DEMIRE Deutsche Mittelstand Real Estate : Quarterly financial report DEMIRE Interim Report 9M 2023

INTERIM REPORT

1 JANUARY TO 30 SEPTEMBER 2023

DEMIRE INTERIM REPORT

1 JANUARY TO 30 SEPTEMBER 2023

HIGHLIGHTS 9M 2023

KEY EARNINGS FIGURES	KEY FINANCIAL INDICATORS		PORTFOLIO DEVELOPMENT
27.8	52.9	1.2	4.4

in EUR million	in %
FFO I (after taxes,	NET LOAN-TO-VALUE1
before minority interests),	(NET LTV),
compared to EUR 30.8 million	compared to 54.0%
in 9M 2022	as at year-end 2022

in EUR billion	in years
PORTFOLIO VALUE,	WALT,
compared to EUR 1.3 billion	compared to 4.8 years
as at year-end 2022	as at year-end 2022

59.9 1.74 77.1 12.6

in EUR million	in % p.a.
RENTAL INCOME,	AVERAGE NOMINAL
stable compared to	INTEREST COSTS,
9M 2022	compared to 1.67% p.a.
	as at year-end 2022

in EUR million	in %
ANNUALISED	EPRA VACANCY RATE2,
RENTAL INCOME,	compared to 9.5%
compared to EUR 85.1 million	as at year-end 2022
as at year-end 2022

1. According to the definition of bond 2019/2024
2. Excl. properties classified as a project development

4.38	-1.1
in EUR	in %
NET ASSET VALUE	LIKE-FOR-LIKE DECREASE
(PER SHARE, BASIC),	of annualised contractual rent
compared to EUR 4.99	compared to 4.9%
as at year-end 2022	as at 9M 2022

27,240

in m2

LETTING PERFORMANCE, compared to 194,840 m² as at 9M 2022

DEMIRE

INTERIM REPORT1 1 JANUARY TO 30 SEPTEMBER 2023

Key for navigating the interim report:

Reference to table of contents

Reference to another page in the interim report

Reference to websites

CONTENTS

FOREWORD BY THE EXECUTIVE BOARD	2
DEMIRE AT A GLANCE	3
Key Group figures	4
Portfolio highlights	5
INTERIM GROUP MANAGEMENT REPORT	6
Overview	7
Economic report	10
Opportunities and risks	18
Subsequent events	18

INTERIM CONSOLIDATED FINANCIAL
STATEMENTS	19
Consolidated statement of income	20
Consolidated statement of
comprehensive income	21
Consolidated balance sheet	22
Consolidated statement of cash flows	24
Consolidated statement of changes in equity	26
Notes to the consolidated financial statements	27
IMPRINT	39

DEMIRE

INTERIM REPORT2 1 JANUARY TO 30 SEPTEMBER 2023

FOREWORD BY THE EXECUTIVE BOARD

FOREWORD BY THE
EXECUTIVE BOARD	2
DEMIRE AT A GLANCE	3
INTERIM GROUP
MANAGEMENT REPORT	6
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS	19
IMPRINT	39

Dear Shareholders, dear Readers,

A challenging economic environment continues to define the commercial real estate market in the third quarter. With the outlook for interest rate development still uncertain, the transaction market is weak and deals are at historically low levels. Increased financing costs make pricing difficult for market players and are leading to continued price pressure.

In view of the difficult economic situation in many sectors, the rental market is characterised by a strong reluctance to lease new space. The rent level, on the other hand, seems to remain largely stable. A positive factor for lessors is the signifi­ cant decline in developer activity for new office and retail space, which has led to many lessees being willing to renew their leases.

In this market environment, DEMIRE continues to generate solid results in line with expectations. Rental income for the first nine months of 2023 remains stable at EUR 59.9 million compared to the previous period. At the same time, funds from operations I after taxes (FFO I) have fallen by 9.8% to EUR 27.8 million, mainly due to lower rental income and higher income taxes.

For the refinancing, we had planned to create additional liquidity from summer 2022. At the end of the third quarter, DEMIRE had a significantly improved cash position of EUR 132 million (plus EUR 75 million since the end of 2022). In addition to the operational business, sales contributed significantly to the creation of additional li- quidity.

In recent weeks, the dialogue with bondholders, which has been ongoing since the issue of the 2019/2024 bond, has intensified in order to find a viable solution for refinancing the bond maturing in October 2024 in the coming months.

Furthermore, we would like to draw your attention to our progress in terms of sustainability. Our sustainability report this year was awarded gold for the first time by the EPRA European Public Real Estate Association, after being awarded silver the previous year. We see this as recognition for the improvements we have achieved and as an incentive to continue on our path towards becoming a sustainable real estate company.

After the first nine months, the Executive Board can confirm the forecast for the 2023 financial year: rental income will be between EUR 74.5 million and EUR 76.5 million (2022: EUR 81.1 million), and FFO I (after taxes, before minority interests) is expected to be between EUR 33.0 million and EUR 35.0 million (2022: EUR 41.8 million).

We hope you find this report an interesting read and look forward to your comments and ideas.

Frankfurt am Main, 8 November 2023

Prof. Dr Alexander Goepfert	Tim Brückner	Ralf Bongers
(CEO)	(CFO)	(Member of the
		Executive Board)

LEONBERG

DEMIRE

AT A GLANCE

Key Group figures	4
Portfolio highlights	5

DEMIRE

INTERIM REPORT4 1 JANUARY TO 30 SEPTEMBER 2023

KEY GROUP FIGURES

FOREWORD BY THE
EXECUTIVE BOARD	2
DEMIRE AT A GLANCE	3
Key Group figures	4
Portfolio highlights	5
INTERIM GROUP
MANAGEMENT REPORT	6
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS	19
IMPRINT	39

	01/01/2023	01/01/2022
in EUR thousand		- 30/09/2023		- 30/09/2022
Key earnings figures
Rental income		59,885		59,910
Profit/loss from the rental of real estate		45,343		47,682
EBIT		-64,571		41,160
Financial result		7,095		-12,927
EBT		-57,476		28,233
Net profit/loss for the period		-49,530	21,879
Net profit/loss for the period attributable
to parent company shareholders		-47,030	20,181
Net profit/loss for the period per share
(basic/diluted) (in EUR)		-0.45/-0.45		0.19/0.19
FFO I (after taxes, before minority interests)		27,835		30,847
FFO I per share (basic/diluted) (in EUR)		0.26/0.26		0.29/0.29

in EUR thousand	30/09/2023	31/12/2022
Key balance sheet figures
Total assets		1,436,804		1,536,848
Investment property		920,616		1,231,072
Non-current assets held for sale		265,803		121,000
Total real estate portfolio		1,186,419		1,352,070
Financial and lease liabilities		822,679		855,655
Cash and cash equivalents		132,347		57,415
Net financial liabilities		690,332		798,240
Net loan-to-value(Net-LTV) (in %)		52.9		54.0
Equity according to Group balance sheet		436,352		486,691
Equity ratio (in %)		30.4		31.7
Net asset value (NAV)		402,686		450,226
NAV (basic/diluted)		461,834/462,344	526,273/526,783
Number of shares (basic/diluted)		105,513/106,023	105,513/106,023
EPRA NAV per share (basic/diluted)		4.38/4.36		4.99/4.97

	30/09/2023	31/12/2022
Key portfolio indicators
Properties (number)		60		62
Market value (in EUR million)		1,160.4		1,329.8
Annualised contractual rents (in EUR million)		77.1		85.1
Rental yield (in %)		6.6		6.4
EPRA Vacancy Rate 1 (in %)		12.6		9.5
WALT (in years)		4.4		4.8

1 Excl. project developments

DEMIRE

INTERIM REPORT5 1 JANUARY TO 30 SEPTEMBER 2023

PORTFOLIO HIGHLIGHTS

as at 30 September 2023

FOREWORD BY THE
EXECUTIVE BOARD	2
DEMIRE AT A GLANCE	3
Key Group figures	4
Portfolio highlights	5
INTERIM GROUP
MANAGEMENT REPORT	6
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS	19
IMPRINT	39

1.2	8.99
in EUR billion	in EUR/m²
MARKET VALUE OF THE	AVERAGE RENT
PROPERTY PORTFOLIO	across the portfolio
60	12.6
assets	in %
at 49 LOCATIONS	EPRA VACANCY RATE1
in 11 federal states	across the portfolio
77.1	6.6
in EUR million	in %
ANNUALISED CONTRACTUAL RENTS	GROSS RENTAL RETURNS
-1.1	4.4
in %	in years
LIKE-FOR-LIKE DECREASE	WEIGHTED AVERAGE
of annualised contractual rent	residual lease term (WALT)

Schleswig-

Holstein

Mecklenburg-

Western

Hamburg Pomerania

	Bremen
	Lower Saxony	Berlin
		Brandenburg
	Saxony-Anhalt
	North Rhine-
	Westphalia	Saxony
	Thuringia
	Hesse	Office
Rhineland-		Retail
Palatinate		Logistics
		and others
Saarland	Bavaria	Corporate
	location
	Baden-
	Wuerttemberg

1 Excl. properties classified as a project development

KEMPTEN

INTERIM GROUP

MANAGEMENT

REPORT

for the reporting period from

1 January to 30 September 2023

Overview	7
Economic report	10
Opportunities and risks	18
Subsequent events	18

DEMIRE

INTERIM REPORT7 1 JANUARY TO 30 SEPTEMBER 2023

FOREWORD BY THE
EXECUTIVE BOARD	2
DEMIRE AT A GLANCE	3
INTERIM GROUP
MANAGEMENT REPORT	6
Overview	7
Economic report	10
Opportunities and risks	18
Subsequent events	18
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS	19
IMPRINT	39

OVERVIEW

BUSINESS PERFORMANCE

DEMIRE's business developed robustly in the first nine months of 2023. In the reporting period, the insolvency of Karstadt in particular had a negative impact on the vacancy rate and the like-for-like development of the annualised contractual rent. The financial result, on the other hand, was positive. Positive contributions were generated here as a result of the below-par bond buyback and lower financial expenses. Funds from operations declined moderately, partly due to a slightly lower result from rentals and, as in the previous quarter, higher income taxes. Due to the weak rental market and fewer expiring leases in the property portfolio in 2023 and 2024, the letting performance will also be significantly lower, especially compared to the record result of the previous year. Nevertheless, despite the property sales and against the backdrop of the weak economic environment, the Group's key figures are solid overall and in line with the Company's planning and expectations.

In view of the maturity of the 2019/2024 bond in October 2024 with a nominal value of EUR 499.0 million as at the reporting date, the Executive Board, with the approval of the Supervisory Board, is still pursuing the goal of increasing the liquidity reserve. Liquidity showed further improvement at the end of the third quarter.

DEMIRE's key indicators developed as follows in the first nine months of 2023:

• Rental income remained stable at EUR 59.9 million (previous year: EUR 59.9 million).
• Profit from rental income amounted to EUR 45.3 million, compared to EUR 47.7 million in the same period of the previous year.
• Funds from operations (FFO I, after taxes, before minority interests) decreased by 9.8% to EUR 27.8 million.
• At around 27,240 m², the letting performance is significantly lower than the record figure of 194,840 m² achieved in the same period last year.

• The like-for-like development in annualised contractual rents was -1.1% compared to 30 September 2022. The slight decline is due to the increased
  vacancies­ in Celle as a result of the Karstadt insolvency. The indexation of
  existing­ leases, which without Celle would have led to positive growth in
  contractual­ rents, continued to have a counteracting effect.
• The EPRA Vacancy Rate1 rose to 12.6% (31 December 2022: 9.5%),
  and WALT fell slightly to 4.4 years (31 December 2022: 4.8 years).
• The NAV per share (undiluted) decreased, mainly due to the revaluation of properties in the middle of the year, to EUR 4.38 compared to EUR 4.99 at the end of 2022.
• The net loan-to-value ratio2 (net LTV) remained unchanged from the previous quarter at 52.9% (31 December 2022: 54%); liquidity as at the reporting date increased to EUR 132.3 million (30 June 2023: EUR 123.4 million, 31 December 2022: EUR 57.4 million).
• The average nominal financing costs were 1.74% p.a.; there are no significant maturities until mid-2024.

PERFORMANCE IN LINE WITH FORECAST FOR 2023 FINANCIAL YEAR

Given the development in the first nine months of 2023, the Executive Board confirms the forecast for the 2023 financial year: rental income will be between EUR 74.5 million and EUR 76.5 million (2022: EUR 81.1 million), and FFO I (after taxes, before minority interests) is expected to be between EUR 33.0 million and EUR 35.0 million (2022: EUR 41.8 million).

1. Excl. properties classified as a project development
2. According to the definition of bond 2019/2024

DEMIRE

INTERIM REPORT8 1 JANUARY TO 30 SEPTEMBER 2023

FOREWORD BY THE
EXECUTIVE BOARD	2
DEMIRE AT A GLANCE	3
INTERIM GROUP
MANAGEMENT REPORT	6
Overview	7
Economic report	10
Opportunities and risks	18
Subsequent events	18
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS	19
IMPRINT	39

PROPERTY PORTFOLIO

Between the end of the previous year and the reporting date, the property portfolio decreased to 60 properties (31 December 2022: 62 properties). The lettable area of the buildings in the portfolio is around 861,200 m² (31 December 2022: 912,700 m²) and the total market value is approximately EUR 1.2 billion (31 December 2022: approximately EUR 1.3 billion). The last external property valuation of the portfolio, excluding the properties held for sale, was carried out on 30 June 2023.

The EPRA Vacancy Rate1 increased to 12.6% as at the reporting date of 30 Septem- ber 2023, following 9.5% on 31 December 2022. The increase is mainly due to the additional vacancy of the Karstadt space in Celle, the office property in Düsseldorf and the property in Kassel. WALT was 4.4 years as at 30 September 2023, compared to 4.8 years as at year-end 2022. In the period under review, DEMIRE achieved a rental performance of 27,240 m² (9M 2022: 198,840 m²). As well as the weak market situation, the significant decline is due to fewer leases expiring in the property portfolio in 2023 and 2024. 41% of the letting performance was attributable to new lettings and 59% to prolongations. The rental performance was driven, inter alia, by a new lease spanning 3,200 m² in Langenfeld as well as an extension in Darmstadt spanning 4,720 m² and two extensions of around 2,500 m² each in Flensburg and Aschheim.

TOP TEN TENANTS (AS AT 30 SEPTEMBER 2023)

						Contractual	in %
No.	Tenant	Type of use		rents p.a.1
	in EUR million	of total
1	GMG/Dt. Telekom	Office	7.3		9.4
2	IMOTEX	Retail	5.4		7.0
	Bima Bundesanstalt
	für Immobilien­
3	aufgaben	Office	3.4		4.4
4	momox Services GmbH	Logistics	2.5		3.3
5	Amazon	Logistics	2.2		2.8
6	Roomers	Hotel	2.1		2.7
	GALERIA
7	Karstadt Kaufhof	Retail	2.0		2.6
8	Sparkasse Südholstein	Office	1.8		2.3
9	comdirect bank AG	Office	1.4		1.8
	Die Autobahn GmbH
10	des Bundes	Office	1.3		1.6
Total						29.3		38.0
Other						47.8		62.0
Total						77.1		100.0

1 Based on annualised contractual rents, excluding ancillary costs

1 Excl. properties classified as a project development