Deutsche Konsum REIT sells partial portfolio with significant profit / Stable business development in the past financial year 2020/2021 and positive outlook

Press release

Deutsche Konsum REIT sells partial portfolio with significant profit / Stable business development in the past financial year 2020/2021 and positive outlook

Broderstorf, 30 September 2021 - Yesterday, Deutsche Konsum REIT-AG ("DKR") (ISIN DE000A14KRD3) notarised the sale of a partial portfolio comprising seven retail properties for the first time.

Disposals lead to extra dividend of approximately 25 euro cents per share

The sub-portfolio comprises a rental area of approximately 28,000 sqm at the locations Bad Harzburg, Verden, Bergen and Krempe as well as Niesky (Rothenburger Straße), Krakow am See and Altentreptow (Fritz-Reuter-Straße). The properties currently generate an annual rent of EUR 2.6 million with a remaining lease term of approximately nine years and a vacancy rate of 1%. The purchase price of EUR 47.2 million is therefore 18 times the annual rent. The transfer of benefits and encumbrances of all properties is expected by January 2022. The buyer is a German institutional fund.

DKR had acquired the properties individually over the years 2015 to 2019 with an average initial yield of 11% and remaining lease term of 4.5 years on average. The vacancy rate was around 3% at the time of acquisition. During the holding period, the properties generated rental income of around EUR 14.4 million. At the same time, DKR reduced vacancies and significantly extended all major leases.

For this reason, the Management Board, after thorough consultation and with the approval of the Supervisory Board, has decided to sell the properties, which are in good condition, at attractive terms in order to realise the hidden reserves of this sub-portfolio. Half of the capital gain realised in the financial year 2021/2022 is to be used to purchase new food-anchored retail properties. The other half is, subject to shareholder approval at the upcoming Annual General Meeting, to be distributed as an additional dividend for the 2021/2022 financial year. Based on the current number of shares, the increase in the dividend from this half of the capital gain alone is expected to be around 25 euro cents per share.

Furthermore, DKR is currently examining further opportunistic individual sales that could be made insofar as these are value-enhancing to the DKR shareholders.

Acquisition pipeline broadly filled

At the same time, DKR currently has a broadly filled acquisition pipeline with food-anchored local retail properties in established micro-locations that meet the investment criteria and which are to be notarised step by step in the coming months. After a delay in the acquisition process due to the pandemic and a period of less transaction during the summertime in the past financial year, the investment market for commercial real estate has now largely recovered. DKR has approximately EUR 120 million plus the net inflows from the property disposals, available for further acquisitions.

At the same time, the Company is also examining further measures that could further increase shareholder value per share.

Rolf Elgeti, CEO of the Company, comments: "These sales underline that price and capital discipline are very important to the Company in all directions. This applies to purchases but also to possible sales. Moderate and opportunistic recycling of capital can lead to high increases in shareholder value and will therefore be pursued by us where it seems sensible. The question of whether the current share price adequately reflects the value of the Company may also be discussed in this context. We are continuously reviewing potentially useful measures in this regard."

Stable business development in the past financial year 2020/2021 despite pandemic

Despite difficult pandemic conditions, DKR closed the 2020/2021 financial year with a very robust and stable operating performance. The level of incoming rent was continuously high and had only reached a low level of 92% in January 2021, whereby DKR's defensive strategic orientation towards tenants with strong credit ratings from the food retail and daily needs sectors once again proved its worth.

Furthermore, despite the pandemic-related restrictions and delays, DKR was able to realise the purchase of 13 food-anchored properties with an investment volume of more than EUR 120 million and an annualised rent of approximately EUR 11 million, resulting in a purchase yield of 9.1%.

In addition, DKR successfully completed the revitalisation projects in Rostock, Drebkau and Hohenmölsen in the past financial year. At all locations, new and long-term leases were concluded with well-known food retailers before the start of the revitalisation measures and vacancies were successively reduced, which means that the properties will contribute significantly to the increase in rental income from the upcoming financial year. DKR will undertake similar projects in the upcoming financial year.

Optimisation of the debt structure planned

On the debt side, DKR is currently working on refinancing or prolonging expiring financing instruments of around EUR 100 million at significantly lower interest rates. This is expected to result in optimisation potential of up to EUR 1 million per annum, which will directly increase funds from operations ("FFO"). Moreover, the current low interest rate level is to be secured in the long term through extensive fixed interest rate agreements.

Positive outlook for the 2021/2022 financial year

In view of the robust and successful development in the past financial year and the fact that the local shopping centre sector is becoming interesting for broader investor groups, the Management Board believes that DKR is ideally placed in a very attractive niche characterised by non-cyclical, robust and inflation-proof rental income.

In addition, the Management Board expects a continuous normalisation of the pandemic situation in the new financial year and anticipates property acquisitions of between EUR 100 million and EUR 150 million in the upcoming financial year. Furthermore, the planned refinancing of debt capital and a gradual reduction in vacancies in the revitalisation properties will have a positive impact on FFO.

The results of the past financial year 2020/2021 as well as the audited annual financial statements and earnings forecast will be published on 16 December 2021.

About Deutsche Konsum

Deutsche Konsum REIT-AG, headquartered in Broderstorf, is a listed real estate company focusing on retail properties in Germany for goods required for daily use in well-established micro-locations. The focus of the Company's activities is on the acquisition, management and development of convenience retail properties with the aim of achieving a steady increase in value and the realisation of hidden reserves.

Due to its German REIT status ('Real Estate Investment Trust'), the Company is exempt from German corporation and trade tax. The shares of the Company are listed on the Prime Standard of the Deutsche Boerse (ISIN: DE 000A14KRD3) and on the JSE (JSE Limited) (South Africa) by way of a secondary listing. Further information on the Company can be found at https://www.deutsche-konsum.de/en/. You can find image material for download at https://www.deutsche-konsum.de/en/press-downloads/downloads.

Contact:
Deutsche Konsum REIT-AG
Stefanie Frey
Investor Relations
E-Mail: sf@deutsche-konsum.de
Phone: +49 (0) 331 74 00 76 - 533