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Introduction & Market Context
DEMIRE Deutsche Mittelstand Real Estate AG (XETRA:DMRE) presented its H1 2025 results on August 14, revealing a 22% year-over-year decline in rental income amid ongoing portfolio optimization efforts. Despite the revenue drop, the company raised its full-year guidance, citing improved letting performance and successful asset disposals.
The stock closed at €0.68 on August 13, down 1.45% ahead of the results announcement. DEMIRE shares have struggled over the past year, with the stock trading near its 52-week low of €0.58, well below its 52-week high of €1.23.
Executive Summary
DEMIRE reported rental income of €27.8 million for H1 2025, down 22% from €35.5 million in the same period last year. The decline was primarily attributed to the sale of "LogPark" and the deconsolidation of "LIMES" properties. Funds From Operations (FFO 1) fell significantly to €5.0 million from €15.5 million in H1 2024.
Despite these challenges, the company highlighted several positive developments, including increased letting performance of 40,500 square meters (up from 25,000 sqm in H1 2024) and an improved weighted average lease term (WALT) of 4.8 years (up from 4.6 years at year-end 2024).
As shown in the following executive summary from the company’s presentation:
Portfolio Performance
DEMIRE’s annualized contractual rent decreased to €54.5 million in H1 2025 from €56.4 million at the end of 2024. The company attributed this reduction to disposals and increased vacancy in one asset. However, letting performance showed significant improvement, more than doubling compared to the first half of 2024, driven by lease extensions with Deutsche Telekom and a DIY market tenant.
The following chart illustrates the changes in contractual rent and letting performance:
The EPRA vacancy rate increased to 17.3% in H1 2025 from 15.1% at the end of 2024, primarily due to Deutsche Telekom vacating rental space in Bonn. This represents an improvement from the 18.1% vacancy rate reported in Q1 2025. The weighted average lease term improved slightly to 4.8 years, reflecting successful lease extensions.
The portfolio metrics are illustrated in the following chart:
Financial Results
DEMIRE’s financial performance showed significant pressure in the first half of 2025. Rental income declined by 22% year-over-year to €27.8 million, while FFO 1 dropped to €5.0 million from €15.5 million in H1 2024. The company also reported a loss from fair value adjustments in properties of €27.9 million, slightly worse than the €25.9 million loss in the same period last year.
The detailed profit and loss statement shows the financial impact:
On the balance sheet side, investment properties decreased to €624.1 million from €724.7 million at the end of 2024, primarily due to reclassifications and disposals. Total assets declined to €889.8 million from €951.2 million. The company’s reserves fell significantly to €66.9 million from €112.6 million.
The following balance sheet highlights these changes:
DEMIRE’s Net Loan-to-Value (LTV) ratio increased to 42.4% from 40.9% at year-end 2024, moving further away from the company’s target of 40%. However, management indicated that a reduction toward the 40% level is expected. The average cost of debt remained relatively stable at 4.32%, slightly down from 4.35% at the end of 2024.
The debt metrics are illustrated in the following chart:
Updated Guidance & Outlook
Despite the challenges faced in the first half of the year, DEMIRE raised its full-year guidance for both rental income and FFO 1. The company now expects rental income of €52-54 million, up from the previous guidance of €51-53 million. FFO 1 guidance was increased more substantially to €5.0-7.0 million from the previous €3.5-5.5 million.
The updated guidance suggests management expects improved performance in the second half of 2025:
The guidance revision represents a positive shift from the company’s Q1 2025 outlook, indicating that operational improvements and portfolio optimization efforts are beginning to yield results. DEMIRE continues to focus on opportunistic disposals, having successfully executed transactions with approximately €40 million in proceeds during the first half of the year.
The company also highlighted progress in its ESG initiatives, achieving a 40% reduction in CO2 emissions, and successfully extended two mortgage loans, strengthening its financial position.
As DEMIRE navigates the challenging real estate market environment, its strategy of portfolio optimization, improved letting performance, and focus on deleveraging will be crucial for restoring profitability and shareholder value in the coming quarters.
Full presentation:
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