Berlin residential property fund Phoenix Spree Deutschland (PSDL ) has pulled out of a deal to buy a development in the Brandenberg forest, meaning it loses the €5.55m (£4.7m) it paid when the deal was signed.

The £155m London-listed fund cancelled its contract with The Grounds Real Estate Development for the sale of its Terra Homes project in Erkner on the south-eastern edge of Berlin. The trust had been due to purchase the 34 homes in a contract worth €18.5m but the contract was terminated by mutual agreement at PSDL’s request, according to reports in German newspapers.

According to Justin Bell of Deutsche Numis, PSDL has confirmed the cancellation of the contract and the subsequent €5.5m hit it will take will have ‘no material impact on net asset value (NAV)’ and the decision to pull out of the deal ‘avoids drawing down further on debt to fund completion of the project and taking market risk on valuations’.

The property trust has been trying to offload properties over the past six months in a bid to raise cash to reinstate its dividend and hopefully narrow its persistently wide discount, which currently stands at 44%.

The fund even agreed to pay its fund manager, QSix Residential, a 1% disposal fee to increase sales of its condominiums in the German capital. The new fee was combined with a €5m cap on QSix’s annual management fee in the next 12 months, down from the €7m the fund manager earned in the previous year.

Shares in the Jersey investment company have slid 32.5% in the past year, mystifying shareholders such as MIGO Opportunities (MIGO ) manager Nick Greenwood who believes that the closed-end fund deserves a much higher rating given the shortage of residential property in Berlin.

At 168p yesterday the shares languished on a 58% discount to NAV of 399p, although the valuation is out of date as it relates to the 30 June figure released in the half-year results in September.