Good morning once again, and welcome to One United Properties conference call for Q1 2023 results. My name is Zuzanna Kurek, and I am Investor Relations Officer of the One United Properties, and I am joined in this call today by Victor Căpitanu, Executive Board Member and Co-founder of One United Properties, as well as Cosmin Samoilă, the Chief Financial Officer at One United Properties.
Together, we will present to you One United Q1 2023 financial results, as well as answer to any of the questions you might have. Before we begin, I would mention that this call is being recorded and the recording will be uploaded on our website later this week. As stated in the call, by joining this video conference, you automatically and implicitly consent to being recorded. If you do not consent to being recorded, please leave the call.
In terms of the organizational aspects, let me present to you first the setup. Firstly, Victor Căpitanu will deliver opening remarks. We will then move to the next part of the call, where Cosmin will deliver a presentation outlining the Q1 results, as well as the key events that happened since our last call in February. During the presentation, feel free to type any of the questions you might have, and we'll answer them during the Q&A.
After the presentation, we will start the Q&A session. First, we will answer the questions that we received via email prior to this call. We will answer the questions received via chat in chronological order. Please note that all of the participants are put on mute. If you would like to ask a question, please type it in the chat window.
As always, I would like to mention that we have been making forward-looking statements today during this call and regarding the future performance of One United Properties and that the actual results may differ materially. We encourage you to review the disclaimer that you can see right now on the screen and which is included in all of our investor presentations, which you can find on our website. This disclaimer applies equally to all of the statements made in today's call. I would like to now start the call and invite Victor Căpitanu to share some of the highlights regarding our performance in the first three months of 2023.
Good morning, everybody, and welcome to our quarterly call. I will start my remarks with some obvious fundamentals about our business. I know they are obvious for everybody, but I feel from time to time it makes sense maybe to repeat it. For our business, it is critical to have great locations. Always location is critical success to our business.
Also on top of this, it's very important acquisition cost to be reasonable. This allows you to lock your margin for a long period of time. Also critical is the low leverage. Companies with high leverage in periods like this when interest rates are increasing are suffering. Somehow these three fundamentals are in our mind every day, not only today, but every day since we started our business.
The first quarter for this year was a very good quarter, probably the best quarter ever in terms of sales of residential. Also, we had enough product to sell, which last year we didn't. We managed to sell EUR 90 million of new sales of residential in the first quarter of 2023. The demand in the market is very solid and the deficit is structural. This gives us a lot of opportunity ahead of us to create products for the market. What we see also in the first quarter is a flight to quality. We see a lot of clients, they don't want to buy cheaper quality. They prefer to buy higher quality, even if it's a bit more expensive product. We see clients that they don't want to buy periphery.
They want to buy more central, even if it's a bit more expensive maybe. We see people, they don't trust all the developers with their money the same. They prefer to buy from us, that we have by far the strongest balance sheet in the market, because they are much safer with their acquisitions. What we see also in the first quarter is that our brand is getting stronger and we are rewarded for this. Also, some competitors suffer, but we only see competitors suffering where they had too much leverage. As it is normal, companies with too much leverage are penalized in this environment. Probably this will bring some opportunities for us. Probably for us is a good moment.
What you want to do, how you want to behave as a company, like us, you want when the market is tighter, you want to be the one that is able to acquire new opportunities when they appear. On the rental side, the rents are increasing with inflation, so rents are now at one of the highest level in the last years, but still are the lowest for any European capital. Still we see the trend of European companies onshoring their activities to Bucharest, we see continuing, and we see a strong interest in this direction.
Our overall position on the market is excellent and prospects for development are great going forward. In terms of actual results, our turnover increased significantly in the first quarter, driven mainly from the revenue from residential sales, which increased 67%. This led to a similar increase also in the operating profit and the gross profit also. Gross profit of the company will reach to RON 178 million the first quarter. On the business highlights, on the first quarter, as I said, we sold 220 apartments and related parking and spaces for EUR 90.5 million. One High District was the best performing development. It's a new development that we launched around six, seven months ago.
It's three towers with 20 floors on the Lake Tei, very close to the center of the city. In the first quarter since we launch it, we sold around half of it. At end of March, 67% of the units under development were sold out. We continue with our business plan and our strategy. Our strategy is that we develop only for the clients, we don't develop speculatively, and we do our presale everything during construction. We continue with this strategy and it's working pretty well. Also in the first quarter on the residential front, we acquired a new location where we will develop One Cotroceni Towers. It's a land close to One Cotroceni Park, where we already have building permit for 1,300 apartments.
New apartments added to whatever we have up to now, plus a new office building of almost 50,000 sqm GLA. Of course, also the office building will not develop speculatively. We have interested tenants that want to sign long-term leases. We will start construction only after we have tenants secured for long term. On the office side, which I already started to discuss, the rental income increased 265%, but this is mainly due to rent rental agreements that we signed in the previous years. Basically, whatever we are signing this year, we only see in accounting in one, two or even three years in some cases. There is a significant lag from when you sign the lease contract to the moment you reflect the profit into accounting.
We are also quite positive this year with the leasing activity, we see a significant demand for triple A high quality space. Compared to other Western European markets, Bucharest doesn't have enough high quality space, there is still a significant deficit on this side. Maybe not as big as on the residential front, there is still a significant deficit. On the retail side, we sold our buildings that is very central in the City of the Athénée. It's called One Athénée. We sold it to a single buyer in a transaction of EUR 24 million. Instead of splitting and selling unit by unit, we decided to sell everything to a single buyer, especially that it's a small asset.
It's only 2,400 sqm . This is now under construction. Will be finalized by the end of next year. It is a listed monument. On the ground floor, we are discussing to bring some top international brands that are not present yet in the market. On the upper floors, there will be a few apartments. Also in the first quarter, we sold also One Herăstrău Office, which was our first disposal of an office building, around EUR 21 million. We sold it more or less 7%.
Thank you.
Thank you. I will let my colleagues to continue.
Thank you, Victor. I will now invite Cosmin to present the key financials for the first three months of 2023.
Good morning. Thank you for attending our call for the first quarter results of this year. We start with the main financial indicators. Consolidated turnover. Basically here we have a increase of 26% compared to first quarter of last year. You will see all around the financial presentation, we emphasize the fact that last year in the first quarter, we had a exceptional transaction. One-off transaction was the acquisition of Bucur Obor, where we recognized the profit of RON 97 million . All the presentation, we are showing the figures and the changes, including or excluding that specific transaction we had last year. Including the transaction, we had even 26% increase on the turnover.
If we are excluding that transaction from last year, the increase was 75% on, in the turnover. The turnover mainly includes the revenue from sales of apartments. Most of the portion is from here, RON 329 million, but also rental and tenant service revenues and gains from completed property investment. With this, the gross result reached RON 177.9 million, 14% decrease compared to Q1 of last year. If we are excluding the one-off transaction I just mentioned, this will mean a 60% increase compared to the gross profit of last year. The net profit, RON 161.7 million, mostly the same as it was in Q1, only 9% decline.
If we are excluding that specific transaction, the net profit of this quarter was more than double compared to the net profit of last year. If we are going on the residential segment, we see the revenues increasing 67%, the net income from sale of residential property increasing 24% up to RON 101.5 million. As you can see, this is translated in a lower margin in terms of percentages from 42% as it was first quarter last year to 31% this quarter.
This change is strictly due to the fact that last year, most of the revenue we recognized from developments that were close to completion or even completed, while this year we have a lot of income that we are recognizing from developments that are in the initial phase of construction. Naturally, all these developments in the beginning have a lower percentage margin in terms of net revenue. The best-selling, as mentioned also earlier, best-selling development was One High District with 163 units sold from the 220 units in total sold this quarter. If we are going to the commercial segment, here the increase was even more higher, up to RON 31.5 million rental income and revenues from tenant services.
This means more than triple compared to last year. The effect was mainly generated from the office buildings. One Tower, 100% leased. One Cotroceni Park, 80% leased, and One Victoriei Plaza, 100% leased. From the retail asset Bucur Obor also generating rental revenue for the entire quarter. We will see in the next quarters, and the expectation is that this revenue will still increase as the tenants move in, also in the One Cotroceni Park Phase II, that was reception in February and this period, the tenants are moving in space and will soon start to generate rental income. On the other profit and loss position, we have the administrative expenses increasing 84% up to RON 18.5 million.
This here it's including non-cash allocation of the stock option plan of RON 6.3 million. This stock option plan allocation in Q1 last year was not recorded because we started booking with quarter two of last year. If we exclude this effect of this quarter, the increase was only 22%. With this, the EBITDA reached RON 178.4 million, a 16% decline compared to last year. Again, if we are excluding the one-off transaction, EBITDA would have increased to 54% compared to quarter one of last year. On the residential segment, the asset side, we have 27% increase in residential properties up to RON 842.3 million. By this also the current asset grow 100%.
10%, sorry. The significant increase in the inventory represents the acquisition of One Cotroceni Towers, which was done in the first quarter of this year. From the developments that are already delivered and finalized, mainly One Mihai Viteazu, One Herăstrău Towers and One Verdi Park, we have at the moment only 50 units available for sale. If we are going to the investment property segment, offices, retail and land bank, there was an increase of 5% in the investment properties up to RON 2.4 billion, and this also generated an increase in the non-current assets, also is 5%, which reached RON 2.5 billion. The increase here is mainly due to the acquisition of One Cotroceni Office Phase III.
That was done in the first quarter of this year, also from the reclassification of commercial space of 2,000 sqm in the development One Verdi Park. This commercial space is rented to Lidl over in a total of 18 years. On the liability side, we have an increase in non-current liabilities of 12%. This was mainly due to the increase in the long-term loans. These long-term loans increased mainly due to the new loan that we financed the acquisition of One Plaza Athénée and also the drawings that we did during the quarter for the finalization of One Cotroceni Park Office Phase Two.
Nevertheless, the average maturity of the loans as of 31 March, it's 8.1 years for the bank loans related to investment property at a total of EUR 140 million, and 1.2 years for the loans related to the development of residential of EUR 39 million. The increase in current liabilities, 41%. This is mainly due to the advances we received from customers, and that we will recognize in the future revenue and deliver when we are progressing with the stage of construction or delivering in the MD apartments. On the cash position, it's a strong cash position.
18% decrease compared to last year, due mainly due to the investments in the developments that started in the last part of last year and also in the first quarter, and also due to the acquisition that we did, that we mentioned earlier, One Cotroceni Park Office Phase III and also One Cotroceni Towers. The loan to value ratio remains very strong. 20% is constant from the year end and, if we are referring to the net debt, it is only RON 449.7 million. A little bit less than 10% from the total asset value.
If we are referring to the cash inflow, or the contracts, from the residential sales, signed as of the end of the quarter, as of 31 March, we are to receive in the next period for the remaining nine months of the year and 2024 and 2025, another EUR 260 million in cash. You can see on the right side graph, for the first quarter we already received EUR 60 million from these contracts. In the remaining nine months, we have to receive another EUR 171 million and then for the next two years. As of the end of the quarter, in the residential development, we have sold or pre-sold 2,667 units.
Another portfolio of 1,357 residential units are available for sale and pre-sale. We are estimating to start new sales on new developments this year, mainly One Lake District and One Cotroceni Towers, to start sales for another 2,334 units. Basically the cash flow will increase even further, as new sales will be signed and will add to the portfolio of sales. Thank you.
Thank you, Cosmin . A short update, a short business update related to the apartment sales. 220 apartments with a total surface of 18,500 sqm were sold in the first three months of 2022. As a comparison, same period of last year, we sold 120 apartments. We saw an increase of 172% in terms of apartment, the value of the pre-sales and sales. In terms of the total surface pre-sold, we saw an increase of 88%. Please note that this slide includes the... apart from the value of the apartments sold, also the parking spaces, and other units, including commercial units as well as early stage apartments.
In terms of the key residential trends, as it was in the previous quarter, the best-selling development of the first quarter of this year was One High District, where 163 units were sold in the first quarter alone. So far, 437 out of 786 units were sold, well over half of this development, which is estimated to be delivered at the end of 2025. The second development with significant sales was One Floreasca Towers, high-end development located on Barbu Văcărescu, in Bucharest. 16 units sold. A total of 87 since sales and pre-sales started at this development. We have One Lake Club, 15 units, One Cotroceni Park, 12 units.
As you probably remember from our past calls, One Cotroceni Park is majority already sold out. 11 units at One Mircea Eliade and other developments, three units. We have decided going forward that the developments where there is less than five sales per quarter will not be included, will not be highlighted and will be all put together under other developments. In terms of the apartment sales, what is important to notice is that 50 out of 137 units that were pre-sold at One North Lofts as of the end of Q1 2023, are not included in the table and they were not yet recognized.
These units will be only recognized following the obtaining of the building permit, which we estimate for this year. In terms of available stock, it is important to mention that 67% of apartments under development were sold out as of the end of Q1. We saw a significant increase in the number of units, thanks to the addition of One Lake Club, as well as One High District and One Floreasca Towers between Q4 of last year as well as Q1 of this year. If we look at the type of the apartments sold, half of the approximately half of the units sold were two-room apartments. Two-room means one bedroom. Followed by three-room studios, as well as four-room apartments.
It is important to mention we saw three high-value units, which are five rooms, meaning penthouses as well as villas in the first three months of this year. The significant demand for the two rooms was primarily seen at One High District, but also at One Cotroceni Park. In terms of highlights, here we have a mix of past and past accomplishments as well as some indication for the future. In terms of past, I would like to mention that we reported at the beginning of April that we sold our stake in One Herăstrău Office. This was approximately 20%. We held indirectly a 20% stake in One Herăstrău Office.
It was a development that we acquired in 2020. Our stake was sold for EUR 4.2 million. Excluding the debt, the value was EUR 2 million. I would like to mention that we do not exclude the sale of other smaller and non-core office buildings in the future as part of our strategy to consolidate the office portfolio around the large landmark locations. Looking onto the future, I would like to mention that we have two significant developments where sales is estimated to be started this year. The first one of them is One Lake District, which hosts almost 2,100 residential units.
We estimate to start the sales for the first phase, and depending on the sale progress, we will decide when to kick off also the second phase. In terms of One Cotroceni Towers, this land that we, the acquisition of the land that was announced in February, the land was acquired already with all of the necessary permits. Therefore, we estimate the construction to start and also the sales potentially to start already this year. This development will host approximately 1,300 residential units, and we estimate it will continue the success of One Cotroceni Park.
What is important to mention regarding the budget is the results from the first quarter are aligned with the expectations, meaning that the management maintains the budget for this year, which was approved in the shareholders' meeting that we held last month. We are targeting turnover of RON 1.43 billion and a net profit of RON 530 million, with the net margin expected at 37%. The CapEx costs, including land acquisitions and development costs, are estimated at RON 1.2 billion. In terms of the evolution of One share on the Bucharest Stock Exchange, in Q1, One was the 10th most traded stock on the Bucharest Stock Exchange.
We saw trades amounting to a total of RON 56 million around this amount, includes also the PoS trade of RON 24.5 million that was executed at the end of March. Our market capitalization as of the end of the quarter was RON 3.1 billion . We had 7,200 shareholders, a 115% increase since the IPO. Out of the important developments, I would like to mention that our shares were included in the ROTX index of the Vienna Stock Exchange. It is a joint index of the Bucharest Stock Exchange and Wiener Börse that is made up of 15 Romanian blue-chip traded at the Bucharest Stock Exchange. Now, this concludes our presentation of the financial results and the key trends from the first quarter of the year.
We have received several questions ahead of this call, and I would like to start by reading them and addressing them. The first question is: What is the strategy regarding the apartments for rent? Will this become an important business line in the future for One United Properties? I would like to invite Victor to answer that question.
Thank you, Zuzanna. It's not from the, from the chat box. It's, from before the call?
Yes, exactly. We got them on email. We have three questions.
Oh, okay.
that we received on email.
Okay. This is regarding the rental. Basically, the rented apartments, you know, are good business but with low yield. The yield in the market is around 5%. Considering our high rate of return on equity on new deals, which is we are targeting 30% or more return on equity per year, then the return from rented apartment is quite low. From case to case, when we finish some developments, we want to rent some of the last apartments units, in order just to sell them more expensive down the road. Basically, we will always have some rental apartments. We'll sell from them from time to time. Maybe we replace with other apartments. We always have... We'll always have a stock of rented apartments, but not as a strategic hold, not as a strategy of holding them. I hope this answers the question. I don't know.
Thank you, Victor. The second question is, I saw on Friday an announcement about capital increase for the purpose of implementing the stock option plan. Can you please detail the purpose of this operation?
Thank you. Okay, the stock option plan is related to our performance in 2021. It took a bit some time due to the paperwork to be done. Actually, is implemented now, but this was also, this was realized one year ago. Basically, there is no share payment for the performance in 2022. This is only related to the performance in 2021, as it was agreed with the shareholders in the beginning of the year 2021, and as it was disclosed in the prospectus for the IPO and the capital increase in August last year. Basically, this is more or less implementation of the result in the past.
Thank you. Thank you, Victor. We also got three questions on a direct chat that I would like to address first. How do you see the residential trends Q1 and Q2 2023 versus 2022 in terms of apartment prices and number of apartments sold for One and for the overall residential market? What is your forecast for unit prices and number of units sold for the next quarter?
Thank you for the question. What we've seen in the first in the beginning of the year, we have seen less interest in the market for the units in the periphery of the city and less quality developments. Obviously, as it shows in our results, we saw more interest for the well-located developments with higher quality. There is a divergence in the market between the quality properties in good locations and less quality properties in periphery or secondary locations. I think overall the market as an average, in residential sales, yeah, is decreasing on the average. If you analyze by category, you will see we are in the we are for sure in the growing category.
Thank you, Victor. The second question is, the margin net income from residential property, revenues from sales of residential property decreased from 41% in Q1 2022 to 30% in Q1 2023. What are the reasons for this?
This I will ask Cosmin to explain because it's not any decrease. It's just the way we do the accounting of our sales. I'll ask Cosmin to explain a bit why it appears this temporary on the first quarter of this year.
Yes. I mentioned also in the slide where we presented the net income from sale of residential. Last year, in the first quarter, we recognized revenue and profits from developments that were very close to completion. This year, most of the revenue it's generated from the developments that are in the initial stage of construction, that we started construction the last part of last year or this year. How the calculation is done, that always in the beginning, you have a lot of weight on the cost from the land, which is a fixed cost. Then you have the stage of completion is low percent. When you do the calculation, you recognize a smaller profit in the beginning of the development.
As you advance with the stage of completion, this profit starts to increase more and more and more. This is how it's calculated, even if you have the same revenue. In the beginning, you have less margin on the sale. The fact that something on top of this is that the more the construction progress, also there is a change in the pricing. In the developments that are finalized, the pricing is not the same from the moment that the construction is or just started. These are the two aspects why in the developments with very low stage of completion, the margin is lower.
It's very important to know that there is no decrease in the margin. We feel confident our gross margin on developments is safe and is not under pressure from any direction, selling price or cost. We think we are very safe with our normal margin.
Another question from the same person. How do you compare the results for Q1 2023 revenues and net profit versus what you have budgeted for the quarter?
I think we performed better than we budgeted for the quarter. Still, due to general uncertainties in the economy, I think we keep the budget for the year as we just approved it in the general meeting of the shareholders. Comparing to our target, of course, it's obvious to see that it's performed better than we predicted.
The next question. Is your impressive growth encouraging the local government to speed up the planning process? Is there any update since the fourth quarter on this issue?
Thank you. Thank you, Angus. Thank you for the question. I see it on the chat. Basically, there are two things here. One thing is that we don't have this issue anymore, because in the last six, eight months, we managed to get building permit on most of our developments. Plus in February, we bought a new development already permitted. Today we are in a quite unique position that we have around 5,700 units already permitted. Basically, this gives us enough activity for the next four or five years, even if four or five years we wouldn't get any new building permit. Even if in a theoretical possibility that everything is blocked five years, we have what to build and what to sell.
Which, of course, is improbable because the administration works only that, the times, only takes longer to get building permits. Every year we are getting closer and closer to Central and Western Europe timing. It used to be faster, every year it gets more in line with European terms. We are very happy with how many units we have permitted today. Although there is no speeding up in the local government planning process, there is at the country government, there is now a new urbanistic law that is being implemented together with European Union and is part of a structural reform in the country in order to align with European Union norms.
This urbanistic code will be very important and relevant for the development in Bucharest and in the country. As we know, this should pass on this parliamentary term. So by summer, the new urbanistic code should pass, which I think is the first change here for many, many years. I think this will stimulate the local development. This is not done by our impressive growth, but this is done by let's say, rules and regulations imposed by the European Union and the governments that our country has adhered to.
Thank you, Victor. We now go to the question for Cosmin on the cost of financing. On the interest cost, is your 2%-4% margin a premium over, for example, Euribor? Do you mean average interest cost of 2%-4%? Either way, are you happy with this rate, and what do you expect to happen to them over the next year?
This is the margin over the, over the Euribor. Usually, all our loans are linked to Euribor three months. All the financing, like 99% of the financing is in euro. If we are happy with the rates? Don't think it's someone in the real estate industry which is happy with the rates nowadays. We see Euribor, it's like 3.3 these days, it's a, it's a real challenge in the entire industry with the, with the loans. What do we expect? We expect in the next period to stabilize and maybe at the end of the year or next year to start decreasing the Euribor. In the same time, we are on the new financing, what we have and on the existing, we are trying to lower the margin as much as we can.
Thank you, Cosmin. One more question: Where do you expect your loan-to-value to be at the end of 2023 versus the current 28%?
Basically, LTV should stay flat this year. I mean, we don't have any plan to increase. I think our low leverage puts us in a very good position today on the market to take advantage for opportunities that will maybe will come. We don't. As strategy, we don't want to have much more debt. I think this arrangement is reasonable for us. Thank you.
You are on mute, Zuzanna.
Thank you, Victor. We have a question from Vishal: Can you give a overview on construction costs? Have you noticed any issues here? Are contractors happy to provide, fixed price contracts?
On construction costs, for the first time we see downward pressure. Thank you, Vishal, for the question. For the first time with the construction cost, we started to index our construction contracts also to the commodities inside. For example, One High District that we reported record sales for the first quarter. Since the beginning of the year, we saved EUR 500,000 due to the decrease of the cost of steel. Basically we started to put indexation on the commodities included in the construction contracts. This has worked in our advantage this year.
The residential construction works overall decreased in the first quarter in Romania. There is pressure on the construction works from infrastructure because there is huge infrastructure development from European Union funding to develop Romania. Basically it was only residential works. Probably we would see a significant more decrease on cost, but because of the infrastructure works, they compensate and we are more or less on zero.
How we see construction costs this year, probably flat for this year. The contractors, they sign fixed price contracts, yes. And we manage. If you remember, we manage each of them individually. We don't have general contractor. We are doing the general contracting ourselves. We sign contracts per specialties for structure, for facade, for installations, and so on. Although we put a lot of effort to decrease the cost, it's a bit difficult, but at least if they don't increase this year, I think it's okay.
Now, going forward, we have another question from Angus: Might there be more asset sales like the EUR 24 million One Athénée sale? If so, what will the proceeds be used for?
Thank you, Angus. Yes, we are analyzing potential sales of properties where the return on equity, the marginal return on equity is single digit in order to invest the equity in new opportunities or developments where the return, yearly return on equity maybe is 20%, 30% per year or more. Basically, we are just reallocating the money from a lower return to a higher return. In One Athénée case, the estimated rent year, net operating income, rental income is like EUR 1.2 million. Let's say the forward yield on this property is like 5%. We decided a 5% forward yield, it makes sense to sell. Out of EUR 24 million, EUR 14 million is profit for One United Properties.
Not only we are developing with client's money the property, but we also do a very good return in our deal. We have a good profit that we plan to reinvest with higher return. Basically, for other properties that we have rental properties where the marginal return on equity is single- digit, we might decide to sell and reinvest the money with higher return. Already this year we sold One Herăstrău Office. It was a EUR 21 million transaction. This One Athénée in reality was sold last year. Only now we recognized it in accounting because it had a condition precedent, the building permit. Basically it was an older sale that we only announced it now. For the rest of the year, it's possible that maybe we will dispose also one or two more assets in order to create cash flow for new opportunities.
We have another question from Vishal regarding the competition. Can you please provide a gauge on competition for new land opportunities? I'll ask Victor to take it.
Thank you. Thank you, Vishal. What I have seen this year is that some competitors suffered due to high leverage. I see more competitors than ever knocking at our door to find solutions or partnerships. We plan to take full advantage of that. On the land, we don't see any pressure this year. We don't see the cost decreasing, but we don't see any pressure to increase the cost of land, which is good because if you remember, overall, the cost of land is only 20% of our overall cost, which is very, very low. This secures us the high margin that we have in development. I think we are in a good advantage here.
Last year when we raised capital in August, we raised to buy 10 new locations, out of which we already bought eight, and we already made public six. I think we are going very well in this direction to allocate that capital for the lands that we planned to acquire. On top of that, new opportunities are coming, so we are analyzing very carefully in order not to affect the cash flow, not to get too much leverage, but also not to miss a deal if it's a great deal. We do this analysis every day, every week, in order to take advantage of that. Competition therefore, we see it as decreasing this year.
Even on the office side, less people start to develop because of the higher financing costs and the general higher cost of capital. People cannot build speculative anymore. They need to build with a tenant, with bank finance. This gives us an advantage compared to competition on office. On residential, we are much farther after competition. I think in residential, we have our, we have a category of our own, and we are a bit far from the competition.
Now we have a set of questions from our analyst, Jakub. The first one is: How much do you expect to spend on development in 2023 and 2024? What may be the net balance between the CapEx, including the cash spent on inventory, such as, for residential, and inflows from sales this and next year?
This is a very specific question. I will ask Cosmin if he's able to answer now. If not, we will answer afterwards. I think maybe we have on our budget for 2023.
We have. We, in the budget we published in CapEx for this year EUR 235 million to invest. In the presentation, what we shown on the cash inflows already for this year, EUR 60 million already cashed in in the first quarter. We are expecting another EUR 171 million to be cashed. Only here from the residential expectation on the sales that are up to 31 March, we are expecting to cover the CapEx budget for this year. On top of this, we are heading also inflows from the rental portfolio, which is on the first quarter was around EUR 5 million, and we are expecting to slightly increase in the next period. For sure, if there is no other one-off event or something exceptional investment, the balance, the net balance will be positive for this year.
Yes, for sure. For sure. The inflows from sales are much more than the CapEx. This is for sure.
Yeah.
I don't know if we have the exact figure at hand.
For the next year, of course, it's too early to say now when we'll do the budget for next year. The specific budget right now, we have only estimations for the future years. On the specific budget, we are also looking to have a balanced figure in the cash flow also not to go too low on the cash flow or to jeopardize the liquidity position of the company.
Thank you. Also for the future, I would like to mention that, in terms of the future numbers, we are not providing other numbers than the, for other years than the one, that we have published the budget, either ahead of the general meeting of the shareholders or naturally after. We're going to publish a forecasting policy soon clarifying this aspect as well, because we saw we have a lot of questions regarding the guidance and forecasting. Question two: What share of apartments sold and pre-sold during Q1 2023 were bought using cash, and what share were bought, using mortgage?
Basically, when you pre-sell the apartments, they only pay cash to clients. They don't pay with mortgage. They pay mortgage when they close the contract in the end. We don't know exactly how many would buy with mortgage, but historically, we've seen less, less than 30% that buy with mortgage. Something like this. If you remember, in Bucharest, most of the apartments in the market don't have mortgage. More than 90% apartments on the market are not financed, so there is a huge home equity around. This is very helpful for the new transactions.
Now the next question: What range do you expect the gross profit margin from residential could reach for 2023 and 2024? For 2024, we will not be providing any details. For 2023, I will ask Cosmin to provide an update as it was published in our budget for this year.
It's what we also mentioned earlier with the previous question, that initially in the when the construction just start, the margin is lower. Gradually, as the stage of completion increases, the margin increases. Right now for Q1, we were at 30%-31%.
Obviously, the construction will progress in the next period, and we are expecting this margin to increase. In the budget that we published, the gross margin for the year is 38% for this year.
Thank you, Cosmin. You alluded to some of your competitors struggling. Can you talk about the broader market dynamics of Bucharest residential in light of the expensive mortgages and higher rates? What share of Bucharest apartment supply do you believe may be at risk due to the difficulties of your competitors? Would you consider buying land or even M&As? This would be for Victor.
Thank you, Jakub. Basically, what I answered already is that what, where I see struggling is the secondary location, periphery of the city, less quality product, a product that is very much dependent on, high leverage of the client, where they need to take a high level of mortgage. This is the segment of the market, more on the lower income of the market. This is where I think there will be more difficulty. M&A, I don't think is practicable because there is no opportunity in this direction. I don't see any well-organized, professionalized company that could be taken over a discount.
On the other hand, we might see land as opportunity, maybe in some companies that have too much leverage. Maybe some opportunities could buy in a indirect acquisition of assets. But I... For the time being, I don't count very much on that, because the assets we are looking are very centrally located, very good assets. It's more difficult to find opportunities in this kind of assets. I don't know. I hope it's enough.
Thanks very much.
Thank you. Thank you.
We have two more questions from Karim. The first one I will address. Can you talk about the share price evolution and specifically why it is not reflecting the positive year-on-year results? Indeed we have seen that the results are not reflected in the price. Overall, we see the Romanian capital market has been struggling in terms of liquidity since the beginning of the year. The official numbers say that the traded volumes decreased 57% in the first quarter of this year versus last year. We see this low liquidity also impacting price and interest in the issuers. The feedback that we have seen from institutional investors while participating in the roadshow is that there are some...
There is one particular very large deal estimated to come in the Romanian capital market, and a lot of investors are staying on the sidelines in order to see if it happens and to deploy capital at that moment, which could then further have a positive effect, of course, on all of the other issuers. Yes, we are aware of the share price evolution. We are monitoring it on our side. We continue discussing with the institutional investors. We work on inclusion in the indices. Yes, we hope the great results will be better reflected also in the share price evolution. I don't know if Victor would like to add.
Thank you, Karim. you know, I think, from my point of view, a share price is never in linear correlation with the intrinsic performance of the company. I think if we focus on the intrinsic performance of the company, we make the profit, we reinvest the money, we grow the company. Sooner or later, the market will also react. For the short term, what we've seen in the last six months, I would say, since the abrupt increase in the interest rates, I think market generally is quite negative with the real estate sector, without making difference between the winners and the losers of this trend.
I think, of course, some real estate companies will lose and will be in a bad position because of the macro environment. I think we'll be on the winning side. What I think, I think that even though the market doesn't see this immediately, I think on the longer term, this will be fully reflected. On the capital raise, we don't plan to raise more capital. I think we raised enough capital for our pipeline. If you see the cash flow, which is now on the slide, our cash flow from sales now is very strong. We really don't need more capital for the current, for the current developments and for the current deals that we are working to acquire. I think we're in a very good position, and I think we did well that we raised capital in 2021 and 2022.
Thank you very much. Thank you, Zuzanna.
Thank you, Karim.
Thank you for your questions. If there are no further questions, we don't see any additional. We would like to conclude this call. Thank you for all your attention. We'll hear each other next after the publishing of the results for the first half of the year, which are going to be released in the morning on August 29th. Until then, in case of any questions, of course, do not hesitate to contact us at investors@one.ro. We look forward to seeing you. We will be in the coming period in Zagreb and in Warsaw for sure. We hope to see you there in June. Thank you. Thank you all very much.
Thank you very much.
Have a good day.
Thank you. Thank you.