Sales

We successfully continued our sales strategy in the Sales segment in the 2016 fiscal year. The segment covers all business activities relating to the sale of single residential units () and the sale of entire buildings or land ( sales). Sales in the Non-Strategic portfolio are also reported under Non-Core sales.

The following table shows the privatization of apartments:

Sales in the Privatize Portfolio

in € million

 

2016

 

2015

*

Fair value of properties sold adjusted to reflect effects not relating to the period from assets held for sale

 

 

 

 

 

Number of units sold

 

2,701

 

2,979

Income from disposal of properties Privatize

 

267.4

 

262.7

Fair value of properties sold Privatize*

 

-196.3

 

-201.3

Adjusted profit from disposal of properties Privatize

 

71.1

 

61.4

 

 

 

 

 

Fair value step-up (in %)

 

36.2

 

30.5

2,701 units were sold in 2016, down slightly on the figure of 2,979 reported in 2015. Sales proceeds rose by 1.8 % from € 262.7 million in 2015 to € 267.4 million in 2016. At 36.2 %, the was slightly higher than the value for the previous year (30.5%). If we leave the 706 units sold as part of the block sales out of the equation, the fair value step-up came to 38.6 % in the 2016 reporting period (2015: 38.1%).

In 2016, 253 units from the GAGFAH portfolio (2015: 558) and 56 units from the SÜDEWO portfolio were privatized during the reporting period (2015: one unit). Just as in 2015, no units from the Franconia portfolio were privatized.

Non-Core Sales

in € million

 

2016

 

2015

*

Fair value of properties sold adjusted to reflect effects not relating to the period from assets held for sale

 

 

 

 

 

Number of units sold

 

23,930

 

12,195

Income from disposal of properties non-core

 

960.5

 

463.3

Fair value of properties sold non-core*

 

-911.4

 

-424.4

Adjusted profit from disposal of properties non-core

 

49.1

 

38.9

 

 

 

 

 

Fair value step-up (in %)

 

5.4

 

9.2

In the portfolio, we took advantage of opportunities that arose to sell properties that do not fit with our medium- to long-term strategy. With 23,930 units sold in 2016, the sales volume was up considerably on the value for the same period in the previous year (12,195 units). This figure includes two block sales with a total of 1,851 units in the fourth quarter of 2016, one block sale of 1,204 units in the third quarter of 2016, three block sales in the second quarter of 2016 comprising 2,812 units and 13,145 units from the LEG package in the first quarter of 2016.

6,894 Non-Core units (2015: 5,486 Non-Core units) were sold from the GAGFAH portfolio, 145 Non-Core units from the SÜDEWO portfolio (2015: 0 units) and 126 Non-Core units from the Franconia portfolio (2015: 59 Non-Core units).

Overall, the Sales segment developed as follows:

Adjusted EBITDA Sales

in € million

 

2016

 

2015

 

 

 

 

 

Income from disposal of properties

 

1,227.9

 

726.0

Carrying amount of assets sold

 

-1,177.7

 

-658.7

Revaluation of assets held for sale

 

52.0

 

51.7

Profit on disposal of properies (IFRS)

 

102.2

 

119.0

Revaluation (realised) of assets held for sale

 

-52.0

 

-51.7

Revaluation from disposal of assets held for sale

 

70.0

 

33.0

Adjusted profit from disposal of properties

 

120.2

 

100.3

Selling costs

 

-27.7

 

-29.2

Adjusted EBITDA Sales

 

92.5

 

71.1

The adjusted profit from disposal of properties rose by 19.8% from € 100.3 million in 2015 to € 120.2 million in 2016. In the Sales segment, we make adjustments for effects not relating to the period from assets held for sale. This adjustment is made to show the effect of real estate sales on the result only in the period in which the sale takes place. The total adjustment during the 2016 reporting period was € 18.0 million, compared with € -18.7 million in the previous year. This effect is mainly attributable to the 13,570 units already registered as of December 31, 2015, as part of the portfolio sale to LEG, the sale of which was concluded in the first quarter of 2016. In accordance with the IFRS, the associated profits were already reported in the previous year, while the relates to profits and revenue posted in the same period, thus allowing the undistorted disclosure of the step-up.

The selling costs, i.e., the total of all direct and indirect personnel and non-personnel expenses incurred in connection with the sale of real estate and land, came to € -27.7 million in 2016, slightly below the value of € -29.2 million reported in 2015. Adjusted EBITDA Sales rose by 30.1% from € 71.1 million in 2015 to € 92.5 million in 2016.

Privatize
In the “Privatize” subportfolio, our focus is on generating additional added value by privatizing owner-occupied apartments and single-family houses at a premium compared with their fair value.
Non-Core/Non-Strategic
In the “Non-Core” subportfolio, our focus is on selling properties in locations that offer below-average development potential in the medium to long term to private and institutional investors. Limited potential is defined, in particular, by below-average property condition combined with a location that is of similarly below-average quality.
The “Non-Strategic” subportfolio contains locations and properties that were identified in the latest extensive review of the overall portfolio as not being absolutely essential for further strategic development. Properties in the “Non-Strategic” portfolio are reviewed on a regular basis and offer further sale potential.
Fair Value Step-up
Fair value step-up is the difference between the income from selling a unit and its current fair value in relation to its fair value. It shows the percentage increase in value for the company on the sale of a unit before further costs of sale.
Non-Core/Non-Strategic
In the “Non-Core” subportfolio, our focus is on selling properties in locations that offer below-average development potential in the medium to long term to private and institutional investors. Limited potential is defined, in particular, by below-average property condition combined with a location that is of similarly below-average quality.
The “Non-Strategic” subportfolio contains locations and properties that were identified in the latest extensive review of the overall portfolio as not being absolutely essential for further strategic development. Properties in the “Non-Strategic” portfolio are reviewed on a regular basis and offer further sale potential.
Adjusted EBITDA Sales
The adjusted EBITDA Sales is calculated by subtracting all operating expenses (excl. overheads) incurred in connection with sales activities from the profit on the disposal of properties generated by the Group and by adjusting the profit on the disposal of properties to reflect certain reclassification and time effects.