Good morning, everyone. I'm happy to welcome you to this conference call to comment Covivio's 2023 results. Let's start page three with a recap of this year 2023. It's in a challenging market for real estate. I'm proud of what we achieve and how we are able to exceed in our two priorities you see in the left part of the slide, execute our deleveraging plan and capitalize on rental growth. Look at the achievement. First, we reinforced balance sheet with EUR 720 million of disposal, EUR 700 million of net debt decrease, and a double liquidity. Thank to that, we are able to keep a contained LTV ratio at 40.8%, despite -10% in our asset value. Second, the operating activity was really dynamic on hotels, on resi, and on office, where we increased significantly the occupancy rates all during the year.
Thank to this activity and the portfolio quality, we record a 96.7% occupancy rate and 6.4% like-for-like rental growth. In the end, recurrent result was up +1% despite deleveraging, and is 6% above initial guidance. Let's enter into more detail on our achievements, starting with the balance sheet. First, page five. Disposal activity was a challenge in 2023, considering how calm the investment market was. In this context, we are able to secure EUR 900 million of disposal in total and EUR 720 million on a group share basis. We did mostly two kind of disposal, some to crystallize value creation at good price. For example, one central mature office asset in Paris under development with a 3.5% yield at delivery, but also in German resi with privatization at 46% margins.
Second, to improve the average quality of the portfolio, we sold peripheral office such as Majoria in Montpellier or vacated assets to be transformed, such as Charenton-le-Pont at the end of last year. We also sold some business hotels at good conditions. All in all, moving to page six, we are in advance on a EUR 1.5 million disposal program. Since we announced this plan in the Capital Markets Day of December 2022, EUR 920 million of disposal were secured, which means 61% of the plan and with a progressive acceleration, as you can see. We have today EUR 250 million under advanced negotiation. These disposals, together with the cash flow of the year, enable us to accelerate the decrease of our net debt. Look at page seven, -EUR 700 million over one year and EUR 1 billion less, including the disposal agreements to be cashed in soon.
In parallel, 2023 was a really dynamic year in term of financings, as you see in the left part of the slide, with almost EUR 2 billion across with the all kind of counterparts. This deleveraging and refinancing activity enable us to double the liquidity at EUR 2.4 billion, now covering debt expiries until Q1 2026, and to secure a low cost of debt for longer below 2.5% until end 2028. Now let's move to the second priority and how we increase the quality of the portfolio and extract rental growth. Starting by page nine with hotels and this deal ongoing with AccorInvest in order to swap assets. As a reminder, hotel portfolio is owned by our dedicated subsidiary, Covivio Hotels, which we own at 43.9%. Covivio Hotels portfolio is valued EUR 6 billion.
Among this portfolio, a bit more than EUR 1 billion is fully let to AccorInvest on a variable basis. It's a 54 hotels portfolio for which we own the PropCo, AccorInvest own the OpCo. Through this deal, we'll buy 24 OpCos for EUR 260 million with a 12% yield while selling EUR 210 million of PropCos at 5% yield. This deal is expected to be closed in H2 2024. On the right side, you can see the major OpCos we plan to buy. It's focused on Paris, Brussels, Lyon, and Nice, great tourist destination with high potential. Moving to page 10. This deal will bring us greater agility and higher returns. First, it's a win-win deal as owning both OpCos and PropCos create values and provide more flexibility and profitability on hotel managements.
For Covivio, it's also a new growth phase as we are selling mature PropCos with low yield for OpCos with much higher EBITDA yields. It will return the exposure to AccorInvest, to reduce the exposure to AccorInvest and diversify further our hotel operator partners, and it will enable us to extract the full value of those hotels while we were passive with variable rents. Main impacts will be an accretion on earnings for year one, highly profitable CapEx plan, and still a balanced mix between fixed and variable revenues. We also have asset management opportunities on other parts of our portfolio. Look at page 11. On the left side, we signed a new lease in Spain with +15% to 30% increase in rents. On operating properties on the right side, we launched a EUR 70 million CapEx program on six assets with yield on CapEx expected above 15%.
In offices, also, we see significant potential. Page 12. Look at the left part of the slide. The share of core assets increased by three points year-on-year to 94%, of which +4 points in city center to 69%. Meanwhile, we launched two office projects this year in Paris CBD. There are former Orange assets in an area with barely no vacancy for quality buildings. We will make state-of-the-art building for EUR 135 million CapEx on a yield on CapEx of 6.4%. Through these deals, we'll further increase portfolio quality, increase rent levels, and create value. We have lots of other projects of this kind in central Paris for the future. Accretive asset management deals also in German resi. Look at page 13. First, we optimize our land banks. We deliver EUR 60 million of assets with high margin.
Second, we keep on investing in profitable modernization programs to improve asset quality, reduce energy consumption, and increase rents. Third, we crystallize value creation through privatization. We sold EUR 53 million of units with 46% margin on average. I now let the floor to Paul for the operating figures and financial results.
Thank you, Christophe, and good morning, everyone. What Christophe mentioned participated to our strong operating performance across the portfolio. Let me start with offices, page 15. In a polarized market, it has been a busy year for us. We demonstrate how our portfolio fits the demand. As a reminder, 94% of our portfolio is located in city centers and centers of the major business hubs. Thanks to the client centricity we put in place since years, we show strong client satisfaction, as you see in the slide with the KingsleySurveys. This leads to almost 131,000 sq m let or renewed, of which close to 80,000 sq m of new lettings. Let's go more into details, page 16, with some examples which show 50,000 sq m in total of new lettings. The first one is Maslö.
It has been delivered early 2023, 28% occupancy rate at this time, and today we are at 87%. Further discussions are ongoing on this asset. Atlantis in Issy-les-Moulineaux, it was vacated early 2023, and it's already 70% relet. So Pop also in Paris Saint-Ouen, we were at 36% one year ago. Today, we are at 71%. Finally, Zeughaus in Hamburg, we are now at 96%, 14 points improvement over the year. We also have been able, in parallel, to extract the reversionary potential of our core portfolio. Look at the example of Silex² in Lyon or of our two Milan buildings on the right part of the slide with +21% and + 28% uplift in the rents. All this strong letting activity leads to a catch-up in occupancy rate since Q1 2023. You can see that on the next slide, page 17.
Remember, in Q1 2023, occupancy was down by two points due to asset delivery and to one departure in Issy-les-Moulineaux, as I mentioned. Since then, we recorded a progressive rebound quarter- after- quarter, and we finish the year above 2022 at 94.5% occupancy rate. The second great achievement of the year for the office is our capacity to pass inflation to our rents. Look at the right part of the slide, + 5.2% like-for-like rental growth, mostly driven by city centers where occupancy and uplift are the highest. Thanks to the letting successes, we expect like-for-like rents to stay high in 2024. Let's now look at the hotel revenues on the next page, 18, + 13% like-for-like revenue growth, + 9% in fixed rents, + 19% in variable revenues. This is thanks to, of course, the market dynamic, but also thanks to the quality of our portfolio.
As you can see the details on the left part. This quality makes this portfolio strategic for hotel operators, and that explains why our hotel revenues are significantly above 2019 as of today. We put few example and details on the page 19. First, look at the left part of the slide on the variable rents, which are mostly in France and in Belgium. They benefited from the market dynamic, but also from especially the large cities where we have our hotels. See the example of our hotel in Lyon, in Paris or in Brussels, where we recorded + 20% to + 35% increase in the rents. On operating properties on the right part, performance were also strong despite rising cost due to inflation. For instance, we recorded + 16% EBITDA growth in Le Méridien in Nice, or + 15% as well in Park Inn in Alexanderplatz in Berlin.
German residential has been quite a success in this year, last year, 2023. Moving to page 20. We own there, you know that, a very prime portfolio, mostly located in Berlin. Thanks to this positioning, we were able to maintain occupancy rate above 99% and to record a +3.9% like-for-like rental growth in 2023, showing an acceleration compared to 2022. A strong performance across all our locations in German residential, as you can see, page 21, a performance driven, among others, by the reversionary potential we are able to catch. Interestingly this year, we have seen an increasing uplift on our re-lettings across the portfolio. Look at the figures on the right part of the slide. We had uplift of 16% in Berlin in 2022. In 2023, we were at +31%. All in all, what does that mean for our revenues?
Going to page 22. Well, at the end of the year, we recorded EUR 1 billion consolidated revenues, EUR 648 million group share. A few numbers that I can stress. First, the like-for-like revenue growth, 6.4%. It is among the best historical performance for Covivio. It is explained by indexation, 3.5 points, but not only, also rental uplift and variable revenues in the hotel side. Second number, it is a strong like-for-like growth which enables us to more than offset the impact of the disposals and to record a +2.4% growth in our revenues on a current scope. Third number is the occupancy rate. We slightly increased it at a high level of 96.7% with a yield maturity of seven years on average. Let's now look at the financial results. First, moving to page 24 on valuation.
As you know, real estate market has been impacted strongly by the increase of interest rates, and our portfolio recorded a significant value adjustments linked to that. As you can see, -10% on average on a like-for-like basis. In offices, value decreased by -11.7% and now has a yield of 5.5% on average. As you can see, the centrality of our portfolio enables us to limit a bit the yield impact on our office portfolio. In German residential, it is 31% of our portfolio. Like-for-like value was down by -10.8%. Interestingly, after a -7% in H1, the value decline decelerated in the second part of the year with a -3.7%. This is thanks to the low average value per square meters you can see in the slide. The yield is up at 4.1%.
Just as a reminder, our portfolio is valued at block, whereas half of it is already under condominium, and you have seen with Christophe's comment the privatization margin we got on our portfolio. On hotels, 17% of the portfolio. This part of the portfolio resisted better with values down by -4% in 2023. The yield impact has been mostly offset by the strong increase in revenues, and we have now a yield of 5.9% on our hotel portfolio. In this context, as you can see, page 25, risk premium is being rebuilt on our asset classes. Risk premium here on Paris CBD offices is today at around 150 basis points, close to its 20-year average of 170 basis points. The value decrease of the portfolio has a direct impact on our net asset values.
As you can see, page 26, our EPRA NTA is down by -21% at EUR 94.1 per share. The same evolution also for NDV and for the EPRA NRV. Despite this value adjustment, as you can see, page 27, we managed to keep a healthy debt metrics in 2023. LTV was contained at 40.8% at the end of 2023. ICR is high at 6.4x . Debt maturity slightly increased and is close to five years as of today. Net debt to EBITDA is down significantly at 12.8x . Finally, our cost of debt stays low at 1.5% and will stay low, thanks to the strong hedging ratio that we have in our portfolio, 92%. That for the balance sheet. In parallel, operating performance are strong.
You have seen that leads to EPRA earnings, which is up by 1% despite the deleveraging, as you can see, page 28. We finished the year with a EUR 435 million EPRA earnings and EUR 4.47 per share. This result is 6% above the initial guidance and 4% above the revised guidance that we gave in July. This increase mostly relates to the operating performance. We have seen that just before. Also to positive pipeline contribution and to the management of our cost structure, which enabled us to more than offset deleveraging impact and the increase in interest rates. Thank you. I now give the floor to Christophe.
Thank you, Paul. On our ESG also, we are able to deliver. As a reminder, as you see, page 30, ESG is at the heart of our business model based on four main pillars you see on the left part. This ambition was once again awarded by the main rating agency in 2023 with improved rating, for instance, +2 points from GRESB in 2023 with a five-star status, or the A rating of CDP we received few weeks ago. The E part of the ESG is a big challenge for our industry, and we gave ourselves ambitious target to decrease by 30% of carbon trajectory for 2010 to 2030. How do we plan to reach it? First, we favor low-carbon development. Second, by reducing the energy consumption for existing buildings.
Thanks to the green CapEx plan we put in place, a profitable one with 6% return on investment, thanks also to an energy monitoring program. Third, increase the part of green energy for the portfolio. Already 79% of our managed portfolio is green electricity, and we develop photovoltaic panels on 47 buildings in Germany. On water consumption, savings reach -35% between 2019 and 2022, and we recently launched an Eco-water program for our French office portfolio. A showcase of our ESG ambition and now is L'Atelier. See page 32. The refurbishment we did for this asset in Paris CBD enable us to divide by two the CO2 emissions compared to new construction. CapEx are also 100% aligned with taxonomy, and we created 1,000 sq m of green areas. All in all, energy consumption will be reduced by -44%. This building is not only about sustainability.
This is the showcase of all our real estate now. It will be operated by our own flex brand, Wellio, starting at the end of this month and will welcome our new headquarters. It's a perfect illustration of the way we see the use of real estate today and tomorrow. Let's now talk further about our confidence of 2024 and the outlook, page 34. First, let's have a quick step back. 2023 was a really special year for real estate. In this context, we had very positive achievements, proof of the relevance of our positioning and strategy. High operating performances, growing recurring results, balance sheet improvement despite value declines. In 2024, our feeling is that we are near the low point of the cycle, with interest stabilization in Europe and rebuilt risk premium. In this context, our priorities are, first, maintain financial discipline, second, to pursue earning growth.
Dealing with financial discipline, page 35. First, we want to limit the cash outflow linked with dividend payment. Historically, our dividend payout ratio was between 80%-95%. This year, we intend to propose a EUR 3.30 dividend per share with a scrip option. These two decisions will enable us to keep between EUR 185 million-EUR 375 million of cash. This level of dividend will imply the 74% payout ratio below our long-time payout range. It's an assumed decision to maintain cash in the balance sheet and will clearly leave room for further growth. The second driver to maintain cash will be the achievement of our disposal program with a target of EUR 580 million of disposal for 2024, which will enable us to finalize our EUR 1.5 million disposal plan for December 2022 to end 2024. The second priority will be to continue to extract growth potential.
We are well-positioned today, thanks to an intense refocusing of the portfolio since the end of 2020. Look at the left part of the slide 36. We start to rebalance the portfolio with less office and more centrality located. 69% of our office portfolio is in city center today versus 59% two years ago. Hotel and resi are also increasing in our portfolio split. The quality of the portfolio keep on increasing, as you see, for example, with the certification level. In parallel, we reinforce the balance sheet, reducing debt, improving net debt to EBITDA, and keeping a contained level of LTV. This portfolio will enable us to benefit for the new market trends in office and in resi or owned hotel. For our 2024 guidance, page 37.
Thanks to a strong like-for-like revenue growth expected this year and asset management operation, and despite the impact of disposals, we target a continued growth in net recurring results to EUR 440 million in 2024. We also want to come back to full cash dividend next year with a payout ratio above 80% of the adjusted EPRA earnings. To conclude, you can see page 38, the main key takeaways we see from our full- year results publication. To sum up, in 2023, we did better than expected, and we expect 2024 to be also a strong year for Covivio. We are now ready to take your question together with Marielle, our Head of Operation in France, Olivier, our Deputy CEO, Tugdual Millet, our Hotel CEO, and Paul.
A message to our callers. If you want to ask a question, you can press star nine to raise your hand, and then when prompted, press star six to activate your microphone.
Hello, can you hear me?
Yes, we hear you.
Florent Laroche-Joubert from ODDO . Good morning. It's Florent Laroche-Joubert from ODDO BHF. I would have three questions. The first question on offices. Could you please tell us a little bit more on your challenges in leasing for 2024, and specifically in offices in Germany? We have seen a change in the organization, so what can we expect? My second question on the investment market and valuation. You have said that you are near of the low point of the real estate cycle. In the meantime, you are quite active in the investment market. What is your feedback on the current situation in terms of liquidity, appetite of investors, and how you see the valuation of the asset? A third question. On disposal office, are you open to structured deals such as Vonovia with Apollo as part of disposal plans?
Thank you very much.
Thank you. On the challenging of the leases, first topic on the office market. First of all, I have to say that we have a really good year in terms of leasing in 2023. You have seen the positive evolution of the occupancy rate we have. Today, we are close to 99% occupancy rate in Italy, with continued strong demand and evolution positively in the like-for-like situation. In the French office market, we have been able to let a lot of our buildings during the last months, especially in Q4. I have to say, what I see today in the market is really positive.
We have a lot of offers of discussions. We are really positive on the occupancy rate we will have in the coming months, in France specifically. We expect a new increase in the occupancy rate, thanks to the current discussion we have with a lot of potential tenants. In Germany, we also increased the occupancy rate last year. We have this example of Hamburg that we explained before. Today we are still below our target in terms of lettings. We have some discussions. That's why also we have decided to change the organization, as it was written in the press release. We are sure that we will be able, progressively, to improve the situation also in Germany this year. That's on the first topic. On the second question, on investment and valuation. That's a big question of today for a lot of people, as you imagine.
What we see, first, is that on current valuation, the risk premium is really being rebuilt, you see with the evolution of the valuation and what we see in the market. The second. We have some discussions with different investors. My feeling is some of them are starting to think that they are really close to the trough of the market, and they don't want to lose the window to be able to catch it in the coming months. Despite that, what I see in the market, it remains a quiet investment market. I don't expect a strong increase in the volume of the investment in the first half. I rather expect that will start to increase in the second half of the year when short-term interest rate, as we all expect, will start to decrease.
In terms of structure deal and so on and operation, we don't want to do deal like the Vonovia one because we are working on different potential transaction with investors also in German resi, but with the idea to share or to sell at a present value without any structure premium for a co-investor.
Okay. Thank you very much.
Our next question comes from Ms. Jacob, of Société Générale. Ms. Jacob, the line is open. You can press star six and ask your question.
Hello. Hi. I just wanted to ask a couple of follow-up question on the guidance. I just wanted to clarify that this is not on a per share basis. My second question is about the dividend. You say you want to come back to a cash dividend next year. I just wanted to understand your thinking, what happens, for example, if asset values go down more than you expect or if you cannot meet your disposal target, would you review this statement in that context? Thank you.
Yes, indeed. In terms of per share basis, after that, it will depend on the number of shares that will be created after the dividend. But what is key for us is really with a strong decrease in the debt side, the fact that we are deleveraging the business, the capacity we have to increase our EPRA earnings in 2023 and in 2024, I think is really a positive signal of the capacity we have to continue to extract growth in our portfolio. In terms of cash dividend, it's a statement we never take. I have to say, this one, what we say this year. After that, if there is a big, big trouble everywhere, we will see, but it's really, really not where we imagine to be next year. We consider that we are not so far for the true of the value.
We don't expect, in 2024, the same decrease of the value that we had in 2023. We are really more positive on the evolution of the environment. That's why I have to say today, really, we are clearly comfortable of what we write in the press release to come back to full cash dividend next year at minimum 80% of the EPRA earnings. That leaves room to grow compared to the EUR 3.3 of dividend we will pay this year.
Our next question comes from Ms. Dossmann of Jefferies. Ms. Dossmann, the line is open. You can press star six and ask your question.
Hello. Just to come back on the guidance. Will it be possible to give us some colors in terms of drivers? I suspect the guidance was slightly above consensus and just trying to understand what is driving more growth, going forward. Second question on disposals, as you are ahead of the plan, over the 2023, 2024, would it make sense to make more disposals as the debt to debt facility ratio remains quite high compared to rating agencies threshold?
Paul, you take the first one?
Yeah, for sure. On guidance, well, the main reason is basically what we get in 2023, meaning we expect rental growth to continue to be strong, to be above index inflation. A mid-single digit, I would say like-for-like rental growth, thanks to some indexation contribution, thanks to increase in occupancy rate, in office, thanks to a continued growth in hotel and to a solid like-for-like growth in German resi. That's the main explanation which enable us to more than offset the impact of the disposals. We also don't expect any increase in the interest rate cost in 2024, thanks to our hedging level.
In terms of disposal, we are happy with the plan. I have to say, as we consider that we are not so far for the smooth of the market, perhaps it's not the time also to sell the best asset today. We want to continue to dispose assets that are non-core mostly, or in peripheral area. That's what we want to do and also to continue to push perhaps more on disposal on the office sector than on the other sectors.
Thank you.
That was the last question from our callers. Thank you very much.
We have question just on the script. The first one is, can you please share your view on the valuation expected for 2024 by asset class? Apart from that, when do you see investment market to gain traction again? Thank you. I think it is exactly what we tried to explain before. It is not easy. Not easy. All people can do expectation, but what we say and what I said before is that we could expect perhaps a small decrease of the valuation in the first half, and after, stabilization of the market. That perhaps what could arrive this year, and that is what we today expect. Second question in French. [Non-English content] Just in term of dividends, the question is why EUR 3.3 and why not another level?
For us, EUR 3.3 is really a good compromise between to keep the cash in the balance sheet, but also not putting a too high number, creating additional share with the scrip, but also to have a sustainable level that will leave growth for the future. The last one. Could you comment the valuation of office and hotels accelerating downward in H2, where you have been selling quite a lot actually, versus the German revaluation decelerating in H2, where very little has been sold? Yes. Okay. It is really not linked to disposals, I have to say. This equation of valuation is really linked to the market. What I can say, just in term of evolution of the values, we have this whole discussion with appraiser in each asset class.
What we see really today is that we have really no specific topics to continue to do disposal at appraisal value. That is the EUR 250 million disposal we have already under discussion are at the value, close to the value at year-end, what we can say. What is sure is that the investment market in total was not very active in 2023, so each disposal was a specific discussion with the buyer. Perhaps, Paul, if you can continue because I do not really read the questions. What is the next one?
Can you confirm that you think you can sell German residential portfolio at appraisal value without the buyer keeping access to in-place debt at low rates? Can we sell German residential portfolio at appraisal value, basically?
We will see, I have to say. That will be the question of 2024. We are really happy with the German resi activity, just to be clear. Today, this sector we have long-term growth and strong occupancy. That's what we see, and that's why we like really this asset class. We have some discussion today, we have to say, with investors at appraisal value, we will see if we will be able to conclude or not the current discussions.
The other question relates also to German residential. It seems like your peak to trough revaluation on German residential is lagging behind peers, especially for H2. How do you explain that?
I think peers, we don't give them in for H2, I think it's difficult to compare with peers that do not communicate today. What we see today, really, in terms of market, first of all, we have a really qualitative part portfolio, mainly in Berlin, with 50% of the assets that are today divided with, as we said, CC today, when we are selling this asset and on a privatization way, we are more than 40% margin on the disposals. I don't think that we are lagging behind or something like that. As of today, the appraiser is the same for all this management company. I imagine he's doing the same type of appraisal with the same methods.
We have a new question from Ms. Huynh of Barclays. Ms. Huynh, the line is open. You can press star six and ask your question. Ms. Huynh, feel free to press star six to ask your question.
No. I think she's not with us. Are there other questions? If there are not other questions, thanks.
I have an additional question.
Okay. Hello?
This is Florent Laroche-Joubert from ODDO BHF. Can you hear me?
Yes, we hear you. You can go ahead.
Yes. I have an additional question, actually, on German residential. We are able to see that you can dispose residential block deals with a significant margin. My question would be as follow. Are you paying transfer taxes or other fees maybe to get these deals over the line now?
I don't understand. In 2023, we don't have this transaction in our balance sheet, it's not something that is there. I have to say, for me, there is no question for that. For me, there is no specific topics into that. If there is structured transaction, they will come perhaps in the future, and we will see the way they could be structured.
Okay. No more questions this time? Okay. Thanks a lot, everybody, and see you soon. Bye-bye.
Thank you. Bye-bye.