DEMIRE announces robust 9M 2023 results, confirms guidance

• Rental income stable at EUR 59.9 million
• Funds from Operations I (after tax, before minority interests) down 9.8% y-o-y to EUR 27.8 million
• Net LTV brought down to 52.9% from 54% at close of 2022
• Liquidity boosted to EUR 132.3 million
• 2023 guidance confirmed: full-year rental income expected to be between EUR 74.5 and EUR 76.5 million, FFO I (after tax, before minority interests) between EUR 33.0 and EUR 35.0 million

Langen, Germany, 9 November 2023. DEMIRE Deutsche Mittelstand Real Estate AG (ISIN: DE000A0XFSF0) has announced financial results for the first nine months of 2023 in line with management expectations.

Rental income stable, but FFO I down from prior year

Rental income for the nine months was EUR 59.9 million, virtually unchanged from the prior-year period (9M 2022: EUR 59.9 million). Over the same period, earnings before interest and taxes (EBIT) fell to negative EUR 64.6 million (9M 2022: EUR 41.2 million), with the drop largely due to revaluations of investment properties to reflect current market conditions (loss of EUR 59.7 million) as well as of properties held for sale (loss of EUR 25.3 million). The financial result for the first nine months of 2023 was EUR 7.1 million, considerably better than the prior-year period (9M 2022: financial result of EUR -12.9 million). The primary reasons for this improvement were the bond buyback in April and somewhat lower finance costs.

Funds from operations (FFO I) after tax and before minority interests fell by 9.8% to EUR 27.8 million (9M 2022: EUR 30.8 million). The main reasons were slightly lower profit from rental of real estate and, as in the previous quarter, higher income tax expense.

Diminished property values, subdued leasing performance

The market value of DEMIRE’s portfolio holdings fell from the close of 2022 to approx. EUR 1.16 billion (31/12/2022: EUR 1.33 billion). The drop in portfolio value was largely attributable to the sale of properties in Ulm and to the revaluation of the portfolio to reflect current market conditions, both of which occurred during the first half of 2023. Undiluted NAV thus decreased over the nine-month period by EUR 0.61 to EUR 4.38 per share (31/12/2022: EUR 4.99).

Leasing performance (new and extended leases signed) for the nine months was 27,240 sq.m. (9M 2022: 198,840 sq.m.). Compared to DEMIRE’s record leasing performance in the prior year, relatively few leases were scheduled to expire during 2023, and because of the leasing success last year, there was less space available to rent held in inventory during the period. Moreover, the deteriorating economic environment put a damper on new leasing. The vacancy rate calculated on an EPRA basis, and excluding properties classified as development projects, rose significantly to 12.6% (31/12/2022: 9.5%), primarily due to the Karstadt insolvency. The portfolio’s weighted average remaining lease term (WALT) shortened slightly to 4.4 years (31/12/2022: 4.8 years).

“As is well known, the market for real estate transactions is currently going through a difficult market phase,” says Ralf Bongers, Chief Investment Officer of DEMIRE. “We remain committed to entering into property sales only on terms that are economically rational for us and within the framework of our strategic objectives.”

Solid operating cash flow

“Despite a weak transaction market, and therefore a lack of further property sales in the third quarter, our liquidity position has been improving due to our solid operating cash flows,” explains Tim Brückner, Chief Financial Officer of DEMIRE. For the nine-month period, the average nominal borrowing cost remained low at 1.74% p.a. The net loan-to-value (LTV) ratio ended the period at 52.9%, which was slightly lower than the 2022 year-end ratio (54.0%), while cash and cash equivalents rose significantly over the nine-month period to EUR 132.3 million (31/12/2022: EUR 57.4 million).

DEMIRE has engaged Rothschild & Co as an external financial advisor to support the refinancing process for the 2019/24 bond.

Guidance for 2023 confirmed

“Despite the increasingly weak economic environment, we are delivering overall results which are robust and in line with expectations,” emphasises Prof. Dr. Alexander Goepfert, Chief Executive Officer of DEMIRE. “We continue to expect this for the remaining months of the year. Our current focus is on refinancing the 2019/24 bond, and we are already in discussions with bondholders.”

The Executive Board thus confirms its guidance for fiscal year 2023, with full-year rental income expected to be between EUR 74.5 and 76.5 million (2022: EUR 81.1 million) and FFO I (after tax, before minority interests) between EUR 33.0 and 35.0 million (2022: EUR 41.8 million).

End of press release

Invitation to Conference Call on 9^th of November 2023

The Executive Board of DEMIRE is pleased to invite all interested parties to participate in a conference call on 9th of November 2023, starting at 10:00 a.m. (CET) during which the financial results for the first nine months of 2023 will be presented.

Please use the following registration link:

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

The presentation of the financial results will also be webcasted live via the following link:

https://www.webcast-eqs.com/demire-2023-q3/no-audio

To listen to the audio, please use the registration link provided above. The financial results presentation will be available for download at https://www.demire.ag/en/publications/

Selected Key Performance Indicators of DEMIRE Group

About DEMIRE Deutsche Mittelstand Real Estate AG DEMIRE

Deutsche Mittelstand Real Estate AG acquires and holds commercial real estate in mid-sized cities and up-and-coming locations bordering metropolitan areas across Germany. The Company's particular strength lies in realising the potential of the properties at these locations while focusing on a range of properties that appeals to both regional and international tenants. As of 30 September 2023, DEMIRE's portfolio comprises 60 assets with a lettable space of approx. 0.861 million sqm. Including the proportionately acquired Cielo property in Frankfurt/Main, the market value amounts to approximately EUR 1.4 billion.

The portfolio's focus is on office properties with a blend of retail, hotel and logistics properties resulting in a return / risk structure that is appropriate for the commercial real estate segment. The Company places importance on long-term contracts with solvent tenants and the realisation of the properties' potential. DEMIRE anticipates continued stable and sustainable rental income along with solid value appreciation.

DEMIRE aims to expand its portfolio significantly in the medium term. The company focuses on assets contributing strongly to the FFO and properties with the potential for additional value creation. Properties that are not in line with this strategy will be sold. DEMIRE is being further developed operationally and procedurally with numerous measures. The company plans to enhance its operating performance through cost discipline as well as an active asset and portfolio management approach.

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

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