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Introduction & Market Context
DEFAMA Deutsche Fachmarkt AG (DEF) presented its first quarter 2025 results on June 5, showcasing continued growth in its retail property portfolio despite the challenging market environment. The German retail property specialist, which focuses on established shopping centers with creditworthy tenants in small to mid-sized cities, reported solid increases across key metrics while highlighting its strategic acquisitions during the period.
The company’s stock closed at €27.80 on June 4, 2025, trading in the middle of its 52-week range of €25.40 to €32.00, as it continues to execute its buy-and-hold strategy aimed at delivering double-digit equity returns.
Quarterly Performance Highlights
DEFAMA reported strong financial performance for Q1 2025, with its portfolio value increasing by 16% year-over-year to €327 million, up from €283 million in the same period of 2024. Revenue grew by 12% to €7.4 million compared to €6.6 million in Q1 2024.
As shown in the following chart of portfolio value and revenue growth:
Funds From Operations (FFO), a key metric for real estate companies that excludes depreciation and amortization, increased by 7% to €2.7 million, with FFO per share rising from €0.52 to €0.56. Net profit showed a modest increase of 1% to €0.9 million, with earnings per share improving from €0.18 to €0.19.
The following chart illustrates DEFAMA’s net profit and FFO performance:
Strategic Acquisitions and Portfolio Management
As of May 31, 2025, DEFAMA’s portfolio comprised 80 locations with a total leasable area of 313,265 square meters and an impressive occupancy rate of 96.3%. The properties generate annualized net rental income of €27 million, with a weighted average lease term (WALT) of 4.5 years.
The company highlighted its tenant diversification, with food retailers accounting for 38% of rental income, followed by non-cyclical chain stores (16%), home improvement (13%), and fashion retailers (13%). Major tenants include EDEKA/Netto/trinkgut (11.9%), Kaufland/LIDL (9.0%), and toom/B1 (7.3%).
The following breakdown illustrates DEFAMA’s tenant mix and industry distribution:
During Q1 2025, DEFAMA completed two strategic acquisitions. In January, the company purchased a retail center in Havelberg with a leasable area of 2,919 square meters. The property, built in 1992, is anchored by EDEKA and has an occupancy rate of 69%, offering development potential.
The Havelberg retail center acquisition is shown below:
In May, DEFAMA acquired a fully occupied retail property in Wienhausen for €970,000. Built in 1996, the 986-square-meter property is leased to Penny, the only food market in the area, and generates annual net rent of approximately €100,000.
The Wienhausen property is illustrated here:
Additionally, DEFAMA announced the sale of its Templin retail center, which is expected to generate a gain of over €1 million and approximately €2 million in liquidity after taxes.
Financing Structure and Growth Strategy
DEFAMA maintains a diversified financing structure with 40 banking partners. As of March 31, 2025, the company had total bank loans of €189 million with an average interest rate of 3.03% and an average fixed interest period of 7.9 years. The loan-to-value ratio (LTV) stood at 58%.
The company’s debt maturity profile is illustrated in the following chart:
A key aspect of DEFAMA’s strategy is its ability to grow without raising additional equity capital. The company typically acquires properties with initial yields of around 10% per annum and finances more than 80% of the purchase price with debt at 4-5% interest rates, allowing for efficient use of equity capital.
This approach has resulted in consistent growth in FFO per share, which has increased by 29% over the last four years, as shown below:
Similarly, DEFAMA’s Net Asset Value (NAV) per share has grown by 64% over the past four years, while dividends have increased every year since the company’s founding:
Forward-Looking Statements
For the full year 2025, DEFAMA expects to achieve an annual surplus exceeding €5 million and FFO of over €11 million, compared to €4.6 million and €10.0 million respectively in 2024. The company also anticipates a dividend of more than €0.60 per share.
Looking further ahead, DEFAMA has set ambitious long-term targets for 2030, including a portfolio value of €500 million, annualized net rents of €42 million, and FFO of €19 million, as illustrated in this projection:
The company noted that market conditions are increasingly favorable, with more attractive properties becoming available and sellers accepting purchase prices at or below 10 times net rental income. DEFAMA reported a record number of potential acquisition targets under review, including properties in major cities and metropolitan areas, positioning the company for continued growth in the coming years.
Full presentation:
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