Phoenix Spree looks to wind down after lender agrees ramped-up sales

The board of Berlin property fund Phoenix Spree Deutschland reveals it failed to find a cash buyer for the firm but can now speed up sales of its flats in the German capital.

Phoenix Spree Deutschland (PSDL ), the £152m Berlin residential property fund languishing on a London listing, has effectively put itself into a managed wind-down after failing to find a buyer for its portfolio of flats and apartment blocks.

Phoenix shares jumped 6% after chair Robert Hingley said the board and corporate adviser Lazard had sought a cash buyer for the property investment company. This could have liberated shareholders from a stock that has been stuck below net tangible assets (NTA) for six years with a current wide discount of 47%.

Although a complete sale was no longer under consideration, Hingley said a sale of 16 properties to Swiss private equity manager Partners Group had now opened a way to rapidly improve shareholder returns.

While the €75.9m (£62.7m) price tag is lower than the last valuation of the 385 units and knocks pro-forma NTA by 7.9% from €3.68 to €3.39 a share, it also reduces debt by €58.8m to €257.9m with a loan to value of 42.7%.

That has enabled the company to modify its borrowing facility with lender Natixis and ramp up the disposal of 61 buildings, or 80% of the portfolio, that are legally split for condominium sales.

This allows Phoenix to sell up to 40 properties, representing 950 units, in one transaction up from the previous maximum of six. Using this new permission, the company is targeting annual sales of €50m from 2025.

As the debt amendment and sales programme represents a ‘carefully managed portfolio realisation programme’, and having consulted with Phoenix’s biggest shareholders, Hingley said the board had brought forward a continuation vote due next June to early next year. A circular will be published in mid-February.

Shareholders will also be asked to approve an amendment to the investment objective that balances the need to return cash promptly while maximising value. ‘In effect, this constitutes a managed wind-down of the company’s portfolio,’ the company said.

The board is recommending that shareholders support the continuation vote to enable the realisation to go ahead. If shareholders vote against, then liquidation proposals will be prepared.

Among Phoenix’s top investors is CG Asset Management, the activist manager of Capital Gearing Trust (CGT ), which holds a 1.9% stake, according to Refinitiv.

Fund manager Columbia Threadneedle is the biggest shareholder with 22.5%; followed by Bracebridge Capital, a Boston-based hedge fund, with 15.5%; and Hawksmoor Investment Management holding 3.3%.

The company said that condominium sales can achieve a ‘significant value uplift’ with current market evidence of transactions around €5,000 per square metre for vacant units and €3,500 for tenanted units. The average price achieved this year has been €4,122 a square metre, a 19% premium to the first-half valuation of the portfolio.

Shares that peaked at 409p in July 2021 later pared their gains, trading 2.6%, or 4.25p up, at 170p.