Quarterly Report • Sep 6, 2016
Quarterly Report
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Fiscal Year January 1 – December 31, 2016
Group in EURK
| Consolidated income statement | 01/01/2016– 30/06/2016– |
01/01/2015– 30/06/2015– |
|---|---|---|
| Rental income | 37,529 | 13,839 |
| Net rental income | 29,800 | 11,210 |
| EBIT | 32,850 | 16,068 |
| Financial result | -22,849 | -14,289 |
| EBT | 10,001 | 1,779 |
| Net profit/loss for the period | 7,186 | 297 |
| Net profit/loss for the period attributable to parent company shareholders | 5,442 | -144 |
| Net profit/loss for the period per share (basic / diluted, in EUR ) |
0.11 / 0.09 | -0.01 / -0.01 |
| FFO after non-controlling interests | 3,363 | n.a. |
| Consolidated balance sheet | 30/06/2016 | 31/12/2015 |
| Total assets | 1,066,766 | 1,032,945 |
| Investment properties | 981,466 | 915,089 |
| Non-current assets held for sale | 825 | 13,005 |
| Total portfolio | 982,291 | 928,094 |
| Financial liabilities | 677,962 | 655,239 |
| Cash and cash equivalents | 29,015 | 28,467 |
| Net financial debt | 648,947 | 626,772 |
| in % of total portfolio (LTV) | 66.1 | 67.5 |
| Equity according to the consolidated balance sheet | 273,673 | 264,902 |
| Equity ratio in % | 25.7 | 25.6 |
| cash flow | 01/01/2016– 30/06/2016– |
01/01/2015– 30/06/2015– |
| Cash flow from operating activities | 17,180 | 5,787 |
| Cash flow from investing activities | 3,858 | 1,078 |
| Cash flow from financing activities | -20,490 | -1,560 |
| Cash and cash equivalents at the end of the period | 29,015 | 9,702 |
| NAV (Net Asset Value) | 30/06/2016 | 31/12/2015 |
| Net asset value (NAV) for the period | 236,177 | 230,697 |
| Deferred taxes | 28,274 | 25,570 |
| Basic / diluted EPRA NAV |
264,324 / 275,405 | 256,267 / 271,585 |
| Shares in millions (basic / diluted) | 49.31 / 62.95 | 49.29 / 63.95 |
| Basic / diluted EPRA NAV per share in EUR | 5.38 / 4.37 | 5.20 / 4.25 |
Shareholder structure as AT August 31, 2016
Source: German Trading Act notification, own analysis *including subsidiaries
| 2 | DEMIRE | at a glance | |||
|---|---|---|---|---|---|
| 2 | Key Figures | ||||
| 3 | Contents |
Balance Sheet Oath
The report is published in German and as an English translation. In the event of any conflict or inconsistency between the English and the German versions, the German original shall prevail.
After growing successfully in the year 2015, we have used the first six months of the current 2016 fiscal year to focus on consolidating our new additions to the portfolio and improving our future financial result through various refinancings.
In the first half of 2016, we generated rental income of EUR 37.5 million, which meant that we fully achieved our pro rata forecast for full year 2016. As of mid-2016, our overall portfolio had attained an occupancy rate of 87.8 % of the potential rents at full occupancy, which surpassed the rate of 87.2 % at the end of the prior year.
In the second half of 2016, we expect rental income to be slightly higher than in the first half and moderately exceed our full-year forecast. Our optimism is based on the lease contracts concluded as of June 30, 2016 for vacant space that is to be refurbished and, therefore, handed over to tenants only after the reporting date.
Based on the pro forma inclusion of the contractually agreed rental income, the occupancy rate of the entire portfolio as of June 30, 2016 was already at 89.3 % of potential rents, which is EUR 1.3 million in annual rent or 1.5 percentage points higher than the level on the reporting date. This makes us confident that we will reach our target for the year of an occupancy rate of 90 %.
DEMIRE has also made solid progress in terms of its financing structure. In a series of stages taken since June 2016, we have fully repaid our high-interest HFS bond with a volume of EUR 28 million. This will enable us to save annual interest expenses of roughly EUR 4.8 million. The average interest rate on our financial debt is now 4.4 % p.a., and we have also managed to bring down our loan-to-value ratio after repayment of HFS bond from a level of around 66 % of real estate assets on the reporting date to today's level of 64 %.
As a result of measurement effects and special items, our IFRS earnings before interest and taxes (EBIT) in the first half of 2016 doubled to EUR 32.9 million compared to the previous year's level of EUR 16.1 million. At the same time, the profit/loss for the period in the first half of 2016 increased sharply to EUR 7.2 million after amounting to just EUR 0.3 million in the comparable period of the prior year.
Net profit/loss for the period adjusted for measurement effects, non-recurring and special items (EPRA earnings/FFO) before non-controlling interests amounted to EUR 5.3 million in the first half of 2016 and EUR 3.4 million after interests attributable to minority shareholders.
The reductions in administrative costs and interest expenses that will gradually begin to take effect in second half of 2016, will not be sufficient enough to fully compensate for the higher maintenance and rental costs that occurred in the first half-year.
This has prompted the Executive Board to fine-tune its FFO forecast for full year 2016. Instead of the planned FFO before minority interests of just under EUR 20 million, the Executive Board now expects FFO before minority interests for the full year to amount to EUR 19.1 million and EUR 13.9 million after
From left to right: Dipl.-Kfm. (FH) Markus Drews, Executive Board Member (COO), Hon.-Prof. Andreas Steyer MRICS, Speaker of the Eecutive Board (CEO), Frank Schaich, Executive Board Member (CFO)
minority interests. With respect to the higher number of shares outstanding (weighted approximately 50.9 million shares) following the cash capital increase, the new FFO target is EUR 0.27 per share.
For the 2017 fiscal year, assuming there are no changes to the total portfolio, the Executive Board expects rental income to total EUR 77 million and FFO before minority interests of around EUR 25 million and roughly EUR 18 million after minority interests. This amount corresponds to about EUR 0.34 per currently outstanding share.
The forecast for the coming fiscal year illustrates the potential that can be realised through the measures already implemented. We are confident that we can improve our core portfolio even further and continue to strive for the value-creating expansion of our portfolio.
We have taken an important step in this direction with the registration of our cash capital increase in the commercial register on August 31, 2016.
Frankfurt/Main, September 6, 2016
Speaker of the Executive Board (CEO)
| :/// $\sqrt{ }$ |
|
|---|---|
Hon.-Prof. Andreas Steyer Dipl.-Kfm. (FH) Markus Drews Frank Schaich Member of the Executive Board (COO)
Member of the Executive Board (CFO)
In the first half of 2016, the majority of international stock markets experienced sharp downward trends.The German stock market followed suit and declined after some intermittent high volatility, leading the DAX index to close the first half of 2016 at 9,680 points, or roughly 10 % below its 2015 year-end level. The major factors driving this decline were not only geopolitical events such as the crisis in the Middle East but also the weaker global economic outlook, particularly for Asia and Latin America, the development of oil and commodity prices and recent reports of weaker corporate earnings.The decision by Great Britain to leave the EU and the uncertainty unleashed by this decision also led to significant capital market price fluctuations.
While in the first quarter of 2016 DEMIRE's shares performed broadly in line with the DAX and the Prime All Share indices, DEMIRE's share price development in the second quarter of 2016 was not able to keep pace with the positive development of the share's NAV. On the June 30, 2016 reporting date, the DAX and Prime Standard indices declined roughly 10 % below their closing levels at the end of 2015, whereas DEMIRE's share price was roughly 22 % below its 2015 year-end closing price. At the same time, demand for real estate stocks continued interrupted: the EPRA Germany Index, which
| DEMIRE shares |
31/08/2016 |
|---|---|
| ISIN | DE000A0XFSF0 |
| Symbol / ticker | DMRE |
| Stock exchange | Frankfurt Stock Exchange (FSE); XETRA |
| Market segment | Prime Standard |
| Share capital | EUR 54,242,444.00 |
| Ø no. of shares | 54,242,444 |
| Ø daily trading volume 01/01 – 31/08 | 24,481 |
| Market capitalisation | EUR 197.98 million |
| Free float | 48.86 % |
comprises the largest real estate companies in Germany, outperformed the DAX and Prime All Share indices in the first half of 2016 rising 7 % by the June 30, 2016 reporting date.
After the reporting date, the EPRA Germany index and the DAX and Prime All Share indices continued increasing during July and August of 2016. DEMIRE's shares also rose slightly.
DEMIRE's shares recorded their high at the start of the year on January 4, 2016, at EUR 4.33. At the end of the reporting period, DEMIRE's shares closed at a price of EUR 3.45. With the confirmation of the anticipated positive business performance in the context of the 2016 quarterly report, the announcements of successful new leases and the advance into the Prime Standard segment in mid-August 2016, DEMIRE's share price recovered and has continued trending slightly higher. On August 31, 2016, the share price was EUR 3.65. 300,00 350,00
As of June 30, 2016, the Company's market capitalisation was EUR 170.11 million and rose to EUR 197.98 million following the June reporting date as a result of the share price's recovery and the cash capital increase registered at the end of August 2016. At this market capitalisation, DEMIRE is one of the largest listed real estate companies in Germany. 150,00 200,00
The average daily trading volume of DEMIRE's shares in the first eight months of 2016 was 24,481 shares. Following the relatively high trading volume in the shares in the first quarter of 2016, turnover declined somewhat from May through July of 2016 but has picked up again since August. In the first half 2016, the average daily turnover was 29,984 shares, or roughly the same level as in the first half of 2015. 30.12.2014 31.03.2015 30.06.2015 30.09.2015 31.12.2015 50,00 100,00
Source: Deutsche Börse AG; own analysis
The shares of DEMIRE Deutsche Mittelstand Real Estate AG (ISIN: DE000A0XFSF0) have been trading in the Prime Standard segment – the segment of the regulated market of the Deutsche Börse in Frankfurt with the highest transparency standards – since July 15, 2016. As a result, the commercial real estate group specialising in secondary locations in Germany now also meets even a higher degree of the transparency demanded by international investors and also fulfils a key prerequisite for acceptance into the DAX family of selection indices.The listing in the Prime Standard will increase DEMIRE's visibility on the capital market even further.
The cash capital increase announced in ad hoc announcement after the reporting date on August 11, 2016, was placed primarily with institutional investors in a private placement and was several times oversubscribed. DEMIRE's share capital increased by EUR 4,930,722.00 with the registration of the capital increase on August 31, 2016, and by a further EUR 4,500.00 to a total of EUR 54,242,444.00 through the exercise of conversion rights.
The HFS loan will be fully repaid using the proceeds from the capital increase. As a result, the weighted interest rate of financial debt will fall from 5.1 % p.a. to roughly 4.4 % p.a. and will then be within the planned corridor of 4.0 % to 4.5 % p.a. targeted for the end of 2016. This will reduce the net debt ratio from more than 66 % of the real estate assets to around 64 % which comes closer to planned year-end target rate of 60 %.
Research coverage by professional analysts is expected to continue increasing with the Company's recent inclusion in the Prime Standard segment. The latest published reports show a clear discrepancy between DEMIRE's share price and the share's fair value. The most recent analysis by Oddo Seydler in mid-July 2016, places the fair value of DEMIRE's shares at EUR 5.25. This indicates a price potential of more than 50 % compared to the share's closing price at the end of the reporting period. An analysis published by SMC Research also sees significant share price potential and has set a target price for the shares of EUR 4.70.
All of the management's proposed resolutions were approved by a clear majority by the Annual General Meeting of DEMIRE Deutsche Mittelstand Real Estate AG on June 30, 2016. Resolutions were approved for adjusting the authorised and conditional capital given the marked rise in the Company's share capital in 2015. As a result, DEMIRE has access to authorised capital totalling EUR 24.7 million and conditional capital of EUR 14.4 million.
All of the Supervisory Board members were reelected, and a resolution was passed to raise the annual compensation of each member to EUR 30,000.00 with the commencement of the 2017 fiscal year. In the constituent Supervisory Board meeting following the Annual General Meeting, Prof. Dr. Wagner was elected as chairman of the Supervisory Board and Dr. Peter Maser was elected as deputy chairman.
As of the end of August 2016, DEMIRE's shareholder structure reflected a high free float of 48.65 %. In addition, some of the Company's largest shareholders include several well-known institutions:
In the first half of 2016, the remaining 2014/2019 corporate bonds with a nominal value of EUR 14.4 million were placed with institutional investors. The Fair Value REIT convertible bond maturing in 2020 was prematurely redeemed at the request of the creditors due to the change in control.
The EPRA NAV (basic/diluted) per share was EUR 5.38/4.37 on June 30, 2016. Thus, the net asset value per share is significantly higher than the current share price, which highlights the share's price appreciation potential.
| Name | DEMIRE 2015/2018 mandatory convertible bond |
|---|---|
| Issuer | DEMIRE Deutsche Mittelstand Real Estate AG |
| Type of security | Convertible bond |
| Volume | EUR 15,000,000 |
| Interest rate (coupon) | 2.75 % |
| Interest payments | quarterly on March 22, June 22, September 22, December 22 |
| Repayment | May 22, 2018 |
| Redemption rate | 100 % |
| Denomination | EUR 100,000 |
| Paying agent | Bankhaus Gebr. Martin Aktiengesellschaft, Göppingen |
| ISIN | DE000A13R863 |
| Market segment | Frankfurt Stock Exchange |
| Name | 2014/2019 DEMIRE corporate bond |
|---|---|
| Issuer | DEMIRE Deutsche Mittelstand Real Estate AG |
| Type of security | Bearer bond |
| Volume | EUR 100,000,000 |
| Interest rate (coupon) | 7.5 % |
| Interest payments | semi-annual on March 16 and September 16 |
| Repayment | September 16, 2019 |
| Redemption rate | 100 % |
| Denomination | EUR 1,000 |
| Paying agent | Bankhaus Gebr. Martin Aktiengesellschaft, Göppingen |
| ISIN | DE000A12T135 |
| Market segment | Frankfurt Stock Exchange |
| Name | DEMIRE DT.MTS .RE WDL 13/18 |
|---|---|
| Issuer | DEMIRE Deutsche Mittelstand Real Estate AG |
| Type of security | Convertible bond |
| Volume | EUR 11,300,000 |
| Interest rate (coupon) | 6 % |
| Interest payments | quarterly in arrears |
| Repayment | December 30, 2018 |
| Redemption rate | 100 % |
| Denomination | EUR 1 |
| Conversion rate | EUR 1 |
| Paying agent | Bankhaus Gebr. Martin Aktiengesellschaft, Göppingen |
| ISIN | DE000A1YDDY4 |
| Market segment | Frankfurt Stock Exchange |
| FINAN CIAL CALENDAR (sTAtus: August 2016) |
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|---|---|---|---|
| 28-29/09/2016 | European Mid Small Cap Forum in London | ||
| 22/11/2016 | Presentation at the German Equity Forum in Frankfurt | ||
| 30/11/2016 | Publication of the 2016 Nine-Month Report |
DEMIRE Deutsche Mittelstand Real Estate AG is a public stock corporation under German law headquartered in Frankfurt/Main with no other branch offices. As of the reporting date, the shares of DEMIRE Deutsche Mittelstand Real Estate AG (ISIN DE000A0XFSF0) have been listed on the regulated market (General Standard Segment) of the Frankfurt Stock Exchange and on the regulated unofficial market of the Stuttgart, Berlin and Dusseldorf stock exchanges.
Since its strategic realignment in 2013, DEMIRE concentrates exclusively on the German commercial real estate market and is active as an investor and property holder in the segment for secondary locations where its activities include the acquisition, management and the rental of commercial properties. Value appreciation should be achieved through active portfolio management and the Group's in-house asset, property and facility management; which in some cases includes the sale of individual properties when they no longer align with the investment strategy.
DEMIRE's business activities and, consequently, its segment reporting are divided into three segments: Core Portfolio, Fair Value REIT and Corporate Functions/Others. The strategically important segment "Core Portfolio" contains the assets and activities of DEMIRE's direct and indirect subsidiaries that were part of the Group prior to the takeover of Fair Value REIT-AG. The main assets are the commercial properties in Germany. This segment also includes the in-house asset, property and facility management activities established and expanded in 2015 that are intended to ensure that existing properties generate the best possible returns. Another strategically important segment of the Group is the "Fair Value" segment which comprises the activities of the acquired company. The segment "Corporate Functions Others" contains the Group's administrative and general tasks such as risk management, finance, controlling, financing, legal, IT and compliance.
As of June 30, 2016, the core portfolio consisted of 178 commercial properties with lettable area of almost 1.1 million m² and a market value totalling EUR 982.3 million.
The yield-related occupancy rate of the portfolio as of the reporting date was 87.8 % of the potential rents at full occupancy of EUR 84.5 million compared to an occupancy rate of 87.2 % at the end of the prior year.
The yield-weighted occupancy rate of the core portfolio as of June 30, 2016, would have been 89.3 % of the potential rent under the pro forma inclusion of lease contracts concluded as of the reporting date for vacant space that is to be refurbished before it is handed over to tenants.
| DEMIRE GROU P'S REAL ESTATE HOLDINGS ON JUNE 30, 2016 |
||||||||
|---|---|---|---|---|---|---|---|---|
| Plot size | Total rent able area |
Annualised contrac tual rent |
Market value 30/06/2016 |
Occupancy rate |
Ø secured remain ing term of rental agree ments |
Contrac tual rental yield be fore costs |
Interest | |
| in m² | in m² | in EURk | in EURk | in % | in years | in % | in % | |
| Portfolio | 983,681 | 791,272 | 51,977 | 692,160 | 87.4% | 5.6 | 7.5% | 94.8% |
| Fair Value REIT | 424,191 | 263,078 | 22,240 | 290,131 | 88.5% | 4.9 | 7.7% | 62.0% |
| Total | 1,407,872 | 1,054,350 | 74,217 | 982,291 | 87.8% | 5.4 | 7.6% | 81.0% |
The Kiel Institute for the World Economy (IfW) expects global economic growth in 2016 of 3.1 % and 3.5 % in 2017. Experts expect the eurozone's gross domestic product to increase 1.7 % and 1.9 %, respectively, in the next two years. Germany continues to be one of Europe's fastest growing economies with projected growth rates of 1.9 % and 2.1 % for 2016 and 2017. Despite a difficult environment, the German economy remained robust during the first quarter of 2016 and increased its gross domestic product by 0.7 % according to the Federal Statistical Office. Growth was supported further by the solid overall business climate and positive consumer spending thanks to the stable labour market. There is still no clarity on the impact on economic growth from Great Britain's decision to withdraw from the EU (Brexit).
The first surveys regarding the effect of the Brexit decision on the German real estate market, such as the BF.Quartalsbarometer or the Deutsche Hypo Real Estate Economy Index, show that the decision has created questions and uncertainty, particularly given the turbulence the decision has unleashed in the capital markets.
According to an analysis by Jones Lang Lasalle (JLL), the momentum of transactions in the German commercial real estate market slowed down in the first half-year in compared to the prior year with volumes falling 25 % to EUR 18 billion versus the first half of 2015. This decline was mainly the result of a lack of sufficient supply coupled with a continued high demand for real estate. JLL no longer expects transaction volumes to reach the forecast of EUR 50 billion for the full year of 2016, which it set at the start of the year. Measured by the volume of transactions, office property was the dominant asset class in the first half of 2016. Consequently, office property transactions comprised 42 % of the transactions in the real estate market, followed by retail properties with 23 %, hotels with 12 % and logistics with 10 %.
According to JLL, office property benefited from a further drop in vacancy rates and the continued upward trend in rental rates. BNP Paribas Real Estate (BNP) recorded an increase in lease revenue of roughly 13 % in the top eight locations in Germany in the first half of 2016. For the full year, BNP expects record revenue in this asset class.
The retail property segment was also in good shape thanks to the 2.3 % rise in retail sales in the first half of 2016 reported by the Federal Statistical Office and sustained positive economic conditions. Although brokered area volumes declined 5 %, prime rents continued to rise slightly by 0.3 %. Overall, there was a slowdown in the growth of area turnover compared to prior years.
JLL stated that there was a 28 % increase in transaction volumes in logistics and industrial real estate in the first half of 2016. Of this, only roughly 37 % originated from the seven property strongholds – Berlin, Dusseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart. In terms of area turnover, the real estate agency CBRE expects logistics properties to set new records again for the full year of 2016. A total of 3.3 million m² was leased in the first half-year, which is 8 % more than in the comparable period of the strong prior year. This rise is due to the robust German economy and the subsequent demand for logistics services. For full-year 2016, CBRE forecasts area turnover of 6.5 million m² compared to 6 million m² in 2015.
| Consolidated income statement (selected information in EURk ) |
2nd Quarter of 2016 |
2nd Quarter of 2015 |
01/01/2016 – 30/06/2016 – |
01/01/2015 – 30/06/2015 – |
|---|---|---|---|---|
| Rental income | 19,714 | 6,876 | 37,529 | 13,839 |
| Income from utility and service charges | 3,475 | 2,336 | 8,704 | 4,153 |
| Operating expenses to generate rental income | -6,481 | -3,180 | -16,433 | -6,782 |
| Profit/loss from the rental of real estate | 16,708 | 6,032 | 29,800 | 11,210 |
| Profit/loss from the sale of real estate companies | 0 | 520 | 3 | 520 |
| Profit/loss from the sale of real estate | 110 | 458 | 110 | 458 |
| Profit/loss from investments accounted for using the equity method |
0 | 1,465 | 0 | 3,230 |
| Other operating income and other effects | 8,623 | 7,170 | 21,533 | 7,978 |
| General and administrative expenses | -4,079 | -3,573 | -7,484 | -5,144 |
| Other operating expenses | -2,511 | -1,208 | -11,112 | -2,184 |
| Earnings before interest and taxes | 18,851 | 10,864 | 32,850 | 16,068 |
| Financial result | -14,005 | -9,666 | -22,849 | -14,289 |
| Profit/loss before taxes | 4,846 | 1,198 | 10,001 | 1,779 |
| Income taxes | -1,816 | -1,372 | -2,815 | -1,482 |
| Net profit/loss for the period | 3,030 | -174 | 7,186 | 297 |
| of which attributable to parent company shareholders | 2,487 | -596 | 5,442 | -144 |
| Basic earnings per share (EUR) | 0.05 | -0.03 | 0.11 | -0.01 |
| Weighted average number of shares outstanding (thousand) | 49,307 | 21,168 | 49,306 | 21,177 |
| Diluted earnings per share (EUR) | 0.04 | -0.03 | 0.09 | -0.01 |
| Weighted average diluted number of shares outstanding (thousand) |
62,953 | 34,879 | 62,952 | 34,852 |
In the first half of 2016, the DEMIRE Group generated rental income of EUR 37.5 million, which corresponds to exactly half of the forecast of EUR 75 million rental income for the full year of 2016. In the same period of the previous year, rental income was still at EUR 13.8 million.
The profit/loss from the rental of real estate more than doubled year-on-year to EUR 29.8 million (EUR 11.2 million). Due to higher expenses for maintenance and rental costs as well as lower income from utility and service charges, the non-allocable operating expenses to generate rental income actually increased to 21 % of rental income after a level of 19 % in the prior year.
Other operating income and other effects amounted to EUR 21.5 million (1HY 2015: EUR 8.0 million) and primarily include fair value adjustments (totalling EUR 14.3 million) for the Kurfürstengalerie in Kassel amounting to EUR 7.7 million and for Logistikpark Leipzig in the amount of EUR 4.2 million.
Other operating income and other effects also include income related to prior periods of EUR 6.3 million for the settlement of operating costs of prior years. The corresponding expenses related to prior periods of EUR 7.1 million are reported under other operating expenses.
The rise in general and administrative expenses to EUR 7.5 million (1HY 2015: EUR 5.1 million) was mainly due to legal and consulting fees of EUR 3.2 million, of which EUR 2.2 million were transactionrelated. In addition, staff costs of EUR 1.8 million (previous year: EUR 0.9 million) also increased as a result of business growth and the successive insourcing of services that were previously outsourced.
Earnings before interest and taxes (EBIT) rose more than 100 % to EUR 32.9 million in the first half of 2016 (1HY 2015: EUR 16.1 million).
The financial result in the first half of 2016 amounted to EUR -22.8 million (1HY 2015: EUR -14.3 million). This amount includes interest expense of EUR 2.1 million as a special item from the write-off of the call option on the 2014/2019 corporate bond. Also included in the financial result is the profit attributable to minority shareholders in the subsidiaries of Fair Value REIT-AG in the amount to EUR 1.8 million (previous year: 0).
This resulted in profit/loss before taxes of EUR 10.0 million (1HY 2015: EUR 1.8 million) and a net profit/loss for the period of EUR 7.2 million (1HY 2015: EUR 0.3 million).
In the first half of the current fiscal year, the DEMIRE Group's operating result adjusted for measurement and disposal income, other non-recurring effects and income and expenses related to prior periods before minorities at Fair Value REIT-AG as well as DEMIRE AG amounted to EUR 4.4 million and was EUR 3.4 million after minority interests.
In the FFO calculation, deferred taxes and income taxes on current income determined under IFRS were adjusted. These income taxes occur at the level of the subsidiaries and as part of targeted structural alterations of the Group's structure are intended to be offset by the existing tax loss carryforwards of the parent company.
| Adjusted Group earnings (EPRA earnings or FFO) |
01/01/2016 – 30/06/2016 | |||
|---|---|---|---|---|
| Adjustment for special items |
||||
| EURk | According to consolidated income statement |
Effects from acquisitions, disposals and mea surement |
Others | Adjusted consolidated income state ment |
| Rental revenue | 37,529 | 0 | 0 | 37,529 |
| Income from utility and service charges | 8,704 | 0 | 0 | 8,704 |
| Operating expenses to generate rental income | -16,433 | 0 | 450 | -15,983 |
| Profit/loss from the rental of real estate | 29,800 | 0 | 450 | 30,250 |
| Profit/loss from the sale of real estate companies | 3 | -3 | 0 | 0 |
| Profit/loss from the sale of real estate | 110 | -110 | 0 | 0 |
| Other operating income and other effects | 21,533 | -14,263 | -5,552 | 1,718 |
| General and administrative expenses | -7,484 | 0 | 2,459 | -5,025 |
| Other operating expenses | -11,112 | 0 | 8,255 | -2,857 |
| Earnings before interest and taxes | 32,850 | -14,376 | 5,612 | 24,086 |
| Net financial expenses | -21,033 | 2,109 | 1,178 | -17,746 |
| Interests of minority shareholders | -1,816 | -99 | 0 | -1,915 |
| Financial result | -22,849 | 2,010 | 1,178 | -19,661 |
| Profit/loss before taxes | 10,001 | -12,366 | 6,790 | 4,425 |
| Income taxes | -2,815 | 1,369 | 1,446 | 0 |
| Net profit/loss for the period | 7,186 | -21,353 | 16,204 | 4,425 |
| Interests of minority shareholders | -1,744 | -1,062 | ||
| Net profit/loss for the period attributable to parent company | 5,442 | 3,363 | ||
| shareholders | ||||
| Basic earnings per share* | 0.11 | 0.07 |
* Weighted average number of shares 2016: 50,924,000
| Consolidated statement of cash flows (selected information in EURk ) |
01/01/2016 – 30/06/2016 – |
01/01/2015 – 30/06/2015 – |
|---|---|---|
| Cash flow from operating activities | 17,180 | 5,787 |
| Cash flow from investing activities | 3,858 | 1,078 |
| Cash flow from financing activities | -20,490 | -1,560 |
| Net change in cash and cash equivalents | 548 | 5,305 |
| Cash and cash equivalents at the end of the period | 29,015 | 9,702 |
Cash flow from operating activities grew by more than 200 % in the reporting period to EUR 17.2 million (1HY 2015: EUR 5.8 million) as a result of a higher profit/loss from the rental of real estate after taking into account the operating costs and payments for liabilities originating in 2015 in the context of the Fair Value REIT acquisition.
Cash flow from investing activities increased from EUR 1.0 million in the previous year's comparable period to EUR 3.9 million in the first half of 2016 especially as a result of the of the proceeds from the sale of five properties in the amount of EUR 13.9 million. A total of EUR 4.4 million was paid in the reporting period for the acquisition of interests in Kurfürstergalerie GmbH, and a total of EUR 5.7 million was paid for value-enhancing investments in existing properties.
Cash flow from financing activities amounted to EUR -20.5 million (1HY 2015: EUR -1.6 million). Proceeds in the amount of EUR 12.9 million from the issue of corporate bonds and EUR 30.3 million from the assumption of financial liabilities were generated in the first half-year. Interest and principal payments totalling EUR 63.6 million were made and included an early repayment of EUR 24.9 million and the repayment of the Fair Value REIT convertible bond in the amount of EUR 8.7 million.
The net change in cash and cash equivalents in the first half of 2016 was EUR 0.5 million (1HY 2015: EUR 5.3 million). Cash and cash equivalents at the end of the reporting period increased slightly to EUR 29.0 million.
| Consolidated balance sheet – Assets (selected information in EURk ) |
30/06/2016 | 31/12/2015 |
|---|---|---|
| Assets | ||
| Total non-current assets | 1,003,940 | 948,597 |
| Total current assets | 62,001 | 71,343 |
| Assets held for sale | 825 | 13,005 |
| Total assets | 1,066,766 | 1,032,945 |
| Consolidated balance sheet – Equity and | 30/06/2016 | 31/12/2015 |
|---|---|---|
| liabilities (selected information in EURk ) |
||
| Equity and Liabilities | ||
| Equity | ||
| Equity attributable to parent company shareholders | 236,177 | 230,697 |
| Interests of non-controlling shareholders | 37,496 | 34,205 |
| Total equity | 273,673 | 264,902 |
| Liabilities | ||
| Total non-current liabilities | 707,272 | 696,746 |
| Total current liabilities | 85,821 | 71,297 |
| Total liabilities | 793,093 | 768,043 |
| Total equity and liabilities | 1,066,766 | 1,032,945 |
| Equity ratio | 25.7% | 25.6% |
Total assets of the DEMIRE Group as at June 30, 2016, totalled EUR 1.1 billion (December 31, 2015: EUR 1.0 billion) and was slightly higher than at the end of the prior fiscal year due to the acquisition of Kurfürstengalerie. Non-current assets amounted to EUR 1,003.9 million (December 31, 2015: EUR 948.6 million) and current assets stood at EUR 62.0 million (December 31, 2015: EUR 71.3 million). Non-current assets held for sale as of June 30, 2016, included properties in Hohenstein-Ernstthal and Neumünster in the total amount of EUR 0.8 million. Non-current assets held for sale were EUR 13.0 million as of December 31, 2015 and resulted in the corresponding proceeds in the first half of 2016.
The Group's equity in the first six months of 2016 rose slightly to EUR 273.7 million (December 31, 2015: EUR 264.9 million). The equity ratio also increased to 25.7 %, which was slightly higher than the level of 25.6 % at the end of 2015.
It should be noted that the minority interests in the subsidiaries of Fair Value REIT-AG in the amount of EUR 62.4 million are recognised under non-current liabilities and not under equity in accordance with IFRS solely due to their legal form as partnerships. The adjusted Group equity totalled EUR 336.1 million or 31.5 % of the Group's total assets (December 31, 2015: EUR 326.1 million or 31.6 %).
Non-current liabilities at the end of the first half of 2016 amounted to EUR 707.3 million (December31,2015: EUR 696.7million) and current assets totalled EUR 85.8million (December31,2015: EUR 71.3 million). Total liabilities of the DEMIRE Group as of June 30, 2016, increased slightly to EUR 793.1 million (December 31, 2015: EUR 768.0 million).
The change in non-current liabilities was mainly the result of the assumption of financial liabilities from the Kurfürstengalerie, the early repayment of liabilities and reclassifications. The change in current liabilities reflects the repayment of the Fair Value REIT-AG convertible bond and the reclassification of the outstanding amount of the HFS bond as of the reporting date.
The total financial debt of EUR 678.0 million (December 31, 2015: EUR 655.2 million) contained liabilities to financial institutions in the amount of EUR 508.0 million. As of June 30, 2016, there were variable interest rate agreements for loans of EUR 192.5 million.
The DEMIRE Group's loan-to-value (LTV) is defined as the ratio of net financial debt to the carrying amount of investment properties and non-current assets held for sale. It was possible to further improve the loan-to-value ratio to 66.1 % as of June 30, 2016 (December 31, 2015: 67.5 %).
| Loan-to-value (LTV) | 30/06/2016 | 31/12/2015 |
|---|---|---|
| EUR million |
||
| Financial liabilities | 678.0 | 655.2 |
| Cash and cash equivalents | 29.0 | 28.5 |
| Net debt | 649.0 | 626.7 |
| Fair Value of investment properties and non-current assets held for sale |
982.3 | 928.1 |
| LTV in % | 66.1% | 67.5% |
Segment reporting contained in the consolidated financial statements is conducted in accordance with IFRS 8 "Operating Segments" based on the Company's internal alignment according to strategic business areas. The segment information presented represents the information to be reported to the DEMIRE Executive Board. The Core Portfolio and Fair Value REIT segments are the key segments of importance for the DEMIRE Group. The Corporate Functions/Others segment contains the primary administrative activities. This segment also includes the results of the Investments segment, which was previously reported as a separate segment, because the dissolution of the legacy portfolio contained in this segment is of little importance to the DEMIRE Group as a whole. For a more detailed description of the individual segments, please refer to the explanations in the group management report for the 2015 fiscal year.
| EURk | Core Portfolio | Fair Value REIT | Corporate | Total segments |
|---|---|---|---|---|
| 01/01/2016 - 30/06/2016 | Functions/Others | |||
| Segment revenues | 56,338 | 26,015 | 251 | 82,604 |
| Segment expenses | -23,247 | -19,400 | -7,106 | -49,753 |
| EBIT by segment | 33,091 | 6,615 | -6,855 | 32,851 |
| Net profit/loss for the period |
19,625 | 2,623 | -15,064 | 7,184 |
| 30/06/2016 | ||||
| Segment assets | 722,280 | 324,347 | 20,139 | 1,066,766 |
| Real estate holdings | 692,190 | 290,131 | 0 | 982,321 |
| Segment liabilities | 433,066 | 202,294 | 157,733 | 793,093 |
| EURk 01/01/2015 - 30/06/2015 |
Core Portfolio | Fair Value REIT | Corporate Functions/Others |
Total segments |
|---|---|---|---|---|
| Segment revenues | 27,457 | 0 | 6,372 | 33,829 |
| Segment expenses | -9,385 | 0 | -8,376 | -17,761 |
| EBIT by segment | 18,072 | 0 | -2,004 | 16,068 |
| Net profit/loss for the period |
8,178 | 0 | -7,881 | 297 |
| 31/12/2015 | ||||
| Segment assets | 651,165 | 337,261 | 44,519 | 1,032,945 |
| Real estate holdings | 628,550 | 299,544 | 0 | 928,094 |
| Segment liabilities | 414,896 | 217,803 | 135,344 | 768,043 |
As of July 15, 2016, the shares of DEMIRE Deutsche Mittelstand Real Estate AG have been trading in the Prime Standard segment, which is the segment of the regulated market of the Deutsche Börse in Frankfurt with the strictest transparency requirements. As a result, the Company now meets even a higher degree of the transparency demanded by international investors and also fulfils a key prerequisite for acceptance into the DAX family of selection indices.
In early July 2016, Fair Value REIT-AG took out a mortgage loan from Volksbank Mittweida eG of EUR 4.0million with a ten-year fixed interest rate until August 1, 2026. The property in Neubrandenburg serves as collateral. The initial redemption rate was set at 5.63 % p.a. of the principal and the interest rate was fixed at 2.25 % plus interest saved. The processing costs, including the costs for calculating the mortgage lending value of the property, totalled 1.0 % of the principal.
According to the resolution of the Executive Board and the Supervisory Board of DEMIRE Deutsche Mittelstand Real Estate AG of August 11, 2016, the Company's share capital was increased by up to EUR 4,930,722.00 by issuing up to 4,930,722 new no-par value ordinary bearer shares (no-par value shares) with a notional interest in the share capital of EUR 1.00 per no-par value share at an issuance price of EUR 3.45 per new share through the partial use of the available authorised capital (Authorised Capital I/2016) against contribution in cash. Shareholder subscription rights were excluded. The new shares are entitled to dividends as of January 1, 2016 and were offered to selected institutional investors by way of a private placement. A portion of EUR 10 million of the proceeds generated from the cash capital increase was used for the full repayment of the outstanding amount of the HFS bond. DEMIRE intends to use the remaining proceeds to finance real estate purchases and strengthen its financial position.
In the third quarter of 2016, prior to the publication of the half-year financial statements, a total of 4,500 convertible bonds was converted into no-par value shares of DEMIRE Deutsche Mittelstand Real Estate AG. As of August 31, 2016, this represented a notional interest in the share capital consisting of 54,242,444 no-par value shares of roughly 0.01 %.
The DEMIRE Group's business activities expose the Group to various risks such as economic risk, as well as leasing, rent default, interest rate and liquidity risks. The risk management system at DEMIRE AG focusses on the Company's continued viability. A detailed description of DEMIRE's risks and its risk management system can be found in the Company's 2015 Annual Report.
The Executive Board does not expect any changes in the risk situation in the next 12 months that could threaten the Company's viability.
The rental income of EUR 37.5 million generated in the first half of 2016 was in line with the Company's plan. Because of higher expenses for maintenance and rental costs and lower income from utility and service charges, the non-allocable expenses to generate rental income actually increased to 21 % of rental income in the first half of 2016 after a level of 19 % in the prior year.
The Executive Board expects a higher profit/loss from the rental of real estate in the second half of 2016 than in the first half-year based on the assumption that at least a portion of the lease agreements concluded as of the reporting date for vacant space with total pro rata annual rent of roughly EUR 1.3 million will be handed over to tenants in the course of second half of 2016.
The general administrative expenses and other operating expenses adjusted for non-recurring items will decline in the second half of 2016 due to a drop in the volume of outsourced services in the second half of the year.
The full repayment of the HFS bond occurred in several phases starting in mid-June 2016 through total refinancing of EUR 17.8 million at an average annual interest rate of currently around 3.8 % p.a. and an amount of EUR 10 million with the proceeds from the cash capital increase. This results in annual interest savings of approximately EUR 4.8 million, of which EUR 2.2 million will occur by the end of 2016.
These improvements will only gradually begin to take effect in second half of 2016, but will not be sufficient enough to fully compensate for the shortfall in income that occurred in the first half-year.
As a result, the Executive Board has brought down its full-year FFO forecast for 2016. Instead of the planned FFO before minority interests of just under EUR 20 million, the Executive Board now expects FFO before minority interests for the full year of 2016 to amount to EUR 19.1 million and EUR 13.9 million after minority interests. With respect to the higher number of shares outstanding (weighted approximately 50.9 million shares) following the cash capital increase, the new FFO target is EUR 0.27 per share.
For the 2017 fiscal year, assuming there are no changes to the total portfolio, the Executive Board expects rental income to total EUR 77 million and FFO before minority interests of around EUR 25 million and roughly EUR 18 million after minority interests. This amount corresponds to about EUR 0.34 per currently outstanding share.
The Executive Board is operating on the assumption that the taxable income of subsidiaries can be offset by the parent company's tax loss carryforwards through structural alterations of the Group's structure.
Frankfurt, September 6, 2016
Speaker of the Executive Board (CEO)
Hon.-Prof. Andreas Steyer Dipl.-Kfm. (FH) Markus Drews Frank Schaich Member of the Executive Board (COO)
Member of the Executive Board (CFO)
| EUR k |
01/01/2016– 30/06/2016– |
01/01/2015– 30/06/2015– |
01/04/2016– 30/06/2016– |
01/04/2015– 30/06/2015– |
|---|---|---|---|---|
| Rental income | 37,529 | 13,839 | 19,714 | 6,876 |
| Income from utility and service charges | 8,704 | 4,153 | 3,475 | 2,336 |
| Operating expenses to generate rental income | -16,433 | -6,782 | -6,481 | -3,180 |
| Profit/loss from the rental of real estate | 29,800 | 11,210 | 16,708 | 6,032 |
| Revenue from the sale of real estate companies | 0 | 1,766 | 0 | 1,766 |
| Net assets from real estate companies sold | 3 | -1,246 | 0 | -1,246 |
| Profit/loss from the sale of real estate companies | 3 | 520 | 0 | 520 |
| Revenue from the sale of real estate | 13,925 | 2,300 | 2,175 | 2,300 |
| Expenses relating to real estate sales | -13,815 | -1,842 | -2,065 | -1,842 |
| Profit/loss from the sale of real estate | 110 | 458 | 110 | 458 |
| Profits from investments accounted for using the equity method |
0 | 1,824 | 0 | 1,466 |
| Losses from investments accounted for using the equity method |
0 | -63 | 0 | -25 |
| Unrealised fair value adjustments in equity invest ments |
0 | 1,469 | 0 | 24 |
| Profit/loss from investments accounted for using the equity method |
0 | 3,230 | 0 | 1,465 |
| Profit/loss from fair value adjustments in investment properties |
14,263 | 7,720 | 7,254 | 7,492 |
| Impairment of receivables | -912 | -563 | -196 | -558 |
| Other operating income | 8,183 | 821 | 1,566 | 236 |
| Other operating income and other effects | 21,533 | 7,978 | 8,623 | 7,170 |
| General and administrative expenses | -7,484 | -5,144 | -4,079 | -3,573 |
| Other operating expenses | -11,112 | -2,184 | -2,511 | -1,208 |
| Earnings before interest and taxes | 32,850 | 16,068 | 18,851 | 10,864 |
| Financial income | 1,034 | 2,014 | -956 | 1,678 |
| Finance expenses | -22,067 | -16,303 | -11,233 | -11,344 |
| Interests of minority shareholders | -1,816 | 0 | -1,816 | 0 |
| Financial result | -22,849 | -14,289 | -14,005 | -9,666 |
| Profit/loss before taxes | 10,001 | 1,779 | 4,846 | 1,198 |
| Income taxes | -2,815 | -1,482 | -1,816 | -1,372 |
| Net profit/loss for the period | 7,186 | 297 | 3,030 | -174 |
| Of which, attributable to: | ||||
| Non-controlling interests | 1,744 | 441 | 543 | 422 |
| Parent company shareholders | 5,442 | -144 | 2,487 | -596 |
| Basic earnings per share | 0.11 | -0.01 | 0.05 | -0.03 |
| Diluted earnings per share | 0.09 | -0.01 | 0.04 | -0.03 |
| EUR k |
01/01/2016– 30/06/2016– |
01/01/2015– 30/06/2015– |
|---|---|---|
| Net profit/loss for the period | 7,186 | 297 |
| Items that may be reclassified to profit and loss in future periods | ||
| Share of other comprehensive income attributable to associated companies accounted for using the equity method (from currency translation) |
0 | -930 |
| Currency translation differences | 1 | 195 |
| Other comprehensive income | 1 | -735 |
| Total comprehensive income | 7,187 | -438 |
| Of which, attributable to: | ||
| Non-controlling interests | 1,744 | 323 |
| Parent company shareholders | 5,443 | -760 |
| EUR k |
30/06/2016 | 31/12/2015 |
|---|---|---|
| ASSETS | ||
| Non-current assets | ||
| Intangible assets | 6,997 | 6,961 |
| Property, plant and equipment | 203 | 11,285 |
| Investment properties | 981,466 | 915,089 |
| Investments accounted for using the equity method | 3,137 | 3,136 |
| Other financial assets | 10,536 | 11,045 |
| Loans to investments accounted for using the equity method | 903 | 553 |
| Other loans | 413 | 384 |
| Deferred tax assets | 286 | 144 |
| Total non-current assets | 1,003,940 | 948,597 |
| Current assets | ||
| Real estate inventory | 2,303 | 2,298 |
| Trade accounts receivable and other receivables | 19,958 | 14,387 |
| Financial receivables and other financial assets | 10,597 | 26,020 |
| Tax refund claims | 127 | 171 |
| Cash and cash equivalents | 29,015 | 28,467 |
| Total current assets | 62,001 | 71,343 |
| Non-current assets held for sale | 825 | 13,005 |
| Total assets | 1,066,766 | 1,032,945 |
| EUR k |
30/06/2016 | 31/12/2015 |
|---|---|---|
| EQUITY AND LIABILITIES |
||
| Equity | ||
| Subscribed capital | 49,307 | 49,292 |
| Reserves | 186,870 | 181,405 |
| Equity attributable to parent company shareholders | 236,177 | 230,697 |
| Interests of non-controlling shareholders | 37,496 | 34,205 |
| Total equity | 273,673 | 264,902 |
| Liabilities | ||
| Non-current liabilities | ||
| Deferred tax liabilities | 28,274 | 25,714 |
| Minority interests | 62,369 | 61,160 |
| Non-current financial liabilities | 616,629 | 608,796 |
| Other non-current liabilities | 0 | 1,076 |
| Total non-current liabilities | 707,272 | 696,746 |
| Current liabilities | ||
| Provisions | 2,896 | 1,166 |
| Trade payables and other liabilities | 17,721 | 19,887 |
| Tax liabilities | 3,871 | 3,801 |
| Current financial liabilities | 61,333 | 46,443 |
| Total current liabilities | 85,821 | 71,297 |
| Total liabilities | 793,093 | 768,043 |
| Total equity and liabilities | 1,066,766 | 1,032,945 |
| EUR k |
01/01/2016– 30/06/2016– |
01/01/2015– 30/06/2015– |
|---|---|---|
| Group profit/loss before taxes | 10,001 | 1,779 |
| Financial expenses* | 23,883 | 16,303 |
| Financial income* | -1,034 | -2,014 |
| Proceeds from the sale of real estate inventory | 0 | 2,416 |
| Change in other inventory | 0 | -876 |
| Change in trade accounts receivable and other receivables | -1,342 | 918 |
| Change in income tax receivables* | 44 | -17 |
| Change in financial receivables and other financial assets | 1,706 | -2,209 |
| Change in intangible assets | 36 | 0 |
| Change in provisions | 1,656 | -56 |
| Change in trade payables and other liabilities* | -3,702 | 2,199 |
| Valuation gains under IAS 40 | -14,263 | -7,720 |
| Gains from the sale of real estate companies | -113 | -978 |
| Interest proceeds* | 94 | 0 |
| Income taxes paid* | -173 | 0 |
| Change in reserves | 302 | 148 |
| Profit/loss from investments accounted for using the equity method | 0 | -3,230 |
| Depreciation and amortisation and impairment* | 912 | 563 |
| Distributions to minority shareholders | -627 | 0 |
| Other non-cash items* | -199 | -1,439 |
| Cash flow from operating activities | 17,180 | 5,787 |
| Payments for investments in property, plant and equipment | -5,716 | -60 |
| Payments for the purchase of investment properties and interests in fully consolidated companies, less net cash equivalents acquired |
-4,352 | -512 |
| Proceeds from the sale of real estate | 13,925 | 1,650 |
| Cash flow from investing activities | 3,858 | 1,078 |
| Release of equity component of convertible bond | -90 | 0 |
| Payments for expenses associated with raising equity | 0 | -58 |
| Change in financial liabilities from the acquisition of entities | 0 | 0 |
| Proceeds from the issue of bonds | 12,892 | 23,500 |
| Proceeds from the issuance of financial liabilities | 30,344 | 1,466 |
| Interest paid on financial liabilities | -17,078 | -9,128 |
| Payments for the redemption of financial liabilities | -46,558 | -17,340 |
| Cash flow from financing activities | -20,490 | -1,560 |
| Net change in cash and cash equivalents | 548 | 5,305 |
| Cash and cash equivalents at the start of the period | 28,467 | 4,397 |
| Cash and cash equivalents at the end of the period | 29,015 | 9,702 |
*Prior year's information was adjusted for changes in classification.
| EUR k |
Share capital | Reserves | ||||||
|---|---|---|---|---|---|---|---|---|
| Subscribed capital |
Capital reserves |
Retained earnings incl. Group profit/loss |
Reserves for treasury shares |
Currency translation |
Equity attributable to parent company shareholders |
Interests of non controlling shareholders |
Total equity |
|
| 01/01/2016 | 49,292 | 121,120 | 60,651 | -310 | -57 | 230,697 | 34,205 | 264,902 |
| Proportional transfer of earnings-neutral changes in equity in investments accounted for using the equity |
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Currency translation differences | 0 | 0 | 0 | 0 | 1 | 1 | 0 | 1 |
| Total other comprehensive income | 0 | 0 | 0 | 0 | 1 | 1 | 0 | 1 |
| Net profit/loss for the period | 0 | 0 | 5,442 | 0 | 0 | 5,442 | 1,744 | 7,186 |
| Total comprehensive income | 0 | 0 | 5,442 | 0 | 1 | 5,443 | 1,744 | 7,187 |
| Capital increase (related to the conversion of convertible bonds) |
15 | 0 | 0 | 0 | 0 | 15 | 0 | 15 |
| Stock option programme | 0 | 303 | 0 | 0 | 0 | 303 | 0 | 303 |
| Mandatory convertible bonds | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Capital increases against contribution in kind |
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Cash capital increases | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Costs of raising equity under capital increases |
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Change in the scope of consolidation | 0 | -71 | 516 | 0 | -726 | -281 | 1,546 | 1,265 |
| 30/06/2016 | 49,307 | 121,352 | 66,609 | -310 | -782 | 236,177 | 37,495 | 273,672 |
| 01/01/2015 | 14,306 | 8,234 | 32,802 | -310 | -3,348 | 51,685 | 2,944 | 54,629 |
|---|---|---|---|---|---|---|---|---|
| Proportional transfer of earnings-neutral changes in equity in investments accounted for using the equity |
0 | 0 | 0 | 0 | -930 | -930 | 0 | -930 |
| Currency translation differences | 0 | 0 | 0 | 0 | 314 | 314 | -119 | 195 |
| Total other comprehensive income | 0 | 0 | 0 | 0 | -616 | -616 | -119 | -735 |
| Net profit/loss for the period | 0 | 0 | -144 | 0 | 0 | -144 | 442 | 298 |
| Total comprehensive income | 0 | 0 | -144 | 0 | -616 | -760 | 323 | -437 |
| Capital increase (related to the conversion of convertible bonds) |
214 | -10 | 0 | 0 | 0 | 204 | 0 | 204 |
| Stock option programme | 0 | 148 | 0 | 0 | 0 | 148 | 0 | 148 |
| Mandatory convertible bonds | 0 | 14,237 | 0 | 0 | 0 | 14,237 | 0 | 14,237 |
| Capital increases against contribution in kind |
7,816 | 10,834 | 0 | 0 | 0 | 18,650 | 0 | 18,650 |
| Cash capital increases | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Costs of raising equity under capital increases |
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Change in the scope of consolidation | 0 | 0 | -412 | 0 | 0 | -412 | 726 | 314 |
| 30/06/2015 | 22,336 | 33,443 | 32,246 | -310 | -3,964 | 83,752 | 3,993 | 87,745 |
DEMIRE Deutsche Mittelstand Real Estate AG (hereinafter also referred to as the "Company" or "DEMIRE AG" (as the single entity) or "DEMIRE" (as the Group)) is recorded in the commercial register under the number HRB 89041 in Frankfurt/Main, Germany, which is the location of the Company's headquarters. The Company's headquarters are located at Lyoner Strasse 32 in Frankfurt/Main. The Company's fiscal year is the calendar year. The first half of the 2015 calendar year serves as the comparable prior year period.
As of the reporting date, the Company's shares were listed in the General Standard segment of the Frankfurt Stock Exchange. As of July 15, 2016, the shares have been trading in the Prime Standard segment, which is the segment of the regulated market with the strictest transparency requirements.
Since its strategic realignment in 2013, DEMIRE concentrates exclusively on the German commercial real estate market and is active as an investor and property holder in the segment for secondary locations where its activities include the acquisition, management and the rental of commercial properties. Value appreciation should be achieved through active portfolio management and the Group's in-house asset, property and facility management; which in some cases includes the sale of individual properties when they no longer align with the business model.
The interim consolidated financial statements as at the reporting date include the DEMIRE subgroup and the Fair Value REIT subgroup. The DEMIRE subgroup contains the consolidated financial statements of DEMIRE AG and its subsidiaries – except for the Fair Value REIT subgroup – which in turn comprises the consolidated financial statements of Fair Value REIT-AG and its subsidiaries.
The condensed interim consolidated financial statements for the period from January 1 to June 30, 2016, were prepared in accordance with IAS 34 "Interim Financial Reporting", as applicable in the EU. The interim consolidated financial statements were not subject to an audit.
The interim consolidated financial statements of the DEMIRE Group were prepared according to uniform accounting and valuation policies taking into account all International Financial Reporting Standards (IFRS) that require mandatory application as of the reporting date of this interim report (June 30, 2016) and were adopted by the European Union. In preparing the interim consolidated financial statements and determining the figures for the comparable previous year, the same consolidation principles and accounting and measurement policies were applied as for the consolidated financial statements as of December 31, 2015, except for the new accounting standards. A detailed description of these methods can be found in the notes to the 2015 consolidated financial statements.
These interim consolidated financial statements do not contain all of the information and disclosures required for consolidated financial statements and should, therefore, be read in conjunction with the consolidated financial statements as of December 31, 2015.
DEMIRE's business operations are essentially unaffected by seasonal and macroeconomic influences. Due to the extensive acquisitions of real estate companies and business combinations during the 2015 fiscal year and an acquisition in early January 2016, a comparison of quantitative information is limited.
The following new or amended standards and interpretations required mandatory first-time application in the 2016 fiscal year:
The amendments to IAS 1 "Disclosure Initiative" will have an effect on the presentation of the notes to the consolidated financial statements as of December 31, 2016.
In addition, amendments to standards and interpretations occurred that were not relevant for the condensed interim consolidated financial statements as of June 30, 2016:
The preparation of these interim consolidated financial statements required the use of discretionary decisions and estimates for some balance sheet items that affect the recognition and measurement in the balance sheet and statement of income.
The assumptions and estimates that could pose a material risk of significant adjustments being made to the carrying amounts of assets and/or liabilities mainly relate to the fair value measurement of investment properties and are described separately in the corresponding chapter. A detailed description of the measurement can be found in the notes to the 2015 consolidated financial statements.
Discretionary decisions made by the management when applying the accounting and valuation policies that could significantly impact the amounts in the consolidated financial statements are a result of the assessment when the purchase of a real estate portfolio is to be classified as a business combination according to IFRS 3 or as an acquisition of assets and liabilities.
The reporting currency is the euro. Where figures have been rounded to EURk, this has been stated. Discrepancies may occur as a result of rounding to EURk.
In addition to the inclusion of the Company, the interim consolidated financial statements generally include all German and foreign subsidiaries from the date of their acquisition. As of June 30, 2016, the scope of consolidation comprised 58 fully consolidated entities (December 31, 2015: 57), including the parent company.
| Number of fully consolidated subsidiaries | 30/06/2016 | 31/12/2015 |
|---|---|---|
| As of the beginning of the fiscal year | 57 | 54 |
| Additions | 3 | 8 |
| Disposals | 2 | 4 |
| Disposals through mergers | 0 | 1 |
| As of the balance sheet date | 58 | 57 |
The three additions during the reporting period concern the acquisition of Kurfürster Immobilien GmbH, the first-time consolidation of PRAEDIA GmbH and the founding of Condor Yellow BV GmbH (see Note C. 2). The disposals during the reporting period relate to the sale of Magnat Tbilisi Office LLC and Magnat Tbilisi Residential 1 LLC.
DEMIRE AG acquired a 94.9 percent interest in the real estate company Kurfürster Immobilien GmbH, Leipzig, during the reporting period. The company's property, "Kurfürsten Galerie", is located in Kassel. In addition, PRAEDIA GmbH, Berlin, acquired on March 17, 2015, was included in the scope of consolidation for the first time. In the 2015 fiscal year, this subsidiary was not included in the consolidated financial statements for reasons of materiality. DEMIRE AG holds 51 % of PRAEDIA GmbH's share capital and voting rights.
The acquisition of real estate project companies that do not represent a business operation as defined by IFRS 3 was accounted for as a direct purchase of properties. The acquisition costs of the project companies were allocated to the individually identifiable assets and liabilities on the basis of their fair values. During the reporting period, no business combinations as defined by IFRS 3 occurred.
Based on 100 percent of the assets and liabilities and taking into account the interests of noncontrolling shareholders, the following amounts were recognised as of the date of first-time consolidation:
| EUR k |
Amounts recognised as of the acquisition date |
|---|---|
| Assets acquired | 52,677 |
| Liabilities acquired | 37,352 |
| Net assets at 100% | 15,325 |
| of which interests of non-controlling shareholders | 9 |
| Acquisition costs | 15,316 |
The disposals of fully consolidated subsidiaries in the reporting year concern the legacy portfolio and include the following companies: Tbilisi Office LLC (Georgia) and Magnat Tbilisi Residential 1 LLC (Georgia). The disposal of these companies resulted in a total positive earnings effect of EURk 3.
| EUR k |
Date of disposal |
Proceeds from disposal |
Result from disposal of net assets (incl. currency translation reserve) |
Gains/losses on disposal |
|---|---|---|---|---|
| MAGNAT Tbilisi Office LLC | 05/02/2016 | 0 | 3 | 3 |
| MAGNAT Tbilisi Residential 1 LLC | 04/02/2016 | 0 | 0 | 0 |
| Gesamtsumme | 0 | 3 | 3 |
| EUR k |
MAGNAT Tbilisi Office LLC |
MAGNAT Tbilisi Residential 1 LLC |
|---|---|---|
| Aggregated assets | 0 | 0 |
| thereof cash and cash equivalents | 0 | 0 |
| Aggregated liabilities | 1 | 0 |
The Group's rental income consists of the following:
| EUR k |
01/01/2016– 30/06/2016– |
01/01/2015– 30/06/2015– |
|---|---|---|
| Rental income | 37,529 | 13,839 |
| Income from utility and service charges | 8,704 | 4,153 |
| Rental revenue | 46,233 | 17,992 |
| Allocable operating expenses to generate rental income | -12,215 | -5,048 |
| Non-allocable operating expenses to generate rental income | -4,218 | -1,734 |
| Operating expenses to generate rental income | -16,433 | -6,782 |
| Profit/loss from the rental of real estate | 29,800 | 11,210 |
Rental revenue in the reporting period stems from the rental of commercial real estate.
Profit/loss from the rental of real estate in the reporting period is not affected by seasonal effects. The rise largely resulted from the real estate companies acquired during the 2015 fiscal year and first half of 2016.
In the first half of 2016, the Group generated a profit from the sale of real estate in the amount of EURk 110 (1HY 2015: EURk 458).
During the reporting period, the properties in Radevormwald, Tornesch, Bornhöved, Parchim and an interest in the Kempten property were sold for a total amount of EURk 13,925. The proceeds from the disposal of the individual properties amounted to EURk 11,100 (Radevormwald), EURk 650 (Tornesch), EURk 525 (Bornhöved), EURk 650 (Parchim) and EURk 1,000 (Kempten). The sale proceeds were offset by expenses relating to property sales totalling EURk 13,815.
The Group's net profit/loss for the period of EURk 7,186 (1HY 2015: EURk 297) was positively influenced by the higher profit/loss from the rental of real estate of EURk 29,800 (1HY 2015: EURk 11,210).
Other operating income and other effects amounted to EURk 21,533 in the first half-year of 2016 (1HY 2015: EURk 7,978) and were primarily affected by fair value adjustments in investment properties of EURk 14,263 (1HY 2015: EURk 7,720). The fair value adjustments mainly concern Kurfürster-Galerie in Kassel (EURk 7,743) and the Logistikpark Leipzig (EURk 4,241).
Negative earnings effects originated from the financial result, as well as from general and administrative expenses of EURk 7,484 (1HY 2015: EURk 5,144) and other operating expenses of EURk 11,112 (1HY 2015: EURk 2,184).
| Total | 7,484 | 5,144 |
|---|---|---|
| Other general and administrative expenses | 706 | 42 |
| Travel expenses | 47 | 81 |
| Supervisory Board compensation | 92 | 44 |
| Advertising expenses | 114 | 0 |
| Reimbursement of expenses | 162 | 0 |
| Vehicle costs | 234 | 33 |
| Accounting and audit costs | 1,097 | 1,817 |
| Staff costs | 1,845 | 866 |
| Legal and consulting fees | 3,187 | 2,261 |
| EUR k |
01/01/2016 – 30/06/2016– |
01/01/2015 – 30/06/2015– |
Legal and consulting fees mainly include brokerage commissions of EURk 951 in the context of the refinancing of financial liabilities, notary fees of EURk 295 and expenses related to acquisitions (due diligence audits) of EURk 200. The increase in staff costs resulted from the hiring of additional staff in the course of the 2015 fiscal year and the appointment of a third Executive Board member in February 2016.
A detailed description of share-based payments can be found in the notes to the 2015 consolidated financial statements.
Staff costs resulting from the 2015 Stock Option Programme that are recognised in the interim consolidated financial statements pursuant to IFRS 2 amounted to EURk 302 (1HY 2015: EURk 148).
The line items "other operating income" and "other operating expenses" include prior-period income and expenses of EUR 6,449 and EUR 7,117, respectively, resulting from the settlement of prior-years' operating costs. The customary subsequent settlement of operating costs resulted primarily from the real estate portfolios acquired during the abbreviated 2014 fiscal year.
Basic earnings per share is computed by dividing the net profit/loss for the period attributable to the parent company shareholders by the weighted average number of shares outstanding.
| Berechnungsparameter | 01/01/2016 – 30/06/2016– |
01/01/2015 – 30/06/2015– |
|---|---|---|
| Net profit/loss (EUR k) |
7,186 | 297 |
| Group's net profit/loss excl. non-controlling interests | 5,442 | -144 |
| Interest expenses from convertible bonds | 537 | 335 |
| Group's net profit/loss excl. non-controlling interests (diluted) | 5,979 | -144 |
| Number of shares | ||
| Number of shares outstanding as at the balance sheet date | 49,307 | 22,336 |
| Weighted average number of shares outstanding | 49,306 | 21,177 |
| Impact of conversion of convertible bonds | 13,647 | 13,675 |
| Weighted average number of shares (diluted) | 62,952 | 34,852 |
| Earnings per share (EUR ) |
||
| Basic earnings per share (EUR) | 0.11 | -0.01 |
| Diluted earnings per share (EUR) | 0.09 | -0.01 |
In the previous year, convertible bonds were excluded in the calculation of diluted earnings per share in accordance with IAS 33.70 (c) because an assumed conversion would have been anti-dilutive due to the loss for the period. The dilutive effect resulting from the stock option programme will only be taken into account if the share price reaches a level of EUR 4.258.
| EUR k |
01/01/2016– 30/06/2016– |
01/01/2015– 30/06/2015– |
|---|---|---|
| Financial income | 1,034 | 2,014 |
| Financial expenses | -22,067 | -16,302 |
| Interests of minority shareholders | -1,816 | 0 |
| -22,849 | -14,288 |
The increase in financial expenses mainly was the result of financial liabilities acquired and assumed in 2015 and the first half of 2016. The decrease in financial income in the second quarter of 2016 was due to valuation effects from the call option embedded in the 2014/2019 corporate bond.
Interests of minority shareholders of EURk 1,816 refer to minority shareholders in subsidiaries of Fair Value REIT-AG.
Investment properties are carried at fair value. Changes in fair values during the fiscal year were as follows.
| EUR k |
2016 | 2015 |
|---|---|---|
| Fair value as at the beginning of the fiscal year | 915,089 | 333,070 |
| Additions resulting from business combinations | 0 | 469,114 |
| Additions from the acquisition of real estate | 36,329 | 81,624 |
| Reclassifications from advance payments and real estate inventory | 12,985 | 14,065 |
| Additions (subsequent costs of acquisition) | 5,716 | 0 |
| Reclassifications to non-current assets held for sale | -2,916 | -1,255 |
| Unrealised gains from fair value measurement | 18,578 | 21,478 |
| Unrealised losses from fair value measurement | -4,315 | -3,007 |
| Fair value as at June 30, 2016 | 981,466 | 915,089 |
Investment property additions in the amount of EURk 36,329 and the reclassification from advance payments of EURk 12,985 resulted from the investment in the commercial real estate company Kurfürster Immobilien GmbH. The reclassification to non-current assets held for sale of EURk 2,916 relates to the properties in Hohenstein-Ernstthal (EURk 625) and Neumünster (EURk 180), and the properties in Kempten (EURk 910), Parchim (EURk 630) and Bornhöved (EURk 571), which were sold in reporting period.
Valuation of real estate held by the DEMIRE subgroup
Fair values for investment properties held by the DEMIRE subgroup as of June 30, 2016 are determined on the basis of discounted earnings models in accordance with the Federal Building Code (Baugesetzbuch), the Property Valuation Regulation (Immobilienwertermittlungsverordnung [ImmoWertV]) and the Valuation Guidelines (Wertermittlungsrichtlinie [WertR]). The property's net present value is determined based on income and expenditures taking a risk-adjusted property yield into account.
The determination of the net present values depends on underlying key, unobservable input factors used in the valuation (Level 3):
| Off ice real estate |
30/06/2016 | 31/12/2015 |
|---|---|---|
| Ratio of maintenance costs to gross profit (in %) | 7.57 | 7.26 |
| Average maintenance costs (in EUR per m²) | 5.56 | 6.38 |
| Range of maintenance costs (in EUR per m²) | 2.00 – 11.50 | 2.36 - 10.00 |
| Average property yield (in %)1) | 6.20 | 6.09 |
| Range of property yields (in %)2) | 4.95 – 10.25 | 5.00 - 9.75 |
| Average residual useful life (in years) | 30 | 37 |
| Range of residual useful life (in years) | 25 - 45 | 25 - 45 |
| Ratio of management costs to gross profit (in %) | 2.73 | 3.09 |
| Range of ratio of management costs to gross profit (in %) | 3.90 – 32.67 | 0.99 - 7.53 |
| Average market rent (in EUR per m², per year)3) | 73.49 | 96.22 |
| Range of average market rents (in EUR per m², per year) | 12.24 – 193.45 | 30.47 - 161.17 |
| Rentable space as at balance sheet date (in m²) | 804,048 | 470,143 |
| Vacant space as at balance sheet date (in m²) | 152,636 | 39,025 |
| Value-based vacancy rate according to EPRA (in %) |
12.37 | 8.32 |
| Average vacancy rate based on the rentable space (in %) | 18.98 | 8.30 |
| Range of average vacancy rate based on the rentable space (in %) | 0.00 – 86.6 | 0.00 - 67.27 |
| Weighted Average Lease Term – WALT (in years) | 5.63 | 6.04 |
1) The calculation of property-specific property yields is based on the average market property yield and takes into account the respective macro and micro conditions, competing properties, tenant creditworthiness, vacancy risk and the remaining terms of the lease contracts.
2) Property yields derived vary based on the quality, location and structure of the property.
3) The determination of average market rent was based on rentable space as at June 30, 2016.
| Retail real estate | 30/06/2016 | 31/12/2015 |
|---|---|---|
| Ratio of maintenance costs to gross profit (in %) | 6.82 | 11.64 |
| Average maintenance costs (in EUR per m²) | 9.20 | 6.83 |
| Range of maintenance costs (in EUR per m²) | 5.00 – 11.50 | 5.00 - 7.50 |
| Average property yield (in %)1) | 5.73 | 6.62 |
| Range of property yields (in %)2) | 5.47 – 7.25 | 6.00 - 7.25 |
| Average residual useful life (in years) | 38 | 39 |
| Range of residual useful life (in years) | 35 - 45 | 35 - 45 |
| Ratio of management costs to gross profit (in %) | 3.05 | 4.08 |
| Range of ratio of management costs to gross profit (in %) | 2.50 – 4.00 | 2.86 - 7.40 |
| Average market rent (in EUR per m², per year)3) | 134.92 | 70.63 |
| Range of average market rents (in EUR per m², per year) | 48.53 – 193.45 | 47.07 - 134.53 |
| Rentable space as at balance sheet date (in m²) | 43,066 | 21,616 |
| Vacant space as at balance sheet date (in m²) | 5,643 | 3,410 |
| Value-based vacancy rate according to EPRA (in %) |
11.73 | 12.18 |
| Average vacancy rate based on the rentable space (in %) | 13.10 | 15.77 |
| Range of average vacancy rate based on the rentable space (in %) | 0.00 – 45.5 | 0.00 - 46.70 |
| Weighted Average Lease Term – WALT (in years) | 7.79 | 8.10 |
1) The calculation of property-specific property yields is based on the average market property yield and takes into account the respective macro and micro conditions, competing properties, tenant creditworthiness, vacancy risk and the remaining terms of the lease contracts.
2) Property yields derived vary based on the quality, location and structure of the property. 3) The determination of average market rent was based on rentable space as at June 30, 2016.
| Logistics1) real estate | 30/06/2016 | 31/12/2015 |
|---|---|---|
| Ratio of maintenance costs to gross profit (in %) | 11.08 | 19.55 |
| Average maintenance costs (in EUR per m²) | 3.50 | 3.59 |
| Range of maintenance costs (in EUR per m²) | 3.50 – 3.50 | 3.59 - 3.59 |
| Average property yield (in %)2) | 7.71 | 8.00 |
| Range of property yields (in %)3) | 7.71 – 7.71 | 8.00 - 8.00 |
| Average residual useful life (in years) | 25 | 25 |
| Range of residual useful life (in years) | 25 - 25 | 25 - 25 |
| Ratio of management costs to gross profit (in %) | 1.00 | 1.77 |
| Range of ratio of management costs to gross profit (in %) | 1.00 – 1.00 | 1.77 - 1.77 |
| Average market rent (in EUR per m², per year)4) | 31.58 | 26.46 |
| Range of average market rents (in EUR per m², per year) | 31.58 – 31.58 | 26.46 - 26.46 |
| Rentable space as at balance sheet date (in m²) | 217,968 | 218,697 |
| Vacant space as at balance sheet date (in m²) | 75,105 | 66,978 |
| Value-based vacancy rate according to EPRA (in %) |
47.26 | 30.63 |
| Average vacancy rate based on the rentable space (in %) | 34.46 | 30.63 |
| Range of average vacancy rate based on the rentable space (in %) | 34.46 – 34.46 | 30.63 - 30.63 |
| Weighted Average Lease Term – WALT (in years) | 2.37 | 2.42 |
1) Information concerns Logistikpark Leipzig, which was acquired in the reporting year.
2) The calculation of property-specific property yields is based on the average market property yield and takes into account the respective
macro and micro conditions, competing properties, tenant creditworthiness, vacancy risk and the remaining terms of the lease contracts. 3) Property yields derived vary based on the quality, location and structure of the property.
4) The determination of average market rent was based on rentable space as at June 30, 2016.
| Other real estate | 30/06/2016 | 31/12/2015 |
|---|---|---|
| Ratio of maintenance costs to gross profit (in %) | 12.93 | 15.67 |
| Average maintenance costs (in EUR per m²) | 3.97 | 4.02 |
| Range of maintenance costs (in EUR per m²) | 2.00 – 6.50 | 4.00 - 6.50 |
| Average property yield (in %)1) | 9.34 | 9.35 |
| Range of property yields (in %)2) | 6.75 – 10.25 | 6.75 - 10.25 |
| Average residual useful life (in years) | 25 | 25 |
| Range of residual useful life (in years) | 25 - 35 | 25 - 25 |
| Ratio of management costs to gross profit (in %) | 3.00 | 3.70 |
| Range of ratio of management costs to gross profit (in %) | 3.00 – 3.00 | 2.25 - 6.63 |
| Average market rent (in EUR per m², per year)3) | 30.71 | 40.81 |
| Range of average market rents (in EUR per m², per year) | 12.24 – 56.51 | 12.06 - 64.78 |
| Rentable space as at balance sheet date (in m²) | 90,085 | 92,735 |
| Vacant space as at balance sheet date (in m²) | 34,697 | 34,335 |
| Value-based vacancy rate according to EPRA (in %) |
15.53 | 32.81 |
| Average vacancy rate based on the rentable space (in %) | 38.52 | 37.03 |
| Range of average vacancy rate based on the rentable space (in %) | 0.00 – 86.6 | 0.00 - 86.62 |
| Weighted Average Lease Term – WALT (in years) | 2.12 | 2.50 |
1) The calculation of property-specific property yields is based on the average market property yield and takes into account the respective macro and micro conditions, competing properties, tenant creditworthiness, vacancy risk and the remaining terms of the lease contracts.
2) Property yields derived vary based on the quality, location and structure of the property. 3) The determination of average market rent was based on rentable space as at June 30, 2016.
Valuation of real estate held by the Fair Value REIT subgroup
The fair values for investment properties held by the Fair Value REIT subgroup correspond to the values determined on the basis of the discounted cash flow method as of December 31, 2015. These values are based on an appraisal as of December 31, 2015, plus value-enhancing reconstruction measures in Eisenhüttenstadt and Zittau totalling EURk 2,878 and in Neumünster, Röntgenstrasse totalling EURk 20. The sale took place after the reporting date.
The following table summarises the financial liabilities:
| Composition of financial liabilities | 30/06/2016 | 31/12/2015 |
|---|---|---|
| EUR k |
||
| Non-current financial liabilities | ||
| variable interest rates | 186,124 | 188,041 |
| fixed interest rates | 430,505 | 420,755 |
| Total | 616,629 | 608,796 |
| Current financial liabilities | ||
| variable interest rates | 6,376 | 7,974 |
| fixed interest rates | 54,957 | 38,469 |
| Total | 61,333 | 46,443 |
| Total financial liabilities | 677,962 | 655,239 |
The interest rates for bank loans with variable interest rates are based on EURIBOR plus an appropriate margin.
The net profit for the period attributable to the parent company shareholders amounts to EURk 5,442. The net profit attributable to non-controlling interests amounts to EURk 1,744k.
In the reporting period, subscribed capital rose by EURk 15 as a result of the conversion of 2013/2018 convertible bonds.
Capital reserves represent the amount that was received through a capital increase against contribution in kind and the difference in subscribed capital to the sum of the share capital of the economic parent company and the acquisition cost for the acquisition of DEMIRE Deutsche Mittelstand Real Estate AG.
Retained earnings including consolidated net profit/loss contain the accumulated results.
The reserves for treasury shares resulted from the reverse acquisition.
The currency translation reserves include currency differences from fully consolidated companies and of companies accounted for using the equity method whose functional currency is not the euro.
There were no distributions to shareholders either in the reporting period or the subsequent year up until the date of the preparation of these financial statements.
The changes in other comprehensive income of in total EURk 1 resulted from negative currency translation differences.
Cash flow from operating activities is calculated using the indirect method. Cash flow from investing and financing activities are calculated on a payment-related basis.
Cash flow development reflects the investment in the real estate group's growth.
Cash flow from operating activities soared more than 200 % in the reporting period to EURk 17,180 (1HY 2015: EURk 5,787) as a result of the improved profit/loss from the rental of real estate taking into account operating costs and payments for liabilities originating in 2015 in the context of the Fair Value REIT acquisition.
Cash flow from investing activities reached EURk 3,858 in the first half of 2016 after EURk 1,078 in the comparable period of 2015 mainly as a result of the proceeds from the sale of five properties totalling EURk 13,925. Investments in real estate holdings amounted to EURk 5,716 in the reporting period.
Cash flow from financing activities in the first half of 2016 totalled EURk -20,490 (1HY 2015: EURk -1,560) and included proceeds of EURk 12,892 from the issuance of corporate bonds and EURk 30,344 from the assumption of financial liabilities. Interest and principal payments amounted to EURk 63,636 and included early repayments of EURk 24,851 and the redemption of the Fair Value REIT convertible bond of EURk 8,714.
The net change in cash and cash equivalents totalled EURk 548 (1HY 2015: EURk 5,305). As of the end of the reporting period, cash and cash equivalents had risen to EURk 29,015 after EURk 9,702 on June 30, 2015.
Throughout the entire reporting period, the DEMIRE real estate group was always in a position to fully meet its payment obligations. Possible liquidity shortages, for example, due to maturing loans, were avoided by means of the appropriate financial management and lender agreements as presented in the risk report.
| January 1, 2016 – | Segments by business segment | |||
|---|---|---|---|---|
| June 30, 2016 EUR k |
Core Portfolio |
Fair Value REIT |
Central Functions/ Others |
Group |
| External revenues | 34,206 | 25,952 | 0 | 60,158 |
| Total revenues | 34,206 | 25,952 | 0 | 60,158 |
| Profit/loss from fair value adjustments in investment properties |
14,289 | -26 | 0 | 14,263 |
| Other income | 7,843 | 89 | 251 | 8,183 |
| Profits originating from a purchase below market value | 0 | 0 | 0 | 0 |
| Profits from investments accounted for using the equity method |
0 | 0 | 0 | 0 |
| Unrealised fair value adjustments in equity investments | 0 | 0 | 0 | 0 |
| Segment revenues | 56,338 | 26,015 | 251 | 82,604 |
| Net assets from sold real estate companies | 0 | 0 | 0 | 0 |
| Expenses on real estate sales | -1,540 | -12,275 | 0 | -13,815 |
| Other expenses | -21,707 | -7,125 | -7,106 | -35,938 |
| Losses from investments accounted for using the equity method |
0 | 0 | 0 | 0 |
| Segment expenses | -23,247 | -19,400 | -7,106 | -49,753 |
| EBIT | 33,091 | 6,615 | -6,855 | 32,851 |
| Financial income | 38 | 35 | 961 | 1,034 |
| Financial expenses | -11,280 | -3,568 | -9,035 | -23,883 |
| Income taxes | -2,222 | -459 | -135 | -2,816 |
| Net profit/loss for the period | 19,627 | 2,623 | -15,065 | 7,186 |
| Significant non-cash items | -13,433 | 482 | 246 | -12,702 |
| Impairment losses in net profit/loss for the period | 396 | 1 | 515 | 912 |
| Additional information | ||||
| Segment assets | 722,280 | 324,347 | 20,139 | 1,066,766 |
| of which investments accounted for using the equity method |
0 | 0 | 3,137 | 3,137 |
| of which loans to investments accounted for using the equity method |
0 | 0 | 903 | 903 |
| of which financial receivables and other financial assets |
2,659 | 0 | 7,938 | 10,597 |
| of which tax refund claims | 96 | 3 | 28 | 127 |
| of which assets available for sales in investments accounted for using the equity method |
625 | 200 | 0 | 825 |
| Segment liabilities | 433,066 | 202,294 | 157,733 | 793,093 |
| of which non-current financial liabilities | 360,733 | 121,010 | 134,886 | 616,629 |
| of which current financial liabilities | 36,717 | 9,144 | 15,472 | 61,333 |
| of which tax liabilities | 3,864 | 0 | 7 | 3,871 |
| June 30, 2015 Core Fair Value Central Portfolio REIT Functions/ EUR k Others External revenues 19,453 0 2,605 Total revenues 19,453 0 2,605 Profit/loss from fair value adjustments in investment 7,720 0 0 properties Other income 284 0 537 Profits from investments accounted for using the equity 0 0 3,230 method Segment revenues 27,457 0 6,372 Net assets from sold real estate companies 0 0 -1,246 Expenses on real estate sales -1,650 0 -192 Other expenses -7,735 0 -6,938 Segment expenses -9,385 0 -8,376 EBIT 18,072 0 -2,004 Financial income 0 0 2,014 Financial expenses -8,824 0 -7,479 Income taxes -1,070 0 -412 Net profit/loss for the period 8,178 0 -7,881 Significant non-cash items 8,791 0 3,536 Impairment losses in net profit/loss for the period 235 0 238 Additional information Segment assets 651,165 337,261 44,519 of which investments accounted for using the 0 0 3,136 equity method of which loans to investments accounted for using 0 0 553 the equity method |
Group 22,058 22,058 7,720 821 |
||||
|---|---|---|---|---|---|
| 3,230 | |||||
| 33,829 | |||||
| -1,246 | |||||
| -1,842 | |||||
| -14,673 | |||||
| -17,761 | |||||
| 16,068 | |||||
| 2,014 | |||||
| -16,303 | |||||
| -1,482 | |||||
| 297 | |||||
| 12,327 | |||||
| 563 | |||||
| 1,032,945 | |||||
| 3,136 | |||||
| 553 | |||||
| assets | of which financial receivables and other financial | 5,011 | 0 | 21,009 | 26,020 |
| of which tax refund claims 101 22 48 |
171 | ||||
| of which assets available for sales in investments 1,255 11,750 0 accounted for using the equity method |
13,005 | ||||
| 768,043 | |||||
| of which non-current financial liabilities | 187,738 | 134,424 | 671,032 | ||
| Segment liabilities 414,896 217,803 135,344 348,870 |
of which current financial liabilities | 18,531 | 4,676 | 46,443 | |
| 23,236 | of which tax liabilities | 3,801 | 0 | 0 | 3,801 |
The segmentation of the data in the financial statements is based on the Company's internal alignment according to strategic business segments under IFRS 8. The segment information provided represents the information to be reported to DEMIRE's Executive Board.
The Group is divided into the business segments of Core Portfolio, Fair Value REIT and Central Functions/Others.
In the reporting period, the Investments division, which contains information relating to non-current assets, and the business areas of revitalisation, project development and land banking are no longer reported separately. Trailing income and expenses and residual segment assets and liabilities are reported under the segment Corporate Functions/Others.
The Core Portfolio segment includes the German subsidiaries focused on commercial real estate for the entrepreneurial Mittelstand in Germany. The Fair-Value REIT segment contains the activities of Fair Value REIT and its subsidiaries focused on office and retail properties in regional centres in Germany that were acquired at the end of 2015. The definition of the Fair-Value REIT segment meets the requirements under IFRS 8.5 because the responsible governing body making decisions about the allocation of resources to this segment has not changed and separate financial information continues to be available for this segment. The Central Functions/Others segment mainly contains DEMIRE AG's activities in its function as the Group holding company and represents the primary administrative activities.
Business transactions with members of management holding key positions within the Company
Except for the Executive Board remuneration discussed in section G 4, business transactions with members of management holding key positions at the Company did not occur in the reporting period.
The following balances exist with respect to associated companies:
| EUR k |
30/06/2016 | 31/12/2015 |
|---|---|---|
| Financial receivables and other financial assets | 67 | 116 |
| EUR k |
30/06/2016 | 31/12/2015 |
|---|---|---|
| Loans to investments accounted for using the equity method | 903 | 553 |
| Financial receivables and other financial assets | 480 | 480 |
Volume of business transactions with investments accounted for using the equity method:
| EUR k |
01/01/2016– 30/06/2016– |
01/01/2015– 30/06/2015– |
|---|---|---|
| Loans to investments accounted for using the equity method | 350 | 2,857 |
| Financial receivables and other financial assets | 49 | 59 |
| Trade payables and other liabilities | 0 | 123 |
| Current financial liabilities | 0 | 331 |
Due to the short-term maturity of cash and cash equivalents, trade accounts receivable and payable, and other current receivables and liabilities, it is assumed that their respective fair values correspond to the carrying amounts.
| June 30, 2016 | IAS 39 measurement | Value | |||
|---|---|---|---|---|---|
| EUR k |
Measu rement category |
Carrying amount |
Fair value through profit/loss |
Fair value directly in equity |
Fair Value |
| Interests in investments accounted for using the equity |
n/a | 3,137 | 0 | 3,137 | 3,137 |
| Other financial assets | LaR | 10,536 | 0 | 10,536 | 10,536 |
| Loans to investments accounted for using the equity method |
LaR | 903 | 0 | 903 | 903 |
| Other loans | LaR | 413 | 0 | 413 | 413 |
| Trade accounts receivable and other receivables | LaR | 19,958 | 0 | 19,958 | 19,958 |
| Financial receivables and other financial assets | LaR/HfT | 10,597 | 2,383 | 10,597 | 10,597 |
| Cash and cash equivalents | LaR | 29,015 | 0 | 29,015 | 29,015 |
| Convertible bond | AmC | 11,081 | 0 | 11,081 | 34,603 |
| Bonds | AmC | 97,318 | 0 | 97,318 | 96,000 |
| A-/B-Notes (Germavest) | AmC | 102,420 | 0 | 102,420 | 102,420 |
| Financial liabilities (Fair Value REIT) | AmC | 130,644 | 130,644 | 143,620 | |
| Other non-current financial liabilities | AmC | 366,409 | 0 | 366,409 | 365,916 |
| Interest rate swaps | HfT | 1,260 | 1,260 | 0 | 1,260 |
| Trade payables | AmC | 17,721 | 0 | 17,721 | 17,721 |
| Current financial liabilities | AmC | 61,333 | 0 | 61,333 | 61,333 |
| Amount per measurement category | |||||
| LaR | 71,422 | 2,383 | 71,422 | 71,422 | |
| AmC | 553,862 | 0 | 553,862 | 575,573 | |
| AtFVtPL | 102,420 | 0 | 102,420 | 102,420 | |
Afs: Available-for-Sale Financial Assets;
LaR: Loans and Receivables;
AmC: Amortised Cost;
HfT: Held for Trading; AtFVtPL: At Fair Value through Profit or Loss; n/a: not applicable.
| December 31, 2015 | IAS 39 measurement | Value | |||
|---|---|---|---|---|---|
| EURk | Measu rement category |
Carrying amount |
Fair value through profit/loss |
Fair value directly in equity |
Fair Value |
| Interests in investments accounted for using the equity |
n/a | 3,136 | 0 | 3,136 | 3,136 |
| Other financial assets | LaR | 11,045 | 0 | 11,045 | 11,045 |
| Loans to investments accounted for using the equity method |
LaR | 553 | 0 | 553 | 553 |
| Other loans | LaR | 384 | 0 | 384 | 384 |
| Trade accounts receivable and other receivables | LaR | 14,387 | 0 | 14,387 | 14,387 |
| Financial receivables and other financial assets | LaR/HfT | 26,020 | 2,205 | 23,815 | 26,020 |
| Cash and cash equivalents | LaR | 28,467 | 0 | 28,467 | 28,467 |
| Convertible bond | AmC | 19,491 | 0 | 19,491 | 56,947 |
| Bonds | AmC | 97,719 | 0 | 97,719 | 94,000 |
| A-/B-Notes (Germavest) | AmC | 92,651 | 0 | 92,651 | 92,651 |
| Financial liabilities (Fair Value REIT) | AmC | 144,113 | 144,113 | 143,620 | |
| Other non-current financial liabilities | AmC | 317,058 | 0 | 317,058 | 316,565 |
| Interest rate swaps | HfT | 829 | 829 | 0 | 829 |
| Trade payables | AmC | 19,887 | 0 | 19,887 | 19,887 |
| Current financial liabilities | AmC | 46,443 | 0 | 46,443 | 46,443 |
| Amount per measurement category | |||||
| LaR | 80,856 | 2,205 | 78,651 | 80,856 | |
| AmC | 500,598 | 0 | 500,598 | 533,842 | |
| AtFVtPL | 92,651 | 0 | 92,651 | 92,651 |
Afs: Available-for-Sale Financial Assets;
LaR: Loans and Receivables;
AmC: Amortised Cost;
HfT: Held for Trading; AtFVtPL: At Fair Value through Profit or Loss; n/a: not applicable.
The following table presents the measurement hierarchy, the measurement procedure and material input factors for the fair values of each category of non-current financial assets and liabilities.
| Type | Hierarchy | Measurement procedure and material input factors |
|---|---|---|
| Investment properties | Level 3 | Expected future free cash flows of a project by applying a market-based, property-specific discount rate |
| Interests in investments accounted for using the equity method |
Level 3 | Discounted cash flows from the continued use of an asset on the basis of yield curves observable on the market at the re porting date |
| Loans to investments accounted for using the equity method (fixed-rate) |
Level 3 | Discounted cash flows on the basis of yield curves observable on the market at the reporting date |
| Financial receivables and other finan cial assets |
Level 3 | Discounted cash flows on the basis of yield curves observable on the market at the reporting date |
| Non-current financial debt | Level 3 | Discounted cash flows on the basis of yield curves observable on the market at the reporting date |
| Derivatives | Level 2 | Interest rate curves, credit spreads, indices |
| Quoted convertible bonds | Level 1 | Quoted bid prices on active markets |
| Quoted corporate bonds | Level 1 | Quoted bid prices on active markets |
According to IFRS 7.29, it is assumed that all current financial instruments' carrying amounts correspond to their fair value.
The Group's financial risk in the reporting quarter has not changed materially compared to December 31, 2015.
With regard to the risk to future business development, we refer to the information provided in the risk report within the consolidated financial statements as of December 31, 2015. The Group's risk structure did not change materially during the first half of 2016.
There were no purchase obligations of June 30, 2016.
In accordance with the Articles of Association, the Executive Board is responsible for managing business activities.
The Executive Board consisted of the following members:
| Name EUR k |
Fixed remuneration |
Variable remuneration |
Share-based payments |
Total |
|---|---|---|---|---|
| Hon.-Prof. Andreas Steyer | 134 | 60 | 124 | 318 |
| Markus Drews | 130 | 60 | 124 | 314 |
| Frank Schaich | 80 | 50 | 0 | 130 |
| Total | 344 | 170 | 248 | 762 |
Executive Board compensation for the first half of 2015:
| Name EUR k |
Fixed remuneration |
Variable remuneration |
Share-based payments |
Total |
|---|---|---|---|---|
| Hon.-Prof. Andreas Steyer | 121 | 33 | 62 | 216 |
| Markus Drews | 103 | 50 | 62 | 215 |
| Frank Schaich | 0 | 0 | 0 | 0 |
| Total | 224 | 83 | 124 | 431 |
Mr. Frank Schaich has been a member of the DEMIRE AG Executive Board since February 1, 2016. He has received his contractually agreed remuneration from DEMIRE AG since March 2016 following the termination of his service contract with Fair Value REIT-AG effective as of the end of February 2016. Because Mr. Schaich has remained an Executive Board member of Fair Value REIT-AG, 70 % of his short-term remuneration and related costs have been passed on to Fair Value REIT-AG by DEMIRE AG since March 2016 according to the allocation agreement. The salary for the months of January and February 2016 was still paid directly by Fair Value REIT-AG. For further details regarding remuneration under the terminated contract with Fair Value REIT-AG and the termination's conditions, we refer to the section "Subsequent events" in Fair Value REIT-AG's 2015 annual report.
Payments related to employment termination or post-employment benefits for active and former Executive Board members solely concern Mr. Frank Schaich and were recognised by Fair Value REIT-AG. A related obligation of EURk 163 as of June 30, 2016 was recognised in previous periods.
The members of the Executive Board were not granted any loans or advances and no contingencies were assumed for their benefit.
In the constituent Supervisory Board meeting following the Annual General Meeting of June 30, 2016, Prof. Dr. Hermann Anton Wagner and Dr. Peter Maser were re-elected as chairman and deputy chairman of the Supervisory Board.
In addition to the three Executive Board members, the number of employees as of the reporting date was as follows:
| 30/06/2016 | 30/06/2015 | |
|---|---|---|
| Permanent employees | 71 | 34 |
| 71 | 34 |
The average number of employees in the first half of 2016 was 64 (previous year's period: 22).
This interim report was neither subject to an audit under Section 317 HGB nor a review by the auditor and, therefore, does not include an audit opinion.
The current statements of the Executive Board and Supervisory Board of DEMIRE AG under Section 161 AktG with regard to the German Corporate Governance have been made permanently available to shareholders on DEMIRE's website.
As of July 15, 2016, the shares of DEMIRE Deutsche Mittelstand Real Estate AG have been trading in the Prime Standard segment, which is the segment of the regulated market of the Deutsche Börse in Frankfurt with the strictest transparency requirements. As a result, the Company now meets even a higher degree of the transparency demanded by international investors and also fulfils a key prerequisite for acceptance into the DAX family of selection indices.
In early July 2016, Fair Value REIT-AG took out a mortgage loan from Volksbank Mittweida eG of EUR 4.0million with a ten-year fixed interest rate until August 1, 2026. The property in Neubrandenburg serves as collateral. The initial redemption rate was set at 5.63 % p.a. of the principal and the interest rate was fixed at 2.25 % plus interest saved. The processing costs, including the costs for calculating the mortgage lending value of the property, totalled 1.0 % of the principal.
According to the resolution of the Executive Board and the Supervisory Board of DEMIRE Deutsche Mittelstand Real Estate AG of August 11, 2016, the Company's share capital was increased by up to EUR 4,930,722.00 by issuing up to 4,930,722 new no-par value ordinary bearer shares (no-par value shares) with a notional interest in the share capital of EUR 1.00 per no-par value share at an issuance price of EUR 3.45 per new share through the partial use of the available authorised capital (Authorised Capital I/2016) against contribution in cash. Shareholder subscription rights were excluded. The new shares are entitled to dividends as of January 1, 2016 and were offered to selected institutional investors by way of a private placement. DEMIRE will use the proceeds generated from the cash capital increase to repay high interest financial liabilities in order to achieve its target to reduce its interest expenses in 2016 and finance property acquisitions as well as strengthen its financial position.
In the third quarter of 2016, prior to the publication of the half-year financial statements, a total of 4,500 convertible bonds was converted into no-par value shares of DEMIRE Deutsche Mittelstand Real Estate AG. As of August 31, 2016, this represented a notional interest in the share capital consisting of 54,242,444 no-par value shares of roughly 0.01 %.
Frankfurt am Main, September 6, 2016
DEMIRE Deutsche Mittelstand Real Estate AG
Speaker of the Executive Board (CEO)
Hon.-Prof. Andreas Steyer Dipl.-Kfm. (FH) Markus Drews Frank Schaich Member of the Executive Board (COO)
Member of the Executive Board (CFO)
This report was not subject to an audit pursuant to Sec. 317 HGB ["Handelsgesetzbuch": German Commercial Code] or a review by the auditor and therefore does not contain an audit opinion.
On April 29, 2016, the Company's Executive Board submitted its Statement on Corporate Governance pursuant to Section 289a HGB and also made this document generally and permanently accessible on its website www.demire.ag in the Company section under the heading Corporate Governance.
As the Executive Board of DEMIRE Deutsche Mittelstand Real Estate AG, we hereby confirm to the best of our knowledge, and in accordance with the applicable reporting principles, that the consolidated financial statements give a true and fair view of the net assets, financial position, and results of oprations of the Group, and furthermore that the Group management report includes a fair review of the development of the business including the results and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group.
Frankfurt am Main, September 6, 2016
Speaker of the Executive Board (CEO)
Hon.-Prof. Andreas Steyer Dipl.-Kfm. (FH) Markus Drews Frank Schaich Member of the Executive Board (COO)
Member of the Executive Board (CFO)
This half-year financial report contains forward-looking statements and information. Such forwardlooking statements are based on our current expectations and certain assumptions. They harbour a number of risks and uncertainties as a consequence. A large number of factors, many of which lie outside the scope of DEMIRE's influence, affect DEMIRE's business activities, success, its business strategy, and its results. These factors may result in a significant divergence in the actual results, success, and performance achieved by DEMIRE.
Should one or more of these risks or uncertainties materialise, or should the underlying assumptions prove incorrect, the actual results may significantly diverge both positively and negatively from those results that were stated in the forward-looking statements as expected, anticipated, intended, planned, believed, projected, or estimated results. DEMIRE accepts no obligation and does not intend to update these forward-looking statements or to correct them in the event of developments other than those expected.
Lyoner Straße 32 D-60528 Frankfurt/Main
T +49 (0)69 719 189 79-0 F +49 (0)69 719 189 79-11 [email protected] www.demire.ag
The Executive Board of DEMIRE Deutsche Mittelstand Real Estate AG
GFEI Aktiengesellschaft Status: September 2016
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