DEMIRE achieves 2023 guidance for rental income and FFO, successful bond refinancing to be implemented in the coming weeks

• Guidance for 2023 achieved: EUR 78.5 million rental income and EUR 36.7 million FFO I
• Half-year result 2024 in line with expectations: Rental income of EUR 35.5 million (-13.1%) and FFO I of EUR 15.5 million (-19.7%) compared to the previous year.
• Agreement reached with bondholders to extend the 19/24 bond until the end of 2027; implementation expected to be finalised in the coming weeks.

Langen, 30 September 2024. DEMIRE Deutsche Mittelstand Real Estate AG (ISIN: DE000A0XFSF0) closed the 2023 financial year with a solid result despite persistently challenging economic conditions. The result also met the published guidance. The first half of 2024 was also successful in operational terms, although, as expected, the results in absolute terms cannot match the comparative period due to the reduced portfolio base. In addition to the successful operational work, a liquidity cushion was built up by taking advantage of selective sales opportunities. This formed the basis for the agreement on the refinancing of our outstanding bond (ISIN: DE000A2YPAK1). In September 2024, the bondholders formally resolved the adjusted terms of the bond. Among other things, this provides for an extension of the term until the end of 2027. "This agreement puts DEMIRE in a position to continue operating successfully on a stable basis," said Frank Nickel, CEO of DEMIRE. "The restructuring process is currently being implemented and is expected to be finalised in the coming weeks."

Rental income and FFO 2023 within the guidance

Despite a reduced portfolio base, rental income of EUR 78.5 million was generated in the 2023 financial year. This is only 3.2% below the previous year's figure and within the guidance range of EUR 78 to 80 million. The FFO guidance of EUR 35 to 37 million was also achieved at the upper end of the communicated target corridor at EUR 36.7 million. The reduced earnings base is also reflected accordingly in the first half of 2024: rental income is as expected at EUR 35.5 million (previous year: EUR 40.8 million) and FFO I (after taxes, before minority interests) at EUR 15.5 million after EUR 19.3 million in the previous year.

Market-related devaluations reduce EBIT

Earnings before interest and taxes (EBIT) fell from EUR -72.9 million to EUR -187.9 million in the 2023 financial year. This primarily reflects market-related devaluations of the property portfolio as a result of higher yields on the property market: the result from the fair value adjustment of the property portfolio was EUR -176.8 million (previous year: EUR -98.9 million). This corresponds to a devaluation of 13.2% on the portfolio value compared to the end of 2022. No complete revaluation of the entire property portfolio was carried out in the first half of 2024.

The DEMIRE portfolio had a market value of EUR 950 million on 30 June 2024, compared to around EUR 1.3 billion at the end of 2022. The decline is due in particular to the strategic disposals of some properties as well as market-related devaluations of the portfolio. CIO Ralf Bongers comments: "Even in an extremely challenging market environment, DEMIRE was able to successfully conclude property disposals."

Diluted net asset value (NAV) fell from EUR 526.8 million at the end of 2022 to EUR 319.6 million on 30 June 2024. This corresponds to a decrease from EUR 4.97 to EUR 3.01 per share.

Net-LTV kept almost stable

Despite market-related devaluations of the property portfolio on a relevant scale, the Net-LTV of 55.6% as at 30 June 2024 was only 1.6 percentage points higher than at the end of 2022. This was achieved, among other things, through the strategic property disposal opportunities. The property sales proceeds are an important component in the restructuring of the bond. Even though the average interest rate on DEMIRE's debt will rise in the future following the restructuring, the Company still benefitted from a low average interest rate of 1.7-1.8% p.a. in 2023 and the first half of 2024.

Successful extension of bond agreed

In addition to focussing on its operating activities, DEMIRE's main focus was on refinancing its bond with an outstanding volume of EUR 499 million due in October 2024. This bond is the Company's main financing instrument. Following intensive negotiations with the majority of the bondholders, an extension of the bond's term until the end of 2027 at adjusted terms was agreed. As part of the agreement, the volume of the bond will be reduced by a partial redemption of the bond at par in an aggregate principal amount of EUR 49.9 million. In addition, DEMIRE launched a tender offer for a total maximum purchase price of approx. EUR 159,6 million. The tender offer is largely backstopped through commitments of bondholders at a price of 76.25% of the principal amount following the partial redemption. A major shareholder agreed to contribute up to EUR 100 million to enable the Company to consummate the bond buyback. The adjusted terms of the bond include an increase in the current interest rate to 5% p.a., collateralisation of the instrument and amended covenants.

CEO Frank Nickel explains: "The intensive talks on refinancing our bond have paid off: DEMIRE has agreed a sustainably stable financing structure that forms the foundation for continued successful operational work. The focus in the coming years will now be on realising the potential of our property portfolio."

CFO Tim Brückner adds: "With the agreed refinancing at attractive conditions, we have reached an important milestone that also gives DEMIRE room to manoeuvre for planned investments."

The realised property disposals will contribute to the guided rental income of between EUR 64.0 million and EUR 66.0 million in 2024. As the date of expected completion of the implementation of the bond restructuring has not yet been precisely determined (and thus the exact impact on the FFO calculation), DEMIRE is refraining from issuing an FFO guidance for the time being.

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Selected Group key figures of DEMIRE Deutsche Mittelstand Real Estate AG

	Consolidated income statement ( in EUR million)	1 January 2023- 31 December 2023	1 January 2022- 31 December 2022
	Rental income	78.5	81.1
	Profit from the rental of real estate	59.5	62.3
	EBIT	-187.9	-72.9
	Financial result	10.5	-0.4
	Profit for the period after taxes	-152.0	-71.5
	-of which attributable to shareholders of the parent company	-147.2	-65.7
	FFO I (after taxes, before minorities)	36.7	41.8
	Undiluted/diluted FFO I per share (EUR)	0.35/0.35	0.40/0.39
Consolidated income statement ( in EUR million)		1 January 2024- 30 June 2024	1 January 2023- 30 June 2023
Rental income		35.5	40.8
Profit from the rental of real estate		23.5	30.2
EBIT		-14.1	-65.0
Financial result		-7.0	10.0
Profit for the period after taxes		-27.6	-46.7
-of which attributable to shareholders of the parent company		-28.1	-44.0
FFO I (after taxes, before minorities)		15.5	19.3
Undiluted/diluted FFO I per share (EUR)		0.15/0.15	0.18/0.18
	Consolidated balance sheet (in EUR million)	31 December 2023	31 December 2022
	Balance sheet total	1,327.5	1,536.9
	Investment properties	947.3	1,231.1
	Cash and cash equivalents	120.0	57.4
	Properties held for sale	149.1	121.0
	Equity (incl. non-controlling interests)	333.3	486.7
	Equity ratio (in % of total assets)	25.1	31.7
	Undiluted/diluted NAV	341.5/342.0	526.3/526.8
	NAV per share (EUR, undiluted/diluted)	3.24/3.23	4.99/4.97
	Net financial liabilities	697.0	798.2
	Net leverage ratio (Net-LTV) in %	57.7	54.0
	Consolidated balance sheet (in EUR million)	30 June 2024	31 December 2023
	Balance sheet total	1,263.0	1.327.5
	Investment properties	890.6	947.3
	Cash and cash equivalents	167.1	120.0
	Properties held for sale	82.6	149.1
	Equity (incl. non-controlling interests)	303.3	333.3
	Equity ratio (in % of total assets)	24.0	25.1
	Undiluted/diluted NAV	319.1/319.6	341.5/342.0
	NAV per share (EUR, undiluted/diluted)	3.02/3.01	3.24/3.23
	Net financial liabilities	609.6	697.0
	Net leverage ratio (Net-LTV) in %	55.6	57.7
	Portfolio key figures	31 December 2023	31 December 2022
	Properties (number)	59	62
	Market value (in EUR million)	1,076.6	1,329.8
	Annualised contractual rents (in EUR million)	76.7	85.1
	Rental yield (in %)	7.1	6.4
	EPRA vacancy rate (in %) *	13.1	9.5
	WALT (in years)	4.6	4.8
	Portfolio key figures	30 June 2024	31 December 2023
	Properties (number)	58	59
	Market value (in EUR million)	949.8	1,076.6
	Annualised contractual rents (in EUR million)	66.9	76.7
	Rental yield (in %)	7.0	7.1
	EPRA vacancy rate (in %) *	15.5	13.1
	WALT (in years)	4.3	4.6
	*excl. properties classified as project development

 

Invitation to the conference call on 30 September 2024

The Executive Board of DEMIRE invites all interested parties to a conference call on 30 September 2024 at 4:00 pm (CEST) to present the results for the 2023 financial year and the first half of 2024.

 

Please use the following registration link:

https://webcast.meetyoo.de/reg/LCiVCvHJ072h

The presentation of the results will also be broadcast live via webcast. Please use the link https://www.webcast-eqs.com/demire-fy2023-q1h12024/no-audio

For audio transmission, please use the dial-in via the registration link above. A presentation of the results will be made available for download on the website https://www.demire.ag/en/publications/

 

About DEMIRE Deutsche Mittelstand Real Estate AG

DEMIRE Deutsche Mittelstand Real Estate AG acquires and holds commercial properties in medium-sized cities and up-and-coming peripheral locations in metropolitan areas throughout Germany. The company's particular strength lies in realising real estate potential in these locations and focuses on an offering that is attractive to both international and regional tenants. As of 30 June 2024, DEMIRE had a real estate portfolio of 58 properties with a lettable area of around 0.7 million square metres. Taking into account the proportionately acquired Cielo property in Frankfurt/Main, the market value amounts to around EUR 1.1 billion.

The portfolio's focus on office properties with an admixture of retail, hotel and logistics properties is appropriate for the risk/return structure of the commercial property segment. The Company attaches great importance to long-term contracts with solvent tenants and the realisation of potential and therefore continues to expect stable and sustainable rental income and solid value growth. DEMIRE's portfolio is to be significantly expanded in the medium term. In expanding the portfolio, DEMIRE will focus on FFO-strong assets with potential, while properties that do not conform to the strategy will continue to be sold in a targeted manner. DEMIRE will continue to develop its operations and processes with numerous measures. In addition to cost discipline, operating performance is being improved through an active asset and portfolio management approach.

The shares of DEMIRE Deutsche Mittelstand Real Estate AG (ISIN: DE000A0XFSF0) are listed in the Prime Standard of the German Stock Exchange in Frankfurt.
 

Contact:
Julius Stinauer MRICS
Head of Investor Relations & Corporate Finance
DEMIRE Deutsche Mittelstand Real Estate AG
Telefon: +49 6103 372 4944
Email: stinauer@demire.ag