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Introduction & Market Context
DEMIRE Deutsche Mittelstand Real Estate AG (ETR:DMRE) presented its third quarter 2025 results on November 6, revealing a challenging period marked by declining rental income and increased vacancy rates. The company's stock responded negatively, dropping 3.85% to €0.47 following the announcement, as investors digested the mixed results amid ongoing challenges in the German real estate market.
The company continues to navigate a difficult economic environment while implementing its strategic portfolio optimization plan through targeted disposals and financial restructuring efforts.
Quarterly Performance Highlights
DEMIRE reported rental income of €41.4 million for Q3 2025, representing an 18% decline compared to €50.6 million in the same period last year. The company attributed this decrease primarily to the completion of "LogPark" Leipzig and "LIMES" disposals.
The annualized contractual rent declined to €53.9 million from €56.4 million at year-end 2024, reflecting the impact of these strategic disposals. Despite these reductions, DEMIRE maintained relatively stable letting performance at 56,200 square meters, compared to 60,300 square meters in Q3 2024.
As shown in the following chart of annualized contractual rent and letting performance:
The company's vacancy rate increased to 17.4% from 15.1% at the end of 2024, primarily due to Deutsche Telekom vacating portions of their rental space in Bonn. On a more positive note, the weighted average lease term (WALT) improved slightly to 4.7 years from 4.6 years, reflecting successful lease extensions with Deutsche Telekom in Bonn and new letting achievements in Rostock.
The following chart illustrates these occupancy metrics:
Detailed Financial Analysis
DEMIRE's financial performance shows significant pressure on profitability, with a loss from fair value adjustments in properties of €29.9 million and substantial finance expenses of €41.2 million. These factors contributed to negative earnings before taxes and minority interests of €66.3 million.
The company's funds from operations (FFO I) after taxes stood at €8.3 million, while profit from the rental of real estate reached €27.9 million. The following P&L statement provides a comprehensive view of the company's financial performance:
DEMIRE's balance sheet reflects the ongoing portfolio optimization strategy, with investment properties declining to €625.5 million from €724.7 million at year-end 2024. Notably, non-current assets held for sale increased to €121.1 million from €76.7 million, indicating the company's continued focus on strategic disposals.
The balance sheet details reveal the financial position:
The company's Net Loan-to-Value (Net-LTV) ratio increased to 43.0% from 40.9% at the end of 2024, while the average cost of debt rose slightly to 4.43% from 4.35%. These metrics suggest increasing financial pressure, though still within manageable levels:
Strategic Initiatives
DEMIRE highlighted several strategic achievements during the quarter, including the extension of all mortgage loans maturing in 2025 and receiving Gold Awards for both EPRA BPR (Best Practices Recommendations) and SBPR (Sustainability Best Practices Recommendations) reports.
The company continued its portfolio optimization strategy with disposals expected to generate approximately €40 million in proceeds. This approach aligns with management's stated focus on strengthening the company's financial position through debt reduction and financial optimization.
A notable achievement was the prolongation of approximately 9,400 square meters with Deutsche Telekom in Kempten and about 10,100 square meters with a DIY market, helping to stabilize the portfolio despite challenging market conditions.
Forward-Looking Statements
Despite the challenges faced in Q3, DEMIRE maintained its full-year 2025 guidance, projecting rental income between €52-54 million and funds from operations between €5.0-7.0 million:
Management expects additional maintenance costs in the fourth quarter but remains committed to its selective approach to asset disposals. The company faces ongoing risks from the weak economic backdrop in Germany and challenging real estate market conditions.
Not mentioned in the presentation but noted in recent earnings commentary is the company's exposure to penalties for not redeeming a €50 million bond early, adding further pressure to DEMIRE's financial outlook.
As DEMIRE navigates these challenges, investors will be closely monitoring the company's ability to execute its portfolio optimization strategy while maintaining financial stability in a difficult market environment.
Full presentation:
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