Hello, good morning to everyone. Thanks for joining us today. In the name of GCP, I kindly welcome you to our results call for H1 2023. With me today are CEO, Refael Zamir, CFO, Idan Hadad, Chairman of the Board of Directors, Christian Windfuhr, COO, Sebastian Remmert-Faltin, and Senior Financial Analyst, Michael Bar-Yosef. Christian Windfuhr, Refael Zamir, and Idan Hadad 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. 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 for your questions is info@grandcity.lu. With this, I will hand over to Christian Windfuhr to begin with the presentation.
Thank you, welcome also from my side to our financial results presentation for the first half of 2023. Before we dive into the results, we wanted to briefly discuss the current environment and key impacts this has had on our company. On the operational side, the underlying market drivers continue to be supportive. The supply-demand imbalance continues to widen, as demographic trends continue to support demand, and higher financing costs lead also to a higher demand for rentals, as mortgage has become more expensive. At the same time, many construction projects remain on hold or have been canceled, and fewer new projects were started. This has provided a tailwind to our operations, supporting further increasing rents and occupancies.
On the flip side, transactions and capital markets remain impacted by the higher interest rates, which makes financing more expensive and time-consuming, and reduces transaction volumes. This has put downward pressure on property values and increased uncertainty. In light of this, we decided to do a full portfolio revaluation in order to reduce some of that uncertainty and bring our portfolio up to date, the results of which we will discuss in the upcoming slides. On the transaction side, we continue to execute disposals, which remains more difficult.
However, our strong deal sourcing network, geographical diversification, and especially the continued hard work of our experienced transaction team, has allowed us to sign additional disposals. As a result of the combined impacts of solid operational performance, continued disposals, and the suspension of our dividend, we were able to further strengthen our liquidity position and offset the impact of negative revaluations on our leverage, which we were able to keep stable compared to year-end 2022, thereby positioning us well to deal with the current environment.
With that, let us start on slide 2. As just mentioned, you will note that the first half of 2023 was marked by continued strong operational results. Net rental income and adjusted EBITDA increased by 5%. These operational results were supported by our like-for-like rent increase of 2.7%, driven by 2.4% in-place rent growth and 0.3% occupancy increase, reaching to a new record low vacancy of 3.9%. FFO I was slightly below last year, mainly because of higher finance expenses. We will touch on each of these parameters in more details further in the presentation.
As we have seen continued strong operational performance and a reduction in some of the risks we identified earlier, primarily in relation to affordability issues for tenants, we have slightly updated our guidance, which we will discuss at the end of this presentation. With this quick introduction to the highlights, allow me to hand over to Refael Zamir, who will guide you through our H1 results in more detail.
Thank you, Christian. Let me start with slide three, presenting that the company is well positioned in the current environment, with increased liquidity, low leverage, and with very large headroom to bond covenant. During H1 2023, we have been working hard to follow our strategy of preserving cash and managing our balance sheet, which was successful due to our ability to continue disposals, receive new bank finance, which both improve our liquidity position. The bond buyback launch in Q2 slightly supported our de-leveraging. Although we would have liked to buy back bigger portion of the bond, we are encouraged that our bondholders are happy in their position and don't wish to sell a bigger portion of their stake at the current prices. We were able to sign disposal amounting to EUR 130 million in the first half of the year.
We will close disposal amounted to EUR 250 million in H1 2023. At the same time, our consistent effort and good relations with our banking partner result in EUR 220 million of signed loans in the first half of 2023. The loan was signed at an average maturity of around 8.5 years and at an average margin of 1.3% over Euribor. We continue to work for further secured financing, as we see this source as a cheaper source in the current environment. Accordingly, we signed additional loan amounting to EUR 230 million in Q3 so far. This place us in a strong liquidity position with EUR 750 million cash and liquid asset as of June 2023.
Cash and liquid asset, therefore, amount to 18% of the total debt, and cover debt maturity until Q2, 2026. Supported by undrawn RCF. As mentioned earlier, we were able to offset the impact of the negative revaluation result on our MTV, which we see as an important achievement. Leverage remains stable compared to December 2020, as 36%, despite portfolio devaluation due to our successful de-leveraging efforts. Our average debt maturity as of June is 5.7 years, and 91% of debt is fixed or interest hedged . As of June 2023, the company still holds EUR 7.7 billion, reflect of 83% of value of unencumbered assets, which provide us additional access to attractive bank financing, which as I mentioned, already partially signed after June.
Our cost of debt is 1.6% at the end of June 2023. Our interest coverage ratio is 5.8 times. Our credit rating is BBB+ by S&P, which was affirmed in June 2023. However, the outlook was revised to negative. Turning to slide 4, let me review the operational profitability. The 5% net rental income increase against previous year, came mainly from the like-for-like rental growth and impact of acquisition made in the past periods, offset by disposal, which had only partial impact in this period. As already mentioned before, our like-for-like net rental growth was 2.7%, of which 2.4% came from in-place rent growth and 0.3% from occupancy growth.
Property operating expenses increased by 25%, mainly due to inflation in the net recoverable expenses, such as heating and energy costs. This is in line with the increase in the operational income, which mainly refer to recoverable expenses charged to the tenant. Despite the strong cost inflation, we were able to increase adjusted EBITDA by 5% as well, reaching EUR 160 million as a result of our efficient management platform. The loss for the period came primarily as the result of the negative property revaluation, which offset our robust operational profit. On slide 5, allow me to summarize for you the FFO I and FFO II.
Even though the adjusted EBITDA increased by 5% against previous year, this increase was offset by higher finance expenses as a result of higher interest, as well as higher attribution to perpetual note, resulting in a lower FFO I. The additional decrease in the FFO I per share, resulting from additional shares from the scrip dividend issue in 2022, which allowed the company to retain cash. For FFO II, we disposed EUR 250 million of properties in the first half of 2023. The properties were sold at a slight discount to book value of 3%, but allowed us to crystallize a gain of 16% over total cost, and generate results from disposal amount to EUR 34 million, resulting in an FFO II of EUR 128 million.
On slide 6, you can see our EPRA NAV metrics. On the per share basis, EPRA NAV per share and EPRA NTA per share came down by 8% and 9% respectively, during the first half of 2023. While EPRA NDV per share came down by 10%. Comparable percentage of reduction, we also experienced in a total EPRA NAV metrics. The decrease is due to a negative devaluation, offset by positive operational profits. As a reminder, we update the methodology of the EPRA NTA to exclude the rent. Our investment property value decreased by 6% during the first half of 2023, to EUR 9 billion, as a result of aforementioned revaluation and disposal, offset by investment into the portfolio.
Our annualized net rental income of EUR 398 million at the end of H1 2023 has an upside potential of 17% based on the current market rent prices, which amount to EUR 465 million net rental income, once the full market potential is reached. Our reversionary potential remain high. We know that we were able to capture part of this potential in recent periods through rent and occupancy increase. However, due to the expected lower tenant turnover, we expect to extract the remaining potential over the medium to long term. On the other hand, we expect that the Mietspiegel will increase in our main area in the coming periods, further increasing the upside potential in the mid to long term. In total, we have around 63,400 units at the end of H1 2023.
Vacancy have reduced further to 3.9%, increase rent grew to EUR 8.4 per square meter. We have seen vacancy decrease across our portfolio. The vacancy in London also reduced further to 3.2%, compared to 3.8% at the end of 2022. You can find more details on our portfolio in the appendix of the presentation. On slide 8, allow me to present you an overview of our property valuations. As of June 2023, the company revalued its full portfolio in order to reflect the most updated situation of its fair values. During H1 2023, we recorded like-for-like valuation decrease of 5.4%, excluding CapEx, and 4.8%, including CapEx, compared to the year-end value of 2022.
The decrease is driven by higher discount rate because of higher interest rates. The average discount rate increased to 5.1% from 4.8% in December, and average cap rate increased to 3.9% from 3.8%. The difference in the increase between the discount and cap rate is reflective of the current rate environment, with higher uncertainty and a more pessimistic view in the near term, impacting the discount rate more. The cap rate relate to the projected stabilized NOI in the terminal year of the DCF, and is impacted more by the long-term market perspective, which remain more positive. Exception, in H1, 2023, was partially offset by solid operational growth, driven by like-for-like rental growth, supported by the systematic supply-demand imbalance in key metropolitan city in Germany and London.
Grand city value per square meter in Germany only is EUR 1,866, which is less than half compared to EUR 4,200, the median replacement cost per square meter. The significant gap to replacement cost provide us with a strong downside protection. Please move to slide 9, where we can see the maintenance and CapEx slide. Maintenance and repositioning CapEx increased by EUR 1 to EUR 11.9 per average square meter for H1 2023. This amount includes EUR 2.9 for maintenance only, which also is slightly above the previous year period. Repositioning CapEx amount to EUR 9 per average square meter and is directed toward improving the asset quality and supporting the letting activity. The repositioning CapEx also include investment into the surrounding of the our assets.
The CapEx per square meter for H1 2023 was higher than in H1 of the previous year by 8%, mainly because of cost inflation. Going forward, we expect to remain on this level of CapEx investment, which enable us to extract the internal upside in our portfolio while maintaining the quality of our assets. Additionally, we invested around EUR 4 million in modernization, compared to EUR 2.5 million in H1 previous year. We also spent EUR 10 million in pre-letting mitigation in the period, lower than EUR 30 million in the pre- first year of 2022. Investment related to energy-efficient and CO2 reduction, such as the replacing windows and heating system, are attributed to the above categories, depending on the project specified and are not in their own category. Selectively, we also install solar panels on our roofs.
The AFFO for the first half 2023, amounted to EUR 56.4 million, compared to EUR 63.2 million during the same period previous year. Now, please let me hand over to Idan.
... Thank you, Refael. Moving forward to our financial policy, highlighted on slide 10. Our conservative financial profile has been maintained and reinforced, and we have been focused on repaying short-term maturities. As you can see on this slide, we maintain significant headroom to all our covenants. This has given us the flexibility to navigate the current uncertainty with relatively low refinancing pressure. We know that all our covenants are based on IFRS reported numbers, with perpetual notes being recognized as equity. The perspective of S&P and the other rating agencies on the equity content of the perpetual notes are not relevant and have no impact on our covenants. While we have decided not to pay the 2022 dividend, we would like to point out that our dividend policy remains at 75% of our FFO I per share going forward.
That being said, also in the future, dividend payments will remain subject to market conditions. On slide 11, we review our strong financial profile. As highlighted earlier, our LTV remains steadfast at 36%, maintaining its stability from the close of 2022, well within the 45% Board of Directors limit. EPRA LTV, which includes perpetual notes as debt, is 47%. The net debt to EBITDA is 10.4. Our cost of debt is 1.6%, and the interest hedging ratio is 91%. This reduces the impact of interest rate changes on our cost of debt for the next period.
The increase in our cost of debt in recent periods has been the combined results of higher rates on debt that is variable or interest capped, the expiry of some hedging impact, as well as the addition of new bank debt with long maturities and the repayment of near-term debt with relatively lower rates. Unencumbered investment properties are EUR 7.7 billion and 83% of value, giving us good financial flexibility with more favorable bank financing, which is well below bond yields. Our interest coverage ratio is 5.8 times, significantly higher than the bond covenant of 2 times. On slide 12, we present our debt maturity schedule of 5.7 years on average, slightly below the end of 2022 value.
As you can see, there are no upcoming maturities until 2024, and cash and liquid assets cover our debt maturities until Q2 2026. For more complete information, we added the cost of debt of maturities. Before I close, let me point out to you that in the appendix of this presentation, we continue to give you, among other information, more updated detail regarding ESG and sustainability, which is also well covered in various documents of, on our website. Our full sustainability report can be downloaded from our website. Let us move to slide 13 and the updated guidance.
Following the strong operational performance, we slightly updated the guidance of the net rental like-for-like growth over, to over 2% from 1%-2% previously. We expect a slightly higher EBITDA for 2023, which also has a positive impact on the FFO I and FFO I per share guidance. The updated FFO I guidance is EUR 175 million-EUR 185 million, increased from EUR 170 million-EUR 180 million in our previous guidance. FFO I per share is accordingly updated to EUR 1.01-EUR 1.07. We note that the FFO I for H2 2023 is expected to be lower than H1 2023, as we expect to see higher interest expenses from financing and higher expenses from the perpetual notes, with call date in October 2023, which will either be reset or refinanced at a higher rate.
We don't suggest to annualize H1 2023 when forecasting full year 2023. As to the leverage, we expect to keep the LTV well below our 45% internal limit. Thank you for your attention, allow me now to move on to 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. Could you provide some details on the residential market in Germany and London? What are the impacts on your operations? Do you continue to see potential operational headwinds?
Looking at the fundamentals from the operational perspective, we continue to see the positive trends we have seen in recent periods and expect these trends to be supportive long term. Demographic changes, such as population growth, migration, and urbanization, continue to drive strong demand in metropolitan areas. Supply remains highly constrained, with construction costs remaining very high and high interest rates and cost of capital further impacting profits for the new construction. At the same time, demand is also supported by the higher interest rates, making rental more attractive in comparison to mortgage buying. In London, we see similar trends with high demand and low supply and a higher shift into rental from ownership. In recent periods, we have seen the impacts of these drivers accelerate, resulting in increases in market rental levels and significant reductions in available supply.
These trends are also reflected in our own operations. We have recorded total like-for-like rental growth of 2.7% as of June 2023, vacancy has decreased further, standing at 3.9% as of June 2023, another record low for the company. This is also the result of reduced tenant turnover, as we are seeing people stay in their apartments for longer at lower rents than the market rents, which they would have to incur once they move. At the same time, the macroeconomic environment remains uncertain, and we remain cautious for the coming 12-18 months. On the back of slightly better than expected operational performance, we have slightly increased our like-for-like rental growth guidance to over 2% and our FFO guidance range to EUR 175 million-EUR 185 million.
Could you provide some details on the rates you're currently seeing for secured financing? Could you provide some more information on the increase of your average cost of debt, and how do you expect it will develop?
In 2023 so far, we have secured EUR 440 million in bank loans, EUR 190 million drawn within the first half of the year. These loans have maturity periods ranging from 5 to 10 years, carrying an average margin just over 1.3%. They are secure with an average LTV of approximately 50%. Our engagement with the various banks remains ongoing, and we maintain a substantial pipeline totaling EUR several hundred million. This pipeline offers the potential to further bolster our liquidity. It's worth noting that the process of securing bank financing now takes longer than in previous periods. However, bank financings continue to emerge as a relatively favorable avenue to increase liquidity at more favorable rates compared to the capital markets. While interest rates have increased recently, we are of the opinion that we are approaching the peak.
As of June 2023, our average cost of debt has risen to 1.6%. This is primarily due to a combination of higher interest rates on new debt and a smaller portion of existing debt that carries variable interest. Our liability management strategy included repaying shorter-term, lower-cost bonds and replacing them with new, longer maturity debt at higher rates. Additionally, several debt instruments where the interest hedging expired, and as a result, the rates for these instruments increased. Consequently, we anticipate that our cost of debt will result in higher interest expenses moving forward.
Could you provide some more color on your like-for-like rental growth? What was the like-for-like in London? What were the key drivers? What are you expecting for the rest of the year?
In H1 2023, we have seen continued solid like-for-like rental growth, as well as continuation of long-term market trends that are supportive to the portfolio in the mid to long term. At the beginning of the year, we conservatively assumed a lower like-for-like growth, primarily related to affordability issues for the tenants and lower tenant turnover. The reduction in tenant turnover did materialize as expected, limiting our short-term ability to capture market rents through a re-renting. However, we were happy to see that so far, the affordability issues have not materialized in any significant way. As a result, we saw like-for-like rental growth amounting to 2.7% as of June, which was driven by 0.3% in occupancy increase and 2.4% from in-place rental growth.
The in-place rental growth is driven by 1.1% from indexation and 1.3% from re-renting. We saw strong performance in most of our core locations, especially in Hamburg, Bremen, and Nuremberg-Fürth, where we saw both strong vacancy reduction and rent increase, as well as in NRW and Dresden, which benefit from strong in-place rental growth. In London, we have seen a total like-for-like growth of 4%, 3% from rent increase, and 1% from occupancy increase. As like-for-like has remained solid, we increased our conservative like-for-like guidance to over 2% for 2023. In the midterm, we continue to expect higher like-for-like growth as we continue to capture the reversionary potential embedded in the portfolio.
Could you provide some info on the Mietspiegel changes so far in 2023? What are your expectations for the upcoming periods? What are the implications for your rental growth?
So far, we have seen significant increases in the Mietspiegels across most of our locations, where new Mietspiegels have been published in line with expectations. The increases come on the back of both strong market rent increases as a result of the wide supply and demand imbalance. We expect also higher Mietspiegels in the coming periods, as well as the coming years, as the impacts of the high inflation will be spread over several years.
... That being said, due to the complexity and divergence of different Mietspiegel calculations, we can't provide a forecast. While we expect significant adjustments, we do not want to speculate on the Mietspiegel until it is actually published, as it is a highly political issue on which we don't have an impact. We see the increase in the Mietspiegel, particularly impacting our mid to long-term rental growth potential, as it allows for faster capture of the embedded reversionary potential.
Could you provide some details on your revaluations in H1, 2023? What are your expectations for the remainder of 2023?
We revaluate externally the full portfolio in the first half of 2023. We usually do not value the full portfolio as part of the semi-annual report, due to the changes in the market in the last period, we have decided to bring our portfolio to the most update fair value and reduce the uncertainty regarding valuations. We recorded negative revaluation amounted to over EUR 530 million, which reflect a like-for-like value decline of 4.8%, including value contribution from CapEx. Excluding this contribution, the like-for-like decline was 5.4%. As always, the valuation were done by independent external valuators. Devaluation were seen across the full portfolio and not limited to specific location, as the devaluation were driven by higher discount and cap rates, increasing to 5.1% and 3.9% respectively.
Looking forward and following our dialogue with our main valuators, it is too early to provide a clear direction for the valuation going forward, which potentially may be negative impacted further from increased interest rate and other macroeconomic events. The valuers do believe that the German residential sector is expected to maintain its resilience due to the robust operational performance across the industry, and together with the low supply in the market, softening the impact of the increase in the interest rate.
Could you provide us with further details on your disposals? Where did you dispose and at what multiple? How do you see the current market, and do you maintain a pipeline?
In H1 2023, we successfully signed EUR 130 million of new disposals. The signed disposals include properties in London, as well as in NRW and non-core location in Germany. In this period, we called disposal amount to over EUR 250 million, relating to approximately 1,000 units sold at an average NOI factor of 25, which reflect 3% below book value on average. The main disposal comprised properties in London. There, we sold approximately 650 units, compromise a mix of mature properties, social housing, and developments. We additionally sold properties in Germany, comprised over 350 units, mainly non-core and mature properties in NRW, East Germany, as well as land plot in Berlin. The disposals include a vendor loan of around EUR 60 million, and the remainder of the disposal proceed further improve our balance sheet.
The majority of the impact of the rental income of the disposal was already included in the guidance. The transaction market remained very challenging in comparison to previous periods, especially in Germany. While there is some demand for smaller transactions, large conventional deals are not at the same scale as previous years. The buyer take more time to decide whether it's a good time to invest in real estate, and their due diligence process, as well as financing process, take longer. The London market is a bit more mature, which is also reflecting our higher transaction volume in this market. We currently have asset held for sale amounting to nearly 200 million, of which EUR 60 million are already signed.
We expect to execute the remaining held for sale portfolio in the coming 12 months, and may dispose further assets that allow us to crystallize the embedded value in the, and improve our liquidity further.
The company has a high amount of liquidity. What do you plan to do with the proceeds from disposals and new financing? Do you plan further liability management in the upcoming periods?
To date, we have executed bond buybacks totaling approximately EUR 90 million, achieving an average discount of 8%. This move has enabled us to further mitigate our near-term debt maturities. We continuously monitor the market. When favorable conditions arrive, we remain open to the possibility of engaging in further debt management activity in the time ahead. At this juncture, we recognize the importance of bolstering our liquidity. We are steadfast in this pursuit. A heightened level of liquidity not only safeguards the company, but also furnishes us with a heightened degree of flexibility.
Our strategic objectives revolve around leverage reduction and the extension of our debt maturity timeline.
LTV remains stable in the period. Are you planning any steps to deliver? Would you consider an equity increase to support your balance sheet or to refinance your perpetual notes, which have a call date this October?
Indeed, despite witnessing notable asset devaluation in the period, our LTV has remained stable at 36%, same as in December 2022. The devaluations were offset by our deleveraging efforts, mostly from disposals and operational cash flow, supported by the decision to suspend the dividend for 2022. Buying back our bond at a discount has slightly supported our deleveraging, and we may come out with further programs which will support further. Following the devaluation, we continue to maintain a very wide headroom to our covenants, as well as our stricter Board of Directors limit, which provide us with a lot of flexibility in the current environment. Furthermore, as we have no material near-term maturities, with cash covering maturities till mid-2026, we have time on our side to take necessary but diligent actions.
That being said, we continue to analyze the portfolio for potential disposals, which may further strengthen and de-risk our balance sheet. A potential capital increase is always an option in our toolbox. Our healthy balance sheet and strong liquidity position enable us to navigate through the current challenges. Should the macroeconomic climate remain unfavorable over an extended period with a significant further devaluations and liquidity constraints, we expect that equity increases could become a prevailing trend within our sector as a whole in order to reduce leverage and de-risk balance sheets.
S&P recently changed GCP's rating outlook to negative. What is driving the negative outlook? Are you planning any additional measures to avoid a potential downgrade?
S&P published their rating update in June, affirming GCP's rating at BBB+, but adjusting the outlook to negative. The change in the outlook is primarily due to S&P's view on the real estate market and adjusted valuation forecast, together with the alignment of GCP's rating to Aroundtown's rating, following Aroundtown's consolidation and high holding grade in GCP. Note that S&P's indicated a one in three possibility of potential downgrade of Aroundtown, and thus GCP. We see GCP's standalone metric remain strong and thus do not plan additional measures on top of our current focus on maintaining our strong balance sheet.
Do you have an update on your plans for the perpetual notes with their first call date in October?
Our stance remains unchanged. We would prefer to replace the perpetual with a similar equity-like instrument, but unfortunately, the current market environment has not yet provided such option. We will make our final decision closer to the call date, as we have done with the previous notes. As already mentioned, we see perpetual notes as an equity-like instrument and also calculated as 100% equity for the covenants that protect us in such a market environment as we see today.
Can we expect to see GCP distributing a dividend in 2024 for the year 2023?
We stick to our dividend policy of distribution of 75% of the FFO I per share, which is subject to market conditions. We still have nearly a year till this decision point and will make the decision in due time.
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.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question comes from Markus Schmitt from ODDO BHF. Please go ahead.
Yes, thanks for taking the questions. I, I have a couple. first of all, I'm interested in the ancillary cost statement you sent to your tenants. My question is, what % of the tenants has received this year to date? How much on average, was the additional payment GCP received? What % of them has not met the pay date yet, and maybe obviously hurdles to to fund the additional payment? That is the first question. The second question is, on your rent collections.
Yeah, how the tenants base is receiving these rent increases, firstly, and what is your expectation, maybe for the second half of the year, how your bad losses will develop in this very special inflationary environment? Thirdly, just a confirmation about the discount rates GLL uses in valuing your asset base. Are they using the current risk-free rate, so bond yield, or do they use a 10-year rolling average? That would be great if you could confirm this or explain this. Thank you very much.
Hi, Markus, thank you for your questions. First, on the first question, look, we're still in the process of sending out the cost statements to our tenants. So far, we sent around 15% to our tenants, and we will send the majority in the next few months. So far, we see a high collection rate from our tenants, and we don't expect a material negative change. Which leads me also to the second answer, to the general rent collection, which is around 97%-99%. It remains stable now, and we expect it to remain stable also going forward. As to your last questions on the valuation. Look, the valuation use a mix of a rolling average, 10 years risk-free.
On top, they add a discretionary yield to the discounted cap rate, which is also relating to the current interest levels and transaction market. Thank you. Next question, please.
The next question comes from Manuel Martin from ODDO BHF. Please go ahead.
Yes, hello. Thank you for taking my questions. Two questions, I think. First question, if I understood it correctly, you, you think that capital increases might come in, in the resi or in the real estate sector in general. Is this something that you would rule out for Grand City in concrete? That would be my first question. Second question is on your debt coverage until Q2 2026. This is supported by an RCF, if I understand that correctly. Does this RCF belong to the liquid assets covering your debt maturities until 2026, or is this something on top? About what volume do we talk in terms of RCF? Thank you.
Thank you very much for your question. Let me answer the first question regarding capital increases. We do not really know today how the market develops. It is and remains part of our toolbox, but nothing that we are discussing on an immediate basis. For the next question, Michael?
Yeah, sure. Our coverage till Q2 2026, that's on our current cash as we stand as of June, and it does not include the RCF, which amounts to EUR 300 million. The RCF is on top of that level. Thank you.
The next question comes from Kai Klose from Berenberg. Please go ahead.
Yes, good morning. I've got 3 questions, if I may, and I'll ask them 1 by 1. The first one is, could you indicate what was the amortization, amount of amortization, debt amortization in the H1? For the new loans, what is the amortization rate which has been secured?
Yeah, the amortization, I have to check. It's a few millions, EUR 3 million-EUR 4 million in the first half. You could see that in our cash flow as well. As going forward, we have around 2% loan amortization on the loans we have. Currently we have around EUR 500 million, so it's around a run rate of EUR 10 million a year. Next question? Hi, next question, please.
Yes, one moment for the next question, please. It seems we have a follow-up from Kai Klose. Please go ahead.
Yes, I had actually two more questions. The first one is on the vendor loans. What is the average duration for the EUR 60 million? From the vendor loans you had provided previously, have you received the full amount outstanding?
Yeah. The vendor loan, the EUR 60 million we have, it happened in Q1 2023, so there was no change. We didn't take any additional loans, so our balance remained at EUR 60 million. Yeah, the maturity is around 3 years for this loan. However, we have options to receive the funds earlier up until then. Okay, next question.
The next question comes from Neeraj Kumar from Barclays. Please go ahead.
Morning, everyone. I have two questions which are sort of slightly repeat of what has already been asked, but I'll just try asking in a bit different format to get more clarity, if possible. The first question is: you have EUR 700 million of cash as of June, and you signed EUR 230 million in Q3, which brings total cash to near EUR 1 billion. The question is: what do you plan to do with this cash, and how much yield you are able to generate on this cash balance before it's utilized? I mean, given the current interest rate environment, it must be expensive to carry such high cash balance, right?
The second question is, in regards to your hybrids, do you think the current levels are attractive for you to tender them up to 10% within the S&P limits? Also in regards to upcoming hybrid call, are you considering solutions, like the ones opted by Unibail-Rodamco-Westfield, instead of extending them outright, as you have done in the past? Thank you.
Yeah. Thank you, Neeraj. As to your first question, we seek to maintain, at this stage, high level of liquidity. Liquidity will increase, our focus is to delever and increase our cash position, which will enable us to weather the situation better. We may come out with more buybacks of bonds, we also have some refinancing. We have EUR 300 million coming next year, we'd rather be more conservative and more, more cash in a cash position. We, we don't have any expectation to do something else with the cash. Not at this stage. If opportunities will come, yeah, we'll examine them, but this is our main focus at this stage, is to delever. Which also brings to the second question on the perpetual.
The perpetual is an equity instrument. It enables us to keep low leverage. We don't seek to repay at this stage perpetual notes because that will increase our leverage effectively. Of course, we're examining the markets and, and with equity, we might increase and our outlook in the market, we, we might come out with a tender, but currently, our position is that we seek to hold to high cash levels and to reduce leverage. Thank you.
The next question comes from Marios Pastou from Societe Generale. Please go ahead.
Hi, good morning. Thank you for taking my questions. Just three questions from my side. Firstly, you mentioned the 5% value decline in the first quarter call, so flights and expectation decline for the year ahead. This seems to have been taken in full or just a little bit ahead of this in, in the first half, with potentially more to come in the second half. What has changed since that initial expectation? Secondly, can you comment on the difference in the value decline, London versus Germany? Thirdly, you mentioned a 3% discount to book values for disposals in the period. Can I just check if that was a 3% discount to the December book values, or was that a 3% discount to the revised valuation? Thank you.
Thank you for your questions. As in a discount, discount is to December valuations. As to your question, the breakdown between London and Germany, London saw around 2% negative decline, whereas Germany saw higher at around 6%. In general, in the first question, about the 5% level we gave before, look, we're a bit above that level, not significantly. In the last months, we've seen the market conditions further deteriorate. We've seen an additional 2 rate hikes. We've seen a very calm transaction market, in the end, the valuation was a bit higher than expected. Going forward, it's too early to estimate the valuation trends. On one side, we see negative trends in the markets, mentioned with the rate levels and so on.
On the other hand, we continue to see a very strong operations and very little supply in the market, which will offset this negative trend. We believe it's too early to estimate where these two opposite trends will meet, and, and, and we'll update you in the next calls. Thank you.
The next question comes from Paul May from Barclays. Please go ahead.
Hi, team. just a quick couple from me. first one, just a clarification point. I think you mentioned the EUR 10 million per annum of, of amortization. Is that amortizing the capital amount on the debt, or is that the amortization of the fees on the debt? Just to get a clarification there. If it's the former, what is the, what is the latter in terms of amortization of fees on an annual basis? Then secondly, I think at Q1, I recall you mentioned an expectation of a 5% value decline for the full year in the portfolio. obviously, we're coming slightly above that already, and given the transaction market still remains pretty closed and, and, and difficult, one would suspect the values probably still need to fall further. Just wondered if you had an update on that 5% expectation.
Thank you.
Yeah, thank you, Paul. As your first question, the EUR 10 million I referred, is repayment of the debt, so 2% of the debt, of the bank debt is being repaid, so that I mean by amortization. As your second question, we just answered in the valuation, we updated our valuations as we are now, we think it's too early to give an estimation on where the values are going going forward.
The next question comes from Clark McPherson, from Clearance Capital. Please go ahead.
Good morning, all. Just a quick question on the liquidity position. I wanted to just get a clarification on slide 11, you mentioned you, you note the signed disposals and financing, EUR 310 million. If I eliminate the signed disposals for H1, it leaves me around EUR 180 million. On slide 3, you have the new financing at EUR 440 million, less the EUR 190 million, which is drawn. It looks like the new bank financing is sort of significantly larger than the EUR 130 million, which I have after signed disposals. I wonder if I could get a reconciliation of that.
I'm not sure I understood the question. I'm not sure what I should reconcile. Maybe we could have a call later on and clarify this together.
Okay. Since those were the questions that you have asked, we thank you very much for participating in the call. Obviously, if you have any follow-up questions, we are available to answer them, and hopefully meet you in any one of the upcoming conferences in the second half of this year. Thank you very much for your participation, and have a good day from all of us. Bye-bye.