German Landlord Gears Up For Debt Talks With Creditors

Demire Deutsche Mittelstand Real Estate AG and its creditors are gearing up for debt refinancing talks as the Apollo-backed landlord faces a looming bond maturity amid an industry downturn.

(Bloomberg) — Demire Deutsche Mittelstand Real Estate AG and its creditors are gearing up for debt refinancing talks as the Apollo-backed landlord faces a looming bond maturity amid an industry downturn.

Demire has hired Rothschild & Co. to advise on its refinancing, according to people familiar with the matter who asked not to be named because the information is private. Bondholders have also been hearing pitches from potential advisors, said some of the people.

Rothschild declined to comment. Representatives for Demire and Apollo didn’t respond to requests for comment.

Demire, which focuses on commercial real estate in mid-sized German cities, needs to refinance about €500 million ($526 million) of outstanding notes maturing in October 2024. The company has been suffering amid an industry-wide slump, and an asset sale falling through earlier this year has added to the pressure.

In July, the €121 million sale of a logistics property fell through after the buyer pulled out, prompting warnings from ratings agencies who had seen the transaction as key to Demire’s refinancing plans. The company has since said that there is strong buyer interest in the asset and it plans to complete a deal this year.

The challenges facing Demire are a reflection of the broader real estate sector in Europe as companies that grew rapidly during an era of cheap financing adapt to higher-for-longer interest rates. Commercial property markets have seized up as buyers and sellers struggle to agree on pricing, with higher rates prompting real estate investors to demand higher yields, pressuring valuations.

Demire has also explored other ways of reducing its debt burden. In April, it reduced the outstanding amount of notes due in 2024 by buying back €51 million bonds in the secondary market at a discount.

Apollo owns around 59% of Demire’s shares, while around 32% is held by investor Wecken Group, according to Demire’s first-half report.

–With assistance from Giulia Morpurgo.

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