Yesterday, DEMIRE released a solid set of Q3 results, showing a slightly reduced rental income and FFO. Q3 rental income decreased 7% yoy to € 19m (eNuW: € 19m) as index related rent increases (c. 50% of the portfolio's rents increased since 01/23) could not fully compensate for a decreased asset base and the increased vacancy rate of 12.6% (vs 9.5% at FY22) following the departures of Barmer in Dusseldorf and Galeria Karstadt Kaufhof in Celle during the quarter. Q3 FFO decreased by 21% yoy to € 8.6m (eNuW: € 9.1m) due to increased current income tax expenses resulting from, among other, partially used up losses carried forward in some SPVs.
On this basis, management confirmed the FY guidance of € 74.5-76.5m sales and € 33-35m FFO. However, given rental income of € 59.9m after 9M and annualized contractual rents of € 77.1m, we do expect the company to “outperform” its top-line guidance, as we remain conservative regarding further disposals in the course of Q4. Still, the FFO guidance looks fair and should be reached by the company (eNuW: € 34m).
Besides the release, management was not able to provide an update on the refinancing of the 2024 maturities. However, the company stated that the dialogue with the holders of the corporate bond (€ 499m due in 10/24) has been intensified in recent weeks to create a solution for the refinancing, which can be seen as a positive sign. Although we do not take part in speculations, the most likely option seems to be a prolongation at either an increased coupon or at a higher nominal value. In addition to the bond, there is also € 170m in bank debt maturing next year. Here, the company is also in advanced talks with banks and made a confident impression on the progress.
In order to be well positioned to cope with the refinancing wall and to shore up liquidity, management remained confident on the disposal of the LogPark (eNuW: closing in H1’24e) as well as several smaller properties (€ 20-40m). Overall, the company signed LOIs for € 266m worth of properties, which are currently held for sale.

In light of the continued high uncertainty coupled with de facto no visibility on the outcome of the refinancing process, we remain on the sidelines and reiterate our HOLD recommendation with a new PT of € 1.20 (old: € 1.80) based on NAV and DDM.