Good morning, and thank you for joining us. In Q1 2024, we continued our strong operational and financial performance. But before digging into the details, I want to take a step back to reflect on the strong growth we've seen in the three years since our IPO in March 2021. We've more than doubled our GLA, and we have grown our land bank by 162% to 23.1 million sq m, locking in the potential to double our GLA again. We increased the value of our investment properties by 138% to EUR 13.8 billion, and we've grown our next 12 months contracted revenues by 116% to EUR 742 million. We're proud of the growth we've delivered in the past years, and there's much more to come.
Now, coming back to the Q1 numbers, our Parkmaker model continues to be successful, helping us grow with our tenants throughout the CTPark network. With two-thirds of our leases signed with existing tenants, and our clients are happy, as illustrated by the 94% retention rate. Firstly, we signed more leases at higher rents when compared to last year. 336,000 sq m of leases signed in Q1 of 2024. That's 13% more than we signed in the Q1 of 2023. Our average rent per square meter is up 6% compared to the same period last year. We remain the market leader in most of the countries where we operate. We have people on the ground at each CTPark who give us a good feel for what's happening with our tenants in real time.
In Q1, we saw continued strong demand from manufacturing tenants in the CEE region. They accounted for 25% of all leasing in the last 24 months. We expect this to grow in the coming years. Due to the ongoing nearshoring trend, CEE is the business smart and best cost production location for Europe. We also saw this with our growing number of Asian clients, who now represent nearly 10% of the portfolio, producing in Europe for Europe. Of course, there's continued strong demand from 3PLs and retailers as well. CEE remains undersupplied by A-class space, with GLA per capita below the European average in most CEE countries. So there's still plenty of room for us to grow.
Running through our business lines, we grew the portfolio to 12 million sq m of GLA and remain on track to reach our 20 million sq m target by the end of the decade. We have a wide, diversified, and international tenant base with over 1,000 blue-chip tenants from a broad range of industries. And our tenants pay on time with a rent collection rate of 99.9%. Looking at the overall market, we see supply of new product is decreasing in the current higher interest rate environment. This brings opportunities for us. As our track record shows, we are able to grow profitably even when market conditions change. In Q1 of 2024, we delivered 169,000 sq m, which were 95% pre-let at completion, and the yield on cost of these completions was a market leading 10.7%.
We now have 2 million sq m of properties under construction. 77% of this is within existing parks, and an additional 15% is under construction at new locations, each of which can grow to over 100,000 sq m of GLA. When fully let, these projects are expected to add EUR 146 million each year to our rent roll. This year, we expect to deliver another 1-1.5 million sq m , and we expect yield on cost to remain above 10%. The 2024 deliveries are already 43% pre-let. As usual, we start with a slightly lower pre-let than our peers. This allows us to deliver consistently higher yield on cost, and we expect to achieve an 80%-90% pre-let ratio on these completions at delivery.
We have a land bank of 23.1 million sq m . The majority of this is in existing parks. Indeed, together with new locations, over 90% of our land bank is in a CTPark. So we have lots of future growth locked in, and we're on track to reach our 20 million square meter GLA target by the end of the decade. Moving on to our financial highlights. A like-for-like rental growth came to 5% in Q1 of 2024, driven by indexation and strong rent reversion. 68% of our portfolio is now indexed to the Consumer Price Index, while the remaining 32% has fixed escalations. We expect the percentage of our contracts linked to CPI to increase further over time.
Reversionary potential in the portfolio stands at 14.5%, and we've proven to be very successful in capturing this potential as leases come up for renewal. Our gross rental income for the period increased 15.8% year-on-year to EUR 157.5 million. Net rental income went up by 17.5% year-on-year, as we reduced service charge leakage. The NRI to GRI ratio in Q1 of 2024 came to 97.5%. The company-specific adjusted EPRA earnings per share increased 10.7% year-on-year to EUR 0.20 , on track to reach our guidance of EUR 0.80–EUR 0.82 for the calendar year. Now, I hand over to Martin to cover valuations, funding, and our outlook.
Moving on to valuations. During Q1 and Q3 reporting, only investment properties under development are revalued, while there's no revaluation of the standing portfolio. The gross asset value of our portfolio grew to EUR 14 billion, up 2.8% compared to year-end 2023. The Q1 2024 revaluation amounts to EUR 166.7 million, driven by our developments and reflecting the leasing and construction progress on those. Of our 23.1 million sq m land bank, 17.5 million sq m is owned and on balance sheet. The remaining 5.5 million sq m is under option. With the 50% build-up ratio, we need 2 sq m of land for 1 sq m of GLA, which means we can build over 11 million sq m of GLA on our current land bank.
Taking into account the average construction cost of EUR 500 per square meter and land prices of EUR 50 per square meter, the total investment cost for one square meter of GLA comes to EUR 600. This, while the standing portfolio is valued around EUR 950 per square meter, allows us to realize the potential development profit of EUR 350 per square meter. We have conservative valuation yields. CTP reversionary yield now stands at 7.2%. Looking ahead, after the 80 basis points increase we experienced in the last two years, we expect no further material yield widening. However, we do foresee further positive ERV growth on the back of continued tenant demand, due to the positive impact of the secular growth drivers in the CEE region.
In most CEE markets, inflation-adjusted real rents remain lower than 15 years ago, illustrating both the affordability for our tenants as well as the rental growth potential. Our EPRA net tangible asset per share increased from EUR 15.92 at year-end 2023 to EUR 16.50 at the 31st of March 2024, representing an increase of 3.7%. We have a robust balance sheet and strong access to multiple pools of capital. In total, we raised EUR 1.1 billion year to date. In February, we went back to the bond market after nearly two years as pricing normalized. We issued a EUR 750 million six-year bond at mid- swap, plus 220 basis points, which was more than 5 times oversubscribed, despite us upsizing from EUR 500 million.
Together with the bond issuance, we launched a tender offer and repurchased short-dated bonds with a total nominal amount of EUR 250 million. Our pro forma cash position stands at EUR 1.4 billion, more than sufficient to meet our cash needs for the next 12 months. Including our RCF, which we increased to EUR 550 million, our pro forma liquidity position amounts to nearly EUR 2 billion. Our average debt maturity stands at 5.2 years, with no material debt maturity until June 2025. At the end of the quarter, CTP's average cost of debt came to 2.13%. This will continue to tick up going forward, as we bring on new funding to finance our development-led growth. Our higher-yielding portfolio and market-leading development yield on cost allows us to grow profitably, even with higher funding costs. 99.6% of the debt is fixed or hedged until maturity.
Thanks to our strong cash flow-generating portfolio, we have a healthy interest coverage ratio of 3.4 times, while our normalized net debt to EBITDA stands at 9.1 times. Our LTV ratio was 45.9%, down 10 basis points compared to year-end 2023, driven by development completions. This is slightly above our 40%-45% target range, but we expect the LTV to come down as the revaluations of the developments become fully booked. We continue to deem this LTV range to be appropriate, given the high-yielding nature of our portfolio. We are confident in the outlook for CTP, and despite some slowdown in the macro 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, which sets us apart from other players in the sector. We confirm our EPS guidance of EUR 0.80-EUR 0.82 for 2024, and we target to reach annual rental income of EUR 1 billion by 2027, and are on track to reach 20 million sq m of GLA and annual rental income of EUR 1.2 billion before the end of the decade. Thank you for your attention, and we now welcome your questions.
... Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Vanessa Guy from JP Morgan. Vanessa, your line is now open.
Hi. Good morning. Thanks for your presentation. I have three questions. So the first one is on the yield on cost. If you could give some color on how this is developing outside of the CEE region. The second one is more on the like-for-like rental growth, and what are, what are your expectations for the rest of the year? And then the final one is on data centers. So you commented in your last call that you were looking into this, and I would like to know if there, if there have been any developments on this front. Thank you.
Yeah. Hi, Vanessa. Thank you for those questions. Yeah, so in terms of yield on cost, outside of CEE, as you see, we target the 11% in our core markets. In Germany, we are probably getting 9%-9.5% in a couple of our projects. So we don't get to the 10, but we confirm the 10% plus across the whole portfolio. In terms of like-for-like,
Maybe, maybe, Richard, I can add one comment to that Yield on Cost outside of CEE, because also we see construction costs coming down in Germany, for example. So we may be not to around nine, the number, I think that's the right number you mentioned, but maybe even a bit up of nine, north of nine, even also in Germany, because of the fact that there is indeed a construction cost coming down, which helps us a little bit in Germany.
Yeah. Thank you. Thanks, Remon. And then in terms of the like-for-like for the rest of the year, excuse me. Almost all of the indexation clauses take effect on the first of January, which is why we see pretty much our guidance reached for the full year reached in Q1. We do have a few leases where the indexation is first of March or first of April. But going forward, any real change in the like-for-like will be driven by our capacity to capture reversionary growth. As you know, we have a reversionary potential of 14.5%.
At the end of last year, we continued to see ERVs climbing higher in most of our markets. So, we think we're in a good place to deliver on 5% plus. And then finally, on the question on data centers, we are still in research mode there, checking out where and how we think we would possibly be able to fit them into our park network. If you look at our tenant mix, we have a very strong percentage of manufacturing. Around half of our tenants are manufacturing, so we're quite used to the idea of needing a lot of energy. So we do see...
We think that we will see a number of opportunities across our network, also in one or the other brownfield in Germany.
Thank you. Very clear.
Our next question comes from Bart Gysens, from Morgan Stanley.
Yeah, hi, good morning. Bart Gysens from Morgan Stanley. Look, everything is clearly going very well operationally, but we saw vacancy tick up a bit to 7%. And I don't want to put too much emphasis on a one-quarter move, right? But could you perhaps provide a little bit of color on, is this a timing thing? Is this a one-quarter thing? Is it strategically that you allow your vacancy to go up a little bit more? And perhaps a bit of color on how you could see this develop over the year. Thank you.
Hey, thanks, Bart. Yeah, happy to take that. Yeah, well, we have been in around 93%-96% vacancy over I think the past 10-20 years. So yeah, it's a bit of a fluctuation. But we would remain on target to be around 95%. In some markets, a bit higher, others a bit lower. But average portfolio, 95% occupancy remains the target. We see strong demand, as Richard explained also in introduction. We've done more deals than we've done same quarter 2023. So closed some lease contracts, but also we have issued way more proposals. So there are and there is good demand for Central Europe in particular at the moment, because obviously that is very much the portfolio.
Germany is now about building new stuff and getting sites prepared and doing rental growth, which we do successfully. But anyway, yeah, so we see demand coming from existing clients a lot for the region of Central Europe, for nearshoring, for manufacturing, cost-effective location, all kind of different sectors, semiconductor business, but also automotive business, et cetera. At the same time, with consumer spending and the lack of modern space in places like Romania or Hungary or Serbia, we do see good demand and 50/50, as Richard said, manufacturing and the rest is logistics and all of that. So, no, quite positive.
And with regards to Germany, again, we also signed a pre-lease with a Taiwanese semiconductor producer, if you like, part of ecosystem, part of the network we have in Taiwan, where we have been active for more than two decades, a company called Quanta, and for them, we're gonna build a super high-tech facility in Germany, in Jülich, close to Aachen. So also new developments have started in Germany, but overall, good and strong demand from the different industries.
Yeah, and then, but maybe, maybe to add to that-
Great. Thank you very much.
Maybe to add on that, but if you look to Q1, Q1 leasing is always slightly lower than other quarters. So typically you see the take-up in leasing from Q2 onwards. So it's naturally you see sometimes the quarterly volatility, so you shouldn't read too much into that. If we look, for example, into April, in April already, we signed more than 200,000 sq m of new leases. So that continued demand is going on and like Remon said, we expect that occupancy to remain around 95%.
Great. Thank you for the color. Thank you.
Our next question comes from Marios Bastou from Bernstein.
Great, thank you. Good morning, Marios here from Bernstein. Thanks for taking my questions. Just two remaining questions from my side. You're still targeting a range of the 1-1.5 million square meter development completions. You're mentioning quite a few times that demand is very strong, so do you think you'll be maybe towards the upper end of this range for this year? And then secondly, just on your average monthly rents for leases signed over Q1, I see they're up year-on-year, but more broadly in line with the full year 2023 average, and not the levels you saw in the second half of last year. So any further color here will be appreciated. Thank you.
Yeah, Marios, Martin here, and maybe to start with the last question, that's more due to the country mix you have. So as you know, of course, the rental levels we are signing in the different countries are at different stages. So in Czech, we have, of course, seen much more rental growth already in the past years, while other countries, like Romania, are just at the start of the rental growth trajectory. So if you look specifically to Q1, and the average rent signed in Q1, that is purely driven by country mix. So we signed a bit less leases in Q1 in Czech Republic than we did on the average for the full of last year.
If we take away the country mix, and if we look on a country-by-country basis, we continue to see an uptick in rental growth, what Richard already was also referring to, ERVs also continuing to tick up. So that figure is really affecting the specific deals we sign and the weight of the different countries in there, rather than anything else. So overall, in 2024, we expect the figure to be higher than 2023. And then moving on to your first question on the amount of deliveries. Indeed, the guidance is between 1 and 1.5. If tenant demand remains as strong as we see now, we indeed will most likely be on the upper end of that range.
We'll give an update again at the half year where we stand, but for now, we are very comfortable with that, and most of the pipeline we have, of the 2 million will be delivered this year.
Very clear. Thank you very much.
Our next question comes from Steven Bouman from ABN AMRO.
Hi, good morning, and thank you for taking my question. Sorry for that. One follow-up on the previous question, on the vacancy. Which countries do you see the vacancy today? Is there any relationship to the weaker macro in some specific countries?
No.
No, I think... Sorry, Martin, sorry, too late. Yeah, well, the vacancy, I think if I may take this, you had the vacancy currently for CTP is in Poland. The Polish market, as you remember, we entered last year or a year before, maybe we did the acquisition. We started to build a speculative basis, and we knew that we need time to work on doing lease deals in order to get rid of vacancy in Poland, and that's where the highest vacancy is. Why is that? Well, we wanted to enter the market, make sure that we do have properties available to offer.
That was our market strategy at that time, which I'm happy to say and confirm that it worked out quite well for us, and that is the way we have been able to secure a nice position in the Polish market, which is Central Europe's largest country, and what we believe very much location where companies will continue to go to for their nearshoring for in Europe, for Europe, for manufacturing related to automotive, semiconductor industry, but also defense industry related, et cetera, et cetera. So that's, that's why. And I'm not gonna get to 95% occupancy in Poland by the end of this year, and it has never been the target. We need a bit more time for that, but the take-up is very good, and Q1, we've been able to sign leases.
Q2, we'll continue to sign. It's obviously just mostly, yeah, Q2 is stronger in terms of signing, as Martin also confirmed. So that's the one market. Other markets, core markets, low vacancy in Czech, no vacancy in Slovakia, nothing in Serbia. Maybe a bit below the 95 in Romania. We have been quite enthusiastic in Bucharest, but also on the west, along the west border with Hungary. So there, I think 93% occupancy at the moment, but I think that will close by year-end by, with 95% in Romania as well. But, yeah, we remain the kind of company who do speculative or spot speculative and always have space for tenants moving quick.
And that's, that remains the, yeah, the approach going forward, especially in this market where we see less development from other companies, either be developers, I mean, peers, because either they I don't know they are less dynamic, they don't respond quick, or they don't have the funding, or they have different funding costs, whatever it is, but this gives opportunity for us to benefit from that. I think that's how I see or how I would answer it. Martin, for you to add anything?
No, that's, that's it.
Okay, very clear. Then, one second and last question. We see more brownfield developments in Western Europe, along with densification, so higher GLA to land ratios. Given your comments on strong markets in CEE, can we expect more brownfields and densification in your countries, too, going forward?
Yeah, well-
Well, brownfields for us is mostly Germany at the moment. I think that's the only country where we are buying brownfields actively. If I'm not mistaken, yeah, we did our Vallourec deal in Mülheim, huh? So it's the hectare for an urban business park in Mülheim, close to Essen and Düsseldorf. And Wuppertal, we closed on a project in Aachen. Those are, you know, technical universities. We believe in the modernization of the German industry with all of the semiconductor initiatives, Intel, but also TSMC with Bosch. There is dozens of billions of EUR going into the industry. I would like to make sure that we are part of that.
Buying land in Germany, like brownfield, with infrastructure, utilities, and zoning, I think is better in many, many ways than doing a greenfield, so in terms of ESG, but also in terms of, yeah, permitting and the support from local authorities. So I think for us, the moment, what we look at when we look at Germany, we think this is the right time for us to enter, to continue to build land bank, which we then, over the next 5-10 years, will be able to develop our projects. So brownfields, mostly Germany. I don't think any other markets. Maybe coincidentally, we buy something here and there, but... And that will be obviously going forward. In the Czech Republic, we do brownfields as well because of a lack of land.
There is, yeah, there's just very little land available. So you're forced to buy brownfield, which is also good. We've done that. I mean, we've done that for 60, 20 years, so we continue to do so.
Okay, clear. Densification, so more GLA per land. Is that a trend that you see in your key countries?
Yeah, I think especially for the sort of, for the more urban locations, you will continue to see a densification. We plan to start our first double story building in the Czech Republic later this year, early next year. So, you know, we do start to see that, but that's gonna be in the urban locations. And your general think about Central Europe, brownfields, they're more used now for transformation into residential, as the cities in Central Europe continue to grow, as you may have seen from our Central European paper, that Central European capitals are the fastest growing in Europe.
So I think that's a trend that will go on for a couple of years, but then at some stage, yes, there will be more brownfield opportunities in Central Europe.
One more thing to add to that. Yeah, I mean, it's not like... Brownfield is not always, for us, a location where we would build pure logistics. With logistics, I mean, you know, a big warehouse, and then 7% is office or sanitary areas, 7% of the total lettable. I mean, if we look at brownfield locations, a la Wuppertal, Mülheim, or Rastatt, which we acquired last year in Germany, or Aachen, the one I mentioned, they're beautiful locations. They are inner-city, urban business park type of. So the kind of property we would develop there is not a big box warehouse. It's much more, could be lab space, could be space with R&D facilities, could be-
... way higher office, and other, space and not just warehouse, could be a test center, repairment center, clean rooms could be, et cetera, et cetera. So then, yes, per square meter of land, you will see indeed, more potential and higher, and more, more square meter of lettable area indeed. Yeah, that is definitely, that is also because those locations are good enough and, and better than, a typical outside of town logistics site. Yes.
Okay, very clear. Thank you.
Our next question comes from Vinci Lee from Kempen.
Hi, good morning, Vinci Lee from Kempen here. Thank you for taking my questions. First one on the pre-let rate for the pipeline. At 43%, as you mentioned, it is in line with historical rates if you look back at 2022 and before, but if compared to last year, that's a bit lower. Last year was at 49%, so was there anything, like, exceptional in 2023? So could you add a bit more color there? And the second one on guidance. So if we take the quarterly run rate and annualize that, then you're already at the lower end of guidance, and then I think we can agree that throughout the year, the run rate will actually improve because we will capture more reversion and also complete more developments. So could you add a bit more color there as well?
Also, if there is an update, when should we expect that? Thank you.
Yeah. So maybe to start with the last question on guidance. We confirmed our guidance, EUR 0.80-EUR 0.82. Indeed, if you look at run rate, we are on track. You will indeed have some more deliveries and indeed, reversion contributing to that in the Q2, Q3 and Q4 of the year. On the other hand, we also, as you know, run, given our development exposure, a relatively high cash balance. And see that, of course, reflected in the cost of debt, with the new cost of debt coming online. So we did, of course, bond in February, with a coupon of 4.75%.
If you currently look at marginal cost of debt, it's in the range of 4.50-4.75. Of course, if you bring on those new loans and bonds, you see that reflected in the financial expenses. So that's why we stick to the guidance we have given. We will confirm or upgrade or change our guidance, and we look at it quarter by quarter. At this stage, we are very comfortable with the range of 80-82. But we'll give you an update again at the H1. And then, to move to your first question, which was around the pre-let.
Indeed, you refer to the figure of last year, which we had at the Q1. As you might remember, that was excluding Poland, where we started, like Remon mentioned before, some more speculative developments. The figure this year includes Poland. So there is a slight difference in the scope there. So if you look to overall pre-letting, we are very much on track and similar trends than last year.
Yeah, and our target is to deliver the buildings-
Okay, very clear. Thank you.
Our target is to deliver the buildings at, like, 90% on completion. You know, as you've seen in the last years, our deliveries are normally loaded towards the back end of the year as the summer is the main construction season. So, we're very comfortable with where we are at the moment. You know, leasing later is better for our yield on cost because rents continue to go high.
Very clear. Thank you.
Our next question come from Rob Jones from BNP Paribas.
Morning, team. How are we doing? A couple of quick ones. Firstly, thank you for the detail on the delta between the portfolio value per square meter and the all-in development cost per square meter to give us a real clear computation as to how we can think about the current future potential for the development pipeline. When I think about new land acquisitions, I appreciate you've got a huge amount of land and thus buildable area to be getting on with for the next 8-10 years. But when I think about new land acquisitions, do you have a view in terms of the expected yield on cost differential between land that you might be buying over the next 12+ months versus existing land bank?
The second question was just briefly on solar panels, because I'm aware that I haven't got this in my model. 15% yield on cost, obviously very high, but remind me what the total planned investment is there. And then the third one, and final one, is just on the dividend. I think you've given a scrip option this year, and I don't know whether you know yet what the scrip take-up is likely to be, so I can think about share count in the model. And then the very final one, Richard, happy birthday a few days early. It looked like a serious amount of cake consumption across the group. Thanks.
Thanks very much, Rob. Yeah, maybe I answer the questions, you know, the other way around. If we look at the dividend, I think Remon has said that since he has paid off the vendor loan to the heirs of his ex-partner, Eddy, he will be taking almost all of his dividend in scrip. Slight correction, technically, it's a scrip dividend with the option for cash. So, for people who opt for cash. So we would expect more than 75%, more like 80+, to be retained within the company.
In terms of the solar, yield on cost, one megawatt peak costs you around EUR 750,000 to install. So I think that should be good for you to, for your model. And then in terms of the new land, so when we calculate yield on cost, we calculate based on the market value of the land. So in reality, if we're buying land today, that's at the current market value, which is the same math as if we are mobilizing part of our land bank. So we have the same thresholds to buy land as we do to activate.
But, Richard, there's one-
Thank you very much.
There's one comment to buying land, because the most of the land we buy, we buy land within existing business parks. So we grow parks. And then the benefit is that if you do so, then, your all your infrastructure costs, utilities, all of what you do, obviously, the larger the park, the better it becomes, right? Because then you can divide all those costs among more sq M of land. So if you look at land banking, even today, before this call, Richard, Maarten, and myself, we had a talk about some other land that is land next door to parks which we operate. And then we think we can grow the park, and so that makes sense.
So if that's where you can buy land, which will help you to continue do your 10% plus yield or 10+ yield on cost kind of numbers. Yeah, that's always... We buy a huge amount of land, right? I also say to the guys, "Let's buy less land. Let's focus on building on land we already have." But anyway, so we seem to like do that, and we need to be very careful. And if so, we obviously have a, an, like, a kind of investment committee within CTP. Obviously, we look at different opportunities which we consider. But yeah, we would then always look at, okay, can we hit... First question, can we be north of 10% yield on cost in the first place? And buying land with an existing business park, growing existing business parks will help.
Yeah. And so,
Great. Thanks, Remo.
And if you look at the total land bank, the 23.4 million sq m , you know, 77% of that is in and around existing parks, and another 15% is the land for a new park, and the park for us is more than 100,000 sq m . So over 90% of all the land bank is for is in and around our existing parks.
Okay, thank you.
As a reminder, to ask a question, please press star followed by one on your telephone keypad. Our next question comes from Suraj Gulla from Green Street.
Thank you. Good morning, all. You mentioned on a few occasions that you expect ERVs to continue to grow and, you know, I just wanted to get a bit of a sense on if you have some additional color on which of your markets you expect to see the highest growth versus the lowest, and how much you think you'd expect them to grow over the next 1-2 years based on some of the structural tailwinds you've referred to. Would, you know, around 5% per annum be reasonable on average?
Hi, so if you look to ERV growth and the quantum, we haven't given a specific guidance on the amounts, but the figures you mentioned, slightly ahead of indexation, can be reasonable, as we see continued more demand. So you would expect that ERV growth outpaces indexation a bit, but that's the theoretical analysis of that. If you look to with specific countries, as I said earlier, it depends a bit on what states they are in. So, for example, going back to Czech Republic, we have seen already a lot of ERV growth there. So for us, there, the potential is more to capture that.
So the highest reversionary potential we have in Czech next to Germany but that's a bit of course our specific portfolio in Germany which is under-rented and where we have the catch-up potential with rents on expiry increasing 30%-40%. But if you look to the CEE markets Czech has seen the most rental growth and like I said opportunity for us to capture. Other markets we are just at the beginning of that. Romania we only start to see the rental growth so there's much more potential there long term. Slovakia also have seen some opportunities for rental growth there.
So it depends a bit on where the market is, simply in terms of maturity. But on average, we expect to see rents growing in all of our markets. The quantum might be slightly different from market to market.
Perfect. Thank you, Martin. Very clear.
Our next question comes from Jonathan Kownator for Goldman Sachs.
... Good morning. Thank you for taking my question. Just one, please. Obviously, you're describing strong markets. You have a huge land bank available. What would be the conditions for you, to be able to accelerate your development pipeline, if you think that would make any sort of sense? Thank you.
Yeah, thanks, Jonathan. Look, I mean, we're constantly looking at the market in all of our, you know, in everywhere across our region. You know, and if you like what Remon said earlier. Now, our core business is we build a building next to one or ones that we already own in parks that we already own, and we lease those to tenants who we already know. So the real guide for us will be when we feel the tenant demand getting even stronger or firming up again. So, you know, that's something that we kind of review on an ongoing basis.
You know, we had two million sq m under construction at the end of 2023. We delivered 169,000 in Q1. We started the same amount, so we have two million sq m still under construction. So for now, we feel very comfortable reloading the pipeline. And there can come a time where we say, "Yeah, we can, we think we can also go a bit quicker as well.
Should we think that the 2 million square meter is a good number to have a run rate going forward, right?
Yeah. I mean, yes, but that there's not all the things that we're gonna be able to deliver within the 12-month period.
Okay. Very clear. Thank you.
That was our last audio question. To the webcast question. Our first question comes from Francesca Ferragina from ING. The question is: where do you expect LTV to land by year-end? Also, how do you expect the average cost of debt to evolve? Where to expect the stabilization at this level for the rest of the year? Thanks.
Yeah. Hi, Francesca. So if you look to cost of debt, as said in one of the earlier answers, that will tick up over the year, as we continue to develop and therefore continue to bring on new debt. Indeed, if you look to our existing debt stack, and that's all fixed or hedged until maturity , and we have no expiries during the year. The first major expiry is only in June 2025. So our cost of debt for the existing debt stack doesn't increase and remains, of course, the low level that we have been able to secure by issuing the bonds in 2020, 2021, and beginning of 2022.
But the average cost of debt will tick up as we bring on new debt at higher rates. But still, if you look, of course, and then we compare the cost of debt we have to bear with the investment yield, if we have a yield on cost above 10%, borrowing at 4.5% remains a very lucrative business. And you can see that in our P&L, also, of course, the valuation uplifts we are able to book. So that's, of course... The increase in cost of debt goes hand in hand with all the development profits we are able to realize. And then on the LTV, where do we expect it to end by year-end?
I would expect it to be around 45%. Of course, main impact will be what the valuations do. What we said on that is that we don't expect any material further yield widening, but you also heard we expect further ERRV growth. So you can do the math on what that means for valuations. And then the other part, which of course fits into that, how much land do we buy? And do we buy it with cash, or do we buy it, secure it basically through options? Our preference is to secure through options, because that's a less capital-intensive way of securing land. But there might be cases in which we do cash acquisitions, as that simply is what the seller wants.
So there will be a better balance between the acquisitions we do, the amount of deliveries we are able to complete. But it comes as well back to the previous questions also on dividend. We will be able to retain the vast majority of our earnings, as we expect a large take-up of scrip. So all those things feed into the LTV, and then we expect it to be around 45%. So basically, the upper end of our guidance range.
Yeah. And Francesca, just to follow up quickly on that. You know, Martin mentioned the acquisition opportunities. Like in Q4 of 2023, we had a couple of opportunities to buy something. The seller had to close before year-end. We had to pay cash, but we were able to get a very, very attractive deal on that. And as a consequence of that, our year-end cost wasn't the 45 earlier, because even the loan value wasn't the 45 from 4 that it would have been, but it was the 46 at the year-end. But what you see is in the like in a normal quarter, you would expect us to be gradually deleveraging as we deliver deliveries or we deliver developments.
As Martin said, we're expecting values to tick up, which will also contribute to the deleveraging.
Yeah. And as you know, we also look closely at our cash flow metrics because LTV is not something we look at in isolation. We look at it together with our net debt to EBITDA stands. And as you might have seen, our normalized net debt to EBITDA now stands at 9.1x, and we are very comfortable with that. We target to keep that below 10x.
We currently have no further questions, so we'll hand back over to the management team to conclude.
Yeah. We'd just like to thank everyone for their, for their interest, for their questions, and wish you all a great day. Thank you very much, everyone.
Thank you.
That concludes today's call. Thank you for joining. You may now disconnect your line.