Annual Reports

Letter to shareholders

In the past fiscal year 2016, we successfully continued with our strategic portfolio streamlining, saw positive developments in the rental sector and achieved our operating (FFO) targets.

The sale of seven directly and indirectly held properties that no longer belong to our core portfolio generated income before selling costs of €19.8 million, exceeding carrying amounts by 4% overall.

As a result of successful letting activities, the occupancy rate of the portfolio increased to 90.6% of potential rents as of 1 January 2017 compared to 88.5% (like-for-like) of potential rents in the previous year. After including, on a pro forma basis, lease agreements already entered into for space still to be handed over, the occupancy rate again stood at 93.2% of potential rents as of 1 January 2017. This had a positive impact on the measurement result from the properties of the portfolio which, with a measurement gain of €1.7 million in the fiscal year 2016, was up considerably on the previous-year figure. In 2015, a measurement loss of €2.8 million had been recorded.

At €15.5 million, the operating result (EBIT) of the Fair Value Group in 2016 exceeded the previous-year figure of €12.3 million by 26%. The increase in earnings of €3.3 million was achieved despite a fall in net rental income. This resulted from an increase of €2.8 million in the balance of disposal and measurement gains and losses as well as other operating income and expenses in addition to a decrease in general administrative expenses.

Rental income within the Fair Value Group totalling €22.5 million in 2016 fell around 7% short of the previous-year fi gure of €24.3 million due to sales and vacancies. At €16.1 million, adjusted net rental income was down 9% on the previous-year level of €17.7 million.

At €3.4 million, net interest expenses were 19% below the previous-year figure of €4.2 million, largely due to repayments. Deducting the share of profi t/loss attributable to non-controlling interests generated a group net profi t of €6.9 million compared to €6.6 million in the previous year. This corresponds to a group net profi t of €0.49 per share currently outstanding (previous year basic: €0.53).

At €10.4 million, group net profi t adjusted for measurement eff ects and non-recurring effects (EPRA result or FFO = funds from operations) was up slightly on the previous-year figure of €10.3 million. Aft er non-controlling interests, FFO amounted to €6.3 million (previous year: €6.4 million). This figure is within the expected range of between €6.2 million and €6.5 million and corresponds to an adjusted group net profit of €0.45 per share currently outstanding.

 

Group equity attributable to the shareholders of Fair Value REIT-AG as of 31 December 2016 increased to €120.6 million and was thus 3% above the previous-year fi gure of €117.3 million. This corresponds to a net asset value of €8.60 for each share currently outstanding, compared to €8.36 as of the end of the previous year.

 

As of the reporting date, the REIT equity ratio increased to 62.7% of property assets (previous year: 59.6%) and was therefore considerably above the legally prescribed 45% minimum.

 

The past fiscal year 2016 was thus highly satisfactory. On account of the increase in net profi t for the year according to German GAAP, we will propose to the Annual General Meeting to distribute a dividend of €0.40 per share for fi scal year 2016, that is around €5.6 million. This proposed dividend corresponds to a distribution rate of around 91% of the net profi t for the year pursuant to German GAAP.

Outlook for 2017

Based on the existing portfolio, we expect funds from operations (FFO) before non-controlling interests of €9.6 million to €10.2 million for 2017. Without a further increase in the share of properties directly held by the group and a concomitant decrease in the non-controlling interests in group earnings, we expect FFO aft er non-controlling interests to range between €6.1 million and €6.4 million in 2017. This corresponds to FFO of between €0.43 and €0.46 per share currently outstanding. The target dividend for 2017 is €0.25 per share for all shares currently outstanding. This corresponds to a distribution rate of 55% to 57% of FFO.

 

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