DEMIRE AG: First Positive Effects of DEMIRE 2.0 Strategy Felt during 2017 ...

• FFOI forecast achieved at EUR11.7 million (31/12/2016: EUR8.1 million)
• Net Loan-to-Value drops to 60.1% (31/12/2016: 62.8%)
• Diluted EPRA-NAVper share rises by EUR0.34 to EUR4.94 (31/12/2016: EUR4.60)
• EPRAvacancy rate declines by 220 bp to 9.4% (31/12/2016: 11.6%)
• Forecast for 2018: FFOI of c. EUR16-18 million, rental income EUR71-73 million
• Board publishes statement of position pursuant to Art. 27, Sec. 3, Securities Acquisition and Takeover Act, regarding takeover bid by AEPFIII15 S.à.r.l

Langen, 26. April 2018 - Today, DEMIREDeutsche Mittelstand Real Estate AG (ISIN: DE000A0XFSF0) published its annual report for the 2017 financial year. It shows that DEMIREachieved its primary objectives for the year as well as its forecast concerning the funds from operations (FFOI, after taxes and before minority interests) while also collecting the full amount predicted in terms of rental income. As of the balance sheet date, the FFOI totalled EUR11.7 million (31 December 2016: EUR8.1 million). The increase in FFOI year on year is specifically attributable to the improved current financial results and to a decrease in current income taxes. With a view to its robust performance, DEMIREhad already raised the FFOI year-end forecast for 2017 on the strength of its nine months' revenues from EUR8-10 million up to EUR11-12 million. The earnings before interest and tax (EBIT) increased by EUR1.5 million over prior year up to EUR84.7 million (2016 financial year: EUR83.2 million), more or less matching the prior-year level. With the one-year drop in proceeds from property sales taken into account, the funds from operations (FFOII) after taxes and before minority interests added up to EUR12.6 million (2016 financial year: EUR13.0 million), and equalled EUR6.5 million (2016 financial year: EUR7.5 million) after taxes and after minority interests.

Ralf Kind, CEO/CFO of DEMIREAG, commented: 'The concluded financial year confirmed that we are following a successful approach with the consistent implementation of our DEMIRE2.0 strategy. In addition to the further efforts to optimise our Group structure, we will focus specifically on the upcoming growth stages and thus on the expansion of our real estate portfolio. We are therefore pleased to have found another experienced strategic investor in Apollo who, together with our other anchor shareholder, Wecken & Cie, fully backs our DEMIRE2.0 strategy and moreover actively supports the planned growth of DEMIRE.'

Major Reduction of the Net Loan-to-Value ratio
The rent revenues of the DEMIREGroup totalled EUR73.7 million (2016: EUR76.4 million) and thus fall within the range of the raised forecast of c. EUR74 million that was made in November 2017. The decline over prior year is explained by the disposal of non-strategic properties, and it should be added that the drop in rent revenues caused by the sales was largely compensated through the successful elimination of vacancies. The profit for the period dropped to EUR19.4 million (31 December 2016: EUR27.6 million), which is essentially due to the one-off increase in financial results. Included in the sum are one-off expenses in the amount of c. EUR16.4 million, specifically pre-repayment penalties for the premature redemption of existing financing arrangements through the new 2017/2022 corporate bond. Compared to year-end 2016, the net loan-to-value ratio improved significantly by around 270 basis points to 60.1% (31 December 2016: 62.8%). The improvement of net loan-to-value ratio year on year is essentially explained by the appreciation of portfolio real estate and the increase in means of payment over prior year as of the balance sheet date.

As of 31 December 2017, the shareholders' equity of DEMIREhad increased by EUR10.5 million to EUR319.1 million (31 December 2016: EUR308.6 million). The basic EPRA-NAVper share rose to EUR5.96 (31 December 2016: EUR5.69) while the diluted EPRA-NAVper share climbed by EUR0.34 to EUR4.94 (31 December 2016: EUR4.60). This means that the diluted EPRA-NAVper share went up by 7.4% in spite of certain one-off expenses (especially for the refinancing arrangement).

Lower Refinancing Costs
In the course of 2017, the average nominal interest rate of the company's financial liabilities was reduced from 4.4% p.a. as of 31 December 2016 down to 3.0% at the end of the reporting period. The decrease is mainly due to the initial placement of an unsecured, rated corporate bond over EUR270 million in July 2017 and the successful increase of that same bond to a total of EUR400 million in September 2017 for refinancing purposes and the associated redemption of expensive financial liabilities. The reduced interest and redemption expenses will lead to a significant increase in the annual cash flow by a total of c. EUR18 million in 2018 and subsequent years. As of the balance sheet date of 31 December 2017, unsecured property assets accounted for around 45% of the DEMIREGroup's total portfolio.

EPRAVacancy Rate Declines
As of 31 December 2017, the book value of the proprietary portfolio equalled EUR1,034.1 million (31 December 2016: EUR1,005.6 million). At around 4.9 years, the weighted average lease expiry remains more or less as high as it was (31 December 2016: 5.3 years). The property portfolio achieved a net increase in value of EUR48.6 million (2016: EUR38.4 million) during the 2017 financial year. This translates into gross rental returns of 7.0% as of the balance sheet date for the proprietary portfolio and into a square-metre value of EUR1,067.

Owing to the robust letting performance in the course of the financial year-meaning as a result of new rentals and with sold properties taken into account-the EPRAvacancy rate of the proprietary portfolio dropped by a total of 220 basis points to 9.4% at the end of the financial year (31 December 2016: 11.6%). The annualised rental income of the proprietary portfolio, adjusted by acquisitions and disposals (like-for-like approach), rose by 2.6% during the 2017 financial year.

Forecast for 2018 by the Executive Board
During the 2018 financial year, DEMIREplans to generate rental income of around EUR71-73 million from the real estate it held in its portfolio by 31 December 2017 (after the disposal of properties already sold and taking into account planned sales). Considering both the anticipated rental income and the positive effects of the first DEMIRE2.0 strategy milestones that were implemented during the 2017 financial year, DEMIREexpects to see a substantially increased FFOI result of EUR16-18 million in 2018. Particularly the significant reduction in current interest expenses and the successful tax optimisation within the Group structure by the end of 2017 will cause the FFOI (after taxes, before minority interests) to go up as expected.

DEMIREPublishes Statement of Position Regarding Takeover Bid by AEPFIII15 S.à.r.l
In accordance with Art. 27, para. 3 of the German Act on Securities Acquisition and Takeovers (WpÜG), the Executive Board and the Supervisory Board of DEMIREDeutsche Mittelstand Real Estate AG published their joint statement of position today concerning the mandatory offer (cash offer) submitted by AEPFIII15 S.à.r.l.

Considering the comments in the statement and taking into account the overall circumstances of the offer, the Executive Board and the Supervisory Board believe that the cash consideration offered by the bidder in the amount of EUR4.35 per share in cash to be fair within the meaning of Section 31 para. 1 of the German Securities Acquisition and Takeover Act (WpÜG). Both the Executive Board and the Supervisory Board are of the opinion that the offer reflects the company's interests. The Executive Board and the Supervisory Board therefore support the offer and recommend that the shareholders of the target company accept the offer.

For the full-length statement by the Executive Board and the Supervisory Board of DEMIREDeutsche Mittelstand Real Estate AG, please click the link below to go to the company homepage: https://www.demire.ag/en/investor-relations/takeover-offer-by-aepf-iii-15-s-r-l

DEMIRE2.0 - Strategy for the Company's Next Growth Phase
The 'DEMIRE 2.0' strategy signifies the Company's next growth phase. The implementation of an integrated action plan-which, among other things, seeks to reduce the financing costs, optimise costs and to streamline the Group structure-is a cornerstone of the plan to expand the current portfolio to a volume of EUR2 billion. The business model's focus remains on the acquisition of commercial property in German secondary locations. The cost base will continue to be optimised under this programme through permanent improvements in efficiency and economies of scale in real estate management resulting from the Company's growth. Further optimisation of the financing mix and, specifically, continuous examination of potential refinancing options in the debt and equity markets is expected to bring down the average interest costs and to lower the loan-to-value ratio down to around 50% in the medium term. In addition to increasing its market capitalisation, DEMIREalso aims to position its risk profile in the 'investment grade' category to secure sustainable long-term financing on favourable terms with a view to future growth. DEMIRE's anchor shareholders back the DEMIRE2.0 strategy and intend moreover to support the growth of DEMIRE.

To download the 2017 Annual Report, use the following link to the homepage of DEMIRE: https://www.demire.ag/en/investor-relations/reports-results/2017