Dear ladies and gentlemen, welcome to the conference call of Grand City Properties S.A. At our customers' request, this conference will be recorded. As a reminder, all participants will be in 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. May I now hand you over to Ms. Katrin Petersen, Head of Communication, who will start the meeting today. Please go ahead.
Thank you, and a very good morning to every one of you. My name is Katrin Petersen. I'm Head of Communication, and I kindly welcome you in the name of Grand City Properties to our results call for the financial year 2019. With me today, I see all Christian Windfuhr, CFO and Chairman of the Board of Directors, Refael Zamir, COO, Sebastian Ramachandran, and Senior Financial Analyst, Michael Bar-Yosef. Christian Windfuhr and Refael Zamir will guide you through the results immediately 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 questions and answers. The management is available for questions.
We have already asked in advance to be so kind and send us your questions by email prior to the call, and please continue to do so also now. Send us your questions, please, so that we can include them accordingly. Please send your questions to the following email address, info@grandcity.lu, and once again, info@grandcity.lu. I thank you for your attention and hand over to Christian Windfuhr, who will now begin with the presentation of the results.
Good morning, and thank you, Katrin. Welcome to the full year 2019 results call for Grand City Properties. The year 2019 was another successful year for us, with strong internal growth, successful recycling of capital, improving our portfolio by value, quality, and diversity, and also further strengthening our balance sheet ratios, reaffirming our investment-grade credit ratings of BBB+ and Baa1 by Standard & Poor's and Moody's respectively. We have used 2019 to further strengthen our capital and debt structure, supporting our conservative financial position. We feel very confident in both the resilience of our portfolio and company, as well as our ability to capture new opportunities, especially in the current market conditions and our superior liquidity, over EUR 1 billion of cash ready for deployment for great opportunities which might come in 2020.
First, a quick glance at our financial highlights on page three of the presentation, which shows improvement in each of the important KPIs. Before we dive deeper into our results, we would like to address the recent developments around the coronavirus. First, and most important, our highest priority is the health of the people, which make up our company. We follow the recommendations of the Robert Koch Institute, the highest German governmental institution in the health sector, and put the safety of our employees, tenants, suppliers, and all stakeholders above all. The market in recent weeks is experiencing a very high volatility, our share along the overall market has seen significant drops. We would like to update you that our business runs as usual, that we are not directly affected by the virus.
We don't experience a slowdown and are confident that we will reach our internal goals as well as the yearly guidance that we will present later in this presentation. We have built over the years a very resilient portfolio focusing on diversification in one of the most defensive asset classes. We have a low leverage of 33%, an excellent financial profile with long debt maturity and more than EUR 1 billion of cash and liquid assets, providing us both a shield for any future scenario and also as an additional firepower to pursue potential opportunities. With that, let me hand you over to Refael for further details on our financials.
Good morning. First of all, I am sharing the same opinion like Christian. The company will take all the relevant steps to make sure that our employees are safe and that our daily operations will continue in line with our yearly targets. Now, back to the numbers. On slide five, we are able to present our strong like-for-like profitability results on the back of the strong increase in our net rental income by 5% to EUR 383 million. Rental and operating income grew to EUR 516 million. Profit for the year 2019 resulted in EUR 493 million and compared to last year included Later property revaluation and capital gain, which are non-recurring. Accordingly, the earnings per share basic amount to EUR 2.43 per share, the earnings per share diluted is at EUR 2.3 per share.
The recurring profit has increased, which is reflecting the 8% growth in adjusted EBITDA, which came in at EUR 298 million. The adjusted EBITDA increase of 8% compared to the 5% increase in the net rental income, highlights the efficiency of our operational platform and our ability to capture internal growth at a margin cost. Our like-for-like rental income increased by strong 3.6%, with 2.9% came from in-place rent growth and 0.7% from occupancy growth. Turning now to slide number six, you will see our FFO1 result. FFO1 amounted to EUR 212 million, in line with our 2019 guidance published earlier last year. With our per share result, we reached the top range of our 2019 guidance. The FFO1 per share has grown by 7% to EUR 1.27. The CAGR FFO1 per share since 2016 also grew by 7%.
FFO1 per share after perpetual note attribution amounted to EUR 1.07, up from EUR 1.01. Based on our 65% dividend payout ratio, the estimated dividend for 2019 will be just over EUR 0.82 per share, which represents a dividend yield of 4.7%. This result allowed us to continue our growing dividend distribution year after year. Following on to the slide seven, FFO2 grew by 14% to EUR 381 million during 2019, and has a total of over EUR 1.1 billion gain realized over four years. The disposal gain over total cost during 2019 amounted to 52%. This is yet another clear piece of evidence of the value generation, which we can achieve with the Grand City Properties platform. On slide eight, you will see that EPRA NAV has grown during 2019 from EUR 3.075 billion to EUR 4.12 billion, which is EUR 24.5 per share.
EPRA NAV included perpetual note has grown to EUR 5.015 billion from EUR 4.78 billion, which is EUR 30.6 per share. Total shareholder return was 12% in 2019. We continue to show accretive EPRA NAV growth on per share basis year after year, reflected in a 14% CAGR in the last four years. The equity ratio amounted to 50% at the end of 2019, compared to 53% in the end of 2018. The decrease in the equity ratio is mainly attributed to increased cash balances from the bonds issuance during 2019. Cash and liquid assets were over EUR 1 billion, up from EUR 760 million at the end of 2018. We will touch more on our liquidity position later in this presentation. Christian, please continue.
Thank you. Let me carry on with slide nine, where we present an increase of 10% to our investment properties, which at the end of 2019 stood at almost EUR 8 billion. We highlight that increase of the portfolio comes on top of disposals, which enable us to improve the quality of our portfolio. We sold EUR 500 million worth of non-core and mature assets in North Rhine-Westphalia, Berlin, Halle, and Kaiserslautern at 7% above book value and 52% margin over total cost. We acquired 2,300 units for approximately EUR 650 million in London, Berlin, and Munich at an average multiple of 21 times, including 500 units in the pre-letting stage in London. All acquisitions were done in accordance with our strict acquisition criteria, a discipline which also has helped us to create accretive results on a per share basis.
We generated over EUR 400 million revaluation and capital gains in 2019, and a like-for-like revaluation increase of 5% stemming mainly from our operational results. On slide 10, the investment property growth shows a CAGR of 18% since 2016. We view the size of our portfolio in terms of value and not in terms of units, as the focus in recent years is on increasing the quality of the portfolio, disposing mainly non-core properties, and acquiring properties in core locations. Therefore, the rent multiple of the December portfolio increased to 20.4, mainly due to acquisitions and disposals. Additionally, we present the other valuation parameters of 2019 compared to the former year, with average discount rates stable at 5.3% and average cp rate at 4.5%, only 0.1% below previous year. We note that our valuation parameters, and by extension, our valuation results, are conservative compared to market levels.
We rather maintain a defensive and conservative valuation profile, increasing mainly by operational results. We expect to see additional value creation in the next year. On slide 11, you see our portfolio overview in more detail and geographical breakdown. In place rent per square meter increased to EUR 6.8 per square meter, and the vacancy came down to 6.7%. Value per square meter is at EUR 1,543 as of the end of December. The rental yield is 4.9%, mirroring the rent multiple of 20.4. We have a well-balanced and distributed portfolio, focused in densely populated metropolitan areas. On slides 12 to 17, we are summarizing for you the status of our attractive and well-diversified portfolio in densely populated areas with value add potential in top German locations such as North Rhine-Westphalia, Berlin, London, Dresden, Leipzig, Halle, Hamburg, and Bremen.
Slide 13 shows that 24% of our portfolio is located in Berlin, with two-thirds of it in top-tier neighborhoods, including Charlottenburg, Wilmersdorf, Mitte, Kreuzberg, and other strong locations, and one-third in well-located, primarily Reinickendorf, Treptow-Köpenick, and Marzahn-Hellersdorf. Berlin is the largest city by population, with the highest population growth in absolute terms. It is a political and startup hub with high-quality talent, attracting growing companies and organizations. It also has the lowest home ownership rate in Germany. On slide 14, some details and information regarding the Berlin rent cap, which will have only a very limited effect on our well-diversified portfolio. We have discussed in detail the effect of the rent cap on Grand City Properties in the last call and present here an update.
The law was implemented on 23rd February 2020, and the update since our last call is that now the law requires the landlord to discount rents automatically without request from the tenants. The Berlin Senate will be required to, every two years, adjust the rent cases according to real rates. The ruling will have only a minor effect on Grand City because only 14% of our annualized rents come from Berlin. The downside, therefore, is limited to about EUR 3 million per year, which is less than 1% of our total portfolio's annualized net rent. The rent cap will have a one-time negative effect on the Berlin like-for-like 2020, and in the years after, we assume a flat rent in Berlin.
With the adjustments to the 120% rent cap table, we expect the total portfolio's like-for-like for 2020 to come in at above 2% and above 2.5% for the following years, as long as the existing legal framework remains unchanged. On slide 15, we show that 13% of our portfolio is in London, where we have quality assets located in strong middle-class neighborhoods. London benefits from the largest concentration of higher education universities in Europe, experiences a growing share of self-employed persons supporting the existing strong service sector in London, and is the number one global city according to the A.T. Kearney 2019 Global Cities Report, which assesses four metrics: personal well-being, economics, innovation, and governance. Over 90% of our portfolio are located within a short distance to underground or overground stations.
We have experienced a very strong letting performance in London in 2019, and the current vacancy in London is at 4%. In addition, we have EUR 160 million of pre-marketed buildings, which we expect to start letting in the upcoming periods. We are confident that the letting of these properties will be at least as successful as with previous lettings. On slide 16, we come to North Rhine-Westphalia, where we have 24% of our portfolio. With 18 million inhabitants, North Rhine-Westphalia is the most densely populated state in Germany and home to 18 of the largest public companies in the world as per Forbes Global 2000 Ranking 2019, including nine DAX companies. North Rhine-Westphalia is also Germany's industrial center, contributing 21% of the national GDP.
On slide 17, you see on the left our east portfolio with Dresden, Leipzig, Halle, making up 13% of our portfolio in a region with robust demographic fundamentals. It is a tech hub with Dresden accounting for every second microelectronic chip produced in Europe, and with Leipzig expected to be among the cities leading population growth in Germany through 2030. On the right side on this slide is our north portfolio with Hamburg, which benefits from its strategic location as a major transport and logistics hub for activities between Germany and Scandinavia, and of course, worldwide, through its port, one of the busiest in the world. And Bremen, which also benefits from the second-largest port for car trans-shipments in Europe. And Bremen also is a key industrial center with large production sites for both Airbus and Mercedes-Benz.
On slide 18, we show the portfolio reversionary potential , our current annualized net rental income versus market rent levels. By further capturing our rent per square meter and our occupancy to market potential, we will be able to improve our net rental income by around EUR 103 million. The flow-through effect of to FFO1 and subsequent to revaluation will improve our NAV and as a result, add value to our properties. We expect around 80% of the rent revisionary amount to flow to our FFO1. The full effect of the Berlin regulations will affect us only in a minor way because we have a very well-diversified portfolio with only 10% of our revenues from Berlin. The Berlin rent cap effect will reduce our full market potential by EUR 29 million, which can be seen in the middle bar inside the chart, resulting in a rent potential uplift of 20%.
As mentioned earlier, the overall impact of the Berlin rent cap on our present annualized net rental income of our total portfolio will be less than 1%. Of course, we still share the opinion of the majority of legal advisors that the Berlin rent cap will not withstand the legal challenges of the highest court. As to recent news, a Berlin district court has already found that the city's rent cap law is unconstitutional and has referred it to the country's federal constitutional court for a definite ruling. Regardless, in our current base case, we assume that the rent cap will remain, although we believe that the potential to market rent will not disappear. Back to Refael.
Thank you, Christian. On slide 19, you will see our unchanged and very strong financial policy with our long-term goal to achieve an A- rating, keeping LTV below 45%, presently 33%. Keeping our debt-to-debt-plus-equity ratio below 45% on a sustainable basis. Maintaining conservative financial ratio with a strong ICR. Keeping unencumbered assets above 50%. A long-term debt maturity profile. A good mix of long-term unsecured bond and non-recourse bank loans from several banks. A dividend of 65% of FFO1 per share. On slide 20, you can follow the development of our LTV over the last two years from 36% to 33% with a board of director limit of 45%. Cash and liquid assets amounted to nearly EUR 1.1 billion. Together with low LTV, is providing us with a significant headroom and financial cushion.
In 2019, we were active in the capital market and issued over EUR 700 million in trade bonds while preparing more than EUR 300 million of a bank debt. As such, we were able to decrease our cost of debt to 1.3%, down from 1.6% in 2018, while maintaining an average loan debt maturity of eight years. Our capital structure on slide 21 remains strong and conservative with 93% of our interest hedged. A strong financial source mixed with low proportion of bank debt and 34% trade bonds and a high proportion of equity. Our maturity schedule, with an average maturity of eight years as of end of 2019 and no immediate obligation in the next few years, place us in a strong position to respond quickly to market opportunities as and when they arise.
On slide 22, we highlight our strong debt and interest coverage ratio with 6.6 and 5.5, as well as our high unencumbered asset ratio of 79%, representing EUR 6.5 billion in value. Our S&P and Moody's rating were reaffirmed at BBB+ and Baa1 respectively. Our strategic goal to achieve an A- and A3 rating long term remains. Our maintenance CapEx and modernization on slide 23 remain separate into repositioning CapEx with EUR 14.9 per average square meter, modernization with EUR 2.2 per average square meter, resulting in like-for-like interest rent growth of 0.2%. Around EUR 6 million invested in 2019 in plan letting modifications. In 2019, we saw a minor increase in total spending from EUR 20.3 to EUR 21.2 average square meter. The AFFO increased to EUR 136 million, up 11% from 2018. The AFFO increased more than the AFFO1, as the repositioning CapEx remained stable. Christian?
On slide 24, we summarize our ESG activities and are pleased to report that we remain an outperformer compared to our peers worldwide. With 95th percentile by Sustainalytics and EPRA Best Practice Gold Award for the third consecutive year, we are underpinning our genuine efforts in maintaining our forefront position with regard to ESG performance. Incidentally, while not a constituent of the index due to size, Grand City Properties ranked fourth for its ESG measures as part of the formation of the DAX 50 ESG index, and has an ESG ranking higher than any other real estate company traded on the Frankfurt Stock Exchange. Finally, on slide 25, our guidance. We are proud to report that the 2019 targets were achieved in all aspects. The corporate side, financially, operationally, and environmentally, all reflect the upper end of the guidance results we gave at the beginning of 2019.
We will continue to work very hard in order to achieve the goals for 2020 as well. The guidance for 2020 will be FFO1 is expected to be in the range of EUR 220 million-EUR 226 million. FFO1 per share in the range of EUR 1.31-EUR 1.35 per share, reflecting an increase in the range of 4%-7% compared to 2019. Dividend per share to be accordingly at EUR 0.85-EUR 0.87 per share, reflecting a distribution ratio of 65% of the FFO1 per share. FFO1 per share after perpetual notes attribution to be in the range of EUR 1.11-EUR 1.15 per share, reflecting an increase of 6%-8% compared to 2019. Total rent like-for-like growth of over 2%, which factors in the current rent cap in Berlin. LTV to remain well below 45%.
We conservatively factor a small amount of net acquisitions in 2020 in the amount of approximately EUR 200 million, and therefore the prime driver in the increasing guidance is internal growth. With this, let me hand you back to Katrin Petersen.
Yes, thank you very much, Mr. Windfuhr. So we are now ready to start the Q&A session. We will answer the questions we have received by email so far, and we have grouped them together. The answers to your questions have been prepared by the team. I will now start with the first question, and the answer will be given by Christian Windfuhr and Refael Zamir. So question number 1. Can we get an update on the Berlin rent freeze from your perspective? What will be the impact on GCP, and do you see a risk that the rent freeze will be applied on other locations in Germany? Do you plan a change to the strategy of the company, and will you start disposing properties in larger amounts in Berlin? Does GCP continue to invest CapEx in Berlin? Christian Windfuhr.
On 23rd of February 2020, the Berlin Mietendeckel came into effect. Currently, it is expected that the opposition of the Berlin parliament, led by CDU and FDP, will file a proceeding against the Mietendeckel. The legal process is expected to be lengthy, and accordingly to the media, the process is expected to take around 2 years, although some optimistic forecasts have a shorter timeline. Until then, we will abide by the existing legal structure in full. As such, we continue to view these measures as detrimental to the housing shortage in the Berlin market, as it clearly decreases the supply of new construction, and this incentivizes modernization programs leading to lower quality housing.
As we mentioned previously, the problem at hand is clearly a shortage of housing, which in our opinion can only be resolved through increased construction and developments, which can only increase by reducing the extensive bureaucracy and lengthy approval procedures. Our strategy remains unchanged. We will continue to divert our portfolio in German cities with strong fundamentals, which aspects apply also to Berlin, with an additional diversification in London. Our Berlin portfolio accounts for around 14% of rent and 24% of the total value of our investment property. We continue to believe in Berlin and do not intend to materially change our position in the city. Berlin continues to display strong fundamentals, and we remain fully committed to our portfolio in the city. Disposals in Berlin will continue to be on an opportunistic basis with no change to the broader strategy of the company.
The total portfolio comprises assets in other strong locations with distinct economic drivers supporting the diversity of the portfolio. We do not plan to carry out large, complex programs or modernization investments in Berlin and will invest only the minimum needed.
What is the expected impact of the Mietendeckel on GCP? Did you experience decrease in valuations in Berlin during 2019? What is the expectation for 2020?
We expect a decrease in rents in the amount of up to EUR 3 million in total when bringing the rents down to the 120% of the Mietendeckel table. This is a one-time effect of less than 1% on Grand City Properties total rent. An additional effect of the rent cap will be on reletting, where rents from existing contracts will decrease from the 120% level to 100% level for new contracts or to previous rents, whichever is lower. We expect fluctuations to be low as due to the low rent levels, the competition for new lettings will be very high. We expect the total portfolio like-for-like for 2020 to be over 2% compared to over 3% prior to the rent freeze effect, reflecting the expected strong growth in the other locations of the portfolio.
The effect of the 2020 P&L income will be only partial. The full impact will be in 2021, assuming there will be no change in the law by then. It is too early to guide for the like-for-like performance for 2021 and onwards. Assuming the Mietendeckel is still in place, we expect the whole portfolio to generate over 2.5% like-for-like per annum. Without any revisionary potential from Berlin, our portfolio's revisionary potential is still 20%. It shall feed the like-for-like results in the upcoming periods. The impact of the loss of rent increase potential in Berlin, which we have estimated before the rent freeze to be approximately 4%-5% per annum, will affect the previously assumed rent like-for-like of the portfolio by 0.6%-0.8% per annum. The Berlin effect is more on the alternative loss and previously expected rent increases, not from actual rent increases.
In 2019, the valuation of Berlin portfolio remained stable with no material decreases. Looking into 2020, the Berlin transaction market remained positive. Recently published market reports present increase in value in Berlin, which may indicate a further yield compression. The valuation will come under pressure as no rent increases will be included in the DCF model and certain rent decrease will be included. It is hard to estimate what will be a larger impact on the valuations. We expect that the yield compression and the rent decreases to offset each other, and that the total net impact will be small. We believe that going forward, the valuation will get closer to the transaction level. Our current Berlin portfolio is valued significantly below market level and actually at construction level, not including rent.
We reiterate that we still see very high potential in Berlin, which will not disappear under the specific valuation.
Can we get your view on the German residential market? What are the current trends, and in which direction do you see it moving?
Demand for German residential remains robust, especially in the metropolitan areas and university cities. We exhibited strong letting results in 2019, reflected in 3.6% total rent increase, which was strong across all of our German locations. Our strong results were supported by strong market in our main locations, as also presented in market reports recently published. According to publications across German cities, the condo growth was approximately 5% and the rent increase was just below 4%. The increases are the result of continuously increasing demand with an increasing shortage in supply. As to demand, the cities of Berlin, Dresden, Leipzig have seen strong absolute population growth, and this growth trajectory is expected to continue through 2030, according to official statistics. The increase is mainly due to urbanization in Germany and domestic migration. However, international immigration and birth rates also contribute to the growth.
Additionally, Germany is expected to see a decrease in average household size, which shall further increase demand for apartments. According to data from the Federal Statistical Office in Germany- Housing is more affordable today than it was 10 years ago, presumably as a result of the low unemployment levels and steady wage growth. At the same time, supply of residential units has not been able to keep up with the demand. Experts suggest at least 350,000 to 375,000 units per year are required to improve the housing scarcity. However, new construction has struggled to cross the 300,000 mark in the past. Therefore, the supply lag is increasing further year after year. Shortage of labor and land for development, as well as bureaucratic obstacles could mean little change to this situation and a subsequent increase in the demand supply gap.
On a macro level, the global capital markets has been volatile and fears from an economic downturn has increased. We see the importance of the strength of the German residential fundamentals and are confident that the operations will remain robust and growing going forward. In addition, a slowing economy is leading the ECB to extend its supporting measures, which drives positively real estate investments and further decreases the yields and the interest cost. Any crisis also opens up new opportunities, and our defensive business model, paired with our strong cash position, puts us in a good position to grasp opportunities once they arise.
Do you expect an impact of the coronavirus on your business? Do you expect any difficulties to let apartments due to this situation? Will you consider to stop buying new properties due to the uncertainty in the market? Does the guidance include effects of the coronavirus?
We follow strict guidelines to make sure that our employees work in a healthy and safe environment. As to our business, Grand City Properties does not anticipate any substantial direct impact to its internal operations due to virus, since the company's operations are not significantly reliant on a supply chain of any sort. We are also prepared for more work to be done by our employees via home office in case the coronavirus will continue to spread. We believe that any downside is expected to be temporary in nature and Grand City Properties' strong liquidity position with over EUR 1 billion cash and liquid assets would be able to shield the company from potential hurdles. The uncertainty has led to a significant decline in financial markets. We believe that the German residential is a resilient asset class in such times, making it an effective investment option.
We are confident that our strong business fundamentals, in combination of our conservative financial position, will prevail. As to acquisitions, at this stage, we do not expect to see a change that will make a major difference on our current criteria, and we will continue to acquire properties if we find them accretive. We will keep monitoring the market and will take into consideration any change in the market. As mentioned, we do not expect at this stage a material impact on our business from the virus and feel comfortable with the guidance. The guidance does not include a doomsday scenario, which is not forecasted yet.
How does Corona affect your transaction activity as companies increasingly issue travel bans, et cetera?
As our pipeline is mainly in Germany and in London, both where we have local teams which can continue their work uninterruptedly by the travel ban. We do not see a material effect.
Can we get details on the acquisition pipeline? Where are the properties located? What is GCP's acquisition firepower?
The existing pipeline amounts to approximately EUR 300 million and is comprised of assets with similar quality and located mainly in London and North Rhine-Westphalia. The pipeline will be executed utilizing the capital recycling process of recent disposals. We have the capacity to acquire over EUR 1 billion worth of properties while maintaining sufficient headroom to our conservative financial thresholds. We continue to remain responsible and disciplined in our acquisition criteria and will not utilize our full firepower at any price. We maintain the criteria of scaling 5% unlevered NOI yield over total cost within three to four years from acquisition in Germany and 5% rental yield in London within a year from acquisition. In addition to the external growth prospects, Grand City Properties also has a strong internal growth potential, which is a significant source of growth for the company.
Our portfolio remains under-rented and has a revisionary potential of 20%, which supports the company's rental growth in the future. Moreover, around three-quarters of the internal rental growth potential flows into FFO and therefore is a major driver for top-line performance.
Can you please update on the letting of the London assets? Does the demand continue to be strong? When can we expect the pre-marketed building to be occupied? The London portfolio grew to 13% by the end of 2019. What is long-term proportion plan? Will the London portfolio continue to grow in the upcoming period? How does the uncertainty from Brexit impact your decision-making with regards to the London portfolio? Rafael.
As of December 2019, our London portfolio comprised around 2,600 units, which include those units which are in the pre-letting phase. The strong letting trend has continued, we see vacancy reduction at a rapid phase. Coming down from very high double-digit vacancy a few periods ago, to an occupancy of 96% as of the end of 2019. The London residential market is seeing increasing rental substitution, private home ownership. This is a result of significant increasing in housing prices over the years in London, also due to a better understanding of flexibility and benefit of renting over buying. We see rent and prices picking up in London and expect the trend to continue going forward. The letting success was supported by strong demand in the city. Moreover, lettings are achieving at high rent levels, on average, letting at a rent of EUR 32 per square meter.
The London portfolio includes approximately 500 units, which are in the pre-letting stage and are expected to be rented out in the coming quarters. Properties are letting out within two to three quarters from the time they are put on the market. The London portfolio accounts for 13% of the total investment properties portfolio. Currently, we see the window of opportunity closing, we expect this ratio to be in the range of 15%-20%. We see the opportunities in London to be very attractive and accretive to our growth. With the deal sourcing network established, we have the ability to cherry-pick acquisitions. Additionally, the London portfolio is healthy diversification to our portfolio, driven by different economic and political drivers than German residential markets.
As to the Brexit, the Brexit will carry out in the end of January, which does eliminate some uncertainty, but obviously there are still open issues. We continue to focus on the economic and demographic fundamentals, as well on the demand-supply gap, when making an investment decision, we try to filter out background noise. On the other hand, we see that there is a lack of liquidity in the market, therefore, some deals come at a discount to market prices, as well as with further upside potential to be captured.
Can you please provide details on the acquisition in 2019? Where were the acquisitions in London, and what was the price level?
During the year 2019, we acquired approximately EUR 650 million worth of properties, mainly in London, but also in Berlin and Munich. These acquisitions numbered approximately 1,800 units and were acquired at an average multiple of 21x with a vacancy of 3%. Besides these units, we acquired a further approximately 500 units in London, which are in the final stages of completion and are expected to be leased out soon. Our acquisitions in London are in the areas with a steady demand and possesses sustainable fundamentals supporting these demands. On average, the cost of acquisition was approximately EUR 7,500 per square meter, and these properties were situated in a number of localities such as Brent, Queens Park, Kensington, Islington, Hammersmith, Westminster, Leyton, Kingston, Ilford, St Albans, Bexley, Brentford, Hounslow, and Harrow.
Typically, we are able to achieve over 5% rental yield on the total investment subsequent to the asset reaching full occupancy. This goal continues to form part of our acquisition criteria. Over the course of 2019, we have seen the London portfolio evolve to its current position and are comfortable with the outcome so far. The City of London continues to have a real shortage of rental housing. With a population growth expected to continue, we are committed to the London portfolio and aim to retain these assets for the long term. The acquisitions in Germany follow our strategy and acquisition criteria to invest in good cities with strong long-term fundamentals. The acquisitions focus on Munich and Berlin. The acquisitions in London and Germany include upside potential, both in terms of rent increase and value creation, and will fuel growth in the upcoming periods.
Where have the disposals been located? What was the sales multiples? What can we expect going forward in terms of disposal volumes? How many units remain held for sale as per end of the year? Is there a minimum portfolio size in terms of units that GCP wants to maintain during the capital recycling?
In 2019, we disposed over 7,500 units for an amount of EUR 500 million. These assets were mature, staged, and non-core, and the disposals enabled us to crystallize gains achieved on these assets so far, while putting the resulting capital into new acquisitions with a significant upside potential. The sales transactions were executed at a multiple of 17x, which translated into a price of 7% over net book values and generated a 62% profit margin over total cost. The bulk of the disposals were in the regions North Rhine-Westphalia, Berlin, Halle, and Kaiserslautern. As is our practice, we continue to evaluate our portfolio and will dispose properties as and when we see good opportunities. After the reporting date, we disposed an additional EUR 250 million worth of non-core properties. The disposals were 4,700 units in North Rhine-Westphalia.
These properties are included in the December 2019 balance, the decrease in the rent of disposals is considered in the 2020 guidance. In addition, our held-for-sale portfolio as of December 2019 amounts to around EUR 200 million, accounting for over 4,000 units, and we intend to dispose these properties over the course of the coming year. These assets are non-core properties which management marked for disposal. The capital recycling measures implemented are aimed to strengthen the overall portfolio quality, this is the objective we work towards. We don't have growth targets in terms of units and aim to grow in value size terms. Accordingly, our investment property value has grown by 10%, and we expect to maintain this growth also going forward.
Vacancy has decreased to 6.7% from 7% last quarter. What were the drivers for the vacancy reduction? What does management forecast for 2020 in terms of vacancy reduction?
2019 was another successful year with letting achievement. The occupancy like-for-like for the year was 0.7%, which is a result of our strong letting team, the continuation of the repositioning process, both supported by positive market dynamic in our core locations. We have seen like-for-like vacancy reduction across all our main locations, in particular in Dresden, Leipzig, Halle, and in Nürnberg. While in reduction vacancy, we focus on strong tenant base, supporting the repositioning of our assets. Going forward, we expect to maintain the good like-for-like performance also in the upcoming periods.
We see that modernization investments decreased in 2019. What is the reason, what can we expect going forward?
Modernization in 2019 amounted to EUR 11 million or EUR 2.2 per square meter, down from EUR 21 million or EUR 3.9 per square meter in 2018. As we have previously communicated, we do not rely on modernization activities to support our rental growth as we have high upside to market rent for rent increase without carrying large investments. With modernization, we pick the low-hanging fruits and carry out investment which yield high return at a low investment. In 2019, we have seen less opportunities on modernization, also due to regulation change in Germany in general and in Berlin specifically. Therefore, executed less modernization. Going forward, we do not rely on modernization to continue and produce rental growth. We will invest only for a good return.
Can we please get more details on the like-for-like in the period? What was the rent increase in Berlin after June 2019?
As of December 2019, GCP like-for-like rental growth amounted to 3.6%, comprising of 2.9% from in-place rent increase and 0.7% from vacancy reduction. The in-place rent increase is made up of 1.6% due to reletting, 1.1% as a result of indexation, and 0.2% from modernization. The portfolio continued to witness consistent like-for-like growth, a trend we expect to continue going forward. We have seen strong like-for-like performance across the entire portfolio, in particular in Dresden, Leipzig, Halle, and in Nürnberg. In Berlin, after June 2019, we have made rent increases in an insignificant amount, which can be deducted in 2020. However, the impact on Berlin like-for-like in 2020 will be higher due to the reduction the rent to 120% level of the rent cap table.
What was the driver behind the revaluation and the capital gains in 2019? Why was there a lower amount compared to 2018? What revaluation gains can we expect in 2020? What was the like-for-like revaluation gain?
During the year 2019, GCP reported over EUR 400 million of valuation gain, with gains observed in all our core regions. Of the amount, EUR 370 million is related to revaluation gains, and over EUR 30 million are related to capital gains from disposal, which reflect the sale price over the book value. We have seen valuation across all the portfolio, in particular in Berlin, NRW, and in Dresden Leipzig area. The like-for-like revaluation gain is about 5%, mainly from rent growth and operational performance. We have experienced a small yield compression of 0.2%, which has contributed to around one quarter of the like-for-like valuations. In comparison, we recorded around half a billion EUR in valuation gain in 2018. Revaluation gains do not follow a fixed pattern and are driven by various underlying factors which may differ from period to period.
We take a conservative position with our valuations, which increase mostly from operational results. Furthermore, the valuation parameters are conservative, mirroring our defensive portfolio. Going forward, we expect to see operational performance driving value creation, but also expect a certain yield compression to reflect the very strong transaction market. We continue to see contracting yield across all our core locations and expect the valuation to slowly close the gap.
GCP was very active in the debt market in 2019. Are you planning any issuances in 2020?
We maintain a proactive approach with regard to managing our financing structure. Issued bonds worth of over EUR 700 million in 2019, which were used to prepay around EUR 350 million of near-term and high interest-bearing bank loans. This was a key to reduce our average cost of debt to 1.3%, lower from 1.6% year ago. We also work towards maintaining a long average debt maturity and were successful in doing so with an average maturity of eight years as of December 2019. Going forward, we continue to evaluate our debt profile and the opportunity in the markets. If the opportunity arise, we will continue and optimize our debt structure.
Will GCP enter into new markets?
Looking into new markets for acquisitions, we continue to keep a close eye on opportunities in European cities and countries with strong fundamentals which fit our acquisition criteria. We have not come to any conclusion on these matters. Also here, our decision to enter new territories will require to be accretive on the one hand, while also having a positive impact on the overall quality of our existing portfolio. In any case, we will continue to focus primarily on the German market.
Can you please provide an update on the progress of the main development projects?
In our main and largest development projects located in Berlin, near Volkspark Prenzlauer Berg City Park, we are progressing according to our business plan. For one plot, we are expecting to get all the required building permits during 2020 and to start construction soon thereafter. As to the second plot, which is larger and shall include a higher amount of building rights, we are continuing negotiating with the city and working on the zoning plan. As part of the repositioning process, we identify and optimize the potential building rights and then start the process of planning and obtaining permits. This process is most crucial for creating additional value. Once we advance with the building permits, we have the option to decide whether to sell the land and capitalize on the profits, to build and hold or build to sell.
We see high value in keeping all three options open and working in parallel so we can maximize our profits.
GCP has over EUR 1 billion cash and liquid assets and has a low LTV ratio of 33%. Will you increase the payout ratio or consider a share buyback?
Our significant liquidity position give us a fair amount of flexibility in response to available opportunities and enable us to remain very stable in case of market downturn. GCP's strong operational performance provide us with the luxury of consideration to higher payout ratio of FFO1. This decision will be based on our pipeline looking forward. GCP remains as a rather attractive investment option for our shareholders, with a dividend yield of 4.7%, which has grown annually by an average 7% over the past four years.
In case of sustained market downturn, and if we see a value arbitrage where our shares is trading at a sizable discount while our disposal continues to be executed at a premium or not, we could consider a buyback. Another variable in this equation would be acquisition opportunities existing in the market. All things considered, we remain committed to maintaining a conservative financial structure and will not take a decision that has an adverse impact on this policy.
Yes. 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 hearing your questions. Thank you.
Thank you very much. We will now begin our question and answer session via the telephone line. If you have a question for our speakers, please dial 0 and 1 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 is your turn to speak, you can dial 0 and 2 to cancel your question. If you're using speaker equipment today, please lift the handset before making your selection. One moment please for the first question. We've received the first question. It is from Ellis Acklin of First Berlin. Please go ahead. Your line is now open.
Yes. Good morning, gentlemen. Thanks for the comprehensive presentation. I just have one question. Trying to get an understanding if you see any potential risk to the rental income. Let's not talk about a doomsday scenario here, but if there's a widespread lockdown, I would assume that you have a certain number of moderate income earners who would struggle if there's a brief loss of wages, and what the impact of that could possibly be on the rental income over the next couple of months. Thank you.
I would assume that you are referring to the coronavirus situation. We do not expect the tenants need to leave their flats and will continue paying their rent. We are not expecting that even an economical downturn in the country as a result of the coronavirus will affect our rental income in any significant manner.
Thank you. We go to the next question. From Kai Klose from Berenberg. Your line is now open. Please go ahead.
Yes. Good morning. I have two questions. The first one is on the portfolio stock, and in particular on the Dresden, Leipzig, and Halle portfolio. I think if I got it correctly, we have about 9% of vacancies, vacancy rates. Could you indicate what are you planning or expecting for 2020? Could you also give a split of the exposure there between Dresden, Leipzig, and Halle? The second question would be, first, if I understood you correctly, you mentioned you sold 4,800 units by the end of 2019 in NRW. Is this already reflected in the portfolio overview or is it to be taken off when we look into 2020? Thank you.
Yes. Hi. Thank you, Kai, for your questions. First about the disposal. The disposals we had in 2019 are not in the table that we show as of December 2019. We did dispose in the beginning of 2020, another 4,700 units, which are still part of the table, but not part of our guidance. Referring to your second question on the 9% vacancy in Dresden, Leipzig, Halle, we believe we will continue decreasing the vacancies in this location. 2019 was a very good year. We saw a good increase in occupancy both in Halle, Dresden, and Leipzig. On average, the vacancy there is very similar. We see a bit lower vacancy in Dresden, but in Leipzig and Halle, a bit higher, but above average.
We see the trend in both of those cities very strong and believe that next year will be also very strong in the letting in this region. Thank you.
Okay. There doesn't seem to be any more questions. I would like to thank you very much for joining the call, for hanging in with us for the full duration of the call. Hopefully travel will allow that we will meet again face-to-face not too long from now. With that, we wish you all the best and thank you very much for your attendance. Bye-bye.
Thank you.
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