Quickly walk you through the highlights. Ingrid will go into more details about the financial results as published this morning. Very short, we will be touching upon some of the major KPI of the portfolio, then, of course, give you our view of what we think will be happening in terms of healthcare real estate and healthcare real estate markets in Europe in the near future. This being said, hopefully by now, so it'll fit. It works. Fair. Okay, without surprise, I guess most of you have seen these numbers this morning already.
I think on the one hand, we can be relatively proud that we are presenting to the market quite robust and solid results with an EPRA coming in at EPRA earnings, I mean, coming in at EUR 110 million, so up 28% compared to last year on the back of rental income that has shown a like-for-like growth of 5.1%. Ingrid will go into that in more detail immediately. leading to an EPRA EPS at June 30 of EUR 2.76 per share, which is based on the average number of outstanding shares at that point in time, so pre equity raise that was finalized early July. Nevertheless, allowing us to slightly upgrade the guidance that we have been given for the full year.
Looking at the other side of the slide, we show a quite strong balance sheet with a debt-to-assets ratio that post-equity raise is now down to 39.3%. Having raised equity up to EUR 406 million in the first half of 2023. Also presenting, I think, in terms of liquidity, availability of credit lines, a very strong balance sheet. Once again, Ingrid will go into that in full detail. Also early July, we got the confirmation of S&P about the credit rating with BBB- flat, with a stable outlook. Numbers in the middle, we will be talking about them when we scroll through the portfolio slides.
Maybe quickly, drawing your attention to the pipeline that we will be talking about in somewhat more detail to give you an idea of how we see evolving that pipeline in the near future. This being said, moving then to the next slide, which I can do myself, probably. Yes, this is a slide I think that clearly shows how times have changed. The investment activity of Aedifica in the first half of 2023, in the end, was down to 40 new development projects that we added to the pipeline, roughly EUR 90 million to be invested. And an activity that is almost exclusively focusing on Finland with one Spanish project. If you compare these two numbers in the past, I think it's clear what I mean when I say the market has clearly changed.
On the other hand, we see 19 projects being developed out of the development pipeline for roughly EUR 121 million. It also gives an indication about the way that we see the pipeline evolving, meaning that the absolute numbers will come down in the near future. Talking about the portfolio outlook, these are numbers I don't, I don't think with lots of surprises in there. If you take today's portfolio with investment properties at roughly EUR 5.6 billion, and you add the pipeline, we will cross the EUR 6 million bar in the near future. This being said, maybe one number that needs some explanation on this slide is that you will find assets classified as held for sale, EUR 115 million.
This is basically the balance of the EUR 150 million guidance that we have given in terms of asset rotation for 2023, minus EUR 35 million sales that already took place in the first half. This being said, you probably noticed in the press release that we confirmed having signed purchase agreements for the 5 Orpea assets in Brussels. They are in the EUR 115 million, and we also can confirm that we are in the market or will be in the market in the next couple of weeks with 2 small portfolios in 2 countries, and we're also expecting some asset sales in other countries towards the end of the year.
Basically, the message here being that we still think that the guidance that we have given in terms of asset rotation towards the end of the year can be reached. This being said, I think we can switch then to the finances, Ingrid.
Okay. On the income statement, as mentioned by Stefaan, we report this EPRA earnings of EUR 110 million, an increase of 28% compared to the previous year. You can see that this is on the back of a strong operating result, +20%, mainly driven by the increase in rental income of 18%, combined with the good cost control as expressed by the EBIT margin that went up from 83.8% towards 85.4%. We have the financial charges, -EUR 25 million, an increase of more than EUR 9 million compared to the previous year. The average cost of that stands at 1.9% after the first six months. We go to the corporate taxes.
The corporate taxes are showing a plus this time on the back of the one of refunds that we received in the Netherlands regarding the attainment of the FBI status. It covers the period of 2016 up to 2021. This leads to the EPRA earnings of EUR 110 million, or expressed on a per share basis of EUR 2.76 per share. The net result. A net result of EUR 56 million or EUR 1.42 per share, influenced by the changes in fair value of the investment properties, minus EUR 82 million. On a like-for-like basis, during the first six months, there is a minus 1.2% in the valuation of the investment properties.
You can also see some impact of the FBI status related to the reversal of the deferred tax liabilities of approximately EUR 20 million. We will dive a little bit more into the increase of the rental income. For the first six months of 2022, we report rental income of EUR 131 million to make the bridge towards the EUR 154 million at the end of June 2023. There is a contribution of EUR 8 million related to the indexation. Some rent negotiations, mainly top-up rents, in the U.K. portfolio of EUR 1.1 million.
There is some impact related to the disposals, EUR 0.5 million, and then we have the contributions from the deliveries and the acquisitions that took place after June 2022, or only contributed for a couple of months in 2022, leading to the rental income of EUR 154 million. Now, when we look on this on a percentage basis, you can see that the increase of 18% is mainly coming out of the U.K., Finland and Ireland. On a like-for-like basis, there is an increase of +5.1%, which can be split into an impact of the rent indexations, +5.4%, +0.6% related to rent negotiations.
There is a negative impact coming from the exchange currency of -0.9%. In most of the countries, we succeed quite well in transferring the impact of the indexation towards their tenants. There are two countries, Germany and the U.K., where caps are in place and where you will see a lower number for the like-for-like. On the debt-to-assets ratio. At the end of June, we reported a debt-to-assets ratio of 45.6%. That does not take into account yet the proceeds of the capital increase that were received at the beginning of July. The pro forma calculation of the DTA would be 39.3%.
We have a financial policy of keeping the debt-to-assets ratio in the low 40%, with a maximum of 45%. Also, by year end, we are expecting that we will be somewhere around 39%, 40%. On the credit facilities, so total outstanding financial debt of EUR 2.6 billion. We have the first financial debt resources, so 60% is coming out of bank financing and 40% is placed on debt capital markets. Over the past period, we have mainly been focusing on bank financing. You can see that in the first year half, we reported EUR 300 million of early refinancing and also new credit lines. Also in July, we signed an additional loan of EUR 60 million. We can show strong KPIs related to the financial debt.
You can see that the interest cover ratio is 6.2x , and also by year-end, we are expecting that it still will be above 5%. This is supported by the fact that we can keep the average cost of debt around 2%, so allowing to keep the interest cover ratio above 5x . Net Debt/EBITDA that was reported at the end of June, stands at 2.5% 2.5x . This will further reduce because the debt will be reduced with the proceeds of the capital increase. We are expecting that by year-end, this will be below 9x .
Also, take into account that this Net Debt/EBITDA ratio is not adjusted to take into account that we have some projects that are under development. Already some debt that is outstanding, while they are not yet contributing to the EBITDA. As already announced by Stefaan, we had the annual review of our credit rating, and S&P reconfirmed a BBB- flat rating with a stable outlook. We have a well-spread debt maturity profile. Taking into account the proceeds of the capital increase at the end of July, we still have EUR 926 million available on committed credit lines.
The refinancing that you can see, in this graph, for 2023, it's actually concerning the short-term commercial paper for which we have full backup lines in place. To summarize, on the interest rates hedging, at the end of June, we reported a hedge ratio of 86%. Following the capital increase, this will further increase to around 100%. Also for the years to come, we expect to have an hedge ratio of above 95%. The average maturity of the hedging is 5.3 years.
Yeah. Thank you, Ingrid. Maybe before we go into the main features of the portfolio, quickly, letting you know that there will be room for questions after the presentation. Two ways of bringing the questions to us. The preferred way is by using the chat box. If you have questions, please use the chat box. You could also raise your hand and then ask the question directly to us, but then we will have to unmute you. Bear this in mind. This being said, portfolio analysis, as far as the healthcare segments in which we are investing are concerned, absolutely, no surprises.
Up to 88% in line with the recent past of our portfolio, is focused on mainly elderly care and senior housing, with some children daycare centers exclusively in the Nordics, and 7% other segments. When looking at the geographical diversification, once again, no surprises. The four main countries in the portfolio, remain Belgium, Germany, U.K. and Finland. Finland, the only country, as you know, where we are developing ourselves, with the exception of Sweden, but then we're talking about somewhat smaller countries in the portfolio. Maybe to be flagged there, the Netherlands standing at 12%, but specifically also Ireland, where the percentage is increasing as we are delivering on some of the projects that we announced in previous years, in the Irish market.
I think you also will see some further growth of the Irish portfolio as we all are actually, in, in the month of July, have been delivering some other projects, in, in Ireland. Switching to the tenants. We have been talking about tenants a lot during the roadshows, end of June, when doing the equity raise. If you don't mind, I will not be repeating myself and going through the whole explanation once again. This being said, the situation is still quite similar to what we explained a couple of weeks ago. Meaning that when you look at European operators, you will find U.K. operators performing actually very well, in today's market, with quite positive KPIs in terms of EBITDAR and rent cover.
Continental operators are facing somewhat more of a time gap between cost increases and revenue increases, time gap that will have to be closed by improving occupancy, which we see happening in most of the geographies, and by increasing the revenue per resident. It's also something that we, to a certain extent, already see happening in most of the geographies. On the other extreme side of the spectrum, you have the German operators that are really facing the biggest time gap, where what we keep hearing from German operators expectations are that it probably could take another 12 months before they really can close this time gap, meaning rebalance revenue with increased costs. I guess if there are more questions, we will address them afterwards, the situation, as I said, remains fairly unchanged.
Which also means that as we said during the road shows, end of June, that we think that we have a quite good understanding of the risks in our portfolio, and that as based on what we know today, do not expect anything materially going wrong in our portfolio. Which is not to say that there aren't any risks. This is clearly a market where there is an increased risk of incidents. A bit more about the tenants. As you know, 90% of our tenants are profit operators. This is actually no surprise there, because this is a result of the consolidation wave that took place a lot over the past 10 years in most European countries.
This being said, profit only represents one third of all European operators, so there is quite a lot to be done when looking at the not-for-profit and public operators in today's portfolio. They only represent 10%, but maybe the 3% public operators, this is really only Finland here. In the Finnish portfolio today, if we look at the tenants, we reach already 18%, so 18% of public operators being Finnish municipalities, in the Finnish portfolio. That also reflects when you look at the previous slide in the-- for the whole of the portfolio, the 3% public operators. Okay, without any surprise, these features remain unchanged. The WAULT of the portfolio remains at 90 years.
Also important, I think, in today's market, occupancy is remains at 100%. This still is a portfolio which is backed by stable long-term cash flows. I think something that needs a bit more attention in today's market is the valuation of the portfolio. Looking at the end of the first half of the year, at the gross yield on fair value, you will find an average number now of 5.8%, or in terms of net initial yields, 5.2%. I think that more important is the like-for-like valuation over the previous quarters, which you see on the right side of the slide. Where at the end of last year, over Q4, we recorded a negative adjustment of minus 1.2%.
It was down to -0.8% at the end of the first quarter of 2023. Today, at the end of the second quarter of 2023, we clearly see an even somewhat smaller number of -0.5%. The adjustments, the negative adjustments are gradually, well, maybe fading out. It's too soon to be said, but at least, more than stabilizing and going down. You will find on the slide also, the split over the different countries. I don't think there's anything specifically, that needs more explanation. Basically, when we look at the near future, we expect to see similar smaller negative adjustments towards the end of the year, but probably could be even below the -0.5% that we have shown in Q2.
I think that is more or less in line with market expectations, at least for healthcare. Healthcare remains stable. Portfolio growth, then we're talking about our pipeline. I think this is also one of the features that needs some more attention. Two main messages here. What we present at the end of the first half-year is in pipeline for a gross amount of slightly below EUR 600 million. If you compare to the previous quarters and the previous years, these amounts have been much bigger, so they're coming down, and we expect to see this amount coming down in the future. We'll go into that immediately.
The EUR 600 million that is a gross amount, of which EUR 400, more or less, has to be spent, mostly in the next two years. You will find that on the slide, in the middle graph. This being said, one of the other features is that we also expect to see the yield on cost going upwards. The outstanding amount should come down, yield on cost should go up, and that actually already you can see in the geographical split. People remembering this type of graphs, in the previous quarters and previous years, you will remember that the main part of the portfolio, in terms of projects, was located in the German market.
What we now see is that Germany is down to 12% and that our main market has become Finland, with 27% of the pipeline. This is actually, I think, what we expect to see also in the future. Basically, what is happening in the portfolio is that the forward deals that actually were negotiated over the past couple of years are now being delivered, entering the portfolio, and the focus is shifting clearly to the projects where we can get better yields and better yields on cost that is, and, and, and also still see some fair value gains. That clearly is where we are developing ourselves, namely in the Finnish market. Finnish market, where we are targeting initial yields on cost above 6%, IRRs well above 6%.
Maybe looking back to the first half of 2023, the Finnish projects that have been delivered still are showing fair value gains above 15%, slightly above 15%. This is, I think, what you should also expect to see more and more towards the future, this shift towards a bit more Finnish projects. As I mentioned before, we expect to see the outstanding amount decreasing. This is basically what we're expecting towards the end of the year. We already delivered another EUR 65 million, mainly Irish projects, in the month of August. We're actually expecting to see a net decrease of roughly EUR 18 million towards the end of the year.
The net decrease is a combination of deliveries, for a bigger amount, of course, than EUR 18 million, combined with some add-ons that we expect, once again, some new projects that will be starting in the Finnish market, mainly. Leading us to an expectation to see a pipeline of roughly EUR 450 million towards the end of the year. Looking further to 2024, this is not taking into account any changes in the market. We also expect to see the number going, coming down even a bit more. Once again, that's under the assumption that we will not add a lot of new projects that will depend on market circumstances that we will be talking about immediately afterwards. Basically, outstanding number coming down, yield on cost should go up now.
This being said, this brings us then to the outlook. What do we expect towards the end of 2023? I will let Ingrid, first of all, go through the numbers.
Yes. Okay. As you could read this morning in the half-yearly report, we also adjusted slightly the guidance regarding the EPRA earnings that we are expecting for the full year. This is on the back of actuals that are slightly above our forecast that we have set before. You can see that for the full year, we are now expecting rental income of EUR 310 million. That will lead to EPRA earnings of EUR 212 million, or on a per share basis, EUR 4.85 per share. This guidance includes some assumptions. First of all, we are expecting that we will have the deliveries out of the pipeline of approximately EUR 300 million.
We also still, as explained by Stefaan, are expecting that there will be disposals of approximately EUR 150 million by the end of the year. We slightly adjusted the assumptions that we include regarding the exchange rate. The 1.14 that you can see on the slide is in line with the average that we had for the first six months. Average cost of debt, I already explained that we are expecting for the full year, that it will be around 2.1%, based on how the curves look today. This guidance, it also includes the EUR 9 million of the FBI refund, but it's already integrated in the actual. We are not expecting that in the second year half there will be additional one-offs in the taxes.
In principle, there are not so much assumptions on hypothetical investments, on top of the committed pipeline. This will lead to the upper EPS of 4.85, and we reconfirm the dividend at EUR 3.80 per share.
Okay, this is the outlook for the remainder of 2023. Now, trying to explain to you how do we look at the healthcare real estate markets beyond 2023 in today's European market. Now, this being said, what you see on the slide basically is the past, but I'm going to tackle this question in a somewhat chronologically reverse order, starting with the medium term, and medium term for us, it means 2025 and the second half then of 2020. Basically, in, in 18 months' time from now. What we do really expect to see then is, first of all, a market which still is clearly demand-driven on the back of demography. You heard me explaining many times before that the baby boom generation will start turning 80 as of 2025, and that will accelerate aging in Europe.
We will be clearly out of the dip of the historical demographic dip of World War II by 2025, and we will be out of the COVID dip that is dating back to the early 20s now by 2025. That actually means that it will be a clearly demand-driven market, combined with the fact that today we definitely see a slowdown in terms of building new capacity, which means we're not really preparing for this wave in the second half of the 20s. In the end, it all means we expect to see increased demand in terms of healthcare services and the need for healthcare real estate. But we also expect to see more and more upwards pressure on the occupancy rates of the existing facilities. Basically, that will clearly support the business case of operators.
This is what we see coming our way as of 2025. Okay, it's a bit of a mythical date, but this is also what we hear more and more from senior management, from the bigger operators. Everybody's looking at the same way at this European demographic reality. This being said, what to expect for the next 18 months? Or in other words, when will accretive growth kick in again? I think that it's fair to say that, first of all, and this is probably something that we expect to see over the next six to 12 months, we would like to see interest rates reaching their peak.
Probably inflation also stabilizing at a much lower level, so that in the end, the cost of capital also stabilizes, and which could then lead to a somewhat more dynamic investment market. Basically, what I'm saying is that we do expect to see that at the latest towards the summer of 2024. This is a personal view on the market. Secondly, we also expect to see that the pressure on the operator margins will clearly decrease in the next 12 months. Why? Because we do see already today and expect to see further improvement of resident occupancy in some other geographies, and specifically, and hopefully also in German market.
We do also expect to see some increased revenue per resident kicking in, as talks with local authorities are going on, specifically also in the German market, to mention one, one case. We also expect to see staffing issues being addressed over the next 12 months. I already referred to specific migration programs that are being set up, but also some changes in legislation, meaning that lack of staff should not automatically and immediately lead to admission then. These are things that are on the table and hopefully will come through in the next 12 months. This being said, inflation that could be stabilizing at more reasonable levels also will lead to further growth of our rental income, but in a more sustainable way.
It's very nice to see double-digit inflation coming through in the rental income of some of the countries, but you always have to ask yourself the question: how long will operators be able to accept these type of increases? That issue, I think, is also solving itself. The next question, of course, is when and how do we see accretive growth kicking in, in this, in this rather somewhat more volatile market circumstances? I'm actually going to repeat more or less what I've been saying during the roadshows at the end of June. This being said, when you look at brand-new assets today, I think that they're still fairly low yielding, certainly compared to the cost of funding, cost of capital today. That is probably a matter of being a bit more patient.
This being said, we are becoming more and more positive in terms of the project or the development market. We clearly do see more pressure in that market, considering that to be positive signs for a company like Aedifica, meaning that we get more indications of construction costs stabilizing, some cases even coming down a bit. We clearly get much more indications that construction companies no longer have full order books and, for instance, are accepting once again fixed prices. We do see more and more developers facing some liquidity needs. In the end, this means that we expect to see and hope to see, I should say, some positive evolution there in terms of potential for accretive growth for Aedifica.
Referring to our own Finnish experience, you heard me clearly saying that within our own pipeline, we're clearly switching to more towards, well, slower, a somewhat smaller pipeline, but a bigger focus on the own development activity in Finland, where we do see interesting yields on costs and fair value gains still being realized. Looking at the M&A market, there's somewhat more sizable portfolios out there in Europe and or the somewhat more structured transactions. I think that there, the message clearly is that we strongly believe that time is on our side. Having the balance sheet that we have, we can be patient to seize the opportunities. The only thing I can say there is that we are monitoring some targets, and we start to see some potential.
M&A, when that will lead to result, that's always another question, at least the potential is clearly starting to show. This being said, this is basically our conclusion for today, looking back at a strong set of results for the first half year, the impact of the equity raises in terms of the strong balance sheet, I think that we are in a position that we can, as was also requested by some of the shareholders, show discipline in terms of capital deployment, which actually also means be patient and make sure that we seize the opportunities when they will be arising in this market. It still is a market with a very interesting medium term perspective. I think that this concludes the presentation that we were willing to make for you. We can now switch to Q&A.
Maybe quickly reminding... Yeah, I see that somebody raised their hand, and also remind you that you can use the chat box. Delphine, now we're depending on you.
Rob, Rob Jones, I'm allowing you to talk.
Rob, I think, yeah, you should be able. I think you're on mute.
Yes, I think. Can you hear me okay?
Yes, absolutely.
Great. Just by the way, I tried to type in the chat box, for whatever reason, it was blocked. I don't know if that's an issue with us or an issue with someone else. Okay, well, look, thanks for all that information. There's a lot to digest there. I just wanted to kind of summarize a couple of bits and, and then ask some questions on the back of that. We're obviously, in terms of when we look at, FY 2023 weighted average cost of debt versus FY 2022, I think we're going from about 1.4% to 2.1%. Mathematically, that's about a 50% increase. At the same time, we're in a position where development pipeline yield on cost today is about, I think you said 5.4%.
Portfolio yield, let's call it 5.2%, so not much yield spread there in terms of profitability. At the same time, as inflation subsides going forward, you've obviously got slowing indexation. My first question was around when I think about earnings going forward in 2024 and 2025, I think consensus has got expectations of not immaterial earnings growth. Optically, looking at some of those KPIs, it feels more to me, and certainly the commentary from yourselves, like we're more likely to see flat earnings in 2024, 2025, until we get that pickup again in, in kind of growth, excluding any sort of inorganic M&A activity. That was my first question, if possible.
Okay, maybe starting with, that could be a scenario-
Mm-hmm.
Undeniably, because you, you gave the numbers. This being said, it's not the only scenario that's on the table today. Once again, referring to the fact that, okay, when you refer to the, the yield on cost of the pipeline, but that basically, this is yield on cost reflecting the past. As I said, we are expecting to see that going up, and we do still see potential in the Finnish market and in the own project developments. That is something that will kick in normally a bit earlier. Other than that, I think that there are some other features that we can work on to increase EPS in the near future without going into full detail. It is a reality, I think, within today's.
Okay.
The reality of the financial markets today, that it could be a worst-case scenario to see more flat EPS in the next couple of years.
Okay.
It depends on how things change. Yeah.
Okay, that's really helpful. The second question was around operator margins. I thought it was an interesting comment, comparing obviously, U.K. to continental European operators and the, the kind of buzzword to use, time gap, i.e., their costs have gone up. They haven't been able to increase their rents as much. Their margins as, as a result, have been squeezed. Germa ny, obviously, the, the most challenged geographies from that perspective. I wonder if you have any data in terms of numerical margins, that you are seeing some operators delivering at the moment? I'm just trying to think about their ability to service their rents in conjunction with the statement you made where you said, stable, long-term cash flows for the business.
Then just linked to that, my final question or final element of the question was around, you said, obviously, dip in occupancy as a result of COVID, dip in occupancy as a result of the fact that obviously we had lower birth rate during the Second World War, and obviously, that impacting occupancy levels over the next couple of years. I wonder what in the near term then helps operators recover margins? You talked a little bit about the what's happening in Germany, for example, but aside from that, I can't quite see how they can improve their margins near term, and thus their ability to service their rent.
Yeah. Okay. Maybe starting then, with the, the situation in the U.K., because this is the only market that is totally transparent in terms of operator KPIs. What we see in the U.K. is, first of all, looking at 2022, that EBITDA margins on average are above 26%, and this is what we see in our own portfolio, but also comes out of some of the studies that were published for the U.K. market, I think, if I'm not mistaken, by Knight Frank. They started the year 2022 at 26, and they ended the year at 2026, and it's actually 21, 26.3 or something like that.
This being said, secondly, we've seen throughout 2022 costs increasing for U.K. operators, but also a revenue increasing, meaning their occupancy went up, first of all, from lower 80% to higher 80%. Yeah. Secondly, they were also able to decrease agency costs, meaning they were able to stabilize their staffing costs. In the end, that resulted in this EBITDAR margin remaining stable. If we look at the portfolio in terms of rent covers for the U.K., what we see are rent covers once again, well above 1.5. If I'm not mistaken, at the end of 2022, it was around 1.6-1.7.
What you see in the U.K. market is that even though costs have increased throughout 2022, they were able to keep the EBITDAR margin at a healthy level and to keep the rent covers at quite healthy levels. Reason why they were able to do it, and not so much the continental operators, my view is that they are much more flexible in terms of pricing, as they are working more with, with self-payers, and they can increase the fees, the average weekly fees that they are charging to the residents almost overnight.
In the end, to be put once again into numbers, I think the numbers for 2022 were on average 10% increases in average weekly fees paid by self-payers and 5%, around 5%, because this is top of mind, increases on a, in average weekly fees paid by, by the local authorities. This is the U.K. market, where you clearly see that it can be done. What is happening in the continent is it's actually going slower. Costs, of course, are going up, increased revenue is coming in much slower. We do see, and the question you ask is: How will they be able to address then the situation? First of all, we do see occupancy going upwards in most European geographies.
The Belgian market is an example I used during the roadshows a couple of weeks ago, where on average in the Flemish and Walloon region, they're once again above 90% in terms of occupancy. Increased occupancy is the first way of increasing your revenue, of course, as an operator. Secondly, we also do see that the revenue per resident is starting to increase, but it comes with a certain delay. The example I always use during roadshows is the Finnish reality, and then I'm referring to Attendo, that was giving some explanations about what they see happening in their Finnish care home portfolio. They're also, by the way, a big client of Aedifica in, in, in Finland. Basically, what they explained is, and this has to do with the way Finland is financing care homes.
They need to renegotiate outstanding contracts with the Finnish municipalities. In the future, that will be the Finnish care regions. That's the same principle. They need to renegotiate these to get higher fees. What Attendo told the market early 2023, is that they already had renegotiated one third of their contracts and obtained 30%, so 30, on average, increases in the fees. You see the system working, fees are increasing, but it will take time before they have renegotiated full 100% of the outstanding contracts. This is why you keep hearing, for instance, in Germany, that even though they are probably in the worst situation today, meaning in terms of highest cost increases and slowest revenue increases, that they are not 100% negative about their own market.
Even the bigger operators keep telling us that they expect to see in the next 12 months, increased occupancy on the one hand, and the output of some of the talks which are going on between operators and their associations, local authorities, federal government, et cetera. You do really see positive signs in that market. It's the reason why we keep telling the market that we do not see any systemic risk. We do see a risk for incidents, of course, in this intermediary period. If you want to translate that into rent covers, what I just was explaining, that is a bit more tricky because not all European operators, and this is an understatement, are very transparent in that regard. Which does not mean that we do not, on occasion, get the information, but we're not allowed to disclose it.
I think that the reality in Europe is that if you look at the U.K., where rent cover are back at 1.6, 1.7, I think it is getting closer to 1 for certain other countries. It's the reality of what you see in our portfolio, and not just in our portfolio, is that everybody keeps paying rent, with sometimes an exception, and that we still are managing to get inflation passed through. It's not that the rent cover is dropping below 1 at this point in time. The reality is something which is, is probably not the 1.5 that we like to see, but something somewhat below 1.5 in terms of rent cover. This is what I deduct from the information that we have for some of the other countries.
Sorry, just a final quick one, which I promised I'd ask Ingrid as well earlier today, which was, of the Orpea assets that are being... Sorry, of the Orpea tenanted assets that, that obviously they've now, you know, the leases have been terminated, those 5 assets, you're selling those, you found buyers, which is positive news. My question is, if you think about the value of those assets when the tenant was operating and there was no concern around rent delinquencies or whatever it might be, and implicitly call that value of the asset 100. If you then look forward in terms of the price that you've sold those five assets for on average, how does that compare to the 100? Are we down 30%? Are we down less than that?
Just some color around that be great.
Will answer the question to a certain extent, but maybe starting with, first of all, one thing. The five Orpea assets in Brussels that we are selling right now, basically, we negotiated a deal with Orpea about this. In that deal, there is a confidentiality clause. I can assure you that Orpea is closely looking at our communication about this. For the very simple reason, it's not up to me to communicate about this. You should ask the question to Orpea. My understanding is that they are still negotiating with lots of landlords throughout Europe. Apparently, we managed to be one of the first to make a deal with them. They're very strict on whatever we can communicate about it, which is, in the end, saying that we cannot say a lot about it.
This being said. I don't want to jeopardize the compensation that we're expecting from them based on the contracts that we signed with them. This is basically the first message, which in the end, is my shareholders' interest, of course. Secondly, to ask the question then, but without going into specific details for the Orpea assets, but using them as an example, these are, first of all, older assets, that are at a point in the life cycle where they need to be upgraded, for which, in the end, we had a deal with Orpea a couple of years ago, that we were willing to invest, I think, around EUR 45 million into, into these assets. This is the background.
If you then would take away the existing triple net lease contract with a quite long, remaining WAULT, it means that I think in terms of sales value, you're dropping towards something which is of interest to developers that are willing to redevelop these buildings into either residential or to student housing. Then you're looking in terms of value per square meter at values around 1,000 EUR per square meter, on average, 1,000 EUR per square meter, which is nothing compared to the value of an operational building with a long-term lease, et cetera. The gap between fair value, based on long-term triple net leases and empty older buildings that totally need to be redeveloped, can be very important, even more than the 30% that you mentioned.
Thank you very much for giving me a number around that, and look forward to seeing you in October.
Welcome.
Now, Frederic.
Frederic, I think-
Hello.
Yeah, we can hear you.
Okay, super. Hi, good morning. Just maybe one question, or rather one remark, because we see a lot of companies publishing, you know, in the real estate real estate space on occupancy rate, and obviously, your occupancy rate is always 100%, so it doesn't give very a good sense of what is going on beyond the underlying activities. So my question is: Do you have maybe another measure where we could assess as an A, maybe the, the health of what is going on in the market? It could be maybe a good thing to, to report on rent collection. That I wanted to ask Ingrid, what do you think about it?
It's something that you could consider, but it's not always easy how you should define the rent collection. Everything that is paid within 30 days or... It depends a little bit on where you would put the thresholds, but yeah, it's something that we could consider in our reporting. Yep.
Thank you. Maybe, the other question or more questions, I, I would say, you just upgraded the outlook after four weeks. I just wanted to-- wondering, what has changed over the last month?
Yeah, first of all, it was not so much on over the four weeks. So the numbers that were prepared for the prospectus, so that was done end of May, beginning of June. Actually, the difference is different by the fact that we had some higher rental income that we were expecting related to some top-up rents that were invoiced in the U.K., which were originally not foreseen in our budgeted numbers. This combined by the fact that we had some tight cost control, as expressed by the increased EBIT margin. Then there were also some slight changes in the current taxes, but they were rather limited, I would say. Mm.
Okay. On the operating margin, which was relatively nice, and EBIT, I would say: what's your expectation for H2?
I think also by year-end, we will be at 85%, and that is also our target for the coming year. Mm-hmm.
Okay. Interesting. On, on the EPS guidance for this year and maybe next year, I was wondering, because Stefaan mentioned that you will increase the, the development pace in Finland. How do you treat the, the capitalized interest cost, at this stage? Is it capitalized at the average cost of debt or marginal cost of debt?
We capitalize at the average cost of debt.
Some peers are doing at the marginal cost of debt. Is it something you will consider for next year?
I have been doing some thoughts about it, but I think it's not completely fair to do it at a marginal cost of debt. Of course, it would have a positive impact on the EPS that you report, because you can activate more interest charges than what we are currently doing with the average cost of debt. At the end of the project, when you can no longer capitalize, you will fall back on the interest expenses that you are undergoing in your financial debt. For that reason, I think it, it's more correct to do it at the average cost of debt. We calculate that on a quarterly basis, and that's the one that is used to, to activate the interest charges on the development projects.
So from our side, there's no intention to change this. No.
Okay. If just two s mall questions, as an addition. We just spoke about the deal with Orpea. Obviously, as you, you were also saying the, in the previous quarter, there is potentially a compensation to compensate for the, the drop in value, and I refer to your explanation there. In parallel, in the press release, you also mentioned that you were renegotiating rent and new rent on other assets. Can we see maybe, or can we imagine that the compensation would be a bit lower as you have been able to renegotiate maybe a good deal on the other assets? How should we see that?
Yeah, the problem is that I don't know what your expectations are, and, and if you're going to tell me what your expectations are, I will not be in a position to comment on the value, because-
EUR 25 million.
Yeah, I know. I know you told us before, I'm not, definitely not going to comment on that. As I said, we have Orpea breathing down our neck, and this is not being negative towards Orpea. Once again, my understanding, and I'm walking on thin ice here, is that apparently we are the only landlord in Belgium that has a deal with Orpea, whereas the other conversations are still going on. This is not an official communication. This is something that I think we can understand, and we feel a lot of pressure from Orpea not to communicate anything about the deal that we made with them. This being said, we had nine assets with them in Belgium, so five will be sold.
Yes, we will get some compensation from them to cover the end of the lease contracts and 4 remaining assets that they will keep operating. We also had a look at the lease terms there, but as usual, that is more complicated than just the number of the rent. It's also about duration, CapEx programs, who's going to take on the CapEx that is required, things like that. We have a sort of overall deal on the whole of the 9 assets. Once again, I do apologize. Hopefully, maybe in the future, I can be more transparent about it, but I'm not going to jeopardize the deal now. I would like to see it executed, first of all.
Okay, I understand, but do you think we could have a guess at the end of this year already on what would happen?
This one, it's hard to speculate. I think that basically, this is what we are expecting as far as our deal is concerned with Orpea, that it will be executed by the end of the year. That is clearly our expectations. How sensitive Orpea will be about us communicating in more detail about the deal, I feel it probably will depend how far they are by the end of the year.
My last question is on the net initial yield of 4.6% in Germany. If you were to sell that portfolio tomorrow, do you think you can get the 4.6?
That is a very good question. This being said, I think that a lot of our German assets, and certainly the ones that are coming out of the pipeline, which Tech Gruppe, for instance, are of very high quality. In that respect, I'm not afraid. This being said, another thing is whether, and you heard me talking about it during the roadshows, in end of June, whether it would be a good idea to try and sell a portfolio in this market circumstances, and whether or not there is a risk that you might face a portfolio discount rather than a premium, as we've seen in the past.
On the, in that respect, I'm a bit hesitant to say yes, but I'm not afraid of the underlying quality, and in that respect, the yield reflects the underlying, underlying quality in line with today's market circumstances. Yeah.
Thank you, Stephan. Thank you, Ingrid. I appreciate the answers.
Okay. Do we have some written questions?
Sorry. Yeah.
You see?
It's going to chat box. Okay. Okay, maybe quickly walking down through the chat box. If I'm not... I'm just going through them in chronological order. First question was also about the Orpea buildings, whether it's a capital gain, and what are the buyers? I think I more or less answered that question. Do we expect capital gains? No. And what are the type of buyers for these specific buildings? As I explained, older buildings, et cetera, this is clearly developers, that are buying these buildings. Question on the Finnish development still resulting in a positive revaluation when delivered. Yes, that was the reality over the first half year. For the Finnish projects that have been delivered in the first half of 2023, we have seen on average, a development margin of above 15%.
I think to be precise, it was around 18%, This to us means the difference between the cost and the fair value at which these, this, entered the portfolio. Yes, the Finnish activity in that respect is still quite promising. Switching to another question, just give me the... Yeah, sorry. The screen is... There's one question about the yield on cost of the pipeline that we mentioned in slide 5.4%. Is it gross or net? No, it's gross. Yeah. Next question.
Great, under +0.6% rent negotiations for the most important countries. At the rent negotiations, actually, they are mainly related to the U.K. In U.K., in some contracts, we have the possibility of invoicing top rents. As we explained, actually, currently, our U.K. operators are doing quite well, and that means that we also have the possibility to invoice those top rents.
Yeah. Okay, there's one question about the LTV, and the fact that based on the communication that we did, the equity will be deployed largely into the committed pipeline. Do you expect the need for another capital raise, should an attractive M&A opportunity come around? I think that the fair answer to that question, without going into exact numbers, because it also depends on the size. I think that attractive M&A in today's market implies a more, somewhat more structured transaction, which allows you to realize the deal without having to stretch your balance sheet to the point of having to raise new equity in a similar way as we have done in the recent past. This being said, I'm aware that this is a very theoretical answer.
In the end, it will all boil down to the, to the question of whether or not M&A will be sufficiently accretive to justify doing it, including having to raise more equity, if that would be the case.
Okay.
Yeah, you had to-
The next question is on the like-for-like net rental growth. I noticed that Germany actually came down this quarter. Is this on the back of the transfer of some assets? Not so much. I would say it's slightly influenced, so the two assets that we had with Convivo that were transferred to new operators at the beginning of the year, has a slight impact in the number of the like-for-like that is reported for Germany. I would say it's mainly because of the fact that indexation is indexed later. I think it's fair to say that also the indexations, discussions with some of the operations, they take more time. We are a little bit more cautious, I would say, with our expectations of having a like-for-like rental growth in Germany.
Like I explained, the 0.6% that is coming from rent negotiations, that is actually related to the U.K.
Mm-hmm.
Then we have Ireland. Ireland is a little bit... I think you were just too quick by deleting the question, but the like-for-like for Ireland. There, these are mostly new develop or new delivered projects. In the beginning, indexation can be a little bit delayed. Sometimes we agree that indexation only starts after 18 months. There, it will be the like-for-like, slightly below the indexation numbers that you will see published in Ireland itself, but they include normal CPIs, once they are fully up and running.
Okay. There's another question about the four Belgian Orpea assets. Can you give more details on that? Okay, I'm actually referring to what I already said to Frederic when answering his questions. This being said, always underlining that it's not just about rent levels. Certainly, for this type of older assets, it's also a lot about CapEx requirements and lease duration. It is much more than just talking about rent levels. For the same reasons I just explained to Frederic, we're really not willing to go into details because it could jeopardize the deal that we have in place, given the sensitivity of Orpea, and for understandable reasons, by the way. Maybe switching to the question: Can you give an update on EMVIA LIVING and why assets are being transferred?
Yes, we can. This being said, I should start the explanation by... This is about assets that were developed in the partnership between Aedifica and Specht Gruppe. For Specht, by Specht Gruppe, for Aedifica. These are brand-new, top-notch buildings that are in ramping up because they are brand new, and for which, in principle, based on the agreements that we have in place with Specht Gruppe. Specht Gruppe is our prime operator, but they can, if they want, transfer operations to another company, which they have been doing with EMVIA LIVING in the past. They're now in the process of taking back some of these operations towards Specht Gruppe to do them themselves. I think that the underlying reason is quite clear.
Doing a lot of ramping up in today's market, that always comes, by the way, with a situation of cash drain, can put too much stress on a company. I guess that for that reason, Specht Gruppe is taking back some of them, bearing in mind that Specht Gruppe is a quite specialized developer/operator, and certainly in the regions where these buildings are located, they know exactly what they're doing. In the end, I think it is offering some relief to an operator that has perhaps too much of these ramping up situations on hand. Much more than that, not able to tell you today. Once again, this is being dealt with in the first instance between Specht and EMVIA. We know what is happening.
We have, I think, also a clear understanding of what we expect to see in the near future. Once again, it's not always up to us to communicate about it. Secondly, transferring existing operations also comes with lots of responsibilities towards staff, towards residents.... towards local authorities, we do not want to interfere too much in that process. Yeah. Maybe saying this, we consider this process to be positive for Aedifica, clearly, because it will result in a better diversification of ramping up. Yeah. Maybe also adding, we do not expect any negative impact on the rent collection, because that probably would then be the next question that you will be asking us. More details on the disposal of the Orpea assets. Yeah, I, I already answered and explained why not disclose who the buyers are.
Typical Brussels local developers. Full stop. Thoughts on expanding further in Sweden. Development economics are attractive, currency has weakened, and there are motivated sellers. Very interesting question. It is in the focus point of some of the strategic thinking that will take place within the company, I mean, Aedifica, immediately after the summer, on how we will be addressing the situation in Sweden, meaning we own a small portfolio in Sweden, which is mainly developed by the own very small team in Sweden. As the Swedish market, indeed, and I agree with the question and the arguments in the question, as the Swedish market is going through quite impressive changes, it is urging us to perhaps rethink our strategy in Sweden, but it's too soon to communicate on the outcome of that.
We are clearly looking for what might be possible in Sweden right now, and then I think.
I will take the last question.
Yeah.
Can you confirm the tax refund was EUR 9 million and not EUR 6 million? Originally, at the beginning of the year, we announced the EUR 6 million, but that was related for the period 2016 to 2020. In April, or June, we received confirmation that also 2021 will be included, so we increased the tax refund towards EUR 9 million. This information was also disclosed in the prospectus.
Yeah. These are the questions that we found in the chat box, so maybe checking if there are... one other popping up, sorry. Okay, once again, a very interesting strategic question. What is preventing us from re- replicating the structure in Finland, so investor developer to other countries? From a strategic point of view, nothing. It's something that we have been talking about in the past. I think that maybe so it's something that still, from, from a strategic point of view, is interesting for Aedifica, and we're looking into it. Starting up an, an development activity is a quite long process before it becomes profitable. I think that in, in the market that we have seen in 2022, you could say, and, it also comes at quite important risks.
This being said, the fact that we are successful in Finland and remain successful in Finland, is indeed an inspiration to try and replicate it in other countries. I think the most intelligent way of doing it is perhaps by teaming up with existing developers in other countries and or even taking over some of these developers in other countries. This is just me thinking out loud. Yeah. I think we emptied the chat box, if there are any further questions? If nobody's raising their hands, I'm looking at the thing here. Yeah. I think that then we can end the call.
I thank you all for attending this call in the midst of the summer, which is not a lot of a summer in our part of Europe. I think that on this side of the call, we are all hoping to spend a couple of weeks in more sunnier parts of Europe or the world. Thank you all. See you, probably most of you, early September, when all of the conferences start again. Thank you. Bye-bye.