Good morning. It's Remon Vos with the Q1 2023 results. Welcome to all shareholders and analysts and the community. Happy to share with you strong results for the first quarter of 2023. We've seen similar trends as we have seen during 2022 with continuous strong demand from our more than 1,000 tenants. That resulted in us signing leases with a total lettable area of 300,000 square meter during the first quarter of this year. The good news is that we've been able to sign that at an average of EUR 5.31 versus EUR 4.87 during the same period last year, Q1 of 2022. We will continue to further accelerate leasing in April. That's positive when it comes to the leasing.
With respect to the income producing part of our business, we have been able to increase rent like for like at almost 8%, 7.8% compared Q1 2023 compared to Q1 2022. I will continue to inform you on our three business units: the operator, income producing; the developer, our in-house construction business; and last but not least, our energy business. Let me start with the operator. We have under ownership almost 11 million square meters of gross lettable area. With that, CTP is now the largest listed player by GLA in Europe. We have EUR 628 million of secured rent for the next 12 months at an occupancy of approximately 94%-95%, which is similar to what we have seen last year and the years before.
We stay close to our existing clients and tenants, with whom we have been working for the past two decades. We have been able to sign two-thirds of all our leases with existing clients. These clients are more than 1,000 different companies, small, medium-sized, or multinationals, some involved in manufacturing, others are logistic service providers. There's a whole broad range of different industries, but all good and healthy growing businesses, mostly located in Central Europe. These clients, they pay, and they pay on time. We have been able to collect 99.7% of all the rent charged. That's positive. With respect to Western European markets, I can also report good news, maybe a bit more detail on Germany, where we acquired the portfolio.
The portfolio now produces around EUR 66 million compared to EUR 59 million when we bought it. That's a more than 10% increase, and we expect more increase going forward. We've also been able to hire some very talented people to grow our German team, which I'm super excited about. We have 50 people in the meantime. We have three offices: Berlin, Düsseldorf, and Stuttgart. We are well on the way to increase rent income from the portfolio which we acquired but at the same time also start to develop new property, new buildings on the land which we acquired as part of the takeover of DIR. In Germany, underway both income producing, the operator, as well as the developer.
Far Q1 this year, CTP delivered a total of 223,000 square meter at around 10% yield on cost, a bit more. High occupancy, around 90% in the meantime of all the stuff delivered to the market this year. That produces an income of around EUR 13 million per year. That was Q1. In the meantime, we have under construction approximately 1.8 million square meter in 10 countries. We expect that most of that will be completed this year and that we will be able to do similar or more growth as we've done in 2022. We will be doing that at 10% or north of 10% yield on cost because we've seen construction costs stabilize last year and come down a bit. At the same time, we also see a rental growth.
Clients are willing to pay more for the space, and that gives us opportunities maybe even to increase that 10% yield on cost to closer to 11% yield on cost. We have big plans with the developer. We have a land bank of 20 million square meter, and that is mostly land within existing business parks, land with infrastructure, with permits in parks where we have tenants and where we have people on the ground and to continue build those properties, which we do in-house. An advantage of that obviously is that we can, as an in-house construction company, accelerate or delay construction subject to demands, but also we can do adjustments to the properties in case that is needed for the tenants. That's an advantage of having an in-house construction team on site in those business parks.
Because of that land bank and the opportunity, we're confident that we can hit the 20 million square meter target before the end of the decade. More to report on the general contractor at this moment. If we would look at our energy business, which we are at the same time installing solar panels on the rooftops, that is a higher yield on cost, more towards 15%. Much appreciated by our tenants of course, because that renewable energy becomes available to the tenants in the park. That's one thing I would like to report on the development. Also, I did talk about Germany. I want to also highlight Poland, the largest growth market for CTP, not a market where we have been for many years.
We recently entered with currently 70 employees, and we have a lot of property under construction, a total of more than 400,000 square meter, in particular in the region of Upper Silesia, Katowice, Zabrze, but also in Warsaw and along the German-Polish border. Strategic locations with good progress on site, construction cost under control and, with a strong demand and good take-up. We are closing deals and have been closing deals during the 1st quarter of this year, and we continue talking to tenants during Q2 and beyond. The Polish market has been dominated by trade developers. We have a different setup, so we see less supply coming to the market in Poland from other players, and that gives us an opportunity to increase rents and to lease the properties which we have under construction.
Positive on Poland. As you know, very much involved in the new markets where I do spend time, and I'm in Poland on a weekly basis, same as in Germany, and I very much enjoy working with those teams. I wanted to maybe highlight on a CEE paper which we have done. In April, we operate in 10 countries, but CEE is for us the largest region, also the region where we believe in very much. What we see clearly is friendshoring, nearshoring, in Europe, for Europe. All kind of businesses from Asia, European set up shop in Europe, continue to extend their activities in Europe to supply the European market.
Central Europe is the ideal location with lower labor costs, with brand-new infrastructure, with government supporting very much all kind of FDI support programs. That is obviously a positive for our business. It has a positive impact, and we see that continue and are confident and happy with that forecast and outlook. I hand over to Maarten and Richard later on. Of course available to answer any of your questions later. Thank you.
I will now run you through the main financial highlights. We continue to deliver on our promises with another set of strong results on the back of the structural demand drivers described by Remon earlier and historically low vacancy levels while supply is tailing off, improving our competitive position. We achieved a like-for-like rental growth of 7.8%, driven by indexation and strong rent reversion. 52% of our portfolio is now indexed to the consumer price index, and the other 48% is with fixed escalations. By the end of 2023, we expect around 70% of the contracts to be linked to CPI. Our net rental income for the quarter came to EUR 130.7 million, up 21.9% year-on-year, while the next 12 months contracted revenues increased 25.1% year-on-year to EUR 628 million.
Company-specific adjusted EPRA earnings increased 32.1% year-on-year to EUR 78.3 million, while the earnings per share increased 25.2% year-on-year to EUR 0.18. On track to reach our guidance of EUR 0.72 for 2023. Moving on to the valuations. At the Q1 and Q3 results, only investment properties under developments, which were significantly changed, are revalued externally, while there was no revaluation of the standing portfolio. The gross asset value of our portfolio came to EUR 12 billion, up 4.5% compared to 31st of December, 2022, driven by developments and acquisitions. The positive revaluation in Q1, 2023 amounted to EUR 208.3 million and was driven by development completions, which were, with 223,000 sq meter, significantly higher than the 47,000 sq meter in Q1, 2022.
Consequently, the EPRA Net Tangible Assets per share increased from EUR 13.81 as at the 31st of December, 2022 to EUR 14.44 as at 31st of March, 2023, representing an increase of 4.6%. Looking forward, as at during the full year 2022 results, with the larger yield movements in Western European markets, the yield differential between Central and Eastern European logistics on the one hand and Western European logistics on the other hand is back to the long-term average. We expect the yield differential to come down even further, driven by the higher growth expectations for the CEE region. In 2023, we contemplate the further potential yield widening to be offset by positive ERV growth on the back of continued tenant demand, driven by the secular growth drivers in the CEE region.
Rental levels in CEE remain affordable for our tenants despite the strong growth seen as they come from lower absolute levels than in Western European countri es. Now I hand over to Richard.
We have a robust balance sheet and excellent access to capital markets, as we've demonstrated by the different pools of liquidity we've tapped during recent months.
Earlier this month, we raised EUR 280 million of unsecured funding, increasing our pro forma cash position to EUR 892 million, illustrating our access to capital and further strengthening our liquidity position. This brings our pro forma liquidity with the extended and increased RCF of EUR 500 million to EUR 1.4 billion. More than sufficient to meet all our cash needs for the next 12 months. In Q1, we concluded financings, including a EUR 95 million, 7-year secured loan for an all-in cost of 4.3%, and a EUR 133 million, 7-year secured loan for an all-in cost of 4.6%. The first tranche of our new unsecured loan facility was received from a consortium of banks.
The EUR 280 million tranche has both a 5-year and a 7-year maturity for an all-in cost of 4.7%. We expect to sign the second tranche of this facility later in this quarter. This facility allows us to diversify our sources of capital as the bank market continues to price funding for the real estate sector much more realistically than the bond market, with pricing that reflects the long-term and growing cash flows that CTP has to offer. We have a strong pipeline for additional financing with a material amount of loans agreed, which we will draw over the coming weeks. In February 2023, we also increased our RCF to EUR 500 million. This now has a new 3-year maturity with 2 one-year extension options.
Our average debt maturity stands at 5.5 years. We have a EUR 400 million bond maturing in November of this year. This we will repay from available cash reserves. Following this, the next material maturity we have is not until mid-2025. Our average cost of debt stood at 1.6%, with 99.4% of our debt fixed or hedged until maturity. Thanks to our strong cash generating portfolio, we have a healthy interest rate coverage ratio of 4.4 times, while our forward-looking ICR, including annualized income for our projects under development, comes to 5.3 times. Our normalized net debt to EBITDA is 9.7 times. Our loan to value ratio stood at 45.9%, slightly above our 40%-45% target range.
We expect the loan to value at year-end 2023 to be around 45%, as the revaluations of the developments we have are booked. We continue to deem this range to be appropriate given the high yielding nature of our portfolio. We are confident in the outlook for CTP. Leasing dynamics remain strong with robust occupier demand, low vacancies, and decreasing supply, leading to continued rental growth. We are uniquely positioned as market leader to benefit from the tailwinds for logistics and industrial demand in the business smart CEE region. Our pipeline is highly profitable and tenant-led. Our year-long cost target for new projects is increased to 11%, thanks to decreasing construction costs and continued rental growth. CTP has the team, we have the land bank, we have the balance sheet, and we have the tenant relationships to continue to deliver on our promises.
We confirm our guidance for the 2023 company-specific adjusted EPRA earnings per share of EUR 0.72 and remain on track to reach 20 million square meters GLA before the end of the decade. Thank you for your attention. We now welcome your questions.
Thank you. If you would like to ask a question and you have joined on the telephone line, then please press star followed by one on your telephone keypad. To withdraw your question, please press star followed by two. When preparing to ask your question, please ensure that your phone is unmuted locally. If you have joined on the webcast, then please submit a written question in the text box under the video player. Our first question comes from Steven Boumans from ABN AMRO. Steven, please go ahead.
Hi, good morning, thank you for taking my questions. I have a couple. Maybe to start with, the presentation mentions 60% revaluation potential under development completion based on the gross portfolio yield of 6.5%, and 10.4% yield on cost. Two questions on it. Is this the actual margin you expect longer term too, or will this be higher or lower? The second, now that the yield on cost becomes 11%, do you still expect the 60% revaluations implying that the market yields goes up with a similar amount?
Yeah. Steve, thanks for the question. Yes. That maths is correct on your first question. At 10.4% yield on cost and a valuation yield of 6.5%, you would have the 60%. If we're delivering at 11%, we could rather expect that margin to increase going forward.
Okay. Clear. Thanks. Second question. Any comments on where you think like for like revaluations of standing assets will go to in H1 2023? Second, where do you expect the LTC to land by year-end?
In regarding valuations, what we've said is that we expect any further increase in yields to be offset, fully offset by ERV growth. I think in Remon's part, he mentioned the level of rental growth that we're seeing at the moment. Yes, by the end of the year, we expect it to be around 45%.
Okay. Clear. Then the last question. We see most of the peers reducing developments while you are going full steam ahead. Is there a difference between Eastern Europe and Western Europe? Are you just better able to develop and fill new warehouses than your peers, or are other peers too cautious? Could you please help me explain why you see better opportunities than others today?
Yeah, Steven, I'm happy to take that question. It's Remon speaking. Well, yeah, the market is a bit different in Central Europe. First of all, there is less stock, so there is less existing buildings available at all. There is high occupancy. We see a record high occupancy, so no vacancy. There are very little buildings available, the market of Central Europe. That's one, there's the market circumstances. Two is, yeah, we do a lot of stuff for existing clients. More than two-thirds of all our new business is for existing clients who often take extensions and grow their business here in Central Europe.
That can be for different reasons: inventory, that they like more inventory, or that they bring more activity to Central Europe because that's most of our business as explained. There's strong demand. Many of our clients, they somehow reinvent the supply chain related footprint of where they produce and manufacture or where is their service center with less from far, so less, so more local.
Okay. clear.
And, um-
Thank you.
Yeah. Okay. Good.
Oh. Sorry.
Did that answer your question or... Steven?
Yes. I don't know. That's were all my questions. Thank you for answering.
All right.
Thank you. Our next question comes from Pieter Runia from Kempen. Pieter, please go ahead.
Hi, team. Thanks for the presentation. Congrats on another set of strong results. I got a question on the like-for-like rental growth. Is it possible to give a split here, showing how much was driven by indexation and how much by reversion and specifically, associations with this?
Yeah. If you look to the like-for-like rental growth, and you of course have to take in account the splits that we have between leases, that are indexed to CPI, which is now 52%, and then the fixed escalations, which is 48% of our portfolio. If you look to the CPI, as you might know, especially in many of the countries in which we are active, we have seen relatively high inflation and we have local CPI in many of our contracts. That is boosting our like for like. If you look to indexation, it's roughly 5% or 6% of the like for like, and the rest is driven by reversion.
That's, that's a positive to me. How are these renegotiations or, yeah, how are renegotiations with existing tenants going? Are you really pushing rents to the market rents? 'Cause I do know that the market rents are moving up quite quickly, specifically in some of the CEE regions. Yeah, how are your asset managers doing this?
Look, you have seen, of course, the rental growth that we've shown this year. If you look to the leases we signed in the first quarter, you compare it to the average rent of the last quarter, you see the quite substantial increase. This quarter was EUR 5.31 on average per month per square meter, while in the same quarter last year, it was EUR 4.87. You see the strong rental growth, and we continue to sign leases above the ERVs from the appraisers. That's also supportive towards our valuations. Of course, the teams always push the tenants, but it's always a mix, of course.
You have several elements that you take into account in your negotiations. The fact that we continue to beat ERVs, I think, illustrates the fact that market rents are achievable for us. Of course, we try to do better, and Remon can maybe elaborate more on that. Given the strong tenant demand that we are seeing and the low vacancy, it's of course a landlord market and that puts us in a good position.
Yeah. Well, Pieter, yeah, I think Maarten explained it well. Also take into account we have not seen a lot of rental growth now over the past decades. It's very competitive still if... Also what Maarten just said, it's around EUR 5, EUR 5.50. Well, that is compared to Western European markets still very attractive, and I think there's good value for money. We wanna be fair and reasonable when it comes to pricing. Yeah, we are long-term partners to our clients and tenants. Yeah, definitely opportunity to further increase rents, absolutely, yeah, in this market.
Yes.
The strong demand
Okay. That's very clear.
... and maybe also a bit less supply than what we have seen previously. I did mention it in my introduction. I said all of these trade developers, yeah, that's a bit different. We have never been part of that. We've been always in there for long, and the park concept helps as well. We build these ecosystems, so people, maybe tenants, are happy to pay a bit more for being in such an environment and to be part of a business park. Yeah, no, positive and good so far. Fair and reasonable, but yeah, a bit higher than before. Rent, I mean.
Yeah. That is highly appreciated. Maybe, and a last, question from my side. You already gave some additional information on Germany. I was just wondering, you've been active now here for over a year. How's your experience working in this new Western European market? Maybe you could compare it to your initial expectations.
Yeah. Thanks, Pieter. Good question. My German is getting better day by day. We are growing a team of people, so we're currently more than 50 and hiring. Yeah, we like it very much in Germany, so we obviously, we bought the portfolio. Need to see what happens. We had some ideas, but it's actually better than what we thought when it comes to the quality of the properties. No massive CapEx or surprises or things which... Yeah, that's good, point 1. Point 2, we have seen obviously rental growth. It helped a little bit, the indexation, but also the new negotiations with tenants. When we bought it, maybe we should explain.
When we bought it, the rent levels were 3 EUR, 36 EUR per square meter per year, so relatively low. We immediately thought, okay, that is potential to grow that has been, and I mentioned, like first year approximately 10%, and I think there is more to come. That's rental growth. Less CapEx, more rent income. Honestly very positive about the tenants, which we have because with the acquisition of this portfolio, it's not just property. It's also suddenly you get a whole lot of new tenants, and many involved in somehow manufacturing different types of, which we like, as you know. There is demand, and with those you could also think of growing in the region.
You can imagine to further extend activities in Germany or maybe even also set up shop elsewhere in the region. Then I think of places like Czech, Poland, which is all in the same part of Europe and there's a lot of skills and engineering and technical universities and a lot of different industries which are already established and connected. We have a lot of German clients, as you know, historically. That is very positive. Maybe other points I can point for, I mentioned, with the acquisition, we bought property but also land and on that land we now start to build. That, you know, that means that we start a project in Bremen. We have a project being prepared in Berlin. We are doing something close to Stuttgart.
Of course in the yeah, North Rhine-Westphalia region, that's where we're gonna be active. Yeah, so far I'm very positive about the acquisition. Yeah.
Okay. It's very clear. Thanks a lot.
Thank you. Our next question comes from Eleanor Frew from Barclays. Eleanor, please go ahead.
Hi, team. Thank you for the presentation. Firstly, a quick follow-up on a previous question. Have you had any conversations with valuers to give any indication of the size of the potential yield widening over 2023?
Yeah. I think, Thank you for the question, Eleanor. Yeah, I think what you need to do is look at the valuation yields that we already have in our portfolio that are already substantially higher than Western European yields. Maarten mentioned in the presentation that we're now back at what would be historical gaps between Central European and Western European yields by Western European yields continuing to go up. We don't really see a lot of scope, and we don't expect any significant yield widening. If you look at the valuation yields, gross valuation yield of our portfolio at the end of 2022 was 6.5%.
The reversionary yield was 6.9%. We already have significantly higher yields than prevailing in Western Europe. If you look at what's happening in the transaction market, I think you start to see levels being found in the U.K. market around 5.25% yield level. I think that that give us comfort that we wouldn't expect a significant yield widening in the first half.
Very clear. Thank you. On your NTA increase, can you give a bit more color on the breakdown of that increase? Is it right that nothing at all on standing properties, so no impact from increase in ERBs in the quarter?
Indeed. If you look to the NTA, it's driven, of course, by two elements. One is the deliveries, where we of course spend CapEx and saw the revaluation. I think it's good to point out that the deliveries, of course, this quarter were significantly higher than the same quarter last year. That's why we also this quarter have a higher revaluation on those deliveries. Some smaller acquisitions, but no revaluation on the standing portfolio. No revision of standing ERVs, which, of course, coming back to your earlier question and as well to the leasing we have done, we expect that to continue to increase over the course of 2023.
Great. Thanks. Last one. I see that you're focusing on mobilizing your existing land bank. Can you give a bit more info on the land bank market that you're seeing? Is there more competition for plots or are prices still too elevated for you?
I can take that. Land bank. I'm not sure. We have a land bank, 20 million square meter, so we could build 10 million square meter. A land bank is often land which we bought in order to develop our parks. You can imagine if you have a business park, you start, you buy land, you put infrastructure in, and then you one after the other building. That's also what the land is. There's land sitting in existing business parks with infrastructure, utilities, with zoning and permits, so actually lands ready to go. We would consume that land bank.
Yeah, and then, and then we're also obviously careful, but we do buy land to, actually, to replace or, to compensate for the land we consume with our construction. If we were to build 1.5 million square meter this year, then we probably consume 3 million square meters, so we may buy 3 million square meter of lands, maybe something like that. Not always. Depends very much also on where we see the opportunity, what land prices are. Obviously our core business is organic growth. Yeah, we grow, lands, build new buildings using our in-house construction, activity and teams.
If it comes to land, you can understand in this market, there are opportunities to acquire stuff and to help accelerate growth. Yeah. That's what we do. Here and there opportunities which we definitely look at and try to capture, and that would also include buying a bit more land here and there, which is either prepared by other developers or is to be prepared. We typically do not buy land without zoning, so we take an option on the land to try to get it ready and buy upon once the permits is issued, the building permits. We're a bit careful there and conservative, that's what we do. We do continue to grow our land bank.
We don't think it stops at 20 million square meter.
Okay. That's all my questions.
Thank you. Our next question comes from Ben Richford from Societe Generale. David, please go ahead.
Hi, it's Ben Richford from Soc Gen. Just two questions, please. I'll give you both of them together. The first is around your bonds. I think you've mentioned that you're considering repurchasing some, and you'd also mentioned that at the full year. Just a few more thoughts or any more details on that strategy. Second question, regarding Poland, what is the % pre-leasing currently in Poland? I believe it's developed spec and excluded from the FY23 completions number given. Two questions please.
Yes. Regarding the bonds repurchase, hi Ben, thanks for the question. It's one of the options that we look at. If you look at ability of pricing of funding in the bank markets for secured and unsecured funding, it's significantly more attractive than the bond markets at the moment. One of the options that we have is to use some of the funding that's available in other markets to buy back our bonds. As a piece of good housekeeping, we put that in the press release so that everyone is aware that that's one of the options that we consider.
Just maybe on Poland, Remon can continue. If you look in Poland, what we said in the press release is that we have pre-let 80,000 square meter. If you look to the total amount of square meter under construction, it's now roughly 450,000. 80,000 of that pre-let, and more than 100,000 square meter in advance negotiations and obviously good tenant demand, of course, on what we said with the supply coming down in Poland, as the trade, the developer models and the pressure with rents having a record increase last year of almost up to 30%. We feel quite comfortable.
Remon, maybe something to add?
Yeah. No, thank you, Maarten. I think that is what it is. You can go into more detail, 400,000 square meter, EUR 150 million, maybe around that number, which is not money we spend immediately. You probably need around 10 months, it's EUR 50 million per month of money we spend on building property in Poland. We can accelerate or slow down, subject to what demand we see. As you said, we are in negotiation with many companies, mostly, again, existing clients who like Poland. Poland is well located. It's close to Germany. It's large, 40 million people. The government support all kind of activities. Yeah, investor-friendly, with educated workforce, available people in...
Yeah, there's a lot of things, a lot of opportunities in Poland. We are super excited about being part of that now. Indeed, we are well on the way negotiating with different tenants, very optimistic about Poland. The previous question about land banking or buying land, that is definitely, that definitely is, and I mean, and I refer to us growing a footprint in Poland, but where we see good opportunities. In multiple occasions, Upper Silesia, obviously where we have been active and are active in Ostrava and in Brno on the Czech side, and now in Katowice, Zabrze, and in Opole where we have been active for a couple of years already.
Opole was our first project where we do an extension for an existing tenant and another one coming up. Yeah, quite positive, but also along the border with Germany, which is pretty close to Berlin and those places which you can supply out of Poland and then in and around Warsaw. The idea is to cover all of Poland. That also includes a project now which we start in Gdansk, at yeah, close to the harbor where we have a site underway.
Great. Thank you very much.
Thank you. Our next question comes from Francesca Ferragina from ING. Francesca, please go ahead.
Hello. Good morning, everybody. Thanks for taking my questions. First of all, many compliments for the very good results. I have a few questions. The first one is on the top line. What is the level of organic growth that can be a realistic assumption for 2023? Also, when do you think the entire portfolio will have a regular link to inflation? Second argument, Poland. I escalate the previous question. You talk and you stress a lot about the ample potential of the market. Is there any portfolio on sale that might interest you, and would an acquisition make sense here? I guess that growing by regular developments would take more time. Many thanks.
So, uh, I will take your first question on, on, on top line growth and, and, um, CPI, uh, linkage. Um, so in general, what we said on, on the linkage to the CPI is that we, by the end of this year, expect to be roughly, uh, seventy percent of our portfolio to be linked to CPI. Um, it will take a few years more to get to hundred percent, um, as of course we need to, to, to go through our expiry schedule. Um, so in, in twenty twenty-four, uh, twenty twenty-five, we'll still see, uh, quite some growth. But, uh, of course, we need to... We have a vault of, um, uh, over six years, uh, so we need to go through that. Uh, so the last percentages might take a while before we are fully at hundred percent.
Ultimately, the ambition is to have as high as possible percentage. And I think with 70% by year-end, we are good on the way for that. If you look to overall top line growth for this year, I think you can expect something similar than what we've shown in the first quarter, because most of the indexation takes place on the first of January. That's basically locked in. We expect to continue to have a positive reversion. Our reversionary potential, so the gap between the in-place rent and ERVs stood at 12.5%. I said before, we still continue to sign above ERVs, that reversion will continue throughout the year.
So and a top-line growth similar to our first quarter number is quite reasonable. Then, of course, you will see the top-line growth from the developments coming online. Yes, we had a bit more in the first quarter than normally, with the 223,000 square meter delivered. But most of our deliveries are like normally more backward-loaded, Q3, Q4 of the year. So, it's more the annualization of the deliveries we've done in Q4 of last year and in Q1 of this year which drives the growth in rental income. That's for the first question.
Thank you, Maarten, and thank you, Francesca, for joining and for your question. With regards to Poland, and if we would look at the portfolio, we, we like it in Poland. We, as I explained earlier, definitely that's something we like to grow, a place we like to grow. Organic growth, obviously with us buying land and doing in-house construction, that will help us to get to our yield on cost targets easier than if we would acquire something. However, I do not want to exclude now us not doing any acquisitions because it can be part of our entry strategy. As, as you have seen before, when we enter a new market, it's not always through just buy land and go out and build property.
We could also accelerate and grow footprint quicker through acquisitions. We have been very lucky, I think, with the deal we've done last year where we took over a land bank from one of our peers, from 7R, and it came with some properties also under construction. Yeah, so we are keeping our eyes and ears open and have the liquidity available to go out and further extend our footprint in Poland, whether this is through land acquisitions and/or through acquisition of some, yeah, portfolio or something which is halfway in the making, which other parties may be willing to transfer to us.
We are open to any kind of cooperation, and deal, in order to further grow our footprint in Poland indeed.
Very good. Thank you. Thank you. Our next question comes from Saravana Bala from RBC Capital Markets. Saravana, please go ahead.
Thank you. Morning. Thanks for taking my questions. My first is on the progression of your yield on cost. Delivered projects in Q1 were 10.2%, and the current under construction pipeline for this year is selected to be 10.4%. Is it fair to expect just under 10.4% for the average this year and then closer to 11% for deliveries next year as your year yield target starts to come through?
Yeah, that's reasonable. Obviously, we target to increase the yield on cost this year, and if we can continue to grow rents, higher than our expectations, then we can deliver more than the 10.4%.
Okay, thank you. Just one final question, sort of to clarify your expectations for ERV growth offsetting yield increases. Do you expect ERV growth to offset yield increases in more Western markets as well as your core CEE markets? Do you expect a great offset in CEE to outweigh perhaps less offset in the West?
Yeah. Good question. Thank you. If you look at our portfolio, you know, the average valuation yield of our general portfolio is 7.5%. That is already revalued materially differently to prime to a prime portfolio. We don't really see a lot of potential there. The only other assets that we have in Western Europe are in Holland, which are also valued at conservative yields. If you look at the makeup of our portfolio, the overwhelming driver for revaluation gains is the Central European portfolio.
There we have the very positive trends in ERVs, for the reasons that Remon and Martin have been talking about earlier on the call, you know, which we would expect to fully offset any yield increases.
Understood. Thanks.
Thank you. Our next question comes from Thomas Lade from Aberdeen. Thomas, please go ahead.
Hi there. Just two quick questions from me, please. I see that the operating cash flow is negative for the quarter. It looks like it was driven by some working capital movements. Just a little bit surprising. If you could provide a bit more color on what's driving the big decrease in payables and an increase in receivables there.
Yeah. I'll take that one. Yeah, that's to do with the significant increase in rental invoices that we are placing at the end of the quarter that significantly increases our receivables at the end of the quarter. As Remon said earlier, we continue to collect 99.7% of all of our cash flow. You should think about that as a seasonal effect rather than anything else.
Okay, thanks. Just, apologies if this has been covered. On the construction cost, just wondering what the main driver is of the declines there, because just looking at the results from the building materials companies, it seems like most of them are still seeing quite strong pricing growth for aggregate cement, and those sorts of materials. Labor costs are still reasonably sort of, you know, not coming down. I'm just wondering what's driving What you guys say you're seeing construction costs coming down. Just wondering what's driving that. Thanks.
Thanks for the question. Yes, I, you know, they may be able to keep their margins overall, but that doesn't necessarily mean that they can keep all of their margins with all of their customers. If you look at our construction model is, as Remon said, we are our own general contractor. That allows us to go quicker and slower. Also means that we are a very large procurer of most of the parts, the component parts of our buildings. The combination of being our own general contractor, being able to go quicker, slower, allows us to buy things also at times when it suits us from a price perspective rather than when it suits the seller.
We've been seeing construction costs coming down for some time now. It's interesting to see that some of the peers are also saying that now. See that. One of the other things was, you know, and some of the cost inflation in 2022 was opportunistic, was companies just increasing their margins because they thought that they could. It's why we slowed down our construction during 2022 to avoid paying into that. Yeah, the two are not incompatible.
Okay. Thank you very much.
Thank you. As a reminder, to ask a question on the telephone line, please press Star followed by One. For those on the webcast, please submit a written question. Our next question is from Wim Lewi from KBC, who asks: "On Poland, what are the typical tenants you are negotiating with segments? What is the pre-let level now in the Polish pipeline at the moment, and how would that be if included in the overall pre-let level of 49%?
I can take that. Hello, Wim. We touched on it. Maarten explained that out of the 450,000 square meter, 90,000 or something like that, 80,000 is leased. We are currently negotiating with other parties for another 100,000 square meter. These buildings are not sitting empty. These buildings are under construction. We started construction in Q1, just now in March, April. We're confident that we will continue to lease these properties at or before completion, prior completion or about that time. That's one. Secondly, you're looking at if you build 400,000, you're looking at EUR 150 million, something like that money over 10 months. You spend EUR 15 million per month on construction costs.
If you want, then you can slow down accelerate. It's a big tool. Demand and take up, who are we talking to? Mostly existing clients, also tenants with whom we work in other markets, like Czech Republic. Czech Republic is known for lack of available land, so there's not a lot you can do because of the fact that there's no land ready. It's maybe also one of the reasons why rent is so high in Czech, the scarcity of space and land unavailable. Some of our tenants say, "Okay, if it can't be Czech, then I'm happy to go with you guys in Poland or grow in Poland." That's one. Another one is, yeah, logistic service providers, obviously. As you know, DHL is our largest tenants.
We also talk to DSV, Schenker, many different 3PLs who we work with who continue to grow. Other companies we have done deals with in Poland, which I can mention are Saint-Gobain, in along the German border, where we have a beautiful project. We've done a deal with Hermes as well in that same park. I can confirm a deal with Titan we do in Opole, with Fiege in Warsaw. A couple more. A nice young biz dev team based in Warsaw, but also with offices in Katowice, Poznan, in order to be close to where the action is. That team is led by my colleague Bogi, who does a great job there. Good. She works together with Piotr Flugel.
That's the management team in Poland.
Thank you. Our next question comes from Alvaro Mata, who asks: "How do you plan to pay the EUR 400 million bond that matures in November 2023? Where do you expect to end up the year in terms of LTV?
Thanks for the question. Yeah, the bond will be repaid from the available liquidity that we have. I think we said in the presentation that we have EUR 1.4 billion of liquidity available to us. As of now, we will repay the bonds from the available cash that we have. On the LTV, as already indicated by Richard before, we expect it to be around 45% by the end of this year as the revaluations of other deliveries is coming in.
Thank you. Our next question comes from Ruben Ivanov from Berenberg, who asks: "Can you please clarify your normalized net debt to EBITDA of 9.7x guidance? Based on TTM results, net debt to EBITDA is 14x. What EBITDA is the normalized ratio based on, and how do you derive this number?
Thank you, Ruben. That's a good question. Ultimately, as a developer, of course, we are always pre-funding basically developments. What you see is the net debt increase is always 1, 2 years ahead of course, the full annualized income of those developments. As you know, CTP is quite active. Last year, we delivered 1 million square meter. This year we plan to do at least the same, but likely more, if tenant demand continues to be as strong as we're currently seeing. That means that we are spending quite a bit, and that the annualized.
Income is only coming 1 2 years after. What we do for our normalized net debt to EBITDA is that we basically annualize the income of the deliveries that have not yet taken place. Basically, what we do is we assume the spending that is needed to complete what is currently in the pipeline, which we add to our net debt. We take the annualized income of those deliveries, and we add that to our income side. On top, we of course annualize the recent deliveries that are not yet generating 4 quarters of EBITDA.
It's basically a normalization assuming completion of the deliveries and what's our net debt to EBITDA would be on the standing portfolio at that time. That's why you see that it's quite a bit lower than our net debt to EBITDA. If you would calculate that based on indeed the financial statements, EBITDA it's always with a developer like us, especially given that we typically develop 10%-15% or sometimes even more of our standing portfolio each year.
Thank you. We have another question from Alvaro Mata who asks, "Is buying back bonds in the market still something you are considering as you have mentioned in the past?
Yes. I think I covered that question earlier. Yes, it's something that we consider.
Thank you. We have a question from Guy Mountain from City of London who asks, "With leverage on the high side, are there any plans to sell some assets?
Yeah, thanks for the question. Yeah, as we said earlier, we consider our leverage to be appropriate, bearing in mind the valuation yield of our portfolio. I think when you look at loan to value, you have to remember that it's a combination of an absolute number, the amount of debt, and a relative number, the valuation. Our loan to value ratio or target of 40%-45%, we're just slightly over that at the moment, is what we deem appropriate looking at the valuation yields that we have on our portfolio. We have no plans to sell any material assets at the moment.
Thank you. As a reminder, to ask a question on the telephone line, please press star followed by one. For those on the webcast, please submit a written question in the text box under the video player. Our next question is from Alexandru Morar who asks, "Great results from your current markets. Which new markets in Europe is CTP currently targeting for expansion, and what are the key factors deriving this decision?
Hey, Alex. Good question. Yeah, we focus on 10 markets at the moment, so we can only do one thing at a time, so the focus is on those 10 markets, which are obviously the ones you know, the three in Western Europe, Holland, Austria and Germany, and then the seven Central European markets. Yeah, sure we keep our eyes and ears open and we look at opportunities, but not have any concrete plans to open up shop elsewhere, and rather focus on those 10 markets for the moment. Thanks for all your support. Finding those great people.
Thank you. We currently have no further questions. I'll now hand back over to the management team for closing remarks.
Yeah. We'd like to thank everyone for their attention. Thank you for your questions. Look forward to continuing the good cooperation in the future. Thank you.