Listed German commercial property investor DEMIRE looks like it's going to be the next listed company to be swallowed up by private equity, after the recent majority acquisition of Alstria Office REIT-AG by Brookfield Group.
DEMIRE has always had a very small free float, with majority shareholders the US investment group Apollo and Wecken & Cie. controlling 91% of the €1.6bn company.
Both shareholders, Apollo with 58.6% and Wecken with 32.1%, have consistently made heavy demands on DEMIRE's profits, last year sucking up all the profit of €65m as dividends, and the same the year before - a total of €123m.
After sales and disposals, the company booked an operating cash flow (FFO1) from rental income in 2020 of about €40m. DEMIRE's assets under management are largely office properties with a small mixture of retail, hotel and logistics properties added in. It specialises in secondary German towns and cities.
As of 30th September 2021, DEMIRE's portfolio contains 67 assets with lettable space totalling about 1 million sqm. including the recently acquired Cielo property in Frankfurt/Main - the company's largest-ever acquisition (reported on here in REFIRE) - with a total market value exceeding €1.6 billion. After a spate of disposals of management-intensive units or those with little further value-added possibilities, the company's average WALT was 4.8 years, and its vacancy rate was 10.2%.
The two major shareholders have already initiated a structured selling process, and have said that they do not plan a public listing of their holdings, preferring to sell their entire shareholding to another investor, "capable of supporting DEMIRE in the next growth and value creation phase". The top management at DEMIRE said they supported the decision of the major shareholders.
DEMIRE has spent the last few years, since the arrival of CEO Ingo Hartlief, in basically institutionalising its platform for, largely, an exit such as that being currently envisaged by Apollo and Wecken. Hartlief said of the proposed change of status, "Today, the portfolio structure is well balanced and delivers sustainably strong results, and we have also proven the resilience of our business model during Corona's constraints."
Presenting figures for the first three quarters of 2021 recently, Hartlief said: "The strong letting performance and the optimisation of our portfolio in 2021 prove that we are well positioned with our clear focus on ABBA locations. Combined with our proven "REALize Potential" strategy and active asset management approach, we are creating a stable portfolio, which is a key asset especially in uncertain times like these."
CFO Tim Brückner, who previously worked alongside Hartlief at Corpus Sireo, said: "Apollo and Wecken & Cie. have also always constructively supported DEMIRE in the further development of the corporate organisation and the optimisation of the financing structure, enabling us to continuously improve key figures and results and reduce complexity. All shareholders and all stakeholders have benefited from this. DEMIRE is well prepared for further growth today."
Alternative asset manager Apollo had $480 billion of AUM worldwide at end-September, while the Basel-based family office Wecken & Cie. has diversified interests mainly in the fields of Proptech, MedTech, software and real estate.
