Good morning, everyone from Düsseldorf. Welcome to our full year 2021 results call, and thank you for your participation. We have in the call today our entire management team with our CEO, Lars von Lackum, our CFO, Susanne Schröter-Crossan, as well as our COO, Volker Wiegel. You'll find the presentation document as well as the annual report within the IR section of our homepage. Please note that there is also a disclaimer, which you'll find on page three of our presentation. Without further ado, I hand it over to you, Lars.
Thank you, Frank. Good morning, everyone, and thank you for joining our call today. Before we present to you our financial results for 2021, let me first comment on the current political environment, which clearly overshadows everything. We all became witnesses of a war none of us has ever expected. The Western Ukrainian border and the Eastern German border are only separated by 600 km. It takes another 400 km from the Eastern German border to reach the first LEG locations. i.e., LEG is only 1,000 km away from a country in war. We, as LEG, feel the need to support Ukrainian refugees. The number of refugees is expected to rise to a total number of 4-5 million, the by far highest since the Second World War in Europe. Therefore, we are actively offering flats to refugees.
Additionally, via our foundation, Your Home Helps, we are providing EUR 500 thousand to equip the flats. Residential companies have a high social responsibility. At LEG, we have an even higher responsibility being focused on affordable housing. We proudly live up to that responsibility. Under the impression of the horrible pictures reaching us, it is difficult to address the economic impact of the current war on our financial situation. Still, for the time being, we have not seen any change in the demand for affordable German residential real estate. Due to the rise in inflation and the still low yield environment, we currently do not expect a change there. Even more, in line with previous years, we expect a further value increase in 2022. The biggest threat for the German economy and our tenants comes from the strong rising energy costs.
Please keep in mind that those costs are purely being passed through by us. Additionally, with a share of 22% of subsidized flats and the German government offering additional financial aids, including a new subsidy, the Energiegeld, we consider LEG to be well protected. Also, when it comes to inflation, our robust business model, our strong financing structure with long maturities, and a relatively small exposure towards long-tail development business makes us well-positioned in a difficult macroeconomic and political environment. As Susanne and Volker will run you through the details of our operational and financial success later, I would like to point out a few of our key points and flag our latest ESG achievements on slide six. I think it is fair to say that 2021 was an extraordinary year for us while accelerating our positive momentum and achieving record numbers financially.
We reached an FFO I of EUR 423.1 million, which represents another record result. This result is driven by the operational improvements executed by our outstanding platform. We grew our portfolio by 22,000 units as we could opportunistically acquire a major portfolio last year. With this, we outgrew our own external growth ambition by more than 200%, combining more than three years of regular growth ambition in a single business year. We financed all of that by debt at very attractive terms. The average duration was extended, while the average interest costs were reduced. Still, we remained within our LTV target of 43%. On top of that, we secured an attractive growth option for 2022 with a direct holding in BCP and an option to acquire a further 63%.
We feel comfortable to propose an attractive dividend of EUR 4.07, which is an increase of almost 8% over last year. I hope you share our positive view on this strong set of results, and I want to thank all our colleagues who made this success possible. Let me highlight two points on the ESG side. Firstly, the supervisory board reflected on the comments received by investors and analysts regarding management's remuneration system. Therefore, the board proposes to the next AGM in May a couple of changes. As announced with the Adler transaction, the board has voluntarily decided to waive its entitlement. Logically, the board now proposes to completely remove the transaction bonus from the remuneration system.
Growth, for the sake of growing, has never been a driver of our decision-making, the board proposes additionally in the STI to shift from an absolute FFO I to an FFO I per share metric. An even stronger alignment of interest, the board proposes that 25% of the LTI component has to be reinvested into own shares over the public market. Certainly, this comes on top of the existing requirement that one annual fixed salary needs to be invested into own shares. You find an updated illustration of our management compensation scheme on page 31 of the presentation. Secondly, we are happy to share the results of a study conducted together with the renowned Wuppertal Institute in Germany. In that study, we analyzed the total life cycle CO₂ costs of a new build home versus the CO₂ costs for energetic refurbishment, including the complete life cycle costs.
I will provide you with a sneak preview of the key findings at the end of our presentation. Unsurprisingly, the study came to the conclusion that the energetic refurbishment of existing stock is beneficial compared to new buildings looking at the complete CO₂ footprint, i.e., considering also CO₂ costs for the building materials. Ferrocement still in the majority of the cases in Germany. I move now to slide seven. We wanted to provide you with a one-pager on our current core momentum KPIs, excuse me. We believe that LEG is well on track with regards to all of them. We offer growth, which comes from our target markets in and outside of our home market, North Rhine-Westphalia. At the same time, we expand the services segment, contributing strongly to our bottom line, even outpacing the profit growth of the group.
Additionally, we improved our operational KPIs significantly. We increased rent in our free finance units by a strong 3.9%, while we brought down the like-for-like vacancy rate to only 2.3%. This further improved our EBITDA margin by another 50 bps to now 74.9%. This leads to an attractive bottom line and return profile for our investors, differentiating us clearly from most of our peers. We grew our FFO I base by more than 10%, increased our FFO I per share by more than 7%, proposed to increase our dividend by almost 8%. On top, we expect to continue that strong momentum and grow the FFO I in 2022 by at least 12%, simply looking at the lower end of our guidance range.
We hope that you appreciated, appreciate the strong momentum reached last year and to be reached this year, both on a stand-alone basis but also in sector context. Let me now provide you with an update on two major acquisitions. I am now on slide eight. You know that we executed two bigger transactions at the end of last year with Adler. On the one hand, we acquired 15,400 units. On the other hand, we bought directly into BCP and at the same time secured an option providing us with a road to majority for another 12,100 units in Germany. Let me first comment on the portfolio integration. We onboarded 15,400 units at the end of 2021.
Just to reiterate, the Adler portfolio alone represents more than two years of our typical annual growth ambition and represents a major integration effort for our platform. However, I can summarize that our IT platform scales easily, our processes were rolled out quickly, and by the efforts of more than 200 operational colleagues, know-how transfer to new staff worked perfectly. By year-end, we established already our new subsidiary in Northern Germany in Bremen. From there, our operations will cover our entire Northern German portfolio with a total of approximately 18,000 units. Additionally, our foundation, Your Home Helps, is already present in the biggest location in Wilhelmshaven with own staff and cooperates also with local charity organizations. Overall, we can say that the integration and the business plan are well on track. Let us now move on to BCP.
As of today, we bought a participation of 6.8% by year-end from Adler directly and another 27.7% from Israeli minority investors. As we continue to buy shares in the market, the number is a bit higher than the one published early December. In total, we already own a direct stake of 34.5% as of today. The combined acquisition price was EUR 370 million, translating into a discount against the reported NAV as of Q3 2021 of 3%. The option to acquire an additional 63% of BCP expires at the end of September 2022. We have almost another seven months until we need to exercise the call option. This leaves us with sufficient time to complete due diligence and to take into consideration the current volatile capital market environment.
The 12,100 units of BCP would allow us to outgrow our own growth ambition again significantly. Another 7,000 units will therefore not come on top of BCP if we exercise the option. Let's now move to slide nine with an overview slide of our 2021 acquisitions. Our 2021 acquisitions allowed us to evolve from a regional player with strong focus on North Rhine-Westphalia, to a German-wide player with a focus on the West, Northwest, and Southwestern Germany. We followed our expansion roadmap by first entering into orange and green markets, and then expanding via higher-yielding additions. Exactly as laid out in the past. For the nearly 22,000 units, we paid EUR 2.15 billion at a net cold rent multiplier of 22.5x.
This compares against our own portfolio with a net cold rent multiplier of 23.9x . The acquisitions allowed us to further roll out our target operating model to new locations. We expect an FFO contribution in 2022 of around EUR 50 million from the newly acquired units. With this, I hand over to Volker, who will provide you with more details on our operations.
Thank you, Lars, and good morning everybody from my side. Let me start with an overview of our portfolio transactions. In 2021, we were able to add nearly 22,000 units to our portfolio, mainly in Q4, and hence, with a very limited impact on numbers like net cold rent, EBITDA, or FFO I. At year-end, our residential portfolio comprised of more than 166,000 units. The number of roughly 22,000 units differs slightly from the 21,900 acquired units Lars mentioned earlier, as we also converted commercial space into residential space or split larger flats. In 2021, we sold roughly 300 units as part of our normal sales program. As you will see later, we might sell a higher number this year, partly due to cleanups in the acquired portfolios. Let's now move to slide 12.
As you know, our 166,200 units are well-balanced in terms of their market category. 30% are located in high growth and higher-yielding markets, and 40% in stable markets. The acquisitions made in 2021 increased the share of units outside our home market, NRW, to 20% in comparison to 8% at the end of 2020. As Lars said rightly, in 2021, we made the step from a regional player to a German player. Let's continue on slide 13, which shows the development of the in-place rents in our portfolio. For the fiscal year 2021, we guided just from the beginning, a 3% like-for-like increase in in-place rents. With 3.2%, we finally exceeded this target. The in-place rent of our portfolio amounts now to EUR 6.13.
Some catch-up effects from the postponement of rent increases amid the first coronavirus in 2020 contributed to the strong outcome. We started again with first rent increases in Q4 2020. Hence, the increase in the in-place rent in fiscal year 2021 was, as expected, slightly lower than in the nine month period. The 3.2% in-place rent increase splits into a contribution of 1.9% from rent table adjustments and into a contribution of 1.3% from modernization and reletting. We were able to increase rent for free finance units by a very strong 3.9%. Free finance units account for 78% of our portfolio. There are no cost re-rent adjustments for the rent-restricted units in 2021. Hence, the in-place rent for this kind of units only increased by 0.5%.
In 2023, there will be the next adjustment of cold rent. Within the category of free finance units, the stable market recorded the highest increase with 4.3%, followed by the high growth markets with 3.9% and the higher yielding markets with 3.3%. Coming now to slide 14. This slide summarizes our residential portfolio. I would like to highlight again the very positive development on the vacancy rate. On a like-for-like basis, it's dropped by another 14 basis points to 2.3%. All three market categories contributed to the decline. It is the strong demand for affordable housing, our exposure to attractive regions, and our strong customer orientation that has supported the positive vacancy development over the last years.
However, you should have in mind that the Adler portfolio with its relatively high vacancy rate is part of our financial year 2021 reporting. It is by nature, not part of the like-for-like calculation for 2021, but will be part of the calculation at year-end 2022. One remark with regard to the number of units in GAV and the year-on-year percentage change. Some of you may recognize that the year-on-year change does not fit the number we presented back then for 2020. This is due to the regional extension and market development because of which we reallocated some cities to other market categories. Let's now move to slide 15 for our service business. Our value-added services grew strongly in 2021. The FFO contribution increased from EUR 31 million- EUR 39 million.
Overall, the services benefit from our growing portfolio. Additionally, the first time full year consolidation of LWS Plus had a part result of our service portfolio. With the acquisition of the Adler portfolio, our pool of services extended. We took over a facility management company which provides gardening and housecleaning services. Now with a foot in the door here, we might leverage these kind of services to other regions. In addition, we recently launched our Youtilly platform. Youtilly is a digital B2B to C platform, managing the gardening and housecleaning services between the owner of the properties, the service provider, and the tenant. We plan to process all our gardening and housecleaning services through this platform from beginning of next year, and to open this platform to the entire market. For 2022, we expect another slight increase in the value-add business.
Please do not extrapolate the strong development of our services into the future. We benefited in 2021 from the first year consolidation of LWS Plus. Growth this year will be therefore more moderate compared to the past. Now on slide 16, which provides an overview of our investments. For full year 2021, we forecasted adjusted investments of EUR 40-EUR 42 per sq m, and came in close with EUR 42.50 per sq m. The adjusted investments per square meter increased moderately by 3.7%. In absolute terms, our total investments, including, for example, our development projects on own land and own work capitalized, amounted to EUR 452 million. This corresponds to an increase of 16%. Both value enhancing adjusted CapEx and maintenance grew by 10%.
Out of this EUR 452 million, as usual, the bulk of investments relates to CapEx spending, which is three times higher than the maintenance costs. The roughly EUR 300 million CapEx spending relates to two main building blocks, turn costs and energy modernization. In line with our forecast, we spent EUR 110 million to improve the energy efficiency of 3.5% of all our units. The increase in new construction and others from EUR 18 million- EUR 45 million is mainly driven by an increase of new construction on our own land. Given our plans to do more new construction, this number will further increase. Although we increase our new development activities, we believe our exposure there is still small in absolute and relative numbers when compared in sector context.
While inflation is certainly a topic going forward, we believe that in cooperation with modular construction companies, we can keep costs under control. As a reminder, our new construction plans also include the acquisition of turnkey projects from developers. These investments are not part of our CapEx calculation, but part of our acquisition portfolio. With this, I hand it over to Susanne.
Many thanks, Volker. I will start my presentation on slide 18, which shows the development of our key P&L items. Thanks to our strong top-line growth and our continued focus on efficiency, our margins continued to improve in 2021. We achieved our EBITDA margin target of roughly 75%. As we explained in the Q3 call, and as is the case every year, there is a traditional catch-up effect in several cost positions at year-end, including higher maintenance, seasonality from our energy business, as well as some cost effects due to a normalizing cost position following the reopening after the lockdown situation. Hence, the margins were lower in financial year 2021 compared to the numbers at the end of the nine month period. In 2021, net cold rent rose by 9% to EUR 684 million.
Roughly two-thirds of the increase is related to portfolio growth and one-third to organic growth. The recurring net rental and lease income, i.e., the net rental and lease income adjusted for special effects, outpaced the top-line growth and increased by 9.5% to EUR 540 million. The margin improved by 40 basis points to 79%, driven by economies of scale effects considering our portfolio growth and thanks to a strong performance of our services business. EBITDA grew by 9.7% to EUR 512 million. The EBITDA margin reached a level of 74.9%, which corresponds to an increase of 50 basis points. Our FFO I went up by 10.4% and amounted to EUR 423.1 million.
FFO I did not only reach the upper end of our guidance range of EUR 410 million-EUR 420 million, as previously indicated, but exceeded it. For detailed drivers of our FFO I expansion, please turn to the next slide. With EUR 23 million, the highest contribution to our FFO I came from acquisitions in 2020 that showed their full impact in 2021, followed by rent increases with a contribution of EUR 22 million. The third biggest positive driver were lower like-for-like maintenance costs, which contributed EUR 5 million. Higher administrative costs and higher net cash interest had an opposite effect. These higher costs are directly linked to our growing portfolio.
Additionally, the admin costs show some normalization effects as we could better fill open job positions following the reopening after COVID. On slide 20, you find an overview of our valuation effects for the first full fiscal year 2021. We conduct a detailed revaluation process twice a year with the H1 and the full-year report. With our H1 report, we presented a valuation uplift of 7.5% and indicated another uplift of 4%-5% for H2. The outcome of the fiscal year 2021 was a strong uplift of 12.8%, which corresponds to roughly EUR 1.9 billion. Including CapEx, the value of our properties increased by 15%.
In terms of markets, the properties in our high growth markets recorded the strongest increase with a 15.7% increase. The two other markets also saw strong results. The main value driver was yield compression. The discount rate came down from 4.5%- 3.9%, which had an impact of EUR 1.84 billion. Rent performance contributed roughly EUR 350 million. In terms of capital composition, around 15% or EUR 325 million came from our CapEx spending. We feel very comfortable with our valuation levels, which as usual have been confirmed by CBRE as our external appraiser. In the appendix to our presentation, there is a slide which shows a comparison of ours and CBRE's methodology. For the first half of 2022, we expect further revaluation gains.
Demand for our product, affordable housing remains very strong. Now we are coming to slide 21. Our portfolio still offers an attractive gross yield, which amounts to 4.2%, that means in place a multiple of 23.9x. The gross value per square meter stood at EUR 1,706 at year-end. The total gross assets amount to roughly EUR 18.7 billion, including leasehold, land value and assets under construction, the gross asset value is roughly EUR 19.1 billion. As you have seen earlier on our acquisition charts, the acquired assets in 2021 are mainly located in high growth and prime markets.
The reason why the number of residential units in our high growth markets nevertheless increased by only 3,500 is that we did some adjustments to cities and their market category as mentioned by Volker. Bielefeld, a city with more than 3,000 units, was previously considered a high growth market and now belongs to the stable market. Overall, we have therefore a balanced portfolio. On slide 22, we come to the financial profile. Our average financing cost and duration at year-end were influenced by the EUR 1.4 billion short-term bridge financing that we had in place for the Adler portfolio acquisition. Since we have already fully refinanced and repaid it at the beginning of January, we focus today on the average maturity and interest cost after the refinancing to better reflect the current status quo.
Regarding LTV, there is no difference between the bridge financing and the refinancing via bonds. It stood at 42.8%. The increase of roughly five percentage points is a result of our strong portfolio growth of approximately 15%, which was purely debt financed. Reclassifying some short-term deposits as cash, the LTV would be 42.4%. For accounting reasons, these deposits are not treated as cash and therefore not reflected in our LTV calculation. Despite the strong portfolio growth and the fact that we did not issue any new equity, we remained below our target of 43%. Net debt to EBITDA, defined as the average net debt of the last four quarters, divided by our adjusted EBITDA, was 12.6 times.
However, the contribution from the 2021 acquisitions was very small, given the transfer of ownership was predominantly in the fourth quarter or at year-end. On this metric, we will only benefit from the full earnings power of that portfolio by year-end 2022. On an adjusted basis, i.e., taking the EUR 1.5 billion bond issue to refinance the bridge already into account, the average debt maturity stands at 7.5 years, which compares to 7.4 years a year ago, with no significant maturities until 2024. The average interest costs on an adjusted basis are comparatively low, with 1.16% in comparison to 1.33% at the end of last year. Let me now provide you on slide 23 with some insights on our balance sheet positions as this is a focus for most of you.
The chart shows you our starting LTV position and where we expect to end the year 2022, assuming no further growth from here. As we just saw in the previous slide, the starting position is an LTV of 42.8% at year-end. This reflects the 22,000 units acquired last year, as well as the bridge loan from the Adler transaction. We now reflect the full, 34.4 of BCP we have acquired and consider them as a simple portfolio acquisition. If we also adjust for our short-term deposits, which are not reflected in the accounting definition of LTV, that results in a current pro forma LTV of 43.1%. The refinancing of the bridge loan via bonds has no effect on the LTV as mentioned before.
We ignore here the unrealized gains of our BCP stake or the BCP option to keep things simple. If we consider now a scenario where we decide not to grow beyond the units that we have already signed year to date, LTV will be impacted until year-end as follows. First, we intend to dispose of up to 5,000 units. We already flagged 1,500-2,000 at the time of the Adler acquisition, with 1,300 coming from Adler and effectively the remainder from our annual strategic asset disposal program.
We are currently identifying further units within our portfolio, which allow us to further improve the management of our locations and exploit efficiency potential, but clearly allow us also to benefit from the high demand for German residential portfolios. We expect to close those disposals within 2022, and the sale will positively impact LTV. We also continue to remain very constructive of the German residential market, given its huge supply and demand imbalance, especially in the affordable living segment. Therefore, we expect further revaluation gains. The ongoing investment in our portfolio through the roughly 500 units we've already signed, plus our new headquarters we acquired year to date, and our new development pipeline will lead to cash outflows and therefore have the opposite effect on our LTV.
Lastly, there will be a bigger inflow and outflow positions from our operational cash, but certainly, also outflows from our CapEx investments as well as our dividend. Taking all these aspects into consideration, we currently expect an LTV of circa 41% at year-end, well below our maximum threshold of 43%, despite having acquired 22,000 units over three years worth of our typical growth ambition, financed with debt and getting a foot in the door at BCP. This leaves us in a very comfortable position in light of the currently uncertain macro and capital markets environment. With this, back to Lars for our outlook.
Thank you, Susanne. Before I walk you through our guidance, let me provide you with a sneak preview on slide 25 about the study which LEG performed together with the renowned Wuppertal Institute. We analyzed the life cycle CO2 footprint of a new building versus the refurbishment of an existing building. We will publish the study shortly, but I thought it is worth providing you with some first results, especially as it has wider implications against the background of what we currently see with gas and energy prices. The study showed that if you take the carbon costs for the construction of new buildings into account, then the approach of refurbishment does only produce half of the carbon emissions than that of a new build. This might sound trivial to you, but many ESG ratings and questionnaires often look exclusively at day one CO2 costs.
We believe they completely miss out on the total costs perspective. The study supports our view that new development clearly has a social value as it provides support to the supply/demand imbalance, but it comes at an environmental cost. From an environmental perspective, the refurbishment of existing stock is the right strategy. At LEG, we are actively working on new solutions for the entire sector. The processes and the way refurbishments are executed today is too costly. It simply requires too much time and requires too many specific craftsmen. We have one specific test area to gain experience with the Dutch Energiesprong principle. Beyond this, we are also working on solutions to industrialize the process completely. As we have shown in our ESG agenda last year, the energetic refurbishment contributes around 30% towards our path to climate neutrality until 2045.
We want to actively accelerate the process and, with this, the impact on our climate path. The study also reaffirmed that fossil gas needs to be replaced. The current developments of global energy prices confirm that the path towards the electrification of the heating systems, e.g., via heat pumps, will even need to accelerate in order to bring down dependency on fossil energy sources. Let's now move to our guidance for 2022 on slide 26. The guidance is effectively unchanged from what we presented when we published the portfolio acquisition at the 1st of December. We expect an FFO I in the range of EUR 475 million-EUR 490 million at an EBITDA margin of around 75%. Like-for-like rental growth should be around 3%, and we expect a maximum LTV of around 43%.
The investment per square meter is expected to be 46-48 EUR per sq m. As highlighted before, the increase reflects the two major refurbishment projects in Wolfsburg and Göttingen, which we acquired from Adler. Our acquisition ambition remains unchanged at 7,000 units. However, as I said at the beginning, if we exercise the BCP option, you should expect further acquisitions only on an opportunistic basis. What is new, and has already been highlighted by Susanne, is our disposal guidance of up to 5,000 units, which allows us to sell down non-strategic units, taking advantage of strong demand for our asset class and to ensure efficient operations. Finally, our ESG targets are unchanged and are, as always, quantifiable, measurable, and easy for you to benchmark us against. They are part of our remuneration system, which you find on slide 31 of the presentation.
With this, I come to the end of our presentation. My colleagues and I are very happy to take your questions.
Thanks, Lars. With this, we begin a Q&A session. Over to you.
Thank you, Frank. Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. First question is from the line of Jonathan Kownator from Goldman Sachs. Please go ahead.
Good morning. Thank you for taking my questions. I have two questions, please, or two topics that I'd be keen to address. The first one on the investment environment, you're highlighting a higher guidance for 2022. Obviously, the environment currently may push you to accelerate investment into your portfolio. Where is that number going to go going forward, the Euro per square meter? Do you have the ability to speed up the investment environment? What is the evolution from the government? Do you expect subsidies to come? How is the government framework developing? Do you have any news from that perspective? That's the first question, please. The second question relates to acquisitions into Adler. Thank you for providing the color on the LTV evolution.
Could you please clarify whether if you were to exercise the option for Adler, would you need to sell potentially even further than 5,000 units, or would you potentially need to find additional funding beyond that, i.e., hybrid or equity? Thank you.
Thanks a lot for your questions, Jonathan. I will kick it off with the first one with regards to investments. So, indication is that we are expecting EUR 46-EUR 48 to be spent per square meter in 2022. That is our current guidance, and we stick to that. You know that we are already having stepped up a bit on that number due to the acquisition from Adler and the huge projects we have taken over there in the cities of Wolfsburg and Göttingen. It is not that you can go up and above that level easily because as you know, we have quite a lack of craftsmen in the market. We have a lack of material. We have planning to do.
From the current perspective, it is not that we are planning this year to go up and above that number. With regards to the second part of that question, with regards to the evolution of the government side, you might have seen that at the end of January, suddenly there was a stop with regards to the subsidies being paid for modernization measures. That stop has already been revised very quickly a few days afterwards due to the pressure coming from certainly the real estate industry, but as well the tenant associations and many others in the market. For 2022, the old system has been put in place again and it is funded with EUR 9.5 billion. Quite a substantial amount.
We are also planning to take advantage of that system going forward. With regards to the second question, I hand it over to Susanne.
Yes. Thank you, Lars. On the financing of a potential exercise of the option for BCP, I think you have to understand we are two weeks into a war in Europe, and that has led to a lot of volatility clearly in the capital markets, and there is still a lot of uncertainty about the direction of the developments and where this whole situation is headed. Everything we can say today is from today's perspective, may obviously be subject to change. You are aware that we've always been very focused on a very sound capital structure that allows us to grow from a position of strength. As and when we decide to exercise the option, we will of course evaluate all options available to the financing.
You can expect that, as with the last transaction, we will have a bridge financing in place to start with, and we can then consider various instruments dependent on the situation in capital markets, share price development, but clearly also depending on the timing of such transactions, because you're also aware that we are generally positive on valuations to continue to benefit from the lack of supply of affordable housing in Germany.
All right, thanks. Just perhaps one follow-up. Have you got any visibility on the new system from the government in terms of the subsidies? If I understand correctly, for now, we need to think that this 46-48 level in terms of investment in the portfolio could actually go down because it's not necessarily sustainable given these two large projects.
It will be sustainable, Jonathan, for the first years. Please don't expect to see a lower level over the course of the next three years. That is what we have already included in our plans. With regards to the new subsidy regime, the new subsidy regime will most probably be driven by a focus on a CO2 per square meter emission in the different buildings. It is expected at the beginning of January 2023. Of how exactly that will look like still is unclear. We certainly can see that there will be a strong push towards electrification of the heating systems. We think that we are well prepared for that.
You know that we have a daughter company, ESP, which exactly helps us to take care of such solutions. Regardless whether we talk decentral solutions via solar energy being produced on the roof and then being transferred into green heating with the help of heat pumps, or whether we talk centralized solutions, we think that from that perspective, we are well also prepared for that new subsidy regime, which most probably is expected as it's beginning of 2023.
Thank you.
Next question is from the line of Charles Boissier from UBS. Please go ahead.
Yes, good morning. Thank you for taking my question. Just, well, one question from my side. You obviously mentioned about the green heating. I just was wondering, you know, with the rising heating cost, could you comment on the cost on top of net cold rent for your tenants? You know, basically like the Nebenkosten. Like what are these costs, this year in Euro per square meter for the tenants, especially for units where there's not been the energy modernization and the green heating yet. Just to understand for them, in terms of the affordability. Thank you.
Sure, Charles. Happy to take the question. Well, it depends, as you said, on the heating system. Per square meter, it's between 0.50 EUR and 1.50 EUR, depending on the heating system. This is what the price is for last year and, depending on the development of the energy prices for this year, these prices vary. It's about, given the square meter, average square meter size of our units is about 65 EUR per month per unit on average.
Right. You would say this is not significant enough to create a debate in terms of the Mietspiegel increase and the rent affordability. Is it too marginal, you would say?
Well, first of all, you need to bear in mind that it's a pass-through item, so it's not part of the Mietspiegel and rent table discussions. It's something that is borne by the tenant, irrespective of where the unit is located. So that's the first thing to keep in mind. I would not say that it's marginal for our tenants because as we are more focused on the affordable living side, I think increases there in heating costs also has a hit on the personal balance sheet of our tenants. So that's something we should consider and be cautious there. I think that it's not.
It would not have a huge impact on our side or not a significant impact on our side. Given that first, the government started already to subsidize rising energy costs before the war with the new Energiegeld, as Lars pointed out. Secondly, we have very strong relations with the local municipalities and to tackle their individual problems of tenants if they are not able to pay rents to get additional subsidies. Thirdly, we would have also installment payments for rents if tenants would not be able to pay increased heating costs.
We were very successful in the first Corona lockdown to tackle social problems of our tenants and to come up with very limited rent deductions there, as you know. We are very comfortable to also handle the increases in energy prices. Fourth, as you know, about a fourth of our portfolio is rent-restricted and the tenants there benefit from social welfare, which is also borne by the state, and this also comprises the energy costs.
Great. Thank you very much.
Next question is from the line of Marios Pastou from Société Générale. Please go ahead.
Hi. Good morning. Thanks for taking my question. I've got a couple of questions from my side. First, just to cover off, portfolio valuation. I think in the first half of this year you mentioned that it'll be broadly in line with previous years. I just wanted to see if there was maybe any guidance you can give in terms of where we should look in terms of growth, considering the first half of last year was very positive. Second, just going back onto acquisitions, I suppose just maybe a bit more of an update on BCP and the potential option there.
You've increased your stake marginally through minorities, and I just wanted to check what the next steps are for additional information as the ongoing due diligence is happening. You know, is it the results, is it the result of the KPMG forensic review on the wider Adler Group? Maybe just a bit more color on how you could see events playing out over the coming months. Thank you.
Thank you for all your questions, Marios. First on the valuation point, we don't provide guidance on valuation for the first half or for the full year 2020. We will give a little bit more color with our Q1 results, as you know. I think you picked up correctly from what we said, that we expect, however, valuation to be roughly in line with previous years, also in the first half of this year. I think if you remember our discussion last summer, we had one special effect included last year, which is obviously a one-off, where we had one large modernization project which contributed EUR 100 million roughly by itself to valuation uplift. That's obviously not gonna repeat.
Other than that, similar to previous years, I think it's a good indication for the first half.
With regards to the second question, Marios, and the acquisition of BCP. We are still in the midst of the due diligence. Certainly, every additional data point helps, so regardless whether we talk data points with regards to BCP or Adler. Certainly we will use the timeframe which we have agreed to in the auction until September to gather as much data as required to really feel comfortable to buy into BCP. Once again, we are impressed of the quality of the portfolio. We, I think it has quite outstanding development plots here in Düsseldorf. One is quite famous, the [Gareth] plot, and all of that from our perspective makes that entity very attractive.
Certainly, it will take a few more weeks and months, and once again, also in the current very volatile capital markets, we do not want to rush.
Thank you.
Thanks for your questions.
Next question is from the line of Christopher Fremantle from Morgan Stanley. Please go ahead.
Hi. Good morning. I had two questions. The first was just on the 5,000 units of disposals that you're guiding to. Should we expect you to sell assets at a rent multiple that's in line with your overall portfolio? Or are you looking to sell some of the perhaps drier, perhaps lower yielding assets in your portfolio? I'd be interested just if you could comment on that in broad terms, please. The second question, I'm just interested to understand how the profitability of your modernization CapEx is currently looking. What is the blended gross rental yield on your modernization CapEx going forward, please?
Can you just comment when you're talking about that, how you think a world of higher commodity price inflation, higher construction costs feed into that, what that really means for the profitability of your modernization CapEx, please? Thank you.
Yes. Thanks a lot for your questions, Christopher. I will kick it off with the first one. With regards to the 5,000 disposal. Part of that you already know quite well, because it's the 1,500 unit portfolio which we have selected from the acquisition from the Adler portfolio of those 15,400 units which we have bought into. Most of this is in Eastern Germany. As we bought that at a substantially lower multiple than our own book. Also, please don't expect that, and certainly we will try to, but it will be quite difficult to reach the same multiple on that part of the portfolio.
With regards to the remaining one, we will definitely make a selection which enables us to increase efficiency for our operations. Therefore I cannot disclose more than that. Please just have an understanding for that. We are in the midst of the selection process, but certainly I promise to get back on a quarterly basis to give you an update on the disposals, which we are going to make. Before I hand over to Susanne, only a quick remark with regards to the inflation and the increases of costs with regards to construction. We are quite happy that we have not built up a substantial exposure toward the development business. That certainly helps very much. As you know, our focus has been on owned land and doing re-densification and has been on buying projects from developers.
We are very, very well protected on that end. General construction companies take the cost risk, so we have no exposure towards increasing costs on that end. Certainly we have all the flexibility to scale up to the 1,000 or at the current moment while we are seeing material cost increases to also be a bit more conservative while buying into new projects. With regards to the modernization part, I hand it over to Susanne.
Yes. To follow on that, we continue to target a yield on cost of around 5% for our modernization CapEx projects. There's obviously an annual selection process, and in the selection and the configuration of the projects we target that the CapEx will always be only recouped over a number of years, not just in the first year, because we will benefit with re-lettings and the further development over the years from a CapEx project. You alluded also to higher costs. We so far have only had a very minor impact on the cost from inflation because we operate with general contractors where we have long-term contracts in place, which protect us from short-term price changes.
Clearly, that is something to be mindful of in the more medium to longer term. For now, we haven't seen a significant impact here from rising prices.
That's great. Thank you.
Next question is from the line of Marc Mozzi from BofA. Please go ahead.
Thank you. Very good morning, all. I have two questions from my side, please. Number one, can we have some color about what are the underlying assumption of your target of 41% loan to value? Because, I think it does take into account how much you expect capital values to increase or asset valuation increased. Number two, what is the uptake of your scrip alternative you're assuming over here? Can we have some color on that, please?
Okay, thank you Marc , for your question. As I already said, we're obviously not providing detailed guidance on revaluation gains. I won't be able to disclose exactly what we have assumed. I think what we can say here is though that we have been conservative in our assumptions, because you know from us that we are always prudent in the way we look at our financial and our capital structure. If you take the last year's revaluation gains and deduct a small buffer, I think then you get to something that can be the assumption here, it's fair to say.
If you look at the sale of the units, I think Lars has just alluded to what sort of price indication you can perhaps add to that. I think he has commented on the Eastern German portfolio that would come at lower than average, or likely lower than average multiples for LEG. Then also, a new additional program that we are still in the process of figuring out.
I think other than that, we've only assumed, as I tried to explain in my speech earlier, the acquisitions we've already signed year to date, which is a unit number of just around 500 units, and no further growth except just the usual spending we have from operations. With regards to the dividend, we are planning to offer a scrip dividend as in previous years. You can look at the previous year's participation, which was always around a third, which I think is also a base case assumption for this year. Obviously we would be very pleased if it was higher.
Okay, thank you. Very clear. My second question is around do you have a MAC clause in your in the potential any option you have with on BCP? And what could be the trigger for you to raise it? Because we can definitely say that now this Russian-Ukrainian war can fit into that material adverse change clause.
Yeah. Thanks for the question, Marc. No, there's no MAC clause. We have a firm tender commitment from them. If we are getting into the market with a tender offer, they are obliged to also put those 63% for sale. Therefore, we have all the optionality to either do that tender offer or not do that. We are not forced in any way to buy into the 63%, but it's just at our discretion to take that decision or not.
What could be the reason why you would not raise it? Or determining you would go for it.
Yeah. As already stated, Marc, we are in the midst of due diligence, and currently we have not identified any red flags. We still take the opportunity to wait a bit longer, gather more data on the company itself, gather more data on Adler, and as soon as we feel comfortable, certainly our intention is to then exercise the option if nothing has come up. Up to now, it hasn't. We are once again quite convinced that it is a beautiful portfolio with a strong development angle and certainly of interest to us, but certainly wanting to just take the opportunity to look a bit deeper into the company.
Thank you. The final question for me would be around, have you done the math behind the increase in rent it costs to your tenants when you do a modernization, on how much it's gonna help them to save on their energy bill, and what is the net effect, if any?
Marc, certainly we do that, and we do that on a regular basis due to the current CO2 costs, which are part of the energy costs. Unfortunately, in most of the cases, it is not the case that it is in any way neutral with regard to the warm rent. Unfortunately, the increase of rent normally is higher than what they can save due to less usage of energy. With rising energy prices and with a higher CO2 tax certainly going forward, that will become more to a neutral level. It will take a few years if we are really sticking to the current CO2 tax price paths.
Thank you very much. All clear for me. Thank you.
Next question is from the line of Kai Klose from Berenberg. Please go ahead.
Yeah. Good morning. May I can ask three quick questions. The first one, could you indicate how much you spent in 2021 on new developments, or let's say in the acquisition of newly built properties from developers, and what would be the number, what are your expectation for 2022? Second question, on the CapEx spendings into the existing portfolio, what was the split by subregions to say, also high-growth markets, stable markets, and higher-yielding markets? The last question would be, could you indicate the split of the like-for-like vacancy rate for the apartments, if this was in any way different to the whole portfolio? Thank you.
Okay, Kai. With regards to the first question, we will try to find that number quickly. That certainly was a low million amount. The colleagues will quickly look at that. With regards to the CapEx spending, I will hand it over to Susanne.
Yeah. I think, Kai, we will also be happy to provide you with the details later. I think we don't have the numbers in front of us, so we are looking them up as we speak, and we will revert on that point.
Thank you. No worries.
Yeah. Unfortunately, we missed on your third question, so if you could quickly repeat that for us, please, Kai.
Yes, of course. It was regarding the like-for-like when it goes on page, what is it? Page 13.
Yeah.
13? Yeah, 13, where you show the like-for-like financial goals of the entire portfolio, 3.2%, and the split between rent table and modernization. I was just interested, what is the split of the like-for-like financial goals of the free finance units of 3.9% was in any way materially different to the 3.2% for the whole portfolio.
Well, I think if you know, it will on a percentage pro rata basis, it's the same, yeah, because you have on the restricted units, you don't have any rent or any substantial rent increases at all. That is 0.5%. We only achieve there if there's no rent table adjustments. The rent table increases in the pre-finance units, and so you can see more and do it pro rata basis, the 3.9, and split it pro rata, and then you get the figures from the.
Yeah.
The pre-finance part.
Okay, thanks.
Yeah.
Just to come back to your first question, Kai, before you leave us, at least that I can deliver now. It's EUR 14 million which we have spent in new developments.
Thanks so much, Lars.
Thank you.
Next question is from the line of Thomas Rothaeusler from Deutsche Bank. Please go ahead.
Hi, morning, everybody. Two questions. One on the rent growth outlook. I mean, you've got roughly 2% from rent tables and 1.3% from modernizations last year. I mean, what can we expect this year and going further? I mean, given higher CapEx spending, I think it should be more from modernizations and also on rent tables. In my view, it could be that we get a lower number going forward, especially referring to the longer reference period. Would you share that or what is your expectation in this regard?
Well, Thomas, happy to take your question. We got it on the roughly 3% rent increase for this year. We have our planning there internally, but also need to react on fluctuation and on market developments. So it's not really possible to give you an exact guidance there. Next year we will also have the rent adjustment from the subsidized rents, but would provide you with an update on the rent guidance for next year at year end in Q4 as we always do it.
So far we are very convinced to deliver on the rent growth ambitions for this year as we guide it.
Okay. The second question I have is on the elections in North Rhine-Westphalia, which are, I think they happen in May. Maybe you could provide a bit color on this, maybe recent polling. What if the conservatives would not make it again? I mean, any relevant impact for you?
Thanks a lot for the question, Thomas. It currently seems to be a draw between the big two parties, SPD and CDU, both coming in at the latest polls at around 29%. It looks as if a two-party coalition would not be possible, neither for the SPD nor for the conservatives, the CDU. It looks like a three-party coalition, FDP and the Greens together with SPD or the conservative parties. Certainly, there are plenty of rumors that the FDP and the Greens are being forced into a coalition with the SPD, like on the federal level. At the same time, you know about the very strong relations between the conservatives and the liberals in North Rhine-Westphalia.
There are a lot of rumors that this most probably is not going to break, and then most probably the Greens need to decide to step into a government with those two parties. That is the latest market gossip here out of Düsseldorf with regards to the outcome of the elections here. Regardless, I think who is going to win, you see how pragmatic the SPD-led government together with the liberals and the Green Party works. You've seen the decisions over the course of the last two weeks. With regards to delivering weapons into a country in war, which has not happened since the Second World War.
You've seen of how flexible the Green Party behaved, as there are discussions in the market with regards to still buying Russian gas or not, and perhaps instead prolonging the usage of nuclear power here in Germany. All of that, once again, gives us comfort that also with an SPD-led government, we will have not much to see of change with regards to the markets here in North Rhine-Westphalia.
Okay. Thank you.
Next question is from the line of Jaap Kuin from Kempen. Please go ahead.
Yeah. Hi. Thanks. Good morning, all. Just two more questions. On the first one, again on BCP. Please confirm that in your current FFO guidance for 2022, there's zero contribution from BCP. Also, as you indicate there, you're gonna take your time, will you change the dividend policy at BCP? Also, for example, if you decide not to execute, which seems unlikely, but let's say if that, you know, you don't wanna be stuck with the non-yielding assets. So that would be the first one. Could you maybe split on the valuation increase? I think slide 20 suggests that it was 40 basis points of yield compression on the value uplift in total.
Could you maybe confirm the split in percentage points between yield compression and rent growth? Thanks.
Okay, Jaap. With regards to your first questions with regards to BCP. Yes, sir, very happy to confirm there is zero contribution included in our FFO I guidance for 2022. At the same time, looking now and thinking about changing the BCP dividend policy or our intention to do so in case we would not exercise the option, I think it's a bit premature. Once again, we are looking into the company. We are convinced it's a great asset. Just let's wait, let us gather more data with regards to the company, and then we will come up with a decision. Then if we would not exercise the option, certainly we will also let you know of how we will then treat those 35% of an exposure towards BCP.
With regards to your second question, roughly 16% comes from the rent performance, and the rest comes from the dis-adjustment in the discount rate.
60 or 16?
16.
Oh, 16. Okay, great. Thank you very much. Thanks.
Next question comes from the line of Paul May from Barclays. Please go ahead.
Hi, everyone. Thanks for the presentation. Just a couple questions on the loan-to-value slide, if I may. Just a bit of clarification. Is BCP the 34%, is that still included in the V rather than the sort of proportion across the two? Just wondering if you're including the 5,000 disposals that haven't yet been exercised, but excluding the 7,000 acquisitions that haven't yet been exercised. Just wondering what would be the LTV if you were to exercise on those 7,000 units. At that point, I imagine you would then proportionally consolidate the BCP, which would obviously push the LTV slightly higher, assuming it's in the V at the moment.
On the guidance from an earnings point of view, just to be clear, sorry, did you mention there's nothing from BCP, so the 34% holding that you have at the moment that has been purchased, that's not included in the FFO guidance? Just to be clear on that. Finally, on the scrip dividend, I just wonder what the thought process is of offering a scrip dividend, but not necessarily thinking about raising equity separately. Obviously a scrip dividend is effectively an issuance of equity. Just wonder what the thought process there is given where the share price is relative to your NAV. Sorry, the final one, just more broadly, obviously the consumer facing or your tenants facing a lot of inflationary pressures at the moment.
I think the majority of their sort of CPI bucket is growing at a considerable rate. I just wondered whether they can also continue to adopt or take on increases in rents as well to the same extent as they have in the past, or whether you feel you're gonna face sort of greater pressure on increasing re-rents moving forwards, whether post-modernization or just generally like for like. Thank you.
Okay. Thanks a lot for the questions. Let me start with the LTV slide. First, to clarify, BCP is currently included in both the L and the V. We've just reflected it in both sides just proportionally. I can confirm though that it's not included in FFO. We treat this as financial instrument, so it's not proportionally included. Obviously we haven't decided on whether we're gonna exercise the option yet or not, and as long as we are in the current status quo, we plan to keep it that way.
With regards to disposals and acquisitions, I mean, this scenario here clearly represents the scenario where we don't grow beyond the already acquired circa 500 units year to date. If we take the disposals, I mean, it's difficult to say, as I said before, we haven't configured the portfolio as yet. That's why we can't comment on a single standalone impact here. When you think about further acquisitions without disposals and without revaluation, then you have the starting point where we are today of a 42.8%, that you need to consider before looking at whatever is required in terms of further financing instruments.
With regard to the question and the scrip dividend, certainly and the feedback we receive, Paul, by investors, has been very positive over the course of the last years. Therefore, we certainly want to offer investors in our shares the opportunity to also convert dividends into shares once again. That's for sure. The last question with regards to inflation, yes, certainly, and we are very aware that increases are hitting our tenants, and we are very careful. For one-fifth of our portfolio, as you know, our tenants receive state subsidies, they are benefiting from social welfare. A lot of our tenants additionally are entitled to additional state subsidies. If even if they are paying a pre-financed rent, they get the state subsidy, which is called the Wohngeld.
Still, that is all a concern for us. Therefore, we are very actively lobbying for additional help, especially for our tenants. As already said, one of those state subsidies has freshly been decided on the Energiegeld, and we are very happy that this has been decided by the current coalition. That means quite a substantial payment. It's EUR 135 for a single person household, increased to EUR 175 for two persons, and then increased for another EUR 35 for any additional person living in a certain household. All of that certainly makes up for a substantial hit.
Also, you should know that state subsidies or some of them, like the Wohngeld, now also have an inflationary adaptation clause, so that this will be revised on a regular basis in order to make up for that higher inflationary environment we are currently in.
Okay, cool. Sorry, just a quick follow-up on the scrip. Sorry, you mentioned around. I'm sure shareholders do quite like it given where the share price is trading relative to NAV. Just it was more a thought on the how do you view it issuing a scrip dividend versus raising equity, which arguably they are exactly the same thing. I appreciate there's some slight cost differential to doing that. Just wondered more so strategically. Sorry, just one other that came to mind completely separately. Was the Adler portfolio positively revalued in FY 2021? Would you expect the BCP portfolio to have received a positive valuation as at year-end? 'Cause I think you're not reflecting any potential valuation in your LTV.
I'm just asking 'cause I think the rental yield on the residential assets, I think it was 4.3 on the BCP portfolio as at Q3. Not materially different to where your portfolio is at 4.2. I just wonder what your thoughts are on that revaluation. Thank you.
Yeah. Thanks for the follow-up question on the scrip dividend, Paul. Yeah. Certainly there is a difference. While offering a scrip dividend, we are offering certainly the opportunity for existing shareholders to take advantage of the dividend payment. That's once again what we received as a feedback, Paul. There are investors out there strongly considering German residential to be an asset class to be invested in. Luckily, there are also additional people which they think that we are doing a good job. Therefore, looking, for example, at the reduction of the vacancy rate, we have made quite a lot of progress on the operational side. That's certainly something we want to offer.
With regards to the BCP revaluation, you might also be not too surprised, but certainly that's a data point which we also would like to gather. I'm not able to disclose of how much BCP will do as a revaluation in Q4, but hopefully with the publication of the full year number at the end, hopefully of March or beginning of April, whenever those numbers are due, and then we will have more clarity also on the revaluation of those assets. But that's something certainly which we are also looking to get more clarity on with the publication of those figures.
Thank you very much.
Next question is from the line of Manuel Martin from Oddo BHF. Please go ahead.
Hello, ladies and gentlemen. Thank you for taking my questions. I've two questions, maybe one by one. The first question is,
Manuel, sorry to interrupt you. It is very hard to understand you. Could you speak up a bit, please?
Excuse me. Is it better now? Hello?
Yeah.
Can you hear me?
Yeah. Very hard. We will give our very, very best. Otherwise, it's.
Okay. Maybe like this better?
Yeah, that's great. Thanks a lot. That's great now.
Okay. The world changes if I take off my headset. That's great.
That works perfectly for us. Now you seem to have lost us, Manuel. Okay.
Can you hear me?
Yeah. Now we hear you again.
Well, let's try.
Exactly.
First question is follow-up question on your investment program. As far as I understood, your cost risk there seems to be limited. The development companies take the risk, as far as I understood. Do you see any risks coming from material shortages, for example, in the market that you could see some delays in your refurbishment? Do you hear something in the market there? That would be the first question.
Well, Manuel, maybe to take this question. It is sometimes a problem, yeah, that it's harder to get the materials. So far we haven't had large delays and have good relations with our suppliers. We need to spend more time on managing these suppliers and to find the right supplies at the right sites, yeah. Obviously I have not a crystal ball how all these terrible actions in Ukraine might impact this. For the time being, we see this as a challenge, but have it under control and manage it.
Okay. Thanks. My second and last question would be on the Ukraine. Maybe also difficult to answer, but do you see an impact from the Ukraine crisis on the transaction market, i.e., is it harder to make transactions right now? Are sellers unwilling to sell? Do they wait? Or what's happening in the market there?
Yes. Very happy to give you an update there. Certainly it's also after two weeks now in that new situation, we have not seen any impact. Demand is incredibly strong. Regardless whether we talk international or national investors, and we have seen closing of transactions with both parts of the investor spectrum. That seems to be unchanged. Certainly, whether new bigger portfolios come to the market, that's a big question mark. We have seen the first portfolio by now at around 3,000-5,000 units coming to the market. That's very much driven by MIPIM, which is going to take place next week in Cannes. That's always one of those crystallization points where you can see of how much material is coming to the market.
There seem to be already a lot of portfolios now sitting there waiting to be marketed. Whether they come now within the next weeks or whether that's going to be postponed for a few weeks in order to wait for the developments in Ukraine, I think it's a bit too early to say. Our expectation is that it will not impact the market. As far as we know, it hasn't up to now.
Okay. Thank you very much.
Thanks for your question.
Next question is from the line of Thomas Martin from HSBC. Please go ahead.
Yes. Morning, all. Most of my questions have been answered already, but just maybe a follow-up on your CapEx, and in particular, when we look at the CapEx-adjusted FFO I, which has been flat over from 2021. Although you had roughly EUR 40 million more FFO I, at the end of the day, you had maybe, yeah, more or less the same number, higher CapEx. Generally, when we talk about measuring the profitability of your story, your business case, how important is the AFFO or the CapEx-adjusted FFO for you? And on that, how does that influence your dividend payout policy at the end? Because you just.
You still stick to your policy paying out 70% of your FFO I. When CapEx on the other side is increasing more and more in the coming years because of the energy transition and yeah and also inflation, how do you see that number? How important is the CapEx-adjusted FFO for you?
Yes. So as all the KPIs, we also take that into consideration, Thomas. It's not that we are taking that off. Therefore, from our perspective, we want to stick to the 70% payout ratio on the FFO I for the time being. That is also something which is from our perspective a comfortable position. As you know, a lot of competitors have stopped to provide that number to the market. But looking at the dividend which we are going to offer, which will be around EUR 300 million, if you deduct EUR 100 million for the scrip dividend, deduct EUR 100 million of the AFFO, the negative liquidity would be EUR 100 million, which then needs financing.
That's from our perspective quite a manageable amount also in the current environment.
Okay. Thank you.
We have a follow-up question from Christopher Fremantle from Morgan Stanley. Please go ahead.
Hi. I just had one further question, which is just on the option to invest in BCP and to further spend and further lever up effectively into yield compression, which I think, you know, you're suggesting is gonna continue in 2022. The question is how are you judging the decision to proceed relative to where your share price is and the alternative use of cash, which is to buy back stock? I mean, I know we are in volatile times for the share price, for all share prices, but I do ask, just given the discount to NAV is now very wide, the gross rental yield on your existing portfolio implied at current share prices, you know, is in the high fours.
I mean, is that something that you would consider as an alternative if the shares remained at their current levels?
Yes. I think it would be stupid to say it's not part of our consideration, Christopher. Certainly it is. From our perspective, once again, BCP is an outstanding opportunity to grow our business. We think it will and does offer quite a lot of additional valuation upside and certainly valuation gains for our investors. We are taking that into consideration. Certainly therefore, we have also not decided yet on whether we are going to exercise the option or not. That's certainly part of what we take into consideration while looking at the option.
Thank you.
Next question is from the line of Tom Carstairs from Stifel. Please go ahead.
Good morning. A question following up on the subsidy side of things. I appreciate what you said about your expectations for a new subsidy in 2023. In a hypothetical situation, if there was no new subsidy, how would that impact your investment plans in terms of the way you're looking at the energy efficiency levels that you'd be targeting on your investments?
Yeah, Tom. It certainly would impact then the yield which we would be able to earn on that. As you know, currently the subsidization regime is quite generous with regards to doing more with regards to modernization, and might it be on the shell of the building or by providing green heating. I strongly doubt that we are not going to see a modernization subsidization regime as of 2023 because you know that 2/3 of our market is in the hands of private landlords, meaning persons just owning a single multi-family house or two, etc . They would definitely not be able to financially afford a modernization of those buildings. Therefore, if we really, as a country, want to reach 2045 climate neutrality, we need additional subsidies.
That's therefore, from our perspective, currently not our base case assumption for the new subsidization regime. Certainly it will change in the focus away from the energy efficiency towards a much more, intelligent approach of CO2 emissions per square meter, which definitely is a better approach. Therefore, we are quite hopeful to see substantial money flowing into that subsidization regime at the beginning of 2023.
Okay, appreciate that. I guess appreciate what you're saying on the yield side of things, but I guess I was also getting at, would it change your actual view to the way you look at the levels of energy efficiency that you're targeting within individual units? Yeah.
No, sorry, I didn't want to cut you short, so please go ahead if you?
No, that was if that's the question.
Yeah. Certainly we would then once again look at the amount of money we want to spend. As always, I think you're well advised if the external conditions change, then you certainly need to revise your investment plans, and that certainly would be something we would be willing to do. Certainly on the other hand side, as we have the push towards climate neutrality and the legal obligation to reach that 2045, you certainly will not be able to prolong that forever.
Okay. The second question, going back to energy prices and Mietspiegel tables. I appreciate obviously, again, everything that you said about warm rent versus cold rent, and therefore energy prices sort of aren't a consideration or shouldn't be a consideration for the cold rents. My understanding on Mietspiegel table calculation has kind of always been, there's the element of the, what's going on in the market in terms of rents, but there's also that, negotiation, should we say, factor, and sort of political maybe considerations that goes into things. In that sense, could you not see an impact potentially on Mietspiegel table from consideration for, the impact on tenants from the higher gross rent that they're gonna need to pay?
Tom, happy to take the question, follow-up question on the rent table discussions, on the impact of energy prices. Well, we will have more qualified rent tables which will follow a more sophisticated approach, more shadowing or mirroring the.
Real market developments on the rent levels for the cold rents in Germany. I know there's always some pressure from local politicians to have there maybe also other factors and negotiating factors in the rent table discussions. I won't see there any big impact from the energy price developments. We also have significantly increased our presence in these rent table commissions as large landlords in the respective municipalities.
And so far we see there a very constructive and good discussion on in order to set up and to modernize the rent tables.
Great. Thank you very much for the answers.
Next question is from the line of Simon Stippig from Warburg Research. Please go ahead.
Yeah, good morning. Thank you very much for taking my questions. First of all, I want to emphasize that I think it's very positive signaling that you changed your compensation scheme to relative values. I think that's really positive to all stakeholders. My question is, first of all, in regards to your smaller development pipeline, could you please indicate the construction cost without land price?
Yeah, very happy to do so, Simon. As always, it depends on the quality you are building. Currently it's between EUR 3,200-EUR 3,400 per sq m, excluding the land cost.
Great. Thank you very much. That helps. I have a question in regard to the BCP option again. I mean, there were a lot of answered questions already, but I mean, I just wonder if there are also all options on the table in regard to your already acquired stake at around 146 EUR per share. There's a very nice return you already made on those shares. Is there a lockup that you have signed for this stake?
Perhaps just to revise the numbers a bit. The current average amount we have bought at is EUR 139 per share. As always, all options are on the table as long as we have not taken the decision to buy or use, make use of the call option. Until then, all options are on the table.
Okay. Just follow up on that. There's no lockup period on your initially purchased share stake of 31%?
No lockup. No.
Okay. Maybe one more question in regards to the option. I just wonder how you view, I mean, in regard to the FFO years, is it for you an accretion only, on, you mentioned before the revaluation of the portfolio. Is your focus more of, on the BCP portfolio and, on portfolio revaluation instead of FFO year? Just because if I look into FFO years last 12 months of BCP, then, at the option strike, it would be around 2% and does not change materially to FFO II. Just to understand your view on, accretion and then dilutive effect in, that regard.
Yeah. Simon, from our perspective, we clearly focus on the portfolio. We look at the assets. We think it's a very strong portfolio. We see a lot of potential for synergies by including it into LEG and integrating it into LEG. We don't look at it as a financial investment, but really as an asset acquisition. I hope that answers your question.
Thank you very much. Partly. I just wonder then, I mean, where would you see? Because just on the capital side, it is very compressed. Where would you see material synergies? I mean, not with any in regards to us, I think it's very obvious that there are a lot of synergies be set free. Just in regard to the BCP share and additional share in regard to profitability historically of that company, I would be very interested if you see that more on the financing side, more on the top-line side and an overlap of the portfolio. Could you maybe give a little bit more color, so I can understand your reasoning behind that?
Yeah, Simon, apologies, but please, just let us do the decision whether we exercise the option or not. Then I promise we come up with a few pretty comprehensive slides being prepared by our IR guys, giving you all those answers which you have just asked. Certainly, those are exactly those points which we are currently focusing on, and we will definitely disclose that as soon as we will have or might have taken the decision to execute the option.
Great. Thank you very much for answering my questions.
Thanks a lot, Simon.
We have a follow-up question from the line of Marc Mozzi from BofA. Please go ahead.
Thank you. Follow-up question is essentially around your marginal cost of debt right now. Do you have any indication of what is the current state of the negotiation you have with the banks to refinance or your bridge loan? Thank you.
Mark, we've already refinanced the bridge loan, thankfully, just in the beginning of January. We are safe on that front. I think otherwise, what is happening with public markets in the bond market, you can look at the screens, and clearly there's a lot of volatility at the moment. When you look at secured financing, the indications we've received recently are still stable, so we haven't seen a spillover of the volatility in capital markets into the bank loan market yet.
In terms of on the bond market, do you have any indication to provide us?
Look, it fluctuates on a daily basis, so it's very difficult. I think the best indication is just to look at where secondaries are trading in our existing bonds.
You would agree that 200 bps is a new industry right now for real estate?
Certainly not 200, but clearly, events like the current events are leading to a more volatile market, which leads also to higher spreads, yes.
Okay, thank you.
There are no further questions at this time, and I would like to hand back to Frank Kopfinger for closing comments. Please go ahead.
Yeah, thank you, Stuart, and thanks for your questions. As always, should you have further questions, then please do not hesitate and contact us. Otherwise, please note that our next scheduled reporting event is on May 11th, when we report our Q1 results. With this, we close the call, and we wish you all the best and hope to see you soon. Thank you and goodbye.