DEMIRE Deutsche Mittelstand Real Estate AG First in ...€¦ · (1) As of Q1 2017, pro forma for property sales signed but not closed 531 416 39 Core + Value-add Redevelopment 6.6

DEMIRE Deutsche Mittelstand Real Estate AG June 2017

DEMIRE Deutsche Mittelstand Real Estate AG

First in Secondary Locations

Company Presentation - June 2017

DEMIRE Deutsche Mittelstand Real Estate AG June 2017 2

Executive Summary 3

Company and Strategy 7

Portfolio Overview 11

Market Overview 20

Key Financials 27

Strategic Review 34

Appendix 36

Agenda

Section Page


Distribution by Location

Distribution by Investment Cluster

Well Diversified Portfolio (1)

Retail24%

Logistics5%

Other3%

Office68%

Total GRI

€71.7 m

Saxony, 14%

Hesse, 10%

Schleswig-Holstein,

7%

Bavaria, 5%

Other, 21%

Mecklenburg-Western

Pomerania,10%

Brandenburg,4%

Baden-Wurttemberg,

11%

NorthRhine

Westphalia, 18%

Total GRI

€71.7 m

» DEMIRE is a leading German public real estate

firm focused on high quality office, retail and

logistics properties across Germany generally

in secondary locations, i.e. mid-sized cities and

areas bordering metropolitan cities

» Sizeable €1 bn German commercial portfolio

consisting of 85 assets with Core+ and Value-

add investment approach

» Diversified across office 68%, retail 24% and

logistics 5%

» Fully integrated management platform (80

FTEs) with local expertise enables active asset

and property management

» High quality tenant roster with 5.3 years WALT

» €72 m contractual rent representing attractive

7.3% gross yield

» Supportive shareholder base with Wecken &

Cie (26.53%) and Obotritia Capital (R. Elgeti,

11.89%)

(1) As of Q1 2017, pro forma for property sales signed but not closed

531416

39

Core + Value-add Redevelopment

6.6 3.8 3.8

5.4% 16.7% 6.9%

GAV WALT EPRA Vacancy

Distribution by Asset Class

DEMIRE – First in Secondary Locations

Executive Summary


Portfolio181 171 (2)

85

FY 2015 FY 2016 Q1 2017

No. of Assets EPRA Vacancy WALT

% Years

12,8% 11,6% 10,7%

FY 2015 FY 2016 Q1 2017

5,4 yrs 5,3 yrs 5,3 yrs

FY 2015 FY 2016 Q1 2017

Balance

Sheet

GAV

€m

Net LTV Total Equity

% €m

928 1.006 994

FY 2015 FY 2016 Q1 2017

67,5%

62,8% 62,5%

FY 2015 FY 2016 Q1 2017

326371 372

FY 2015 FY 2016 Q1 2017

P&L76,4

17,8 18,5

FY 2016 Q1 2016 Q1 2017

GRI

€m

Adj. EBITDA Net Income

€m €m

39,8

7,0 9,2

FY 2016 Q1 2016 Q1 2017

27,6

3,50,9

FY 2016 Q1 2016 Q1 2017

(1)

(1) Excludes revaluations and sales, but includes majority of TIs which run through P&L (2) Includes disposals signed but not closed in 2016 (3) Includes €7 m valuation gain

(3)

Positive Momentum Across KPIs

Executive Summary


Dynamic Rental

Development

Lower Vacancy

Rates

Higher Yields

5

Source: Bulwiengesa, DG Hyp, Corpus Sireo

» Supportive leasing markets and strong demand

for space are driving vacancy rates down

» Secondary locations offer higher yields with

lower volatility compared to the Top 7 locations

due to, inter alia, limited supply of new products

» Unlike Top 7 locations, the secondary locations

still provide abundant investment opportunities

at attractive yields

» Critical success factors are distinct knowledge

of the regional markets as well as sound real

estate management skills on the ground

» DEMIRE is well positioned to lead the

“secondary” commercial segment in Germany

and to grow its portfolio base substantially over

the next few years

Office Market Rent Development (1)

Office Market Gross Initial Yield Development

Top 7 Locations Secondary Locations

7,2%

10,9%

2008 2009 2010 2011 2012 2013 2014 2015

8,9%

7,2%

2008 2009 2010 2011 2012 2013 2014 2015

111115

5.6%

10.3%

7.6%

6.0%

CommentsOffice Market Vacancy Development

(1) Indexed to 100

100

2008 2009 2010 2011 2012 2013 2014 2015

Suitable Asset Base in Secondary Cities that Provide High Yields with Low Cyclicality

Executive Summary


Markus Drews (COO)* Ralf Kind (CFO)*

In total more than 20 years of

professional real estate experience

Previous functions include Head of

Real Estate at Colonia Real Estate AG

Responsible for transactions totalling

€3 bn and assets under management

of €3 bn

19 years of experience in international

real estate

Previously Co-Founder and CEO of

Arbireo Capital AG and Managing

Partner of Dr. Lübke & Kelber GmbH

12 years at Barcap (lastly as Head of

Barclays Real Estate Investment

Banking Team for DACH Region)

Previous functions include Principal

Consultant at PwC

* CEO as of July 2017 * CFO since March 2017

Experienced Management Team With Proven Track Record

Executive Summary


Company and Strategy

Office Building, Frankfurter Str. 29-35, Eschborn


Secondary Locations» Focus on secondary locations where yields and occupancy rates are higher and less cyclical than in

the Top-7 cities

Diversification» Achieve and maintain high degree of diversification across locations, asset classes and tenants in a

manageable way

Bonn Ulm Eschborn

Bonner Talweg Zeitblomstrasse Frankfurter Strasse

Active Asset

Management

» Clear “manage-to-core” strategy acquiring assets with partial vacancy in off-market situations

» Combination of stable income from Core+ portfolio and rental growth opportunities from Value-add

assets

Internal Management » Strong internal asset, property and facility management to support business model locally

Capital Recycling» Actively review capital recycling opportunities to crystallize value creation, optimise portfolio structure

and calibrate external funding needs

Selected Acquisitions» Increase portfolio size and stock liquidity to improve access to capital markets

» In parallel, continue to de-lever company towards mid-term LTV target of 50%

DEMIRE Strategy



» Secure income & long-term visibility

» Potential capital recycling

54%

Key Metrics

GAV: €531 m

GRI Yield: 7.1%

Vacancy: 5.4%

WALT: 6.6yrs

Current allocation (1)

Core+

» Secure income & growth upside

» Active “manage-to-core” approach

42%

Key Metrics

GAV: €416 m

GRI Yield: 7.5%

Vacancy: 16.7%

WALT: 3.8yrs


Value-add

» “Risk-free” upside potential

» Extensions, refurbishments and

selective developments on the basis

of pre-lettings and building permits

4%

Key Metrics

GAV: €39 m

GRI Yield: 7.3%

Vacancy: 6.9%

WALT: 3.8yrs


Redevelopment

» DEMIRE has clustered its portfolio into three buckets according to the value generation potential of its assets:

» Core+ assets are stabilised assets with low vacancy rate and long WALTs; DEMIRE might opportunistically consider

selling some of these assets to recycle capital

» Value-add assets have higher degree of vacancy and shorter WALTs; despite its higher vacancy, this bucket already

generates attractive yields today hence any reduction in vacancy can be seen as immediate value upside

» Redevelopment represents upside potential identified within existing assets, e.g. new construction on existing land

» The company sees itself as active owner of real estate with a "manage-to-core" approach

» A key differentiator for DEMIRE is its fully integrated asset, property and facility management platform which has

the necessary know how to actively acquire assets with vacancy and to turn such assets around

(1) Based on GAV

DEMIRE’s In-house Management Platform Enables Active Portfolio Management



Op

era

tio

na

l B

usin

es

s

Property & Asset Management

» Hands on property management

» Asset Management / controlling

» OpEx analysis and reduction

» CapEx planning and monitoring

» Rent accounting

Facility Management

» Caretaker service

» 24/7 technical monitoring

» Maintenance and renovations

Letting Division

» Development of vacancy reduction

strategy

» Rental and marketing management

» Insights and know how in local

markets

» Strong local network

IT &

Sys

tem

s

» State-of-the-art ERP- and controlling systems (IBM Cognos TM1, Aareon GES)

Str

ate

gy

10

» DEMIRE’s platform covers the full real estate value chain and is a key success factor for its strategy in secondary locations

» Combination of centralized data systems and local presence allows for minimum response times vis-à-vis new and current tenants

» All building blocks of the DEMIRE management platform are involved throughout the “lifecycle” of an asset: from acquisition to disposal

» Portfolio management / Strategy

» Risk management / Compliance

» Finance and Controlling

» Legal

» Investor Relations

DEMIRE’s Internal Platform Covers the Whole Real Estate Value Chain



Vacancy <5%

WALT min. 5 years

Gross initial yield 6-8%

Core+

Value-add

Locations

Vacancy 5 – 40%

WALT min. 3 years

Gross initial yield >7%

Existing locations in secondary cities with strong micro location demand

and fundamentals

Metropolitan areas/ commuter belts including the Ruhr area,

Bremen/Schleswig Holstein, Leipzig, Rhine-Main area, Stuttgart

Acquisition Criteria

Strict Acquisition Criteria for Commercial real estate



Portfolio Overview

Logistics Park Leipzig, Am alten Flughafen 1, Leipzig


Clearly Defined Target Regions Strong Underlying Portfolio Locations

» Focus on secondary cities with positive fundamentals and

economic growth while at the same time providing a resilient

rent and yield profile

» Portfolio locations are centered around densely populated

areas with the key portfolio locations in large cities outside the

Top 7 including Bonn, Ulm, Rostock, Kassel and Leipzig

» The majority of the portfolio is located in metropolitan areas

and the commuter belts of larger German cities with strong

macroeconomic fundamentals

» Micro locations of the assets exhibit meaningful demand in

the respective asset class

North-Rhine

Westphalia

DEMIRE Assets


Retail24%

Logistics5%

Other3%

Office68%

Well Diversified Portfolio

Distribution by Asset Class (1) Distribution by Location (1)

Total GRI

€71.7 m

Saxony, 14%

Hesse, 10%

Schleswig-Holstein,

7%

Bavaria, 5%

Other, 21%

Mecklenburg-Western

Pomerania,10%

Brandenburg,4%

Baden-Wurttemberg,

11%

NorthRhine

Westphalia, 18%

Total GRI

€71.7 m

Portfolio Well Diversified Within Focus Regions

Portfolio Overview


Attractive Yield and WALT Across Portfolio (1)

All Three Buckets Generate Attractive Rental Yields (1)Significant Value Upside Within Portfolio

Office Likely to Remain Dominant Asset Class

Redevelopment

4%

Core+ Portfolio

54%

Value-add

42%

Retail

24%

Logistics

6%

Others

2%

Office

68%

31 Mar 2017

GAV

(€m)

GRI p.a.

(€m)

GRI p.a.

(€/m2/

p.m.)

GRI Yield

(%)

EPRA

Vacancy

(%)

WALT

(Years)

Office 667 48.8 7.4 7.3% 6.6% 5.1

Retail 239 16.9 8.8 7.1% 10.4% 6.4

Logistics 55 3.8 1.4 6.8% 45.2% 1.9

Other 26 2.2 4.6 8.7% 3.0% 6.4

Total 987 71.7 6.2 7.3% 10.7% 5.3

31 Mar 2017

GAV

(€m)

GRI p.a.

(€m)

GRI p.a.

(€/m2/

p.m.)

GRI Yield

(%)

EPRA

Vacancy

(%)

WALT

(Years)

Core+ 531 37.7 8.7 7.1% 5.4% 6.6

Value add 416 31.2 4.5 7.5% 16.7% 3.8

Redevelopment 39 2.9 8.2 7.3% 6.9% 3.8

Total 987 71.7 6.2 7.3% 10.7% 5.3

Portfolio Split by Asset Class (1)

Portfolio Split by Cluster (1)

Total GAV

€987 m

Total GAV

€987 m


Portfolio Strategy Based on Value Creation and Diversification Across Asset Classes

Portfolio Overview


181

85

FY 2015 Q1 2017

FY2015 Q1 2017

15

Broadly Stable Portfolio Value

GAV (€m) (2)

Focus on Larger Assets

(3)

Profitable Disposals

€m (2)

Reduced Number of Properties

Number of Properties

FY2015 Q1 2017

6,077

11,609

Average Asset Size (sqm) Average Asset Value (€m)

5.1

11.7

928

(39)

105 994

FY 2015 Disposals Additions Q1 2017

39

44

Book Value of Properties Sold Proceeds from Sales

(1)

(1) Pro forma for property sales signed but not closed (3) Includes inter alia acquisitions, net valuation movements and capex (capitalised)

(1) (1)

(2) FY 2016 and Q1 2017

Active Capital Recycling Will Help to Calibrate External Funding Needs

Portfolio Overview


…With Income Predictability

Low Level of Upcoming Lease Maturities

Lease Expiry Schedule (1)(3)

» High quality tenant roster including Dt. Telekom, and other

high quality tenants such as Dt. Post or Bundesanstalt für

Immobilienaufgaben

» Well diversified tenant base with a total of 811 tenants

» 5.3 years WALT provides high visibility of future cash flows

WALT: 5.3 years

High Quality Tenant Base (1)

30%

3%

2%

2%

2%

2%

2%

2%

2%2%

Other51%

(2)

Total GRI: €71.7 m

811

Tenants

7%12%

8%14%

19%

6% 7%13%

4%10%

2017 2018 2019 2020 2021 2022 2023 2024 2025 >2025

(2) 28 lease contracts spread over 18 properties incl. strategic assets like Telekom Campus in Bonn & Ulm (3) Based on GRI(1) Pro forma for property sales signed but not closed

Strong Diversified Tenant Base With Long WALT And High Rent Visibility

Portfolio Overview

https://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjS1_GUwpjUAhWJmBoKHbqqB4UQjRwIBw&url=https://www.businesstraveller.com/news/2015/06/25/pentahotel-to-open-second-hong-kong-property/&psig=AFQjCNGD9-Mqa0rKlyvhzEuq4YfzXm6swg&ust=1496264606857669

https://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjS1_GUwpjUAhWJmBoKHbqqB4UQjRwIBw&url=https://www.businesstraveller.com/news/2015/06/25/pentahotel-to-open-second-hong-kong-property/&psig=AFQjCNGD9-Mqa0rKlyvhzEuq4YfzXm6swg&ust=1496264606857669


7,5%

5,6%

3,7%

3,4%2,6%

Q1 2017

30% of GRI Comes from Dt. Telekom… …But Exposure is Split over 28 Leases…

…In Several Assets

City Bonn

Address Bonner Talweg

GAV €78 m

Total GRI €5.4 m

Dt. Telekom GRI €5.4 m

% Dt. Telekom 100%

Dt. Telekom WALT 8.0yrs

Lease Maturity Profile (1)

- - 2% 4%

45%

1% -

23% 25%

2017 2018 2019 2020 2021 2022 2023 2024 2025

17

City Ulm

Address Zeitblomstrasse

GAV €64.2 m

Total GRI €4.3 m


% Dt. Telekom 93%


City Freiburg

Address Berlin Allee

GAV €37 m

Total GRI €2.6 m


% Dt. Telekom 100%


(1) Based on GRI

Split

by

asset

Dt. Telekom WALT: 5.8 years

7.4%

Dt. Telekom: Prime Tenant with Diversified Lease Structure

Portfolio Overview


City

Asset

Class Cluster

GAV

(€ m)

Share

(%)

Space

(‘000 sqm)

EPRA

Vacancy (%)

GAV/sqm

(€)

GRI p.a.

(€ m)

GRI Yield

(%)

WALT

(Years)

1 Bonn Office Core+ 78.0 7.9% 38.4 0.0% 2,033 5.4 6.9% 8.0

2 Rostock Retail Core+ 64.9 6.6% 19.3 5.3% 3,361 4.2 6.5% 4.8

3 Ulm Office Core+ 64.2 6.5% 47.5 10.9% 1,351 4.3 6.6% 7.4

4 Kassel Retail Core+ 57.5 5.8% 21.5 11.7% 2,674 3.6 6.3% 9.0

5 Leipzig Logistic Value-add 55.2 5.6% 217.6 45.2% 254 3.8 6.8% 1.9

6 Freiburg Office Redevelopment 37.1 3.8% 22.7 0.0% 1,636 2.6 7.1% 4.0

7 Regensburg Office Value-add 31.0 3.1% 29.2 0.0% 1,060 2.5 8.0% 4.0

8 Düsseldorf Office Value-add 30.1 3.1% 24.3 27.7% 1,238 1.9 6.5% 5.1

9 Eschborn Office Core+ 29.6 3.0% 18.8 0.0% 1,577 2.0 6.8% 7.9

10 Eisenhüttenstadt Retail Value-add 26.8 2.7% 30.5 34.1% 870 1.8 6.6% 4.8

Top 10 Properties 474.4 48.1% 469.8 16.4% 1,010 32.1 6.8% 5.9

11 Leipzig Office Value-add 25.2 2.6% 23.2 16.6% 1,086 1.6 6.3% 4.1

12Lutherstadt

WittenbergRetail Core+ 21.6 2.2% 14.7 4.2% 1,468 1.7 7.8% 5.9

13 Zittau Retail Value-add 18.9 1.9% 17.5 6.2% 1,084 1.3 6.8% 12.1

14 Unterschleißheim Office Value-add 17.1 1.7% 15.7 37.8% 1,092 1.0 5.6% 3.3

15 Flensburg Office Value-add 16.4 1.7% 23.8 0.0% 690 1.6 10.0% 4.0

16 Quickborn Office Core+ 15.6 1.6% 10.6 0.0% 1,476 1.1 7.4% 4.9

17 Neumünster Office Value-add 15.2 1.5% 11.8 0.0% 1,287 1.0 6.9% 8.4

18 Kempten Office Value-add 15.0 1.5% 16.8 11.9% 893 1.0 6.7% 2.8

19 Stahnsdorf Office Value-add 14.5 1.5% 17.1 0.0% 849 1.8 12.7% 4.0

20 Köln Office Core+ 14.4 1.5% 9.1 0.0% 1,581 1.0 6.8% 4.3

Top 20 Properties 648.3 65.7% 630.1 12.6% 1,029 45.3 7.0% 5.7

Other Properties 338.4 34.3% 337.5 7.4% 1,003 26.5 7.8% 4.5

Total Properties 986.7 100.0% 967.6 10.7% 1,020 71.7 7.3% 5.3

Top 20 Properties (of Q1 2017)

Overview of Top 20 Assets

Portfolio Overview


Bonn Rostock Ulm

City Bonn

Street & number Bonner Talweg 100

Use Office

GAV €78 m

Total lettable area (‘000 sqm) 38.4

GAV / sqm €2,032.7

GRI p. a. €5.4 m

GRI Yield (%) 6.9%

GRI / sqm €11.7

EPRA Vacancy (%) 0.0%

WALT (years) 8.0

City Rostock

Street & number Kröpeliner Str. 26-28

Use Retail

GAV €65 m


GAV / sqm €3,361.4

GRI p. a. €4.2 m

GRI Yield (%) 6.5%

GRI / sqm €18.3


WALT (years) 4.8

City Ulm

Street & number Zeitblomstr.

Use Office

GAV €64 m


GAV / sqm €1,350.6

GRI p. a. €4.3 m

GRI Yield (%) 6.6%

GRI / sqm €7.5

EPRA Vacancy (%)) 10.9%

WALT (years) 7.4

Core+: Top Three Assets

Portfolio Overview


Leipzig Regensburg Düsseldorf

City Leipzig

Street & number Am alten Flughafen 1

Use Logistic

GAV (€) €55 m


GAV / sqm €253.5

GRI p. a. €3.8 m

GRI Yield (%) 6.8%

GRI / sqm €1.4


WALT (years) 1.9

City Regensburg

Street & number Bajuwarenstrase 4

Use Office

GAV €31 m


GAV / sqm €1,060.3

GRI p. a. €2.5 m

GRI Yield (%) 8.0%

GRI / sqm €7.0


WALT (years) 4.0

City Düsseldorf

Street & number Wiesenstr. 70

Use Office

GAV €30 m


GAV / sqm €1,238.3

GRI p. a. €1.9 m

GRI Yield (%) 6.5%

GRI / sqm €6.7


WALT (years) 5.1

Value-add: Top Three Assets

Portfolio Overview


Market Overview

Office Building, DEMIRE Headquarters, Robert-Bosch-Str. 11, Langen


8,7%

6,0%5,5% 5,2%

4,6%

3,3% 2,9%

8,1% 7,7%

6,2%5,6%

5,3% 4,8% 4,8% 4,6% 4,4% 4,0%3,9% 3,7%

22

» Next to Germany’s Top 7 hubs, there are various secondary cities that are attractive and show upside potential

» They are characterised by an increasing focus of international investors, decreasing vacancy rates and continuously rising

rents

» While there are still significant differences between the Top 7 and secondary cities in rent and yield, these markets show

similar directional trends

Increasing Focus on Secondary Cities

Comparably Low Unemployment Rate and High GDP per Capita Growth

2016 Unemployment (%)

2009 - 2014 GDP per Capita CAGR in %

2.7%(1) 3.2%2.4% 1.8% 1.2% 2.3%(1) 4.0%

Source: Destatis, Statistische Ämter des Bundes und der Länder, Oxford Economics

(1) Based on 2009 – 2015 GDP per Capita CAGR

Top 7 (3) Regional 12 (4)

(2) Based on the respective region

Average: 5.2% Average: 5.2%

4.3% 2.7%1.9% 2.0% 3.1%(1) 3.1% 1.0%1.6% 1.8%2.5% 2.1% 1.7%

(3) Berlin, Cologne, Dusseldorf, Frankfurt, Hamburg, Munich, Stuttgart

(4) Augsburg, Bremen, Darmstadt, Dresden, Essen, Hannover, Karlsruhe, Leipzig, Mainz, Mannheim, Munster and Nuremberg

Secondary Locations Exhibit Strong Macro Fundamentals

Market Overview


Comments

» Significant and liquid markets: The secondary markets (Germany excl. Top 7) are significant and liquid. They accounted for c. 44%

of the commercial transaction volume in 2015 and 2016

» Growing markets: From 2009 through 2016 the secondary markets grew by c. 23% on average per year

» Liquidity available even in downturn of cycles: During the financial crisis years of 2008 and 2009, the secondary markets had a

market share on pre-crises level of c. 53% in 2008 and c. 43% in 2009

Source: PMA

23

Share of Transactions in Secondary Locations Increases

Commercial Transaction Volume in € bn, Top 7 vs. Germany

2332

10 6 11 13 15 19 2331 29

27

27

115

8 11 1012

17

25 23

49

59

21

11

2024 26

31

40

5653

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Top 7 Secondary Cities (Germany excl. Top 7)

54% 45% 53% 43% 41% 47% 40% 42% 44% 44%39%

Share of Secondary Cities (% of total transaction volume)

Investment Volumes in Secondary Cities Are Significant

Market Overview


10.3%

-

3%

6%

9%

12%

2005 2007 2009 2011 2013 2015

Source: Bulwiengesa, DG Hyp, Corpus Sireo

Secondary Locations (2)Top 7 Locations

(1) Indexed to 100 in 2008

5.6%

0.6%

...With Yields Providing Further

Upside Potential to Compress

Office Market Gross Initial Yield Development

10-Year German Bund

Secondary Locations Have Lower

and Less Volatile Vacancy Rates…

Office Market Vacancy

4%

6%

8%

10%

12%

2005 2007 2009 2011 2013 2015

7.6%

6.0%

…Resulting in Accelerating Rental

Growth…

Office Market Rent (1)

90

100

110

120

2008 2009 2010 2011 2012 2013 2014 2015

111

115

24

(2) According to Bulwiengesa

Real Estate Fundamentals of Secondary Cities less Cyclical than those of Top 7 cities

Market Overview – Focus on Office


28,0

35,5 34,7

28,0 26,0 24,521,0 19,7

13,6 15,2 14,8 14,2 14,0 13,8 13,3 13,1 13,0 12,7 12,6 12,5 12,5

19%

8%

25%

37%

16% 14%

5%

21%15% 14% 16% 14% 12%

25%

16%19% 20%

4%

20%

(2%)

14%

(40%)

(20%)

%

20%

40%

0

20

40

60

80

Top-7Frankfurt

MunichBerlin

HamburgDusseldorf

CologneStuttgart

Regional12 Mannheim

HanoverMunster

EssenNuremberg

KarlsruheDarmstadt

LeipzigMainz

DresdenBremen

Augsburg

2%

3%

4%

5%

6%

7%

5101520

25

Strong Secondary Markets Offer Additional ‘Alpha’

Secondary Cities Show Lower Prime Rent Yet Similar Rental Growth

Source: Bulwiengesa, DG HYP, PMA

Prime Yield (%)

BerlinMunich

Hamburg

Frankfurt

Dusseldorf

Cologne

Stuttgart

Office Stock (m sqm)

Top 7 Cities Secondary Cities (Regional 12)

Average:

3.9%

Average:

5.0%

Top 7 Prime Rent (€/sqm/m) Regional 12 Prime Rent (€/sqm/m) Top 7 Prime Rent Growth from 2010 to 2016 (%) Regional 12 Prime Rent Growth from 2010 to 2016 (%)

Comments

» Yields in secondary locations are significantly higher and

prices are less volatile

» The performance volatility of the Top 7 locations is

significantly greater than that of secondary locations because

of the larger size and the exposure to major shifts in weight of

capital

» The construction activities in secondary locations are driven

by demand and less likely driven by speculation in

comparison to the activities in the Top 7 locations, which

leads to a lower risk in terms local price bubbles

2016

Secondary Cities Benefit from Higher Yields and Significant Rental Growth

Market Overview – Focus on Office


Source: JLL, BNP Paribas, Nord LB

Bochum

Duisburg

Bremen

Essen

Mannheim

Dresden

Leipzig

Dortmund

Berlin

Karlsruhe

Wiesbaden

Dusseldorf, Frankfurt, Munich, Stuttgart

Nuremberg

HamburgMunster

Hannover

Bonn Cologne

Accelerating Growth Slowing Growth Falling Values Bottoming out Values

50,7%36,9% 35,4%

14,1%19,2% 19,1%

14,2%11,5% 17,6%

21,0%32,4% 27,9%

2014 2015 2016

Top 6 >250,000 Inhabitants 100,000-250,000 Inhabitants <100,000 Inhabitants

(1) Top 7 are based on the JLL property clock

Secondary Locations Increased their Market Share in

Investments…

Investments per City Category

…And are at a more Attractive Point in the Cycle

Retail Real Estate Cycle (1)

Comments

» Secondary locations are in a more advantageous phase of the real estate cycle than the Top 7 which have already passed the

accelerating growth phase

» Non Top 6 cities were able to increase their market share in investments from 49.3% in 2014 to 64.6% in 2016

49.3% 63.1% 64.6%

% share of non Top 6 locations

Dynamic Developments in Secondary Locations

Market Overview – Focus on Retail


Investment Volumes in Logistics Have Increased… …And Leipzig Has Been One of the Most Active Markets

The Above Average Yields Have Compressed in the Past (1)

€m

Investment Volume by Logistics Region 2011-2015 (€m)

Net Initial Yield

- 200 400 600 800 1.000 1.200 1.400

Rhine-Main/Frankfurt

Hamburg

Dusseldorf

Halle/Leipzig

Munich

Cologne

Hanover/Braunschweig

Berlin

Nuremberg

Bremen

Rhine-Ruhr

Upper Rhine

Dortmund

Rhine-Neckar

Stuttgart

East Westphalia-Lippe

Kassel/Göttingen

A4 Motorway Thuringa

Lower Bavara

879

1.647 1.6811.964 1.960188

172523

8581.328

2011 2012 2013 2014 2015

Single Transactions Portfolios

5%

6%

7%

8%

9%

10%

Q2/2016 2015 2011

Source: Bulwiengesa

(1) The top score of the piston represents the NIY at the start of the period under review, 2011. The middle marking represents the NIY at the end of the

period under review, 2015. The bottom piston shows the continued NIY compression this year to date at the end of the first two quarters of 2016

1,067

1,819

2,204

2,822

3,288» Germany profits from its central location within Europe

» The growth of the e-commerce industry increases the

demand for logistics space

DEMIRE Portfolio Locations

Booming Market Segment Throughout Germany

Market Overview – Focus on Logistics


Key Financials

Office Building, Kuhberg 17-19 / Kieler Straße 1, Neumünster


Highlights Q1 2017

Key Financials

Portfolio and profit development as planned – further optimisation potential identified

Status quo „Strategic

Review“

» Process started

» First tangible interest savings due to refinancing in FY16 and prolongation in Q1-17

» Additional optimisation potentials identified

Continous

improvement of

financing structure

Ongoing portfolio

streamlining

» Current portfolio with a market value of EUR 1.0bn after strategic consolidation

» EPRA vacancy rate reduced from 11.6% as of 31/12/2016 to 10.9% considering real estate

already sold

» WALT kept constant at 5.3 years

» LTV decreased by 30bps to 62.5%

» Reduction of avg. cost of debt by 30 bps to 4.1%

» Financial result improved from EUR -9.5m in Q1 2016 to EUR -5.5m in Q1 2017

Forecast 2017

» After successful portfolio streamlining slightly lower rental income compared to FY16

» Cost optimization with effect on profit, especially though reduction of administrative expenses

» Increasing FFO I due to continuous improvement of financing structure


Income Statement (€m) FY 2016 Q1 2016 Q1 2017 Change (%)

Rental income 76.4 17.8 18.5 4%

Income from utility and service charges 15.7 5.2 6.2 19%

Operating expenses to generate rental income (33.5) (10.0) (10.9) 10%

Profit/loss from the rental of real estate 58.6 13.1 13.8 6%

Profit/loss from the sale of real estate companies 4.0 0.0 0.0 n.m.

Profit/loss from the sale of real estate 1.0 0.0 (0.2) n.m.

Profit/loss from investments accounted for using the equity

method(0.4) 0.0 0.0 n.m.

Profit/loss from fair value adjustments in investment properties 38.4 7.0 0.2 n.m.

Other operating income and other effects 3.5 0.4 1.8 402%

General and administrative expenses (14.5) (3.4) (3.6) 5%

Other operating expenses (7.4) (3.1) (2.9) (7%)

Earnings before interest and taxes (EBIT) 83.2 14.0 9.2 (34%)

Financial result (43.2) (9.5) (5.5) (42%)

Profit/loss before taxes (EBT) 40.0 4.5 3.7 (18%)

Income taxes (12.3) (1.0) (2.8) 178%

Net profit/loss for the period 27.7 3.5 0.9 (73%)

Of which attributable to:

Non-controlling interests 3.0 1.8 0.8 (56%)

Parent company shareholders 24.7 1.7 0.1 (92%)

2

» Lower interest expenses due to refinancing measures in

2016 and the extension of the promissory notes in Q1

2017 all at better conditions

3

Comments

» Higher rental income due

to new rental contracts

and vacancy reduction

1 » Revaluation uplift in Q1

2016 distorted the profits

in that period

2

1

3

Income Statement

Key Financials


(€m) FY 2016 Q1 2016 Q1 2017 Change (%)

Earnings before interest and taxes (EBIT) 83.2 14.0 9.2 (34%)

Profit/loss from fair value adjustments in investment properties (38.4) (7.0) (0.2) n.m.

Profit/loss from the sale of real estate (1.0) - 0.2 n.m.

Profit/loss from the sale of real estate companies (4.0) (0.0) - n.m.

Adjusted EBITDA 39.8 7.0 9.2 32%1

(1) Including profit/loss on non-controlling interests of Fair Value REIT funds in financial result

(€m) FY 2016 Q1 2016 Q1 2017 Change (%)

FFO I (post tax) 8.1 3.4 2.0 (41%)

Profit/loss from the sale of real estate and real estate companies

(after taxes)4.9 0.0 (0.2) n.m.

FFO II (post tax) 13.0 3.4 1.8 (46%)

2

Comments

» Strong improvement of Adj. EBITDA driven

by strong letting performance1 » Lower FFO mainly due to

higher tax expenses

2

Adjusted EBITDA and Funds From Operations (FFO)

Key Financials


Comments

Investment properties have nearly tripled since the end of 2014;

decrease between FY 2016 and Q1 2017 is due to non-core

disposals

1 Minority interests are attributable to equity capital of limited

partners in real estate funds of Fair Value REIT AG. Under

German GAAP and G-REIT Act this is recognised as equity

2

Balance Sheet (€m) FY 2015 FY 2016 Q1 2017

ASSETS

Investment Properties 915 981 958

Properties held for sale 13 24 36

Other assets 77 58 63

Cash and cash equivalents 28 31 44

Total assets 1,033 1,094 1,101

EQUITY AND LIABILITIES

Subscribed capital 49 54 54

Reserves 181 218 218

Equity attributable to parent company shareholders 231 272 272

Non-controlling interests 34 37 39

Minority interests 61 63 61

Total equity 326 371 372

Non-current financial debt 609 621 626

Current financial debt 46 42 39

Other liabilities 52 60 65

Total liabilities 707 723 729

Total equity and liabilities 1,033 1,094 1,101

1

2

Balance Sheet

Key Financials


Reconciliation of EPRA NAV NAV has Developed Positively over Time

272 271

275

283

313 313

Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017

4.25 4.31 4.37 4.42 4.60

EPRA NAV € m

EPRA NAV Per Share

4.61

(€ m) FY 2015 FY 2016 Q1 2017

NAV for the Period 230.7 271.9 272.3

Market Value from Derivate

Financial Instruments- (1.8) (2.8)

Deferred Taxes 25.6 35.0 37.1

Goodwill from Deferred Taxes - (4.7) (4.7)

Undiluted EPRA NAV 256.3 300.5 301.9

Undiluted EPRA NAV 256.3 300.5 301.9

Shares (m) 49.29 54.25 54.26

Undiluted EPRA NAV

(€ per share)5.20 5.34 5.56

Diluted EPRA NAV 271.6 312.5 313.2

Shares (m) 63.95 67.89 67.88

Diluted EPRA NAV (€ per share) 4.25 4.60 4.61

EPRA NAV Has Developed Positively Over Time

Key Financials


(1) Excluding the mandatory convertible bond (€15 m), which will be converted into equity on 22 May 2018

25

11432

11

100

14

67

214

65

33

144

13 10 4

96

2017 2018 2019 2020 2021 2022 2025 2026 2031 2033

Bank Debt incl. Notes Promissory Notes Mezzanine Loan

Convertible Notes Senior Unsecured Notes

Strong Track Record in Leverage Reduction DEMIRE has Successfully Reduced its Cost of Debt

6,4% 6,3%

5,9% 6.0%

5,2%

4,4% 4,4%4,1%

Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q3 2016 Q4 2016 Q1 2017

87,4%83,1%

76,7% 74,6%

67,5%64,8% 62,8% 62,5%

Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q3 2016 Q4 2016 Q1 2017

Net Loan to Value Avg. Cost of Debt

Net LTV Avg. cost of debt

Diverse Funding Mix – with 83% secured financing

Q1 2017Q1 2017 Debt Maturity Profile (1) (€m)

No Significant Debt Maturities in 2017 and 2018

Bank Debt 56%

Promissory Notes22%

Mezzanine Loan5%

Convertible Notes2%

Senior Unsecured Notes15%

Total Debt

€660m

Strong Track Record of Improving Financing Structure

Key Financials


Strategic Review

Gutenberggalerie, Gutenbergplatz 1, Leipzig


Targets Mid-term Action PlanAttractive Growth

Potential

» DEMIRE to lead the German secondary commercial market segment

» Significantly increase the size of the portfolio

» Efficient platform

» Investment grade profile

» Ability to pay dividends fully covered by excess cash flow

» Significantly increase free-float market cap

» M-DAX inclusion

» Active portfolio management as well as focused acquisitions and disciplined underwriting

» Refinancing of expensive debt at lower rates plus fund acquisitions with lower leverage

» Cost optimization and simplification of group structure

» Active investor dialogue and transparency

» Substantial FFO improvement over time

» Drive of NAV by organic rental growth and dedicated capex strategy

» Growth in German secondary commercial market

» Increase of market cap and liquidity of shares

» Ongoing review

» Analysis of concrete options for action ongoing

» Ongoing review

» Ongoing dialogue and enlargement of transparency

Status

DEMIRE 2.0 – Positioning for next growth phase

Strategic Review


Appendix

37


Obotritia Capital KGAA

11.9%

Wecken & Cie.

26.5%

Freefloat (Holdings <5 %)

56.6%

Shareholder Structure

Key share data (as of 31 May 2017)

Wecken & Cie.

» Klaus Wecken has been investing in the German and Swiss

listed real estate space for several years. He has been

invested in ADLER and Westgrund and has supported the

takeover of Westgrund by ADLER in 2015

» Wecken & Cie. increased its stake in DEMIRE subsequently

inter alia by a significant take-up of the August 2016 capital

increase and the acquisition of a c. 8% stake of DeGeLog, a

seed investor of DEMIRE

» Wecken & Cie. has informed DEMIRE that the investment into

the company is seen as strategic

» Wecken & Cie. is represented on the SVB by Frank Hoelzle

who is the CEO of Care4 AG (the management company of

Wecken & Cie.)

Obotritia Capital

» The shareholder behind Obotritia Capital is Rolf Elgeti, the

former CEO and current chairman of the SVB of TAG

Immobilien, chairman of the SVB of Fair Value REIT AG and

CEO of Deutsche Konsum REIT AG

» The company became a shareholder during the Fair Value

REIT takeover in 2015

» Obotritia is also a major shareholder of Deutsche Konsum

REIT AG, a commercial real estate company with a GAV of

€0.2 bn

Key Shareholders have Real Estate Experience

Sigrid Wecken

5.0%

Strong Shareholder Support for Further Growth and Leverage Reduction

Appendix

ISIN DE000A0XFSF0

Symbol / Ticker DMRE

Stock Exchange Deutsche Börse Frankfurt

(FSE); XETRA

Market Segment Prime Standard

Subscribed Capital (31/03/2017) €54,255,944

Number of shares (31/03/2017) 54,255,944

Daily Trading Volume (90-Day) 104,348

Market Capitalisation (approx.) €210.0m


Successful track record in acquisitions

AppendixG

ross A

sset

Valu

e (

GA

V)

(€m

)

2016:

» Kurfürsten-Galerie Kassel (€58m)

2015:

» 77.7% in Fair Value REIT-AG (€290m)

» T6 Portfolio (€190m)

» Logistik-Park Leipzig (€54m)

» Gutenberg Galerie Leipzig (€25m)

2014:

» Alpine Portfolio (€25m)

» Condor Portfolio (€260m)

» Alpha Portfolio (€67m)

Gro

ss R

en

tal

Inc

om

e (

GR

I)(€

m)

Change in Strategy Growth Phase ILegacy

1) Numbers in brackets reflect GAV of properties as of 31/12/2016

31/12/2012 31/12/2013 31/12/2014 31/12/2015 31/12/2016

19 24

333

928

1006

31/12/2013 31/12/2014 31/12/2015 31/12/2016

0.7 1.3

26.0

72.2

31/12/2012

74.1

Acquisitions1)

Following the change in strategy our portfolio has grown from €24m to approx. €1bn in only 3 years


Peer Schlinkmann

Head of Investor Relations & Corporate Communications

Phone: + 49 (0) 61 03 372 49 44

Fax: + 49 (0) 61 03 372 49 11

Email: [email protected]

Web: www.demire.ag/en/investor-relations

Financial Calendar 2017

Date Event

31 May 2017 Publication Quarterly Report 2017

29 June 2017 Annual General Meeting

31 August 2017 Publication Half-Year Report 2017

November 2017 Participation in Analyst Conference German Equity Forum in Frankfurt

30 November 2017 Publication Nine-Month Report 2017

Contact Details/Financial Calendar 2017


Disclaimer

This document is for informational purposes only. This document is not intended to form the basis of any investment decision and should not be considered as a

recommendation by DEMIRE Deutsche Mittelstand Real Estate AG (the “Company”) or any other person in relation to the Company. This document does not constitute an

offer to sell, a solicitation of an offer of the sale or purchase of securities or an invitation to purchase or tender for the Company. Securities of the Company shall not be

offered or sold, in any jurisdiction in which such an offer, solicitation or sale would be unlawful.

This document and its contents are confidential and not meant for forwarding, transmission, publication, duplication, or disclosure (in whole or part) to other persons.

Outside of Germany the distribution of this document may be restricted by applicable laws.

This document and the information contained therein may not be distributed in the United States of America, Canada, Australia, Japan or other jurisdictions, in which such

offer, respectively, such invitation to make an offer to buy or subscribe for securities is not allowed. This document does not constitute an offer to sell securities in the

United States. Securities, including the bond of the Company may not be sold or offered for sale within the United States or to or for the account of / in favour of US

citizens (as defined in Regulation S under the U.S. Securities Act of 1933 in the current version (the "Securities Act") unless they are registered under the regulations of the

Securities Act or unless they are subject to an exemption from registration. Neither the Company nor any other person intend to register the offer or a part thereof in the

United States or to make a public offer of the securities in the United States.

Certain information in this document is based on management estimates. Such estimates have been made in good faith and represent the current beliefs of applicable

members of management. Those management members believe that such estimates are founded on reasonable grounds. However, by their nature, estimates may not be

correct or complete. Accordingly, no representation or warranty (express or implied) is given that such estimates are correct or complete.

This document includes 'forward-looking statements'. Forward-looking statements are all statements which do not describe facts of the past but contain the words

"believe", "estimate", "expect", "anticipate", "assume", "plan", "intend", "could", and words of similar meaning. These forward-looking statements are subject to inherent

risks and uncertainties since they relate to future events and are based on current assumptions and estimates of the Company, which might not occur at all or occur not as

assumed. They therefore do not constitute a guarantee for the occurrence of future results or performances of the Company. The actual financial position and the actual

results of the Company as well as the overall economic development and the regulatory environment may differ materially from the expectations which are assumed

explicitly or implicitly in the forward-looking statements and do not comply to them. Therefore, investors are warned to base their investment decisions with respect to the

Company on the forward-looking statements mentioned in this document.

Documents

DEMIRE Deutsche Mittelstand Real Estate AG First in ...€¦ · (1) As of Q1 2017, pro forma for property sales signed but not closed 531 416 39 Core + Value-add Redevelopment 6.6