DEMIRE Deutsche Mittelstand Real Estate Aktie

Good morning, everyone, and welcome to the DEMIRE AG's H1 2026 Earnings Call. My name is Maxi Goodman from NuWays, and I'll be moderating today's call. We will begin with a presentation by the management, followed by a Q&A session.

[Operator Instructions]

And with that, let's get started. Mr. Ruffel, the floor is yours.

Ladies and gentlemen, good morning, everyone. Welcome to our results presentation for the first half of 2026. Thank you for dialing in. Trust you're all well. With me here is Tim Bruckner, DEMIRE's CFO; and Julius Stinauer, our Head of Investor Relations. Before we jump into the presentation and the details, let me start with a few general comments. Overall, the first 6 months were marked by the consistent execution of our strategic priorities, which are namely actively managing our portfolio, preserving operational stability and further strengthening our financial position.

This, as we all know, against a still very challenging economic background. Against this backdrop, we achieved important milestones during the first half of the year and continue to make solid progress in executing our strategy. Our results reflect both the ongoing transformation of the portfolio and the disciplined approach we have taken to capital allocation and asset management. With that, let's jump straight into the key highlights and go to the executive summary. Top left-hand side, operational performance basically reflects 2 opposing effects. Rental income declined compared to the previous year, amounted to EUR 23 million, representing a decrease of around 17% year-on-year. However, this is, of course, a logical consequence of our asset disposal strategy to strengthen our balance sheet. As a result of the lower rental income, you see on the right top hand side, FFO I amounted to EUR 2 million compared to EUR 5 million in the prior year period. Looking at the transactions, that's the middle section. We successfully completed the sale of 1 asset in Flensburg and a small building on our bond property, generating total proceeds of around about EUR 17.5 million.

In addition, we signed further transactions in June and July with expected proceeds of approximately EUR 40 million. Closing for these 2 assets, I think it was, is expected to happen in the third quarter of this year. Then on the right-hand side, in terms of processes, beyond our operational activities, we also continue to advance important strategic initiatives. We are supporting the process initiated by our main shareholders regarding the potential sale of their shareholdings. At the same time, we further strengthened our ESG reporting by publishing our fifth EPRA sustainability report. And then finally, if you look at the updated guidance, bottom of the page, given the visibility we have gained over the remainder of the year, we are updating the full year guidance. We now expect rental income to be between EUR 42.5 million and EUR 44.5 million compared with the previous guidance of EUR 41.5 million to EUR 43.5 million. At the same time, we are raising our FFO I guidance to a range of EUR 0.5 million to EUR 2.5 million compared with the previous expectation of around minus EUR 1 million to plus EUR 1 million.

I think that was the executive summary, and let's now talk about the portfolio performance. Page 7. As you can see on the left-hand side, annualized contractual rent stood at EUR 46 million at the end of the first half compared to EUR 56.4 million a year earlier. As explained before, this is mainly the result of the smaller asset base following the disposals over the last 12 months. In addition, the somewhat higher vacancy level also contributed to the decline. And on the right-hand side, if you look at the letting performance, the same dynamic is visible. During the first half of the year, we signed leases covering around 18,000 square meters compared with approximately 40,000 square meters in the prior year period. Again, this reduction, I think, has to be viewed in the context of our smaller portfolio with fewer assets under management, potential for new lettings and lease prolongations is naturally declining. Also, if you look at the 40,000 square meters in the previous year, this had a special effect of the conversion of the [ North ] lease included. So I think on a like-for-like basis, the gap would definitely look smaller if you take that into consideration.

And if you jump to the next one, Julius. Key portfolio metrics, occupancy and lease maturity, I would say, developed in line with the underlying changes in the portfolio. Left-hand side, the EPRA vacancy rate increased from 16.4% at year-end to 21.5% at the end of the first half. This is largely caused by 2 effects. First, 2 properties became fully vacant at the beginning of the year, which was the properties in Schwerin and Neumunster. Second, we completed the disposal of the asset in Flensburg and that asset has been, I think, almost fully let. Of course, the main priority, what I was just describing in terms of the 2 vacant properties, Schwerin and Neumunster, is to relet these 2 vacant assets. And I would say we have already some promising leads in this respect. And then on the right-hand side, at the same time, the weighted average lease have remained at a solid level and even improved slightly from 4.7 to 5 years. So overall, I would say, while the vacancy increased due to the points I just mentioned before, our lease maturity profile remains stable and appropriate for a portfolio with a significant office rating.

And on that note, Tim, if we jump to the financial highlights.

Thank you, Dirk. I think we show in the first half of 2026, a pretty clean P&L in the first half of 2025. If you look at it, we had significant valuation effects and impairment effects mainly because of the -- at the timeline situation that is now all gone. So we, as Dirk said, we show some declining rental income because of the before mentioned disposals, but at the same time, we do show now and that I think was suggested in the previous calls, a slight improvement of our operating margin as seen in the profit loss from the rental of real estate. At least we moved up from about 67% to now 68%. There is still a long way to go, but I think the stabilization is good. And as Dirk said, there is some potential in the leasing pipeline, and we are pretty positive that we are performing in line with our own expectations here.

We had no relevant valuation effects. We have now relevant impairment effects in the first half of this year and also due to the extension of the [ CLO ] structure until the end of 2027. We show a pretty clean P&L with an EBIT -- positive EBIT of EUR 8 million. The financial expenses slightly increased because of the interest on the shareholder loan, and that in total then translates to the before mentioned funds from operations of EUR 2 million, which is slightly ahead of our planning, and that also caused the slight upward lift of the guidance. Let us have a brief look on the balance sheet. Obviously, there's also not much happening here. There's a small balance sheet contradiction due to the asset sales and the small negative result of the period. As Dirk already said, we expect some closings of 2 transactions in the third quarter of this year, and this will then have a bit of an effect on the balance sheet, of course, as well as there's some mortgage loans associated with them that will then be repaid.

We are in line with the disposals in our business plan, and that will also help to cover our liquidity needs going forward for the next 5 months of this year and also 2027. And it will, of course, also help to reach our repayment targets and refinancing targets going forward. One last slide on the financials. We saw a slight increase of the net LTV. We expect that to stabilize or be slightly reduced in the third quarter of the year and we were also able to show a slight decrease on the average cost of debt as we renegotiated along with one bank that we partially repaid before, and we're able to reach lower interest expense here. I think in total, we show a very stable first half. There is some upward potential in line of lettings, and we are quite well on track with disposals, I think is a pretty good result in the difficult current commercial real estate market.

Thanks, Tim. I think we can open the call for questions. I think Tim already summarized what the overall message is. I think one of the most important things is that we successfully executed the disposal strategy this year with the expected closings in the third quarter for 2 remaining deals. And that obviously helps our balance sheet. I think that's the main message. And going forward, I would say the main focus is obviously on improving the occupancy level. The vacancy in the 2 assets obviously hurt us. But as I mentioned before, we have some, I would say, very promising needs, especially for one of the assets. So let's see how that turns out until the end of the year.

[Operator Instructions]

Let's start with the first question from Philipp Sennewald.

First question is on the new guidance, the EUR 40 million proceeds you mentioned. Is this all that is embedded there? Or is there further disposals embedded in the guidance? And also which vacancy level do you see towards year end that brought you to this new guidance?

Tim, do you want to cover the first one?

Yes. We have one further relevant disposal in our planning for the second half of this year, but we are currently evaluating the options, whether we refinance the asset or we sell it, and we don't major impact on this disposal anyhow at least not until year-end. And in terms of vacancy level, maybe back to you, Dirk.

Yes. I think, I mean, looking at the upcoming renewals, I would say there is nothing major in terms of better prices to be expected until the end of the year. We have a healthy lease pipeline. So I would not expect any bad surprises in the next 6 months.

But also no improvement. I'm hearing out of that.

Well, no, I mentioned -- I mean, as I said, we have a healthy leasing pipeline, I would say, right, with realistic, I would say, leases there. Yes, I would call it at an advanced stage. There are also some bigger leases there. Obviously, I can't talk about it before they are signed, and we have to see whether the economics of those leases work. But the pipeline looks actually quite promising. So there might be an improvement until the end of the year.

Okay. That helps it. Back on the signed disposals, what is the EUR 40 million compared to the book value of that? is it below book? Or is it at book?

It's pretty much in line with book.

Okay. That's good. And maybe you moved back one asset from asset held for sale to investment properties around EUR 27 million. What's the reasoning behind that? And do you still market that asset? And which asset is it?

I think it's light, if I'm not mistaken. The reason why we took it out of the assets held for sale was the interest, which was shown on the market, to be honest with you, was not very appealing to us. And then what we decided is basically we want to refill the top levels where the tenant moved out. We have -- now we are now in talks with, I think, around 3 hotel operators to refill this space. And I think it will be very value accretive if we get this done before we put it on the market.

Yes, makes sense. All right. Now one question, I saw on the cash flow statement that your income tax cash payments increased substantially compared to previous year. What's behind that?

Those were tax payments related to previous periods only. And it's just a change of tax liabilities to tax payments. It has nothing to do with the current profitability of the group. Obviously, there is no relevant tax payments associated to the current P&L.

Yes, I thought so. All right. And then maybe on the FFO guidance, the implied H2 deterioration of FFO. Is this simply reflecting the upcoming asset disposals? Or is that also -- you mentioned maintenance was below plan in H1. Is that deferred to H2? Can you maybe give me a bit of granularity here?

The number is very small. So giving granularity on that level is quite difficult, but it's really related to the topic that you just mentioned. It's maybe some lower spending in maintenance and it's lower rental income as a basis.

I think we had one written question that I believe Dirk mostly answered. There were some disposals signed after the end of the period, and we expect closing in Q3.

Well, there are no further questions, I think. I think we can wrap up this call, honestly. Mr. Ruffel, would you like to share any final remarks before we close?

Look, other than thank you very much for joining us today, right? I think the next call we have for the Q3 results is on the 5th of November. And we obviously look very much forward speaking with you again. And in the meantime, again, as always, if you have any follow-up questions, don't hesitate to reach out. We are more than happy to answer them.

Thank you very much, and have all a nice day. Bye.

Good morning, everyone, and welcome to the DEMIRE [ Ageas ] Q1 2026 Earnings Call. My name is Maxi Gutmann from NuWays, and I'll be moderating today. We'll start with the management presentation and then move into the Q&A session.

[Operator Instructions]

I'll briefly explain the procedure once the presentation is finished. And with that, let's begin. Mr. Ruffel, the floor is yours.

Yes. Ladies and gentlemen, good morning, everybody. Welcome to the results presentation for the first quarter of '26. Thank you for dialing in. With me here is, Tim Bruckner, CFO; Julius Stinauer, our Head of HR; and a couple of other members of our team sitting in the room. Roughly 2 months ago, we presented our annual report. Today, at the close of the first quarter of '26, I can report our business is roughly progressing in line with plan despite ongoing macroeconomic headwinds, which we are familiar with. Annualized contractual rent is down, primarily caused by disposals and the higher vacancy level.

I will get to that in more detail later on. Meanwhile, both our net LTV and cost of debt declined slightly over the first 3 months of the year. On the transaction side, we continue to execute selective transactions. We have sold 2 properties with total proceeds of EUR 17.5 million. During the quarter, we also streamlined the management structure, reducing the Management Board from 3 to 2 members and reallocating the responsibilities accordingly. These are kind of the highlights in the exact summary.

Let's jump straight into the details, starting with Page 7, where I'll briefly walk you through the development of the key metrics. On the left-hand side, as you can see, the reduced asset base is reflected in our key operating metrics. Annualized contractual rent decreased from EUR 56.4 million at year-end '25 to EUR 45.7 million at the end of the first quarter this year, decline mainly driven by the disposals we did in 2025 as well as the higher vacancy level, which I already mentioned.

On the right-hand side, looking at the letting performance, we recorded 2,700 square meters in the first quarter compared to a fairly high number of 25,000 square meters in the prior year period. I think it's important here to point out that Q1 '25 figure was a bit of an outlier because that was mainly supported by 2 larger lease prolongations, whereas in this quarter, we didn't have these comparable effects. That said, it's a big difference but we do expect letting activity to pick up over the course of the year. I would say within the next 6 weeks where we have a big leasing pipeline, including some larger letting opportunities. So this should help us close the gap to last year's overall performance.

And if you go to the next page, left-hand side, vacancy. I mentioned it several times, EPRA vacancy increased from 16.4% at year-end '25 to 21%. This rise is primarily driven by assets that became fully vacant. I think since January. This is Nest and S with approximately around 12,000 square meters of lettable space. At the same time, on the right-hand side, you can see that the weighted average lease term improved increasing from 4.7 to 5.2. This is mainly attributable to the conversion of the master lease into individual rental contracts at the [ asset invoice ] basically strengthening the overall lease duration profile. So while vacancy increased in the short term, we have been able to enhance the cash flow through longer WALT.

And then on the financial highlights, Tim, if you go to the next page, you could take that over.

Thank you. Good morning, everyone. There's basically no surprise on the P&L and the balance sheet. As Dirk mentioned, rental income is down driven mainly by disposals. What we successfully managed to do is to stabilize our NOI margin now at roughly 65%. We don't have any material impact from value adjustments in the first quarter of this year, but slightly increasing cost of financing, resulting in FFO as expected at EUR 0.3 million.

The balance sheet has shortened slightly driven by the negative result of the period and the effect of the disposals in the previous quarters from EUR 849 million to EUR 833 million. That's basically it from the financial highlights.

Let's go to the next slide. Net LTV is slightly down. We did not have any negative impacts from the valuation side but repaid part of some loans, and this drives down net LTV slightly to 41.2%. At the same time, given that we have redeemed part of a relatively costly mortgage loan from the proceeds of the disposal of the Flensburg property, the average cost of debt, excluding shareholder loan expenses are now at 4.74%. And when I look forward to upcoming renewals of loans, I would expect that this figure stays roughly the same over the next quarters.

And with that, back to you, Dirk.

I mean that's short and sweet. I mean all in all, I think we delivered solid results for the first quarter of '26 and feel prepared for the developments ahead for the remainder of the year. So based on the numbers we showed you, we can confirm our full year guidance, i.e., we continue to expect rental income in the range of EUR 41.5 million to EUR 43.5 million, and FFO I of approximately plus or minus EUR 1 million. And that's about it, and we are very happy to take questions if there are any.

Thank you Mr. Bruckner and Ruffel for the presentation.

[Operator Instructions] Let's proceed with the first question from Philipp Sennewald.

Thank you for this brief presentation of Q1. A quick follow-up questions on what you said. The 2 assets that became fully vacated now, how is your view there on reletting them? How advanced are the negotiations there? And can you tell us about the impact? And on the 2 assets you sold in Flensburg and Bonn, were they sold at book value or below? And what was the LTV on those assets?

Maybe I'll take the first question on the now empty assets, Schwerin, actually been there last week. It's a difficult asset. Nevertheless, there was a surprise amount of interest, I would say, in potential new tenants. We, I think, signed already one lease for over 1,600 square meters. And I would say we have around 4 to 5 interested parties also in that range. So we are not -- I would say we are quite confident that we can bring up the occupancy at least back to 50% in Schwerin. [indiscernible] is a bit of a different beast. We have interested parties as well, surprisingly, I think 2 to 3. If one materialize, I would say we bring it up to 25%. If we are lucky and everything goes in, it would be fully let. But that's early conversation. So we have to see.

And the disposals of Flensburg and Bonn, were both mortgage financed by loan. In Bonn we sold a part of the building, a small residential block, roughly EUR 1 million. And in Flensburg, the property was sold and EUR 15 million of the proceeds were used to pay down the before mentioned loan. The values or the depreciation of the values were recognized already in 2025, so that we don't see any material impact in the Q1 figures.

All right. Understood. Yes, maybe one last follow-up. With the EUR 50 million repayment at '26, how confident are you're going to make it? Or do you even intend to repay those EUR 50 million?

I think what we mentioned last year in November is still valid. We have a close look at the market. As you know, we have quite a number of properties in the properties held for sale section of our balance sheet, and we try our very best to achieve those results. But given the current market sentiment, I think we remain cautious if we are able to execute successfully. We're not selling for any price.

There are actually no further questions -- or there is a further question from [ Andrew Roland.]

Yes. Can you hear me?

Yes.

Perfect. I was just going to ask, and it's a bit of a follow-on to the prior question. Obviously, the business now has in excess of EUR 50 million in cash. Is the intention to almost to raise proceeds from disposals to hit the sort of bond threshold? Or would you just prepay part of the bond anyway? And what do you see as a sort of sensible level of cash balance to retain within the business?

I think when you look at the cash balance of the business, you need to carefully differentiate between cash sitting at Fair Value REIT and DEMIRE. You don't get quarterly numbers from Fair Value, obviously. But if you look back at the 2025 numbers, you get a fair view of where the cash actually sits. And then you can relatively easily figure out that the cash at DEMIRE is currently not sufficient to repay EUR 50 million in outstanding bonds. But as I said before, I mean, we're trying our best to execute the planned disposals. And if we are able to do so, there will be more cash at the DEMIRE level. But at this stage, we cannot give a clear guidance on how to proceed here with repayments.

Thank you very much. I think there are no further questions, and we can conclude this call. Mr. Ruffel, would you like to share any closing remarks?

To be honest, not really. I mean, we mentioned everything. As I said, the lease-up numbers are not the best in the first quarter, but we are quite confident that for the next quarter reporting, the numbers will look much better. And as I said, in Q1 '25, the 20,000 square meters was a bit of an outlier. So I think overall, we are on track with the business plan for this year.

Okay. Thank you then, and good day everyone.

Good morning, everyone, and welcome to the FY 2025 Earnings Call of DEMIRE Deutsche Mittelstand Real Estate AG. I'm Maxi Gutmann from NuWays, and I'll be moderating today's call. We will begin with the management presentation followed by a Q&A session. I will provide instructions for the Q&A once the presentation has concluded. And with that, let's get started. Dirk Ruffel, the floor is yours.

Thank you. So ladies and gentlemen, good morning, everybody. Welcome to the results presentation. On DEMIRE side in the conference room here in London, you have myself, Dirk Ruffel, obviously, who's talking; Tim Bruckner, CFO; Ralf Bongers, CIO; Julius Stinauer, Investor Relations; and I think 5 people of our team being present as well.

In terms of structure of the call, I will provide a quick executive summary before handing over to Tim and Ralf to provide more details for '25. And at the end, I will give also a quick outlook on what we are going to expect for '26. So I think first main message is that both our rental income and FFO for '25 are in line with expectations and the provided guidance.

Company continued to optimize financial profile through active management of the debt, in particular, we refied or newly raised roughly EUR 77 million in mortgage loans over the year '25. In terms of sales, we sold rough -- we sold about -- I think it was 11 assets with a total GDP of over EUR 64 million. These disposals mainly served to streamline the portfolio and contributed to the deleveraging strategy.

We further strengthened our operational capabilities, especially on the asset management side, which is obviously to help driving letting performance. In terms of detail, if you jump to Page 5 of the presentation, which is the executive summary. So maybe some highlights from my side before I hand over to Ralf. The letting performance improved compared to last year, but that was predominantly driven by the conversion of the noise master lease into the individual contracts.

EPRA-Vacancy slightly increased due to space reductions of some bigger tenants like telecom, whereas our WALT was bumped up a little bit to now 4.7 years. Transaction side, I mentioned it already, we sold 11 assets, GDP, EUR 64 million, including also some smaller ones like a leasehold sale that will generate cost savings going forward.

On the financials, to point out, rental income reached EUR 53.5 million, FFO I at EUR 10.1 million. I mentioned it before, it's in line with the guidance we provided. The net LTV remained stable at 41.8%. And then on the bottom right-hand side, finally, on the processes, we refied EUR 77 million of mortgage loans and have achieved gold awards again for EPRA best practice reporting. And then if we jump to now page, I think it is Page 7 and 8, and then Ralf can provide a bit more detailed specifics on the asset management side and the transaction side of things.

Good morning, everybody. The annualized contractual rent has decreased from EUR 56.4 million down to EUR 51.3 million. This reduction is mainly driven by the disposal of the assets in Freiburg and Hamburg and an increased vacancy of our asset in Bonn. We have seen a strong letting performance. The letting performance increased significantly from 68,000 square meters in 2024 up to 127,000 square meters in 2025.

And the largest drivers are here the prolongations of 9,400 square meters with Deutsche Telekom in our asset in Kempten and approximately 10,000 square meters with the DIY market. And of course, the converting, as already mentioned by Dirk of the former master lease for our largest asset in Neuss to individual lease contracts.

Coming to the occupancy rate, the EPRA-Vacancy has increased from 15.1% up to 16.4%. The increase of vacancy is primarily a consequence of Deutsche Telekom leaving part of their rental space in our asset in Bonn. And of course, letting achievements in our assets in Rostock and Langenfeld have mitigated this effect. The WALT has increased slightly from 4.6 years up to 4.7 years, what we consider to be a good number for our portfolio consisting mainly of office properties. And the WALT improvement reflects a prolongation with Deutsche Telekom in our asset in Bonn and letting achievements in our largest asset in Rostock. Let's talk about now about the financials, and I hand over to my colleague, CFO, Tim Bogner.

Thank you, Ralf. Welcome, everyone. As you have already heard, rental income is down, but I think the good news is that we have stabilized our NOI margin, albeit at a rather low level of 68%. But nevertheless, I guess it was important to stabilize it. What you then see in our P&L that there is a further negative impact from the valuation of our portfolio. I guess that is a bit weaker than we thought about a year ago. But as we already highlighted in November last year, we see a lot of pressure on the transaction market continuing.

And so we have nearly the same fair value adjustment for our portfolio. We have slightly lower SG&A, mainly driven by the effects from the bond restructuring a year before, but we are working obviously actively on reducing G&A further. It's not easy in that structure, and it's not easy also if you see inflation pressure on especially consultant work. But I guess we are positive that we are able to reduce the number this year.

Going further down to financial income and expenses, you see a big gap to last year, mainly driven by the effect of the bond structure in the year before and the shareholder loan, which then at the end results to the negative earnings figures and also in effect to the lower FFO I, which is still in line with expectations, but considerably lower than the year before. The same effects are basically visible on the next slide, the balance sheet.

You see a shrinking balance sheet volume driven by the valuation effect and the disposals that have been mentioned by Dirk and Ralf before. Obviously, because of the negative P&L effect, we also see lower equity and lower equity ratios in our balance sheet. The next slide gives you an idea of the LTV. As Dirk already said, the LTV is about stable. We have sold some properties. We have refinanced some mortgage loans.

And we have only one mortgage loan left to refinance in 2026, and that is at a very low double-digit euro amount. So we are pretty confident that we can probably even increase our mortgage volume a bit and benefit from the higher volumes that German mortgage banks seem to lend this year, which will hopefully also decrease pressure on the bond refinancing that comes up next year, but that we will obviously address early at the second half in this year. What we see when we refinance our debt, obviously, we have some old debt in our balance sheet with very low interest rates.

When we refinance that, we currently see net cost of leverage of between 3.7% to about 4.5%. And overall, this has increased our average cost of debt from 4.35% to 4.85%. And with that, I hand back to Dirk.

Okay. Yes, in terms of outlook for '26, if you go to Page 13, you see on the right-hand side, we expect lower numbers due to having a reduced portfolio following the planned disposals. The guidance for next year is rental income between EUR 41.5 million to EUR 43.5 million, FFO I in the range of minus EUR 1 million to plus EUR 1 million. The main objectives for '26 are not surprising, reducing costs, have a look at cost efficiency measures and above all, improve rental income, and that's only been done through renewals and new lettings.

So this is the main objectives for next year. Obviously, also deleveraging where we can and selling assets where we can, all acknowledging that is at the moment, a very difficult market and certainly, the global incidents happening literally on a semiannual basis don't help, but we obviously do the best we can. So I think that concludes the outlook for '26, and then we jump into the Q&A.

[Operator Instructions] then let's proceed with the first question from Philipp Sennewald.

Maybe first one to start with for Tim. You mentioned you only have a small amount to refinance this year. Can you tell me what is the interest on that loan you have to refinance the current interest?

The interest on that loan is currently quite high because it was a restructured financing from a larger asset, and we expect the interest expense to come down or the loan to be fully repaid at, let's say, the third quarter of this year.

Okay. That's -- I mean that's good news to hear. Then I have a couple on the portfolio and on your rent levels. First, the like-for-like rent, the decline, is that purely explained by the increased vacancy? Or did you also like relet at lower face rents? And considering the overall vacancy, do you have a target for this year, which you want to reach?

I think the vacancy is a combination -- I mean maybe to answer the first question, the headline rent has not changed. So there was no decline in headline rents on a square meter basis when you look at the assets. So the decrease in occupancy is literally either selling assets or actually losing tenants, i.e., people not renewing or having a couple of insolvencies. So that's the reason.

Okay. And the vacancy -- I mean, you must have a target for this year, target figure for the vacancy level for the end of the year. Can you elaborate on that?

It depends on the sales very much, right? I mean if the sales go through, then obviously, we have a target. We have annualized lease-up assumptions as well, but it very much depends how we will go through with our asset sales, which is, to be honest with you, hard to predict because at the moment and in the last 2 years, I would say the average transaction time if a transaction goes through is between, what, 8 to 10 months. And you can only be sure once you actually sit in the notary and sign the SPA and get your down payment that the deal is going through. So it very much depends whether the sales are going to happen or not.

Yes, that's fair enough, I think. I would like to continue with one final part of my questions here. I see your contractual rent is at around [ RON 50 million ] at the end of '25. When I do the math, to reach like the midpoint of your top line guidance for 2026 and yes, taking the yield you currently have on your portfolio, you would have to sell assets with north of EUR 100 million, which you were not able to achieve last year. I would be interested in what is your disposal strategy? Is it rather selling like 2, 3 larger assets or rather sell smaller noncore ones? And I mean, you mentioned already, how do you see the market at the moment, especially in the past couple of weeks with the events happening in the Middle East?

Yes. I mean in terms of asset selection, what we are going to sell, I would say it's a mixed bag, right? There are assets where we basically lose money on because you have an empty asset and you have vacancy costs. So there are a couple of these ones we want to get rid of. So nonstrategic. And then obviously, in order to achieve a certain volume, we are going to market some assets which we consider to be liquid in the market. and liquid in the market, meaning they obviously have to have some level of stabilization. In terms of how I see the market in the last couple of weeks, I would say it hasn't gotten worse due to Iran, but it wasn't good to start with. I would have hoped that things will calm down a little bit. And then this happened, it certainly doesn't help. The buyer pool is still very much restricted in terms of smaller assets between EUR 5 million to EUR 20 million in okay locations still work, but the buyer pool is very restricted in terms of it's mostly family offices. There is no institutional money. So obviously, that restricts the buyer pool.

And Philipp, maybe the rental income has certain components. And as you have seen, we have sold 11 assets last year and earlier this year, and that also drives rental income down together with the beforementioned disposals and vacancies. So it's a mixed bag, and you cannot just say how much do you sell this year to reach this year's guidance. It's more the effects from last year that affect this year's numbers.

Okay. I just thought the contractual rent would have included that already, but thanks for the...

The rental income guidance, just to be clear that, that is much driven by what happened in the past.

Yes. Yes, yes, for sure, for sure. Makes perfect sense. Thank you, Tim. Yes, I think -- yes, I can totally agree to what you've said on Iran. We all hope that it goes by soon, affects all of us.

Well, it doesn't seem like there are any more questions. I think, honestly, we can conclude the call for today. Dirk Ruffel, would you like to share any closing remarks?

I mean, look, thanks again for taking the time and joining us and having a look at the documents. If there are any questions coming up afterwards, feel free to get in touch with the team, and we are more than happy to provide answers where we can.

Good morning, everyone, and welcome to DEMIRE's Q3 Earnings Call. My name is Maxi Goodman, and I'll be your moderator today. We'll begin with the management presentation and then move into the Q&A. I'll provide more details on the process once the presentation concludes. And with that, let's get started. Mr. Nickel, the floor is yours.

Thank you very much. Good morning, everyone, from DEMIRE's side, and welcome to our 9 months 2025 results presentation. Thanks for joining us today.

With me here is DEMIRE's CFO, Tim Bruckner; CIO, Ralf Bongers; and Julius Stinauer, our Head of Investor Relations.

I'm sure many of you have already reviewed our results, which I would describe as robust, particularly in light of our smaller portfolio size compared to 2024.

In a still challenging environment and weak real estate markets, we successfully completed several property disposals to streamline our portfolio and strengthen our balance sheet. These sales have already generated around EUR 43 million this year. Given current market prices, we have decided to hold back some further disposals and will, therefore, not redeem the EUR 50 million of our bonds early as originally planned. We believe retaining these assets for now positions us for stronger value appreciation and gives us more financial flexibility in the future.

This year, we secured new bank loans totaling around EUR 75 million for 5 properties, and we were able to partially revalue these loans. Since summer, we've already seen encouraging signs of recovery in the financing market and for real estate companies. Despite a weak economic backdrop, DEMIRE delivered solid operational performance, achieving nearly the same letting volume as last year while maintaining stable and in some areas, higher rent levels. This positive trend reflects our excellent work of our asset management team and our close tenant relationships. On top of that, we expect added momentum from the new IMOTEX center manager starting in early 2026.

Now that we've covered some of the highlights, let's move to the next slide. We'll briefly walk you through the developments of our key metrics in the first 9 months of this year. Let us make a more detailed look at our 4 strategic pillars. Among the key highlights, there are continued robust letting performance, the successful financing and the progress we've made on our asset disposals. Our asset management activities generated an annualized contractual rent of EUR 53.9 million, slightly lower than at the end of '24 due to property disposals. Letting performance remained almost stable, a solid achievement given the challenging economic environment in Germany. We are also adding momentum at our largest asset, IMOTEX in Neuss with a new center manager starting early 2026. From that point on, leases will be concluded directly with DEMIRE, further enhancing our earnings potential. The EPRA vacancy rate rose to 17.4%, mainly due to Deutsche Telekom partially vacating space in Bonn as already announced before, offset by successful new lettings in Rostock and Langenfeld. Encouragingly, these lettings also improved our WALT to 4.7 years.

Let's look at our transactions. This year, we completed several disposals with expected proceeds of around EUR 40 million, though some are still closing and not fully reflected in the Q3 figures. The sale of a leasehold property will bring meaningful cost savings going forward. We are continuing to focus our disposals on smaller, nonstrategic and mature assets. Overall, these steps strengthen our flexibility and position us well for the future.

Turning to the financials. Rental income came in at EUR 41.4 million, down 18% compared to the previous period, mainly due to the removal of LogPark” and Leipzig and the LIMES asset from our portfolio. FFO I stood at EUR 8.3 million, reflecting the smaller portfolio and the lower rental income. Our net LTV was 43%, only slightly higher than year-end 2024 at 40.9%, showing that our balance sheet remains solid.

Regarding our processes, all our mortgage loans maturing in 2025 have been successfully extended by at least 3 years. In addition, we once again achieved Gold Awards for both our EPRA section of our annual report and our EPRA sustainability report, reflecting the high quality and the transparency of our reporting.

Looking at our earnings so far this year and what we expect for the rest of 2025, we are sticking to our guidance. For the full year, we anticipate rental income of around EUR 52 million to EUR 54 million and FFO I of EUR 5 million to EUR 7 million. Ralf I would now ask you to continue with some more portfolio highlights.

Good morning, everybody. And as already mentioned by Frank, the annualized contractual rent has decreased slightly from EUR 56.4 million down to EUR 53.9 million. This reduction is mainly driven by the disposals of 3 smaller assets and then an increased vacancy in one of our larger assets. Nevertheless, as already mentioned by Frank also, we had a strong letting performance and close to matching last year's strong performance with 56,000 square meters. Largest drivers here are prolongations of 9,400 square meters with Deutsche Telekom in our asset in Kempten and approximately 10,000 square meters with the DIY market. And Frank already elaborated a bit on our asset in Neuss and in addition to this strong letting performance, we have appointed a new center manager for our largest asset in Neuss with 56,000 square meters. And this new management will come into effect in Jan 2026. And from then on, leases will be handled directly by DEMIRE and this will give us better control over the property and help us to unlock more of its earning potential.

The EPRA vacancy has increased from 15.1% up to 17.4%. The increase of vacancy is primarily a consequence of Deutsche Telekom leaving parts of their rental space in the asset in Bonn and our letting achievements, especially in the asset in Rostock and Langenfeld helped us to mitigate this effect. The WALT has increased slightly from 4.6 years up to 4.7 years and the WALT improvement reflects prolongation with Deutsche Telekom in Bonn and further letting achievements, for example, in our asset in Rostock. And we see this 4.7 years still at a solid level for our portfolio with an office overweight.

Yes, I would like to hand over to our CFO, Tim, who will explain the financial highlights. Tim, please take over.

Hello, everybody. Our [indiscernible] as said before, lower mainly driven by the previously disposal of LogPark and the deconsolidation of the LIMES portfolio [indiscernible] or less stable operating margin in the high 60s in line loss from the rental of real estate. I think for the first time, this is a stabilization of our margins, and we are looking forward obviously to reduce vacancy and increase margins again 60%.

When you further go down, we see that there were some [indiscernible] again, profit from fair value adjustments in properties. Those were connected to the disposal prices we can achieve in the current market conditions. And as you have all read our release from last week, it has also an effect on our disposal strategy going forward.

The impairment of financial and other receivables mainly consists of the remaining LIMES connected shareholder loans into the structure given the assumed disposal prices of that portfolio. We have now completely written off all proceeds that we expected previously from the LIMES portfolio. We -- given the difficult economic situation, obviously also try hard to push down G&A. I think there is some success in our complex structure. It's not that easy, but we have reduced the number quite a bit from EUR 9.1 million to EUR 7.8 million for the first 9 months of this year.

As you all know, interest expense is up mainly driven because of the amended terms of the bond and also the shareholder loan. As you know, shareholder loan interest is not payable, but it is shown in our current financial statements. So we show a significant rise from EUR 12 million to EUR 41 million. This all sums up into FFO after taxes before minorities and shareholder loan interest of EUR 8.3 million for the first 3 quarters of this year.

As you know, our guidance is slightly above our guidance for the first 9 months, but we expect some factors in the last 3 months that will hinder us from increasing the guidance at least at this point.

On our balance sheet, you see the effect, obviously, of a shift from investment properties to assets held for sale and also the negative results of the period that at the end of the day, shortened our balance sheet and led to some slightly weaker ratios than in the previous reporting period. At the same time, the net LTV is increasing slightly from 40.9% to [ 43% ] excluding the shareholder loan, obviously, we expect that to go down for year-end driven by some closing of the disposals that have been mentioned by Ralf and Frank before.

The average cost of debt is more or less stable against the end of the previous year. As said before, we have refinanced quite a number of mortgage loans. You can imagine that those refinancings came in at a higher cost than the original loan. So we see a bit or we will see a slightly further increase in the nominal cost of debt going forward.

Back to you, Frank.

Thanks, Tim. All in all, we delivered robust results for the first 9 months of 2025 and feel well prepared for the developments ahead of the remainder of the year.

Looking at our performance in the first 9 months and the outlook for the rest of the year, we are keeping our full year 2025 guidance, as Tim just mentioned. FFO is currently at EUR 8.3 million, above guidance, though we do expect some additional maintenance costs in the last quarter. Hence, we are confident to achieve the rental income guidance of EUR 52 million to EUR 54 million and to generate an FFO I of EUR 5 million to EUR 7 million.

Before we move into the Q&A session, I'd like to reiterate our key priorities going forward. We are staying firmly closed and focused on strengthening our financial position with debt reduction and financial optimization as key priorities. At the same time, we'll continue selling assets where it makes sense, while putting a strong focus on operational excellence to unlock the full value of our portfolio. Thanks for listening, and we are now happy to answer your questions.

[Operator Instructions] Hopefully, that's clear. Then let's proceed with the first question.

I hope you can hear me well. Tim, I want to get back to the extra effects you mentioned in the fourth quarter affecting FFO. Can you elaborate a bit further? I mean you consistently improved FFO over the first quarters sequentially, and now you expect at least EUR 1.5 million negative or EUR 1.3 million negative to be precise in Q4. Yes, I want to know maybe a bit more detail on that.

I think Frank helped me with that by saying that we expect to spend more maintenance than in the previous quarters. So if those maintenance effects really materialize, we think that this should have a negative FFO impact.

Maintenance piles up at the end of the year, Philipp. So we have to be -- and this is why we think that going down with the FFO I prognosis makes a lot of sense to us.

All right. Understood. That helps. And then also regarding the news you put out last week, you also mentioned in the end. I want to know, I mean, you have to pay the penalty fee now as you do not pay back the EUR 50 million. First of all, when is this cash relevant? Is this cash relevant this year? Or is it stretched over the course of the -- until the bond is due? And second one, what makes you so confident that you can compensate by higher selling prices for this penalty payment? And does this imply that you see easing pricing pressure?

Well, let me answer the first part of the question. It's payable at maturity.

And on the second part of the question, Philipp, we always said that we are opportunistic in our sales. So we plan to sell the assets that we want to sell and that at a fair price. And we haven't seen that for the last month. So the decision was to go on with the assets that are usually our best assets because otherwise, you can't sell anything these days anyhow and keep them to keep us flexible for the future.

Okay. That makes sense. And I mean, in the case of, yes, easing pricing pressure next year, should that happen? Would you also be willing to sell like, let's say, a portfolio of assets once the market improves?

If it makes sense, of course, Philipp. But I think the glass bowl is not big enough to give you a real answer on that.

Yes. And so far, we don't see any significant portfolio deals in the market.

All right. Then thank you very much. Since it seems there are no additional questions at this time, we can wrap things up here. Mr. Nickel, would you like to share any closing remarks?

Yes. Thanks again, everybody, for dialing in. We'll be back at our full year results presentation on March 19, 2026. And we are looking forward to speaking with you then again.