As already anticipated in our recent earnings review, DEMIRE yesterday updated its FY guidance for a second time this year as management now expects a lower number of property disposals than what was planned at the beginning of the year. As this consequently results in a larger asset base, rental income as well as FFO are now expected to come in higher.

Management now guides for rental income of € 78-80m (vs € 74.5-76.5m before; eNuW old: € 77.9m) and FFO of € 35-37m (vs € 33-35m before; eNuW old: € 34m). After the company already adjusted its outlook in July following the withdrawal of the LogPark buyer, this has been the second guidance update this year. Initially, management targeted a rental income range of € 71-73m and FFO of € 30-32m.  According to our estimates, this would have required disposals to the tune of > € 300m throughout the year vs € 69m as of Q3.

The lower sales volume is seen to be mainly attributable to the de facto standstill on the real estate transaction market, as buyers do have little to none acting pressure due to the lack of competition. Still, management remains confident that the disposal of the LogPark will still be signed this year, although a closing and thus the related cash inflow (eNuW: € 110m gross; book value of € 121m) will likely not take place before mid Q1.

While the delayed disposals are causing higher rental income and thus cash flows on the one hand, it also means that significant cash inflows, which would have been vital to at least partly release some of the refinancing pressure, are not available.

That said and despite the recent rating downgrade by Moody's, we remain confident that the company will announce a solution on the refinancing issue in the course of H1'24, as the dialogue with the holders of the corporate bond (€ 499m due in 10/24) intensified in recent weeks. In our view, a prolongation at either an increased coupon or at a higher nominal value appears as the most likely option. To further shore up liquidity, we expect at least parts of the € 266m worth of LOIs to materialize in the first quarters of 2024e.

As visibility remains low regarding the outcome of the refinancing process, we reiterate our HOLD recommendation with an unchanged PT of € 1.20 based on NAV and DDM.