Good morning from Prague here at CTP's headquarters, and thank you for joining and for dialing in with some good news. So far, Q1 has been a bit bumpy and a bit interesting, I would say, for CTP, for our clients. The markets have seen a lot of change and opportunity, which we like at CTP. We are an entrepreneurial property company, very dynamic and ready to make quick decisions with money in hand so that the market where we are currently definitely is an interesting market and circumstances which we will do our very best to benefit from. It's about, I think, de-globalization. It's about nearshoring. It's about bringing production to the markets where your clients are. We have 450 million consumers in Europe. We see a lot of companies coming to Europe to set up business, to grow their business.
That's what we have been doing for the past more than two decades, to help companies set up business and grow their business in Central Europe for the European market. Nowadays we see Asian companies coming in. I've just returned back from another trip to Asia to visit our clients who are bringing more business to Europe for the European market, as explained. Multiple reasons, decarbonization, tariffs is an issue, geopolitical circumstances, so there are lots of reasons why to bring production or e-commerce activities to Europe for European markets going forward. Different industries, automotive still very interesting, e-commerce, obviously, technology, the electronics sector, AI-driven maybe push, but also data center and not necessarily us building data centers, but many of our clients somehow involved in the data center industry, especially Taiwanese, when I refer to the Asian clients.
A lot of change going on and definitely, interesting, for us to be part of. With regards to business, so far Q1 has been good. Back to the Asian is around 20% of our new business. We still do a lot of business with existing clients, as you know. That is still the largest driver at CTP. Business we do for existing clients who came over, who started to work with CTP and then continue to grow. Maybe also because we offer small, medium-sized properties to help them get started. When they need more, we can offer them a larger building, sometimes within the same park.
We can do an extension, or also we see that we do for existing clients, property solutions in different parts of the portfolio, which we are currently in 10 markets and looking at other markets to open up as well. We did sign 416,000 sq m of leases during Q1 of 2025, and 416 is almost 25% up compared to last year. We have done more leases, we signed more leases, and I think more importantly, also we continue to collect more euros per sq m per month. We continue to see rental growth, around 3% more than we got for the same sq m a year ago. Looking forward, I mentioned nearshoring. One of the drivers, we will also see large fashion retailers, who continue to grow footprint. I mentioned fashion retailers the other day, but it is also pet food. Yeah, Europeans, they love pets.
They have rabbits and donkeys, and pet food is just a great industry to be part of. We do that as well. Also, pharmaceutical, we have seen many of our clients grow their business. That is all, of course, also to do with the consumer spending, which is just growing in Central European countries because people make more money. That is what we do as well. Defense industry, we see consumer electronics, we see, yes, it is very diverse. Actually, we have so many different clients, multinationals or SMEs in different businesses. Not overexposed to one industry or one specific client, but rather diversify. Tenants are happy, and that is very important. We are almost 1,000 people here at CTP, and I always say, keep your clients happy. Make sure that they can do their business.
If they do their business, if they're successful, they will come to you for more space, or maybe they will talk to you, with their suppliers, with their friends, and then through them you can get more business. That is, number one. Talk to your clients and make sure clients are happy, buildings are in excellent condition. That is the target. Retention rate 90%. The park model continues to be successful, growing with existing tenants, offering new tenants attractive locations. Obviously, the concept and the model of having these CT park projects with CTP people on site in the parks, look after the buildings, look after tenants, close to where the action is, stay connected to the core business.
Especially nowadays when we see, CTP growing, it's very important to, you know, stay and stick to the core business and, and create micro teams so they can actually focus on, on the business going forward. Yeah, maybe break it down, operator. You know, the, the, our business responsible for the income producing part, stable occupancy 93%, around 93%. Wald six and a half years. And, together is a 13.4 million sq m of lettable area. And that is good for EUR 750 million of Rental Income, with more than 1,500 different clients and tenants from all kinds of different industries, in those buildings. That's for the operator. Jump to the developer, in-house construction company. very passionate about building new buildings.
We continue to do, prepare a lot of projects and do a lot of innovations, making buildings better, new buildings, but also the existing buildings, continue to invest, make sure that these are in excellent condition. We see lots of opportunities to do better, to, yeah, also to create parks with more amenities, and services, and of course utilities on site at 10% yield on cost, as we've been doing. Big thank you to the team of in-house design procurement, all of the people involved in the construction management, to build good quality properties to last, genetic designed. Q1 in terms of deliveries has been quite small, low, below 100,000 sq m, but we still have a 1.9 million sq m under construction for most of that. I think we can complete this year.
Almost 80%, 80% of the 1.9 million sq m under construction is within existing business parks. When we started with a park, we bought land, we do a nice master plan, we start to build infrastructure and one after the other building is being built. We have more land to go with zoning, with permits, with infrastructure and utilities to build on those land plots, for the same company or for other companies, and to continue to build larger business parks. That is 80% of all what we have on the construction. Benefit is that we know the location, know the authorities, we have infrastructure. Limited risk, we can start a development and then see how we can lease it up and then complete the building on time.
When this 1.9 million sq m is completed, we think it will produce another EUR 148 million of rental income. We think we do that, north of 10% yield on cost. Yeah, we think that by end of this year, Q1 into next year, most of that will be leased and will become part of the portfolio and then will be transferred to the operator. Poland, good demand, largest, country can be very competitive. We got a hold of a few very nice sites there where we can do nice projects for good clients. Yeah. Overall, quite satisfied with what we see in Poland, the engine of Central Europe. If Central Europe is the engine of Europe, then within Central Europe, Poland, definitely a large opportunity. We are moving on in Germany. As you remember, we bought some land sites. Two things in Germany.
One is the Deutsche Industrie. That's the portfolio of properties we bought, 100 buildings. We are working on the clients, make sure buildings are in good condition. We need to invest here and there, but in return we get rental growth. At the same time, the future of CTP Germany is much more to develop. We have been very lucky, I think, that we have got a hold of a couple of land sites: Düsseldorf, Mülheim, also Stuttgart, Rastatt, et cetera, Krefeld, where we are currently either under construction or preparing for construction next year. We are quite advanced at the same time doing the leasing.
It is a mix of SMEs or small business units, huh, let's say 450, 500, maybe 1,000 sq m, 800, 800 sq m as well, below 1,000 with a loading dock in a good location in the city center, close to the city center. In most of the locations it is Rastatt, Krefeld, those locations I refer to. You also have larger sites, Mülheim, Düsseldorf. Mülheim will start construction next year. I think Düsseldorf is going to take a bit longer, but we have the full support of the city of Düsseldorf as well. Yeah, a lot of opportunity. I continue to visit Germany every week. The management team has grown a lot in terms of responsibility, in terms of where we want to go with CTP Germany for the coming years. We have a nice business plan for 2030.
That looks good. Overall, quite positive and maybe a bit better than you would expect. Seems to be good demand in Europe for Europe. Definitely, CTP with our activities in Central Europe, with the strong client base we have, with all of the local knowledge, I think we are in a good position. Thank you very much for your attention. I will be available for any questions if you have later on. I will now hand over to Maarten. Thank you.
Moving on to the financial highlights. The like-for-like rental growth came to 4.2% in Q1 2025, driven by indexation and strong rental reversion. Occupancy remained stable at 93%. Our gross rental income increased by 15.9% year- on- year to EUR 182.5 million.
Net rental income went up by 16.8% year- on- year as we reduced the service charge leakage further. Consequently, the annualized to GRI ratio came to 98.3%. Annualized rental income increased to EUR 748 million, illustrating the strong cash flow generation of our portfolio. We confirm our target to reach an annualized rental income of EUR 1 billion by 2027. The company specific adjusted EPRA earnings per share increased 6.9% year- on- year to EUR 0.21 on track to reach our guidance for EUR 0.25. As highlighted with the 2024 results, we did a material amount of refinancing in 2024. We repriced the vast majority of our debt stack. This results in a slight headwind for the 2025 EPS, but we expect to return to double digit EPS growth from 2026 onwards.
Now looking at the valuation results for the Q1 and Q3 results, only investment properties under development are revalued. In Q1 2025, the revaluation amounted to EUR 156.2 million, driven by the construction and leasing progress on our developments. Our total gross assets value now stands at EUR 16.3 billion, up 2.3% in Q1 2025 and 16.7% year- on- year. CTP's reversionary yield stands at a conservative 7.1%. We saw the first yield compression in the second half of last year, and we expect both further yield compression in 2025 as well as positive EV growth for the CEE region. In most CEE markets, inflation-resistant real rents remain lower than 15 years ago, illustrating the affordability of the region for our tenants, as well as the midterm rental growth potential.
This is also illustrated by the new leases that we signed in Q1 2025, which were 3% higher than the new leases signed in Q1 2024. We also saw transaction markets reopening across Europe as there is more clarity around funding costs, and especially on the private equity side, its funds coming to their maturity, we expect to see more churn. This will further support our valuations, but as well offer opportunities for us. Our EPRA net tangible assets per share increased from EUR 18.08 at year end 2024 to EUR 18.58 at quarter end, representing an increase of 2.8%. Year- on -year, the increase was 12.6%. With this NTA growth and our dividend, we delivered a total accounting return of 16% in the last 12 months to our shareholders. I hand over to Richard.
In Q1 2025, we raised EUR 1.2 billion of debt to further improve our liquidity position. We issued EUR 1 billion of bonds directly after our full year 2024 results, seizing the market opportunity ahead of the tariff announcements and the subsequent market turmoil. In addition, we closed our inaugural samurai loan of JPY 30 billion, the equivalent of EUR 185 million. Diversifying the sources of our funding is one of our main priorities. We transformed CTP from a purely euro senior secured financing structure in 2020 to now having a largely unsecured financing structure. We did this through bonds, private placements, unsecured syndicated bank loans, consistent with our stable investment grade rating.
Adding the Japanese yen market to our funding mix further improves our position as the Japanese Yen market, which is the world's third largest lending market after US dollars and euros, is competitive at different times than the euro market. We continue to actively manage the loan portfolio in Q1 2025 and negotiated margin reductions on a further EUR 159 million of secured bank loans. In total, we have renegotiated or repaid over EUR 1.1 billion of our most expensive bank loans in recent months. Our cash position stands at EUR 1.8 billion. When including our RCF, our liquidity position amounts to EUR 3.1 billion, more than sufficient to meet our cash needs for the next 12 months. The average maturity of our debt stands at 5.1 years, with only EUR 547 million of debt maturities in 2025.
At the end of the quarter, CTP's average cost of debt came to 2.9%, slightly down compared to year end 2024, as the renegotiated secured loans with lower margins reduced our funding costs from Q1. Our marginal cost of funding is currently around 4% for five year money. Thanks to our strong cash generating portfolio, we have a healthy interest coverage ratio of 2.5 times, while our normalized net debt to EBITDA remains stable at 9.1 times. As shown during our last capital markets day, thanks to our market leading development yield on cost of over 10%, each euro we invest in our pipeline increases our ICR and decreases our net debt to EBITDA. Our loan to value stands at 45.3%, stable from year end 2024. We are confident in the outlook for CTP. Our leasing remains strong.
We see nearshoring speeding up in many industries, with production in Europe for Europe continuing to drive demand. Our pipeline is highly profitable and our growth is tenant led. Thanks to our industry leading yield on cost of over 10%, we are able to deliver sustainable and profitable organic growth while maintaining our strong financial position. We confirm our EPS guidance of EUR 0.86-EUR 0.88 for 2025, representing 8%-10% growth compared to 2024. We expect to deliver 1.2-1.7 million sq m of developments this year, in line with our long-term growth targets. Thank you for your attention. We now welcome your questions.
Our first question comes from Marios Pastou from Bernstein. Your line is open. Please go ahead.
Good morning. Thank you for taking my question. Just two from my side. Firstly, very positive leasing in the first quarter.
Can you comment on how this has trended over the second quarter so far? Are you seeing any change in momentum, or any occupiers delaying their decision making in light of uncertainties? Secondly, maybe if we move to Romania, are you seeing any changes in occupier intentions considering the ongoing headlines over elections? Thank you.
Hi Marios, good morning. I think Remon will comment on the leasing question, but let me take the first question on Romania. Ultimately, yeah, what you see is that political volatility is everywhere in Europe. We see that across different markets. Many times it's more headlines in the news than it impacts our business. We have, for example, seen in Poland, and less European friendly government for four years.
Poland has been the fastest growing market or in the top three of fastest growing markets in Europe in that period. Unless governments start to run fiscal irresponsible policies, we do not see it impact the overall demand. We have not seen a change from our tenants in Romania in terms of behavior. We will see what the elections will result in. Overall, consumers will keep spending, and that is the most important, of course, that drives a lot of the demand. As you know, we have quite a bit of retailers in Romania, 3PLs. It is driven by the local consumption, et cetera. That is ultimately driving demand. We do not expect and we do not foresee at this state it to have any impact on our business.
I'll let Remon comment on the Q2 leasing.
Thank you. Q2 leasing is positive so far. We will soon report on that officially, but so far it looks even better than Q1. With regards to what Maarten said about all the things happening, maybe a bit more unstable nowadays, and not necessarily just 2025, but also what we have seen in the past years, this also supports the idea of leasing property, renting property instead of maybe owning. Even though leasing gives more flexibility, we can do 10 year leases, we can do break at year five. I think that is not necessarily bad for our industry. For some businesses, they would maybe rather go for lease in compared to ownership. It does not have to be bad necessarily.
Also, yeah, if it's a bit bumpy here and there, or if you have what you just referred to, different governments and whatnot, that maybe keeps away investors. We don't have an exit model. It's not like we need to build something and rent it and then sell it on to some investor. Maybe that also gives us an opportunity compared to our peers, as we are, that we develop to hold, as you know, in line with the business park concept, building parks for different companies and bringing amenities and utilities and facilities for companies to continue to grow their business. These things don't have to necessarily be bad for us, for CTP as one of the players.
With regards to Romania, you know that we are big fans and we like Romania, we like to invest and do business in Romania. We like that because our clients like it. Otherwise, we would not continue to develop our portfolio. Romania turned into a regional, especially Bucharest regional distribution logistics center kind of location. Because of all the infrastructure which has been developed, because consumer spending has increased so much that our clients now choose Bucharest for the regional logistics and distribution. I refer to fashion retailers, but also other companies, pet food producers, what do you not, and Pepco, those kind of companies, IKEA, LPP, et cetera. They pick Bucharest as a hub for their regional distribution. What they do, they get supply in from Asia sometimes, yeah, through the Constanța harbor.
If it's fashion retailers, then it comes to their distribution center in Bucharest. From there, they serve the Bucharest market, 3 million people, the Romania market, 20 million people. Out of Bucharest, they can also do the region. The region often includes the Balkan area, but also Bulgaria, Greece, and sometimes even to Istanbul, which is only 450 km away from Bucharest. Nowadays, all of this road network has been perfectly well developed. Bucharest has turned into a very interesting location for regional logistics and distribution. So far, quite positive. We see good take up and are positive about the future. Outlook is good.
Our next question comes from John Vuong from Kempen. Your line is open. Please go ahead.
Hi, good morning. Thank you for taking my questions.
You mentioned that you're seeing investment opportunities from churn in PE funds. Would it be fair to assume that these will be more the value add type of assets, given your return requirements on the pipeline?
Hey, John. Yes, that's correct. Similar, of course, to what we did in Germany, yeah, when we entered Deutschen Industrie. We, of course, have higher return requirements than maybe pension fund insurance money. We can have relatively dry, stable assets. We always look to add value. Where can we add with our in-house teams, drive the operations, whether it's through regearing the lease, whether it's through refurbishment, whether it's through extensions of the building.
Always, more on the value add side, is more interesting for us, given our cost of capital and our ability, of course, to add value to those properties. We are looking at that across markets in Europe. We might do here and there some core stuff, but it will be more skewed indeed to the value add. That is more our sweet spot.
Okay, Claire. And just to follow up on Romania, have you changed anything in your approach to Romania or perhaps differently? How are you preparing for a potential change in leadership?
No, business as usual. What we do is, we have a portfolio of 3.3 or 3 point something million sq m and focus on keeping occupancy high.
We will continue to develop land and to build buildings subject to demand. For the moment, as I said, we see strong and good demand. Yeah, we will be cautious and careful, and we will adjust to the circumstances immediately. As you know, we are very reactive and close to the market. We think that people will continue to eat and buy t-shirts, but we will be careful.
Okay, fair. Thank you. That is it from my side.
As a reminder, to ask a question, please press star and the number one on your telephone keypad. If joining us on the webcast, please use the question box with the video player. Our next question, Pierre Clouard from Jefferies. Your line is open. Please go ahead.
Thank you. Good morning. A question for you. Let us take them one by one.
This one is on the pre-letting ratio of your new deliveries. Can you remind us what was the pre-letting ratio in Q4 2024 for Q1 2025 deliveries? What is the pre-letting ratio for Q2 deliveries today?
We always report the pre-letting for the year. As you might remember, what we reported is 35% pre-let for the 2025 deliveries as at 31st December 2024. That increased currently, as you see, which is the normal trend that we see through the year as our deliveries are skewed to the fourth quarter. Currently, it is 42% for the deliveries this year, despite having delivered the 95,000 sq m in Q1, 100% pre-let. We always have that continued increase over the quarter. The Q1 deliveries were not fully pre-let as at 31st December.
We did some leasing in Q1 and reached 100%. That is how we also will continue to the Q2, Q3, and Q4 deliveries, which are now 42% pre-let at this stage and where we expect, of course, consistent with our track record, to reach the 80-90% at delivery. What we did in Q1 was even better than that.
You are not seeing any decline or, let's say, waiting systems between Q4 and Q1, and there is nothing to mention for Q2 deliveries.
I think that is reflected in the increase in the leasing that we saw in Q1 with the 24% increase compared to 2024. Remon commented earlier on the ongoing strong leasing demand into Q2.
We're not seeing a material slowdown across the board.
Okay. Okay. That's good. My second question on the operation. As you mentioned, you reached 100% pre-letting rate for the new deliveries and you increased by 24% the lease sign in Q1 versus last year, but there is no improvement on the vacancy. Can you remind us what has been the absorption rate that you achieved in Q1? Do you expect any improvement of vacancy over the course of the year or not?
Yeah. If you look to the retention rate in Q1, it was 87%, so around the usual 90% that we are. We saw some churn in existing tenants, but that's normal and sometimes also good. That allows us, of course, to capture the reversion.
As long as that remains around 90%, we are pretty happy, allowing us to continue to grow with existing clients, but also in some cases, increase the rents if the tenants move out, allowing us to capture that reversion. If you look to the occupancy and break it maybe down, it's indeed 93% at group level. Two countries are a bit lower, Poland and Germany. Both have been new market entries, so part of the new market entry strategy, in line with our plan. If you look to the core markets, like Czech, Slovakia, Romania, Hungary, we are all around the 95% or slightly above. That's always our target. We target to be around the 95%, which always ensures that we have space available for the existing tenant to grow.
That is also what Remon, of course, referred to, with our focus on our business parks, growing with those existing clients in those existing locations. If you look to Poland, we are currently in the high 80s, 86-87%. By the end of the year, we expect to be more around 90%. We continue to see a good take up in Poland, both in terms of the leasing that we have signed and expected deliveries we plan to do this year. The second largest market in terms of the amount of space we have under construction. The second market where we are below, as indicated, is Germany. There also Remon referred to the split between Deutschen Industrie on one hand and the new developments on the other hand.
In the Deutschen Industrie portfolio, we are going through it on a lease by lease basis, do some refurbishments here and there. That will take some time for it to increase the occupancy. As well, with the new stuff coming online, that will, of course, have a positive impact because we have advanced leasing negotiations with the assets, for example, that we plan to develop in Mülheim. We also hope to show you at our capital markets day in September of this year and give you an update on that. When those new assets are coming online, whether it is Mülheim, whether it is Krefeld, whether it is Düsseldorf, that is a bit longer, that is two-three years from now. We will expect it also to have the positive impact on the occupancy.
That's part of the normal market entry strategy and we are ramping up also in those markets to the 95% target that we have across the group.
Mm-hmm. Okay. On the ICR, there's a slight deterioration in Q1. Where do you think the trough will be reached and where it could land? Is it in 2025 and two times or how do you see it?
No, I think we bottom out around here. If you look, and we showed you in the capital markets day last year, that every euro we invest in the developments is extremely cash flow accretive and increases and improves the ICR, but also decreases the net debt to EBITDA.
If you look at our funding mix, we already took a lot of the, or most of the repricing risk in our funding. We expect the ICR to bottom around 2.5-2.6.
Okay. That's clear. My final question, on asset valuation. You have been mentioning that you are expecting yield compression to occur in 2025. Can you give us maybe more colors on the magnitude of the yield compression that you expect, and if there are huge discrepancies among countries?
I think if you look at the transactional evidence in the investment market, it has certainly picked up a lot in the last six to nine months.
You know, there are material transactions in the largest markets in Western Europe taking place significantly below five towards four, headline market caps. There is room for some meaningful yield compression. At the same time, we would continue to expect the gap between Central European yields and Western European yields to narrow over time. We think that there is a nice potential for valuation uplift in the portfolio.
Yeah. Also, of course, in the Central and Eastern European markets, we have seen in Q4 of last year and the end of Q4, you saw Blackstone buying in Czech and Slovakia. One of our other peers bought an asset in the Czech Republic, also at yields below where prime yields are quoted.
Also in the CE markets, you see more transactional activity in Poland. There are some portfolios on the market. Overall, investment markets, of course, with more clarity on where cost of funding will be, are getting better. That is driving that yield compression where Richard was referring to. Just to be clear, we do not have it in our financial models, but we like to run a conservative profile in terms of financial metrics. Based on our conversations that we are having, we expected to see trickling through 2025. As you might remember, we saw eight basis points in the second half of last year. Might be something of a similar quantum or a bit more in the first half of this year.
Okay. That's perfect. Thank you.
Our next question comes from the webcast. From Jonathan Kownator from Goldman Sachs. He's asking, why is vacancy stuck at 93% given good demand? Is it located in older or newer buildings or in specific countries, for example, Germany?
Yeah, Jonathan, I think we answered that question already. It's driven by two countries. It also comes back to the business model that we are having. We will never target a 100% occupancy across our portfolio because that would limit our ability to grow with our existing clients. Especially that ability to grow with existing clients is very valuable for us because it de-risked basically our pipeline, and natural stream of new leasing coming in.
It also allows us typically to do a better return, because ultimately when you attract a new client, you typically have to pay more incentives than when you are expanding with an existing client. That business model is core to us. That is why, if we would get much over 95% occupancy, we would start building more to always have that space available for our existing clients to grow. That has been our strategy for the past 25 years and we continue to do that, which has allowed us to build up the market leading position, but also the very long-term client relationships that we are having.
And many of our clients, as you know, across multiple markets, across multiple of our parks, especially on the manufacturing side, we have manufacturing clients which are already in their fifth or sixth expansion with us in the last one or two decades. That is ultimately why we are running this occupancy, to have that flexibility, to continue to facilitate them and to continue to be that long-term partner for our clients.
We currently have no further questions. I would like to hand back to the management team for some closing remarks.
We would like to thank everyone for your attention and we look forward to continuing the dialogue going forward. Thanks very much, everyone. Have a good day.