Divestment

Note: The term “disinvestment” does not formally exist. “Divestment” was used instead.

Divestment is defined as releasing the capital invested in long-term assets by selling these assets. These are usually operating systems that are no longer needed by the company. When dealing with investments such as properties, divestment decisions are made when one or more properties, for example, no longer fit the investor’s investment strategy, or have reached their previously calculated optimal holding period. Selling the assets releases liquid funds that are reinvested in new assets that are consistent with the investment strategy. This can mean buying a new property or modernising a property already in the portfolio. Thus, divestments can have a financing function seen as a means of self-finance.1

For property investors, different reasons can lead to a divestment decision. These include:

  • Sales of corporate property for reinvestment in other assets
  • Sales of corporate property to optimise balance sheet
  • Liquidity shortages
  • Properties are not consistent with the core business of the owner
  • Properties no longer fit the investor’s current investment or risk strategy
  • Realising value growth
  • Realising capital losses
  • Change in expectations (investor expects a market downturn)
  • Changing political or social circumstances at the investment location
  • Sale under pressure from shareholders2

 

Every property divestment usually entails an elaborate search for a buyer. Specialised service providers therefore often undertake the search for a suitable investor. The large investment volumes in properties and the complexity of the asset class often mean a sales process lasting several months.


  • 1 Vgl. Springer Gabler Verlag (Herausgeber), Gabler Wirtschaftslexikon (2015): Desinvestition. Abrufbar im Internet. URL: http://wirtschaftslexikon.gabler.de/Definition/desinvestition.html. Stand: 11.12.2015.
  • 2 Vgl. Gier, Sonja (2006): Bereitstellung und Desinvestition von Unternehmensimmobilien. In: Schulte, Karl-Werner; Bone-Winkel, Stephan: Schriften zur Immobilienökonomie, Band 35, S. 236-243.
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: 25.06.2019