Formerly PMM Group
Phoenix Spree Annual Report and Accounts 2022
Better Futures
Phoenix Spree Annual Report and Accounts 2022
QSix has acted as the Property Advisor
since the Company’s inception. It has an
experienced team of property professionals
with long-standing experience of the
German residential property market.
Company founded in 2007
and listed on the London Stock
Exchange. It is a long-term
investor in Berlin rental property,
committed to improving the
quality of accommodation
for its customers.
Introduction
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Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
Report
Directors’
Report
Financial
Statements
ContentsHighlights of the Year
Gross rental income (million)
€25.9
Like-for-like rent per sqm growth
3.9%
Invested in modernisation (million)
€16.4
Condominium sales
notarised (million)
€4.7
www.phoenixspree.com
Highlights of the Year
Read more on this section on pages 2-3
Chairman’s Statement
Read more on this section on page 6
Strategic Report 1-37
Highlights of the Year 1
At a Glance 4
Chairman’s Statement 6
Stakeholder Engagement 8
Board Decision Making 11
Our Strategy 13
Our Business Model 14
Report of the Property Advisor 16
Key Performance Indicators 23
Corporate Responsibility 24
– Protecting Our Environment 28
– Respecting People 29
– Valuing Our Customers 30
– Investing in Our Communities 31
– Governing Responsibly 32
Principal Risks and Uncertainties 34
Directors’ Report 38-59
Our Board 38
Directors’ Report 40
Corporate Governance Statement 44
Audit Committee Report 53
Directors’ Remuneration Report 56
Statement of Directors’ Responsibilities 59
Financial Statements 60-95
Independent Auditor’s Report 60
Consolidated Statement
of Comprehensive Income 66
Consolidated Statement
of Financial Position 67
Consolidated Statement
of Changes in Equity 68
Consolidated Statement
of Cash Flows 69
Reconciliation of Net Cash Flow
to Movement in Debt 70
Notes to the Financial Statements 71
Professional Advisors 96
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Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Highlights of the Year continued
Further increase in rental levels, resilient
re-letting premium
• Like-for-like rental income per sqm
increased by 3.9% versus prior year.
• New leases in Berlin signed at an average
32.3% premium to passing rents.
• 320 new leases signed during the year,
with the average rent of all new lettings
increasing to €13.0 per sqm, a 6.6%
increase on the prior year.
• European Public Real Estate Association
(EPRA) vacancy of 2.4% as at 31 December
2022 remains at historically low level,
reflecting ongoing structural undersupply
of available rental property.
Portfolio valuation impacted by interest
rate rises and yield expansion
• Like-for-like Portfolio value, adjusted for
acquisitions and disposals, decreased by
3.1% versus 2021, reflecting an increase
in market yields.
• Including investment properties under
construction valued at €5.3 million, the
Portfolio was valued at €775.9 million as
at 31 December 2022, compared with
€801.5 million as at 31 December 2021.
• EPRA Net Tangible Assets (NTA) per share
down 9.7% versus 2022 to €5.10.
• EPRA NTA per share total return of (8.4%).
Condominium sales at a premium to
carrying value, reduced volumes
• Condominiums notarised for sale during
2022 of €4.7 million, (2021: €15.2 million),
reflecting deterioration in buyer sentiment
and the difficulty in selling tenanted units.
• Average achieved value per sqm of €5,502
for residential units, a 22.4% premium to
trailing carrying value of each property.
• Since the financial year end, a further
three condominiums have been notarised
for sale, for a total consideration of €0.8
million, at an average 62% premium to
carrying value as at 31 December 2022.
• Reservations for three additional units,
with a combined value of €0.6million,
and an average 80.0% premium to
carrying value, have recently been
received and are pending notarisation.
• 77% of Portfolio assets legally split into
condominiums, up from 75% as at
31 December 2021.
• A number of new condominium projects
are being brought to market, resulting in a
significant increase in vacant apartments
offered for sale.
Portfolio management
• Sales agreed on three non-core properties
during the financial year for an aggregate
consideration of €12.1 million and at an
average 6% discount to December 2021
carrying value.
• Although the Company has been actively
marketing both individual assets and
portfolios, and continues to do so, liquidity
in Berlin has been, and remains, limited.
• The majority of offers received during the
last six months have been significantly
below carrying value, at levels where the
Property Advisor considers that sale is not
in shareholders’ interests.
• Approximately €16.4 million of
capital investment was made into
the Portfolio during the financial year
for refurbishment of apartments and
bringing new residential condominium
projects to market.
• This investment is expected to be
recouped from 2023 onwards through
significant rental uplifts.
• It is expected that total capital investment
will be materially lower in 2023.
Dividend suspended, investment in
Portfolio prioritised
• Under PSD’s business model, cash to pay
dividends is substantially dependent on
condominium and/or other asset sales.
• Priority for use of available cash is to
continue to invest in the Portfolio,
underpinning our core reversionary
rental business which continues to thrive.
• In light of this, and the persistent very
low level of liquidity in the Berlin market,
and in line with its peer group, the
Company has suspended dividend
payments to preserve cash and
support its core business.
• Net Loan to Value (LTV) remains
conservative at 39.1% (31 December 2021:
34.7%).
• €42.4 million of Berliner Sparkasse debt
successfully refinanced during the
financial year.
Outlook
• Supply-demand imbalances within Berlin
PRS provide support for rental values:
– Rental growth remains strongly
underpinned, with new letting rental
values expected to continue to be at
significant premia to average in-place
rents across the Portfolio.
– Rising cost of home ownership forcing
potential buyers to remain within the
rental system for longer.
– Urban housing shortage further
exacerbated by anticipated net inward
migration of almost one million from
Ukraine to Germany.
– Rising cost of construction further
limiting new-build development.
• Transaction activity and asset values:
– Ongoing impact of 2022’s interest
rate rises continues to weigh on
buyer sentiment.
– Further declines in property values
driven by macro factors such as higher
medium-term interest rates are likely in
H1 2023.
– The Company continues to market
actively both individual properties
and portfolios for sale. The Portfolio
remains under continuous review and
additional properties will be put up for
sale. Disposals at a discount to carrying
value will be considered, but only at
levels that the Board considers to be
in shareholders’ interests.
– Plans to bring additional condominium
properties to market have been
accelerated and bulk condominium
sales are under active consideration.
• Balance sheet and dividend:
– The Board considers the current level
of gearing and cash balances to be
appropriate at this stage in the real
estate cycle.
– The Company remains conservatively
financed with its first loan maturity
not due until September 2026.
– The Company intends to reinstate
dividends as soon as practical to do so.
– Any surplus cash generated over
amounts required to reinvest in core
Portfolio and reinstate dividends on a
sustainable basis will, so long as share
price discount to Net Asset Value (NAV)
persists, be used for share buybacks
and not to acquire further properties.
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Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
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Directors’
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Financial
Statements
Highlights for the financial year ended 31 December 2022
Year to
31 December
2022
Year to
31 December
2021
2022 v 2021
% change
Income Statement
Gross rental income (€ million) 25.9 25.8 0.6
(Loss)/Profit before tax (€ million) (17.5) 45.3 (138.8)
Dividend per share in respect of the period (€ c (£ p)) 2.35 (2.09) 7.50 (6.38) –
Balance Sheet
Portfolio valuation (€ million)
1
775.9 801.5 (3.2)
Like-for-like valuation (decrease)/increase (%) (3.1) 6.3 –
IFRS NAV per share (€) 4.50 4.74 (5.1)
IFRS NAV per share (£)
2
3.99 3.98 0.3
EPRA NTA per share (€) 5.10 5.65 (9.7)
EPRA NTA per share (£)
2
4.52 4.74 (4.6)
EPRA NTA per share total return (€%) (8.4) 8.4 –
Net LT V
3
(%) 39.1 34.7 –
Operational Statistics
Portfolio valuation per sqm (€) 4,082 4,225 (3.4)
Annual like-for-like rent per sqm growth (%) 3.9 3.9 –
EPRA vacancy (%) 2.4 3.1 –
Condominium sales notarised (€ million) 4.7 15.2 (69.1)
1 Portfolio valuation includes investment properties under construction.
2 Calculated at FX rate £/€1:1.128 as at 31 December 2022 (2021: £/€1:1.191).
3 Net LTV uses nominal loan balances (note 22) rather than the loan balances on the Consolidated Statement of Financial Position which include Capitalised Finance
Arrangement Fees.
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Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Phoenix Spree Deutschland
is a Berlin focused German
residential property fund
that has been operating
in Germany since 2007.
The Portfolio of properties owned by Phoenix mainly consists of classic ‘Altbau’
properties (older buildings) which were built before 1914. Typically, these five-
storey buildings contain between 20 and 40 units, consisting of one to three
bedroom apartments, often with shops on the ground floor.
Since listing on the Main Market of the
London Stock Exchange in June 2015,
the Company has increased the Berlin focus
of the Portfolio through a combination of
carefully selected acquisitions and disposals,
effectively creating a pure-play Berlin fund.
As at 31 December 2022, the Portfolio
of properties owned by Phoenix Spree
consists of 96 properties, 2,553 residential
apartments and 135 commercial units
with 189 thousand square metres of
usable space.
QSix Residential Limited (Formerly PMM
Partners (UK) Limited) has acted as Property
Advisor and has an experienced team
of property and investment professionals
with an established record in the German
residential property market.
Reported property Portfolio valuation
(€ million)
€775.9
Like-for-like Portfolio valuation decrease
2021-2022
-3.1%
At a Glance
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Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
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Financial
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190.3
219.0
233.1
245.3
282.8
423.8
609.3
645.7
730.2
768.3
801.5
775.9
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
Pure-play Berlin Portfolio – total properties
Berlin
Residential property
Commercial property
Usable space (sqm thousands)
188.8
Residential units
2,553
Commercial units
135
Reported Portfolio valuation 2011-2022 (€ million)
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Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Since the onset of the war
in Ukraine, the European
real estate industry has
faced a number of headwinds
which have impacted investor
confidence, transaction
volumes and real estate
pricing across much of
Europe. In particular, the
industry has had to adjust
to the combined effects of
global inflationary pressures
and higher interest rates.
PSD has not been immune
from these broader trends
and so has reported the
first decline in the value
of its Portfolio.
Financial performance and dividend
As at 31 December 2022, the Portfolio
was valued at €775.9 million, a like-for-like
annual decline of 3.1%. Reflecting this
decline, the Euro EPRA NTA total return
per share was (8.4)% over the year and
the Sterling return was (3.2%).
Although our core rental business continues
to thrive, condominium sales volumes have
been impacted by a significant deterioration
in buyer sentiment in the light of more
challenging economic circumstances.
With cash to pay dividends substantially
dependent on revenues generated from
condominium and other sales, the Board
has taken the difficult decision to suspend
the dividend.
Further details relating to the Company’s
financial and operating performance can be
found in the Report of the Property Advisor.
Our tenants and their homes
We recognise that the current cost of living
crisis presents challenges for a number of
our tenants, and, at all times, their health
and wellbeing remain foremost in our minds.
We are committed to providing good-quality
affordable homes with a reliable, friendly
rental service and continue to work
constructively with those in greatest need,
wherever we can. Where necessary, the
Company endeavours to support its tenants
who are experiencing financial hardship.
The Company has continued with its
programme of investment to improve
the overall standard of our tenanted
accommodation and provide a platform
for rental growth. To this end, over 80%
of the Company’s net rental income was
reinvested into the Portfolio during the
financial year.
Chairman’s Statement
“ The Board and
Property Advisor
remain fully focused
on delivering the best
possible outcome
for the Company’s
stakeholders.”
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Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
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Directors’
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Financial
Statements
‘Better Futures’
The Board acknowledges the significance
of conducting business with integrity,
transparency, and accountability towards
shareholders, tenants, and other key
stakeholders. We recognise that being
a responsible company, balancing the
needs of our stakeholders, and addressing
our environmental and social impacts,
is critical to the success and longevity
of ourbusiness.
To achieve this, our ‘Better Futures’
Corporate Responsibility (CR) Plan provides
a framework to monitor and improve our
current activities. The plan has five key
pillars that are integrated throughout
our business operations: Protecting the
Environment; Respecting People; Valuing
our Tenants; Investing in our Communities;
and Governance.
Protecting our environment
The Board recognises that the nature of
our business has environmental and social
impacts and that we have a responsibility
to consider and minimise these impacts,
where possible. As a member of EPRA, we
want to contribute to greater transparency
in reporting. We have strengthened our
commitment to delivering against our
environmental and social impacts by
introducing EPRA’s Sustainability Best
Practices Recommendations and
capturing our ESG measurements
within their framework.
I am therefore delighted to report that this
commitment has been recognised in the
EPRA Sustainability Awards 2022, with PSD
receiving a Gold Award in recognition of the
Company’s commitment to best practice
in its reporting. This recognition further
encourages us to continue to approach
the future in a consistent, ethical, safe
and environmentally friendly way.
Our charities
The Company continues to provide
financial support to two charities in Berlin:
The Intercultural Initiative, a refuge that
helps women and children affected by
domestic violence; and Laughing Hearts,
which provides assistance to children living
in children’s homes and under social care.
QSix, our Property Advisor, continues to
provide support to two charities in London:
SPEAR and SHP. Both organisations work
with homeless people. SPEAR receives
funding to run an outreach service that
provides accommodation to rough sleepers
and addresses their health and social care
needs. SHP supports an employability
programme that helps homeless people or
those at high risk of homelessness to find
jobs and secure sustainable income. During
2022, QSix additionally agreed funding
for Home-Start, a UK community network
of trained volunteers and expert support
helping families with young children.
Ukrainian crisis
The tragic humanitarian toll caused by
Russia’s invasion of Ukraine remains foremost
in our minds. The war in Ukraine has caused
unimaginable hardship and displaced millions
from their homes and, in recognition of this,
PSD made available a number of apartments
on a rent-free basis for Ukrainian refugees.
I am pleased to report that these tenants
have transitioned into long-term tenancies
with the costs covered by the Berlin district
of Teltow Fläming.
Our Board
The Board acknowledges the significance of
a robust corporate governance culture and
adheres to the principles of good corporate
governance as outlined in the Association of
Investment Companies Code of Corporate
Governance (“AIC Code”). More information
on how the Company has implemented the
provisions of and adhered to the AIC Code
can be found in the Directors’ Report.
The death of Greg Branch in August has
deeply saddened us, and we express our
gratitude for his exceptional service during
his tenure on the Board. Greg brought a
wealth of knowledge from over 30 years
in financial services and real estate. He is
greatly missed as a colleague and friend
by current and former Directors of the
Company, QSix investment professionals,
and those in the broader business
community who had the opportunity
to work with him.
As previously announced, Isabel Robins
was appointed as a Non-executive Director,
effective 14 March 2022. Isabel brings
over 23 years of expertise in offshore
real estate structures, including property
funds, investments, and developments.
Her extensive real estate background and
knowledge will provide valuable insight
and complement the skillset of the Board.
She takes the place of Monique O’Keefe,
who resigned as Senior Independent
Director to accept a senior executive
role at anothercompany.
The Board was pleased to announce
the appointment of Steven Wilderspin
as a Non-executive Director in January
2023. A resident of Jersey, Steven has had
extensive experience as an Independent
Director for multiple public and private
investment funds and commercial
companies since 2007.
Outlook
European real estate markets continue
to adjust to more challenging economic
conditions, particularly higher inflation
and interest rates, with consequential
impacts on transaction volumes and
real assetpricing.
Whilst it is still too early to predict when
the current real estate cycle will bottom
out, PSD remains well positioned, with
a strong balance sheet and conservative
debt financing. Moreover, our core rental
business continues to thrive, with rental
values well supported by the positive
demographic trends that continue to
exist within the Berlin residential property
market. This, combined with the ongoing
programme of investment into our buildings,
underpins the future reversionary potential
that exists within the Portfolio. The Board
and Property Advisor remain fully focused
on delivering the best possible outcome
for the Company’s stakeholders. We
recognise the importance of dividends
to our shareholders, and the resumption
of dividend payments is a priority, once
market conditions and the outlook for
future condominium sales become clearer.
Robert Hingley
Chairman
28 March 2023
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Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Tenant s
People
ShareholdersRegulators
Local
communities
Partners
Listening to our
stakeholders
We believe that, to maximise value and secure our long-term success, we must take
account of what is important to all our key stakeholders. These encompass our tenants,
shareholders, regulators, partners and local communities. This is best achieved through
proactive and effective engagement.
Section 172 of the Companies Act 2006
Although it is not a legal requirement for a
non-UK company to comply with section
172 of the UK Companies Act 2006, there
are related corporate governance provisions
in the AIC Code which apply to the Company
on a “comply-or-explain” basis.
The Board of Directors considers, both
individually and collectively, that they have
acted in the way they consider in good
faith will be most likely to promote the
success of the Company for the benefit of
its members as whole (having regard to the
stakeholders and matters set out in section
172 of the UK Companies Act 2006) in the
decisions taken during the year.
The Board values the importance of
maintaining a high standard of business
conduct and stakeholder engagement
and ensuring a positive impact on the
environment in which the Company
operates. While the Board will engage
directly with stakeholders on certain issues,
stakeholder engagement will often take
place at an operational level, with the Board
receiving regular updates on stakeholder
views from the Property Advisor.
The table below aims to highlight how
we engage with our key stakeholders,
why they are important to us and the
impact they have on our business, which
we believe helps to demonstrate the
fulfilment of the Board’s duties under
section 172. Additionally, there is more
detail about how PSD and its Property
Advisor engage in the corporate
responsibility section of thisreport.
Stakeholder Engagement
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Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
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Directors’
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Financial
Statements
Key stakeholder issues
Tenants
Taking good care of our tenants ultimately
results in taking good care of all stakeholders.
By gaining insight into the requirements of our
tenants, the Property Advisor is able to ensure
a high retention rate and stable income stream
from ourassets.
A significant increase in the cost of living,
particularly heating costs, has reduced net
disposable income and placed more pressure
on vulnerable tenants.
Shareholders
The engagement of our shareholders is
important to the future success of our business.
The Property Advisor has a productive dialogue
with both large investors and retail shareholders.
Partners
PSD and its Property Advisor respect and value
our partners, treating them fairly at all times,
so they in turn can deliver the best service to
our tenants and investors.
How the Company engages
Tenants
• The Property Advisor partners with, and
monitors the activities of, Core Immobilien
(“Core”), who have the responsibility of
interacting with and managing the tenants.
• By interacting in the day-to-day business with
tenants, Core builds up a picture of relevant
issues and concerns that tenants wish us to
consider. These are reported to the PSD
Board via the Property Tenant Survey issued
by Core to invite constructive feedback.
• Health and Safety is central to all our business
activities. It is our responsibility to ensure that
we provide and promote a healthy, safe and
secure environment for our tenants.
• The Property Advisor has introduced and
monitors a vulnerable tenant policy to provide
procedures to assist tenants who may require
additional protection.
Shareholders
The Company engages directly with shareholders
in the following manner:
• Through our investor relations programme
with regular written updates, meetings and
roadshows.
• Through our Annual General Meeting (‘AGM’),
to which all investors are invited; investors are
updated on the Company and encouraged to
share their views.
• The Company provides relevant, timely
communications on its Company website.
• The Property Advisor’s Investor Relations
department is always on hand to deal with
investor queries.
The Property Advisor organises bespoke investor
trips to Berlin to view PSD’s portfolio of assets,
meet regulators and valuers and other industry
practitioners.
Partners
• The Property Advisor has a close working
relationship with all of the Company’s
business partners and advisers, and
regularly engages with all parties.
• The PSD Board regularly monitors the
performance and reviews the terms
of each service contract.
• The Property Advisor ensures suppliers
meet the Company’s high level of conduct.
All suppliers are required to confirm on an
annual basis, in the form of a questionnaire,
that they have adequate policies and
procedures in place to align their values
with those of the Company.
• Affirmation letters requesting confirmation
of alignment with PSD’s key policies and
standards signed by key partners of PSD
and by the Property Advisor are obtained
by the Board.
Highlights
Tenants
• The Property Advisor has conducted tenant
surveys for incoming tenants to gain better
insight on the issues that they regard as
important to them.
• For 2023, in addition to incoming tenants,
the Property Advisor intends to extend its
survey to sitting tenants.
• The Company incurred capital expenditure
of €16.4 million during 2022 to enhance
properties within itsPortfolio.
• The Company has supported its tenants,
both residential and commercial, during
a period of significant inflation. Where
necessary, it has agreed, on a case-by-
case basis, the payment of monthly rents
or deferring rental payments.
Shareholders
• In addition to Numis, the Company Broker,
Edison have been engaged to produce
regular, in-depth research on the Company.
The intention is to raise the visibility of the
Company and enable investors to develop
an improved understanding of the business.
• The Property Advisor conducts regular
conference calls with key investors, both
current and potential.
• The Property Advisor regularly attends
industry conferences and participates in
industry webcasts.
• The Property Advisor publishes market
insights to help educate existing and
potential investors on the German
residential asset class.
Partners
• The Board, at its meeting held on 7 March
2023, reviewed the performance, and
considered the continued appointment,
of the Company’s service providers.
• The continued appointment of all service
providers was approved by the Board.
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Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Stakeholder Engagement continued
Key stakeholder issues
People
PSD pays particular attention to the employment
practices of the Property Advisor, its principal
partner.
Having people who bring a diverse range of talents
and perspectives, and who feel engaged in their
roles, is fundamental to the long-term success of
the Property Advisor’s business. It is crucial that the
Property Advisor, and PSD, understand their values
and what motivates them – and reflect this in the
way the Property Advisor operates.
Local communities
Through responsible investing, the Company
can ensure the long-term success of not only
itself, but also that of the environment within
which it operates.
Regulators
PSD is committed to operating within the relevant
regulatory and planning frameworks.
We observe all Berlin tenant laws, building and
other relevant regulations.
How the Company engages
People
• Our Company Values (Responsible,
Fair, Excellent, Respectful) underpin our
commitment to acting responsibly. They
set guidelines for the way we conduct our
business. The Property Advisor has also
committed to PSD’s values.
• The Property Advisor is committed to having
an inclusive working environment. Employees
are offered a variety of training programmes
to develop personally and professionally.
• The Property Advisor is committed to
rewarding performance, offering competitive
base salaries and benefit packages. Its reward
philosophy is based on team performance and
its incentive schemes aim to focus everyone
on the achievement of its strategic objectives.
• The Property Advisor provides leading health
and welfare benefits including access to
medical advice.
Local communities
• Our ‘Better Futures’ Corporate Responsibility
plan has structured our charitable giving
through our Community Policy.
• PSD provides financial support to two
Berlin-focused charities, The Intercultural
Initiative and Laughing Hearts.
• The Intercultural Initiative is a Berlin refuge
that helps women and children affected
by domestic violence. Laughing Hearts
supports children living in children’s homes
and social care.
• The Property Advisor supports two homeless
charities in London, SPEAR and SHP.
• Funding is given to SPEAR to run an
outreach service, helping rough sleepers in
the Wandsworth area into accommodation
and helping them to address health and wider
social care problems.
• Funding provided to SHP supports an
employability programme that helps
homeless people or those at high risk
of becoming homeless to find a job and
secure a sustainable income.
• During 2022, the Property Advisor additionally
agreed funding for Home-Start, a UK
community network of trained volunteers
and expert support helping families with
young children.
Regulators
• The Property Advisor liaises with Non-
Governmental Organisations (NGOs) and
industry bodies to enhance the positive
impact we have on the communities in
which we operate.
• The Property Advisor takes a constructive,
positive approach to working with local
authorities to ensure high quality planning
applications are submitted.
• On an ongoing basis, the Property Advisor
reviews all relevant tenant and property laws
to ensure PSD continues to operate within
the regulatory framework.
Highlights
People
• The Property Advisor runs weekly online
employee town hall meetings to update on
the business and share its culture and values.
• Results from the Property Advisor’s 2022
employee survey suggest that employees
are treated with respect and are provided
with equal opportunities. Ninety-five%
of employees rate QSix as an excellent/
good employer.
• The Property Advisor has adapted its working
from home policies. Subject to line manager
approval, employees are now entitled to
work from home two days per week.
The Property Advisor ensures systems
are set up to accommodate employees
working from home.
Local communities
• In 2022, PSD’s support to the Intercultural
Initiative helped with the operational costs
of a support apartment which provides
accommodation for families who no
longer need to live in a refuge, but still
require protection and support to build
an independent life. We also helped fund
education therapy sessions for children and
family counselling support.
• PSD’s donation to Laughing Hearts in 2022
facilitated the purchase of a garden swing,
well received new-experiences trips for the
children to Hamburg and Hungary, residential
items for the charity’s facilities, as well as the
opportunity to attend workshops and camp
to learn English.
• The Property Advisor’s work with SPEAR
provided assistance to 644 homeless people
in Southwest London during 2022.
• The Property Advisor’s involvement with SHP
during 2022 allowed 180 additional people to
benefit from SHP’s employability programme.
Regulators
• The Company remains fully committed
to complying with all relevant property
legislation and regulation and acting in
line with best practice.
• The Property Advisor is in constant dialogue
with the Company’s property manager (Core
Immobilien) to ensure that all tenants are
notified on a timely basis of any changes
to tenancy laws and rental levels.
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Board Decision Making
Examples of topics where the Board considered the interests of its key stakeholders
when making decisions include rent collection during the cost of living crisis, our charitable
initiatives, the provision of support for Ukrainian refugees and our commitment to enhanced
environmental reporting.
Board decision-making and stakeholder considerations
Key decision/item Stakeholder
How stakeholders’ views
were taken into account
Actions taken as a result
of this engagement Long-term effects of decision
Rent collection
during the cost
of living crisis
Tenants The Board has received
regular updates from the
Property Advisor on rent
arrears and tenants in
difficulty as a result of a rise
in inflation and potential
reduction in disposal income.
Where necessary, the Company
provided support to its tenants, both
residential and commercial, through
agreeing, on a case-by-case basis, the
payment of monthly rents or deferring
rental payments.
The Board better
understands adverse
circumstances as they
impact on tenants and
potential remedies.
Ukraine crisis
All
stakeholders
All stakeholders have been
painfully aware that the
ongoing conflict in Ukraine
has caused severe hardship
and displaced millions from
their homes.
The Company made available a
number of furnished apartments on a
rent-free basis for Ukrainian refugees.
These tenants have transitioned into
long-term tenancies.
The Board is aware
of the Company’s
social responsibilities
and its obligation to all
stakeholders to ensure
it acts as a responsible
corporate citizen during
a period of extreme
hardship.
Charitable
giving
All
stakeholders
Through its Community
Investment Policy, the Board
is committed to supporting
charities where there is
a connection with either
‘homelessness’ or ‘families’.
The Company continues to support
two Berlin Charities, The Intercultural
Initiative, a women and children’s refuge
that helps women and children affected
by domestic violence, and Laughing
Hearts, which helps children living in
children’s homes and social care.
Breaking the cycle of
disadvantage by providing
support to women and
children affected by
domestic violence, and
broadening children’s
experiences to give them
a more positive outlook
for the future.
Environmental
reporting
All
stakeholders
The Board recognises
that the German property
sector needs to play a major
role in Germany achieving
its environmental targets.
The Board has listened to
the Company’s stakeholders
and recognises that the
nature of the Company’s
business has environmental
and social impacts and
that the Company has a
responsibility to consider
and minimise these impacts
where possible.
The Company has strengthened its
Environmental, Social and Governance
(‘ESG’) monitoring and reporting
by introducing EPRA’s Sustainability
Best Practice Recommendations and
capturing our ESG measurements within
their framework. In 2022, the Company
attained an EPRA Gold Award for its
commitment to environmental reporting.
The Company has additionally
committed to making its first Global
Real Estate Sustainability Benchmark
(GRESB) submission with a view to
obtaining full accreditation.
The Company has mandated external
consultants to begin the process of
establishing the carbon footprint
of the Portfolio.
Improved monitoring
of the Portfolio’s
environmental impact
and future reduction
in the Company’s
environmental footprint.
Creating more
attractive homes for
tenants, that benefit
the environment and
society as a whole.
Reducing the carbon
footprint of the portfolio
of buildings owned by
the Company.
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Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Board Decision Making continued
Key decision/item Stakeholder
How stakeholders’ views
were taken into account
Actions taken as a result
of this engagement Long-term effects of decision
Shareholder
engagement
Shareholders The Board considered
feedback from shareholders,
the Property Advisor, and the
Company’s corporate broker
in relation to the level of
shareholder contact and
research coverage.
In addition to Numis, the Company’s
corporate broker, Edison, a respected
equity research company, produces
regular, “free to read” in-depth research
on PSD.
The Company has a productive dialogue
with a number of other investment
houses on an informal basis, with a
view to increasing investor awareness.
The Property Advisor attends a number
of Investor conferences, with a view to
raising the profile of the Company.
Raising the visibility of
the Company to enable
investors to develop an
improved understanding
of the business.
Corporate
strategy
and asset
management
Shareholders The Board recognises that
its shares are currently valued
at a significant discount to
published net asset value and
has listened to shareholder
views on measures that can
be taken to address this.
A number of new properties have
been identified as non-core and have
been placed on the market for sale.
The Company will consider disposing
of assets at a discount to carrying value
in instances where disposal proceeds
can, once dividend payments can be
sustainably restored, be deployed
accretively to share buybacks.
No further acquisitions are planned,
pending improvement in market
conditions and narrowing of share
price discount to EPRA NAV.
Balanced capital
management in the light
of prevailing economic
and industry backdrop.
Ensuring that the
Company delivers the
best possible outcome for
its shareholders through
the real estate cycle.
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Tenants
People
ShareholdersRegulators
Local
communities
Partners
An active approach to
portfolio management
Our strategy is to manage and invest in our
Portfolio of properties to improve the overall
standard of accommodation to our tenants and
deliver superior risk-adjusted returns to our investors.
To deliver on our strategic objectives, it is imperative
that we work closely with all of our key stakeholders.
These encompass tenants, shareholders, regulators,
our partners and local communities.
2022 gross rental income invested
in property enhancements
69.3%
Combined value of agreed property
(asset) sales
€12.1m
Our key stakeholders
Tenants
We aim to create for our tenants modern,
well-maintained homes at affordable rents.
Shareholders
The engagement of our shareholders is
important to the future success of our
business. The Board and The Property Advisor
seek to maintain a productive dialogue with
both large investors and retail shareholders.
Partners
We respect and value our partners, treating
them fairly, so they in turn can deliver the best
service to our tenants and investors.
People
PSD pays particular attention to the
employment practices of the Property
Advisor, its principal partner. Having people
who bring a diverse range of talents and
perspectives, and who feel engaged in their
roles, is fundamental to the long-term success
of our business.
Local communities
We aim to make a positive contribution to the
local environment in which our properties are
located, through improving the external
facades of the buildings and supporting local
charities.
Regulators
We always observe all Berlin tenant laws,
building and other relevant regulations.
Read more page 8
Our Strategy
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Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Underpinning our strategy is a
business model that involves our
Property Advisor’s active management
of the portfolio of assets.
The key stages of this process are: Originate, Invest, Optimise, and Monetise.
Our Business Model
Originate
The Portfolio has been assembled by
acquiring apartment buildings which
offer the potential for medium-term
value creation. For example, properties
may be rented at rates well below
current market levels, have development
capacity, or have the potential to be
resold profitably as condominiums.
Invest
A business plan is formulated
for each property which analyses
medium-term investment requirements
and the potential return on investment.
Vacant apartments are considered for
modernisation and vacant attic space
is reviewed for conversion to residential
space. At all times, strive to reduce
our environmental impact during the
property refurbishment process.
Read more on pages 16-22 Read more on pages 16-22
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Monetise
The Company evaluates options
for the disposal of buildings deemed
to be non-core. Typically, these
buildings will have a mature tenant
structure with limited scope for further
capital expenditure and subsequent
reversionary re-letting. Condominium
properties are sold on a unit-by-unit basis
at a premium to rental property values.
Optimise
For properties considered to be
core rental buildings, vacant units
are re-let after refurbishment at the
prevailing market rent. Tenant lists
are reviewed carefully and, where
appropriate, rent increases are applied
for, either where tenants are paying less
than the statutory rent level (Mietspiegel),
where modernisation has been
undertaken (and these costs are allowed
to be recouped), or where the lease
contains provisions for indexation.
Read more on pages 16-22 Read more on pages 16-22
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Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Financial results
Revenue for the financial year to
31 December 2022 was €25.9 million
(31 December 2021: €25.8 million). The
Company recorded a loss before tax of
€17.5 million (31 December 2021: profit
before tax €45.3 million), reflecting the
non-cash impact of a revaluation loss
of €42.2 million (31 December 2021:
revaluation gain of €38.0 million).
Property expenses rose by 6.4% over
the year, due primarily to service charge
increases and related energy/utility price
movements. Administration costs and
legal and professional fees were marginally
down over the year, with slightly higher legal
costs from transactional activity offset by a
drop in other professional costs. Reported
earnings per share for the period were
(€0.17) (31 December 2021: €0.39).
Reported EPRA NTA per share declined
by 9.7% in the period to €5.10 (£4.52)
(31 December 2021: €5.65 (£4.74)). After
accounting for dividends paid during 2022
of €7.5 (£6.45), which were paid in June
and October 2022, the Euro EPRA NTA
total return for the period was (8.4)% (2021:
8.4%). The Sterling EPRA NAV per share total
return was (3.2)% (31 December 2021: 1.0%),
reflecting the decline in the value of Sterling
versus the Euro during the financial year.
Report of the Property Advisor
Financial highlights for the 12-month period to 31 December 2022
€ million
(unless otherwise stated)
Year to
31 December
2022
Year to
31 December
2021
Gross rental income 25.9 25.8
Investment property fair value (loss)/gain (42.2) 38.0
(Loss)/gain before tax (PBT) (17.5) 45.3
Reported EPS (€) (0.17) 0.39
Investment property value 775.9 801.5
Net debt (Nominal balances)
1
303.3 278.0
Net LTV (%) 39.1 34.7
IFRS NAV per share (€) 4.50 4.74
IFRS NAV per share (£)
2
3.99 3.98
EPRA NTA per share (€)
3
5.10 5.65
EPRA NTA per share (£)
2
4.52 4.74
Dividend per share in respect of the period (€) 2.35 7.50
Dividend per share in respect of the period (£) 2.09 6.38
€ EPRA NTA per share total return for period (%) (8.4) 8.4
£ EPRA NTA per share total return for period (%)
2
(3.2) 1.0
1 Nominal loan balances as per note 22 rather than the loan balances on the Consolidated Statement of Financial Position which consider Capitalised Finance
Arrangement Fees in the balance as per IAS 23.
2 Calculated at FX rate £/€1:1.128 (2021: £/€1: 1.191).
3 Further EPRA Net Asset Measures can be found in note 29.
Portfolio valuation and breakdown
Year to
31 December
2022
Year to
31 December
2021
Total sqm (’000) 188.8 189.7
Valuation (€ million) 775.9 801.5
Like-for-like valuation (decline)/growth (%) (3.1) 6.3
Value per sqm (€)
1
4,082 4,225
Fully occupied gross yield (%) 3.0 2.8
Number of buildings 96 97
Residential units 2,553 2,569
Commercial units 135 138
Total units 2,688 2,707
1 Value per sqm provided by JLL based on portfolio valuation excluding assets under construction of €5.3 million.
Dividend and share buybacks
The Company has taken the difficult
decision to suspend dividend payments.
Although the performance of the
Company’s core rental business remains
strong and its balance sheet and financing
remain conservative, this is considered the
appropriate course of action in the light of
ongoing weakness in buyer confidence,
asset pricing and condominium and
othersales.
The dividend has always been paid from
operating cash flows, including the disposal
proceeds from condominium projects
and other properties. Subject to the cash
requirements of the business, and after
full consideration of the impact that the
economic and operating environment may
have on the portfolio of assets owned by
the Company, it is the intention to resume
dividends once the outlook is clearer.
In the light of the decision not to pay a
final dividend and taking into account the
interim dividend paid in October 2022,
the total dividend for the financial year to
31 December 2022 is €2.35 per share (£2.09
per share) (31 December 2021: €7.5, £6.38).
During the financial year ended
31 December 2022, the Company bought
back a further 974,754 ordinary shares,
representing 1.0% of the ordinary share
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capital, for a total consideration of £3.5
million. The average price paid represents
a 20.9% discount to EPRA NTA per share as
at 31 December 2022.
Although the Company recognises that
PSD’s share price remains at a material
discount to EPRA NTA, it did not buyback
shares in the second half of the financial
year. This reflected a decline in the
proceeds from condominium sales and
uncertainty on the transaction market for
other asset disposals.
The Company will continue to keep its cash
commitments under close review and will
prioritise continued investment in the core
Portfolio. Any surplus cash generated over
the amounts required to reinvest in the
core Portfolio and reinstate dividends on
a sustainable basis will, so long as share
price discount to NAV persists, be used
for share buybacks and not to acquire
additional properties.
Like-for-like decline in Portfolio
valuation of 3.1%
Pricing in the Berlin residential property
market weakened in the second half of
the financial year, with higher inflation
and interest rates adversely affecting buyer
sentiment and, consequently, transaction
volumes. Market sales volumes in 2022 were
at a ten-year low, reflecting a widening gap
between buyer and seller price expectations.
These weaker market conditions have
impacted the valuation of the Portfolio.
Rental income and vacancy rate
Year to
31 December
2022
Year to
31 December
2021
Total sqm (’000) 188.8 189.7
Annualised Rental Income (€ million) 21.4 20.3
Gross in-place rent per sqm (€) 10.0 9.6
Like-for-like rent per sqm growth (%) 3.9 3.9
Vacancy (%) 6.2 8.4
EPRA Vacancy (%) 2.4 3.1
JLL has conducted a full RICS (Royal
Institution of Chartered Surveyors) Red
Book property-by-property analysis, tied
back to comparable transactions in the
Berlin market, and provided a portfolio
valuation on this basis. As at 31 December
2022, the Portfolio, including investment
properties under construction, was valued
at €775.9 million (31 December 2021:
€801.5 million). Investment properties
under construction totalling €5.3 million
were valued by the Board on a discounted
cost basis (see note 16 of the Financial
Statements for further detail). Across the
Portfolio, this represents a 3.2% decline
over the year, reflecting an increase in
market yields and the subsequent impact
on real estate asset valuations.
On a like-for-like basis, after adjusting for
the impact of acquisitions net of disposals,
the Portfolio valuation declined by 3.1% in
the year to 31 December 2022, and by 5.2%
in the second half of the financial year.
The valuation as at 31 December 2022
represents an average value per sqm
of €4,082 (31 December 2021: €4,225)
and a gross fully occupied yield of 3.0%
(31 December 2021: 2.8%). Included within
the Portfolio are six multi-family properties
valued as condominiums, with an aggregate
value of €30.1 million (31 December 2021:
eight properties; €38.8million).
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Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Report of the Property Advisor continued
Like-for-like rental income per sqm
growth of 3.9%
After considering the impact of acquisitions
and disposals, like-for-like rental income
per sqm grew 3.9% compared with
31 December 2021. Like-for-like rental
income grew 6.0% over the same period.
Net cold rent was €10.00 per sqm as at
31 December 2022, an increase from
€9.64 per sqm as at 31 December 2021.
The Company recognises the challenges
that tenants are facing as a direct
consequence of inflation, particularly higher
fuel prices. Notwithstanding current cost of
living pressures, rent collection levels have
remained stable. The Company has always
managed rent-to-income multiples for new
tenants conservatively. Given this customer
demographic, combined with German
Federal support initiatives to help mitigate
the financial impact of rising fuel costs,
the Company expects rent collection
levels to remain resilient.
EPRA vacancy remains low
Reported vacancy at 31 December 2022
was 6.2% (31 December 2021: 8.4%).
On an EPRA basis, which adjusts for units
undergoing development, the vacancy
rate was 2.4% (31 December 2021: 3.1%).
Reversionary re-letting premium
rises to 29%
During the year to 31 December 2022,
320 new leases were signed (2021: 240
new leases), representing a letting rate of
approximately 12.9% of occupied units.
The average rent achieved on all new lettings
was €13.0 per sqm, a 6.6% increase on the
prior year, and an average premium of 29.1%
to passing rents, excluding condominium
assets. This compares with a 26.8% premium
in the period to 31 December 2021.
The reversionary premium for the Portfolio
is affected by the inclusion of re-lettings
from the acquisition in Brandenburg in
2022, where rents are lower than those
achieved in central Berlin. Looking solely
at the Berlin portfolio assets held for rental,
which represents 90.3% of total lettable
space, the reversionary premium achieved
was 32.3%, comparable to the prior
year (33.8%).
Portfolio investment
During the year to 31 December 2022, €16.4
million was invested across the Portfolio
(31 December 2021: €9.5 million). These
items are recorded as capital expenditure
in the Financial Statements. A further €1.5
million (31 December 2021: €1.7 million)
was spent on maintaining the assets and
is expensed through profit or loss.
The year-on-year increase in capital
expenditure reflects the intensification
in renovation and modernisation activity
resulting from the repeal of the Mietendeckel
rent cap in April 2021 (which made it
economically viable for the Company
to resume its programme of vacant
apartment improvements), alongside
increased renovation expenditure on the
asset in Brandenburg and further work on
bringing assets into a position to be sold
as condominiums. This investment is
expected to be recouped in 2023 and
beyond through condominium sales
and rental uplifts.
In the light of current weaker market
conditions and reflecting that future
expenditure on the Brandenburg asset
will be lower, it is anticipated that total
discretionary capital investment will be
materially lower in 2023.
EPRA Net Initial Yield (NIY)
All figures in € million unless otherwise stated
Year to
31 December
2022
Year to
31 December
2021
Investment property 775.9 801.5
Reduction for non-controlling interest (NCI) share and property
under development (12.3) (12.8)
Completed property portfolio 763.6 788.7
Estimated purchasers’ costs 63.2 65.1
Gross up completed property portfolio valuation 826.8 853.8
Annualised cash passing collected rental income 21.4 20.3
Property outgoings (3.6) (3.4)
Annualised collected net rents 17. 8 16.8
EPRA NIY (%) 2.1 2.0
EPRA Capital Expenditure
All figures in € million unless otherwise stated
Year to
31 December
2022
Year to
31 December
2021
Acquisitions 11.6 –
Like-for-like portfolio 7.4 4.7
Development 8.5 4.4
Other 0.5 0.4
Total Capital Expenditure 28.0 9.5
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Disposals
In September 2022, the Company
announced that it had exchanged contracts
to sell two non-core properties for an
aggregate consideration of €8.6million.
These buildings were acquired in 2008 and
2017 respectively, for an aggregate purchase
price of €3.9 million and had a carrying
value of €9.0 million as at December 2021.
The Company exchanged contracts to
sell a further property deemed to be
non-core in December 2022 for €3.5
million. This building was acquired in 2008
for €1.0 million and had a carrying value
of €3.9 million as at 31 December 2021.
Since the financial year end, a number of
additional properties have been placed on
the market. However, the market for asset
disposals has been challenging in 2023 to
date, with offers significantly below carrying
value, and at prices that would release limited
cash after repayment of associated debt.
Although the Company has and will consider
asset disposals at a discount to carrying value,
it will only do so in instances where disposal
is clearly in shareholders’interests.
Acquisitions
On 21 March 2022, the Company announced
that it has exchanged contracts to acquire
a portfolio of 17 new-build, semi-detached,
residential properties (34 units) for a total
agreed purchase price of €18.5 million. This
new-build has been forward-funded, with
construction expected to complete in the
second half of 2024. The projected fully
occupied rental income generated by the
property is €0.7 million per annum,
equivalent to 3.1% of the Portfolio gross
in-place rent as at 31 December 2022. Based
on the price paid of €4,323 per sqm, this
represents an estimated prospective gross
yield of 3.5%.
On 5 May 2022, the Company exchanged
contracts to acquire four multi-family
houses consisting of 24 residential units
for a purchase price of €6.3 million. These
properties are located in Hoppegarten and
Neuenhagen, Berlin. Built in 1995 and 1998,
they are in good technical condition and
offer significant reversionary potential,
having benefited from recent positive
demographic changes.
On 22 September 2022, the Company
exchanged contracts to acquire a multi-
family house with 22 residential units and
three commercial units for €4.9million.
This property is located in Berlin-Neukölln,
is well maintained, and offers significant
reversionary and attic potential. The property
was acquired for a price of €2,312 per sqm,
a level which the Property Advisor believes
is below market value. The purchase is due
to complete in Q2 2023.
Acquisitions are financed using the NATIXIS
loan facility. No further acquisitions are
planned for 2023, pending an improvement
in market conditions, the resumption
of dividend payments and a significant
narrowing of the Company’s discount to
EPRA Net Tangible Assets.
Condominium sales
Condominium sales during 2022 were
heavily impacted by concerns over increases
in the cost of living, higher borrowing costs
and uncertainty surrounding the macro-
economic environment caused by the crisis
in Ukraine. These factors led to a significant
deterioration in buyer sentiment and
reduced volumes.
During the financial year, 13 condominium
units were notarised for sale for an aggregate
value of €4.7 million (2021: €15.2million).
The average achieved notarised value per
sqm for the residential units was €5,502,
representing a gross premium of 22.4% to
carrying value and a 34.8% premium to PSD’s
average Berlin residential portfolio value as at
31 December2022.
Since the financial year end, a further
three condominiums have been notarised
for a total consideration of €0.8 million,
at an average 62% premium to carrying
value. Reservations for a further three units,
with a combined value of €0.6million,
and an average 80% premium to carrying
value have recently been received and are
pending notarisation. These condominiums
were smaller than the average across the
portfolio of condominium assets, and the
premium achieved should not be viewed
as representative of future condominium
valuations.
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Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Report of the Property Advisor continued
As at 31 December 2022, PSD had gross
borrowings of €315.8 million (31 December
2021: €288.4 million) and cash balances
of €12.5 million (31 December 2021: €10.4
million), resulting in net debt of €303.3
million (31 December 2021: €278.0 million)
and a net loan-to-value (LTV) ratio on
the Portfolio of 39.1% (31 December
2021: 34.7%).
The change in gross debt in the period
results from an additional drawdown
from the NATIXIS facility, which includes
borrowings for further capital expenditure,
previously announced acquisitions and a
tranche of debt related to the new-build
project in Erkner. Partly offsetting the
drawdowns are repayments of debt on the
sale of whole assets and condominiums,
alongside amortisation of debt held with
Berliner Sparkasse.
The majority of PSD’s debt effectively
has a fixed interest rate through hedging.
As at 31 December 2022, the blended
interest rate of PSD’s loan book was 2.2%
(31 December 2021: 2.0%).
Sustainability
The European Union has set a target
of achieving carbon neutrality by 2050
and the real estate sector will play a crucial
role in meeting this goal. The broad thrust
of government policy is to reduce carbon
emissions and incentivise investments
in low-carbon and environmentally
sustainablesolutions.
Most climate-related regulation as it
affects the Berlin residential sector has the
objective of reducing and de-carbonising
the heat consumption of buildings. PSD
regularly receives updates from third-party
experts on environmental legislative
developments in Europe, Germany, and
Berlin to ensure compliance and plan for
future capital expenditure.
One example is green leases. Whilst currently
predominantly used in commercial real
estate, they are likely to become increasingly
popular in the residential sector. Currently,
residential landlords in Germany do not have
sight of the utility consumption in tenants’
homes, as the information is controlled by
the tenant. Green leases may eventually be
helpful in encouraging landlords and tenants
to work together to understand where there
can potentially be reciprocal value in working
towards shared environmental goals.
Under a green lease, the landlord and tenant
may agree to undertake measures such as
improving the building’s energy efficiency,
using renewable energy sources, reducing
water consumption and implementing
waste management practices. Tenants are
encouraged to make changes to their own
operations and behaviour, such as using
energy-efficient equipment, reducing waste,
and conserving resources.
Buyer confidence in the condominium
market remains very fragile, particularly for
occupied units. The Company is therefore
focussing on plans to bring additional
unoccupied condominium properties to
market and bulk condominium sales are
under active consideration.
German Federal Government legislation
enacted in 2022 has placed significant
restrictions on the ability of landlords to
split their properties into condominiums.
This legislation is, however, not retrospective
and does not impact assets that have already
been split into condominiums. These
measures will inevitably increase the scarcity
of condominiums available for sale in the
future, further exacerbating the supply-
demand imbalance which currently exists.
With 76.6% of its Portfolio already legally
split in the land registry, the Company is
well placed to benefit from this trend over
the longer term.
Condominium construction
As previously reported, a condominium
construction project has commenced in an
existing asset bought in 2007, involving the
building-out of the attic and renovating
existing commercial units to create seven
new residential units. Construction on this
project started in the second half of 2021,
and the first unit has been notarised for
sale, with more units being made available
throughout 2023. The total construction
budget for this project is €4.5 million,
a 15% increase from initial budget due to an
industry-wide cost increase in buildingcosts.
The Company also has building permits
for another 20 existing assets to create a
further 49 attic units for sale as condominiums
or as rental stock. This investment will
be considered as and when market
conditionspermit.
Debt and gearing
PSD has loan facilities with two principal
bankers, NATIXIS Pfandbriefbank AG
and Berliner Sparkasse, with an average
remaining duration of the loan book
exceeding three years and none of the
Company’s debt reaching maturity until
September 2026. Despite interest rate rises
during 2022, the Company’s interest rate
hedging policy has largely negated the
impact on our cash borrowing costs. The
Board considers the current level of gearing
and cash balances to be appropriate at this
stage in the real estate cycle and will not
look to materially increase debt levels until
such time as the market outlook becomes
more stable.
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The Property Advisor is monitoring the
feasibility of smart metering. Although
it is expected that there will soon be an
obligatory rollout of smart metering
infrastructure in Germany for electricity,
it is understood that the responsibility for
the implementation of this may reside with
the respective meter operators.
The Company has additionally mandated
external consultants to begin the process
of establishing the carbon footprint of the
Portfolio. This work will initially commence
on a representative sample of five buildings
within the Portfolio. It is anticipated that the
outputs of this exercise will help further
clarify the processes and any associated
capital expenditure required to comply with
medium to long-term German residential
emissions targets. Any associated carbon
emissions that occur as a result of remedial
works would also be considered.
The Company remains committed to best
practice in ESG reporting and will publish
a separate EPRA Sustainability report in the
second half of 2023. The Company has
additionally committed to making its first
GRESB submission with a view to obtaining
full accreditation in 2023.
EPRA Best Practice Financial
Reporting Metrics
PSD fully supports the EPRA best
practice recommendations (BPR)
for financial disclosures by public real
estate companies which are designed
to improve the quality and comparability
of information for investors.
The following table sets out PSD’s EPRA
key performance indicators (KPIs) from
the released BPR dated February 2022
and references where more detailed
calculations supporting the KPIs can be
found in thereport.
EPRA metrics
Metric Balance Note reference
EPRA Earnings (€m) (2.8) 28
EPRA Net Tangible Assets/share (NTA) (€) 5.10 29
EPRA Net Reinvestment Value/share (NRV) (€) 5.79 29
EPRA Net Disposal Value/share (NDV) (€) 4.53 29
EPRA Capital Expenditure (€m) 28.0 N/A
EPRA Net Initial Yield (%) 2.1 N/A
EPRA Vacancy (%) 2.4 N/A
EPRA Like-for-Like rent per sqm growth (%) 3.9 N/A
Outlook
With the publication of the 2022 interim
results, the Property Advisor cautioned that
there had been a deterioration in buyer
sentiment leading to reduced transaction
volumes and that the outlook for the
German property market in the second half
was uncertain. Ultimately, the steep upward
movement in interest rates has triggered
a price correction in real estate markets.
Uncertainty about the extent and duration
of the correction led to many investors
withdrawing from the market. In instances
where portfolios of properties were placed
on the market, pricing did not match vendor
expectations. Effectively, the bid-offer
spread widened to an extent that most
potential transactions did not complete, and
transaction activity fell to a ten-year low.
This process of adjustment has yet to
complete and the outlook for property
values in the first half of 2023 is likely to
remain challenging. Further declines in
property values driven by higher medium-
term interest rates cannot be discounted.
This risk is already being reflected in the
share prices of listed German residential
companies, all of which currently trade at
a significant discount to net asset value.
The Property Advisor retains a wide network
of industry practitioners, including potential
buyers of assets. Since the beginning of 2023,
a significant number of larger participants,
that had temporarily withdrawn from the
market, have now begun to indicate an
appetite for acquiring German residential
property again. Although this is an important
first step in narrowing the bid-offer spread,
it remains uncertain as to when or whether
renewed interest is priced at a level that
matches vendor expectations.
Whilst there remains uncertainty about real
asset values, supply-demand imbalances
within the Berlin residential market remain
supportive of rental values, underpinning
our core rental business. Demand for rental
properties continues to rise as higher home
ownership costs force potential buyers to
remain within the rental system for longer.
Demand has been further increased by
inward migration in excess of one million
refugees into Germany from Ukraine during
2022, placing further pressure on residential
vacancy levels, which are already at
historically low levels.
At the same time, higher funding, and
labour and construction costs represent
significant headwinds to new-build
construction, limiting the future supply
of rental accommodation. Set against an
annual target set by the German Federal
Government of 400,000 new completions
per year, less than 250,000 are estimated
to have completed in 2022, with forecasts
for 2023 and 2024 lower still. Future rental
growth should therefore continue to be
underpinned, and there remains significant
reversionary re-letting potential across
PSD’s Portfolio.
It remains too early to predict the timing
of any industry upswing in sales volumes in
the condominium market. Buyer confidence
remains fragile, particularly for occupied
units. Longer term, Federal Government
legislation enacted in 2022 has placed
significant restrictions on the ability of
landlords to split their properties into
condominiums and these measures will
inevitably increase the scarcity of stock
available for sale in the future, further
exacerbating the supply-demand imbalance
which currently exists. With 76.6% of its
Portfolio already legally split in the land
registry, the Company should be well
placed to benefit from this trend in the
longer term.
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Report of the Property Advisor continued
Cash balances (million)
€12.5
Net LTV on the Portfolio
39.1%
With a net LTV of 39.1% and no loans
maturing until September 2026, the
Company remains conservatively financed.
The current level of gearing and cash
balances is considered to be appropriate
at this stage in the real estate cycle and the
Company will not seek to undertake further
acquisitions or increase debt levels until
such time as the market outlook becomes
more stable. Historically, excessive leverage
at this stage in a real estate cycle has not
been well rewarded by equity and debt
capital markets and the Company will
therefore continue to seek opportunities to
dispose of further assets where appropriate.
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14.0
7.1
6.3
6.3
-3.1
2022
2021
2020
2019
2018
6.73
6.30
6.75
6.38
2.09
2022
2021
2020
2019
2018
Key Performance Indicators
PSD has chosen a number of KPIs, which the Board believes will help investors
understand the performance of PSD and the underlying portfolio:
• The value of the Portfolio declined by 3.1% on a
like-for-like basis during the year to 31 December
2022 (31 December 2021: 6.3% increase).
• The EPRA vacancy of the Portfolio stood at 2.4%
(31 December 2021: 3.1%).
• The Group continued with its targeted condominium
programme, notarising sales of €4.7 million in the
year to 31 December 2022 (2021: €15.2 million).
• EPRA NTA per share decreased by 9.7% to €5.10 as
at 31 December 2022 (31 December 2021: €5.65).
• In the light of the decision not to pay a final dividend
and taking into account the interim dividend paid
in October 2022, the total dividend for the financial
year to 31 December 2022 is €2.35 per share (£2.09
per share) (31 December 2021: €7.5, £6.38).
• Like-for-like Portfolio rent per sqm increased by 3.9%
as at 31 December 2022 (31 December 2021: 3.9%).
Like-for-like portfolio annual value growth
-3.1%
8.7
9.0
9.3
9.6
10.0
2022
2021
2020
2019
2018
Like-for-like portfolio rent per sqm (€)
+3.9% y-o-y
9.0
8.8
14.6
15.2
4.7
2022
2021
2020
2019
2018
Condominium sales – notarised (€ million)
€4.7
2.8
2.8
2.1
3.1
2.4
2022
2021
2020
2019
2018
EPRA vacancy
2.4%
4.58
4.92
5.28
5.65
5.10
2022
2021
2020
2019
2018
EPRA NTA per share (€)
€5.10
Dividend per share (p)
2.09p
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The Company believes that an environmentally and socially responsible
approach to managing our business is fundamental for long-term
risk-adjusted success, to the benefit of all our stakeholders.
Corporate Responsibility
Committed to
acting responsibly
Our approach to corporate responsibility
The Board recognises the importance of a
clear and relevant framework for conducting
business with environmental responsibility
and operating with integrity and transparency,
and engaging with its tenants, shareholders
and other key stakeholders.
We are committed to understanding what
is important to all of our key stakeholders,
balancing these different interests and
addressing our environmental and social
impacts. This commitment is captured
within our Company Values, business
model and ‘Better Futures’ CR Plan.
A major reason for joining EPRA was to
enable us to report more transparently. We
have introduced EPRA’s SBPR (Sustainability
Best Practice Recommendations) and have
included our ESG measurements within that
framework. In 2022, the Company’s EPRA
SBPR Report received a Gold Award, in
recognition of the Company’s commitment
to best practice in its reporting. This was an
improvement on the prior-year Silver award,
our first EPRA SBPR Report. PSD additionally
won the Best ESG Fund: Real Estate category
of the Private Equity Wire ESG AAA European
Awards 2022.
Stakeholder engagement
We regularly engage with our stakeholders
to ensure we appreciate their differing
viewpoints and take these into consideration
when making business decisions. We
strive to strike a meaningful balance
between providing a return to our
investors whilst addressing our social
and environmental impacts.
The cost of living crisis triggered by global
inflationary pressures that have built since
the onset of the war in Ukraine has inevitably
impacted many of our stakeholders’ lives.
During this period of economic stress, the
Company’s overriding priority continues to
be the health and wellbeing of our tenants,
work colleagues and wider stakeholders.
Where required, we endeavour to support
our tenants (both residential and commercial),
on a case-by-case basis, agreeing with them
the payment of monthly rents, deferring
rental payments and agreeing workable
repayment schedules.
Our Company Values
Our Company Values mirror our CR Plan
and underpin our commitment to acting
responsibly. They set guidelines for our
behaviours to make good commercial and
ethical decisions. We share these with our
key business partners who undertake many
of the day-to-day business operations for
PSD, to ensure that their own values and
behaviours are consistent with ours.
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Responsible
We act responsibly at all times and expect
a high level of integrity from all our partners
and their employees. That means we conduct
ourselves with the highest ethical standards
when partnering with our tenants, suppliers
and investors.
Fair
We are fair to all our stakeholders,
whether employees, partners, investors
or tenants and endeavour to balance their
different needs. Where financially viable,
we seek to improve the overall standard
of our accommodation whilst investing
responsibly for our investors and addressing
environmental and social impacts.
Respectful
We respect and value our partners and the
people who work for them as they are at the
heart of our business success and the face
of our Company with tenants and investors.
We believe this will ultimately deliver a
better service to our tenants and results
for our investors.
Excellence
We strive for excellence and continuous
improvement. We carefully select our
business partners based on their strong
industry experience and take a rigorous
approach to managing our business
and executing our strategy to deliver
outstanding results.
OUR COMPANY VALUES
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Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Corporate Responsibility continued
Our ‘Better Futures’
Corporate Responsibility Plan
Our ‘Better Futures’ Plan provides a framework to guide our activities
and improve our overall sustainability by being integrated throughout
our business operations. Our CR pillars align with EPRA’s ESG reporting.
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Protecting our environment
We strive to reduce our environmental impact by introducing renewable forms
of energy, improving the energy performance of buildings within the Portfolio
and encouraging tenants to minimise their utility use.
Read more page 28
ENVIRONMENTAL (E)
SOCIAL (S)
GOVERNANCE (G)
Respecting people
Our partners and their employees are at the heart of our business’s success and
are the face of our Company with tenants and investors. Our key partner, QSix,
is committed to hiring, developing and retaining highly experienced people.
Read more page 29
Valuing our customers
Working together with our partners, we provide good-quality affordable homes
with a reliable friendly rental service for our tenants and a highly professional
service for our investors.
Read more page 30
Investing in our communities
By investing in the housing stock and supporting local charities, we help
contribute to thriving and sustainable communities.
Read more page 31
Governing responsibly
By ensuring we have a strong corporate governance culture and the appropriate
policies and structures in place, we aim to deliver sustainable benefits to all of our
key stakeholders.
Read more page 32
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Protecting our
environment
ENVIRONMENT
Corporate Responsibility continued
We aim to understand our
carbon footprint, encourage
our tenants to minimise their
utility use and continue to
improve our measurement
and reporting.
Germany has set a target of climate
neutrality by 2045, five years earlier than
the overall EU target, and we recognise
that, for this ambition to be achieved, the
German property sector will need to play
a major role. The nature of our business
has environmental and social impacts, and
we have a responsibility to consider and
minimise these impacts where possible.
Our Environment Policy sets out guidance
as to how PSD, our Property Advisor (QSix)
and other key suppliers should operate to
reduce this impact. Measuring our impact
on the environment, and transparent
reporting thereon, are important elements
in our journey to reduce our environmental
footprint. Therefore, in 2022, we continued
to evolve our measurement and reporting
of our building portfolio, in line with EPRA’s
SBPR framework. For more details on our
ESG performance, see our EPRA SBPR
Reports published in 2021 and 2022.
Additionally, we receive regular regulatory-
focused reports from expert third-party
providers to ensure PSD is in the best position
to understand current and potential future
developments around the ESG regulatory
framework in Europe, Germany and Berlin.
Our environmental measures
Refurbishment
Improving the sustainability of good housing stock through renovation is fundamental
to our business model and ethos. Bringing valuable housing stock back into good
repair extends the life of the building and facilitates its positive environmental
contribution. Throughout the property refurbishment process, we work with our
contractors to minimise the amount of waste by re-using materials, where feasible,
and ensure that all construction works are carried out in line with local health and
safety regulations.
Procurement
Consistent with our Sustainable Procurement Policy, we aim to use products
and materials that have a low environmental impact, so long as their technical
performance meets the required standards, and they are economically viable for
refurbished properties.
Development
Although the core of our business consists of upgrading older buildings, where we do
develop new buildings, we operate to the highest environmental standards. We have
recently purchased a site in Erkner, in the outskirts of Berlin, where we are developing
34 single family houses. Each unit will have an electric car charging point and triple
glazing as standard, and heating will use a combination of hybrid solar collectors and
brine/water heat pumps. These energy-saving measures have earned the asset a pro
forma KfW 55 energy efficiency rating, one of the highest ratings that new-builds can
receive. The energy-efficient nature of this development underpins the Company’s
commitment to ensuring compliance with the highest efficiency standards for
new-build acquisitions.
Utility usage
The greatest environmental impact from our property portfolio is from the utilities
used by our tenants in their homes. As a landlord, we do not have direct control
over most of the utility usage, as tenants are in control of the utility-consumption
information within their own homes. However, where we can, we encourage our
tenants to reduce their utility usage by providing them with helpful hints and advice,
and we endeavour to ensure that a greater proportion of the electricity supplied to
our buildings is from renewable sources.
Waste
To better manage tenants’ waste, we ensure that tenants are kept well informed
about how to properly recycle their waste and we work with our waste providers on
the disposal routes. Many of our properties have been awarded recycling awards.
Our Business
Partners
Given the bulk of the day-to-day running of PSD’s operations is undertaken by
our Property Advisor and PSD itself does not have offices, we encourage QSix to
minimise its environmental impact. QSix’s Berlin and London offices are fitted with
energy-saving products, and they have an Environment Champion for each office
to encourage employees to reduce their utility usage, improve recycling and reduce
the amount of paper used. Employees at the London and Berlin offices receive ESG
training every two years.
Measurement
To the extent that the majority of our tenants have direct contact themselves with the
electricity providers, we do not have direct control over the majority of the utility usage
in our properties. Although our visibility and oversight are therefore limited, we have
continued to strengthen our ESG monitoring and reporting in 2022 in line with EPRA’s
SBPR framework.
In addition to measuring the buildings that use oil and district heating energy, in 2022,
we have added to this more of our buildings using gas heating. This has increased the
percentage of our Portfolio that is measurable from 25% in 2020 to over 90% currently.
Given QSix is a separate legal entity, its office impact is not included within our EPRA
ESG reporting. For more details on our ESG performance, see our EPRA SBPR Reports
published in 2021 and 2022.
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Our Property Advisor, QSix,
is our key partner and has
an experienced team of
property professionals with
long-standing experience
of the German residential
property market.
QSix is de facto the face of PSD. We
therefore believe it is important that QSix’s
and PSD’s Company Values are aligned
and how QSix treats their employees is
consistent with our People Policy.
Although PSD does not have its own
full-time employees, it does invest in the
development of its Non-executive Board,
with each Board Member being required to
undertake professional training throughout
the year. This training is often provided
by external third parties with relevant
experience, the Property Advisor or other
service providers. Each member of the
Board also undertakes an annual appraisal.
Respecting
people
SOCIAL
“I started as an IT Support Engineer in January 2022.
QSix management and colleagues have provided valuable
support as I have learned so much about overseeing the
company’s day-to-day IT operations, and as I continue to
build on my professional qualifications.
Since my arrival, I have successfully implemented a
major IT transformation, moving the offices from an on-
prem/hybrid environment to a cloud solution. This was
fully supported by QSix. Additionally, QSix funded my
ITIL 4 – IT Service Management Certification, enabling
me to continue to evolve in delivering best IT practices
for the business. My focus next is to obtain more cloud
computing certifications and to continue to apply this
knowledge within the company.”
James Remmer, IT Support Engineer
Valuing our people
Work environment
QSix is committed to having an inclusive working environment that encourages all employees to develop both personally and
professionally through having access to a variety of training programmes, receiving on-the-job support and coaching, and having
annual Development Reviews.
Work-life balance
The culture is to have a positive work-life balance, with both the Company and QSix committed to the health and wellbeing
of all employees. Leading health and welfare benefits are provided, including access to medical and legal advice.
Home working
Post many of the COVID-19 restrictions and challenges, QSix has implemented a hybrid working from home/working from the office
model. The most recent (2022) employee survey was helpful in engaging with employees to understand their views on topics such as
home working to ensure productivity remained high whilst balancing employees’ needs.
People policies
Neither PSD nor QSix meets the criteria requiring publication of a Modern Slavery Statement. Nevertheless, both companies fully support
the intentions of the Act and are committed to implementing systems and controls aimed at minimising the risk of modern slavery taking
place anywhere within our organisations or in our supply chains. We have an Anti-Slavery and Human Trafficking Policy which is shared
with key business partners, who are asked to verify that they have acted in accordance with the Policy.
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Valuing our
customers
SOCIAL
We are committed to
providing good-quality
affordable homes with
a reliable, friendly rental
service to our tenants
and a professional service
to our investors.
Our tenants are at the centre of our
business activity. PSD focuses on providing
homes for people that are both comfortable
and affordable. We aim to make a positive
contribution to our tenants’ personal and
social wellbeing, as we focus on living
standards and on ensuring that their
apartment is a place in which they enjoy
living. In 2022, we have continued to make
improvements in our buildings for the
enjoyment of our tenants, renovating
common areas such as staircases and
elevators, and providing bike storage and
playgrounds where possible. The topic of
affordable housing has dominated public
debate in recent years and PSD seeks to
help with this challenge via providing more
conveniently located renovated apartments
at pricing that is transparent and fair.
Corporate Responsibility continued
Customer service
Providing a reliable friendly rental service and responding to any concerns in a
timely manner are important to building our tenant satisfaction and long-term
tenant loyalty, which ultimately safeguards our long-term commercial success.
Through the engagement our management agent, Core Immobilien, has
with our tenants, and via tenant surveys, we are able to build a clear picture
of what is important to our tenants so that we can deliver a high standard of
responsible service.
Health and safety
We seek to provide a healthy, safe and secure environment for our tenants
and improve the standard of accommodation through renovation and regular
inspections to ensure that we are aware of and avoid any hazards. In 2022, we
have again had no major health and safety incidents reported across our Portfolio.
Protecting vulnerable
tenants
We recognise that some tenants may be more vulnerable than others and
our Vulnerable Tenant Policy provides guidance on procedures that should
be followed when dealing with tenants who are particularly vulnerable to
provide them with additional support and protection.
Informing our
shareholders
We are committed to providing a highly professional service to our investors
through strong corporate governance and providing timely, frequent and clear
engagement with business updates. We have a dedicated investor resource
available to address investor questions and to arrange investor visits to Berlin
to allow investors to view the Portfolio, meet members of the Berlin team and
discuss industry trends with external experts.
Our business
partners
Working with the right partners is key to ensuring we deliver the best results for
our tenants and investors. We require our partners to share our commitment to
high standards of responsibility and treating customers fairly, as outlined in our
Suppliers Code of Conduct. Our key policies and Company Values are shared with
our business partners annually and they are asked to affirm that they are operating
in a manner consistent with our Company Values and standards of responsibility.
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Investing in our
communities
SOCIAL
We help to make a social
contribution to communities
by investing in homes and
surroundings for people and
via support for local charities.
In addition to investing in communities by
providing affordable homes in which people
want to live, we look to improve the external
façade of the buildings and other outdoor
areas, recognising the social benefit that
can also have on the wider community.
For our tenants, the look and feel of a
neighbourhood plays an important role in
how they feel about their home and the
community in which they live. In 2022,
€16.4 million (2021: €9.5 million) was
reinvested in building improvement
programmes across the Portfolio.
PSD is committed to being a good
corporate citizen. We take a strategic
approach to our charitable giving which
is guided by our Community Investment
Policy and focuses on supporting charities
where there is a connection with either
‘homelessness’ or ‘families’.
“Thank you to Laughing
Hearts for making this
extraordinary Hamburg trip
possible. The kids enjoyed
themselves and the break
from everyday life was
appreciated. We returned
with many new memories
and great experiences.
Many thanks for your support
and for making such trips
possible. The kids rarely
experience something like
this and are infinitely grateful.”
A message from the families of the
children on that trip
Our charitable initiatives
The Intercultural
Initiative
For the fourth year, we have continued to support a women’s refuge that helps
women affected by domestic violence by providing emergency shelter and advice
and counselling to the women and their children.
In 2022, PSD’s donation helped to cover management costs that were not covered by
the charity’s received grants, provided funding for some of the immediate purchases
that the women, children and young people need when beginning their transition into
their new lives, having left violent households and situations. PSD’s donation in general
helped the charity provide more intensive support to women and children in crisis in
supporting the refuge’s purpose in serving these clients to transition to an
independentlife.
Laughing Hearts
PSD supports The Laughing Hearts charity, which supports children living in children’s
homes and social care. The charity aims to provide the children with cultural, sport and
art activities and social events to which they would otherwise not have access. The
aim is to break the cycle of disadvantage and broaden the children’s experiences, and
give them a more positive outlook for the future.
PSD’s donation to Laughing Hearts in 2022 facilitated the purchase of a garden
swing, well-received new-experiences trips for the children to Hamburg and Hungary,
residential items for the charity’s facilities, as well as the opportunity to attend
workshops and camp to learn English.
Ukrainian
refugees
In early 2022, PSD made available a number of apartments on a rent-free basis for
Ukrainian refugees. These tenants have transitioned into long-term tenancies with
the costs covered by the Berlin district of Teltow Fläming. Several of the tenants have
already found employment and children have been provided with school places.
Single Homeless
Project (SHP)
QSix, our key partner and Property Advisor, continued to support SHP for a fourth year.
Their funding with SHP supports an employability programme that helps homeless
people or those at high risk of becoming homeless to find a job and secure a
sustainable income that enables them to afford housing. In 2022, 180 people took
part in the Achieving Potential employability programme that is funded by QSix.
This year, QSix also donated towards our Big Give Christmas match-funding campaign
which saw their £10,000 turned into £30,000. This helped to support approximately
263 people with micro-grants for emergency funding to help them pay for things such
as energy bills, food, identification, mobile phones, or qualifications to progress with
their career goals. QSix also funded recovery sessions as part of our Opportunities
Programme, which include therapy, art, sports, gardening and music.
Funds donated by QSix were also used for ‘move-on packs’ for people that are
about to move back into their own accommodation. This helps to give them basic
furnishings for their home such as a kettle, towels, bedding etc. in order to live
independently. In total this year, support from QSix helped support 443 people
in some way.
SPEAR
QSix provides funding to SPEAR to run an outreach service, helping rough
sleepers in Southwest London to secure accommodation and to support them
to address vital health and social care needs. In 2022, this helped 644 people
experiencing homelessness.
Home-Start
QSix has in 2022 started to provide funding to a third charity, Home-Start. With its
distinctive offer of volunteer-led home visiting support, Home-Start stands alongside
families in communities across the UK, in its aim to ensure that no parent or family feels
alone in the critical task of raising children, in its belief that “childhood can’t wait.”
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Corporate Responsibility continued
Governing
responsibly
SOCIAL
Having a strong corporate
governance culture and
effective policies and
structures in place will deliver
sustainable benefits across
all of our key stakeholders.
The Board recognises the importance of
a strong corporate governance structure
and operating with integrity, accountability
and transparency across the business.
To ensure the successful delivery of our
‘Better Futures’ CR Plan, we have policies
for each of the pillars, a measurement
framework to monitor progress and a
structure to ensure robust oversight.
We share the relevant policies with QSix,
which in turn has its own policies that are
aligned with ours. We request that QSix
periodically verifies that it has acted in
accordance with the policies. Where QSix
outsources any key functions to other
business partners, it has likewise shared the
policies with them and requested that they
periodically verify that they have acted
within the spirit of the relevant policies.
Structurally, QSix has an ESG Task Force
that oversees the implementation of the
plan across the business. This Task Force
reports the progress on the CR Plan, at a
minimum of twice a year, to PSD’s ESG
Sub-Committee, which in turn reports
into the Company’s Board.
Additional information on our governance is
contained within our EPRA SBPR reporting.
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“ Our tenants are at
the centre of our
business activity.”
34
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
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
Economic and
political risk
The global economic and political environment
remains uncertain, heightened by the ongoing
conflict in Ukraine.
Economic, political, fiscal and legal issues can have
a negative effect on property valuations. A decline in
the Company’s property valuations could negatively
impact the ability of the Company to sell properties
within the Portfolio at valuations which satisfy the
Company’s investment objective.
The ongoing war in Ukraine has negatively impacted
gas, energy and raw material supplies to Germany
and the rest of Europe. This has led to, and could
lead to, further rises in overall costs both for the
Company and its tenants.
Rising inflation has directly impacted the cost
of building materials and the construction
workforce, which could negatively impact
the Company’s development, renovation and
modernisation projects.
The Federal Government has introduced new laws
which would allow States to block the partitioning
of apartment blocks into condominiums. The Berlin
Government has adopted these proposals.
Although the Board and Property Advisor cannot control
external macro-economic risks, economic indicators are
constantly monitored by both the Board and Property Advisor,
and Company strategy is tailored accordingly.
The Company reviews and monitors emerging policy
and legislation to ensure that appropriate steps are taken
to ensure compliance.
The Company monitors costs and cash balances closely at all
times and plans budgets for capital expenditure that take into
consideration the potential for cost inflation. The Company has
suspended dividend payments to preserve cash.
The Company rigorously checks the credit worthiness of new
tenants and has always set strict income to rent criteria for
incoming tenants.
The Company engages with external advisers to advise on
potential policy and regulatory implications of political events.
Blocking the ability of landlords to split assets at the land registry
would likely be a net positive for the Company since the supply
of condominiums would be materially reduced, increasing
the value of the existing stock. With 76.6% of the Company’s
Portfolio already split in the land registry as condominiums,
the Company is likely to benefit from this.
Increased
Financial and
interest rate risk
Inadequate management of financing risks could
lead to insufficient funds for sustaining business
operations and timely repayment of existing debt
facilities. These risks encompass reduced availability
of financing, rising financing costs, higher than
planned leverage and breaches of borrowing
facility covenants.
A fall in revenue or asset values could also lead to
the Company being unable to restart and maintain
dividend payments to investors.
The Company seeks to manage its LTV ratio through the
property cycle to ensure that, in the event of a significant
decline in property values, its financial position remains robust.
Interest rate risk is managed through the use of derivative
instruments with matching maturity or fixed-rate debt.
At least 80% of drawn loan facilities are hedged.
The Company continues to model expected revenues, property
values and covenant levels, and these are reported to the Board
as part of its annual Viability Assessment.
The Company took on new covenants when signing its
facility with NATIXIS in January 2022: Interest coverage ratio
(ICR), debt yield and LTV covenants. Only the debt yield and
ICR covenants are “hard” covenants, resulting in an event of
default in case of breach. The LTV covenant is a “cash trap”
covenant (the requirement to hold all related rental income in
NATIXIS accounts until sufficient debt is repaid to return within
the covenant level), with no event of default. The Company
carried out extensive sensitivity analysis prior to signing this
facility and, even in the most stressed rent scenarios, no
covenants were breached.
The Company is in regular contact with its financing partners
and regularly reviews its financing covenants. They are subject
to bi-annual valuations which were last carried out at the end of
2022. At that time, the Company retained substantial headroom
on all covenants.
Acquisition and disposal activity within the Portfolio is closely
monitored in the light of underlying property market conditions
to ensure that the Company’s LTV ratio and debt refinancing
schedules remain appropriate.
In the light of weak current market demand, the Company has
suspended dividend payments to preserve cash.
Berlin residential rental values have historically been relatively
resilient during times of economic stress, and this is not
expected to change due to supply constraints.
Increased
35
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Risk Impact Mitigation Movement
Inability to sell
properties including
condominiums
During the 2022 financial year, there has been a
significant deterioration in investor and consumer
confidence in reaction to inflationary pressures and
consequential interest rate rises.
A higher cost of financing has seen investor
appetite for German residential assets weaken,
and, during the second half of the financial year,
pricing has weakened. In parallel with this, a number
of larger market participants are now net sellers of
assets as they seek to reduce leverage. As pricing
expectations between buyers and sellers have
differed, transaction volumes have dropped.
Higher mortgage rates combined with economic
and geopolitical uncertainty has negatively impacted
buyer sentiment for condominiums.
Under PSD’s business model, cash to pay dividends
is substantially dependent on condominium and/or
other asset sales.
The Company continually monitors the portfolio of assets
to ascertain the potential for disposals of buildings.
The Company regularly reviews whether any current or future
changes in the property market outlook present risks which
should be reflected in the execution of its asset management
and capital position.
The Company maintains a strong relationship with its
independent valuers who provide regular assessments
of the property market outlook.
The Property Advisor maintains a strong network of investors
active in the market and actively monitors valuation and liquidity
trends in the Berlin residential market.
In the light of weak current market demand, the Company has
suspended dividend payments to preserve cash.
Increased
Tenant and tenancy
law risk
Property laws remain under constant review by
both the Federal Government and the coalition
government in Berlin.
Further tightening of the Mietpreisbremse laws,
which limit the amount that landlords can increase
rent in apartments in certain zoned areas, could
negatively impact the Company’s reversionary
re-letting strategy.
During the 2022 financial year, there has been
increasing use of online platforms by tenants in
order to ascertain if rents prescribed by landlords
are compliant with all tenancy laws and regulations.
A significant increase in the cost of living has reduced
net disposable income and placed more pressure on
vulnerable tenants, which could lead to defaults on
rents. This, in turn, could place financial pressure on
the Company.
The Company has historically been able to adapt its business
model to accommodate new rent regulations.
The Property Advisor regularly monitors the impact that existing
and proposed laws or regulations could have on future rental
values and property planning applications.
The Property Advisor maintains regular contact with a broad
network of professional advisers and industry participants to
ensure that it is kept up to date on property tenancy laws and
regulations, both current and future.
The Property Advisor is in constant dialogue with the Company’s
property manager (Core Immobilien) to ensure that tenants are
notified on a timely basis of any changes to tenancy laws and
rental levels.
The Company, through its Property Advisor and Property
Manager, maintains close contact with tenants. To date, few
concerns have been raised, either through online platforms
or elsewhere in relation to non-compliance with tenancy laws
and regulations.
The Company rigorously checks the credit worthiness of new
tenants and has always set strict income to rent criteria for
incoming tenants. The Company has in place a Vulnerable
Tenant Policy which it will continue to monitor and apply
to relevant tenants. The Property Advisor closely monitors
vulnerable tenants and those unable to afford their rents.
A vulnerable tenants list is reviewed by the Company Board.
In instances of hardship the Company seeks to support its
tenants, both residential and commercial, by agreeing, on a
case-by-case basis, the payment of monthly rents or deferring
rental payments.
Increased
36
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Principal Risks and Uncertainties continued
Risk Impact Mitigation Movement
IT and cyber
security risk
The Company is dependent on network and
information systems of various service providers –
mainly the Property Advisor, Property Manager
and Administrator, and is therefore exposed to the
risk of cyber-crimes and loss of data.
As cyber-crime remains prevalent, this is considered
a significant risk by the Company. A breach could
lead to the illegal access of commercially sensitive
information and the potential to impact investor,
supplier, and tenant confidentiality, and to disrupt
the business of the Company.
The Russian state has been linked to cyber-attacks
on government and international infrastructure and
the risk of an increase in these attacks is highly likely
now that the Russian state is subject to international
sanctions due to its invasion of Ukraine.
There is a constant review of IT systems and infrastructure in
place for the Company to ensure these are robust. Service
providers are required to report to the Board on request,
and at least annually, on their IT controls and procedures.
A detailed review has been undertaken of the cyber security
of the Company and its outsourced processes. As part of this
review, the Company has required all its key service providers
to confirm to the Company their procedures and protocols
around cyber security on an annual basis. Additionally, the
Company has requested that all service providers carry out
cyber penetration testing and report back to the Board with
any significant observations. No material concerns have arisen
from these reviews.
Service providers are also required to hold detailed risk and
control registers regarding their IT systems. The Property Advisor
and the Board review service organisations’ IT reports as part of
Board meetings each year. No material concerns have arisen
from these reviews.
The Board believes that, while the risk of cyber-attacks has
increased due to the sanctions imposed on Russia, the risk to its
service providers directly remains relatively low. The secondary
risk from cyber-attacks on digital infrastructure, such as payment
systems, remains high and the Board, and the Property Advisor,
will continue to monitor the situation.
Increased
Lack of investment
opportunity
Availability of potential investments which meet the
Company’s investment objective can be negatively
affected by supply and demand dynamics within
the market for German residential property and the
state of the German economy and financial markets
more generally.
Decreased financial liquidity has resulted in reduced
acquisition opportunities available to the Company.
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.
The Company’s shares are currently valued at a significant
discount to NAV. Given this, the Company has undertaken
to not commit to further acquisitions until such time as this
discount narrows.
Any future acquisitions will be subject to rigorous checks
to ensure that they meet financial and environmental targets.
Acquisitions are benchmarked against the alternative of
share buybacks.
Unchanged
Outsourcing risk
The Company’s future performance depends on the
success of its outsourced third-party suppliers,
particularly the Property Advisor, QSix, but also its
outsourced property management, IFRS
(International Financial Reporting Standards) and
German GAAP accountants and its administrative
functions. The departure of one or more key
third-party providers may have an adverse effect on
the performance of the Company.
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 significant stake in the
Company, aligning their interests with other key stakeholders.
The key third parties responsible for property management,
accounting and administration are continually monitored by
the Property Advisor and must provide responses annually to a
Board assessment questionnaire regarding their internal controls
and performance. These questionnaires are reviewed annually
by the Board.
Unchanged
37
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
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Directors’
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Financial
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Risk Impact Mitigation Movement
ESG risk
A failure to anticipate and respond to environmental
risks and take proactive measures could damage the
Company’s reputation and disrupt its operations.
Unplanned capital expenditure from the cost of
complying with energy performance and climate
legislation with specific energy performance and/or
building requirements could negatively impact on
operational cashflow.
Future investor expectations for ESG compliance
could result in diminished asset values and/or
illiquidity in the resale market if assets are not
deemed suitably ESG compliant.
All investment in the modernisation of assets is undertaken with
a view to the energy efficiency impact and is performed on an
asset-by-asset basis.
The Company maintains its own dedicated ESG consultant to
advise and assist in the implementation of ESG-related activity.
The Company has instructed a leading law firm to provide
a watching brief on current and future climate and energy
performance-related legislation as they affect German
residential properties.
The Company has recently secured the services of a carbon
mapping consultancy to advise on the carbon footprint of five
buildings that are representative of the Portfolio.
ESG considerations are reviewed by the Company Board on a
quarterly basis.
The Company seeks to ensure accurate reporting of its ESG
related activities and, in 2022, was awarded a gold medal for
its sustainability reporting by the EPRA.
Increased
Robert Hingley
Chairman
28 March 2023
38
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Our Board
We are all deeply saddened by the death of Greg Branch during 2022, and I would like to
reiterate our sincere thanks for his exemplary service during his time in office.
Robert, a UK resident, acts as an
Independent Non-executive Director and
Chairman of the Company. He is Chairman
of Euroclear UK & International Limited and
The Law Debenture Corporation PLC and
a Director of Marathon Asset Management
Limited. He had over 30 years’ experience
as a corporate finance advisor, retiring as a
Partner at Ondra Partners LLP in 2017. He
joined the Association of British Insurers as
Director, Investment Affairs in September
2012 and, following the merger of ABI’s
Investment Affairs with the Investment
Management Association, acted as a
consultant to the enlarged IMA until the
end of 2014. From 2010 until 2015, he
was a Managing Director, and later Senior
Advisor, at Lazard. He was previously
Director General of The Takeover Panel
from 2007, on secondment from Lexicon
Partners, where he was Vice Chairman.
Prior to joining Lexicon Partners in 2005,
he was Co-Head of the Global Financial
Institutions Group and Head of German
Investment Banking at Citigroup Global
Capital Markets, which acquired the
investment banking business of Schroders
in 2000. He joined Schroders in 1985 after
having qualified as a solicitor with Clifford
Chance in 1984. Robert was appointed to
the Board on 15 June 2015.
Jonathan is the Non-executive Chairman of
the Argent group of real estate regeneration,
development and investment businesses.
He is also a Non-executive Director and
Chair of the Audit Committee at Schroders
European Real Estate Investment Trust PLC,
a Non-executive Director and Chair
of the Audit and Risk Committee at The
Government Property Agency and an
independent member of the investment
advisory board to a family wealth fund. He
is a past Chair of the Investment Property
Forum and a past member of the Board
of the British Property Federation. An
accountant by background, he spent 32
years at KPMG, including 12 as Chair of its
International Real Estate and Construction
practice. He is a member of the Institute
of Chartered Accountants of England
and Wales, and an Honorary Fellow of
the Royal Institute of Chartered Surveyors.
Jonathan was appointed to the Board on
24 January2018.
Antonia has nearly 30 years’ experience
working in the legal and financial services
sectors. She is a Jersey resident Independent
Non-executive Director with considerable
experience working with leading institutional
real estate fund managers and investment
companies, and has an in-depth
understanding of real estate investment
transactions and structuring. Antonia
qualified as a solicitor in England and
Wales in 1995, and prior to relocating to
Jersey, where she led Mourant’s European
real estate fund administration business
(subsequently acquired by State Street),
she was a real estate lawyer at Hogan
Lovells in London. She holds a number
of non-executive roles, including with
Oxford Properties and also in fund entities
managed by Signal Capital Partners. She is
regulated by the Jersey Financial Services
Commission and is a member of the Institute
of Directors. Antonia was appointed to the
Board on 12 August 2020 and was elected
Senior Independent Director and Chair
of the Remuneration Committee with
effect from 1 April 2022 and 1 December
2022 respectively.
Isabel has been a member of The Royal
Institution of Chartered Surveyors since
1993 and received a BSc (Hons) Valuation
and Estate Management degree from the
University of the West of England (1991).
She holds several non-executive roles,
including with EcoWorld. Isabel has over
23 years’ experience running complex
offshore real estate structures,
encompassing a broad range of property
funds, investments, and developments,
including working with Schroders and
abrdn. She is a Jersey resident Independent
Non-executive Director and is regulated by
the Jersey Financial Services Commission
and is a member of the Institute of Directors.
Isabel was appointed to the Board on
14 March 2022 and was appointed Chair
of the Environmental, Social & Governance
Committee and the Property Valuation
Committee with effect from 1 April 2022
and 28 September 2022 respectively.
Steven Wilderspin, a Jersey resident,
is a fellow of the Institute of Chartered
Accountants of England and Wales. He
has acted as an Independent Director of a
number of public and private investment
funds and commercial companies since
2007 and is regulated by the Jersey
Financial Services Commission.
He is currently a Non-executive Director and
Chair of the Risk Committee of Blackstone
Loan Financing Limited, a Non-executive
Director and Chair of the Audit and Risk
Committee of HarbourVest Global Private
Equity Limited and a Non-executive Director
and Chair of the Audit and Risk Committee
of GCP Infrastructure Investments Limited,
all listed on the LSE.
Prior to 2007, Steven was a Director at
Maples Finance Jersey, with responsibility
for their fund administration and fiduciary
business, which mainly administered
property structures. Steven began his
career at PwC in London in 1990.
Steven was appointed to the Board
on 10 January 2023.
Robert Hingley
Independent Non-executive
Director, Chairman and Chair
of the Nomination Committee
Jonathan Thompson
Independent Non-executive
Director and Chair of the
Audit Committee
Greg had served on the Company Board
since 2020, bringing a wealth of experience
from a distinguished career spanning over
30 years in the financial services and real
estate sectors. He is sorely missed as a
colleague and friend to the current and
previous Directors of the Company,
investment professionals at QSix, and by
those in the wider business community
who were privileged to work with him.
Isabel Robins joined the Board of PSD as
a Non-executive Director with effect from
14 March 2022. Isabel has over 23 years’
experience of complex offshore real estate
structures, encompassing a broad range
of property funds, investments, and
developments. Her real estate experience
and insight will add a valuable perspective
to complement and enhance the skill set
of the Board. Isabel replaces Monique
O’Keefe, who stepped down as a Senior
Independent Director, effective 31 March
2022, to take up a senior executive position
at another company.
Steven Wilderspin joined the Board of
PSD as a Non-executive Director with
effect from 10 January 2023. A Jersey
resident, he is a fellow of the Institute of
Chartered Accountants of England and
Wales. He has acted as an independent
director of a number of public and private
investment funds and commercial
companies since 2007.
The Company has an experienced Non-
executive Board, chaired by Robert Hingley.
The Directors have a wealth of experience
in real estate, corporate finance, investment
funds and capital markets.
39
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
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Directors’
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Financial
Statements
Robert, a UK resident, acts as an
Independent Non-executive Director and
Chairman of the Company. He is Chairman
of Euroclear UK & International Limited and
The Law Debenture Corporation PLC and
a Director of Marathon Asset Management
Limited. He had over 30 years’ experience
as a corporate finance advisor, retiring as a
Partner at Ondra Partners LLP in 2017. He
joined the Association of British Insurers as
Director, Investment Affairs in September
2012 and, following the merger of ABI’s
Investment Affairs with the Investment
Management Association, acted as a
consultant to the enlarged IMA until the
end of 2014. From 2010 until 2015, he
was a Managing Director, and later Senior
Advisor, at Lazard. He was previously
Director General of The Takeover Panel
from 2007, on secondment from Lexicon
Partners, where he was Vice Chairman.
Prior to joining Lexicon Partners in 2005,
he was Co-Head of the Global Financial
Institutions Group and Head of German
Investment Banking at Citigroup Global
Capital Markets, which acquired the
investment banking business of Schroders
in 2000. He joined Schroders in 1985 after
having qualified as a solicitor with Clifford
Chance in 1984. Robert was appointed to
the Board on 15 June 2015.
Jonathan is the Non-executive Chairman of
the Argent group of real estate regeneration,
development and investment businesses.
He is also a Non-executive Director and
Chair of the Audit Committee at Schroders
European Real Estate Investment Trust PLC,
a Non-executive Director and Chair
of the Audit and Risk Committee at The
Government Property Agency and an
independent member of the investment
advisory board to a family wealth fund. He
is a past Chair of the Investment Property
Forum and a past member of the Board
of the British Property Federation. An
accountant by background, he spent 32
years at KPMG, including 12 as Chair of its
International Real Estate and Construction
practice. He is a member of the Institute
of Chartered Accountants of England
and Wales, and an Honorary Fellow of
the Royal Institute of Chartered Surveyors.
Jonathan was appointed to the Board on
24 January2018.
Antonia has nearly 30 years’ experience
working in the legal and financial services
sectors. She is a Jersey resident Independent
Non-executive Director with considerable
experience working with leading institutional
real estate fund managers and investment
companies, and has an in-depth
understanding of real estate investment
transactions and structuring. Antonia
qualified as a solicitor in England and
Wales in 1995, and prior to relocating to
Jersey, where she led Mourant’s European
real estate fund administration business
(subsequently acquired by State Street),
she was a real estate lawyer at Hogan
Lovells in London. She holds a number
of non-executive roles, including with
Oxford Properties and also in fund entities
managed by Signal Capital Partners. She is
regulated by the Jersey Financial Services
Commission and is a member of the Institute
of Directors. Antonia was appointed to the
Board on 12 August 2020 and was elected
Senior Independent Director and Chair
of the Remuneration Committee with
effect from 1 April 2022 and 1 December
2022 respectively.
Isabel has been a member of The Royal
Institution of Chartered Surveyors since
1993 and received a BSc (Hons) Valuation
and Estate Management degree from the
University of the West of England (1991).
She holds several non-executive roles,
including with EcoWorld. Isabel has over
23 years’ experience running complex
offshore real estate structures,
encompassing a broad range of property
funds, investments, and developments,
including working with Schroders and
abrdn. She is a Jersey resident Independent
Non-executive Director and is regulated by
the Jersey Financial Services Commission
and is a member of the Institute of Directors.
Isabel was appointed to the Board on
14 March 2022 and was appointed Chair
of the Environmental, Social & Governance
Committee and the Property Valuation
Committee with effect from 1 April 2022
and 28 September 2022 respectively.
Steven Wilderspin, a Jersey resident,
is a fellow of the Institute of Chartered
Accountants of England and Wales. He
has acted as an Independent Director of a
number of public and private investment
funds and commercial companies since
2007 and is regulated by the Jersey
Financial Services Commission.
He is currently a Non-executive Director and
Chair of the Risk Committee of Blackstone
Loan Financing Limited, a Non-executive
Director and Chair of the Audit and Risk
Committee of HarbourVest Global Private
Equity Limited and a Non-executive Director
and Chair of the Audit and Risk Committee
of GCP Infrastructure Investments Limited,
all listed on the LSE.
Prior to 2007, Steven was a Director at
Maples Finance Jersey, with responsibility
for their fund administration and fiduciary
business, which mainly administered
property structures. Steven began his
career at PwC in London in 1990.
Steven was appointed to the Board
on 10 January 2023.
Antonia Burgess
Independent Non-executive
Director, Senior Independent
Director and Chair of the Risk
Committee and the Remuneration
Committee
Isabel Robins
Independent Non-executive
Director and Chair of the
Environmental, Social and
Governance Committee and the
Property Valuation Committee
Steven Wilderspin
Independent Non-executive
Director
40
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
The Directors are pleased to present their Annual Report and the Audited Consolidated Financial Statements for the year ended
31 December 2022.
Corporate Governance
The Corporate Governance Statement on pages 44 to 52 forms part of this Directors’ Report, which, together with the Strategic Report set
out on pages 1 to 37, form the management report for the purposes of Disclosure Guidance and Transparency Rule 4.1.5R.
The Corporate Governance Statement details how the Association of Investment Companies Code of Corporate Governance (‘AIC Code’)
has been applied.
General information
The Company is a public and closed-ended investment company incorporated in Jersey, Channel Islands under the Companies (Jersey)
Law 1991. The Company has a premium listing on the Official List of the Financial Conduct Authority and was admitted to the premium
segment of the Main Market of the London Stock Exchange on 15 June 2015.
The Group’s objective is to generate an attractive return for shareholders through the acquisition and active management of high-quality pre-let
properties in Berlin, Germany. The Group is primarily invested in the residential market in Berlin, supplemented with selective investments in
commercial property. The majority of commercial property within the portfolio is located within residential and mixed-use properties.
Dividends
In the light of ongoing weakness in buyer confidence, asset pricing and condominium sales, the Board has suspended future dividend
payments until further notice. It is the intention to resume dividends as soon as there is sufficient clarity of outlook. This approach has also
been adopted by many of our peers across the sector.
In the light of the decision not to pay a final dividend and taking into account the interim dividend paid in October 2022, the total dividend
for the financial year to 31 December 2022 is €2.35 per share (£2.09 per share) (31 December 2021: €7.5, £6.38).
Directors
The Directors in office at the date of this report and their biographical details are shown on pages 38 to 39.
The Company has made third-party indemnity provisions for the benefit of its Directors which were in place throughout the year and
remain in force at the date of this report. The Company maintains directors’ and officers’ liability insurance for its Directors and officers.
The terms and conditions of appointment of the Directors are formalised in letters of appointment, copies of which are available for
inspection at the Company’s registered office. None of the Directors has a contract of service with the Company nor has there been
any other contract or arrangement between the Company and any Director at any time during the year.
During the year, none of the Directors or any persons closely associated to them had a material interest in the Company’s transactions
or agreements.
The Board, through the Company Secretary, maintains a register of conflicts, which is reviewed quarterly at Board meetings, to ensure that
any conflicts remain appropriate and to confirm whether there have been any changes.
It is the Directors’ duty to avoid situations where they have, or could have, a direct or indirect interest that conflicts, or possibly could
conflict, with the Company’s interests. Any Directors who have a material interest in the matter being considered will not be able to
participate in the Board approval process.
The Board believes that its procedures regarding conflicts of interest have operated effectively. At 31 December 2022, the interests of the
Directors in the ordinary shares of the Company were as follows:
31 December 2022
Number of shares
31 December 2021
Number of shares
Robert Hingley 5,150 5,150
Jonathan Thompson 7,337 7,337
There has been no change to the interests of each Director between 31 December 2022 and the date of this report.
The Board has adopted the policy of maintaining a gifts and hospitality register to record all gifts and hospitality in excess of £250 accepted
by the Directors from the Company’s service providers or other third parties. All gifts and hospitality in excess of £500 require pre-approval
from the Board.
Directors’ Report
41
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
Report
Directors’
Report
Financial
Statements
Share capital
No shares were issued by the Company during the year.
At the year end, the issued share capital of the Company comprised 100,751,410 ordinary shares, of which 8,924,047 were held in treasury.
At general meetings of the Company, ordinary shareholders are entitled to one vote on a show of hands and, on a poll, to one vote for
every ordinary share held. At 31 December 2022, the total voting rights of the Company were 91,827,363 and, as at the date of this report,
remain at 91,827,363, being the issued share capital minus shares held in treasury.
On 15 June 2022, the Company obtained shareholder approval permitting it to issue up to 10,075,141 ordinary shares for cash on a non-pre-
emptive basis, representing 10% of the ordinary shares then in issue. The Directors are proposing that this shareholder approval be renewed
at the forthcoming 2023 AGM.
Share repurchases
In accordance with the Company’s Articles of Association and the Companies (Jersey) Law 1991, the Company may hold any ordinary shares
that it repurchases in treasury or cancel them. Authority for the Company to make market purchases of, and to cancel or hold in treasury, up
to 13,834,122 of its ordinary shares (representing approximately 13.73% of the ordinary shares in issue) is sought from shareholders at each
AGM, with the latest authority granted on 15 June 2022.
At 31 December 2022, 8,924,047 shares, representing 8.9% of shares in issue, have been repurchased at an average price of £4.04 per
share. The average discount to December 2022 EPRA NTA per share was 17.9%. At 31 December 2022, all the repurchased shares were
held in treasury.
Substantial shareholdings
At 31 December 2022, the Company had been informed of the following holdings representing more than five% of the voting rights
of the Company:
Name of holder
Percentage of
voting rights
No. of ordinary
shares
Columbia Threadneedle Investments 18.63% 17,108,637
Bracebridge Capital 15.54% 14,267,47 7
The Company has not been notified of any changes to holdings representing more than five per cent of the voting rights of the Company
between 31 December 2022 and the date of this report.
Requirements of the Listing Rules
Listing Rule 9.8.4 requires the Company to include specified information in a single identifiable section of the annual report or a cross
reference table indicating where the information is set out.
The Directors confirm that there are no disclosures required under Listing Rule 9.8.4.
Financial risk management
Details of the financial risk management objectives and policies adopted by the Directors, and the exposure of the Company to price,
credit, liquidity and cashflow risk, can be found in note 3 to the Consolidated Financial Statements.
Events after the reporting date
In September 2022, the Company exchanged contracts to acquire a multi-family house with 22 residential units and three commercial
units in Berlin-Neukölln for €4.9 million. The completion is expected in Q2 2023.
In H2 2022, the Company exchanged contracts to dispose of two non-core assets for the total consideration of €7.3 million. The two sales
completed in Q1 2023.
The Company has exchanged contracts for the sale of one residential, one commercial and one attic unit in Berlin with aggregated
consideration of €1.6 million prior to the reporting date. The sale of these is expected to complete in 2023.
In Q1 2023, the Company exchanged contracts for the sale of three condominiums in Berlin for aggregated consideration of €0.8 million.
All of them are awaiting completion.
42
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Directors’ Report continued
Auditor
Each of the Directors at the date of approval of this Annual Report has taken all the steps that he or she ought to have taken as a Director in
order to make him or herself aware of any relevant audit information and to establish that the Group’s auditor is aware of that information.
The Directors are not aware of any relevant audit information which has not been disclosed to the auditor.
RSM has been the Company’s auditor since 2014, given the length of tenure the Audit Committee has recommended to the Board to
commence with an audit tender process following the publication of the 2022 Annual Financial Statements. Following the consideration
of the performance of the Auditor, the services provided during the year and the review of its independence and objectivity, the Audit
Committee has concluded that RSM should be included as part of the audit tender process along with two other potential audit firms.
The successful audit firm’s appointment following the completion of the audit tender process will be put to shareholder vote at the
Company’s upcoming AGM on 28 June 2023.
Going concern
The Directors have reviewed projections for the period up to March 2024, using assumptions which the Directors consider to be appropriate
to the current financial position of the Group with regard to revenues, its cost base, the Group’s investments, borrowing and debt repayment
plans. These projections show that the Group should be able to operate within the level of its current resources and expects to manage all
debt covenants for a period of at least 12 months from the date of approval of the Financial Statements. The Group’s business activities,
together with the factors likely to affect its future development and the Group’s objectives, policies and processes from managing its capital
and its risks, are set out in the Strategic Report.
The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the
foreseeable future and, therefore, continue to adopt the going concern basis in the preparation of these Financial Statements.
Viability Statement
The Directors have assessed the viability of the Group over a three-year period to 31 December 2025. The Directors have chosen three
years because that is the period that fits within the strategic planning cycle of the business. The Viability Statement is based on a robust
assessment of those risks that would threaten the business model, future performance, solvency or liquidity of the Group, as set out in
the assessment of principal risks in this document on pages 34 to 37. 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 2025:
a) the potential operating cash flow requirements of the Group;
b) the method of payment of the performance fee due to the Property Advisor;
c) seasonal fluctuations in working capital requirements;
d) property vacancy rates;
e) rent arrears and bad debts;
f) capital and corporate expenditure;
g) proceeds from the sale of condominiums and other assets;
h) dividends and share buybacks; and
i) asset acquisitions.
This model assumes stresses to each of a) through to i) in the above list.
Financial modelling and stress testing were carried out on the Group’s cashflows, taking into account the following assumptions, which the
Directors believe to reflect the conditions present in a reasonable ‘worst case’ scenario over the forecast period:
• increased regulation of rent levels of tenancies in the Berlin and Brandenburg markets leads to a fall in rental income of 20%;
• projected condominium sales are reduced by 20% as a result of continuing weak market conditions and/or response to the Berlin and/or
Federal authorities attempting to slow down condominium sales;
• whole asset sales are not economically viable and therefore reduced by 100%;
• changes in climate-related and energy-performance legislation lead to a mandated 20% increase in capital expenditure to reach the
required regulatory level. This includes a 20% increase in the costs of the forward funding development acquisition in Erkner; and
• a 20% reduction in the debt available for future capital expenditure projects.
After applying the assumptions above, individually and collectively, there was no scenario in 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, cashflow mitigation may be required in
2024 and headroom could be obtained in the following ways:
• cancellation of larger capital expenditure projects;
• continuing the suspension of the dividend.
43
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
Report
Directors’
Report
Financial
Statements
Under these stressed assumptions, the Group remains able to manage all banking covenant obligations during the period using the
available liquidity to reduce debt levels, as appropriate.
The projected cash flows include the impact of already contracted property acquisitions. On the basis of this assessment, 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.
Directors’ confirmations
In accordance with the FCA’s DTRs, each of the Directors in office at the date of this report, whose names are set out on pages 38 to 39,
confirms that to the best of his or her knowledge:
• the Annual Report and Financial Statements have been prepared in accordance with IFRS and UK-adopted IAS, give a true and fair view
of the assets, liabilities, financial position and profit or loss of the Company; and
• the Annual Report, including the Directors’ and Strategic Report, includes a fair and balanced review of the development and
performance of the business, and the financial position of the Company, together with a description of the principal risks and
uncertainties that the Company faces.
The Directors confirm that they have complied with the above requirements in preparing the Financial Statements. The Annual Report and
Financial Statements, taken as a whole, are considered by the Board to be fair, balanced and understandable, and provide the information
necessary for shareholders to assess the Company’s position, performance, business model and strategy. The Directors’ Report was approved
by the Board of Directors and authorised for issue and signed as follows:
On behalf of the Board
Robert Hingley
Chairman
28 March 2023
44
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Corporate Governance Statement
Board Leadership and Purpose
This Corporate Governance Statement comprises pages 44 to 52 and forms part of the Directors’ Report.
Introduction from Chairman
I am pleased to introduce this year’s Corporate Governance Statement. In this statement, the Company reports on its compliance with the
AIC Code, sets out how the Board and its committees have operated during the past year and describes how the Board exercises effective
oversight of the Group’s activities in the interests of shareholders.
The Board recognises the importance of a strong corporate governance culture and has established a framework for corporate governance
which it considers to be appropriate to the business of the Company and the Group as a whole.
The AIC Code
As a member of the AIC, the Company reports against the Principles and Provisions of the AIC Code. The AIC Code addresses the Principles
and Provisions set out in the UK Corporate Governance Code (the ‘UK Code’) as well as setting out additional provisions on issues that are of
specific relevance to investment companies. The AIC Code can be found on the AIC website (www.theaic.co.uk). It includes an explanation
of how the AIC Code adapts the Principles and Provisions set out in the UK Code to make them relevant for investment companies. The UK
Code is available on the Financial Reporting Council (FRC) website (www.frc.org.uk).
The Board considers that reporting against the Principles and Provisions of the AIC Code, which has been endorsed by the FRC and
supported by the Jersey Financial Services Commission, provides more relevant information to shareholders.
The Board has made the appropriate disclosures in this report to ensure that the Company meets its continuing obligations. It should be
noted that, as an investment company, most of the Company’s day-to-day responsibilities are delegated to third-party service providers.
The Company has no executive employees, and the Directors are all Non-executive Directors. Therefore, not all of the Provisions of the UK
Code are directly applicable to the Company.
The Board considers that the Company has complied with the recommendations of the AIC Code.
Board Leadership, Purpose and Culture
At the date of this report, the Board comprised five Directors. Their biographical details are shown on pages 38 to 39. The Board considers all
Directors to be independent and that there are no relationships or circumstances that are likely to affect their independence. Further details
can be found in the Nomination Committee report on pages 50 to 51. The interests that some of the Directors hold in the Company, as set
out on page 57 of this report, are not considered significant so as to bring their independence into question.
The Board has overall responsibility for maximising the Group’s long-term success by directing and supervising the affairs of the business
and meeting the appropriate interests of shareholders and relevant stakeholders, while enhancing the value of the Group and ensuring
protection of investors.
Within the Annual Report and Financial Statements, the Directors have set out the Group’s investment objective and policy which, as per the
2015 listing prospectus, is to deliver both stable income returns as well as capital growth through investment in German real estate, centred
on Berlin residential real estate. Its investment objective and policy are set out on pages 16 to 22 of the Annual Report. The Directors have
reported how the Board and its delegated committees operate and how the Directors consider and address the opportunities and risks to
the future success of the Company, along with the sustainability of the Company’s business model and how its governance contributes to
the delivery of its strategy.
The Board has approved a formal schedule of matters reserved for its approval, which is available on the Company’s website and upon
request from the Company Secretary. The principal matters considered by the Board during the year included:
• the interim and annual Financial Statements;
• declaration of dividends;
• share buybacks;
• ordinary winding up of one special purpose vehicle;
• renewal of Master Power of Attorney delegating a number of administrative matters to the Property Advisor;
• sale of non-core assets;
• consideration of intercompany loans;
• standard and non-standard capital expenditure projects;
• consideration of new investment proposals received from its Property Advisor;
• refinancing proposals;
• recommendations from the Company’s respective committees;
• annual review of service providers; and
• appointment of new Non-executive Directors.
45
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
Report
Directors’
Report
Financial
Statements
Post year-end, in March 2023, the Board reviewed the overall performance of the Property Advisor and the terms of the Property Advisory
Agreement, as amended, as set out in note 32. Based on the results, the continued appointment of the Property Advisor is considered to be
in the best interests of shareholders as a whole. Accordingly, it was approved by the Board that QSix Residential Limited be retained as
Property Advisor under the terms of the agreement.
The Company has no direct employees and therefore is not required to monitor culture in this respect. However, the Board recognises
its wider responsibility to demonstrate to shareholders that it is operating responsibly and managing its social and environmental impacts
for the benefit of all stakeholders. Following a thorough review of how sustainability is managed within the Company, a ‘Better Futures’
CR Plan has been developed. This provides a framework to measure existing activities better, while adding new initiatives to improve
overall sustainability.
Additionally, the Board continuously monitors its policies, practices and behaviours and undertakes a rigorous evaluation of its own
performance and that of its key service providers on an annual basis to ensure their culture is aligned with the Company’s purpose, values,
and strategy. Details on the Board evaluation and the annual service provider review can be found on pages 51 and 52, respectively. Where
the Board is not satisfied, it will seek assurance from key service providers that management have taken corrective action.
Stakeholder engagement
Details of how the Directors have engaged with the Company’s key stakeholders are set out in the Stakeholder Engagement section and
Corporate Responsibility report within the Strategic Report on pages 8 to 33 respectively.
The Board believes that the maintenance of good relations with both institutional and retail shareholders is important for the long-term
prospects of the Group. The Board receives feedback on the views of shareholders from its corporate broker and the Property Advisor.
Through this process, the Board seeks to monitor the views of shareholders and to ensure an effective communication programme. The
Board seeks to utilise stakeholder communication to inform them of the decisions that the Company takes, whether about the services
it provides, or about its strategic direction, its long-term health, and the society in which it operates. The Board agrees that stakeholder
engagement strengthens the business and promotes its long-term success to the benefit of stakeholders and shareholders alike.
The Chair is open to discussions on governance and strategy with major shareholders and the other Directors are provided with the
opportunity to attend these meetings.
The Board believes that the AGM provides an appropriate forum for investors to communicate with the Board and encourages participation.
The Company regularly reviews its shareholder profile through reports prepared by its corporate broker. Shareholders may contact the
Company directly through the investor section of the Company’s website www.phoenixspree.com.
2022 Annual General Meeting
The 2022 AGM of the Company was held on 15 June 2022. Resolutions 1 to 9 related to ordinary business and resolutions 10 and 11 related
to the following special business:
• to authorise the Company to make market purchases of, and to cancel or hold in treasury, up to 13,834,122 of its shares (representing
approximately 13.73% of its issued shares capital at the date of the AGM notice); and
• to authorise the Directors to issue up to 10,075,141 shares (representing approximately 10% of the Company’s issued share capital at the
date of the AGM notice) for cash as if the pre-emption rights contained in the Articles of Association did not apply.
All resolutions put to shareholders were passed with in excess of 99% of votes cast in favour.
2023 Annual General Meeting
The 2023 AGM will be held on 28 June 2023 at IFC 5, St Helier JE1 1ST, Jersey.
A separate notice convening the AGM will be distributed to shareholders with the Annual Report and Financial Statements on or around
1 June 2023, which includes an explanation of the items of business to be considered at the meeting. A copy of the notice will also be
published on the Company’s website.
46
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Board
Committees
• Robert Hingley (Chairman)
• Antonia Burgess (appointed as Senior Independent Director on 1 April 2022)
• Jonathan Thompson
• Isabel Robins (appointed 14 March 2022)
• Steven Wilderspin (appointed 10 January 2023)
Nomination
• Robert Hingley
(Chair)
• Isabel Robins
(appointed
1 April 2022)
• Antonia
Burgess
Remuneration
• Antonia
Burgess (Chair)
(appointed
1 December
2022)
• Jonathan
Thompson
• Steven
Wilderspin
(appointed
10 January
2023)
Audit
• Jonathan
Thompson
(Chair)
• Isabel Robins
(appointed
1 April 2022)
• Steven
Wilderspin
(appointed
10 January
2023)
Risk
• Antonia
Burgess (Chair)
• Jonathan
Thompson
• Isabel Robins
(appointed
1 April 2022
• Steven
Wilderspin
(appointed
10 January
2023)
ESG
• Isabel Robins
(Chair)
(appointed
1 April 2022)
• Antonia
Burgess
• Steven
Wilderspin
(appointed
10 January
2023)
Market Abuse
Regulation
• Any two
Independent
Non-executive
Directors
Property
Valuation
• Isabel Robins
(Chair)
(appointed
28 September
2022)
• Jonathan
Thompson
• Antonia
Burgess
As at the date of the report, the Board comprised five Non-executive Directors. Their biographical details are on pages 38 to 39.
Changes to the composition of the committees during the year are described in the Nomination Committee Report on page 50.
Chairman and Senior Independent Director
The Chairman, Robert Hingley, is responsible for the leadership of the Board’s business and setting its agenda, together with the promotion
of a culture of openness and debate, and for ensuring that the Directors receive accurate, timely, and clear information and that there is
adequate time available for the discussion of agenda items at each Board meeting. The Chairman is deemed by his fellow Board members
to be independent in character and judgement, and free of any conflicts of interest. He considers himself to have sufficient time to spend
on the affairs of the Company. He has no significant commitments other than those disclosed in his biography on page 38.
Antonia Burgess was appointed Senior Independent Director on 1 April 2022 following Monique O’Keefe’s retirement from the Board on
31 March 2022. The Senior Independent Director works closely with the Chairman, acting as a sounding board when necessary and serves
as an intermediary for the other Directors and shareholders, and takes the lead in the annual evaluation of the Chairman by the Directors.
A schedule of responsibilities of the Chairman and the Senior Independent Director is available on the Company’s website.
Committees of the Board
At year end, the structure included an Audit Committee, a Risk Committee, a Property Valuation Committee, a Remuneration Committee,
a Nomination Committee, an Environmental, Social and Governance Committee, and a Market Abuse Regulation Committee.
The terms of reference for the Board Committees, including their duties, are available on the Company website at www.phoenixspree.com.
The terms of reference are reviewed annually by the respective Committees, with any changes recommended to the Board for approval.
Management Engagement Committee
It was agreed and disclosed in the Company’s 2020 Annual Report that the role of the Management Engagement Committee to consider
the performance of the Property Advisor and other third-party service providers, the terms of their engagement, including the fees payable
to them, and their continued appointment was subsumed into the Board agenda. The Board felt that all Directors would have a crucial
view on the Property Advisor, and other key service providers, that should be captured. Therefore, it was agreed to avoid duplication and
subsume the role of the Management Engagement Committee into the Board agenda rather than appoint all Directors as members
of the Committee.
Board and Committee composition as at the date of this report:
Corporate Governance Statement continued
Division of Responsibilities
47
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
Report
Directors’
Report
Financial
Statements
Property Valuation Committee
The Property Valuation Committee is responsible for reviewing the property valuations prepared by the Valuation Agent and any further
matters relating to the valuation of the Portfolio. The Property Valuation Committee met twice during the year with the Valuation Agent
and the Property Advisor in attendance, to review the outcomes of the valuation process throughout the year and discuss:
• the valuation methodology;
• the sociodemographic and residential market overview; and
• the detail of each semi-annual valuation.
The Committee reported to the Board its findings on the property valuation and the Committee was satisfied with the independent
valuation report and values associated with all properties of the Group.
Environmental, Social and Governance Committee
The ESG Committee meets no less than twice a year. It is responsible for approving a strategy for discharging the Company’s ESG Strategy,
overseeing the creation of appropriate policies and supporting measures along with monitoring compliance with such policies. The
Committee also ensures that the policies are regularly reviewed and updated in line with national and international regulations.
The ESG Committee has responsibility for deciding upon which environmental guidelines to follow and report against, with the Audit
Committee overseeing how this is reported upon in the Annual Report and Financial Statements.
The Board has appointed an independent ESG consultant to support the Company in implementing its ESG policy and strategy. Further
details on the Company’s ESG policy and strategy can be found in the corporate responsibility report on page 24 to 33.
Risk Committee
The Risk Committee is comprised of Independent Non-executive Directors and meets no less than twice a year and, if required, meetings
can also be attended by the Property Advisor. The Risk Committee is responsible for advising the Board on the Company’s overall risk
appetite, tolerance, and strategy. The Risk Committee oversees and advises the Board on the current risk assessment processes, ensuring
that both qualitative and quantitative metrics are used.
The Committee, in conjunction with the Property Advisor, who also carry out their own service provider evaluation, reviews the adequacy
and effectiveness of the Group’s (and its service providers’) internal financial controls and internal control and risk management systems
and reviews and approves the statements to be included in the Annual Report concerning internal controls and risk management.
During the year, the Committee reviewed reports from the Company’s service providers in respect of their policies on the prevention
of market abuse, cyber-crime, anti-bribery, General Data Protection Regulation (GDPR), whistleblowing and their compliance with
the UK Criminal Finances Act 2017.
The Committee is also responsible for oversight and advice to the Board on the current risk exposures and future risk strategy of the
Company. The Company has in place a risk register to manage and track identified risks and uncertainties and potential emerging risks
that the Committee believes the Company is exposed to. For each risk, the Committee considers, inter alia, the impact on the Company
achieving its investment strategy along with the nature and extent of the risk, mitigants and any driving factors which may increase the risk.
The level of residual risk determined as part of this analysis assists the Board (on the Risk Committee’s recommendation) to determine whether
it is within the Company’s appetite and any actions needed to be taken. The register is reviewed at least twice a year by the Committee.
During the year, the Committee carried out a robust assessment of the principal risks, emerging risks and principal uncertainties facing
the Group, including those that would threaten its business model, future performance, solvency or liquidity. The result of this review, the
potential impact of each type of risk identified and the mitigants put in place are set out in the ‘Principal Risks and Uncertainties’ section
of the Annual Report on pages 34 to 37.
The Committee also reviewed the appropriateness of the disclosure of risk-related matters in the Annual Report and Financial Statements.
Audit Committee
The membership and activities of the Audit Committee are described in its report on pages 53 to 55.
Nomination Committee
The membership and activities of the Nomination Committee are described in this report on pages 50 to 51.
Remuneration Committee
The Remuneration Committee deals with matters of Directors’ remuneration. In particular, the Committee reviews and makes
recommendations to the Board regarding the ongoing appropriateness and relevance of the Remuneration Policy and Directors’ fee levels
and considers the need to appoint external remuneration consultants.
An overview of the Remuneration Committee’s responsibilities is set out in the Directors’ Remuneration Report and policy on pages 56
to 58.
48
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Corporate Governance Statement continued
Division of Responsibilities
Market Abuse Regulation Committee
The Market Abuse Regulation Committee comprises any two Directors and its responsibilities are to identify inside information when it
arises, understand and ensure compliance with the Company’s disclosure obligations in respect of such inside information, understand
and ensure compliance with the record-keeping and notification obligations of the Company in respect of inside information, and take
reasonable steps to ensure that individuals on the insider list are aware of their legal obligations in respect of insider dealing, unlawful
disclosure and market manipulation.
Board and Committee meetings
The Company holds a minimum of four Board meetings per year to discuss strategy, general management, structure, finance, corporate
governance, marketing, risk management, compliance, asset allocation and gearing, contracts, performance and ESG matters. The reports
provided by the Company’s service providers are the principal source of regular information for the Board enabling it to determine policy
and to monitor performance, compliance and controls, which are supplemented by communication and discussions throughout the year.
Representatives of the service providers, including the Property Advisor, attend each quarterly Board meeting to present their reports to
theDirectors.
The table below sets out the number of scheduled meetings of the Board and Committees held during the year ended 31 December 2022
and the attendance of individual Directors.
Quarterly Board Audit Risk
Number
entitled
to attend
Number
attended
Number
entitled
to attend
Number
attended
Number
entitled
to attend
Number
attended
R Hingley 4 4 – – – –
I Robins* 4 4 4 4 1 1
J Thompson 4 4 5 5 2 2
M O’Keefe** 1 1 2 2 1 1
A Burgess 4 4 2 2 2 2
G Branch*** 2 2 3 3 1 1
Property Valuation Nomination ESG
Number
entitled
to attend
Number
attended
Number
entitled
to attend
Number
attended
Number
entitled
to attend
Number
attended
R Hingley – – 3 3 – –
I Robins* 2 2 1 1 1 1
J Thompson 4 4 – – – –
M O’Keefe** – – 2 2 1 1
A Burgess 4 4 3 3 2 2
G Branch*** 4 3 – – 1 1
Remuneration
Market Abuse Regulation
(any two Non-executive Directors)
Number
entitled
to attend
Number
attended
Number
entitled
to attend
Number
attended
R Hingley – – 2 2
I Robins* – – 3 3
J Thompson – – 3 3
M O’Keefe** 1 1 1 1
A Burgess 1 1 3 3
G Branch*** 1 1 2 2
* Isabel Robins was appointed to the Board on 14 March 2022.
** Monique O’Keefe retired from the Board on 31 March 2022.
*** Greg Branch died on 22 August 2022.
49
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
Report
Directors’
Report
Financial
Statements
During the year, five additional Board meetings were held. These meetings were in respect of the Erkner development; the bi-annual review
and final approval of property valuations; the approval of the Annual Report and Financial Statements; and the appointment of an interim
Audit Committee member.
Information and support for Directors
The Chairman, in conjunction with the Company Secretary, ensures that all new Directors receive a full, formal and tailored induction on
joining the Board in order to further inform them of the Group’s activities and structure.
Upon appointment, new Directors are briefed about their responsibilities and duties and provided with an induction pack containing
relevant information about the Company, its constitutional documents, terms of reference, policies, processes and procedures.
New Directors are also provided with an opportunity to meet representatives of the Property Advisor and administrator of the Company.
The Board has a continued professional development programme to assist the Directors in complying with mandatory requirements set
by the Jersey Financial Services Commission. This programme entails the Company’s service providers and/or appropriate third parties
presenting to the Directors on key topics such as:
• Directors’ continuing obligations under the Listing Rules;
• Jersey economic substance;
• The UK Criminal Finances Act;
• GDPR and cyber security;
• Jersey anti-money laundering, combating the financing of terrorism, and countering of proliferation financing legislation; and
• German residential law and regulations.
The Directors are also encouraged to attend industry and other seminars covering issues and developments relevant to investment
companies, and Board meetings regularly include agenda items on recent developments in governance and industry issues.
All Directors can take independent professional advice at the Group’s expense in the furtherance of their duties, if necessary.
Company Secretary
All Directors have direct access to the advice of the Company Secretary. The Company Secretary is responsible for supporting the Board
to ensure it has the policies, processes, information, time and resources it needs to function effectively and efficiently and for ensuring that
such policies and procedures are followed. Under the guidance of the Chairman, the Company Secretary ensures that appropriate and
timely information flows between the Board, the Committees and the Directors. It facilitates inductions to new Directors and the provision
of additional information where required and appropriate.
50
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Corporate Governance Statement continued
Composition, succession, and evaluation
Nomination Committee report
The Nomination Committee is responsible for a number of matters pertaining to the structure, size and composition of the Board,
succession planning in respect of Board members and performance evaluation of the Board, its committees and Board members.
Composition
The Nomination Committee is chaired by Robert Hingley with Antonia Burgess and Isabel Robins as members, all of whom are considered
independent. Monique O’Keefe was a member until she retired on 31 March 2022. The Board is satisfied that the Chair of the Committee has
relevant experience and understanding of the Company. Robert Hingley does not chair the Committee when it is dealing with his succession.
Diversity
Diversity is an important consideration in ensuring that the Board and its Committees have the right balance of skills, experience,
independence and knowledge necessary to discharge their responsibilities. The right blend of perspectives is critical to ensuring an
effective Board and a successful Company.
Board diversity, including, but not limited to, gender, ethnicity, professional and industry specific knowledge and expertise, understanding
of geographic markets and different cultures, is taken into account when evaluating the skills, knowledge and experience desirable to fill
vacancies on the Board as and when they arise. Board appointments are made based on merit and calibre with the most appropriate
candidate, who is the best fit for the Company, being nominated for appointment and as a result no measurable targets in relation to Board
diversity have been set. At the date of this report, the Board consists of three men and two women. The Committee believes the Directors
provide, individually and collectively, the breadth of skill and experience to successfully manage the Company.
The Committee notes the new recommendations of the FTSE Women Leaders Review and the Parker Review on gender and diversity, as
well as the Financial Conduct Authority (FCA) rules on diversity and inclusion on company boards. Namely, that from accounting periods
starting on or after 1 April 2022:
a) at least 40% of individuals on the Board to be women;
b) at least one senior Board position to be held by a woman; and
c) at least one individual on the Board to be from a minority ethnic background.
The Committee continues to develop its succession plan in line with these recommendations, noting that both (a) and (b) are currently
satisfied. There are two female Directors on the Board and one of these, Antonia Burgess, holds the role of Senior Independent Director.
As a Jersey resident Company, the Board must comprise at least two Jersey resident directors and each Board meeting should be held with
a majority of directors present in Jersey. This affects the Company’s ability to source ethnically diverse directors. The 2021 census of the
population of Jersey showed that, of a population of 103,297, only 4.1% were from a minority ethnic background. This should be compared
with England and Wales which had a population of 66.8 million in 2019 (2019 being the latest ethnic data to be released for England and
Wales), of which 15.2% were from a minority ethnic background.
In accordance with Listing Rule 9 Annex 2.1, the below tables, in the prescribed format, show the gender and ethnic background of the
Directors as at 31 December 2022:
Gender identity
Number of Board
members
Percentage on the
Board
Number of senior
positions on the
Board
Men 3 60% 1
Women 2 40% 1
Not specified/prefer not to say – – –
Ethnic background
Number of Board
members
Percentage on the
Board
Number of senior
positions on the
Board
White British or other white (including minority white groups) 5 100% 2
Mixed/multiple ethnic groups – – –
Mixed/multiple ethnic – – –
Black/African/Caribbean/British – – –
Other ethnic group including Arab – – –
Not specified/prefer not to say – – –
The data in the above tables were collected through self-reporting by the Directors.
51
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
Report
Directors’
Report
Financial
Statements
Tenure and succession planning
The Board’s policy regarding tenure of service, including in respect of the Chair, is that any decisions regarding tenure will balance the
need to provide and maintain continuity, knowledge, experience and independence, against the need to periodically refresh the Board
composition in order to maintain an appropriate mix of the required skills, experience, age and length of service.
The Board does not consider that lengthy service in itself necessarily undermines a Director’s independence, nor that each Director,
including the Chair, should serve for a finite fixed period. In particular, given the long-term nature of the Company’s assets, the Board may
regard a longer tenure of service as being necessary and desirable. However, a succession plan is in place to allow, subject to re-election,
for a staged rotation of Directors to ensure the continuity and stability of experience remains.
In line with corporate governance best practice as set out in the AIC Code, all Directors seek annual re-election at the Company’s Annual
General Meetings.
On an annual basis, the Nomination Committee reviews the composition of the Board and its Committees, taking into account the
above-mentioned needs and each Director’s performance and ability to meet the ongoing commitments of the Company. This review is
balanced against the succession plan of the Company to enable the Board to make the appropriate recommendation for each Director’s
re-election to the Board and its Committees.
Prior to appointment to the Board, a Director must disclose existing significant commitments and confirm that they are able to allocate
sufficient time to the business of the Company. In addition, a Director must consult with the Chairman or Senior Independent Director
from time to time prior to taking on any new listed, conflicted, time-consuming or otherwise material board appointments and promptly
notify the Company Secretary of any new Board appointments that they take on. On an annual basis, through the Board’s internal
evaluation, as described below, each Director’s continuing ability to meet the time requirements of the role is assessed by considering,
amongst other things, their attendance at Board, Committee and other ad-hoc meetings and events of the Company held during the year,
as well as the nature and complexity of other, both public and private, roles held.
Directors’ attendance at all Board and Committee meetings held during the year is detailed on pages 48 to 49. None of the Directors holds
an executive position of a public company or chairs a public operating company.
The Committee believes all the Directors have sufficient time to meet their Board responsibilities.
Board evaluation
In accordance with the AIC Code, the Company undertakes an annual evaluation of the Board, its committees, the Chairman, and its Directors.
An external evaluation is undertaken every three years, with the next due in 2024. In the intervening years, the Board conducts an internal
evaluation by means of a questionnaire. The aim of the evaluation is to recognise strengths, address any weaknesses, and consider
improvements to the Board process. The evaluation is designed to ensure that the Board meets its objectives and effectiveness is maximised.
The evaluation focuses on:
• the frequency of meetings and the business transacted;
• workload;
• diversity, and how effectively Board members work together;
• the timing, level of detail and appropriateness of information;
• delegation and the reporting process from Committees to the Board;
• the levels of expertise available; and
• the effectiveness of internal controls.
Each Director engages with the process and takes appropriate action where development needs have been identified.
The Board undertook its 2022 internal performance evaluation, which was led by the Nomination Committee and designed to assess the
strengths and independence of the Board and the performance of its committees, the Chairman, and individual Directors.
The evaluation of the Chairman was carried out by the Directors of the Company and led by the Senior Independent Director. The results
of the 2022 Board evaluation process were reviewed and discussed by the Nomination Committee and subsequently by the Board.
Based on the results and the recommendations of the Nomination Committee, the following areas will be of focus in the next financial year:
• Managing the discount to NAV;
• Identifying relevant Director training topics; and
• Streamlining the timing of the delivery of packs for quarterly Board and committee meetings.
52
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Corporate Governance Statement continued
Division of Responsibilities
Re-election
All newly appointed Directors stand for election by the shareholders at the next AGM following their appointment. There are provisions in
the Company’s Articles of Association which require Directors to seek re-election at the AGM held in the third calendar year following the
year in which they were elected or last re-elected. Beyond these requirements, the Board has agreed a policy whereby all Directors will
seek annual re-election at the Company’s AGM, in accordance with the AIC Code. The AGM circular issued to shareholders will set out
sufficient biographical details and specific reasons why each Director’s contribution is, and continues to be, important to the Company’s
long-term sustainable success in order to enable shareholders to make an informed decision.
Following the sudden death of Mr. Greg Branch, the Company engaged Thomas & Dessain Limited, an independent external executive
recruitment company based in Jersey, to assist with identifying a suitable replacement for Greg. Mr. Steven Wilderspin was shortlisted
and identified as a suitable candidate during the recruitment process, which included interviews with the Board and Property Advisor
on separate occasions. Mr. Wilderspin was appointed to the Board on 10 January 2023.
On appointment to the Board, Mr. Wilderspin was appointed to the Audit Committee, Risk Committee, Remuneration Committee and the
ESG Committee.
Mr. Wilderspin will be standing for election at the 2023 AGM.
All other Directors will be standing for re-election.
Taking into account matters considered above, the Board strongly recommends the election/re-election of each Director standing for
election/re-election on the basis of their experience and expertise, their independence, capacity and continuing effectiveness and
commitment to the Company.
Audit, risk and internal control
The Company’s approach to compliance with the AIC Code in respect of audit is set out in the Audit Committee Report on pages 53 to 55.
The Company’s approach to compliance with the AIC Code in respect of risk and internal control is described under ‘Division of
Responsibilities, Risk Committee’ on page 47.
Remuneration
The Company’s approach to compliance with the AIC Code in respect of remuneration is set out in the Directors’ Remuneration Report on
pages 56 to 58.
53
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
Report
Directors’
Report
Financial
Statements
This report provides details of the role of the Audit Committee and the duties it has undertaken during the year under review.
Composition of the Audit Committee
The Audit Committee is chaired by Jonathan Thompson, with Isabel Robins and Antonia Burgess as members during the year. Jonathan
was appointed Chair of the Committee upon his appointment to the Board on 24 January 2018, with Isabel replacing Monique O’Keefe
with effect from 1 April 2022, following her retirement from the Board. By following good governance practices and to ensure the
Committee meets its quorum requirements, the Board agreed that Antonia Burgess be appointed to the Committee, with effect from
21 September 2022 on an interim basis to replace Greg Branch following his death, and until such time as a permanent replacement
could be identified. The qualifications and experience of the members of the Audit Committee during the financial year are set out in their
biographical details on pages 38 to 39. The Board considers that the Committee Chair, a chartered accountant, has recent and relevant
experience as required by the provisions of the AIC Code. Antonia Burgess was replaced by Steven Wilderspin who joined the Committee
on 10 January 2023 following his appointment to the Board.
Meetings
The Audit Committee is scheduled to meet no less than twice a year and, if required, meetings can also be attended by the Property
Advisor, the Company Secretary and the external auditor. The external auditor is not present when their performance and/or remuneration
is discussed. The number of Committee meetings held, and attendance of the members is detailed on pages 48 to 49.
Summary of the role of the Audit Committee
The Audit Committee is responsible for reviewing the half-year and Annual Report and Financial Statements and recommends them to the
Board for approval. The role of the Audit Committee includes:
Monitoring the integrity of the Annual Report and Financial Statements of the Group, covering:
• formal announcements relating to the Group’s financial performance;
• significant financial reporting issues and judgements;
• review of the Company’s going concern and viability statements;
• matters raised by the external auditors;
• the appropriateness of accounting policies and practices;
• reviewing and considering the AIC Code and FRC Guidance with respect to the Financial Statements;
• monitoring the quality and effectiveness of the independent external auditors, which includes:
– meeting regularly to discuss the audit plan and the subsequent audit report;
– developing a policy on the engagement of the external auditor to supply non-audit services and considering the level of fees for both
audit and non-audit services;
– reviewing independence, objectivity, expertise, resources and qualification; and
– conducting the tender process and making recommendations to the Board on the appointment, reappointment, replacement and
remuneration of the external auditors.
• reviewing the Group’s procedures for prevention, detection and reporting of fraud, bribery and corruption; and
• monitoring and reviewing, in conjunction with the Risk Committee, the internal control and risk management systems of the
service providers.
The ESG Committee has responsibility for deciding upon which environmental guidelines to follow and report against, and the Audit
Committee oversees how this is reported upon in the Annual Report and Financial Statements.
The Audit Committee’s full terms of reference can be obtained from the Company’s website www.phoenixspree.com.
Financial reporting
The Audit Committee reviewed the Company’s Annual Report and Financial Statements to conclude whether it is fair, balanced,
understandable, comprehensive, consistent with prior years and how the Board assesses the performance of the Company’s business
during the financial year, as required by the AIC Code.
As part of this review, the Committee considered whether the Annual Report and Financial Statements provided the information necessary
to enable shareholders to assess the Company’s position and performance, strategy and business model, and reviewed the description of
the Company’s key performance indicators as well as updating the governance section of the Annual Report.
The Committee presented its recommendations to the Board, and the Board concluded that it considered the Annual Report and Financial
Statements, taken as a whole, to be fair, balanced and understandable and to provide the information necessary for shareholders.
Audit Committee Report
Audit, Risk, and Internal Control
54
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Monitoring the significant issues related to the Financial Statements, Viability and Going Concern
After discussions with the Property Advisor and the external auditor, the Committee determined that the key risk of material misstatement
of the Company’s Financial Statements was in relation to the valuation of investment property.
Valuation of investment property Mitigation
A significant focus for the Audit Committee is the
valuation of the Group’s property portfolio carried
out at half year in June and at the financial year end
in December each year, as this is a key determinant
of the Group’s IFRS NAV, EPRA NTA, its profit or loss
and the Property Advisor’s remuneration.
The Group has appointed Jones Lang LaSalle (JLL) to act as the Independent Property Valuer (‘the valuer’).
The Audit Committee is satisfied that the valuer is independent and that it conducts its work in accordance
with the Royal Institution of Chartered Surveyors Valuation Standards (RICS).
The Property Valuation Committee reviews the valuer’s report, the methodology adopted, and the
assumptions incorporated to assess the adequacy of the valuation. They also meet the independent valuers
JLL as part of the valuation review.
External audit
Assessing the effectiveness of the external audit process
The Audit Committee reviews the effectiveness of the external audit carried out by the Auditor on an annual basis, considering
performance, objectivity, independence, relevant experience and materiality. To assess the effectiveness of the external auditor,
the Committee considered:
• the external auditor’s fulfilment of the agreed audit plan and variations from it, if any;
• the external auditor’s report to the Committee highlighting any issues that arose during the audit; and
• feedback from the Property Adviser, accountants and Administrator evaluating the performance of the audit team.
Audit partners are subject to mandatory rotation every five years. As RSM UK Audit LLP were appointed in 2014, a new audit partner,
Graham Ricketts, was introduced for the 2019 Financial Statement audit process.
The Chair of the Committee maintained regular contact with the Company’s audit partner throughout the year and met him prior to the
finalisation of the audit of the 2022 Annual Financial Statements, without the Property Advisor present, to discuss how the external audit
was carried out, the findings from the audit, and whether any issues had arisen from the Auditor’s interaction with the Company’s various
service providers.
In addition, the Auditor attended Audit Committee meetings throughout the year, which allowed the Auditor the opportunity to challenge
management’s judgement and discuss any matters it wished to raise. During these meetings, the Auditor demonstrated its understanding
of the Company’s business risks and the consequential impact on the risks included in the Financial Statements.
As part of the audit planning process, the audit partner met the Audit Committee chair and the Property Advisor to discuss the risk profile
of the business. The audit plan was presented to and approved by the Audit Committee in December 2022. The audit partner met again the
chair of the Audit Committee in March 2023 to discuss their draft audit report and opinion prior to the release of the accounts.
Audit and non-audit fees
The following table summarises the remuneration paid to RSM UK Audit LLP for audit and non-audit related services during the year ended
31 December 2022:
2022
£
2021
£
Audit 205,000 199,000
Agreed upon procedures – interim report 29,000 26,000
Total 234,000 225,000
Independence and objectivity
The Audit Committee has considered the independence and objectivity of the Auditor and has conducted a review of non-audit services
which the Auditor has provided during the year under review. The Audit Committee receives an annual assurance from the Auditor that its
independence is not compromised by the provision of such non-audit services.
The Audit Committee is satisfied that the Auditor’s objectivity and independence is not impaired by the performance of these non-audit
services and that the Auditor has fulfilled its obligations to the Company and its shareholders.
Audit Committee Report continued
Audit, Risk, and Internal Control
55
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
Report
Directors’
Report
Financial
Statements
Audit tendering
The Committee considered whether the audit appointment should be put out to tender. In doing so, it considered both the performance
of the current auditor and the likely costs and potential benefits of change.
RSM UK Audit LLP has been the Company’s auditor since 2014, given the length of tenure the Audit Committee has recommended to
the Board to commence with an audit tender process following the publication of the 2022 annual Financial Statements. Following the
consideration of the performance of the Auditor, the services provided during the year, and a review of its independence and objectivity,
the Audit Committee has concluded that RSM should be included as part of the audit tender process along with two other potential audit
firms. The successful audit firm’s appointment following the completion of the audit tender process, will be put to shareholder vote at the
Company’s upcoming AGM on 28 June 2023.
Going forward, the Committee will continue to keep the audit appointment under review, having regard to requirements for audit tendering.
Group policy on the provision of non-audit services by the auditor
The Committee has an established policy for the commission of non-audit work from the Group’s auditor.
The external auditor is excluded from providing non-audit services to the Group where the objectives of such assignments are inconsistent
with the objectives of the audit. No work is awarded to the Auditor which would result in an element of self-review, either during the work
or via the audit itself. Additionally, the external auditor is excluded from providing any services to the Property Advisor.
The Committee will continue to approve all non-audit fees prior to the work commencing and review the non-audit fees in aggregate for
the year.
Risk management and internal control
Details of how the Risk Committee oversees and advises the Board on the current risk assessment processes is set out on page 47 and
of its assessment of the principal and emerging risks is set out on pages 34 to 37.
Jonathan Thompson
Chair of the Audit Committee
28 March 2023
56
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Directors’ Remuneration Report
Remuneration
Statement from the Chair of the Remuneration Committee
As set out on page 46 of the Corporate Governance Statement, the Remuneration Committee comprised Antonia Burgess (Chair)
and Jonathan Thompson. Monique O’Keefe was Chair of the Committee until her retirement on 31 March 2022 and Greg Branch was
a member of the Committee until his death on 22 August 2022. Steven Wilderspin joined the Committee on 10 January 2023. The
Committee is responsible for setting the Directors’ remuneration levels, including in respect of the Chairman, with consideration
of the following:
• levels of Directors’ remuneration should reflect the time commitment and responsibilities of the role;
• Non-executive Directors’ remuneration should not include share options or other performance-related elements;
• careful consideration should be given to what compensation commitments entail in the event of early termination of a Director’s appointment;
• contract notice periods should be set at one year or less;
• no Director should be involved in deciding his or her own remuneration;
• consideration of remuneration in other companies of comparable scale and complexity; and
• independent judgement and discretion should be exercised when authorising remuneration outcomes, taking account of Company and
individual performance and wider circumstances.
In the year under review, and with effect from 1 January 2022, it was agreed that the Jersey resident Non-executive Directors’ annual fee be
increased with £5,000.
As detailed in its Terms of Reference, a copy of which is available on the Company’s website, the Committee has full authority to
appoint remuneration consultants and to commission or purchase any reports, surveys or information which it deems necessary at the
expense of the Company. The Committee is also responsible for reviewing the ongoing appropriateness and relevance of the Director’s
RemunerationPolicy.
The Directors’ Remuneration Report provides details on remuneration in the year. Although it is not a requirement under Companies (Jersey)
Law 1991 to have the Directors’ Remuneration Report or the Directors’ Remuneration Policy approved by shareholders, the Board believes
that, as a company whose shares are listed on the London Stock Exchange, it is good practice for it to do so. The Directors’ Remuneration
Policy will be put to shareholder vote at least once every three years and, in any year if there is to be a change in the Directors’ Remuneration
Policy. Since the current Remuneration Policy was last approved by shareholders in 2020, it will again be put forward for shareholder
approval at this year’s AGM scheduled for 28 June 2023.
A resolution will also be put to shareholders at the Company’s upcoming AGM to receive and approve the Directors’ Remuneration Report.
This report is not subject to audit.
Voting at 2022 Annual General Meeting
The Directors’ Remuneration Report for the year ended 31 December 2021 was approved by shareholders at the AGM held on 15 June 2022.
The votes cast by proxy were as follows:
Directors’ Remuneration Report
Number of
votes cast
% of
votes cast
For 50,503,196 99.93%
Against 34,033 0.07%
At Chairman’s discretion – 0%
Total votes cast 50,537,229 100%
Number of votes withheld 197,039 –
57
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
Report
Directors’
Report
Financial
Statements
Directors’ remuneration for the year ended 31 December 2022
The fees paid to the Directors for the year ended 31 December 2022 (and prior year) are set out below:
Audited
2022 2021
Director’s fee
£
Expenses
£
Total
£
Director’s fee
£
Expenses
£
Total
£
R Hingley 50,000 1,276 51,276 50,000 – 50,000
M O’Keefe* 11,250 – 11,250 40,000 – 40,000
Q Spicer** – – – 17,562 – 17,562
I Robins*** 36,000 755 36,755 – – –
J Thompson 45,000 1,698 46,698 45,000 415 45,415
A Burgess 45,000 932 45,932 40,000 – 40,000
G Branch**** 33,750 – 33,750 40,000 – 40,000
Total 221,000 4,661 225,661 232,562 415 232,977
* Monique O’Keefe retired from the Board with effect from 31 March 2022.
** Quentin Spicer retired from the Board at the AGM on 8 June 2021.
*** Isabel Robins was appointed to the Board with effect from 14 March 2022.
**** Greg Branch died on 22 August 2022.
Relative importance to spend on pay
The table below sets out, in respect of the year ended 31 December 2022:
a) the remuneration paid to the Directors; and
b) the distributions made to Directors by way of dividend.
31 December
2022
£’000
31 December
2021
£’000
Change
%
Directors’ remuneration 226 233 (3.4)
Dividends paid to Directors 1 3 –
Directors’ interests
There is no requirement under the Company’s Articles of Association for the Directors to hold shares in the Company. At 31 December 2022,
the interest of the Directors in the ordinary shares of the Company are set out below:
31 December
2022
31 December
2021
Robert Hingley 5,150 5,150
Jonathan Thompson 7,337 7,337
There have been no changes to the interests of the existing Directors between 31 December 2022 and the date of this report.
58
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Directors’ Remuneration Report continued
Remuneration
Remuneration policy
A resolution to approve the Directors’ Remuneration Policy was proposed and passed at the Company’s AGM held on 29 May 2020.
The Remuneration Policy provisions set out below will apply until they are next put to shareholders for renewal of that approval which,
as explained above, will take place in any year where there is to be a change to the policy and, in any event, at least once every three years.
In accordance with the AIC Code, no Director is involved in deciding his/her own remuneration.
The Group’s policy, designed to support strategy and promote long-term sustainable success of the Company, is that the remuneration
of the Directors should reflect the experience of the Board as a whole, the time commitment required, and be fair and comparable with
that of other similar companies. Furthermore, the level of remuneration should be sufficient to attract and retain the Directors needed to
oversee the Group properly and to reflect its specific circumstances. With effect from 1 January 2022, the Jersey based Non-executive
Directors received a £5,000 fee increase to better reflect their workload in relation to performing additional director duties to the
Company’s respective Jersey domiciled subsidiaries.
The aggregate of all the Directors’ remuneration is subject to an annual cap of £400,000 or such higher amount as may from time
to time be determined by ordinary resolution of the Company in accordance with the Company’s Articles of Association and shall be
reviewed annually.
Any Director who holds any office with the Company, or any subsidiary of the Company (including for this purpose the office of Chairman
or deputy Chairman whether or not such office is held in an executive capacity), or who serves on any committee of the Directors, or who
is involved in ad-hoc duties beyond those normally expected as part of their appointment, may be paid such extra remuneration by way of
salary, commission or otherwise or may receive such other benefits as the Directors may determine. Any additional remuneration will not
be ‘variable’ in that it will not be linked to the performance of the Company.
The Company may pay on behalf of, or repay to, any Director all such reasonable expenses as he/she may incur in attending and returning
from meetings of the Directors or of any Committee of the Directors or Shareholders’ meetings or otherwise in connection with the
business of the Company.
Directors’ fee levels
The Board has set three levels of fees: one for the Chairman, one for the Directors, and an additional fee that is paid to the Director who
chairs the Audit Committee. Fees are reviewed annually in accordance with the above policy. The fee for any new Director appointed will
be determined on the same basis. The basic and additional fees payable to Directors in respect of the year ended 31 December 2022 and
the expected fees payable in respect of the year ending 31 December 2023 are set out in the table below:
Expected annual fee
for the year to
31 December 2023
£
Annual fees
for the year to
31 December 2022
£
Chairman 50,000 50,000
Chair of the Audit Committee 45,000 45,000
Non-executive Directors 40,000 40,000
Additional Jersey-resident Director’s fee
1
5,000 5,000
Total remuneration paid to Directors 230,000 230,000
1 Jersey resident directors also act as directors on the Jersey subsidiaries.
Approval
The Directors’ Remuneration Report was approved by the Board and signed on its behalf by:
Antonia Burgess
Chair of the Remuneration Committee
28 March 2023
59
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
Report
Directors’
Report
Financial
Statements
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Strategic Report, the Directors’ Report, the Directors’ Remuneration Report and the
Financial Statements in accordance with applicable law and regulations.
Jersey company law requires the Directors to prepare Group Financial Statements for a period of not more than 18 months in accordance
with generally accepted accounting principles. The Directors have elected under Jersey company law to prepare the Group Financial
Statements in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies
in the European Union and are required under the Listing Rules of the Financial Conduct Authority to prepare the Group Financial
Statements in accordance with UK-adopted International Accounting Standards.
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 international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and UK-adopted International Accounting Standards 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 international financial reporting standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union and UK-adopted International Accounting Standards; 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 Group
Financial Statements comply with the requirements of the Companies (Jersey) Law 1991, international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and UK-adopted International Accounting
Standards. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Directors’ statement pursuant to the Disclosure and Transparency Rules
Each of the Directors, whose names and functions are listed on pages 38 to 39 confirm that, to the best of each person’s knowledge:
• the Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit of the Group; and
• the Strategic Report contained in the Annual Report includes a fair review of the development and performance of the business and the
position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Phoenix Spree
Deutschland Limited website.
Legislation in Jersey governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.
Approval
The Statement of Directors’ Responsibilities was approved by the Board and signed on its behalf by:
Antonia Burgess
Director
28 March 2023
60
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Independent Auditor’s Report
to the Members of Phoenix Spree Deutschland Limited
Opinion
We have audited the financial statements of Phoenix Spree Deutschland Limited and its subsidiaries (the “group”) for the year ended
31 December 2022 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial
Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and notes to the financial
statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is
applicable law and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.
In our opinion, the financial statements:
• give a true and fair view of the state of the group’s affairs as at 31 December 2022 and of the group’s loss for the year then ended;
• have been properly prepared in accordance with international financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union; and
• have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
Separate opinion in relation to UK-adopted International Accounting Standards
As explained in note 2 to the financial statements, the Group in addition to complying with its legal obligation to apply international
financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, has also applied
UK-adopted International Accounting Standards.
In our opinion the financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2022
and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with UK-adopted
International Accounting Standards.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in
the UK, including the FRC’s Ethical Standard as applied to listed public interest entities and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Summary of our audit approach
Key audit matter Valuation of investment property
Materiality
Overall materiality: €7,750,000 (2021: €8,010,000)
Performance materiality: €5,810,000 (2021: €6,010,000)
Scope Our audit procedures covered 100% of revenue, total assets and loss before taxation.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the group financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we
identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit and directing
the efforts of the engagement team. These matters were addressed in the context of our audit of the Group financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Valuation of investment properties held by the group
Key audit matter description
The group owns a portfolio of residential and commercial investment properties. The total value of the portfolio reported in the
financial statements at 31 December 2022 was €775.9 million (2021: €801.5 million), including properties designated as held for sale.
These properties are all in Germany and predominately in Berlin.
The accounting policy in respect of investment properties is to hold them at fair value in the financial statements, and to recognise
the movement in the value in the accounting period in the Income Statement. The group has appointed an independent valuation
expert (“the valuer”) in determining the fair value of the investment properties at 31 December 2022. €770.6 million (2021: €801.5
million) are held at fair value based on external valuation reports and €5.3 million (2021: nil) at directors’ valuation.
The valuation of investment properties involves the use of assumptions and judgements and the group’s approach to the risks
associated with valuation of investment properties is detailed in the Audit Committee report on pages 53 to 55; the significant
accounting judgements and estimates on page 78; significant accounting policies on pages 71 to 77 and notes 16 and 17 to the
Financial Statements on pages 82 to 85.
The audit risk relating to the valuation of investment properties at the year-end date is considered to be one of most significance in
the audit and was therefore determined to be a key audit matter due to the magnitude of the total amount, the potential impact of
the movement in value on the reported results, and the subjectivity of the valuation process.
61
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
Report
Directors’
Report
Financial
Statements
How the matter was
addressed in the audit
Our audit work included:
• Assessing the valuer’s qualifications, expertise and terms of engagement and assessing their independence and objectivity.
• Auditing on a sample basis the inputs provided by the Property Advisor to the valuer and checking that these were consistent with
the underlying accounting records.
• Assessing the challenge provided by the Property Valuation Committee of the Board to the valuation.
• Obtaining a confirmation and land registry documents from the Group’s solicitors to confirm the existence and ownership
of all properties.
• Identifying the largest properties by value, and the properties where there were unusual movements in value compared to the
average or the previous year and discussing and challenging the valuation of these properties with the valuer, as well as obtaining
evidence to support the explanations received.
• Challenging the valuer on the appropriateness of key assumptions in the valuation, including specific discussion of increases in
value outside of an average range, reductions in property values, uplifts for condominiumisation and densification.
• Engaging an independent auditor’s expert to assist us in challenging assumptions made by the valuer and directors in respect
of the Berlin property market.
Key observations
Disclosure of the impact of the key judgements and estimates applied in respect of the valuation of investment properties is given in
note 16 to the financial statements. Based on the results of the audit procedures outlined above, we have no observations to report.
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and extent of our audit
procedures. When evaluating whether the effects of misstatements, both individually and on the financial statements as a whole, could
reasonably influence the economic decisions of the users we take into account the qualitative nature and the size of the misstatements.
Based on our professional judgement, we determined materiality as follows:
Overall materiality
€7,750,000 (2021: €8,010,000)
Basis for determining overall
materiality
1% of property valuation (2021: 1% of property valuation)
Rationale for benchmark
applied
We determined that key users of the Group’s financial statements are primarily focused on the valuation of the Group’s investment
properties.
Performance materiality
€5,810,000 (2021: €6,010,000)
Basis for determining
performance materiality
75% of overall materiality (2021: 75% of overall materiality)
Reporting of misstatements
to the Audit Committee
Misstatements in excess of €193,000 (2021: €200,000) and misstatements below that threshold that, in our view, warranted
reporting on qualitative grounds.
An overview of the scope of our audit
Our audit scope covered 100% of group revenue, group loss before tax and total group assets and was performed to the materiality levels
set out above.
All audit work was completed by the group audit team and no component auditors were used in our audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s ability to continue to adopt the going
concern basis of accounting included:
• obtaining an understanding of management’s going concern evaluation
• assessing the information used in the going concern assessment for consistency with management’s plans and information obtained
through our other audit work
• challenging the major assumptions in management’s forecasts, being the level of rents receivable, expenses, capital expenditure,
dividends and sales of condominiums
• checking the integrity and mathematical accuracy of the forecasts
• evaluating management’s sensitivity analysis
• reviewing the appropriateness of disclosures in respect of the going concern basis, including in the viability statement.
Our evaluation of the directors’ assessment of the group’s ability to continue to adopt the going concern basis of accounting included
gaining an understanding of their assessment of the underlying risks relating to going concern, the key facts and variables within that
assessment and the judgements they applied in reaching their conclusion. We concluded that the directors’ assessment was appropriate
in the circumstances.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the group’s ability to continue as a going concern for a period of at least twelve months from
when the financial statements are authorised for issue.
62
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Independent Auditor’s Report continued
to the Members of Phoenix Spree Deutschland Limited
In relation to entities reporting on how they have applied the AIC Code of Corporate Governance, we have nothing material to add or draw
attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt
the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor’s
report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify
such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies (Jersey) Law 1991 requires us to report to
you if, in our opinion:
• proper accounting records have not been kept by the company, or proper returns adequate for our audit have not been received from
branches not visited by us; or
• the financial statements are not in agreement with the accounting records and returns; or
• we have failed to receive all the information and explanations which, to the bast of our knowledge and belief, was necessary for our audit.
Corporate governance statement
We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance
Statement relating to the company’s compliance with the provisions of the AIC Code of Corporate Governance specified for our review
by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
• Directors’ statement with regards the appropriateness of adopting the going concern basis of accounting and any material uncertainties
identified set out on page 42;
• Directors’ explanation as to their assessment of the group’s prospects, the period this assessment covers and why this period is
appropriate set out on page 42;
• Director’s statement on whether it has a reasonable expectation that the group will be able to continue in operation and meets its
liabilities set out on pages 42 to 43;
• Directors’ statement on fair, balanced and understandable set out on page 43;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 47;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on
page 47; and,
• The section describing the work of the audit committee set out on pages 53 to 55.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on 59, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the group or to cease operations, or have no realistic alternative but to do so.
63
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
Report
Directors’
Report
Financial
Statements
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
The extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities are instances of non-compliance with laws and regulations. The objectives of our audit are to obtain sufficient appropriate
audit evidence regarding compliance with laws and regulations that have a direct effect on the determination of material amounts and
disclosures in the financial statements, to perform audit procedures to help identify instances of non-compliance with other laws and
regulations that may have a material effect on the financial statements, and to respond appropriately to identified or suspected non-
compliance with laws and regulations identified during the audit.
In relation to fraud, the objectives of our audit are to identify and assess the risk of material misstatement of the financial statements due to
fraud, to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud through designing
and implementing appropriate responses and to respond appropriately to fraud or suspected fraud identified during the audit.
However, it is the primary responsibility of management, with the oversight of those charged with governance, to ensure that the entity’s
operations are conducted in accordance with the provisions of laws and regulations and for the prevention and detection of fraud.
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud, the group audit engagement team:
• obtained an understanding of the nature of the industry and sector, including the legal and regulatory frameworks that the group
operates in and how the group is complying with the legal and regulatory frameworks;
• inquired of management, and those charged with governance, about their own identification and assessment of the risks
of irregularities, including any known actual, suspected, or alleged instances of fraud;
• discussed matters about non-compliance with laws and regulations and how fraud might occur including assessment of how
and where the financial statements may be susceptible to fraud having obtained an understanding of the effectiveness of the
control environment.
The most significant laws and regulations were determined as follows:
Legislation/Regulation Additional audit procedures performed by the Group audit engagement team included:
IFRS and Companies (Jersey)
Law 1991;
AIC Code of Corporate
Governance;
Listing and Transparency Rules
• Review of the financial statement disclosures and testing to supporting documentation.
• Completion of disclosure checklists to identify areas of non-compliance.
• Review of the financial statement disclosures by a specialist in Jersey company law.
Tax compliance regulations
• Inspection of advice received by the group from its tax advisers.
• Inspection of correspondence with tax authorities in the jurisdictions in which the group operates.
The Codes of Practice for
Certified Funds in Jersey
• Review by a specialist in Jersey regulatory compliance of the Company’s compliance with local regulatory requirements in its
country of incorporation, Jersey, specifically The Codes of Practice for Certified Funds. The review covered correspondence with
the Jersey Financial Services Commission (JFSC), the breaches errors and complaints registers, compliance with CPD
requirements, and the quarterly reports made by the compliance officer to the Board.
The areas that we identified as being susceptible to material misstatement due to fraud were:
Risk Audit procedures performed by the audit engagement team:
Management override
of controls
• Testing the appropriateness of journal entries and other adjustments;
• Assessing whether the judgements made in making accounting estimates, in particular in respect of investment property
valuations, are indicative of a potential bias; and
• Evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
Valuation of Investment
Properties
• Audit procedures performed on valuation of investment properties are outlined in the Key Audit Matter section of this audit report.
A further description of our responsibilities for the audit of the financial statements is included in appendix 1 of this auditor’s report. This
description, which is located at page 65, forms part of our auditor’s report.
64
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Other matters which we are required to address
Following the recommendation of the audit committee, we were appointed by the Directors on 16 December 2014 to audit the financial
statements for the year ending 31 December 2014 and subsequent financial periods.
The period of total uninterrupted consecutive appointment is 9 years, covering the years ending 31 December 2014 to 31 December 2022.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group and we remain independent of the group
in conducting our audit.
Our audit opinion is consistent with the additional report to the audit committee in accordance with ISAs (UK).
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Article 113A of the Companies (Jersey) Law 1991. Our
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
In due course, as required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.14R, these
financial statements will form part of the European Single Electronic Format (ESEF) prepared Annual Financial Report filed on the National
Storage Mechanism of the UK FCA in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditor’s report provides
no assurance over whether the annual financial report has been prepared using the single electronic format specified in the ESEF RTS.
Graham Ricketts
For and on behalf of RSM UK Audit LLP
Auditor
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
28 March 2023
Independent Auditor’s Report continued
to the Members of Phoenix Spree Deutschland Limited
65
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
Report
Directors’
Report
Financial
Statements
Appendix 1: Auditor’s responsibilities for the audit of the financial Statements
As part of an audit in accordance with ISAs (UK), we exercise professional judgment and maintain professional scepticism throughout the
audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made
by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the group
to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to
express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, including the FRC’s Ethical Standard as applied to listed public interest entities, and communicate with them all relationships
and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the
audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
66
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Notes
Year ended
31 December
2022
€’000
Year ended
31 December
2021
€’000
Continuing operations
Revenue 6 25 , 93 4 25,79 0
Property expenses 7 (1 7,1 1 9 ) (16 ,0 82 )
Gross profit 8,81 5 9,70 8
Administrative expenses 8 (3, 26 4 ) (3 ,4 47 )
(Loss)/gain on disposal of investment property (including investment property held for sale) 10 (185 ) 1 , 518
Investment property fair value (loss)/gain 11 (42 ,241 ) 3 7, 9 8 3
Performance fee due to Property Advisor 25 343 (3 43 )
Operating (loss)/profit (36, 532 ) 45,419
Net finance charge (before gain/(loss) on interest rate swaps) 12 (7, 9 3 7 ) (7 ,482 )
Gain on interest rate swaps 12 26 ,920 7, 31 3
(Loss)/profit before taxation (1 7, 5 49 ) 45,250
Income tax credit/(expense) 13 1 ,739 (7, 8 82 )
(Loss)/profit after taxation (15, 810 ) 37, 3 6 8
Other comprehensive income – –
Total comprehensive (loss)/income for the year (15, 810 ) 3 7, 3 6 8
Total comprehensive income attributable to: (15, 435 )
Owners of the parent (375 ) 57
Non-controlling interests (15, 810 ) 3 7, 3 6 8
Earnings per share attributable to the owners of the parent:
From continuing operations
Basic (€) 28 (0.17 ) 0. 39
Diluted (€) 28 (0. 17 ) 0 . 39
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
67
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
Report
Directors’
Report
Financial
Statements
Notes
As at
31 December
2022
€’000
As at
31 December
2021
€’000
ASSETS
Non-current assets
Investment properties 16 76 1 , 37 7 7 59, 83 0
Property, plant and equipment 18 12 20
Other financial assets at amortised cost 19 828 926
Derivative financial instruments 24 16, 036 –
Deferred tax asset 13 – 1,72 2
Current assets
Investment properties – held for sale 17 14, 527 41 , 631
Trade and other receivables 20 10,068 1 1 ,69 9
Cash and cash equivalents 21 12 ,485 10, 4 41
Total assets 815 , 333 826,269
EQUITY AND LIABILITIES
Current liabilities
Borrowings 22 820 922
Trade and other payables 23 15, 130 1 1 , 8 93
Current tax 13 808 51 2
Non-current liabilities
Borrowings 22 311 , 2 64 283, 2 33
Derivative financial instruments 24 – 10 ,8 8 4
Deferred tax liability 13 70 ,920 75,198
Total liabilities 398,9 42 382 ,6 42
Equity
Stated capital 26 196 , 578 1 96 , 578
Treasury shares 26 (3 7,4 4 8 ) (33 , 275 )
Share-based payment reserve 25 – 3 43
Retained earnings 254,049 276 , 39 4
Equity attributable to owners of the parent 413,179 44 0,040
Non-controlling interest 27 3, 212 3 ,5 87
Total equity 416, 391 443 ,627
Total equity and liabilities 815, 333 826, 269
The Consolidated Financial Statements on pages 66 to 95 were approved and authorised for issue by the Board of Directors and were
signed on its behalf by:
Robert Hingley Jonathan Thompson
Chairman Director
28 March 2023 28 March 2023
Consolidated Statement of Financial Position
At 31 December 2022
68
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Attributable to the owners of the parent
Non-
controlling
interest
€’000
Total equity
€’000
Stated capital
€’000
Treasury shares
€’000
Share-based
payment
reserve
€’000
Retained
earnings
€’000
Total
€’000
Balance at 1 January 2021 19 6, 578 (1 7,2 0 6 ) 6, 369 244, 68 5 430,426 3, 530 433,9 56
Comprehensive income:
Profit for the year – – –
Other comprehensive income – – – – – – –
Total comprehensive income for
the year – – –
Transactions with owners –
recognised directly in equity:
Dividends paid – – – (7, 43 5 ) (7, 4 3 5 ) – (7, 4 3 5 )
Performance fee – – 3 43 – 343 – 343
Settlement of performance fee
using treasury shares – 4, 536 (6, 3 69 ) 1, 833 – – –
Acquisition of treasury shares – (20,605 ) – – (20,605 ) – (20,605 )
Balance at 31 December 2021 1 96 ,578 (33, 275 ) 343 2 76 , 39 4 440,040 3, 587 4 43 ,627
Comprehensive income:
Loss for the year – – – (1 5 ,435 ) (1 5, 435 ) (375 ) (15,810 )
Other comprehensive income – – – – – – –
Total comprehensive income for
the year – – – (1 5,435 ) (15 ,435 ) (375 ) (1 5,810 )
Transactions with owners –
recognised directly in equity:
Dividends paid – – – (6,910 ) (6 ,910 ) – (6, 910 )
Performance fee – – (3 43 ) – (343 ) – (3 43 )
Acquisition of treasury shares – (4 ,1 7 3 ) – – (4 , 17 3 ) – (4, 1 73 )
Balance at 31 December 2022 196 , 578 (3 7,4 4 8 ) – 254,049 413,179 3, 212 416, 39 1
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
69
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
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Directors’
Report
Financial
Statements
Year ended
31 December
2022
€’000
Year ended
31 December
2021
€’000
(Loss)/profit before taxation (1 7, 5 49 ) 45,2 50
Adjustments for:
Net finance charge (18,9 83 ) 169
Loss/(gain) on disposal of investment property 185 (1 , 518 )
Investment property revaluation loss/(gain) 42 , 241 (3 7,9 8 3 )
Depreciation 8 8
Performance fee due to property adviser (share-based payment) (3 43 ) 343
Operating cash flows before movements in working capital 5, 559 6, 269
Increase in receivables (2, 882 ) (1, 320 )
(Decrease)/increase in payables (46 3 ) 2,875
Cash generated from operating activities 2 , 214 7, 82 4
Income tax (paid)/received (521 ) 163
Net cash generated from operating activities 1 , 693 7, 9 87
Cash flow from investing activities
Proceeds on disposal of investment property (net of disposal costs) 21 ,010 13 ,758
Interest received 474 1
Capital expenditure on investment property (16,437 ) (9,47 7 )
Property additions (13,229 ) –
Disposals of property, plant and equipment – 14
Net cash (used in)/generated from investing activities (8, 182 ) 4,296
Cash flow from financing activities
Interest paid on bank loans ( 7, 2 96 ) (6,69 9 )
Loan arrangement fees paid (499 ) (1 ,0 4 4 )
Repayment of bank loans (6, 35 4 ) (4, 059 )
Drawdown on bank loan facilities 3 3, 76 5 900
Dividends paid (6,9 10 ) (7, 4 3 5 )
Acquisition of treasury shares (4, 1 73 ) (20,501 )
Net cash generated from/(used in) financing activities 8, 533 (38,838 )
Net increase in cash and cash equivalents 2,0 44 (26,555 )
Cash and cash equivalents at beginning of year 10, 4 41 36,996
Exchange (losses)/gains on cash and cash equivalents – –
Cash and cash equivalents at end of year 12,485 10,4 41
Consolidated Statement of Cash Flows
For the year ended 31 December 2022
70
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Reconciliation of Net Cash Flow to Movement in Debt
For the year ended 31 December 2022
Notes
Year ended
31 December
2022
€’000
Year ended
31 December
2021
€’000
Cashflow from increase/(decrease) in debt financing 27,411 (3,159)
Loan arrangement fees paid (499) (1,044)
Non-cash changes from increase/(decrease) in debt financing 1,017 809
Change in net debt resulting from cash flows 27,929 (3,394)
Movement in debt in the year 27,929 (3,394)
Debt at the start of the year 284,155 287, 5 49
Debt at the end of the year 22 312,084 284,155
71
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
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Directors’
Report
Financial
Statements
72
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2022
73
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
Report
Directors’
Report
Financial
Statements
77
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
Report
Directors’
Report
Financial
Statements
95
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Strategic
Report
Directors’
Report
Financial
Statements
96
Phoenix Spree Deutschland Limited Annual Report and Accounts 2022
Professional Advisors
Property Advisor QSix Residential Limited
54-56 Jermyn Street
London SW1Y 6LX
Administrator, Company Secretary and Registered Office Apex Financial Services (Alternative Funds) Limited
12 Castle Street
St Helier
Jersey JE2 3RT
Registrar Link Asset Services (Jersey) Limited
12 Castle Street
St. Helier
Jersey JE2 3RT
Principal Banker Barclays Bank Plc, Jersey Branch
13 Library Place
St. Helier
Jersey JE4 8NE
UK Legal Adviser Stephenson Harwood LLP
1 Finsbury Circus
London EC2M 7SH
Jersey Legal Adviser Mourant
22 Grenville St.
St. Helier
Jersey JE4 8PX
German Legal Adviser as to property law Mittelstein Rechtsanwälte
Alsterarkaden 20
20354 Hamburg
Germany
German Legal Adviser as to German partnership law Taylor Wessing Partnerschaftsgesellschaft mbB
Thurn-und-Taxis-Platz 6
60313 Frankfurt a.M.
Germany
Sponsor and Broker Numis Securities Limited
45 Gresham Street
10 Paternoster Square
London
EC2V 7BF
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
Printed by a carbon balanced, FSC
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printer, certified to ISO 14001 environmental
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This product has been made of material from
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®
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controlled sources. Both paper and production are
measured and carbon balanced, based on a third
party, audited, calculation.
100% of the inks used are HP Indigo ElectroInk
which complies with RoHS legislation and meets
the chemical requirements of the Nordic Ecolabel
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chemicals are recycled for further use and, on
average 99% of any waste associated with this
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The printer contributes to the World Land Trust’s
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and thereby protect thousands of acres of threatened
coastal forest. The local organisation FUNDAECO
works with over 3000 families to help transform local
livelihoods through job creation and ecotourism.
Phoenix Spree Annual Report and Accounts 2022
Phoenix Spree Deutschland Limited
12 Castle Street
St. Helier
Jersey
JE2 3RT
www.phoenixspree.com