Annual Report • Mar 31, 2017
Annual Report
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| Revenue and earnings | 2016 | 2015 | |
|---|---|---|---|
| Rental income | in € thousand | 22,542 | 24,291 |
| Net rental result | in € thousand | 16,088 | 17,726 |
| Operating result (EBIT) | in € thousand | 15,520 | 12,282 |
| Group net profi t | in € thousand | 6,909 | 6,585 |
| Earnings per share (basic/diluted)1) | in € | 0.49/0.49 | 0.53/0.52 |
| Adjusted group net profi t (EPRA-Earnings)/FFO | in € thousand | 6,313 | 6,406 |
| EPRA-earnings/FFO per share (basic/diluted)1) | in € | 0.45/0.45 | 0.52/0.51 |
| Assets and capital | 31/12/2016 | 31/12/2015 | |
|---|---|---|---|
| Non-current assets | in € thousand | 296,907 | 296,914 |
| Current assets | in € thousand | 21,237 | 21,702 |
| Non-current assets available for sale | in € thousand | 3,600 | 11,750 |
| Total assets | in € thousand | 321,744 | 330,366 |
| Equity/Net asset value (NAV) | in € thousand | 120,590 | 117,278 |
| Equity ratio | in % | 37.5 | 35.5 |
| Immovable assets | in € thousand | 290,542 | 299,544 |
| Equity within the meaning of Sec. 15 REITG | in € thousand | 182,298 | 178,438 |
| Equity ratio within the meaning of Sec. 15 REITG (minimum 45%) | in % | 62.7 | 59.6 |
| 31/12/2015 | |
|---|---|
| 40 | |
| 300 | |
| 23.1 | |
| 26.0 | |
| 89.2 | |
| 4.9 | |
| 7.7 | |
| 31/12/2016 33 291 21.8 24.0 90.6 5.2 7.5 |
Weighted average number of shares outstanding in 2016: 14,029,013 basic /diluted Weighted average number of shares outstanding 2015: 12.379.587 basic / 13.265.505 diluted
| Further key fi gures | |||
|---|---|---|---|
| 31/12/2016 | 31/12/2015 | ||
| Number of shares outstanding | in pieces | 14,029,013 | 14,029,013 |
| Net asset value (NAV) per share | in € | 8.60 | 8.36 |
| EPRA-NAV per share | in € | 8.60 | 8.36 |
| Number of employees (excluding Management Board) | 3 | 3 |
97 Declaration by legal representatives 98 Audit opinion
In the past fi scal year 2016, we successfully continued with our strategic portfolio streamlining, saw positive developments in the rental sector and achieved our operating (FFO) targets.
Frank Schaich Patrick Kaiser
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. At er 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 fi scal year 2016, was up considerably on the previous-year fi gure. 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 fi gure 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 fi gure 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 ef ects and non-recurring ef ects (EPRA result or FFO = funds from operations) was up slightly on the previous-year fi gure of €10.3 million. At er non-controlling interests, FFO amounted to €6.3 million (previous year: €6.4 million). This fi gure is within the expected range of between €6.2 million and €6.5 million and corresponds to an adjusted group net profi t 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 fi scal 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.
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 at 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.
May we take this opportunity to thank you for the trust you have placed in Fair Value REIT-AG and hope we can count on your continuing support.
Graefelfi ng, 30 March 2017
The Management Board
Frank Schaich Patrick Kaiser
REIT stands for Real Estate Investment Trust. REITs are well established in many countries worldwide and represent a widely recognised form of indirect property investment. In Germany, they consist of listes companies that largely invest in property as well as in property participations.
REIT shares can be rapidly and easily bought and resold on the stock exchange.
German REITs have a payout ratio fi xed by law of at least 90% of the net income according to German commercial law.
German REITs are not subject to corporation tax and trade tax. Only the dividends are taxable at shareholder level, and even then at a maximum tax rate of 25% plus Solidarity surcharge. Companies and non-resident shareholders can, under certain conditions, limit the tax rate to 15%.
German REITs have to show an equity ratio of 45% of their real estate assets on each balance sheet date.
Fair Value REIT-AG invests in German commercial properties, focusing on retail and o ce property in secondary locations. These locations of er more stable development in rent and value in the long term than property markets in prime locations that experience shows react more strongly to economic cycles.
As of 31 December 2016, the directly and indirectly owned portfolio comprised 33 properties (previous year: 40 properties) with market values totalling around €291 million (previous year: €300 million). The €9 million decrease on the previous year is due to the sale of seven properties for previous year market values totalling €19 million and from valuation gains of the portfolio as of 31 December 2016 totalling €10 million.
| Portfolio overview as of 31 December 2016 |
Market | secured remaining |
Share of Fair Value REIT-AG |
|||||
|---|---|---|---|---|---|---|---|---|
| Direct investments and participations | Number of properties |
Total lettable area [in m2 ] |
Annualised contractual rent [in T€] |
value as of 31/12/2016 [in T€] |
Occupancy rate [in %] |
term of rental agreements [in yrs] |
Contractual rental yield before costs [in %] |
Investment [in %] |
| Direct investments segment | 16 | 72,615 | 5,143 | 64,650 | 96.3 | 6.7 | 8.0 | 100.0 |
| Subsidiaries segment | 17 | 181,651 | 16,651 | 225,892 | 89.0 | 4.8 | 7.4 | 51.0 |
| Overall portfolio | 33 | 254,266 | 21,794 | 290,542 | 90.6 | 5.2 | 7.5 | 61.9 |
The market values of the properties as of 31 December 2016 were up by €10 million, or 3.6%, on the like-for-like previous-year fi gures. At er deducting the capitalised investment in improving the value of the properties, the measurement result recognised through profi t or loss amounts to €1.8 million.
As of 1 January 2017, the overall portfolio generated around 55% of the total potential rents of €24.0 million with properties that are used primarily for retail purposes. Around 37% of potential rents is generated with properties that are used primarily as o ces, 8% by other usage.
With regard to the overall portfolio, the Company continues to aim to gradually gain direct ownership of properties held by subsidiaries or in individual cases to sell them as best possible. This allows the noncontrolling interests in subsidiaries to be compensated and costs to be reduced following the successive liquidation of the subsidiaries.
When investing in the future, the Company will continue to focus on secondary locations in Germany.
The Fair Value Group continued to benefi t from its quality and substance in the fi scal year 2016. The occupancy rate again increased by around 2 percentage points, thus following on from the high fi gures of previous years. The weighted remaining lease term also increased again to over 5 years.
At the beginning of the past fi scal year 2016, with an occupancy rate of around 89.2% of potential rents, 275 leases accounting for around 29% of the total contractual rental volume were due for renewal. The occupancy rate was expanded further by extending leases and through new lets despite selling seven buildings during the year, most of which were let in full.
This put the occupancy rate of Fair Value REIT-AG's overall portfolio at 90.6% of the potential rents of €24.0 million as of the beginning of 2017. The weighted remaining lease term, which increased to 5.2 years on the previous year, is a further indication of the portfolio's quality in terms of properties and location.
At er including, on a pro forma basis, those lease agreements already entered into on 1 January 2017 or vacancies that are yet to be handed over to the tenants, the profi t-weighted occupancy rate of the portfolio as of 1 January 2017 stood at €22.4 million or 93% of potential rents.
Of the current 513 leases in the overall portfolio, a total of 62 leases are due for renewal in the current fi scal year 2017. They represent a roughly 9% share of the contractual rents of €21.8 million as of 1 January 2017.
The ten largest tenants in the portfolio account for around 50% of the Fair Value Group's contractual rents. At around 19%, large retail companies such as REWE, EDEKA, Kaufl and and Metro make up the largest share of contractual rents. Bank tenants (Sparkasse Südholstein, Commerzbank Group) come in second, accounting for around 15%.
Share prices on the German stock markets were shaped by stronger fl uctuations in 2016, with signifi cant drops recorded in February and June 2016 in particular. Weak economic data from China as well as the UK's decision to leave the EU, among other factors, dampened investor sentiment. Nevertheless, the German indices developed positively for the year as a whole. At year-end 2016, the DAX, Germany's leading share index comprising the 30 largest companies in Germany, was just under 7% above the level seen at the end of December 2015. The MDAX also increased by almost 7%. The SDAX, for smaller stocks, managed an increase of 4.6%.
The performance of the Fair Value REIT-AG share was also volatile in 2016. At er reaching its high for the year of €7.48 on 4 July 2016, the day of the Annual General Meeting, the Fair Value share came under pressure over the remaining course of the year, recording its low for the year of €6.11 on 6 December 2016. As of year-end 2016, the share price in the electronic trading system Xetra was down 10.5% on the previous year at €6.31. However, the price recovered signifi cantly at er the end of the reporting period, hovering around the €7.00 mark from mid-January 2017.
On average, a good 3,400 Fair Value shares were traded per day on all German stock exchanges, of which just under 96% related to the electronic trading system Xetra.
At the Annual General Meeting held in Munich on 4 July 2016, Prof. Andreas Steyer and Markus Drews were appointed as members of the Management Board by the shareholders present with a majority of more than 99%. They had previously been appointed as members of the board by court order ef ective 1 March 2016 at er Prof. Dr. Heinz Rehkugler and Dr. Oscar Kienzle had resigned from their positions on the Supervisory Board. All other points on the agenda were also approved with a majority of more than 99%. This also included the creation of new conditional capital 2016 by up to €14,110,323.00 by issuing up to 7,055,161 new bearer shares. Among the resolutions was also a decision to pay out a dividend of €0.25 per share for the fi scal year 2015.
On 31 October 2016, Fair Value REIT-AG announced that the former sole Management Board member, Frank Schaich, would be resigning from the Management Board as of 31 March 2017, leaving the Company on the best of terms with the Supervisory Board. As of 1 November 2016, the Supervisory Board appointed Patrick Kaiser as an additional member of the Management Board for three years. He has since taken over the role of CFO of Fair Value REIT-AG.
FVR Beteiligungsgesellschat Erste mbH <10%, FVR Beteiligungsgesellschat Zweite mbH <10%, FVR Beteiligungsgesellschat Dritte mbH <10%, FVR Beteiligungsgesellschat Vierte mbH <10%, FVR Beteiligungsgesellschat Fünt e mbH <10%, FVR Beteiligungsgesellschat Sechste mbH <10%, FVR Beteiligungsgesellschat Siebente mbH <10%, FVR Beteiligungsgesellschat Achte mbH <10%
2) According to Free-Float defi nition of Deutsche Börse AG (shareholding <5%)
| Fair Value REIT-AG's share | 2016 |
|---|---|
| Sector | Real Estate (REIT) |
| WKN (German Securities Code)/ISIN | A0MW97/DE000A0MW975 |
| Stock symbol | FVI |
| Share capital | €28,220,646.00 |
| Number of shares (non-par value shares) | 14,110,323 pcs. |
| Proportion per share in the share capital | €2.00 |
| Initial listing | 16 November 2007 |
| High/low 2016 (XETRA) | €7.48 / €6.11 |
| Market capitalization as of 31 December 2016 (XETRA) | €89 million |
| Market segment | Prime Standard |
| Stock exchanges Prime Standard | Frankfurt, XETRA |
| Stock exchanges OTC | Stuttgart, Berlin-Bremen, Düsseldorf, Munich |
| Designated sponsor | ODDO SEYDLER Bank |
| Indices | RX REIT All Shares-Index, RX REIT Index |
Contact with investors, analysts and journalists was again intensively maintained in the past fi scal year 2016. The Management Board of Fair Value REIT-AG was, for instance, represented at important capital market conferences like the German Equity Forum. The business model and perspectives of the Company were also explained in more detail during roadshows.
Fair Value REIT-AG provides information on the Company, the portfolio and business development on its website www.fvreit.de. Moreover, the Company announces details on business development in ad-hoc announcements and press releases and publishes annual and semi-annual reports as well as quarterly statements.
Research reports by analysts can also be accessed on the www.fvreit.de website in the "Investor relations" section.
Fair Value REIT-AG (hereinat er also referred to as Fair Value) is headquartered in Gräfelfi ng in the Munich district and does not have any branch o ces. As a listed property investor, the Company satisfi es the provisions of the REITG ["Gesetz über deutsche Immobilienaktiengesellschat en mit börsennotierten Anteilen": German REIT Act] and is exempt from corporation and trade tax.
For the Company to be exempt from these taxes it must comply with certain legal and capital-related provisions. These are primarily aimed at the sustainable management of a mainly commercial real estate portfolio and are intended to enable distributions to be continuously made to the shareholders.
These distributions must amount to at least 90% of the Company's net profi t for the year pursuant to German GAAP (HGB). They are taxed at the shareholder level, with a fl at tax rate that is currently at a maximum of 25% plus solidarity surcharge being applied.
Proof that the legal provisions have been complied with must be provided as of the end of the reporting period and confi rmed by the auditor. Confi rmation by the auditor relates to declarations made by the Management Board to comply with the requirements of Secs. 11 and 13 at the level of Fair Value REIT-AG (distribution of shares and minimum distribution) as well as Secs. 12, 14 and 15 (net assets and income requirements, exclusion of real estate trading and proof of minimum equity) at group level. As in previous years, Fair Value REIT-AG again fulfi lled all requirements of the REIT law as of 31 December 2016.
| Requirements of the REIT Act | Actual volume Fair value |
|||||
|---|---|---|---|---|---|---|
| REIT-G | Criterion | Requirement | 31/12/2016 | 31/12/2015 | ||
| Sec. 11 | Free fl oat – separate fi nancial statements 1) | Min. 15% | 21.7 % | 21.7 % | ||
| Sec. 12, para. 2 a | Capital requirements – Group | Min. 75% | 91.9 % | 90.7 % | ||
| Sec. 12, para. 3 a | Income requirements – Group | Min. 75% | 100.0 % | 100.0 % | ||
| Sec. 13 | Minimum distribution to shareholders – separate fi nancial statements |
Min. 90% | 91.0 % | n/a²) | ||
| Sec. 14 | Exclusion of real estate trading – Group | Max. 50% | 34.9 % | 31.3 % | ||
| Sec. 15 | Minimum equity – Group | Min. 45% | 62.7 % | 59.6 % |
1) Free fl oat pursuant to Secs. 22 and 23 WpHG ["Wertpapierhandelsgesetz": German Securities Trading Act]
2) In 2016 the accumulated profi t pursuant to HGB for fi scal year 2015 was fully distributed.
The Fair Value Group concentrates on the acquisition and management of commercial property in Germany. Its investing activities focus on retail and o ce property in secondary and regional locations. Fair Value invests directly in real estate as well as indirectly via investments in real estate partnerships and actively manages its portfolio.
Non-strategic operating functions such as accounting as well as commercial and technical property management are outsourced to external service providers, which receive partly fi xed and partly performance-based variable remuneration for their services.
Taking into account the trade limitations of the REITG, the strategy also encompasses the targeted sales of individual portfolio properties, with particular focus on smaller properties and non-strategic real estate. The successive liquidation of subsidiaries is intended to save on investment-related administrative expenses and further expand the share of directly owned properties in the overall portfolio.
As of 31 December 2016, the directly and indirectly owned portfolio comprised 33 properties (previous year: 40 properties) with market values totalling around €291 million (previous year: €300 million).
The €9 million decrease on the previous year is due to the disposal of seven properties with previous-year market values totalling €19 million and from valuation gains/additions as part of construction measures in the portfolio as of 31 December 2016 totalling €10 million.
The contractual rent volume of the overall portfolio came to €21.8 million as of 1 January 2017 with a weighted remaining lease term of 5.2 years; this corresponds to a profi t-weighted occupancy rate of 90.6% of potential rents with full occupancy of €24.0 million (previous year like-for-like: 88.5% of potential rents with full occupancy of €24.4 million).
At er including, on a pro forma basis, those lease agreements already entered into on 1 January 2017 for vacancies that are yet to be handed over to the tenants, the profi t-weighted occupancy rate of the portfolio as of 1 January 2017 would come to €22.4 million or 93% of potential rents.
Direct investments As of the reporting date, the Company directly owns 16 commercial properties (previous year: 17 properties) with a total rentable space of 72,615 m² (previous year: 71,251 m²). The decrease resulted from the disposal of three properties that were largely used as bank branches in Schleswig-Holstein (Bornhoeved, Neumuenster, Tornesch) and the acquisition of direct ownership of two properties previously held by the subsidiary BBV 06 (Meschede and Waltrop).
The market values of the directly owned properties were determined by an expert at around €64.7 million in total as of the reporting date, slightly below the like-for-like previous-year fi gure of €65.0 million.
The total contractual rent volume of these properties came to €5.1 million as of 1 January 2017 with a weighted remaining lease term of 6.7 years; this corresponds to a profi t-weighted occupancy rate of 96.3% of potential rents with full occupancy of €5.3 million (previous year like-for-like: 95.8% of potential rents with full occupancy of €5.3 million).
Subsidiaries Fair Value REIT-AG holds interests in a total of 15 subsidiaries, of which eight companies are property-holding partnerships (previous year: 10), fi ve companies are management partnerships without any direct property holding. One subsidiary is the general partner GmbH (limited liability company) in the BBV management partnerships and in the IC Fonds KGs (see the consolidated fi nancial statements note 2).
The subsidiaries held 17 properties as of the reporting date (previous year: 23). The decrease arises from the sale of fi ve properties by the subsidiary BBV 06, in two of which Fair Value REIT-AG acquired direct ownership. The market values of the properties held by the subsidiaries totalling €225.9 million as of 31 December 2016 were up on balance by €10.4 million or 4.8% on the like-for-like previous-year fi gure of €215.5 million in total.
The increase in value is the balance of measurement losses totalling €1.0 million with six properties and measurement gains totalling €11.3 million with 11 properties. For two of these 11 properties, namely in Eisenhuettenstadt and Zittau, the measurement gains totalling €8.0 million were counterbalanced by costs capitalised in connection with renewals of approximately the same amount, with the recognition of the measurement result through profi t or loss being reduced in the consolidated statement of income. The measurement gain of €2.1 million for the property in Quickborn resulted from extending the rental agreement in place with the anchor tenant for a further fi ve years.
The contractual rents of the properties held by the subsidiaries as of 1 January 2017 totalling €16.7 million were up slightly on the like-for-like previous-year fi gure of €16.5 million. This corresponds to a profi t-weighted occupancy rate of 89.0% of potential rents with full occupancy of €18.7 million (previous year like-for-like: 86.4% with full occupancy of €19.1 million).
Fair Value REIT-AG pursues a sustainable dividend policy and strives to pay out dividends that fulfi l the legal provision of at least 90% of net profi t under the German commercial law as well as at least 50% of the adjusted profi t/loss of the Group (EPRA earnings/funds from operations (FFO)).
The dividend potential of the Group is to be secured and expanded in the long term with successive reduction of external administrative levels at the indirectly held properties.
Given this goal, free cash available for investments are to be used by the Company to further increase existing investments and expand the portfolio of directly held properties. This allows the non-controlling interests within the Group and also costs to be reduced as a result of the successive liquidation of subsidiaries.
When investing in the future, the Company will continue to focus on secondary locations in Germany.
Fair Value REIT-AG is managed autonomously by the Management Board. The Management Board currently consists of two persons – Frank Schaich and Patrick Kaiser.
Frank Schaich has more than 30 years' experience in the acquisition, portfolio management and sale of commercial properties in Germany, North America and the Netherlands and participations in closed-end real estate funds. On 31 October 2016, Frank Schaich resigned from the Management Board ef ective 31 March 2017. He is leaving the Company on the best of terms with the Supervisory Board of the Company in order to devote himself to new tasks in future. The resignation is connected with Mr. Schaich resigning from the Management Board of the majority shareholder DEMIRE Deutsche Mittelstand Real Estate AG, Frankfurt am Main (DEMIRE), ef ective 31 October 2016.
Mr. Kaiser was appointed as an additional member of the Management Board of the Company for three years ef ective 1 November 2016. At the same time, Mr. Kaiser is commercial director and authorised signatory of DEMIRE as well as general manager of DEMIRE Immobilien Management GmbH and DEMIRE Einkauf GmbH. Mr. Kaiser has many years' experience heading the fi nancial departments of listed groups.
The main responsibilities of the Company's management are the strategic management of the Company and its participations and real estate portfolio, risk management, fi nancial reporting and investor relations. Moreover, the Company performs the function of general partner and therefore has management functions in all property-holding participations via its subsidiaries.
The Management Board works closely with the Supervisory Board and the latter is involved in all important decisions. The Supervisory Board has three members in accordance with its articles of incorporation.
Information on the remuneration system of the Management Board and Supervisory Board is provided in this group management report, in the notes to the consolidated fi nancial statements (note 31) as well as in the corporate governance statement pursuant to Sec 289 a HGB ["Handelsgesetzbuch": German Commercial Code]. The declaration concerning the German Corporate Governance Code in accordance with Sec. 161 AktG ["Aktiengesetz": German Stock Corporations Act] can also be downloaded from the Investor Relations/Corporate Governance section of the Company's website www.fvreit.de.
In the past fi scal year, accounting and property management functions were carried out via service agreements by IC Immobilien Service GmbH based in Munich. Since 1 January 2017, the real estate portfolio directly held by the Company has been managed by DEMIRE Immobilien Management GmbH based in Berlin. The indirectly held real estate portfolio as well as the accounting of the Company, the Group and investments continue to be carried out by IC Immobilien Service GmbH.
Fair Value REIT-AG's internal management system is based on rolling fi ve-year forecasts for the individual properties in the directly and indirectly held real estate portfolio.
At least every quarter, the Company obtains information in accordance with its specifi cations about all the directly and indirectly held properties. The reports contain information about important, contractually relevant incidents or incidents that deviate from plans and strategy. Important performance indicators in this respect are net rental income, current management costs as well as maintenance costs and capital expenditures.
At group level, property and company information is aggregated including Fair Value's overhead costs and fi nancing expenses. Planning fi gures from the forecast report are also published for the EPRA earnings/funds from operations.
In view of the business activities of the Group, which focus on property management and property portfolio services, the Group does not dedicate any if its own resources to research and development activities.
Group management report Basic group information Economic report
The German economy continued its moderate upswing in the fi scal year 2016. At 43.5 million, the number of persons employed again slightly exceeded the record fi gure of many years since in the previous year. The annual infl ation rate increased marginally by 0.5%. In the commercial letting markets, the o ce segment saw a signifi cant rise in space turnover and rising rents; in the retail segment, there was a sideways movement at a high level. In the investment market, a transaction volume of €53 billion was generated with commercial property in Germany, just short of the revenue record of €55 billion from the previous year.
Sources: German Federal Statistics O ce, Deutsche Bundesbank, German Federal Ministry of Economics and Energy, German Federal Employment Agency
In 2016, gross domestic product (GDP) (adjusted for price ef ects) increased by 1.9% following 1.7% in the previous year. As in the previous year, this development was driven by higher private consumer spending as well as construction output. As in the previous year, foreign trade's share of growth was in decline.
Consumer prices in 2016 increased by an average of 0.5% on the previous year. The price increase was again up on the very low previous-year level of 0.3%, which was largely shaped by falling energy prices. Without taking the development of energy prices into account, the annual infl ation rate was 1.2% in 2016 (previous year: 1.1%).
Given the good economic development, the labour market continued to develop very positively. According to preliminary fi gures, the annual average number of persons in gainful employment increased to 43.5 million, again manifesting the long-standing upward trend. An average of 2.7 million persons were registered as unemployed in 2016, a 3.7% decrease in comparison to the previous year. The unemployment rate thus dropped by 0.3 percentage points to 6.1%.
Source: Jones Lang LaSalle
The rental market Oi ce space O ce space turnover on the seven large German o ce letting markets1) signifi cantly increased to a total volume of 3.9 million m² in fi scal year 2016, an increase of around 9% on the previous year. Prime rents in fi scal year 2016 increased in almost every major city, stagnating only in Cologne. The prime rent price index in the "Big 7"1) actually rose by 4.6%, the biggest increase since 2007.
The average vacancy rate of the "Big 7"1) fell to 5.5% over the course of 2016 compared to 6.4% in the previous year. At the same time, a total of about 1.1 million m² new o ce space was completed during the year, which corresponded to a 28% increase in comparison to the previous year. However, 83% of this space was already let at the time of completion, which is an indicator of just how rigorous demand is in the o ce segment.
1) Berlin, Düsseldorf, Frankfurt/Main, Hamburg, Cologne, Munich, Stuttgart
Retail space In line with the good economic environment, there was steady space turnover of around 483,300 m² on the retail property market in fi scal year 2016. Although this was 7% less than in the previous year, the number of transactions closed (1,070) matched the previous-year level. A trend is thus emerging toward small and medium-sized areas.
Retail textile tenants remained the strongest sector, although its share fell to 33% of total space turnover in 2016 compared to 37% in the previous year and 40% in 2014. The gastronomy/food industry remained steady, settling at around 20% over the past fi ve years. By contrast, the health and beauty retail segment increased its share considerably to 15% of total space turnover in 2016 compared to 10% in the previous year and remained the third-strongest sector. Prime rents in the 1a commercial locations in the 185 locations analysed across Germany lost much of their momentum in the past fi scal year, seeing an increase of a mere 0.1% compared to 1.2% in the previous year.
The investment market The German investment market for commercial property recorded a total transaction volume of around €53 billion in 2016, falling only 4% short of the record revenue level of €55 billion seen in the previous year. Around 45% of the transaction volume relates to o ce property, following 41% in the previous year. Retail property ranked second with a share of 23%, following 31% in the previous year. The remaining shares are largely spread among hotel and warehouse/logistic properties (around 9% each), while mixed-use properties had a share of 6% compared to 10% in the previous year with special-purpose properties, such as care and retirement homes, accounting for the rest.
Refl ecting the rise in demand for commercial property, net present values rose signifi cantly not only in the prime locations but also increasingly in the secondary locations and for properties with partial vacancies or shorter remaining terms.
In the past fi scal year 2016, Fair Value REIT-AG successfully continued with its strategic portfolio streamlining, generated positive developments in the rental sector and largely achieved its operating (FFO) targets.
As a result, as of 31 December 2016, the occupancy rate of the portfolio stood at 90.6% of potential rents following 88.5% (like-for-like) at the end of the previous year. The average remaining lease term as of the reporting date increased to 5.2 years compared to 4.9 years at the end of the previous year. At er including, on a pro forma basis, lease agreements already entered into for space still to be handed over, the occupancy rate again stood at around 93% of potential rents as of 1 January 2017.
As of 31 December 2016, the directly and indirectly owned portfolio represented 33 properties with an aggregate market value of around €291 million (previous year: 40 properties with market values totalling €300 million). The €9 million decrease in the portfolio volume on the previous year is due to the disposal of seven non-strategic properties for previous-year market values totalling €19 million and from valuation gains of the portfolio as of 31 December 2016 totalling €10 million.
These valuation gains primarily resulted from the successful lets of the properties in Eisenhüttenstadt, Quickborn and Zittau. Deducting the capitalised fi t-out costs for the properties in Eisenhüttenstadt and Zittau let a measurement gain of €1.8 million (previous-year loss: €2.8 million).
At €3.4 million, net interest expenses were down €0.8 million (19%) on the previous-year fi gure of €4.2 million. This was mainly attributable to (unscheduled) repayments of fi nancial liabilities.
Overall, at er deducting the share of profi t/loss attributable to non-controlling interests, this resulted in a group net profi t of €6.9 million (previous year: €6.6 million).
As of the reporting date, group equity amounted to €120.6 million (previous year: €117.3 million) or €8.60 for each share currently outstanding (previous year: €8.36). Total assets decreased as of the reporting date 2016 to €321.7 million compared to €330.4 million in the previous year, thus causing the equity ratio as of 31 December 2016 to increase to 37% (previous year: 35%).
Including the shares in non-controlling interests in subsidiaries, as intended when calculating REIT equity, the equity of all shareholders amounted to €182.3 million or 57% of total assets (previous year: 54%).
As of the reporting date, the REIT equity ratio came to 62.7% of the immovable property (previous year: 59.6%) and was therefore considerably over the 45.0% minimum prescribed by Sec. 15 REITG.
EPRA earnings (FFO) compared to planning In its forecast report in the 2015 annual report, the Management Board expected group net profi t adjusted for measurement ef ects and non-recurring ef ects (EPRA result or FFO = funds from operations) before non-controlling interests to amount to between €10.5 million and €10.8 million for the fi scal year 2016. With the share of directly held properties in the overall portfolio not having changed further and thus also the share of non-controlling interests in the Group, the Management Board had forecast FFO at er non-controlling interests of between €6.2 million and €6.5 million.
The Management Board has clarifi ed this plan with the publication of the quarterly statement as of 30 September 2016 – and in light of the costs for those lease agreements for vacancies that have already been entered into projected an EPRA result for 2016 at the lower end of the communicated range.
In ef ect, the FFO before non-controlling interests generated in 2016 at €10.4 million was slightly below the specifi c fi gure planned. At er deducting the non-controlling interests, the FFO came to around €6.3 million, which was up slightly on the specifi c fi gure planned and thus demonstrates the stability and profi tability of the portfolio, which has been reduced slightly through disposals.
EPRA earnings (FFO) compared to the previous year At €16.1 million, the adjusted net rental income for the past fi scal year was around 14% above the previous-year fi gure of €18.7 million. The decrease on the previous year resulted from the sales-related merger of potential rents as well as from temporary vacancies of the portfolio. Half of this decrease was absorbed by a reduction in general administrative expenses and a positive balance from other operating income and expenses. As a result, the adjusted operating result adjusted for these non-recurring ef ects came to €13.5 million, still down around 7% on the previous-year fi gure of €14.5 million.
The 26% decrease in the adjusted net interest expense to €3.1 million (previous year: €4.2 million), which mainly related to repayments, compensated almost entirely for the decrease in the adjusted operating result. Accordingly, FFO before non-controlling interests of €10.4 million was up 1% on the previous-year fi gure of €10.3 million.
At €4.1 million, the adjusted share of profi t/loss attributable to non-controlling interests was up 5% on the previous-year fi gure of €3.9 million. The adjusted group net profi t (EPRA result or FFO) at er non-controlling interest of €6.3 million is thus down marginally on the previous-year fi gure of €6.4 million. This corresponds to €0.45 per share currently outstanding.
The past fi scal year 2016 was thus satisfactory and met our expectations
| Adjusted profi t/loss of the Group (EPRA earnings) or FFO 2016 | |||||
|---|---|---|---|---|---|
| According to the |
Adjusted | ||||
| consolidated statement of |
Gains / losses | Property mea | consolidated statement |
||
| in € thousand | income | on disposal | surement | Other | of income |
| Rental income | 22,542 | – | – | – | 22,542 |
| Service charge income | 5,080 | – | – | – | 5,080 |
| Service charge expenses /ground rent | (8,085) | – | – | – | (8,085) |
| Other property-related expenses | (3,449) | – | – | – | (3,449) |
| Net rental income | 16,088 | – | – | – | 16,088 |
| General administrative expenses | (3,162) | – | – | 226 | (2,936) |
| Other operating income and expenses | 389 | – | – | – | 389 |
| Profi t / loss from disposal of investment properties | 452 | (452) | – | – | – |
| Measurement result | 1,753 | – | (1,753) | – | – |
| Operating result | 15,520 | (452) | (1,753) | 226 | 13,541 |
| Net interest expenses | (3,375) | – | – | 254 | (3,121) |
| Result before non-controlling interests | 12,145 | (452) | (1,753) | 480 | 10,420 |
| Share of profi t / loss attributable to non-controlling | |||||
| interests | (5,226) | (95) | 1,224 | – | (4,097) |
| Income taxes | (10) | – | – | – | (10) |
| Group net profi t | 6,909 | (547) | (529) | 480 | 6,313 |
| Profi t / loss of the Group per share | 0.491) | 0.451) | |||
1) Weighted average number of shares outstanding in 2016: 14,029,013 basic /diluted
| Adjusted consolidated net income (EPRA-earnings) or FFO 2015 | |||||
|---|---|---|---|---|---|
| in € thousand | According to the conso lidated statement of income |
Gains/losses on disposal |
Property measurement |
Other | Adjusted consolidated statement of income |
| Rental income | 24,291 | – | – | – | 24,291 |
| Service charge income | 5,556 | – | – | – | 5,556 |
| Service charge expenses /ground rent | (7,929) | – | – | – | (7,929) |
| Other property-related expenses | (4,192) | – | – | 962 | (3,230) |
| Net rental income | 17,726 | – | – | 962 | 18,688 |
| General administrative expenses | (5,230) | – | – | 1,170 | (4,060) |
| Other operating income and expenses | 2,607 | – | – | (2,854) | (247) |
| Profi t / loss from disposal of investment properties | (29) | 147 | – | – | 118 |
| Measurement result | (2,792) | – | 2,792 | – | – |
| Operating result | 12,282 | 147 | 2,792 | (722) | 14,499 |
| Net interest expenses | (4,201) | – | – | 23 | (4,178) |
| Result before non-controlling interests | 8,081 | 147 | 2,792 | (699) | 10,321 |
| Share of profi t / loss attributable to non-controlling interests | (1,496) | (74) | (1,853) | (492) | (3,915) |
| Group net profi t | 6,585 | 73 | 939 | (1,191) | 6,406 |
| Profi t / loss of the Group per share | 0.53/0.521) | 0.52/0.511) |
1) Weighted average number of shares outstanding in 2015: 12,379,587 basic / 13,265,505 diluted
| Change | ||||
|---|---|---|---|---|
| in € million | 2016 | 2015 | [€ million] | [%] |
| Rental income | 22.5 | 24.3 | (1.8) | (7) |
| Service charge income | 5.1 | 5.6 | (0.5) | (9) |
| Service charge expenses | (8.1) | (7.9) | 0.2 | 3 |
| Other property-related expenses | (3.4) | (4.2) | (0.8) | (19) |
| Net rental income | 16.1 | 17.7 | (1.6) | (9) |
| General administrative expenses | (3.2) | (5.2) | (2.0) | (38) |
| Balance of other operating income and expenses, disposal and measurement gains/losses |
2.6 | (0.2) | 2.8 | 1,400 |
| Operating result | 15.5 | 12.3 | 3.2 | 26 |
| Net interest expenses | (3.4) | (4.2) | (0.8) | (19) |
| Share of profi t/loss attributable to non-controlling interests | (5.2) | (1.5) | 3.7 | 247 |
| Group net profi t / loss | 6.9 | 6.6 | 0.3 | 5 |
| Group net profi t/loss per share basic / diluted | 0.491) | 0.53/0.522) |
1) Weighted average number of shares outstanding in 2016: basic /diluted 14,029,013
2) Weighted average number of shares outstanding in 2015: 12,379,587 basic / 13,265,505 diluted
At €22.5 million, rental income was down 7% on the previous-year fi gure. The decrease was due to sales of non-strategic properties and from temporary vacancies. Service charge income decreased by €0.5 million, or 9%, to €5.1 million (previous year: €5.6 million), while service charge expenses increased marginally by €0.2 million, or 3%, to €8.1 million.
Other property-related expenses amounted to €3.4 million, exceeding the previous-year fi gure by 19%. At €16.1 million, net rental income was thus down €1.6 million, or 9%, on the previous-year fi gure of €17.7 million.
At €3.2 million, general administrative expenses were down €2.0 million or 38% on the previous year. This decrease was mainly attributable to the lower legal and consulting fees. The balance from other operating income and expenses including the profi t/loss from the disposal of investment property and the measurement result led to net income of €2.6 million, which was up €2.8 million on the previous-year total expense of €0.2 million.
At €15.5 million, the operating result was thus up 26% on the previous-year fi gure of €12.3 million.
At €3.4 million, net interest expenses were down €0.8 million or 19% on the previous-year fi gure (€4.2 million) largely due to repayments. However, they also contain a non-recurring expense of €0.3 million in the form of the redemption premium for the premature repayment of the convertible bond placed in the previous year as desired by the creditors as part of the change of control at Fair Value REIT-AG that occurred on 21 December 2015.
Deducting the share of profi t/loss attributable to non-controlling interests in the subsidiaries generated a group net profi t of €6.9 million (previous year: €6.6 million). This corresponds to earnings per number of shares currently outstanding of €0.49 at er €0.53 (basic) in the previous year.
Principles and goals of fi nancial management The Fair Value Group's fi nancial management ensures that the Group is able to meet its payment obligations at all times. To this end, the cash fl ows from operating activities are recognised in a rolling plan. Liquidity surpluses are placed in risk-free deposit accounts.
The loan agreements concluded are continually monitored for potential savings in interest expenses. To hedge against cash fl ow fl uctuations of fl oating-rate interest loans, the Company in earlier years used derivative fi nancial instruments (interest rate hedges) on a case-by-case basis and also does not rule this out for the future. As of the reporting date, there were no interest rate hedges in the Group.
Capital structure Equity attributable to the shareholders of Fair Value REIT-AG amounted to €120.6 million as of the reporting date (previous-year fi gure: €117.3 million). Including the shares in non-controlling interests in subsidiaries totalling €61.7 million, the equity of all shareholders amounts to €182.3 million (previous year: €178.4 million). This corresponds to around 57% of consolidated total assets of €321.7 million (previous year: 54% of €330.4 million).
As presented below, the Group's fi nancial liabilities amounted to €131.7 million as of the reporting date (previous year: €144.1 million):
| Financial liabilities of the Group | ||||||
|---|---|---|---|---|---|---|
| Amount 12/2016 |
Amount 12/2015 |
|||||
| Short name | Lender | [T€] | [T€] | Interest rate | Bankmargin | Term |
| FVAG | Convertible bond | – | (8,460) | – | – | – |
| FV AG | Capital Bank GRAWE Group, Graz | (7,000) | – | fl oating | 4.00% | 15.02.2019E |
| FV AG | WIB Westdeutsche Immobilienbank AG1) | (8,800) | (9,300) | 2.55% | – | 30.06.2019E |
| FV AG | WIB Westdeutsche Immobilienbank AG1) | (5,909) | (7.256) | fl oating | 1.27% | 30.06.2019E |
| FVAG | Stadt-Sparkasse Langenfeld | (2,636) | (2,719) | 1.55% | – | 30.03.2020 |
| FVAG | Stadt-Sparkasse Langenfeld | (1,943) | – | 1.69% | – | 30.03.2020 |
| FVAG | Volksbank Mittweida eG4) | (3,913) | – | 2.25% | – | 01.08.2026 |
| IC 12 | WIB Westdeutsche Immobilienbank AG2) | (1,831) | (1,907) | 2.50% | – | 31.03.2017 |
| IC 15 | Sparkasse Südholstein | (7,269) | (7,490) | 2.71% | – | 30.01.2018 |
| BBV 02 | Bayer. Beamten Lebensvers. a.G.3) | (139) | (139) | – | – | – |
| BBV 02 | Bayer. Beamten Lebensvers. a.G.3) | (942) | (942) | – | – | – |
| BBV 08 | Unicredit Bank AG | (8,556) | (18,576) | fl oating | 2.60% | 30.09.2025E |
| BBV 10 | Bayer. Beamten Lebensvers. a.G. | (20,409) | (20,980) | 3.90% | – | 30.11.2019 |
| BBV 10 | Unicredit Bank AG | (23,257) | (23,670) | fl oating | 2.05% | 31.03.2017 |
| BBV 10 | Unicredit Bank AG | (7,434) | (9,850) | fl oating | 2.10% | 31.03.2017 |
| BBV 14 | DG Hypothekenbank AG | (31,642) | (32,824) | 1.38% | 31.03.2020E | |
| Total | (131,680) | (144,113) |
1) LTV 75 % // DSCR 120 %
LTV 50 % // DSCR 120 % 3) Interest-free and redemption-free on account of assigning the purchase price deposited to an escrow account for the property sold in Erlangen
4) LTV 52% // minimum annual net rent of €588,000.00
Other than those loans marked with an "E" indicating the date of fi nal maturity, the dates relate to the interest terms agreed as of 31 December 2016. At er the terms expire, the lenders have to of er new conditions.
The required debt service coverage ratio for the loans secured by mortgages issued by WIB Westdeutsche Immobilienbank comes to 120% of the sum of interest and repayment. The loan-to-value (LTV) ratio of the properties amounts to a maximum of 50% and 75%, respectively. Both conditions were complied with as of the reporting date.
The LTV ratio for the loan on the mortgaged property in Neubrandenburg from Volksbank Mittweida eG secured by mortgages comes to 52% of the lending value calculated by the bank. In the event that the LTV ratio is exceeded, among other things additional collateral must be provided and special repayments made within six months until the ratio is achieved again. Moreover a minimum annual net rent of €588,000 must be achieved. The conditions were complied with as of the reporting date.
As of the reporting date, there were no fi nancial liabilities at the Group secured using interest rate swaps or interest rate caps. The fi xed interest loans amounted to €79.5 million (previous year: €84.8 million).
At €52.2 million, around 40% of fi nancial liabilities with no interest hedges were thus subject to fl oating-rate interest as of the reporting date (previous year: €59.4 million, or 41%).
Assuming a stable 3-month EURIBOR interest rate of 0.0% p.a., the weighted interest rate for the fi nancial liabilities at the Group amounted to around 2.1% p.a. as of the reporting date. This represents a decline of 16% compared with the previous-year fi gure of 2.5% p.a. The weighted bank margin for the loans with fl oating-rate interest rates increased from 219 bp in the previous year to 233 bp.
The weighted remaining term of the fi xed-interest and bank margin agreements amounted to 16 months as of the reporting date compared to 23 months in the previous year.
Liquidity The Group's cash and cash equivalents amounted to €16.8 million as of the reporting date, up €0.8 million, or 5%, on the previous-year fi gure of €16.0 million.
At €9.5 million, the net cash fl ow from operating activities was thus up considerably on the previous-year fi gure of €6.6 million. The lower previous-year fi gure was largely due to non-cash income from the acquisition of non-controlling interests of €3.6 million as well as a lower cash infl ow compensated for non-cash ef ects from the measurement result.
| in € thousand | 2016 | 2015 |
|---|---|---|
| Profi t/loss of the Group | 6,909 | 6,585 |
| Measurement and sales result | (2,205) | 2,580 |
| Non-controlling interests (shares of gains) | 5,226 | 1,496 |
| Income from the acquisition of non-controlling interests | 7 | (3,607) |
| Other adjustments | (454) | (447) |
| Net cash fl ow from operating activities | 9,483 | 6,607 |
Cash fl ow from investment activities Investment activities resulted in a cash infl ow of €12.1 million following €11.6 million in the previous year. In 2016, cash infl ows resulted from cash received from the disposal of seven properties for a total of €19.8 million (previous year: €17.0 million), which was counterbalanced by cash paid for investments or fi t-outs of €7.7 million (previous year: €5.4 million).
| in € thousand | 2016 | 2015 |
|---|---|---|
| Net cash infl ow from investment activities | 12,066 | 11,632 |
| Net cash outfl ow from fi nancing activities | (20.801) | (16.799) |
| Change to cash and cash equivalents | 748 | 1,440 |
| Cash and cash equivalents at the beginning of the period | 16,028 | 14,588 |
| Cash and cash equivalent at the end of the period | 16,776 | 16,028 |
Cash fl ow from fi nancing activities The cash outfl ow from fi nancing activities of €20.8 million (previous year: €16.8 million) consists of a net outfl ow of €12.5 million from the repayment of and proceeds from fi nancial liabilities (previous year: €40.0 million). Furthermore, the dividend for the fi scal year 2015 amounted to €3.5 million (previous year: €2.3 million) and distributions to non-controlling interests in subsidiaries to €4.4 million (previous year: €3.3 million).
More than 90% of the Fair Value Group's assets is shaped by the market values of the directly and indirectly held properties. The market values of the Group's properties, for which there is no notarised purchase agreement, is calculated at least once a year as of the respective reporting date by external appraisers who primarily use the discounted cash fl ow method. Additional information on the methods of property measurement can be found in notes 2 and 6 of the notes to the consolidated fi nancial statements.
| Assets | ||||||
|---|---|---|---|---|---|---|
| 31/12/2016 | 31/12/2015 | Change | ||||
| [€ thousand] | [%] | [€ thousand] | [%] | [€ thousand] | [%] | |
| Total non-current assets | 296,907 | 92 | 296,914 | 90 | (7) | – |
| Total current assets | 21,237 | 7 | 21,702 | 7 | (465) | (2) |
| Non-current assets available for sale | 3,600 | 1 | 11,750 | 3 | (8,150) | (69) |
| Total assets | 321,744 | 100 | 330,366 | 100 | (8,622) | (3) |
Total assets decreased by 3% compared to the previous year to €321.7 million. The decrease resulted from a balance of disposing of seven non-strategic properties and the measurement result.
Non-current assets of €296.9 million accounted for 92% of total assets (previous year: €296.9 million, or 90%). Around 97% or €286.9 million related to investment property (previous year: 97% or €287.8 million).
Current assets of €21.2 million (previous year: €21.7 million) comprised €16.8 million or around 79% of cash and cash equivalents (previous year: €16.0 million). Around €2.6 million (12%) relates to trade receivables following €2.8 million in the previous year. Around €1.9 million (9%) related to other receivables and assets (previous year: €2.9 million).
Non-current assets held for sale relate to one property in Krefeld which was sold at its carrying amount at er the reporting date. In February 2017, title, risks and rewards were transferred once the usual prerequisites for payment have been met in return for payment of the purchase price.
| Equity and liabilities | ||||||
|---|---|---|---|---|---|---|
| 31/12/2016 | 31/12/2015 | Change | ||||
| [€ thousand] | [%] | [€ thousand] | [%] | [€ thousand] | [%] | |
| Equity of parent company | 120,590 | 37 | 117,278 | 35 | 3,312 | 3 |
| Non-controlling interests | 61,708 | 19 | 61,160 | 19 | 548 | 1 |
| Financial liabilities, derivatives, other liabilities | 123,289 | 38 | 127,071 | 36 | (4,647) | – |
| Total non-current liabilities | 184,997 | 57 | 188,231 | 54 | (4,099) | 2 |
| Total current liabilities | 16,157 | 5 | 24,857 | 10 | (7,835) | (32) |
| Total liabilities | 201,154 | 63 | 213,088 | 65 | (11,934) | (6) |
| Thereof fi nancial liabilities | 131,680 | 65 | 144,113 | 68 | (12,433) | (9) |
| Total equity and liabilities | 321,744 | 100 | 330,366 | 100 | (8,622) | (3) |
On the reporting date, a total of 37% of assets (previous year: 35%) was fi nanced by equity attributable to shareholders of the parent company and 63% (previous year: 65%) by liabilities. Here it must be taken into account that the non-controlling interests in subsidiaries of €61.7 million (previous year: €61.2 million) are recognised under liabilities pursuant to IFRSs. For the calculation of the minimum equity ratio for the purpose of the REITG, interests in subsidiaries included in the consolidated fi nancial statements not belonging to the parent company and recognised as debt capital are treated as equity. Accordingly, group equity increased to €182.3 million or 57% of the total equity and liabilities (adjusted previous-year fi gure: €178.4 million or 54%).
The fi nancial liabilities of the Group amounted to €131.7 million or 41% of total assets (previous year: €144.1 million or 44%). The decrease in fi nancial liabilities by €12.4 million or 9% on the previous year is due to the premature repayment of the convertible bond as well as sales-related unscheduled repayments, less new loans taken out. Of the fi nancial liabilities, €9.3 million (previous year: €18.1 million) is due in less than one year.
Equity ratio pursuant to Sec. 15 REITG When calculating the equity ratio pursuant to Sec. 15 REITG, the total of the equity attributable to the shareholders of the parent company and the non-controlling interests in subsidiaries is divided by the immovable assets. Immovable assets comprise the market value of investment property.
As of 31 December 2016 immovable assets totalled €290.5 million. Nominal REIT equity amounted to €182.3 million. This resulted in a REIT equity ratio of 62.7%, thus above the legally required minimum ratio of 45.0% of immovable assets.
| Calculation of equity ratio pursuant to Sec. 15 REITG | ||||
|---|---|---|---|---|
| 31/12/2016 | 31/12/2015 | |||
| [€ thousand] | [%] | [€ thousand] | [%] | |
| Investment properties incl. assets under construction | 286,942 | – | 287,794 | – |
| Non-current assets held for sale | 3,600 | – | 11,750 | – |
| Immovable assets | 290,542 | 100.0 | 299,544 | 100.0 |
| Equity | 120,590 | – | 117,278 | – |
| Non-controlling interests | 61,708 | – | 61,160 | – |
| Equity pursuant to Sec. 15 REITG | 182,298 | 62.7 | 178,438 | 59.6 |
Equity/net asset value (NAV) per share As of 31 December 2016, the net asset value amounted to €120.6 million (previous year: €117.3 million). The net asset value is a central measurement indicator for property holding real estate companies. The 14,029,013 shares outstanding as of the reporting date produce a NAV of €8.60 per share following €8.36 in the previous year.
| NAV in the consolidated statement of fi nancial position | ||
|---|---|---|
| in € thousand | 31/12/2016 | 31/12/2015 |
| Market value of properties (incl. held for sale) | 290,542 | 299,544 |
| Other assets less other liabilities | 27,322 | 27,400 |
| Non-controlling interests | (61,708) | (61,160) |
| Financial liabilities | (131,678) | (144,113) |
| Other liabilities | (3,888) | (4,393) |
| Net asset value | 120,590 | 117,278 |
| Net asset value per share | 8.60 | 8.36 |
EPRA-NAV per share The Best Practice Recommendations of the European Public Real Estate Association (EPRA) are accepted guidelines which complement the IFRS reporting of real estate companies and provide guidance on a transparent calculation of net asset value. The EPRA-NAV indicator shown below is based on this guideline. As deferred taxes are not relevant for Fair Value REIT-AG due to its REIT status, the EPRA-NAV fi gure presented below also corresponds with the NNAV indicator used by some experts.
| EPRA-NAV | ||
|---|---|---|
| in € thousand | 31/12/2016 | 31/12/2015 |
| NAV pursuant to consolidated statement of fi nancial position | 120,590 | 117,278 |
| Market value of derivative fi nancial instruments | – | – |
| Thereof attributable to non-controlling interests | – | – |
| EPRA-NAV | 120,590 | 117,278 |
| EPRA-NAV per share (in €) | 8.60 | 8.36 |
The German economy will also maintain its essentially healthy constitution in 2017. The o ce markets will continue to grow, while the retail markets are expected to at least remain stable. In light of high demand and persistently good fi nancing conditions, the German investment market will remain attractive at a high level.
In its annual economic report for 2017, the forecast issued by the German federal government expects the German economy to grow by 1.4% in 2017; however, the slight decrease on 2016 is largely attributable to the lower number of working days. On the domestic side, this will primarily be driven by private consumer spending and increased government spending on refugee migration as well as investments in residential buildings. It is also assumed that the global economy and global trade will accelerate only slightly. The low external value of the euro against the US dollar should provide impetus for growth in foreign trade. Development of prices for private consumption is forecast at 1.6%.
According to analysts' estimates, the o ce letting market will experience high demand in 2017 as well. The volume of new construction is anticipated at around 1.1 million m², 83% of which has already been let in advance. Due to the continuing demand for o ce space, the vacancy rate is thus expected to decline slightly again in 2017. This should have a positive impact on prime rents; an increase of 3% is expected. An anticipated increase for average rents is expected to exceed this.
Positive consumer sentiment owing to the good labour market conditions should bolster retail revenue in 2017 as well. However, the Management Board expects the letting dynamics to wane in the retail segment.
The investment market for commercial property in Germany will stay attractive for investors in 2017 and will therefore continue to exhibit a high transaction volume, albeit below that of the last two years in an estimated range of €45 billion to €50 billion. Investor demand will lead to further yield compression and increasing net present values, even in secondary locations.
Sources: German Federal Ministry of Economics and Energy, Jones Lang LaSalle
The earnings forecast is based on item-by-item planning of income and expenses of the directly and indirectly held properties of the Group. If income is not derived from contractual rents for the year as a whole, assumptions on the likelihood of the lease being renewed and the duration of vacancies were made in relation to the specifi c rental space. This is also the case for anticipated rental expenses contained in property-related operating expenses. The planned repair and maintenance expenses are primarily based on fi rmly planned measures or are otherwise generally estimated based on past experience. Operating costs for the properties were rolled forward based on the price indexed fi gures of the previous year.
Any non-recurring ef ects, such as from market valuations, were not taken into account. With the exception of the disposal of assets held for sale as of 31 December 2016, it is assumed that the real estate portfolio will remain unchanged.
The Management Board plans to continue expanding Fair Value REIT-AG's stake in selected subsidiaries and to acquire further previously indirectly owned properties.
As these investments will not have an impact on the amount of investment income and net rental income that can be precisely planned, the Management Board has not provided a concrete forecast for the income statement pursuant to IFRS. As a result of acquiring direct ownership of properties previously held indirectly, rental income from direct ownership is expected to increase. However, the Management Board prefers not to allocate these investment projects to specifi c companies and properties in the forecast report.
Based on the existing portfolio without any changes in the share of directly owned properties, the Management Board expects funds from operations (FFO) to amount to between €9.6 million and €10.2 million at group level in 2017 before non-controlling interests. At er non-controlling interest, the Management Board expects FFO of around €6.1 million to €6.4 million. 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 outstanding shares. This corresponds to a distribution rate of 55% to 57% of FFO.
The forecast economic development for Germany of ers good framework conditions overall for the real estate industry and therefore also for Fair Value REIT-AG. These are expected to continue having a positive ef ect on demand for space and therefore on upcoming follow-up and new rentals.
The demand for real estate investments remains high and is also likely to extend to properties in secondary locations in 2017. The Management Board is confi dent that it can further develop the existing direct and investment portfolio in the current market environment in a way that adds value.
The risk management system of Fair Value REIT-AG is an integral part of the management and control system of the Fair Value Group. It enables all risks relevant to the business activities of Fair Value to be identifi ed as early as possible, analysed, evaluated and managed. Opportunities are not recognised on an ongoing basis.
The risk management system is integrated into the regular reporting to the Management Board and Supervisory Board in order to ensure that risks are dealt with proactively and e ciently. The Company's risk strategy also involves the services of the external service providers IC Immobilien Service GmbH (ICIS) and DEMIRE Immobilien Management GmbH.
The service providers support the management of Fair Value in the identifi cation, notifi cation, assessment and management of current and potential risks. Risk control and reporting are carried out centrally by the management of Fair Value REIT-AG. This ensures that the Management Board is informed in a timely manner of all signifi cant risks in order to initiate appropriate measures.
The Management Board believes that no material risks for the Group exist which are not identifi ed by risk management and which can be fundamentally avoided.
Internal control system The internal accounting control system has been implemented with the objective of ensuring adequate certainty in the internal and external accounting and reporting procedures by introducing suitable control mechanisms. This ensures that the annual accounts and consolidated fi nancial statements are issued in accordance with statutory provisions.
Fair Value REIT-AG is involved in the budgeting process for both directly and indirectly held properties, as it performs the function of general partner in the property-holding participations via its subsidiary GP Value Management GmbH and, in the case of the subsidiary BBV 08, participates in the budget meetings of the business agency of the ICIS investments as the largest shareholder and without power of representation.
At least every quarter, the Company receives property, fund and portfolio information as required, in which it is informed of any important matters relevant to the contracts and any deviations from budget. The information is analysed, validated and examined for recognisable risks. Identifi ed risks are assessed and reported to the Supervisory Board in regular or ad-hoc risk reports.
Risk management system with regard to the Group's accounting process The risk management system of Fair Value REIT-AG ensures the early identifi cation, analysis and management of risks that could lead to signifi cant errors in internal and external reporting. The service provider ICIS, which is appointed to take care of most of the accounting procedures for the Company, is also involved in the risk management system.
Its services include fulfi lling accounting obligations pursuant to the HGB as well as responsibility for payment transactions, preparing monthly VAT returns, statements of income, account and business analyses and preparing consolidated quarterly fi nancial statements in accordance with IFRSs as well as providing property, fund and portfolio information.
The accounting procedures at ICIS as well as at Fair Value REIT-AG are monitored by an ef ective internal control system which ensures compliance of the fi nancial reporting and compliance with legal provisions. Specifi cally, this includes the clear allocation of responsibilities and controls bearing in mind the principles of dual control and segregation of duties, appropriate data access rights for the IT system used for fi nancial reporting and consideration of the risks identifi ed and assessed.
For determining the market value of property as well as measuring pension obligations, the Company consults external experts or draws on expert opinions for the subsidiaries.
In view of the size of the Company, Fair Value REIT-AG has up to now not established an internal audit function. At least once a year in the course of the audit of fi nancial statements, the auditor is to assess whether the Management Board took the steps required by Sec. 91 (2) AktG to install a monitoring system capable of identifying, at an early stage, any risks jeopardising the Company's ability to continue as a going concern and whether the monitoring system implemented is capable of performing its function.
Risk management system Other Risk identifi cation To identify risky developments at the earliest possible stage, Fair Value continuously monitors macroeconomic and industry-specifi c developments in the real estate and fi nance sectors as well as the processes within the Fair Value Group.
Risk analysis Identifi ed risks are carefully analysed. Any potential loss is calculated and weighted according to a probability of occurrence. The potential ef ect on earnings for the Fair Value Group is calculated using scenario analyses.
Risk control A key component of risk control is the above-mentioned reporting system as a basis for defi ning, assessing and documenting individual risks. The assessments of individual risks are recorded in the risk inventory. The risk inventory is used as a basis for making decisions on managing risks and shows the overall risk position of the Fair Value Group.
Early warning indicators are defi ned for individual risks to indicate the development of a potential risk. In addition to the early warning indicators, thresholds have been defi ned and immediate reporting to the Management Board is triggered when they are exceeded.
Risk management The respective employee responsible decides together with the Management Board on the risk management measures to take.
The future development of rental income constitutes a risk that can also have an indirect impact on the measurement of the portfolios of Fair Value REIT-AG. Fair Value is exposed to strong competition in the commercial property sector and therefore to a risk that the Company might not be able to assert itself su ciently.
Business strategy risks mainly exist in the misjudgement of future market developments and aligning business activities based on this. Strategic risks also arise from unexpected changes in the market and economic conditions having negative ef ects on the fi nancial performance and competitive position of the Group.
Letting and leasing There are risks related to rent reduction, rental losses and vacancies. Moreover, rent increases based on price indexes cannot always be implemented completely, immediately or if at all. In extreme cases, decreases in rent based on price indexes can also occur. A total downward variance of rental income of 5% of the contractual amount, for example, would implicate a deterioration in FFO before non-controlling interests estimated at around €1.1 million.
Management of property There are risks related to unexpected costs being incurred for maintenance and repair or adapting properties to modernisation requirements.
Measurement The value of directly and indirectly owned properties af ects the business value of Fair Value REIT-AG directly and indirectly. The measurement result as the balance of measurement gains and losses has an impact on the fi xed assets, the composition of the statement of fi nancial position, and fi nancing conditions (see debt capital).
A general change in the capitalisation rates for property measurement of 25 basis points upward or downward, for example, with unchanged market rents, implicates a fl uctuation margin of the market measurement of the entire portfolio of around 2.2% below to around 2.4% above the market values as of 31 December 2016. Accordingly, this would result in a deterioration or improvement of FFO before non-controlling interests of around €6.2 million or €6.8 million, respectively.
If market rents of the portfolio moved upward or downward by 5%, with an unchanged capitalisation rate, this would have ef ects of around 3.7% below or above the market values as of 31 December 2016. Accordingly, this would result in a deterioration or improvement of FFO before non-controlling interests of around €10.4 million.
Insurance There is the risk that Fair Value does not have the required extent of insurance coverage in the event of damage claims.
Liability There is a warranty risk related to material and legal defects when leasing and disposing of properties and property management companies. Fair Value REIT-AG is liable up to the amount of its contribution as a limited partner in property funds and as a shareholder in a civil law partnership (BGB-Gesellschat ), up to an unlimited amount.
Litigation There is the risk that Fair Value REIT-AG or its subsidiaries may be involved in legal disputes with tenants, real estate buyers and sellers or shareholders or even co-partners of property funds. There is currently one legal dispute pending, which involves an o ce tenant in the Bad Segeberg property concerning parking space issues with a disputed amount of €5 thousand.
Personnel-related risks Fair Value is exposed to the risk of its Management Board or its employees leaving the Company as well as not being able to replace them with su ciently qualifi ed staf . The dependence on the centralised service provided by DEMIRE Immobilien Management GmbH and IC Immobilien Service GmbH could bring about comparable risks for Fair Value REIT-AG.
IT risks The IT networks of Fair Value REIT-AG and its service providers could irretrievably lose important data or encounter unauthorised access to data from the outside. Both could result in costs and ultimately lead to fi nancial losses.
Risks from investing activities Selection of property Fair Value's operations depend on the acquisition of suitable commercial property and property management companies at appropriate prices and conditions.
Due diligence Investments in property assets could develop negatively as a result of misjudgements, unforeseen problems or unidentifi ed risks. Investments in interests in property-holding partnerships could develop unfavourably due to misjudgements or negative developments in the real estate market.
Selling The selling of property assets by Fair Value is subject to the risk of selling prices declining, the market value of the property being misjudged as well as warranty claims from the buyer.
Risks from fi nancing activities Fair Value REIT-AG's operations are af ected by the future procurement of equity and debt capital and thus also the general interest rate level.
Equity Opportunities for organic growth without external capital injections are very limited on account of the requirement of REITG law on the distribution of at least 90% of the net profi t for the year pursuant to German GAAP.
Liquidity The liquidity of Fair Value REIT-AG dif ers from the liquidity ratio of the Fair Value Group. It is developed from the current income of directly owned properties and from infl ows of a liated companies and equity investments less management costs, administrative expenses and fi nancing costs as well as amortisation, depreciation and write-downs.
There is the risk that the Company will not always have access to su cient liquidity during the year to meet its current obligations together with paying out the legally required minimum dividends.
The existing cash and cash equivalents as of the reporting date and the planned cash fl ow in 2017 are su cient for the present needs of the current operating activities as well as for the proposed dividend payouts.
Debt capital There is the risk that follow-up fi nancing or loan extensions cannot be agreed for the planned amount or only under unfavourable conditions. The same applies to borrowing in connection with the refi nancing of previously unencumbered property assets, with the direct acquisition of previously indirectly owned properties or with the acquisition of investments in property-holding partnerships.
There is the risk of a decline in income and the market values of the properties. This could reduce the loan-to-value ratio (LTV), the debt service coverage ratio (DSCR) or the capability to service debt. As a consequence, Fair Value REIT-AG could be faced with providing additional collateral, additional debt servicing or deposits into pledged credit accounts as further loan collateral.
A general interest rate risk also exists. In addition to the interest rate risk, there is the risk of an increase in funding costs of banks and thus bank margins. Any increase in the overall interest burden for the existing fi nancial obligations within the Group as of 31 December 2016, for example, of one percentage point, would involve a reduction in the FFO before non-controlling interests of around €1.3 million in total.
Then again, the current low interest rate level could lead to high compensation payments to creditors, for example, in connection with the sale of properties with premature redemption of loans. This would correspondingly burden liquidity and fi nancial performance.
Fair Value possibly might not be able to exert su cient infl uence on non-controlling interests and, for example, not be successful in passing partner resolutions which require a qualifi ed majority of the votes cast. The legal and tax framework could change to the disadvantage of Fair Value.
The prerequisite for exemption of the REIT-AG from corporate income tax and trade tax is meeting the criteria of Secs. 8 to 15 of the REIT law.
Infringements of the requirements of the REIT law in some cases implicate the immediate loss of tax exemption. In some cases of infringement penalties would be incurred, while in others there would be no immediate consequences. However, given repeat occurrences these would result in the loss of the tax exemption.
This could potentially lead to tax backpayments and considerable cash outfl ows. If Fair Value REIT-AG is not able to maintain its REIT stock corporation status, this could also adversely af ect the competitive position of Fair Value. If it were to lose its REIT status, the partners could be entitled to claims for compensation.
To assess the risk situation of the Fair Value Group, the individual budgets used as a basis for the forecast report which contain the risk provisioning, for example, for losses in rental income or vacancy losses as well as the calculated market values of the properties as the base value were recognised with a probability of occurrence ratio of 50%. Negative deviations from the base value were calculated with a probability of occurrence ratio of 30% (lower deviation) or 20% (higher deviation).
To calculate rental risks, the planned income from properties for each company was reduced by a further 1.5% or 3% concerning the direct portfolio and 2.5% or by 5% with regard to the properties held in subsidiaries.
To assess the measurement risks, the market values calculated by the valuers as of 31 December 2016 were taken into account with a reduction of 2.5% or 5% with regard to the direct portfolio and 5% or 10% with regard to the subsidiaries.
Countermeasures for weighted gross risks were not taken into account; they therefore also pertain to net risks. The maximum risk was calculated from the sum of digits of all the risks assessed with a maximum deviation from the base value with a probability of occurrence of 100%.
Using this approach, the maximum risks amount to around €20.3 million at er deducting non-controlling interests. Of this amount, 81% (€16.4 million) constitutes non-cash measurement risks.
Weighted net risks amount to €6.1 million; of this amount, with a share of €5.7 million, 93% constitutes non-cash measurement risks. Net risks with cash ef ects of the Fair Value Group are thus estimated at a total of €0.4 million.
Overall for fi scal year 2017, the Management Board thus does not expect any risks to occur that could jeopardise the ability of Fair Value-AG to continue as a going concern.
There are no issuer credit ratings for Fair Value REIT-AG.
The Management Board is confi dent that it can exploit the current market environment to enhance Fair Value's share in the overall portfolio in a value-adding manner and to further and sustainably improve the Company's fi nancial position and performance.
The good condition of the German economy has created increased demand for space, which should have a positive impact on the occupancy rate of the portfolio. The Management Board expects rents to increase further, in particular in the o ce segment, and is confi dent in light of the current maintenance expenses that the value of the portfolio will develop positively.
Until 29 February 2016, the remuneration of the member of the Management Board, Frank Schaich, was composed of a basic component of €220,000 p.a. plus fringe benefi ts (primarily contributions to a pension fund of 10% of the basic salary and the provision of a company car in the price category of up to €50,000 net for both work and private use) as well as variable components.
The variable remuneration components mainly comprise variable remuneration pegged at 4% of the dividends distributed by the Company. In previous years, this variable remuneration was partly settled in phantom stock in Fair Value REIT-AG depending on the discount of the share price on the Xetra exchange of the Frankfurt Stock Exchange compared to the NAV as reported in the consolidated fi nancial statements; this was settled in cash at the prevailing price of the shares on the XETRA exchange over the vesting period of two to four years.
A long-term remuneration concept was also agreed that contained a cash payment of 0.2% of the positive change in the market capitalisation of the Company by comparing the market capitalisation of the Company on 1 October 2012 and as of the original end of the agreement on 30 September 2016 or the date upon leaving prematurely.
The employment contract with Fair Value REIT-AG was rescinded by mutual agreement in light of Mr. Schaich's appointment as an additional member of the management board of DEMIRE ef ective 29 February 2016. The corresponding agreement stipulates that the phantom stock granted in previous years at the value as of 31 December 2015 would be paid out on 31 March 2016. The same applies for the long-term remuneration components of 0.2% of the change in the market capitalisation of the Company in the period from 1 October 2012 to 31 December 2015.
It was also agreed that the dividend-based variable remuneration for 2015 and the pro rata temporis component for 2016 would be fully paid out in cash when due.
In the management board service agreement concluded between DEMIRE and Mr. Schaich ef ective 1 March 2016, a basic remuneration component of €230,000 p.a. plus fringe benefi ts (primarily contributions to a pension fund of €5,200 p.a., contributions to a private health insurance of around €3,600 p.a. and the provision of a company car, including costs for leasing and fully comprehensive insurance coverage, of up to €18,000 p.a. net for both work and private use) was agreed.
In addition to the annual basic remuneration, Mr. Schaich receives a bonus of up to €125,000 per year for serving on the management board of DEMIRE based on conditions related to success and performance. As a long-term remuneration component, Mr. Schaich had been granted 400,000 phantom stock options of DEMIRE by DEMIRE, which at er a vesting period of four years under the conditions of the stock option programme 2015 at DEMIRE entitle the holder to a cash pay-out less taxes by DEMIRE.
According to the cost allocation agreement between the Company and DEMIRE Deutsche Mittelstand Real Estate AG dated 1/14 March 2016, 70% of the short-term remuneration components and fringe benefi ts and expense refunds agreed therein are borne by the Company and 30% by DEMIRE ef ective 1 March 2016.
The same applies for the settlement amounts for the short-term contractual and post-contractual remuneration components and fringe benefi ts agreed in the termination agreement between Frank Schaich and DEMIRE dated 31 October 2016.
No remuneration structure has been set yet for the new member of the Management Board Patrick Kaiser for fi scal year 2016. The Supervisory Board and Mr. Kaiser are currently negotiating the contractual arrangements.
Shortly, the Supervisory Board will set a level of remuneration for Mr. Kaiser that is appropriate and thus in line with the AktG and the GCG code. It will apply retroactively from date of appointment and the Supervisory Board will report on it.
The remuneration of the Supervisory Board breaks down into a fi xed component of €5,000 per year and pro rata temporis and a performance-related component of €1 per €1,000 in paid-out dividends. The variable remuneration component is limited to a maximum amount of €25,000. The Chairman receives twice the amount of the fi xed and variable components of a member of the Supervisory Board and the Deputy Chairman, one-and-a-half times the said amount. In accordance with Sec. 314 (1) No. 6 HGB, the total remuneration of the Management Board and the Supervisory Board is included in the notes to the consolidated fi nancial statements, under no. 31.
The Company's share capital consists of 14,110,323 no-par value bearer shares of the same class. As of the reporting date, the Company held 81,310 treasury shares, meaning that at that point in time there were only 14,029,013 shares outstanding. All shares have the same rights and duties attached. Each share carries one vote at the Annual General Meeting.
The shares can be independently transferred in accordance with the legal requirements applicable to no-par value bearer shares. No shares with special rights granting control authority were issued. If employees have an interest in the Company, they exercise their rights of control directly.
Pursuant to Sec. 11 (4) REITG, no single shareholder may directly hold 10% or more of the shares or voting rights (maximum participation ratio). Should the maximum participation ratio be exceeded, the shareholder concerned must provide proper evidence of the reduction in their direct participation within two months of the Management Board's request. According to regulations, a continuing breach of the maximum participation ratio can result in the non-compensated transfer of the shares in excess of the maximum participation ratio or in the confi scation of these shares without compensation.
As of the reporting date, DEMIRE indirectly held a total of 77.70% of the voting rights via eight subsidiaries. Seven companies each had 9.93% of the voting rights in Fair Value REIT-AG; one company had 8.17% of the voting rights in Fair Value REIT-AG. Pursuant to Sec. 11 (4) REITG, it is permissible for the maximum participation ratio to be exceeded indirectly.
Authorised capital The Management Board was authorised by the Annual General Meeting on 19 May 2015 to increase the share capital of the Company in the period until 18 May 2020, with the approval of the Supervisory Board, once or several times by a total of up to €14,110,323.00 by issuing up to 7,055,161 new no-par value bearer shares (ordinary shares) in exchange for cash contributions and/or contributions in kind (authorised capital 2015). The Management Board is authorised, with the approval of the Supervisory Board, to preclude the subscription rights of shareholders under certain conditions.
Contingent capital The Management Board was authorised by the Annual General Meeting on 4 July 2016, with the approval of the Supervisory Board, to issue once or several times until 3 July 2021 convertible bonds or warrant bonds or profi t participating rights (referred to together as "bonds") with or without a limited term for a total nominal amount of up to €250,000,000.00 and to grant holders or creditors of bonds conversion or option rights (also with conversion or option duties) on no-par value bearer shares of the Company with a pro rata amount of the share capital totalling up to €14,110,323.00 in accordance with the Convertible and Warrant Bond Terms.
By resolution of the Annual General Meeting on 4 July 2016, contingent capital 2014 of €9,406,882.00 was cancelled. At the same time, the share capital of the Company was contingently increased by up to €14,110,323.00 by issuing up to 7,055,161 new bearer shares with a right to participate in profi ts from the beginning of the fi scal year in which they are issued (contingent capital 2016). The contingent capital
increase was performed to serve bonds issued on the basis of the authorisation resolved by the Annual General Meeting on 4 July 2016.
Repurchasing treasury shares The Annual General Meeting on 4 July 2016 authorised the Company to acquire treasury shares until 23 July 2021 up to 10% of the existing share capital of the Company as of the date of the resolution. The number of shares acquired on the basis of this authorisation together with the other treasury shares held by the Company, or allocable to the company in accordance with Sec. 71a et seq. AktG ["Aktiengesetz": German Stock Corporation Act], may not at any time exceed 10% of the share capital.
The Management Board can choose to acquire treasury shares either via the stock exchange, through a public purchase of er addressed to all shareholders, or through a public invitation for the submission of bids. The purchase price indicated or of ered or the upper and lower limits of the range of purchase prices of ered per share (excluding incidental acquisition costs) may not exceed or fall below the notional mean closing rate for the Company's share (excluding incidental acquisition costs) as traded on XETRA (or a comparable successor system) at Frankfurt Stock Exchange during the ten trading days prior to acquisition via the stock exchange by more than 10%, and through a public purchase of er addressed to all shareholders or through a public invitation for the submission of bids, by more than 20%.
For changes to the articles of incorporation, a majority of 75% of the voting rights represented at the Annual General Meeting is required as prescribed by the provisions of the German Stock Corporation Act.
Determination of the number as well as the appointment of the members of the Management Board and the deputies of the members of the Management Board, the conclusion of employment agreements and revocation of appointments is handled by the Supervisory Board.
There are no agreements in place with the Management Board in the event of a change of control as a result of a takeover bid. There are also no compensation agreements in place in favour of the Management Board or employees in the event of a takeover bid.
Graefelfi ng, 27 March 2017
Fair Value REIT-AG
Frank Schaich Patrick Kaiser
| Consolidated balance sheet | ||
|---|---|---|
| in € thousand Note no. |
31/12/2016 | 31/12/2015 |
| Assets | ||
| Non-current Assets | ||
| Intangible assets (5) |
75 | 78 |
| Property, plant and equipment (5) |
62 | 26 |
| Investment property (6) |
286,942 | 287,794 |
| Other receivables and assets (7) |
9,828 | 9,016 |
| Total non-current assets | 296,907 | 296,914 |
| Current assets | ||
| Trade receivables (9) |
2,578 | 2,757 |
| Income Tax receivables (10) |
5 | 22 |
| Other receivables and assets (11) |
1,878 | 2,895 |
| Cash and cash equivalent (12) |
16,776 | 16,028 |
| Total current assets | 21,237 | 21,702 |
| Non-current asset held for sale | 3,600 | 11,750 |
| (8) Total assets |
321,744 | 330,366 |
| Equity and liabilities | ||
| Equity (13) |
||
| Issued capital | 28,221 | 28,221 |
| Capital reserves | 99,645 | 99,729 |
| Revaluation reserve Accumulated loss |
(22) (6,856) |
(16) (10,258) |
| Treasury shares | (398) | (398) |
| Total equity attributable to the shareholders of the parent company | 120,590 | 117,278 |
| Non-current liabilities | ||
| Non-controlling interests (14) |
61,708 | 61,160 |
| Financial liabilities (15) |
122,405 | 125,995 |
| Other liabilities (16) |
884 | 1,076 |
| Total non-current liabilities | 184,997 | 188,231 |
| Current liabilities | ||
| Provisions (17) |
645 | 743 |
| Financial liabilities (15) |
9,275 | 18,118 |
| Trade payables (16) |
3,233 | 2,679 |
| Other liabilities (16) |
3,004 | 3,317 |
| Total current liabilities | 16,157 | 24,857 |
| Total equity and liabilities | 321,744 | 330,366 |
46
| Consolidated statement of income | |||
|---|---|---|---|
| in € thousand | Note no. | 2016 | 2015 |
| Rental income | 22,542 | 24,291 | |
| Service charge income | 5,080 | 5,556 | |
| Ground rent | (6) | (9) | |
| Service charge expenses | (21) | (8,079) | (7,920) |
| Other property operating expenses | (21) | (3,449) | (4,192) |
| Net rental income | (20) | 16,088 | 17,726 |
| General administrative expenses | (22) | (3,162) | (5,230) |
| Other operating income | 597 | 4,246 | |
| Other operating expenses | (208) | (1,639) | |
| Total other operating income and expenses | (23) | 389 | 2,607 |
| Income from the disposal of investment property and non-current assets held for sale | 19,780 | 17,022 | |
| Expenses in connection with the disposal of investment property and non-current assets held for sale | (19,328) | (17,051) | |
| Profi t/loss from the disposal of investment properties and non-current assets held for sale | (24) | 452 | (29) |
| Measurement gains from investment property and non-current assets held for sale | 4,293 | 9,655 | |
| Measurement losses from investment property and non-current assets held for sale | (2,540) | (12,447) | |
| Measurement result | (25) | 1,753 | (2,792) |
| Operating result | 15,520 | 12,282 | |
| Interest income | – | 11 | |
| Interest expenses | (26) | (3,375) | (4,212) |
| Share of profi t/loss attributable to non-controlling interests | (14) | (5,226) | (1,496) |
| Financial result | (8,601) | (5,697) | |
| Income taxes | (10) | – | |
| Net profi t/loss of the Group | 6,909 | 6,585 | |
| Earnings per share in € (basic /diluted) | (28) | 0.49/0.49 | 0.53/0.52 |
| Consolidated statement of comprehensive income | ||
|---|---|---|
| in € thousand Note no. |
2016 | 2015 |
| Profi t/loss of the Group | 6,909 | 6,585 |
| Other comprehensive income | ||
| Gains (+) /losses (–) from changes of actuarial assumptions (7) |
(6) | 2 |
| Total other comprehensive income | (6) | 2 |
| Total Comprehensive income | 6,903 | 6,587 |
No amounts need to be recycled from other comprehensive income to the statement of income in later periods.
| Consolidated statement of changes in equity | ||||||||
|---|---|---|---|---|---|---|---|---|
| Number of | ||||||||
| in € thousand except for circulating shares | Note no. | shares out standing |
Issued capital |
Capital reserves |
Revaluation reserve |
Accumulated loss |
Treasury shares |
Total |
| As of 1 January 2015 | (13) | 9,325,572 | 18,814 | 74,387 | (18) | (14,512) | (398) | 78,273 |
| Increase in issued capital | 4,703,441 | 9,407 | 25,342 | – | – | – | 34,749 | |
| Distribution | – | – | – | – | (2,331) | – | (2,331) | |
| Profi t/loss of the Group | – | – | – | – | 6,585 | – | 6,585 | |
| Other comprehensive income | – | – | – | 2 | – | – | 2 | |
| As of 31 December 2015 | 14,029,013 | 28,221 | 99,729 | (16) | (10,258) | (398) | 117,278 | |
| Distributions | – | – | – | – | (3,507) | – | (3,507) | |
| Repayment of convertible bond | – | – | (84) | – | – | – | (84) | |
| Total comprehensive income | – | – | – | (6) | 6.909 | – | 6.903 | |
| Profi t/loss of the Group | – | – | – | – | 6,909 | – | 6,909 | |
| Other comprehensive income | – | – | – | (6) | – | – | (6) | |
| As of 31 December 2016 | 14,029,013 | 28,221 | 99,645 | (22) | (6,856) | (398) | 120,590 |
A dividend of €0.25 per share was paid out in the reporting period for the past fi scal year. In the previous year, a dividend of €0.25 per share was distributed.
Consolidated fi nancial statements 49 Consolidated statement of comprehensive income and statement of changes in consolidated equity Consolidated statement of cash fl ows
| Consolidated statement of cash fl ows | |||
|---|---|---|---|
| in € thousand | Note no. | 2016 | 2015 |
| Profi t/loss of the Group | 6.909 | 6.585 | |
| Adjustments to consolidated earnings for reconciliation to cash fl ow from operating activities | |||
| Interest expenses | 3,611 | 4,212 | |
| Interest income | (236) | (11) | |
| Depreciation of property, plant and equipment and amortisation of intangible assets | (5) | 3 | 4 |
| Gains (-)/losses (+) on disposal of investment properties | (24) | (452) | (212) |
| Measurement result | (25) | (1,753) | 2,792 |
| Cash paid in connection with intercompany transactions | (23) | (208) | |
| Non-cash income from the acquisition of non-controlling interests | 7 | (3,607) | |
| Other non-cash relevant expenses and income | (848) | (730) | |
| Shares of losses (+) / gains (-) attributable to non-controlling interests | (14) | 5,226 | 1,496 |
| Interest paid | (26) | (3,897) | (4,672) |
| Interest received | (26) | 322 | 11 |
| Changes in assets, equity and liabilities | |||
| (Increase)/decrease in trade receivables | (9) | 171 | 465 |
| (Increase)/decrease in other receivables | (7) | 133 | 906 |
| (Decrease)/increase in provisions | (17) | (98) | 173 |
| (Decrease(/increase in trade payables | 554 | 364 | |
| (Decrease)/increase in other liabilities | (16) | (146) | (961) |
| Net cash fl ow from operating acitivities | 9,483 | 6,607 | |
| Cash paid for the purchase of interests in BBV 08 | – | (4,713) | |
| Purchase of investment properties | (6) | (7,678) | (650) |
| Net income from the disposal of investment property | (6) | 19,780 | 17,022 |
| Purchase of property, plant and equipment and intangible assets | (36) | (27) | |
| Net cash fl ow from investing activities | 12,066 | 11,632 | |
| Severance payments to former non-controlling interests | (14) | (400) | (4,988) |
| Distributions to non-controlling interests | (14) | (4,358) | (3,284) |
| Proceeds from borrowings | (15) | 13,671 | 44,876 |
| Repayment of borrowings | (15) | (26,123) | (84,831) |
| Redemption of swaps/caps | – | (990) | |
| Cash received from capital increases | – | 37,157 | |
| Costs of the capital increase | (84) | (2,408) | |
| Dividend payments | (3,507) | (2,331) | |
| Net cash fl ow from fi nancing activities | (13) | (20,801) | (16,799) |
| Change in cash and cash equivalents | (12) | 748 | 1,440 |
| Cash and cash equivalents at the beginning of the period | (12) | 16,028 | 14,588 |
| Cash and cash equivalents at the end of the period | 16,776 | 16,028 |
51 (1) General corporate information
The consolidated fi nancial statements of Fair Value REIT-AG for the fi scal year ended 31 December 2016 were authorised for issue by a resolution of management on 27 March 2017. Fair Value REIT-AG is a stock corporation founded and based in Germany. The Company does not have any branch o ces. Following its registration as a stock corporation on 12 July 2007, Fair Value REIT-AG (the "Company") has been listed on the stock exchange since 16 November 2007. It qualifi ed as a real estate investment trust (REIT) on 6 December 2007. The shares of Fair Value REIT-AG are publicly traded. The registered o ces of the Company are located at Wuermstr. 13a in 82166 Graefelfi ng. As a real estate investment fi rm, the Company concentrates on the acquisition and management of commercial property in Germany. Its investing activities focus on o ce and retail property in regional locations. Fair Value REIT-AG invests directly in real estate as well as indirectly via the acquisition of investments in property-holding partnerships. Information on the group structure is presented in note 2. Information on other group relationships with related parties is presented in note 31.
Basis of preparation The consolidated fi nancial statements prepared by Fair Value REIT-AG were prepared in accordance with the International Financial Reporting Standards (IFRSs) of the International Accounting Standards Board (IASB) taking into account the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) as adopted by the EU.
The consolidated fi nancial statements are prepared in accordance with the historical cost convention, except for investment property and derivative fi nancial instruments, which were measured at fair value, provided they have a balance as of the reporting date.
The consolidated fi nancial statements have been prepared in euros. Unless otherwise specifi ed, all amounts are stated in thousands of euro (€ thousand). It is possible that dif erences arise due to rounding the fi gures.
In fi scal year 2016, the following standards and interpretations were subject to mandatory adoption for the fi rst time in accordance with the provisions of the European Union:
| Standards and interpretations |
Title | Ef ective as of |
|---|---|---|
| IAS 19 | Defi ned Benefi t Plans: Employee Contributions | reporting years beginning on or at er 1 February 2015 |
| Various | Improvements to IFRSs (2010 to 2012) | reporting years beginning on or at er 1 February 2015 |
| IFRS 10, IFRS 12 and IAS 28 |
Investment Entities – Applying the Consolidation Exception |
reporting years beginning on or at er 1 January 2016 |
| IAS 27 | Equity Method in Separate Financial Statements | reporting years beginning on or at er 1 January 2016 |
| IAS 1 | Disclosure Initiative | reporting years beginning on or at er 1 January 2016 |
| Various | Improvements to IFRSs (2012 to 2014) | reporting years beginning on or at er 1 January 2016 |
| IAS 16 | Clarifi cation of Acceptable Methods of Depreciation and Amortisation |
reporting years beginning on or at er 1 January 2016 |
| IFRS 11 | Accounting for Acquisitions of Interests in Joint Operations |
reporting years beginning on or at er 1 January 2016 |
| IAS 16 and 41 | Bearer Plants | reporting years beginning on or at er 1 January 2016 |
The standards and interpretations subject to mandatory adoption for the fi rst time in fi scal year 2016 in accordance with the provisions of the European Union did not have any material ef ect on the Group's fi nancial position and performance.
The IASB has published the standards and interpretations listed below, the adoption of which was voluntary and not yet mandatory for the reporting year 2016.
| Standards and interpretations |
Title | Ef ective as of |
|---|---|---|
| reporting years beginning on or at er | ||
| IFRS 9 | Financial instruments | 1 January 2018 |
| IFRS 15 | Revenue from Contracts with Customers | reporting years beginning on or at er 1 January 2018 |
| reporting years beginning on or at er | ||
| IFRS 16 | Leases | 1 January 2019 |
| reporting years beginning on or at er | ||
| IAS 12 | Recognition of Deferred Taxes for Unrealised Losses | 1 January 2017 |
| IAS 7 | Statement of Cash Flows (part of the Disclosure Initiative) |
reporting years beginning on or at er 1 January 2017 |
| Clarifi cation of Revenue from Contracts with | reporting years beginning on or at er | |
| IFRS 15 | Customers | 1 January 2018 |
| Classifi cation and Measurement of Share-based | reporting years beginning on or at er | |
| IFRS 2 | Payment Transactions | 1 January 2018 |
| Application of IFRS 9 Financial Instruments together | reporting years beginning on or at er | |
| IFRS 4 and IFRS 9 | with IFRS 4 Insurance Contracts | 1 January 2018 |
On 24 July 2014, the IASB issued the fi nal IFRS 9 Financial Instruments, which replaced IAS 39 Financial Instruments: Recognition and Measurement. The new IFRS 9 introduces a uniform approach for classifying and measuring fi nancial assets. It also includes a new risk management model that also takes into account expected losses for calculating risk provisions. In addition, the new regulations on hedge accounting issued in November 2013 were incorporated in the fi nal IFRS 9. The standard becomes ef ective retroactively for fi scal years beginning on or at er 1 January 2018. It has yet to be adopted into European law as the EU Commission has only just begun the EU endorsement process. Early adoption is permitted subject to EU endorsement. The Group assumes that the adoption of IFRS 9 will not have any signifi cant ef ects.
Furthermore, the IASB issued the accounting standard IFRS 15 Revenue from Contracts with Customers in May 2014. IFRS 15 sets out a fi ve-step model according to which revenue is recognised at an amount that refl ects the consideration to which the entity expects to be entitled in exchange for goods or services. In addition, IFRS 15 results in comprehensive, new disclosure requirements. The new standard replaces IAS 18 Revenue, IAS 11 Construction Contracts as well as all related interpretations and is ef ective for fi scal years beginning on or at er 1 January 2018. Early adoption is permitted subject to the EU endorsement. In fi scal year 2016, the Group carried out an assessment of IFRS 15. The Group renders various services generally from current contracts. For these current contracts, the Group has come to the conclusion that the services are rendered over a period of time as the benefi t that fl ows from the Group's services to the customer is simultaneously consumed by it. The new standard is not expected to have any ef ect with regard to these contracts.
If a contract contains several performance obligations, the Company spreads the transaction price over the performance obligations of the contract. If an individual sale price cannot be observed directly, it must be estimated by the Company. Various methods are suggested in IFRS 15 that can be adopted for this estimate. Unlike previous recognition methods, this estimation method can give rise to deviations. However, the Group assumes that these deviations will not be material.
The IASB published the new standard on leases (IFRS 16 Leases) in January 2016. For most leases this standard requires lessees to recognise a right-of-use asset for the underlying asset and a corresponding lease liability. By comparison, the changes af ecting lessors are only minor and pertain to the classifi cation and accounting treatment of leases under IAS 17. IFRS 16 requires extended disclosures in the notes of lessees and of lessors and becomes ef ective for the fi rst time for fi scal years beginning on or at er 1 January 2019. The Group aims to apply the new standard as of the date it is due to become ef ective. Adoption of the new standard will generally not lead to any signifi cant changes as Fair Value REIT-AG does not have any signifi cant lease arrangements in place as lessee. The exact extent of this impact still needs to be determined, however.
All the other new or amended standards to be adopted in the reporting year do not have any impact on the fi nancial position and performance of the Group, as amendments frequently only serve to clarify documentation or reporting issues or do not relate to business transactions within the Group.
Consolidation principles and basis of consolidation The consolidated fi nancial statements include the fi nancial statements of Fair Value REIT-AG and its subsidiaries as of 31 December 2016. A group has control when it is exposed, or has rights, to variable returns from its involvement with the investee and can also infl uence these returns by exercising its power over the investee. In particular, the Group has control over an investee if, and only if, it has all of the following:
a) Power over the investee (i.e., the Group has the possibility to control any of the investee's activities that have a material impact on returns as a result of its current rights)
b) Exposure, or rights, to variable returns from its involvement with the investee
c) The ability to infl uence the returns by exercising its power over the investee.
| As of 31 December 2016, the basis of consolidation was as follows: | ||
|---|---|---|
| -------------------------------------------------------------------- | -- | -- |
| Share of voting rights/fi xed capital in % | 31/12/2016 | 31/12/2015 |
|---|---|---|
| GP Value Management GmbH, Munich ("GPVM") | 100.00 | 100.00 |
| BBV 3 Geschät sführungs-GmbH & Co. KG, Munich ("FV03") | 100.00 | 100.00 |
| BBV 6 Geschät sführungs-GmbH & Co. KG, Munich ("FV06") | 100.00 | 100.00 |
| BBV 9 Geschät sführungs-GmbH & Co. KG, Munich ("FV09") | 100.00 | 100.00 |
| BBV 10 Geschät sführungs-GmbH & Co. KG, Munich ("FV10") | 100.00 | 100.00 |
| BBV 14 Geschät sführungs-GmbH & Co. KG, Munich ("FV14") | 100.00 | 100.00 |
| IC Fonds & Co. Büropark Teltow KG, Munich ("IC 07") | 78.16 | 78.16 |
| BBV Immobilien-Fonds Nr. 6 GmbH & Co. KG, Munich ("BBV 06") | 62.23 | 62.22 |
| BBV Immobilien-Fonds Nr. 8 GmbH & Co. KG, Munich ("BBV 08") | 58.22 | 58.02 |
| IC Fonds & Co. Gewerbeportfolio Deutschland 13. KG, Munich ("IC 13") | 57.37 | 57.37 |
| IC Fonds & Co. SchmidtBank-Passage KG, Munich ("IC 12") | 53.95 | 53.95 |
| BBV Immobilien-Fonds Nr. 14 GmbH & Co. KG, Munich ("BBV 14") | 51.01 | 50.78 |
| IC Fonds & Co. Gewerbeobjekte Deutschland 15. KG, Munich ("IC 15") | 48.17 | 48.17 |
| BBV Immobilien-Fonds Nr. 10 GmbH & Co. KG, Munich ("BBV 10") | 45.16 | 44.96 |
| BBV Immobilien-Fonds Erlangen GbR, Munich ("BBV 02") | 42.02 | 42.02 |
| IC Fonds & Co. Forum Neuss KG, Munich i.L. ("IC 03") | – | 71.58 |
| BBV Immobilien-Fonds Nr. 3 GmbH & Co. KG, Munich ("BBV 03") | – | 80.05 |
Consolidation methods Subsidiaries are consolidated from the date on which the Group obtains control over them until control is extinguished. Upon acquisition all identifi able assets, liabilities and contingent liabilities of the purchased entity are measured at their fair value on the date of acquisition. Shares held by non-controlling interests are measured at the potential obligation that would arise if they were squeezed out and reported under fi nancial liabilities.
Intercompany receivables and liabilities and intercompany income and expenses are of set against each other. Unrealised profi ts from transactions between group entities are eliminated in full. The separate fi nancial statements of consolidated entities are adjusted to comply with the Group's GAAP.
Acquisition of assets and business combinations Upon assuming control of a subsidiary or acquiring assets, it must be assessed whether these transactions are to be classifi ed as a business combination pursuant to IFRS 3 or as an acquisition of a group of assets or net assets. If business activities within the meaning of an integrated set of activities are also acquired in addition to the assets and liabilities, this constitutes a business combination which must be recognised pursuant to IFRS 3. An integrated set of activities can include for example the business processes from the areas of property management, receivables management and accounting. Furthermore, the fact that personnel are employed at the acquired property companies is also an indication that business activities were acquired.
Current versus non-current classifi cation The Group classifi es its assets and liabilities in the statement of fi nancial position into current and non-current items. An asset is to be classifi ed as current if:
All other assets are classifi ed as non-current.
A liability is classifi ed as current if:
All other liabilities are classifi ed as non-current.
Fair value measurement The Group measures fi nancial instruments and property at fair value at each balance sheet date. The fair values of fi nancial instruments measured at amortised cost are listed in note 4.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurement assumes that the business transaction in the course of which the asset is sold or the liability is transferred takes place either on the:
The Group must have access to the principal market or the most advantageous market.
The fair value of an asset or liability is measured based on the assumptions that market participants would make when setting the price for the asset or liability. It is assumed here that the market participants are acting in their best economic interest.
Measurement of the fair value of a non-fi nancial asset takes into account the ability of the market participant to generate an economic benefi t through the highest and best use of the asset or by selling it to another market participant that will fi nd the highest and best use for the asset.
The Group uses valuation techniques that are appropriate in the circumstances and for which su cient data are available to measure fair value. The use of authoritative observable input factors should be as high as possible, while the use of input factors not based on observable data should be as low as possible.
All assets and liabilities for which fair value is measured or disclosed in the fi nancial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is signifi cant to the fair value measurement as a whole:
With regard to assets or liabilities that are recorded in the fi nancial statements on a recurring basis, the Group determines whether reclassifi cation has taken place between the levels of the hierarchy by examining the classifi cation at the end of each reporting period.
They were measured in accordance with the International Financial Reporting Standards (IFRSs), the International Standards of Valuation of Real Estate for Investment Purposes ("International Valuation Standards") and the RICS Valuation - Professional Standards (January 2014) of the Royal Institution of Chartered Surveyors.
The properties were measured at fair value pursuant to IAS 40 in conjunction with IFRS 13.9. This was issued by the International Accounting Standards Board (IASB) and contains the following defi nition:
"Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date."
The fair value, for accounting purposes pursuant to IFRSs, is taken to be the same as the market value, which is defi ned by the International Valuation Standarts Council (IVSC) as follows:
"The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, at er proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion."
The fair value considers the incidental costs of acquisition (real estate acquisition tax, agent's commission, conveyance costs and legal expenses) and is presented as the net capital value.
The fair value of the individual properties is calculated using the internationally recognised discounted cash fl ow method. The discounted cash fl ow method is used as a basis for calculating a dynamic investment and identifi es the various future cash fl ows expected from the investment over the course of time.
In the process, all factors af ecting the value of the investment are identifi ed and the future cash fl ows forecast accurately for each period and aggregated. The resulting cash infl ows and outfl ows are then discounted to a fi xed point in time (valuation date) using the discount rate. In contrast to the German capitalised earnings method ("Ertragswertverfahren") defi ned in the WertV ["Wertermittlungsverordnung": Regulation on performing valuations], the cash fl ows over the observation period are quantifi ed explicitly and not presented as an annuity payment.
Due to the fact that the infl uence of events in the future on the valuation decreases over time on account of the discounting of future cash fl ows, coupled with the planning uncertainty, it is customary practice when considering an investment in real estate to calculate the net cash infl ows over a ten-year period (detailed planning period) using the minimum interest rate implicit in the investment (discount rate) to discount the resulting value to the valuation date.
The assumptions used in the valuation model refl ect the average assumptions made by the dominant investors on the market on the respective valuation date. These valuation inputs refl ect the customary expectations of the market and roll forward the past fi gures identifi ed in the analysis of the property being valued or, alternatively, several comparable properties.
When making a market valuation, the valuation inputs are assessed by the valuer to the best of his or her ability and can be split into two groups:
The specifi c inputs for the property include, for example, the rental income from fi rst-time leases and renewals, the likelihood of renewals of existing leases, the duration of vacancies and vacancy costs, non-allocable service charges and the expected capital expenditure of the owner, costs of fi nishings and rental expenses for fi rst-time leases and renewals or the interest on the capital employed for the property as a whole or by specifi c lease agreement.
Macroeconomic factors primarily include market trends and the development of rents over the detailed planning phase and the infl ation rate assumed in the calculation model. In order to meet the disclosure requirements on fair value, the Group has identifi ed groups of assets and liabilities on the basis of their nature, their characteristics and risks as well as the level they occupy in the fair value hierarchy explained above.
The management of the Group is involved in the valuation process of investment property, which is performed at least once annually, and monitors the process accordingly. To do this, it checks the plausibility of the fi ndings provided by the independent valuer during a fi rst inspection and compares them to the values of previous years. In addition, the management makes a critical appraisal of the results of the valuation and compares them to their own assumptions made in the course of the early identifi cation of risk and discusses the deviations and their possible causes with the valuer accordingly. Furthermore, the development of the portfolio is regularly discussed with the Supervisory Board and the development of the investment portfolio is monitored continuously.
Financial instruments According to IAS 39, all fi nancial assets and fi nancial liabilities must be classifi ed into categories. The accounting treatment depends on this classifi cation. The Fair Value Group uses the following categories:
Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market and arise when the Group provides them to a debtor on the basis of an agreement or service rendered.
Available-for-sale fi nancial assets are non-derivative fi nancial assets that are not designated to any other category.
Liabilities measured at amortised cost are all fi nancial liabilities which are initially recognised at fair value less transaction costs. In the following periods these instruments are measured at amortised cost. Dif erences between the amount paid out and the repayment amount are spread over the life of the held-to-maturity investment using the ef ective interest rate method.
Financial liabilities measured at fair value through profi t or loss consist solely of derivatives with a negative market value that are not part of a designated hedge. Since 2015, there have not been any more such derivative fi nancial instruments within the Group.
Regular way purchases or sales of fi nancial instruments are recognised using trade date accounting.
Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefi ts will fl ow to the Group and the revenue can be reliably measured, regardless of when the payment is made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defi ned terms of payment and excluding taxes or other duties.
The Group has entered into commercial property leases on its investment property portfolio. In view of the contractual terms, such as the fact that the term does not represent substantially all of the remaining economic useful life of the commercial properties, virtually all risks and rewards associated with ownership of the rented properties remain with the Group. For this reason, the Group recognises these agreements as operating leases. Rental income arising from operating leases on investment properties is recognised on a straight-line basis over the lease terms and included in revenue due to its operating nature.
Upon sale of a property, the revenue is recognised when the risks and rewards incidental to ownership are transferred to the buyer (title, benefi ts and encumbrances).
Investment property Investment property is initially measured at cost, including transaction costs. Subsequent to initial recognition, investment property is stated at fair value which refl ects market conditions at the end of the reporting period. Gains or losses arising from changes in the fair values of investment properties are included in the statement of income in the period in which they arise. Fair values are evaluated by an accredited external, independent valuer, based on a measurement that is performed annually and applying a valuation model recommended by the International Valuation Standards Committee.
Investment property is derecognised either when it has been disposed of or when the investment property is permanently withdrawn from use and no future economic benefi t is expected from its disposal. The dif erence between the net disposal proceeds and the carrying amount of the asset is recognised in the statement of income in the period of derecognition.
Intangible assets and property, plant and equipment Intangible assets and property, plant and equipment are initially recognised at cost. Following initial recognition, they are carried at cost less any accumulated depreciation, amortisation and accumulated impairment losses.
Non-current assets held for sale Classifi cation as non-current assets requires the assets to be available for immediate sale in their present condition and that their sale is highly probable. A sale is highly probable if the plan for the sale was concluded, the search for a buyer and execution of the plan was actively begun, the asset was actively of ered at an appropriate price and it is sold as expected within a year from the time of classifi cation.
Investment property is accounted for as non-current assets held for sale if there are notarised agreements or a purchase commitment agreement signed by both parties in place by the time the consolidated fi nancial statements are prepared, but ownership will not be transferred until the subsequent period as per the agreement. It is initially recognised at the contractually agreed sales price and subsequently at the lower of fair value less costs to sell.
Receivables and other assets Receivables and other assets are initially recognised at fair value and measured using the ef ective interest method taking into account any impairment. The Group determines whether there are any indications of impairment on each reporting date. Impairment arises when one or more loss events occur since the initial recognition of the receivable which have an impact on the expected future cash fl ows and these can be reliably estimated. An analysis of impairment losses is performed at each reporting date on an individual basis for major clients.
Impairment losses are recognised in the statement of income under other operating expenses. Receivables are derecognised when the Group becomes aware that they are no longer collectible or collection of the receivable does not make any economic sense, for example, when the amount is trivial.
Derivative fi nancial instruments These instruments are used to hedge interest risks for fl oating-rate interest-bearing loans. They are measured at fair value. Fair value is the net present value of the expected future cash fl ows, based on the published interest rates. Where the criteria for hedge accounting laid out in IAS 39.88 are met (documentation and designation as well as regular demonstration that the hedge is ef ective), the changes in fair value are posted to a separate line item in other comprehensive income without af ecting income. If the criteria are not met, the changes in fair value are posted through profi t or loss. The Group did not apply hedge accounting in the past fi scal year.
Non-controlling interests Non-controlling interests comprise the share of capital held by limited partners, most of whom are natural persons, in property funds structured as limited liability partnerships (GmbH & Co. KG). The property-holding partnerships reported in the consolidated fi nancial statements as non-controlling interests have a right to terminate their interest. For this reason, the shares held by these subsidiaries in the capital of the subsidiaries are treated as potential severance payment claims pursuant to IAS 32 and reported as liabilities in the consolidated fi nancial statements. Initial measurement is at fair value, which corresponds to the non-controlling interest in the net assets of the corresponding
company. Subsequent measurement of the obligation is at amortised cost. Shares in profi t increase the obligation and shares in losses and profi t distributions decrease it. The liability presented in the fi nancial statements therefore corresponds to the imputed share held by non-controlling interests in the carrying amount of the net assets of the respective subsidiary reported in the consolidated fi nancial statements.
Due to the fact that the equity investments of the Group are almost all partnerships, there are no non-controlling interests that need reporting under group equity.
Provisions Provisions are recognised when there is a legal or constructive obligation towards a third party as the result of past events and settlement of this obligation is likely to lead to an outfl ow of economic resources which can be reliably measured.
Liabilities to banks Liabilities to banks are initially recognised at fair value and subsequently measured at amortised cost using the ef ective interest method. For new liabilities, cost is the amount paid out less any directly allocable transaction costs. Liabilities carried by subsidiaries that are added to the Group upon fi rst-time consolidation are measured at the respective market values of the liabilities on the date of fi rst-time consolidation. Any dif erence between the historical cost and the settlement amount of the instruments is spread over the term of fi xed interest by adjusting the carrying amount on a pro rata basis with the amount posted through profi t or loss. If the estimates regarding cash infl ows or outfl ows of a liability due to banks are changed, the carrying amount of the liability is adjusted such that it refl ects the actual and amended estimated cash fl ows.
Consolidation of entities over which the Group no longer holds control The Group assesses control on the basis of whether it holds a majority of the voting rights in the shareholder/partnership meetings of its subsidiaries where decisions are made on the policies of the respective subsidiary. The Group holds less than 50% of the voting rights in BBV 02, BBV 10 and IC 15. Nevertheless, Fair Value REIT-AG is the largest shareholder/partner in the above entities. An assessment of control was performed within the framework of determining whether the entities should be fully consolidated or not. This led to the conclusion that Fair Value REIT-AG could once again substantially exercise control over the past fi scal year by simple majority on such decisions as ratifying the fi nancial statements, setting the amount of the profi t distribution and appointing property and/or fund managers, and thus, despite voting rights of less than 50%, can direct the relevant activities of these entities. It can be empirically demonstrated that Fair Value REIT-AG always controlled well above 50% of the votes at all of the shareholder/partnership meetings. Transactions in the course of property sales, on the other hand, require a qualifi ed 66% or 75% majority. However, such transactions do not qualify as signifi cant operating activities. In addition Fair Value REIT-AG receives annual distributions from its equity investments which depend on the result generated for the period.
Remeasurement of investment property As in the previous year, the Group engaged an independent property valuer to determine the fair values of its investment properties as of 31 December 2016. Due to the distinctive characteristics and features of the investment properties, there were no market values available to use as reference values, apart from the purchase price paid for the property sold in Krefeld. Consequently, fair value was generally measured using the discounted cash fl ow model. Land and buildings were measured using market data. This involved making reference to comparable properties
and specifi c market factors, such as the nature of the property, its location and condition. The changes in fair value were posted to the measurement result in the consolidated statement of income.
| Fair values of assets and liabilities 2016 | |||||
|---|---|---|---|---|---|
| Quoted prices in active |
Signifi cant observable |
Signifi cant not observable |
|||
| in € thousand | Measurement date |
Total | markets (level 1) |
input (level 2) |
input (level 3) |
| Investment Property | 31/12/2016 | 286,942 | – | – | 286,942 |
| Non-current assets held for sale | |||||
| Commercial property in Germany | 31/12/2016 | 3,600 | – | – | 3,600 |
| Fair values of assets and liabilities 2015 | |||||
|---|---|---|---|---|---|
| in € thousand | Measurement date |
Total | Quoted prices in active markets (level 1) |
Signifi cant observable input (level 2) |
Signifi cant not observable Input (level 3) |
| Investment Property | 31/12/2015 | 287,794 | – | – | 287,794 |
| Non-current assets held for sale | |||||
| Commercial property in Germany | 31/12/2015 | 11,750 | – | – | 11,750 |
Development of intangible assets and property, plant and equipment
| in € thousand | Intangible assets |
Property, plant and equipment (o ce and operating equipment) |
|---|---|---|
| Acquisition costs | ||
| As of 1 January 2015 | 211 | 12 |
| Additions | 1 | 26 |
| As of 31 December 2015 | 212 | 38 |
| Additions | – | 37 |
| As of 31 December 2016 | 212 | 75 |
| Accumulated depreciation, amortization and impairment loss | ||
| As of 1 January 2015 | (133) | (9) |
|---|---|---|
| Additions | (1) | (3) |
| As of 31 December 2015 | (134) | (12) |
| Additions | (3) | (1) |
| As of 31 December 2016 | (137) | (13) |
| Carrying amounts | ||
|---|---|---|
| As of 1 January 2015 | 78 | 3 |
| As of 31 December 2015 | 78 | 26 |
| As of 31 December 2016 | 75 | 62 |
| Development of investment property | |||
|---|---|---|---|
| in € thousand | Direct | ||
| investments | Subsidiaries | Total | |
| Cost of the business combination | |||
| As of 1 January 2015 | 38,062 | 325,678 | 363,740 |
| Additions (change in basis of consolidation) | – | 36,155 | 36,155 |
| Additions (subsequent acquisition costs) | 1,100 | – | 1,100 |
| Disposals – sales | (3,967) | – | (3,967) |
| Reclassifi cations | 29,800 | (75,919) | (46,119) |
| Reclassifi cation to assets held for sale | (721) | (9,875) | (10,596) |
| As of 31 December 2015 | 64,274 | 276,039 | 340,313 |
| Additions (subsequent acquisition costs) | 86 | 8,165 | 8,251 |
| Reclassifi cations | 2,300 | – | 2,300 |
| Disposals – sale | (1,052) | (8,903) | (9,955) |
| Reclassifi cation to non-current assets held for sale | – | (5,843) | (5,843) |
| As of 31 December 2016 | 65,608 | 269,458 | 335,066 |
| Changes in value | |||
| As of 1 January 2015 | (5,002) | (91,020) | (96,022) |
| Write-ups | 1,230 | 7,048 | 8,278 |
| Write-downs | (490) | (9,647) | (10,137) |
| Reclassifi cations | 2,310 | 43,809 | 46,119 |
| Disposals – sale | 397 | – | 397 |
| Reclassifi cation to non-current assets held for sale | 71 | (1,225) | (1,154) |
| As of 31 December 2015 | (1,484) | (51,035) | (52,519) |
| Write-ups | 1,070 | 3,904 | 4,974 |
| Write-downs | (840) | (1,700) | (2,540) |
| Reclassifi cations | 681 | (2,981) | (2,300) |
| Disposals – sale | (385) | 2,403 | 2,018 |
| Reclassifi cation to non-current assets held for sale | – | 2,243 | 2,243 |
| As of 31 December 2016 | (958) | (47,166) | (48,124) |
| Fair values | |||
| As of 1 January 2015 | 33,060 | 234,658 | 267,718 |
| As of 31 December 2015 | 62,790 | 225,004 | 287,794 |
| As of 31 December 2016 | 64,650 | 222,292 | 286,942 |
As of 31 December 2016, investment property consisted of a total of 32 properties, of which 29 are wholly owned and three are partially owned. Compared to 31 December 2015, the number of properties has fallen on balance by six. In the past fi scal year, two investment properties were sold from the portfolio held directly by Fair Value REIT-AG and three properties held by subsidiaries for which both title and the risks and rewards incidental to ownership were transferred. Fair Value REIT-AG also acquired direct ownership of two properties from subsidiaries in fi scal year 2016. For the Krefeld property sold in December, title, risks and rewards of ownership were not transferred before the end of 2016. Consequently, they were reclassifi ed to non-current assets held for sale.
The property portfolio is primarily encumbered by mortgage rights to secure bank loans. There are no signifi cant restrictions on the sale of property and no contractual obligations to improve the properties. Purchase obligations arising from maintenance contracts amount to €655 thousand (2015: €1,500 thousand).
Apart from the sold Krefeld property, for which the contractually agreed sales price was used as management was of the opinion that this was the best evidence of the fair value as of 31 December 2016, the fair value of the properties was measured on a property-by-property basis by CBRE GmbH, Frankfurt, using the DCF method. The cash fl ows were projected in detail for a ten-year period. For the ensuing terminal phase, the net rental income was assessed on the basis of the capital value of the property using the specifi c capitalisation rates for the property concerned and the estimated cost of sale at er ten years. The surplus cash fl ows over the ten-year period and the resulting capital value at the end of the ten-year period were discounted to the valuation date and reduced by the estimated transaction costs for a potential buyer. The land reference value was used for the land in Chemnitz.
The projected rental income is based on the rental payments contractually agreed with the tenants plus the local rents for any space not rented on the valuation date. The contractually agreed monthly rents per m2 on the valuation date for the various types of use and compared to the previous year were as follows:
| Rental contracts | ||
|---|---|---|
| in € | 31/12/2016 | 31/12/2015 |
| O ce Min |
2.02 | 2.50 |
| Max | 25.80 | 25.80 |
| Average | 7.34 | 6.10 |
| Retail Min |
2.50 | 2.50 |
| Max | 90.00 | 90.00 |
| Average | 9.65 | 7.97 |
| Other Min |
2.00 | 2.00 |
| Max | 11.60 | 11.60 |
| Average | 4.80 | 5.46 |
| Total Min |
2.00 | 2.00 |
| Max | 90.00 | 90.00 |
| Average | 8.04 | 6.92 |
Compared to the previous year, the following ranges were applied to the capitalisation and discount rates for the various types of use:
| Bandwidths for capitalisation and discounting rates1) | |||||
|---|---|---|---|---|---|
| Capitalisation rates in % | Discount rates in % | ||||
| 31/12/2016 | 31/12/2015 | 31/12/2016 | 31/12/2015 | ||
| O ce | 6.0 – 7.5 | 6.1 – 7.8 | 6.5 – 8.1 | 6.6 – 8.5 | |
| Weighted average | 6.49 | 6.61 | 7.04 | 7.15 | |
| Retail | 5.6 – 7.9 | 5.7 – 8.0 | 6.1 – 8.5 | 6.2 – 8.75 | |
| Weighted average | 6.37 | 6.59 | 6.93 | 7.15 | |
| Other | 7.3 – 7.8 | 7.3 – 7.9 | 7.8 – 8.3 | 7.8 – 8.4 | |
| Weighted average | 7.51 | 7.55 | 8.00 | 8.03 |
1) Source: Property appraisal CBRE 2016, 2015
The resulting changes in value (remeasurement gains and losses) result largely from the adjustments to the capitalisation rates and discount rates and the shrinking benefi t of some existing lease agreements which were entered into at rents above the current market rates (over-rents).
A general change in the capitalisation rates for property measurement of 25 basis points upward or downward, for example, with unchanged market rents, implicates a fl uctuation margin of the market measurement of the entire portfolio of around 2% below to around 2% above the market values as of 31 December 2016. Accordingly, this would result in a deterioration or improvement of FFO before non-controlling interests of around €6 million (2015: €6 million) or around €7 million (2015: €6 million), respectively.
If market rents of the portfolio moved upward or downward by 5%, with an unchanged capitalisation rate, this would have ef ects of around 4% below or above the market values as of 31 December 2016. Accordingly, this would result in a deterioration or improvement of FFO before non-controlling interests of around €10 million (2015: €10 million).
Of the 16 (2015: 27) properties whose value either remained stable or rose, two properties displayed no change in value. Two (2015: 8) of the remaining 14 (2015: 23) properties whose market value rose were directly held.
The minimum non-cancellable rental income from the properties breaks down as follows:
| Future rental income | ||
|---|---|---|
| in € thousand | 31/12/2016 | 31/12/2015 |
| Less than one year | 21,031 | 22,583 |
| Between one to fi ve years | 58,235 | 57,097 |
| At er more than fi ve years | 34,740 | 32,747 |
| Total of future rental income | 114,006 | 112,427 |
This does not include any expected hikes in rents due to the agreed index-related adjustments.
| in € thousand | 31/12/2016 | 31/12/2015 |
|---|---|---|
| Financial assets | ||
| Receivable settlement balance BBV 09 | 9,822 | 9,018 |
| Non-fi nancial assets | ||
| Other | 6 | (2) |
| Total other assets | 9,828 | 9,016 |
The settlement balance for the terminated shares in BBV 09 was set at €10.02 million by the appointed arbitrator on 30 November 2015.
The settlement balance was due on 31 May 2016. However, according to the business plan of BBV 09, it will be paid out in three annual instalments of 1%, 1% and 98%, plus a late payment penalty of 4% p.a. from the due date. The amount falls due six months at er being agreed. This results in a non-current portion of €9,822 thousand and a current portion of €332 thousand (see note 11). The outstanding receivable is subject to interest at 4% p.a. as of 1 June 2016.
The Company has issued a letter of subordination in favour of the bank fi nancing BBV 09. BBV 09 has waived its right to make distributions to the shareholders of BBV 09 until the claims of the departing shareholders are fulfi lled.
By contract dated 10 July 2008, a pension commitment carried by IC Fonds GmbH in favour of Mr. Frank Schaich was taken over by Fair Value. This results in a defi ned benefi t obligation for the Company pursuant to IAS 19. Pension insurance has been taken out to cover the commitment. This is pledged to the benefi ciary and is therefore of set against the defi ned benefi t obligation (DBO) as plan assets. Actuarial gains or losses are posted directly to other comprehensive income.
| in € thousand | 31/12/2016 | 31/12/2015 |
|---|---|---|
| Radevormwald property ("BBV 08") | – | 11,100 |
| Tornesch property ("Fair Value") | – | 650 |
| Krefeld property ("BBV 06") | 3,600 | – |
| Total non-current assets held for sale | 3,600 | 11,750 |
The Krefeld property (BBV 06) was sold by purchase agreement from 22 December 2016. Risks and rewards were transferred following full payment of the purchase price on 6 February 2017 as of 7 February 2017.
| in € thousand | 31/12/2016 | 31/12/2015 |
|---|---|---|
| Rent receivables including settlement of incidental costs | ||
| Not yet due | 1,296 | 1,224 |
| Past due and not impaired | ||
| Due for up to 30 days | 585 | 20 |
| Due for between 30 and 90 days | 82 | 100 |
| Due for between 90 and 360 days | 304 | 257 |
| Due for more than 360 days | 311 | 1,156 |
| Bad debt allowances | 287 | 509 |
| Total rent receivables | 2,865 | 3,266 |
| Valuation allowances | (287) | (509) |
| Total trade receivables | 2,578 | 2,757 |
Receivables from tenants mainly consist of outstanding rent for the past year, the allocation of service charges less prepayments made as well as the allocation of maintenance costs. The ten largest tenants within the Group in terms of amount of receivables are responsible for an outstanding debt totalling €1,182 thousand (2015: €1,834 thousand).
All trade receivables are due in the short-term.
The specifi c valuation allowances recorded on trade receivables relate to past due items. These developed as follows:
| in € thousand | 2016 | 2015 |
|---|---|---|
| As of the beginning of the year | 509 | 548 |
| Additions | – | 268 |
| Utilised | (168) | (236) |
| Reversal | (54) | (71) |
| As of the end of the year | 287 | 509 |
This item consists of withholding tax on interest income that will be reimbursed.
| in € thousand | 31/12/2016 | 31/12/2015 |
|---|---|---|
| Financial assets | ||
| Purchase price receivable for commercial property Erlangen, Henkestr. 5 (BBV 02) | 1,361 | 1,355 |
| Receivable settlement balance BBV 09 | 332 | 1,002 |
| Other | 136 | 451 |
| Collateral provided | 7 | 3 |
| Settlement balance of holders of non-controlling interests | – | 18 |
| Total fi nancial assets | 1,836 | 2,829 |
| Non-fi nancial assets | ||
| VAT | 42 | 44 |
| Other | – | 22 |
| Total non-fi nancial assets | 42 | 66 |
For information about the receivable for the settlement balance for BBV 09, we refer to note 7.
The payment of the purchase price for the commercial property is subject to the condition that the entries in the land register be made in full. This is expected to be concluded mid-2017.
At subsidiary BBV 10, current account balances of €1,000 thousand (2015: €2,140 thousand) are pledged to the fi nancing bank.
All other cash and cash equivalents consist of bank balances and time deposits of not more than three months.
Issued capital Issued capital consists of 14,110,323 bearer no-par shares. All shares are issued and fully paid up. As of the reporting date 31 December 2016, there were 14,029,013 shares outstanding (2015: 14,029,013 shares).
According to Art. 5 (1) of the articles of incorporation dated 19 May 2015 the share capital of Fair Value amounts to €28,220,646.00. The share in issued capital amounts to €2.00 per share. The shareholders are entitled to any dividends passed by resolution and to one vote per share at the Annual General Meeting.
Authorised capital At er the authorised capital 2014 had been used in full on 8 May 2015, the Annual General Meeting on 19 May 2015 resolved to create a new authorised capital 2015 of up to €14,110,323.00. Furthermore, the Management Board was authorised in the Annual General Meeting on 4 July 2016 to issue convertible bonds and/or warrant bonds or profi t participating rights with or without conversion or subscription rights in bearer shares of up to €14,110,323.00 until 3 July 2021.
Contingent capital By resolution of the Annual General Meeting on 4 July 2016, the share capital of the Company was contingently increased by up to €14,110,322.00 by issuing up to 7,055,161 new bearer shares with a right to participate in profi ts from the beginning of the fi scal year in which they are issued (contingent capital 2016).
Capital reserve The capital reserve contains additional paid-in capital from capital increases performed, less the costs of procuring capital. In addition, the shareholder assets of €28,220 thousand freed up in 2014 was also added to the capital reserve.
Accumulated profi t according to German GAAP In 2017, based on a proposal of the Management Board, the Annual General Meeting will propose that a dividend of €0.40 (2015: €0.25) per share currently outstanding be distributed and the remaining accumulated profi t of €556,619.32 be carried forward to new account. The amount to be distributed of €5,611,605.20 is around 91.0% of the net profi t for the year of Fair Value REIT-AG according to German GAAP and therefore complies with Sec. 1 REITG ["Gesetz über deutsche Immobilienaktiengesellschat en mit börsennotierten Anteilen": German REIT Act], which stipulates that at least 90% of the net profi t for the year measured under German GAAP be distributed to shareholders.
Treasury shares The Management Board was authorised by resolution of the Annual General Meeting dated 4 July 2016 to purchase treasury shares of up to 10% of the share capital at any time prior to 3 July 2021. The treasury shares are intended to be used by management to purchase other companies and equity investments, particularly shares in property funds, as well as property, rapidly, fl exibly and at favourable conditions. The treasury shares of €398 thousand have not changed on the previous year.
| in € thousand | IC 03 | IC 07 | IC 13 | BBV 03 | |
|---|---|---|---|---|---|
| As of 1 January 2015 | 36 | 1,766 | 1,692 | 929 | |
| Share of profi t/loss – expense (-) / income (+) | – | 180 | (507) | (109) | |
| Additions | – | – | – | – | |
| Payments | – | – | (1,043) | (806) | |
| Reclassifi cation (severance payments) | (36) | (7) | (114) | – | |
| As of 31 December 2015 | – | 1,939 | 28 | 14 | |
| Share of profi t/loss – expense (-) / income (+) | – | 80 | 28 | – | |
| Payments | – | – | – | (14) | |
| Reclassifi cations (severance payments) | – | – | – | – | |
| As of 31 December 2016 | – | 2,019 | 56 | – |
Non-controlling interests in subsidiaries are calculated at their share in the equity of the individual subsidiaries as of 31 December 2016 and constitutes either a profi t (–) or a loss (+) attributable to the non-controlling interest.
| BBV 06 | BBV 08 | IC 12 | IC 15 | BBV 02 | BBV 10 | BBV 14 | Total |
|---|---|---|---|---|---|---|---|
| 5,487 | – | 3,159 | 10,423 | 175 | 14,971 | 21,410 | 60,048 |
| 339 | 897 | 275 | 368 | (16) | (1,604) | 1,709 | 1,532 |
| – | 8,451 | – | – | – | – | – | 8,451 |
| (244) | – | (95) | (251) | – | – | (846) | (3,285) |
| (223) | (153) | (233) | (1,399) | (1) | (1,053) | (2,367) | (5,586) |
| 5,359 | 9,195 | 3,106 | 9,141 | 158 | 12,314 | 19,906 | 61,160 |
| 153 | 153 | (42) | 1,562 | (8) | 1,607 | 1,693 | 5,226 |
| (2,953) | – | – | (561) | – | – | (823) | (4,351) |
| (2) | (61) | – | – | – | (113) | (151) | (327) |
| 2,557 | 9,287 | 3,064 | 10,142 | 150 | 13,808 | 20,625 | 61,708 |
| Structure of the fi nancial liabilities | ||
|---|---|---|
| in € thousand | 31/12/2016 | 31/12/2015 |
| Non-current liabilities | ||
| Floating-rate liabilities to banks | 49,284 | 55,924 |
| Fixed interest liabilities to banks | 73,121 | 70,071 |
| Total non-current liabilities | 122,405 | 125,995 |
| Current liabilities | ||
| Floating-rate liabilities to banks | 2,871 | 3,586 |
| Fixed interest liabilitities to banks | 6,404 | 6,231 |
| Convertible bond | – | 8,301 |
| Total current liabilities | 9,275 | 18,118 |
| Total fi nancial liabilities | 131,680 | 144,113 |
The terms of non-current liabilities to banks are as follows:
| Remaining terms of non-current liabilities | ||
|---|---|---|
| in € thousand | 31/12/2016 | 31/12/2015 |
| Between 1 and 2 years | 6,287 | 6,889 |
| Between 2 and 5 years | 63,762 | 60,952 |
| More than 5 years | 52,356 | 58,154 |
| Total non-current liabilities | 122,405 | 125,995 |
Floating-rate interest bank loans are charged interest at a rate based on the EURIBOR plus a margin. The interest rates on the fl oating-rate interest bank loans carried as of 31 December 2016 averaged 1.74%. In the previous year they averaged 2.05% p.a., including the fl oating-rate interest loans that were not ef ectively hedged. The average interest rate on fi xed interest bank loans came to 2.48% as of 31 December 2016, 2.51% p.a. in the previous year.
Financial liabilities of €131,680 thousand (2015: €144,133 thousand) were fully secured by mortgages. In addition, rent receivables have been assigned as collateral by all entities.
Since December 2009, a loan-to-value test has been performed every two years on the loans from Westdeutsche ImmobilienBank AG to Fair Value and IC 12. According to this, the value of the loan may not exceed 75% (Fair Value) or 50% (IC 12) of the market value of the pledged property. Furthermore, the debt service coverage ratio must not fall below 120% in future. If the ratio falls below this threshold, a time deposit must be created to cover the dif erence and pledged to the bank or, alternatively, a portion of the loan must be repaid to restore the correct ratio. The loan covenants had been observed as of 31 December 2016, which the bank confi rmed by email on 10 March 2017.
The LTV ratio for the loan from Volksbank Mittweida eG comes to 52% of the lending value calculated by the bank. In the event that the LTV ratio is exceeded, among other things additional collateral must be provided and special repayments made within six months until the ratio is achieved again. Moreover a minimum annual net rent of €588,000 must be achieved. The conditions were complied with as of the reporting date. There are no other agreements regarding compliance with covenants.
The fi nancial liabilities are fully secured by mortgages. In addition, rent receivables have been assigned as collateral by all entities.
| in € thousand | Property liens / other collateral | 31/12/2016 | 31/12/2015 | |
|---|---|---|---|---|
| IC 12 | Land charge | Lease / Rental income | 2,500 | 2,500 |
| IC 15 | Land charge | Lease / Rental income | 8,100 | 8,100 |
| BBV 02 | Land charge | Lease / Rental income | 6,243 | 6,243 |
| BBV 08 | Land charge | Lease / Rental income | 23,008 | 23,008 |
| BBV 10 | Land charge | Lease / Rental income | 132,324 | 132,324 |
| BBV 14 | Land charge | Lease / Rental income / guarantee | 38,649 | 38,649 |
| Fair Value | Land charge | Pledging of fund shares/Lease/Rental income | 51,453 | 38,291 |
The trade payables are current liabilities which were incurred in connection with facility management and the maintenance and repair of the properties. All liabilities are due in up to one year.
| in € thousand | 31/12/2016 | 31/12/2015 |
|---|---|---|
| Non-current | ||
| Financial liabilities | ||
| Former non-controlling interests | 865 | 1,071 |
| Shortfall in pension plan | 19 | 5 |
| Total non-current liabilities | 884 | 1,076 |
| Current | ||
| Former non-controlling interests | 1,171 | 1,038 |
| Liabilities from the settlement of service charges | 693 | 396 |
| Other | 493 | 638 |
| Debtors with credit balances | 312 | 238 |
| Tax liabilities (VAT) | 153 | 547 |
| Interest liabilities | 69 | 355 |
| Deferred income | 66 | 69 |
| Remuneration of the Supervisory Board | 47 | 35 |
| Liabilities to non-controlling interests from acquisition of shares | – | 1 |
| Total current liabilities | 3,004 | 3,317 |
| Total other liabilities | 3,888 | 4,393 |
Liabilities to former non-controlling interests in subsidiaries consist of the obligation to pay out the non-controlling interest in capital on account of the respective partner retiring from the partnership.
| Development of provisions | |||
|---|---|---|---|
| in € thousand | Personnel | Audit/ consulting costs |
Total |
| As of 1 January 2016 | 423 | 320 | 743 |
| Additions | 371 | 65 | 436 |
| Utilised | (423) | (111) | (534) |
| As of 31 December 2016 | 371 | 274 | 645 |
The Group is liable in the case of three subsidiaries (BBV 08, BBV 10 and BBV 14) if the limited partners' liability of €2,801 thousand (2015: €2,044 thousand), €1,104 thousand (2015: €1,879 thousand) and €1,882 thousand (2015: €1,825 thousand), respectively, revives pursuant to Sec. 172 (4) HGB.
There are no fi nance leases. All rent agreements which the Group has entered into with tenants qualify as operating leases pursuant to IAS 17. The minimum future rental income is presented in note 6.
The o ces in Munich and Gräfelfi ng and a company car (until 28 February 2016) were leased during the reporting period. The lease expense for the company car amounted to €1 thousand (2015: €9 thousand).
| Classifi cation of net rental result | 2016 | 2015 | ||||
|---|---|---|---|---|---|---|
| Non-current | Non-current | |||||
| in € thousand | Investment property |
assets held for sale |
Total | Investment property |
assets held for sale |
Total |
| Rental income | 22,257 | 285 | 22,542 | 23,167 | 1,124 | 24,291 |
| Service charge income | 5,034 | 46 | 5,080 | 5,510 | 46 | 5,556 |
| Ground rent | (6) | – | (6) | (9) | – | (9) |
| Property related operating expenses | ||||||
| Investment property with which rental income was generated | (11,447) | (81) | (11,528) | (12,070) | (42) | (12,112) |
| Total net rental income | 15,838 | 250 | 16,088 | 16,598 | 1,128 | 17,726 |
| in € thousand | 2016 | 2015 |
|---|---|---|
| Energy costs and water consumption | 2,406 | 2,750 |
| Property management fees | 873 | 705 |
| Property tax | 810 | 865 |
| Servicing and operating technical systems | 619 | 493 |
| Garden maintenance/cleaning | 596 | 532 |
| Management contract costs | 540 | 206 |
| Security | 357 | 347 |
| Caretaker costs | 344 | 333 |
| Non-deductible input tax | 336 | 379 |
| Building cleaning | 331 | 318 |
| Insurance | 216 | 256 |
| Street cleaning/rubbish removal | 171 | 230 |
| Other operating expenses | 151 | 36 |
| Other | 149 | 6 |
| Other property costs | 112 | 158 |
| Advertising and promotional costs | 68 | 180 |
| Maintenance cost payments for partially-owned properties | – | 126 |
| Service charge expenses | 8,079 | 7,920 |
| Repair and maintenance costs | 2,173 | 2,940 |
| Letting costs | 639 | 508 |
| Technical building maintenance | 637 | 744 |
| Other property-related expenses | 3,449 | 4,192 |
| Total property-related operating expenses | 11,528 | 12,112 |
| in € thousand | 2016 | 2015 |
|---|---|---|
| Personnel expenses | 693 | 740 |
| Fund management fees | 514 | 846 |
| Non-deductible input tax | 354 | 445 |
| Legal and consulting fees | 345 | 1.880 |
| Stock market listing, Annual General Meeting and events | 271 | 334 |
| Trustee fees | 268 | 282 |
| Audit fees | 224 | 215 |
| Accounting | 138 | 143 |
| Travel and vehicle expenses | 128 | 43 |
| O ce expenses | 96 | 76 |
| Appraisals | 63 | 124 |
| Other | 53 | – |
| Remuneration (Supervisory Board, Advisory Board and general partner remuneration) | 14 | 102 |
| Amortisation, depreciation and impairment | 1 | – |
| Total general administrative expenses | 3,162 | 5,230 |
| in € thousand | 2016 | 2015 |
|---|---|---|
| Income | ||
| Cost refunds | 292 | 179 |
| Income from the redemption of liabilities from non-controlling interests | 215 | 1,298 |
| Other | 90 | 460 |
| Income from the bargain purchase of BBV 08 | – | 2,310 |
| Total income | 597 | 4,247 |
| Expenses | ||
| Other write-of s of receivables | (168) | (621) |
| Other | (94) | (121) |
| Allocation of specifi c valuation allowances on trade receivables | – | (268) |
| Allocation of specifi c valuation allowances on other receivables | – | (700) |
| Reversal/utilization of specifi c valuation allowances on trade receivables | 54 | 71 |
| Total expenses | (208) | (1,639) |
| Total other operating income (+) and expenses (-) | 389 | 2,608 |
| in € thousand | 2016 | 2015 |
|---|---|---|
| Net income from the disposal of investment property and non-current assets held for sale (purchase price) |
19,780 | 17,022 |
| Expenses in connection with the disposal of investment property and non-current assets held for sale |
452 | (231) |
| Carrying amounts | (19,780) | (16,820) |
| Total expenses in connection with the disposal of investment property and non-current assets held for sale |
(19,328) | (17,051) |
| Profi t/loss from the disposal of investment property and non-current assets held for sale | 452 | (29) |
These items consist of three (2015: fi ve) properties directly held by the Company and four (2015: two) properties held by subsidiaries for which both title and the risks and rewards incidental to ownership were transferred in 2016.
| in € thousand | 2016 | 2015 |
|---|---|---|
| Measurement gains | 4,293 | 9,655 |
| Measurement losses | (2,540) | (12,447) |
| Total measurement gains / losses | 1,753 | (2,792) |
The measurement result in the fi scal year stems from fair value measurement as of the reporting date; capitalised fi t-out costs of €8,251 were of set. There were measurement losses for 12 (2015: fi ve) of the properties directly held by the Company and for seven (2015: seven) properties held by its investments. There were measurement gains for two (2015: eight) of the properties directly held by the Company and for ten (2015: 15) properties held by its investments.
| in € thousand | 2016 | 2015 |
|---|---|---|
| Loans and swaps interest | 3,255 | 4,201 |
| Interest expense convertible bond | 356 | – |
| Total interest expenses | 3,611 | 4,201 |
| in € thousand | 2016 | 2015 |
|---|---|---|
| Salaries | 657 | 706 |
| Social security contributions | 36 | 34 |
| Total personnel expenses | 693 | 740 |
| thereof expenses for pension obligations | 12 | 15 |
Excluding the Management Board, the Company had three (2015: three) employees as an annual average. As of 31 December 2016, the number of employees came to three, excluding the Management Board.
Fees and services provided by the group auditors In 2016 the Group's auditor, Ernst & Young GmbH Wirtschat sprüfungsgesellschat , Munich, charged the following fees:
| in € thousand | 2016 | 2015 |
|---|---|---|
| Audits of fi nancial statements | 198 | 215 |
| Other attestation services | 5 | 286 |
| Other services | 21 | 22 |
| Total fees | 224 | 523 |
Basic earnings per share can be calculated as follows:
| 2016 | 2015 | ||
|---|---|---|---|
| Profi t/loss of the Group | in € thousand | 6,909 | 6,585 |
| Interest convertible bond | in € thousand | – | 359 |
| Net profi t adjusted for the ef ect of dilution | in € thousand | 6,909 | 6,944 |
| Weighted average number of shares for the calculation of the basic earnings | in pieces | 14,029,013 | 12,379,587 |
| Convertible shares | in pieces | – | 885,918 |
| Weighted average number of shares for the calculation of the diluted earnings | in pieces | 14,029,013 | 13,265,505 |
| Earnings per share (basic/diluted) | in € | 0.49/0.49 | 0.53/0.52 |
Basic earnings per share are calculated by dividing the net profi t for the year attributable to equity holders of the parent by the weighted average number of shares outstanding during the year.
Diluted earnings per share are calculated by dividing the net profi t attributable to equity holders of the parent (at er adjusting for interest on the convertible bond) by the weighted average number of shares outstanding during the year plus the weighted average number of shares that would result from the conversion of the convertible bond.
Fair value The following table presents the fair values of all fi nancial instruments as compared to their carrying amounts:
| Fair values of fi nancial instruments | 31/12/2016 | 31/12/2015 | ||
|---|---|---|---|---|
| in € thousand | Carrying amounts |
Fair values | Carrying amounts |
Fair values |
| Assets | ||||
| Trade receivables | 2,578 | 2,578 | 2,757 | 2,757 |
| Other receivables | 11,706 | 11,706 | 11,911 | 11,911 |
| Cash and cash equivalent | 16,776 | 16,776 | 16,028 | 16,028 |
| Total assets | 31,060 | 31,060 | 30,696 | 30,696 |
| Equity and liabilities | ||||
| Liabilities measured at amortized cost | ||||
| Non-controlling interests | 61,708 | 61,708 | 61,160 | 61,160 |
| Financial liabilities | 131,680 | 132,097 | 144,113 | 143,620 |
| Trade payables | 3,233 | 3,233 | 2,679 | 2,679 |
| Other liabilities | 3,888 | 3,888 | 4,393 | 4,393 |
| Total equity and liabilities | 200,509 | 200,926 | 212,345 | 211,852 |
Cash and cash equivalents, trade receivables and trade payables as well as other receivables and liabilities generally have short terms. As a result their carrying amounts correspond to their fair values. Financial liabilities at fair value through profi t or loss are measured on the basis of the underlying cash fl ows using the interest curves applying on the reporting date.
Financial risks The Group is exposed to the following fi nancial risks as a result of its activities: market risks, interest rate risk, credit risks and liquidity risks. There are no foreign exchange risks. The risk management of the Group concentrates on the risks associated with the fi nancial markets and is geared towards keeping the impact of such risks on its fi nancial position and performance as low as possible.
Risk management is performed centrally at Group level based on the guidelines issued by the Management Board and in close cooperation with the central fi nance department of the IC Immobilien Group. This department acts as a service provider and assists the subsidiaries of the Group with the calculation, measurement and hedging of fi nancial risks.
Most of the Group's interest rate risks arise from its fi nancial liabilities. The Group is exposed to the risk of higher interest rates on its fl oating-rate liabilities and when fi xed-interest loans are rearranged at higher rates when they expire (cash fl ow risks). To hedge these risks, interest swaps and interest caps were entered into in some cases in previous years. There were no more interest caps as of the reporting date 31 December 2016.
If the interest rates had been one percentage point higher or lower in the period, the net income of the Group and its equity would have been €558 thousand lower (2015: €638 thousand lower) or higher respectively. This ef ect stems from interest expenses for fl oating-rate loans less the interest on bank deposits.
An increase in the discount and cap rates would lead to a reduction in the fair value of investment property. An increase in these rates would lead to a corresponding increase in the fair value of investment property.
Fixed interest liabilities have an inherent risk of their fair value increasing. However, this risk does not af ect either the statement of fi nancial position or the statement of income as fi nancial liabilities are not measured at fair value but at amortised cost. The risk does have signifi cance though if the liability is repaid prematurely (e.g. upon sale of the property for which the loan was taken out). The Group has decided not to hedge against this risk.
The Group regularly reviews to what extent it is exposed to interest rate risks. To do this, various scenarios are modelled in which the possibilities of refi nancing, renewing existing arrangements or hedging the interest risk are considered.
c) Credit risks Credit risks arise from receivables from tenants, respites granted on purchase price receivables and investments of free cash. The Group has guidelines under which lease agreements may only be entered into with parties who can demonstrate immaculate credit ratings. The credit ratings are monitored continuously. The Group has a wide tenant base. In fi scal year 2016, rental losses, calculated on the basis of additions to specifi c bad debt allowances, amounted to 0.0% (2015: 0.90%) of rental income and service charge income.
Respites of purchase price receivables are generally only issued in return for security. Legal title is not transferred until the full payment is received.
Derivative fi nancial instruments and cash investments are only entered into with fi nancial institutions with top ratings.
The maximum credit risk for each category of fi nancial instrument is limited to the carrying amount of the fi nancial assets recognised in the statement of fi nancial position.
d) Liquidity risks
Liquidity management Liquidity is managed responsibly and this includes maintaining a base level of cash and cash equivalents. Ef ort is made to be as fl exible as possible when procuring liquidity. The Management Board monitors liquidity and discusses the situation with the Supervisory Board at regular intervals.
The following presentation, which is used by the Management Board when managing liquidity, shows the due dates of the liabilities carried on the reporting date:
| 31/12/2016 | 31/12/2015 | |||||||
|---|---|---|---|---|---|---|---|---|
| in € thousand | due within 1 year |
due between 1 and 2 years |
due between 3 and 5 years |
due at er 5 years |
due within 1 year |
due between 1 and 2 years |
due between 3 and 5 years |
due at er 5 years |
| Non-controlling interests | – | – | – | 61,708 | – | – | – | 61,249 |
| Financial liabilities | 9,275 | 6,287 | 63,762 | 52,356 | 18,118 | 6,889 | 60,952 | 58,154 |
| Provisions | 645 | – | – | – | 743 | – | – | – |
| Trade payables | 3,233 | – | – | – | 2,679 | – | – | – |
| Other liabilities | 3,004 | 475 | 397 | 12 | 3,317 | 1,076 | – | – |
| Total maturities | 16,157 | 6,762 | 64,159 | 114,076 | 24,857 | 7,965 | 60,952 | 119,403 |
The amounts listed refer solely to the required debt servicing (repayments and interest).
Capital management The Group pursues a number of objectives within the framework of its capital management: First and foremost, the fi nancial base should be retained, the ability to meet debt servicing requirements ensured and a profi t generated under German GAAP, from which dividends can be paid.
There were no changes to the Group's approach to capital management during the reporting period.
The fi nancial position of the Group is measured on the level of cash and cash equivalents and the Group's equity ratio. The equity ratio indicates the ratio between the equity and the total equity and liabilities reported in the consolidated statement of fi nancial position.
| Consolidated equity ratio | |||
|---|---|---|---|
| 31/12/2016 | 31/12/2015 | ||
| Equity | in € thousand | 120,590 | 117,278 |
| Total assets | in € thousand | 321,744 | 330,366 |
| Equity ratio | in % | 37.5 | 35.5 |
The Group's ability to steer its capital structures is limited, apart from the possibility of retaining profi ts at its subsidiaries, as at least 90% of the net profi t of Fair Value REIT-AG pursuant to German GAAP must be distributed. Thus, the available instruments for improving the capital structure are to issue new shares (capital increase) and to sell assets in order to reduce the Group's debt.
Another signifi cant goal of capital management is to meet the capital adequacy requirements of the REITG as this is a prerequisite for exemption from corporate income tax and trade tax for the long term. According to Sec. 15 REITG, equity must amount to at least 45% of the immovable property as defi ned by the REITG.
| in € thousand | 31/12/2016 | 31/12/2015 |
|---|---|---|
| Equity acc. to consolidated statement of fi nancial position | 120,590 | 117,278 |
| Non-controlling interests | 61,708 | 61,160 |
| Equity purusant to Sec. 15 REITG | 182,298 | 178,438 |
| Immovable assets | ||
| Investment property | 286,942 | 287,794 |
| Non-current assets held for sale | 3,600 | 11,750 |
| Total immovable assets | 290,542 | 299,544 |
| Equity ratio pursuant to Sec. 15 REITG | 62.7% | 59.6% |
The Group holds property in Fair Value REIT-AG and its subsidiaries. The organisational and management structure of the Group corresponds to these two investment forms. Consequently, there are two divisions, "direct investment" and "subsidiaries", with each subsidiary reporting separately. In addition, investments are held in fi ve Geschaet sfuehrungs-GmbH & KGs (limited management partnerships) which are not allocated to these two segments on grounds of immateriality. The only active territory of the Group is "Germany". To improve the clarity of the presentation, segment reporting is presented in both aggregate form ("subsidiaries") and individual at the level of the individual funds.
Segment sales (rental income plus income from service charges) and the segment results can be presented as follows:
| 2016 | 2015 | |||
|---|---|---|---|---|
| in € thousand | Segment revenues |
Segment results |
Segment revenues |
Segment results |
| Direct investments | 6,051 | 4,262 | 4,434 | 2,369 |
| Subsidiaries | 21,572 | 12,978 | 25,413 | 7,436 |
| Total segment revenue and profi t/loss | 27,623 | 17,240 | 29,847 | 9,805 |
| Consolidation entries recognised through profi t or loss | – | 57 | – | 3,692 |
| Central administrative expenses and other | – | (1,787) | – | (1,215) |
| Net interest expense | – | (3,375) | – | (4,201) |
| Share of profi t/loss attributable to non-controlling interests | – | (5,226) | – | (1,496) |
| Profi t/loss of the Group | – | 6,909 | – | 6,585 |
Segment revenue is generated solely with tenants external to the Group. There is no inter-segment revenue.
Rental income accounting for more than 10% of total revenue was generated with the following tenants:
| in € thousand | 2016 | 2015 |
|---|---|---|
| Main tenant 1 (Direct investments segment) | 2,214 | 3,976 |
| Main tenant 2 (Subsidiaries segment) | 1,458 | – |
| Other between 5% and 10% | 1,361 | 5,720 |
| Other under 5% each | 22,589 | 20,151 |
| Total rental revenue | 27,622 | 29,847 |
Segment revenue breaks down by property and main use as follows:
| 2016 | 2015 | |||
|---|---|---|---|---|
| in € thousand | Direct investments |
Subsidiaries | Direct investments |
Subsidiaries |
| O ce | 3,893 | 6,335 | 3,050 | 6,086 |
| Retail | – | 15,237 | 30 | 18,507 |
| Other | 2,157 | – | 1,354 | 820 |
| Total revenue | 6,050 | 21,572 | 4,434 | 25,413 |
The segment results of the two segments are calculated prior to central administrative expenses, net interest expenses and the profi t allocable to non-controlling interests. This indicator is reported to the chief operating decision maker of the Group to assist in the allocation of resources to the particular segment and to measure its profi tability.
The following results from the measurement of investment property and the sale of such property have been included in the segment results:
| 2016 | 2015 | |||
|---|---|---|---|---|
| in € thousand | Direct investments |
Subsidiaries | Direct investments |
Subsidiaries |
| Measurement gains | 1,070 | 3,223 | 2,607 | 7,048 |
| Measurement losses | (840) | (1,700) | (490) | (11,957) |
| 230 | 1,523 | 2,117 | (4,909) | |
| Gains (losses) on disposal | (26) | 478 | 9 | (38) |
| 204 | 2,001 | 2,126 | (4,947) |
The following table shows the profi t and loss account of the segments in more detail. The "subsidiaries" segment is broken down into the individual entities. In the reconciliation column, intragroup ef ects are of set and immaterial general partners presented.
| Income statement by segments 2016 | Direct investments |
||||
|---|---|---|---|---|---|
| in € thousand | FV AG | IC 07 | IC 12 | IC 13 | |
| Rental income | 4,945 | 745 | 597 | (2) | |
| Service charge income | 1,106 | 304 | 375 | 58 | |
| Segment revenue | 6,051 | 1,049 | 972 | 56 | |
| Ground rent | – | – | (1) | – | |
| Service charge expenses | (1,444) | (431) | (461) | 44 | |
| Other property operating expenses | (514) | (289) | (70) | 7 | |
| Segment-related administrative expenses | (94) | (60) | (52) | (35) | |
| Other opeating expenses and income (net) | 59 | 67 | 1 | (7) | |
| Gain from disposal of investment properties | (26) | – | – | – | |
| Measurement gains | 1,070 | 40 | – | – | |
| Measurement losses | (840) | – | (400) | – | |
| Segment profi t | 4,262 | 376 | (11) | 65 | |
| Central administrative expenses | (1,777) | – | – | – | |
| Other expenses | – | – | – | – | |
| Profi t/loss of investment accounted for using the equity method | – | – | – | – | |
| Other income from participations | 6,306 | – | – | – | |
| Net interest expense | (898) | (8) | (80) | – | |
| Share of profi t/loss attributable to non-controlling interests | – | – | – | – | |
| Income taxes | – | – | – | – | |
| Net income for 2016 | 7,893 | 368 | (91) | 65 | |
| Subsidiaries | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Group | Reconciliation | Total | BBV 14 | BBV 10 | BBV 08 | BBV 06 | BBV 02 | IC 15 | |
| 22,542 | (1) | 17,598 | 4,892 | 6,155 | 2,226 | 1,018 | – | 1,967 | |
| 5,080 | – | 3,974 | 1,421 | 1,475 | (1) | 90 | – | 252 | |
| 27,622 | (1) | 21,572 | 6,313 | 7,630 | 2,225 | 1,108 | – | 2,219 | |
| (6) | – | (6) | – | – | – | (4) | – | (1) | |
| (8,079) | (2) | (6,633) | (1,706) | (2,716) | (512) | (289) | (5) | (557) | |
| (3,449) | – | (2,935) | (508) | (1,116) | (135) | (172) | – | (652) | |
| (1,385) | 71 | (1,362) | (316) | (305) | (233) | (155) | (8) | (198) | |
| 389 | (34) | 364 | (26) | 174 | 26 | (24) | – | 153 | |
| 452 | 704 | (226) | – | – | (236) | 10 | – | – | |
| 4,293 | (681) | 3,904 | 270 | 1,044 | 300 | – | – | 2,250 | |
| (2,540) | – | (1,700) | (100) | (381) | (749) | (70) | – | – | |
| 17,297 | 57 | 12,978 | 3,927 | 4,330 | 686 | 404 | (13) | 3,214 | |
| (1,777) | – | – | – | – | – | – | – | – | |
| – | – | – | – | – | – | – | – | – | |
| – | – | – | – | – | – | – | – | – | |
| – | (6,306) | – | – | – | – | – | – | – | |
| (3,375) | 3 | (2,480) | (471) | (1,400) | (320) | – | – | (201) | |
| (5,226) | (5,226) | – | – | – | – | – | – | – | |
| (10) | (10) | – | – | – | – | – | – | – | |
| 6,909 | (11,482) | 10,498 | 3,456 | 2,930 | 366 | 404 | (13) | 3,013 | |
| Income statement by segments 2015 | Direct investments |
||||
|---|---|---|---|---|---|
| in € thousand | FV AG | IC 07 | IC 12 | IC 13 | |
| Rental income | 3,797 | 716 | 670 | 939 | |
| Service charge income | 637 | 322 | 337 | 324 | |
| Segment revenue | 4,434 | 1,038 | 1,007 | 1,236 | |
| Service charge expenses | (1,031) | (386) | (410) | (418) | |
| Other property operating expenses | (189) | (175) | (156) | (260) | |
| Segment-related administrative expenses | (2,239) | (68) | (39) | (306) | |
| Other operating expenses and income (net) | (732) | (40) | (16) | (10) | |
| Gain from disposal of investment properties | 9 | – | – | (950) | |
| Measurement gains | 2,607 | 470 | 310 | – | |
| Measurement losses | (490) | – | – | – | |
| Segment profi t / loss | 2,369 | 839 | 696 | (681) | |
| Central administrative expenses | (1,215) | – | – | – | |
| Other expenses | – | – | – | – | |
| Profi t/loss of investments accounted for using the equity method | – | – | – | – | |
| Other income from investments | 3,110 | – | – | – | |
| Net interest expenses | (970) | (21) | (99) | (293) | |
| Share of profi t/loss attributable to non-controlling interests | – | – | – | – | |
| Income tax | – | – | – | – | |
| Net income for 2015 | 3,294 | 818 | 597 | (974) |
| 31/12/2016 | 31/12/2015 | |||
|---|---|---|---|---|
| in € thousand | Assets | Liabilities | Assets | Liabilities |
| Direct investments | 81,565 | – | 76,095 | 2,900 |
| Subsidiaries | 242,465 | 6,552 | 254,660 | 5,177 |
| Total segment assets/segment liabilities | 324,030 | 6,552 | 330,755 | 8,077 |
| Non-allocated assets/liabilities/consolidation | (2,286) | 315,192 | (389) | 322,289 |
| Total Group assets/group liabilities | 321,744 | 321,744 | 330,366 | 330,366 |
The assets of the segments consist primarily of investment property, receivables and cash and cash equivalents. The assets of the "subsidiaries" segment also include non-current assets held for sale (note 8). The assets not allocated to segments in the reporting period consist of intangible assets and the cash and cash equivalents carried by the Geschaet sfuehrungs-GmbH Co. KGs and the Komplementaer-GmbH. Segment liabilities consist of the operating liabilities. Financial liabilities, derivative fi nancial instruments and non-controlling interests are presented under the liabilities not allocated to any particular segment.
| Subsidiaries | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| IC 15 | BBV 02 | BBV 03 | BBV 06 | BBV 08 | BBV 10 | BBV 14 | Total | Reconciliation | Group |
| 2,320 | (1) | 91 | 1,384 | 1,851 | 7,497 | 5,027 | 20,494 | – | 24,291 |
| 220 | – | 14 | 287 | 74 | 2,322 | 1,010 | 4,910 | – | 5,547 |
| 2,540 | (1) | 105 | 1,671 | 1,925 | 9,819 | 6,037 | 25,404 | – | 29,838 |
| (406) | 16 | (77) | (497) | (50) | (2,983) | (1,677) | (6,888) | (1) | (7,920) |
| (315) | – | (56) | (265) | (138) | (1,446) | (1,196) | (4,007) | 4 | (4,192) |
| (123) | (21) | (135) | (232) | (217) | (391) | (313) | (1,845) | 69 | (4,015) |
| 52 | – | 16 | 140 | 36 | (112) | (229) | (163) | 3,502 | 2,607 |
| (1,080) | (20) | (398) | (5) | – | (13) | – | (2,466) | 2,428 | (29) |
| 510 | – | – | 193 | 845 | 1,720 | 2,100 | 6,148 | – | 8,755 |
| – | – | – | (80) | – | (7,847) | (820) | (8,747) | (2,310) | (11,547) |
| 1,178 | (26) | (545) | 925 | 2,401 | (1,253) | 3,902 | 7,436 | 3,692 | 13,497 |
| – | – | – | – | – | – | – | – | – | (1,215) |
| – | – | – | – | – | – | – | – | – | – |
| – | – | – | – | – | – | – | – | – | – |
| – | – | – | – | – | – | – | – | (3,110) | – |
| (381) | (1) | – | (38) | (289) | (1,633) | (477) | (3,232) | 1 | (4,201) |
| – | – | – | – | – | – | – | – | (1,496) | (1,496) |
| – | – | – | – | – | – | – | – | – | – |
| 797 | (27) | (545) | 887 | 2,112 | (2,886) | 3,425 | 4,204 | (913) | 6,585 |
The following table shows all assets and liabilities allocated and not allocated to the segments in more detail. The "Subsidiaries" segment has been broken down by fund company.
| Assets and liabilities by segments 2016 | Direct investments |
|||||
|---|---|---|---|---|---|---|
| in € thousand | FV AG | IC 07 | IC 12 | IC 13 | IC 15 | |
| Property, plant and equipment and in intangible assets | 43 | – | 24 | – | – | |
| Investment property | 64,650 | 9,140 | 7,480 | – | 25,600 | |
| Non-current assets held for sale | – | – | – | – | – | |
| Trade receivables | 481 | 190 | 108 | 69 | 62 | |
| Income tax receivables | 5 | – | – | – | – | |
| Other receivables and assets | 12,464 | – | 13 | 87 | 69 | |
| Cash and cash equivalent | 3,922 | 26 | 938 | 44 | 1,290 | |
| Subtotal segment assets | 81,565 | 9,356 | 8,563 | 200 | 27,021 | |
| Shares in subsidiaries | 68,766 | – | – | – | – | |
| Investments accounted for using the equity method | – | – | – | – | – | |
| Total assets | 150,331 | 9,356 | 8,563 | 200 | 27,021 | |
| Provisions | (447) | (11) | (9) | (9) | (20) | |
| Trade payables | (179) | (69) | (43) | (3) | (85) | |
| Other liabilities | (994) | (4) | (23) | (83) | (38) | |
| Subtotal segment liabilities | (1,620) | (84) | (75) | (95) | (143) | |
| Non-controlling interests | – | – | – | – | – | |
| Financial liabilities | (30,201) | (50) | (1,831) | – | (7,269) | |
| Total liabilities | (31,821) | (134) | (1,906) | (95) | (7,412) | |
| Net assets as of 31 December 2016 | 118,510 | 9,222 | 6,657 | 105 | 19,609 | |
| Overview of maturities of fi nancial liabilities | ||||||
| Non-current | (29,086) | – | – | – | (7,042) | |
| Current | (1,115) | (50) | (1,831) | – | (227) | |
| Financial liabilities | (30,201) | (50) | (1,831) | – | (7,269) |
| Subsidiaries | ||||||||
|---|---|---|---|---|---|---|---|---|
| Group | Reconciliation | Total | BBV 14 | BBV 10 | BBV 08 | BBV 06 | BBV 02 | |
| 137 | 70 | 24 | – | – | – | – | – | |
| 286,942 | – | 222,292 | 71,270 | 78,802 | 30,000 | – | – | |
| 3,600 | – | 3,600 | – | – | – | 3,600 | – | |
| 2,578 | – | 2,097 | 318 | 1,198 | 29 | 123 | – | |
| 5 | – | – | – | – | – | – | – | |
| 11,706 | (2,447) | 1,689 | 66 | 30 | 16 | 47 | 1,361 | |
| 16,776 | 91 | 12,763 | 3,231 | 1,193 | 2,531 | 3,483 | 27 | |
| 321,744 | (2,286) | 242,465 | 74,885 | 81,223 | 32,576 | 7,253 | 1,388 | |
| – | (68,766) | – | – | – | – | – | – | |
| – | – | – | – | – | – | – | – | |
| 321,744 | (71,052) | 242,465 | 74,885 | 81,223 | 32,576 | 7,253 | 1,388 | |
| (645) | (23) | (175) | (28) | (24) | (33) | (33) | (8) | |
| (3,233) | (7) | (3,047) | (92) | (1,224) | (1,344) | (179) | (8) | |
| (3,888) | 436 | (3,330) | (993) | (1,402) | (482) | (275) | (30) | |
| (7,766) | 406 | (6,552) | (1,113) | (2,650) | (1,859) | (487) | (46) | |
| (61,708) | (61,708) | – | – | – | – | – | – | |
| (131,680) | 2,250 | (103,729) | (31,642) | (53,300) | (8,556) | – | (1,081) | |
| (201,154) | (59,052) | (110,281) | (32,755) | (55,950) | (10,415) | (487) | (1,127) | |
| 120,590 | (130,104) | 132,184 | 42,130 | 25,273 | 22,161 | 6,766 | 261 | |
| (122,405) | 2,200 | (95,519) | (30,442) | (50,287) | (7,748) | – | – | |
| (9,275) | 50 | (8,210) | (1,200) | (3,013) | (808) | – | (1,081) | |
| (131,680) | 2,250 | (103,729) | (31,642) | (53,300) | (8,556) | – | (1,081) |
| Assets and liabilities by segments 2015 | Direct investments |
|||||
|---|---|---|---|---|---|---|
| in € thousand | FV AG | IC 07 | IC 12 | IC 13 | IC 15 | |
| Property, plant and equipment and intangible assets | 10 | – | 24 | – | – | |
| Investment property | 62,790 | 9,100 | 7,880 | – | 23,350 | |
| Non-current assets held for sale | 650 | – | – | – | – | |
| Trade receivables | 331 | 229 | 52 | 112 | 80 | |
| Income tax receivables | 22 | – | – | – | – | |
| Other receivables and assets | 10,541 | – | 13 | 49 | 114 | |
| Cash and cash equivalent | 1,751 | 107 | 806 | 109 | 1,850 | |
| Segment assets subtotal | 76,095 | 9,436 | 8,775 | 270 | 25,394 | |
| Shares in subsidiaries | 68,754 | – | – | – | – | |
| Total assets | 144,849 | 9,436 | 8,775 | 270 | 25,394 | |
| Provisions | (516) | (9) | (6) | (13) | (15) | |
| Trade payables | (1,128) | (66) | (71) | (66) | (123) | |
| Other liabilities | (1,256) | (77) | (43) | (126) | (90) | |
| Subtotal segment liabilities | (2,900) | (152) | (120) | (205) | (228) | |
| Non-controlling interests | – | – | – | – | – | |
| Financial liabilities | (27,735) | (450) | (1,907) | – | (7,490) | |
| Derivative fi nancial instruments | – | – | – | – | – | |
| Total liabilities | (30,635) | (602) | (2,207) | (205) | (7,718) | |
| Net assets as of 31 December 2015 | 114,214 | 8,834 | 6,748 | 65 | 17,676 | |
| Overview of maturities of fi nancial liabilities | ||||||
| Non-current | (18,529) | (450) | – | – | (7,269) | |
| Current | (9,206) | – | (1,907) | – | (221) | |
| Financial liabilities | (27,735) | (450) | (1,907) | – | (7,490) |
| 2016 | 2015 | |||
|---|---|---|---|---|
| in € thousand | Investments | Amortisation, depreciation and impairment |
Investments | Amortisation, depreciation and impairment |
| Direct investments | ||||
| Investment property | 86 | – | 1,100 | – |
| Property, plant and equipment and intangible assets | 36 | (1) | 1 | (3) |
| Total direct investments | 122 | (1) | 1,101 | (3) |
| Subsidiaries | ||||
| Investment property | 8,165 | – | – | – |
| Total subsidiaries | 8,165 | – | – | – |
| Total investments and amortisation, depreciation and impairment | 8,287 | (1) | 1,101 | (3) |
| Subsidiaries | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Group | Reconciliation | Total | BBV 14 | BBV 10 | BBV 08 | BBV 06 | BBV 03 | BBV 02 | |
| 104 | 70 | 24 | – | – | – | – | – | – | |
| 287,794 | – | 225,004 | 71,100 | 74,523 | 25,900 | 13,151 | – | – | |
| 11,750 | – | 11,100 | – | – | 11,100 | – | – | – | |
| 2,757 | 14 | 2,412 | 210 | 1,459 | 134 | 136 | – | – | |
| 22 | – | – | – | – | – | – | – | – | |
| 11,911 | (551) | 1,921 | 3 | 10 | 287 | 84 | – | 1,361 | |
| 16,028 | 78 | 14,199 | 3,170 | 3,262 | 3,619 | 1,041 | 192 | 43 | |
| 330,366 | (389) | 254,600 | 74,483 | 79,254 | 41,040 | 14,412 | 192 | 1,404 | |
| – | (68,754) | – | – | – | – | – | – | – | |
| 330,366 | (69,143) | 254,600 | 74,483 | 79,254 | 41,040 | 14,412 | 192 | 1,404 | |
| (743) | (6) | (221) | (28) | (21) | (14) | (44) | (66) | (5) | |
| (2,679) | 36 | (1,587) | (222) | (829) | (114) | (74) | (14) | (8) | |
| (4,393) | 232 | (3,369) | (912) | (1,448) | (480) | (117) | (40) | (36) | |
| (7,815) | 262 | (5,177) | (1,162) | (2,298) | (608) | (235) | (120) | (49) | |
| (61,160) | (61,160) | – | – | – | – | – | – | – | |
| (144,113) | 450 | (116,828) | (32,824) | (54,500) | (18,576) | – | – | (1,081) | |
| – | – | – | – | – | – | – | – | – | |
| (213,088) | (60,448) | (122,005) | (33,986) | (56,798) | (19,184) | (235) | (120) | (1,130) | |
| 117,278 | (129,591) | 110,799 | 40,497 | 22,456 | 21,856 | 14,177 | 72 | 274 | |
| – | – | – | (16,999) | (51,674) | (31,524) | (107,916) | 450 | (125,995) |
|---|---|---|---|---|---|---|---|---|
| (1,081) | – | – | (1,577) | (2,826) | (1,300) | (8,912) | – | (18,118) |
| (1,081) | – | – | (18,576) | (54,500) | (32,824) | (16,828) | 450 | (144,113) |
Related parties Related parties of the Group are DEMIRE with 77.70% of the voting rights (10,963,878 voting rights).
| in € | 2016 | 2015 |
|---|---|---|
| Fixed remuneration | ||
| Fixed salary | 170,833 | 220,000 |
| Payments in kind and other | 10,642 | 12,178 |
| Performance-based remuneration | 141,411 | 214,362 |
| Remuneration as defi ned by Sec. 285 No. 9 HGB | 322,886 | 446,540 |
| Expenses pension obligations | 2,797 | 12,533 |
| Total | 325,683 | 459,073 |
Remuneration in the previous year relates exclusively to the CEO Frank Schaich and breaks down as follows:
| in € thousand | 2016 | 2015 |
|---|---|---|
| Short-term benefi ts | 326 | 459 |
| Post employment benefi ts | 226 | – |
| Total remuneration of the Management Board | 552 | 459 |
On 1 March 2016, the Supervisory Board of the Company extended the current management board appointment of Mr. Schaich until 31 January 2019 and the existing service agreement was mutually terminated as of 29 February 2016. In this context, the phantom stock outstanding as of the reporting date and the variable remuneration due upon termination of this contract of 0.2% of the gain in the market capitalisation of the Company since 1 October 2012 as per the fi gure reported in the statement of fi nancial position as of 31 December 2015 were settled, while actual payment was made on 31 March 2016.
It was also agreed that the dividend-based variable remuneration for 2015 and the pro rata temporis component for 2016 would be fully paid out in cash when due. In the event that the Annual General Meeting does not pass any resolutions on dividends in 2016 and 2017, payment is ef ected on the basis of a notional dividend of €0.25 per participating share.
Remuneration of the Management Board member Frank Schaich was paid in the fi scal year for January and February 2016 in line with his employment contract with the Company, which was rescinded ef ective end of February 2016. Due to his additional appointment as a management board member of DEMIRE, ef ective 1 March 2016 Mr. Schaich was remunerated under his management board service agreement with DEMIRE. 70% of the short-term remuneration components and fringe benefi ts agreed therein were borne by the Company under a cost allocation agreement between the Company and DEMIRE. The same applies for the settlement amounts for the short-term contractual and post-contractual remuneration components and fringe benefi ts agreed in the termination agreement between Frank Schaich and DEMIRE dated 31 October 2016.
Please see the comments in the section on remuneration in the management report for more details of the remuneration paid to members of the Management Board.
Loans and advances No loans or advances were granted to the management board. Likewise, no contingent liabilities were entered into on behalf of the management board. There is also no pension commitment or share-based payment dif erent to that described above.
Remuneration of the Supervisory Board In fi scal year 2015, the members of the Supervisory Board were granted short-term benefi ts totalling €48 thousand (2014: €35 thousand). No loans or advances were granted to members of the Supervisory Board. Likewise, no contingent liabilities were entered into on behalf of members of the Supervisory Board.
Supervisory Board and Management Board The members of the Supervisory Board of Fair Value REIT-AG, their activities outside the company and their appointments to the boards of other companies over the last fi ve years are listed in the following summary.
| Name Function onthe Supervisory Board |
Member since | domestic and foreign entities | Main activity outside the Company as well as additional activities as governing body in comparable |
|---|---|---|---|
| Rolf Elgeti Chairman of the Supervisory Board from 02/02/2015) |
from 01/02/2015 |
until 10/2014 CEO of TAG Immobilien AG, Hamburg since 11/2014 Chairman of the Supervisory Board of TAG Immobilien AG, Hamburg since 11/2014 Founder and general partner of Obotritia Capital KGaA, Potsdam since 06/2015 Chairman of the Supervisory Board of 1801 Deutsche Leibrenten AG since 07/2016 Member of the Board of Social Commerce SE |
|
| Markus Drews Deputy Chairman of the Supervisory Board |
from 01/03/2016 |
since 12/2014 Member of the Executive Board of DEMIRE Deutsche Mittelstand Real Estate AG since 04/2016 Deputy Chairman of the Supervisory Board of BF Direkt AG, Stuttgart |
|
| Prof. Andreas Steyer | from 01/03/2016 |
since 04/2013 Member of the Executive Board (CEO) of DEMIRE Deutsche Mittelstand Real Estate AG |
|
| Prof. Dr. Heinz Rehkugler Chairman of the Supervisory Board (until 02/02/2015) Member from 02/02/2015 |
from 10/2007 until 28/02/2016 |
seit 1997 seit 2002 |
University professor (emeritus 2009) Deputy Chairman of the Supervisory Board of DIA Consulting AG, Freiburg |
| Dr. Oscar Kienzle Deputy Chairman of the Supervisory Board |
from 07/2007 until 29/02/2016 |
until 04/2013 | since 07/2009 CEO of Günther Graf von Hardenberg Stit ung, Karlsruhe until 08/2011 CEO of IC Immobilien Holding AG from 08/2011 Chairman of the Supervisory Board of IC Immobilien Holding AG since 05/2013 Chairman of the Supervisory Board of GIEAG Immobilien AG |
| Management Board |
| Name | Age | Appointed as fi rst time as of | Currently appointed until |
|---|---|---|---|
| Frank Schaich, CEO | 57 | 17/09/2007 | 31/03/2017 |
| Patrick Kaiser, CFO | 41 | 01/11/2016 | 31/10/2019 |
On 26 January 2017 the Management Board and the Supervisory Board issued a declaration of compliance pursuant to Sec. 161 AktG. The declaration was made permanently available to the shareholders on the Company's website (http://www.fvreit.de/en/investor-relations/corporate-governance/declaration-ofconformity/declaration-of-conformity.html).
Graefelfi ng, 27 March 2017
Fair Value REIT-AG
Frank Schaich Patrick Kaiser
Consolidated fi nancial statements 97 Notes to the consolidated fi nancial
To the best of our knowledge, we declare that, according to the principles of proper consolidated reporting applied, the consolidated fi nancial statements provide a true and fair view of the Group's net assets, fi nancial position and results of operations, that the Group management interim report presents the Group's business including the results and the Group's position such as to provide a true and fair view and that the major opportunities and risks of the Group's anticipated growth for the remaining fi scal year are described.
Graefelfi ng, 27 March 2017
Fair Value REIT-AG
Frank Schaich, CEO Patrick Kaiser, CFO
We have audited the consolidated fi nancial statements for Fair Value REIT-AG, Munich, comprising the balance sheet, statement of comprehensive income, income statement, statement of changes in shareholders' equity, cash fl ow statement and notes to the fi nancial statements as well as the Group management report for the fi scal year from 1 January 2016 to 31 December 2016. The preparation of the consolidated fi nancial statements and the consolidated management report in accordance with IFRSs, as they are to be applied in the EU, and the supplementary provisions of Section 315 a (1) of the Handels gesetzbuch (HGB – German Commercial Code) are the responsibility of the company's legal representatives. Our responsibility is to express an opinion, based on our audit, on the annual consolidated fi nancial statements and on the consolidated management report based on our audit.
We conducted our audit of the consolidated fi nancial statements in accordance with Section 317 of the HGB and German generally accepted standards for the audit of fi nancial statements promulgated by the Institut der Wirtschat sprüfer (IDW). Those standards require that we plan and perform the audit such that misstatements materially af ecting the presentation of the net assets, fi nancial position and results of operations in the consolidated fi nancial statements in accord ance with the applicable fi nancial report ing framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The ef ectiveness of the internal control system and the evidence supporting the disclosures in the consolidated fi nancial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual fi nancial state ments of those entities included in the consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and signifi cant estimates made by management, as well as evaluating the over all presentation of the consolidated fi nancial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion.
Our audit has not led to any reservation.
In our opinion, based on the fi ndings of our audit, the consolidated fi nancial statements comply with IFRSs as adopted by the EU and the additional requirements of german commercial law pursuant to section 315 a (1) of the HGB, and give a true and fair view of the net assets, fi nancial position and results of operations of the group in accordance with these requirements. The group management report is consistent with the consolidated fi nancial statements and as a whole provides a suitable view of the Group's position and suitably presents the opportunities and risks of future development.
Munich, 27 March 2017
Ernst & Young GmbH Wirtschat sprüfungsgesellschat
Horbach Ehrnboeck Auditor Auditor
100 Supervisory Board and Management Board 102 Report of the Supervisory Board 105 Corporate governance report
Rolf Elgeti (Chairman of the Supervisory Board) Member of the Supervisory Board since 02/2015 Term of appointment until the General Meeting in 2020
Principal activity outside the company, also serving as a director in similar domestic and foreign businesses:
| since 11/2014 | Founder and general partner of Obotritia Capital KGaA, Potsdam |
|---|---|
| since 11/2014 | Chairman of the supervisory board of TAG Immobilien AG, Hamburg |
| since 06/2015 | Chairman of the supervisory board of 1801 Deutsche Leibrenten AG |
| since 07/2016 | Member of the Board of Social Commerce SE |
| further Mr. Elgeti is a member of the Advisory Board of Laurus Property Partners |
Rolf Elgeti, born in Rostock in 1976, is a business studies graduate and began his career in London where he worked for many years as an analyst and equity strategist, including a period as chief strategist for ABM AMRO. In the period from 2003, he also founded and managed various German real estate investment companies. In July 2009, he took over as CEO of TAG Immobilien AG, an MDAX-listed real estate company at er having served on the company's supervisory board from October 2008. In November 2014, Mr. Elgeti transferred to the supervisory board, took the chair of that board and founded Obotritia Capital KGAA, an investment company in the real estate sector specialised in the German commercial property market.
Markus Drews (Deputy Chairman of the Supervisory Board) Member of the Supervisory Board since 03/2016 Term of appointment due to run until the General Meeting in 2021
Principal activity outside the company, also serving as a director in similar domestic and foreign businesses:
since 12/2014 Member of the executive board of DEMIRE Deutsche Mittelstand Real Estate AG since 04/2016 Deputy Chairman of the Supervisory Board of BF Direkt AG, Stuttgart
Markus Drews (born 1975) is a member of the executive board (COO) of DEMIRE Deutsche Mittelstand Real Estate AG. He has a degree in German business administration and has decades of experience in positions of high responsibility in the real estate sector. Markus Drews made signifi cant contribution in establishing, managing and selling of a listed real estate company with a market capitalisation of €1.5 billion. He has gained experience in dealing with distressed and non-core assets for example Haniel and RWE systems. Markus Drews has as a Real Estate M & A Advisor (Remi) extensive experience with listed real estate companies, particularly with regard to timing capital measures with real estate transactions.
Hon.-Prof. Andreas Steyer (Member of the Supervisory Board) Member of the Supervisory Board since 03/2016 Term of appointment due to run until the General Meeting in 2021
Principal activity outside the company, also serving as a director in similar domestic and foreign businesses:
since 04/2013 Member of the executive board of DEMIRE Deutsche Mittelstand Real Estate AG
Hon.-Prof. Andreas Steyer (born 1965) is the speaker of the executive board (CEO) of DEMIRE Deutsche Mittelstand Real Estate AG. He has a degree in business economics and real estate economics (ebs business school). Andreas Steyer is a member of the Royal Institution of Chartered Surveyors (MRICS). As from 1992 to 2007 he held several management positions in the companies KPMG Wirtschat s prüfungs gesellschaft, Arthur Andersen Real Estate GmbH, Ernst & Young Real Estate GmbH and Deka Immobilien Investment GmbH. Furthermore he held executive positions at Global Gate Investment GmbH and at VB Real Estate Services GmbH in the years 2007 to 2012. Andreas Steyer is honorary professor for real estate economics at the Jade University of Oldenburg.
Prof. Dr. Heinz Rehkugler (Member of the Supervisory Board until 29 February 2016)
Dr. Oscar Kienzle (Deputy Chairman of the Supervisory Board until 29 February 2016)
Frank Schaich CEO since 17 September 2007 Term of appointment due to run until 31 March 2017
Frank Schaich (born 1959) has been the CEO of Fair Value REIT-AG since 17 September 2007 and has in addition been appointed to the management board of DEMIRE Deutsche Mittelstand Real Estate AG as of 1 February 2016. Mr. Schaich's professional base is a classic apprenticeship in banking. He was previously a member of the IC Immobilien Holding AG's management board, where he was responsible for the fund business. He has held executive positions in various departments of IC real estate group since 1988. From 1993 onwards he served as managing director for several IC Real Estate Group companies and the funds under management by IC. In total, he has more than 30 years' experience in international real estate markets. Frank Schaich has gained extensive experience in syndicating, fi nancing, and placing closedend real estate funds, in investor relations and in asset and portfolio management of commercial real estate.
CFO since 1 November 2016 Term of appointment due to run until 31 October 2019
Patrick Kaiser (born 1975) was appointed as an additional member of the Company's Management Board for three years as of 1 November 2016. Mr. Kaiser is also commercial director of DEMIRE and managing director of DEMIRE Immobilien Management GmbH. Mr. Kaiser has many years' experience in heading up the fi nance departments of listed companies.
Fair Value REIT-AG developed positively again in the past fi scal year, and as a result, we will be able to propose to you a dividend distribution of €0.40 per share at the upcoming Annual General Meeting.
In 2016 the Company also acquired additional shares in subsidiaries and invested in the direct acquisition of previously indirectly owned properties.
The Management Board plans to actively continue this strategy in the current fi scal year in order to strengthen the equity base and profi tability for the shareholders. The Supervisory Board expressly supports the Management Board in this strategy.
The Supervisory Board focused its activity on supervising and managing the economic development of the Company and its strategic orientation, taking particular account of the volatile capital market.
The Supervisory Board was involved in all decisions of fundamental importance. In compliance with Sec. 90 (2) AktG ["Aktiengesetz": German Stock Corporations Act], the Management Board informed the Supervisory Board of the general business development and situation of the Company and of the Group promptly and in detail. All business transactions subject to the approval of the Supervisory Board as prescribed by legal or statutory provisions were discussed at the Supervisory Board meetings.
The Supervisory Board was convened six times in fi scal year 2016. The Supervisory Board thoroughly discussed and adopted the budgets and the planning for the Company and approved the planning for the Group. Discussion of the development of revenue and earnings of the Group as well as its fi nancial position and net assets with special regard to the risk situation, and of the interim reports/statements took place at regular intervals at the Supervisory Board meetings.
Adhering to corporate governance principles is of great importance for the Supervisory Board and the Management Board. Correspondingly, the corporate governance report has a dedicated section in the annual report.
The recommendation issued by the government commission on the German Corporate Governance Code most recently updated in May 2015 was discussed in depth with the Management Board. In this context, the e ciency of the work of the Supervisory Board was also reviewed. The current declaration of compliance pursuant to Sec. 161 AktG was issued on 1 February 2017 together with the Management Board and is published on the Company's website.
The corporate governance statement pursuant to Sec. 289a HGB ["Handelsgesetzbuch": German Commercial Code] was issued by the Management Board and published on the Company's website on 1 February 2017.
The consolidated fi nancial statements prepared by the Management Board in accordance with International Financial Reporting Standards (IFRSs) and the separate fi nancial statements of Fair Value REIT-AG prepared in accordance with the requirements of German GAAP (HGB) were both audited by Ernst & Young GmbH, Wirtschat sprüfungsgesellschat , Munich, appointed as auditor by the Annual General Meeting on 4 July 2016. The auditor issued an unqualifi ed audit opinion on both the separate and consolidated fi nancial statements including the respective management reports.
The Supervisory Board dealt with the fi nancial statements for fi scal year 2016 including the respective management reports as well as the audit reports which were submitted on time for its own review at its meeting on 27 March 2017. The auditors attesting the separate fi nancial statements reported on the audit fi ndings and were available to respond to any questions posed by the Supervisory Board.
As there was no cause for objection, the Supervisory Board ratifi ed the separate fi nancial statements and approved the consolidated fi nancial statements on 27 March 2017.
The auditor confi rmed the declaration made by the Management Board on compliance with the requirements for the spread of shares and minimum distribution as well as on compliance with the net asset and earnings ratios.
On 31 October 2016, Frank Schaich, long-standing sole Management Board member and CEO, resigned from the Management Board ef ective 31 March 2017. He is leaving the Company on the best of terms with the Supervisory Board in order to devote himself to new tasks in future. The Supervisory Board of the Company would like to expressly thank Mr. Schaich for all the work he has done since September 2007 and wishes him all the best for the future.
The Supervisory Board appointed Mr. Patrick Kaiser as an additional member of the Management Board of Fair Value REIT-AG for three years ef ective 1 November 2016. As of 1 April 2017, Mr. Kaiser will lead the Company as the sole Management Board member. The Supervisory Board wishes him every success.
Finally, the Supervisory Board would like to thank the Management Board and the employees for their dedication and valuable contribution to the annual result.
Graefelfi ng, 27 March 2017
On behalf of the Supervisory Board
Rolf Elgeti (Chairman of the Supervisory Board)
Compliance Report of the Supervisory Board Corporate governance report
The Management and Supervisory Boards of Fair Value REIT-AG attach great importance to the application of clear and e cient rules for the management and control of the business and to the recommendations of the German Corporate Governance Code. Both boards of Fair Value REIT-AG again have dealt with the latest version of the code during the 2015 fi scal year.
Corporate governance refers to good and responsible corporate management and control, with the ultimate aim of creating long-term added value. Guidelines have been drawn up for this and are summarized for German companies in the German Corporate Governance Code (GCGC), which was updated on 5 May 2015.
In the period from 1 January 2016 to 31 October 2016, the Management Board of Fair Value REIT-AG comprised one person. Since 1 November 2016 it has comprised two persons. The Management Board manages the Company and acts in the sole interest of Fair Value REIT-AG. The Management Board is duty bound to increase the Company's long-term value. It consults with the Supervisory Board on company strategy as well as its implementation. It reports to the Supervisory Board regularly, promptly and comprehensively on the business plan and strategic development as well as on the current business and risk situation.
The Supervisory Board of Fair Value REIT-AG currently has three members. It advises and controls the management of the Company by the Management Board. Furthermore, the Supervisory Board discusses the interim reports, reviews and approves the fi nancial statements of Fair Value REIT-AG pursuant to HGB and ratifi es the consolidated fi nancial statements according to IFRSs. Signifi cant decisions regarding the management of the Company require the approval of the Supervisory Board.
With regard to the 2016 fi scal year, Fair Value REIT-AG no reports were received regarding securities transactions on the part of members of the Management and the Supervisory Board or persons with a close relationship to these members as defi ned in § 15 WpHG (German Securities Trading Act).
The shares in Fair Value REIT-AG held directly and indirectly by the members of the Management and Supervisory Boards amounts in total to less than 1% of the share capital of Fair Value REIT-AG as of 31 December 2016. When determining the indirectly held shares, holdings without a direct infl uence are not taken into account.
The shareholders of Fair Value REIT-AG realize their rights as shareholders at the Annual General Meeting and exercise their voting rights there. All shareholders are invited to the Annual General Meeting and can address the agenda there and ask questions. Resolutions regarding the following points are among those passed at the Annual General Meeting:
Discharge of the Management and Supervisory Boards and selection of the auditor and the Supervisory Board, the appropriation of the balance sheet profi t, amendments to the articles of association and measures leading to changes in capital.
The company reports on a quarterly basis regarding business performance as well as about the fi nancial status and earnings position. The general public is informed about the company's activities via the media.
Information that could have a signifi cant ef ect on the company's share price is released in the form of ad-hoc disclosures in accordance with legal provisions. Fair Value REIT-AG uses its website at www.fvreit. de to provide shareholders, investors and the general public with information.
Fair Value REIT-AG issues its consolidated fi nancial statements in line with International Financial Reporting Standards (IFRS) and its single entity accounts are prepared in accordance with the provisions of the HGB. The Supervisory Board proposes an auditor for election by the Annual General Meeting. The increased requirements with regard to auditor independence are met.
The Management and Supervisory Boards of Fair Value REIT-AG issued the following declaration of conformity with the German Corporate Governance Code (Version dated 5 May 2015) within the meaning of section 161 of the AktG on 1 February 2017:
Fair Value REIT-AG's Management and Supervisory Boards welcome and support the German Corporate Governance Code and the objectives it pursues. Fair Value REIT-AG follows the recommendations of the German Corporate Governance Code in the version dated 5 May 2015 and will continue to do so in future with the following exceptions:
– D&O insurance The D&O insurance concluded for the Management and Supervisory Boards does not include a deductible for members of the Supervisory Board (Item 3.8 GCGC). The Company is of the opinion that the inclusion of a deductible is not necessary to urge the members of the supervisory board to a responsible behaviour as they are already obliged to a responsible behaviour in the best interest of the company qua their o ce and that an inclusion of a deductible may prevent potential suitable candidates from assuming the o ce as members of the supervisory board.
– Age limit for members of the Management and Supervisory Boards There is no age limit for members of the Managing and Supervisory Boards (Items 5.1.2 and 5.4.1 GCGC). The Company is of the opinion that the determination of an age limit is not appropriate as the Company shall also benefi t from the knowledge and experience of older persons in the work of the Managing and Supervisory Boards.
– Committees In view of its low number of members, the Supervisory Board has not formed any committees (Item 5.3 GCGC).
108 Management Board declaration adhering to the requirements of the REIT Act
109 Auditor's report pursuant to section 1 para. 4 of the REIT Act
110 Method of real estate valuation
112 Individual property information of Fair Value REIT-AG's portfolio
116 Financial calendar
118 Imprint
In connection with the fi nancial statements pursuant to Sec. 264 HGB ["Handelsgesetzbuch": German Commercial Code] as well as the consolidated fi nancial statements pursuant to Sec. 315a HGB as of 31 December 2016, the Management Board makes the following declaration of compliance with the requirements of Secs. 11 to 15 REITG ["Gesetz über deutsche Immobilienaktiengesellschat en mit börsennotierten Anteilen": German REIT Act] as well as the composition of income with regards to possible advance taxation pursuant to Sec. 19 (3) in conjunction with Sec. 19a REITG as of 31 December 2016:
As of 31 December 2016, to our knowledge 21.72% of the shares in our Company were in free fl oat in accordance with Sec. 11 (1) REITG. This was announced to the BaFin ["Bundesanstalt für Finanzdienstleistungsaufsicht": Federal Financial Supervisory Authority] on 9 January 2017. In compliance with Sec. 11 (4) REITG, to our knowledge no single shareholder directly holds 10% or more of the shares in the company or shares in an amount which would result in a shareholder directly holding 10% or more of the voting rights.
As of 31 December 2016, immovable assets were calculated at €290,542 thousand in line with Sec. 12 (1) and (2) REITG. This represents 91.9% of assets totalling €316,193 thousand calculated pursuant to Sec. 12 (2). Revenue plus other income from immovable assets pursuant to Sec. 12 No. 4 REITG stems exclusively (100%) from rent, letting and leases including property-related activities or sales of immovable assets. The asset and income requirements pursuant to Sec. 12 (2b) and (3b) REITG were not applicable as no REIT service companies are part of the Group.
Following a resolution of the Annual General Meeting on 4 July 2016, a dividend of €0.25 per share currently outstanding was distributed in 2016, which corresponds to €3,507,253.25 or 100% of the accumulated profi t for 2015. For the fi scal year 2016, the Management Board proposes a dividend of €0.40 per share currently outstanding or €5,611,605.20, which corresponds to 91.0% of net income pursuant to HGB.
Pursuant to Sec. 14 (2) REITG, the proceeds from the sale of immovable assets within the last fi ve fi scal years (2012 to 2016) totalled €94.8 million and therefore accounted for 34.9% of the average portfolio of immovable assets of €271,780 thousand during this period. The Group did not qualify as a real estate trader during the fi scal year 2016.
Equity pursuant to Sec. 15 REITG totalled €182,298 thousand as of 31 December 2016. This represents 62.7% of the Group's immovable assets totalling €290,542 thousand calculated pursuant to Sec. 12 (1) REITG.
The dividends of Fair Value REIT-AG do not stem from parts of profi t subject to advance taxation.
Graefelfi ng, 27 March 2017
Fair Value REIT-AG
Frank Schaich, CEO Patrick Kaiser, CFO
As auditor of the fi nancial statements and the consolidated fi nancial statements of Fair Value REIT-AG, Munich, for the fi nancial year 1 January to 31 December 2016, we checked the information in the corresponding attached disclosures of the Management Board for adherence to the requirements of Sections 11 – 15 of the REIT Act as well as the composition of income with regards to pre-taxed and untaxed income pursuant to Section 19 para. 3 in connection with Section 19 a of the REIT Act as of 31 December 2016 (referred to as the "REIT declaration" in the following). The disclosures in the REIT declaration are the responsibility of the company's Management Board. Our task is to express an opinion on these disclosures based on our audit.
We carried out our audit taking into account the IDW audit instructions published by the Institut der Wirtschat sprüfer in Deutschland e.V. (Institute of Public Auditors in Germany, Incorporated Association – IDW): Special requirements in the auditing of a REIT stock company pursuant to Section 1 para. 4 of the REIT Act, for a pre-REIT stock company pursuant to Section 2 clause 3 of the REIT Act and auditing pursuant to Section 21 para. 3 clause 3 of the REIT Act (IDW PH 9.950.2). We planned and carried out audit activities for producing our opinion of the disclosures in the REIT declaration in line with these, in order to provide an opinion with su cient certainty of whether the disclosures on the free fl oat ratio and the maximum interest ownership per shareholder pursuant to Section 11 para. 1 and 4 of the REIT Act corresponds with the disclosures pursuant to Section 11 para. 5 of the REIT Act as of 31 December 2016, and whether the disclosures on the requirements of Sections 12 – 15 of the REIT Act as well as the composition of income with regards to pre-taxed and untaxed income pursuant to Section 19 a of the REIT Act are correct. Our task was not to fully trace or examine the tax assessment of the relevant companies. As part of our audit we compared the disclosures on the free fl oat ratio and the maximum interest ownership per shareholder pursuant to Section 11 para. 1 and 4 of the REIT Act with the information pursuant to Section 11 para. 5 of the REIT Act as of 31 December 2016 and matched the disclosures in the REIT declaration relating to Sections 12 – 15 of the REIT Act with the corresponding disclosures of the annual fi nancial statements and consolidated fi nancial statements of the company. We are confi dent that our audit provides a su ciently sound basis on which to make an assessment.
According to our opinion based on the insights gained as part of the audit, the disclosures in the REIT declaration on the free fl oat ratio and the maximum interest ownership per shareholder pursuant to Section 11 para. 1 and 4 REIT Act correspond with the disclosures pursuant to Section 11 para. 5 of the REIT Act as of 31 December 2016, and the disclosures in the REIT declaration on the requirements of Sections 12 – 15 of the REIT Act as well as the composition of income with regards to pre-taxed and untaxed income pursuant to Section 19 a of the REIT Act are correct.
This report is intended exclusively for submission to the fi nancial authorities in Munich as part of the tax assessment pursuant to Section 21 para. 2 of the REIT Act and may not be used for other purposes.
Munich, 27 March 2017
Ernst & Young GmbH Wirtschat sprüfungsgesellschat
Horbach Ehrnboeck Wirtschat sprüfer Wirtschat sprüfer
As in the previous years, Frankfurt-based CB Richard Ellis GmbH (CBRE) was engaged to value Fair Value's directly and indirectly held properties as of 31 December 2016. CBRE is not a company regulated by a supervisory body, however it does employ publicly appointed, sworn experts, members of the Royal Institution of Chartered Surveyors (RICS) and real estate experts certifi ed by HypZert GmbH in its Valuation division.
The valuation has been prepared in accordance with the International Financial Reporting Standards ("IFRS"), the International Standards for the Valuation of Real Estate for Investment Purposes ("International Valuation-Standards") and the RICS Valuation – Professional Standards (January 2014) (Red Book) of the Royal Institution of Chartered Surveyors.
The properties have been valued to fair value according to IAS 40 combined with IFRS 13.9 which has been published and defi ned by the International Accounting Standards Board (IASB) as follows:
"Fair value is the price that would be received to sell an asset or paid to transfer a liability, in an orderly transaction in the principal (or most advantageous) market at the measurement date."
For the purpose of fi nancial reporting under International Financial Reporting Standards, fair value is ef ectively the same as market value, which is defi ned as:
"The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction at er proper marketing where the parties had each acted knowledgeably, prudently and without compulsion".
The fair value was identifi ed in each case by subtracting incidental acquisition costs (land transfer tax, estate agents' fees and notary's and attorney's fees) and was presented as the net capital value.
The fair values of the individual properties were determined using the internationally recognized dis counted cash fl ow method. Only the directly owned land at Hartmannstrasse 1, Chemnitz, was measured at land value. The discounted cash fl ow method forms the basis for many dynamic investment appraisal models and is used to calculate the value of cash fl ows anticipated in future on various dates and in dif ering amounts.
In so doing, at er identifying all of the factors relevant for the valuation, the future cash fl ows, some of which are linked to forecasts, are aggregated on an accrual basis. The balance of the receipts and payments recorded is then discounted to a fi xed point in time (valuation date) using the discount rate. In contrast to the German Ertragswertverfahren (income-based approach) according to the Immobilienwertermittlungsverordnung (ImmoWertV – German Real Estate Appraisal Directive), the cash fl ows are explicity quantifi ed during the observed period and are not shown as annuity payments.
As the impact of future cash fl ows falls as a result of the discounting, and as the forecasting insecurity increases over the observed period, as a rule in the case of real estate investments the stabilized net investment income is capitalized at er a ten-year period (detailed observation period) using a growthimplicit minimum interest rate (capitalization rate) and discounted to the valuation date.
The assumptions used in the valuation model refl ect the average assumptions of the dominant investors on the market on the respective valuation date. These valuation parameters refl ect the standard market expectations and the extrapolation of the analyzed past fi gures for the property to be valued or for one or several comparable properties.
CBRE estimated the valuation parameters, which can be broken down into two groups, using its best judgement.
The property-specifi c valuation parameters include, for example, rent for initial term renewals, the probability of existing rental agreements being extended, vacancy periods and vacancy costs, non reimbursable incidental costs and capital expenditure expected by the owner, fi tting and rental costs of initial and renewals as well as property and lease specifi c returns on the capital tied up in the investment.
The general economic factors include, in particular, changes to market prices and rent during the detailed observation period and the infl ation assumed in the calculation model.
According to Guidance Note 1 of the RICS Valuation-Professional Standards CBRE points out explicity in its valuation reports as of 21 and 23 February 2017 that against the background of the currently rapidly changing environment on global fi nancial and national real estate markets the fair value is a "snapshot" as of the balance sheet date, which refl ects the market conditions valid on the reporting day. CBRE furthermore states that the fair value should not be understood as a fi gure valid for a longer period of time but is subject to market related fl uctuations.
| Address | Fund | Primary use | Year of construc tion |
Last renovation/ modern ization |
Plot size [m2 ] |
Market value 31/12/2015 [€ thousand] |
Market value 31/12/2016 [€ thousand] |
Change [€ thousand] |
Change [%] |
|
|---|---|---|---|---|---|---|---|---|---|---|
| Direct investments | ||||||||||
| Appen Hauptstraße 56e / 56 d | n/a | O ce | 1975 | 1995 | 4,320 | 170 | 140 | (30) | (17.6) | |
| Bad Bramstedt Bleeck 1 | n/a | O ce | 1973 | 2006 | 3,873 | 1,120 | 1,070 | (50) | (4.5) | |
| Bad Segeberg Oldesloer Straße 24 | n/a | O ce | 1982 | 2007 | 5,152 | 8,800 | 8,450 | (350) | (4.0) | |
| Barmstedt Königstr. 19–21 | n/a | O ce | 1911 | regular | 2,842 | 1,410 | 1,390 | (20) | (1.4) | |
| Geschendorf Dorfstraße 29 | n/a | O ce | 1985 | 2006 | 1,154 | 210 | 210 | – | – | |
| Neumünster Kuhberg 17–19 | n/a | O ce | 1989 | 2005 | 5,286 | 15,200 | 15,200 | – | – | |
| Trappenkamp Am Markt 1 | n/a | O ce | 1985 | 2005 | 1,190 | 610 | 570 | (40) | (6.6) | |
| Wahlstedt Markt 1 | n/a | O ce | 1975 | 2005 | 1,848 | 890 | 830 | (60) | (6.7) | |
| Chemnitz Hartmannstraße 1 | n/a | Other | 2000 | – | 3,520 | 1,690 | 1,690 | – | – | |
| Dresden Königsbrücker Str. 121 a | n/a | Other | 1997 | – | 8,574 | 9,710 | 9,730 | 20 | 0.2 | |
| Köln Marconistr. 4–8 | n/a | Other | 1990 | – | 13,924 | 3,750 | 3,710 | (40) | (1.1) | |
| Langenfeld Max-Planck-Ring 26/28 | n/a | Other | 1996 | – | 14,727 | 7,570 | 7,460 | (110) | (1.5) | |
| Neubrandenburg Friedrich-Engels Ring 52 |
n/a | O ce | 1996 | – | 4,705 | 7,190 | 7,060 | (130) | (1.8) | |
| Potsdam Großbeerenstr. 231 | n/a | O ce | 1995 | – | 2,925 | 3,730 | 4,180 | 450 | 12.1 | |
| Meschede Zeughausstr. 13 | n/a | Retail | 1989 | – | 1,673 | 431 | 430 | (1) | (0.2) | |
| Waltrop Bahnhofstraße 20 a-e | n/a | Retail | 1989 | – | 1,742 | 2,550 | 2,530 | (20) | (0.8) | |
| Subtotal direct investments | 77,455 | 65,031 | 64,650 | (381) | (0.6) |
| Discount rate 31/12/2016 [%] |
Capitalization rate 31/12/2016 [%] |
Lettable space [m2 ] |
Vacancies [m2 ] |
Secured remaining term of rental agreements [years] |
Income based occupancy rate [%] |
Annualized contractual rent [€ thousand] |
Annualized potential rent [€ thousand] |
Contractual rental yield before costs [%] |
Potential rental yield before costs [%] |
Participating interest [%] |
|---|---|---|---|---|---|---|---|---|---|---|
| 6.70 | 6.20 | 212 | – | 1.0 | 100.0 | 21 | 21 | 15.2 | 15.2 | 100.00 |
| 6.50 | 6.00 | 997 | 40 | 8.9 | 99.3 | 80 | 81 | 7.5 | 7.6 | 100.00 |
| 6.50 | 6.00 | 9,184 | 358 | 7.5 | 96.2 | 644 | 670 | 7.6 | 7.9 | 100.00 |
| 6.60 | 6.10 | 1,257 | – | 7.9 | 100.0 | 102 | 102 | 7.3 | 7.3 | 100.00 |
| 6.65 | 6.15 | 316 | – | 0.8 | 100.0 | 22 | 22 | 10.3 | 10.3 | 100.00 |
| 6.90 | 6.30 | 11,808 | – | 8.6 | 100.0 | 1,046 | 1,046 | 6.9 | 6.9 | 100.00 |
| 6.90 | 6.40 | 787 | – | 0.8 | 100.0 | 59 | 59 | 10.3 | 10.3 | 100.00 |
| 6.70 | 6.20 | 1,346 | 198 | 0.9 | 84.5 | 78 | 92 | 9.4 | 11.1 | 100.00 |
| – | – | 300 | – | 0.7 | 100.0 | 41 | 41 | 2.4 | 2.4 | 100.00 |
| 7.80 | 7.30 | 11,554 | – | 12.5 | 100.0 | 761 | 761 | 7.8 | 7.8 | 100.00 |
| 7.90 | 7.50 | 9,640 | – | 6.1 | 100.0 | 334 | 334 | 9.0 | 9.0 | 100.00 |
| 8.30 | 7.80 | 10,940 | – | 3.2 | 100.0 | 776 | 776 | 10.4 | 10.4 | 100.00 |
| 7.55 | 7.10 | 7,228 | 1,371 | 3.3 | 83.0 | 600 | 723 | 8.5 | 10.2 | 100.00 |
| 6.75 | 6.25 | 3,828 | 120 | 5.4 | 94.9 | 314 | 330 | 7.5 | 7.9 | 100.00 |
| 7.70 | 7.00 | 1,095 | – | 2.5 | 100.0 | 42 | 42 | 9.8 | 9.8 | 100.00 |
| 7.75 | 7.25 | 2,124 | 250 | 3.7 | 92.7 | 225 | 242 | 8.9 | 9.6 | 100.00 |
| 72,615 | 2,337 | 6.7 | 96.3 | 5,143 | 5,341 | 8.0 | 8.3 | |||
| Address | Fund | Primary use | Year of construc tion |
Last renovation/ modern ization |
Plot size [m2 ] |
Market value 31/12/2015 [€ thousand] |
Market value 31/12/2016 [€ thousand] |
Change [€ thousand] |
Change [%] |
|
|---|---|---|---|---|---|---|---|---|---|---|
| Subsidiaries | ||||||||||
| Teltow Rheinstr. 8 | IC 07 | O ce | 1995 | – | 5,324 | 9,100 | 9,140 | 40 | 0.4 | |
| Krefeld Gutenbergstr. 152 / | ||||||||||
| St.Töniser Str. 12 | BBV 06 | Retail | 1990 | – | 8,417 | 3,670 | 3,600 | (70) | (1.9) | |
| Chemnitz Hartmannstr. 3 a–7 | IC 12 | O ce | 1997 | – | 4,226 | 7,880 | 7,480 | (400) | (5.1) | |
| Dresden Nossener Brücke 8–12 | BBV 14 | O ce | 1997 | – | 4,134 | 6,100 | 6,370 | 270 | 4.4 | |
| Rostock Kröpeliner Str. 26–28 | BBV 14 | Retail | 1995 | – | 7,479 | 65,000 | 64,900 | (100) | (0.2) | |
| Querfurt Nebraer Tor 5 | BBV 08 | Retail | 1992 | – | 32,020 | 11,100 | 11,400 | 300 | 2.7 | |
| Zittau Hochwaldstraße / Mittelweg | BBV 08 | Retail | 1992 | – | 48,840 | 14,800 | 18,600 | 3,800 | 25.7 | |
| Celle Vor den Fuhren 2 | BBV 10 | Retail | 1992 | – | 21,076 | 7,200 | 6,930 | (270) | (3.8) | |
| Eisenhüttenstadt Nordpassage 1 | BBV 10 | Retail | 1993 | – | 96,822 | 20,900 | 25,100 | 4,200 | 20.1 | |
| Genthin Altmärker Str. 5 | BBV 10 | Retail | 1998 | – | 3,153 | 473 | 462 | (11) | (2.3) | |
| Langen Robert-Bosch-Str. 11 | BBV 10 | O ce | 1994 | – | 6,003 | 13,800 | 14,200 | 400 | 2.9 | |
| Münster Hammer Str. 455–459 | BBV 10 | Retail | 1991 | – | 15,854 | 7,310 | 7,340 | 30 | 0.4 | |
| Osnabrück Hannoversche Str. 39 | BBV 10 | Retail | 1989 | – | 7,502 | 3,140 | 3,170 | 30 | 1.0 | |
| Lutherstadt Wittenberg Lerchenberg | ||||||||||
| str.112/113, Annendorfer Str. 15 / 16 | BBV 10 | Retail | 1994 | – | 20,482 | 21,700 | 21,600 | (100) | (0.5) | |
| Chemnitz Heinrich-Lorenz-Str. 35 | IC 15 | O ce | 1998 | – | 4,718 | 3,960 | 4,010 | 50 | 1.3 | |
| Chemnitz Am alten Bad 1–7, | ||||||||||
| Theaterstr. 34a | IC 15 | O ce | 1997 | – | 3,246 | 5,890 | 5,990 | 100 | 1.7 | |
| Quickborn Pascalkehre 15 / 15a | IC 15 | O ce | 1997 | – | 33,255 | 13,500 | 15,600 | 2,100 | 15.6 | |
| Subtotal subsidiaries | 322,551 | 215,523 | 225,892 | 10,369 | 4.8 | |||||
| Total Group | 400,006 | 280,554 | 290,542 | 9,988 | 3.6 | |
|---|---|---|---|---|---|---|
| Discount rate 31/12//2016 [%] |
Capitalization rate 31/12//2016 [%] |
Lettable space [m2 ] |
Vacancies [m2 ] |
Secured remaining term of rental agreements [years] |
Income based occupancy rate [%] |
Annualized contractual rent [€ thousand] |
Annualized potential rent [€ thousand] |
Contractual rental yield before costs [%] |
Potential rental yield before costs [%] |
Participating interest [%] |
|---|---|---|---|---|---|---|---|---|---|---|
| 6.60 | 6.10 | 9,913 | 209 | 2.4 | 95.9 | 756 | 789 | 8.3 | 8.6 | 78.16 |
| 7.60 | 7.10 | 4,575 | 723 | 5.3 | 86.5 | 285 | 329 | 7.9 | 9.1 | 62.23 |
| 7.00 | 6.30 | 8,380 | 601 | 2.6 | 94.6 | 613 | 648 | 8.2 | 8.7 | 53.95 |
| 8.10 | 7.50 | 8,791 | 1,484 | 1.6 | 72.2 | 547 | 758 | 8.6 | 11.9 | 51.01 |
| 6.10 | 5.60 | 19,307 | 679 | 5.0 | 97.9 | 4,380 | 4,473 | 6.7 | 6.9 | 51.01 |
| 7.70 | 7.00 | 9,331 | – | 5.7 | 100.0 | 981 | 981 | 8.6 | 8.6 | 58.22 |
| 6.60 | 6.10 | 17,447 | 484 | 11.6 | 95.1 | 1,297 | 1,364 | 7.0 | 7.3 | 58.22 |
| 7.50 | 7.00 | 10,611 | – | 6.0 | 100.0 | 595 | 595 | 8.6 | 8.6 | 45.17 |
| 8.50 | 7.75 | 30,543 | 18,553 | 3.7 | 62.5 | 1,536 | 2,457 | 6.1 | 9.8 | 45.17 |
| 8.50 | 7.70 | 1,275 | 320 | 1.8 | 95.4 | 62 | 65 | 13.3 | 14.0 | 45.17 |
| 7.70 | 7.10 | 13,681 | 4,808 | 2.4 | 64.1 | 894 | 1,395 | 6.3 | 9.8 | 45.17 |
| 7.60 | 6.90 | 7,353 | – | 2.1 | 100.0 | 716 | 716 | 9.8 | 9.8 | 45.17 |
| 8.40 | 7.90 | 4,207 | – | 2.3 | 100.0 | 302 | 302 | 9.5 | 9.5 | 45.17 |
| 6.60 | 6.10 | 14,710 | 854 | 6.2 | 94.9 | 1,664 | 1,754 | 7.7 | 8.1 | 45.17 |
| 7.60 | 7.10 | 5,845 | – | 0.9 | 100.0 | 462 | 462 | 11.5 | 11.5 | 48.17 |
| 6.60 | 6.10 | 5,110 | 396 | 2.3 | 89.2 | 417 | 467 | 7.0 | 7.8 | 48.17 |
| 6.70 | 6.20 | 10,570 | – | 5.2 | 99.3 | 1,143 | 1,151 | 7.3 | 7.4 | 48.17 |
| 181,651 | 29,111 | 4.8 | 89.0 | 16,651 | 18,707 | 7.4 | 8.3 | |||
| 254,266 | 31,447 | 5.2 | 90.6 | 21,794 | 24,047 | 7.5 | 8.3 |
| Fair Value REIT-AG | |
|---|---|
| 11 May 2017 | Interim Report 1st Quarter 2017 |
| 2 June 2017 | Annual General Meeting, Munich/Germany |
| 10 August 2017 | Semi-Annual Report 2017 |
| 9 November 2017 | Interim Report 1st to 3rd Quarter 2017 |
| November 2017 | Presentation, German Equity Forum, Frankfurt am Main/Germany |
Wuermstrasse 13 a 82166 Graefelfi ng Germany Tel. +49 (0) 89/92 92 815-0 Fax +49 (0) 89/92 92 815-15 [email protected] www.fvreit.de
Registered o ce: Graefelfi ng Commercial register at Munich Local Court No. HRB 168 882
Date of publication: 30 March 2017
Frank Schaich (CEO) Patrick Kaiser (CFO)
Rolf Elgeti, Chairman Markus Drews, Vice Chairman Hon.-Prof. Andreas Steyer
DEMIRE Deutsche Mittelstand Real Estate AG
This annual report contains future-oriented statements, which are subject to risks and uncertainties. They are estimations of the management board of Fair Value REIT-AG and refl ect their current views with regard to future events. Such expressions concerning forecasts can be recognised by terms such as "expect", "estimate", "intend", "can", "will" and similar expressions with reference to the enterprise. Factors, that can cause deviations or ef ects can be (without claim on completeness): the development of the property market, competition infl uences, alterations of prices, the situation on the fi nancial markets or developments related to general economic conditions. Should these or other risks and uncertainty factors take ef ect or should the assumptions underlying the forecasts prove to be incorrect, the results of Fair Value REIT-AG could vary from those, which are expressed or implied in these forecasts. The Company assumes no obligation to update such expressions or forecasts.
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