After the disposal of the LogPark in Leipzig to CommerzReal initially fell through in July 2023, DEMIRE has now found a new buyer, namely HIH Invest Real Estate. We estimate the purchase price, which was not disclosed, to be in the range of € 100-105m, hence being some 15% below the volume of the collapsed CommerzReal deal. As the property is encumbered with c. € 35m (eNuW) debt, the company will receive a net cash inflow of € 65-70m.  

On top of this, DEMIRE has signed leases for c. 28k sqm with a total annualized rental income of € 3.4m at the end of 2023: (1) In Eschborn, the lease agreement with the Institute for Federal Real Estate for the buildings entire rental space of c. 18.9k sqm was extended for a period of five years. (2) The district of Breisgau-Hochschwarzwald expanded its rental space in Freiburg by 4.7k sqm (eNuW: € 0.7m additional annual rental income) in addition to a lease extension for c. 4.4k sqm. Both contracts run for eleven years.

Especially with the sale of the LogPark, DEMIRE is shoring up liquidity, which is urgently needed in light of the 2024 refinancing wall. As a quick reminder, the company has to refinance bank loans with a volume of € 170m as well as the corporate bond (€ 499 due in 10/24).

While the bank loans are seen to be prolonged at adjusted rates (eNuW: 4-5% vs current avg rate of 1.52% = c. € 5m extra cost p.a.), the refinancing of the bond, on the other hand, is somewhat more complicated. However, the company managed to bring a sufficient share of the bondholders (eNuW; >75% of bond volume) to the table to discuss possible refinancing options. While no solution has been presented yet, we expect news flow in that regard towards the end of Q1 at the latest. In our view, a prolongation of the bond at either an increased coupon (currently 1.875%) or at a higher nominal value appear as the most likely options.

Although uncertainty remains high, the cash inflow from the disposal as well as an easing interest rate environment following declining swap rates, the tide has turned a bit towards DEMIRE’s favor again, in our view.

Still, as visibility continues to be 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.