Return of capital through share redemption programme
As its asset disposal progresses, PSD intends to make regular distributions of cash
as it becomes available, subject to market conditions and maintaining compliance with
the new banking covenants. This will be effected by way of compulsory pro rata share
redemptions (‘redemptions’), and the company will provide details on the expected
size and terms of the first redemption, including the relevant percentage of shares
to be redeemed, with the FY25 full-year results, which it expects to release on 23
April 2026.
With each redemption, the company will redeem and cancel a fixed percentage of the
shares outstanding in exchange for a cash payment. This will apply to each shareholder
in proportion to their percentage holding, treating all shareholders equally. PSD
expects that each redemption will be at the sterling equivalent of most recently published
EPRA NTA per share (€3.49 as at 30 June 2025) to maintain consistency and comparability
of accounting.
In the appendix of this report, we show the additional shareholder information provided
by PSD and we also show a simple example demonstrating that redemptions will progressively
reduce the net assets of the company but will have no impact on the percentage interest
of each shareholder. A shareholding of 1% in the company will remain 1% and the EPRA
NTA per share will be unchanged, but the shareholder will own fewer shares having
received a capital return in cash. We expect the timing and amount of capital redemptions
will have some impact on share price performance around the event, in the same way
that a high dividend paying company may see its share price increase ahead of the
ex-dividend date and reduce by more than the dividend immediately after. Aside from
this, we expect the commencement of redemptions to have a cumulative positive impact
on the price-to-NAV ratio and shareholder total return.
How much cash will PSD be able to distribute?
The net cash generated by disposals will include the cost of sales, primarily sales
transfer tax (the standard rate in Berlin is 6%) but also including brokerage fees,
as well as the crystallisation of historically deferred tax accumulated on property
revaluation gains. At end-H125, the deferred tax liability was c €55m, compared with
a portfolio value of c €549. From the net cash flow, approximately half must be used
to pay down debt and the balance is available to shareholders. We expect most of this
to be available for distributions, although some will be required to fund portfolio
capex (including preparing condos for sale) and general company running costs. We
would expect at least some of the capex to be reflected in sales values over time
and, to this extent, it represents a timing effect, with expenditure subsequently
recovered through higher sales values. For 2025, PSD expects capex to amount to c
€15m, with an acceleration in the second half of the year (H125: c €5m) as a result
of the step-up in sales preparation. A materially lower spend is expected in 2026.
Under the terms of the bank agreement, at least 52% of the net proceeds on any sales
must be applied to prepayment of borrowings, although the exact percentage will vary
according to the loan collateral value of the specific assets sold. The new debt facility
€255m, compared with the H125 portfolio value of c €549m, represents a c 46% loan-to-value
ratio (LTV) but this does not reflect H225 asset sales or any valuation movements.
We expect the LTV at refinancing to be c 50%.
Although each transaction will differ, for the portfolio as a whole (assuming a facility
LTV of 50%, 7% cost of sales and a full crystallisation of deferred tax liabilities)
around one-third of gross proceeds will be available to shareholders over time.
