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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 3
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 4
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 6
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 7
Company and Strategy
Office Building, Frankfurter Str. 29-35, Eschborn
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 8
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
Company and Strategy
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 9
» 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
Current allocation (1)
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
Current allocation (1)
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
Company and Strategy
DEMIRE Deutsche Mittelstand Real Estate AG June 2017
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
Company and Strategy
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 11
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
Company and Strategy
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 12
Portfolio Overview
Logistics Park Leipzig, Am alten Flughafen 1, Leipzig
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 13
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
(1) As of Q1 2017, pro forma for property sales signed but not closed
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 14
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
(1) As of Q1 2017, pro forma for property sales signed but not closed
Portfolio Strategy Based on Value Creation and Diversification Across Asset Classes
Portfolio Overview
DEMIRE Deutsche Mittelstand Real Estate AG June 2017
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 16
…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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017
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 GRI €4.0 m
% Dt. Telekom 93%
Dt. Telekom WALT 7.7yrs
City Freiburg
Address Berlin Allee
GAV €37 m
Total GRI €2.6 m
Dt. Telekom GRI €2.6 m
% Dt. Telekom 100%
Dt. Telekom WALT 4.0yrs
(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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 18
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 19
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
Total lettable area (‘000 sqm) 19.3
GAV / sqm €3,361.4
GRI p. a. €4.2 m
GRI Yield (%) 6.5%
GRI / sqm €18.3
EPRA Vacancy (%) 5.3%
WALT (years) 4.8
City Ulm
Street & number Zeitblomstr.
Use Office
GAV €64 m
Total lettable area (‘000 sqm) 47.5
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 20
Leipzig Regensburg Düsseldorf
City Leipzig
Street & number Am alten Flughafen 1
Use Logistic
GAV (€) €55 m
Total lettable area (‘000 sqm) 217.6
GAV / sqm €253.5
GRI p. a. €3.8 m
GRI Yield (%) 6.8%
GRI / sqm €1.4
EPRA Vacancy (%) 45.2%
WALT (years) 1.9
City Regensburg
Street & number Bajuwarenstrase 4
Use Office
GAV €31 m
Total lettable area (‘000 sqm) 29.2
GAV / sqm €1,060.3
GRI p. a. €2.5 m
GRI Yield (%) 8.0%
GRI / sqm €7.0
EPRA Vacancy (%) 0.0%
WALT (years) 4.0
City Düsseldorf
Street & number Wiesenstr. 70
Use Office
GAV €30 m
Total lettable area (‘000 sqm) 24.3
GAV / sqm €1,238.3
GRI p. a. €1.9 m
GRI Yield (%) 6.5%
GRI / sqm €6.7
EPRA Vacancy (%) 27.7%
WALT (years) 5.1
Value-add: Top Three Assets
Portfolio Overview
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 21
Market Overview
Office Building, DEMIRE Headquarters, Robert-Bosch-Str. 11, Langen
DEMIRE Deutsche Mittelstand Real Estate AG June 2017
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 26
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 27
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 28
Key Financials
Office Building, Kuhberg 17-19 / Kieler Straße 1, Neumünster
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 29
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 30
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 31
(€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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 32
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 33
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 34
(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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 35
Strategic Review
Gutenberggalerie, Gutenbergplatz 1, Leipzig
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 36
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017
Appendix
37
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 38
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 39
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 40
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
DEMIRE Deutsche Mittelstand Real Estate AG June 2017 41
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.