Ladies and gentlemen, welcome to the Q1 2025 results presentation Aroundtown SA conference call. I am Sergeant, the call's call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and then one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to the company. Please go ahead.
Good morning, everybody. Thank you for joining us for Aroundtown's Q1 2025 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. Guiding you through the presentation today will be CEO Barak Bar-Hen, CFO Eyal Ben David, Executive Director Frank Roseen, Investor Relations Timothy Wright, Chief Sustainability Officer Limor Bermann, Deputy CFO Jonas Tintelnot, CFO of Hotels Kamaldeep Manaktala, and representatives from Grand City Properties are also present. For the duration of the call, all participants will be on listen-only mode. During our presentation, you will have the opportunity to ask questions. With that, I would like to hand over to Barak and the rest of the team who will guide you through the presentation of our results.
Good morning, everyone, and thank you for joining our first quarter 2025 results presentation. We're happy to present a good start of 2025 with solid operational achievements, which has more than offset the impact of the disposal completed over the past periods, positioning us well on track for our 2025 guidance. Although markets experience short-term volatility driven by macroeconomic and geopolitical uncertainty, our business has continued to perform resiliently with no material impact from these external factors. Importantly, the downward trend in interest rates has persisted into 2025. We saw further rate cuts both during and after the reporting period, which have created a more favorable landscape for financing and refinancing.
This was clearly reflected in the strong investor demand of our latest bond issuance two weeks ago, where we achieved a 1.3 percentage point lower coupon compared to our last issuance in July of last year, reflecting the significant progress we made as a company as well as the improved market sentiment. We're also encouraged by the continuing recovery in the asset values. The positive valuation momentum that began in the second half of 2024 has carried into this year, supporting a further uplift in the property valuation. Our proactive financial strategy and successful disposals have positioned us well to pursue new opportunities and create value going forward. We'll take you through these developments and more in the following slides. On slide four, we present the financial highlights for Q1 2025.
Net rental income amounted to EUR 295 million, reflecting an increase of 1% compared to Q1 2024, driven by solid like-for-like rental growth of 3% and only partially offset by the impact of disposals between the periods. Adjusted EBITDA increased as well and amounted to EUR 251 million as rental growth was further supported by cost efficiencies. FFO1 amounted to EUR 76 million, stable year- over- year as a result of higher adjusted EBITDA, which offset the higher perpetual notes attribution. As in previous years, we are revaluing part of the portfolio each quarter and each asset at least once a year. In the first quarter, 15% of the portfolio was revalued, resulting in a positive like-for-like value change of 0.8% compared to December 2024, supported by operational growth. EPRA NTA per share came in at EUR 7.6, higher by 3% compared to December 2024.
We also made further progress on obtaining a green certificate and are happy to report key milestones. Now, over half of our commercial portfolio is green certified, with 65% of offices and 50% of our hotel assets having green certificates. LTV stands at 41%, 1% lower compared to year-end 2024, maintaining our wide headroom to bond covenants. While we made significant improvements in strengthening our balance sheet in recent periods, we decided not to distribute the dividend for the year 2024, as we believe we should still remain conservative regarding capital allocation and maintain financial flexibility. Last month, S&P lowered our credit rating by one notch to BBB-, with a stable outlook. The recent macroeconomic and geopolitical volatility has extended the market recovery period and has slowed down the pace of our disposal progress, thus extending the time to meet S&P's expectations.
The updated rating level provides us much more flexibility going forward. Following the adjustment in the rating, we issued a EUR 750 million bond for a period of five years with a 3.5% coupon, showing the continuous investor trust in the company. On slide five, we present a summary of our operational growth reflected in continued like-for-like rental growth. Total like-for-like rental growth was 3%, with all segments contributing positively to the result. The like-for-like rental growth in the residential portfolio was 4.5%, benefiting from the persistent supply-demand imbalance, resulting in low vacancy and steady rent increases. The like-for-like in the hotel portfolio was 3.7%, reflecting positive fundamentals as well as the successful repositioning of several assets. The like-for-like in the office portfolio was 1.6%. The segment benefits from high revisionary potential, allowing us to offer competitive rents and capturing upside.
This positions our office assets well for growth when broader economic activity rebounds. Eyal, please continue on the next slide.
Thanks, Barak. On slide six, we provide an update of our disposal progress. In the first quarter of 2025, we completed EUR 149 million of disposals around book values at an average rental multiple of 18. These transactions cover a range of asset types, with the majority being residential properties as well as offices, building rights, and retail. The disposals were primarily located in Bremen, Frankfurt, as well as non-core locations in Berlin. The relatively high share of residential disposals during the first quarter is mainly the result of timing effects of the closing of the disposals. We signed year-to-date disposals in the amount of EUR 140 million, and together with disposals signed but not closed from previous periods, a total amount of EUR 330 million disposals are expected to be completed in the coming periods. Moving to slide seven, where we provide an update on our recent bond issuance and liability management.
Earlier this month, we successfully completed a EUR 750 million senior unsecured bond issuance with a five-year maturity and a 3.5%. This marks a significant improvement compared to the 4.8% coupon on our previous issuance in July 2024. The transaction was very well received by the market, with the order book more than three times oversubscribed on the day of issuance. The proceeds are being used to support EUR 1.3 billion of debt repayments in 2025 year-to-date. This includes approximately EUR 600 million used for the repurchase of bonds, including some bonds with relatively higher coupons, and around EUR 660 million relates to scheduled repayments. As a result of these proactive liability management measures, we further extended our debt maturity profile. These actions underscore our continued focus on disciplined financial management and optimizing our capital structure. Frank, please continue on the next slide.
Thank you, Eyal. On slide nine, we present an overview of our portfolio breakdown. Our portfolio includes 22% hotels, 34% residential, 38% offices, with the remaining 6% being logistics and retail. The portfolio remains well distributed across top locations in Germany, the Netherlands, and London. These top cities together are making up 88% of the portfolio locations. Our largest cities are Berlin at 24%, London at 8%, Munich at 7%, and Frankfurt at 6%. The long-term fundamentals of these markets remain intact, and we continue to see solid upside potential in the mid to long term. You can find further detailed breakdowns with area views of our main cities in the appendix. Continuing on slide ten, we present the main portfolio KPIs along with an overview of our tenant composition.
As of March 2025, the portfolio is valued at EUR 24.7 billion, generating EUR 1.15 billion in annualized recurring net income, which reflects a rental yield of 5%. WALT remains robust at 7.5 years, supported by a well-diversified lease expiry profile that avoids any single-year concentration. Vacancy stands at 7.5%, stable compared to the end of 2024. In-place rent remains stable as well at EUR 11.2 per sq m. Our tenant base continues to reflect strong diversification with around 3,000 commercial tenants and a highly granular residential segment. Worth to highlight is that our top ten tenants contribute less than 20% of total rent income, underscoring both the low dependency on individual tenants and the resilience of our income stream. On slide 11, we provide a closer look at the performance and positioning of our office portfolio.
The majority of office assets are located in our four top strategic cities: Berlin, Frankfurt, Munich, and Amsterdam. These top cities collectively represent 60% of the total office portfolio. As of March 2025, 65% of our office portfolio holds green certifications. Going forward, we continue to expect gradual progress in obtaining certificates for the full portfolio. The office portfolio recorded a like-for-like rental growth of 1.6% in March 2025, the main drivers being rent taxation and reversion opportunities. Our tenant mix is well diversified, with approximately 75% of rental income derived from public sector entities, multinational corporations, and large domestic firms. The demand situation remains impacted by the sluggish economy, as supplier decision-making remains cautious due to the ongoing economic uncertainty. We do see an encouraging pickup in office demand, and we do expect to start to see the office market improving in 2025 and in 2026.
Market reports have already indicated the office take-up in Germany's seven big cities growing by 50% year-on-year in the first quarter. Slide 12 highlights the significant policy measures undertaken by the German government to stimulate economic growth through reforms to the Debt Brake. A EUR 500 billion investment is to be launched, which is estimated to boost GDP by up to 2% per annum over the next decade by addressing chronic underinvestment in German infrastructure. In parallel, the suspension of Debt Brake rules for defense spending, aligned with the euro's ambition to mobilize EUR 800 billion by 2030, is expected to strengthen the defense sector and related infrastructure. These fiscal expenditures are anticipated to yield considerable economic benefits, with projected multiplier effects of up to 2.7 times GDP across Europe.
In our view, these developments are positive for economic growth in Germany and for Europe as a whole, which continues to be the main driver for office demand in the long term. Kamaldeep, please continue on the next slide.
Thank you, Frank. Moving to slide 13, we provide an update on select office properties that we plan to convert into centrally located service departments and long-stay accommodations. These conversions are designed to meet the rising demand in key urban markets while unlocking value from under-rented properties. We have also already secured lease agreements across eight assets located in Berlin, Frankfurt, Dortmund, Hanover, and Rotterdam. These assets total approximately 1,200 rooms designated for conversion. Also, building permits have been already secured in Rotterdam and Dortmund, while the remaining projects in Berlin, Frankfurt, and Hanover are in the permitting phase. Moving to slide 14, our residential portfolio continues to demonstrate strong operational performance, underpinned by favorable market fundamentals. In March 2025, we recorded a like-for-like rental growth of 4.5%, largely due to increasing in-place rents amid a persistent supply-demand imbalance.
Residential market conditions in both Germany and London remain strong, with resilient fundamentals positioning us for sustained growth in rental income and cash flow. On slide 15, we provide an update on our hotel portfolio, which continues to perform very well. Our portfolio comprises more than 150 hotels, well-diversified across major European tourist and business destinations. These properties are leased to third-party operators under long-term fixed leases, which are either inflation-indexed or include contractual rent increases. In March 2025, the hotel portfolio achieved a like-for-like rental growth of 3.7%, driven by favorable market dynamics and robust tourism demand. Looking ahead, we anticipate continued moderate growth in RevPAR, supported by increasing overnight stays and a steady recovery in international travel, all of which will contribute positively to our hotel rental income.
Through the re-positionings which we successfully completed last year, we will capture approximately EUR 50 million in additional annual rental income over the coming years. Jonas, please continue on the next slide.
Thank you, Kamaldeep. Let's move to slide 17, where we present our financial results for the first quarter of 2025. Net rental income reached EUR 295 million, representing an increase of 1% compared to EUR 293 million in the same period last year. This growth was primarily driven by strong like-for-like rental increases, which more than offset the impact from asset disposals. Operating and other income decreased slightly year-over-year and amounted to EUR 83 million. The decrease is mainly due to lower rechargeable income to tenants in relation to heating and energy costs. During the quarter, we revalued 15% of our portfolio, which resulted in a positive like-for-like value increase of 0.8% compared to December 2024. This uplift was largely driven by sustained operational growth, while rental yields remained unchanged.
Net finance expenses declined EUR 55 million, a reduction of EUR 55 million. Net finance expenses declined to EUR 55 million, a reduction of 10% compared to EUR 61 million in the first quarter of 2024. This improvement reflects the impact of our proactive measures taken last year, including net debt repayments, lower base interest, and swapping floating rates into lower fixed rates. These factors were partially offset by a decline in interest income on our cash position due to lower benchmark rates. Net profit for the period amounted to EUR 319 million, up from EUR 150 million in the same period last year, resulting in earnings of EUR 0.20 per share. Please turn to slide 18. Adjusted EBITDA for the quarter amounted to EUR 251 million, an increase of 1% compared to the previous year. This was supported by the underlying rental growth and improved operational efficiencies.
FFO1 came in at EUR 76 million, stable compared to the EUR 76 million recorded in Q1 2024. This result was driven by the growth in adjusted EBITDA and lower finance expenses and offset by the expected higher attribution to perpetual notes. On a per-share basis, FFO1 amounted to EUR 0.07, stable compared to the EUR 0.07 in the same quarter last year. FFO2, which includes the disposal gain over total costs, amounted to EUR 121 million. Moving on to slide 20, where we highlight our EPRA NAV metrics. The EPRA NAV amounted to EUR 10.3 billion, slightly higher by 2% compared to December 2024, reflecting EUR 9.4 per share as of March 2025. The EPRA NTA amounted to EUR 8.4 billion, or EUR 7.6 per share as of March 2025, increasing by 3% compared to December 2024 on a per-share basis.
The increase in EPRA NAV metrics is mainly the result of operational profits supported by further positive property revaluations. Tim, please continue on the next slide.
Thanks, Jonas. On slide 21, we highlight our disciplined capital structure and strong credit profile. Our loan-to-value ratio improved to 41%, down from 42% at the end of December 2024. This was driven by the impact of asset disposals and strong operational performance. Through the company's proactive measures, we were able to keep leverage below the 45% board of directors guidance and will continue to take proactive measures to maintain a conservative financial profile in the coming periods. EUR 17 billion and 71% of our portfolio remain unencumbered, which supports our strong access to bank financing. Our average cost of debt was 2% as of March 2025. An average debt maturity was 3.7 years, or 4.5 years when adjusting for debt covered by our liquidity position. Our hedge ratio is 97%. Our ICR was 4.3 times, and net debt to EBITDA was 10.5 times as of March 2025.
Moving to slide 22, here we present our debt maturity profile. This includes our recent issuance and buyback, which extended our average debt maturity profile. Our liquidity position is further supported by EUR 0.9 billion of RCFs, with an average maturity in the second half of 2028. On slide 24, we confirm our four-year guidance for 2025. We are guiding for an FFO in the range of EUR 280 million-EUR 310 million, which translates to EUR 0.26-EUR 0.28 per share. This outlook reflects the expected positive contribution from continued rental growth, benefits from hotel repositionings, enhanced cost efficiencies, and the impact of our hedging and deleveraging efforts. At the same time, we expect some offsetting effects from the four-year impact of disposals, which were completed in 2024 and this year in 2025, along with higher coupon payments on perpetual notes compared to last year.
This concludes our presentation. As always, you can find further material in our appendix. With that, we would like to start the Q&A. 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. Could you provide some details on the latest performance of your hotel portfolio? What do you expect for this asset class going forward?
Thanks, Liat. As in 2024, our hotel portfolio continues with its strong performance, driven by a good environment and the positive impact from targeted repositionings of selected assets, as reflected in the 3.7% like-for-like rental growth recorded in March 2025, up from 2.3% in March 2024. Last year, the hospitality industry in Europe was positively impacted by several drivers, such as large events and the resurgence of corporate groups and international travel. We see this positive industry momentum sustained. This should also support an improved sentiment in the transaction market. Conference and business travel have increased in recent periods, and when combined with the already strong leisure demand, this trend bodes well for the hotel portfolio. We are on track to capture the upside potential through repositioning and reopening hotels, as well as from fixed rent step-ups and indexations, driving strong internal growth.
Going forward, we will continue unlocking further revenue increases from repositioning, refurbishments, and rebranding, which were also the drivers of our recent results.
Thank you, Kamaldeep. What is the current letting situation of your office portfolio? What is your perspective going forward?
In the first quarter of the year, we continue to see in-place rent increase, driving the 1.6% like-for-like growth. Work patterns continue to normalize, and rates of return to office continue to increase. In the past five years since the pandemic, we have seen very little supply coming into the market, and in many cases, supply was reduced due to the office conversion, which will provide tailwinds for the recovery. Having an under-rented portfolio with high revisionary potential will provide us with flexibility to capture the demand while driving higher rent. Recently, in Germany, the economic outlook has been positively impacted by the new government's plan to reduce fiscal constraints and invest very significant public funds. While this has caused some volatility in interest rates, we view this plan as a positive driver for the German economy and ultimately for office space demand.
We've prolonged 30,000 sq m of leases with an average in-place rent of EUR 16.2 per sq m and a WALT of 5.5 years. Additionally, we signed 41,000 sq m of new leases, double that of Q1 2024, with an average in-place rent of EUR 15.8 per sq m and a WALT of 9 years. On a selected and targeted basis, we are also continuing to explore conversions from our offices into service apartments. Also, conversion of office into edge data centers is considered. Due to the strong location of our assets, we have the opportunity to consider other usage concepts which are economically feasible and will create excess value.
Thank you, Barak. Can you provide more details on your rent like-for-like performance?
Across the whole portfolio, we recorded like-for-like rental growth of 3%. London and Berlin were both standout performers and both recorded over 5% like-for-like rental growth in this period. Other strong locations included Leipzig, Halle, Amsterdam, and Hamburg. The residential portfolio continues to benefit from the structural supply-demand mismatch that supported its solid like-for-like rental growth of 4.5%. The hotel portfolio also recorded strong rental growth of 3.7%, driven by step-up rents and indexation. The office portfolio recorded rental growth of 1.6%, mainly driven by indexation. The solid rental growth is expected to continue, especially in the hotel and residential segments. We see the German debt brake reform and therefore potential higher government spending in upcoming periods as broadly positive and are hopeful it's a catalyst for economic growth and better office performance.
Looking ahead, we will continue looking at ways to extract the full potential of the portfolio, including through repositionings and conversions. We conservatively expect rental income to increase 2%-3% on a like-for-like basis in 2025.
Thank you, Tim. Could you provide more details on the revaluation conducted? What are your expectations for the year?
We have conducted a partial revaluation of about 15% across the portfolio as part of our Q1 2025 report, showing a positive 0.8% like-for-like revaluation gains after accounting for CapEx, where we saw significant operational improvements of some of the properties. While we are cautious about generalizing the results from this partial revaluation to our whole portfolio, these results are following the positive operational achievements, while yields remained broadly stable. We plan to revalue the complete portfolio by H1 and to provide the normal details as we provide in the year-end as part of H1 results.
Thank you, Eyal. What are your thoughts on your current liquidity position? Will you continue prioritizing deleveraging?
Our strong liquidity position has been a key factor in successfully navigating uncertain market conditions in past quarters. Since last year, we have been experiencing improving financing conditions with a recent issuance at a lower coupon of 3.5% compared to our issuance last summer at a coupon of 4.8%, also driven by the ECB's rate cut policy. Therefore, we believe that we do not need to maintain a super high liquidity position and expect to gradually reduce the balance in the coming period as we repay upcoming maturing debt. The proceeds in our conservative liquidity position have allowed us to conduct liability management exercises, whereby we repurchased approximately EUR 600 million in shorter-term bonds, as well as repaying EUR 660 million in scheduled bond redemptions so far in 2025.
Regarding our deleveraging efforts, as of March 2025, our LTV declined further by one percentage point to 41% compared to year-end 2024 and has fallen four percentage points since June 2024. The successful decrease is a result of proactive management, driven mainly by disposals, increasing of cash flows, value creation, collections, and bond buyback at discount. Going forward, we follow our disposal strategy, but we are more open to utilize growth opportunities.
Thank you, Jonas. How has the S&P downgrade impacted your approach for the rest of 2025 in terms of disposal and liability management?
Now, our rating is at BBB stable, and we have ample headroom and financial flexibility, so we're clearly less in the need to dispose. We still expect to sell our held-for-sale portfolio, amounting to EUR 660 million, of which half already signed but not closed. We still seek to sell on an opportunistic basis if the price is right, which will enable us to recycle capital, reduce gross debt, and pursue attractive growth opportunities while keeping leverage on a similar level.
Thank you, Tim. What's the latest progress with your disposals? Do you still plan on being a net seller in 2025?
We have signed EUR 140 million in new disposals in 2025 so far and closed EUR 150 million disposals in Q1 2025, consisting mainly of residential assets, which represented 81% of the disposal volume. Office assets represented 12%, development assets represented 6%, and retail logistics and other represented 1%. Disposal locations included Bremen, Frankfurt, Berlin, NRW, and London, as well as non-core locations. The closed disposals were executed around book values. Additionally, signed but not closed disposals amount to around EUR 330 million, of which around half has already been closed as of today, comprising primarily office and development assets. Looking ahead, we plan to continue disposed properties and to reduce leverage on one hand, while proceeds can also be used to fund accretive acquisition opportunities as part of our capital recycling strategy if we see attractive opportunities.
Thank you, Barak. Why have you decided not to distribute your dividends for 2024? When do you expect to distribute dividends again?
Thank you, Liat. The actions we have taken in past periods have allowed us to significantly strengthen our financial position and successfully navigate through past volatility. This is reflected in the significant improvement of our leverage metrics, such as the LTV, which is currently at 41%, down from 45% as of June 2024. Moreover, our proactive approach and the improved financial environment allow us to further strengthen our financial profile by assessing capital markets to extend our debt maturities. Our operations also remain robust, and we have a positive outlook for the coming periods. That being said, we believe that there is more work to be done on strengthening our balance sheet and the financial profile in order to position the company more strongly in the future. As such, the distribution of a dividend at these stages will be contradictory.
For this reason, the board has decided not to distribute dividends for 2024. We expect to distribute dividends again once our balance sheet has strengthened sufficiently and it will be appropriate from a capital allocation perspective to resume dividends. We believe that we will be able to distribute next year but need to continue and see how the market develops in the upcoming periods before taking such a decision.
Thank you, Frank. Can you provide an update on the green certifications of your portfolio? How do you see them evolving?
We are pleased to announce we have continued to make progress on our green certifications since our last update as part of our annual report, which was published in March. Notably, in this short period, we have made the most progress in our hotel portfolio, which is now 50% green certified, up from 30%, which includes all our Center Parcs now fully certified. This was the main driver behind the increase in the share of certificates in our commercial portfolio, which reached 53%, up from 47%. We expect continued progress in the future, but we still know that as a result of limited capacity from certifying bodies and our large portfolio, it will take time to reach the full certification of our portfolio.
Thank you, Tim. Those were the questions that we received prior to this call. We can now start the open session for your questions. We would appreciate it if you can ask all your questions at once, and we will answer them one by one.
Anyone who wishes to ask a question may press star and one on the touchstone telephone. You'll 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 at this time. The first question comes from Ellis Acklin from First Berlin. Please go ahead.
Good morning, everyone. Thanks for the detailed presentation as usual. The first question I have is this morning if you might be able to provide us a little bit of insight into the economic opportunity of the office conversions and the flash which is going on right now and are expected to start coming online next year.
Hi, Ellis. Thanks for the question. Yeah, we're in the conversion process, and they have been pre-signed, so we definitely see upside here in rental in the future. It clearly depends also on permits when we reach them. So far, we see like EUR 10 million-EUR 15 million potential coming over the next years. Cannot assess when it will come, but over the next two years is realistic.
The next question comes from Marios Pastou from Bernstein. Please go ahead.
Hi, good morning. Thank you for taking my question. Just two from my side. I think you mentioned that after the reporting period, you obviously raised the bonds and then repaid around EUR 770 million through the buybacks and maturities. Were there any other debt drawdowns or repayments we should be aware of, maybe on the bank financing side? That is my first question. Secondly, can you break down the EUR 180 million of new acquisitions or investment properties between the different categories, such as loan-to-own and the vendor loans as well? Thank you.
Hi. Thank you for the questions. No, there were no other material repayments other than the ones that you also mentioned with the EUR 770 million post Q1. Out of the EUR 180 million conditions to the investment property, EUR 40 million were acquired, and EUR 140 million were converted from vendor loans and loan-to-own. Out of this, already parts were sold, and another two properties are in negotiation to be sold. Eventually, some properties we'll keep, and they will generate very nice return, and some will be disposed at a higher price than the loan that we have given. Thank you.
The next question comes from Manuel Martin from ODDO BHF. Please go ahead.
Yes, hello. Thank you for taking my question. Two questions from my side. The first one is on the valuation gains that you recorded in Q1. Is it possible for you to break down the valuation gains according to asset classes? How much comes from resi, how much from hotel, how much from office? That would be the first question. Second question, maybe you can clarify that a bit. In the Aroundtown reporting, it is reported that Grand City had like-for-like rental growth of 4.5%, while in the Grand City reporting, it is reported that it is 3.8%. Maybe there is a reason for the deviation. That is the second question, please.
Thanks, Manuel, for the questions. Yes, so the revaluations were on a targeted basis, where we saw operational improvements in the assets. Across the board, nothing specific in asset class. Clearly, you've seen also GCP had some revaluation gains. We will provide a full breakdown with the full portfolio evaluation in H1. The second question, yeah, GCP reports total portfolio like-for-like, while Aroundtown breaks it down by asset class, or it takes only the specific residential part connected to it.
The next question comes from Nadir Rahman from UBS. Please go ahead.
Hello, good morning. Nadir Rahman from UBS. Two questions for me. The first one is on the dividend resumption. You said that you will be looking to see when your capital structure reaches what you call an appropriate stage. Could I ask if you have any metrics on that or any quantifiable targets you have to resume the dividends? My second question, a very quick one, is on the average cost of debt. You said it was 2.2%, and then now it is 2% specifically. Could you provide that to a higher degree of accuracy, please? Thank you.
Hi, thank you for the questions. On the dividends, we did not build up a specific formula of when we are going to start. It just feels too early now. We are still on the leveraging level, and we see the market improvements, and we do feel more positive for next year. For the moment, we feel that for this year, it is better to keep the liquidity and have a bit more flexibility also for external growth once we see it coming. On the cost of debt, it was 2% end of the year, and it is also 2% now. There is no material change in the cost of debt. Thank you.
The next question comes from Neeraj Kumar from Barclays. Please go ahead.
Morning, everyone. Just a quick one on my side. Do you think you have good access to hybrids market, and how do you plan to address non-core 2026 hybrids and the non-exchange subs?
We definitely see some good recovery in the hybrid markets for our instruments, but also we've seen peers. We've seen some issuances from some of our peers, so it gives us confidence that the market is open for new issuances, refinancing of the hybrids. Until next year, mid-next year, when our next perpetuals have the next call, there is still some time. We'll assess the situation clearly then, but clearly, it's a good sign to see that the market is open.
The next question comes from Rob Jones from BNPP. Please go ahead.
Morning, team. I think I've got about three or four. One's on offices. You talk about 1.6% like-for-like rental growth year on year. Obviously, that includes indexation. I suspect indexation was more than 1.6%. What's the negative kind of contributor to pushing the like-for-like down to 1.6%? I think it wasn't vacancy because I think vacancy actually improved year on year for offices. The second one was on cash. If you think, or if we look post-period end and think about pro forma cash today, adjusting for the liability management exercises you've done, etc., where are we today, roughly, in terms of that pro forma cash balance? The other two were investor flagged to me this morning that there's, I think, about EUR 7.1 million of director or senior management loans from Aroundtown. I'm just wondering what that EUR 7 million was for.
Finally, on the divvy, just going back to one of the questions earlier, to the outside-in view, from my perspective, it looks like you've taken a view on the dividend and said there are specific criteria that has resulted in us deciding or electing to not pay a dividend in relation to FY 2024. In my simplistic head, that would be a very similar or indeed same criteria for the decision to reinstate a dividend in a future year should whatever those conditions are improve. If you do not want to say what the conditions would need to look like to reinstate a dividend, maybe you could tell us what your kind of hurdle rate or conditions were that caused you or made you go down the route of electing to suspend the dividend. Thanks.
Thanks, Rob. About the first question about the offices, we did add about nearly 2% interest rent growth and about 0.3% negative occupancy on the like-for-like. That is on the offices side. I will need to check the cash balances as of today. I do not have it in my mind, but I think that the overall balance is not material. We did reduce the total balance because we repaid more than we recruited, but it is not a significant amount. On the dividend side, I will need to check about the loans, and I will come back to you. On the dividend side, we really were on a, let's say, deleveraging mode really until recently. We continue to want to improve our balance sheet and deliver. The main idea was so far to keep the rating at the triple B plus and remove the negative outlook.
Just a few weeks ago, S&P took the decision already to take a rating action. We basically need to revalue again the situation. We have nice headrooms now that we can allow ourselves to also seek external growth. We need to think what is, let's say, the right move now for the capital allocation, whether it's to distribute dividends, if it's to do external growth. There are also other opportunities for the cash. That was the reason that we decided for this time not to pay the dividend now, but we are positive that next year, subject to market condition, looks good. Once we have, let's say, a better formula or we decide about specific conditions, we will give you an update. Thank you.
The next question comes from Stephanie Dossmann from Jefferies. Please go ahead.
Hello, good morning. Maybe a follow-up on your like-for-like rental growth, please. Could you give the drivers for the group like-for-like rental growth? In offices, what is currently the reversionary potential? You talked about the occupancy, which was, so the impact was down 0.3% in place rent. What is your typical reversion or rental uplift on renewals or reletting in your portfolio? What can we expect in terms of rental growth for this year in offices? The second question, you talked about external growth. What kind of acquisition are you currently targeting? What kind of, I mean, in what asset type? What are your financial criteria to invest? On the opposite side, the third question would be, what could we expect in terms of disposals for this year on top of the EUR 330 million to be closed? Thank you.
Thank you for your questions. About the revisionary potential on the offices, I think that when we combine the market rental for our portfolio to the current rental income of the office portfolio, we have about a 15% gap. The market is higher by 15%. This gives us additional way to go up when every tenant goes out and a tenant comes in. Plus, you can add to that our vacancy that gives us an additional rental income. Once it is let, then it gives you more than 25% revision potential on the office side. When you compare to the actual reletting activity, even now in a weaker demand environment, we managed to relet at a higher rent per sq m in comparison to the tenant that is leaving or to the average. When we compare just Q1 reletting activities, they were about 6% higher than the former tenants.
Our focus now is not on capturing the full market trend that we can. It is really just to bring in more tenants and taking the demand from the market. We will be able to push more the interest rent once we have a big tailwind from the market and the demand comes back once the economy shows a bit more signs of recovery. On the acquisition side, we are more opportunistic on acquisition. We did not put any target how much we want to acquire. We built up the TAC fund, the turnaround fund, to enable us to acquire more without putting all the equity from our side. We are pretty much opportunistic here.
We are looking for a high yield, more mismanaged properties that their buyers cannot now refinance, or if it is a fund that cannot now, let's say, close fund that comes to the end, that we really manage to buy it at attractive yields. There is no specific target of how much yield. It is really on an opportunistic level. We do analyze some deals, and if they will be closed, we are clearly going to update. On the disposal side, we have the L4 sale with nearly EUR 700 million, of which EUR 330 million were already signed. We are going to dispose in the coming 12 months this EUR 400 million. We have additional negotiations, initial ones, about additional disposals. There is a possibility for more disposals than just the L4 sale, but this is still initial. We believe that the EUR 700 million is the right number for the next overall for the next 12 months.
Thank you for the question.
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. All the best and goodbye.