DEMIRE Deutsche Mittelstand Real Estate AG: Public Takeover Offer for All Shares of Fair Value REIT-AG

DEMIRE Deutsche Mittelstand Real Estate AG / Key word(s): Offer/Merger

2015-07-31 / 09:15

DEMIRE Deutsche Mittelstand Real Estate AG: Public Takeover Offer for All Shares of Fair Value REIT-AG

- Takeover in the form of an exchange offer: Two DEMIRE shares for one Fair Value share

- Offer currently corresponds to a price of EUR 10.02 per Fair Value share based on the XETRA closing price of DEMIRE's shares on 30 July 2015

- Offer includes a premium of 11.00 % based on the relationship of the values of both companies based on the further refined EPRA NAV (adjusted, diluted) per share (status: 27 July 2015)

- With a successful takeover, portfolio of commercial real estate to grow to a market value of roughly EUR 1 billion

- Significant synergies and efficiency gains expected

- Targeted LTV of 50-60 % for the combined company

- Intended change to Prime Standard segment

- Fair Value's major shareholders undertake to accept Takeover Offer

Frankfurt/Main, 31 July 2015 - Today, the Executive Board and the Supervisory Board of DEMIRE Deutsche Mittelstand Real Estate AG ("DEMIRE", ISIN DE000A0XFSF0) decided to submit a voluntary public takeover offer pursuant to the German Securities Trading Act (WpHG) for all shares of Fair Value REIT-AG ("Fair Value") (ISIN DE000A0MW975). In the event of the successful completion of the Takeover Offer, a stock-market listed specialist for commercial real estate in secondary locations will be formed and will possess a portfolio valued at around EUR 1 billion with annual net rent of EUR 77.5 million.

The takeover shall be executed as an exchange offer. Subject to the final determination in the offer document, DEMIRE will offer the Fair Value shareholders two new no-par value bearer shares of DEMIRE, with a notional interest in DEMIRE's share capital of EUR 1.00 each for one Fair Value share. This represents an exchange ratio of 1:2. The new shares, to be created from a capital increase in kind that must still be resolved by the Extraordinary General Meeting of DEMIRE to be convened on short notice, will be entitled to dividends as of 1 January 2015. The offer includes a premium of 11.00 % based on the relationship of the values of both companies based on the further refined EPRA NAV (adjusted, diluted) per share (status: 27 July 2015). In the opinion of the Executive Board, this value is primarily relevant for the valuation of real estate companies.

Major shareholders of Fair Value, who hold a total of 23.21% of the share capital, support DEMIRE's offer and have irrevocably committed to accept the Takeover Offer. These shareholders include, inter alia, Obotritia Capital KGaA, whose personally liable partner is Mr. Rolf Elgeti, Chairman of the Supervisory Board of Fair Value, who holds the shares indirectly through subsidiaries. Furthermore, today, DEMIRE and Fair Value entered into a so-called business combination agreement in which the two companies have established their current understanding with regard to the implementation of the Takeover Offer and the general support of the Fair Value Management Board.

The transaction, which in its technical implementation takes into account the requirements of the REIT Act, is due to be completed by the end of 2015, subject to a minimum acceptance rate of 50.1% of the voting rights and further customary market terms and conditions. The final terms and conditions and the other provisions of the public Takeover Offer will be contained in the offer document after publication approval is given by the Federal Financial Supervisory Authority.

The shareholders of both Fair Value as well as those of DEMIRE can profit considerably from the takeover. The expanded real estate group, with around 175 commercial properties in the office, logistics and retail asset classes and more than 1.1 million m² of space (more than 810,000 m² from DEMIRE and approximately 275,000 m² from Fair Value) will have significantly more clout on the market and considerable economies of scale. The portfolio with a market value totalling roughly EUR 1 billion will generate annual net rent of over EUR 77.5 million.

The combination of these two companies creates a homogeneous portfolio, which can be managed more efficiently. The diversified overall portfolio in fast-growing secondary locations will also be expanded in the future in order to sustainably strengthen the position obtained as an established holder of commercial real estate and to be able to realise further economies of scale. At the forefront of this will be the acquisition of properties with tenants with good credit, increasing equity of the Group and the generation of sustainable and clearly positive cash flows. A further common mid-term target is the payment of a dividend.

DEMIRE expects that the future size of the Company following the takeover will lead to cost advantages due to the increased visibility inter alia in the capital markets. With the intended change to the Prime Standard segment, this increased transparency will provide better access to the capital markets. Also expected are around EUR 2 million p.a. from synergies and economies of scale in the administration and management of the portfolio by DEMIRE's in-house asset, property and facility management and general and administrative expenses. Future costs savings can also be realised in the area of financing.

"Fair Value's diversified portfolio with a current valuation approach of around 12 times net rent, blends in exceptionally well with DEMIRE's portfolio. The portfolio includes tenants with good credit, has a positive cash flow and offers development potential. Furthermore it is financed with interest rates of an average of 2.7% and an LTV of approx. 50%. Currently, the intrinsic value of Fair Value is in our view not fully reflected in the stock price. DEMIRE and Fair Value also follow the same objectives in terms of strategic positioning. Both companies have lean administration and a strict cost discipline as well as excellent acquisition channels. Whereas DEMIRE's core capabilities lie in the acquisition of properties in "distressed situations", Fair Value has extensive know-how in the value-creating acquisition and management of closed-end fund structures. The average interest obligations beyond all liabilities will decline from the current 4.7% to initially around 4.2%. For the combined platform, we see excellent conditions to gradually steer the LTV ratio to the desired range of 50% to 60% and to considerably reduce the interest burden on our financial debt. Together with the synergies and economies of scale of the joint organisation that covers the entire value chain of real estate management, these measures will contribute to a sustainable improvement in the consolidated profits", explains Markus Drews, member of the Executive Board of DEMIRE.

The Executive Board

About DEMIRE Deutsche Mittelstand Real Estate AG

Leading holder of commercial real estate

DEMIRE Deutsche Mittelstand Real Estate AG is transforming itself into a leading holder of German commercial real estate. The core business activities of the Frankfurt/Main- headquartered real estate group consist of the acquisition, the management and the rental of commercial real estate and their further development, for example, through modification, modernisation or expansion, and increasing their value through their active portfolio management.

As of the end of July 2015, the commercial property portfolio consisted of more than 810,000 m2 of rentable space that mainly comprised office, logistics and retail properties. Annualised net rent excluding utilities amounts to approximately EUR 52.2 million. The portfolio's regional focus lies in Bavaria, North Rhine-Westphalia, Baden-Württemberg, Saxony, Hamburg and Bremen as well as in the Rhein-Main and Rhein-Neckar areas. The in-house asset, property and facility management ensures the optimum management and development of the holdings

The DEMIRE real estate group pursues a buy-and-hold-strategy combined with active portfolio management. It is concentrated on both the value-added and core-plus investment approaches. The combination of these two approaches offers a balanced risk-return ratio and attractive opportunities.

The real estate group's lean structure allows it to take action quickly and flexibly. The shares of DEMIRE Deutsche Mittelstand Real Estate AG (ISIN DE000A0XFSF0) are listed in the regulated market (General Standard Segment) of the Frankfurt Stock Exchange.


DEMIRE Deutsche Mittelstand Real Estate AG
Lyoner Straße 32
60528 Frankfurt/Main
Phone: +49 (0) 69-719 189 79 0
Fax: +49 (0) 69-719 189 79 11

Investor Relations
GFEI Aktiengesellschaft
Lars Kuhnke
Phone: +49 (0) 511 47 40 23 10

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