Ladies and gentlemen, welcome to the Inmobiliaria Colonial Q1 2022 conference call. The management will run you through the presentation, which will be followed by a Q&A session. You can request to ask a question at any point during the presentation by dialing zero one on your telephone keypad. I'm now pleased to introduce Mr. Pere Viñolas Serra, CEO of Inmobiliaria Colonial.
Thank you. Good afternoon. Pleasure to be here again to present our results for the Q1 2022. The team with me, we will have Carmina Ganyet, Corporate Managing Director, and Carlos Krohmer, Chief Corporate Development Officer. In order to introduce these results, I would like to say first of all that as you will see, they are quite satisfactory. The actual figures that we will share with you are, we believe, very, very good and very accretive comparative to the end of last year or to 12 months ago. In these introductory remarks, maybe I would like to emphasize why we believe these results are strong and it's not only this quarter, but in recent past and why we believe we are very well positioned for the next quarters or next years.
As you all know, because you've been following us for a certain time already, we are a company with a quite specific strategy. Within the office sector, we are betting on what we call the Flight to Quality. That is, a focus on the ultra-high supply of the best quality offices. We believe that we do not sell the same product, no, that other people sell. That means a different kind of assessment. We believe that this strategy is benefiting from what's happening, let's say, in our sector in the outside world. It's clear as time goes by that after COVID, that after all changes have happened in recent years, quality now is a must for a number of clients.
Now the quality, the experience, the product that the companies have, no, and offer to their employees for talent retention, for talent promotion, it's certainly at a different level. It's a priority today for any average high quality corporate. This is having an impact in our sector of polarization. If you have the high quality product, this product is even more required than in the past. The scarcity attached to this product is even bigger. If you are not in this kind of segment, maybe the problems you may have could be bigger than in the past. No? Page six of the presentation, remarks, maybe, the obvious. No?
We are a company with EUR 12 billion of gross asset value, 98% in city center, more than 80% on CBD. There's nothing comparable to this in our sector. If instead of talking about location, we talk about sustainability, 95% of our portfolio is either BREEAM or LEED. Sustainability is again high above any comparable. We are positioned, as you know, very strong European cities. We believe that because of that, we have been able to secure maximum rental prices, setting the benchmark for prime, getting very good numbers in terms of occupancy, getting a superior cash flow and capital value growth with very limited risk. In the end, benefiting from a strong profitable growth on the back of polarization.
That's the results that you will see for the Q1 . The expectations for the next few years, you will see are also quite positive. Page 7 is only a reminder of the kind of product that we have. As I said, the product we sell, it's in a different league, is in a different business. Based on that, on page 8, basically what you will see in the results for this Q1 is, number one, that our net profit and earnings per share of a high double-digit year-over-year growth. That's important. This profit growth is driven by solid execution on different key value drivers. First of all, the successful project delivery.
As you know, we are a company that we've been defining ourselves as a company that without having to look for anything in particular outside our company, we can generate incremental cash flows just delivering what we are expected to deliver. In these recent months, we've been delivering important projects, and that's accelerating our profits and our cash flow. We also are on a constant dynamic of renovating our assets, what we call the renovation program. This is also accelerating, and as you will see, this producing incremental cash flows that enhance our profits. We invested in SFL during last year. This is proving to be also very aggressive in terms of our results. That's another driver for our results.
Basically, besides all of this news or let's say side by side with all of this news, our existing portfolio is being able, as expected, to capture indexation and rental growth. This together with our active liability management on the capital structure side is allowing us to deliver strong growth in our profits. Behind this news, let's call it this way, in the end, what is happening is that we are going through a process of very good performance of our fundamentals. As you will see in a minute, our letting volume for the Q1 was 51,000 square meters, which is well above our pre-COVID levels, not only last year but our 2019 levels.
that has allowed us to execute our operations in 2022 in a very successful way. Based on that, page nine is devoted to the fundamental KPIs of our performance during this quarter. At the end of March, our adjusted net profit is EUR 28 million, 32% year-on-year. Our recurring net profit is EUR 36 million, 26% year-on-year. Our EPS is growing at 19%. That would be 0.067 EUR per share at this moment of the Q1 . Gross rental income EUR 82 million, 4%, or to be more specific, 4.6% office like-for-like. Our EBITDA EUR 58 million, 4% more than this all.
As I said, behind this, there is a strong letting volume, 74% higher than a year ago, already above pre-COVID levels, so that is Q1 of 2019. More specifically, if you talk about the renovation program, we've done almost 10,000 square meters, only on this specific part of our portfolio that is going through renovation. Not only have we leased almost 10,000 square meters during the Q1 , we have already done additional prelets of almost 5,000 square meters, post the Q1 of 2022. If instead of talking about our renovation program, we talk about our pipeline, we would be talking about agreements, equivalent to 17,000 square meters.
Therefore, our letting volume is not only applying to our existing buildings, which are already in operation, but as you can see, to buildings that are being renovated or to future buildings that are currently part of our project pipeline. Anyway, everything together, that means that we finish our Q1 with a group occupancy of 95%, which in Paris would be 99%. All of this happening in parallel to rent behavior that, as you can see at the bottom of this page 9, remains in very satisfactory terms. The group ERV growth is 4% compared to December last year. This across markets is the general behavior.
In summary, very important double-digit numbers in terms of growth of our profits, very good letting activity for existing buildings of our new projects. Now we will enter in more detail and section two will be devoted to go through the financials more in detail. Carmina, you wish.
Thank you, Pere. On this section and on page 11, we are covering the main financial KPIs and especially the key drivers of this strong growth. First, just to remind, the net group profit increased 32% year-on-year. Instead of looking at the group profit, if we look at the recurring net profit, it is increasing 26% year-on-year. In terms of earnings per share, as Pere mentioned before, we are showing a Q1 result of a growth of 19% year-on-year. If we look at the top line, the main drivers of this income recovery in a growth of 26%.
The first important impact is revenues with a profit impact of 11%. The second layer of a positive impact is the financial results, thanks to the work done last year on the liability management. The third layer is due to the fact that we increased our exposure in SFL, and also some acquisitions that we have done, adding 7% of this, recording profit year-on-year growth of 26%. If we look at the top line, on page 13. Basically, the gross rental income increases 4.1%, but especially highlighting that excluding the disposal as you know that we have disposed last year, non-strategic assets, the growth of the rental income would be 6%, without considering the disposal.
Especially when you look at the main key impact of this gross rental income growth, we are having a positive impact coming from the project pipeline with the 3.2%. Additionally, a renovation program, the acceleration of the renovation program and the rent achieved after being renewed with additional 1% of the rental income. The renewal of the contract of our core portfolio is adding also slightly 1% of this rental growth. On top, the indexation program also adds a positive impact of probably 1%. These are the main key drivers, all of them positive with the 6% gross rental income growth without including the disposal program.
In the next page you can see that this growth is across all the markets. I would like to highlight the like-for-like growth in offices, 4.6%, total portfolio. When you look at the different markets, all of them are in a very positive mood, with Paris 4.2%, Madrid 4.2%, and Barcelona more than 6%. If we looked at the main sources of this rental growth, basically, is driven by prices. More than 50% is driven by prices, 2.5%, and 45%, probably speaking, is driven by occupancy. Increasing the volume of occupancy, which impacts with 2.1%.
You can see in all the markets, in Paris especially driven by volume as we mentioned, with full occupancy in the Paris market and in Madrid, Barcelona, mainly driven by price. As you can see here with Madrid, 3.45% price impact in the office, and Barcelona outstanding with 5.2% in the office sector. As you know, another layer of this positive impact in the profit in the Q1 has been the financial impact. This quarter, in February, we have finished the conversion of our bonds for 100% bond conversion into green. It's the first company in the IBEX 35, also in the real estate sector, which have all the bonds being converted to green.
It means that we have a very, I would say, outstanding and leadership position in the decarbonization of our portfolio. That it's going or it's been a very, I would say, positive impact also in our debt market, being in a very good position of tapping all the whole market in a liquid sector of the green bonds. As a reminder, we start and then Carlos will cover all the efforts and all the decarbonization part to the carbon footprint, which today we are at the lowest level in the sector with 9 kg CO2 per square meter. As you know very well, 95% of our portfolio has already a green or LEED and a very, I would say, outstanding levels of the green only.
As a consequence of this conversion, as a consequence also of this, very active liability management done in 2021 and also the disposals of, non-strategic assets, we have a very solid capital structure. LTV 16 with a very significant liquidity position with more than EUR 2.5 billion, EUR 2.6 billion specifically of liquidity between cash and undrawn balance. Thanks to that, Colonial is maintaining the high end of Investment Grade with a BBB+ stable by agencies. Today, Colonial has the benefit of a very, I would say, interesting cost of debt of 1.35% and an average maturity debt for the following 5 years with a very, I would say, interesting cost of debt for the following years.
We have not only done this conversion into green. We've also did in 2021 a very interesting movement of protecting all the debt. It means that lowering the interest rate risk is what we did last year. We had a very, I would say, benefit of taking advantage of the market conditions last year. Today, Colonial has 40% of the total group already protected. At an average swap of less than 0.6% to 60 basis points for the 40% of our debt. This hedge is starting. It's a hedge forward swap starting in each bond maturity date for the following seven, ten years.
It means that at the moment that we are going to renew our bond, which, as you know, more than 80% of our debt will mature after 2025. At the moment that we are going to renew this bond, we have already 40% of the total amount of the debt maturing in the future already pre-hedged at a very interesting levels of rates, which is less than 60 basis points today. 92.2% today is fully hedged. In the future, we have almost, close to 50% already pre-hedged at a very, we say, interesting levels of cost of debt. What does it mean today? That the hedge today already closed has a mark to market value of EUR 175.
We know that current debt is EUR 200 million. The last number was 175. If you consider this 175 positive Mark to Market for the following 7-10 years after maturity, you can see the savings on the interest rates that Colonial will have the benefits in the future. As a summary and in page 17, we have experienced a very strong profit growth of this 26%. Basically, you can see here the different key drivers of this positive impact. The first one is the success of our project delivery. As you know, we have delivered Naturgy headquarters in Barcelona. We have delivered also Goldman Sachs headquarters in Paris. It will...
It has been impacted in this Q1 of 8% additional profit growth in comparison to the previous year. Additionally, the second layer of this growth positive growth has come from the acceleration of the renovation program with 2.6%. The third key driver also has been the increase of our exposure in SFL. Today, with 98.3% participation in SFL plus the acquisition of the Danone headquarters has been impacted positively of 10%. On top, Carlos will cover the performance of our letting activity. We have delivered rental growth in comparison to the year with December 2021. Also with a very positive lease spread of 9%.
All in all, the impact on the profit is 2.1%, 2.8%, sorry, coming from the core portfolio and the renewal of our contracts. On top, as I mentioned, all the liability management done in 2021 has added another positive layer of 9%. As a consequence, our EPS of this Q1 is increasing 19% yearly.
Thank you, Carmina. Now to have more in-depth focus now on what is going on in the company, Carlos Krohmer will step in to cover the delivery and operations section.
Thank you very much, Pere. First, on page number 19, a quick view on the market where we act. As you can see, our fundamental markets where we are, that is basically in the city center of the three cities, are performing very well. You see here the CBD vacancy ratios, and what is more important than that, the grade A availability. As you can see in Paris, it's none. There's only 0.4%, and in Madrid and Barcelona is around 2% what is available in terms of grade A. On the other hand, take-up is increasing. Take-up has increased quite a lot in the Paris CBD. It has increased 70%. This is much higher than in the total market, but the total Paris market has increased 40%, but in the CBD even more.
In the Madrid and Barcelona markets also, the take-up has been quite high. In Madrid, it has increased 99% versus the quarter of the previous year, and in Barcelona it has increased around 40% compared to the previous year, Q1 . This leads that we are at rental price levels of EUR 930 for prime rent, EUR 36.8 for prime rent in Madrid, and EUR 27.5 for prime rent in Barcelona. I will come later on back on this. The investment market also remains very strong. In Paris intra-muros, so CBD plus city center, there has been a 64% increase and 34% increase of year-on-year total investment volume only in the CBD. Quite a lot. What is the assets that are being transacted?
The high-quality Grade A assets. In Madrid, we have had a significant pickup. We have had a volume that is doubling the previous year Q1 figure. In Barcelona, we had EUR 150 million, basically concentrated on the 22@ and looking basically at Grade A assets. There, the main highlight would be that we see more international investors in Barcelona. When we then step to Colonial performance, you see a first overview. All of the figures are on page 20, quite healthy, quite strong. This is on the back of our high-quality product portfolio. When we go more into detail on page 21, the first thing that you can see is a very, very high letting activity in Q1. 74% above the Q1 of the last year.
If we put it in economic terms, so combine this with the rental price that we have signed, it's even doubling the volume of the previous year's Q1 , and all of it are really high quality tenants. Also interesting to highlight, half of this letting volume is letting up available space or letting up vacancy. Why is this so? Because of the product that we offer. On page 22, you can see it quite clearly. Out of the CBD, out of the Paris letting activity, almost all of it has been CBD in the 7ème. In Madrid and Barcelona also, the major part of the activity has been assets located in the CBD or in the 22@. More interesting than that, here you see the maximum rents that we have signed. EUR 940 in Paris.
This is higher than the prime rent consultants are flagging for the Q1 . EUR 39 per square meter a month in Madrid. This is post Q1, but has to do with some pre-lets on our projects. 28, the highest rent signed in our portfolio in Barcelona, also half a EUR above the prime rent reference. Really our portfolio is setting the reference on rental prices. On page 23, you can see the occupancy profile, 95%. This is a healthy level. With this level, you have sufficient available space for future activity. Very outstanding Paris. Paris is full, 99%. No, it's totally full. Here that you see another interesting point on page 23, when you look at the take-up volume.
It's not only much higher than the previous year, it's the highest in the last four years regarding the Q1 , and it's 60% above the Q1 letting activity of the pre-COVID world, which is a quite important element also. Out of the vacancy that we have today in our portfolio, what is this attached to? We have 4.7%. 1.8% is renovation program in Spain. Part of this is already pre-let post Q1, that I will make some comments on this. The second part is renovation program in Paris. As you can see, it's almost fully let. Grenelle, that is just the remaining part to be let in March, as of the date of this results release, is also fully let.
The other vacant or available space is basically the CBD of Madrid, with also some pre-lets post Q1 and the CBD in 22@ of Barcelona and open 6% in cycle. Last page on this section, on page 25. Rental growth remains very strong, 4%, as Pere has mentioned. Re-let spread at 9%. Outstanding 21%. I think the most interesting element on this page is where our maximum rent is and how does this compare with the prime market rent of the consultants. You can really see we offer here the product that sets the reference, and it is absolutely at the highest end of the market. With this, I pass to Pere regarding ESG.
Thank you. As Carlos mentioned, our next section is devoted to ESG, which as you know, is a high priority for us, is where we've been working a lot for a long time, and where we are also delivering. We have a decarbonization business plan that is being executed. Of course, here always the question is, we say that we reduce. Everybody says so. How can we prove that we are being excellent at this level? In this page 27, we are providing just four milestones, four remarks in order to prove the degree of excellence of our ESG policies. First of all, on the left-hand side of this page, we have this business plan of our strategies for decarbonization.
We have been working in order to get science-based target approval on this business plan, which has an objective with a goal, with an ambition, within the framework of 1.5 degree increase. This is done. This is delivered. We are, as of now, the first and only real estate company in Spain to deliver that. We are 8 out of 35, IBEX 35 with this ambition, where we have this business plan, which has been statistically validated. As mentioned before, we have already been working not only on the asset side of our balance sheet, but also on the capital structure side. We already delivered regarding the bonds. All of our bonds are green now. Again, no, not many people can say so.
We are the first and only IBEX 35 company with 100% of our bonds which have gone green. We are the first and only Spanish real estate company with all of our bonds gone green and very well positioned within continental Europe. On this, we give a lot of importance to this. It's not only a delivery, it's how you are positioned, how the company remains positioned for the immediate future, where we think that this is gonna be extremely important. Which other ways can we share with you that more or less prove the degree of excellence of our ESG strategies? Well, GRESB is also a widely well-known standard. We scored at the five-star level.
Our last qualification was 94 points out of 100, according to GRESB leader in the listed offices, segment of Western Europe, no? For the investment portfolio. For development portfolio, we got 97 out of 100. That's the end or just the final stage of a very long strategy with strong momentum that allowed us to increase by 54% in two years our level of excellence according to GRESB. Last but not least, if we talk about CDP, the Carbon Disclosure Project, there we score with an A. That means the only office real estate company in Europe. Only 5 real estate companies in Europe rank this way. Only 12 real estate companies worldwide rank this way. All of this is because of this decarbonization plan that you can see on page 28.
We try to simplify our achievements in one specific KPI that we could share with you, which is the carbon intensity emissions per square meter. How many kilos of CO2 per square meter is Colonial generating? The most recent number is nine kilos of CO2 per square meter, which again, if we should compare, we could compare this with, and the benchmark would be in the very high end. Finally, the section five, I think we've seen, let's call it the past or the immediate past. You can see that the delivery is great looking at the occupancy, looking at the letting activity, looking at the EPS, looking at any KPI. It's very important to talk about the past, but it's even more important to talk about the future.
We would like to devote this next section to the future. Basically, you will see that today Colonial has a number of elements which allow them to have strong visibility on a strong EPS growth for the next three years. With everything that we are working on as of today, with everything that is being agreed as of today, that will lead us to an expectation of EPS growth of more than 60% in the next three years. Let's be specific about this to see where the numbers come from. Page 31 maybe is one of the most important slides of our presentation. It's our Colonial particular stairway. You can see here, basically what is our outlook for the next few years.
Our number for the end of 2021 in terms of Passing Gross Rental Income, it's around EUR 350 million. Our outlook, or I was going to say our ambition, but as you can see, it's more an outlook or more or less where do we probably see, you know, the outlook for Colonial in the next four years and then we'll see, it's above EUR 500 million. How do we go from EUR 350 million, more or less EUR 334 million, to more than EUR 500 million? We are relying on four value drivers. First of all, you will see the status of our pre-letting regarding our project pipeline, which we expect them to contribute with close to EUR 70 million to our future rents. 68 to be specific.
We are already delivering 44. Sorry if you hear a little bit of noise, but it looks like there's an alarm going on in our building. We will work with it as we can. Our second level in this particular strategy, it's what we call the renovation program. That is what we are expected to do in our existing buildings, not in our future buildings, but in our existing buildings. That should contribute with around EUR 40 million, and we are delivering already EUR 23 million. Third level, it's our acquisition program. We've been delivering the acquisitions that we expected. That's contributing another EUR 20 million. Finally, the indexation and rental growth that should contribute in the future with EUR 35 million.
Well, this is a particular outlook for growth that Colonial is going through. I'm going to go very quick through this. First value driver, delivery of project pipeline. This is beating our expectations. Some examples. On page 32, regarding Velázquez, basically you can see here that this is being almost fully delivered, the pre-letting of this building, well ahead our expectations. That is almost 16,000 square meters. On page 33, you can see at Miguel Ángel, which has been also fully pre-let to a global advisory firm, also ahead of schedule. Putting all this in perspective, on page 34, you can see that out of a pipeline of EUR 1.2 billion, there's almost a vast majority of this which has already been delivered.
As a result, out of EUR 80 million that we are expecting from this pipeline, 37 is already pre-let. In fact, 13 is already passing GRI. 16 are under negotiation. Only 27 are for the immediate future to deliver. The second value driver is our renovation program, which is almost completed. On page 35, there are a number of examples. Let's go to page 36. The outlook is again quite positive. Our passing GRI has already gone from EUR 17 million to EUR 24 million, but we have already pre-let an additional EUR 11 million. That is, if we are expecting EUR 47 million from this value driver source, 35 has already been secured. Our third value driver on page 37, it's the two most recent acquisitions that have been delivered that are helping, you know, our future cash flow with an additional EUR 20 million.
Finally, the indexation component. You know that our rents are fully indexed through CPI with a few exceptions, but the vast majority, like 99%. This component it's gonna be also very important, being CPI 8% in Spain and ILAT 4% in France. I think that this is also going to be an important contributor of growth. Basically, that's what we wanted to share with you today. In page 40, in the end the summary is looking at the past, at recent past important delivery of earnings growth, 26% in recurring profit, 19% on recurring EPS. This on the back of very important letting activity.
If we, instead of looking at the past, we look at the future, based on these four levels, some of our particular staircase, very good progress in order to deliver something that would be equivalent to 60% of EPS growth in the next few years. This is basically what we wanted to share today. I would again, maybe apologize because of the noise, but to be more specific, it looks like it's a fire alarm, and maybe we cannot cope with too many questions today because of this, I don't know how to call it inconvenience or just recent news that we did not expect. Maybe we can have time to go through a couple of questions, and sorry about this unexpected event. Maybe let's start now with the final questions. Thank you.
Thank you. Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press zero one on your telephone keypad. Please be informed that there can be a short silence while questions are being registered. Thank you. The first question comes from Celine Huynh from Barclays. Please go ahead.
Hi, Gary. I have two questions, please. The first one is on your like-for-like rental growth number. Can you help me reconcile your numbers because I'm a little bit confused? First of all, you're indicating 1.8% like-for-like rental growth, page four of your statement. According to the chart, it looks like you've included acquisition, which should not be part of the like-for-like rental growth calculation. Secondly, why is your 1.8% different from the 3% EPRA like-for-like? If I purely isolate the contribution from your core portfolio, your like-for-like rental growth is like 0.9%. Can you tell us what the contribution of indexation in this number was? In your like-for-like in offices, it looks like your like-for-like in offices was stronger than the overall like-for-like.
Can you give us more color about what's happening in retail, especially in Paris? The second question. Sorry about the questions. Second question is on your decarbonization strategy. Can you clarify whether your carbon neutrality target includes Scope 3? And if so, whether your Scope 3 includes carbon from construction and tenants' emissions? Thank you.
Look, I will answer very quick, and we can with you specifically do a call, specifically technically that you get the figures done. First of all, the like-for-like is correctly calculated regarding EPRA recommendation. It does not include neither projects, nor renovation, nor acquisitions. When you look at 1% growth, it's on the profit base. It's not on the revenue base. It's there, we are looking how much is the portfolio contributing on the profit base.
The like-for-like is correct. It's 3%, and it's basically concentrated in our office portfolio that is 4.6% like-for-like. What we have in terms of a temporary outlier is the hotel activity, basically in France that is still driven by volatility and it's operational driven on hotel occupancy. This is basically the impact that is reducing the overall like-for-like. All of the like-for-like is correctly, and the office portfolio like-for-like is 4.6%, half of it price, half of it volume. We happy to organize a specific call to walk you through the numbers that you get everything right.
Thank you.
Any other questions please?
Carlos, sorry. Can I go back again? Because I really don't understand why you're pointing at 1.8% in your chart, and it comes up as a 3% like-for-like. What is the 1.8% here?
I think maybe let's do tomorrow a specific call for it.
Okay.
It's correct. You will understand very easily.
I'm sorry to interrupt. We have this specific problem of our fire alarm going on. It looks not relevant, but it's actual fire.
Yeah.
I've got a number of presentations in my life, but that's a new kind of presentation with a fire going on. Maybe you have time just for a final question and the rest we can let take place later. Maybe one final question, please.
Thank you. The next question comes from Alberto Soriano, from BNP Paribas. Please go ahead.
Hello, guys. If it is the final question, it will be simple. What do you think, or what sort of LTV leverage it is the right one for the current cycle in offices in Paris, Madrid, and Barcelona? Should we expect more acquisitions to come in the coming quarters? How do you feel about the current interest rate environment linked with your balance sheet, with your leverage, et cetera?
Well, look, Alberto, you've been the right one because now we have the fire alarm stopped.
No.
No? You have to go?
No, no. Yeah.
I start maybe answering the last part of your question. I think that we are going through a current environment which is quite particular because there are two driving forces. One is interest rates, you know, going up. The other is inflation even going higher than interest rates. The first question for a company like Colonial is Colonial able to pass through this inflation to our clients? Our question is, yes, it is.
Not only because from a legal point of view, all of the indexation is automatic in our clients, but also because I think that real life it has to do basically about to what extent your product and your client is strong enough or not so strong enough. Being in the high end, I think that allows us to do the pass through, no? Then based on that, from an investment point of view, if inflation is at the higher end, no, that interest rate itself, that means entering into even more negative zone of interest rates, no? I think that it's something that deserves quite a deep analysis to see the impact on a company like ours.
Having said that, from the point of view of your question, which is actually, let's say, safety or strength of our capital structure, as you know, our way of approaching this is, first of all of this is more or less in our rating. Our rating is very strong. This takes into consideration everything, no, that has to do with the specifics of our balance sheet. So not only our LTV, but the nature of our assets, the strength of our cash flow. I think that this gives you a first measure about this, no? But the second point to stress about this is maybe what Carmina mentioned in the presentation. We've been working for a number of years to have an even stronger balance sheet.
As you know, doing liability management to have longer and longer maturities with lower and lower interest rates. As of now, it doesn't matter. It matters, but besides what happens to the market in terms of interest rates that go higher, our interest rate will not go higher for a number of years, and there will be no maturities for this. This means a value that will be easily calculated, the net present value of interest rates that we are not paying. On top of that, this may be more technical, as Carmina was mentioning, we have pre-hedged some part of our interest risk that goes beyond the maturity of our bonds.
That has also a significant mark-to-market value that as of today, I don't know, but will be in the range of EUR 200 million or something like this. Of course, generally speaking, higher interest rates maybe deserve more prudent capital structures. In a way, we've done the work before, and that means that we can live with, let's say, this safer environment in our balance sheet for the next few years because of the business strategy that has been put in place before.
Okay. If I can quick follow-up. I'd like to know your view on the cycle, more specifically your personal view on how to read offices for the next three, four years and try to link it with Colonial if it is gonna be a net buyer or net seller or neutral on the investment market for the next three years. Maybe it's too much philosophical question. If I may also on indexation, out of the 3% like for like, how much is indexation in this Q1? Thank you.
Look, indexation for us in our, let's say, past numbers. Let me start from the end of your question. It just has a residual impact because indexation or CPI has shown very high numbers just very recently, no? A very rough estimate would be that if indexation should remain, CPI would remain at the same level as it is today. By the end of the year, this should be adding an additional EUR 50 million or so to our profits and to our gross rental income that, let's say, on top of what we expected before. This would be if inflation was to remain at the same level and we revisit the contracts that are due during the rest of the year.
Going to the first part of your question, no, our outlook for the future, I would differentiate, let's say on the leasing side and on the investment side. On the leasing side, I would like to differentiate. I know that we are, let's say maybe too boring coming also with the same kind of emphasis, but the kind of product that we are in, it sits in a particular world where the balance of supply and demand, and demand is very particular. The kind of clients, the kind of long-term approach of those clients.
With the pace of the growth of the economies, we feel, let's say, quite, let's say, comfortable with what we could expect on the leasing side and on rents. On the financial side of the equation, I think that here the situation is more complex because it's just what I mentioned before, no? It's a balance between what happens to interest rates and to inflation, and therefore to real interest rates, no? Which today is still difficult to see. If we had to contemplate just the spot numbers that we have today, that would mean negative real interest rates, much more negative than they were a few months ago.
That would mean that real estate would remain even more as a safe haven because fixed income would be even more as we know, no fixed, no income, no? That would be positive. If real estate interest rates should go much higher while inflation becomes much lower, that would mean a normalization of the spread between yields and interest rates. You know that it's been very high for several years. That would mean coming back to normalization. In our view, this should mean neutral, let's say, consequences for yields if you look at history, you know? In a way, we don't see that today the numbers mean fundamental negative KPIs for our business.
Having said that, I mean, the macro scenario is uncertain enough not to be able to forecast what may happen to those key drivers, no? To interest rates and inflation, which means that an average, let's say, decent manager should be more prudent than on average regarding their investments. In this framework, we don't have specific goals of investing significantly in the short term. I think we will be more concentrated in what the presentation was about, which is the delivery of what we have already in, which only with this, just based on that, we are able to deliver a very significant earnings per share growth in the next few years.
I don't know if I answered with this because it's a very, very sophisticated question, a very complex scenario that would allow for a long, long discussion. That's what I can say right now.
Well, it's perfect. Thank you, Pere.
Thank you. Okay. My final remark, first of all, to inform you that we are safe so far. We have to leave. Just a save the date, our capital markets day will take place on July 11. That will be the next milestone in our communication with you. Thank you very much for attention. Sorry again for the incident, and let's keep in touch. We are available, if not today, at any other moment to go through your questions more in depth, let's say, directly. Thank you and have a good day. Bye-bye.