Ladies and gentlemen, welcome to the conference call of Grand City Properties S.A. As our customer service rep, 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 difficulty hearing the conference, please press star 2 followed by zero on your telephone corporate systems. May I now hand it over to Ms. Katrin Petersen, Head of Communications, who will start the meeting today. Please go ahead.
Hi. Thank you, and a very good morning to everyone. My name is Katrin Petersen, Head of Communication. In the name of Grand City Properties, I kindly welcome you to our results call for the first quarter of 2020. With me today are CEO Christian Windfuhr, CFO and Chairman of the Board of Directors, Refael Zamir, COO Sebastian Remmert-Faltin, Senior Financial Analyst Michael Bar-Yosef, and Yakir Gabay, Advisory Board Member. 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 and the 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. Once again, the email address is info@grandcity.lu. With this, I hand you over to Christian Windfuhr to begin with the presentation. Thank you.
Thank you, Katrin, good morning, everyone, and welcome to our first quarter 2020 results call. Let me start with slide three in the presentation for the highlights. Here we are showing stable and robust operational performance, driving top and bottom line results, supplying prudent financial management, resulting in good FFO I and like-for-like rent increases, as well as maintaining strong balance sheet ratios with conservative financial results. The company maintains, especially in these times, high level of cash and liquid assets and has no material impact due to COVID-19 in Q1. We will touch on these points in detail in the upcoming slides. The year 2020 gave us all an unexpected challenge that were presented by the appearance and spread of COVID-19, and that came on top of the known Berlin rental cap ruling.
I'm happy to report that Grand City Properties was able to deal with both these challenges comparatively well. Based on the majority of legal opinions, we believe that the Berlin rental cap ruling will be overturned in time to come. Last week, legal proceedings have been initiated by the federal government in the form of a Normenkontrolle claim, and the fact that this was initiated from the federal government level, as well as pressure coming from several local and district courts, suggests that the High Court will not procrastinate the 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 Grand City Properties will be limited. Now slide four, please.
COVID-19 has presented us with a new challenge, but due to our operational setup and flexibility, we were able to adjust to the new situation and keep our operation and services to our tenants at the quality level that we had before. Our adaptability has helped us immensely to respond to the fast changing situations that we were faced with because of COVID-19. Letting activities remain stable because we adjusted to visits by personal video, followed by arranged personal visits. Through our TÜV approved and ISO 9001:2015 certified service center, combined with our proprietary software, we were able to provide uninterrupted, same quality, 24/7 services to our tenants from home office, at the same time minimizing any risks for our employees. The strong geographical diversification has helped to operate from local offices, reducing the risk that a large centralized office would present.
Showing solidarity with our tenants, we have currently postponed rent increases until after the crisis, which will put the tenants' mind at ease in times when they face the challenges of insecurity as to what might happen. The effect on the company's 2020 results is expected to be marginal. The number of tenants who have asked us up to now to delay rental payments or part thereof for installment repayment after June 20, which is the government ruling, has been low with around 1% of the tenants. This, of course, does not present an income challenge. We do not expect a significant increase of defaults in rent payments as a result of COVID-19. We have to keep in mind, of course, that it is only mid-May and the ruling postponements of resident rent payments last until end of June.
Further applications could come, even though we think we have seen the lion's share of this already. In terms of re-rentals, we have seen no major impact as a result of corona, which is greatly due to our adaptation to prevailing situation. We have seen a comparable amount of new tenants to previous periods, with a reduction in people moving out, leading to a vacancy reduction also in the first quarter. As to acquisitions, we have slowed down and postponed most of the planned acquisitions with the expectation for potential distressed situation in the upcoming quarters, and accordingly believe that now it is important to hold high liquidity and strong firepower. Now allow us to move to the results of the first quarter 2020, and I will turn you over to Refael.
Good morning. On slide five, we show our business profitability. Despite significant volume of disposal in the amount of over EUR 270 million since the beginning of 2020, compared to EUR 100 million acquisition, we were able to increase our net rental income slightly, which was supported by steady like-for-like rental growth. Our like-for-like net rental income increased by 3.4%, with 2.8% stemming from in place rent growth and 0.6% from occupancy growth. The revenue decreased slightly in 2020 due to the lower amount of operating and other income, while net rental income slightly increased to EUR 94.5 million in Q1 2020 from EUR 94.2 million in the comparable period. As operating and other income relate primarily to expenses recoverable by tenants, we suggest to focus on the net rent.
The operating and other income declined due to successful capital recycling measures implemented in the past periods, which include disposal of properties with higher recoverable operating expenses, coupled with acquisitions, which include lower recoverable expenses. Our strong operational platform, supported by rent increases, resulted in an increased EBITDA of EUR 74 million. The net profit amount to EUR 56 million, which is down from EUR 125 million in the comparable period. The reason for the lower profit is mainly from the non-operative items. The revaluation of investment property in the first quarter of 2020 were relatively lower than the comparable period. Turning to slide six, you can follow the development of the FFO I and FFO II performance, both of which were positive by 5% and 12% respectively.
FFO II improved on the back of value creation, which was crystallized through disposal at profit margin over total cost of 47%, as well as premium over the net book value of 2%. In the first quarter of 2020, GCP sold over EUR 270 million properties. On slide seven, you can follow the EPRA NAV. We haven't seen a change in the number in the first quarter of 2020. As you can see on slide eight, the investment property decreased slightly in the first quarter of 2020 due to the disposals, offset by EUR 100 million of acquisitions. GCP acquired approximately EUR 100 million in Q1 2020, including around 60 units at an average multiple of 21, and further 200 units in the pre-letting stage.
Assets primarily located in London and also a result of disposal over EUR 270 million of property at an average multiple of 16, generating a profit of 47% over cost and a small premium to the book value. Those assets were located mainly in NRW. The cash from disposal will serve the company as a shield and financial cushion and will provide additional firepower to pursue opportunities on the market, which we believe will come in the coming quarters. Christian, back to you.
On slide nine, we present, as usual, our portfolio in some more detail. In-place rent per square meter grew to EUR 6.95, and the vacancy came down to 6.5%, and our overall value per square meter reached EUR 1,612. Our strategy remains unchanged, with a focus on value add opportunity in densely populated metropolitan areas, along with diversification among areas of sustainable economic fundamentals and demographic prospects. On slides 10 to 13, we give you an updated overview of our portfolio, which remains well-diversified over strong densely populated areas with value add potential in Berlin, North Rhine-Westphalia, Dresden, Leipzig, Halle, London, Hamburg, and Bremen, and other strong locations, each benefiting from different economic drivers and growth potentials. Our North Rhine-Westphalia portfolio on Slide 10 makes up 21% of our portfolio and was reduced due to the disposals in the first quarter of 2020. The disposals were in secondary cities in North Rhine-Westphalia.
Therefore, the stronger cities in North Rhine-Westphalia have a larger portion. Now Cologne accounts for 27% of the North Rhine-Westphalia portfolio, and together with Dortmund, Bonn, and Essen, it accounts for nearly half of the North Rhine-Westphalia portfolio. Berlin on Slide 11 remains with 24% an important location for us, with two-thirds of the Berlin portfolio located in top-tier neighborhoods, and the remaining one-third well-located in high-demand secondary locations. London on Slide 12 has grown to over 2,800 units, including pre-marketed units, and remains with meanwhile 15% of our portfolio, a very attractive and successful international diversification into a strong and resilient market. Over 90% of our portfolio is located within short walking distance to train or underground. The letting performance has been very strong, coming from double-digit vacancy to 96% occupancy in March 2020.
Our eastern portfolio on Slide 13 with 13% and our north portfolio with 5% remain stable environments with strong economic drivers. Turning now to Slide 14, we present to you the current annualized net rental income versus the market potential. The market potential of our portfolio, which we will reach through increasing rents and occupancy to market levels, is plus 20%, including the impact of the Berlin rental cap. This is currently our base case. In case the Berlin law will be rejected, which we believe is likely, our potential will be 28%. Now back to Refael.
Our financial policy on Slide 15 remain unchanged, with the long-term goal to achieve an A- rating. Keep the LTV limit to 45%, keep the debt-to-debt plus equity ratio at 45% or below on a sustainable basis. Maintaining conservative financial ratio 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 bond and non-recourse bank loans. Distribute a dividend of 55% of FFO I per share. Also, as you note on the same slide, our covenant limits are well met or exceed in all aspects, and our cooperation with strong financial institutions continues to enable us to access the capital market when needed. Our capital structure on Slide 16 remains solid, with 93% of our debt hedged.
Low LTV of 36% and an average duration of our maturity of 7.8 at the end of March, with a widely spread maturity schedule. On Slide 17, you can see that our ICR and DSCR remain strong with 6.7 and 5.3 respectively. Our large pool of unencumbered assets with a EUR 6.2 billion or 77% gives us additional safety and headroom if needed. Among peers, we have the highest liquidity position as of March 2020, which in present times acts as a strong cushion for all eventualities, as well as strong basis for which to initiate and act upon opportunities that the market may present. Particularly now during times when business may need a fast transaction in order to counteract downturn resulting from the COVID-19 crisis.
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 since 2013 continuously.
On Slide 18, we give you an indication about the maintenance, CapEx, and modernization costs during the first quarter of 2020, which is EUR 5 per average square meter and slightly below the comparable quarter last year. The spend for repositioning CapEx remains stable with EUR 3.5 per square meter. The EUR 1.5 per square meter spent in maintenance was with EUR 0.20 slightly less than last year. In the current situation, we continue to carry out return maintenance works to ensure continued tenant satisfaction. However, new CapEx projects are based on their necessity, and projects that do not require immediate attention are delayed to a later point in time.
Finally, on Slide 19, we show you our guidance for the full year 2020, which has been adjusted slightly as a result of the EUR 600 million bond issued in April, Q1 finalized disposals of EUR 270 million, and due to our decision to postpone planned acquisitions. We have issued the bond in order to increase further our cash and liquidity position. We believe that strong liquidity is very important at this stage in uncertain times. The strong liquidity, coupled with long debt maturity schedule, will enable us to shield ourselves from an extreme negative scenario. Further, the issuance will enable us to capture opportunities when they will rise, which we believe could arise in the current crisis. We also decided to postpone our immediate acquisition pipeline and reassess the condition of such deals.
We will continue to acquire opportunities when either we see stabilization in the market or when we come upon very attractive yielding opportunities. As we cannot estimate the timing of such acquisitions, we have conservatively updated our guidance to include very few acquisitions in 2020. Use of our hiring power during 2020 for such purposes would increase the results in the next years. As to the previous guidance, the impact from the Berlin rental cap and from COVID-19 are also factored in. We have slightly adjusted the like-for-like estimate for 2020 due to temporarily freezing rent increases. We expect to continue with the planned rent increases the last third of the year. Therefore, the guidance is FFO I between EUR 213 million-EUR 220 million. FFO I per share, EUR 127-EUR 131. Dividend per share, EUR 0.82-EUR 0.85. FFO I per share, EUR 1.7-EUR 1.11.
That's FFO I per share after perpetual note attribution. Sorry. Total net rent like-for-like growth between 1.5%-2%. LTV remains below 45%. With that, thank you very much, and I will turn you back to Katrin.
Thank you. We are now starting the Q&A session. You will answer the questions you 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, and I will now start with the first question, and the answer will be given by Christian Windfuhr and by Refael Zamir. First question. How has the coronavirus impacted the German residential market? Do you see a decline in rents or in values?
We believe that the German residential market is very stable, and in the sense that rents are stable due to the strong demand from the prevailing demographic factors of growing demand from migration to urban centers, demand for smaller household sizes, affordable rent levels to household income compared to other European countries, and rents being backed up through government support in case of unemployment. The low supply of new builds, especially for the affordable sector, led to consistent increase over the past years. The full impact of the current economic shutdown is hard to assess, but the impact is currently limited as these factors remain, and therefore, we believe in the stability of rental income and values.
During the first quarter 2020, our letting results were stable and in line with our expectations, and we continue to see robust demand in our primary asset locations, while fluctuations from our properties remain low. Accordingly, vacancy reduction continued during the first three months of 2020. Rent levels have stayed steady, and the resilient nature of the residential market was also highlighted in recent market reports, which identified the slowdown in construction activities and existing demand and supply imbalance as supporting factors to the market rents. Our property valuations are well below replacement costs and market levels, and we expect the gap to close over time. We believe that there is some potential for a decrease in yields due to the fiscal stimulus measures driven by governments and in connection with the negative interest environment to remain in the foreseeable future.
Although we see the following scenario as unlikely, it should be noted that a long-term lockdown and a potential economic crisis could put some negative pressure on valuations. Given that under the current market situation, the transaction activity has decreased significantly, and there is little evidence to point for a clear trend. In a very pessimistic case that the shutdown remains for a long term with additional waves, we can expect a negative impact on operations. It will be harder to rent apartments, but on the other hand, the fluctuation will decrease as well, which will result in stable rents, but will delay our like for like performance. The pressure on valuations will also appear in this scenario, mainly due to higher discount rates.
We see this bleak scenario less likely, but nevertheless, we are confident in the defensiveness and strength of our portfolio, our strong balance sheet with high cash liquidity and a conservative leverage, and are prepared to sustain under pressure. It should be mentioned that in such scenario, we expect many very good distressed opportunities to appear, which enable us to take advantage of our liquidity and firepower for external growth. The situation in the capital markets is more complicated due to the uncertainty from the shutdown and the effects on the global economy. Countries across the world are reporting on dramatic negative effects on their economies, and the uncertainty on when, how, and to which extent the economies will resume to the levels seen before the outbreak of the pandemic will weigh significantly on the capital markets.
Although we believe that the German residential market is not directly impacted from the current situation, we believe that liquidity will play an important factor. With the extension of the market shutdown, we expect companies and asset owners with weak liquidity and limited access to capital to come under pressure, and for opportunities to rise for stronger market players such as ourselves.
What has been the impact of the coronavirus on your business? Are you still able to rent vacant apartments? If so, are there any hurdles to this process?
Our top priority is to ensure the safety of our employees. We are happy to report that we had no incident among our staff. We follow the recommendations of the Robert Koch Institute and have provided our employees with protective masks. A large amount of our employees switched to home office. So are the digital solutions to ensure a smooth process working from home. Some of our teams are already back to work in the offices, but we will resume in full force once schools and kindergartens are fully back open. In any case, we will continue to implement further digital processes going forward, also when everybody is back in their offices, as we see them being very efficient and will allow to cut traveling costs.
Grand City Properties' agility has been beneficial as we have conducted virtual tours in our vacant apartments, implemented solutions for identity checks using the Deutsche Post, and offered services during the lease signing processes with our personal via video calls. Accordingly, Grand City Properties has complied with social distancing norms while ensuring our employees are able to carry out their tasks in a safe environment. As expected, during such periods, we are seeing a lower tenant turnover rate. During the first quarter of 2020, our operations have hardly been impacted due to the coronavirus. The trend of steady rent and occupational increases have continued. With letting continuing at a stable level and fluctuation being lower, the combined effect has been a positive for the business. Our ability to adapt in a dynamic environment has ensured business operations to continue.
We have seen collection rates remain stable with a limited decline of approximately 3% in April, due primarily to rent deferred, which we expect to collect later. In Germany, the social support in this pandemic was strong and swift. We therefore expect to see tenants fulfilling their obligations. We are in contact with tenants that ask for support. In some cases, also help them contact the government in order to receive their rights. Since the pandemic breakout, we decided to stop our rent increase processes. We will review them once the markets will be fully open again.
How does the pandemic impact the business in London? Is it different than in Germany? Are tenants asking for rent reduction? How is the letting in London, and what is the impact of the coronavirus pandemic on the units in the pre-letting state? Can we get some color on the rent and value changes due to the corona crisis, Refael?
Thanks, Katrin. Similar to Germany, our operation remains stable in London. Q1 2020 results were in line with our targets and hardly affected by the shutdown. Moving into Q2 2020, currently, we do see the lockdown imposed in London impacting the letting level and reduction fluctuation level as the market come to standstill. As we have already achieved 96% occupancy level at the end of 2019. Our properties are primarily newly let and have small portion of lease expires. Therefore, the letting activity are focused mainly on re-letting and coupled with low fluctuation. The net effect is small. We see a small number of tenants contact us and asking for flexibility of payment or rent deferral. Similar to Germany, workers which lost their job due to the pandemic receive government support. Therefore, we see only a small number of tenants which cannot meet their obligation.
An amount of approximately 5% of the rents were not collected yet compared to previous levels. We have open communication channel with our tenants and try to find a reasonable solution. As to the properties in the pre-letting stage, we continue to prepare the building for letting and works are progressing. Also under the current situation, we are in line with the timeline and aim to be able to let out the properties in the upcoming periods and hope that the lockdown be lifted by then, which otherwise may slow down our letting once we are completed. It is too early to estimate the impact on the virus on rents and values in London. We currently do not see estimate significant negative change in the levels and believe that middle class property in good location in London will not be largely impact.
In any case, we have acquired properties at substantial discount to market price, and we see properties as a very defensive, yielding much above market level and with low vacancy. We see a good fundamental in London as strong and expect them to stay robust also in the future.
Any change in the Berlin rental cap? What is your expectation for the implementation of the regulation?
Two weeks ago, it was published that the lawmakers from CDU, CSU, and SPD are challenging measures to impose restrictions on Berlin's rental market, claiming they are unconstitutional. Claim is that the Berlin authorities have violated the rights of the landlords. Issues such as limiting rent should be regulated on a national level rather than by individual states. Challenge to the Berlin Mietendeckel by lawmakers does not come as a surprise, as we have maintained from the beginning that this law is unconstitutional as rent regulations is set by the federal government. We believe that this is an important milestone to reject the rent cap. In our opinion, we believe the only solution to meaningfully address the housing situation is by increasing supply and easing the building approval process.
We have seen lower revaluation in the first quarter of 2020 compared to previous periods. What was the reason for that? What levels of revaluations can we expect to see in the first half of 2020? How has the coronavirus pandemic impacted valuation?
In the first quarter of 2020, we have record small amount of revaluation as we have revaluate only small portion of our portfolio due to the lockdown and the limited mobility of the team. Once the lockdown is lifted, we will carry a larger revaluation in our portfolio. We continue to see our valuation as conservative and see the large gap to market level and replacement cost as the upside to the valuations. It is too early to estimate if the coronavirus pandemic will impact valuations. Our rents remain resilient, and the valuation are based on long-term strong fundamentals. Moreover, we expect the historically low interest environment will remain in the upcoming years.
Can you please give us some more details on the acquisition during the first quarter of 2020? Can you please provide us an update on your acquisition pipeline? Would GCP continue with acquisitions given the current uncertainties? What is the targeted level of London exposure? What is GCP's acquisition firepower?
Over the first quarter of 2020, Grand City Properties concluded acquisitions of approximately EUR 100 million, which were primarily in London. Acquisitions included 60 units acquired at a multiple of 21 times and included fully occupied, newly built properties in Hackney, as well as social housing across several middle class locations in London. The acquisition also include approximately 200 units located in Greenwich and Hillingdon, which are in the pre-letting stage and are expected to be let out in the next series. The acquisition price per square meter was approximately EUR 7,000 per square meter, which we find as attractive. Currently, we are more selective than usual and are continuously scanning the market for opportunities and are reviewing a sizable pipeline of half a billion EUR.
We believe that more effective acquisition opportunities will arise as long as the pandemic concerns are impacting the market and would resume to the previous acquisition pace once we see more clarity on the direction of the pandemic, or once we see a pricing that create attractive opportunities. We do expect to see an increasing amount of distressed properties in the market. We will benefit from high cash position. This pipeline acquisition is expected to be further funded with proceeds arising out of the capital recycling measures undertaken in the normal course of business. Grand City Properties' firepower for acquisition, staying within our leverage target, amounts to over EUR 1 billion, positioning us strategically to take advantage of opportunities that may arise. Given our conservative financing structure, we have sufficient headroom to fully utilize our firepower before hitting our internal limits.
Regardless of firepower, investment decisions continue to be subject to our stricter acquisition criteria of achieving a 5%-7% unlevered NOI yield on total costs within 3-4 years from acquisition in Germany as well as in London. We continue to monitor the London market for opportunities and believe that some more opportunities will rise. We expect the London portfolio to reach 20% of the total portfolio. Regardless to external growth, Grand City Properties continues to focus on organic growth, which provides a strong growth driver in the years to come. Grand City Properties' under-rented portfolio also benefits from a reversionary potential amounting to 20%, which value the source of top-line growth in future periods. Assuming the Berlin rental cap will be canceled, this potential will increase to 28%. A lion's share of these incremental rents flow straight into FFO I, significantly boosting the bottom line.
Could you provide more information on the disposals during the quarter? What was the sale multiple? How many units remain held for sale as of the end of March 2020? Can we expect to see more disposals? Are they included in the guidance?
During Q1 2020, we completed the disposal of 4,800 units located in various locations in North Rhine-Westphalia. The disposals amounting to over EUR 270 million, were closed at a multiple of 16 times and generated a profit margin of 47% over total costs. The disposals contributed over EUR 17 million rents per annum and included a vacancy of around 10%. We are currently in negotiations for further disposals in a volume of a few hundred million EUR, which includes, on average, a gain over book value. These negotiations include the held for sale portfolio, including a value of EUR 200 million or over 4,000 units, as well as potential disposals carried out on an opportunistic basis. In our guidance, we did not include opportunistic disposals as they are only in negotiations, and we do not set these disposals as a target, more as an additional value creation.
The disposal gains enable us to capitalize on values over NAV, whereas our share price is currently traded at a discount. These disposals enable us to benefit from this gap, which can be channeled into acquisitions and market opportunities, increasing the shareholder return.
Could you provide some more color on the like for like during the first quarter of 2020?
As of the end of March 2020, the top line increased by 3.4% on a like-for-like basis, with 2.8% as a result of in-place rent increase and 0.6% due to occupancy increase. The in-place rent increase can be further attributed to 1.6% from reletting and 1.2% from indexation. Specifically, we continue to see strong like-for-like performance in the region of Bremen, Dresden, Leipzig, and Halle, and in London, while Berlin is stable to negative due to the rent cut. The defensive nature of our portfolio allows us for steady like-for-like rental growth, which in strength we expect will continue to support the business even during the current uncertainty.
Has the coronavirus pandemic impacted maintenance and CapEx measures across the portfolio? Do you continue with modernization in your portfolio?
The maintenance has remained stable in Q1 2020. We expect to see a similar level also in the next months. We have the ability to continue the work largely without interruption to ensure tenant satisfaction. We acknowledge that our tenants need to feel as comfortable as possible at home, now more than ever. Our 24/7 service center, which continue to be fully operated in those times, provide an additional layer of tenant satisfaction, ensure the tenants have their needs fulfilled. As to CapEx work, we continue as usual with projects which started before the outbreak. All the new projects are evaluated based on their requirement and urgency. Projects which are not required immediately are on a temporary hold. We have reduced the modernization investment in the recent period, already before the pandemic. With the current regulatory environment, it is harder to achieve a high return.
We currently have a substantial headroom to capture rental growth without relying on relatively expensive investment to increase cash flow. In any case, we continue to review our processes on a case-by-case basis and analyze the potential return.
Is GCP considering moving into another geographical market? How large do you see your London portfolio in proportion to your total portfolio?
Our primary focus is on the German market and London. We keep our eyes open for acquisition opportunities in geography with solid fundamentals similar to the German market. Currently, we have not reached any decision on this matter. Any acquisition in a different geographical market will have to be accretive in nature, while also enhancing the quality of the investment property portfolio. We see our portfolio in Germany at a level of not less than two-thirds.
GCP has over EUR 1 billion at end of March 2020 and has issued an additional EUR 600 million in April 2020 at a relatively high rate of 1.7%. What is the reason for the issuance, and what are the expected uses for the funds? In your decisions with banks, are there stricter covenants or increasing margins being requested due to the current uncertainty?
The issuance we carried out in the beginning of April was to further strengthen our liquidity position and to ensure that GCP will have sufficient firepower and additional liquidity headroom in case the capital markets shut down or in case of liquidity or credit shortage in the market. The market conditions were uncertain, and there was no certainty to know how the market is going to develop. In order not to lose an opportunity, which may call for an undefined time, we increased our liquidity. The issuance was carried at relative higher rates, reflecting the market pricing at the time of issuance. We view difference to our average cost of debt as an insurance premium to secure liquidity during a very high-risk period. We believe that liquidity is the most important factor in those market situations, which at some point could open up attractive opportunities.
As it's not clear when opportunities will start to raise, and to what extent, we currently do not guide for acquisition and conservatively do not include those acquisitions in our 2020 guidance. We believe that it is important to be disciplined on acquisition on one hand, and to be prepared on the other. We took into consideration that such issuance may harm our 2020 FFO performance. We are also of the opinion that this situation brings opportunities, which in the next years will yield much more than our cost of debt. As to the bank financing, we maintain a strong relationship with multiple banks in general. As a result of the robust nature of our business, coupled with our conservative financing platform, we see no adverse impact due to the pandemic.
Can you please provide us with an update on your plans with your development rights?
Approximately half of our development in London, as mentioned, is progressing well and according to plan. As to the remaining half, which is primarily located in Berlin, we do not see a significant change. Our largest project is Prenzlauer Berg, where we are in the final stages of submitting building permit for the first plot and expect to get the approval by the end of the third quarter. We recently completed the expert opinion and assessment of the soil and land and got the necessary certificates. We do not expect the coronavirus to delay the timeline. We hope that the city's officials will continue working on the request also given the current situation. We are reliant on the city's schedule.
What is the reason for the lower assumed like-for-like rental growth for 2020?
The reason for the wider range of guidance on the like-for-like rental growth from 2% to a range of 1.5%-2% is due to the fact that GCP put rent increases on hold due to solidarity with the tenants until the main effects of the crisis will be over.
Is there any change in the decision to pay out dividends given the pandemic? If not, will there be an option for script dividends for the upcoming dividend payment? Given the comfortable liquidity position, will GCP be open to share buybacks?
There is no change in the decision to pay our dividend as a result of coronavirus pandemic. The robust operational result, as well as our peer-leading liquidity position, provide us with a viable financial flexibility that is useful in navigating the current uncertainty. Accordingly, the management decides not to change the dividend payout decision, which is subject to the AGM. In this year, the management will recommend to offer a high discount to shareholders who choose the script in order to encourage the exercise of the script dividend option.
As far as a share buyback is concerned, we will include in our AGM taking place in about a month, a five-year share buyback framework to be approved by our shareholders to allow our management to execute a buyback program in case the market continues to decline, where a value arbitrage is evident, with our share trading at a discount to NAV, while our disposals are at a premium on NAV persist. We would also have to evaluate our acquisition environment in the market prior to coming to the final decision.
You postponed acquisitions. Please explain if you expect market values to decline.
We don't expect the general market to go down, but we believe that there will be more specific special situations and distressed situations of forced sellers.
Thank you. I think these were the questions so far that we received, and then we will now start the open Q&A part. If you have several questions, then we kindly ask you to ask all your questions together right at the beginning. We are now looking forward to hearing your questions, please.
Ladies and gentlemen, if you have a question for our speakers, please dial zero and one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it's your turn to speak, you can dial zero 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 Ellis Acklin, First Berlin. Your line is now open.
Good morning, gentlemen. Thanks for the comprehensive presentation. My question is, assuming the Berlin rent cap gets overturned at some point next year, I would be interested in hearing your views how the city might react afterwards. If there are any other measures that the city might take or if, there at that point, they are just going to lay down arms in a matter of speaking and let the matter rest. Thank you.
Well, it is a bit of a crystal ball question that you are asking there. I think that the Berlin government will definitely not rest their case totally. I think they will find ways and means, hopefully with the cooperation of the landlords, to support tenants that really need help, and not put out a ruling which supports tenants that did not need help, amongst others. We hope that a good cooperation between the government and the landlords can take place to help the situation. Next question, please.
The next question is from Kai Josef Bernberg. Your line is now open.
Yes. Good morning, gentlemen. Just four quick questions. The first one is also on the COVID-19 impact. You mentioned that the collection rate has changed. Just to clarify, what was the exact collection rate for the, what, was it for the months April and May? Second question would be on page 21 of the report. You had a relatively high increase in other financial results, and you mentioned that it was coming from change in as well as from refinancing costs. What was the split of these items in the amount of EUR 59.5 million? The third question would be on page nine of the presentation. Just to check, we had a decrease in development rights and new building by about 3%, but the portion of the pre-marketed buildings in London went up by about EUR 60 million, EUR 50 million.
Which other projects saw a decline in value? Maybe you could elaborate on that. The last question would be that in general, overall, the portfolio size went down by 5% in Q1. Could you indicate what kind of minimum size S&P requires to sustain the credit rating or, of course, preferably to see an upgrade over time? Thank you.
Hi, guys. Thank you for your questions. I hope I get all of them. The collection rate is above 95% currently. We continue to collect the remaining percentage and are hopeful that in the next months we will reach a higher rate, reaching 98%. What's over 98% will be have on an ongoing basis.
Regarding the other financial results, I think the split comes mainly from derivatives and other financial assets. I think the split is around 7% on the derivatives and 30% on the other items. I'll have to get back to you on the exact amount later. As to the credit ratings, S&P specified a C2C over EUR 10 billion of portfolio, where they will feel it'll be easier for them to reach A minus. Naturally, this is not the only criteria, but that's the amount they specified. We will continue to grow our portfolio, acquiring once we decide to do so, and hope to reach that target eventually. I think that answers it all. Thank you.
The next question is from Markus Schmitt, ODDO BHF. Your line is now open.
Yes, good morning. Thanks for taking the questions. Just two from me. The first one, a rather quick one. If you could just disclose what the profit over book value was of your disposals in Q1. The second, you said you reduced investments now because you maybe hope for better opportunities in the coming quarters. This implies somehow that you have a certain idea of to what extent market values will decline going forward. Could you maybe disclose or give insight, what is your expectation and quantify to what extent market values could decline in Germany?
Thank you. I'll take your first question. We disposed 2% over the book value in Q1. On the second, how much market values will decline, it's very difficult to anticipate anything. As we said in the question earlier on, we don't expect the general market to go down, but believe that there will be opportunities coming up from owners who, as a result of COVID, will come into a distressed situation and may therefore be forced sellers. More precise, I don't think we can be on this one. Thank you.
The next question is from Manuel Martin, Oddo BHF. Your line is now open.
Good morning, gentlemen. Two questions from my side, if I may please. Question number one is on your valuation gains. Maybe you could give us some details on how much of your portfolio was being revalued, and maybe also on the regions. Second question would be the effect on your collection rate that you mentioned on your 95% collection rate versus your usual 98% collection rate. Could you give us more color on where does the impact come from? Any specific regions on that? That's it. Thank you.
Hi, Manuel. I'll start with your second question. No, there's no specific region where we see a higher collection rate. I think it's distributed more or less evenly between the areas. As the effects have reached, that resulted in lower collection rates is across Germany, actually globally. We don't see a specific area where we see higher collection rates. As to the valuation gains, yes, as mentioned, we did very small amounts. Just on specific cases due to the pandemic and to the effects of it, we decided not to carry a large amount of revaluations. Therefore, the split in the locations also is, I think, not that relevant. We just did it on targeted amounts, so we saw a big difference. Thank you.
Next follow-up question from Kai Josef Bernberg . Your line is now open.
Yes. Sorry. One question was still left. That was on page nine of the presentation. We had development rights of 447, including EUR 217 million of pre-marketed buildings in London, which compared to 461 by December last year, which included EUR 160 million of pre-market buildings in London. The overall number went down. The proportion of London properties went up. I just would like to know what was the reason for the decline in figures of non-London-based properties, based development. Thank you.
Hi, Patrick. I'm sorry I missed that question before. Yes, London increased and also the other locations in Germany have decreased as the investment property grew accordingly. I believe this was a project located in our other portfolio. There was a pre-letting acquisition that we did last year, and now it's completed, and we have it included in the other portfolio. Thank you.
Another follow-up question is from Manuel Martin. Your line is now open again.
Good, gentlemen. A follow-up question on the valuation stuff, just to make sure that I understood that. The portion valued of the portfolio was of a minor degree, you said. I remember in the past that you valued something like 25% of your portfolio per quarter. Can we assume that the amount is significantly lower, or do you have a specific percentage number for us in that? Thank you.
Yeah. I don't have the exact number in front of me, but definitely significantly below the 25% of last quarter. That mainly explains the difference between the two quarters, basically Q1 2020 and Q1 2019. Thank you.
The next question is from Pierre Perrin, Kepler Cheuvreux, line open.
Hi, good morning. I just had a theoretical question. Could you explain why you think that there will be more distressed sellers in the market? If we just look at Berlin, your peers have indicated so far that there is no distressed sales for this market. Of course, this could change going forward, but I would be interested to know what are the drivers that you think that could motivate more distressed sales in Germany generally. Who would be those distressed sellers, is it individual firms? What will be the triggers of such distress, given that collection rates of rent seems to be very high across the board, so it doesn't seem to be very high issue around collecting rents and therefore getting cash. Going forward, one could assume that it should be fairly similar given the government support.
Just curious to know more around your rationale there. Obviously, if there is no distressed property on the market going forward, you got large amount of cash on your balance sheet. What would you do with it in case that the high-yielding opportunities never really materialize? Thank you.
Thank you very much for the question. The situation that we think might arise a bit similar to 2007, 2008, where a lot of sellers came to the market, partly forced by the bank, partly forced as a result of their own priorities, who were selling. We don't see these opportunities today. We don't know who the sellers exactly are, but they will probably be the non-listed owners who don't have access to big funds through capital market activities, but who have bank financing under obligations to repay banks. Maybe they have another business which they want to place focus on and therefore sell their residential business, which they have to balance their obligations that they have. All kinds of situations can come up, none of which we have seen specifically, but the market development suggests that situations like this will come up.
I hope that answers the question, so I can't be more precise about this.
Just to add on what Christian said, I guess the more time will pass with the current crisis and deep recession that might follow, we will see players that will want to sell due to pressure of less liquidity. We will see this coming. I think the more the time passes, the more we see it coming. Thank you.
Okay, there seems to be no further questions, in which case I would like to thank you very much for attending our call, for participating with your questions. We hope that we will see you probably in the not too distant future on video and in the distant future, again, face-to-face, which we all look forward to. Thank you very much. Bye-bye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.