evolved within the changing regulatory framework. The Board remains firmly of the view that the Mietendeckel rules will ultimately be successfully challenged in the courts of law and the priority for the year ahead is, therefore, to ensure that the Company maintains its strategic optionality during this period.

REPORT OF THE PROPERTY ADVISOR

THE BERLIN MIETENDECKEL

The final draft of the new Berlin-specific rent cap (or "Mietendeckel") became law, following publication in the official gazette on 23 February 2020. Launched by the  Red-Red-Green coalition (the ruling coalition in the Berlin House of Representatives, consisting of the Social Democrats, Die Linke and the Green Party) the new rules allow the limitation of housing rents, such that rates are no longer set at free market levels.

Legality of the Mietendeckel rules
PSD's legal advisors remain of the view that the Mietendeckel is unconstitutional and, as such, will be successfully challenged. They raise concerns about whether the state of Berlin is competent to pass local rent legislation, as the provisions substantially deviate from existing German federal law.

The opposition in the Berlin House of Representatives and a quorum of Federal Parliament MPs have already announced that they intend to have the legislation reviewed by Berlin's Regional Constitutional Court and the Federal Constitutional Court. In addition, it is expected that there will be a number of private challenges. These legal actions were not possible prior to the Mietendeckel being enacted in law.

The financial impact on the Company and its future business model and strategy are largely dependent on the timing and eventual outcome of the legal actions. Although there is a degree of uncertainty as to the timing of the likely sequence of events, the Company has been advised that the three most probable outcomes are as follows:

1. A judicial review and injunction leading to an immediate moratorium on implementation of the new rules, pending final determination, with the Mietendeckel found to be illegal. Depending on the timing of the injunction, there would be a low or minimal impact on PSD's business.

2.  No injunction, but Mietendeckel ultimately judged to be illegal. In this scenario, PSD would have to adapt its business model for the duration of court proceedings which could last 18 months or more.

3.  No injunction and Mietendeckel ultimately judged to be legal. Although the Company has been advised that this is unlikely, PSD's strategic business model would need to be adapted on a permanent basis.

Key elements of the Mietendeckel rules
The main components of the new regulations include a freeze on rents, rent ceilings, possible rent reductions and a limitation of the  modernization  costs that can be passed onto tenants in the form of higher rents.  

The new rules prescribe rent levels that apply throughout central Berlin which are dependent on the age and technical specification of each apartment. They cover all residential rental leases, furnished apartments and short-term rental models. The only exceptions are buildings constructed after 1 January 2014, publicly-funded housing or housing that has been modernized or repaired with funds from public budgets, accommodation provided by publicly recognized providers of welfare care and refurbished apartments that were previously uninhabitable. As such, the Mietendeckel, if deemed to be constitutional, potentially applies to the vast majority of residential properties within PSD's Portfolio.

Impact of Mietendeckel

Given the timing and complexity of the legal challenges that are currently underway, there remains considerable uncertainty surrounding the potential financial impact of the proposed new rules.

The table below sets out the timing for implementation of the key elements of the new rules together with the potential impact on rental income for the full year to December 2020. It should be noted that these estimates assume that, by 23 November 2020, there has been no successful legal action or moratorium preventing the implementation of the Mietendeckel. They also do not take into account any successful legal challenge or any mitigating action taken by PSD to reduce the financial impact of implementation; nor any potential impact of the COVID-19 outbreak.

Summary of Key Mietendeckel Rules 

Effective Date	Type of Rental Contract	Applicable Measures Prescribed by the Mietendeckel	Likely Negative Financial Impact
Post 23 February 2020	First time letting and reletting	In the case of first-time letting or reletting after the Mietendeckel comes into force, the new rent may not exceed the prescribed upper rent limit. This could result in lessors having to lower the rent to a level below the rent paid by the previous tenant.	The impact of this requirement is dependent on level of tenant churn. Assuming this remains unchanged versus FY 2019, the likely financial impact could be in the region of 1.5% of annualised net rental income.
Post 23 February 2020	Existing leases: rent freeze	For existing leases, a rent freeze initially applies, but with no requirement to lower rents, provided the rent level set at 18 June 2019 has not been increased since that date. If there has been a rent increase, future rental payments must be reduced to the June 2019 level.	Absent any mitigating action by PSD (please refer to section on "Maintaining Strategic Flexibility"), it is estimated that the impact for the financial year ended 31 December 2020 could be in the region of 1% of annualised net rental income.
Post 23 November 2020	Automatic rent reduction	If the rent limit (adjusted for location surcharges or discounts) is exceeded by more than 20%, the landlord must reduce the rent to 120% of the prescribed rent limit, but only nine months after the rental cover comes into force (i.e. 23 November 2020). If the landlord accepts a rent higher than 120% of the prescribed limit, he is liable to a fine of up to Euro 500,000 in each case.	Absent any mitigating action by PSD (please refer to section on "Maintaining Strategic Flexibility"), it is estimated that the financial impact for the financial year ended 31 December 2020 could be in the region of 1.5% of annualised net rental income. Moreover, considering the 2021 impact, the Company estimates that the rent reductions for Berlin-based residential tenants could represent up to 17% of annualised net rental income.

MAINTAINING STRATEGIC FLEXIBILITY

The Company set out in September 2019 how it intends to adapt its strategy during the period in which the proposed rent controls are in force, so as to mitigate any short-term impact on the portfolio, while ensuring it maintains maximum strategic optionality in the event the proposals are found to be unconstitutional. These measures are summarised below:

New re-letting contracts

To avoid uncertainty among tenants as to their contractual rental obligations during the period when the legality of Mietendeckel remains unresolved, PSD will be amending its tenancy agreements. The new agreements stipulate that if the Mietendeckel or any part thereof is voided, suspended, repealed, or otherwise abolished, any higher contractual rent permissible under the German Civil Code (BGB) shall once again be payable. If the voiding or suspension were to be applied on an ex-tunc basis (i.e. from the outset), back-payments would be sought to cover the difference between the capped rent and contractual rent for the entire term of the agreement. Tenants have, therefore, been advised by the Berlin government to set aside appropriate reserves to cover this eventuality.

Additionally, PSD continues to review the option of reletting newly vacant units as short-term furnished apartments until the legal questions surrounding the Mietendeckel are resolved.

Condominium Conversion

PSD believes that there is significant additional value within PSD's potential condominium portfolio and intends to increase condominium sales activities during 2020. In order to ensure strategic flexibility, PSD has sought to split as many multi-family properties as possible into individual condominium units at the Land Registry, a prerequisite to selling each apartment separately. As at 30 March 2020, 58% of all units had been registered as condominiums. A further 29% are in application, a significant majority of which are in the final stage of approval. By the end of 2020, in excess of 75% of the portfolio could be registered as condominiums.

The Property Advisor has an in-house capability for condominiums which focusses on selling vacant, rather than occupied, units. Occupied units are typically acquired by investors seeking income or by buyers prepared to wait before taking possession (and in the meantime benefiting from rental income). 

In order to sell occupied units in volume, PSD has entered into an agreement with Accentro Real Estate AG ("Accentro"), one of Germany's leading condominium sales platforms. This provides access to a successful, European-wide, distribution platform which should allow PSD to accelerate significantly sales of apartments.

Under the terms of the agreement, PSD can, if and to the extent it so chooses, offer properties to Accentro to market for sale as condominiums at an agreed price per condominium unit. On acceptance, Accentro will have an exclusivity period of 18 to 24 months during which they will be eligible to receive commission for completed sales.  At the end of this period, Accentro will make PSD an irrevocable offer to purchase any remaining unsold condominiums at the previously assigned minimum purchase price, guaranteeing PSD a minimum value for the assets . This also guarantees the sale of all condominiums within a building.  Accentro markets the properties at its own expense while PSD retains all rights and benefits of the condominium assets while they remain unsold.

New Condominium Construction

PSD has building permits approved, or in process, for 91 units. Approximately 75% of these units are attic conversions, with the remainder representing a new apartment block in the footprint of an existing property. A consequence of the Mietendeckel has been to create overcapacity in the construction sector as landlords reduce their capital expenditure programmes and developments are reassessed, which, in turn, is being reflected in lower labour and material costs. The Property Advisor intends to appraise future projects on the basis of condominiums for sale, as opposed to rental properties.

Reduced Capital Expenditure

In the light of the proposed new rental laws, careful consideration has been given to certain elements of discretionary capital expenditure that are no longer financially justifiable. Regrettably, the maximum €1 rent per sqm premium (€600-700 per annum) on future modernisations that the new rules permit will not justify the typical investment of €20-30k that was possible when reletting was permissible at free market levels. This is likely to reduce planned capital expenditure by up to €3.5 million per annum for so long as the Mietendeckel remains in force. Although this reduction in capital expenditure is regrettable, PSD remains committed to maintaining a portfolio of homes for tenants that are both comfortable and compliant with all health and safety standards. 

Acquisitions outside the designated Mietendeckel zone

Pending clarity on the legality of the Mietendeckel rules, the Company will also consider acquisitions in the Greater Berlin area that are unaffected by the rent cap. There has been no change to PSD's strict investment criteria and any acquisitions considered would be benchmarked against share buy-backs at a discount to Net Asset Value.

Share Buybacks

Following the completion of a new €240 million loan facility on improved terms, the Company announced in September 2019 that it would consider buying back up to 10% of existing share capital in issue. The share buy-back programme commenced in mid-October and, as at 31 March 2020, the Company had purchased a total of 3.5 million shares (3.5% of the ordinary share capital) for a total consideration of £11.2 million. The average price paid represented a 23% discount to EPRA Net Asset Value per share as at 31 December 2019.

In the light of current market disruption, the share buyback programme has been suspended. The Board will keep this policy under review.

FINANCIAL & OPERATIONAL HIGHLIGHTS FOR THE YEAR TO 31 DECEMBER 2019  

€ million (unless otherwise stated)	Year to	Year to	6 months to	6 months to
	31-Dec-19	31-Dec-18	30-Jun-19	30-Jun-18
Gross rental income   1	22.6	22.7	10.8	11.9
Investment property fair value gain	41.5	66.1	21.6	21.7
Profit before tax (PBT)	28.6	56.4	12.0	19.4
Reported EPS (€)	0.22	0.46	0.11	0.16
Investment property value	730.2	645.7	665.2	583.7
Net debt (nominal balances) 3	237.8	168.4	178.0	150.5
Net LTV (%)	32.6	26. 1	26.8	25.8
IFRS NAV per share (€)	4.23	4.05	4.11	3.74
IFRS NAV per share (£)  2	3.58	3.64	3.68	3.31
EPRA NAV per share (€)	4.92	4.58	4.73	4.23
EPRA NAV per share (£)	4.16	4.11	4.24	3.74
Dividend per share (€ cents)	7.5	7.5	2.35	2.35
Dividend per share (£ pence)	6.3	6.7	2.1	2.1
EPRA NAV per share total return for period (€%)	9.1	13.2	4.4	4.1
EPRA NAV per share total return for period (£%)	2.9	11.4	4.3	3.8

 ¹  June 2018 reported Gross rental income was restated due to change in accounting policies (IFRS 15) 

² FX rate GBP/EUR 1:1.18 

³   Net debt uses nominal loan balances as per note 23 rather than the loan balances on the Consolidated Statement of Financial Position which take into account Capitalised Finance Arrangement Fees in the balance as per IAS 23.

Financial results  

Reported revenue for the financial year to 31 December 2019 was €22.6 million ( 31 December 2018: €22.7 million). Profit before taxation was 28.6 million ( 31 December 2018: €56.4 million) which was positively affected by a revaluation gain of €41.5 million ( 31 December 2018: €66.1 million).

The reduced profit before tax, compared with 2018, primarily reflects a lower revaluation gain due to a moderation in the rate of market yield compression coupled with loan break costs following the completion of PSD's €240 million refinancing in September 2019. Reported earnings per share for the period were 0.22 cents ( 31 December 2018: 0.46 cents). 

Reported EPRA NAV per share rose by 7.4% in the period to €4.92 (£4.16) (31 December 2018: €4.58 (£4.11)). After taking into account the dividends paid during 2019 of 7.5 cents (6.3 pence), which were paid in June and October 2019, the Euro EPRA NAV total return for the period was 9.1% (2018: 13.2%). 

Dividend
Having regard to the potential impacts of COVID-19 and the Mietendeckel, the Company has declared a further dividend of €5.15 cents per share (GBP 4.4 pence per share), (31 December 2018 €5.15 cents) (GBP 4.62 pence per share), which is expected to be paid on or around 03 July 2020 to shareholders on the register at close of business on 12 June 2020, with an ex-dividend date of 11 June 2020. Taking into account the interim dividend paid in October 2019, the full dividend for the financial year to 31 December 2019 is €7.5 cents per share (GBP 6.3 pence per share), (31 December 2018: 7.5 cents per share (GBP 6.73 pence per share)). 

Since listing on the London Stock Market in June 2015, and including the second dividend for 2019 and bought-back treasury shares, €46.6 million has been returned to shareholders. The dividend is paid from operating cash flows, including the disposal proceeds from condominium projects, and the Company will seek to continue to provide its shareholders with a secure dividend over the medium term, subject to the distribution requirements for Non-Mainstream Pooled Investments, and after full consideration of the impact of the Mietendeckel and any ongoing impact associated with COVID-19.

Portfolio valuation and breakdown

	Year to	Year to	6 months to	6 months to
	31-Dec-19	31-Dec-18	30-Jun-19	30-Jun-18
Number of buildings	98	96	96	93
Number of residential units	2,537	2,392	2,378	2,322
Number of commercial units	142	153	143	152
Total Units	2,679	2,545	2,521	2,474
Total sqm ('000)	195.2	183.1	179.0	178.2
Annualised Net Rent (€m)	19.7	18.0	18.1	17.0
Valuation (€m)	730.2	645.7	665.2	583.7
Value per sqm (€)	3,741	3,527	3,716	3,275
Fully occupied gross yield %	2.9	3.0	2.9	3.1
Vacancy %	6.7	4.8	4.2	5.6
EPRA Vacancy %	2.8	2.8	2.5	2.8

As at 31 December 2019, the total Portfolio was valued at €730.2 million by Jones Lang LaSalle GmbH, the Company's external valuers, an increase of 13.1% over the twelve-month period (31 December 2018: €645.7 million).

On a like-for-like basis, after adjusting for the impact of acquisitions net of disposals, the Portfolio valuation increased by 7.1% in the year to 31 December 2019, a 3.1% increase in the second half of the financial year. This reflects the combined impact of market rental growth and the active management of the Portfolio.

The valuation as at 31 December 2019 represents an average value per square metre of €3,741 (31 December 2018: €3,527), a gross fully occupied yield of 2.9% (31 December 2018: 3.0%) and a net yield, using EPRA methodology, of 2.3% (31 December 2018: 2.4%). Included within the Portfolio are five properties valued as condominiums, with all sales permissions granted, with an aggregate value of €26.5 million (31 December 2018: €22.3 million). 

The Portfolio valuation conducted by Jones Lang LaSalle GmbH for year to 31 December 2019 reflects current Berlin market prices and does not factor in any additional future impact on property valuations that may materialise as a result of the Mietendeckel rent controls, or any impact of COVID-19 on the Berlin economy.

Rental income and vacancy rate

	Year to	Year to	6 months to	6 months to
	31-Dec-19	31-Dec-18	30-Jun-19	30-Jun-18
Total sqm ('000)	195.2	183.1	179.0	178.2
Gross in-place rent per sqm (€)	9.0	8.6	8.7	8.4
Like-for-like rent per sqm growth %	5.6	7.4	6.3	9.5
Vacancy %	6.7	4.8	4.2	5.6
EPRA Vacancy %	2.8	2.8	2.5	2.8

After considering the impact of acquisitions and disposals, like-for-like rental income per square metre grew 5.6% in the year to 31 December 2019 and like-for-like rental income grew 6.1% over the same period. Gross in-place rent was €9.0 per sqm as at 31 December 2019, an increase of 4.6% compared with the prior year.

Reported vacancy at 31 December was 6.7% (31 December 2018: 4.8%). On an EPRA basis, which adjusts for units undergoing renovation, development or made available for sale, the vacancy rate was 2.8% (31 December 2018: 2.8%). The rise in the reported vacancy rate reflects the acquisition in December 2019 of a rental apartment complex in Brandenburg. This complex is undergoing a refurbishment programme and consequently has a significantly higher vacancy rate. Excluding this, reported vacancy as at 31 December 2019 would have been 4.0 %.

During the year to 31 December 2019, 306 new leases were signed, representing a letting rate of approximately 11.1% of units. The average rent achieved on new lettings was €11.9 per sqm. 

Acquisitions and disposals  

During 2019, three new assets with an aggregate valuation of €49.0 million were notarised for acquisition. In total, these buildings comprise 286 units (282 residential and 4 commercial), at an average price per sqm of €2,706, which represents an estimated prospective gross yield of 3.9 % .  The acquired properties complement the existing Portfolio, adding an initial 6.6% to rental income. These acquisitions were financed using a combination of debt and equity, with an achieved loan-to-value ratio of approximately 39%. 

One of the acquired assets was an apartment complex in Brandenburg, an area within Greater Berlin that is unaffected by the proposed Mietendeckel rent controls, which the Company notarised and completed in December 2019. The Property is a former army barracks, comprising 259 residential units, one commercial unit and 210 parking spaces. It was substantially redeveloped in 2018/19 through a refurbishment programme which has seen 155 units receive new facades and insulation, new windows, balconies, electricity, pipes and outside facilities. Refurbishment of a further 40 units is ongoing and expected to be completed to the same standard, and in accordance with our CSR strategy, by the end of the first half of 2020. The last part of the housing complex will be vacated before the end of 2020, after which the redevelopment of another 65 units is expected to be completed within a twelve-month period.

In January 2021 a commercial unit in the complex will become vacant with outline planning permission already agreed for a new three-storey building of approximately 15 units. Outline planning permission has also been sought for the construction of a residential building and the complex offers the opportunity for further densification in the future. In total, the whole complex offers new build potential for approximately 60 additional units representing further growth opportunities.

The average price paid per square metre of €2,674 represents an estimated prospective gross yield of 4.1 %.  The average residential rent per sqm is €9.02, with new lettings in 2019 (52 leases) of up to €14.01 per sqm. This acquisition has initially been financed from existing cash reserves. It is expected that outstanding bank debt of €16.4 million will be refinanced prior to maturity.

Portfolio enhancements  

During the financial year, a total of €6.5 million was invested across the Portfolio (2018: €7.9 million). These items are recorded as capital expenditure in the Financial Statements. A further €1.7 million was spent on maintaining the assets and is expensed through the profit and loss account. The year-on-year decline in investment reflects ongoing regulatory uncertainty. Regrettably, a number of capex projects which would previously have been justified at free market rents have been postponed or cancelled pending further clarity on the legality of the Mietendeckel.

EPRA Capital Expenditure

Property related capex	Value (€,000)
Acquisitions	62
Like-for-like portfolio	5,948
Other1	511
Total Capital Expenditure	6,459

¹ Relates to capex monitoring fees paid to property advisor in the year

Condominium sales

PSD's condominium strategy involves the division and resale of selected apartment blocks as private units. This is subject to regulatory approval and involves the legal splitting of the freeholds in properties that have been identified as being suitable for condominium conversion.  

During the year to 31 December 2019, a total of 18 units were notarised for sale, with an aggregate value of €8.8 million. The average notarised value per sqm achieved was €4,068, representing a 17.6% premium to book value and an 8.8% premium to the 31 December 2019 Berlin Portfolio average of €3,741 per sqm. Excluding the impact of one large commercial unit, the average notarised value per sqm value of the 17 residential units was €4,711, a 25.9% premium to 2019 year-end Portfolio average value per sqm of €3,741. Condominium sales accelerated significantly during the second half of the financial year, with a total of 14 units notarised with an aggregate value of €6.3m, a 23.7% premium to prevailing book value.

Since the financial year-end, four additional apartments have been notarised for sale for an aggregate value of €1.4 million, which represents a 21.7% premium to the 31 December 2019 book value.

Condominium conversion

As at 30 March 2020, 58% of all units (63% by value) had been registered as condominiums. A further 29% are in application, a significant majority of which are in the final stage of approval. By the end of 2020, it is expected that in excess of 75% of the portfolio could be registered as condominiums. Although PSD has not had any applications declined during 2019, the speed at which applications have been processed by planning offices has slowed and there has been some discussion by the Berlin government regarding new laws preventing condominium splitting. However, it is unlikely that these will progress pending final judgement on the legality of the Mietendeckel. Any laws should not impact properties already split.

Debt and gearing  

As at 31 December 2019, PSD had gross borrowings of €280.2 million (31 December 2018: €195.3 million) and cash balances of €42.4 million (31 December 2018: €26.9 million), resulting in net debt of €237.8 million (31 Dec 2018: €168.4 million) and a net loan to value on the portfolio of 32.6% (31 December 2018: 26.1%). 

Following a strategic review of PSD's liability structure, a new €240 million term loan facility on improved terms was completed in September 2019. The new facility was agreed with Natixis Pfandbriefbank AG and comprises of two tranches, being a refinancing facility for €190 million and a further acquisition facility for €50 million.

The refinancing facility, which was partly used to refinance existing indebtedness of c. €119 million, is a seven-year, interest-only loan (eliminating the previous amortisation obligations) with a margin of 115bp over 3-month Euribor, floored at zero. The outstanding swap portfolio was restructured to provide interest rate hedging so as effectively to provide a fixed interest rate for the full duration of the new loan. This facility was drawn in September 2019, after which PSD's gross loan to value (excluding cash held on balance sheet) increased from 28.6% to 39.2%, while the overall cost of the refinanced debt decreased from 2.2% to 2.1%. The remainder of the Refinancing Facility has been used to fund working capital, capital expenditure, opportunities that have arisen from the market dislocation caused by the Mietendeckel, and to buy back the Company's shares. 

The additional €50 million facility is available for drawdown on acquisitions over a period of 24 months and carries a commitment fee of 57.5bp. On utilisation, the drawn amounts will be subject to the same terms as the Refinancing Facility. 

The increase in gross debt in the period partly results from the refinancing discussed above, offset by debt repayments associated with the sale of condominiums during the year, and scheduled amortisation repayments on existing debt. The Company acquired debt of €16.4 million on the acquisition in December 2019 of the company which owned the apartment complex in Brandenburg previously described. This debt had a fixed interest rate of 1.35% and is intended to be refinanced in mid-2020 using the acquisition facility negotiated in 2019.  There was a further disbursement of €3.5 million of debt secured against other acquisitions made in 2019.

Nearly all PSD's debt effectively has a fixed interest rate through hedging. As at 31 December 2019, the blended interest rate of PSD's loan book was 2.0% (31 December 2018: 2.1%).  The average remaining duration of the loan book at 31 December 2019 had decreased to 6.6 years (31 December 2018: 7.7 years). 

Outlook
The COVID-19 outbreak has presented PSD with an unexpected new set of challenges. On a macroeconomic level, it is too early to predict accurately the medium-term impact on global and regional economies. The German federal government has announced an unprecedented €750 billion fiscal package to help cushion its impact including financial assistance for public and private sector industry as well as Germany's Hartz IV welfare programme. This programme includes help for rental payments in instances of financial hardship, and is available to tenants directly impacted by the COVID-19 outbreak.

Although, as yet, the consequences of COVID-19 for PSD have been limited, it does have the potential to impact the Berlin property market.  Firstly, the temporary restrictions on mobility will restrict the ability of prospective tenants and buyers to view rental properties and condominiums. Secondly, although commercial tenants represent a small percentage of the PSD's rental income, a number of businesses deemed to be "non-essential" under the current restrictions may be forced to close for a period of time. Finally, notwithstanding the financial hardship support offered by Germany's Hartz IV programme, any negative impact on the Berlin economy and employment levels could affect residential arrears.

If the COVID-19 outbreak is of limited time duration, these potential impacts are likely to be temporary in nature. The Property Advisor has rigorously stress tested for potential downside scenarios associated with COVID-19, including any potential impact on arrears and loan covenants, and is confident that PSD is well positioned to withstand the current dislocations it may cause. Moreover, PSD is well funded, with a low LTV and cash on its balance sheet of €42.4m as at 31 December 2019. This represents 188% of 2019 gross rental income.

In addition, uncertainty surrounding the new Berlin rent laws has the potential to affect market dynamics as owners adapt to the new regulatory environment. Jones Lang Lasalle GmbH, the Company's independent property advisors, have confirmed that, as of 31 December 2019, there had been no material adverse effect on either sale prices or rental levels in the Berlin market, although the volume of transactions in both cases had reduced significantly. However, given the current uncertainty about the legal validity of the Mietendeckel, it is not yet clear what impact, if any, there could be on future property prices.

During the past decade, Berlin has developed into one of Europe's most vibrant and dynamic cities. Economic and population growth have substantially outstripped nearly all other European cities.   In particular, growth in the business services, media and technology sectors has ensured strong job creation and net inward migration. At the same time, new construction has continually failed to meet demand and, against this backdrop, rental prices have risen. These demographic trends will continue in the absence of a well-considered, long-term, policy response.

The Mietendeckel focuses exclusively on the effects of a housing shortage rather than addressing the underlying causes. It fails to address the result of years of underinvestment in new housing supply. It is only by incentivising new supply and modernisation that a sustainable solution to Berlin's housing shortage is likely to be successful.

Pending regulatory clarity, PSD will seek to maximise its strategic optionality. These actions will help alleviate the short-term impact of the new rental laws and we remain of the view the legal challenges against their permanent implementation will be successful.

PRINCIPAL RISKS AND UNCERTAINTIES

The Board recognises that effective risk evaluation and management needs to be foremost in the strategic planning and the decision-making process. In conjunction with the Property Advisor, key risks and risk mitigation measures are reviewed by the Board on a regular basis and discussed formally during Board meetings.

RISK	IMPACT	MITIGATION	MOVEMENT
Changes to property and tenant law	Property laws remain under constant review by the new "Red-Red-Green" coalition government in Germany and future changes to property regulation and rent controls for new tenancies could negatively affect rental values and property valuations. The most recent tenant law changes involve the Mietendeckel rent cap, which was passed into law in February 2020, the main provisions of which are set out in this announcement.	The Property Advisor regularly monitors the impact that existing and proposed regulation could have on future rental values and property planning applications. The Company has sought independent legal advice regarding the Mietendeckel and has been advised that the proposals are likely to be unconstitutional and illegal and should be successfully challenged in the courts of law. The Company has set out how it intends to adapt its strategy during the period in which the proposed rent controls are in force to mitigate any short-term impact on the portfolio, while ensuring it maintains maximum strategic optionality in the event the proposals are found to be unconstitutional. These measures, together with the potential financial impact for the current financial year, are summarised in this announcement.	Increasing
Decline in property valuation	Economic, political, fiscal and legal issues can have a negative effect on property valuations. A decline in Group property valuations could negatively affect the valuation of the Portfolio and the ability of the Group to sell properties within the portfolio at valuations which satisfy the Group's investment objective.	The Property Advisor believes Berlin housing affordability metrics remain favourable relative to other European countries. However, the newly introduced Berlin Mietendeckel (rent cap) legislation has the potential to impact rental property valuations in the future. Given the current uncertainty on the timing and outcome of legal proceedings, the potential financial impact on property valuations remains unclear. The Company has set out how it intends to adapt its strategy during the period in which the proposed rent controls are in force to mitigate any short-term impact on the Portfolio, while ensuring it maintains maximum strategic optionality in the event the proposals are found to be unconstitutional. These measures, together with the potential financial impact for the current financial year, are summarised within this announcement.	Increasing
Insufficient capital to support dividend	Lack of capital may restrict the ability of the Group to pay dividend, especially in light of the Mietendeckel rent caps and the possible impact they will have on operating cashflows.	Dividends are due to be paid out of operating cashflows which include both rental income and condominium sales cashflows. The Company has entered into an agreement with Accentro, one of Germany's leading condominium sales platforms. This Agreement provides access to a successful, European-wide, distribution platform which should allow PSD to accelerate sales of apartments if required to cover operating cashflows. The cashflow impact of the Mietendeckel is not due be felt until November 2020, therefore the impact on rental income in 2020 is set to be minimal. The Company therefore has sufficient time to implement its various strategies discussed within this announcement to counteract the effects on rental income. The Group always maintains conservative long-term forecasts regarding its cash balances to ensure a three-year viability projection, which include full settlement of dividends in the forecast period.	Unchanged
Loss of data due to cyber security attack on IT systems	Illegal access of commercially sensitive information and potential to impact investor, supplier and tenant confidentiality.	Review of IT systems and infrastructure in place to ensure these are as robust as possible. Service Providers are required to report to the board on request on their financial controls and procedures. A detailed review of all IT processes led to the introduction of new invoice payment software, as well as introducing new IT and Communication platforms to ensure all communications are carried out in a secure environment. Service providers are also required to hold detailed risk and controls registers regarding their IT systems. The Board reviews service organisations IT reports as part of the management engagement committee each year.	Unchanged
Inability to sell vacant condominiums	Inability to sell vacant condominiums in the Berlin market due to changing political or economic conditions could affect the Company's cashflows in the short term, which may affect the ability of the company to fund its capital expenditure programme or fund its annual dividend.	Over half of the Company's properties have been split in the German land registry, the final step to allowing the sale of properties as individual condominiums. The Property Advisor reviews the condominium profile on a monthly basis, and the Company can bring new condominium properties online quickly for sale as appropriate. The Company intends to market vacant condominiums for sale from its portfolio which are easier to release into the market, even with the potential market effects of the Mietendeckel. The Company has also entered into an agreement with Accentro, one of Germany's leading condominium sales platforms. This agreement provides access to a successful, European-wide, distribution platform which should allow PSD to accelerate sales of apartments if required.	Unchanged
Insufficient investment opportunity	Availability of potential investments which meet the Group's investment objective can be negatively affected by supply and demand dynamics within the market for German residential property and the state of the German economy and financial markets more generally.	The Property Advisor has been active in the German residential property market since 2006. It has specialised acquisition personnel and an extensive network of industry contacts including property agents, industry consultants and the principals of other investment funds. It is expected that future acquisitions will be sourced from these channels. While the market in Berlin is currently challenging due to the recently introduced Mietendeckel, The Property Advisor believes that this will create other opportunities, including acquiring in the suburbs of Berlin, outside the scope of the Mietendeckel, where the growth potential is more promising.	Increasing
Breach of covenant requirements	Should any fall in revenues result in the Group breaching financial covenants given to any lender, the Group may be required to repay such borrowings in whole or in part, together with any related costs.	The Group took on new covenants when signing the €190m debt with Natixis; Interest coverage ratio (ICR), debt yield, and Loan-to-Value covenants. Only the Debt yield and ICR covenants are "hard" covenants resulting in an event of default in case of breach. The loan-to-value covenant is a cash trap covenant alone, with no event of default. The Company carried out extensive sensitivity analysis prior to signing these covenants, and even in the most stressed Mietendeckel scenario, no covenants were breached. The cashflow impact of the Mietendeckel is not due to be felt until November 2020, therefore the impact on rental income in 2020 is set to be minimal. The Company therefore has sufficient time to implement its various strategies discussed within this announcement to counteract the effects on rental income. In the event that rent levels or property values were to fall to a point where the covenants were in danger of being affected, the Company would use its surplus cashflow and cash reserves to pay down the debt balances to rectify the situation. At the most recent covenant test date, in January 2020, all covenants were cleared with significant headroom.	Increasing
Macro-economic environment	A deterioration in economic growth and a recessionary environment could adversely affect tenant demand and vacancy, leading to a reduction in rental and property values.	Although the Board and Property Advisor cannot control external macro-economic risks, economic indicators are constantly monitored by both the Board and Property Advisor and Group strategy is tailored accordingly. The Company has considered the impact of the Coronavirus (COVID-19) outbreak, and while it considers the risk to the Group's operations to be minimal, it continues to monitor the situation. The Company is a Jersey and Guernsey based entity operating in Germany, and therefore Brexit should not affect the fund as it currently operates outside the UK.	Increasing
Reputational risk	Adverse publicity and inaccurate media reporting could reflect negatively on stakeholders' perception of the Group, its strategy and its key personnel. Landlords in Berlin are likely to face increasing negative sentiment and media scrutiny in the light of the Mietendeckel.	The Group has retained an external public relations consultancy and press releases are approved by the Board prior to release. The Group maintains regular communication with key shareholders and conducts presentations and roadshows to provide investors with relevant information on the Group, its strategy and key personnel. The Group also has a dedicated CSR committee of the Board which ensures the company ethos is in line with societal expectations. The Company also maintains a technical department with the property advisor who ensures that all health and safety regulations are followed with respect to landlord obligations in Berlin.	Increasing
Non-compliance with new regulatory, health and safety, accounting and taxation legislation	Failure to identify and respond to the introduction of new financial regulation in a timely manner. Risk of reputational damage, penalties or fines. Failure to suitably prove that the substance of the Company is in Jersey could lead to a change in the tax residency.	The Group employs internal compliance and corporate governance advisors to provide updates and boardroom briefings on regulatory changes likely to impact the Group. The Group works closely with external accountants and tax advisors to keep up to date with changes to financial regulation in the UK, Channel Islands and Germany. Berlin is currently under the government of a "Red-red-green" coalition which is looking at tenant law, however the Company believes that its external legal, tax and accountancy advisors, and market experience are sufficient to ensure that there is no non-compliance with new regulations as they come in. The Group is carrying out an ongoing remediation project with its new administrators to ensure all regulatory processes have been followed with respect to its substance in Jersey requirements, and its corporate governance. The Group has also taken tax residency advice over 2019 to ensure The Group is still complying with residency in Jersey. The Company also maintains a technical department with the property advisor who ensures that all health and safety regulations are followed with respect to landlord obligations in Berlin.	Unchanged
Reliance on the Property Advisor and its key personnel	The Group's future performance depends on the success of the Property Advisor's strategy, skill, judgement and reputation. The departure of one or more key employees may have an adverse effect on the performance of the Group and any diminution in the Property Advisor's reputation may have an adverse effect on the Group's performance.	Since the Company listed on the London Stock Exchange, the Property Advisor has expanded headcount through the recruitment of several additional experienced London and Berlin-based personnel. Additionally, senior Property Advisor personnel and their families retain a stake in the Group, aligning their interests with other key stakeholders. In November 2018 the Group announced that it had signed a new Property Advisor agreement with PMM, committing the Property Advisor to the Fund for the foreseeable future.	Unchanged
Coronavirus (COVID-19) outbreak	Disruption to business activities, European economic slowdown, equity market decline.	The broader impact of the Coronavirus outbreak will depend on how the virus spreads and the response of the authorities. The Property Advisor has considered and will continue to monitor the threat and implications of the coronavirus and has prepared contingency and mitigation plans.  The Group has carried out extensive scenario modelling, estimating the impact of COVID-19 on the Group's financial and operational performance, further analysis of this modelling can be found in the Annual Report. All the Property Advisors IT systems are cloud based and all employees have the necessary equipment to conduct their day to day business activities from home if required. All tenant payments are by bank transfer / direct debit.  Furthermore, a  significant portion of the Berlin economy is based on the service sector, which tends to offer a relatively flexible working environment  and is likely to be less affected by the virus than other sectors of the economy. This overall effect however remains uncertain.	Increasing

Going concern

The Directors have reviewed projections for the period to 31 December 2022 using assumptions which the Directors consider to be appropriate to the current financial position of the Group with regard to  revenues, its cost base, the Group's investments, borrowing and debt repayment plans, and the assumed passing of the continuation vote. These projections show that the Group should be able to operate within the level of its current resources and expects to manage all debt covenants for a period of at least 12 months from the date of approval of the financial statements. The Group's going concern assumption is based on the outcome of a variety of scenarios that show the Group's ability to withstand the expected market disruption arising from post balance sheet events, including the Mietendeckel, and COVID-19. The Group's business activities together with the factors likely to affect its future development and the Group's objectives, policies and processes from managing its capital and its risks are set out in the Strategic Report. After making enquiries and having regard to the FRC's Guidance for Companies on COVID-19 issued in March 2020, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, and, therefore, continue to adopt the going concern basis in the preparation of these financial statements.

Viability Statement

The Directors have assessed the viability of the Group over a three-year period. The Directors have chosen three years because that is the period that broadly fits within the financing and development cycle of the business. The Viability Statement is based on a robust assessment of those risks that would threaten the business model, future performance, solvency or liquidity of the Group, as set out in the assessment of risks described earlier in this document. 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 2022:

a) the potential operating cash flow requirement of the Group;

b) seasonal fluctuations in working capital requirements;

c) property vacancy rates;

d) rent arrears and bad debts;

e) capital and administration expenditure (excluding potential acquisitions as set out below) during the period;

f) condominium sales proceeds;

g) the impact of the Mietendeckel in the event a legal challenge is unsuccessful, which the Board considers to be unlikely;

h) the potential impact of COVID-19; and

i) the passing of the continuation vote scheduled for the AGM in May 2020.

Under normal scenarios, this base case model assumes stresses to each of a) through to f) in the above list. However, this year the Group has additionally considered g, h and i.

As per the Company´s Articles of Association, a continuation vote is due at the AGM scheduled for May 2020. The Directors have examined the current circumstances of the Group and its prospects over the next three years. Given current uncertainty related to the Mietendeckel and COVID-19 and in consideration that both of these will be short-term events, the Directors believe that the continuation of the Company should deliver a better outcome for shareholders than any proposal to reorganise, unitise or reconstruct the Company or for the Company to be wound up with the aim of enabling members to realise their holdings in the Company. The Directors are, therefore, recommending that the vote to continue the Group is passed at the forthcoming AGM, and are of the opinion that there is no material uncertainty that the vote to continue will be passed.

The assumptions on the effect of the Mietendeckel and COVID-19, as they relate to the Company, were assessed by the Board. They are intended to demonstrate the degree of stress that the Company is able to withstand over an extended period. The Board considers that it is unlikely that the more severe assumptions reviewed will represent a real-life scenario as the Company believes that the Mietendeckel will be found unconstitutional and, as the German government has very high levels of social protection, arrears arising from COVID-19 are unlikely to reach the levels incorporated in the model.

In re sponse to the risks posed by the Mietendeckel and COVID-19, the directors applied additional stresses to the model as described below.

In the event that the Mietendeckel is not reversed, the Group has estimated that it could have a material impact on its revenues as set out in the tables contained within this announcement. The cash impact of this fall in revenues could be mitigated in full by reducing capital expenditure down to a level of essential maintenance only, to preserve the condition of the assets to required standards. Furthermore, as set out in the Mietendeckel response in this announcement, the Group would plan to increase sales of condominiums over the forecast period to mitigate any falls in revenue.

COVID-19 has potential to cause significant disruption to the German economy for at least a large part of 2020 and, while the financial effect on the Group is difficult to quantify, various scenarios have been modelled in respect of the impact of the COVID-19 outbreak to stress the financial metrics of the Group. This includes tenants' ability to pay their rents as they fall due, the impact on the ability to sell condominiums, and the consequential impact on debt finance facilities.

Financial modelling and stress testing was carried out on the Group's cashflows taking into account the Mietendeckel and COVID-19, and the following assumptions, which the Directors consider to be reasonable estimates of a worst case scenario, were made with respect to the operating metrics of the Company:

· COVID-19 leads to a significant increase in tenant arrears up to December 2020 - current tenant arrears stand at around 1% of total revenues and, whilst the impact of the pandemic is uncertain it has the potential to lead to tenant defaults;

· projected condominium sales are reduced to only contractually agreed sales over the forecast period;

· capital expenditure is reduced to a level of essential maintenance that preserves the condition of the assets to required standards, but it is lower than in prior years, and in a base case, business as usual, scenario;

· dividends are maintained at current levels throughout the forecast period, but, remain a potential source of mitigation from interim 2020 onwards if cash retention is required;

· the Mietendeckel remains in force throughout the forecast period;

·     Debt facilities with a maturity during the forecast period are to be refinanced using the acquisition facility signed with Natixis in 2019; and

· EPRA NAV is assumed to remain constant during the forecast period. The cash impact of any EPRA NAV movements is limited as few overhead or property costs are linked to EPRA NAV.

After applying the assumptions above, individually and collectively, there was no scenario by which the viability of the Company over the next 12 months was brought into doubt from a cashflow perspective. Under the stresses set out above, mitigation may be required in 2021 and 2022 and headroom could be obtained in the following ways:

· reducing the dividend to preserve cash; and

· selling individual assets, or condominiums to release cash.

Under these stressed assumptions used to assess viability, including the impact of COVID-19, the Group is able to manage all banking covenant obligations during the period using the available liquidity to reduce debt levels, as appropriate.

The projection of cash flows does 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 complete a formal review of the working capital headroom of the Group for material acquisitions.

On the basis of the above, and assuming the principal risks are managed or mitigated as expected, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period of their assessment.

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

Directors Responsibilities

The directors are responsible for preparing the   Annual Report and the financial statements in accordance with applicable law and regulations, including the requirements of the Listing Rules and the Disclosure Guidance and Transparency Rules.

Jersey company law requires the directors to prepare group financial statements for a period of not more than 18 months in accordance with generally accepted accounting principles. The directors are required under the Listing Rules of the FCA to prepare group financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU").    

The financial statements of the Group are required by law to give a true and fair view of the state of the Group's affairs at the end of the financial period and of the profit or loss of the Group for that period  and are required by IFRS as adopted by the EU to present fairly the financial position and performance of the group.

In preparing the Group financial statements, the directors should:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· state whether they have been prepared in accordance with IFRS as adopted by the EU; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors are responsible for keeping accounting records which are sufficient to show and explain the Group's  transactions and are such as to disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the Financial Statements comply with the requirements of the Companies (Jersey) Law 1991 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Phoenix Spree Deutschland Limited 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 Consolidated Financial Statements, prepared in accordance with the applicable set of accounting standards (as detailed above) and Company (Jersey) Law 1991, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group;

· the management report includes a fair and balanced review of the development and performance of the business and the position of the Group, together with a description of the principal and emerging risks and uncertainties they face, as well as the business model and strategy of the Group; and

· the Annual Report and Consolidated Financial Statements, as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's position, performance, business model and strategy.

So far as the Directors are aware, there is no relevant audit information of which the Auditor is unaware, and each Director has taken all steps that he or she ought to have taken as a Director in order to make himself or herself aware of any relevant audit information and to establish that the Auditor is aware of that information.

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

The Annual Report and Financial Statements, taken as a whole, are considered by the Board to be fair, balanced and understandable, and provide the information necessary for shareholders to assess the Company's position, performance, business model and strategy.

Consolidated Statement of Comprehensive Income
For the year ended 31 December 2019
																		Year ended		Year ended
														Notes				31 December 2019		31 December 2018
																			€'000		€'000
Continuing operations
Revenue														6					22,600		22,681
Property expenses														7					(14,196)		(15,763)
Gross profit																			8,404		6,918
Administrative expenses														8					(3,103)		(3,194)
Gain on disposal of investment property (including investment property held for sale)														10					858		1,026
Investment property fair value gain														11					41,491		66,146
Performance fee due to property advisor														27					(2,798)		(4,010)
Separately disclosed items														12					(278)		(966)
Operating profit																			44,574		65,920
Net finance charge														13					(16,013)		(9,491)
Profit before taxation																			28,561		56,429
Income tax expense														14					(5,817)		(11,071)
Profit after taxation																			22,744		45,358
Other comprehensive income																			-		-
Total comprehensive income for the year																			22,744		45,358
Total comprehensive income attributable to:
Owners of the parent																			22,293		45,094
Non-controlling interests																			451		264
																			22,744		45,358
Earnings per share attributable to the owners of the parent:
From continuing operations
Basic (€)														30					0.22		0.46
Diluted (€)														30					0.22		0.46
Consolidated Statement of Financial Position
At 31 December 2019
																		As at			As at
														Notes				31 December 2019		31 December 2018
																			'000		'000
ASSETS
Non-current assets
Investment properties														17					719,521		632,933
Property, plant and equipment														19					54		88
Other financial assets at amortised cost														20					876		2,406
Deferred tax asset														14					2,529		948
																			722,980		636,375
Current Assets
Investment properties - held for sale														18					10,639		12,747
Other financial assets at amortised cost														20					1,590		-
Trade and other receivables														21					7,937		7,531
Cash and cash equivalents														22					42,414		26,868
																			62,580		47,146
Total assets																			785,560		683,521
EQUITY AND LIABILITIES
Current liabilities
Borrowings														23					17,752		3,642
Trade and other payables														24					7,236		10,429
Derivative financial instruments														25					-		1,354
Other financial liabilities														26					6,951		-
Current tax														14					1,413		1,387
																			33,352		16,812
Non-current liabilities
Borrowings														23					258,502		191,632
Derivative financial instruments														25					15,979		4,637
Other financial liabilities														26					-		7,135
Deferred tax liability														14					60,825		53,458
																			335,306		256,862
Total liabilities																			368,658		273,674
Equity
Stated capital														28					196,578		196,578
Treasury shares														28					(11,354)		-
Share based payment reserve														27					6,808		4,010
Retained earnings																			221,859		207,270
Equity attributable to owners of the parent																			413,891		407,858
Non-controlling interest														29					3,011		1,989
Total equity																			416,902		409,847
Total equity and liabilities																			785,560		683,521
Consolidated Statement of Changes in Equity
For the year ended 31 December 2019
								Attributable to the owners of the parent
					Stated capital			Treasury shares			Share based payment reserve			Retained earnings			Total		Non-controlling interest		Total equity
					€'000			€'000			€'000			€'000			€'000		€'000		€'000
Balance at 1 January 2018					162,630			-			33,953			169,634			366,217		1,725		367,942
Comprehensive income:
Profit for the year					-			-			-			45,094			45,094		264		45,358
Other comprehensive income					-			-			-			-			-		-		-
Total comprehensive income for the year					-			-			-			45,094			45,094		264		45,358
Transactions with owners -
recognised directly in equity:
Issue of shares					33,948			-			(33,948)			-			-		-		-
Dividends paid					-			-			-			(7,458)			(7,458)		-		(7,458)
Performance fee					-			-			4,010			-			4,010		-		4,010
Adjustment to performance fee					-			-			(5)			-			(5)		-		(5)
Balance at 31 December 2018					196,578			-			4,010			207,270			407,858		1,989		409,847
Comprehensive income:
Profit for the year					-			-			-			22,293			22,293		451		22,744
Other comprehensive income					-			-			-			-			-		-		-
Total comprehensive income for the year					-			-			-			22,293			22,293		451		22,744
Transactions with owners -
recognised directly in equity:
Dividends paid					-			-			-			(7,704)			(7,704)		-		(7,704)
Performance fee					-			-			2,798			-			2,798		-		2,798
Non-controlling interests on acquisition of subsidiaries					-			-			-			-			-		571		571
Acquisition of treasury shares					-			(11,354)			-			-			(11,354)		-		(11,354)
Balance at 31 December 2019					196,578			(11,354)			6,808			221,859			413,891		3,011		416,902
Treasury shares comprise the accumulated cost of shares acquired on-market.
The share based payment reserve was established in relation to the issue of shares for the payment of the performance fee of the property advisor.
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 2019
																		Year ended		Year ended
																		31 December 2019		31 December 2018
																			€'000		€'000
Profit before taxation																			28,561		56,429
Adjustments for:
Net finance charge																			16,013		9,491
Gain on disposal of investment property																			(858)		(1,026)
Investment property revaluation gain																			(41,491)		(66,146)
Depreciation																			16		16
Performance fee charge																			2,798		4,010
Operating cash flows before movements in working capital																			5,039		2,774
(Increase) / decrease in receivables																			(393)		6,492
(Decrease) / increase in payables																			(3,193)		3,908
Cash generated from operating activities																			1,453		13,174
Income tax paid																			(5)		(4,678)
Net cash generated from operating activities																			1,448		8,496
Cash flow from investing activities
Proceeds on disposal of investment property (net of disposal costs)																			13,526		86,021
Interest received																			62		54
Capital expenditure on investment property																			(6,459)		(7,943)
Property additions																			(32,208)		(47,329)
Disposals/(additions) to property, plant and equipment																			18		(12)
Net cash used in investing activities																			(25,061)		30,791
Cash flow from financing activities
Interest paid on bank loans																			(6,160)		(5,118)
Repayment of bank loans																		(124,032)			(54,680)
Drawdown on bank loan facilities																			188,594		27,660
Dividends paid																			(7,704)		(7,458)
Acquisition of treasury shares																			(11,536)		-
Net cash generated from financing activities																			39,162		(39,596)
Net increase / (decrease) in cash and cash equivalents																			15,549		(309)
Cash and cash equivalents at beginning of year																			26,868		27,182
Exchange (losses) / gains on cash and cash equivalents																			(3)		(5)
Cash and cash equivalents at end of year																			42,414		26,868
Reconciliation of Net Cash Flow to Movement in Debt
For the year ended 31 December 2019
																		Year ended		Year ended
																		31 December 2019		31 December 2018
																			€'000		€'000
Cashflow from increase/ (decrease) in debt financing																			64,562		(27,020)
Non cashflow from increase in debt financing																			16,418		-
Change in net debt resulting from cash flows																			80,980		(27,020)
Movement in debt in the year																			80,980		(27,020)
Debt at the start of the year																			195,274		222,294
Debt at the end of the year																			276,254		195,274
Notes to the Financial Statements
For the year ended 31 December 2019
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, Guernsey and Germany. Phoenix Spree Deutschland Limited is listed on the premium segment of the Main Market of the London Stock Exchange.
The Group invests in residential and commercial property in Berlin, Germany.
The registered office is at 12 Castle Street, St Helier, Jersey, JE2 3RT, Channel Islands.
2 - Summary of significant accounting policies
The principal accounting policies adopted are set out below.
2.1 Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and interpretations (collectively, 'IFRS'), International and 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 2019 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 2019 have been audited and approved, but have not yet been filed.  The Group's audited financial statements for the period ended 31 December 2019 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 5 April 2020.
2.2 Going concern
The Directors have prepared projections for the period to 31 December 2022. 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 has considered the current economic environment in its going concern assessment, including COVID - 19, the Mietendeckel and the continuation vote, further information can be found in the viability statement. The Group therefore continues to adopt the going concern basis in preparing its consolidated financial statements.
2.3 Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). The Company controls an entity when the Group is exposed to, or has rights to, variable returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
Profit or loss and each component of other comprehensive income are attributable to the owners of the Company and to the non-controlling interests. Total comprehensive income of the subsidiaries is attributable to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
Accounting policies of subsidiaries which differ from Group accounting policies are adjusted on consolidation. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Non-controlling interests in subsidiaries are identified separately from the Group's equity therein. Those interests of non-controlling shareholders that present ownership interests entitling their holders to a proportionate share of net assets upon liquidation may initially be measured at fair value or at the non-controlling interests' proportionate share of the fair value of the acquiree's identifiable net assets. The choice of measurement is made on an acquisition-by-acquisition basis. Other non-controlling interests are initially measured at fair value. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests' share of subsequent changes in equity.
Changes in the Group's interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amount of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the Company.
2.4 Revenue recognition
Revenue includes rental income and service charges and other amounts directly recoverable from tenants. Rental income and service charges from operating leases are recognised as income on a straight-line basis over the lease term. When the Group provides incentives to its tenants, the cost of incentives are recognised over the lease term, on a straight-line basis, as a reduction of rental income.
2.5 Foreign currencies
(a) Functional and presentation currency
The currency of the primary economic environment in which the Company operates ('the functional currency') is the Euro (€). The presentational currency of the consolidated financial statements is also the Euro (€).
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Foreign exchange gains and losses resulting from such transactions are recognised in the consolidated statement of comprehensive income.
Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
2.6 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating-decision maker.  The chief operating-decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors. The Board has identified the operations of the Group as a whole as the only operating segment.
2.7 Operating profit
Operating profit is stated before the Group's gain or loss on its financial assets and after the revaluation gains or losses for the year in respect of investment properties and after gains or losses on the disposal of investment properties.
2.8 Administrative and property expenses
All expenses are accounted for on an accruals basis and are charged to the consolidated statement of comprehensive income in the period in which they are incurred. Service charge costs, to the extent that they are not recoverable from tenants, are accounted for on an accruals basis and included in property expenses.
2.9 Separately disclosed items
Certain items are disclosed separately in the consolidated financial statements where this provides further understanding of the financial performance of the Group, due to their significance in terms of nature or amount.
2.10 Property Advisor fees
The element of Property Advisor fees for management services provided are accounted for on an accruals basis and are charged to the consolidated statement of comprehensive income. These fees are detailed in note 7 and classified under 'Property advisors' fees and expenses'. The settlement of the Property Advisor performance fees is detailed in note 27. Due to the nature of the settlement of the performance fee, any movement in the amount payable at the year end is reflected within the share based payment reserve on the consolidated statement of financial position.
2.11 Investment property
Property that is held for long-term rental yields or for capital appreciation, or both, 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 the consolidated statement of comprehensive income 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 17 on a building-by-building basis. Such estimates are inherently subjective and actual values can only be determined in a sales transaction. The valuations have been prepared by JLL on a consistent basis at each reporting date.
Subsequent expenditure is added to the asset's carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Repairs and maintenance costs are charged to the consolidated statement of comprehensive income during the financial period in which they are incurred. Changes in fair values are recorded in the consolidated statement of comprehensive income for the year.
Purchases and sales of investment properties are recognised on legal completion.
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset, where the carrying amount is the higher of cost or fair value) is included in the consolidated statement of comprehensive income in the period in which the property is derecognised.
2.12 Current assets held for sale - investment property
Current assets (and disposal groups) classified as held for sale are measured at the most recent valuation.
Current assets (and disposal groups) are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
The Group recognises an asset in this category once the Board has committed the sale of an asset and marketing has commenced.
When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.
If an asset held for sale is unsold within one year of being classified as such, it will continue to be classified as held for sale if:
(a) at the date the Company commits itself to a plan to sell a non-current asset (or disposal group) it reasonably expects that others (not a buyer) will impose conditions on the transfer of the asset that will extend the period required to complete the sale, and actions necessary to respond to those conditions cannot be initiated until after a firm purchase commitment is obtained, and a firm purchase commitment is highly probable within one year;
(b) the Company obtains a firm purchase commitment and, as a result, a buyer or others unexpectedly impose conditions on the transfer of a non-current asset (or disposal group) previously classified as held for sale that will extend the period required to complete the sale, and timely actions necessary to respond to the conditions have been taken, and a favourable resolution of the delaying factors is expected;
(c) during the initial one-year period, circumstances arise that were previously considered unlikely and, as a result, a non-current asset previously classified as held for sale is not sold by the end of that period, and during the initial one-year period the Company took action necessary to respond to the change in circumstances, and the non-current asset is being actively marketed at a price that is reasonable, given the change in circumstances, and the criteria above are met;
(d) otherwise it will be transferred back to investment property.
2.13 Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation.
Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is charged so as to write off the costs of assets to their residual values over their estimated useful lives, on the following basis:
Equipment, 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 the consolidated statement of comprehensive income.
2.14 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the consolidated statement of comprehensive income in the period in which they are incurred.
2.15 Tenants deposits
Tenants deposits are held off the consolidated statement of financial position in a separate bank account in accordance with German legal requirements, and the funds are not accessible to the Group. Accordingly, neither an asset nor a liability is recognised.
2.16 Financial Instruments
Financial assets and financial liabilities are recognised in the Group's statement of financial position when the Group becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
Trade and other receivables
Trade receivables are amounts due from tenants for rents and service charges and are initially recognised at the amount of the consideration that is unconditional and subsequently carried at amortised cost as the Group's business model is to collect the contractual cash flows due from tenants. Provision is made based on the expected credit loss model which reflects the Company's historical credit loss experience over the past three years but also reflects the lifetime expected credit loss.
Cash and cash equivalents
Cash and cash equivalents are defined as cash and short term deposits, including any bank overdrafts, with an original maturity of three months or less, measured at amortised cost.
Trade and other payables
Trade payables are recognised and carried at their invoiced value inclusive of any VAT that may be applicable, and subsequently at amortised cost using the effective interest method.
Borrowings
All loans and borrowings are initially measured at fair value less directly attributable transaction costs. After initial recognition, all interest-bearing loans and borrowings are subsequently measured at amortised cost, using the effective interest method.
The interest due within the next twelve months is accrued at the end of the year and presented as a current liability within trade and other payables.
Treasury shares
When shares recognised as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the treasury share reserve. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity and the resulting surplus or deficit on the transaction is presented within share premium.
Interest-rate swaps
The Group uses interest-rate swaps to manage its market risk.  The Group does not hold or issue derivatives for trading purposes.
The interest-rate swaps are recognised in the Statement of Financial Position at fair value, based on counterparty quotes.  The gain or loss on the swaps is recognised in the income statement within net finance charges.
2.17 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the consolidated statement of comprehensive income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In that case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
(a) Current tax
The current tax charge is based on taxable profit for the year. Taxable profit differs from net profit reported in the consolidated statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the accounting date.
(b) Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Deferred tax is charged or credited in the consolidated statement of comprehensive income except when it relates to items credited or charged directly in equity, in which case the deferred tax is also dealt with in equity.
Deferred tax is calculated at the tax rates and laws that are expected to apply to the period when the asset is realised or the liability is settled based upon tax rates that have been enacted or substantively enacted by the accounting date.
The carrying amount of deferred tax assets is reviewed at each accounting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
2.18 New standards and interpretations
The following relevant new standards, amendments to standards and interpretations have been issued, and are effective for the financial year beginning on 1 January 2019, as adopted by the European Union:
Title													As issued by the IASB, mandatory for accounting periods starting on or after
IFRS 16 - Leases													Accounting periods beginning on or after 1 January 2019
IFRIC Interpretation 23 Uncertainty over Income Tax Treatment													Accounting periods beginning on or after 1 January 2019
Amendments to IFRS 9: Prepayment Features with Negative Compensation													Accounting periods beginning on or after 1 January 2019
Annual Improvements 2015-2017 Cycle													Accounting periods beginning on or after 1 January 2019
IFRS 16 - Leases
IFRS 16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes to lessee accounting by removing the distinction between operating and finance leases and requiring the recognition of a right-of-use asset and a lease liability at commencement for all leases, except for short-term leases and leases of low value assets. In contrast to lessee accounting, the requirements for lessor accounting have remained largely unchanged. The impact of the adoption of IFRS 16 on the Group's consolidated financial statements is described below.
Impact on Lessor Accounting
IFRS 16 does not change substantially how a lessor accounts for leases. Under IFRS 16, a lessor continues to classify leases as either finance leases or operating leases and account for those two types of leases differently.
However, IFRS 16 has changed and expanded the disclosures required, in particular with regard to how a lessor manages the risks arising from its residual interest in leased assets.
Financial impact of the initial application of IFRS 16
Being that the Group is not a lessee there has been no substantial financial impact that requires disclosure on the adoption of this standard.
IFRIC 23 Uncertainty over Income Tax Treatments
The Group has adopted IFRIC 23 for the first time in the current year. IFRIC 23 sets out how to determine the accounting tax position when there is uncertainty over income tax treatments. The Interpretation requires the Group to:
• determine whether uncertain tax positions are assessed separately or as a group; and
• assess whether it is probable that a tax authority will accept an uncertain tax treatment used, or proposed to be used, by an entity in its income tax filings.
If yes, the Group should determine its accounting tax position consistently with, the tax treatment used or planned to be used in its income tax filings. If no, the Group should reflect the effect of uncertainty in determining its accounting tax position using either the most likely amount or the expected value method.
Amendments to IFRS 9 Prepayment Features with Negative Compensation
The Group has adopted the amendments to IFRS 9 for the first time in the current year. The amendments to IFRS 9 clarify that for the purpose of assessing whether a prepayment feature meets the 'solely payments of principal and interest' (SPPI) condition, the party exercising the option may pay or receive reasonable compensation for the prepayment irrespective of the reason for prepayment. In other words, financial assets with prepayment features with negative compensation do not automatically fail SPPI.
Annual Improvements to IFRS Standards 2015-2017 Cycle Amendments to IFRS 3 Business Combinations, IFRS 11 Joint Arrangements, IAS 12 Income Taxes and IAS 23 Borrowing Costs
The Group has adopted the amendments included in the Annual Improvements to IFRS Standards 2015-2017 Cycle for the first time in the current year. The Annual Improvements include amendments to four Standards:
IAS 12 Income Taxes
The amendments clarify that the Group should recognise the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the Group originally recognised the transactions that generated the distributable profits. This is the case irrespective of whether different tax rates apply to distributed and undistributed profits.
IAS 23 Borrowing Costs
The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings.
IFRS 3 Business Combinations
The amendments clarify that when the Group obtains control of a business that is a joint operation, the Group applies the requirements for a business combination achieved in stages, including remeasuring its previously held interest (PHI) in the joint operation at fair value. The PHI to be remeasured includes any unrecognised assets, liabilities and goodwill relating to the joint operation.
New and revised IFRS Standards in issue but not yet effective
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
IFRS 17 - Insurance Contracts													Accounting periods beginning on or after 1 January 2021
IFRS 10 and IAS 28 (amendments)													Accounting periods beginning on or after 1 January 2020
Amendments to IFRS 3													Accounting periods beginning on or after 1 January 2020
Amendments to IAS 1 and IAS 8													Accounting periods beginning on or after 1 January 2020
Amendments to References to the Conceptual Framework in IFRS Standards													Accounting periods beginning on or after 1 January 2020
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 Risk Committee under policies approved by the Board of Directors. The Board provides principles for overall risk management, as well as policies covering specific areas, such as interest rate risk, credit risk and investment of excess liquidity.
3.2 Market risk
Market risk is the risk of loss that may arise from changes in market factors such as foreign exchange rates, interest rates and general property market risk.
(a) Foreign exchange risk
The Group operates in Germany and is exposed to foreign exchange risk arising from currency exposures, primarily with respect to Sterling against the Euro arising from the costs which are incurred in Sterling. Foreign exchange risk arises from future commercial transactions, and recognised monetary assets and liabilities denominated in currencies other than the Euro.
The Group's policy is not to enter into any currency hedging transactions, as the majority of transactions are in euros, the Groups functional currency.  Therefore any currency fluctuations are minimal.
(b) Interest rate risk
The Group has exposure to interest rate risk. It has external borrowings at a number of different variable interest rates. The Group is also exposed to interest rate risk on some of its financial assets, being its cash at bank balances. Details of actual interest rates paid or accrued during each period can be found in note 23 to the consolidated financial statements.
The Group's policy is to manage its interest rate risk by entering into a suitable hedging arrangement, either caps or swaps, in order to limit exposure to borrowings at variable rates.
(c) General property market risk
Through its investment in property, the Group is subject to other risks which can affect the value of property. The Group seeks to minimise the impact of these risks by review of economic trends and property markets in order to anticipate major changes affecting property values.
(d) Market risk - Rent legislation
Through its policy of investing in Berlin, the Group is subject to the risk of changing rental legislation, specifically the Mietendeckel which, if found constitutional, can affect the both the rental income, and the value of property. The Group seeks to mitigate any effect of the Mietendeckel using strategies set out in this announcement.
(e) Market risk - COVID - 19
The broader impact of the novel coronavirus (COVID-19) outbreak will depend on how the virus spreads and the response of the authorities. The risk around whether service providers can continue their duties, and whether tenants can continue to pay rents as they come due will continue to be monitors by the Board.
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 23 after deducting cash and cash equivalents) and equity of the Group (comprising stated capital (excluding treasury shares), reserves and retained earnings).
In order to manage the capital structure, the Group can adjust the amount of dividend paid to shareholders, issue or repurchase shares or sell assets to reduce debt.
When reviewing the capital structure the Group considers the cost of capital and the risks associated with each class of capital. The Group reviews the gearing ratio which is determined as the proportion of net debt to equity. In comparison with comparable companies operating within the property sector the Board considers the gearing ratios to be reasonable.
The gearing ratios for the reporting periods are as follows:
																			As at		As at
																		31 December 2019		31 December 2018
																			€'000		€'000
Borrowings																		(276,254)		(195,274)
Cash and cash equivalents																			42,414		26,868
Net debt																		(233,840)		(168,406)
Equity																			416,902		409,847
Net debt to equity ratio																		56%		41%
4. Critical accounting estimates and judgements
The preparation of consolidated financial statements in conformity with IFRS requires the Group to make certain critical accounting estimates and judgements. In the process of applying the Group's accounting policies, management has decided the following estimates and assumptions have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the financial year;
i) Estimate of fair value of investment properties
The valuation of the Group's property portfolio is inherently subjective due to, among other factors, the individual nature of each property, its location and condition, and expected future rentals. The valuation as at 31 December 2019 is based on the rules, regulations and market as at that date, and does not take into account the potential effects of the Mietendeckel which came into law after the reporting date.
The best evidence of fair value is current prices in an active market of investment properties with similar leases and other contracts. In the absence of such information, the Group determines the amount within a range of reasonable fair value estimates. In making its estimate, the Group considers information from a variety of sources, including:
a) 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.
b) Current prices in an active market for properties of different nature, condition or location (or subject to different lease or other contracts), adjusted to reflect those differences.
c) 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.
The Directors remain ultimately responsible for ensuring that the valuers are adequately qualified, competent and base their results on reasonable and realistic assumptions. The Directors have appointed JLL as the real estate valuation experts who determine the fair value of investment properties using recognised valuation techniques and the principles of IFRS 13. Further information on the valuation process can be found in note 17.
ii) Judgment in relation to the recognition of assets held for sale
Management has made an assumption in respect of the likelihood of investment properties - held for sale, being sold within 12 months, in accordance with the requirement of IFRS 5. Management considers that based on historical and current experience that the properties can be reasonably expected to sell within 12 months.
5.  Segmental information
In prior periods, information reported to the Board of Directors, the chief operating decision maker, for the purposes of resource allocation and assessment of segment performance was focussed on the different revenue streams that existed within the Group. In these periods the Group's principal reportable segments under IFRS 8 were as follows:
- Residential; and
- Commercial
The Group is required to report financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet the following specified criteria:
- its reported revenue, from both external customers and intersegment sales or transfers, is 10 per cent or more of the combined revenue, internal and external, of all operating segments, or
- the absolute measure of its reported profit or loss is 10 per cent or more of the greater, in absolute amount, of (i) the combined reported profit of all operating segments that did not report a loss and (ii) the combined reported loss of all operating segments that reported a loss, or
- its assets are 10 per cent or more of the combined assets of all operating segments.
Management have applied the above criteria to the commercial segment and the commercial segment is not more than 10% of any of the above criteria. The Group does not own any wholly commercial buildings nor does management report directly on the commercial results. The Board considers that the non-residential element of the portfolio is incidental to the Group's activities. Therefore, the Group has not included any further segmental analysis within these consolidated audited financial statements.
6.  Revenue
																		31 December 2019		31 December 2018
																			€'000		€'000
Rental income																			17,941		17,508
Service charge income																			4,659		5,173
																			22,600		22,681
The total future aggregated minimum rentals receivable under non-cancellable operating leases are as follows:
																				31 December 2019
																					€'000
Within 1 year																					1,462
1 - 2 years																					1,119
2 - 3 years																					857
3 - 4 years																					773
4 - 5 years																					736
Later than 5 years																					593
																					5,540
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 from tenants to cancel the lease in most cases.
The commercial leases are non-cancellable, with an average lease period of 3 years.
7.  Property expenses
																		31 December 2019		31 December 2018
																			€'000		€'000
Property management expenses																			1,066		1,024
Repairs and maintenance																			1,665		1,710
Impairment charge - trade receivables																			61		29
Other property expenses																			5,306		7,053
Property advisors' fees and expenses																			6,098		5,947
																			14,196		15,763
8.  Administrative expenses
																		31 December 2019		31 December 2018
																			€'000		€'000
Secretarial and administration fees																			896		880
Legal and professional fees																			1,329		1,160
Directors' fees																			246		300
Audit and accountancy fees																			761		840
Bank charges																			19		54
Loss on foreign exchange																			49		133
Depreciation																			16		16
Other income																			(213)		(189)
																			3,103		3,194
Key management compensation - the functions of management are undertaken by external providers of professional services, as set out in note 34.
Further details of the Directors' fees are set out in the Directors' Remuneration Report.
9.  Auditor's remuneration
An analysis of the fees charged by the auditor and its associates is as follows:
																		31 December 2019		31 December 2018
																			€'000		€'000
Fees payable to the Group's auditor and its associates for the audit of the consolidated financial statements:																			195		188
Fees payable to the Group's auditor and its associates for other services:
- Audit-related assurance services																			29		27
- Other																			-		8
																			224		223
10.  Gain on disposal of investment property (including investment property held for sale)
																		31 December 2019		31 December 2018
																			€'000		€'000
Disposal proceeds																			13,616		86,959
Book value of disposals																			(12,668)		(84,995)
Disposal costs																			(90)		(938)
																			858		1,026
Where there has been a partial disposal of a property, the net book value of the asset sold is calculated on a per square metre rate, based on the prior period or interim valuation.
11.  Investment property fair value gain
																		31 December 2019		31 December 2018
																			€'000		€'000
Investment property fair value gain																			41,491		66,146
Further information on investment properties is shown in note 17.
12.  Separately disclosed items
These relate to legal and professional fees incurred during a significant transaction which was considered by the Board but not pursued totalling 278,000 (December 2018: €966,000).
13.  Net finance charge
																		31 December 2019		31 December 2018
																			€'000		€'000
Interest income																			(62)		(54)
Interest from related party loans																			(54)		(83)
Fair value loss on interest rate swap																			9,988		2,658
Finance expense on bank borrowings																			6,325		5,499
Fair value charge on redemption liability																			(184)		1,471
																			16,013		9,491
14.  Income tax expense
																		31 December 2019		31 December 2018
The tax charge for the period is as follows:																			€'000		€'000
Current tax charge																			31		3,151
Deferred tax charge - origination and reversal of temporary differences																			5,786		7,920
																			5,817		11,071
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 2019		31 December 2018
																			€'000		€'000
Profit before tax on continuing operations																			28,561		56,429
Tax at German income tax rate of 15.8% (2018: 15.8%)																			4,513		8,916
Income not taxable																			(136)		(162)
Losses carried forward not recognised																			1,440		2,317
Total tax charge for the year																			5,817		11,071
Reconciliation of current tax liabilities
																		31 December 2019		31 December 2018
																			€'000		€'000
Balance at beginning of year																			1,387		2,914
Tax paid during the year																			(5)		(4,678)
Current tax charge																			31		3,151
Balance at end of year																			1,413		1,387
Reconciliation of deferred tax
														Capital gains on properties				Interest rate swaps			Total
																€'000			€'000		€'000
														(Liabilities)					Asset	(Net liabilities)
Balance at 1 January 2018																(45,117)			527		(44,590)
Charged to the statement of comprehensive income																(8,341)			421		(7,920)
Deferred tax (liability) / asset at 31 December 2018																(53,458)			948		(52,510)
Charged to the statement of comprehensive income																(7,367)			1,581		(5,786)
Deferred tax (liability) / asset at 31 December 2019																(60,825)			2,529		(58,296)
Jersey income tax
The Group is liable to Jersey income tax at 0%.
Guernsey income tax
The Group is liable to Guernsey income tax at 0%.
German tax
As a result of the Group's operations in Germany, the Group is subject to German Corporate Income Tax ('CIT') - the effective rate for Phoenix Spree Deutschland Limited for 2019 was 15.8% (2018: 15.8%).
Factors affecting future tax charges
The Group has accumulated tax losses of approximately €29.0 million (2018: €17.6 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 as there is insufficient certainty the losses can be utilised by Group entities.
15.  Dividends
																		31 December 2019		31 December 2018
																			€'000		€'000
Amounts recognised as distributions to equity holders in the period:
Interim dividend for the year ended 31 December 2019 of €2.35 cents (2.1p) (2018: €2.35 cents (2.1p)) per share																			2,420		2,420
Proposed dividend for the year ended 31 December 2019 of €5.15 cents (4.4p) (2018: €5.15 cents (4.62p)) per share																			5,034		5,189
The proposed dividend has not been included as a liability in these consolidated financial statements. The proposed dividend is payable to all shareholders on the Register of Members on 12 June 2020. The total estimated dividend to be paid is 4.4p per share. The payment of this dividend will not have any tax consequences for the Group. The translated amount shown as paid may differ from that disclosed here due to foreign exchange movements between the date of the dividend being proposed and it being paid.
16.  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, Guernsey and Germany.
Further details are given below:
											Country of incorporation						% holding			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 Spree Deutschland XII Limited														Jersey			100		Investment property
Phoenix Property Holding GmbH & Co.KG													Germany				100		Holding Company
Phoenix Spree Mueller GmbH													Germany				94.9		Investment property
Phoenix Spree Gottlieb GmbH													Germany				94.9		Investment property
PSPF Holdings GmbH													Germany				100		Holding Company
Accentro 5. WE GmbH													Germany				94.9		Investment property
Phoenix Spree Property Fund Ltd & Co. KG													Germany				94.8		Investment property
PSPF General Partner (Guernsey) Limited														Guernsey			100		Management of PSPF
During the year the Group acquired an interest of 94.9% in Accentro 5. WE GmbH for consideration of €23.6 million. The net assets acquired comprised investment property of € 43.5 million and borrowings of €16.4 million. The objective of the acquisition was to acquire a single asset, being the investment property, and for this reason the acquisition has been treated as an asset acquisition, and not a business combination
17.  Investment properties
																			2019		2018
Fair Value																			€'000		€'000
At 1 January																			645,680		609,257
Capital expenditure																			6,459		7,943
Property additions																			49,198		47,329
Disposals																			(12,668)		(84,995)
Fair value gain																			41,491		66,146
Investment properties at fair value - as set out in the report by JLL																			730,160		645,680
Assets considered as "Held for Sale" (Note 18)																			(10,639)		(12,747)
At 31 December																			719,521		632,933
The property portfolio was valued at 31 December 2019 by the Group's independent valuers, Jones Lang LaSalle GmbH ('JLL'), in accordance with the methodology described below. The valuations were performed in accordance with the current Appraisal and Valuation Standards, 8th edition (the 'Red Book') published by the Royal Institution of Chartered Surveyors (RICS).
The valuation is performed on a building-by-building basis from source information on the properties including current rent levels, void rates and non-recoverable costs provided to JLL by the Property Advisors Residential (UK) Limited. Assumptions with respect to rental growth, adjustments to non-recoverable costs and the future valuation of these are those of JLL. JLL also use comparable market transactions alongside their own assumptions to justify their valuations.  Such valuation estimates however, 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 consolidated financial statements.
The valuations have been prepared by JLL on a consistent basis at each reporting date and the methodology is consistent and in accordance with IFRS which requires that the 'highest and best use' value is taken into account where that use is physically possible, legally permissible and financially feasible for the property concerned, and irrespective of the current or intended use.
All properties are valued as Level 3 measurements under the fair value hierarchy (see note 32) as the inputs to the discounted cash flow methodology which have a significant effect on the recorded fair value are not observable. Additionally, JLL perform reference checks back to comparable market transactions to confirm the valuation model.
The unrealised fair value gain in respect of investment property is disclosed in the consolidated statement of comprehensive income as 'Investment property fair value gain'.
Valuations are undertaken using the discounted cash flow valuation technique as described below and with the inputs set out below.
Discounted cash flow methodology (DCF)
The fair value of investment properties is determined using discounted forecast cash flows, cross checked against comparable market transactions where available.
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 principal inputs to the valuation are as follows:																			Year ended		Year ended
																		31 December 2019		31 December 2018
																			Range		Range
Residential Properties
Market Rent
Rental Value (€ per sq. p.m.)																			9 - 15		7 - 14
Stabilised residency vacancy (% per year)																			2		2
Tenancy vacancy fluctuation (% per year)																			8		8 - 10
Commercial Properties
Market Rent
Rental Value (€ per sq. p.m.)																			2 - 32		4 - 31
Stabilised commercial vacancy (% per year)																			0 - 25		0 - 25
Tenancy vacancy fluctuation (% per year)																			8		8 - 10
Estimated Rental Value (ERV)
ERV per year per property (€'000)																			62 - 2,322		60 - 1,201
ERV (€ per sq.)																			8 - 15		8 - 14
Financial Rates - blended average
Discount rate (%)																			4		4
Portfolio yield (%)																			2.9		3.0
The rental values used in the valuation do not take into account the impact of the Mietendeckel rent restrictions, which were only enacted after the reporting date.
Sensitivity
Changes in the key assumptions and inputs to the valuation models used would impact the valuations as follows:
Vacancy: A change in vacancy by 1% would not materially affect the investment property fair value assessment.
Discount rate: An increase of 0.5% in the discount rate would reduce the investment property fair value by €101.9m, and a decrease in the discount rate of 0.5% would increase the investment property fair value by €169.7m.
There are, however, inter-relationships between unobservable inputs as they are determined by market conditions. The existence of an increase of more than one unobservable input could amplify the impact on the valuation. Conversely, changes on unobservable inputs moving in opposite directions could cancel each other out, or lessen the overall effect.
The Group values all investment properties in one of three ways;
Rental Scenario
Where properties have been valued under the "Discounted Cashflow Methodology" and are intended to be held by the Group for the foreseeable future, they are valued under the "Rental Scenario" This will equal the "Investment Properties" line in the Non-Current Assets section of the consolidated statement of financial position.
Condominium scenario
Where properties have the potential or the benefit of all relevant permissions required to sell apartments individually (condominiums) then we refer to this as a 'condominium scenario'. Expected sales in the coming year from these assets are considered held for sale under IFRS 5 and can be seen in note 18. The additional value is reflected by using a lower discount rate under the DCF Methodology. Properties which do not have the benefit of all relevant permissions are described as valued using a standard 'rental scenario'. Included in properties valued under the condominium scenario are properties not yet released to held for sale as only a portion of the properties are forecast to be sold in the coming 12 months.
Disposal Scenario
Where properties have been notarised for sale prior to the reporting date, but have not completed; they are held at their notarised disposal value. These assets are considered held for sale under IFRS 5 and can be seen in note 18.
The table below sets out the assets valued using these 3 scenarios:
																		31 December 2019		31 December 2018
																			€'000		€'000
Rental scenario																			703,650		619,430
Condominium scenario																			23,956		22,330
Disposal scenario																			2,554		3,920
Total																			730,160		645,680
The movement in the fair value of investment properties is included in the consolidated statement of comprehensive income as 'gain on disposal of investment property' and comprises:
																		31 December 2019		31 December 2018
																			€'000		€'000
Investment properties																			41,429		65,717
Properties held for sale (see note 18)																			62		429
																			41,491		66,146
18.  Investment properties - held for sale
																		2019		2018
																			€'000		€'000
Fair value - held for sale investment properties
At 1 January																			12,747		106,897
Transferred from investment properties																			10,064		5,850
Transferred (to) investment properties																			-		(15,434)
Capital expenditure																			434		-
Properties sold																			(12,668)		(84,995)
Valuation gain on apartments held for sale																			62		429
At 31 December																			10,639		12,747
Investment properties are re-classified as current assets and described as 'held for sale' in three different situations: Properties notarised for sale at the reporting date, Properties where at the reporting date the group has obtained and implemented all relevant permissions required to sell individual apartment units, and efforts are being made to dispose of the assets (condominium); and Properties which are being marketed for sale but have currently not been notarised.
Properties which no longer satisfy the criteria for recognition as held for sale are transferred back to investment properties at fair value.
Properties notarised for sale by the reporting date are valued at their disposal price (disposal scenario), and other properties are valued using the condominium or rental scenarios (see note 17) as appropriate. The table below sets out the respective categories:
																		2019		2018
																			€'000		€'000
Rental scenario																			-		1,931
Condominium scenario																			8,085		6,896
Disposal scenario																			2,554		3,920
																			10,639		12,747
Investment properties held for sale are all expected to be sold within 12 months of the reporting date based on Management knowledge of current and historic market conditions. While whole properties have been valued under a condominium scenario in note 17, only the expected sales have been transferred to assets held for sale.
There were liabilities secured on the investment properties held for sale of €0.6 (2018: €5.2m).
19.  Property, plant and equipment
																				Equipment
																					€'000
Cost or valuation
As at 1 January 2018																					133
Additions																					12
As at 31 December 2018																					145
Disposals																					(18)
As at 31 December 2019																					127
Accumulated depreciation and impairment
As at 1 January 2018																					41
Charge for the year																					16
As at 31 December 2018																					57
Charge for the year																					16
As at 31 December 2019																					73
Carrying amount
As at 31 December 2018																					88
As at 31 December 2019																					54
20. Other financial assets at amortised cost
																		31 December 2019		31 December 2018
Current																			€'000		€'000
At 1 January																			-		-
Transfer from non-current other financial assets at amortised cost																			1,554		-
Accrued interest																			54		-
Interest adjustment related to prior period																			(18)		-
At 31 December																			1,590		-
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.
																		31 December 2019		31 December 2018
Non-current																			€'000		€'000
At 1 January																			2,406		2,323
Transfer to current other financial assets at amortised cost																			(1,554)		-
Additions																			-		83
Accrued interest																			24		-
At 31 December																			876		2,406
The Group entered into a loan agreement with the minority interest of Accentro Real Estate AG (formerly Blitz B16 - 210 GmbH) in relation to the acquisition of the assets as share deals. This loan bears interest at 3% per annum.
These assets are considered to have low credit risk and any loss allowance would be immaterial.
21.  Trade and other receivables
																		31 December 2019		31 December 2018
																			€'000		€'000
Current
Trade receivables																			1,219		1,045
Less: impairment provision																			(223)		(313)
Net receivables																			996		732
Prepayments and accrued income																			508		549
Investment property disposal proceeds receivable																			375		1,167
Service charges receivable																			5,271		4,766
Prepaid Treasury Shares																			182		-
Other receivables																			605		317
																			7,937		7,531
Prepaid Treasury Shares consist of a transaction for the Company's own shares which had yet to settle at 31 December 2019.
Aging analysis of trade receivables
																		31 December 2019		31 December 2018
																			€'000		€'000
Up to 12 months																			977		731
Between 1 year and 2 years																			19		1
Over 3 years																			-		-
																			996		732
Impairment of trade and service charge receivables
The Company calculates lifetime expected credit losses for trade and service charge receivables using a portfolio approach. Receivables are grouped based on the credit terms offered and the type of lease. The probability of default is determined at the year-end based on the aging of the receivables, and historical data about default rates. That data is adjusted if the Company determines that historical data is not reflective of expected future conditions due changes in the nature of its tenants and how they are affected by external factors such as economic and market conditions.
On this basis, the loss allowance as at 31 December 2019, and on 1 January 2019 was determined as set out below.
The Company applies the following loss rates to trade and service charge receivables:
As noted below, a loss allowance of 50% (2018: 50%) has been recognised for trade receivables that are more than 60 days past due. Any receivables where the tenant is no longer resident in the property are provided for in full.
Trade receivables:											Aging			0-60 days			Over 60 days		Non-current tenant		Total 2019
Expected loss rate (%)														0%			50%		100%
Gross carrying amount (€'000)														889			214		116		1,219
Loss allowance provision (€'000)														-			(107)		(116)		(223)
Trade receivables:											Aging			0-60 days			Over 60 days		Non-current tenant		Total 2018
Expected loss rate (%)														0%			50%		100%
Gross carrying amount (€'000)														582			300		163		1,045
Loss allowance provision (€'000)														-			(150)		(163)		(313)
Movements in the impairment provision against trade receivables are as follows:
																		31 December 2019		31 December 2018
																			€'000		€'000
Balance at the beginning of the year																			313		342
Impairment losses recognised																			61		360
Amounts written off as uncollectable																			(151)		(389)
Balance at the end of the year																			223		313
All impairment losses relate to the receivables arising from tenants.
22.  Cash and cash equivalents
																		31 December 2019		31 December 2018
																			€'000		€'000
Cash at bank																			40,737		25,626
Cash at agents																			1,677		1,242
Cash and cash equivalents																			42,414		26,868
23.  Borrowings
													31 December 2019						31 December 2018
													Nominal value				Book value		Nominal value		Book value
														€'000			€'000		€'000		€'000
Current liabilities
Bank loans  -  Deutsche Genossenschafts-Hypothekenbank AG														-			-		2,596		2,596
Bank loans  -  NATIXIS Pfandbriefbank AG														784			192		-		-
Bank loans  -  Mittelbrandenburgische Sparkasse														16,418			16,418		-		-
Bank loans  -  Berliner Sparkasse														1,142			1,142		1,046		1,046
														18,344			17,752		3,642		3,642
Non-current liabilities
Bank loans  -  Deutsche Genossenschafts-Hypothekenbank AG														-			-		122,054		122,054
Bank loans  -  NATIXIS Pfandbriefbank AG														190,000			186,636		-		-
Bank loans  -  Berliner Sparkasse														71,866			71,866		69,578		69,578
														261,866			258,502		191,632		191,632
														280,210			276,254		195,274		195,274
The Group has complied with the financial covenants of its borrowing facilities during the 2019 and 2018 reporting periods.
All borrowings are secured against the investment properties of the Group. As at 31 December 2019, the Company had €50m of undrawn debt facilities (2018: €1.2 million). A summary of the loans as at the year end is as follows:
																Amount			Interest rate		Maturity
Bank																	€'000		%
Berliner Sparkasse																	9,183		1.72	31/12/2026
																	7,573		1.74	31/12/2026
																12,464			1.89	28/02/2027
																	4,944		1.93	31/08/2027
																	3,465		1.05	31/08/2027
																10,436			1.95	30/11/2027
																	3,344		1.09	30/11/2027
																11,730			2.30	30/04/2028
																	7,338		2.00	31/12/2028
																	2,531		2.14	30/07/2026
NATIXIS Pfandbriefbank AG																29,000			1.89	09/11/2026
																58,000			1.89	09/11/2026
																103,000			1.89	09/11/2026
Mittelbrandenburgische Sparkasse																16,418			1.35	31/12/2020
Accrued Interest due to NATIXIS Pfandbriefbank AG																	784
																280,210
24.  Trade and other payables
																		31 December 2019		31 December 2018
																			€'000		€'000
Trade payables																			1,597		1,808
Accrued liabilities																			1,319		4,592
Service charges payable																			4,320		4,028
Deferred income																			-		1
																			7,236		10,429
25.  Derivative financial instruments
																		31 December 2019		31 December 2018
																			€'000		€'000
Interest rate swaps - carried at fair value through profit or loss
Balance at 1 January																			5,991		3,333
Loss in movement in fair value through profit or loss																			9,988		2,658
Balance at 31 December																			15,979		5,991
The notional principal amounts of the outstanding interest rate swap contracts at 31 December 2019 were €202,932,000 (2018: €206,690,000). At 31 December 2019 the fixed interest rates vary from 0.775% to 1.07% (2018: 0.625% to 1.01%) above the main factoring Euribor rate.
Maturity analysis of interest rate swaps
																		31 December 2019		31 December 2018
																			€'000		€'000
Less than 1 year																			-		1,354
Between 1 and 2 years																			-		-
Between 2 and 5 years																			-		-
More than 5 years																			15,979		4,637
																			15,979		5,991
At 31 December 2018 the Company had Interest Rate Swaps which were in excess of the debt being hedged. These were disclosed as having a maturity of less than 12 months.
26.  Other financial liabilities
																		31 December 2019		31 December 2018
																			€'000		€'000
Current
Balance at beginning of year																			-		-
Transferred from non-current liabilities																			6,951		-
Balance at end of year																			6,951		-
Non-current
Balance at 1 January																			7,135		5,663
Profit share attributable to NCI in PSPF																			(184)		1,472
Transferred to current liabilities																			(6,951)		-
Balance at 31 December																			-		7,135
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 and ends three months later. The amount of the purchase price will be based on the EPRA NAV on the latest reporting date as well as the movement in the EPRA NAV during the period and the proportion of EPRA NAV attributable to the non-controlling interest in PSPF.
A portion of the liability (€1,070k, 2018: (€1,124k)) 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.
27.  Share based payment reserve
																			Performance fee
																					€'000
Balance at 1 January 2018																					33,953
Adjustment to performance fee																					(5)
Transfer to stated capital - settled by issue of shares																					(33,948)
Fee charge for the period																					4,010
Balance at 31 December 2018																					4,010
Fee charge for the period																					2,798
Balance at 31 December 2019																					6,808
Property Advisor performance fee
The Property Advisor is entitled to an asset and estate management performance fee, measured over consecutive three year periods, equal to 15% of the excess (or in the case of the initial period or any performance period ending prior to 31 December 2020, 16%) 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) EPRA NAV per share at 1 July 2018; and
(ii) the EPRA NAV per share at the end of a Performance Period in relation to which a performance fee was earned in accordance with the provisions contained with the Property Advisor and Investor Relations Agreement.
The fee will be settled in shares of the Company and, being determined by reference to an equity based formula, meets the definition of a share based payment arrangement.
Property Advisor Fees (from 1 January 2019)
Under the new Property Advisory Agreement for providing property advisory services, the Property Advisor will be entitled to a Portfolio and Asset Management Fee as follows:
(i) 1.20% of the EPRA NAV of the Group where the EPRA NAV of the Group is equal to or less than €500 million; and
(ii) 1% of the EPRA NAV of the Group greater than €500 million.
The management fee will be reduced by the aggregate amount of any transaction fees and finance fees payable to the Property Advisor in respect of that calendar year.
The Property Advisor is entitled to a capex monitoring fee equal to 7% of any capital expenditure incurred by any Subsidiary which the Property Advisor is responsible for managing.
The Property Advisor is entitled to receive a 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.
The Property Advisor is entitled to a letting fee equal to between 1 and 3 month's net cold rent (being gross rents receivable less service costs and taxes) for each new tenancy signed by the Company where the Property Advisor has sourced the relevant tenant.
The Property Advisor shall be entitled to a fee for Investor Relations Services at the annual rate of £75,000 payable quarterly in arrears.
Details of the fees paid to the Property Advisor are set out in note 34.
28.  Stated capital
																		31 December 2019		31 December 2018
																			€'000		€'000
Issued and fully paid:
At 1 January																			196,578		162,630
Issued during the year at €4.11 per share																			-		33,948
At 31 December																			196,578		196,578
The number of shares in issue at 31 December 2019 was 100,751,410 (31 December 2018: 100,751,410).
Treasury shares
The reserve for the Company's treasury shares comprises the cost of the Company's shares held by the Group. At 31 December 2019, the Group held 3,000,000 of the Company's shares (2018: nil).
29.  Non-controlling interests
														Non-controlling interest %				31 December 2019		31 December 2018
																			€'000		€'000
Phoenix Spree Mueller GmbH (formerly Laxpan Mueller GmbH)																	5.1%		1,197		1,026
Phoenix Spree Gottlieb GmbH (formerly Invador Grundbesitz GmbH)																	5.1%		1,076		963
Accentro 5. WE GmbH																	5.1%		738		-
																			3,011		1,989
30.  Earnings per share
																		31 December 2019		31 December 2018
Earnings for the purposes of basic earnings per share being net profit attributable to owners of the parent (€'000)																			22,293		45,094
Weighted average number of ordinary shares for the purposes of basic earnings per share (Number)																	100,389,943			97,945,250
Effect of dilutive potential ordinary shares (Number)																	1,721,657			1,014,078
Weighted average number of ordinary shares for the purposes of diluted earnings per share (Number)																		102,111,600		98,959,328
Earnings per share (€)																			0.22		0.46
Diluted earnings per share (€)																			0.22		0.46
31.  Net asset value per share and EPRA net asset value
																		31 December 2019		31 December 2018
Net assets (€'000)																			413,889		407,858
Number of participating ordinary shares																		97,751,410		100,751,410
Net asset value per share (€)																			4.23		4.05
EPRA net asset value																		31 December 2019		31 December 2018
Net assets (€'000)																			413,889		407,858
Add back deferred tax assets and liabilities, derivative financial instruments and share based payment reserves (€'000)																			67,467		53,137
EPRA net asset value (€'000)																			481,356		460,995
EPRA net asset value per share (€)																			4.92		4.58
The derivative financial liability relating to swap contracts in respect of borrowings repaid has not been added back as they no longer have a hedging objective (€0m (2018: €1.354m)).
32.  Financial instruments
The Group is exposed to the risks that arise from its use of financial instruments. This note describes the objectives, policies and processes of the Group for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout the financial statements.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
• Cash and cash equivalents
• Trade and other receivables
• Other financial assets
• Trade and other payables
• Borrowings
• Derivative financial instruments
The Group held the following financial assets at each reporting date:
																		31 December 2019		31 December 2018
																			€'000		€'000
At amortised cost
Trade and other receivables - current																			7,247		6,982
Cash and cash equivalents																			42,414		26,868
Other financial assets at amortised cost																			2,466		2,406
																			52,127		36,256
The Group held the following financial liabilities at each reporting date:
																		31 December 2019		31 December 2018
																			€'000		€'000
Held at amortised cost
Borrowings payable: current																			17,752		3,642
Borrowings payable: non-current																			258,502		191,632
Other financial liabilities																			6,951		7,135
Trade and other payables																			7,236		10,429
																			290,441		212,838
Fair value through profit or loss
Derivative financial (asset)/ liability - interest rate swaps																			15,979		4,637
Excess hedge due to property disposal																			-		1,354
																			15,979		5,991
																			306,420		218,829
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 September 2026 and December 2028.
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 2019		31 December 2018
																			€'000		€'000
Financial assets/ (liabilities)
Interest rate swaps - Level 2 - current																			-		(1,354)
Interest rate swaps - Level 2 - non-current																			(15,979)		(4,637)
																			(15,979)		(5,991)
The valuation basis for the investment properties is disclosed in note 17.
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 2019		31 December 2018
																			€'000		€'000
Financial assets
Cash and cash equivalents																			2,107		1,142
Financial liabilities
Trade and other payables																			(317)		(350)
Net position																			1,790		792
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
																	€'000				€'000
31 December 2019																	179				(179)
31 December 2018																	79				(79)
Credit risk management
Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk arises principally from the Group's trade and other receivables and its cash balances. The Group gives careful consideration to which organisations it uses for its banking services in order to minimise credit risk. The Group has an established credit policy under which each new tenant is analysed for creditworthiness and each tenant is required to pay a two month deposit.
At each reporting date the Group had no tenants with outstanding balances over 10% of the total trade receivables balance.
The Group holds cash at the following banks: Barclays Private Clients International Jersey Ltd, Deutsche Bank AG and Berliner Sparkasse. The split of cash held at each of the banks respectively at 31 December 2019 was 73%/26%/1% (31 December 2018: Barclays Private Clients International Jersey Ltd, Barclays Bank Plc Frankfurt and Deutsche Bank the split was 57%/33%/10%) Barclays and Deutsche Bank have credit ratings of A and A- respectively, Berliner Sparkasse has a credit rating of A+.
The Group holds no collateral as security against any financial asset. The carrying amount of financial assets recorded in the financial information, net of any allowances for losses, represents the Group's maximum exposure to credit risk.
Details of receivables from tenants in arrears at each reporting date can be found in note 21 as can details of the receivables that were impaired during each period.
An allowance for impairment is made using an expected credit loss model based on previous experience. Management considers the above measures to be sufficient to control the credit risk exposure.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.
The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group's maximum exposure to credit risk as no collateral or other credit enhancements are held.
Liquidity risk management
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity risk is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or damage to the Group's reputation.
The Directors manage liquidity risk by regularly reviewing cash requirements by reference to short term cash flow forecasts and medium term working capital projections prepared by management.
The Group maintains good relationships with its banks, which have high credit ratings.
The following table details the Group's remaining contractual maturity for its non-derivative financial liabilities with agreed maturity periods. The table has been drawn up based on the undiscounted cash flows of the financial liabilities based on the earliest date on which the Group can be required to pay. The tables include both interest payable and principal cash flows.
Maturity analysis for financial liabilities
											Less than 1 year			Between 1 - 2 years			Between 2 - 5 years		More than 5 years		Total
											€'000			€'000			€'000		€'000		€'000
At 31 December 2019
Borrowings payable: current											17,752			-			-		-		17,752
Borrowings payable: non-current											-			-			-		258,502		258,502
Other financial liabilities											6,951			-			-		-		6,951
Trade and other payables											7,236			-			-		-		7,236
											31,939			-			-		258,502		290,441
											Less than 1 year			Between 1 - 2 years			Between 2 - 5 years		More than 5 years		Total
											€'000			€'000			€'000		€'000		€'000
At 31 December 2018
Borrowings payable: current											3,642			-			-		-		3,642
Borrowings payable: non-current											-			-			-		191,632		191,632
Other financial liabilities											-			7,135			-		-		7,135
Trade and other payables											10,429			-			-		-		10,429
											14,071			7,135			-		191,632		212,838
The analysis of the market risk review and sensitivity analysis is detailed in note 21.
33. Capital commitments
																		31 December 2019		31 December 2018
																			€'000		€'000
Contracted capital commitments at the end of the year																			3,000		-
Capital commitments include contracted obligations in respect of the enhancement and repair of the Group's properties.
34. Related party transactions
Related party transactions not disclosed elsewhere are as follows:
PMM Residential Limited (Formerly PMM Partners (UK) Limited), was the Group's appointed Property Advisor. Partners of PMM Residential Limited formerly sat on the Board of PSD and retains a shareholding in the Group. During the year ended 31 December 2019, an amount of €6,097,647 (€5,943,969 Management Fees and €153,688 Other expenses and fees) (2018: €5,947,282 (€5,858,791 Management Fees and €88,491 Other expenses and fees)) was payable PMM Residential Limited (Formerly PMM Partners (UK) Limited). At 31 December 2019 €9,000 (2018: €7,450) was outstanding. Fees payable to the Property Advisor in relation to overseeing capital expenditure during the year were €511,000 (2018: €458,000).
The Property Advisor is also entitled to an asset and estate management performance fee. The charge for the period in respect of the performance fee was €2,798,000 (2018: €3,995,000). Please refer to note 27 for more details.
The Property Advisor has a controlling stake in IWA Real Estate Gmbh & Co. KG who are contracted to dispose of condominiums in Berlin on behalf of the Company. IWA does not receive a fee from the Company in providing this service.
Apex Financial Services (Alternative Funds) Limited, the Company's administrator provided administration and company secretarial services along with Directors for the PSPF General Partner (Guernsey) Limited entity in 2019. During the period, fees of £129,450 were charged (2018: €nil) with £nil (2018: £nil) outstanding.
In March 2015 the Group entered into an option agreement to acquire the remaining 5.2% interest in Phoenix Spree Property Fund GmbH & Co.KG (PSPF) 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. For their role as the limited partner in Phoenix Spree Property Fund GmbH & Co.KG they were also paid €120,000 (2018: €120,000) each.
The Group also entered into an unsecured loan agreement with M Hilton and P Ruddle in connection with the acquisition of PSPF. At the year-end an amount of €795,000 (2018: €768,195) each was owed to the Group. The loans bear interest of 4% per annum. Fees payable to key management personnel during the year amounted to €246,000 (2018: €300,000).
Dividends paid to directors in their capacity as a shareholder amounted to €1,735 (2018: €1,740).
35.  Events after the reporting date
The Company had exchanged contracts for the sale of three condominiums in Berlin with aggregated consideration of €1.6 million prior to the reporting date. The sale of these units subsequently completed in Q1 2020.
Since the Balance Sheet date, The Company has exchanged contracts for the sale of four condominiums with aggregated consideration of €1.4 million. These four units await completion as of the date of this report.
The Company continued with buying back its own shares. In Q1 2020, 425,000 PSD shares have been purchased back with average price paid of £3.11, a 25% discount to December 2019 EPRA NAV per share of £4.16.
The final draft of the new Berlin-specific rent cap (or "Mietendeckel") became law following publication in the official gazette on 23 February 2020. The new rules allow the limitation of housing rents, such that rates are no longer set at free market levels. The financial impact and the Company's future business model and strategy are largely dependent on the timing and eventual outcome of any legal action. These have been outlined in more detail in this announcement.
The broader impact of the Coronavirus (COVID-19) outbreak will depend on how the virus spreads and the response of the authorities. The current impact on the Company is difficult to quantify as the outbreak length and severity is unknown. A variety of scenarios have been modelled and the result of these is set out in the Viability Statement. The Property Advisor has considered and will continue to monitor the threat and implications for PSD of the Coronavirus.
Professional Advisors
Property Advisor											PMM Residential Limited
											54-56 Jermyn Street
											London SW1Y 6LX
Administrator, Company Secretary and Registered Office
(From 04 October 2019)											Apex Financial Services (Alternative Funds) Limited
											12 Castle Street
											St Helier
											Jersey JE2 3RT
(Until 04 October 2019)											Estera Fund Administrators (Jersey) Limited
											Estera Secretaries (Jersey) Limited
											13-14 Esplanade
											St. Helier
											Jersey JE1 1EE
Registrar											Link Asset Services (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
UK Legal Advisor											Stephenson Harwood LLP
											1 Finsbury Circus
											London EC2M 7SH
Jersey Legal Advisor											Mourant Ozannes
											22 Grenville Street
											St. Helier
											Jersey JE4 8PX
German Legal Advisor											Mittelstein Rechtsanwälte
as to property law											Alsterarkaden 20
											20354 Hamburg
											Germany
German Legal Advisor as											Taylor Wessing Partnerschaftsgesellschaft mbB
to German partnership law											Thurn-und-Taxis-Platz 6
											60313 Frankfurt a.M.
											Germany
Broker											Numis Securities Limited
											The London Stock Exchange Building
											10 Paternoster Square
											London
											EC4M 7LT
Independent Property Valuer											Jones Lang LaSalle GmbH
											Rahel-Hirsch-Strasse 10
											10557 Berlin
											Germany
Auditor											RSM UK Audit LLP
											25 Farringdon Street
											London EC4A 4AB

 

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