Hello, everyone. Thanks for joining our call tonight. I'm very happy together with Paul to share with you a very strong set of first half results for Covivio. Without further ado, let's start with the key figures of the first half, as that will provide a good overview of our performance. First, on the operating side, page four, we gained momentum in H1 with strong performance across all our businesses. In offices, letting activity once again proved the success of our positioning. In German resi, the performance was strong both on rents and on values. In hotels, the recovery is going faster than expected.
All this results in strong figures, as you can see on the right side, +13% like-for-like growth in rental revenue, 96.5% occupancy rate, together with a long lease maturity and a 2.6% like-for-like value growth. This strong operating performance drives the growth in our financial results on page five, 8% growth in Adjusted EPRA earnings, 8%-17% growth in EPRA net asset value, while at the same time keeping a healthy balance sheet, as shown in the slide, in terms of LTV, cost of debt or hedging ratio. These strong results are driven by our strategy on three pillars, as you can see on slide 6. First, centrality with a focus on major European cities. Since 2015, we have increased the centrality of our portfolio by 24 points.
Second, a focus on new buildings with a 61% pre-let ratio. Our development pipeline is welcomed by tenants and drives the growth in the gen-greenification of our portfolio. Third, client centricity. Our clients are very satisfied with our asset and services across all businesses. These are also the findings of a survey from Kingsley in the office sector. I will now let Paul comment on the operating and financing performance.
Thank you, Christophe. We titled this part by acceleration in operating performance, that you will see first on offices. Moving to slide nine and starting by the market figures. Take-up, as you see, kept on increasing in all markets during the first half. Greater Paris, Milan, Germany. From now on, brokers are all expecting take-up to finish the year 2022 above the 10-year average. In parallel with the rebound in demand, we also are seeing a change in demand with a bigger focus on prime buildings offering a top level of services. Take the example on the right side with Milan. Grade A buildings now represent 76% of the take-up. This leads to further polarization between central areas and peripheral, as you can see in this slide. What does it mean for us?
Moving to slide 10. Let's focus a moment on our strategy. It consists in offering brand-new buildings with high level of services and flexibility. This really explains the successful first half we had, first in our letting activity, second in our pipeline, and third with our flexible offer and clients approach. Starting with the letting activity, you see on slide 11 the record level of new letting. 101,000 sq m of letting and pre-lettings. We have been able to sign 70,000 sq m of pre-letting in our development pipeline, which drives the pre-let ratio up to 61%. 31,000 sq m of letting in our operating portfolio, which drives the occupancy rate up to 94%. This increase is mainly on the Manage to Core assets that you can see on the next slide, 12.
Remember, during our capital market day, we presented to you a split of our office portfolio with the Manage to Core being made of assets with the main letting challenges. It's a portfolio of nine assets, which accounts for 16% of the office portfolio value and a potential of EUR 20 million of additional rents. We had a great achievement on this portfolio in this first half. First, we sold one asset in Milan in line with the appraisal value. We also let 16,000 sq m to reduce the vacancy on five assets that are in this slide. We launched an ambitious redevelopment plan for Herzogt errassen. All this, we secured 24% of the letting challenges identified. Let's take a closer look at Herzogt errassen on the next slide. You know, this is an iconic building.
It's a healthy market, as you can see, with vacancy rate below 4%, and it is well connected to public transport. It is also an outdated asset. That's why we decided an ambitious plan to create 7,000 sq m of rooftop and offer a full range of services. We will invest for that EUR 64 million of CapEx by 2023. Second success, development pipeline, you can see it on page 14. As a reminder, this pipeline is made of well-located project, 84% exposed to city centers. It is highly secured with the 61% pre-let level, and it is profitable with a 5.3% yield on cost. You can see on the next slide that the deliveries of project are well spread over the coming years and mostly in central areas.
As you can see on the right side of the slide, costs are well secured with a maximum risk of EUR 50 million, to be compared with EUR 350 million of value creation that remains to be captured. Let's take a look at an example, a good example of this success, page 16, with Corso Italia. It's a project which is in Milan CBD, to be delivered in 2024. It's a good example of pricing power we can reach. Look at the right part of the slide. We bought this asset in 2016. In 2021, we launched the redevelopment. We had a target rent at EUR 500 per sq m, and today we increased,
Thanks to the increasing demand for quality and central assets, we were able to increase the rent at EUR 638 per sq m , which gives a 6.3% yield on cost. Another success of this first half is this new signing with Thales in Velizy on page 17. We have, once again, the proof of the attractiveness of this area. As a reminder, you know, this area, we have three tenants there, mainly Thales and Dassault, which are our main tenants. As you can see, there are a lot of other big tenants in this area. By our long-term partnership with strong tenants, we have been able to sign the new turnkey project with Thales for their third development in Velizy, totaling 38,000 sq m with, more importantly, a 7% yield on cost.
At the same time, we were able to extend the existing lease on the first two buildings by 15 years, which improve sharply the visibility of our cash flow. Third success on offices, page 18. It's our all-in-one offer. In 2017, we decided to launch this flexible offer with Wellio. It's a success today, as you can see, in this slide with the figures. In 2022, we have nine assets, 95% occupancy rate. This has been much more than just a flexible offer, but it is rather a laboratory of our client approach, which is leading to our all-in-one offer. The results are the letting successes we just commented it before. It's also the high client satisfaction you can see on the right part of the slide.
Moving to German residential, the fundamentals here remain very solid. You see, page 20, market figures on the left part. Demography is still favorable with immigration, aging population, and expected increase in household. At the same time, the pressure on offer is increasing. Look at the figures on this slide, and this gap is driving rent and market price up. At Covivio, we benefited from this situation, and even more, we wanted also to flag in this slide our capacity to outperform inflation over the long term, as you can see on this chart. Our rents have outperformed inflation on the long term and market rents. This is the same story in the H1 2022, as you can see on page 21.
Revenues kept on increasing with a 3% like-for-like growth and a growth which is well spread among our different cities. Indexation accounts for almost half of the performance, and the rest is coming from relating or from our modernization works that we do with a 5% yield on cost. The 5% yield on cost you can see also on our development pipeline in which is page 22. We, it's also a driver for growth for us in German residential. We have a EUR 176 million committed pipeline, and we expect important value creation. You see the figures, 35% margin on the build to sell, and as I mentioned, 5% yield on cost and 20% value creation on the build to let. We show here, page 23, one example, a good example of our track record.
Prenzlauer Promenade, it's a mix of a build to sell and build to let. It's in Berlin. Here, as you can see in this slide, we were able to reach 37% value creation on the build to let part. On the build to sell, the selling price we reach is EUR 6,000 per sq m, which is far above 18% above our budget and which implies 56% margin. Now, on hotel, we told you at the beginning of the year, we were confident with our global portfolio with the expected strong recovery. What we can say at the middle of the year is that this recovery went much faster than what we were expected. On market figures, we can see page 25, RevPAR started to significantly recover since mid-February and the end of the sanitary measures.
In May, we have RevPAR higher than in 2019 in Europe, but and especially in France. A recovery which is also driven by the strong pricing power of this industry, and you can see the figures on the right side with price per room, which is above 2019 in May, and it's the same in June. For our portfolio, we directly benefited from this recovery, as you can see on page 26. The growth came from all kind of revenues, variable revenues of course, but also fixed rents and also the U.K. rents following the new contract we signed this first half.
Moving to slide 27, you can see how rapid the recovery has been on variable revenues, coming back to 2019 figures in May for our AccorInvest portfolio on the left part and close to the 2019 figures also for operating portfolio, which is in Germany, starting to recover after a bit of delay following more lockdown in this country. We also have seen growth in revenues on fixed rents. Moving to slide 28. We have a solid tenant base here, made up of some of the largest hotel operators you already know. This and the quality of the portfolio explains the full collection rate we had on hotel. This is also driving our hotel performance with +9% like-for-like rental growth.
Part is due to indexation, but more importantly, the bigger part is coming from our asset management work, which drives the like-for-like rent by 3%. You see an example of the asset management work on the next slide, page 29. We signed in H1 this year a great deal, which, by changing hotel operator from Accor to B&B and creates a lot of value. It's a 30 asset portfolio previously led, as I said, by Accor Invest on a variable basis. We signed a new lease with B&B and with a fixed rent, which is significantly above 2019 level. We increase the rental revenue, and we create more than 20% value on this portfolio. I'm sure that it's only the beginning for this hotel portfolio.
Moving to the financial results, on the back of this acceleration of the operating performance I just commented, we published strong financial results over H1. First, page 31, with a growth in the portfolio value by +2.6%, as you can see in the context of increased interest rates. You see more details on page 32. A good performance which illustrates the success of our positioning on our different activities, +0.7% like-for-like in offices. It is mainly driven by the success of the development, which increased by 3% on like-for-like. + 5.9% in German residential, a continued rise in rent and a scarcity, putting upside pressure on condominium values.
Finally, +2.8% in hotel, increasing on variable revenues, but also on U.K. portfolio and on the fixed leases, thanks to our asset management work. The quality of our portfolio is also a driver of the value growth, and we move to slide 33. Here, we continuously increase the share of green assets into our portfolio, reaching 91%. Focusing on offices, you see that 88% of the office portfolio is certified green, and we also have significantly improved the rating quality since 2015 of this portfolio. We are close to 60% of our office that are now certified very good or above. Another driver of the value growth is our qualitative asset rotation. We show more figures on page 34. During the first half, we once again improve the quality of our portfolio.
On the disposal side, we signed for EUR 260 million of new disposal agreement, mainly offices, and at a price which is slightly above our last book value. Here you have, we included one Telecom Italia portfolio we just signed in July in Italy above appraisal value. In parallel, we reinvested EUR 172 million, mostly of CapEx, in prime new office developments, and as you can see in this slide, in modernization CapEx in residential. We wanted also to do a focus on offices that you see on the right part. Since the beginning of 2020, we sold for EUR 1.6 billion of offices with a 4% average margin, and we reinvested part of the money into new developments in central location and creating value by 28%.
This is for the portfolio. For rental performance, moving to page 35. The end of 2021 was a turning point with improving performance in office and in hotel. What we can say is that 2022 marks an acceleration of this performance. In offices, you can see on the left part, occupancy is increasing, like-for-like rental growth as well. In offices, in hotel, on the right part, we see a strong catch up as commented before, and then in German residential in the middle, it's once again a strong performance in the first half. More details with more figures on page 36, that gives all in all, our +13% like-for-like rental growth on our revenues at EUR 306 million group share.
If we go directly to the bottom part of the slide, you see the different drivers of the solid performance. Of course, indexation 1.6% on offices. Of course, also the increase of the hotel viable revenues by 6.6%, but also our asset management works. It supports the growth with +1% coming from occupancy increased and +3.8% coming from the rental uplift, mostly on German residential and in hotel. This performance gives +8% growth in Adjusted EPRA earnings per share. You can see on page 37. Few comments on this, on this slide.
This performance, let's say more than offset the lower property development margin recorded in the first half, thanks to the strong letting activity I just commented, thanks to the reduction of the net operating cost, and thanks to the reduction of the cost of debt. Speaking about debt and moving to slide 38. All these results were achieved while maintaining an healthy balance sheet. LTV is down by 170 basis points to 39.5%, an LTV level which take into account the full dividend payment in the first half. Cost of debt is also slightly down to 1.40%, and as you see on the right part, 86% of the debt is hedged with a 6.6 years average hedging maturity. A healthy balance sheet also through the diversification, as you can see page 39.
You know, we like the diversification on our portfolio. We also like it on our debt, and it is today a key strength. If you look at the pie chart, you can see the diversification on our debt. On the right side, you see that we have close to no debt maturity before April 2024. In 2024, it's diversified with corporate credits, with bank loans, and with very limited amount of bonds, EUR 300 million, to be exact. At the same time, the bank lending continue to offer attractive conditions. You see in the bottom part of the slide, we have signed this month two new bank financing for eight and 10 years at conditions that are well below the bond market by more than 100 basis points.
Moving to page 40, the strong financial results and the property value growth lead a significant increase in EPRA NAV, as you can see, +8% year-on-year on EPRA NTA, which reach EUR 109 per share and +17% in EPRA NDV at EUR 107 per share, which benefits from the positive mark to market of the debt-hedging instruments. Thank you. I now leave the floor to Christophe.
Thanks, Paul. Let's move to the outlook and guidance part. Just before going into the outlook, I would like to say a few words on governance. Our Chairman of the Board, Jean Laurent, decided to leave his seat for health reasons. We would like to thank him once again for his commitment since 2011 to Covivio's success. Working alongside with Jean has been a great pleasure, especially for me. I'm sure it will be the same with Jean-Luc Biamonti, our new Chairman of the Board. Jean-Luc knows the company very well as an independent member of the board since 2011. He's a successful businessman and brings a lot of expertise to Covivio. The board also decided to make some changes on the board committees.
The committee chair profiles on the right-hand side of the slide are all independent members of the board who can draw on a wide range of expertise and their deep knowledge of the company. Another board decision was made today with a change in Delfin representative following the Leonardo Del Vecchio death. Delfin will now be represented by Giovanni Giallombardo. Delfin is a long-term shareholder, supportive and instrumental to the company's growth. Those changes show the continuity in the board, the stability and trust of the board, and our shareholders are strong support to Covivio story. It's a key strength, especially in today's environment. Covivio is well prepared to this changing environment and can draw on several source of strength. You see that page 43. Our solid EPRA earnings that are underpinned by a diversified business model that brings resilience and visibility.
We also stand to benefit from the high inflation environment, first in offices, thanks to fully indexed rent and reversionary production in city centers. Second, a 20% reversionary potential in German resi. Third, a strong pricing power in hotels. Financing costs are under control, thanks to high debt hedging and long average maturity with no major debt expiry in 2022 and 2023, as Paul said just before. On value, page 44, we have potential or buffer, depending on how you see things today, with the future rental growth that will further build value, with a EUR 400 million value creation and development, with a 40% gap between appraisal and unit market value in German resi, with a high-risk premium and asset management potential in hotels. Last, but not least, our debt ratio is robust.
Our LTV is below 40% on this substantial headroom compared to our covenants. Switching to page 45. All in all, in the short term, we confirm our guidance for 2022, taking into account the new environment with the increase of interest rates and lower property development margin that should be positively balanced by a higher than expected indexation, a strong letting activity, and a faster than expected recovery in the hotel sector. Looking forward, I'm page 46. I'm convinced that in this environment, the strategy will make the difference. In offices, our strategy fully address the needs of our clients and will bring future results. We have a high-quality portfolio with a big chunk in city centers with strong reversionary potential. On top of that, we also have an exposure to long-term leases with high and fully indexed yield with on Telecom Italia and VDC portfolios.
In German residential, page 47, we built a portfolio focused on the best locations where we can increase rent and values. If you look at the figure on the bottom of this line, you'll see that our rental reversionary potential on the left and the strong gap between our book value and the market unit prices on the right are both sources of strong potentials. Turning to page 48. In hotels, we own a strategic portfolio for hotel operators. The recovery will continue to drive revenue growth. We still have EUR 20 million of rent to capture in 2023 compared to 2019. Remember that January and February were affected by the Omicron virus. 2019 is also no longer a ceiling, and the trend is strong, especially for tourism activities. We also mentioned asset management opportunities.
The first deal with B&B is only the beginning, and I'm convinced that operators and Tugdual, we will work together to adapt the hotel concept. We are the right partner to support them. To summarize what we said today, sorry to be a little long, but there was a lot of things to share. First, the first half was very strong in all our activities with high lettings in offices, sustained growth in German resi, and strong recovery in hotels. This led to very good operating and financial performances, which enables us to confirm our 2022 guidance in a more challenging environment. For which we believe we are well prepared due to the quality of our assets, the strategy, and the balance sheet we have. Thanks for your attention.
We will now move to the Q&A session with Paul, but also with Olivier, our Deputy CEO, and Tugdual Millet, our hotel CEO. There is no questions? Any questions arise?
Ladies, and gentlemen, if you wish to ask a question at this time, please signal by pressing star one on your telephone keypad. Please ensure the mute function on your telephone is switched off to allow your signal to reach our equipment. Again, please press star one to ask a question. Our first question now comes from Céline Soo-Huynh of Barclays. Please go ahead.
Hi. Hi. I just have one question, please. If the hotel recovery is faster than what you had expected, why didn't you upgrade your earnings guidance? Thank you.
Hello. You know, at this stage, we prefer also being cautious. We may, let's say, do a little bit better than this guidance. Keep in mind that we also have some effects in H2 with the increase of cost of debt on the 16%, 14% part of the debt, which is not hedged, and some also one-off effect of the H1. That's why we prefer at this time to keep our guidance.
What do you mean by one-off effect?
In fact, in hotels, thanks to the recovery, we benefited from the reversal of an unpaid rent.
Okay.
-for one hotel in Spain that has a one-off effect in H1.
Thank you, Paul.
We can now take our next question from Markus Kulessa of Bank of America. Please go ahead.
Yeah, good evening. Thank you very much for your call and for taking my question. I wanted to also in line with your guidance, which implies a lower EPS in H2 versus H1 and lower than H2 last year, to know what exactly is the impact of the cost of debt, or at least if you can give us the new average cost of debt after the last refinancing in July. This is the first question. I have three questions.
Well, in terms of cost of debt, we should be around the cost of debt that we had at the end of last year. Stability after a decrease in the H1 this year, so around 1.2% in terms of cost of debt, which makes an increase in H2 versus H1 of, let's say, around EUR 6 million-EUR 7 million.
Okay, thank you very much. On the hotels, because it moves a lot. I just wanted to understand on average on H1, are we back to 100% of pre-COVID levels or?
That was the case for the variable part of the portfolio. Starting in May and confirmed in June only, but first quarter and April were much below 2019 level.
Okay.
That means that we have EUR 20 million to catch compared to 2019 because the beginning of the year was affected by the COVID crisis, for significant part, mostly in France, but also in Germany until April.
Okay, thank you. My last question is on German resi. First, just on the slide, you say you're 20% below the regular-regulated rent. You mean, does this mean you're 20% below the local Mietspiegel index? Then I wanted to have a bit of color on the appetite from institutional investors in the German resi market currently.
I confirm, Markus, it's 20% below the Mietspiegel index rent.
You know, on the institutional market, we are not seller of block assets, so we are not the best player to give you answer on top of that. Well, just we can share that what we understand. The last asset transaction is that it has made at an average price, which is slightly above our appraisal value we have in Berlin. As we consider that our portfolio is one of the best that we can imagine in Berlin, we are confident on this valuation.
Okay, thank you. Would you still be a buyer of portfolios at the current cost of debt in German resi?
We-
Are you looking at portfolios?
We stopped new investment since March, not only in German resi, but considering the situation, we have decided to freeze new investment. That's why you see during the first half, the sole investment we made was made on the portfolio and on the pipeline. At this stage, we are not buyer on new portfolio. We are working on new portfolio. We are really happy on that. We are working on the pipeline. That's why we are not looking today to new portfolios.
Okay, thank you very much.
We can now take our next question from Véronique Meertens of Van Lanschot Kempen. Please go ahead.
Thank you for your time, gentlemen. A few questions from my side. Maybe first on offices. You report a record first half year in terms of lettings, but maybe can you disclose what the reversion was on the re-lettings and what you currently see as a reversion rate for the future for the office portfolio?
Yes, hello. On the reversionary, we've got some reversionary actually in Milan on one of our assets, which is Via G. Bellini. It's had a little positive impact in the like-for-like rents by 0.2%, actually. The most part of the reversionary potential we aim to obtain is actually through our development in the city centers. A good example is Corso Italia. You have the slide in the slideshow. We started at EUR 500 per sq m. We ended the tender at EUR 640 per sq m. We have a couple of other examples like this one in our Paris office portfolio.
Okay, thank you. Maybe in terms of disposals, you recorded EUR 260 million. In the beginning of the year, you said you would be aiming at EUR 400 million or EUR 500 million. Is this still the target? What is included in the guidance for your FY?
We sold EUR 260 million in the first half. We also finalized roughly EUR 500 million of disposal that was committed last year. We have strong activity in the first half. We have today LTV below 30%, despite the full dividend payment in H1. Today, the investment market really taking a break. We have, I have to say, roughly EUR 150 million of other disposal under discussions. Our target is to continue to sell assets, but with no hurry.
Okay, thank you. That's very clear. Maybe to focus on that LTV, you are at least below 40% now. I believe the target was always between 30% and 40%. Is that target maybe a bit on the wider end given current environment? Is this something that you would want to lower these times and perhaps by being a seller in German resi, if you see that kind of spreads in your valuations there?
We are happy with the level, current level of LTV we have in the current environment we face. We have a portfolio that really will benefit strongly from the inflation. We are far away from the covenants. We have a BBB+ rating at S&P, which is solid. We want to continue to stick in this level of LTV in the next months in this new environment that we are facing.
Okay, thank you. That's very clear.
We can now take our next question from Florent Laroche-Joubert of Oddo BHF. Please go ahead.
Yes. Hello, this is Florent Laroche-Joubert from Oddo BHF. Yes, I would have two follow-up questions. The first one is on the guidance. We have not been able maybe to perform precise calculations. What I remember from your last capital market day is that the potential in revenue for hotels was very significant. What can we say today for your guidance? Are you very comfortable to keep your guidance at this level? Or would you say that is a fair guidance, meaning that maybe could we expect maybe a revision of your guidance maybe at the end of September? Maybe my second question on the disposals.
I understand that you see the investment market taking a break. How are you comfortable to see the valuation of your offices staying at the same level at the end of the year? Thank you.
The second question was about the valuation. Valuation.
It's the valuation. How comfortable are you on the valuation of your offices?
First of all, on the guidance, just to complete what Paul said before, we in this environment prefer to be cautious. That clearly today we are more comfortable, I have to say, on the guidance that we share today, that it was in February, because on what we achieved in the first half and what we have also in the second half, that will be delivered. Yes, perhaps we could increase the guidance before year end, but at the end, it will not be so different that it's already EUR 4.5 per share. What I can share also, because that could be also the question which is not asked, it's the guidance of 2023.
Today is too early to give figures, but what today we imagine is that we will not expect a decrease of our EPRA for next year, thanks to what we have today in our balance sheet and in our results. On the valuation side, it's impossible to give you a precise answer on that because that will really depend on the market and where it will go. Today, I really don't know. I will not say what could be the impact. What is sure today is that we have a lot of potential in our portfolio. That what we described during the call with this big amount of value creation we have in the pipeline, with the fact that on the city center exposure or asset will increase, rent will increase in the future.
After that, today, what is sure is that there is not a lot of transactions that are, finalized or decided in the office market in Europe, I have to say. But not only in the office market, I have to say more and more in the real estate sector, because as I said, a lot of investors are taking a break and are waiting September, to move. It's really difficult to give you today a clear answer on this point.
Okay. Thank you very much.
We can now take our next question from Jonathan Kownator of Goldman Sachs. Please go ahead.
Good evening, and thank you for taking my question. If you look at the forward indicators that you have in your business, whether it's reservations for hotels or leasing discussions that you can have, obviously you talked about the investment market to some extent already. Can you give us a bit of a view of what you see over the next month and what you've seen just, you know, very recently in terms of activity? Obviously, it's been strong around H1. Are you seeing any sort of acceleration, any sort of inflection, given the environment, or is it still difficult to read? Are you also expecting some of the leases that have been signed, for instance, to take into effect and improve vacancy, or on the contrary, some releases of space that are coming? Thank you.
See, in the market, in our market, because we are present on different market, and really the activity is strong and is getting stronger everywhere. We see really, you see the hotel sector, the performance during April, May and June continue to improve. What we imagine today for this summer period is really positive and going into a good direction. Also it's not only tourism. What is clear on this sector is that also the business part is now back. All the companies need to have the, to have team building, to have the people all together, and now the first figures we start to have for September seems to be really good also.
On the office sector, what we share, the figure we share on the first half in terms of letting, not only on Covivio but on the, on the market, on all the markets where we are, that means the main major European cities, the figures are going in a good direction. We don't see today, could change, but we don't see today any turning point in our activities.
Thank you. That's very clear.
We can now take our next question from Marie Dorm euil of Green Street. Please go ahead.
Hi, good evening. I had two questions on my side. The first one relates to the indexation. I wanted to get a sense if you have any tenants that have reached out to maybe not take on the full indexation, or have you had this kind of conversation at all, or not at all, and you think actually this is not even a question. Maybe the other question relates to the valuation. I can see actually some yield compression I think in your portfolio. Just curious to know how values or what kind of conversations you've had given the environment and the increasing interest rates. Thank you.
On the indexation, we have been able to pass the full indexation to all tenants, and we have a very solid tenant base and large corporates and no discussion regarding the level of indexation. They didn't come back to us when the index was negative, so there is no question about positive indexation. On the valuation side, today we don't see too much rate compression. In fact, rates are much more stable than decreasing. The valuation were sustained by the indexation, the inflation and the indexation already taken in the first half, and also the expectation of a higher indexation for the coming years.
Okay. Really it's the top line that's mostly driving your revaluation rather than the denominator.
Yeah. Yep. Next question.
We can now take our next question from Stéphane Afonso of Invest Securities. Please go ahead.
Yes, good evening, and thank you for the presentation. Two questions on my side, if I may. The first one on the office division. I understand that the cost of your committed pipeline is mainly secured. What about your managed pipeline? Do you expect to maintain a given cost above 5%? And finally, on the hotel division, could we have an idea of the lag compared to pre-COVID levels between the business and the leisure clientele? Many thanks.
On the cost of the pipeline, we have been able also to manage on the committed pipeline a good negotiation with companies. On the managed pipeline, what we can say is that what we expect is probably the market cooling down on the construction side, because we are probably at a peak in terms of construction costs, because we see some postponement of certain projects. We are able to postpone project if needed, of course. We will see how the markets will react at the beginning, in October or in November. Also what we can say on that is the fact that today the activity, especially for new buildings, I'm thinking about our Herzogterrassen project, is decreasing a lot.
We expect also a stronger competition between contractors by the end of the year. We are quite confident in our capacity to maintain the value creation on our portfolio. We should also benefit the increase of the rent due to indexation and inflation. On the hotel side?
On the hotel side, what we perceived and specifically looking back precisely on the figures and data that we have for May and June, is that considering the fact that we reach 2019 level, there is a significant change in the customer mix. Which means that probably leisure customers exceed by 10%-20% the 2019 level. And that was compensated, I would say on the other side, by 10%-20% lower business customer. I would say this is in RevPAR, after you have the effect on occupancy and average price. This is-
I would say as a summary, what we've seen so far on the data.
Okay, thank you. Maybe one last question regarding your hedging policy. Could we have an idea of the strike of your cap?
Actually, we have very limited CapEx. It's around 4%, and the strike is at 0.8%. Most of it.
Okay.
Really, most of it is swap.
Compared to EURIBOR or Prime?
Yes.
Okay, thank you.
We can now take our final phone question from Marc Mozzi of Bank of America. Please go ahead.
Yes. Sorry. Very good afternoon, all. Thank you. Just two very basic questions for my understanding of the current funding condition right now. What would be a spread from a bank financing right now, unsecured? If you can give us a bit of color from your perspective. Secondly, can you give us a bit of color on your RCF, meaning your credit lines, open credit line. What is the size? What is the maturity? What is the cost? What is the repayment schedule? Just trying to understand how relevant it would be eventually to use those credit lines in the case of a kind of a liquidity crisis. Thank you.
We'll give you more details after the call on all this. What I can say is that on the credit line, we have EUR 1.3 billion of credit line. Average maturity is basically four years. We just have renewed two credit lines for EUR 225 million at the same conditions as they were before, and actually could be a little bit better because it's also green credit lines. Depending on our green certification of the portfolio, we could obtain an improvement of the conditions. That's the second question. On the first one.
That was the question is what is the spread?
Yes. On the question of the spread, we cannot give the conditions of the line that we just signed. What I said is that we have 100 basis points better conditions on those bank mortgage loans than what we could obtain on the bond market today.
What is-
Let's say 320- 100. So, 200 basis points.
There is no change in the margin on the spread on the bank market compared to what it was one year ago. That was what we see and what we can share, so we don't give the details loan by loan because you cannot. But what is sure today, you cannot take as market what is around the bond market as a spread for all the financing of all the listed companies you have today, because we can address the bond market. Today this market is open and is there at the same condition that it was one year ago. That could change, but today this is the case.
Can I have a follow-up question? Sorry on all of this. 100 basis points below credit market means 200 basis points like the bank margin, roughly.
No, not what I will say. It's really less than that. Really less than that. Okay, we cannot give you the.
Okay, fine. Well, let's have a discussion to, as a result.
What it was before and when you and then before I have to say one year ago and one half year ago, you have the spread that was really different on the bond market. That after that-
Okay.
Really, the banks are open, especially I have to say for secured financing, that's what we made, but that's what we can do also on our balance sheet for the future.
I have a follow-up question for you.
Conditions are also the same as they were before the current situation.
Okay. Can I ask you
Questions on the.
I cannot hear. Ask you a follow-up question, sorry. Your EUR 1.3 billion credit lines, are they in excess of your commercial paper, short-term funding you have? Or does it include your commercial paper?
Commercial paper.
That does include the commercial paper.
The commercial paper, how much are they out of the EUR 1.3 billion?
Basically at this time, your question, it's EUR 1 billion of commercial paper, and we have also EUR 500 million of net cash available in the accounts. This is the final question that you are looking for.
Thank you very much.
We hope so. No, but he will try to explain what is written, so that's normal. Okay. The question we have on what is written is the impact on the interest rate increase on your strategy. Do you intend to make a pipeline review regarding new loan cost? Yes, there really is. We cannot say that there is no impact on the interest rate situation. That's why we have decided to stop new investment in lab since until March. We are looking to the pipeline. That's something that is already under control, especially on the managed part. We will perhaps postpone some operation or we will see that. We are not in a hurry.
As you see, we have a lot of potential in our portfolio, and we will continue to look at that especially. Also on the yield on cost side, what is also important to have in mind is that the inflation is also inflation of the rents. That's also something that we see and that we were able to demonstrate in the result in the first half. Second question, given that the stock is trading at 48% discount to NDV, don't you think the time has come for a substantial buyback? We don't think so. We were never in this position one year ago.
We consider that we have more to do working on the portfolio on what we are, so that's why we will not do a substantial buyback tomorrow, as we don't have done that in the past. You mentioned financing 100% bit below bond market yield. Do you refer to the current actual yield of existing bond or prospective yield you could have had if emitting new bonds? Paul, I let you this one because that's for you. You don't listen to me, Paul. Never. That's life. That's my life every day. He's really trying to understand the question.
Yeah, just looking at the questions. We refer to a prospective yield we could have for the same maturity, actually.
Okay. Thank you. There is no more questions. Thanks for this call, and see you soon, everybody. Bye-bye.
Thank you.