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DEMIRE Deutsche Mittelstand Real Estate AG
Company Presentation
June 2018
June 2018
2
Disclaimer
This document is for informational purposes only. This document is not intended to form the basis of any investment decision and should not be
considered as a recommendation by DEMIRE Deutsche Mittelstand Real Estate AG (the “Company”) or any other person in relation to the Company. This
document does not constitute an offer to sell, a solicitation of an offer of the sale or purchase of securities or an invitation to purchase or tender for the
Company. Securities of the Company shall not be offered or sold, in any jurisdiction in which such an offer, solicitation or sale would be unlawful.
Certain information in this document is based on management estimates. Such estimates have been made in good faith and represent the current beliefs
of management. Management believes that such estimates are founded on reasonable grounds. However, by their nature, estimates may not be correct or
complete. Accordingly, no representation or warranty (express or implied) is given that such estimates are correct or complete.
This document includes 'forward-looking statements'. Forward-looking statements are all statements which do not describe facts of the past but contain the
words "believe", "estimate", "expect", "anticipate", "assume", "plan", "intend", "could", and words of similar meaning. These forward-looking statements are
subject to inherent risks and uncertainties since they relate to future events and are based on current assumptions and estimates of the Company, which
might not occur at all or occur not as assumed. They therefore do not constitute a guarantee for the occurrence of future results or performances of the
Company. The actual financial position and the actual results of the Company as well as the overall economic development and the regulatory
environment may differ materially from the expectations which are assumed explicitly or implicitly in the forward-looking statements and do not comply to
them. Therefore, investors are warned to base their investment decisions with respect to the Company on the forward-looking statements mentioned in this
document.
June 2018
3
DEMIRE’s Management
Ralf Kind (CEO/CFO)
» 20 years of experience in international real
estate
» Previously Co-Founder and CEO of Arbireo
Capital AG and Managing Partner of Dr.
Lübke & Kelber GmbH
» 12 years at Barcap (lastly as Head of
Barclays Real Estate Investment Banking
Team for DACH Region)
» Previous functions include Principal
Consultant at PwC
June 2018
4
Agenda
DEMIRE at a Glance
Q1 2018 and Portfolio Update
Financials
Market Overview
Outlook
Appendix
June 2018
5
5
DEMIRE at a Glance
Office Building, Frankfurter Str. 29-35, Eschborn
June 2018
6
Distribution by Asset Class
Distribution by Location
Distribution by Investment Cluster
Well Diversified Portfolio (1)
Retail24%
Logistics6%
Other3%
Office67%
Total GRI
€72.4 m
North Rhine Westphalia
19%
Saxony14%
Baden-Wurttemberg
12%Hesse10%
Mecklenburg-Western Pomerania
10%
Schleswig-Holstein
7%
Brandenburg6%
Bavaria10%
Other12%
Total GRI
€72.4 m
» DEMIRE is a leading German public real estate
firm focused on high quality office, retail and
logistics properties across Germany generally in
secondary locations, i.e. mid-sized cities and
areas bordering metropolitan cities
» Sizeable €1 bn German commercial portfolio
consisting of 86 assets with Core+ and Value-
add investment approach
» Diversified across office 67%, retail 24% and
logistics 6%
» Real estate management platform with local
expertise enables active asset and property
management
» High quality tenant roster with 4.8 years WALT
» €72.4 m contractual rent representing attractive
6.8% Gross yield
» Strong shareholder base incl. Apollo Global
Management together with Wecken Group (c.
77%); Apollo subscribed for 10% capital increase
in February 2018, effective in April 2018
» Both key shareholders support the DEMIRE 2.0
strategy(1) As of Q1 2018, pro forma for property sales signed but not closed
558442
67
Core + Value-add Redevelopment
5.9 3.7 3.3
3.1% 14.4% 0.5%
GAV WALT EPRA Vacancy
DEMIRE at a Glance
First in Secondary Locations
June 2018
7
Stable Cash Flows and Value Creation in Secondary Real Estate Markets
Secondary Locations» Focus mainly on secondary locations and areas bordering metropolitan cities where yields and
occupancy rates are higher and less cyclical than in the core spots of the German Top-7 cities
Diversification» Achieve and maintain high degree of diversification across locations, asset classes and tenants in a
manageable way
Bonn Ulm Eschborn
Bonner Talweg Zeitblomstrasse Frankfurter Strasse
Active Asset
Management
» Clear “manage-to-core” strategy with a preference acquiring assets with partial vacancy in off-market
situations
» Combination of stable income from Core+ portfolio and rental growth opportunities from Value-add
assets
» Further levers to drive cash flow generation from current portfolio
Selective Disposals» Actively review capital recycling opportunities to crystallise value creation, optimise portfolio structure
and calibrate external funding needs
Acquisitions &
Deleveraging
» Increase portfolio size across Core+ and Value-add spectrum
» In parallel, continue to de-lever company towards mid-term LTV target of 50%
DEMIRE‘s Business Model
June 2018
8
Key Metrics(1) Q1 2018
No. properties: 7
GAV (€m): 67
GRI Yield: 6.0%
Vacancy(2) 0.5%
WALT: 3.3 yrs
Driving Organic Growth and Profitability in the Portfolio
Proactive Asset Management Across Investment Clusters
» DEMIRE is an active owner of real estate with a “manage-to-core” approach
» Clear investment strategy across three portfolio clusters with stable income from ‘core+’ assets and growth potential from
‘value-add’ and ‘redevelopment’ properties
Active Portfolio Management
Core+
» Stabilised assets with low
vacancy rate and long
WALTs
Value-add
» Higher degree of vacancy
and shorter WALTs while
already generating
attractive yields today
» Income & growth upside
from vacancy reduction
Redevelopment
» Extensions, refurbishments
and selective
developments
Active
“manage-
to-core”
approach
(1) as of 31 March 2018, including properties sold (signed but not closed)
(2) excluding properties sold (signed but not closed); calculation as defined by EPRA BPR standards
(3) Based on the current portfolio
Strong Upside from Vacancy Reduction, Rent
Growth, and Improved NRI Margin
Key Metrics(1) Q1 2018
No. properties: 42
GAV (€m): 442
GRI Yield: 7.1%
Vacancy(2) 14.4%
WALT: 3.7 yrs
Key Metrics(1) Q1 2018
No. properties: 37
GAV (€m): 558
GRI Yield: 6.6%
Vacancy(2) 3.1%
WALT: 5.9 yrs
June 2018
9
10.98.6
Q1 2017 Q1 2018
Strategy DEMIRE 2.0
» Optimise cost of debt/funding mix further, increase
unencumbered asset base, extend maturity profile
» Reduce LTV to 50%
» Target investment-grade rating
Optimisation
of Financing
» Double portfolio size with accretive acquisitions diversified across
asset classes
» New anchor investor to accelerate growth
» Operating performance and strong fundamentals drive NAV
Growth
in %
» Strong leasing performance driving vacancy rate down
» Optimise cost structures and PM/FM units
» Simplify corporate and tax structure
Operating
Efficiency
(1) Q1 2018 pro forma Net-LTV ) incl. effects from 10% capital increase and conversion of mandatory convertible bond and convertible bonds
Action Plan
Strong and Supportive Shareholder Base
EPRA-Vacancy rate
4.13.0
62.555.0
40
60
80
2
4
6
Q1 2017 Q1 2018Avg. Cost of Debt Net-LTV
in %
Avg. Cost of debt / Net-LTV
4.61
5.29
Q1 2017 Q1 2018
in %
EPRA NAV per share (diluted)
June 2018
10
Change of Control of Senior Notes 2017/2022
Capital Increase and Takeover Process
Apollo subscribed a 10% capital increase on 26 February 2018
» Issue price of € 4.35 (effective from April 2018)
» 11.3% premium compared to latest closing share price
Takeover Offer DEMIRE/Fair Value REIT:
» Mandatory tender offer for DEMIRE ended on 14 May 2018, approx. 13% of shares (7.8m) have been tendered
» Voluntary tender offer for Fair Value REIT ended on 31 May 2018, approx. 1.7% of shares (238k) have been tendered
» Additionally, Apollo / Wecken group also converted convertiblebonds in the total amount of roughly € 10.3m in June 2018
» Change of Supervisory Board planned, proposal on next AGM to appoint Prof Alexander Goepfert as new chairman of theboard
Change of Control Offer of Senior Notes 2017/2022:
» Based on the information stated in the public offer document published by Apollo on 16 April 2018, the management board and supervisory board concluded on a conservative interpretation of the change of control provision that a change of control under the indenture governing the senior notes has occurred on that day
» DEMIRE has published a change of control offer in compliance with its obligations under the indenture governing the senior notes running from 16 May 2018 until 14 June 2018 (10am UK time)
» Roughly 8.4% of bonds (€ 33.4m) have been tendered
Wecken & Cie./Apollo (AEPF III 15 S.à.r.l.) ²
76.52%
Freefloat (Holdings <3 %)
18.49%
Sigrid Wecken
4.99%
Shareholder Structure 1
(1) As of 18 May 2018
(2) Incl. subsidiaries
June 2018
11
Office Building, Frankfurter Str. 29-35, Eschborn
Q1 2018 and Portfolio Update
Office Building, Frankfurter Str. 29-35, Eschborn
June 2018
12
Highlights Q1 2018
Solid Start into 2018 Fiscal Year
PORTFOLIO
FINANCING
FFO &
EPRA NAV
» Good operational performance: Letting activities of c. 29.800 sqm, thereof new lettings (c.
66%), average lease term of 4.9 years, WALT across portfolio at 4.8 years
» EPRA vacancy rate down by another 80 bps to 8.6%(1), Like-for-like rental growth
of c. 1.6 % (Top 10 assets c. 5.8%) in Q1 2018
» Rental income slightly decreased to € 18.3m (Q1 2017: € 18.5m) due to
the sale of non-strategic real estate in the last 12 months
» Valuation result of investment properties of c. € 32.1m in Q1 2018 predominantly driven by
operational performance and strong real estate fundamentals in the “Secondaries” (avg.
value per m² at € 1.100 per sqm, 6.8 % GRI yield)
» Net-LTV decreased by 200 bps to 58.1% (Year end 2017: 60.1%), after balance sheet
date pro forma Net-LTV at 55% (2)
» Average cost of debt at 3.0% p.a.(3) (Q1 2017: 4.1% p.a.)
» FFO I (after taxes, before minorities) reached € 5.2m (Q1 2017: € 2.0m) driven by lower
interest expenses and improved tax burden, compared to full year expectation first quarter
2018 was also influenced by lower capex as planned
» EPRA NAV per share increased to € 5.29 (diluted, +7.1%) and to € 6.47 (undiluted, +8.5%)
(1) Excluding assets held for sale (2) incl. effects from 10% capital increase and conversion of mandatory convertible bond and convertible bonds (3) based on nominal interest
June 2018
13
Diversified Across Asset Classes and Locations
Attractive + €1bn Commercial Portfolio
Retail24%
Logistics6%
Other3%
Office67%
…With no Dependency on an Individual Asset
-
25%
50%
75%
100%
- 10 20 30 40 50 60 70 80
Rent Distributed Across Assets
Number of assets
Top 10 assets
46.5% of rent
Top 32 assets
80% of rent
Well Diversified Across Asset Classes and Locations…
Distribution by Asset Class Distribution by Location
Diversified Portfolio in Densely Populated Regions
Total GRI
€72.4 m
North Rhine Westphalia
19%
Saxony14%
Baden-Wurttemberg
12%Hesse10%
Mecklenburg-Western Pomerania
10%
Schleswig-Holstein
7%
Brandenburg6%
Bavaria10%
Other12%
Total GRI
€72.4 m
June 2018
14
Portfolio Optimisation by Vacancy Reduction…
Leasing Performance Q1 2018
EPRA Vacancy (in %)
11.69.4 8.6
FY 16 FY 17 Q1 18
Low Level of Upcoming Lease Maturities
Lease Expiry Schedule(2)
Comments
» EPRA vacancy rate down by another 80 bps to 8.6%(1)
» Successful letting activities of c. 29.800 sqm (3.1% of TLA),
thereof c. 19,700 sqm of new lettings and c. 10,100 sqm of
renewals
» Like-for-like rental growth of 1.6% (Top 10 assets with 5.8%),
driven by c. 20% from indexations and step up rents, c. 70%
due to vacancy reduction and c. 10% from increase of in-place
rent
(1) As of 31st March 2018, excluding assets held for sale; calculation as defined by EPRA BPR standards
(2) Over term of leases signed
…While Maintaining a Stable Lease Profile
WALT (years)
5.3 years 4.9 years 4.8 years
FY 16 FY 17 Q1 18
Continuous Improvement of Occupancy
(1)
6%8% 9%
20%
9% 9%
13%12%
2% 2%
7%
3%
June 2018
15
Portfolio Breakdown
Good Portfolio Performance Drives Valuation Uplift in Q1 2018
No.
properties
GAV
(€m)
GRI p.a.
(€m) (1)
GRI p.a.
(€/m2/
p.m.) (1)
GRI
Yield
(%)
EPRA
Vacancy
(%) (2)
WALT
(Years)
Core+ 37 557.7 37.0 9.1 6.6 3.1 5.9
Value added 42 441.7 31.3 5.5 7.1 14.4 3.7
Redevelopment 7 67.0 4.0 7.9 6.0 0.5 3.3
Total (Q1 2018) 86 1.066,3 72.4 7.0 6.8 8.6 4.8
Total (FY 2017) 86 1.034,1 72.1 7.2 7.0 9.4 4.9
% / ppt change - 32.2 0.3 (0.2) (20 bp) (80 bp) (0.1 yrs.)
No.
properties
GAV
(€m)
GRI p.a.
(€m) (1)
GRI p.a.
(€/m2/
p.m.) (1)
GRI
Yield
(%)
EPRA
Vacancy
(%) (2)
WALT
(Years)
Office 63 714.2 48.7 8.1 7.0 8.5 4.4
Retail 16 253.3 17.4 10.2 7.1 6.7 6.3
Logistics 1 64.3 4.3 2.1 6.2 20.1 1.7
Other 6 34.5 1.9 4.0 6.6 0.1 6.4
Total (Q1 2018) 86 1.066,3 72.4 7.0 6.8 8.6 4.8
Total (FY 2017) 86 1.034,1 72.1 7.2 7.0 9.4 4.9
% / ppt change - 32.2 0.3 (0.2) (20 bp) (80 bp) (0.1 yrs.)
(1) Annualised contractual rent excluding service charges
(2) As of 31s tMarch 2018, excluding properties sold (signed but not closed); calculation as defined by EPRA BPR standards
(3) Capitalisation of investments
in € m
1,021.8
1,053.6
(0.4)
0.1
32.112.7 1,066.3
IFRS Investmentproperties31 Dec 17
ReclassificationAssets held for
sale
Capex Revaluations IFRS Investmentproperties31 Mar 18
Assets held forsale
Market value ofPortfolio
Comments
» Market value of investment properties increased by
€ 32.1m (3.1%) in Q1 2018, mainly driven by good
operational performance
» Average asset value at € 12.4m (FY 2017: € 12.0m),
increased due to valuation uplifts
» Assets held for sale: no material changes since FY 2017
(3)
Development of Investment Properties
Attractive Yield and WALT Across Asset ClassesAll Three Clusters Generate Attractive Rental Yields
June 2018
16
Off Market Acquisition from Distressed Situation and Full Turnaround
Case Study: “Gutenberggalerie” Leipzig
27 May 2015
€19.0 m
» Enhance image/external
appearance
» Improve lease structure
» Invest in the building
» OpEx reduction
» Increase sustainable rents
25.5 28.4
H1 2017 Q1 2018
1.61.8
H1 2017 Q1 2018
13%6%
H1 2017 Q1 2018
Acquisition:
Purchase Price:
Measures:
GAV
(€m)
Net Rent
(€m)
EPRA Vacancy
(%)
June 2018
17
30%20%
H1 2017 Q1 2018
Full Upside of Currently Vacant Space
Case Study: “Logistic Park” Leipzig – Managing to Full Potential
3.74.3
H1 2017 Q1 2018
Acquisition: 13 May 2015
Purchase Price: €51.9 m
Measures:
» Bringing in own letting management
» Reducing the Vacancy
» Reposition of asset and conversion
of single to multi tenant usage
55.164.3
H1 2017 Q1 2018
GAV
(€m)
Net Rent
(€m)
EPRA Vacancy
(%)
June 2018
18
0% 0%
H1 2017 Q1 2018
Acquisition: 30 June 2007
Purchase Price: €9.7 m
Measures:
» Long-term renewal of lease contract
with national DIY brand
» WALT increase from 1yr to 11yrs
» Renovation measures: improved
lighting system
7.3 9.9
H1 2017 Q1 2018
700 700
H1 2017 Q1 2018
GAV
(€m)
Net Rent
(€ ‘000s)
EPRA Vacancy
(%)
Renewed Lease for ten Years with DIY store
Case Study: Münster, Hammer Str. 455 - 459
June 2018
19
631 734
H1 2017 Q1 2018
Acquisition: 30 June 2007
Purchase Price: €8.4 m
Measures:
» Letting of remaining vacant space to
Dt. Bahn AG
» Option for DB on additional 530
sqm; increasing rental revenue
» WALT increase
» Improved tenant structure
7.5 10.1
H1 2017 Q1 2018
GAV
(€m)
Net Rent
(€ ‘000s)
EPRA Vacancy
(%)
Significant Improvement through Active Asset Management
Case Study: Dresden, Nossener Brücke 8-12
17%
2%
H1 2017 Q1 2018
June 2018
20
Market Valuation
Top 5 DEMIRE Assets with Valuation Increase
Use: Office
GAV: € 84,600,000
Net Rent p.a.: € 5.6m
Use: Office
GAV: € 8,700,000
Net Rent p.a.: € 0.6m
Use: Logistic
GAV: € 64,300,000
Net Rent p.a.: € 4.3m
Leipzig, (LogPark) Bonn, Bonner Talweg
Ludwigsburg, Uhlandstr.
Comments
» Average value per sqm increased to € 1,100 per sqm, still
way below replacement costs for German commercial real
estate
» GRI Yield of 6.8% for the total portfolio (FY 2017: 7.0%)
» Valuation uplift in Q1 2018 driven by good operational
performance
Valuation Increase Q1 2018 – TOP 5 properties
EURm
Münster, Hammer Str. 455-459 2.6
Leipzig, Logpark 2.6
Ulm, Zeitblomstr./Olgastr./Bahnhofsplatz 2.6
Bonn, Bonner Talweg 100/ Reuterstrasse 2.4
Ludwigburg, Uhlandstr. 21 1.9
Sub uplift 12.1
Total uplift 32.1
Ulm, Zeitblomstr.
Use: Retail
GAV: € 71,500,000
Net Rent p.a.: € 4.4m
Münster, Hammer Str.
Use: Retail
GAV: € 9,930,000
Net Rent p.a.: € 0.7m
June 2018
21
Office Building, Kuhberg 17-19 / Kieler Straße 1, Neumünster
Financials
June 2018
22
Positive Development Across KPI’s
More Equity, Lower LTV, Better Profitability
Portfolio174
86 86
FY 2016 FY 2017 Q1 2018
No. of Assets EPRA Vacancy WALT
% Years
11.6%9.4% 8.6%
FY 2016 FY 2017 Q1 2018
5.3 yrs 4.9 yrs 4.8 yrs
FY 2016 FY 2017 Q1 2018
Balance
Sheet
Gross Asset Value
€m
Net-LTV Total Equity
% €m
9281,006 1,034 1,066
FY 2015 FY 2016 FY 2017 Q1 2018
67.5%62.8%
60.1%
55%
FY 2015 FY 2016 FY 2017 Q1 2018pro forma
326371
391417
FY 2015 FY 2016 FY 2017 Q1 2018
P&L 74.0
18.5 18.3
FY 2017 Q1 2017 Q1 2018
Rental Income
€m
Adj. EBITDA FFO I
€m €m
35.1
9.2 10.1
FY 2017 Q1 2017 Q1 2018
11.7
2.0
5.2
FY 2017 Q1 2017 Q1 2018
(1)
(1) Excludes revaluations and sales, but includes majority of TIs which run through P&L
(2) After taxes, before minorities (4) ) incl. effects from 10% capital increase and conversion of mandatory convertible bond and convertible bonds
(3) Reduction of WALT due to one disposal of a property and related early cancellation of rental agreement
(3)
(2)
(4)
June 2018
23
2.0
5.2
Q1 2017 Q1 2018
Rental Income
€m
FFO I More Than Doubled Compared to Previous Year’s Period
Selected P&L Positions
Comments
» Rental income slightly decreased to € 18.3m due to
the sale of non-strategic real estate in the last 12 months
» Financial expenses decreased to € 6.0m, y-o-y lowered
by € 2.1m due to successful refinancing activities in 2017
» FFO I increased y-o-y due to lower average recurring
financing costs and lower tax burden - compared to full
year expectation, first quarter 2018 was also influenced by
budgeted lower capex
(1) Calculation of expected run rate based on effective interest rates and current debt profile
(2) After tax, before minorities
Funds from operations I (2)
€m
(8.1)
(6.0)
Q1 2017 Q1 2018
Financial expenses (1)
€m
18.5 18.3
Q1 2017 Q1 2018
June 2018
24
1,021.8
1,053.6
FY 2017 Q1 2018
Investment properties
€m
No Material Changes Except for Value Increase of Investment properties
Selected Balance Sheet Positions
Comments
» Gross Asset Value increased based on positive valuation
results in Q1 2018
» Financial debt decreased due to amortization of short-term
debt and payment of accrued interest
» Cash at hand at € 69.5m, pro forma at c. € 92.5m from
capital increase
» EPRA-NAV per share (diluted) increased by 35 cent per
share, mainly due to the positive valuation result in Q1 2018
694.9 689.2
FY 2017 Q1 2018
Financial Debt
€m
4.94
5.29
FY 2017 Q1 2018
EPRA-NAV per share (diluted)
In €
June 2018
25
Improving Credit Profile
Financial Profile
67.5
62.8
60.158.1
55
5.2
4.4
3.0 3.0 3.0
0
1
2
3
4
5
6
52%53%54%55%56%57%58%59%60%61%62%63%64%65%66%67%68%69%70%
Q4 2015 Q4 2016 Q4 2017 Q1 2018 Q1 2018pro forma
Net LTV / Avg. Cost of Debt (1) in %
Net Loan to Value
Successfully reduced Leverage & Cost of Debt
(1) Based on nominal interest
(2) Calculated as share of unencumbered assets divided by total real estate assets (3) IFRS values (4) accrued interest payable (5) incl. effects from 10% capital increase and conversion of
mandatory convertible bond and convertible bonds (6) Carrying values, pro forma conversion of mandatory convertible and convertible bonds (effective on 22 May 2018 and 18 June 2018)
Gross debt (€m) 689.2
Net LTV (%) 58.1
Pro forma Net LTV(%)(5) 55.0
Avg. cost of debt (%) 3.0 (1)
Unencumbered asset ratio (%) (2) 44
Rating Bond (S&P/Moody’s) BB+/Ba2 – stable Outlook
Rating Corporate (S&P/Moody’s) BB/Ba2 – stable Outlook
Financing KPI’s as of 31/03/2018 Financing structure post Capital Increase & Mandatory CB
Tranche (3)
Amount (€m)Margin/
Coupon31/03/2018
pro forma (5)
Cash and Cash Equivalents (92.5)
New Senior Unsecured Notes 392.9 2.875%
Bank Loans 23.9 2.45% - 3.25%
Promissory Notes 141.9 4.00%
Total Fair Value REIT-AG Debt 117.2 2.37%
Convertible Bond 0.3 6.00%
Other (4) 2.6
Net Total Financial Liabilities 585.9
Debt Maturity profile (31 March 2018) (6)
400
0.3
144
14
11 4 10
9 572017 2018 2019 2020 2021 2022 2025 2026 after
2026open-ended
New Senior Unsecured Bonds Promissory Notes Bilateral Notes
(5)
In € m
June 2018
26
Accelerating Growth from Operational Performance
EPRA-NAV
EPRA-NAV Development EPRA-NAV Per Share Development
Strong portfolio dynamics drive NAV growth
EPRA NAV
(diluted)/ per
share
# shares in Mio.
(undiluted/diluted)
EPRA NAV (diluted)
/per share
q-on-q growth
Q4 2016 4.60 54.25/ 67.89
Q1 2017 4.61 54.25/ 67.89 0.2%
Q2 2017 4.61 54.25/ 67.89 -
Q3 2017 4.72 54.25/ 67.89 2.4%
Q4 2017 4.94 54.25/ 67.89 4.7%
Q1 2018 5.29 54.29/68.45 7.1%
Total growth +0.69 15.0%
313 313 313321
336
362
Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
EPRA NAV (diluted)
June 2018
27
No Changes: Target to Reach Investment Grade Profile Over Time
Financial Policies and Targets
Leverage » Medium term target is to reduce Net LTV to approximately 50%
Debt Strategy
» Debt maturities to be staggered to mitigate interest rate risk and limit refinancing exposure in
any particular period
» Targeted funding mix of encumbered vs. unencumbered assets in the medium term
» Preference for amortisation-free instruments going forward to increase financial flexibility
Funding Sources» DEMIRE intends to maintain diversified funding sources including, but not limited to, common
equity, mortgage debt, unsecured bonds and convertible debt
Acquisitions
» Actively pursue accretive acquisitions to further grow its portfolio
» Any sizeable acquisition is expected to be funded in line with the medium term LTV target and
redevelopments are only undertaken if lease contracts are signed beforehand and building
permits are in place
June 2018
28
Office Building, Colonia-Allee 11, Cologne
Market Overview
June 2018
29
DEMIRE Follows a Research-driven Investment Approach
Market Research
» There are 13 cities above 500,000 inhabitants
and 78 cities above 100,000 inhabitants in
Germany
» While these cities provide ample investment
opportunities, they are far less well reasearched
as the German Top 7 given the high degree of
granularity
» Fundamental real estate data for secondary
cities is very difficult to obtain, therefore DEMIRE
has procured a study on secondary cities by
bulwiengesa
» Out of a total of 67 locations in the DEMIRE
portfolio, 27 locations/cities are being covered by
the most recent study
» This data set available to DEMIRE represents a
competitive advantage compared to other local
competitors and will help to allocate capital in a
value maximizing way
Source: Statistische Ämter des Bundes und der Länder
June 2018
30
5.2%
4.6%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
German Commercial Real Estate Market
(1) „Office Real Estate Market Study – Investment Opportunities in Secondary Locations”, 31 selected cities in Germany vs Top 7, Download under www.demire.ag/en/property/research
(2) Indexed to 100 (3) Represents average yield for Class B-D cities as defined by Bulwiengesa
Dynamic Rental Development Not Limited to Top 7 Cities Secondary Locations Offer Higher Yields and Lower Volatility
Average Top 7 Locations Average Secondary Locations
Strong Demand for Space Driving Vacancy Rates Down
Source: PMA, Bulwiengesa
Positive Fundamentals – Updated Study published with bulwiengesa
119.9
117.3
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
3.9%
6.7%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Secondaries with High Liquidity in the Commercial RE Market
6 12 13 15 19 2331 29 31
58 11 10
1217
25 23 26
1120
24 2631
40
5653
57
2009 2010 2011 2012 2013 2014 2015 2016 2017
Top 7 cities Secondary locations (Germany excl. Top 7 cities)
43% 41% 47% 40% 42% 44% 44%39% 45%Development of Office Market Vacancy rate in %
Development of Office Market Rent (2) Development of Office Market Gross Initial Yield (3)
June 2018
31
Risk/Return Profiles
(2) Represents average yield for Class B-D cities as defined by Bulwiengesa (3) Green marked cities are part of DEMIRE portfolio
Better Risk Adjusted Returns of Secondary Cities Compared to Class A Cities
(1) Indexed to 100, the standard deviation (average rent) refers to the period between 2008 and 2017 Source: Bulwiengesa
Risk vs Return Representation(1)Secondary office locations (3)
# City RSD NIY
5 Bayreuth 0.03 6.0
1 Bonn 0.01 4.2
16 Bremen 0.05 4.7
11 Chemnitz 0.05 7.0
10 Darmstadt 0.03 4.6
2 Dortmund 0.02 4.6
28 Dresden 0.07 4.6
4 Essen 0.02 4.5
8 Flensburg 0.03 6.0
31 Freiburg (B.) 0.08 4.4
9 Göttingen 0.03 6.0
26 Ingolstadt 0.08 5.0
20 Jena 0.07 6.0
23 Karlsruhe 0.05 4.4
29 Kassel 0.09 5.5
33 Kempten 0.13 6.0
3 Koblenz 0.03 6.1
35 Leipzig 0.10 4.4
14 Leverkusen 0.06 5.7
22 Lüneburg 0.07 6.0
13 Mannheim 0.04 4.5
27 Münster 0.07 4.4
30 Osnabrück 0.09 5.0
32 Potsdam 0.10 4.8
34 Regensburg 0.10 4.8
12 Reutlingen 0.04 5.9
6 Rostock 0.03 5.3
21 Schwerin 0.08 6.5
18 Stralsund 0.08 7.0
17 Ulm 0.06 5.1
15 Wuppertal 0.06 5.8
Secondary Office Locations Have Highly Stable Parameters at Higher Yields
» Compared to Top 7 cities, many of secondary locations offer significantly higher yield opportunities while their rental levels are no more volatile than the Top 7 cities
» Secondary locations are generally characterised by little speculative building activity and higher tenant retention
» Office demand in many of these locations follows a stable or upward trend, driven by increasing office employment and regional tenants with long-term business horizons
5
1
16
11
102 284 31
8/9
26
23
29
333
35
14
20/22
13 27
3032 34
12
6
21
18
5.117
15
37
7
2536
24
38
19
2.0
3.0
4.0
5.0
6.0
7.0
8.0
0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16
Net in
itia
l yie
ld 2
016 %
Relative standard deviation of the average rent %
Top 7 cities (3)
# City RSD NIY
37 Berlin 0.13 2.9
7 Düsseldorf 0.02 3.7
25 Frankfurt 0.05 3.3
36 Hamburg 0.10 3.1
24 Köln 0.05 3.6
38 München 0.14 3.0
19 Stuttgart 0.04 3.5
June 2018
32
Office Building, DEMIRE Headquarters, Robert-Bosch-Str. 11, Langen
Outlook
June 2018
33
Rental income
FFO I (after taxes, before minorities)
c. € 71m - 73m
c. € 16m -18m
Based on Current Portfolio
Guidance 2018
June 2018
34
Logistics Park Leipzig, Am alten Flughafen 1, Leipzig
Appendix I: Additional Financial Information
June 2018
35
Comments
» Rental income slightly
decreased to € 18.3m due
to the sale of non-strategic
real estate in the last 12
months
» General and administrative
expenses decreased mainly
due to lower legal, advisory
and audit costs
» Financial result increased
mainly due to higher
minority interests of € 5.7m
due to significant valuation
results in Q1 2018, interest
expenses down to € 6m y-
o-y (minus € 2.1m) thanks
to refinancing activities last
year
» Due to successful tax
pooling in 2017 cash taxes
have been reduced
Income Statement
Income Statement (€m) Q1 2017 Q1 2018
Rental income 18.5 18.3
Income from utility and service charges 6.2 5.7
Operating expenses to generate rental income (10.9) (10.8)
Profit/loss from the rental of real estate 13.8 13.2
Profit/loss from the sale of real estate companies 0.0 0.0
Profit/loss from the sale of real estate (0.2) 0.0
Profit/loss from investments accounted for using the equity method (0.0) 0.1
Profit/loss from fair value adjustments in investment properties 0.2 32.1
Other operating income and other effects 1.6 1.2
General and administrative expenses (3.6) (3.1)
Other operating expenses (2.7) (1.2)
Earnings before interest and taxes (EBIT) 9.2 42.2
Financial result (5.5) (11.7)
Profit/loss before taxes (EBT) 3.7 30.5
Deferred taxes (2.1) (9.5)
Current income taxes (0.7) (0.2)
Net profit/loss for the period 0.9 20.8
Of which attributable to:
Non-controlling interests 0.8 2.6
Parent company shareholders 0.1 18.2
1
2
1
2
3
4
3
4
June 2018
36
Comments
» Investment properties
increased due to
valuation uplift in Q1 2018
» Cash at hand at approx. €
70m, mainly decreased due to
interest payments for the bond
2017/2022, pro forma at €
93m due to 10% capital
increase (settlement in Q2)
» Relates to c. 22% minority
shareholders of Fair Value
REIT AG and RETT blockers
» Minority interests are
attributable to equity capital of
limited partners in real estate
funds of Fair Value REIT-AG
under German GAAP and G-
REIT Act., these are
recognised as equity, includes
reclassification of certain
RETT Blocker
Balance Sheet
Balance Sheet (€m) FY 2017 Q1 2018
ASSETS
Investment properties 1,021 1,054
Properties held for sale 12 13
Other assets 39 42
Cash and cash equivalents 74 70
Total assets 1,147 1,180
EQUITY AND LIABILITIES
Subscribed capital 54 54
Reserves 231 249
Equity attributable to parent company shareholders 285 304
Non-controlling interests 34 36
Total equity 319 340
Minority interests 72 78
Non-current financial debt 666 665
Current financial debt 29 25
Other liabilities 61 74
Total liabilities 828 840
Total equity and liabilities 1,147 1,180
1
4
1
2
3
2
3
4
June 2018
37
18.3
30.5
5.3 5.2
(0.1)
(5.1)
(3.2) (0.0)
(11.7)
(32.1)
32.1 0.1
1.20.0
5.7
(0.1)
Rentalincome
Fair valueadjustmentsin investment
properties
Sale of realestate and
other
Operatingexpenses,
net
G&Aexpenses
Otheroperatingexpenses,
net
Financialresult
Profit/lossbefore taxes
Fair valueadjustmentsin investment
properties
Sale of realestate and
other
Revaluationof financialinstruments
Otheradjustments
MinorityInterests
FFO I beforetaxes
Currentincometaxes
FFO I aftertaxes
Q1 2018
Funds From Operations (FFO) Reconciliation – Q1 2018
(1) (1)
(4)
(1) Other includes (i) profit/loss from the sale of real estate companies of € 0m, (ii), Profit/loss from the sale of real estate of € 0 thousand and (iii) Profit/loss from investments accounted for using the equity method of
€(0.1)m
(2) Includes income from utility and service changes of €5.7m and operating expenses to generate rental income of €(10.8)m
(3) Includes impairment of receivables of €(0.1)m, other operating income of €1.3m and other operating expenses of €(1.2)m
(4) Other adjustments relate to, among others, one-time refinancing costs of €0.8m (before hedging costs) incl. legal and advisor fees, one-time legal and transaction costs of € 0.25m,
one-time administrative costs of € 0.2m and net other operating expenses/income relating to prior periods of €0.01m in the quarter ended March 31, 2018
(2)
(3)
€m
June 2018
38
Office Building, DEMIRE Headquarters, Robert-Bosch-Str. 11, Langen
Appendix II: Additional Portfolio Information
June 2018
39
Property Locations
Properties Book value Total rental space
EPRA
Vacancy rate
Status as at:
31/03/2018 Number (€m) (m2)
thereof
office
(m2)
thereof
retail
(m2)
thereof
logistics
(m2)
thereof
others
(m2) (%)
Baden-Wuerttemberg 4 129,4 85,130 85,130 0,000 0.000 0,000 1,8%
Bavaria 7 100,1 95,837 95,837 0,000 0.000 0,000 10,8%
Berlin 1 5,9 7,150 0,000 7,150 0.000 0,000 5,9%
Brandenburg 4 48,6 52,422 22,079 30,343 0.000 0,000 13,6%
Bremen 10 41,2 34,561 34,561 0,000 0.000 0,000 28,1%
Hamburg 1 9,0 3,973 0,000 3,973 0.000 0,000 0,0%
Hesse 7 132,2 71,192 44,183 21,471 0.000 5,538 7,8%
Mecklenburg-
Western Pomerania6 113,3 58,117 38,811 19,306 0.000 0,000 6,8%
Lower Saxony 4 15,2 21,753 5,288 16,466 0.000 0,000 1,2%
North Rhine-Westphalia 14 201,2 127,721 96,564 10,576 0.000 20,581 8,0%
Rhineland Palatinate 3 11,6 12,528 12,528 0,000 0.000 0,000 4,1%
Saxony 11 156,9 304,490 51,396 20,835 217.968 14,291 12,6%
Saxony-Anhalt 3 35,7 25,316 0,000 25,316 0.000 0,000 2,6%
Schleswig-Holstein 10 64,3 63,819 63,819 0,000 0.000 0,000 1,9%
Thuringa 1 1,9 5,505 0,000 5,505 0.000 0,000 43,3%
Germany 86 1.066,4 969,515 550,197 160,941 217.968 40,410 8.6%(1)
Overview of the Real Estate Portfolio by Region
(1) As of 31st March 2018, excluding properties sold (signed but not closed); calculation as defined by EPRA BPR standards
June 2018
40
City
Asset
Class Cluster
GAV
(€ m)
Share
(%)
Space
(‘000 sqm)
EPRA
Vacancy (%) 1
GAV/sqm
(€)
GRI p.a.(2)
(€ m)
GRI Yield
(%)
WALT
(Years)
1 Bonn Office Core+ 84,6 7,9% 38,353 - 2.206 5,6 6,7% 6,9
2 Ulm Office Core+ 71,5 6,7% 47,527 1,2% 1.504 4,3 6,1% 6,6
3 Rostock Retail Core+ 67,9 6,4% 19,306 3,5% 3.517 4,3 6,3% 4,4
4 Leipzig Logistic Value-Add 64,3 6,0% 217,968 20,1% 295 4,3 6,6% 1,7
5 Kassel Retail Core+ 57,8 5,4% 21,471 6,0% 2.692 3,5 6,0% 7,7
6 Freiburg Office Redevelopment 37,8 3,5% 22,674 - 1.667 2,7 7,3% 2,9
7 Düsseldorf Office Value-Add 33,8 3,2% 24,304 23,1% 1.391 2,0 6,0% 4,2
8 Regensburg Office Value-Add 33,4 3,1% 29,219 - 1.143 2,6 7,7% 2,9
9 Eschborn Office Core+ 32,3 3,0% 18,774 - 1.720 2,0 6,1% 6,8
10 Eisenhüttenstadt Retail Value-Add 28,5 2,7% 30,343 22,9% 939 2,3 8,1% 5,7
Top 10 Properties 511.9 48.0% 469.939 9.1% 1,089 33.6 6.6% 5.1
11 Leipzig Office Value-Add 28,4 2,7% 23,220 6,1% 1.223 1,8 6,2% 3,4
12Lutherstadt
WittenbergRetail Core+ 23,0 2,2% 14,710 3,9% 1.564 1,7 7,3% 5,1
13 Zittau Retail Value-Add 21,1 2,0% 17,411 3,2% 1.212 1,3 6,3% 11,1
14 Unterschleißheim Office Value-Add 19,4 1,8% 15,663 36,8% 1.239 1,0 5,1% 2,9
15 Flensburg Office Value-Add 17,1 1,6% 23,800 - 718 1,7 10,0% 2,9
16 Quickborn Office Core+ 16,8 1,6% 10,570 0,6% 1.589 1,2 7,3% 3,9
17 Meckenheim Office Redevelopment 16,3 1,5% 7,650 - 2.131 1,0 6,1% 4,8
18 Neumünster Office Value-Add 15,8 1,5% 11,808 1,6% 1.338 1,0 6,6% 7,6
19 Langen Office Value-Add 15,4 1,4% 13,681 27,2% 1.126 1,0 6,8% 2,9
20 Kempten Office Value-Add 14,7 1,4% 16,795 2,0% 875 1,0 6,8% 1,8
Top 20 Properties 699.9 65.6% 625.247 9.0% 1,119 46.4 6.6% 5.0
Other Properties 366.5 34.4% 344.267 8.1% 1,065 26.0 7.1% 4.5
Total Properties 1,066.4 100.0% 969.515 8.6% 1,100 72.4 6.8% 4.8
Top 20 Properties (as of 31/03/2018)
Overview of Top 20 Assets
(1) As of 31st March 2018, excluding properties sold (signed but not closed), calculation as
defined by EPRA BPR standards
2) Annualised contractual rent excl. service charges
3) including other exernal spaces of 44,000 sqm
June 2018
41
Peer Schlinkmann
Email: [email protected]
Web: www.demire.ag/en/investor-relations
Peer Schlinkmann - Head of Investor Relations & Corporate Communications
Phone: + 49 (0) 61 03 372 49 44
Fax: + 49 (0) 61 03 372 49 11
Financial Calendar 2018
Date Event
27 June 2018 Annual General Meeting, Frankfurt
16 August 2018 Half Year Results 2018
15 November 2018 Interim Results Q3 2018
Contact Details/Financial Calendar 2018
Share information (as of 31 May 2018)
Symbol / Ticker DMRE
Share price (XETRA) € 4.38
Market Segment Prime Standard
ISIN DE000A0XFSF0
Market cap € 262m
Free Float(1) 18.5%
Shares outstanding 59,714,658