Ladies and gentlemen, welcome to the financial presentation call of Grand City Properties S.A.. At our customers' 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 star key followed by zero on your telephone for operator assistance. I will now hand over to Ms. Katrin Petersen, Head of Communications, who will start the meeting today. Please go ahead.
Yes, thank you very much. Have a very good morning, everyone. My name is Katrin Petersen, and I am Head of Communications. In the name of Grand City Properties, I welcome you kindly to our results call for the first half year of 2020. With me today are Christian Windfuhr, CEO; Refael Zamir, CFO and Chairman of the Board of Directors; Sebastian Ramasahlkin, COO; and Michael Bar-Yosef, Senior Financial Analyst. Christian Windfuhr and Refael Zamir will guide you through the results presentation directly after this introduction. You will find the financial 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 question and answers, the management is available for questions.
We have asked you already in advance to send us your questions by email, please continue to send them so we can include them accordingly. Please send the questions to the following email address: info@grandcity.lu. Saying it once again, the email address for your questions is info@grandcity.lu. Now I hand you over to Christian Windfuhr to begin with the presentation. Thank you.
Thank you very much, Katrin. Good morning to everybody for joining our first half 2020 financial results presentation. The first half of 2020 was characterized by a continued stable operational performance in spite of the COVID-19 disruption, with good like-for-like rental, net rental growth, and efficient operational growth control, which in turn translated into slight operational improvements and value creation. The pandemic and its effects highlighted the resilience of our portfolio, the adaptivity and flexibility of our company, and the stable market in which we operate. We were able to navigate successfully through these challenging times, continuing to generate operational profits as well as value creation while keeping our employees safe and systems fully running. The collection rate decreased temporarily by around 1%, we expect to collect these deferred rents in the next periods.
We thank our employees for their dedication and agility, and above all, we would like to thank them for their loyalty, not only to the company, but to each of our tenants, with the property management on site and with the 24/7 service center active. Their dedication and agility enabled us to adapt fast to these new circumstances and grow stronger. In 2020, we disposed non-core and mature properties in the amount of over EUR 350 million, which freed up funds for further opportunistic acquisitions, leading to a higher portfolio quality. Acquisitions in the first half of 2020 were relatively low as we have muted the closing of new deals due to the international lockdown and high uncertainty.
Towards the end of the reporting period, with the opening of the markets and the better assessment of the market situation, we continued to execute our acquisition pipeline. Due to the delay, acquisitions had little impact in H1 2020, but will contribute in the coming periods. With that introduction, let me start with slide three in the presentation for the highlights, showing a stable and robust operational improvement in adjusted EBITDA FFO 1, in spite of a marginal decrease in the net rental income due to, as just explained, successful disposals and muted acquisition activity. Our assets reached to nearly EUR 11 billion, up 9%, and EPRA NAV per share improved by a further 2% after the 2019 dividend. Accounting for the dividend, the EPRA NAV per share increased by 5%.
We also maintained our conservative financial risk profile with an LTV of 36%, 1.4% cost of debt, and an average debt maturity profile of seven years. Now allow us to move to the results of the first quarter 2020, and I will turn over to Refael.
Thank you very much, Christian, and good morning. On slide four, we show our business profitability. Net rental income, which amounted to EUR 186 million for the period, decreased a bit by 2% due to the net disposals. The acquisition we did toward the end of H1 2020 had only an immaterial effect for this period. At the same time, we were able to maintain and further improve our efficient cost structure and our positive development in this respect, offset the decrease in revenue and result in an increase of adjusted EBITDA of 1%.
To EUR 147 million. Our like-for-like net rental income increased by 3.1%, with 2.1% stemming from the in-place rent growth and 1% from occupancy growth, also supporting the operational profitability in the period. Property valuation and capital gain of EUR 221 million were EUR 10 million above previous year's result for the same period, and profit for period income were EUR 3 million above previous year's level. Our finance amounted to a negative result of EUR 37 million, related mainly to decrease in value of derivative and financial assets. Turning to slide five, you can follow the development of our FFO 1 and FFO 2 performance, both of which were positive, increased by 2% and 13% respectively. The high FFO 2 period-over-period result of capitalizing on disposal of non-core and mature properties.
In H1 2020, GCP sold over EUR 350 million worth properties at 43% above the total cost, which freed up fund for opportunistic acquisition with a higher upside potential. FFO 1 per share remains stable at EUR 0.64 per share as the number of shares increased due to the scrip dividend issued in the second half of 2019. GCP's shares continue to provide investor with attractive return and FFO 1 yield of 6.3% and a dividend yield of 4.1%. On slide six, you can follow the EPRA NAV. The CAGR of the EPRA NAV per share was 9% since December 2017. The cash from disposal during H1 have partially been used for acquisition, and the remainder will serve the company as a shield and financial cushion, and will provide additional firepower to pursue opportunities in the market, which we believe will come in the coming quarters. Christian, can you continue, please?
Thank you. On slide seven, we present an overview of our investment property and our accretive capital approach. Our investment properties compared to December 2019 has remained stable at approximately EUR 8 billion. We saw revaluation gains of over EUR 200 million, driven by increased rents on a like-for-like basis, as well as yield compression of 0.2%, driven by operational improvements. On a like-for-like basis, valuations increased by 3%. We are seeing revaluation gains across our entire portfolio and, in particular, in Berlin, North Rhine-Westphalia, London, and Mannheim. We disposed over EUR 350 million of properties at a multiple of 16 times, mainly in North Rhine-Westphalia, generating a profit of 43% over total cost. After the reporting date, we have signed further disposals of close to EUR 400 million, which are mostly expected to be completed at the end of 2020.
These disposals include properties mainly in North Rhine-Westphalia, sold at a multiple of around 18 times. The disposals were mainly of mature properties and sold at a premium to book value as of June 30, 2020. The successful sales prices emphasize and once again confirm and give validity to the EPRA NAV per share of the company, which amounts to EUR 24.9. We acquired diverse properties of approximately EUR 150 million, including over 100 units of lettable units and generating yields of 5%, with further potential improvement, in addition to over 200 units in the pre-let stage. These assets acquired are primarily located in good middle-class neighborhoods in London. Towards the end and after the reporting date, we signed acquisitions of further EUR 150 million. Still remain disciplined and follow our acquisition criteria.
On slides 8 to 12, we will give you an updated overview of our portfolio, which remains well diversified across strong densely populated metropolitans in Berlin, North Rhine-Westphalia, Dresden, Leipzig, Halle, London, Hamburg, Bremen, and other strong locations, each benefiting from different economic drivers and growth potential. Our North Rhine-Westphalia portfolio on slide nine makes up 20% of our portfolio from 24% at the end of 2019 due to the disposals in the reporting period. The disposals were in secondary cities of North Rhine-Westphalia. Therefore, the stronger cities in North Rhine-Westphalia now have a larger portion. Cologne, Bonn now accounts for over one-third of the North Rhine-Westphalia portfolio. Berlin, on slide 10, remains with 25% of our portfolio value and 16% of our total rent. An important location for us, with 70% of the Berlin portfolio located in top-tier neighborhoods, and the remaining 30% well-located in high-demand secondary locations.
Regarding the Berlin rental cap, the Supreme Court did not rule any decision so far. However, based on the majority of legal opinions, we believe that this law will be overruled in time to come. Legal proceedings have been initiated by the Federal Government in the form of a Normenkontrollklage, and the fact that this was initiated on the Federal Government level, as well as pressure coming from several local and district courts, suggests that the High Court will not procrastinate this issue. Even in a scenario where the Berlin rental cap will not be overruled, we have already stated in previous calls that due to the good geographical diversification of our portfolio, the impact of the Berlin ruling on the total portfolio of Grand City Properties will be limited. We expect to see the impact the last quarter of 2020.
London, on slide 11, makes up 15% of our portfolio. Over 90% of our portfolio is located within short walking distance to train or underground. The London portfolio includes now 2,900 units, including the units in the pre-market stage. The vacancy in London increased to 8% as of June 2020, which is linked directly to the effects of the lockdown, which was longer and more intense than in Germany. As a result to the letting activity slow down, with the limitations limited after the reporting period, we see a pickup in the letting and expect to reduce the vacancies. We continue to see strong fundamentals in the residential market in London, driven by very high demand and low supply. Our East portfolio on slide 12 was 13%, and our North portfolio was 5%, remain stable in environments with strong economic drivers. Turning now to slide 13.
We present you the current annualized net rental income versus the market potential. The market potential of our portfolio, which we will reach through increasing rent and occupancy to market levels, is +20%, including the impact of the Berlin rental cap. This is currently our base case. In case the law will be rejected, which we believe is likely, our potential will be 28%. Now let me hand you back to Refael.
Our financial promises on slide 14 remain unchanged, with the long-term goal to achieve an A- rating, to keep the LTV at 45%, to keep the debt to debt plus equity ratio at 45% or below on a sustainable basis, maintaining conservative financial ratios with a strong ICR, keep unencumbered assets above 50% of the total assets, maintain a long debt maturity profile, a good mix of long-term, unencumbered bonds and non-recourse bank loans, and distribute a dividend of 65% of FFO 1 per share. As you will note on the same slide, our ratio to our covenant limit has a large headroom in all the aspects, and our cooperation with the strong financial institution continues to enable us to access bank lending and capital market when needed.
Our capital structure on slide 15 remains solid, with 94% of our interest hedged, low LTV of 36%, and an average duration of our maturity of seven years at the end of June, with a widely spread maturity schedule. Excluding the convertible bond in 2022, the next significant maturity is in 2024. Including the EUR 600 million straight bond, which we issue in the peak of the crisis at the coupon of 1.7%, the cost of debt increased to 1.4%. Slide 16, you see our solid liquidity position with very strong ICR and DSCR ratio of 6.1 and 4.8 respectively, and our large pool of unencumbered assets with EUR 6.2 billion or 77%, gives us additional safety and headroom if needed.
Among our peers, we have the strongest liquidity position as of June 2020, which in present times acts as a strong cushion on all eventualities, as well as strong basis for which to initiate and act upon opportunities that the market may present. With a rating of BBB+ by S&P and Baa1 by Moody's, we have a very good position among our peers and have developed and improved this position continuously since 2013. Our long-term goal to achieve A- and A2 rating remains unchanged.
Slide 17, we give you an indication about the maintenance and repositioning CapEx during the first half of 2020, which was EUR 10.2 per average sq m and slightly above the comparable period last year, mainly due to an increase in repositioning CapEx from EUR 6 to EUR 7.20 per sq m. Spend for maintenance per sq m decreased slightly during the first half compared to last year. The lower maintenance is supported by the higher CapEx spending. Repositioning CapEx focuses on increasing property quality and supports value creation, and includes upgrading of flats for re-renting at higher initial rents, improving public areas, developing playgrounds, and installing elevators and ramps. Page 18, we confirm our guidance for the full year 2020, and we believe that we can meet all targets. The guidance doesn't include significant acquisitions on top of signed deals.
Furthermore, the disposals signed after the reporting date are expected to be completed in the end of 2020 and have no impact on the 2020 guidance. The COVID-19 effect on our 2020 FFO1 remains very limited, as per the levels assumed in the guidance. The Berlin rent cap effect is included in the guidance, having a partial impact on the 2020 FFO and a full effect in 2020 like-for-like. Additionally, in solidarity with our tenants, we have postponed rent increases in the second quarter of 2020 to the third quarter of 2020, which will have a marginal impact of the 2020 results. Therefore, our guidance is FFO1 between EUR 213 million-EUR 220 million. FFO1 per share, EUR 1.27-EUR 1.31. Dividend per share, EUR 0.82-EUR 0.85. FFO1 per share, EUR 1.07-EUR 1.11. Total net rent like-for-like growth, 1.5%-2%. HEV, below 45%.
Thank you, Mr. Windfuhr. We are now starting with the Q&A session. We will answer the questions we have received by email so far, and we have grouped them together for the reasons of simplification. The answers to your questions have been prepared by the team. I will now start with the first question, and the answers will be given by Christian Windfuhr. We are starting with the first question. What is your view on the current German residential market, the impact from the crisis and the recovery potential? Also about London, can you please elaborate on the pandemic effects on GCP? Mr. Windfuhr.
Thank you for the question. The strong fundamentals of the German residential market prevail, which is verified by the cash flow stability and transaction values we see in the market, and also evident in our portfolio in particular. The demand remains high, exceeding the supply, which has remained low. The economic shutdown served to slow down construction activity, which increased the housing shortage while demand for housing remained strong. For Berlin, where the rent freeze has impacted the market rents, however, so far, the values remain strong as the Berlin rent cap has not reduced the demand for housing in the city. On the contrary, we see the Berlin rent cap reducing supply of housing and tenant fluctuation and thus making it even harder for new tenants to find vacant apartments.
The residential real estate is benefiting from strong tailwinds of the negative interest environment, which is expected to be maintained in the foreseeable future and thus keep the investment demand on its high levels. As to the pandemic effect, our portfolio and operations proved to be resilient and adaptable. The impact on our operations were very limited, with a voluntary slight impact on the like-for-like rent as we decided to hold rent increases in the second quarter of 2020. From a small temporary decline in the collection rate of around 1%, with rent deferrals given to specific tenants compared to the pre-corona levels. During the lockdown, the letting activities continued with an average letting coupled with lower tenant fluctuation. Therefore, we were able to decrease further the vacancy.
The collection rate stability as well as the stability of our occupancy rate is further demonstrating the underlying strength of the business. Although the lockdown has been mostly lifted, we remain committed to supporting our tenants during this difficult period and work towards coming to a mutual solution wherever necessary. We have strengthened our operations during the last few months and going forward, we are confident to continue improving our operational results. The London market is, in general, a strong residential market due to the strong fundamentals the city has been demonstrating over many previous crisis situations. For the market, rents have decreased slightly on the back of higher supply from apartments for short-term stays being offered to long-term renters. However, this remains a short-term event that we expect will reverse in due course as lockdowns are being lifted.
As to our portfolio, we have reached higher occupancy rates prior to the outbreak of the pandemic, with tenants signing lease agreements for one to three years. The effect of our rents is immaterial. Moreover, our London portfolio is located in good middle-class neighborhoods and is less reliant on short-term lettings. Unlike the German residential market, which is characterized by very long-term lettings and low fluctuations, the London residential market usually has higher tenant fluctuation. The location and distance requirements subdued our letting ability, which did not offset completely the fluctuation. Therefore, the vacancy in London increased to 8% from 4% in December. Based on our experience and what we experience currently, we believe the strong long-term fundamentals of the London market will support the fast recovery of our reletting achievements. The collection rate in London remains strong, with a small temporary decrease of around 2%.
With regard to the properties in the pre-letting stage, work has been slightly slowed down, but nevertheless is progressing, and we expect to be able to let out these properties in the upcoming periods.
How was the company able to operate during the pandemic and the market lockdown? What can we expect if there will be an additional lockdown or restrictions?
Due to our IT systems and agility, we were well prepared to switch to remote working and to continued operations very smoothly. During the lockdowns, our letting teams implemented virtual tours of the apartments, guided videos, electronic verification, and identity checks through the German post office, have all continued, and as a result, we have maintained the level of tenants moving in as usual, while a lower level of tenants have moved out. This has supported the strong like-for-like performance of our business with rental increases of 1% due to occupancy increases. All our teams did a great job to ensure this process went smoothly, and especially the IT department rechecked all systems are fully running at high security standards. In case of an additional lockdown, we remain well prepared, and after the recent lockdown, even better adjusted to the situation.
What will be the impact of the COVID disruption on the fair value of the portfolio going forward? Refael, please.
We currently don't see any material negative impact on the value of the portfolio as a result of the COVID-19 pandemic. We continue to see the strong long-term fundamentals in our portfolio locations coupled with robust demand and muted supply of residential units. The lockdown did not change those factors. We see the German affordable housing market as very resilient and coming from a very low level, well below replacement cost. Furthermore, the current low interest environment and the lack of sustainable investment is expected to support income compression and to drive value further. In H1, we continued to record positive revaluation gains and also continued to sell properties above the book value, providing as a strong indication to the positive market direction and validating the conservative valuations of our properties.
How do you expect the work from home trend to evolve? How is this affecting your business? Mr. Windfuhr.
At this stage, we don't believe this will initiate a long-term trend to fully outsource its employees from its office premises. Some form of hybrid model could arise, though, such as flexible space. This trend may have a positive impact for housing companies as we expect demand for more space per tenant will increase. It is hard to estimate the impact at this stage. We also don't believe there will be a demand to live outside the cities as cities offer residents with much more than simply access to their offices. Cities also provide residents with a higher quality of an array of public amenities such as education, childcare services, transportation services, recreation experiences, and healthcare facilities, to name a few. It is the other way.
Companies have their offices in central city locations due to the fact that most people live within the city and prefer not to commute.
How much of the rent like-for-like was achieved as a result of indexation, and how much due to reletting? In which locations That had the most significant impact, Refael.
Our net rent increased by 3.1% overall on a like-for-like basis, with an increase of 2.1% due to an in-place rent increase and a further 1% as a result of successful vacancy reduction measures. 1.2% of the in-place rent increase related to reletting of 0.9% to indexation. The indexation contribution was lower than in previous periods as in the last month, we had postponed rent increase to our tenants as an act of solidarity. As of July, we had resumed with our rent increases. Most significantly, the region of Dresden, Leipzig and Halle, as well as London, delivered strong like-for-like results. The Berlin portfolio continued to remain stable as a result of the Berlin rent cap. The portfolio continued to provide robust like-for-like results, demonstrating its underlying resilience while serving as a useful tool for sustainable growth in the coming periods.
Vacancy in London increased in June 2020 to 8%, compared to 4% in December. What is the reason for this, and what can we expect going forward? Has the increase in vacancy impacted the valuations negatively, Refael?
The rental market in London was affected more from the pandemic in comparison to the German market. The lockdown in London was longer and stricter than in Germany. Accordingly, we have seen a slower pace of new lettings, while we experienced higher amount of termination, mainly students and young professionals. Assuming no second wave or additional lockdown, we expect the vacancy in London to fill up quickly. As we see a high demand for the property, we had a very strong track record in London, reducing the vacancy from around 35% to nearly fully occupied within a short period. The valuation remains stable and not affected from short-term vacancy increase, as the vacancy increase is a temporary effect. The fundamental residential demand in London remains strong and can be seen in Q3 when the lockdown was removed.
What was the scope of your maintenance and CapEx measures across the portfolio? Was there a significant impact due to the coronavirus pandemic? There has been a decrease in the modernization spend year-over-year. What is your view on modernization, Mr. Christian?
The lockdown did not significantly impact our maintenance or CapEx measures. Our service center continued as usual to be available 24 hours a day and seven days a week for all services requested. Our strong operational efficiency has been vital in this regard, and we were able to continue maintenance activities. For CapEx measures, in the peak of the lockdown, we carried out projects based on their urgency and need, but very fast resumed to the levels set in our business plan. Going forward, we expect CapEx levels to continue at similar levels to previous years and expect the CapEx to be around EUR 15 per square meter. Lastly, modernization investments have decreased over the past periods, also before the lockdown, as the change in the regulation reduced the return potential.
With the current regulation, we see less return than our internal yield goals and rather focus on our operational improvements of our portfolio, which due to it being under rented, yields better returns.
Do you remain focused on Germany and London, or would you consider also other locations? London has been increasing. Which portion of the total would you feel comfortable with? Christian.
We continue to focus on Germany and London. We also review deals from other locations as we are opportunistic buyers and open for ideas. We believe that the pandemic disruption may open up new opportunities. We keep analyzing opportunities across main cities in Europe. Of course, these opportunities have to follow our accretive acquisition criteria of fundamentally strong locations with high upside potential regarding the proportions of our portfolio's location and expect to keep the German portfolio at more than two-thirds. We would increase the London portfolio to around 20%-25% of the portfolio and potentially have 10% in additional European cities.
Could you provide some more color on the acquisitions completed in the half year 2020? Are you still buying more properties currently? If so, what is the size of your pipeline and where are you looking for targets?
In H1 2020, Grand City Properties acquired assets in the amount of approximately EUR 150 million, mainly located in London. These acquisitions included acquisitions of over 100 units at a multiple of 20 times and over 200 units of pre-letting stage. The acquisitions were mainly affordable housing located across multiple middle-class locations among others, Greenwich, Hillingdon, and Hackney, which include also new build or newly refurbished assets in the pre-letting stage and social housing. During the peak of the pandemic disruption in the first half of 2020, we decided to put on hold the acquisition pipeline as we wanted to see if changes in prices occur due to the crisis. Far, we didn't experience any significant change in prices, and we currently continue to analyze the pipeline and source of new deals.
With the uncertainty partially clearing up towards the end of the second quarter, we have resumed to acquire properties. After the reporting date, we have signed the acquisition of EUR 150 million, and we continue to analyze an additional pipeline of well over EUR 500 million. We are still in the opinion that the full economic impact of the pandemic is yet to be determined, therefore remain very selective on deals. Investment decisions continue to be subject to our acquisition criteria of achieving a 5%-7% unlevered NOI yield on total costs within three to four years from acquisition in Germany as well as in London. Our strong liquidity position provides us with an advantage here to grasp the opportunities when they arise.
The capital recycling of selling non-core and mature properties and using the funds for accretive acquisitions increases also the portfolio's quality and maintains the value add potential going forward. Besides external growth opportunities, our portfolio also has a significant upside potential due to its under-rented situation of currently 20%, considering the Berlin rental freeze, and 28%, excluding the rent freeze, which we still see, as in the previous periods, that the courts will decide against it.
The total cash and liquid assets in the end of June 2020 amounted to EUR 1.5 billion. What is the reason for this high cash balance, and how does GCP intend to utilize it? Will GCP carry out a share buyback? Mr. Refael.
As a result of the high uncertainty in the market, we focus on maintaining a high cash balance. Our cash balance increased in the first six months of 2020 by over EUR 400 million, as we continue to disposing properties. By temporarily halting our acquisition activity due to the uncertain situation in the market at the time of the peak of the lockdown, and due to further issuance of EUR 600 million of bonds at the beginning of April. At the height of the economic lockdown, we considered it highly important to remain liquid with high reserve, strengthening the cash position as we anticipate that significant potential acquisition could arise, and wanted to have the ability to execute such potential pipeline. Further, there was uncertainty on how long the capital markets will be open for further fundraising at normal prices.
With the increased clarity in the market in the last weeks, we have resumed acquiring properties and have a strong pipeline. Additionally, we will continue to optimize our debt structure and repay shorter and more expensive debt. Regarding a potential share buyback, we have concluded in the recent AGM in June a five-year share buyback framework. As per framework, GCP can execute a buyback program relatively fast once a decision in this regard has been made. Currently, we do still see many opportunities in the market and would like to stay highly liquid in case of additional downside scenario in the market.
Can we get an update on the development portfolio?
Around half of our development portfolio is in London, and these properties are progressing as planned. We expect to finalize the snagging works on these properties and start letting in the next month. Once these units will be ready for letting, we expect to fill them fast, driving additional rental income. The rest of the development portfolio is largely in Berlin. Our largest project is Prenzlauer Berg, where we have submitted the building permit for the first plot and expect to get approval this year. We have completed the expert opinion, the assessment of the soil and land, and got the necessary certificates. We experienced slight delays in the planned timeline due to the pandemic and hope that the city officials will continue working on the requests within a reasonable timeframe.
Can you provide some more information on the disposals? How many units were sold? What was the transaction multiple? What was the average vacancy of these units? What can we expect going forward? Do the disposals have any impact on the guidance for 2020? Is there a limit below which GCP will not dispose assets?
During the first half of 2020, we disposed assets amounting to approximately EUR 350 million at a multiple of 15 times with a solid profit margin of 43% over cost generated in this program. These disposals were a mix of mature and non-core properties. These disposals were sold at a small premium over the net book values. The sales included 7,000 units with an average vacancy of around 15% and were primarily located in secondary cities within North Rhine-Westphalia. These disposals improve the overall quality of the portfolio and make room for higher quality properties with an upside potential. Looking ahead, we have signed after the reporting date disposals of investment property amounting to close to EUR 400 million, and expect these to be closed only by year-end 2020. These properties are mainly located in secondary locations in North Rhine-Westphalia.
We do not expect any material impact of our guidance for the year. The disposals were carried on an opportunistic basis at a multiple of 18 times and at a double-digit premium over their book value. With disposals being closed at premium, we continue to crystallize gains expected over the past period and deliver strong and sustainable shareholder value creation. We expect to continue and dispose our held-for-sale portfolio, which stands at approximately EUR 170 million as of June 2020. In addition, we continue to maintain our opportunistic stance with disposing mature assets, where a large part of the upside potential has already been captured. We intend to recycle the capital from these disposals and keep creating accretive growth to our shareholders.
Please provide an update on the rent cap in Berlin. Has there been any updates?
The legality of the Berlin rent cap is currently being dealt with by the Federal Constitutional Court. As part of this process, the court has invited associations to submit their arguments for and against the law, including the German Bar Association, the ZIA Real Estate Association, as well as German and Berlin Tenants Association, among others. At this stage, we cannot estimate on how this process will pan out and how long this process will take. However, a decision on this matter before end of 2020 seems to be rather unlikely. In any case, we remain optimistic on this front, but continue to assume in our business plan that there will be no change to the rent cap.
Valuation gains in the second quarter have been quite strong. What have been the drivers for this? What was the like-for-like valuation realized in London? How much was as a result of yield compression? How much of the portfolio has been revalued in the first half year? Could you provide some color on what can be expected for the rest of 2020 with respect to revaluation gains?
For the first half of 2020, we reported valuation gain of approximately EUR 220 million. The strong level of valuation has been driven by rental income increase and from approximately 0.2% yield compression, driven by operational improvement of our assets. On a like-for-like basis, valuation increased by 3% for the total portfolio. We have seen positive revaluation gain across of the portfolio. Specifically, the most significant movement were absorbed in Berlin, London, NRW and Mannheim. London valuation alone contribute approximately 20% of the revaluation gains and increased 4% on a like-for-like basis. We view this yield compression as a testament to the steady and sustained success achieved in extracting the internal growth potential of the portfolio through several measures, ultimately resulting in the demand for those units increased. Vacancy decreasing and rent increasing Berlin, London, NRW and Mannheim.
During the first half of 2020, we revaluate around two-third of the portfolio by third-party experts. Looking forward, we expect to see further revaluation gains stemming from the positive dynamic in market as well as from operational development.
When will GCP publish the new EPRA net asset value KPIs?
We will publish the new EPRA KPI by the end of this year, in line with EPRA requirements.
Are there any updates on the A- rating goal?
As mentioned, to achieve a higher rating is stipulated in our financial policies, we reaffirm our commitment to maintain a conservative capital structure to support our strong business performance. One of the main hurdle to reach the rating upgrade is the total portfolio size, which S&P expect an A- rating company to have a portfolio over EUR 10 billion. We will continue to grow our portfolio if accretive and if will support shareholder returns.
What was the reason for the over proportion decline of operating and other income to EUR 81.4 million in the half year 2020?
This is a result of operational efficiency and disposal of lower quality assets which have higher proportion of operating costs.
Okay, thank you. I think those were the questions so far, and we will now start with the open Q&A part. If you have several questions, we kindly ask that you ask us all your questions together right at the beginning. We are now looking forward to your questions, please.
Ladies and gentlemen, if you would like to ask a question now, please press zero and one on your telephone keypad to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it is your turn to speak, you can dial zero and two to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. One moment please for the first question. The first question is from Kai Klose with Berenberg. Your line is now open. Please go ahead, sir.
Yes, good morning. I've got three questions. The first one, could you please indicate what was the rent collection rate on a monthly basis for April to June? Ideally, also for July. You could also split that between the entire portfolio and for London. Second question is on page 31 of the first half report, where you indicate that you bought a number of loans rather than assets. Could you maybe explain for which region this refers to? I have a question on the balance sheet on page 44 of the first half report. You had a strong increase in the investment in equity accounted investees, as well as in the financial assets. That was not so strong, but it also went up by EUR 60 million. Could you explain what are the reasons behind? Thank you.
Hi, Kai. Thank you for your questions. As to your first question regarding the collection rate. In April, May, we saw a collection rate of around 3% below what we usually see pre-corona, which came down to approximately 1% as of now and as of, I'd say, H1 in total. London, I don't have the number in front of me exactly, but currently we're seeing a collection rate of just 3% below what we've seen pre-corona. As to your questions regarding loan-to-own. We invested in loan-to-own in London as well as in Germany. As to your last questions on the equity accounted investees, the balance increased from the end of last year, due to disposals of properties which we disposed of a majority stake and stayed as a minority stake in the property.
Thank you very much.
The next question is from Markus Schmidt, ODDO BHF. Your line is now open. Please go ahead.
Good morning. Thanks for taking the questions. Just a couple if I may. The first one is again on your London properties. Quarter-on-quarter, as you said already, the vacancy rose to 8%, or actually the space was the same. You had also a lower increase than per square meter. My question is why the square meter increased here. Is it driven by yield compression? Which I doubt it, because I think investment activity in London was also a bit muted. Maybe driven by your development projects, as you said, you made progress there, which maybe increased the value. Maybe you can explain that. I find it a little bit contradictory.
Thank you for your question. I saw the vacancy in London increased, but the valuations don't always follow a specific trend with the vacancy. In particular in London, where we see this as a very temporary change in the vacancy. We see a change already now in Q3, we and our valuators as well, also look at this on a mid-to-long-term basis. In London, actually saw a positive valuation of like-for-like of 4% during the period. This is as values were lower and catching up to the market as we see now in London, which remains stable in general. Thank you.
The next question is from Manuel Martin of BHF. Your line is now open. Please go ahead.
Hello, gentlemen. One question from us, please. From the Berlin valuation gains. If I understood correctly, you recorded some Berlin valuation gains. Maybe you could elaborate a bit on that, because some of your competitors did not value the Berlin portfolio, or some competitors didn't see any valuation increase in Berlin. Thank you.
Thank you, Manuel, for your question. Yes, we did see a positive valuation like-for-like in Berlin. We saw approximately 5% in the period. This is mainly almost all due to yield compression. We see our portfolio, which is very well located in Berlin, still going up. The demand is increasing, the supply is low. We came from a relatively low position. Therefore, we still see some upside in the city. Thank you very much.
We haven't received any further questions at this point.
If there are no more questions as far as we can see here, therefore, we would like to thank everybody very much for attending the call, asking the questions. We all wish you well under the circumstances and hope that there will be opportunities soon to meet face-to-face. All the best to everyone. Thank you very much.
Thank you.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect now.