Dear ladies and gentlemen, welcome to the Q1 2022 results presentation for Grand City Properties S.A. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press the star key followed by zero on your telephone for operator assistance. May I now hand you over to Ms. Teresa Staill, who will lead you through the meeting today. Please go ahead.
Thanks. Hello, and good morning to everyone. Thanks for joining us today. In the name of GCP, I kindly welcome you to our results call for the first quarter of 2022. With me today are CEO and CFO Refael Zamir, Chairman of the Board of Directors Christian Windfuhr, COO Sebastian Remmel-Faltin, and Senior Financial Analyst Michael Bar-Yosef. Christian Windfuhr and Refael Zamir will guide you through the results presentation directly after this introduction. You will find the results presentation for this call on the company website in the section Investor Relations under Publications. The presentation of the results will be followed by a session with questions and answers. The management is available for questions. We have already asked you in advance to send us your questions by email. Please continue to send us your questions so that we can include them accordingly.
Please send your questions to the following email address: info@grandcity.lu. I repeat once again, the email address is info@grandcity.lu. With this, I will hand over to Christian Windfuhr to begin with the presentation.
Thank you very much, Teresa, and also a very warm welcome from my side to our first quarter 2022 financial results presentation. Let us turn directly to slide two for an overview of the first quarter 2022. The first quarter was marked by our continued strong operational performance and the stability and resilience of our portfolio and operational platform. We are in line with our guidance as well as our internal targets, and are well-positioned to continue and benefit from our robust operational platform. We continue to see solid like-for-like rent net rent growth of 2.8%. Our portfolio fundamentals remain strong, with the main parameters improving over the last year. Our vacancy is at 5.1% as of March 2022, and has remained at a similar level to three months ago, but is at a historic low.
The letting trend is strong, and we expect to continue and extract internal growth from our portfolio. Despite volatile capital markets, our operations and business remain strong, reflected in an increasing FFO I per share of 7%. The first quarter of 2022, we continued to improve our capital structure, repaying over EUR 615 million worth of debt. As a result, we have no upcoming debt maturity in the next two years with a low LTV of 35%, cost of debt of 1.1%, and average debt maturity of 6.6 years. Furthermore, by repaying expensive bank loans, we further increased our unencumbered investment properties, which amount to EUR 8.7 billion and 92% of our portfolio as at the end of March.
All of these factors combined shield us to a good extent from the current interest rate environment and volatility in the capital markets. Now let me hand you over to Refael Zamir for the following few slides.
Thank you, Christian, and good morning, everyone. Move to slide three and start with the rental income, which increased by 7% to EUR 97 million compared to first quarter last year. The like-for-like net rent growth was 2.8%, of which 2.3% came from in-place rent growth and 0.5% from occupancy growth. The like-for-like in-place rent growth include the one-off impact related to reversal of Berlin rent cap in the second quarter of 2022. This impact will no longer be included from the next quarter onward. Regardless, we have seen good letting results across our portfolio. Rent growth was also driven by the impact of net acquisition in 2021, in addition to the solid like-for-like rent growth. Adjusted EBITDA increased by 5% to EUR 76 million during Q1 2021, compared to the same period last year.
Our operational profit was driven by consistent improvement in our operational performance, as well as by optimizing our cost structure. We continue to digitalize our letting process and tenant service, which started in the beginning of the pandemic. Currently, most of our lease agreement are signed digitally, supporting the letting activities. This quarter, we continued to experience cost inflation in several cost items, mainly in personnel expenses and with external service provider. Property valuation during the period was EUR 47 million compared to EUR 42 million and gross capital gain of EUR 30 million, growth to EUR 72 million during the same period last year. In the first quarter of 2022, we didn't dispose material asset and therefore we didn't record any significant capital gain.
We revalue less than 10% of our portfolio in the third quarter of 2022, which is even less than in the first quarter of 2021, and we plan to revalue the rest of the portfolio in the coming period. Our EBITDA came in at EUR 121 million and profit for the period amounts to EUR 47 million, slightly lower than the comparable period due to lower revaluation. Our adjusted EBITDA amounted to EUR 76 million, up 5% from the comparable period, and presents the improvement in the operational performance. Basic earnings per share results in EUR 0.18 per share. On slide four, you can see that our FFO I is up 3% against the first quarter of 2021, which amounted to EUR 48 million.
Our FFO I per share improved by 7% from EUR 0.27 to EUR 0.29, which was additionally supported by the full impact of the share buyback in 2021. The annualized FFO I per share represent an attractive yield of 7.1% on the yesterday closing price. FFO II came lower in first quarter of 2022, as we had sold an insignificant amount properties in the period, whereas in the comparable period, we have sold EUR 220 million properties and recorded EUR 30 million capital gain. On slide five, you can follow our EPRA NAV metrics. All EPRA NAV metrics saw increase in the first quarter of 2022 compared to year 2021.
EPRA NRV per share, EPRA NTA per share, as well as EPRA NRV and EPRA NTA grew by 1% each, while EPRA NDV per share, as well as EPRA NDV grew by 7%. The relatively strong increase in EPRA NDV can be attributed to the higher bond yield in the market, which has impacted the net fair value of our traded debt. On the same slide, number five, we present you some more information on our approach regarding EPRA NRV, NTA, and NDV. Let me now hand back to Christian to the portfolio overview on slide six.
Thank you, Refael. Now to our portfolio overview, where you can see that our investment property increased by 17% since December 2020, and reached EUR 9.4 billion in March 2022. There was no material growth in the portfolio from December 2021, as we have not bought or sold a material amount of properties, and we have barely revalued the portfolio. In total, we have around 65,000 units at the end of 2021, and the portfolio has remained fairly unchanged since the end of 2021. Vacancy remained at 5.1%, and so did in-place rent at 8.1 per square meter.
Our annualized rental income of EUR 384 million at the end of March 2022 has an upside potential of 21% based on current prices, which amounts to EUR 465 million net rental income once the full market potential is reached. This will be driven by continued in-place rent and occupancy growth. The general overview of our portfolio on slide seven shows that we continue to maintain a well-diversified portfolio in strong locations in Germany and London. Our main locations, North Rhine-Westphalia, Berlin, Dresden, Leipzig, Halle, and London, have strong and sustainable fundamentals and also are very diverse in terms of economic and demographic drivers. On slide eight, you can see that Berlin makes up 24% of our portfolio value and is our largest single location.
70% of our Berlin portfolio is located in top-tier locations including Charlottenburg, Wilmersdorf, Mitte, Friedrichshain, and others. The remainder is in affordable locations, primarily Reinickendorf, Treptow- Köpenick, and Marzahn-Hellersdorf. In North Rhine-Westphalia, Germany's largest metropolitan area, we have 21% of our portfolio with Cologne, the fourth largest city in Germany, being the strongest location with around 28%, and the rest distributed throughout the region's main cities. Our quality London portfolio on slide nine makes up 19% of our portfolio and is well distributed in the suburbs of London with around 80% of these properties situated within short walking distance to underground or overground stations. The total London portfolio consists of over 4,000 units, including pre-marketed units in the pre-let stage.
Since acquisitions of our London portfolio, our strong letting performance has taken double-digit vacancy down to an occupancy of over 94% as of March 2022. We continue to see strong letting momentum and expect to continue to reduce the vacancy further in the next periods. We have reached a sizable portfolio in London, enabling us to benefit from economies of scale, and we feel comfortable going forward in maintaining a portfolio size in London of around one quarter of our total portfolio. On slide 10, we show Dresden, Leipzig, Halle, Germany's dynamic eastern cities with strong fundamentals, which make up our quality East portfolio with 13% of our portfolio. A further 4% of our portfolio are in Hamburg and Bremen, Germany's largest northern cities. Our maintenance and repositioning CapEx on slide 11 was EUR 4.6 per average square meter for the first quarter.
This amount is slightly less than 2021. EUR 1.3 of this amount went to maintenance, and the remaining EUR 3.3 to repositioning CapEx. Repositioning CapEx is directed towards improving the assets' quality and supporting the letting activities. The repositioning CapEx also includes investments into the surroundings of the assets. Decrease in CapEx per square meter is mostly related to delays in several CapEx works relating to recent supply chain disruptions. However, we expect to catch up on these delays and do not expect to have a material impact going forward. As a result, the AFFO for the first quarter 2022 amounted to EUR 35 million compared to EUR 32 million during the same period in 2021. With this, back please to Refael.
Thank you, Christian. Our financial policy present on slide 12 remain unchanged. We keep significant headroom to our financial covenant and continue to maintain healthy relation with banking sector, which provide additional flexibility to our financial resources. We are committed to maintain a conservative financial policy. Our dividend policy remain at 75% of our FFO I per share, and based on the current share price, reflect dividend yield of 5.4%. We also show you on this slide that we remain comfortable with above bond covenant in all our aspects. On slide 13, we review our capital structure, and you can see that our LTV is at 35%, down from 36% in December 2021.
We have taken care to maintain and improve our debt profile by repaying high interest during short-term financial debt, taking advantage on the favorable market condition in previous periods. During Q1 2022, we have repaid EUR 615 million of debt using our strong liquidity position, which amounted to around EUR 1.1 billion at the start of the period. Only 4% of our debt has variable interest rates, and our cost of debt stand at a very low of 1.1%. Our average debt maturity is 6.6 years. GCP additionally maintains several undrawn credit facilities from a selection of banks, which currently amount to EUR 250 million at a very low interest.
Our current debt profile, with no maturities in the next two years and the low cost of debt, which is mostly fixed, help to shield the company to a good extent from the current volatility in debt market and rising interest rates. Debt coverage and credit rating on slide 14 show that we improve our very strong interest cover ratio to 6.7. Also, our unencumbered asset ratio improved to a strong 92% of our value of approximately EUR 8.7 billion. As a result of the repayment of debts, our liquidity position reduced somewhat, but remain very strong at around EUR 550 million, a sufficient buffer to fund the company ongoing needs. Our corporate credit rating remains strong, with BBB+ by S&P, and our long-term goal remains to achieve a rating improvement to A-.
S&P has reaffirmed our credit rating in December, highlighting our moderate leverage and financial policy with a strong liquidity position. Back to Christian.
Thank you, Refael. Before I close, let me point out to you that in the appendix of this presentation, we give you more detail regarding ESG and sustainability, which is also well-covered in various documents on our website. We have released our sustainability report a couple of weeks ago, which can be downloaded from the website. With this, allow me to confirm our guidance for 2022 on slide 15. FFO I will be between EUR 188 million-EUR 297 million. FFO I per share will be between EUR 1.13-EUR 1.18. Dividend per share will be between EUR 0.85-EUR 0.89. Total net rent like- for- like growth will be larger than 2%, and LTV will remain below 45%. FFO I will be driven by increased operational performance through increased like- for- like rental growth and the full year impact of 2021.
Additionally, debt optimization measures in 2021 and 2022 year to date will further provide tailwinds. With this, let me hand you back to Teresa for our Q&A.
Thank you very much. We are now starting the Q&A session. We will answer the questions we have received by email so far. We have grouped them together for the reason of simplification. The answers to your questions have been prepared by the team. I will now start with the first question, and answer will be given by Christian Windfuhr. Sorry. Could you provide an update on the German residential market? Did the fundamentals change in 2022?
The German residential market continues its positive development. The key demand trends remain strong, especially urbanization and immigration, which is now also being positively affected by the Ukrainian refugees. On the supply level, the inflation on construction costs, supply chain disruptions, in addition to shortage in skilled craftsmen, is delaying further needed current and future supply. The portfolio valuations remain below replacement cost and remain conservative considering market transactions are exceeding our valuations. Approval processes for new projects remain long as a result of regulatory constraints. Although the general economic market is weak and interest rates rise, we still do not feel a meaningful change in the supply demand imbalance in the short to medium term, which will support operational achievements and valuations. We continue to see these factors reflected in our portfolio.
We record a like-for-like rental growth of 2.8% in March, which was driven by 2.3% in-place rent growth and 0.5% occupancy increase. At the same time, we maintained our low vacancy of 5.1%.
Could you provide an update on the inflationary impacts on your business? What is the impact of yield changes in the capital markets on GCP?
Thank you, Teresa. We have seen inflation accelerate more in recent months, driven by a mix of continued impact of the Corona pandemic as well as the war in Ukraine. The highest price increase are seen in the cost of energy, which to a large extent is recovered from our tenants, so the impact on our profitability should be limited. Moreover, tenants receive government support directly aimed to mitigate increased heating costs. We also experienced general inflation increasing in the last months, however, at a lower pace than the increase in the cost of energy. We mainly experience inflation in higher personnel expenses, costs related to external services and IT, which result in some increase in our operational costs based on our overhead expenses. The increase level is around 5%-2% on average.
However, as we operate at strong operational margins, this cost increase impact on our profit margin is expected to be limited. Additionally, we have seen quite high increase in material prices as well as unavailability of subcontractors. However, we currently see a limited impact as for the new terms we have contractually locked in prices for the larger project we expected to execute in the next 12 months. However, we see on average cost increase at the level of around 10%. Regarding rising yields, we have seen that bond yields in the market, including our own, have increased in recent weeks, especially since the end of quarter and with the 10-year German bonds trading at around 1% recently. While the spread between rental yield and the German bonds has decreased, it still provide a good buffer when compared to historical level.
As part of our conservative financial profile, we have always sought to protect ourselves against abrupt interest changes such as those we see today. While we don't know how long the higher rates in the market will prevail, GCP is protected for the next few years as a result of our proactive debt management and well-structured maturities profile. In Q1, we repaid our EUR 450 million convertible bond, as well as over EUR 165 million of bank debts. As a result, we have no upcoming debt maturity for the next two years. Additionally, in the next four years, the upcoming maturity are not very material. If we were in need of financing, we could access our strong, diverse mortgage banking relations we have built over the last two decades.
Currently, we see that bank financing rates have not been impacted materially as compared to the increase in bond market yields. Accordingly, we have signed recently a bank loan of over five years at 1% margin, which provides us a good funding alternative to the bonds. We maintain a strong portfolio of unencumbered assets, currently of 92% of our portfolio, which reflect EUR 8.7 billion in values. We maintain a large untapped liquidity potential. For a short bridge financing, we also have EUR 250 million unused credit line at a low margin for the next 2.5 years. Summing up, the current environment should not have a material impact on our interest expense and FFO.
With the war in Ukraine continuing for nearly three months now, do you see any impacts on your company?
We are very saddened to see continued and daily loss of life as a result of the war in the Ukraine. Our thoughts are with the people in Ukraine and those who fled the conflict that are still suffering on a daily basis. Grand City Properties operations are not directly impacted by the conflict. However, there are some indirect impacts, which are starting to affect our business, especially related to price inflation as well as supply chain bottlenecks. We see a shortage of materials for construction, a lot of which is sourced from Russia and Ukraine, as well as a shortage of construction workers. Furthermore, the conflict is one of the drivers of high inflation in recent months, which also has affected our operating cost and increased the energy cost burden on our tenants.
On a demographic level, we have already seen millions of people flee the violence of Ukraine. According to recent information from the German government, over 600,000 refugees have been registered in Germany, and the number is expected to continue to grow. We have seen a lot of solidarity from the German government, which is providing housing to the refugees. For our part, we contribute to the refugees and seeking to assist and support as much as possible in different channels. On a small scale, we rented apartments to local authorities for the refugees and have also started to rent apartments directly to Ukrainians. While we hope that the conflict will be resolved soon, we do not know how long it will last, nor do we know how long refugees will decide or need to stay.
We believe that the influx of refugees will impact the housing market directly and indirectly, increasing the demand similar to what we have seen in 2015 and 2016.
How much of the portfolio was reevaluated in the first quarter of 2022? What do you expect for valuations in full year 2022? What is the impact from inflation and increasing interest rates?
Thank you, Teresa. We had only an insignificant amount of the portfolio evaluated in the first quarter of 2022, as we have recently fully evaluated our portfolio for our annual report. We will carry a more extensive valuation of our portfolio in the upcoming period, but more to the second half of 2022. We continue to improve on the operational metrics of the portfolio and invest in value-enhancing activities which will drive valuation growth. The impact of increased interest rates on our valuation will depend on which level the interest rate will stabilize. Please note that we continue to see a positive gap between the market transaction and the book values. Valuations are mostly based on a 10-year DCF model, which use the average interest rate over the last 10 years, which is higher than the current interest level.
Valuations are also driven by operational achievement and market transactions. The DCF model may include higher cost inflation than previously assumed, but on a 10-year basis, also the level of the rent are expected to increase due to the correlation between inflation and increase in rents, also under the Mietspiegel regime. As well as from vacancy reduction and fluctuation, which enable us to capture market rent faster. Next question.
How is the London residential market developing? How is your London portfolio performing and what are your expectations?
We continue to see the London housing market develop positively. Underlying demographic trends are strong, supported by urbanization, population growth, and a recovery in international migration. London has a very diverse structure when it comes to the demand drivers of its different boroughs, which provides diversification benefits as the city as a whole is not driven by a single demand driver. Additionally, London provides further diversification to Grand City Properties Germany portfolio as a result of its unique value drivers. We see the strong fundamentals of the market and demand remaining strong, particularly in London's middle class boroughs, while the recovery in international migration also benefits more central and upper scale boroughs. In the quarter, we saw vacancy slightly decrease to 5.7% from 5.8% in December 2021, and from 8.4% in March 2021, when London was still under the pandemic lockdown.
The rent like- for- like in London was 4% in the last 12 months, indicating the good letting momentum. We have stabilized the vacancy levels in London, and now we will focus on increasing the rent levels and letting at higher price levels, which shall drive further internal growth, but could impact the pace of occupancy growth short term as fluctuation might take longer to fill up.
Could you provide a breakdown of your like- for- like rental growth? Which regions contributed most? What was the split between indexation and reletting?
We recorded like-for-like rental growth of 2.8%, which is comprised of 2.3% in-place rent growth and 0.5% occupancy increases. The solid like-for-like rental growth has been a key driver of the strong increase in net rental income year-over-year, together with the net acquisition from 2021. With our in-place rent below market level and some vacancy remaining, we continue to see upside potential to market level, which can be extracted over the coming years. The 2.3% rent growth can be further broken down into roughly 0.9% from reletting and 1.4% from indexation, which include a one-off impact due to the reversal of the rental cap.
The like- for- like performance was strongest in Berlin with over 7%, which was especially high as a result of the rent cap, which was still effective in the end of March 2021, and impacted the last 12 months like- for- like results. For next reporting period, we will not have this one-time impact and the total like- for- like will be accordingly at a normalized level. We have seen also above average like- for- like performance in NRW with 3% and in London with 4%. We continue to see positive developments and expect like- for- like rental growth of around 2% for this year. As we have reduced the vacancy in recent period, further occupancy increase is expected to be smaller percent of like- for- like rental growth going forward.
Furthermore, the current like- for- like figure is the last result impacted by the Berlin rental cap, which is mentioned in a one-time effect and will not be included in our next like- for- like results.
Could you provide some information regarding the maintenance and repositioning CapEx? What are your expectations going forward, and how are you impacted by inflation and the shortage in materials and in workforce?
In the first quarter of 2022, we spent EUR 5 million on maintenance and refurbishment expenses, or EUR 1.3 per square meter, similar to the previous result and in line with our expectation. These expenses are mainly related to maintenance, the asset quality and the living standard of the tenant, which is managed efficiently on an ongoing basis and should remain stable over time. Repositioning CapEx amounted to EUR 14 million or EUR 3.3 per average square meter, and decreased from 3.8 per square meter compared to Q1 2021. The number additionally include EUR 1 million related to modernization project, which directly contribute to higher rent. Furthermore, we spent EUR 7 million on pre-letting modification in London and Berlin in the first quarter of 2022, compared to EUR 8 million in the first quarter of 2021.
We have since retained the rate of several CapEx works, which resulted in slightly lower spending per square meter this period. The delays were not substantial and have no effect on our operational performance. We expect to catch up on those investments in the upcoming periods. The cost inflation in both higher material cost as well as personnel cost is in line and limited to about 10%. As to our larger CapEx project, in particular will be our development project in Berlin, we currently expect certain delays in the timeline as a result of a shortage, primarily related to a shortage of workers. However, we know that development is not a major part of our business and can be done mostly on a discretionary basis.
You mentioned that your acquisitions in the quarter were immaterial. What is your pipeline? How about disposals? Would you expect to become a net seller or buyer in 2022, and do you see any change to the pricing levels in the market?
In the first quarter of 2022, we did not close any material acquisitions or disposals. We signed during the quarter an acquisition amounting to approximately EUR 100 million in Berlin at a multiple of 26x, which we expect to be taken over in the upcoming months. The acquisition pipeline, which fit to our acquisition criteria, is relatively small compared to previous periods, as the pricing levels remain high and the market remains very competitive. We always stick to our acquisition criteria, and we currently are extra mindful of the cost of funding, which has increased in recent months. On the disposal side, we have a pipeline of disposals, including EUR 130 million worth of assets held for sale, which we expect to dispose in the next 12 months. In addition, we may dispose further properties on an opportunistic basis, depending on the offers we receive.
We continue to see interest in the market, which is a reflection of a competitive pricing we see in our acquisition pipeline. As long as this trend continues, we tend towards becoming a net seller, but we are very well prepared to become a net buyer if the market changes and we see attractive opportunities arising.
Can you please give an update on your share buyback intentions?
We continuously review our options when it comes to creating shareholder value. The disposal of non-core and mature properties and using the funds for value accretive purposes, including share buybacks, is one of those options. In the case we would execute material disposal volumes in the future and become a net seller, we may use part of the funds for a share buyback and/or repay debt in order to maintain our conservative financial profile, similar to what we did in the past.
Can you please give an update on the financing of the London portfolio? Would you consider taking loans in GBP? How do you hedge your GBP exposure?
We checked several times in the past the option to finance our London portfolio via GBP, but we find it not the best alternative. The currency exposure of our London portfolio is hedged through the use of forward contract. We benefit from full flexibility, as the portfolio is primarily unencumbered. Using GBP debt in the future would be another alternative to hedge the exposure that we may consider.
Are you increasing the amount tenants are paying monthly for electricity and heating to match the current prices? Do you have a liability risk if tenants cannot pay for the increased costs?
The electricity costs are directly paid by the tenants to the energy providers. Same goes for gas, which is used for cooking. On the other hand, heating is managed and paid by the landlord and collected from the tenants as part of the ancillary income. The tenant pays the utilities on a monthly basis based on the prior year expense level, which includes expectations for the next year. The gap between the actual expenses and expected expenses are settled with our tenants in the following year. Due to the high increase in energy costs, we recently proactively notified our tenants that the energy costs will increase in 2022 and suggested an immediate increase of the monthly payments. Many of our tenants accepted.
The German government has provided grants and support for households directly aimed to subsidize the cost increase, but we are not certain if it is sufficient to cover the increase. We expect to continue having a high collection rate and do not expect to see significant liability created here.
What are your current expectations regarding the CO₂ tax, and what is the impact on 2022?
Currently, the CO₂ tax is still carried in full by the tenant and the final consumer of the emission, which will remain the case for 2022, but will change going forward. The price per ton of CO₂ will increase to EUR 35 per ton in 2023 and up to EUR 55 in 2025. The government has currently agreed on a model based on the energy intensity of properties, where the share of tax carried ranges from fully by the tenant on the lowest intensity to 90% by the landlord on the highest intensity. We note that the current proposed model has not yet been made into law.
We think the proposed system is an improvement over the previous suggested 50/50 split between tenants and landlord, but remains somewhat uncertain, flawed, especially as energy intensity is not a fully foolproof proxy of energy efficiency, which would be better measured through EPCs, which are already widely used and available. Based on the proposed model and our current portfolio, our current estimation is that the expense for GCP will be around EUR 3 million in 2023, increasing to around EUR 4 million by 2025, which we believe is not that material in relation to our EBITDA, reflecting between 1%-2% of the margin.
Thank you. I think those were the questions so far. We will now start the open Q&A part. If you have several questions, we kindly ask you to ask all your questions together right at the beginning. We are now looking forward to your questions, please.
Thank you. We will now begin our question and answer session. If you have a question for our speakers, please dial zero one on your telephone keypad. Now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it's your turn to speak, you can dial zero two to cancel your question. If you're using speaker equipment today, please lift the handset before making your selection. One moment please for the first question. The first question comes from Kai Klose, Berenberg. Please go ahead. Your line is now open.
Yes, good morning. I've got two quick questions, if I may. The first one is regarding the adjusted EBITDA margin, which was in Q1 this year, about 200 pips lower compared to last year. It is a function of the smaller portfolio size, or is it any other reasons? Second question is on the kind of delays you'd suffered from the higher material costs and shortage of materials. When we expect this to be reversed?
All right. Good morning, Kai. I'll take the first question, the EBITDA margin. The EBITDA margin increased by 1%, 79% in 2022 from 80% in Q1 2021. The decrease is mainly due to the inflation impacts. We've seen the increase in energy costs, personnel costs, and external service providers, as we mentioned, which were partially offset by increased efficiencies. Looking forward, we expect to keep a high margin, but it might have some certain level of headwinds in the upcoming quarters due to the inflationary impacts.
Kai, good morning. Regarding your second question, when will the price increases and the delays be over? We do not really know when that will happen. The delay is mainly due to availability, not so much due to the price increases. The availability of materials and of labor are delaying things. We are counteracting this through our internal workforce and through more pushing on the projects that we are working on. Thank you for the question.
The next question comes from Manuel Martin, Oddo BHF. Please go ahead. Your line is now open.
Thank you, ladies and gentlemen. Two questions from my side, please. First question would be on your refinancing activity. You explained that there's no material upcoming maturity for the next two years. Can we suppose that you're going to have less other financial costs during 2022 because of not existing prepayments? That would be the first question. Second question, cash on balance sheet decreased to EUR 300 million, something like that, from something like EUR 800 million last year. Is that due to the purchases that you conducted in 2021? Thank you.
Hi, Manuel, good morning. Maybe I'll start with the second question. The decrease in the cash balances come from a repayment of EUR 650 million of the convertible bonds, EUR 450 and another EUR 165 million related to bank loans we have prepaid. The net debt actually stayed stable in that sense. As to the other financing costs, yes, we do expect to have less refinancing costs in the next periods. We might still repay future debts earlier, even more proactively, refinance that might have an impact.
I'd like us to know the other finance cost also includes changes in the fair value of financial assets and liabilities, which may also impact in changes in the interest rates and currencies, which do impact this line as well. Thank you.
The next question comes from [Mireille Comeaux], Barclays. Please go ahead. Your line is now open.
Hello. I was wondering if you could give us a bit more color on the perpetual bonds that you have, which are coming up for first call in 2023. I think one of them is within the next 12 months. If you have any thoughts on your plans for these bonds.
Thank you. We have EUR 200 million of perpetual notes with the first call in beginning of 2023. We know that's a relatively small amount. Of course, we're following the market and having all options open. If it's refinancing perpetuals or perhaps repaying a certain amount or finding a different solution. We still have time for this. We're monitoring and when the time comes, we'll try to find the optimal solution. Thank you.
We haven't received further questions at this point. I will hand back to the speakers.
Okay. With that, thank you very much for your participation in the call, for your questions. We look forward to further good close cooperation with you and hopefully even personal meetings during the year. Thank you very much from all of us here in Grand City Properties. Bye-bye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.