Good morning, and thanks to all of you for joining us for Aroundtown's first half 2024 results call. You can view this presentation on Aroundtown's website, either on the home section or under Financial Reports of the Investor Relations section. I am Katrin Petersen, Aroundtown's Group Head of Communications, and with me today will be the CEO, Barak Bar-Hen, CFO, Eyal Ben David, Chief Capital Markets Officer, Oschrie Massatschi, and Executive Director, Frank Roseen, Head of Investor Relations, Timothy Wright, Chief Sustainability Officer, Limor Bermann, and representatives from Grand City Properties are also present. For the duration of the call, all participants will be in a listen-only mode. Following our presentation, you will have the opportunity to ask questions, but please feel free to send us your questions via email also during this presentation. The email address is info@aroundtown.de. I repeat, it's info@aroundtown.de.
With that, I'd like to hand you over to Barak to start with the presentation.
Thank you, Katrin, and good morning. We believe we're entering a turning point of the real estate cycle, as data contains more positive than negatives. The capital markets, which are usually ahead of the cycle, are open again and showing positive momentum, driven by strong investor demand. A significant slowdown in devaluation is indicative of soon reaching the bottom. The risk of severe recession has diminished, and interest rate cuts have begun. We continue to focus on our strategy of reducing leverage, extending our debt maturity schedule, and lifting our portfolio's upside potential. Our presentation will outline the details of this strategy. Since Q1, we have had several very successful capital market transactions, starting with the perpetual notes exchange and tender transactions in Q2, followed by senior unsecured bond issuances in July.
All transactions have met strong investor demand, and we received positive feedback from our investor community, strengthening our position in the markets. With these transactions, we have provided clarity on upcoming perpetual coupon levels, reduced the debt refinancing risk, and further diversified our funding sources, which are all credit rating supportive measures. Slide four provides a summary of our financial performance. Due to our accretive like-for-like rent increase and further operational efficiency gains, the Adjusted EBITDA increased by 1% year-over-year, although we have seen a 1% decrease in net rental income due to our successful disposals. The net rental like-for-like growth amounted to 2.9% in June 2024. Our FFO 1 resulted in EUR 154 million, 12% lower year-over-year, as higher perpetual coupon levels and higher finance expenses continued to weigh on our operational achievements.
We expected the increase in the perpetual and financing expenses, but have seen stronger than expected EBITDA growth, which enable us to increase our full year guidance. Post the full portfolio revaluation in H1, our portfolio value reduced by 2.4% on our like-for-like basis compared to December 2023, ignoring the positive impact from CapEx. We will further discuss about the value changes later in this presentation. Due to the devaluation, the EPRA NTA per share reduced to EUR 7 per share. We have maintained a conservative debt profile with an LTV of 45% as of June 2024, a large headroom to our covenants, and a strong liquidity position of EUR 2.7 billion, which covers 19% of our debt. This does not include our recent unsecured bond issuances in July. Our liquidity is in addition, strengthened by unused credit lines. Oschrie, please continue.
Thank you. Please turn to slide 5, which presents our recent capital market activity. We issued in Q2, EUR 2.5 billion of perpetual notes through the exchange and tender offer transactions, with an exceptional acceptance ratio of circa 80%. In these transactions, we regained EUR 650 million equity credit, which is supportive to our credit rating and gave liquidity and certainty to our perpetual holders. In July, we issued EUR 1.15 billion senior unsecured bonds for the first time since December 2021. The issuances were 7 times oversubscribed, which proved the investor interest and confidence in our company and strategy. Through these issuances, we have further diversified and strengthened our funding sources, in addition to the secured debt, bank debt, funding, and disposals.
We utilized our funds for proactive liability management and bought back shorter-dated debt in the amount of EUR 675 million, and redeemed further EUR 445 million year to date. This includes debt at relatively lower coupons, as well as variable coupons. The average coupon of the variable debt was 5.5%. We, thus, extended our debt maturity profile and reduced refinancing risk. In addition, we bought back circa EUR 230 million of perpetual notes, which supports our FFO. We continue with slide six, where we show the progress on our disposal strategy in order to reduce leverage and strengthen our balance sheet. Year to date, we have signed EUR 475 million of disposals around book value.
In H1, EUR 340 million disposals have been completed around book value at a multiple of 17x. We sold across all our asset types, of which the majority was residential and offices, mainly located in London, Berlin, Rotterdam, and non-core locations. The signed but not completed disposals in the amount of around EUR 270 million will support our deleveraging strategy in the next periods. We continue to deliver on our disposal strategy. In recent months, we feel the sentiment improving and expect the transaction market activity to increase further with a progressive easing of cost of financing. So far, the deals remain to be smaller tickets, and big funds have not yet returned to the investment market in a large scale. We sell mostly to family offices, high net worth individuals, tenants, municipalities, and developers.
We will continue disposing properties to further strengthen our balance sheet, delever, and support our credit rating. Moving to slide 7, where we want to highlight the positive operational momentum, supporting stabilization, and a positive operational outlook. Residential, which makes up 33% of our portfolio value, is showing consistently strong operations, driven by the widening supply-demand imbalance, resulting in robust growth and a stable source of FFO. Hotels comprises 22% of our portfolio. The positive momentum in the hotel market continues. In recent months, we reopened several large hotels, which were closed for extensive refurbishment, which will operationally grow in the coming periods. Lastly, offices make up 39% of our portfolio. The office sector continues to benefit from indexation, which offsets the lagging pickup of the German economy.
Our portfolio continues to embed significant upside to market rents, which positions us well for when economic activity picks up again. With interest rates decreasing, supported by improving sentiment in transaction markets, we believe we are close to stabilization of values, with a positive operational growth becoming the main driver of further yield expansion. On slide 9, we provide our portfolio overview, which has remained broadly stable. The portfolio remains well distributed among top locations in Germany, the Netherlands, and London, together making up 89% of the portfolio locations. Within these main regions, the portfolio continues to be well-diversified across top-tier cities. Berlin at 24%, London at 8%, and Frankfurt and Munich at 7% each, remain our largest cities.
We continue to see positive long-term fundamentals in these markets, and we continue to see solid upside potential, which can be extracted in the mid to long term. Further detailed breakdowns can be found in the appendix. Moving to slide 10, and our main portfolio KPIs and details on our tenant base. The portfolio is valued at EUR 24 billion as of June 2024. Annualized recurring net rental income of EUR 1.15 billion euro, thereby reflecting a rental yield of 5.1%. The portfolio's WALT remained long at over 7 years. As you can see on the slide, the maturity schedule remains well balanced over the coming years, with no significant concentration in any given year. Vacancy is 7.9%, stable compared to December 2023 and March 2024. In-place rent increased further, reaching EUR 10.9 per sq m.
Our tenant base remains highly diversified, with over 3,000 commercial tenants, further supported by the highly granular residential segment. Top ten tenants continue to account for less than 20% of rental income, and we also provide here an overview of some of our quality commercial tenants. Slide 11, we provide an update on our office portfolio. The majority of the portfolio continues to be in our top four locations, Berlin, Frankfurt, Munich, and Amsterdam, which comprise 60% of the office portfolio. The tenant structure remains strong and well diversified, with around 75% of our office tenants in the public sector, multinational or large domestic corporations. As of June 2024, the office portfolio saw a like-for-like rental growth of 2.4%, with indexation and rent reversion contribution of 3.3%.
Office vacancy reduced slightly in the quarter, but demand remains impacted by the weaker economy. While we see improvement in sentiment, tenants continue to exercise caution on the large occupancy decisions, and delay space prolongations or decrease space when prolonging, which we expect will continue until economic activity starts to pick up more, particularly in Germany, which is still lagging long-term average levels. As we have seen macro indicators and sentiment improving, we expect positive momentum to also pick up as the economy turns back to moderate growth, albeit with some time lag, in line with previous cycles. Turning to slide 12. On this slide, we provide some data underlining the healthy fundamentals of the German and Dutch office markets, which are well positioned to benefit from an acceleration in economic activity.
These markets entered the economic environment that we have seen the last few years with record low market vacancy. The vacancy has only increased moderately since 2018, remaining at healthy levels due to strong fundamentals, such as healthy supply/demand dynamics and no dependency on single industries. Looking at key U.S. and U.K. markets, on the other hand, significant increases in vacancy due to their oversupply and industry dependency can be observed. Looking at historic averages, it is clear that despite an uptick in market vacancy levels, the current level still remains well below historic averages. The key driver of office demand is economic activity, and this significant correlation suggests vacancy will fall when economic growth accelerates once more. Moving to slide 13, and our residential portfolio, which continues to show very strong operational performance.
The residential like-for-like rental growth was 3.8% year-over-year as of June, driven mostly by strong in-place rental growth, as vacancy has reached a low level, and thus, occupancy increase is expected to contribute less going forward. Momentum in in-place rental growth remains strong as the supply and demand gap keeps widening, with new completions at low and decreasing levels, while demand continues to increase further. Building permits for new construction decreased by 23% to 85,000 apartments in H1 2024, compared to last year's period. The German Real Estate Association, ZIA, estimates the current gap to be around 600,000 units and expect this to increase to 830,000 units by 2027.
Significant changes are required to change the current trend, let alone reducing the gap meaningfully, and therefore, this is expected to continue to provide tailwinds for long-term rental growth. Furthermore, the nature of the German regulated rental tables will result in past inflation being reflected only slowly, therefore contributing to higher rental growth over the midterm. The London portfolio, which does not have rent control and therefore a faster reflection of inflation and market rent, continues to perform very well with a like-for-like rental growth of over 5% as of June. We see the dynamics in the German and London residential markets strong and sustainable, which will drive growing cash flows also in the long term. Frank, please continue with the next slides.
Thank you, Oschrie . Please move to slide 14, where we provide an update on our hotel portfolio. The hotel portfolio comprises over 150 hotels and continues to be well diversified across attractive European tourism and business destinations. The hotels are leased to third-party operators on the long-term fixed leases linked to inflation or with step-up rents. We recorded a 2.6 like-for-like rental growth as of June 2024, reflecting the positive momentum for this asset class. Q2 and Q3 have been strong this year, supported by major events as well as growth in corporate and group travel. As mentioned in our previous calls, we were in the process of reopening several hotels, that they were undergoing major refurbishment in recent periods. All three hotels have now been opened, and this will support positive rental growth in the coming years. Our operations will ramp up.
At the same time, we continue to extract the potential in the portfolio by rebranding, repositioning, and upgrading hotels, and these efforts will drive further rental growth in the future. On slide 15, we provide an update on our progress, making the portfolio greener. ESG measures that support the enhancement of sustainability metrics form an integral part of our holistic asset management approach. Many of the regular ongoing maintenance and CapEx projects that we undertake, target operational improvements, as well as enhancement of sustainability measures, and as a result, these do not require significant additional investments to support the ESG profile of the portfolio. On this slide, we provide two examples of regular measures we undertake as part of our ongoing asset management activities.
In Amersfoort, Netherlands, we executed a regular maintenance and CapEx project, improving fire life safety measures, replacing the ventilation system, improving the facade, and installing PV on the roof, in addition to other measures. These measures support the EPC and recertification of the property. In Berlin, Germany, we executed tenant improvement measures as part of the lease extension with the public service tenant. As part of these measures, we improved the layout and implemented high standards in common areas, in sanitary facilities, and we improved the water consumption management. These measures are also supporting the green certification process of this asset. In general, such measures support us in our goal to green certify the overall office portfolio, of which 50% has been green certified to date. On slide 16, we provide a case study of our building rights, showcasing one of our assets in Cologne.
While our goal with obtaining building rights is generally to sell these assets and crystallize the returns, in certain cases, with high pre-let ratio, we execute the project ourselves and benefit from high returns. This is a logistics and industrial center comprising a variety of building land plots and other areas. In 2017 and 2018, we built two areas that were underutilized. Following discussion with existing tenants, we created a development plan, constructing these areas into two new logistic and industrial halls, totaling 26,000 square meters, fully pre-let and green-certified.... In 2022, we used the experience that we gained in previous developments to develop a new 11,000 square meters industrial hall on one of our
unused plots that was finished in 2024 and fully pre-let, green certified, and tailor-made toward the needs of the tenant. Further potential remains within this asset, as additional areas may be redeveloped. We have obtained a pre-permit for two projects, and we are in advanced negotiations with several strong tenants. With that, let me hand it over to Eyal.
Thank you, Frank. We are moving to slide 18 to discuss our financial results. Net rental income amounted to EUR 588 million, and decreased slightly by 1%, impacted by disposal, partially offset by the positive rent like-for-like of 2.9% for the total portfolio. Operating other income, which mainly includes recoverable expenses from tenants, decreased by 16% year-over-year, in line with the decrease in the operating expenses. As a result, total revenue decreased year-over-year by 5%. Property devaluations and capital losses amounted to EUR 593 million, significantly lower than last year's period, as the negative momentum is decreasing. We will go into further details about our valuations on the next slide.
Property operating expenses decreased by 20%, mainly as the comparable figures was impacted by the extraordinary provision for uncollected hotel rents, which is not needed anymore. The impact of disposals and the lower cost of utilities. Finance expenses amounted to EUR 120 million, an increase by 13%, impacted by new secured loans at higher than average coupon rates, partially offset by repayments of debt and fixing variable and capped debt at lower fixed coupon rates. Overall, the loss for the period amounted to EUR 330 million, 75% better than the comparable period. On a per share level, this results in a loss of 0.30 EUR. Moving to slide 19, where we break down our valuation results for the first half of 2024. We recorded like-for-like devaluation of 2.4%, driven by yield increase.
The devaluation is much softer than in the comparable period of last year and presents signs of slowdown of momentum as sentiments have become more positive. The impact of the higher yield on the value was partially offset by rent increase, and going forward, we expect the lion's share of yield expansion will derive from operational growth rather than devaluation. The average portfolio yield as of June stands at 5.1%, compared to 5% at the end of last year. Looking at the different asset classes, offices was down 3%, residential 2%, hotel 1.5%, and development rights and invest recorded a 4% devaluation. Although the German economy has still not recovered, going forward, we see several positive valuation catalysts. The labor market remains stable and the economy has so far defied gloomy expectations.
Furthermore, with interest rates decreasing, we expect improvements in the transaction markets. New supply remains constrained due to high construction costs, with replacement costs, excluding land, continuing to be well above our portfolio value. This catalyst, in addition to the solid operational momentum, gives us reason to be cautiously optimistic regarding future value movements. On slide 20, we present the development of the Adjusted EBITDA and FFO. Adjusted EBITDA increased slightly by 1% to EUR 502 million, despite rent decline from disposals in the period, as our efficiency measures and like-for-like rental increase offset the slight reduction in rental income.
FFO 1, on the other hand, decreased by 12% to EUR 154 million due to anticipated higher finance expenses and perpetual notes attribution, due to the reset of the coupons of some notes, as well as the exchange and tender transaction, which resulted in lower coupons starting from next year. Our proactive measures to mitigate interest expenses, as well as interest income generated on our large, large cash position, partially offset some of these higher costs. On a per share level, FFO 1 resulted in EUR 0.14 per share. These results are in line with our increased guidance. On slide 21, we highlight our key drivers, which support our FFO in the short and long term.
Our focus on balance sheet strength and reduction, reducing refinancing risk in recent years, puts us in a strong position to execute our long-term growth strategy and extract the operational growth potential embedded in our portfolio. As of June 2024, our reversionary potential stands at 25%, which will be extracted over the coming years through reversion on reletting at lease expiry, further indexation, as well as vacancy reduction, supported by positive market momentum. Additional growth will be driven by targeted repositioning of properties through optimizing of the tenant structure, upgrading hotels by realigning the hotels to key demand drivers, as well as through green investments with attractive yields. Furthermore, selective CapEx investments into the redevelopment and building upgrades provide high returns at relatively low risk, and is not included in the portfolio's reversionary potential.
As a result of our efficient operation cost structure, this top-line growth results in high conversion into FFO. In addition to the long-term internal growth drivers, we have been proactive in executing measures to mitigate the negative impact from short-term pressures. The perpetual notes exchange and tender offer support FFO and are accretive, taking effect from 2025, while providing clarity on future coupons. Furthermore, through effective hedging of our interest and foreign currency exposure, we have been able to obtain lower fixed rates. As interest rates are expected to normalize in the coming periods, we will benefit from lower costs on the part of our debt that is capped and variable. In the meantime, our strong cash position continues to generate interest income, partially offsetting higher interest costs and providing us with a lot of flexibility.
On slide 23, we highlight our EPRA NAV metrics, which decreased primarily as a result of the devaluation. The EPRA NAV amounted to EUR 9.5 billion, or 8.6 per share, as of June 2024. The EPRA NTA amounted to EUR 7.7 billion, or 7 EUR per share, as of June 2024. Oschrie, please continue with the rest of the presentation.
Thanks, Eyal. On slide 24, we provide an update on our maturity schedule and liquidity position. As mentioned before, we executed several capital market activities, which further support our maturity profile. We issued two new bonds with maturities in 2029 and 2030, with a total value of EUR 1.15 billion, while buying back shorter-term debt with a total value of around EUR 675 million, in addition to EUR 445 million of bond redemptions in 2024 year to date. This has allowed us to further extend our debt maturity coverage, which on a pro forma basis and including signed disposals, now extends to year-end 2026. Our liquidity position is further supported by undrawn RCF, of which EUR 500 million was recently extended with an average maturity of four years. More RCFs are in the process of extensions.
Moving to slide 25, where we give some key metrics regarding our conservative capital structure. LTV increased slightly to 45%, despite disposal proceeds and operational profits, partially offsetting the devaluation in the period. We remain committed to executing proactive measures to reduce leverage in the coming periods. We continue to maintain a large balance of unencumbered assets amounting to EUR 17 billion or 72% of rental income. Cost of debt stood at below 2%, lower compared to December 2023, primarily as a result of proactive measures taken to mitigate interest expenses. The average debt maturity is 4 years, and we note that for our cost of debt and average debt maturity, we do not take into account our strong cash balance. In the current environment, our existing cash balance generates positive interest income, offsetting part of the interest costs.
Furthermore, cash and liquid assets cover 19% of debt as of June, and as a result, the effective maturity is longer. Including the cash position in post-balance sheet issuance, buybacks, and redemptions, the average debt maturity is five years. The interest cover ratio was 4 times in the first half in 2024, and net debt to EBITDA was 11.3 times. Turning to our guidance on slide 27. Following a strong first half in 2024, and with a more positive outlook for the remainder of the year, we are increasing the full year 2024 guidance to a range between EUR 290 million and EUR 320 million, reflecting EUR 0.27-EUR 0.29 per share. The increase is primarily driven by lower than expected finance expenses, as well as slightly higher EBITDA than initially expected as a result of good operational momentum. This concludes our
presentation. As always, you can find further materials in our appendix. With that, we would like to start the Q&A session.
Thank you. Before we invite your direct telephone questions, we would like to answer questions that we have received by email prior to this call. For simplicity reasons, the team has taken liberty to group similar questions in order to answer as many questions as possible. Allow me now to read out these questions. First one to Frank: Could you provide an update on the hotel portfolio?
The hotel portfolio recorded a 2.6 like-for-like rental growth as of June 2024, reflecting the growth of the hotel market. We are seeing continuous positive momentum for this asset class. Moreover, this summer has been bolstered by major events such as the Euro Cup in Germany and a revival of corporate and group travel. We recently completed the reopening of several hotels in Brussels, Rome, and Paris after undergoing major refurbishments.
... All three hotels are now operational and are expected to contribute positively to rental growth in the coming years as their operations ramp up. Simultaneously, we are continuing unlocking the potential with our portfolio by rebranding, repositioning, and upgrading hotels, which will further drive rental growth in the future. We further support our tenants to reduce costs by driving digitalization of time-consuming processes. Looking ahead, we are confident that the hotel asset class will generate positive internal growth, continuing to enhance the company's top and bottom line.
Next question goes to Barak. Could you provide an update on the residential portfolio?
The residential portfolio continues to perform very well, with like-for-like rental growth of 3.8% year-over-year as of June, driven by strong in-place rental growth as vacancy has reached a low level, and as occupancy increase is expected to contribute less going forward. The momentum in in-place rental growth remains robust and sustainable, fueled by a widening gap between supply and demand. New completions are at low and declining levels, while demand continues to rise across all of our major locations. Significant changes would be necessary to narrow the gap, making it likely that this will continue to support the long-term rental growth. Additionally, the structure of the German regulated rental tables means that past inflation will gradually, over time, contribute to higher rental growth over the midterm.
In London, where there is no rent control, allowing for a quicker adjustment to inflation and market rents, the portfolio continues to perform strongly, with like-for-like rental growth exceeding 5% as of June. We believe the dynamics in both the German and London residential markets are strong and sustainable, positioning us for continued growth in cash flows over the long term.
For Oschrie, please, could you provide details on the letting market in the office sector? Do you see a shift in momentum? How do you see your vacancy rate going forward?
The demand for office space continues to be affected by the slow German economy. Currently, office tenants continue to exercise caution and prefer to maintain or reduce their existing leases, delaying decisions until there's more economic clarity. As employers grow more comfortable with remote work options, tenants are becoming more flexible in their office space requirements as well. To accommodate this, we also create a flexible office space concept across dozens of locations in our portfolio, offering tenants the benefit of adjustable space options, and in the future, we can enter the B2C market, which follows different demand drivers. We expect positive momentum to pick up since the economy turns back to higher level of growth, similar to previous cycles.
The reduced level of new construction and supply in the office space and the conversion of office space to other uses will support a faster rebound in demand levels in the coming periods. Our reversionary potential and long-term average leases provides a buffer against a fast rise in vacancy rate under current market conditions. The gap to market rent makes us competitive by allowing us to offer more affordable options, while also capturing some of our reversionary rent potential. At present, our focus is more on maintaining occupancy levels rather than fully capturing the reversionary potential. In the first half of 2024, we extended 127,000 square meters of leases with an average WALT of 5.8 years and an average in-place rent of EUR 15 per square meter.
We also signed new leases for 46,000 square meters, with a WALT of 7 years and an in-place rent of EUR 14.5 per square meter. Like-for-like, rent performance continued to be driven by rent indexation and step-ups, resulting in 2.4% rental income growth in our office portfolio. We are confident in our ability to navigate the current situation with a measurable impact on total office rent on a like-for-like basis. Due to our staggered and long average lease schedule, the impact of the current slow economic environment is manageable. Should the market improve, pent-up demand could drive a swift recovery.
Could you provide more detail of your rent like-for-like performance? Do you continue to benefit from CPI indexation? What are your expectations going forward?
As of June, our like-for-like rental growth for the total portfolio was 2.9%, with residential at 3.8%, office at 2.4%, and hotels at 2.6%. In the office sector, we continue to benefit from CPI indexation and reversion. Looking ahead for the remainder of 2024, we expect this trend to continue as the high inflation rates from last year have not yet been fully reflected in all leases. Some leases have upcoming annual reviews, and a portion have indexation hurdle rates that we anticipate will surpass in the coming periods. Additionally, we foresee strong like-for-like performance in the residential portfolio, driven by the significant supply and demand gap. The positive momentum in the hospitality sector, particularly this summer, gives us confidence that this sector will continue to benefit. For the full year 2024, we are conservatively projecting a like-for-like rental growth of approximately 2% across the total portfolio.
Question goes to Eyal. Could you provide some more details on your valuation results? What are your expectations for the remainder of the year?
Our portfolio valuations are up to date as part of our H1 2024 report. ... which resulted in a like-for-like value decline of 2.4% compared to December 2023. The value decline was primarily driven by further yield expansion, although we note that the momentum was significantly reduced, resulting in a softer devaluation, with operational growth offsetting a significant portion of the value decrease. The average portfolio yield as of June stands at 5.1%, compared to 5% at the end of last year. Looking ahead, we see several positive catalysts for valuation. The labor market remains stable, and the economy has so far outperformed gloomy expectations. Moreover, new supply remains constrained due to high construction costs.
Additionally, as the market consensus is that the worst is behind, coupled with interest rate cuts in anticipation that rates will go further down, we expect high volumes in, higher volumes in real estate transactions going forward. We believe that the reopening activity of the capital market provides the sector with greater certainty. Although we do cautiously note that we do not rule out some further devaluation for selected asset types and locations for the remainder of the year, the overall factors, combined with our solid operation, operational momentum, are indicative of getting closer to true levels.
The next question goes to Oschrie. What is the impact of your recent capital market activity on your financial position? Do you plan additional liability management and bond issuances?
The capital market issuances have proved again the diversification of our funding sources, complementing our secured bank debt funding and asset disposals. We are pleased to see the very large demand we received from our investors in the last transactions. We utilized these funds for proactive liability management, buying back EUR 675 million of shorter-dated debt, and redeeming an additional EUR 445 million year to date. This included debt with relatively lower and variable coupons, the average coupon of the variable debt at 5.5%. These actions have allowed us to extend our debt maturity profile and reduce refinancing risk. Additionally, we repurchased EUR 230 million of perpetual notes as part of the perpetual note exchange and tenders, further supporting our FFO.
We have a very clean maturity profile in the coming periods, and we have effectively sufficient liquidity until the end of 2026, but we are not ruling out additional liability management exercises to proactively refinance debt prior to maturity, in line with our strategy and as we have done in the past.
Following the bond issuance, do you plan to continue drawing new bank debt or focus on raising unsecured debt instead?
With our substantial cash reserves and no immediate debt maturities, we are not in a need to raise new funds. However, in line with our conservative approach, we plan several years in advance. Looking ahead, we will maintain our strategy of leveraging diverse funding sources, including capital markets and secured debt. Our significant portfolio of unencumbered assets allows us to successfully access bank financing, and we will continue to raise bank debt in parallel to ensure multiple liquidity options remain available, though at a low, slower pace. We currently have potential loans totaling several hundred million EUR in the pipeline. After securing EUR 1 billion in new bank financing last year, we have signed an additional EUR 240 million year to date.
To Frank: What are your plans with your strong liquidity, especially following your recent bond issuance? Would you consider acquisitions?
The reopening of the capital markets is very encouraging and provides the real estate sector with access to an important liquidity source at lower costs compared to what we have seen recently. While we continue to believe that maintaining a large liquidity position is important, we see that the momentum is shifting and that the overall environment is turning more positive, and therefore, the need to maintain a liquidity position as high as we currently have may not be necessary. Currently, we expect to primarily deploy the cash to repay debt, either through liability management or as it matures over the coming years. However, we remain flexible and open to alternative uses of the cash, such as acquisitions, assuming that this is very accretive and does not negatively impact our overall credit metrics.
To Barak, could you provide an update on your disposal activity? Will you continue selling assets, assuming devaluations are getting less?
In the first half of 2024, we completed approximately EUR 340 million of disposals and signed disposals amounting to EUR 475 million. In current times, we continue to focus on reducing our LTV and expect to continue selling properties on case-by-case basis for the right price. This will enable us to support the credit rating and to reduce the need for refinance at relatively high rates, at relatively higher rates. As interest rates decrease in the coming periods, in line with market expectation, we expect to see more transaction volumes, as the market recovers.
To Eyal, you mentioned that you hedged part of your foreign currency exposure and swapped variable and capped debt to fixed. What is the impact of this on your financials?
We took advantage of the reduced base rates and swapped portions of our variable and cap debt to fixed rates, which has resulted in lower interest expenses compared to the previous floating rates. This results in lower finance expenses going forward, which will support our FFO. As a result, we have increased our overall hedging ratio, including fixed and cap instruments, to 96%, up from 83%.
Was there any update from S&P following your recent capital market activity?
In December 2023, S&P affirmed Aroundtown's rating at BBB+ with a negative outlook. Since then, we have executed trade rating supportive measures. The perpetual exchange are beneficial for the rating, as they have restored much of the lost equity content and extended a significant portion of their notes with first call dates in the next 12 months. The bond issuances in July support the rating by further extending the debt maturity profile and thereby minimizing the refinancing risk. We continue disposing properties, buying back debt at discount, and suspending the dividend payment. While we understand that these transactions may not immediately alter the rating outlook on their own, they strengthen our credit matrix and position us more favorably.
We believe that with the June portfolio devaluation and the significant slower devaluation compared to last year, as well as the reversal of the interest rate momentum and overall a more positive outlook, the most challenging phase is behind us, and we anticipate our credit metrics to improve further going forward. Our ongoing deleveraging efforts, including asset disposals and increasing cash flows, should continue to support these improvements.
Since you reached your 45% guided LTV, what will you do to bring it back down?
45% LTV is a broad guidance and not a covenant, and is set on a sustainable basis and not on a one-time check. We continue to focus on maintaining a conservative profile. As we see negative valuation pressures easing, we are cautiously optimistic that the worst is behind us. We are continuing with disposals and have additional signed disposals of EUR 270 million, which we expect to close in the coming periods. Disposal proceeds, together with repayments of vendor loans, will reduce our LTV below 45%.
What drives your increased FFO guidance? What would need to happen for you to reinstate dividends?
The increase in the guidance to a range of EUR 290 million-EUR 320 million is primarily the results of a stronger than expected H1, combined with the impact of measures we have taken to mitigate higher finance expenses, resulting in a lower expenses than previously expected. In addition, we see some positive operational developments, particularly in the stronger performance of the residential and the hotel portfolio, which support a higher EBITDA. The updated guidance provide a yield of over 12% on the midpoint. A dividend decision will be taken into account the macro environment, as well as the company's financial position, such as the leverage in relation to the board of directors' internal guidance, as well as the position with regard to the credit rating metrics.
Currently, we continue to see some hurdles in this regard and would like to see more clarity over the coming period. We have sufficient time, as we only had the AGM at the end of June, and thus have nearly a year left until next year's AGM.
This question goes to Limor. Half of your office portfolio is now green certified. How long will it take to have the other half certified, and will you also get certifications for your hotel?
We are gradually obtaining certification for our assets. Due to the size of our portfolio and the process time, it will take a few years to get all of our portfolio certified. We improved our process to shorten the time to get more certifications, but we also encounter some timing capacity problem on the side of the certifying body in Germany, the TÜV. We have also started the process for green building certifications for our hotel properties, and we will share updates once we have some results. We will have continuous progress in increasing our share of green certifications in our portfolio, and we'll publish our progress soon.
Thank you. Those were the questions that we received prior to this call, and we can now start the open session for your questions. We would appreciate if you can ask all your questions at once, and we will answer them one by one.
We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and one. The first question comes from the line of Pranava Boyidapu with Barclays. Please go ahead.
Hi. Thank you for the presentation today. My first question is about your cost of debt. I see that you mentioned it's less than 2%. I was hoping you could give me more clarity on that, and also how it has reduced from 2.2%. That's quite remarkable, actually. And how it would evolve in the future, considering the two bonds that you have issued in July. And the second question is, I've noticed that, you know, you have been increasing your disposals a bit slowly, but the vendor loans and loan- to- own have been flat for quite some time, from the start of or mid 2023, vendor loans have been around EUR 650 million. Just wondering how they're evolving and how do you see their performance?
Hi. Thank you for your question. About the cost of debt, I think the material part that enabled us to reduce the cost of debt from 2.2% to 2% was this hedging instruments that we basically swapped and fixed some of the variable loans that we have end of the year into fixed ones. If you will calculate the base rates was about nearly 4% end of the year, and we managed to save about 1, about 1.5% by fixing it end of June. This results in a significant decrease in our run rate expenses and cost of debt.
This, we will have, let's say, the new issuances we did in Q2 and Q3, sorry, was a bit more expensive than the average, so we will have a slight impact there. Not necessarily, it will increase the cost of debt because it's still only a net amount of about EUR 400 million over the redemptions, but we will update in Q3 the updated cost of debt after these issuances. Referring to the progression of the vendor loans, the LTV overall. So during the period, we received EUR 60 million of vendor loans, but we gave additional EUR 60 million, nearly the same amount in a new disposal. So there is a progress on that front.
Those vendor loans are, were given from the beginning with a period of one to three years with some extension options, and whenever a buyer decided to use this option, then we agreed to such an extension. Overall, the remaining disposals that we have that are not closed yet, of about EUR 270 million, have only 10% vendor loan embedded inside, so we expect to receive 90% of them as cash once these deals are closed. Thank you.
The next question comes from the line of Manuel Martin with ODDO BHF. Please go ahead.
Thank you, ladies and gentlemen. Two questions from my side. The first question refers to slide 21 of your presentation, where you talk about the accretive perpetual notes exchange and tender. So this perpetual transactions, if I understand that correctly, are supposed to be FFO accretive starting 2025. Maybe you can give us a bit more color on that, because if I see that correctly, the total cost of perpetuals has increased, and maybe a kind of quarterly run rate would be helpful. I think the expenses were EUR 52.2 million in Q2. What can we expect going forward per quarter in terms of perpetual cost? And how can this be accretive for FFO? Or maybe there's a misunderstanding. That's the first question. Second question is on the office portfolio.
The like- for- like rent growth is with 2.4%, has decreased from 3.4% in the first quarter. I mean, 2.4 is still a good number. But given the economic environment that we have and then the rent contracts that you might have inside, do you think that's kind of bottom that you have reached there in the like- for- like rent growth in the office portfolio? Thank you.
Hi, Manuel. Thank you for your questions. I think on the perpetual tender and exchange, on an annual level, we saving starting from 2025 about EUR 35 million. We added part of the presentation of Q1 when we described the transaction in detail. So in 2024, it's basically balanced, so it's we don't have an impact because the transaction only took place not at the beginning of the year. But since from 2025, we see a EUR 35 million reduction in the annual coupon of the perpetual loans, which immediately reducing, and let's say, increase in our FFO. On the like for like on the offices. So last time it was last quarter it was 2.9%.
The 3.4 was on the only on the in-place rent, so we have a reduction of 2.1-2.4. We see still the contribution of indexation flowing into the rents. Some, not all the rents had fully indexed with full capacities because of a timing of when these rents have been indexed. And we do see also for this year, on the whole, a positive like for like from the offices. We had this year, so far, 2.4%, also 3.3 coming from in-place rent. As we mentioned before, we do expect to have a positive like for like also on the offices in the full year. Thank you.
The next question comes from the line of Jonathan Kownator with GS. Please go ahead.
Hi, good morning. Thank you for taking my questions. Two questions, if I may. First of all, do you have a scope to reduce operating expenses on a like-for-like basis, given the sort of high levels that you had in the past? And, question number two, just checking if you had had any losses on vendor loans and any properties that you had to take back, recently. Thank you.
Hi. On... I will start on the second question on the vendor loans. So we so far didn't have any material losses on vendor loans. We actually, whatever was need to be received, we received. We gave some extensions, but this is an ongoing process, and on the vendor loans, we didn't need to take, so far, any property back. On the OpEx, the our EBITDA, adjusted EBITDA ratio is increasing due to several factors. Some of them are reduction in cost and efficiencies, and due to also not in, no increase on payroll, and basically, the low inflation also reflected in the cost side. But also the like-for-like that we are recording is flowing into the Adjusted EBITDA in a high level because it's not attached to a cost. So these both together, both elements are improving our Adjusted EBITDA ratios. Thank you.
The next question comes from the line of Ben Richford with Bernstein. Please go ahead.
Good morning. Thank you for taking my questions. I just wondered about the office. Could you give us the letting rates versus ERV for the first half and versus prior passing levels? And then secondly, just could you give a bit more detail on the acquisitions you made? They're in JVs. Were they above or below the book values of the existing assets, your previous share of the JVs? That's it. Thanks.
Hi, Ben. Thank you. Our letting, and now, for the purpose of that, I'll just combine the prolongation together with the new lettings, were eventually done in a higher interest rent compared to those that were out. So it's about, was about 2% higher altogether. At the moment, we are not trying to reach or to maximize the in-place rents. Our focus at the moment in the office side is to keep occupancy levels and improve occupancies and not to maximize to ERV. Once we see the economy coming back, and then this will be the time for us also to push on also maximizing the in-place rents . On the acquisitions, there was mainly two acquisitions in the UK, mainly London, of residential and a hotel.
One of them came through, increase our position from a JV investment into a consolidation, and the other one was a pure acquisition that we did with a very nice yield. Thank you.
The next question comes from the line of Mary Pollock with CreditSights. Please go ahead. Ms. Pollock, can you hear us? We are experiencing a technical issue with the line of Mary Pollock. We have no further questions at this time. I will now pass it to management for any closing comments. Thank you.
Thank you. With that, I'd like to thank all of you that participated in this call and the questions you raised before and during the call, of course. All the best, and goodbye!