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DEMIRE Deutsche Mittelstand Real Estate AG successfully taps its corporate bond issued in July 2017 for EUR 130 million for refinancing and general corporate purposes

• Strong demand from institutional investors - successful placement at an issue price of 101.25 percent above par value
   
• S&P and Moody's bond ratings of BB+/Ba2 and corporate ratings of BB/Ba2 unchanged
   
• Net proceeds to be used in the fourth quarter of 2017 for the early refinancing of the outstanding A/B- notes and general corporate purposes, including the financing of future acquisitions
   
• DEMIRE 2.0 further optimises the financial structure:

- Continued improvement of average annual financing costs: through the repayment of several old liabilities using the proceeds from the initial placement in July 2017 and by tapping the bond, the average annual financing costs are expected to decrease from 4.1% p.a. to 3.0% p.a. (on a pro forma basis)

- Reduced interest expenses and redemption payments to lead to a significant increase in annual cash flow as of 2018 in an amount totalling c. EUR 18 million, of which c. EUR 9 million alone is due to the tap placement and planned early redemption of the A/B- notes

- Increase in the funds from operations (FFO I, before taxes, before minorities) totalling c. EUR 6.6 million p.a. expected as of 2018, of which c. EUR 1 million will result from the early refinancing of the A/B- notes

- Further increase in the share of unencumbered assets to c. 41% of current real estate assets
 

Langen, 18 September 2017 - DEMIRE Deutsche Mittelstand Real Estate AG (WKN A0XFSF / ISIN DE000A0XFSF0) today successfully placed an additional EUR 130 million of its rated, unsecured corporate bond (Senior Notes), originally issued in July 2017 with an interest rate of 2.875% p.a. and a term until 2022, at an issue price of 101.25%.

The tapped corporate bond was issued under New York law (Rule 144A/Reg S) and admitted to trading on the Luxembourg Stock Exchange (Euro MTF Market). The net proceeds from the issue will be used to refinance outstanding liabilities (including prepayment penalties and other transaction costs) of Germavest S.à.r.l., an indirect subsidiary of DEMIRE Deutsche Mittelstand Real Estate AG, in the amount of c. EUR 94 million at a current average interest rate of c. 4.4% p.a., and for general corporate purposes, including the financing of future acquisitions.

The internationally recognised rating agencies Standard & Poor's and Moody's have confirmed their current ratings of BB+ and Ba2, respectively, for the corporate bond. The rating from Standard & Poor's is thereby unchanged at one level below an investment grade rating. The two rating agencies' company ratings for DEMIRE also remain unchanged at BB and Ba2, respectively, both with a stable outlook. Deutsche Bank and Morgan Stanley are acting as joint global coordinators in the transaction.

The detailed ratings and an update on the tapping of the bond are available on the Standard & Poor's website at www.standardandpoors.com, on the Moody's website at www.moodys.com and on DEMIRE's website at www.demire.ag/en/investor-relations/bonds/rating.

DEMIRE 2.0 further optimises the financial structure

With the successful tapping of the corporate bond, DEMIRE has further optimised its financial structure on a sustainable basis in a short period of time under its strategic DEMIRE 2.0 programme. DEMIRE will use the net proceeds from both the corporate bond issue in July 2017 and the recent tapping of the bond to reduce expensive liabilities until the year's end. After one-time refinancing and transactions costs in the second half of 2017, particularly as a result of paying diverse prepayment penalties, DEMIRE expects an increase in annual cash flows of c. EUR 18 million p.a. due to ongoing lower interest expenses and a significant drop in redemption payments starting in the year 2018. EUR 9 million of this amount will come from the planned repayment of the A/B- notes in the fourth quarter of 2017. In addition, through the repayment of liabilities secured by land charges, c. EUR 400 million in real estate assets will be unencumbered and free, corresponding to c. 41% of the DEMIRE Group's current total real estate assets.
 

With the completion of the planned refinancing of existing liabilities by the end of the year, the average annual financing costs will decrease from 4.1% p.a. as of the 30 June 2017 reporting date to 3.0% p.a. on a pro forma basis. The interest expenses saved will result in a significant annual increase in FFO I (before taxes, before minorities) of approximately EUR 6.6 million as of the year 2018.
 

Ralf Kind, CFO of the DEMIRE Group, comments: "By recently tapping our corporate bond, which was successfully placed on the international capital market in July 2017, we have reached a key milestone on the road to increasing the profitability of the DEMIRE Group. We are repaying all of our expensive and complex financing of the past and, at the same time, achieving a significant increase in our FFO and cash flows starting in 2018 as a result of considerably lower interest rates and savings on repayments."
 

Markus Drews, CEO of the DEMIRE Group, adds: "Our strategic DEMIRE 2.0 programme continues to yield positive results. We are continuing to implement our plans in a sustainable manner with the aim of further increasing the appeal and stability of our business model. By successively optimising and expanding our real estate platform in Germany's secondary locations, we are increasingly enhancing the appeal and awareness of our shares."

Disclaimer

This document and the information contained herein are for information purposes only and do not constitute a prospectus or an offer to sell, or a solicitation of an offer to buy, any securities in the United States. Any securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States absent registration or pursuant to an available exemption from registration under the Securities Act.

This document does not constitute an offer document or an offer of securities to the public in the U.K. to which section 85 of the Financial Services and Markets Act 2000 of the U.K. applies and should not be considered as a recommendation that any person should subscribe for or purchase any securities as part of the Offer. This document is being communicated only to (i) persons who are outside the U.K.; (ii) persons who have professional experience in matters relating to investments falling within article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (the "Order") or (iii) high net worth companies, unincorporated associations and other bodies who fall within article 49(2)(a) to (d) of the Order (all such persons together being referred to as "Relevant Persons"). Any person who is not a Relevant Person must not act or rely on this communication or any of its contents. Any investment or investment activity to which this communication relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. This document should not be published, reproduced, distributed or otherwise made available, in whole or in part, to any other person without the prior consent of the Company.

This document contains forward-looking statements. These statements are based on the current views, expectations, assumptions and information of the management of the Company. Forward-looking statements should not be construed as a promise of future results and developments and involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those described in such statements due to, among other things, changes in the general economic and competitive environment, risks associated with capital markets, currency exchange rate fluctuations, changes in international and national laws and regulations, in particular with respect to tax laws and regulations, affecting the Company, and other factors. The Company does not assume any obligations to update any forward-looking statements.

Contact

DEMIRE Deutsche Mittelstand Real Estate AG
Robert-Bosch-Straße 11
D-63225 Langen
Phone: +49 (0) 6103 - 372 49 - 0
Fax: +49 (0) 6103 - 372 49 - 11
ir@demire.ag
www.demire.ag

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About DEMIRE Deutsche Mittelstand Real Estate AG

DEMIRE - First in secondary locations

DEMIRE Deutsche Mittelstand Real Estate AG has commercial real estate holdings in mid-sized cities and up-and-coming areas bordering metropolitan areas across Germany. As of 30 June 2017, DEMIRE held real estate with a market value of roughly EUR 1 billion. As of the reporting date, annualised contractual rents of approximately EUR 72 million had been firmly agreed upon for an average term of 4.9 years.

DEMIRE aims to maintain its corporate organisation as lean as possible, although it still believes that economies of scale and portfolio optimisation are best achieved by having its own in-house asset, property and facility management. This safeguards the Company's business expertise and, equally important, allows the Company to maintain direct contact with the customer.

DEMIRE Deutsche Mittelstand Real Estate AG shares (ISIN: DE000A0XFSF0) are listed in the Prime Standard segment of the Deutsche Börse in Frankfurt.