Berlin residential property fund Phoenix Spree Deutschland (PSDL ) has agreed to pay its fund manager a 1% disposal fee as the board looks to increase sales of condominiums in the German capital as it strives to narrow a wide share price discount and reinstate the suspended dividend.

Shares in the London-listed Jersey investment company, which languish 55% below net asset value, rose 2.6% to 201p on news that the new fee to QSix Residential will be accompanied by a €5m (£4.3m) cap to its annual management fee in the next 12 months. This is down from the €7m the fund manager earned last year.

Chair Robert Hingley said ‘generating sufficient cash to pay dividends is substantially dependent on condominium and/or other asset sales and, in recent times,’ with the German capital gripped by a cost-of-living crisis, ‘these have been difficult to implement at prices that the board believes reflect the long-term value of the properties’.

However, he said the board was prepared to sell properties at a discount if the price achieved was in shareholder interests.

The new disposal fee of 1% of gross asset value is designed to incentivise the fund manager to generate the cash for dividends and share buybacks.

Hingley acknowledged the ‘frustration of shareholders that PSDL’s share price remains at a material discount to assets’ despite the strong rental performance it has shown over the past year. The company faces a continuation vote at its annual general meeting next year.

‘Any surplus cash generated over amounts required to reinvest in the company’s existing portfolio and reinstate dividends on a sustainable basis will, so long as the material discount to net tangible assets (NTA) persists, continue to be used principally to return capital to shareholders and not to acquire further properties,’ said Hingley.

‘This enhanced disposal activity will be the primary focus of the company’s strategy for at least the next 12 months,’ he added.

Under the new arrangement, QSix’s base fee will after the first year be calculated as 1.2% of assets up to €500m and 1% thereafter.

Analysts at Numis, the company’s corporate broker, pointed out the disposal fee was based on the value of sales achieved, rather than a flat rate based on the number of beds or units sold.

‘We note this is in contrast to the disposal fee that was introduced by Home Reit (HOME ) as part of its new manager appointment,’ analyst Andrew Rees said.

PSDL’s portfolio fell 3.1% in value to €775.9 last year, which the underlying total investment return dropping 8.4% in euros and 3.2% in sterling.

Hingley blamed the decline on ‘a deterioration in buyer sentiment in light of more challenging economic circumstances’ that had hindered condominium sales, but added that the rental business continued to ‘thrive’.