DEMIRE Deutsche Mittelstand Real Estate AG ($DMRE)

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.