Ladies and gentlemen, thank you for standing by, and welcome to the MERLIN Properties 1H 2020 results presentation. At this time, all participants are in listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Also, I must advise that the call is being recorded today, Thursday, the 30th of July, 2020. Without any further delay, I would now like to hand over the call to your first speaker today, Ms. Ines Arellano. Thank you. Please go ahead.
Thank you. Good afternoon, ladies and gentlemen, welcome to MERLIN's first half 2020 results presentation. We hope that all of you and your relatives are safe and sound. Today, the three top managers of the company will provide you with an overview of MERLIN's performance and will be available for a Q&A session after the presentation. With no further delay, I pass the floor to Ismael Clemente, CEO of the company. Thank you.
Thank you, Ines. Good afternoon, everyone. Welcome to the six months 2020 results presentation of MERLIN Properties. Needless to say, the necessary introduction of our speech today is that we have been operating in these first six months of the year under very challenging operating conditions. The company performance has clearly suffered. The company has been affected mainly in the retail segment in shopping centers. In all the other asset classes, we can now proudly say that it's been similar to business as usual for the six months to date in the year. Of course, we remain prudent and cautious for the rest of the year and the years to come because we are a service company, and as such, we need a good performance of our clients in order to survive and thrive.
Eventually, we are, at the moment, safe and well prepared for what the future will hold. We are a very resilient company, and that resilience comes from a number of differentiating factors that, in some cases, have been the source of some critics in the past. The first one is the diversification of our business. As you know, we have four business lines, of which one is now ailing, but the other three are functioning at almost full steam. We obtain our income from offices, 51%, more than 30% from logistics and net leases, and only 18% by value now in retail, with close to 2,000 tenants across all of our asset classes. We also enjoy a very high-quality portfolio that we have been thoroughly refining over the past three years.
Now a number of the decisions we took make more sense, including the sale of Resi, which in Spain is having, of course, more difficult collection rates. The sale of hotels, which would have been another factor of worry had we still owned our hotel portfolio. The sale of the Juno portfolio in offices, which significantly refined the quality of our office portfolio. We basically said goodbye to around one-third of our client relationships that represented only 4% of our rental income and 11% of our GLA at the time, and transactions like, for example, the contribution of the non-core shopping centers to Cepsa last year. Our portfolio now is 91% in offices. It's 91 located in prime CBD and new business areas, which are proving very resilient in this COVID environment. Our logistics portfolio is 90% e-commerce related.
We have divested over the past years of the most, we'll say, industrial flavor type of sheds in our portfolio. Shopping centers is focused 96% in urban and dominant malls, for which we have the confidence that in the future they will emerge stronger from the upcoming retail crisis that we see for the coming years. On page five, we have made a little reminder of a point of situation regarding what the future might hold for this company in terms of resilience. In infrastructure terms, we have a very significant backlog. We have more than EUR 3 billion of contracted rents to first break and EUR 5 billion till maturity. We only have 15% of rents maturing before end of 2021, 3% this year, second half, 12% in 2021. We have fully booked all the hit of COVID-19 incentives in 2020 with no linearization.
EUR 66 million, no change from the latest disclosure we gave to market. With rent collection loss, it will be in the region of EUR 70 million in top line, around EUR 60 million in cash flow. In the most damaged asset class, which is shopping centers, we have secured a minimum of EUR 101 million of rents for 2021 through lease extensions, in partnership with our clients. We only deem between 3% and 4% of our tenants in shopping centers now irrecoverable, down from 5%-6% at the beginning of the pandemic. That was the estimate we gave to you. Of course, this may contain errors because some of the clients may think they are feasible and 12 months from now, the truth or the reality may demonstrate to them that they are not as feasible as they thought they were.
In principle, when in a Napoleonic legal system, somebody extends a contract for one year and a half, he's making a statement as to his belief in his future feasibility. Clearly, our asset, our client base, has demonstrated their willingness to continue doing business with us over the coming years. In terms of debt profile, we enjoy now a comfortable LTV of around 40%, 3.7x interest coverage ratio. We face no debt repayments till May 2022, have extended our maturity profile to 6.5 years, and are BBB stable by S&P. What is more important, our company enjoys the capacity to generate enough cash flow to serve and repay debt, bond at least till 2025, which is a luxury in times like the ones we are living at present.
On page six, we are going to go down to the concrete data for what has happened to the company in the first half of 2020. Our financial performance has been positive with a like-for-like rental growth overall in the company of 2.7% year-on-year, evidencing the strength of our portfolio. Our FFO per share of EUR 0.29 has been affected clearly by the COVID-19 incentives in EUR 0.06 and the change of perimeter in EUR 0.02. Otherwise, it would show significant growth when compared to last year, same quarter. That was our aim for the year. We were trying to be as flat as possible compared to the previous year, despite the asset sales, which were taking out around EUR 26 million from the company's top line, that our internal ambition was to be as flat as possible through internal growth of rent and cash flow.
Of course, all those ambitions have now gone to the wastepaper, given the new situation under COVID-19, but we will cope with it and eventually we will emerge stronger. Our valuations are flat versus December 2019, with offices and logistics slightly on the positive territory based on rents, and retail down by 4.7%. The debt management exercise that we have been carrying out in the recent past results in a loan-to-value on par with last year, and an average maturity extended to 6.5 years with no floating rate risk. In terms of operating performance, very interestingly, we are showing like-for-like growth in all asset categories, combining with a very sound re-leasing spread, which as we have commented with you many times, marks the fact that the situation of the cycle in Spain, we have been now caught by the COVID-19 pandemic.
The point of situation of the cycle was much healthier than in most competing countries. You will see what re-spread numbers we will be showing in the absence of external hits. The leasing activity has continued at a very good pace, even during COVID-19, with more than 150,000 sq m signed in offices just in the second quarter. Of course, this is affected by 55,000 signed in the renewal of the Endesa lease in Campo de las Naciones. Still, 100,000 will be a very good mark for the second quarter. Retail, as could be expected by anyone, has seen a very modest activity with only 6,200 sq m signed, mainly because of deliveries in our flagship plan. We have been finishing some units and delivering to the corresponding prelets.
Logistics continued advancing with 45,000 sq m signed. All leases have generally been signed above ERV, including the renewal of Endesa, which has caused a negative re-leasing spread in Madrid in the period. Our occupancy remains resilient, standing today where it was at the end of last year, 93.9%. The perspective is reasonable with a very high adoption rate of our COVID commercial policy, which, as you all know, included an extension of contracts beyond January 2022. The extension of the Endesa lease till 2030, which further improves our rental backlog. We have a very significant visibility on future rents. In terms of value creation, which is the source of very interesting valuation uplifts for the company in the coming times. In Landmark, we have signed very significant leases in Castellana 85 and Monumental in Praça Duque de Saldanha in Lisbon.
Rents have been signed at the same level as pre-COVID. Of course, most of those contracts had started negotiations pre-COVID, but it is at least meaningful to observe that there has been no evidence of any attempt of retrade by clients. Because the vacancy rate in central Lisbon and central Madrid remains at historical minimums, and the real estate market enjoys very significant inertia. This is something that is important to have in mind, because nothing happens very quickly and very harshly in real estate. Both projects are achieving very compelling returns of 8.3% and 9.4% in terms of yield on cost above our underwriting, because rents have been signed at very healthy levels. In the case of Lisbon, it's a record rent in the city. In the case of Madrid, it is also EUR 35.
It's among the best rents signed in the city, which together with some news we are receiving this week from Barcelona, show a very interesting resilience of rent in those cities. The interesting part of the Landmark project is that it is securing additional future rents of EUR 13.3 million commencing in 2021, which will help offset whatever hit we continue feeling in 2021 in our shopping center portfolio, as we all expect. In terms of the Flagship plan, the works have progressed more or less on pace, with slight delays owing mainly to public administration delays in both El Saler in Valencia and Porto Pi in Palma de Mallorca.
In our logistics plans, Best II and III, we have delivered two projects in Seville, fully let, and have signed pre-let for Madrid San Fernando II and Zaragoza Plaza II, which again resolved in EUR 6.3 million of additional rents commencing in 2021. We are also moving Cabanillas Park extension now to priority one because we look closer, fingers crossed, to securing an anchor tenant for the operation of that park. The demand in the A2 corridor continues to be very strong. Without further delay, I pass the floor to my colleague, Miguel Ollero, who will comment on the financial results.
Good afternoon, everybody. We have the financial results for the first half. First of all, I should highlight that in this first half, in terms of raw rents, we were achieving EUR 257 million of rents, which implies a 2.3% reduction with regards to the prior year. Nevertheless, as it was commented before, we have been able to catch up and to recover all the rents that we said goodbye last year as a result of the different divestments we put in place. In the end, it's pretty good outcome to be at such level of rents for the first half of the year. With regards to the net rents, it is what it is. We have been commenting before that as a result of the coronavirus pandemic, we took the bold decision to be a part of the solution for the retail component of our portfolio.
We were putting in place two policies, one commercial policy during the lockdown that took place in the second quarter of the year, and also a follow-up commercial policy that will be since reopening in June this year until December. As a result of it, we have been accounting 27.8 million of extraordinary incentives on a full expense basis, so we are not linearizing anything. Whatever incentive has been provided to the tenant has been expensed in the balance sheet, in the P&L of the company. That implies that our net rents are at close to EUR 200 million, EUR 198.7 million, 13% below last year. All of this flows through to the EBITDA level, that is EUR 184.1 million. We are 72% EBITDA margin for the company.
Consequently, the FFO was set at EUR 154.3 million, which implies EUR 0.29 per share below what it was last year. As we were commenting before, only EUR 0.06 were related to the coronavirus commercial policies that we put in place. In the end, the company has proven, even in these challenging times, that we are a cash flow generation company well above our peers in the market. We think that it is a characteristic of the company that is proof of our resiliency and also proof that we are very well positioned for whatever it comes. Regarding the EPRA NAV of the company, it was EUR 15.68 per share, 3.8% above last year. If we move on to the next page, we have here which has been the performance in terms of rent.
We have a like-for-like of 2.7% all across the portfolio, fairly commanded by office. The office component is bringing 4.4% of uplift on a like-for-like basis, followed by shopping centers at 2.8%. Despite the current situation, shopping centers continue having a healthy evolution in terms of rent. This is 1.2%, and this is 2.9% for, again, logistics, which is the great winner of the current situation, continues to be performing as it has been in the prior years. As you can see on top of it, as we were commenting before, we were losing from the last year, EUR 4.5 million of rents as a result of the asset sales we were putting in place last year and early this year with the three non-core retail assets that we were selling in the month of February.
Despite that, as I said, we are in a very good position, and we continue improving our rents in the company. We are now moving on into discussing the performance of every single asset class. Maybe, Guy, our CIO, will be commenting on them.
Thank you, Miguel. I'll start on page 11, and as Miguel said, go into the detail of each of the individual categories. Starting with offices, the 4% like-for-like growth that Miguel mentioned. You can see here again the impact of the non-core sale in 2019, with EUR 8.5 million of rents lost through the sale of those assets. If you look at where it's coming from, all three markets produced like-for-like growth. Barcelona and Lisbon continue to be the two star performers with their growth of 9.2% and 5.1% effectively. Again, all three markets showing like-for-like growth. In terms of occupancy in Barcelona, you'll see that's the one market that saw a drop in occupancy. That's the result, as we point out here, of the termination of a TravelPerk lease. TravelPerk is a startup company in the travel space. As you can imagine, a company suffering significantly.
The transaction we agreed with them is to allow them out of their lease early. We will continue to be paid rent through the end of September. That was part of the indemnification. So we were already in the process of re-letting that space. The other thing to comment, I think, in terms of the occupancy is there on the BBVA lease, which we note in the report was a post-closing event. That's 8,400 sq m of space that's now let but was not included in these occupancies. As we talked earlier as well, large lease with public administration. While that lease has now been agreed, they will be taking occupancy at a later date, so that's another 8,000 square meters that's not yet included in occupancy, although the lease has been secured.
Again, good momentum there, and we've got a pretty meaningful backlog of leases that will ultimately be in production. Moving to page 12. If you look at the re-leasing spread again by market. You'll see Barcelona and Lisbon significant re-leasing spread. Certainly in the case of Barcelona, a meaningful number of contracts. What you're seeing here now is, as we've been talking the last few years of growing rents. You're now having leases that were signed two to three years ago being renewed, all of that growth in rents that has been occurring in the market is now being incorporated into the portfolio as we renew leases or we have marked to markets of existing leases. The one point, I think if you look in Madrid, the 1.9 re-leasing spread, we'll cover on the following page. That relates specifically to the extension of Endesa.
If we turn to page 13, we'll cover that. Leasing activity, as you can see, meaningful new contracts signed and a significant amount of contracts renewed. As Miguel pointed out initially, significant activity even in a period of time where obviously we're far from normal. Re-lease spread, again, very meaningful. Endesa, the specifics of Endesa, that's a conversation we actually started pre-COVID. Because it's such a significant amount of space, they were doing their corporate planning, even though the lease did not mature for another two and a half years. Starting the conversation early. Obviously for us, in the post-COVID world, getting seven years extension for a significant amount of rent was something we felt was for prudence, as we mentioned earlier about wanting to really secure a significant amount of income going forward.
We felt like in a post-COVID world, the value of that extension was significant. At the end of the day, we felt the trade-off of a rent reduction in exchange for seven years of term, especially considering we knew that building was marginally over-rented, and so we knew there was going to be a degree of reduction. That seven years of additional term we felt was very important to secure the income stream further. Moving to shopping centers. Not anything significant. Performance quite good. 2.8% like-for-like growth. You see the impact of the sales that were from the first quarter of this year. When you look at footfall, just to remind people, because if you look at these footfall numbers, and we'll talk about some footfall numbers later. Latest 12 months through Q1, our footfall was positive 2.4%, and sales were 5.1%.
Going into COVID, the market was performing quite well. Both of those numbers were in fact accelerating. Each LTM, we were seeing an increase in the footfall and sales. What you see is obviously the COVID impact. The LTM footfall dropping by 20%, the tenant sales dropping by 18.2% when you include the first two quarters of this year, that's all the impact, obviously, of the centers being closed completely effectively for April and May, and only starting to reopen in June. We have data on that a bit later on you can see. Re-leasing spreads. Moving to page 16. Re-leasing spread of 4%. Over 100 contracts. Again, that's a good underlying growth in the rents that we're able to achieve on new tenants or on renewals of existing tenants. Occupancy holding constant at 94.1.
Given that as part of the commercial policy that's been accepted by 92% of our tenants, with all those leases being extended into 2022, we're pretty confident that occupancy numbers should hold quite well. Again, that was a strategic decision about extending contracts and securing an income stream, in this case, in exchange for the relief that we've given during the COVID period, both the period of closure and as they ramp up, the incentives decline evenly over from June to the end of the year. We felt like that trade-off in exchange for longer maturity was a good one. If you look at evolution, we decided to look at both our footfall, at least our footfall, because sales, you only have really one month of data. To do it at evolution, because I think it's important how things are changing.
In the first period of opening, because there was nothing open until that first period of June. You can see the evolution in footfall, that it started off at 41%. We're excluding Puerto Pi and El Saler because those are basically construction sites, you would expect the footfall and sales to be impacted like it has been in our other projects. If you look at the ex Puerto Pi and El Saler starting off at 41% and then steadily dropping to where in the most recent period, the middle of July, 29%. People are coming back slowly to shopping centers and the direction of that movement so far has been positive.
On the other side, you see with sales for June, that the evolution of sales is less impacted than footfall, which again, is normal because those people who are going, are going to buy, and there's some pent-up demand. The impact on sales has been less significant than the impact on footfall. If you move now finally to logistics. Always been a relatively steady performer. That has not changed. A 2.9% like-for-like growth. The EUR 1.9 million of rents through disposals. As Ismael said earlier, we took the opportunity in a very hot market to sell those assets that we felt were not really logistics assets, but had more of an industrial component to improve the quality. Again, if you look at the like-for-like, I'll talk about Barcelona in a second, but very strong like-for-like in both Madrid and in the regions outside of either Madrid or Barcelona.
If you look at Barcelona, that was really the effect of one major tenant that left in Q1. We obviously reported that. That was 16,750 square meters that went out. We re-let 4,170 of that in Q2, so that is why you see the occupancy go from 85.4 up to 88.7. Post period, we have signed another 4,000 sq m, and there is about 8,000 sq m that we are in advanced discussions on. I am not worried about that being a trend. It was just when you have a significant lease, single tenant, it takes time to re-let that space. In aggregate, I am very confident on the movement on that. Again, if you go to the following page 20, you can see that the re-lease spread again is very healthy across markets. Barcelona, again, being the most significant space there, getting just very tight market in what is also growing.
There's good tailwind behind this business. That's pushing rents up in the aggregate 6.7%. This also does not include the contracted rents for our projects that will be coming into the portfolio, the Best II and III. As Miguel said earlier, that's another EUR 6.3 million of rents on those contracts that have been executed that have been delivered this year, and therefore start producing rents in an equal way in 2021. The last page just gives you the overview of the stock, which we always do. Again, significant amounts of stock delivered in 2020, 155,000 sq m. Built to suit for UPS, for Damm, for Lidl, Caprabo, and Agility, mainly delivered in the second quarter. Those will again generate meaningful uplift in rents in the years to come. One thing to point out, because if you look at the FFO, it looks unusual.
The FFO is down when rents and everything else are up. That's really the impact of the fact that you start paying underlying tenant and you're paying the interest expense once you start construction. We have the cost of the interest expense, but the rents have not yet been recorded because as I said, most of these were delivered in May. Once you start to get the rents, there's a mismatch between the costs you have to pay and the rents you're going to receive. Once those rents start coming in, then you'll see that obviously reverse itself. With that, I'm going to turn it back to Miguel to talk about valuation and debt.
Thank you, David. In terms of valuation, as we were commenting at the very beginning about valuation for the first half of the year is quite flat, 0.2% only up. This is commanded by the fact that in office we are up on a 2% basis, with an adjustment down of 4.7% on shopping centers and 2% up in logistics. In terms of logistics, we were flat 0% evolution. In the end, the company in terms of GAV valuation is in the office business. They are already capturing, first, the fact that we are capturing higher rents at a new renewal we are putting in place as the re-leasing spread has been proving so far. On top of it, we have different landmark projects which are now in a final phase.
We have been able to secure, as we were commenting before, in Castellana 85, a full occupancy on a pre-let basis at very high or top rents in the Madrid market. The fact that in the monumental building refurbishment in this one, we have been able to secure BPI as main tenant for the largest portion of the building in a transaction that is at top rent also in that special Lisbon market, is proving that it has some reflection also on the valuation of the assets in offices. Logistics continue evolving in the right direction, mainly because we are bringing new product into production, as we have been commenting, and will follow on in the following quarters due to the pipeline we have in place. On this basis, we have the expansion of eight bips in shopping centers and one bips in logistics and logistics compression.
Moving now into the debt profile of the company. We have been also acting on this front mainly right after the beginning of the first half of the year. In July, we put in place a liability management action within the company that implied the issue of a EUR 500 million seven year maturity bond that was raised to put in place liability management. As a result of this issue, we have been reducing EUR 250 million of the two bonds approaching maturity in 2022, 2023, advancing and expanding our maturity profile of the company in terms of debt. At the same time, we are devoting another portion of those proceeds to pay back in full two mortgage loans we have in place, which are maturing in 2025. In the end, we are expanding the maturity profile of the company.
We are reducing the first refinancing milestones we have ahead. In addition to that, we decided to fully repay back the RCF of EUR 700 million that we have withdrawn at the very beginning at the time in the month of March, when the pandemic came into place as a measure of conservative approach into the situation given the uncertainty. By now, we have already paid it back, it stays now fully available if needed in the future. As a consequence of that, we have right now a company with a 40.4% loan-to-value, well in line with the loan-to-value we had at the beginning of last year. The company has been expanding the maturity profile from six year on average to 6.5 with the action I was commenting before.
Also on fixed rate, we have almost 100% of all the debt is on a fixed rate basis. We don't have any forward issues with interest rate hike. Although so far we can say that with the current monetary policy in place, this is not the case. It's important to have covered these potential risks for the future. A lot of actions on the liability side that have been helping also the company to be set for any problem in the future. Finally, on page 27, we have here the covenants attached to our debt positions. We have a lot of room to maneuver and a lot of headroom with regards to the different covenants on loan-to-value ICR and recovery assets. All in all, the balance sheet is well set, and for sure we will continue improving, taking advantage of this year also.
Now I pass the word to Ismael sorry, who is going to be covering the value creation section that is coming up.
Thank you, Miguel. In terms of value creation, the period has been marked on the Landmark plan by the advance in the works of Castellana 85. We are fully refurbishing the asset, which is located in AZCA, which is the best business area in Madrid prime CBD. At the same time, we are advancing on a public to private partnership with the municipality of Madrid, together with the main owners in the area, which should result in the possibility to refurbish, and in the future, take care of the maintenance and security of the whole area by the owners who have the biggest percentages of ownership on it, in the region of 85%, the top 10 owners of the area. It's a big building. We have signed close to 13,000 sq m post-COVID. Plus, we have an option for another 1,842 sq m.
Castellana 85 will become the headquarters of both companies, one of them being a top-tier international consulting firm and the other a Spanish construction and engineering company. The delivery is set for the beginning of 2021, and the yield on cost is quite meaningful at 8.3%. This building will clearly be an engine of value for the company in the next year. In Lisbon, in Monumental, we are also completing the full refurbishment of the building, which is located in best and best in Duque de Saldanha with Fontes Pereira de Melo, one of the most emblematic squares in the city, in the core of Lisbon's CBD.
During COVID, we signed a 10-year lease agreement with BPI, the leading Portuguese bank, comprising close to 20,000 sq m of the building, to become their headquarter in Lisbon, where they will be gathering the people they have in six scattered buildings across the city. Again, a very significant construction yard. We have to also thank the construction company, Somague, because they have endured during COVID with a number of positives recorded in this construction yard. They have continued performing, and the building is running on track in terms of delivery date. We expect it for the beginning of 2021, will mean an additional significant rent for the Landmark program with a yield on cost of 9.4%.
On page 30, you have renders of the works we are developing in El Saler, which will lead to the consolidation of this center, which is located in a unique location in the new area of the city, what is called in Valencia, the City of Arts and Sciences, right next to the port of Valencia. It will convert this in the leading urban mall in Valencia. All anchors are now upsizing and upscaling the units. The center will be now much more open with a very significant terrace space, which in Valencia will help and will have helped a lot, particularly had it been opened during the COVID period. It's not been the case, disgracefully. Yield on cost is much humbler, 5.2%, simply because there is an offensive component into this CapEx. There is also a defensive component into it.
In Porto Pi, which is right in front of the cruise terminal of the port of Palma de Mallorca, which these days probably is not in vogue, talking about cruises. Clearly, the port of Palma de Mallorca is one of the main hubs in the Mediterranean, if not the biggest in terms of cruise traffic. We are now proceeding to a full refurbishment of a shopping center. Again, converting it into a much more open shopping center with lots of terraces overlooking the sea. We have bought space and all future additional space is now fully let in this shopping center as it is in El Saler.
The yield on cost is 4.2% because the acquisition of some of the additional units was really expensive, but we wanted to keep as much control of destiny as possible in terms of the operation post-refurbishment of the shopping center. In page 31, you have renders and pictures of the construction activity in logistics. San Fernando II will be delivered in September. Cepero is two-thirds let to the beer maker, Grupo Damm, in Spain, with a yield on cost of 8.9%. Zaragoza Plaza II is fully let to DSV, with a yield on cost of 7.1%. In Seville ZAL, we have already delivered three warehouses totaling 27,000 sq m, which have been let to Amazon. Carbajosa, which is a cold storage, and Cuatro Casas, with a yield on cost of 8.4%.
Activity will continue in the first quarter of next year with the delivery of the national logistic hub of Carrefour in Azuqueca de Henares. On page 33, we wanted to inform of our commercial policy in shopping centers, which is the most visible hit we have suffered during the COVID-19 pandemic. The phase I of the commercial policy was enacted on March 15. We were really early to react and pioneering the market, as in many other occasions. We decided to basically forgive the rent to all tenants affected by compulsory shutdown. In the ground floor of our offices, which was a relatively small eligible universe, 100% accepted. In shopping centers, from the eligible universe, which was only the people compulsorily obliged to close, which was 89% of our population, more than 85% accepted.
Some others were still expecting to get a better treatment from the law, and they didn't get it. As such, you will see a much higher acceptance rate in policy two. Policy two was put in place to help not only the tenants affected by the compulsory shutdown, but also the ones in which we have observed a severe operational limitation during the pandemic. We granted partial rent relief, starting at 60 in the month of June, going to 50 in July and August. Then diminishing till 0% on the 31st of December with a specific policy for food and beverage retailers, which normally operate with higher OCRs. In offices, the eligible universe was 4%, with 93% embracing the policy. In shopping centers, the eligible universe went up to 94%, with more than 92% embracing the policy.
In terms of collection rates, in offices for the office component, there was 0% applicability. We have collected 99.2% of our rent in the quarter, with 0.8% that remain uncollected. In shopping centers, 59.7% was affected by the commercial policies, therefore waived. 37.7% have been collected, including all common expenses, and 2.6% remain uncollected, which is a remarkable achievement of our shopping center team. In net leases, of course, no commercial policy applicable, 100% collected. In logistics, no commercial policy applicable, 96.4% collected, 2.7% in process, mainly public administrations, Generalitat of Catalonia in Barcelona, and 0.9% which remains uncollected. In page 35, we repeat what we expect to be the impact for 2020 of the COVID-19 pandemic in our accounts. We expect to record EUR 66 million of incentives and have in mind in the region of EUR 4 million of collection loss.
About EUR 29 million have already been booked in the first half, and EUR 41 million is expected for the second half. That will result in around EUR 250 million of cash flow, which will result in EUR 0.53 per share. I know many of you will call this conservative, but probably it's better to be safe than sorry. The 2021 impact, which again has been the object of many questions by all analysts and investors, we believe will be significantly mitigated by a very low level of maturities in the year. The delivery of the buildings from the Landmark Flagship and Best II and III plans, which will result in some additional rental stream, which will help offset the loss of rent deriving from further affection of our activity by COVID in the coming year. Only 12% of our rents mature in 2021. The incentives have been expensed in 2020.
We haven't straight-lined them. Therefore, there is no impact in 2021 or in 2022, 2023, or 2024. We are taking the hit. We are biting the bullet in 2020. As commented, we expect EUR 20 million of extra income to enter into operation next year. The retail occupancy is supported by our commercial policy. At the very least, even assuming that some of our tenants might be wrong in their possibility to survive, at the very least, this will help our asset managers because it will give them the possibility to focus in 2021 on the re-tenanting of vacant units while retaking their normal activity from 2022 onwards, including renewals. At least they will not be looking at renewals and re-tenanting in 2021. They will be just focused on the re-tenanting of irrecoverable clients.
In offices, we have said many times that as any other company in an up cycle, we were lagging behind the cycle. Our reversionary potential today, after having renewed Endesa, which was negatively affecting the reversionary potential, but now has been adjusted, is 13%. We are lagging the market, the ERV, by 13%. This will act as a buffer if the market turns down, as many of you are expecting, we will see. Our net leases will continue playing the role of safe harbor. They clearly help us to serve our debt and to stabilize cash flow profile of the company. The logistics will continue to grow, and we will try to accelerate their incidence in the numbers of the company as a future vector for growth because we know part of the future of the company lies in the logistics activity.
On page 37, as closing remarks, just to say that the financial performance has been heavily hit by the COVID impact with lower net rents by about EUR 70 million and lower FFO of about EUR 60 million approximately. The FFO guidance for 2020 is now EUR 250 million, EUR 0.53 per share. These are all approximate magnitudes. Very importantly, I will stress that this is ceteris paribus. I mean, all things being equal. Of course, if we start having new outbreaks of COVID in September, October, November, December, we will need to recalculate completely the whole thing. In principle, if we can dance with the pandemic, having already hammered it, if we can now dance with the pandemic, as the epidemiologist says, this is the numbers that we expect to show you by end of the year.
Evaluations have remained flat in the first half. We don't expect very significant hit also for year end. We expect some further impacts in shopping centers eventually, depending on how the situation evolves. We don't expect significant hits in logistics and offices because we are generating more and more rents through the market situation at present. If it varies in the future, no one knows. We have a strong balance sheet with EUR 1.2 billion of liquidity, no maturities till 2022, and very safe headroom with covenants. What is important, the capacity to generate enough cash flow to serve the debt, including the bond maturities, through very late in the cycle. In terms of business performance, it is true that the leasing activity post-COVID is revealing much higher retention rates with clients because simply people doesn't want to bother to do movings in the middle of the pandemic.
With new deals signed above ERV and renewals with positive re-spread. Occupancy is on par with financial year 2019 and set up for a resilient performance in the future because only 15% of tenants have expired between the second half and all 2021. Collection rates, even in the hardest part of the crisis, have maintained very healthy levels, which marks or simply reflects the quality of our tenant base, which has been also significantly refined over the past years. In terms of value creation, Landmark is evolving very satisfactorily with leases signed in Castellana 85 and Monumental with very healthy yield on cost and secured rents of EUR 13.3 million entering into operation next year. In Flagship works are advancing very well in El Saler and Larios, with leasing activity clearly growing on the back of the reforms.
In Best II and III, two warehouses have been delivered in Seville. Leases in Madrid, San Fernando two, and Zaragoza Plaza two have been signed, which mean rent of EUR 6.3 million starting next year, where the first quarter will also be marked by the delivery of the national logistic hub of Carrefour expected for February. In Cabanillas Park 2, the extension of our successful Cabanillas Park 1, we have moved now the project to priority one because we are closer to securing a big logistic operator as a launching client for the park. That's basically all. We are ready now for your questions, at your disposal.
Operator, please could you open the line for Q&A? Thank you.
Will do. Ladies and gentlemen, we will now begin the question and answer session. Again, as a reminder, if you wish to ask a question, please press star one on your telephone and wait for your name to be taken by an operator. If you wish to cancel your request, please press the hash key. Once again, star one should you wish to ask a question. Our first question is from the line of Pedro Alves. Thank you. Please ask your question.
Hi. Thank you for the presentation. Three questions, please. The first one on your portfolio and valuation. Can you share with us what was the like-for-like revaluation inside the project pipeline and the like-for-like of the portfolio already in operation, if this is meaningful, the difference? The second one on your lease maturities. I guess you mentioned 15% of rents expiring until 2021. I guess this excludes the shopping centers portfolio. Out of this 15%, how much is related to secondary offices? Thirdly, on your strategy for the crisis period. The latest data in Spain shows naturally a rising unemployment. What kind of contingency plan do you have for an extended period of low job creation or even job destruction? Would you try to be more aggressive on pricing to have a minimum level of occupancy? Start offering more flexible leases conditions?
Just some color on that would be helpful. Thank you.
Well, hi, Pedro. The first thing, the 15%, three plus 12 includes shopping centers because as you know, at the expense of a very significant loss, we have extended all contracts to 2022 and beyond. In principle, it includes everything under operation in the company. Logistics offices, of course, net leases, which there is nothing, and shopping centers. As to your last question, what will we do? Pray, simply. What do you want me to say? Of course, any indication of whether we are going to maximize yield by occupancy or by rent will be information that we don't want to share with the market because we will have our policies and we want to keep our cards with us.
It will depend very much on the type of client and on the faith we have on their survival and the capacity to stay within our portfolio for the coming years. This will mark what we will do. In principle, we haven't created any contingency plan based on the somber panorama that we are facing for next year because we have the confidence that the different asset managers of the company are well-trained to react depending on the situation and to inform upwards of why they are doing what they are doing.
Yeah. Let me just amplify on the question of flexibility. As you all know, we started first through acquisition and now investment and through acquisition. We now have internally the Loom brand, which allows us to have the ability to provide flexibility to the extent that that's what tenants want. We're prepared for that because if the market does look for more flexibility, we're prepared for that. The second thing I think we've prepared for is if the idea of this diffused workforce. You hear a lot about the diffused workforce. There's not going to be CBD only, but people are going to have multiple opportunities where people can work closer to home. I wouldn't say at home, but closer to home. We have a portfolio that we think allows us to accommodate that as well. The last part, a little bit on what Ismael said.
We are responsive to the market. Right now, we've seen the market has not been that affected, but it's early. The true effects of COVID-19 will come after the fiscal stimulus, whereas it will come when the economy is meant to pick up from all the stimulus that has come into play. We will react to the market and be flexible in doing so. We think we've created a portfolio that allows us to accommodate that. We've created the ability internally to meet flexibility demands if that's what tenants want. We'll be focused on making sure we're generating as much cash flow out of the portfolio as possible. The last thing I'll say is, if you think about how we respond, we've already started to do that.
These decisions to extend maturity, both in the investor portfolio and the retail portfolio, was to make sure we had more resilience to the extent the situation deteriorates. With only 12% of our portfolio coming up against maturities within the next 18 months, or excuse me, 15% for the next 18 months. We don't have to deal meaningfully with a lot of these rollovers. We've taken a view that extending the vault and making sure we don't have a lot of near-term maturities was part of that strategy, and the same thing with Miguel in the finance side. We took the decision to extend maturities earlier this year as a way of ensuring that we have a minimal amount of capital market exposure as well. Creating this resiliency in the portfolio is the way we've reacted now.
If the situation changes, then we'll react to and respond to the market if that's what presents itself.
Okay. Very clear. Thank you.
Okay, our next question is from the line of Celine Yoon. Thank you. Please ask your question.
There's a 13% revisionary potential in offices. If I look at slide 13, the re-leasing spread has been -7.5% Q2. First of all, how do you reconcile the two numbers? Secondly, do you think that we are likely to see more rent negotiation like the Endesa deal, going forward? My second question would be, what is the percentage of the portfolio to renew in 2022, please? Thank you.
Well, the answer on the first question, Celine, I think is why we tried to say if you took the Endesa lease is what's driving that negative re-leasing spread. If you take the Endesa lease out, the LTM re-leasing spread would've been 13.2%. The re-leasing spread for the quarter in Madrid would've been 17.2%. That individual negotiation had all of the impact. The underlying in the broader portfolio was actually quite strong. In fact, continued that same progression. As we've been reporting re-leasing spreads each quarter to all of you've seen that in each quarter, the re-leasing spread has actually been increasing. Even in this quarter, it would, if you take out that strategic decision we took about the Endesa lease. I don't think the numbers, when you look at them, really, they show underlying strength.
As to your second question, we have pretty good visibility between now and the end of the year, which is why we felt like a lot of companies are not giving guidance. We felt like we can give guidance on the FFO because we're six months through the year. We've already agreed the commercial policy with the retail tenants. They signed on to it. We're pretty sure we know what's going to happen on the retail side. Logistics and net lease are like money in the bank. The only question really then about future income or future FFO comes from offices. Again, given we only have a small amount of renewals in Q3 and Q4, that gave us the confidence to be able to say, okay, let's put a number. We'll be brave.
We'll put a guidance into the market of FFO this year because we're pretty confident in that number. As to 2021, it's like I said earlier, I don't think anybody has visibility on 2021 because it is so dependent upon what happens with the economy, and the economy is frankly dependent upon what happens with the virus. Now not only do we have to be real estate managers, but we have to be epidemiologists as well. I didn't study epidemiology at all in college, so I know nothing about it. How that virus impacts the recovery, the early numbers have been pretty good. The recovery through July, when you look at different markets around the world, the market was recovering as people expected it to do, and in some cases even better.
The last three weeks with all of these, in the U.S. you've got California, Florida, Texas, and Arizona showing increases. That's had an impact on the U.S. economy. You've got Hong Kong, you've got India. People have the view about what's going to happen now going forward is much, much murkier. Anything about what might happen in 2021 that I told you would be purely speculative. We can give guidance on what we have visibility on, which is the end of 2020. I think what's going to happen in 2021, we'll have to take a look at when we give guidance at the end of the fourth quarter. The positive I will say, though, as Ismael pointed out earlier, we already know that we've signed leases that will be in place in 2021 that were not in place today.
That will be EUR 20 million more in rent. Whatever happens in the rest of the portfolio, we know that we're going to have EUR 20 million more in rents coming in in 2021. If there is deterioration in the rest of the portfolio because of the economic performance, that's a good buffer against that deterioration.
Thank you, Leslie. Just making sure, what is the percentage of rents to renew in 2022? What is the number?
I'm going to have to ask the analysts to get back to you on that because that's not a number I have in the top of my head.
Okay. No worries. Thank you.
Thank you.
Thank you. The next question is from the line of Alvaro Soriano. Thank you. Please ask your question.
Hi. Thank you for the presentation. Three questions on my side. The first one is, what is the utilization rate of your office buildings as of today? Is there any difference between Spain and Portugal? The second question is on shopping centers. Should we expect any bankruptcy among the smaller retailer once your favorable commercial policy ends? A third one, and this one, I guess, needs clarification. On your office portfolio, without the positive impact of projects like Castellana and Monumental, stripping out the development gains, what is the real growth on your office NAV? Thank you.
Well, as for the first, which is the utilization rate, we estimate that currently in mid-July, utilization rate of our clientele oscillates between approximately 33% and 50%. Between two-thirds and half of their real office space. The trend we are observing is that by September, the whole thing should normalize. As you know, Spain starts in September.
Restarts.
July and August are almost void months, except for people who work in finance, consulting, Real estate and very few other company,.
For example, this morning, we were having a conversation with one of our clients, PwC, which is now around 60%, 1,100 out of 1,900 employees in the office, and is calling back everybody 100% by 15th of September. We are also calling all of our personnel 100% back in the office by 15th of September. I believe this is going to be more or less the tone all across the market. That is what is happening. In Portugal, frankly speaking, I need to ask because I do not know. What I know, of course, is Carleon, BNP Paribas. They are working between 40% and 60%, but I do not know across the rest of the portfolio what has been the real occupancy of buildings. As for shopping center clients bankruptcy, Alfredo, I have no idea.
In principle, what I was saying is that at the very least, every client who has taken the decision to accept the policy and move the contract to 2022, as you know, our legal system is very stringent, so he's taking a personal liability that can be enforced against his personal worth till 2022. In principle, these is people that I don't know whether they will go bankrupt, but they don't want to go bankrupt, which is important. Hence why they deserve also our help. There is people who is not even fighting. It's people that has already thrown the towel, which is the 2.5%, 2.6%, which is currently in uncollected. I really don't know how many of those. You remember that based on the polls of our asset managers, we gave to market a figure of between 5% and 6%.
We said 5.5% of people that we thought was the weakest. That was the people that we thought eventually will need to be replaced. To our surprise, some of these people has restarted business. Now the uncollection is only 2.6%. Between this 2.6% and the 5.5% will be the truth of the people that eventually will not be able to survive this strain of COVID.
The last point please. I'll answer part of it, but I'll also say we'll have to get back because the specific detail. I think in some ways, I'm not sure that I really agree with the question because a big part of our argument in the past, if you remember when we had this conversation of why we felt our valuations were lagging behind the valuations of some of our peers, was because we had to invest in the assets that we own. Even though they were generating cash flow just from a pure aesthetic standpoint and from a future potential investment standpoint, people were saying, "Well, you may have to invest more money in order to generate those returns.
We're going to discount those cash flows higher. Now that we've done the work, as we move through Diagonal 605, we move through Castellana 100, and we move through Monumental, what you're seeing is you're seeing the reality reflected as saying, "Okay, now I know what this cost is because we're pretty much through those projects." We've signed rents for over 85%, 90% of the space. It's no longer we think this is what we'll generate. The discount rate associated with that is now much lower. When we look at it today, we say those valuations have now moved closer to where they should have been relative to our peers. To break it out is almost like saying the whole reason we did it was to get those numbers up in the existing portfolio.
What I'll tell you is, yes, the valuations, some of the valuation movement was driven by the investment we made in the assets. That's why we did the investment in the first place. Now those are much closer relatively. By the way, we've looked at top transactions as have the appraisers, because there are deals being done in Madrid right now, like 4% yield by Zurich Insurance on a building in the center of Madrid, 33% let in a location not as good as ours, and our valuations are actually marginally below that.
There's empirical evidence for it, and it is supportive of the reason why we entered the Landmark transaction in the first place. That's what I think is the appropriate way to look at it across the entire portfolio.
Okay. Thanks, David. It's just to try to compare with some of your peers, which are disclosing the impact of the gains on developments, and then they have reported a negative revaluation on the portfolio. I understand the reasoning behind your explanation. Thank you.
You're welcome.
Okay, our next question is from the line of Peter Papadakis. Papadakis, sorry. Thank you. Please ask your question.
Close enough. Doesn't matter. Good afternoon, everyone. I have a couple of questions. Maybe to begin with, one thing I didn't see in your slide deck was a slide that talks about potentially shrinking the company, given where you're trading. Isn't that a better risk-adjusted-
Peter, potentially what?
A slide talking about how you're gonna be a net seller or potentially shrink the company given your share price. Isn't that just a better capital allocation than discussing about development pipelines, given where you trade? The second question, if you can give any insight. You have a lot of office tenants. They are staying put, as you say, so the retention rates are high. Do you have any insight on whether they are trying to sublease space or about to sublease space? Are you aware of sublet gray space going up quickly in the market? Thank you.
On the second one, Peter, on the sublease, I have to tell you because that has been clearly one of our indications to the asset managers. So far, zero. Zero, zero. So far. Okay? In the future, don't worry. In six months, I will come with a 50% of our clientele trying to sublease because they have excess space. For now, zero, which is important. Okay?
Yep.
That is very important. Remember also that generally speaking, leases in Spain are shorter than you are accustomed in the U.K. If you look at the world from a U.K. perspective, I understand that somebody who is taken by a lease contract till year 2035 may try to sublease. In Spain, contracts expire in two, three years, on average, four years. Eventually, what they need to do is simply wait till the leases expire and then negotiate a different GLA, which is what we really expect. If the world moves into a complete disaster as everybody's expecting, what we expect is a negative tension, both in occupancy and in rents. Up to now, we were enjoying a market in which we were significantly hiking up our rent because demand was bigger than offer.
Very importantly, on average, clients were demanding from us 1.1 times the space they used to occupy. There was a net new absorption, at least the one we could measure within our portfolio, of 10%. This might revert, and eventually will revert, and if it reverts, we will give you the number. Not now. We are not yet experiencing any downward tension, neither in square meterage nor in rents.
On your other question, Peter, I'll take that one on. We know from reading the reports, we know that people feel like that our asset rotation should be faster. I'll remind you, in the last 18 months, we've sold EUR 500 million of assets between the retail, between the non-core office sale, and between the bank branches. We have other non-core assets that we want to sell. We sold the residential portfolio. We sold the hotel portfolio. We're a company that we built ourselves up through acquisition, both corporate and individual, and since then we've been reforming the company. We've sold in the last three years, if you go back to hotel and retail, over EUR 2.5 billion of assets. I'm not sure how much faster people would like us to go in doing that because it's a long process and a complicated process.
We still have the objective. We have certain office buildings that we would like to sell when the market comes back. I don't think right now, this moment in time, is not a time to be going back into the market. We have assets in the office portfolio. When we look at their future potential, we know that we have better uses for that capital. Same with, now down to very few in retail, because most that we've managed to dispose of, but a few non-core retail that we'd like to dispose of. The branch network, the strategy is always the same, continue to sell those Cs, Ds, and Es. Again, we've sold up EUR 25 million of bank branches so far this year. That process will continue, and we will continue to rotate those assets back into the portfolio.
I'll answer a question that wasn't asked because I'm sure people are either thinking about it or may even come later. That's the question of share buyback when you're trading where you are. We're at 40% LTV today. I think we've done a pretty good job. We started at 50, we managed to get ourselves down to 40. We continue to stay there. We have an objective of getting that number down further. I think, Gail, you would agree with this. I know the way Green Street feels about leveraging companies. Our priority would be to delever before it would be to go in and buy shares. Those companies have levered up to buy shares. The history's not been kind to those companies.
I think right now our objective is to continue to use whatever excess cash beyond building out our pipeline into delevering rather than using it to acquire shares in the market.
Yeah, agreed with that priority. Thanks, David.
Sure.
Thank you. There are no further questions. Please continue.
Okay. Well, thank you everybody for attending today's call. As always, we remain at your disposal for any questions or clarifications that you may have. Both Fernando and I will be happy to address them. Have a happy summer break if you happen to have one. Please keep safe. Bye-bye.
That does conclude our conference for today. Thank you all for participating. You may all disconnect.