Hi, everyone. Thank you for attending today this meeting, either in person at Gecina headquarters or using the webcast for this H1 2022 earnings presentation. I'm very pleased to talk to you as Gecina's CEO. As you know, I have joined Gecina three months ago following the AGM. Since then, those first months have been extremely active, asking a lot to our teams, meeting all our people, visiting all our assets, our clients, our partners, our banks, and starting now with our shareholders, but also trying to deliver the best results for our company. Since I joined the group, I've gone through a full process of asset reviews, asset by asset, project by project, to investigate every single business opportunity to enhance the group performance. Ensure we were not missing opportunities to improve our path to cash flow growth starting from today.
What I can say at this stage is that I have been impressed by the quality and the engagement of the teams and their deep knowledge of our portfolio. Having said that, I can share with you my conviction that the DNA of Gecina is the relevant setup to perform in the current context and for the years ahead and grow the cash flow. Centrality and scarcity are obviously key assets for Gecina's current and future performance, because we have the conviction that leasing market is set to remain polarized over the long term. Gecina being an emblematic leader on CSR criteria is also a massive strength when looking ahead. As you all know, soberness, carbon issues, biodiversity, and well-being have became already a key criteria when corporates are seeking for their new headquarters. Here again, Gecina's leadership is at the right place.
The pipeline is also something quite unique, not so much because of its size, but because of its quality, given the location where our projects are. To my knowledge, I see no other players having such a pipeline in such prime locations. Here again, Gecina is at the right place. Right place also, right time as well, considering the balance sheets. In the current context of increase in interest rates, with an excess liquidity covering all our bond refinancing needs until 2027, combined with a strong hedging profile. Let's move now to this, H1 earnings publications, which is a clear illustration of how these trends are actually driving Gecina performance. Year to date, our activity has been particularly strong and benefiting from supporting market trends, mostly in areas where Gecina is active.
More than 57,000 sq m have been let, relet or renewed, bringing an average positive reversion of 13% and an improved occupancy. As a result, gross rents are up by 3% in H1, so our recurring net result is driven up +4.3%, excluding the impact of disposals occurred in 2021 and a one-off effect. On the valuation side, figures moved upwards as well, +1.3% like-for-like, mainly driven by rental growth. NTA is thus up +2.8% since end 2021. Those solid achievements in H1, beating our initial expectations on operational matters, drove us to raise our guidance 2022 to EUR 5.55 per share, up +4.3%. All the current context is calling for caution.
Let's move now to a quick dive in our Office and Resi markets. Office rental markets have been particularly well rented this year, this half year again, revealing a strong polarization and stronger than expected. The recovery of the take-up is in evidence since Q2 2021, and this rise has been even higher in Paris City. Immediate supply fell in the heart of Paris by 14%, while increasing slightly on average for the whole region. Polarization is clearly there, with vacancy in Paris at 2.8% and Northern Rim now at more than 18% in vacancy, up 26%. Favorable trends for us that largely serve Gecina's business considering its portfolio is highly concentrated in the most central locations in the Paris region.
84% of our portfolio is located in Paris, Neuilly or Boulogne, and those sub-markets are clearly ticking the box of centrality and scarcity. We have been leading those leasing markets with new leases that these past weeks broke prime records in the best markets in Paris CBD and Neuilly. In May, Gecina signed with a pharmaceutical group a nine-year firm lease on its freshly delivered asset in Neuilly, the 157 Charles de Gaulle on 8,000 sq m at more than EUR 650 per sq m. Few days ago, we just signed a lease with a luxury brand in Paris CBD, a 10-year firm lease on the whole 67 Lisbonne in the CBD, almost 8,000 square meters with no vacancy, no CapEx, and a 20% uplift.
Other discussions are ongoing, and we will try to exceed the 950 threshold. Because of the quality of its portfolio, the size of its portfolio, and the deep knowledge and the energy of our teams, we are capable to set new benchmarks in the area where we operate, like I said, in Paris CBD, but also in Neuilly. Iconic transactions, obviously, but also significant deal flow since Gecina signed more than 57,000 sq m in H1. Through this transaction, again, 13% uplift in rents through renewals and relettings, an increase in average occupancy rate by 110 basis points, and an increase in pre-letting since operations delivered in 2022 and 2023 are now pre-let at 85% against 67% at end of 2021. As a reminder, half of the transactions achieved by Gecina in 2020 and 2021 were outside the central areas.
In La Défense, for example, on Paris La Défense, leaving us in a favorable situation with 91% of current vacant premises and our pipeline ahead are located in Paris and the Levallois. Calculating the theoretical timeframe to clear vacant stock on each of those subsectors shows how much the market can be polarized in favor of where we have currently leasing challenges. Now moving to our Resi business. These H1 results show how predictable is our occupancy rate. Shows also that we can deliver significant rental growth, on average 8% during H1, on top of indexation through the reversionary potential of our assets. Same as in our Office business, scarcity and centrality are key drivers for that growth. Our Resi portfolio is unique in Paris and adjacent cities, same as our student housing portfolio, located in the key student cities in France.
On student housing, we can confirm in H1 that occupancy rate is progressively returning to its pre-COVID levels. We do expect occupancy rate in September to be above 97%. Additionally, like in offices or resi, our pricing power is strong. Since this good occupancy plan in September above 97% will be achieved in a context where we have grown our prices by 16% since the pandemic started. These favorable trends and strong operating achievements in H1 have started to benefit our financial performance over the first half, with a positive contribution of occupancy rates and also reversionary potential. The combination of favorable drivers brought a significant performance in Gecina's like-for-like portfolio rental growth up to, for example, 2.7% in offices. We'll go through the main drivers of that growth in the following slides, vacancy reduction, reversion, and indexation.
Occupancy rate, as I said, is the strongest driver of our like-for-like growth this half, first half. Already in H1, average financial occupancy grew by 110 basis points driven by offices and student housing. Note that we are referring to our average financial occupancy that impacts H1 at 92.3%, but our spot occupancy rate at the end of June is 93.1%, so eighty basis points above that level, and will feed our like-for-like growth in H2 again and 2023, obviously. We don't include there the pre-lettings. As we said earlier, average reversion is pretty high at 13% , but has a limited impact on H1 on a pro rata basis, obviously. Strong performance also in Paris.
Same on reversion, 8% on our Resi portfolio, but we have also, during that period, improved our internal processes, thanks to digital, our renovation program, but also management intensity. Those efforts are clearly paying off with the growth of our reversion month after month this semester. The third driver is obviously indexation. As you can see, there is a lag effect between the day inflation that we have all in mind in France, and what finally drives our rents up. In H1, contribution from indexation to like-for-like is only 0.9%, while the last index for ILAT, the one applied for offices, was published at 5.1% recently, and should drive further indexation impacts in the months to come.
On top of these three drivers for like-for-like growth, the good news in H1 is that pipeline is also contributing to our rental growth and consequently to our FFO. As you will see, this pillar is expected to increasingly feed the net recurring cash flow soon. Recurring net results is up by 3.9% in H1 if we exclude the impact of the disposals achieved in 2021 and a one-off effect. Recurring net income benefited from the positive organic performance as just detailed, EUR 8 million. The net positive contribution from the pipeline, we've talked about, EUR 2.4 million, and a stable cost of debt in H1 at 1.2% in average. Let's move now to the capital return of our performance in H1, which is crucial for REIT, obviously.
This is, I believe, necessary to point out the fact that the macroeconomic environment has changed rapidly. These past few months and weeks, with a new paradigm now emerging. We may have left the world without interest rates and no inflation. Recently, the risk premium, compared to the prime property yields to French sovereign bonds, yields that we usually comment on, has adjusted significantly in the last weeks. We thought it interesting in this potential new paradigm, to note that comparing prime property yields in Paris to French sovereign bonds, indexed, we see that the risk premium remains stable at a relatively high level around 390 basis points. The increase in interest rates being offset by the increase in inflation forecasts.
I hope that we have shown in the past and during this H1, that our pricing power in our three markets, three pillars, three activities, is relevant towards inflation. In this context, investment volumes in offices are up by 52% in Paris in H1. As an illustration of this, investment markets have remained dynamic in the most central areas, with recent traction seen in H1 until late H1 at prime values significantly higher than our valuation at end June 2022. I'm even not talking about implicit values at our current stock price. On a like-for-like portfolio, appraisal values are, at end of June 2022, up by 1.3%, largely driven by our rental achievements and roughly stable yields. On top of our like-for-like evolution, NTA NAV had been positively driven by the pipeline value creation gains.
EUR 171 million in six months have been achieved on our pipeline of offices, largely driven by the new lettings better than expected on our key assets. On Boétie, for example, Paris CBD to Eight Advisory, or namely on the 157 Charles de Gaulle in Neuilly. Not only offices are driving our NTA up on the pipeline, but also our Resi perimeter. With a net contribution these past six months, very solid at +EUR 34 million net capital gain booked in from our valuation. This is clearly coming from operations to assets in our portfolio, Ville d'Avray, that we started leasing recently and will be delivered in Q1 2023.
Also from a building we own in Paris, Résidence Dareau, to be transformed from a former office asset into residential, with an increase in size, increase in square meters because we transform offices into resi. This half, we have obtained all the legal requirements to launch this project. As a consequence, NTA net asset value adjusted from the dividend payment is up by 4.3% in six months, also including a positive contribution from asset disposals in H1 because we have sold assets at 8% premium over the last appraisal value. I'm referring to the disposals of building being in La Défense, which have been sold in H1 and two other small assets in Paris. On the ESG side, you're surely aware of our clear ambition regarding carbon neutrality by 2030.
The news flow these past months clearly show how increasingly important soberness is day to day. This challenge has been underlined recently by Emmanuel Macron a few days ago, and the European Commission, obviously. We at Gecina want to be clear, we want to be a short-term contributor for energy soberness, and consequently, we have been the full team to engage our company, our suppliers, and our clients on that matter. We will have more time to share my views on this topic of ESG later this year. We have identified at least 30 assets where without CapEx, we can optimize the current situation. Now moving to the balance sheet. Our A3 rating has been recently confirmed by Moody's, July first, at the highest quote for the sector.
Our LTV has been further decreasing by 150 basis points over these past 12 months, mostly thanks to the disposals done in 2021 and being recently. Additionally, I wanted to mention today that our liquidity position and bond maturity schedule is particularly strong. In January 2022, so before I came, Gecina issued an opportunistic new EUR 500 million bond right before interest rates started to rise with a 0.875% coupon with an 11-year maturity. To maintain the excess liquidity of more than EUR 1 billion, and that allows us to face all refinancing bonds needs until 2027 at stable debt. We are in a situation where we can select where and when we want to go on the market in the next years. That's a favorable situation, I do think.
We also have a conservative approach on hedging. Let me share with you a few words on Gecina hedging policy that will drive potential change of cost of debt at constant level of debt. Short term, 90% of our financial expenses are hedged at excellent conditions for the years 2022 up to 2024. On top of that short-term protection, almost half of our bonds in volumes will mature after 2030. This is due to the fact that we have decided to issue bonds since 2020 with an average maturity of 13 years, with obviously a higher cost short term. That was decided to offer us a unique protection for the future, and we think that's quite unique in our industry. Since we talk a bit about the future, let's go through our pipeline.
As I said, excellent leasing on that asset, 157 Charles de Gaulle in H1, driving obviously capital gain. Another key asset is delivered in CBD. l1ve project Avenue de la Grande Armée in Paris. I don't want to be too long today. I guess you have been talking about that quite long. I won't take the time to comment the asset, but it's a brilliant example of Gecina's capacity and know-how to transform obsolete assets into best-in-class ones. Services, CSR, architecture, design, and excellent leasing is at stake with l1ve. This asset will continue, and we'll start to contribute to our cash flow in H2 this year. We are launching a new project in the Triangle d'Or of Paris, 32 Marbeuf.
13,000 sq m assets that we plan to redevelop in order to bring more square meters, more valuable square meters, but also 2,000 sq m of gardens, terraces, and rooftops. This project will have all the relevant CSR certification obviously, including biodiversity. 32 Marbeuf will be delivered in 2025, and we target an uplift versus current rents, and they could be above 60% than the previous rent. Important to note that this committed pipeline is secured in terms of costs and should generate more than EUR 90 million of annual rents in the years to come, with less than EUR 600 million to be spent from now on. Leasing is very much advanced, as you can see, 85% for the next years and 50% as a whole.
To conclude this presentation, we can summarize this H1 by saying that operating performance is there and has beaten Gecina's expectation in H1 in all KPIs. Occupancy, pipeline leasing, stronger reversionary potential capture, et cetera. Second, markets where Gecina operates have shown stronger dynamics than expected. ERV moving upwards quicker than expected in the more central locations. Inflation and thus indexation came above forecasts as well. In the meantime, uncertainty increased on the debt markets, thus calling for caution. In this context, calling for caution and despite an interest rate increase since the last month, we are raising Gecina's 2022 guidance to 5.55%. We are, Nicolas, Samuel, and I, now happy to answer your questions that you may have. Thank you.
Good morning. Thank you very much for this presentation. I would have three questions. The first one maybe on the indexation. We can see that we could expect an indexation in the coming year of +5% in your offices. How are you comfortable to invoice this indexation to your tenants? And how can we compare it to your reversion potential? Maybe on the cost of debt. Second question on the cost of debt. We understand that you are hedged at 90% for the two or three coming years. And today your cost of debt is 1.2%. What can we take in our model for 2023, 2024, for example?
I don't know if you have any color to give us for that. Third question, we can see that your LTV is quite low today, below 32%. How do you want to allocate your capital in the coming months? Thank you.
Thank you for those questions. The first one is indexation. How comfortable are we? I think we have a favorable situation. We have an excellent quality of clients with strong credit. The leasing markets are supportive, and our contracts are fully indexed. I think the indexation topic will obviously fuel our cash flow growth. On cost of debt, I think the forward curves are pretty easy to get on Bloomberg. 90% hedging for Gecina for those three years, a combination between swaps and caps. The rest is on the market.
Maybe to answer your question on LTV, yes, I think we are, and that's the job done before me, obviously, we are in a favorable situation regarding LTV. As I said, I think we are quite enthusiastic on business. I think we have a lot of growth to capture through our business, through our pipeline, through reversion, et cetera. That's our first driver. I think on the rest, asset allocation is a key topic for a company, for REIT, we will work on it quite hard, but I think the time is to look at it more as a positive sign. It's not bad to have a low LTV now.
Just maybe to help you to make the calculation on the cost of debt, we can give you at least one clue, which is that, as you know, a part of hedging is coming from caps, which are presenting a little bit less than 20% for the next three years. These caps are at strikes which are just above 0%. They will be very efficient very soon.
Otherwise, we have few questions online, if I'm correct. I'm reading the first one. Could you please elaborate on the indexation capturing, how much is expected for this year and how much for next one? Furthermore, when should we expect to see the strongest impact per quarter?
Indexation, the impact of indexation will progressively grow through our P&L in the next months, obviously, with the schedule of our leases. That had been included in our guidance. It's not a huge impact for the first quarter. Obviously, occupancy and the arrival of some pipeline assets will be a key driver for our cash flow growth and for the next quarters. I think we are planning an important growth in our H2. When you look at H2 2021 compared to H2 2022, when you deduct H1 within our guidance, yes, we are planning a significant growth over the next quarters. Almost 10% growth, H2 to H2. Especially, the main impacts are delivering the pipeline and growing occupancy, obviously, because on the pro rata basis, it plays not fully indexation.
Maybe to add just one small thing, it means that, as of today, every single lease coming to the anniversary date of the lease signature will be indexed using the last ILAT index, which is, as we said, 5.1%. It means that we have a progressive and lagged effect into our P&L, and that's something progressive. Full impact will be more seen along 2023. I will invite you maybe to see several publications that we've done in the past or in this recommendation that shows on average the lag effect. It means that we're gonna have it, but that's not immediately seen in the like-for-like measures for accounting reason and for. That's in there. That's embedded.
We have a second question online. Taking into account your solid balance sheet, could you also consider an external growth into a new office European markets via an investment into a discounted REIT? That's a question from Laurent Saint-Aubin.
Thank you for the question. A company like us is always looking out opportunities, but it's depending on opportunities. I think I will not comment in advance, any kind of those topics.
Okay. Next one. Given the strength of a reversion, you describe a mechanical contribution from indexation, what are the reasons behind this relatively small print?
This is exactly what we said about the lags between the transactions and the spot indexation and what we post in our H1 results. The deals that we are signing today, like we gave some examples, we have starting dates most of the time after the period. If it's within the period, the pro rata basis of that is limited. That's really the explanation. There is always a lag effect between what we post as an operational performance and the results of the semester.
We have another question from Laurent Saint-Aubin. Good morning. Are you considering a share buyback program, accelerating divestments when possible to address huge discount on NTA?
Again, thank you for the question. The share buyback program, obviously, we see the advantages of a share buyback program with the quality of the portfolio we have and the consequent quality of the square meters we buy at a low price. Obviously, I think time is not there. The markets, we need to be prudent and cautious on what we do. It has to be seen in a, like you say, on a global asset allocation strategy based on disposals, acquisition, potentialities, and share buyback. We see all the potentials of each of those aspects of capital allocation. We will work on it, but there is no definitive answer on that topic now.
Another question from Amal Aboulkhouatem. Earnings guidance up by 1%, given how bullish you are, is it a bit conservative? What's the rationale behind the guidance raise?
As I said, there is a lag effect between what we achieve in a semester and the consequence on the semester and the next semester. I think we are happy about our performance, and that was more to show our confidence. Obviously, the more we progress during the year, the more certainty we get on our results for the whole year. We are now at the end of July, so we have secured a series of indicators of our P&L for the year. This is in that context that we have raised our guidance. Obviously, there is still caution. We are still cautious because of the interest rates and the impact on the uncovered cost of debt. We have taken those elements and felt that growing slightly the guidance was relevant.
A question from Jonathan Kownator. Could you please go through your main leasing challenges, and what's your target in terms of occupancy?
As I said, the leasing challenges are mainly located in Paris in Neuilly and Boulogne. We have within the next months Horizons, which is a Jean Nouvel tower in Boulogne to be let. We are currently renovating, improving the services to lease that. We have a series of small square meters around Paris and typically some square meters in l1ve, some square meters in the 157 Charles de Gaulle to let in Neuilly. Clearly also our challenges are on our pipeline. Aside to Marbeuf we also have the 3 Opéra just facing a flagship building facing Opéra, so very concentrated. We hope to give you some good news on that front over the next quarters and results for 2022.
A question from Nassim Devaraj. Could you throw some light on rent incentives being offered for the new lettings in Paris? How has this changed versus 2020 and 2021?
Well, rent incentives are quite usual in our Office business. I would say they are roughly flat in Paris. While the rents we are asking for our prime assets are clearly significantly increasing. I would say that no specific update on incentives for Paris.
Two questions from Harm Meijer. First one, what is the outlook for vacancy and rental growth in your markets in the coming years? The second one, what else can you do as a new CEO? What areas are you looking at?
Obviously, we don't give too much guidance on the next years, huh? The guidance will be for February 2023, during our H2 results for 2022. I will not go through all the items of the cash flow growth for next year. That will be for that period. What I can say is that, yes, we have objectives to improve occupancy significantly. I think we have, following COVID, a decrease in occupancy in our portfolio, but the trends are good, o ur assets are well located, and our leasing challenges are on the best spots. Occupancy should go up before year-end. Just as an indication, like I said, the spot vacancy is already higher than H1 average at 93%, but if we include all the type of deals, we might be even slightly higher.
The areas you want to look at?
The areas I want to look at, as a CEO, all of them. Asset allocation, asset strategy, CSR strategy, ERV growth, potentiality to accelerate the cash flow growth by accelerating the pipeline. You know, classical CEO for it. Faster, better, sooner, yeah. We may have also some question by phone, if I understand correctly, so maybe we can take them.
Of course. As a reminder, if you would like to ask a question via the audio line, please press star one on your telephone keypad. We do also have a question coming from the line of Véronique Meertens, calling from Kempen. Please go ahead.
Thank you for the presentation, gentlemen. A few questions from my side. Very first, I appreciate that you say it's too early to give a strategy on the capital allocation, but just to get a bit of a feeling, you did already announce some disposals at a decent premium of 8%. Are you still seeing the kind of opportunities in the market? Is there still appetite? You comment a bit on the transactional market towards H2, but is it still ongoing in the last month? Secondly, on like-for-like rental growth, I noticed that for CBD offices it's a bit lower. It's only 0.5%, slightly below even indexation, even though you do report strong reversion figures there. Does that difference come from occupancy levels there? Yes, so those are my questions.
Yeah. The investment appetite, yes, we have seen until late June a very decent transaction. The investment market, like I said, in Paris, has been quite buoyant, up by 50% compared to the same half the year before. We have seen so far quite an appetite for the best locations. Obviously the market is trying to understand what will be the consequences on each asset and on each location, what will the consequences of the new paradigm inflation slash rising interest rates. But so far, and even in June and even in July, we saw transactions which are supportive. On the CBD, like-for-like growth, yes, you're right.
It's a bit lower than the rest because of occupancy as you said. We are planning to relet some assets, namely Triangle, for example, within the next months, with quite a decent reversion, but the occupancy has impacted downwards the performance of that specific sector.
Okay, thank you. Sorry, one more question. On the pipeline, you mentioned the EUR 1 billion of controlled and certain, so those eight assets. Are those costs already fully locked in the development costs, or do you see any impact there or any delays of them actually transferring to the pipelines because of the current climate?
You are referring to the committed pipeline?
No, to the controlled and certain. Those eight projects of EUR 1 billion. If those costs, development costs are already fixed or if you could see some delays or lower yield on costs, because of the current rising development.
No, what is fixed is all what is committed, so what is ongoing, with a fixed term and quite significant penalties in case of delays. We have selected always, at Gecina, very solid companies, construction companies that have, you know, the capacity to deliver on time and on price. On the control of sort of the future ones, obviously, we will have to assess one by one if it's relevant still or not. What is clear is that we have a positive effect because of rental growth. I think those products are still valid, but we are agile, we are pragmatic, so when time will come, we need to get sometimes the building permits and so on. When time will come, we'll reassess the opportunity to do it, and we'll deliver on it. So far, I think we are quite confident on them. The cost is obviously not secured.
For the assets in the portfolio and pipeline, just to add one thing, Véronique, keep in mind that these portfolio are largely in the heart of Paris City. Just keep in mind that most of the value of this theoretical total investment cost is made by the initial value of the land and the building. It means that the part of it, which is driven by construction cost, is relatively moderate. Let's say it can be 20%-25%. It means that the total impact of increasing construction cost is having a moderate impact on the total investment cost for this project, and not always having significant consequences on the yield on cost you can expect, especially if you consider the fact that ERVs on this location are driven upwards these past quarters.
We have a couple of questions from Bruno Duclos. One regarding the cost of the pipelines. Is that something that we have just already answered? Another one, will you conduct a pipeline review given the uncertainty on exit values and yield on cost for both committed and uncommitted pipeline?
Obviously, like I said, it's asset by asset. Very often we reassess our targets. Yes, we will be agile and pragmatic on each of those projects. As I said, 85% of that committed pipeline is already prelet for the next two years, and we have in whole more than 50% of prelettings on those projects. I think we are quite secure on the costs, and we are quite confident on the top line.
Another question from Bruno. What is your view on cap rates for prime assets, given that the investment market is less busy? Do you intend to intensify your disposal strategies?
On the prime assets, the cap rates have been pretty stable, at least what I've seen so far. With still quite an appetite, we saw a recent transaction with Taddéi here in Paris, 9th on this month, which was done at a good price. We see still a good pricing on those assets until recently. On the disposal strategy, I think Gecina has been really active to reshape its portfolio, and we are super happy with the portfolio we have today. We are back to the conversation we had just before on what should be the right asset allocation strategy, but you know, it's so not something you do like this, so it will have to be worked out. It will be in that context. I think on the portfolio, we are happy with the portfolio we have. Any question in the room, maybe? Otherwise on the phone.
As a reminder that it is star one on your telephone keypad, if you would like to ask a question via the audio line.
Okay. Thank you very much again. Thank you for your questions, and see you soon. Have a nice day. Bye-bye.