Ad-hoc Disclosures

05/03/2009 | Ad-hoc Disclosure

Fair Value REIT-AG publishes preliminary results for 2008

  • Consolidated operating results of € 5.9 million before valuation result and extraordinary factors
  • Consolidated net loss of € 13.1 million (IFRS)
  • NAV per share of € 8.16
  • Funds from operations (FFO) amount to € 18.4 million
  • No dividend distribution for 2008 due to set-up of a re-investment reserve on profits from sale

Munich, March 5, 2009 – Fair Value REIT-AG recorded consolidated operating results of € 5.9 million in fiscal year 2008 according to preliminary figures. This amount is before the consideration of other operating income, the valuation result and the market valuation of interest derivatives. The income, which is substantially higher than forecasted, is primarily due to profits from the sale of investment properties.

During the past fiscal year, the proportionate rental income for Fair Value from the Direct Investments and Participation business segments totaled € 21.7 million. Of this amount, € 3.4 million is due to directly held properties. A further € 18.3 million is due to participating interests in properties held in a total of thirteen closed-end real estate funds.

In line with the real estate valuation on December 31, 2008, the proportionate market values for the entire portfolio fell by € 29.3 million to € 244.5 million, in a year-on-year comparison (like for like). Taking other operating income from a compensation payment for the premature termination of a rental agreement in one of Fair Value's subsidiaries into account, the proportionate valuation loss fell, on balance, to € 17.5 million or 6.4% in a year-on-year comparison.

The market valuation of interest derivatives on the balance sheet date resulted in a proportionate downturn of € 6.2 million in the corresponding item due to the lower market interest rates. Of this total a proportionate € 1.5 million was recognized in income and € 4.7 million was taken directly to equity.

In total, Fair Value REIT-AG thus recorded a consolidated net loss (IFRS) of € 13.1 million in fiscal year 2008. A year-on-year comparison is not meaningful, as the company only commenced its operating activities at the start of the fourth quarter of 2007.

In the company's single entity statements according to German GAAP (HGB), the proceeds from the participating interests were only partially recognized in income in the amount of the profits disbursed for the period from October 1, 2007. Correspondingly, the market-price valuation of the properties on the balance sheet date also led to reductions in the carrying amounts of individual participating interests. The set-up of a re-investment reserve on parts of the profits from the sale of the office property in Düsseldorf resulted in a slight loss for the year, with the result that the company will not pay a dividend for the fiscal year 2008.

Consolidated total assets amounted to € 198 million (previous year: € 230 million) and equity on the balance sheet date totaled € 76.8 million. This corresponds to a net asset value per share of € 8.16. According to Section 15 of the German REIT Act, equity increases to around € 93 million as a result of the inclusion of minority interests, and thus corresponds to 52% of immoveable assets.

During the period under review, Fair Value REIT-AG recorded a cash flow from operating activities (Funds from Operations) of € 18.4 million. The Group's cash totaled approximately € 14 million, and were thus up by € 8.7 million compared to the previous year's figure of € 5.4 million.

While the average term of Fair Value REIT-AG’s proportionate share of the financial liabilities sums up to around 5 years, 91% of the loan volume has already been agreed on long-term. In 2009, only 9% of the total loan volume is due for renewal. Fixed interest-rate agreements have been entered into 83% of Fair Value REIT-AG’s proportionate liabilities. Of this total, around half is hedged with derivative interest rate hedges, and traditional fixed-interest contracts have been concluded for the remainder. Interest rates have been fixed for a weighted residual period of 5.9 years, with 73% having a term of more than 5 years. The weighted interest rate for the fixed-interest-rate agreements is 6.10% per year.

The final figures will be published together with the 2008 annual report on March 31, 2009

<End of ad hoc disclosure>

Information on Fair Value for this ad hoc disclosure

Fair Value REIT-AG's operating business has progressed well in a difficult environment, and consolidated earnings adjusted for valuations and other operating income totaled € 5.9 million, surpassing the company's forecast. In addition to net rental income, the sale of the "Airport Office II" property in Düsseldorf made a positive contribution to earnings.

Fair Values share of the total portfolio is 95% let and valuation losses on this proportionate portfolio totaled 6.4% of the comparable previous year's figure, thus reflecting the changed economic situation. At the same time, the company had partly expected the valuation result, as the present value of rental agreements which are above the market level for some of the properties in the portfolio decreases over time by its very nature. The changes in value mostly result from the higher discount and capitalization interest rates compared to the previous year as used by the surveyor. As a result, the valuation losses are due to the current situation on the capital markets and are not due to the operating activities. In total, it can be stated that the market values of the Fair Value portfolio have remained comparatively stable.

At the same time, the strong downturn in the prime rate has depressed the market values of the contracted interest derivatives. This applies irrespective of the fact that the low interest rates when concluding new financing are, at least at present, not making their way through to investors, as banks are passing on their own refinancing costs and higher margins to customers. Irrespective of this, it can be concluded that the market value of interest derivatives, which has had a negative impact to the tune of € 6.2 million, will be at the latest compensated for when the contracts expire, thus having a correspondingly positive impact on balance-sheet equity.

For reasons of prudence, the reductions in value for individual properties thus identified have been categorized as being sustained, in particular for the properties with rents higher than market prices. Special write-downs were thus necessary according to German GAAP (HGB) at some of the participating companies. As a result of this, and due to scheduled depreciation of the properties, there were losses (HGB) in 2007 and 2008 at some of the companies with the result that disbursements from these participating companies could not be recognized in income, but rather that these reduced the carrying amounts of the participations. In addition, parts of the profits from the sale of "Airport Office II" was booked to the reinvestment reserve within the meaning of Section 13 of the German REIT Act. This gives the company additional financial latitude, allowing it to react flexibly to future changes on the market. The valuation of the properties and the formation of reserves thus led to a slight loss (HGB). As the HGB annual financial statements are the determining factor for dividend payments, no dividend will be paid for the past fiscal year.

Frank Schaich, Fair Value REIT-AG's CEO, explains the 2008 earnings: "We fared well in the face of the turbulence during the past few months. Our company's operations enjoyed positive growth – this is underscored by our cash flow from operating activities of € 18.4 million. Fair Value has a high level of equity and our refinancing structure is solid. We will only have to extend a minor proportion of our liabilities during the current fiscal year.” As a result, the CEO believes that the company is well positioned. "In addition, we also have a high level of cash and cash equivalents, and thus have the latitude to secure our pending follow-on financing and for select investments."


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A REIT – Higher Return for Investors

REIT stands for Real Estate Investment Trust. The assets of these listed companies in Germany consist mainly of real estate and investments in other real estate companies.


At the international level, REITs have been established for many years. On 1 January 2007, they were introduced in Germany as well.


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Fair Value REIT-AG