Ladies and gentlemen, thank you for standing by, and welcome to the Merlin Properties 1H twenty twenty Results Presentation. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. Also, must advise that the call is being recorded today, Thursday, 07/30/2020. And without any further delay, I would now like to hand over the call to your first speaker today, Ms.
Ines Ariano. Thank you. Please go ahead.
Thank you. Good afternoon, ladies and gentlemen, and welcome to Merlin's first half twenty twenty 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 and A session after the presentation. With no further delay, I pass the floor to Ismeric Lamente, CEO of the company.
Thank you.
Thank you, Ines. Good afternoon, everyone. Welcome to the six months 2020 results presentation of Maryland Properties. Needless to say, the introduction the necessary introduction of our speech today is that we have been operating in these first six months of the year under very, very challenging operating conditions. The company performance has clearly suffered.
The company has been affected mainly in the retail segment in shopping centers. But in all the other asset classes, we can now probably 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. But eventually, I mean, 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 obtained 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.
I mean, 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 Cilixis 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. Again, we have divested over the past years of the most, will say, industrial flavor type of shares in our portfolio.
And in shopping centers, it's 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 €3,000,000,000 of contracted rents to first break and $5,000,000,000 till maturity. We only have 15% of rents maturing before 2021, 3% this year second half, 12% in 2021.
We have fully booked all the hit of COVID-nineteen incentives in 2020 with no linearization, 66,000,000, no change from the latest disclosure we gave to market. With rent collection loss, it will be in the region of $70,000,000 in top line around 60,000,000 in cash flow. In the most damaged asset class, which is shopping centers, we have secured a minimum of €101,000,000 of rents for 2021 through lease extensions in partnership with our clients. And we only deem between 34% 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 twelve months from now, the truth or the reality may demonstrate to them that they are not as feasible as they thought they were. But in principle, when in Napoleonic legal system somebody extends a contract for one years, point he's making a statement as to his belief in his future feasibility. So 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%, 3.7 times interest coverage ratio.
We face no debt repayments till May 2022, have extended our maturity profile to six point five years and are BBB stable by S and P. But 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 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 €0.29 has been affected clearly by the COVID-nineteen incentives in €06 and the change of perimeter in €02 But otherwise, it will 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 €26,000,000 from the company's top line that our internal ambition was to be as flat as possible through internal growth of rents and cash flow. Of course, all those ambitions have now go to the white paper given the new situation under COVID-nineteen that 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 six point five 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 release 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-nineteen pandemic that the situation the point of situation of the cycle was more was much healthier than in most competing countries. I mean, you will see what release 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-nineteen with more than 150,000 square meters 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 Nacional, but 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 square meters signed, mainly because of deliveries in our flagship plan.
I mean, we have been finishing some units and delivering to the corresponding prelates. Logistics continued advancing with 45,000 square meters signed. And all leases have generally been signed above ERV including the renewal of Endesa, which has caused a negative release 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, plus the extension of the Endesa lease till 02/1930, which further improves our rental backlog.
So we have a very significant visibility on future rents. In terms of value creation, which is the source of very interesting valuation uplift for the company in the coming times, In Landmark, we have seen we have signed very significant leases in Castellana 85 and Monumental in Prasaduque Del Saldane 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 free trade 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.
I mean, 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, very compelling returns of 8.39.4% 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 €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 rents in those cities. The interesting part of the landmark project is that it is securing additional future rents of €13,300,000 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 Puerto P in Palma De Mallorca. And in our logistic plans, BEST two and three, we have delivered two projects in Seville fully let and have signed pre led for Madrid San Fernando 2 and Zaragoza Plaza 2, which again result in $6,300,000 of additional rents commencing in 2021. We are also moving Cavanilla's park extension now to priority one because we look closer, fingers crossed, to securing an anchor tenant for the operation of that park. And the demand in the Genarez 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. Regarding the financial results for the first half, first of all, I should highlight that 2020 in this first half in terms of gross rents, we were achieving €257,000,000 of rent, which implies 2.3% reduction with regards to the prior year. Nevertheless, as 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 refund investments we put in place. So in the end, it's pretty good outcome to be at such level of rents for the first half of the year. With regard to net net trends, it is what it is.
We have been commenting before that as result of the coronavirus pandemic, we took the bold decision to be part of the solution for the retail component of our portfolio. And 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 until December. As a result of it, we have been accounting $27,800,000 of extraordinary incentives on a full expense basis. So we are not linearizing anything. So whatever doesn't come or whatever incentive has been provided to the tenant has been expensed in the balance sheet in the P and L of the company.
That implies that our net rents are close to €200000000.108700000.0 euros 13% below last year. All of this goes through to the EBITDA level that is €184,100,000 with a 72% EBITDA margin for the company. Consequently, the FFO was set at €134,300,000 with inflation of €0.29 per share below what it was last year. But as we were commenting before, only €06 were related to the coronavirus commercial policies that we put in place. So in the end, the company has proven even in these challenging times that we are cash generation company, well above our peers in the market.
And we think that this 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 E Prime value of the company, it was €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 gross rent. So we have a like for like for the 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%.
So despite the current situation, shopping centers continue having a healthy evolution in terms of rent. And then this is 1.2% and logistics 2.9%. Again, logistics, which is a great winner of the current situation, continues to be performing as it has been in the prior years. So as you can see on top of it, as we were commenting before, we were losing from the last year $12,500,000 of rents as a result of the asset sales that 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. So despite that, as I said, we are in a very good position and we continue improving our ranks in the company.
We are now moving on into discussing the performance of every single asset class. David Das, our CIO, will be commenting on them.
Thank you, Miguel. So 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% growth like for like growth that Miguel mentioned. You can see here again the impact of the noncore sale in 2019 with $8,500,000 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 nine point two and five point one percent effectively. But again, all three markets showing like for like growth. In terms of occupancy, in Barcelona, you'll see that the one market that saw a drop in occupancy, that's the result, as we pointed out here, of the termination of Travelperk lease. Travel Perk is a start up company in the travel space.
So 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 September. That was part of the indemnification. And so we were already in the process of relevning that space.
The other thing to comment, I think, in terms of the occupancy is there are the BBVA lease, which we note in the report was a post closing event. That's 8,000 feet of space that's now let but was not included in these occupancies. And as we talked earlier as well, these 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 leases have secured. So again, 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 release spread, again, by market, you'll see Barcelona and Lisbon significantly significant release spreads.
And on 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. And so 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 mark to markets of existing leases. The one point, I think, look at Madrid, the 1,900,000 release spread, we'll cover on the following page. That relates specifically to the extension of Endesa.
So if you turn to Page 13, I will cover that. So leasing activity, as you can see, meaningful new contracts signed and a significant amount of contracts renewed. So as Isabelle pointed out initially, significant activity even in a period of time where, obviously, we're far from normal. And really spread, again, very, very meaningful. And that's the specifics of Andesa, 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 point five years, starting the conversation early. And 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 the post COVID world, the value of that extension was significant. And so in the end of the day, that 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 was we felt was very important to secure the income stream further. Moving to shopping centers. Again, not anything significant. Performance quite good, 2.8% like for like growth. Again, you see the impact of the sales that were from the first quarter of this year.
And then 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 twelve months in Q1, our footfall was positive 2.4% and sales were 5.1%. So going into COVID, the market was performing quite well. And both of those numbers were, in fact, accelerating. Each LTM, we were seeing an increase in the footfall of sales. So what you see is obviously the COVID impact.
The LTM footfall dropping by 20% and the tenant sales dropping by 18.2% when you include the first two quarters of this year, and that's all the impact, obviously, of the centers being closed completely effectively for April and May and only starting to reopen in
June.
So and we real data on that a little bit later on, you can see. Released spreads, moving to Page 16, released spread of 4%, over 100 contracts. So 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 we as part of the commercial policy that's been accepted by 92% of our tenants, with all of those leases being extended into 2022, we're pretty confident that occupancy number 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 football at least our football because sales, we only have really one month of data. But to do it at Evolution, because I think it's important how things are changing. So in the first period of opening, because most of the openings are there was nothing open until that first period of June, you can see the evolution in football that it started off at 41 percent.
And we're excluding Porto and El Salera because those are basically construction sites, and so you would expect the footfall in sales to be impacted like it has been in our other projects. So if you look at the ex Porto Pia and Salera, starting off at 41 percent and then steadily dropping to where in the last period, the most recent period, the July, 29%. So people are coming back slowly to shopping centers and the direction of that movement so far has been positive. On the other side, we see with sales for June that the evolution of sales is less impacted than football, which again is normal because those people who are going are going to buy, there's some pent up demand. So 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. So a 2.9% like for like growth and $1,900,000 of rent through disposals. As Ismail 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 industrial component to improve the quality. And 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's why you see the occupancy go from 85.4 up to 88.7. And we post period, we've signed another 4,000 square meters, and there's about 8,000 square meters that we're in advanced discussions on.
So I'm not worried about that being a trend. It was just a when you have a significant lease single tenant, it takes time to relet that space. But in aggregate, I'm very, very confident on
the movement on that. And 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. And so that's pushing rents up in the aggregate 6.7%. This also does not include the contracted rents for projects that will be coming into the portfolio.
They'd be the best two and three. And as Mel said earlier, that's another $6,300,000 of rents on those contracts that have been executed that will be that have been delivered this year and therefore start producing rents in a meaningful way in 2021. And the last page just gives you the overview of the Pfau Port, which we always do. Again, significant amounts of stock delivered in 2020, 155,000 square meters, built to suit for UPS, for DOM, for Lidl, for Bravo and Agility, mainly delivered in the second quarter. And so 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 end line tenant and you're paying the interest expense once you start construction. So 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. So 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 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, our 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 4.7% on shopping centers and 2% up in logistics. In terms of net leases, we were flat, 0% evolution. So in the end, the company in terms of JV valuation needs in the office business, they are already capturing first the fact that we are capturing higher rents.
I mean, at the new renewal we are putting in place as the release has been improving so far. And 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 Castilla 90 five full occupancy on a pre lent basis at very high top rents in the market, in the marine market. Also the fact that in the fundamental building refurbishment in this one, have been able to secure BPI as main tenant for the largest portion of the building in a transaction that is at top rents also in that special lease one 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 products into production as we have been commenting and will follow on in the following quarters due to the pipeline we have in place. So on this basis, we have the expansion of eight bps in shopping centers and one bps in logistics compression. Moving now to the debt profile of the company. We have been also acting on this front, mainly right after the end of the first half of the year. So in July, we put in place a liability management action within the company that imply the issue of 500,000,000 seven year maturity bond that was raised to put in basic liability management.
As a result of this issue, we have been reducing $250,000,000 of the two bonds approaching maturity in 2022, 2023, which is advancing and expanding our maturity profile of the company in terms of debt. And at the same time, we are deboning another portion of those proceeds to pay back in full two mortgage loans we have in place, which are maturing in 2025. So in the end, we are expanding the maturity profile of the company while reducing the first refinancing milestones we have ahead. In addition to that, we decided to fully repay back the RCF of $700,000,000 that we 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.
So it is it stays now fully available if needed in the future. So 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 end of last year. But 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. So we don't have to report issues with interest rate hike, although so far we can say that with the current monetary policy in place, this is not the case.
But it's important to have covered these potential risks for the future. So again, 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. So we are we have a lot of room of maneuver, a lot of headroom with regards to the different covenants on loan to value, ICR and on the camera sets. So all in all, the balance sheet is well set.
And for sure, we will continue improving, taking advantage of the balance sheet ratio. Now I pass the word to David or to Ismail, sorry, Salvador. Ismail, who is going to be covering the value creation section that is coming after. 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 eighty five.
We are fully refurbishing the asset, which is located in AFCA, 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 square meters post COVID plus we have an option for another eighteen forty two square meters. Castana 85 will become the headquarter 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 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 Saldana with Fontes Pereira De Melo, one of the most emblematic squares in the city in the core of Lisbon's CBD. And during COVID, we signed a ten year lease agreement with BPI, the leading Portuguese bank, comprising close to 20,000 square meters of the building to become the 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 companies, Somage, because they have endured during COVID with a number of positives recorded in this construction yard. But they have continued performing and the building is running on track in terms of delivery date. We expect it for the 2021 and 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, 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. And the center will be now much more open with a very significant rush space, which in Valencia will help and will have helped a lot, particularly having been opened during the COVID period that 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, but there is also a defensive component into it. In Porto P, 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, but clearly, the Port Of Palma Mallorca is one of the main hubs in the Mediterranean, if not the biggest in terms of cruise traffic. So we are now proceeding to a full refreshment 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 our 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, Saverro, is two thirds led to the beer maker Grupovan in Spain with a yield on cost of 8.9%. Saragossa Plaza DOS is fully led to DACs to DSV with a yield on cost of 7.1%.
And in Seville, have already delivered three warehouses totaling 27,000 square meters, which have been led to Amazon, Cargoco Latalle, which is a cold storage and Cuatrovaca with a yield on cost of 8.4%. And activity will continue in the first quarter of next year with the delivery of the national hub, logistic hub of Carrefour in Matuqueca De Inares. On Page 33, we wanted to inform of our commercial policy in shopping centers, which is the most visible heat we have suffered during the COVID pandemic. The Phase one of the commercial policy was enacted on March 15, so we were really early to react on pioneering the market as in many other occasions. And we decided to basically forgive the rent to all tenants affected by compulsory shutdown.
In the Ground Floor of our offices, which is was a relatively small eligible universe, 100% accepted in shopping centers from the eligible universe, which was only the people compulsory obliged to grow, which was 89% of our population. More than 85% accepted. Some other were still expecting to get a better treatment from the law and they didn't get it. And 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 severe operational limitation during the pandemic.
So we granted partial rent reliefs starting at 60,000,000 in the month of June going to 50% in July and August and then diminishing till 0% on the December 31 with a specific policy for food and beverage retailers, which normally operate with higher OCR's. In offices, the eligible owners was 4% with 93% embracing the policy. And in shopping centers, the eligible owners 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 rents 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. And in logistics, no commercial policy applicable, 96.4% collected, 2.7% in process, mainly public administrations, Generali Tapia Catolonia in Barcelona, and zero point nine percent which remains uncollected. In Page 35, we repeat what we expect to be the impact for 2020 of the COVID-nineteen pandemic in our accounts.
We expect to record €66,000,000 of incentives and have in mind in the region of €4,000,000 of collection loss. About €29,000,000 have already been booked in the first half and €41,000,000 is expected for the second half. That will result in around €250,000,000 of cash flow, which will result in €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 is 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 and the delivery of the buildings from the Landmark flagship and best two and three 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 twelve percent of our rents mature in 2021. The incentives have been expensed in 2020. We haven't straight lined them. And therefore, there is no impact in 2021 or in 2022, 2023 or 2024. So we are taking the hit.
We are biting the bullet in 2020. As commented, we expect €20,000,000 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 in the re tenanting of vacant units while retaking their normal activity from 2022 onwards including renewals. But at least they will not be looking at renewals and retenanting in 2021.
They will be just focused on the retenanting 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. So our reversion rate potential today after having renewed Endesa, which was negatively affecting the reversionary potential that now has been adjusted is 13%. So we are lagging the market, the ERV, by 13%. So 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. I mean, they clearly help us to serve our debt and to stabilize cash flow profile of the company. And the logistics will continue to grow and we will try to accelerate their incidents 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 logistic activity. On Page 37, closing remarks, just to say that the financial performance has been heavily hit by the COVID impact
with
lower net rents by about $70,000,000 and lower FFO of about $60,000,000 approximately. The FFO guidance for 2020 is now $250,000,000 $5.03 per share. These are all approximate magnitudes. And very importantly, I will stress that this is fetteris 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.
But in principle, if we can dance with the pandemic, having already hammered it, if we can now dance with the pandemic as epidemiologists say, this is the numbers that we expect to show you by end of the year. The valuations have remained flat in the first half. And we don't expect very significant hit also for year end. I mean, we expect some further impact in shopping centers eventually depending on where the situation or how the situation evolves. But 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 €1,200,000,000 of liquidity, no maturities till 2022 and very safe headroom with covenants. And 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 move ins in the middle of the pandemic with new deals signed above ERV and renewals with positive release 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 experience between the second half and 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. And in terms of value creation, Landmark is evolving very satisfactorily with leases signed in Castellan ninety five and Monumental with very healthy yield on costs and secured rents of $13,300,000 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. And in Des two and three, two warehouses have been delivered in Seville. Leases in Madrid, San Fernando 2 and Farajofa Plaza 2 have been signed, which mean rent of $6,300,000 starting next year, where the first quarter will also be marked by the delivery of the national logistics hub of Carrefour expected for February.
In Cavanillas Park 2, the extension of our successful Cavanillas 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. And that's basically all. And we are all ready now for your questions at your disposal.
Operator, please could you open the line for Q and A? You.
Ladies and gentlemen, we will now begin the question and answer session. So our first question is from the line of Pedro Alvesh. Thank you. Please ask your question.
Thank you for the presentation. Three questions, please. The first one on the portfolio 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? And the second one on your lease maturities.
I guess you mentioned 15% of rents expiring until 2021. And I guess this excludes the shopping centers portfolio. Out of these 15%, how much is related to secondary offices? And thirdly, on your strategy for the crisis period, the latest state in Spain shows naturally rising unemployment. So 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 or start offering more flexible leases conditions? Just some color on that would be helpful. Thank you.
Pedro. The first thing, the 15%, 3% 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. So in principle, it includes everything in under operation in the company, logistics, offices, of course net leases, which there's nothing and shopping centers. And as to your last question, what will we do? Pray simply.
I mean, what do you want me to say? And 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. But 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.
Yes.
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 Bloom brand, which allows us to have the ability to provide flexibility to the extent that that's what tenants want. And so 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 CDD 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. So we have a portfolio that we think allows us to accommodate that as well. And I'll ask a little bit on what Ismail said. We are responsive to the market. That's the so right now, we've seen the market has not been that affected, but it's early.
The true effects of COVID 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. And we will react to the market and be flexible in doing so. So we think we've created a portfolio that allows us to accommodate that. We've created the ability internally to meet flexibility demand, that's what tenants want. And so we'll be focused on making sure we're generating as much cash flow out of the portfolio as possible.
And the last thing I'll say is we've already if you think about how we respond, we've already started to do that. These decisions to extend maturity, both the investor portfolio and the retail portfolio, was to make sure we had more resilience to the extent the situation deteriorates. So with only 12% of our portfolio coming up against maturities the next eighteen months or excuse me, 15% for the next eighteen months, we don't have to deal meaningfully with a lot of these rollovers. So we've taken a view that extending the WALT 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 making sure that we don't have we have a minimal amount of capital market exposure as well. So creating this resiliency in the portfolio is the way we've reacted now. And 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.
And there's a 13% reversionary potential in offices. But if I look at Slide 13, the release spread has been minus 7.5% in Q2. So first of all, how do you reconcile the two numbers? And then secondly, do you think that we are likely to see more rent negotiation like the Endesa deal going forward? And 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 investor lease is what's driving that negative release spread. So if you take the Andessa lease out, the LTM release spread would have been 13.2%. And the release spread for the quarter in Madrid would have been 17.2%. So that individual negotiation had all of impact. So the underlying in the broader portfolio was actually quite strong.
In fact, continue that same progression as we've been reporting release spreads each quarter to all of you, you've seen that in each quarter, the release spread has actually been increasing. So even in this quarter, it would if you take out that strategic decision we took about the investor lease. So 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've signed on to it. So 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. So the only question really then about future income or future FFO comes from offices.
And 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 for 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. So now not only do we have to be real estate managers, but we have to be epidemiologists as well.
And I didn't study epidemiology at all in college, I know nothing about it. But 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. 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.
So people have the view about what's going to happen now going forward is much, much murkier. So anything about what might happen in 2021 that I told you would be purely speculative. So we can give guidance on what we have visibility on, which is the 2020. And I think what's going 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 is, as Maelle pointed out earlier, we already know that we signed leases that will be in place in 2021 that were not in place today, there will be $20,000,000 more in rent.
So whatever happens in the rest of the portfolio, we know that we're going to have $20,000,000 more in rents coming in in 2021. So if there is deterioration in the rest of the portfolio because of the economic performance, that's a good buffer to against that deterioration.
Thank you, Navi. Just making sure, what is the percentage of rents to renew in 2022? What is the number?
I'm going to have to ask Jimenez to get back to you on that because that's not a number I have on the top of my head. We'll
Okay. Sorry. Thank you.
Thank you.
Thank you. The next question is from the line of Alburo 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? And is there any difference between Spain and Portugal?
Then the second question is on shopping centers. Should we expect any bankruptcy among a smaller retailer once your favorable commercial policy ends? And then a third one, and this one, I guess, needs clarification on your office portfolio without the positive impact of projects like Castellana and Monumental. I mean stripping out the development gains, what is the real growth on your office JV? Thank you.
Well, as for the first, which is utilization rate, we estimate that currently in mid July utilization rate of our clientele oscillates between approximately 3350%, so 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. So I mean July and August are almost void months except for people who work in finance, consulting, real estate and very few other companies. So 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 September 15.
We are also calling all of our personnel 100% back in the office by September 15. And I believe this is going to be more or less the tone all across the market. So that is what is happening in Portugal. Frankly speaking, I need to ask because I don't know. I mean, what I know, of course, is Calion, BNP Paribas, they are working between 4060%, but I don't know across the rest of the portfolio what has been the real occupancy of buildings.
As for shopping center clients' bankruptcy, I don't know I have no idea. I mean 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. So in principle, this is people that I don't know whether they will go bankrupt, but they don't want to go bankrupt, which is important. So hence why they deserve also our help.
There is people who is not even fighting. I mean, it's people that has already thrown the towel, which is the 2.5%, 2.6%, which is currently uncollected. So 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 56%, we said 5.5 of people that we thought was the weakest. So that was the people that we thought eventually will need to be replaced.
To our surprise, some of these people has restarted business. So now the uncollection is only 2.6%. So 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 of the specific details.
But 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 about 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. Because even though they were generating cash flow, just from a pure aesthetic standpoint and for a future potential investment standpoint, people are saying, well, you may have to invest more money in order to generate those returns. So we're going to discount those cash flows higher. Now that we've done the work and as we move through Diagonal 605, we move through Castellano Centetinko, we move through Guanaumetag, what you're seeing is you're seeing the reality reflected as saying, okay, now I know what this cost is because we pretty much do those projects. We've signed rents for over 85%, 90% of the space, so it's no longer we think this is what we'll generate.
And so the discount rate associated with that is now much lower. So when we look at it today, we say those valuations have now moved closer to where they should have been relative to our peers. So to break it out is almost like saying, the whole reason we did it was to get those numbers up in the existing portfolio. So 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.
So now those are much closer relatively. By the way, we've looked at comp 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. So there's empirical evidence for it, and it is supportive of the reason why we entered into Landmark transaction in the first place. So that's what I think is the appropriate way to kind of 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. But I understand the reasoning behind your explanation. Thank you.
Okay. Our next question is from the line of Peter Papadagas, 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 going to be a net seller or potentially shrink the company given your share price. So isn't that just a better capital allocation than discussing about development pipelines given where you trade? And the second question, if you can give any insight. So you you have a lot of 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? So are they 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, so far, okay? Then 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. But for now, zero comma zero, which is important, okay? So that is very, very important.
Remember also that generally speaking, leases in Spain are shorter than you are accustomed in The U. K. So if you look at the world from a U. K. Perspective, I understand that somebody who is taken by a lease contract till year two thousand and thirty five may try to sublease.
But in Spain, contracts expire on two, three years on average four years. So 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. I mean, if the world moves into a complete disaster as everybody is expecting, what we expect is a negative tension both in occupancy and in rents. Because up to now, we were enjoying a market in which we were significantly hiking up our rent because demand was bigger than offer. And very importantly, on average, clients were demanding from us 1.1 times the space they used to occupy.
So there was a net new absorption, at least the one we could measure within our portfolio of 10%. So this might revert and eventually will revert. And if it reverts, we will give you the number, but not now. We are not yet experiencing any downward tension neither in square meterage nor in Brent.
Your other question, Peter, I'll take that one on. I know we know. We know from reading the reports, and we know that people feel like that our asset rotation should be faster. But I'll remind you, in the last eighteen months, we've sold $500,000,000 of assets between the retail, between the noncore office sale and between the bank branches. And so and we have other noncore assets that we want to sell.
We sold the residential portfolio. We sold the hotel portfolio. So we're a company that we built ourselves up through acquisition, both corporate and individual. And since then, we've been reforming the company. So we've sold in the last three years, if you go back to hotel and retail, over $2,500,000,000 of assets.
I'm not sure how much faster people would like us to go in doing that because that's a 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. But 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 of what we've managed to dispose of, but a few non core retail that we'd like to dispose of. And the branch network strategy is always
the same, continue to sell those CDs and Es.
And again, we've sold up $25,000,000 of bank branches so far this year. So that process will continue, and we will continue to rotate those assets back into the portfolio. Now 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, and I think we've done a pretty good job.
We said we wanted to get us to
be starting at 50%.
We managed to get ourselves down to 40 and we continue to stay there. We have an objective of getting that number down further. I think and you would agree with this. I know 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 has not been kind to those companies. So 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 of the market.
Yes, 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. And have a happy summer break if you happen to have one.
Please keep safe. Bye bye.
So that does conclude our conference for today. Thank you all for participating. You may all disconnect.