DEMIRE ratings affirmed as Fitch flags refinancing pressure on 2027 bond

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DEMIRE ratings and bond pressure

Highlights

Fitch affirms DEMIRE's Long-Term Issuer Default Rating at 'CCC+' and senior secured bond at 'B', citing weak operating profile and mounting refinancing pressure.
DEMIRE's portfolio value drops to EUR0.7 billion in 2025 from EUR0.8 billion in 2024, with disposals at a weighted average discount of 29% and 21% vacancy projected in early 2026.
Apollo and the Wecken family will sell their 90% equity stake as EUR247 million secured bond maturity nears in December 2027, intensifying strategic pressure amid high leverage at 18.0x–19.5x net debt/EBITDA.

Rating action and portfolio pressures

As reported by Fitch Ratings, DEMIRE Deutsche Mittelstand Real Estate AG's Long-Term Issuer Default Rating is affirmed at 'CCC+' and its senior secured bond at 'B' with a Recovery Rating of 'RR2'. Fitch says the ratings reflect a weak operating profile, declining letting momentum, high vacancy across the portfolio and limited deleveraging prospects as asset sales slow and refinancing pressure rises.

DEMIRE's German portfolio of secondary assets falls to 43 properties at end-2025 from 51 a year earlier, with the portfolio valued at EUR0.7 billion versus EUR0.8 billion in 2024. Fitch says the reduction is driven by asset disposals and a 30% peak-to-trough devaluation, while the geographically scattered nature of the assets makes management less efficient even though diversification by region and use provides some resilience.

By value, the portfolio is made up of 61.7% office assets, 30.6% retail and 7.7% hotel and other properties. Vacancy stands at 21% in the first quarter of 2026, average rents are about EUR10 per square metre per month and the weighted average unexpired lease term is 5.2 years, although Fitch says that would fall to 4.8 years if the sale of the long-leased Frankfurt hotel now held for sale is completed.

Fitch says operational challenges are most visible in the office segment, where vacancy reaches 27% and reletting times are lengthening as Germany's economic weakness weighs on demand. The agency says competing local space is pushing rents lower in many markets, contributing to negative like-for-like rental growth of 2.8% in 2025, and it expects rents to decline again in 2026 as tenant departures in the first quarter are unlikely to be offset.

Bond maturity shapes sale process

DEMIRE's shareholders, Apollo and the Wecken family, announce on 8 June that they will begin a structured process to sell their combined 90% equity stakes. Fitch says any bidder will need a strategy for the EUR247 million secured bond because it contains a change-of-control put and is scheduled to mature in December 2027.

The rating agency says the equity value is affected by the approaching bond maturity, the possibility of a negotiated part-repayment and voluntary extension, and the treatment of the shareholder loan due in December 2028. Fitch also says that if no attractive bid emerges, DEMIRE may instead pursue a forced monetisation of the portfolio.

Fitch says debt reduction still depends on asset sales, but the pool of smaller properties in assets held for sale and completed disposals points to weak investor appetite for assets valued below EUR20 million, which account for 42% of the portfolio. More meaningful disposals could come from the group's 10 largest assets, representing 58% of market value, but Fitch says that would likely remove higher-quality properties and cut rental income more materially.

Disposals in 2025 are led by the sale of a fully let Freiburg office for EUR24.8 million, 26% below its 2024 book value. DEMIRE reports EUR64 million of headline disposals in 2025, down from EUR124 million in 2024, but Fitch says that excluding transactions signed and reported in 2024 and 2026 leaves only EUR33.8 million for 2025, with a weighted average discount of 29% on disposals signed during the year.

Leasing conditions also weaken sharply, with DEMIRE's leasing volume dropping to 2,700 square metres in the first quarter of 2026 from 25,000 square metres a year earlier. Fitch says the delayed recovery of the German economy now looks more likely in 2027 than in 2026, while DEMIRE's reported leasing volume of 128,000 square metres in 2025 is dominated by renewals and boosted by the conversion of a 56,000 square metre master lease into direct leases.

Fitch forecasts net debt to EBITDA leverage at 18.0x to 19.5x in 2026 and 2027, even though it falls to 13.4x in 2025. The agency expects EBITDA interest cover to remain around 1x in 2026 and at 0.8x in 2027 excluding the bond's penalty interest, while Fitch-calculated loan-to-value stands at 48% at end-2025.

Our earlier article covered KBRA’s surveillance review affirming Peapack-Gladstone Financial Corporation’s existing credit ratings, including its senior unsecured, subordinated, and short-term debt ratings. We also noted that the Stable Outlook across long-term ratings signals no change in the agency’s credit view, offering a reference point for investors and counterparties when assessing funding conditions and perception within the regional banking sector.

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