Ladies and gentlemen, welcome to the full- year 2025 results conference call. I'm Lorenzo, the Chorus 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 a question at any time by pressing star one on your telephone. For operator assistance, please press star 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 afternoon, and thank you for joining us for Grand City's results call of the year 2025. You can view this presentation on Grand City's website, either on the home section or under financial reports of the investor relations section. With me today will be Chairman and Director Christian Windfuhr, CEO Refael Zamir, CFO Idan Hadad, and Chief of Capital Markets Officer Michael Bar-Yosef. 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. Please feel free to send us your questions via email also during the presentation. The email address is gcp-ir@grandcity.lu. With that, I would like to hand you over to Christian to start with the presentation.
Thank you very much, welcome to our full -year 2025 results presentation. We have come out a few days earlier with our results on the back of Aroundtown's offer to GCP shareholders. We believe that the offer is enabling GCP shareholders to take part in a larger and more dynamic company with very good growth prospects, enabling the participation in the long-term value creation of a larger and more diversified real estate platform. Let me turn to our results. 2025 was a year shaped by geopolitical uncertainty, the European economy demonstrated notable resilience. Interest rates continued to decline and have now stabilized, contributing to a more constructive backdrop for real estate markets. In Germany, the economic outlook improved as a result of the government's stimulus package. We could also see that transactions activity began to pick up further over the course of the year.
We still note, however, that the recovery remains asymmetric. While well-capitalized players benefit from improved conditions, many smaller participants continue to face financial pressure. This environment aligned well with our strategy, enabling us to recycle capital efficiently and capture opportunities that arose from ongoing market dislocations. Operationally, 2025 was another strong year for GCP. We reached our full year guidance, recording like-for-like rental growth of 3.5% and reducing vacancy to a historic low of 3.6%. The portfolio continued to demonstrate its resilience, supported by a robust demand and structurally lower supply. We recorded a positive like-for-like revaluation of 3.2%, reinforcing the upward trend in values that began in the H2 of 2024.
This supported further the decrease in our leverage with LTV down 2 percentage points compared to the end of 2024. While we were active in capital markets in December, tapping both our Series H senior bonds and executing a perpetual note transaction. Through which we were able to take initial steps towards refinancing the perpetual notes with first call date in 2026, while also mitigating part of the expected increase in perpetual note coupons. These actions reflect our ongoing commitment to prudent financial management and long-term value creation. More details of these topics will be presented in the following slides. With this, I would like to hand over to Refael.
Thank you, Christian. Welcome also from my side. On slide three, we present a summary of our key financial results for the full- year 2025. We continued to record strong operational performance with net rental income and adjusted EBITDA both increasing by 1% year-over-year. FFO I remained stable as operational growth offset the impact of higher financing costs. Our balance sheet became stronger further in 2025, with the LTV decreasing to 31% compared to 33% in December 2024. Supported by disciplined capital allocation and continued deleveraging effort as well as positive valuation recorded in the period. Our interest coverage ratio reached to 5.2x, and Net Debt to EBITDA to 8.2x, remaining strong and reflecting our solid operational performance.
EPRA NTA increased in 2025, driven mainly by property valuation and continued operational growth. We will provide more details on valuation in the dedicated slides later in the presentation. Throughout the year, we remained proactive in our financings activity. We issued EUR 250 million in new bonds and repaid EUR 260 million of existing bonds, allowing us to further extend our debt maturity profile. We successfully refinanced EUR 600 million of perpetual notes. We will expand on those developments in the following slides. Slide four highlights the continued strength of our operational performance in 2025.
We recorded a sustainable solid like-for-like rental growth of 3.5% as of December 2025, supported by a 3.3% increase in in-place rent and an additional 0.2% increase in occupancy. Vacancy decreased further and reached to a new historic low of 3.6%, reflecting sustained demand across our location and the effectiveness of our asset management initiative. Our reversionary potential remain high at 21%, supported by strong demand and supply fundamentals in the key metropolitan area of our portfolio. Those dynamic position us to well gradually unlock additional rental upside in the coming periods. Adjusted EBITDA continue to grow as an increase in rental income offset impact of net disposals. In the coming period, we expect positive impact from acquisitions executed primarily through disciplined capital recycling to support both rental and EBITDA growth.
Those operational trends reinforce the strength of our platforms and provide a solid base for continued internal and external growth. On slide five, we highlighted the continued positive momentum across our portfolio, reflected in both operational and valuation metrics. Annualized net rent increased to EUR 429 million as of December 2025, compared to EUR 413 million as of year-end 2024, driven mainly by strong like-for-like rental growth of 3.5%. Rental growth was driven by a strong increase in, and a further reduction in vacancy, which declined to 3.6%, marking another historical low of for our portfolio. Our portfolio value increased to EUR 8.9 billion, up from EUR 8.6 billion last year. We recorded a like-for-like revaluation gain of 3.2% for the year, excluding CapEx.
This reflects the resilience of our assets and the contribution from the strong operational performance. We will go into more details on the valuation parameter on slide 16. Rental yield remained stable at 4.9%, while average value per square meter increased to EUR 2,335, compared to EUR 2,203 at the end of the year 2024. In 2025, we continue executing our capital recycling strategy, which we will discuss in more detail in the next slide. Overall, our actions throughout the year reflect our ability to generate sustainable value across the platform. Slide six highlights our continued success in executing our capital recycling strategy throughout 2025.
We completed approximately EUR 340 million of disposals during the year at a rent factor of around 20, equivalent to a yield of 5.1%. Those transactions were spread across several locations, primarily in Germany, and carried out at around book value, resulting in a mere 1% capital loss in the year end and generating strong return over total cost, resulting in FFO II of EUR 350 million in 2025 in compared to EUR 205 million in 2024. On the acquisition side, we deployed around EUR 300 million at an attractive rent factor of around 13 or 7.7% yield. Those acquisitions were mainly in London and focused on high quality assets, including recently built or converted properties.
Over EUR 100 million of those acquisitions are expected to close in the coming periods, and our broad and established deal sourcing network continue to give us access to off-market opportunities at attractive pricing, allowing us to reinvest disposal proceeds into high-yielding assets with strong fundamentals. We continue sourcing attractive deals also in 2026 and acquired approximately EUR 75 million, which are expected to be completed in the next month. Overall, the disciplined execution of disposal reinvestment throughout the year demonstrate the effectiveness of our strategy. Maintaining leverage stable while continuously upgrading the portfolio and enhance long-term cash flow generation. In line with this, slide seven highlights again how GCP strategy has continued to adapt to market condition while consistently creating value.
In 2025, we have continued to successfully execute our strategy, reducing leverage as reflecting in our LTV of 31%, while at the same time increasing our annualized rent to EUR 429 million. Over the years, we have shifted from scaling through disciplined acquisitions to optimization the portfolio and strengthening the balance sheet. Looking ahead, we are well-positioned to capture both internal and external growth. Internally, significant value remain embedded in the portfolio through a reversionary potential of 21% and continued operational improvements. Externally, our strong sourcing networks support both strategic disposals and target acquisition, with accretive deal executed in 2025 and 2026 supporting future growth. Overall, our strategy remains defined by disciplined growth, balancing opportunity with conservative financial reports, and creating value across market cycles.
On slide eight, we present an overview of the successful execution of our perpetual note transaction, which further improve our capital structure and reduce market risks. In last December, we issued EUR 600 million of new perpetual notes at a coupon of 4.75%, while simultaneously buying back the same amount. Around EUR 500 million of those were notes with materially higher coupon revenues, resulting in an annual coupon saving of around EUR 7 million. In addition to the EUR 500 million, we repurchased EUR 100 million of the 1.5% perpetual note that have their first call date in 2026. Proactively targeting the refinancing of the notes and reducing potential negative impact from the market volatility.
Following those actions, the overall perpetual notes balance remain at the EUR 1.2 billion, while the average coupon decreased from 3.4% to 3.1%, with the reduction allowing us to partially offset the expected increase from the full refinancing of 2026 perpetual notes in the coming months. This transaction demonstrate the strong investor demand, our proactive approach to financing management, and our commitment to maintain a conservative financial profile. The refinancing measures strengthening our balance sheet resilience, and we are supported of our S&P credit metrics. We will continue to manage our capital structure with the same discipline as market condition progress. On slide nine, we provide an update on our vendor loan activity, which have proven to be an effective and value-accretive component of our disposal strategy.
Since 2020, we have disposed of approximately EUR 2.2 billion of assets and provided around EUR 145 million of vendor loans, which were linked to around EUR 245 million of disposal transactions. At that time of disposal, we received the sale proceed in cash in the amount of around EUR 100 million, while for the remaining portion, we gave a short-term loan fully secured directly against the asset. As of December 2025, the loan was collected in full, and the entire vendor loan balance has now been repaid. Vendor loans have not only supported the successful execution of disposal, especially in period of limited buyer liquidity and longer financing process but have done so in a very in a way that benefit GCP.
Overall, our vendor loan have been proven to be a reliable and accretive tool supporting disposal activity, safeguarding values, and enhancing the flexibility of our capital recycling strategy. The vendor loan structure reflects on the strong reputation of the company as a deal maker, facilitating transactions successfully also when the market is challenging. Slide 10, we present an overview of our ESG rating across several leading agencies. Both S&P and Sustainalytics upgrade our assessment, placing us with the top nine and top fourth of our respective real estate peer group. ISS also improve our rating, confirming prime status and positioning us within the top 10% of the sector. We are also proud to announce that EPRA once again award us gold for our financial and sustainability reporting for the ninth consecutive year. Those awards reflect our continued progress in supporting our ESG performance.
The robustness and the transparency of our reporting and the effectiveness of our sustainability frameworks. Moving to slide 12 and 13, we provide some short highlights into the German and London residential market, where fundamentals remain very strong. In Germany, new construction activity continues to be quiet, particularly in metropolitan area. Permitting volumes have remained low and continue to be well below historical levels, signaling continued supply constraints. At the same time, demand remain robust, putting upward pressure on the rental levels as it can be seen in the positive results of the operation, mainly in the biggest city in Germany. As a result, supply shortages are expected to persist and mark vacancy levels should remain low over the medium term. Those dynamics continue to support rental growth and reinforce the resilience of our portfolio, where we recorded a new historical vacancy low.
On slide 13, we can see that the fundamentals in the London residential market also remain robust. Rental growth continue to be strong, supported by a more flexible regulatory environment that allows quicker alignment of the rents with market levels. Supply conditions in London remain tight. Planning application and approval have declined material, construction activity is running well below the level required to meet structural demand. As a result, we expect continued supply constraint in the medium to long term. Those developments reinforce the strength of our London portfolio, we expect that solid fundamentals will continue supporting rental growth and the strong operational momentum going forward. Within London itself, we have seen variance in trends, with the trend in central and higher price growth being weak. Whereas the more affordable boroughs has been strong growth, where the vast majority of our portfolio is located.
Turning to slide 14, we provide an overview of our portfolio. As of the end of December, our investment property portfolio totaled EUR 8.9 billion. Berlin remain our largest location at 23% of the portfolio, followed by London at 21%, NRW at 19%, and Greater London at 14%, with the remainder spread across other strong metropolitan areas. Slide 15 highlights the solid operational dynamic of the portfolio, supported by both in-house property management and market fundamentals. In-place rent continued to growth and reach EUR 9.7 per square meter in December 2025. This corresponds to a compounded annual growth rate of 4.6% since 2021, and a 5% increase compared with December 2024. Total like-for-like rental growth was 3.5%, 3.6% in Germany, and over 3% in London.
The portfolio has an annualized net rent of EUR 429 million, compared with an estimated market rental value of EUR 519 million. The 21% gap indicates, on one hand, the remaining upside that can be captured through reletting and operational improvement and, on the other hand, the limited downside of the portfolio. Those trends reflect steady progress in aligning existing rent with the market conditions while maintaining consistently high occupancy rates. On slide 16, we provide an update on the valuation of our portfolio. The year-end valuation was carried out by independent qualified internationally recognized valuers, who performed a full revaluation of all our portfolio.
For 2025, we recorded a positive like-for-like value revaluation of 3.2%, with valuation driven by rental growth, while yield as well as discounts and cap rates remained stable compared to 2024. As of December 2025, the average rent factor was 20.5, corresponding to a yield of 4.9%, same as the end of 2024. The average value per square meter increased to EUR 2,335, which remain conservative for the estimated replacement cost. When reviewing the portfolio on a like-for-like basis and adjusting for the impact of transaction over the years, the current yields are at the same level as in 2018, which was eight years ago. This stability reflects the conservative nature of our valuation.
Historically, valuation movements have been relatively modest, with increases driven primarily by rental and operational performance rather than by market-driven revaluation. Slide 17 provides an overview of our diversification within the broader residential segment. We operate in senior homes and short stay or service apartments, which offer different lifestyle and living concepts, which support additional income stability, exposure to different demand drivers, while capturing higher rents. Senior homes offer diversification and stable income supported by strong market fundamentals. With Berlin being our largest location within this asset class, senior homes account for 6.1% of the total rental income. Those properties are operated by experienced third-party operators under fixed long-term rental contracts. Short stay and service apartments generate additional value through long-term fixed lease and management agreements with established operators. This category contributes 1.8% of the GCP total rental income.
Together, those two segments illustrate how the company extend its income base within the living sector, balancing the business with complementary concepts that have higher return and exposure to different customer groups. Slide 18 present our high-quality London portfolio, which account for 21% of the total portfolio. The assets benefit from strong locations, excellent transport connectivity and high demand. This is reflected in a strong operational performance with occupancy at 97% as of December 2025. London lower regulatory environment also supports faster revisions to increasing market rental levels. The market continues to show solid fundamentals that enhance both income growth and diversification. A component of the portfolio is the social tenant and HMO segment, which provide additional cash flow stability.
Those units are leased to a local operator with extensive experience in the sector and strong relationship with over 60 local authorities, charities, and housing associations, with rents generally linked to inflation. Social tenants represent 9% of the total rental income. Overall, the London portfolio combines strong market fundamentals, resilient occupancy, and diversified income streams, making it an important contributor to the group performance. Slide 19 gives an overview of how GCP drives innovation across the organization by both investing in and adopting real estate technologies at scale. Our approach combines access to venture-backed solutions with the ability to adopt new tools directly into our operation, helping us to streamline processes, improve efficiencies, and support our ESG objectives. Two of such success stories are Enter and VARM. Enter support us with data-driven energy efficiency services, including audits, contractor sourcing, and renovation planning.
Their work has enabled targeting improvement measures across the portfolio and contributed to increasing the share of regulatory-ready assets from 78% to 84%. VARM provides tech-enabled insulation solutions designed to reduce time to installation and improved energy performance. By using their cloud-based installation model, we benefit from faster execution, higher insulation impact, and more efficient sourcing and delivery processes. Together, those partnerships illustrated how tech solutions can result in more efficient enhancement and our operational performance and support long-term value creation. Continuing from the innovation example on the previous slide number 20 shows how those initiatives are already translating into measurable improvement in the quality of our portfolio. The work supported by Enter and VARM, together with our broader energy efficiency program, has helped us increase the share of regulation-ready assets from 78% in 2024 to 84% in 2025.
This represents a 6% year-on-year improvement. Our portfolio is now positioned well ahead of the German average, both multi-family and for a total residential stock. This stronger EPC profile directly lowers regulatory risk and provides greater resilience as energy efficiency rules continue to tighten. We have also made significant progress in CO₂ emissions reduction. This positions us well to reach our emission reduction target well before 2030, decreasing potential risk related to CO₂ tax. The progress achieved in 2025 reflects both ongoing improvement measures and the benefit of early technology-driven intervention. With this foundation, we expect to continue evolving the quality of the portfolio in the coming years. Thank you. Now I will hand over to Idan.
Thanks very much, Refael. On slide 22, we present our P&L results for 2025. Net rental income amounted to EUR 429 million, primarily driven by strong like-for-like rental growth and acquisitions completed during the period, partially offset by the impact of net disposals. Adjusted EBITDA increased by 1% to EUR 340 million. The company recorded a one-off deferred tax income in 2025. This was the result of the positive impact related to changes in the income tax in Germany, effective from January 2028, where the rate is gradually reduced from currently 15% to 10% by 2032. As a result of which, the deferred tax impact of past positive revaluations has reduced, resulting in a one-off deferred tax income in the current period.
This positive impact was partially offset by the deferred tax expenses connected to the positive revaluation result in the year. We recorded a profit of EUR 588 million in 2025, compared to a profit of EUR 242 million in 2024. This was primarily due to the strong operational results as well as positive portfolio evaluation recorded in 2025 and the one-off deferred tax income, partially offset by a higher finance expenses and other financial results. Basic earnings per share for the period came in at EUR 2.67. Turning to slide 23, our FFO I and II results. In 2025, FFO I amounted to EUR 188 million remaining stable primarily as a result of higher adjusted EBITDA and slightly lower perpetual notes attribution, which were offset by higher finance expenses.
FFO I per share was EUR 1.06, slightly lower compared to EUR 1.08 in 2024 due to slightly higher average number of shares outstanding. FFO II came in at EUR 351 million, higher than EUR 205 million in 2024, driven by higher profit margins on disposed properties combined with a larger volume of disposals. On slide 24, we present an update on our maintenance and CapEx activities. Our focus remains on enhancing the overall asset quality of the portfolio. Total investments amounted to EUR 26.8 per square meter compared with EUR 25.8 per sq m in 2024. We have seen a slight 4% increase in the investment per square meter, which is the result of a slight cost inflation as well as a large investment program.
Of this amount, EUR 20.9 per square meter relates to repositioning CapEx and EUR 5.9 per square meter to maintenance. We invested EUR 27 million in pre-letting modifications. These investments include the creation of new rental space and other measures that fall outside repositioning CapEx and are intent to support additional rental income in upcoming periods. In 2025, we also invested EUR 3.6 million in modernization projects. These targeted upgrades are designed to improve the quality and appeal of our properties, helping to support higher rental levels. Examples include adding balconies, installing elevators, and upgrading technical infrastructure to ensure reliable power, water, and heating supply. Investments that aim to improving energy efficiency and reducing CO₂ emissions, such as window replacements and heating system upgrades are allocated based on the specific nature and scope of each project.
Adjusted FFO for this period was EUR 105 million, broadly unchanged from the EUR 105 million recorded in 2024. On slide 25, we present an update on our EPRA NAV metrics. EPRA NAV per share increased by 4% to EUR 28.9. EPRA NTA per share increased by 5% to EUR 25.6. EPRA NDV per share increased by 9% to EUR 23.3. The increase in EPRA NAV metrics was mainly driven by strong operational performance and a positive property revaluation recording during the year. The EPRA NDV also benefited from the one-off deferred tax income resulting from the change in Germany's tax regime. This effect was not material for the other NAV metrics as these already add back most of the deferred tax liabilities. Slide 27, we turn to our financial profile.
Following the deleveraging measures implemented during the year, our LTV ratio decreased to 31% from 33% at year-end 2024. The EPRA LTV ratio, which treats perpetual notes as debt, also improved, falling to 44% from 46% at the end of 2024. The interest coverage ratio stands at 5.2 x. In addition, EUR 6.4 billion or 71% of the portfolio remains unencumbered, ensuring strong access to bank financing. As of December 2025, cash and liquid assets total EUR 1.6 billion and as a result, we do not have a refinancing pressure for the upcoming future. Our cost of debt remained low at 2.1% with an average debt maturity of 4.3 years.
During the year, we repaid the remaining balances of the Series U and Series E bonds using existing liquidity. We also tapped the Series H bond maturing in 2032 by additional EUR 250 million. With this, allow me to hand over to Christian to conclude the presentation.
Thank you, Idan. As always, in the appendix of our presentation, you will find more detail on our strategy, our portfolio distribution, and some more data on the German and London housing market in general, ESG, financial policy, analyst coverage, and so on. On slide 29, I would like to conclude with our guidance for 2026. For 2026, we expect continued strong like-for-like growth as well as positive impacts from acquisitions, which should translate into a long single-digit increase in adjusted EBITDA. We note that around EUR 100 million of the acquisition signed in 2025 will be taken over later in 2026 and include newly developed units in London, which are expected to be let out in the periods after, therefore the impact on the P&L will be seen starting from 2027.
Net financing expenses are anticipated to rise, mainly due to lower interest income on the cash balance, partly offset by expected debt repayments. Perpetual note coupons expenses are also expected to be higher due to the expected refinancing of the EUR 600 million perpetual note with a first call date in 2026. Although this will be partly mitigated by the positive impact of the proactive perpetual note transaction completed in 2025. Accordingly, we guide for like-for-like rental growth around 3.5%. FFO in the range of EUR 175 million-EUR 185 million, translating one per share in the range of EUR 0.99-EUR 1.05. As always, we aim to maintain our strong balance sheet and will keep our LTV below 45%, which is our internal limit.
Thank you for your attention and allow me now to move to our Q&A.
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 these out. What is your latest assessment of the macroeconomic environment, and how do you see transaction activity for German residential assets?
We continue to observe the supportive environment underpinned by solid and structural supply and demand fundamentals in our portfolio. Demand for housing across our key location remains high, supported by several long-term drivers. Although we have seen an uptick in recent months on the number of permits in Germany, supported by the Bau-Turbo-Pakt regulations, supply remains constrained for the foreseeable future. These dynamics, in addition to the significant reversionary potential of our portfolio, support the gradual unlocking of internal rental growth. We have also seen positive developments in the transaction markets with our successful disposals in 2025, which have accelerated towards the end of the year, and in the market in general, which has become more liquid in recent periods, supporting us in executing accretive capital recycling measures, which will further support rental growth in the coming years.
Can you please comment on the potential implication of the war in the Middle East on GCP and its business?
We are following the news and the events in the Middle East closely, which could potentially have ripple effect that could have several implications for Grand City Properties and its business. It is too early to estimate the impact, but in general, geopolitical instability in the region increases market volatility, affects investor sentiment and potentially disrupt global supply chains. We highlight our very strong balance sheet, little refinancing needs in the upcoming periods and high cash balances, which provide GCP with extra protection in case of a significant market downturn.
With the Bau-Turbo-Pakt advancing towards practical implementation and the government drafting a new tenancy law, how do you assess the impact of these regulatory developments on your operations?
We see both developments as broadly supportive for our long-term operating environment. On Bau-Turbo-Pakt , the direction remains positive. The framework aims to streamline planning and approval processes, reduce bureaucracy and enable faster conversions or densification. While the ultimate impact will depend on how effectively municipalities implement it, we view the initiative as helpful for improving the social pressure over time and thus supportive for our business. Regarding the tenancy law change, it is still within drafting and it's too early to estimate the implications, but currently, we expect the impact on our business to be immaterial. The proposed cap on indexed rents is immaterial given the immaterial portion of indexed leases in our portfolio and our rental growth within the Mietspiegel framework remains unchanged.
The new rules for short stay furnished units also do not meaningfully affect us. Less than 2% of our rental income comes from short stay and serviced apartment tenants, of which around half are located in London. As a fallback position, we can always change the concept into a long-term contract. Overall, the regulatory changes do not alter the fundamentals of our operations or our rental growth outlook.
Can you please elaborate on the like-for-like rental growth? In which regions do you see growth? How do you see the market developments? What is your expectations for the performance going forward?
For 2025, we recorded like-for-like rental growth of 3.5%. This was driven mainly by in-place rental growth, which accounted for 3.3%, as well as occupancy growth contributing 0.2% to the like-for-like rental growth. Indexation accounted for 1.5% in the period. Vacancy in our portfolio remain very low at a rate of 3.6%. As always, we are proud that this rental growth came at a high accretive to cash flow. It is not the product of significant modernization project or new construction. We recorded like-for-like rental growth across all our regions, with total like-for-like rental growth reaching 3.6% in Germany, reflecting the positive long-term fundamental across all our portfolio location. The highest increase were recorded in Berlin, Cologne, Wuppertal, Mannheim, Frankfurt, as well as Dresden, Leipzig, and Halle.
Rental growth in the London portfolio remain robust at 3.1%, stabilizing at a good level after a period of high growth. Vacancy in the London portfolio remain very low at 2.7%. We expect to continue unlocking gradually the significant reversionary potential in the portfolio through reletting in the coming years. The operating environment remains supportive, positioning us well to continue growing. We anticipate like-for-like rental growth for the total portfolio of above 3% for the foreseeable future. In our London portfolio, vacancies has reached structurally low level of just above 2%, the substantial rental increase capture in recent periods are gradually reflected in the in-place rents. As a result, we expect rental growth to align more closely with our German operation.
Could you update how you are approaching acquisitions and disposals in the current market environment?
Our external growth strategy remains focused on disciplined capital recycling and selectivity, capturing opportunities where we see high value creation potential. Overall, the backdrop continue to improve, although not uniformly across markets. Transaction activity is gradually picking up. We expect market tailwinds to increase as financing conditions stabilize and investment volumes increase. In the German market, unique opportunity remain relatively limited. We therefore continue to see fewer accretive opportunities. We do expect more activity once certain funds vehicle approach the end of their life cycle. At present, the environment remain more constrained relative to other regions. In London, by contrast, we continue to see convincing opportunities. Smaller player, particularly developers, remain under pressure due to shorter financing cycle and higher refinancing needs. This is creating a window for us to acquire high quality, well-located asset at attractive pricing.
Furthermore, we see closed-ended funds coming into the market, pressure to sell. Our strong reputation and preferred buyer status help us to secure deals at discount to comparable market transactions. The acquisition we have already signed will begin contributing in 2026. Capital recycling remain a strong strategic driver for us and continues to support both operational performance and returns. We view capital recycling as the most equity accretive strategy in the current market, where the recovery in the market is not symmetric, and accordingly, we have competitive advantage both when we buying and when we sell. In the reporting period, we execute around EUR 340 million of disposals, mainly in NRW, Bremen, Frankfurt and other non-core location, at an attractive average factor of around 20 over net rent.
Over the same period, we acquired around GBP 300 million of high-quality residential asset in London at attractive yields, with an average acquisition factor of 13 over the net rent, including new build turnkey properties in London, which we expect to take over in tranches in 2026 as the properties near completion. This disciplined recycling of capital enable us to shift from lower-yielding asset into high-quality asset with higher yield and stronger upside potential. After the reporting period, we signed additional acquisition amounting to around EUR 75 million in Germany. We also note that we do not set disposal volume targets. Our acquisition and disposal strategy remain opportunistic and guided by asset quality, value creation potential, and FFO creation. We will continue to dispose our asset if pricing remain attractive and if we can recycle and proceed into high-quality acquisition at better yields.
As the asset we are acquiring come in with strong operating margins and attractive yields, we expect acquisition to become a net contributor on an EBITDA basis over the coming period, mostly from 2027 onwards. Overall, the direction of the market is contructive, but our focus remains on disciplined acquisition, maintaining balance sheet strength, and pursuing high quality accretive external growth where condition is favorable.
Could you provide some further details on your revaluation result for FY 2025?
We completed a full external valuation at the end of the year. The results continue to reflect the strong operational momentum in the portfolio. For 2025, we recorded a like-for-like value growth of 3.2% excluding CapEx, driven mainly by the strong operational performance of the portfolio. Accordingly, yield and discount capitalization rates have remained stable year-over-year. Our yield remains conservative at 4.9%. It is discount rate at 5.4% and capitalization rate at 4.2%. This operational performance has more than offset the remaining market uncertainty, and yields have remained broadly stable, which also supporting the positive outcome. Looking ahead, we expect organic value growth to continue in line with the fundamental of the business. The underlying drivers remain intact. Low vacancy, consistent rent reversion, and stable yield environment.
At the same time, we are seeing a continuous improvement in transaction activity, and we expect this to accelerate further in 2026 as the market recovery becomes more pronounced and investment volume pick up. On a like-for-like basis, our current rental yield similar to the rental yield of 2018, reflecting our conservative valuation approach and that the portfolio is geared for growth.
How do you view your current leverage position? Do you expect significant changes?
We have improved our leverage further in 2025, with the LTV reaching a conservative ratio of 31% as of December 2025, lower compared to 33% in December 2024. The EPRA LTV ratio also reduced to 44%, down from 46% in December 2024. The reduction in leverage was supported by net disposals and positive revaluation. While our leverage metrics put us in a strong position to capture external growth, we expect to continue unlocking external growth mainly through capital recycling in the coming periods. As always, preserving a conservative financial profile remains a core pillar of our strategy, which we view as a key element in the company's success.
Have you seen changes in your financing conditions in recent months?
We continue to maintain a strong access to capital markets, and we continue to see low spreads on our bonds, which are currently below the margins offered on secured bank financing. In general, the capital markets closed very strongly in 2025, with many large issuances at attractive pricing, and 2026 has so far continued this trend. That being said, in 2025, we utilized both capital markets as well as our secured banking sources with EUR 250 million tap of our Series H bond maturing in 2032 and raising around EUR 100 million in bank financing with bonds and bank loans repaid during the year. Looking ahead, we are under no near- term need to raise new debt given our strong liquidity position, which is more than sufficient to cover our 2026 bonds maturities.
That said, we may consider issuing debt in the context of a liability management exercise, provided market conditions remain supportive.
Could you give an update on your 2026 perpetual note call date, and what is your expectation here?
We conducted a successful perpetual note transaction in December in which we issued EUR 600 million at a coupon of 4.75%. We came back to the perpetual market with a new plain vanilla issuance for the first time in five years, we're very happy with the results and with the demand we have seen. The proceeds of the issuance were used to replace notes with higher coupons, as well as proactively tackling part of the refinancing of the perpetual notes for the next upcoming call date, which is in mid-2026. Accordingly, we have reduced the outstanding amount by around EUR 100 million, now remaining around EUR 600 million outstanding.
We aim to refinance the 2026 perpetual notes at or before the upcoming call date. Through the transaction in December and redemption options completed earlier this year, we were able to mitigate part of the higher coupon expenses, which we expect from the refinancing of the 2026 perpetual notes.
You have published your 2026 guidance. Can you provide some more details on the drivers?
We guide for 2026 an FFO I of EUR 175 million-EUR 185 million in total or EUR 0.99 or EUR 1.05 on a per share basis, reflecting nearly 10% yield over the midpoint on the current share price. The slight decrease in 2026 guidance compared to the 2025 results was expected mainly due to the refinancing of the EUR 600 million perpetual notes, which are currently bearing a very low coupon of 1.5%, which we have partially offset with a re-couponing exercise in December. Operationally, we expect momentum to maintain strong next year with like-for-like rental growth of around 3.5%. This positive contribution will be partially offset by the timing impact of capital recycling.
2026, we have the full period effect of 2025 disposals, while the full year impact of acquisitions will be only from 2027 onwards as around EUR 100 million of the acquisitions are signed and will be taken over in mid-2026. Most of the acquisitions were carried through TAC, their contribution to minorities will increase in 2026 compared to 2025. We expect the EBITDA margin to remain broadly stable as operational efficiencies remain high. As a result, we forecast a low single-digit increase in adjusted EBITDA. On the financing side, we expect higher finance expenses compared to 2025, mainly due to the refinancing effects in 2025 and lower interest income.
For the perpetual notes, as mentioned, we expect a higher coupon expense linked to the refinancing of the notes reaching their first call date in 2026, which is already partially mitigated by the perpetual note transaction we executed in December 2025. Overall, the underlying operations remain very strong. The year-on-year change in FFO I is largely driven by the timing of disposals, acquisitions and financing flows, rather than by changes in the operating performance of the portfolio.
Can you please shed more light on postponing the dividend decision? Would GCP change its dividend policy?
GCP has not decided yet on dividend payout for the year 2025 and will present its decision prior to the AGM invitation. The policy currently remains unchanged.
Can you please comment on your view on the offer of Aroundtown? Do you support the offer?
The offer is enabling Grand City Properties shareholders to move into a more dynamic company with stronger internal and external growth engines. The offer provides the participation in the long term value creation of a larger and more diversified real estate platform. The total premium is 7% over Grand City Properties yesterday's share price or 13% over the six months average, and is additionally accretive 20% in terms of NTA. As AT share is currently trading at a larger discount to NTA, offering GCP shareholders more EPRA NTA in AT than in GCP, increasing the upside potential. To support our decision, we received an external fairness opinion testing the exchange ratio on several metrics and parameters, which has validated that the offer is fair.
The offer allows GCP shareholders to exchange their shares for Aroundtown shares, which are significantly more liquid and are currently part of major indices such as MDAX and have the potential to be included in larger indices. GCP's board of directors and management welcomes the offer and subject to their review of the offer document, intends to recommend that shareholders accept the exchange offer.
How should minority shareholders think about the future positioning of GCP if Aroundtown's ownership increases to around 90%, particularly in terms of liquidity, governance and the long term listing status?
We expect the current governance and structure to be maintained as is. The offer did not suggest a change in governance. Liquidity is expected to be lower, which could result from exclusion from indices. If that is the case, we could consider down listing if it doesn't serve a purpose to be listed at Prime Standard.
Those are the questions that we received prior to this call. 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.
The first question comes from the line of Kai Klose from Berenberg. Please go ahead.
Yes, good afternoon. I've got, four questions, if I may. The first one is, could you indicate want to give more a split of last year's disposal volumes? You mentioned this also included condo sales. Maybe you could indicate what was the contribution to total disposals and what was the average gain on selling a single condo. Second question would be on the ICR in 2026.
We saw a 50 basis point decline in the last year, given the fact there's only a marginal increase in the EBITDA. What is your expectation by how much the ICR will fall in this year, and when do you expect it to trough, at which levels, in which year, and at which levels? Third question would be on the contribution from rents from commercial properties. Could you remind us how much that was? It is 11% of the asset base and how much was in rents from commercial properties? The last one is on the balance sheet. We saw a EUR 10 million increase in provisions. Could you indicate what was the reason for that? Is it because of ancillary cost reconciliation or other reasons? Thanks.
Hi, Kai. Thank you for your question. First on the disposals. Yes, we did have some condo sales, but I would say it's a relatively insignificant amount. The vast majority is from regular disposals of assets and multi-family houses. As to your second question, as the ICR, it's a bit hard to forecast where ICR is going. EBITDA, as we mentioned, is increasing, but interest expenses also are expected to increase slightly, given the issuances we did towards the end of 2025 and also on the back of a bit lower interest income. We do expect to see a small decline in ICR. We know now we're at a high level of over 5.
We have to see if we remain over five, but we expect to remain at a similar level. We believe that potentially we could reach already trough in 2026 or in 2027. Depends a bit on timing of financing, but we see EBITDA growing. As you know, we have big cash balances, no needs for refinancing in the near future. We expect EBITDA at some point to outpace interest expense growth. On the commercial in terms of rent, it's no big difference. We're around 10%, 11% rent contribution from the commercial portfolio. Regarding your last question, I think, we'll take that offline. I'll check the numbers and get back to you. Thank you. Next question.
The next question comes from the line of Manuel Martin from ODDO. Please go ahead.
Thank you, ladies and gentlemen. Two questions from my side, please. The first question is on the fairness opinion, would you be willing to share with us the name of the institution which gave the fairness opinion on the voluntary tender offer Aroundtown? The second question, the CapEx of Grand City, I think, has remained more or less unchanged year-over-year. Do you expect that to continue, or do you think CapEx might increase with the time? Thank you.
Hi, Manuel. Thank you for your question. The fairness opinion was received by Big Four, one of the Big Four institutions. As to the CapEx, your second question, CapEx has remained stable. On a per square meter, we saw a slight increase of 3%-4%. We expect to see similar levels going forward, so we don't expect to see a big change in CapEx. Thank you.
Okay. There seems to be no further questions, so I would like to thank you very much for your participation in this call and the questions that you raised during and before the call. We, from our side, wish you well and hopefully meet in one of the future conferences or other occasions. Thank you very much and all the best. Bye-bye.