Annual Reports

Letter to shareholders

The operating result of the Fair Value Group in the financial year 2012 came in around 8% up on our forecast. We also increased the occupancy rate of our portfolio and further boosted the equity ratio. In addition, we were able to substantially exceed the most recently determined market value in five of seven property sales. Retained earnings pursuant to the German Commercial Code were recorded at around €1 million, some 30% up on the previous year. This allows us to distribute a dividend of €0.10 per share for 2012.

Financial year 2012: FFO up, valuation result impacts consolidated net income

Consolidated net income adjusted for valuation effects (FFO Funds from Operations) of €5.6 million or €0.60 per share was around 2% up on the previous year figure of €5.5 million and exceeded our most recently increased forecast of €5.2 million from August 2012 by 8%.

In contrast, IFRS consolidated net income came in at €1.2 million, around €3.4 million down on previous year figure of €4.6 million. Around two thirds of the fall resulted from a valuation loss of some properties and from a voluntary change of the accounting method, which also led to adjustments in the figures of previous years. The remaining third of this reduction is largely attributable to increased rental costs and changes to the market values of interest rate derivatives recognised in profit or loss.

The fall in the property valuation mainly relates to two propertie at the associated companies, where reletting costs after termination of long term general leases are coming up. Adjusted for both these properties, there was a slight valuation gain of 0.4% proportionate to Fair Value. The Group balance sheet equity ratio rose from 40% in the previous year to 42% of total assets. On the balance sheet date, the REIT equity ratio came in at 52.6% of real estate assets after 50.7% in the previous year, substantially higher than the legally required minimum level of 45%. Net asset value per share rose slightly from €8.25 (adjusted figure for the previous year) to €8.30 on the balance sheet date.

Net income pursuant to HGB rises sharply

Net income for 2012 pursuant to HGB came in at €1.1 million, around 50% up on the €0.7 million reported in the previous year. After establishment of a reinvestment reserve in line with Section 13 REITG totalling 50% of capital gains after sales costs, retained earnings of arount €1 million were reported. At the Annual General Meeting on May 16, 2013, we will therefore propose distributing a dividend of €0.10 per share from the retained earnings of Fair Value REIT-AG for the year 2012.

Stable FFO and higher dividends forecast for 2013 and 2014

Our forecast for 2013 and 2014 includes sales of several properties within the Group and at the associated companies. As part of this we initially intend to use most of the proceeds from the sales for the repayment of loans and therefore for further strengthening the Group's equity base. This in turn will give us scope for future investments.

For 2013, we are expecting FFO of €5.3 million or €0.57 per share, with this figure rising to €5.6 million or €0.60 per share in 2014. We are also anticipating commercial net income for 2013 and 2014 which would allow a dividend payment of €0.12 per share.

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