Release Date: September 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DEMIRE Deutsche Mittelstand Real Estate AG successfully refinanced its EUR499 million bond, extending maturity to December 2027, providing more than three years for balance sheet refinancing.
- The company achieved substantial shareholder support, including a EUR100 million shareholder loan for bond buybacks.
- DEMIRE Deutsche Mittelstand Real Estate AG managed to sell properties worth EUR176 million in 2023, contributing to liquidity and operational stability.
- The company's net Loan-to-Value (LTV) ratio decreased from 57.7% in 2023 to 55.6% in June 2024, with expectations to fall further to about 50% after bond extension.
- Despite a challenging market environment, DEMIRE Deutsche Mittelstand Real Estate AG maintained a stable Weighted Average Lease Term (WALT) of 4.3 years, indicating a solid lease structure.
Negative Points
- Rental income decreased by 13% in the first half of 2024 compared to the previous year, driven by asset disposals.
- The company's Funds From Operations (FFO) I dropped to EUR15.5 million in the first half of 2024, significantly lower than the previous year.
- DEMIRE Deutsche Mittelstand Real Estate AG's vacancy rate increased to 15.5% due to tenant move-outs, impacting rental income.
- The company reported a revaluation loss of EUR180 million in 2023, reflecting a challenging real estate market.
- The average cost of debt is expected to rise to approximately 3.5% after the bond extension, increasing financial expenses.
Q & A Highlights
Q: Could you provide an indication of the potential volume of smaller and mature asset disposals, and your strategy regarding these sales in light of the EUR50 million repayment requirement for the next two years?
A: Frank Nickel, CEO: We need to be cautious not to sell our best assets. The refinancing solution provides flexibility, so there's no immediate pressure to sell. We are looking at disposing of smaller assets worth around EUR20 million and are working on another EUR30 million in larger disposals. The strategy will depend on market conditions over the next 12 months.
Q: Do you expect any further write-downs on the portfolio towards year-end, or is everything already reflected?
A: Frank Nickel, CEO: We do not anticipate significant further write-downs. Tim Brueckner, CFO: There was no external valuation as part of the bond extension process, and discussions with auditors did not indicate a need for revaluation midyear.
Q: After the refinancing, what will be the impact on the LTV, and what is the expected EPRA net LTV?
A: Tim Brueckner, CFO: The immediate positive effect will be a EUR40 million discount, reducing the LTV to roughly 50% or slightly below on a pro forma basis. We will review the EPRA numbers and provide them shortly.
Q: Regarding the high vacancy rate of 15.5%, what is the expected reduction, and what investments are needed to achieve this?
A: Ralf Bongers, CIO: The reduction is based on concluded contracts and advanced negotiations. It's too early for precise numbers, but no additional investments beyond our current CapEx program are anticipated.
Q: How will the interest on the shareholder loan affect the company's cash flow?
A: Tim Brueckner, CFO: The interest on the shareholder loan will likely be paid at maturity, which is after the bond's maturity date. Therefore, the operating cash flow is expected to remain positive.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
