It was all looking well regarding DEMIRE’s refinancing preparations (€ 499m corporate bond +170m bank financing maturing in 2024e), after the company shored up some liquidity with the disposals of the LogPark in Leipzig (€ 121m gross proceeds) and a property in Ulm (eNuW: € 80m).

However, as announced by the company, the buyer (Commerz Real) of the LogPark pulled out of the deal and does not intend to complete the transaction. The reason for the investor’s withdrawal was not disclosed. Although DEMIRE regards the withdrawal as unfounded and will consequently consider pursuing legal action against it, it appears highly unlikely that the transaction will be completed in 2023.

Hence, management decided to adjust the FY guidance, as the company will still generate rental income from the property throughout the year. Management now expects rental income of € 74.5-76.5m (old: € 71-73m) and FFO of € 33-35m (old: 30-32m). We even regard this new outlook as too low, considering inflation linked rent increases and expect rental income of € 77.9m and FFO of € 35.5m. On top of this, we regard the company’s LTV target of >45% as not achievable and expect the LTV to come in at 48.8% (53.9% after Q1), considering € 125m in further property disposals.

While the failed disposal will cause higher rental income and FFO on the one hand, it also means that cash inflows to the tune of € 121m (eNuW: c. € 80m ex financing) are not available. With this the upcoming refinancing task appears even more challenging. Given no successful disposal of the LogPark before the 2024 maturities, the company would need c. € 500m new debt (eNuW) to keep a sufficient cash cushion. As financing costs have risen following several rate hikes, we hence estimate DEMIRE’s average cost of debt to increase from 1.7% at FY’22 to 4.1% by FY’24e, indicating € 9.5m additional interest expenses per year. Should DEMIRE not be able to dispose the extra € 125m this year, our estimates could even serve as too bullish.  

In light of the negative newsflow leading to even increased refinancing pressure and no catalyst in sight, we downgrade the stock to HOLD with a new PT of € 2.00 (old: € 2.50) based on NAV and DDM.