Ladies and gentlemen, thank you for standing by and welcome to MERLIN Properties' three months 2020 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. To ask a question during the session, you will need to press star one on your telephone. I must advise you that this conference is being recorded today. I would now like to hand over the conference to your speakers today, Fernando Rivas, Investor Relations. Please go ahead, sir.
Good afternoon, ladies and gentlemen. Welcome to our first quarter results presentation. First of all, we really hope that everybody is good, in good health and safe, and all the best for the coming difficult months. Without further delay, I will pass the word to Ismael and the three top managers of the company will join today during the call and will give you light and color on what's happening on the company. Ismael, the floor is yours. Thank you very much.
Thank you, Fernando. Good afternoon to everybody. Thanks for joining MERLIN Properties' first quarter results presentation. I will make a very quick review of the quarterly results because as many of you in the analyst community have pointed out in your morning notes, they have become disgracefully uneventful. I will, however, be slightly slower and more detailed in the analysis of the post-COVID situation, which for us is mainly the month of April. You can assume that May is very similar to April. April is an almost perfect proxy for what we are seeing in May. The objective for the year was to overcome as much as possible the effects of the 2019 sales in rents and FFO with only organic growth and some new assets entering operation following development or redevelopment. In principle, we were very close to achieving that.
The results of the first quarter were slightly better than expected. The idea, our internal targets, were to try to be as close as possible or above EUR 520 million in total rents, in gross rents, compared to EUR 530 million last year, and around EUR 300 million in cash flow, FFO, as compared to a little bit in excess of EUR 310 million last year. We were perfectly on track to get there with the quarter and with the remainder of the year eventually to beat it and have a year as close as possible, if not slightly better, than 2019. All this is now the past because COVID has come to stay and has completely distorted the normal evolution of the year.
In terms of consolidated performance in rents, well, whether revenues or gross rents, we have been almost on par with last year, closer in revenues, EUR 1 million less in gross rents. In cash flow per share, we are below last year by 5.6%, but this already includes a provision for the effect of COVID in March rents. March was a month that had already been collected. We have decided from an accounting perspective to include a provision depicting the results of COVID in the second half of the month, given our policy in shopping centers. In NAV per share, we are plus 5.2%, and we haven't revalued assets in the quarter. I can say that the business performance was good, generally speaking, in the pre-COVID environment. We had a fantastic like-for-like rental growth and very good re-lease spreads across the board.
After the COVID-19 pandemic erupted, we decided to launch a commercial policy granting 100% rent relief to our retail tenants whose stores were compulsorily closed as a consequence of the declaration of the state of alarm by the Spanish government. The three months 2020 figures, as I said before, include half a month of impact of such extraordinary incentive, which is in reality worsening the aspect of the figures. The FFO per share, even with this figure, with this effect included, was on track to meet the guidance given for 2020, although of course, the whole year guidance will need to be reviewed. We had a minus EUR 0.01 effect due to the incentive granted to tenants, and we had a further EUR 0.01 owing to the change in perimeter between 2019 and 2020 because of the sale of the Juno and Mercury portfolios.
In terms of business performance, the behavior of rents like-for-like was excellent, with a 3.5% increase year-on-year, which breaks down as 4.5% in offices, 3.8% in shopping centers, and 3.5% in logistics. Re-lease spreads were fantastic all across the board with 9.7% in offices, where the lack of equilibrium between demand and offer was starting to be patent in all the renegotiations we were making and renewals we were making with tenants. 3.8% in shopping centers, which was performing quite good until the COVID crisis erupted. We were plus five point something percent in traffic and sales. 8% in logistics. Occupancy was slightly lower at 94%, so minus 0.8, owing mainly to a loss of tenants in Parc Logístic , Zona Franca in Barcelona, and in offices Madrid with the exit of a company called Cigna that has since been replaced.
Generally speaking, we were heading for a fantastic year, as you can see in the gross rent bridge on the bottom right of the page, where we were only EUR 1.3 million short of overcoming the effect of the change of perimeter of 2019 sales. I will skip the detailed analysis of offices and shopping centers and logistics because, as I said before, probably those have become uneventful for most of you, and will move directly into balance sheet. Okay. Page one, two, three, four, five, six, seven, eight. Page eight. In terms of balance sheet, the company took the decision to fully draw down on the existing RCF lines. The company is now sitting on EUR 1.3 billion of cash and equivalents.
We had our credit rating examined by both Standard & Poor's and Moody's in the month of March. Both ratings were affirmed, even after having taken the decision already of the commercial policy. The Loan-to-Value, as was traditional lately, was further reduced to 40.1%, which is a meaningful half a point less reduction versus December 2019. As commented before, no changes in the value of assets in the quarter. I will also skip investments, divestment and CapEx because it's not important and sustainability and move into post-closing events, which will give you a picture of what we continue doing during the COVID pandemic. In May, our subsidiary, CILSA, ZAL Port in Barcelona, has delivered two warehouses, pre-let to Lidl with close to 61,000 sq m, which is set to become their Catalonian hub for online and Agility, slightly above 11,000 sq m.
These, along with the units that were already delivered to the beer maker Grupo Damm and UPS during the month, during the quarter, sorry, which add up to close to 60,000 sq m. This takes the total square meterage in operation in ZAL Port above 600,000 sq m, which is a very interesting figure for such a premium logistics space in the close vicinity of Barcelona. On the 27th of April, Merlin signed a 10-year lease agreement with a top-tier tenant, currently confidential, which comprises 19,500 sq m in Monumental Praça Saldanha in Lisbon. That pre-let represents 77% of the asset and in a building that is yet under refurbishment and will be delivered to the tenant on the first quarter of 2021 with a very interesting yield on cost. By the way, this is the largest leasing transaction in Lisbon CBD on record.
It's the largest third-party leasing transaction on record. There have been some build to suit by the public administration, but this is the largest in the private sector. On April 1st, MERLIN delivered close to 5,000 sq m positive negative cold storage warehouse in the ZAL Sevilla to Carbó Collbatallé. As you can see, and you will also see when David covers leasing activity, we have remained pretty active during the COVID-19 pandemic with the little hiccup of the teleworking affecting significantly the productivity, but the company has remained active and protecting its business during the period. On the following page, I will provide you an update of what has happened in the company since the eruption of the COVID-19 pandemic, using April as a proxy month.
On the 15th of March, the state of alarm was declared in Spain, followed briefly thereafter by a state of emergency in Portugal. The calendar to come back to normal life has only started in May, and in Spain it's staggered into four phases. Portugal is faster, pointing to an end in Spain towards the end of June. During the pandemic period, our primary focus, of course, has been to protect the health and safety of our employees, tenants, contractors, and suppliers while preserving our business activity as aforesaid. From an operational standpoint, all of our operating assets have remained open and accessible to tenants during the period, fully serviced with reinforced measures for cleaning, disinfection, and air filtering.
In accordance with the state of alarm, there have been activities of tenants declared as essential and permitted to open, and some non-essential, which have been forced to close, that in shopping centers. Thanks, God, MERLIN enjoys a broad diversification of income by asset categories, a very good tenant base, and a very defensive underlying industry exposure, as evidenced by the S&P report, which has helped to mitigate the impact of the pandemic. In offices, which as you know represent around 47% of our total passing rent, we have had mainly ground floor activities, retail activities affected by the lockdown for an amount of around 3.5% of the total offices, and 96.5% non-affected. In shopping centers, which weighs around 22% of our rents, we have had 89% and 11% non-affected. Originally, our first take on it was 77, which was the legal definition.
We have decided to include F&B into the affected by lockdown category because despite the fact that the state of alarm allowed restaurants to continue working for takeaway, we have seen a meaningless activity in that regard. We have decided to include them in affected by lockdown. In logistics, which currently weighs around 11% of our total rents and growing, we have had a 0% incidence of the lockdown. In fact, the government encouraged light industrial activities and logistic activities to continue throughout the pandemic, and therefore, 100% of our clients have been working uninterruptedly. In net leases, which now represents 17% of our rents, again, 0% has been affected, 100% has been operational. In other, which as many of you know, is mostly comprised of hotels, 97% has been affected by the lockdown and 3% unaffected.
That has been the extent of the damage inflicted by the COVID pandemic to our business. Following page, we discuss commercial policy. As soon as we saw what was coming, we fast reacted and implemented a commercial policy with the idea of sharing with our tenants the difficulties arising in the pandemic environment. We provided them relief during their compulsory lockdown, and very interestingly, I think in retrospect, it's been a good decision. The policy met widespread acceptance within our tenant base without affecting too much our collection figures as compared to what we are seeing across Europe. With the big difference that there has been no litigation against any tenants. We believe in the long term, this will have neutral or mildly positive or positive effect in our brand value and eventually will pay off in terms of business performance in the long term.
We will keep you abreast of how this evolves. The policy was enacted starting on the 17th of March 2020, following the declaration of the state of alarm. The tenants eligible were those affected by the compulsory shutdown set forth in the state of alarm regulation. The conditions to apply were to be completely up to date in contractual obligations, including the payment of any past rents due or common expenses. The policy provided 100% rent relief since mid-March, declaration of the state of alarm, and up until the earliest of the end of the compulsory shutdown or 31st July, whichever would have come first. The common area charges continued to be paid by tenants, and the tenants had to waive rights to take any further actions against MERLIN as a consequence of the COVID-19 pandemic.
In offices, the eligible universe was only the ground floor retail, around 3% of the rents. 100% of the tenants accepted. In shopping centers, the eligible universe, as commented before, was 89%, and more than 85% have accepted. We believe many more clients will continue to accept till the end of the month, which is the term given to accept the policy. In other, the eligible universe was 97%, and it has been embraced by 100%. On March 19, we provided an update to the Spanish CNMV, to the market regulator, quantifying the impact of the commercial policy as below 10% of our total income.
That calculation assumed only the policy in shopping centers and only the one linked to the state of alarm declaration, assuming that 100% of the eligible tenants would choose it, and that the relief persisted up until July 31st, i.e., four and a half months of full application. On April 28, the Spanish central government published the general guidelines for the return to the new normality over the next eight weeks. In principle, all of our stores within shopping centers will reopen as from May 25 or around, because it varies from province to province, depending on whether they make it into phase 2 or remain in phase 1. In phase 2, the footfall is reduced 60%, so the permitted affluence is only 40%, and there are distancing restrictions to comply with social distancing measures.
As from June 8th, the shopping centers footfall reduction will be eased to 50%, and common areas will be allowed to be used for more income generation purposes and also for recreational purposes, namely the activities related to kid leisure areas, et cetera. As a consequence of what I have just commented, the impact of the commercial policy that we put in place on March 15th will be slightly lower than the originally projected. Well, not slightly lower, it's approximately half. However, we are not going to recover that money. We are going to make a new partial relief policy available to our tenants to cover the post-COVID-19 trading period. The details will be announced once communicated and agreed with all of our tenants, but it will have a very beneficial effect in the weighted average and expired lease term of our contracts.
We will at least obtain the benefit of extending most of our tenant base beyond January 2022. While I will not disclose the exact details by retail segment of the policy until it has been communicated to our tenants, I will give to you the round number of how it will affect our year gross income and cash flow. We estimate the total effect of this plus eventual moratoriums or zombification of clients that we might have in offices and logistics that I will discuss afterwards in between EUR 65 million and EUR 70 million total impact per year. That is between 12.5% and 13.5% of our gross rents. Given the cost-cutting measures implemented, do not assume that there will be a complete flow-through to FFO. We estimate that the flow-through to FFO will be minus EUR 10 million.
This is the effect that the ones that are going to go back to their models after the call, yeah, this is the effect that you should take into account for the company for the full year. Okay? Please understand that we are providing more information and more degree of detail and more degree of analysis than we have seen in some other cases. This goes with a prevention. The prevention is that all this is assumed, taking into account that the de-escalation calendar put in place by the Spanish sanitary authorities goes as expected. If we start having back and forth in the different provinces, and eventually we end up with a disaster in terms of a comeback of the COVID strains of COVID during the fall or the winter, et cetera, eventually, the results of what I am saying will be slightly different.
This is the effect that we are calculating, taking into account that life goes back to normal during 2020, and eventually the recovery starts in 2021, which we are not going to project because we need much more information on how the whole pandemic and economic crisis arising from the pandemic evolves. In the following page, we have made a table with a detailed analysis of our collection rate. As many of you know, the common practice in Spain, which is similar in Portugal, where normally quarters are invoiced in advance, the common practice in Spain is to invoice on a monthly basis in advance. Given the quality of our tenant base, we have been lucky and have obtained relatively high collection rates, as illustrated in the table.
You will see that in offices, we have for pure office tenants, because ground floor retail has been added into shopping centers. We have 0% clients affected by commercial policy and 95.2% collection rate and 3.2% in process. Many of you may wonder what in process means. For the vast majority, 90%, in process means public administration, which by law or by fact, pay whenever it wants. However, it always pays by rule of law. This is not in question. The uncollected stands for April at 1.6% of the total rents. Out of this, we believe that approximately half a point is at risk, meaning clients more or less in zombification process.
The rest is people that is either making legal consultations, they have multinational policies, they thought the royal decree moratorium would be more beneficial to them, and they are trying to apply the royal decree moratorium, but they don't want to show us their books. These people, which is a little bit now under discussion. Very importantly, 2 times the amount at risk, 2 times the 1.6, is covered by guarantees. We have a little bit of benefit of time to think about what we do with the different situations here and with the different clients here, whether we legally proceed against them or simply continue negotiating, trying to reach a meaningful solution. Okay.
For shopping centers, 58% of our income has been affected by the commercial policy, 28.2% has been collected, 0% is in process, because in shopping centers, we have elected not to make any guessing, not to make any polls as to whether somebody's delayed on purpose or as always. We have moved all the people in uncollected. Out of the 13.8% uncollected, many of you are asking what is the level of zombification. What is the amount truly at risk that may become future vacancy? Our best estimate with the visibility we have today is around 5.5%, which is the clientele that has either no cash or no payment morale to face their obligations, and therefore will be treated according to law.
For the rest, we are talking mainly about people who need to consult with the lawyers, multinationals that need to go to California and back because they have a global policy on payments, people that eventually thought the royal decree will be more beneficial to them and delayed given consent. There are a number of situations in that mixed bag. What we believe is future vacancy is to the tune of 5.5%. No incidents at all in net leases, as one could expect, and 94.9% collection in logistics where no commercial policy was applied, with 3.2% in process and 1.9% uncollected, which again, is more than two times covered by guarantees, and of which we estimate 1% to be zombie status. As you know, in particularly in light industrial and small logistics, in many cases, balance sheets and P&Ls are very, very thin.
We believe there will be a little bit more effect in logistics than in offices of the zombification. In the following page, very, very quickly, we have simply reminded you that the collection rates you are seeing are a consequence of our tenant quality, which in offices is mainly composed by big corporations, 95% versus 5% SMEs, by headquarters of companies, 70% versus 30% local delegations, and by less vulnerable clients operating in less vulnerable industries after the Standard & Poor's definition, which is utilities, industrial, public administration, healthcare, consumer products, consulting, law, finance, et cetera. We only have a 5% exposure in offices to retail, 3% to transportation, 1% to leisure, 1% to automotive, 1% to tourism, and less than 1% to third party flex space operators.
In shopping centers, now we are starting to see a little bit of relief in the pressure that we have usually experienced on our secondary exposure, because now we have reduced the secondary exposure to less than 5%. We are 58% urban, which eventually will be the type of shopping center that will emerge stronger from the current crisis, and 37% dominant. In terms of tenant resiliency, 41% of our tenants are listed public corporations, 32% are large private corporations versus only 27% smaller tenants classified as "other." In logistics, the best KPI that can be indicated is that 89% of our logistics is of very recent or brand-new development and suitable for 3PL, so linked to e-commerce, versus only 11% now following last year's sale of a couple of non-core facilities in Catalonia.
11% now are industry-related, which in some cases, automotive industry mainly, have been affected by the consequences of the COVID. In terms of balance sheet, we benefit from a solid balance sheet, as you all know. We believe it will help us to overcome this very challenging period. We continued reducing the leverage, we will have continued reducing the leverage to the extent possible. We are now at 40.1% LTV, we are holding onto cash and cash equivalents position of EUR 1.3 billion as of March 31st, 2020. The company, as many of you know, does not face any debt expiry till 2022. We have no commercial paper or any other similar short-term financial instruments. We are in good shape to continue trading over the next couple of years and fully concentrated in our daily business.
The rating agencies have reaffirmed our corporate rating following the COVID-19 outbreak, and we have implemented a number of capital preservation and cost-cutting measures. Those are mainly focused on restriction on CapEx plans, where we have concentrated on the projects which are under execution and have a high level of pre-let and have separated those from the ones that might be deferred perfectly. The project under execution, which will produce future income in the short term, entail an aggregate investment of EUR 247.7 million, as informed to the market regulator in due time over the next four years, of which EUR 167.4 are expected for 2020. However, future rents attributable to those projects, of which now two-thirds is pre-let, amount to EUR 37.3 million. By segmenting our CapEx plans, we have preserved capital in the amount of EUR 458 million while we wait for the evolution of the world COVID pandemic.
In dividends, what we have decided is to propose to the AGM the distribution of EUR 0.32 on top of the EUR 0.20 that were already distributed on account in October last year. The EUR 0.32 are divided in circa EUR 0.15 payable in cash in July, one month after the celebration of the general shareholders meeting, and the other EUR 0.17, we expect that the general shareholders meeting delegates their distribution or not in the board of directors, who will decide after analyzing the full impact of the COVID-19 evolution in the business during 2020 and perspectives for the forthcoming years. By doing so, we have preserved EUR 81 million cash in our accounts. In terms of overhead, what we have agreed with the board is for us, senior management of the company, to waive all short and long cash and/or shares incentives for the year.
We will also review situations for the coming years, if the COVID-19 pandemic continues, which makes up for between 60% and 80% of our compensation. We have also agreed for the board of directors to reduce their total compensation by around 25% in the year. By doing so, we are saving in the region of EUR 11 million, which will help overcome the excess of financial expenses that we will have this year as a consequence of having drawn down on the RCF lines and other costs that might be associated with the COVID-19 pandemic. Like for example, the slight CapEx that buildings will require in terms of acquisition of temperature measuring devices, et cetera, in order to comply with the sanitary measures once phase 3 is achieved. Without further delay, I believe we should now move to Q&A. You have the full team at your disposal.
Please feel free to make any questions you deem appropriate, no matter how difficult. I am sure there will be a lot of debate today, we are happy to entertain all of your questions and leave nothing unanswered. If something is numerical or we don't have the response handy, as you know, you can resort to our Investor Relations team who will, right after the call, brief you with any information you might need. Thanks a lot. Thanks for attending.
Ladies and gentlemen, we will now begin the question and answer session. 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. Please stand by while we compile the Q&A queue. This will only take a few moments. If you wish to cancel your request, please press the hash key. Once again, if you do wish to ask a question, please press star one. Our first question comes from the line of Jaap Krim from Kempen. Please go ahead.
Hi, good afternoon. Thanks for taking the question. The first one is on rent collection, I guess, because I think you provided a lot of detail on April so far, which is great and better than a lot of your peers. Given we're halfway into May, I was hoping to tempt you to maybe also discuss a bit months down the line how May is shaping up, and if you see any indications that this will be different from April. Maybe a lot more long-term question as a second question, just looking at kind of at the future of your offices portfolio, you obviously sold a bit on the bottom end. You still own a sizable chunk of kind of non-HQ type of offices. How do you see the usage of that going forward?
Also considering kind of shorter lease durations, in Spain versus maybe the rest of Europe, what do you see as a risk of tenants starting to game the market and actively renegotiating lower rents and kind of the midterm prospects for your office portfolio? Thanks.
Thanks, Jaap. I'll take both those questions. I think first, with respect to May collections, at this point of the month, they're looking very similar to April. We're not expecting any meaningful deviation in May versus April. Obviously, in retail, because of the commercial policy, that's pretty well sorted because as people sign on to that commercial policy, it dictates the future payments as well. In offices and logistics, we're not seeing any deviation in May versus April. Your second question is obviously more complicated. I think the one thing to start with that is, I think we have to be careful now at this time to get too prescriptive about the way work is going to change, right?
You're seeing a lot of press out there, a lot of articles, of course, the press want to sell, so radical change sells better than gradual evolution. Everybody who's prognosticating and speaking has a dog in the fight. CEOs want to try to push rents down, consultants want to get fees to advise you on how the new office will look like. I always go back to 9/11. When I look at 9/11, post-9/11, the world was going to change. No company was going to locate its headquarters in an iconic building in a major city. It was going to be dispersed because you didn't want all of your management in the same location. Iconic hotels and the like were going to be viewed as being high risk.
Honestly, with the passage of time, the only real thing that came out of 9/11 was the disaster recovery center, which ironically enough, with everybody now working from home and then finding that that's actually doable, the disaster recovery center is probably going to go by the wayside. The things that I do think are clearly going to happen, with regard to the post-COVID world is lower density. It's clear that the higher densification process that was going on is going to stop and reverse. You saw densification going from 10 sq m per person in some WeWorks down to five sq m per person. That will clearly, I think go away. As a reference point, in our LOOM business, our flexible, we never went below 10 sq m per person.
Lower density was always part of our strategy, so adapting our LOOM to the new world is going to be a little easier than those companies that went very high density. In fact, even across the whole MERLIN office portfolio. Our density is about nine sq m per person. I think we feel like we're well-positioned to handle that less densification because we had not really gone very far in pushing density. Second is more flexibility. I think clearly that's going to be the case. People are going to want not that it wasn't like that before, 75%-80% of the space being fixed, 20% being flexible to account for different working conditions. Now that will also be to react to a situation like this, where you can maybe reduce your workforce. More flexibility is clearly coming.
I think, again, we were well-positioned with that, with growing the LOOM business. That will, I think, kind of play in. I do think this idea of the dispersed workforce is also going to be something that comes into play. You probably saw the announcement even recently of Facebook and Twitter is saying that employees may never have to come back to work. They can be in a more dispersed work environment. Again, I think that plays into the idea of what we're doing in flexible space, because that doesn't mean just work from home, but it may mean three days in the office and two days into a place that's closer to home. You may want to get your team members who are working from home together in a space.
Again, I think with the LOOM business, we're kind of in a position to react to that. That said, to the point of your conversation, one of the things that's been talked about, again, is the whole re-suburbanization, if you will, right? Are people going to want to, because mass transit and like, are people going to want to commute into the city centers where they have to rely on mass transit? Are you going to now perhaps see more of a dispersion into near-in suburbs or more remote? The whole idea of everything into the CBD is now going to be questioned. I have less visibility on that, but I could easily see how that might become a result of this.
What was formerly believed as the CBD is the end all and be all is now, I think, going to be questioned as people think twice about packing into mass transit to commit to those central locations. Which again, is why I think diversification is the only way to account for these changing trends that we see. That's the best answer I think I can give about the future. Either way, I think, with our little more diversified portfolio and with the LOOM business having grown that and expanded it, I think we're in a pretty good position to respond to the way the market's going to evolve.
Okay, great. Thanks.
Our following question comes from the line of Celine Huynh from Barclays. Please go ahead.
Hi. Thank you for the presentation. Just have two questions on my side. The first one is your estimated impact of COVID-19. Do you mind building the bridge of how you get from a EUR -65 million on your top line to a EUR -10 million on your bottom line of your P&L? The second question will be on the pipeline. What would it take for you to relaunch your development projects that are currently on hold? Thank you.
Okay. Celine, what I was saying is that the top-line impact will be between EUR 65 million and EUR 70 million, and that when you flow this through to FFO, you should subtract around EUR 10 million because of the cost-cutting measures, not that we are only going to miss EUR 10 million in the cash flow. I wish that was the truth.
All right. Okay.
This is not the case. Okay?
Okay.
For the second one, I didn't get it well. I mean, David, did you get it?
Yeah, I did.
I was wondering.
Yeah, sorry, Celine. I understood the question.
Okay. Yeah.
If you remember, most of our forward pipeline is warehouse logistics. Which is obviously very well-positioned for this, right? It won't be a one-size-fits-all, but I think we're going to be looking at how the economy evolves post-COVID, right? Because no one really yet knows. You've seen projections have all changed from the original projections to today's projections. Everybody's really flying. They're flying on faulty instruments in a thunderstorm, right? It's very difficult to see which way is going forward. What we'll be looking at is how is the economy reopening? Is that reopening, how is it going in terms of, it's going to come in stops and starts, we know, but we'll see how that's progressing. What is the impact beyond Q2? Because we know Q2 is going to be a disaster globally, frankly.
We'll look and say, do our capital preservation measures, can we relax those somewhat and say, we now have more capacity because we're more comfortable with the way rents are going to evolve and we're comfortable with the way cash flow is going to evolve to say we can commit more capital to this pipeline. We've prioritized that pipeline, obviously. We'll take those projects that we think are best suited, given the amount of capital we may be able to free up from that, and we'll start those projects first. The good thing about it is, Ismael said, all those projects that we've chosen to defer. We have complete flexibility on. We control the land, we control the project, we can start them. It's not a either/or.
We can start the ones we think are the highest priority first, once we see that the evolution of cash flow is more clear to us.
When you say you choose the best-suited project, does that mean you choose a project with a pre-let agreement attached to it, otherwise you would not go ahead with it?
Pre-let agreement. Again, if you look at logistics, we're still 96% let. That's the area where there's continued to be significant demand. In fact, the logistics market is actually today letting market is even stronger than it was post-COVID because there's more demand for e-commerce and online activity. So we would just look at the underlying characteristics of the market. Doesn't have to be a pre-lease agreement. Obviously, that's the best thing you'd have. If we see we've got our occupancy and logistics is up back above 98%. We've got a project in a strong corridor where there's very little vacancy, we might be willing to start a project like that. There's a lot of factors that go into it beyond just whether or not it's pre-let.
All right. Thank you very much.
Yep.
We have another question. Please bear with us. We're just taking the name. Our following question comes from the line of Beltrán Palazuelo from Santalucía. Please go ahead.
Hello, good afternoon. Thank you for the hard work in these difficult times. I have two questions. First of all, maybe how liquid would your net leases assets be in a moment of pressure like now? My second question is regarding the CapEx, if let's say in a couple of months or a year, we have more visibility. David was talking about continuing with the pipeline of assets that could be already rented with high visibility on future cash flow. What is the financial rationale of whatever thinking about continuing with CapEx when if capital is free to invest in the pipeline of CapEx, there's also maybe capital to execute the buybacks at, let's say, less than half of the NAV? These are my two questions.
On the first one, Beltrán, which is the BBVA sale and leaseback liquidity, only God knows. We believe it continues to be very interesting. In fact, on the 25th of May, we are selling 13 million worth of branches to clients that have requested them and who have not withdrawn from the promissory agreement. It continues to be a very interesting cash flow, I believe, highly valued by the market because it continues to be a pension fund-like type of stream, which is extremely helpful for many Spaniards. On the retail market, I believe it continues to be a very liquid product. In the meantime, whether we continue selling or not, I believe it's a very much welcome source of income because, as you know, it's completely triple net, and it represents around three quarters of our total debt service.
To have three quarters of the debt service covered by a triple net lease long-term till 2039, I believe is a good advantage in these difficult times. For the second, I will leave David to answer you because this has been the object or the subject of numerous internal debate on which returns should be used as a hurdle in terms of giving green light or not to a development. As you know, as you say, as you correctly point out, our share price now is so shitty that eventually, buying back our shares will deliver a very interesting result in some cases. David will elaborate on that.
Yeah, I think to your point, at first I would say, the only thing we would even consider are the existing projects. Where we already own the land, and we've even done the planning, because we've been going through the planning process, and we have that kind of increased value that comes through the planning process. Any new project, as we said, the capital hurdle now would be so high given where the share price is, that even things that we were talking about earlier that would fit our profile, offices in Lisbon or new logistics projects that we don't already control. I think it's highly unlikely you would see us doing anything there because, as you rightly point out, we'd be better off buying our current portfolio, given that it's trading at such a discount.
That said, even the hurdle for starting something new for a new project, if you will, or an existing project that we already own, we'll set the hurdle relatively high as to what we think the return on that would be now. If we control the land, we don't have to worry about ultimately being able to complete it. We'll be looking at that in conjunction with where is the share price and deciding whether we're better to allocate capital in that way or whether better to allocate capital to buyback. I think that's the best way to look at it. We will take into account that share price as we look at relaxing or opening up any further CapEx commitments than the ones that we've indicated here.
Okay, thank you very much. Maybe I'll follow up, if I can, in the first one, as theoretically, Ismael commented that there, of course, it's a very recurrent asset as the net leases. As long as you divest during this year in more assets of net leases of BBVA, exactly when will you feel comfortable in order to be more aggressive with existing projects and with buybacks? Currently, in order for your covenants, if there's no free cash flow generation, the assets as a whole would have to go down more like 33% in order for your covenants to go up. When will you feel, when you divest those net leases in order to be more aggressive? With those proceeds only for debt reduction or when do you feel comfortable taking those proceeds for maybe buybacks or going through the CapEx program again?
Mainly for debt reduction at this stage. The figure I was mentioning is meaningless anyway, EUR 13 million out of a EUR 1.7 billion portfolio. That cash flow will be simply accumulated, like eventually any other cash flow that we might obtain from non-core sales, till we have more visibility on what the future holds. By taking order, if we start having more visibility on what the future holds, the first thing we will do is pay back the credit lines and go back to a normality situation. Okay. The second thing we will do is continue in our path to try to deleverage the company towards the 35%-36% loan-to-value objective, which only God knows whether will be achievable or will be counter-affected by a foreseeable drop in values of mainly shopping centers. In principle, pay down debt till we have more visibility.
We wouldn't like to see ourselves in a situation like U.S. companies who have been extensively buying back their own shares, and in some cases, now are in need of a public sector rescue. We want to be prudent, and only with true excess cash, eventually we will go for shares in the market.
Okay, thank you very much, and I appreciate the hard work for all of you. Thank you very much.
Thank you.
Thank you.
We have no further questions at this time. Please go ahead.
Okay. Any other question?
Fernando, just before you close up, there's one thing that I didn't come up in questions, but I think it's important for us to talk about as well. A lot of the questions that have been seen is what's going to happen in the post-COVID world. Just to remind people that between the lease in Lisbon, which we've already announced, and the replacement of the Sigla tenant in Madrid, and another lease that we've signed in Barcelona. In the post-COVID world, we've signed 29,000 sq m of space. The economic terms on which we signed those leases are the same economic terms that we were negotiating on those leases prior to COVID. When we talk about what the post-COVID impact is, all we can really talk about is what we've done. The future is still quite clear.
In those major leases that we've signed, or LOIs that we've signed or LOIs we've converted to leases that started in the pre-COVID world and ended up completing in the post-COVID world. We've seen no meaningful change in the economic conditions of those. I think it's at least an indicator of how people are reacting now. What the situation is like three, four, or five months from now, obviously, will depend on how the economy evolves. I thought that was an important piece of information to get across.
Another important piece of information, because I know some of you are asking about it, is what will happen to valuations. I know there has been a lot of noise about that, and many people are now hectic about what happened to Land Securities in the U.K. and are reading across to other companies using Landsec as a proxy. Of course, there is nothing that we can say which eventually will allay everybody's fears. For what it's worth, it is important to note that in the U.K., retail was having problems before COVID-19. In Spain, January and February, we had sales up 5.1% and footfall up 2.4%, and our occupancy costs.
Generally speaking, our OCR, our tenant effort ratio across the portfolio is 12.5%, which is much lower than the tenant effort ratios that are normally seen in other countries where everybody is now completely frantic about what will happen to retail. This is not implying that there is not going to be any challenges to retail. Of course, there will be challenges to retail. Of course, we will try to cope with those challenges. Thanks God, we were quick in refurbishing most of our shopping centers. As we indicated to you, part of that refurbishment was offensive, part of that refurbishment was defensive, and our expectation, at least for June, is to take some hit in shopping centers, but not even close to the ones that most people are expecting, opining or writing in the different literature that we are receiving.
For offices and logistics, we expect no or meaningless and very limited impact on values. In fact, they might even go slightly up in some cases, particularly in logistics. That is important because I know that the trend is your friend, and now everybody is trying to create a downward pressure on everything. We are not seeing on the ground the level of desperation that the financial market is expressing. It might well be that the financial market is right and we are wrong, but for the time being, this is what we are seeing on the day-to-day work.
Okay.
Excuse me, we have one question from the line of Pierre Perrin from [VML]. Please go ahead. Your line is now open.
Yeah. Hi, good afternoon. I just had a follow-up question on FFO impact you were providing. On top line between EUR 65 million and EUR 70 million. Does it include the losses from higher vacancy on shopping centers? The 5.5% that you indicated are related to not collected rent?
Yes.
Yes, it does.
Okay. Thank you.
Well, thank you very much for your kind attention. As Fernando said at the very beginning, keep safe, and we remain here at your full disposal for any further clarification. Especially these days, we as a company are making an effort to be absolutely transparent and to convey as much information as possible to the market so that the investors community at least have the proper information to make decisions. Thank you very much.
Would you like to take the last question from Ignacio Carvajal?
No problem. Please.
Okay. Please go ahead. Your line is now open.
Yes. Hi, Ismael. Just a very quick follow-up question. Maybe to David, I think he answered the question on this. Just going forward, I know you have very low visibility, but what are you seeing in terms of major differences between this post-COVID-19 world to the last real estate crisis in Spain, 2009, 2010? I'm trying to get a sense of what you feel could be the level or the floor level for rents going forward. I know there's little visibility, but maybe your line of thought would be great on this one.
Sure. Well, two things. First, I think, one, the supply situation going into this period now is significantly better than it was previously, where there was a significant amount of supply. That's a positive. Second is that the rental levels relative to general economic activity are again, much lower. If you think that today we're still below the prior peak. We haven't even recovered rents in Spain back to what existed in 2008. It's a long time of declining and flat rents. There's not as high a perch from which to fall for rents. Those two things together, the supply situation and the fact that rents are more in line with where economic activity, I think give me a better sense. Then the third is, at least to date, and this is, I think, the big thing people are looking at.
This is not a financial crisis, which are always deeper and longer to recover from. The banks, having rebuilt their balance sheets from the last crisis and not having gotten overextended, the banks are stronger going into this. The spillover effect into the broader financial services should be more reduced. The recovery, again, barring the fact that this pandemic becomes deeper or longer, the recovery should be faster. Even today, when you look at a lot of the reports that I pay attention to or listen to. The most conservative ones are saying 3 years to get back to level economic activity existed pre, and the general consensus is about 18 months. Some of the early ones, the V-shape, it's going to be one year, were a little crazy, and I thought that at the beginning.
Now the market consensus is kind of falling into an 18-month period. That feels, again, as best I can tell from now, that feels like a pretty good estimate, frankly. One other thing to point out for us for 2020 in offices, going into the year, we had a 15% expiry. The first quarter, we took care of a third of that. From here to the end of the year, we only have 10% of the office leases that come up for expiration. That's a relatively low percentage, especially in a market where, as Jaap pointed out earlier, leases tend to be short. We only have 10% to deal with between now and the end of the year, and then we have a relatively light calendar next year as well, comparatively speaking.
That puts us in a reasonable spot that we're not having to negotiate large volumes of office leases within this next six to 12-month period.
I would add, Ignacio, three secondary things which are also important, which is the general level of indebtedness. The leverage of families and companies is well below the last cycle. As you know, in Spain, it has come down 70%. 70 percentage points of GDP, lower families and corporates. Disgracefully, the state, the government, has not followed the same route, but families and corporates have significantly deleveraged as compared to the last crisis. The second factor, which I believe is important, is accumulation of equity, accumulation of wealth. There are many full equity buyers still out there, believe it or not, chasing high-quality assets. This is particularly true for offices and logistics. As we speak, in the middle of the pandemic, we are still negotiating a couple of non-core sales in offices with full equity buyers.
The third important factor, although secondary, is that the environment of interest rates is much, much, much lower, giving more relevance to any cash flow-linked activity. The price of real goods is better because remember that in the last crisis, at the beginning of the crisis particularly, there was a significant hike in the price of money, and as a consequence, that more than doubled the diabolic effect of the 2008 crisis. In this one, I believe the multilateral organizations and the central banks have been much quicker to react, and price of money is significantly depressed, therefore holding steadily the value of real assets.
Understood. Thank you very much.
You're welcome.
We have no further questions at this time. Please go ahead.
Okay. Thank you, everybody. As [Jose] said, you know where we are, so let's keep in contact. Thank you. Bye.
That does conclude our conference for today. Thank you for participating. You may all disconnect.