Hi, good morning. This is Remon Vos speaking from, looks like Bucharest is not really Bucharest. It's in Prague. While we are sending this, we will be in Bucharest, in Romania. Great business opportunities. And also 2023 has been excellent for CTP. And we are sharing today with you the financial results. During the year of 2023 we've delivered strong performance, and our Park maker model continues to be successful, helping us to grow with our tenants throughout the CT Park network, with more than two-thirds of all our leases signed with existing clients, our tenants with whom we have been working together for many, many years. They are happy, and this is confirmed by the fact that we do 90% retention rate. In numbers, 2 million square meters in 2023, which is compared to the previous year of 2022, 5% increase.
More importantly, we have also been able to increase the rent per square meter per month up to EUR 5.69 per square meter, and that is up 18% compared to the previous year. Now, CTP are market leaders in most of the countries where we operate. Long-term commitment, with people on the ground. We have people in all of the CT Park developments on. CTP staff, colleagues, and the fact that they are on-site and talking to the tenants on a daily basis helps us a lot to understand what is happening in the market. We've seen continued strong demand from our clients involved, especially in the region of Central Europe, and that in numbers accounts for approximately 27% of all the deals done. And we do expect this to continue, and that companies involved in manufacturing will ask for more space. For many reasons.
Obviously, nearshoring is an important argument for our clients to grow their business in Europe, for Europe. But also we see different growth drivers in the industry, which actually demands more space. We have seen strong demand from our Asian clients, which we have been working with Asian companies for the past 20 years, but now it represents approximately 10% of all business we do. Of course, there is continued demand as well from the 3PLs. Besides the companies involved in manufacturing, we have a lot of our tenants involved in logistics. And the 3PLs and retailers, they continue to ask for more space. As the CEE region remains undersupplied by A-class space per GLA per capita, if you compare that to Western European markets. So they're still catching up to do.
The more people make in those countries, Central European, the more they spend for that you need, consumer spending in different warehouses and, different property. Also the fact that infrastructure projects have developed so well in Central Europe with new road networks and better airports and other infrastructure that also supports very much the growth of Central Europe. We call Central Europe the engine of Europe. And so we have made some good progress on our leasing activity, in particular in Poland, where we leased more than 300,000 square meters in 2023. So far also in Poland, again, I just got off a call with the colleagues that the first quarter so far, 2024, also showed a lot of take-up, and our Polish colleagues have been able to sign leases and also have been able to negotiate term sheets with various clients.
Often, by the way, again, long-term CTP clients who are happy that CTP is now active in Poland as well, and we can offer the services which we have been offering for all those years in other Central European countries. Germany, I'm actually on my way to meet the colleagues in Düsseldorf. I have a full day meetings tomorrow with all kind of project reviews. We have been able to increase rents where leases expired. We have been able to renegotiate, and that resulted in the total rent roll in the country to increase significantly and substantially from EUR 60 million per year of rental income at the time of the DIR acquisition to EUR 70 million already last year, which is almost 20% increase. We foresee more rental growth opportunities in Germany when it comes to the portfolio which we have acquired in the past.
In the meantime, in Germany, we have been able to start with our own developments, which will be delivered in 2024 and onwards, also start some projects this year, which will only come to the market in 2025, using the land we bought with the DIR portfolio, but also we've been able to buy more land in Germany. It's quite a good time to buy land in Germany at this moment. Now, a short update on our three business lines. You remember, operator. This is part of our company who look after the existing buildings. It's approximately 11.8 million square meters of total GLA. We have a wide and diversified mix of clients involved in manufacturing, in R&D, in logistics, etc., etc., with together more than 1,000 blue chip tenants from a broad range of industries, as I mentioned.
Tenants, important thing about tenants is that they're happy, that they can do their business, focus on their core business while we'll do the property, and always is related to the property in our parks, create an ecosystem so they can grow their businesses. That's important. Important is that the clients come back and they stay. It's also important that clients pay, and they do pay on time. Rent collection stands at 99.9% with occupancy at 94%, which is an increase compared to the first half of 2023. Developer. Looking at the overall market, supply is now decreasing due to the higher interest rate. But this is good for CTP because it brings opportunities. If others are not building, we can, we see that window and we continue to build using our land, start to build, not complete.
So we see growth opportunities there. In 2023, we delivered a record of 1.2 million square meters of space, which were around 80%-90%, 86% to be precise, pre-letting at handover, and then we continue to lease in order to hit our 90%-95% occupancy target. Yield on cost for these completions was that, a market-leading 10.8%, adding EUR 90 million of annual rent, when this is fully let. Large deliveries. Some examples. One is the 84,000 square meters at the CTPark Belgrade City, right in the city center of Belgrade, Serbia, for tenants like Mercator, but also Wagen International. Another one, 65,000 square meters. We completed it at the famous CTPark Bucharest West, 65,000 square meters pre-leased to LPP. An additional 40,000 square meters in the Czech Republic was leased to Vitesco in Ostrava. And those were a couple of highlights for 2023.
Now, in 2024, we have under construction 2 million square meters, and we think that most of that will be complete during this year. 72% of all the 2 million square meters are being built within our existing business parks, means land bank utilization. We use the land which we've bought, land where we have already invested in infrastructure, have permits, in place where we have local teams on the ground to build these properties. And when they are fully leased, they will produce an income of EUR 142 million per year. For the 2024 deliveries, around 30%-38% is pre-leased. And as we do, we do start on site with construction works. During the construction, we will continue to lease the properties. We will slow down or accelerate, subject to demand, and we do modifications during the process of constructing those properties for our tenants.
We believe that these buildings will be in 80%-90% lease, and then we'll continue to lease them up to 95%-100%. With regards to the land bank, we continue to buy land to compensate for the land we use for our developments and beyond. So we have 23.4 million square meters, 23.4 million square meters now of land in ownership slash under option. Most of that in our existing business parks. This gives great opportunities for us to utilize that land and do more projects at north of 10% yield on cost. And that land obviously gives us the opportunity to continue to grow our portfolio to 20 million square meters and beyond, because we think 20 million is just the start.
It's the beginning of our company with this foundation, with this fantastic team of people, more than 750 employees, 50-50 male females, 38 years of age, can continue and grow this business and bring it to a next level. We have so much talent at CTP, especially the younger people. It's fantastic. It's really nice to be part of that and to work with them. Last but not least, our third business, the energy business. Very positive about last year's result, where we have been able with the different countries to install rooftop solar plants, creating solar energy, which is being offered to our tenants, or we sell to the grid. It has been very successful, both commercially as well as much appreciated by our tenants to have access to renewable energy.
Goes hand in hand with installing smart metering to understand, do you really need to use energy now and here, or are there other ways to manage energy consumption? And that in the first place will result in savings being in smarter buildings, better buildings with a lower energy bill. And that is, of course, what we have in mind. And that's the way how we can support our tenants and help them get the cost down and grow their business more and, yeah, and build on these long-term relations with all those tenants in our parks. So very positive about that. Overall, 2023 was a fantastic year, and there's more to come in 2024. Happy to answer any of your questions. So for now, I hand over to Martin. Thank you for your attention.
I will now give an update on the main financial highlights.
In 2023, we achieved a like-for-like rental growth of 7.4% driven by strong indexation and rent reversion. 66% of our portfolio is now indexed to the Consumer Price Index, while the remaining 34% has fixed escalations. We expect the percentage of our contracts that is linked to CPI to increase further. The reversionary potential stands at 14.5%, and we have been successful in capturing this potential for the leases that came up for expiry. For example, in 2023, we saw an 18% increase in the average monthly rent per square meter of the new leases signed compared to last year. Our gross rental income increased by 17.9% year-on-year to EUR 571.9 million. Also, the net rental income went up by 20.1% year-on-year as we reduced the service charge leakage. The NRI to GRI ratio now stands at 95%, and we continue to improve this.
Company-specific adjusted EPRA earnings increased by 21.8% year-on-year to EUR 323.5 million. The EPS increased by 18.5% year-on-year to EUR 0.73, ahead of our guidance of EUR 0.72. Looking at our valuations, the gross asset value of our portfolio grew to EUR 13.6 billion, up 18.7% compared to year-end 2022. The valuation of our standing portfolio increased by 18.8% year-on-year driven by the development completions and positive revaluations. In terms of our investment properties under development, valuations increased by 13.9% year-on-year due to the growth of our pipeline from 1.7 million square meters to 2 million square meters. Of our 23.4 million square meters land bank, 17.7 million square meters is owned and unencumbered. The remaining 5.7 million square meters is under option.
The valuation of our owned land bank came to EUR 920 million, up 20.6% year-on-year, reflecting positive revaluations and new land acquisitions. With this land bank, we are able to reach our 20 million sq m GLA target and even go much beyond that. The 2023 revaluation amounted to EUR 878.7 million and was mainly driven by new developments, reflecting the leasing and construction progress, as well as positive revaluation of standing assets. The valuation of the standing asset increased on a like-for-like basis by 2% in 2023, driven by the positive ERV growth of 10.1%, which fully offset the yield widening that we saw during the year. The reversionary yield now stands at 7.2%. Looking forward, after the 80 basis point increase we experienced in the last 18 months, we expect no further material yield widening.
However, we do foresee positive ERV growth on the back of continued tenant demand due to the positive impact of the secular growth drivers in the CEE region. Central and Eastern European rental levels remain affordable, despite the overall strong growth seen as they have started from significantly lower absolute levels than in Western European countries. In most CEE markets, the inflation-adjusted real rents remain lower than 15 years ago, illustrating both the affordability for our tenants as well as the rental growth potential. Furthermore, with larger yield movements in Western European markets, the yield differential between CEE and Western European logistics is now back to the long-term average. Our EPRA, net tangible asset per year, increased from EUR 13.81 at year-end 2022 to EUR 15.92 at year-end 2023, representing an impressive increase of 15.2%.
This increase was driven by the positive portfolio revaluation and recurring earnings, while partly offset by the dividends we paid out. And now I hand over to Richard, who will run us through the funding, dividend, and outlook.
We have a robust balance sheet and strong access to multiple pools of capital. In total, we raised almost EUR 1.6 billion in 2023. This was split between EUR 641 million of unsecured loan facilities with an average maturity of 7.3 years and EUR 916 million of secured loan facilities with an average maturity of 6.3 years. Our average cost of new debt in 2023 was 4.9%. Our higher yielding portfolio and market-leading development yield on cost allow us to grow profitably even with materially higher funding costs. In 2024, we've continued to be active in debt markets.
By February, we had signed another EUR 190 million of secured loan facilities and issued a EUR 750 million six-year green bond with a coupon of 4.75%. Together with the bond issuance, we launched a tender offer and repurchased short-dated bonds with a total nominal amount of EUR 250 million to improve our debt maturity profile. With this, our pro forma cash position came to EUR 1.38 billion, more than sufficient to meet our cash needs for the next 12 months. Including our EUR 500 million RCF, our pro forma liquidity amounts to almost EUR 1.9 billion. In the second half of 2023, both Standard & Poor's and Moody's confirmed their investment-grade ratings with a stable outlook. Our average debt maturity stands at 5.3 years, with no material debt maturities until June 2025. CTP's average cost of debt in 2023 came to 1.95%.
This will continue to tick up going forward as we bring on new funding to finance our development-led growth. 99.5% of the debt is fixed or hedged until maturity. Thanks to our strong cash-generating portfolio, we have a healthy interest coverage ratio of 3.8 times, while our forward-looking ICR, reflecting annualized income for our developments, comes to 4.2 times, and our normalized net debt to EBITDA stands at 9.2 times. Our loan-to-value ratio was 46%, slightly above our 40%-45% target range. Our loan-to-value would have been 60 basis points lower without the highly attractive land bank acquisitions that we completed for cash during the fourth quarter. These are mainly brownfield development sites in Germany. We expect the loan-to-value ratio to come down as the revaluations of our developments are fully booked.
We continue to deem this loan-to-value ratio to be appropriate given the higher yielding nature of our portfolio. Coming to our dividend, we propose a final payout of EUR 0.275 per ordinary share, which will, subject to approval by the AGM, be paid in May of 2024. This will bring the total 2023 dividend to EUR 0.525 per ordinary share, an increase of 16.7% compared to 2022. This represents a company-specific adjusted EPRA earnings per share payout ratio of 72%. We are confident in the outlook for CTP. Despite some slowdown in the macroeconomic environment, leasing dynamics in the CEE region remain strong, leading to continued rental growth and supporting valuations. Our pipeline is highly profitable and tenant-led. And thanks to our industry-leading yield on cost, we are able to deliver sustainable and profitable growth, also in the current higher interest rate environment.
This sets us apart from other players in the sector. CTP has the team, the land bank, the balance sheet, and the tenant relationships to deliver on our promises. We confirm our EPRA EPS guidance for 2024 of 80%-82%, and we are on track to reach 20 million sq m of GLA, an annual rental income of EUR 1.2 billion before the end of the decade. Thank you for your attention. We now welcome your questions.
If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind or would like to remove yourself from the queue, please press star followed by two. When preparing to ask your question, please ensure that your phone is unmuted locally.
If you are viewing via the webcast, please enter any written questions using the question function on your screen. Our first question today is from the line of Marius Pretor of Société Générale. Marius, your line is now open. Please go ahead.
Good morning. Thank you for the presentation and for taking my questions. Just two questions from my side. So firstly, the yield on cost across the development pipeline ticked down marginally in the fourth quarter. You're maintaining an 11% target on your future projects across the CEE region. I wanted to get an idea of the reasons for this. Was there a bit of a change in the scope or the kind of underlying regions of your existing pipeline? And also, what are you targeting for your Western European exposure? And then secondly, so the LTV did tick up in the fourth quarter.
It's a bit above your target. I think you were looking for around 45% by the end of 2023. Can you quantify how much of that was down to the land bank acquisitions, and how did the property values trend compared to your own forecasts? And also, could you consider equity financing at this stage, considering where you are in terms of the LTV? Thank you.
Hey, Marius. Martin here. Let me take your first question, and then Richard can continue on the LTV. If you look to your yield on cost, indeed, if you look to the pipeline, it ticked down from 10.6% to 10.3%. That's more a timing effect and indeed geographical differences.
So if you look to the deliveries we did in Q4 of 2023, which was over 600,000 square meters, those had high yield on cost that you saw also reflected in basically the yield on cost for the year 2023, which came to 10.8%. So those, of course, went out of the pipeline and the construction while the new projects came in. Typically, when we underwrite the projects, we are relatively moderate with our ERV assumptions. But when we are leasing them and we lease, as you know, during the construction, we are often beating the ERV expectations. So there is potential for those to tick up as the leasing progresses. So that's one, in terms of more the timing and the movements between the quarters. And two, it's indeed geographical exposure. So we started more projects in Germany. And in Germany, we target around a 9% yield on cost.
Of course, that lowers a bit the average of the group. And that's why we reiterated that we say the 11% target is for the CEE markets, so for the core CEE markets where we are in. And we take it more broader in terms of capital allocation because even a yield on cost of 9% in Germany is very profitable for us because, of course, your evaluation yield is lower. So we look to the spread between the yield on cost and the standing portfolio yield in terms of where we allocate capital. But no fundamental change in our yield on cost targets nor the profitability of our development.
Okay. Thank you. I'm not sure if you can hear me, but I'm getting messages that people can't hear me asking my questions.
I don't know if there's an issue on the line and whether it's the call or the webcast.
We hear you loud and clear, but. Yes, we're hearing you loud and clear here on the.
Okay. I think there's a few people on the line that were unable to hear me asking my question. Just confirming that we have now failed over to the backup webcast line. So the webcast now should be hearing all audio.
Okay. Yeah, it's working now. Thank you.
Yep. Okay. And Marius, the question on the loan-to-value. If we would not have done the acquisitions in Q4, the loan-to-value ratio would have decreased to 45.4 at the year-end. But we saw the opportunity to buy a couple of really outstanding opportunities in Germany at very, very attractive prices. So we decided to take those in Q4. They were dealt ahead to close before the year-end.
So we're very, very happy to have done that. That will provide us with really nice opportunities going forward. One of them provides a running yield of 10%, which for Germany is an outstanding return. And regarding the question on the valuations, we said through the second half of last year that we think yields will have stopped going up. We continue to see rents increase and ERVs increase. Therefore, we would expect valuations to have bottomed around the middle of last year and would anticipate that they will tick up over the next few quarters as rental growth will continue to feed through. Supply remains constrained. Vacancy rates remain very low. Occupier demand continues. And also real rents across most of Europe, particularly in Central Europe, are still lower than they were 10 or 15 years ago. So the affordability of rents is still given for tenants.
So we do expect a continued strong demand. Now, equity is always an option to accelerate our growth plans. But nothing that we have concrete on our agenda for the moment.
Okay. Very clear. Thank you.
Thank you. Our next question today is from the line of Bence Ilyés of Kempen. Bence, your line is now open. Please go ahead.
Good morning. And thank you for taking my questions. First one on the pipeline. So currently, we have 2 million under construction. But then in terms of deliveries, there's a quite wide range in terms of expectations, so between 1 and 1.5. Could you elaborate a bit more on the moving parts and potentially whether you're factoring delays, etc.? And then second one on new leasing. So as you mentioned, new rents are up 18% sorry, rents for new leases are up 18% versus last year.
Of course, Czechia is the strongest market. But could you elaborate a bit more on the other strong markets and what the increases are there?
Yep. Thanks for the question. Go on, Bryan. You can take shall I take this?
Yep.
Richard, and you just add if you think I missed out on something.
Thanks for the question. Well, we think we'll be close to 2 million sq m of space being completed this year. And that 2 million sq m, those are new buildings mostly being built within existing parks, as explained, more than two-thirds. And obviously, most of those buildings, more than half of those buildings, also being leased to our existing tenants who are growing their business. And we then provide additional space. And so that's in 10 markets, 10 different countries.
So we are not actively building in the Netherlands, but we are constructing properties in all the other nine countries. So you can imagine, as an in-house construction company or construction management company, we have many different projects which are in different phases of realization. So some of the projects started last year, which will complete this year. Other projects, we started construction this year, and we can still complete this year. But I think, on average, we need around nine months of good weather to complete a building. So that's why we do not exactly know what the exact amount of spaces we will complete because of that reason, because we need time to construct these buildings. But also, we have no interest in completing property with our tenants, right?
So while we are constructing the properties, at the same time, we're also talking to tenants about doing lease deals. So the good thing, on one hand, is and that's also why we have more than 750 employees. It's quite intense to do in-house construction. But on the other hand, it gives a lot of benefits. You can start with groundworks and preparations and infrastructure. You can even go as far as doing shell and core. With that, I mean building the shell, which is the structure and the empty box, without doing any kit, any fit-out, any of the expensive part. But on the other hand, by doing that, I think you can be ahead of the market. You have a property available immediately or very soon. So if the demand picks up or if there are requirements, you can react to the market very quick.
And that has been the model for the past more than two decades. And that is what we continue to do. And yes, of course, if you have a building and there is demand for property, you can do better deals. And that will support higher rents. And with regards to your question or comment on the Czech Republic, that remains strong. Yes, that is true. That is still the largest market for us in terms of square meters and rental income. So we have on the way multiple projects in the Czech Republic. But we are building in all the other countries. Romania, we have more than 200,000 square meters under construction. That is pre-lease, by the way. We are doing a project for H&M, for Hanon Systems, but also for Diehl Group, a German company involved in automotive but also defense industry.
Budapest, in Hungary, we are doing a project for Tesco. That's another 100,000 square meters, fully leased, etc., etc. So a significant part of the projects we do is already leased, and the rest is being leased while we are building the properties.
Okay. Thank you.
Maybe just to add on that, if you look to rental growth in the different markets, indeed, Czech Republic has been the most advanced. But we see a lot of opportunities for rental growth in other markets. An example of that is Romania. So Romania, until 2023, you didn't see too much rental growth. So there, we expect, especially in the coming years, still quite some to come. And it comes also back to what we said. If you look to real rents, they are still lower than they are 15 years ago.
So adjusted for inflation, it has become more affordable for our tenants. So Romania is a market where we see rental growth. We also see strong rental growth in Poland, of course, with a change in the model from being trader-developer-led towards more owner-developer. We also see rental growth in other markets. In Serbia, we have done very good deals at good rental levels. Slovakia. So yes, Czech is most advanced. But the other countries are following. And the mix might be a bit different in 2024 with the other markets coming up a bit more. But overall, we continue to see the strong rental growth across the markets where we are in.
Okay. Thank you. Very clear. I don't have any further questions.
Thank you. Our next question today is from the line of Eleanor Frew of Barclays. Eleanor, your line is now open. Please go ahead. Hi, team.
Thank you for the presentation. Two questions from me. At your CMD, you guided to marginal cost of debt of 5.5%. But recent deals you've signed have been below that, 4.9%, 4.75%. Just wondering if that gives you any scope to upgrade your guidance. And then your pre-let ratio seems a little low. I appreciate you expect to get it up to 80%-90% on completion. But maybe could you give us some more color on what you're seeing from tenants? Are they taking longer to come to decisions, maybe?
Yeah. Good question, Eleanor. Thank you. In terms of the cost on debt, we have two factors. One, the interest costs are lower than we were budgeting for in the Capital Markets Day or during our planning process. But we also took the liquidity a little bit earlier than we were originally planning.
So the two factors offset. We're very confident in our EUR 0.80-EUR 0.82 EPS guidance for the year. We're not adjusting it at the moment. So that would be the answer to that question.
And on the pre-letting , and I will give it at the start, and Remon can add, but if you look to the pre-letting , the pre-letting is 38% for the project we deliver this year. If we look back to last year, it was 32% at the start of the year. And we delivered 86% at completion. So that's a very normal figure for us. We start the year lower, and we lease during the construction with most of the deliveries in the fourth quarter. As you might have seen, more than 50% of our deliveries also in 2023 were in the fourth quarter.
So that's a very normal trend that it ticks up over the year. Like I said, the 38% pre-letting for this year's deliveries is actually slightly higher than what we started last year. I'll let Remon add on tenant demand.
Yeah. Thanks, Martin. Yes, demand is good. It takes time for people to make decisions. Yeah, it does. It always did and still does. But at the end, they do make the right decision, which is then taking more space in CTP. We see demand coming from different industries, obviously, have to do with nearshoring, right? So from COVID times, we have learned or the world has learned that supply chain issues, etc., we need to rethink and we can redesign. It's not about cheap. It's about reliability. Initially, we saw our tenants build in stock inventory.
Later, they moved activities from, for example, Asia to Europe. There's a lot of proof of that. Then recently, when the Suez Canal was closed or unsafe and so on and so on, all of that will continue to support in Europe for Europe type of thinking. Then if you want to set up a factory in Europe, you don't want to do that well, let's not talk about that. But you want to do that in Central Europe, the engine of Europe, where it's different approach and different productivities and all of that and well-developed new infrastructure, etc., etc. So that's what we see. Where does it come from? It comes from, obviously, automotive. It comes from semiconductor business, not only for Central Europe but also for Western Europe. Martin mentioned Germany, where we are currently building properties in different locations, but also defense industry.
That's only the very, very, very first beginning of what we have seen and what we see nowadays because we think and we believe that there's going to be huge demand for space for that sector. The sector has been sleeping. It has been very small. That would need to grow. On top of that, very simple, we go back to the foundations and the fundamentals, the fact that in Central Europe, there is just less stock and less space and full-service business parks, as CTP would do, with a developed-to-hold structure to be good for the communities where you operate long-term commitments. That I think is a very solid business model.
And as I said, in combination with the fact that there is hardly any stock of new property in the countries where we operate, yeah, that gives a lot of comfort and confidence for us to continue building these properties and also hitting the occupancy targets, which we have in mind. Otherwise, we will just start building.
Thanks, team.
Our next question today is from the line of Steven Boumans of ABN AMRO. Steven, your line is now open. Please go ahead.
Hey. Good morning. And thank you for taking my questions. I have two separated ones. The first one is a bit of a follow-up on the previous questions on tenant demand. Has tenant demand and the time before a client signs improved year to date versus, let's say, H2/2023?
If so, do you expect, most likely, rent to be at the high end of your development completions by year-end 2024, given tenant demand seems to be the main hurdle for the development completions, if I'm correct? That's the first one.
Yeah. Thank you. No, it's not any hurdle. Yeah. We are an all-in property company. That means that we own land and we own property. But we are also a construction company. And we are also a property management company and all of that in one. And then we are an entrepreneurial business. So we look at opportunity, and we continue to gain market share in the markets where we operate, many of the markets where we operate. We have a market-leading position, and so on and so on. So it's not like we would start when we have a pre-lease.
We start when we think the market is there. Why do we think the market is there? Because we are the market or close to the market. We talk to our tenants, and we see different industries. In order to be close to where the action is, we sit in parks where we build property and where we own property. We don't sit in a shiny office downtown Prague with a big CTP logo on the skyscraper. We sit inside cabins and clubhouses, which are built and located in our business parks. But also, we are the ones who open up offices in China, in Taipei, in Asia, that part of the world, if we feel, okay, what used to be produced in China for the European market will no longer be produced in China. These factories are in Asia.
In Taipei, for example, they will need to relocate to Europe. So if we see TSMC with Bosch doing a massive project in Dresden or Intel in Magdeburg or ASML in Eindhoven, then we think, "Wow, we should get land positioned in and around. We should, in a proactive way, make sure that we're part of that ecosystem, that we connect to these companies, that we make sure we have space available or products available and teams on site available to support these businesses." So that's the entrepreneurial part of the thinking and the way we do. So no, it's not that we don't see demand. I mentioned it just now, and I referred to it. If you look at semiconductor business, that is a business which will grow. There's also geopolitical reasons.
Out of Taiwan, Taipei, some Asian Taiwanese clients of ours with whom we have worked for the past more than 20 years, they clearly indicate that they like to grow their footprint in Europe, for Europe, and not only in the Czech Republic but also in Germany, for instance. And we are very proud of being their partners. And we are building facilities for many of our Taiwanese clients at this moment. So that industry. I refer to the other industries and to the fact that there is a lack of space in countries where we operate. That is the region of Central Europe. And also, important to mention again that places like the Czech Republic, there is maybe not an undersupply because there is, in the meantime, has been built so much space. But in the Czech Republic, land is scarce.
That is throughout the region, but especially in the Czech Republic. I think if you look at the legislation to get land zoned for our type of business, that takes time. And there is only a limited amount of land available. We have the, yeah, the comfortable position of having a large land bank in the Czech Republic, almost 7 million square meters at the moment, which is actually the opportunity for us to build properties. And we will do that when the market is right, when we see decline in demand, when we do not believe in the market any longer. For whatever reason, we will not start to build. But as long as we see demand, again, mostly coming from existing clients because most of us are used to doing with existing clients, then we will go ahead and start building property. And that's what we do.
Then you can think of timing. If I build something now, do I get a good rent? Or if I build it 2 years later, do I get a higher rent? Yeah, those things you can consider. Maybe you have other opportunities in 2 years. But that's the approach and how we run it.
So yeah. Okay. That is clear. Okay. That is clear. But a bit more specific. So the first part of the question has to do with demand, so for all sectors combined, and the time before an average client signs, improved year to date or not?
Yeah, I think so. Martin, you mentioned something year to date compared to last year. I think the higher pre-lease now is similar to what it was last year, I think, 4% more, 34%-38%, as we said.
Yeah, indeed. Indeed. We have a slightly higher pre-letting .
But also, if you look indeed in the activity we did in January, February, we continue to sign heads of terms. It's always very hard to compare month by month because ultimately, as you know, our deals are we can sign deals of 40, 50, and in some cases, up to 100,000 square meters. Certain deal falls in a certain month. So you see sometimes volatility month by month. But the overall trend, and that's why we also showed you the absolute amount of leasing we are doing each quarter last year, except the first quarter was higher than 2022. And that trend continued in 2024. And also, the fact that we have a pipeline of 2 million square meters currently indicates also our confidence, Stephen. And that goes back to what Raymond said. If we were not confident, we would not start.
So we continue to see the demand also in 2024.
Yeah. And also, I can add to that to close it. Steven, also, we see, if you look at the BizDev team, there's more proposals being if you look at Q1 last year, Q1 this year, there is, so far, more proposals, so more term sheets. We see activity, of course, in the 10 countries with the different BizDev teams. And you can track easily. You can see the amount of proposals they issue, so the offers they make, and negotiations they're having with tenants.
So yeah, good. It's good. Okay. That was very clear. Very clear. Thanks. Maybe a different question. That's the last one. On tax, what effective tax rate do you foresee in 2024 and in the midterm?
And related to that, does the Pillar Two rule, so the global minimum tax rule of 50%, have an impact on CTP, the technical?
So on the first part, our effective tax rate looks optically a bit higher this year. And the reason is that in Czech, the tax rate moves from 19%-21%. And therefore, the deferred tax liability is repriced with the 2%. But that's more a one-off effect driving the effective tax rate in 2023 higher because you have the base effect of repricing, basically, your DTL. So we don't give guidance on an exact effective tax rate. But I would expect that next year to be slightly lower again. Like I said, there's a bit of a base effect if you look to that specific number. If you look to the tax on recurring, it was slightly higher but nothing material.
There are also some tax-related to previous years in there. But if you look to the underlying tax rate, no, no big differences there. We, at this stage, don't foresee any impact of new tax legislation. And if so, we will update them accordingly.
Okay. Clear. Thank you so much.
Thank you. Our next question today is from the line of Thierry Cherel of Natixis. Thierry, your line is now open. Please go ahead.
Thank you very much for taking my questions. Maybe you could skip some because I have six of them. I'm questioning about the long-term growth of the CTP. And I wonder if or how long the extension in Poland and Germany could make the model last, I mean, make the growth stay at that pace. Second question is about the land bank acquisition in Germany. Very good. So congratulations, by the way, for the full results.
But I'm wondering what's the depth of the market in terms of opportunity to sales with the German investors and developers currently struggling? Another question about lack of space, you mentioned. Just wondering if you are thinking about developing your assets with a second story or thinking about the way that you are currently developing one-floor buildings and thinking about making second story over the medium to long term. And two last questions. First, on LTV, will your LTV stay at that level, around 45, over the next three years because of the balancing of the valuation gain balanced by the acquisition of land bank? And last one is, do you have an internal guideline you could share with us on the ICR with the 3.8 times being still under pressure? Thank you.
Well, maybe to start with the questions on LTV and ICR, and then Remon can answer later on Germany, Poland, and two-story one. So if you look to LTV, indeed, it comes also back to what we showed with our capital markets there. We can keep our leverage stable and develop over 1 million square meter thanks to our retained earnings and revaluation. So as long as we keep developing at this speed, the LTV might slightly tick lower as, of course, some of the revaluations are booked. But it's not foreseen as to go materially below 45%. For that, either we will need to slow down the development, which is no point because we can make a yield on cost above 10%. So the best thing we can do is to invest in the land we already have because we have EUR 920 million of land on our balance sheet.
Even our incremental yield on cost is higher because ultimately, we already paid for the land. The best thing we can do is develop, and that generates more cash flow for the portfolio. That feeds into the second question you had on ICR. ICR inevitably will tick a bit lower. I think that's across the real estate industry as funding costs will go up. As said before, given that we have such a high yield on cost, which has a very nice spread compared to cost of funding, each euro we borrow and invest in our pipeline basically improves your ICR and mitigates the decrease you would otherwise see driven by, of course, the refinancing of your current debt stack. Yes, the ICR will slightly tick lower. I think we are in a very comfortable position still there.
If you look to how our cash flows are leveraged, you see that the net debt to EBITDA stands at 9.2x on a normalized basis, which we feel very comfortable with. And also, if you look to, again, ICR, if you compare to covenants, 3.8x is still way ahead of any covenant level. And we expect to be also, if you look to the rating agencies, to stay within the benchmarks. They would like to have investment grade rating.
Very clear. Thanks.
Yeah. And in regards to building double-deckers, yeah, we have one project on the way now in, sorry, in Líšeň, in Brno, in the Czech Republic because, yeah, we're running out of land there short term. We have land bank positions for the mid-long-term future but not something now.
So we need to be very careful with what we do with the land and how we utilize it. With the current rents, it pays off to do two floors. It's not really warehousing. It's more, yeah, light industrial with some value-added kind of activities, etc., etc. So from a functionality point of view, we think it makes sense. So that's what we are doing here and there. The Brno one, we are doing one in Pilsen. It's also Czech Republic. It's part of our innovation. And yeah, we say that every next project should be better than the previous project. Now, that is part of, I think, the thinking at the design team and the innovation team. And we do test these things and come with new type of new property types and that you think of energy consumption and all of those kind of things.
Of course, the ESG team is closely working with the innovation team and the design team. So yes, we do that. The higher the land price is, yeah, the more feasible these things are. That's everything to do with the lack of available land. Plus, as you mentioned, and that is in particular in inner-city business park or urban business park kind of developments where you would do those kind of activities. This is first. The other question with regards to when we're going to close or when we are going to stop, well, that's not the plan. We will continue to be innovative. We continue to make existing properties better, yeah, to make them fit for use and to keep these buildings in an excellent condition. With regards to the German portfolio in particular, there are many good things about the acquisition.
Now is easy to say. At that time, when we bought it, obviously, it was a bit different. But we have seen significant rental growth. We bought the portfolio when it did EUR 60 million. Now it has EUR 70 million. And we think it's going to continue to grow. So rental income from the existing portfolio, which we bought two years ago. That's one thing which is positive. The other thing positive is another side effect that with the acquisition, we also have many new tenants. And with those tenants, they are not just for Germany, but they also have demand and opportunities for them to develop outside of Germany, by the way. But let's stick to the German part, maybe point three. For the existing tenants, we now build extensions. And we do now do developments, for example, in Simmern. But also, we are doing now development in Schliengen.
We are doing some things. So all over the place where we have bought a portfolio with land next door, we are doing extensions. And when you do an extension, you also do a modernization of the existing property. You get a new lease term, etc. And then maybe when it comes to development opportunities, the land sites we bought in Germany recently, maybe three highlights: Aachen, Mülheim an der Ruhr, and also Stuttgart. Yeah, those are very beautiful land sites, we think. We have been able to buy them at an attractive price. That is, of course, compared to what the value was maybe three years ago, obviously. So I think that is also part of what we do. When do you buy? What, etc.? And what do you think of these opportunities? And yeah, so I think there are a lot of opportunities. And these locations are good.
They are suitable for urban business park type of developments. Then think of a mix of R&D, test centers, but also connect and accommodate education. Maybe there is a bit of logistics involved in an urban business park type of project. That's also things we have learned over the past years when we develop different properties. Yeah, I think we have a lot of inspiration and ideas on how we would continue to do that to make sure that we do continue to provide the right property in line with the demands from our clients but also looking into the future because, as you know, we develop to hold. So we think beyond the lease contract. We think of what happens if the lease expires and there is no renewal and the tenant moves out because they need a larger building.
What do we do with that building which then comes back to us? That's how we think of properties. That is also what we are taking into account while doing things in Germany. And honestly, I think let's see. But so far, I'm quite positive. I think we have been lucky with the opportunities which we have been given. Yeah, we look forward very much to doing developments. I can also share more things over the next couple of months when we start with different projects, when we will be able to do some announcements. Other projects will take a bit more time because in Mülheim, for example, we will have to wait for the seller to move out. We need to do some demolition work. So we now plan to start on site in 2026 with the development of that project.
But as I said, I've been in Düsseldorf on Tuesday. And already now, we have been approached by different companies about there's interest already now from some large companies who would be happy to talk to us about us developing property for them in Mülheim, etc., etc. So positive. And also, the team in Germany, we have a team of almost 70 people, three offices: Berlin, Wuppertal, Düsseldorf, and Stuttgart. And yeah, that's a real pleasure to be part of. So I'm positive about that.
Yeah. And then maybe a couple of words in terms of the long-term growth potential. So last year, we secured 4.6 million square meters of land. So we actually increased the runway for us to be able to develop. We had 23 million square meters at the end of last year.
A little bit under 80% of that, we already own and pay for, a little more than 20% under option. Last year, we were able to secure more under option than in previous years. So in terms of the long-term potential, just with the land bank that we have, we have the potential to almost double the size of the company. And as Remon said, we continue to see significant opportunities in the countries and the markets that we operate in. So we will continue to secure attractive land, ideally in and around our existing parks. Almost 90% of the land bank now is in and around existing parks or the core of a new park. So our growth model developed for existing clients in existing parks continues to be very strong and supported by the land bank that we have.
So that combined with the ongoing tenant demand and the long-term trends, Remon says, the engine of Europe. So in the meantime, labor costs in China are actually higher than labor costs in Central Europe. So there's no value in companies producing outside of Europe when they can produce inside Europe, save all of the hassle, and be cheaper as well. So we are very optimistic about that, the mid to long term.
Thank you very much for your insights.
Our next question today is from the line of Bart Gysens of Morgan Stanley. Bart, your line is now open. Please go ahead.
Yeah. Hi. Good morning. Thank you. I have two questions, if that's okay. One quite specific and the other a bit more broad, perhaps. Firstly, on leverage, I appreciate you've already talked about it quite a bit. But it's above your target range.
You highlight development gains as clearly a way to deliver. But of course, you can also reduce this by retaining earnings. The default option for the dividend is scrip. This is perhaps a question for Remon specifically. Could you already give us an indication whether you intend a material portion of your dividend in shares and what that percentage would be? The other question, more broadly, look, a very popular theme for warehousing real estate at the moment is data centers. I appreciate demand for your assets is clearly very strong from all kinds of businesses. Do you see any demand from data center operators for your assets? Or do you have any intentions to add such exposure? Thank you.
Good questions. I don't plan to take any money this time maybe when it comes to dividends, right?
I had maybe to explain that also to everybody. I did mention it before. Just a few sentences. Look at ownership of CTP. Initially, we started with three shareholders. We continued with two shareholders. Unfortunately, my partner, Eddy, passed away in 2016. His shares went to his family, to the children. Back in 2018, two years after he passed away, we did a deal with the family to acquire the shares, so the remaining 50% of CTP. They gave us or me a long time to pay for that. That was still outstanding. That is why I've taken dividends in the past also to settle that and to pay that. All of that has been settled and paid for. There are no debt fees. I have no obligations toward the family or anybody else.
So I don't need to take money from the company. And that's also not my intention to do. It would be crazy, I wish. But no, that's not the plan. Point one. Point two, very good question. Of course, yes, yes, we have someone in the company and also external to look at data centers and how can we be part of that. We have been screening the market. There is a little business plan which explains where, why, and how we could be part of that. So yes, definitely, we are looking into that. And when I refer to Germany, obviously, you can imagine that that can also be part of what we want to do. But I don't want to disclose too much on that now. But yes, clearly, yes. And that's not the only thing we look into, by the way.
We also look at different type of property development opportunities to make sure that we develop what the market is looking for and that we have an understanding of what the market's going to be, also a certain outlook. And it's also why I refer to campuses where you can also have a combination of education with employers, with cowork, co-live type of concepts, of course. That's what we look at and educate ourselves, part of the innovation team, the design team, and also these people which we have now on board for the data center business. And also, by the way, I didn't mention that we also have a group of people now on board with a lot of experience in the energy business. As you remember, we set up this energy business at CTP. We know nothing about energy.
So obviously, we have to also build that and get the right people on board to help us understand how that works. And there we also make some very good progress. And that is about solar. But it's also about smart metering. It's also about ESG. It's also about how can we reduce the amount of energy which our projects consume to get rid of our tenants? And how can we be much smarter in that respect? But yes, we do keep our eyes and ears open. And we actively have people involved to help us understand the opportunity. And I also think not too long, we will materialize, or we will be able to use the things we learn in practice and to, yeah, continue to develop.
Great. Thank you very much.
You're welcome.
Thank you. We will now move over to take some written questions.
So our first written question here is from Suraj Gulla of Green Street, who asks, "Which geographies within your portfolio, sorry, have the highest and lowest reversionary potential?" Thank you.
Yes. Hi, Suraj. So what we see in terms of reversionary potential, the highest reversionary potential, we have in Czech. Market trends have grown there the fastest. And as you might know, historically, we had most of the leases only with 1%-2% indexation. We have been switching that to CPI linkage from 2019 onwards. Now, 66% is linked to CPI. But in Czech, we have some of the older leases still which need to come up for expiry. So the indexation there, with only the 1%-2% escalation, is a bit lower. While the market trends have grown the fastest, so most of the reversionary potential is in the Czech Republic.
When the leases are coming up for expiry, we see that we are able to capture that. Also in other markets, of course, most of the revisionary potential inherently is in markets where we are for a bit longer time because new markets like Poland, Serbia, etc., we have been all leasing in the last year. They are pretty well up to market standard. As well, Germany. You might have seen the update we've given on Germany earlier this year. Remon also referred to that, how we have been able to increase the rent roll. At the time of the acquisition, the average rent was around EUR 3.30 per square meter per month. In 2023, we have been able to sign the new leases more around EUR 5. Uplift of 30%, 40%, 50%.
So also in Germany, there's an enormous reversionary potential, basically, for us to capture in the coming years as we are going through the evolution of the portfolio.
Thank you. Our next question is from Niraj Kumar of Barclays, who asks, "Do you expect to come to bond market later this year to fund your development CapEx?"
Yeah. Thanks for the question. Yeah, we were very happy to see the bond market regain a sense of equilibrium in Q4, Q1 of this year. As you know, we did a very successful bond earlier in the year coupled with a buyback of some of our shorter bonds to allow us to manage our maturity profile. No guarantees. But looking forward, we expect to be a regular issuer of bonds over the next years.
That's great. Thank you.
And our next question is entered from Cezary Bernatek of Erste Group, who asks, "Do you expect intensified competition from developer " oh, my apologies. "Do you expect intensified competition from developer trader in the region in 2024 to 2025 alongside falling costs of financing? Could it have any major impact on the demand-supply balance rental rates development?" Second question, "Where do you see the LFL rentals' average growth in the region this year?" And third and final question, "What is your view on sector prime yields this year and 2025 in the eye of likely falling base rate in EU starting July?"
Yeah. So regarding the like-for-like rental growth, we guide for 5% this year. So it's what we said at the Capital Markets Day last year. And we stuck to that. Inflation and indexation came in as we were expecting. So we're confident in that expectation.
Regarding the yields, we said mid of last year, we think that the yields in Central Europe are topping out. If you look at the growth dynamics in Western Europe versus the growth dynamics in Central Europe, the reason for the materially higher yields in Central Europe is quite difficult to understand. It's long been our belief that the spread between Central European yields and Western European yields should narrow. Actually, coming into the period of rate increases that widen, those Western European yields decreased dramatically. Following the increase in yields across the board, that spread is now normalized. But we would continue to expect that to narrow over the mid-term, so higher valuation gains in Central Europe than in Western Europe.
And regarding the first question on trader developers and declining cost of financing, our view is that financing cost will remain higher for longer.
Yes, they have moderated a bit of their peaks. But we foresee them to stay materially higher than they were in, say, 2020, 2021. But yes, inevitably, the trader developers will come back to the market. But what we also feel, and Remon referred to that, for example, in Poland, we see a lot of our existing tenants from the other markets that are now happy that we are also active in Poland because it also comes back to being a long-term partner. As an owner developer, we can grow with the tenants throughout their growth plans. And we can facilitate that. They know the quality of building we deliver. They know the quality of property management we deliver. And that is very much valued by our tenants, long-term ownership, also vis-à-vis communities, municipalities, etc. So we see definitely clear benefits for our model.
And we see that also reflected in the leasing that we are doing, like I said, also particularly in Poland. But yes, it doesn't take away that there will be times that competition will increase again. But we feel that we have good proposition.
Thank you. And we have a final question here in the queue from Philipp Hadeck of RBI, who's thank you for taking his questions and for the presentation. And the first question is, "Could you shed a bit more color on your LFL revaluation result for the portfolio? You mentioned the valuations increased by 2% across the portfolio. Could you break this down a bit further on a country level?" Second question is, "You mentioned construction cost per square meter to be down versus last year. Yields have also trended up during the year.
Nevertheless, you estimate yield on cost of the current pipeline to be at around 10.3% down from 10.8% in fiscal year 2023. Could you give us a bit more detail on why you think yield on cost is decreasing despite the tailwinds? And third and final question, "The land that was acquired during Q4 in Germany, is that already zoned? Or is there some further work to do to obtain zoning?"
Yeah. Maybe I do the yield on cost question. And Remon takes the German one and Maarten does the first one. If you look at yield on cost, we're relatively conservative when we underwrite new projects. So the yield on cost reflects what we planned for at the start.
If you look through the last couple of years, you see that the yield on cost on completion is normally ticking up compared to what we're saying it is in the pipeline. You saw that last year very nicely. So what and why is that? Well, normally, we have a pre-let ratio of 38% at the moment. That means with rents going up, as we lease later in the construction phase, we're leasing at higher rents than we were originally underwriting, which will help our loan to value. At the same time, you are normally able to negotiate with the clients in terms of specific building improvements that they would like, where we're able to earn a nice margin.
Finally, we're always looking in terms of value engineering as our own construction company through the construction process to try and optimize the costs that we actually spend on building the buildings. So we're not, at the start of the construction process, having all of the costs fixed because that would take away our flexibility in terms of timing. So as we play with timing, as we play with our procurement, as we manage the pipeline, we're normally able to reduce construction costs through the process. And by having all of those capabilities in-house, that generally allows us to increase the yield on cost through the period of execution to deliver.
Thank you. Yes. Exactly. And I think we started out oh, my apologies. No, I think the answer is still something. So anyway, we started with 10% yield on cost. This is great, yeah?
Now people get used to 10%. We increased to 11% yield on cost. It's even greater, no? But yes, we do our best to hit that 11% yield on cost. Maybe it's not always 11. Maybe it's 10.5. Maybe it's something. Obviously, if you do more stuff in Germany, then the average yield on cost may drop a little bit. It may not be 12% as it is in Serbia. It may become a mix of the 10 countries very often. In regards to the yield on cost, maybe one thing to add is that the prices we pay for land in the past may be lower than what it's worth today. Anyway, with regards to the question in Germany, yes, the land is zoned. So typically, it works like we would not buy land unless it's zoned.
So as Richard explained, 20% of the land bank is under option. That is often because we're waiting for zoning or permitting to become available. Then we would then decide to buy. With regards to the German land acquisitions we've done last year, as I mentioned, three of them, three highlights, Aachen, Mülheim, and Stuttgart, yeah, those are existing industrial sites with properties which are in a good condition or to be demolished and to be redeveloped. That's for Mülheim, for example, where we have also had the opportunity to negotiate with the city of Mülheim on a, and that is also a contract which has been signed on a cooperation on what is to be developed in Mülheim on that land. That is, there is a steel plant which has been built in the '60s and was operated by Vallourec.
And Vallourec will move out. Then we will demolish the properties. And then we will have the opportunity to build an inner-city business park, urban business park type of project with smaller units but with a whole mix of different properties which we plan to develop in Mülheim. And I think that the Stuttgart one will take a bit longer. But to answer the question, yes, it is land suitable for these type of developments.
And just to add and finalize on the first question, if you look to the like-for-like revaluation, indeed, 2% for the group, split per country, we've seen quite some revaluation in Germany. And that comes as the portfolio was very conservatively valued at relatively high yields, of course, compared to the market. But as we have been increasing the rents materially, we saw the positive like-for-like revaluation in Germany.
We also saw positive like-for-like revaluation in Czech, for example, also on the back of, of course, the continued ERV growth. Romania was another example. Markets that were a bit slower was Hungary, where we had some more inflationary pressure and therefore slightly more yield widening if you look to the last 18 months. But overall, the 2% for the group is a number we are happy with. And like I said before, we expect to have seen most of the yield widening. We don't foresee any future material yield widening while we foresee ERV growth. So I think that gives a good outlook for the 2024 valuations.
Thank you. We have no further questions in the queue for today. So I'd like to hand back to the CTP team for any closing remarks. All right.
Thank you all for your questions.
We just want to remind you, we'll do our Capital Markets Day in Bucharest on the 25th and the 26th of September. We would be happy to show you the largest park in Europe, Bucharest West, 830,000 square meters. So we all hope to see you there and continue the dialogue. Thank you.
Thank you very much. Have a good day.