Phoenix Spree discusses Berlin rent controls – Phoenix Spree Deutschland, the UK listed investment company specialising in Berlin residential real estate, has updated on proposed rent controls in the German capital.
The proposed new Berlin State rent controls continue to create significant uncertainty which has negatively impacted the company share price, resulting in a valuation discount to EPRA NAV as at 31 December 2018 of 28.6%. Both the share price decline and the discount are in line with the Berlin focused listed peer group.
On June 2019, as expected, the Berlin Senate approved in principle the draft term sheet for the proposed bill for new rent controls. Although the proposed details and mechanisms are as yet unclear, there remain serious concerns regarding the legality and constitutionality of the draft proposal given that rental price laws have always been determined under German federal legislation.
A detailed analysis of the proposals will not be possible until the draft is presented at the end of August, after which there will be hearings from interested parties and experts and before entering the legislative process in October.
The legal research department of the Bundestag, the German Federal Parliament, issued a statement highlighting that the proposals violate the German Constitution in a number of key aspects and that there are numerous legal arguments to support the view that State law cannot supersede Federal law. It said it expects an increasing number of legal challenges as details of the draft bill are made public at the end of August.
Given the uncertainty about the legal validity of the proposed rent controls, it is not yet clear what impact there could be on future property prices at this time. However, the company’s interim portfolio valuation, conducted by JLL, does not factor in any impact on property values.
Portfolio valuation
As at 30 June 2019, The company’s portfolio at 30 June 2019 was valued at €665.2m, up from €645.7m on 31 December 2018.
On a like-for-like basis, after adjusting for the impact of acquisitions net of disposals, the portfolio valuation increased by 3.9%. This reflected the combined impact of market rental growth and the active management of the portfolio.
PSDL : Phoenix Spree discusses Berlin rent controls
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