Good morning. Good afternoon, and welcome to CPI Property Group's Webcast covering our financial results for the first half of 2025. This is David Greenbaum, CEO of CPI Property Group. I'm speaking to you today from our beautiful Quadrio office and retail property in Prague. Joining me around the table or on the phone are several members of our senior management team. Please allow me to introduce Pavel Měchura, our CFO, Michal Felcman, Co-Head of Group M&A and Deputy COO, Květa Vojtová, Co-Head of M&A and Head of Transaction Legal, Stefano Filippi, Head of Corporate Finance, Mindee Lee, Head of Corporate Strategy, Petra Hajna, Group Sustainability Officer, Petra Mizera, Head of External Reporting, Martin Matula, our General Counsel, and Moritz Mayer, who's responsible for Capital Markets and Investor Relations. As usual, you will hear from many of my colleagues today, either during the presentation or during our Q&A.
Speaking of which, we hope you are ready cooking up good questions for us. Please don't be shy. The webcast has a tool for asking any question you like, so please ask questions, and we'll do our very best to answer. Today's presentation will reference CPIPG's Management Report for the first half of 2025, and you should be able to see the relevant pages displayed on the webcast. The same Management Report is also available on our website, cpipg.com. If you have any technical issues, please reach out to Moritz even during the call, and we'll do our best to sort it out. Now we can focus on CPIPG. I'm proud of the work that we accomplished in H1, and we all look forward to describing our achievements and plan in more detail today.
I'm probably too old now to talk about vibes and good energy, but I'll do it anyway. For European real estate, H1 2025 has seen much better vibes and a more positive tone than we've seen in several years. The European Central Bank has maintained short-term rates at a relatively low level of 2% since the middle of last year, and long-term rates continue to trade in a band, which makes financing attractive to borrowers. Bank appetite for commercial real estate lending is strong, and lending margins are decreasing. Can I call it a borrower's market yet? It almost feels that way. The CPIPG team meets a lot of investors, and we keep hearing about a shift in asset allocation towards European real estate. While geopolitical uncertainty and the impact of U.S.
tariffs remain a risk, there has also been a big change in expectations about the German economy, bordering on optimism, which is boosting general sentiment. A better macro picture is helpful, but the micro picture is also important. The good news is most Central and Eastern European economies are performing better than the EU average. Real estate construction is limited. Major threats from inflation have receded. Household consumption is expanding. People are shopping. Across nearly all geographies and subsegments, CEE real estate has been a solid performer even during challenging times and is therefore well positioned for growth because the economic fundamentals and real estate dynamics are solid. All the good vibes and helpful developments have made our jobs just a little bit easier. In H1, CPIPG reported a small increase in valuation by about 1%.
That's the first time we have reported an increase in valuation since 2021. Occupancy in our portfolio increased slightly. Administrative costs are down. Our operations are becoming leaner, and we're making good progress in tougher markets like Berlin. The group's disposal program continues to hit the mark. We are reducing leverage, and we are repaying expensive debt to improve our interest coverage ratio. We are also seeing opportunities to invest in our portfolio, even as we prioritize repaying debt. I'll keep coming back to these themes as we go through the presentation. Let's begin. Page four is a financial snapshot of where we are as a company. CPIPG' s property portfolio was EUR 17.8 billion as of H1, which is EUR 433 million less than last year, as we completed more than EUR 650 million of disposals, but also made small acquisitions and invested CapEx.
LTV was 49.4%, down slightly, still above target, but moving in the right direction. Our contracted gross rent was EUR 898 million. For comparison, at H1 2024, the contracted rent was EUR 939 million, so a change of about 4% as the group continues to make disposals. You see similar trends in EBITDA and net rental income, with single-digit decline because of our disposal program. On the other hand, the core portfolio continues to perform well, with like-for-like rental growth of 2.6%. Net ICR at 2.3 x. This is lower than we want, but we also believe the figure will improve in the coming quarters, partially because of the liability management transactions we completed in July and because we're making continued progress on repaying expensive debt while also generating some income through our investments. On page five, a brief reminder of our portfolio split. Not much has changed.
Office and retail remain the group's largest segments. We still like residential and hotels, especially in the Czech Republic, and the group continues to own land for development, sale, and long-term holding. Geographically, things have not changed much either, though we continue to reduce our exposure to non-core locations such as Germany outside of Berlin and the UK. Jumping forward to page eight, you can see the changes in our portfolio this year in terms of value and income. The two go hand in hand. We've been making sales and prioritizing lower yielding assets wherever possible, but that still has an impact on the top line. One of the benefits of investing in CEE real estate is slightly higher yields. You can see that on this slide, that the yield in our portfolio keeps increasing. Occupancy was stable. On page 10, we have a picture of the group's financing activities.
CPIPG's secured financing comes from 25 banks, and we are facing no problems rolling over bank loans. In fact, we are not accepting every loan we are offered, even though the pricing is still better than the bond market, and it keeps getting better because margins are tightening, but we're trying to keep the proportion of debt balance between senior unsecured and secured. We definitely see more banks competing for loans, which is a nice thing to see. During the first half, we did not do much in the bond markets. We mostly focused on repaying small foreign currency bonds. However, we were quite active in July when CPIPG completed an exchange on our hybrid bonds with 92% success, a EUR 118 million tap of our hybrid bonds, and a new issue of EUR 500 million with a coupon of 4.75%.
Our subsidiary, CPI Europe, also recently tendered for EUR 130 million of their bonds due in 2027. CPIPG tendered for EUR 180 million of our 7% bonds due in 2029, and recently we launched a tender offer for $330 million of the CPIPG's U.S. private placement bonds, which also have a cost of nearly 7%. Everything I just mentioned was modestly positive for the group's ICR, but was not reflected in H1. On future issuance plans, we would only consider a transaction which is ICR positive and further strengthens our capital structure. As Moritz will describe later, we have no near-term urgent needs for finance. Let me pause for a moment and ask Michal, Pavel, and Květa to take over for a little while. Michal?
Thank you, David. I will continue on page 11 to speak about our disposal. Since I joined CPIPG together with my colleague Květa Vojtová earlier this year, the disposal pipeline has been our priority. The reason is we made a commitment to reach EUR 1 billion of disposal in 2025 and another EUR 500 million in 2026 and in 2027. So far this year, we closed over EUR 650 million of disposal, and we have another EUR 250 million of deals which are signed, and their closings will come soon. In total, it is EUR 900 million from our EUR 1 billion target. Additional EUR 280 million are the deals where we signed LOIs, and we are in the process of due diligence with our buyers. Both together, it is EUR 1.2 billion. I trust we will exceed the EUR 1 billion target this year.
For next years, 2026 and 2027, we have a pipeline of EUR 2 billion of assets which are being prepared for sale, and some of them are already being discussed with potential buyers. Thanks to such an extensive pipeline, we can exceed the planned targets if it is needed. All our disposals are our non-core assets, assets with low yield or non-yielding land bank which we do not intend to develop. These assets are originated from every geography and segment across our portfolio. We can see some examples on the slide, including the sale of our Marriott Hotel in Vienna, a residential asset in the UK, and an office in Vienna. We see a good demand for small and mid-sized tickets, and the recent signs suggest that out of the market or larger deals is improving. Now, I will turn the presentation over to Pavel Měchura.
Thank you, Michal. I can take over on page 12 to discuss our investment. I will add to David's earlier point that CPIPG is primarily in the mode of selling assets to reduce leverage, and investments are less of a priority. On the other hand, everybody knows that we are trying to improve the ICR. Repaying debt is one way to do that, but generating income is another way. Where we can, we are making investments in CapEx, investments in development, and of course, we continue to look at high-yielding income-generating assets and even land bank when appropriate. Some of our investments during H1 are described on this page. Residential development infra remains a good opportunity.
You can see a really high 32% profit, and the construction is financed by banks with minimal contribution from CPIPG , aside from the land which we effectively monetize through these developments. We also developed some retail parks in Croatia and added it to our existing network. These properties bring a rental yield of 8.5%. We also acquired a retail park in Serbia with a yield of over 9%. The volumes are not large, but we see the effect on the growth as positive. Now, moving on to page 13. Reducing the complexity of our group has been an important topic for a while. Since we completed the acquisitions of IMMOFINANZ and S IMMO in 2022, we have taken some big steps to integrate and streamline the group.
The most important step was the squeeze out of S IMMO and the combination of IMMOFINANZ and S IMMO into CPI Europe. Right now, CPIPG directly owns 75% in CPI Europe, and we have found many ways to integrate our operations. We have one local team managing properties across all groups and entities, leading to greater efficiency. As one example, and David already mentioned that, our administrative costs were down 13% in H1. Overall, we want to continue streamlining the group wherever we can. This also includes the allocation of assets and resources. You may have noticed the recent signing of a letter of intent between CPIPG and CPI Europe, which relates to the intra-group sale of our Czech residential portfolio. This is a transaction which benefits both companies on a standalone basis, but overall has no impact on the consolidated group.
CPI Europe is completing a good number of non-core asset sales. They have the resources to invest, and of course, CPIPG is happy to provide a vendor loan in the interim period to facilitate an acquisition by our subsidiary. Another way to speak about the simplification is through figures. CPIPG now has 538 commercial properties, down from a peak of more than 700 properties not long ago as we completed asset sales. As mentioned earlier, we are also sharpening our strategy to remove non-core locations. All these activities lead to a simpler and healthier group. Finally, on page 14, David already mentioned some of the key figures, but you can see a story of positives and negatives. On the positive side, net debt decreased, our LTV improved, EPR and RV improved, and net debt to EBITDA improved slightly.
Of course, also occupancy improved, like-for-like growth was positive, and we sold 54 properties during the first half. Plus, the net profit increased significantly, due in large part to high valuation. On the negative side, gross and net rental income each dropped 5% - 6%, and FFOs dropped by more than 15%, largely because of a lower hotel income and taxes. ICR also weakened. As David described, we hope the trajectory will be positive from this point forward. Before we move on to the portfolio review, there are a few quick case studies. Květa, would you like to go through them?
Thank you, Pavel. I will begin on page 15. As Michal mentioned, we both joined the group in January of this year and have been spending a lot of time in the countries looking at the operation. So far, what has impressed me the most has been the creativity and flexibility of our local teams in terms of leasing and bringing value to tenants. I'm happy to present a few examples. In Vienna, we have transformed an obsolete single-tenant office building into so-called myhive Urban Garden , which is a perfect example of our myhive concept, featuring versatile infrastructure, flexible layout, and premium quality coworking spaces. The occupancy of the building is now 100%. In response to the challenging office market in Budapest, our local team launched the CPI Club application, a strategic digital platform designed to enhance the tenant experience and increase the asset utilization.
The app allows tenants to access the full range of services that CPIPG has to offer in Budapest, including temporary workstations across our nine office assets, catering services, and event spaces from our hotels, car sharing, and events. The early adoption and user feedback have been excellent and are supportive of our efforts to sustain and improve occupancy and differentiate CPIPG in a competitive market. On page 16, in Warsaw, Google was our large tenant in Warsaw Financial Center, and when they purchased a new building to be their local headquarters, they left 10,000 sq m vacant, which meant occupancy immediately dropped to 75%. Our asset management and leasing team responded quickly, reallocating the space to a more diversified group of medium-sized tenants. Additionally, the former Google canteen was successfully converted into a restaurant that will be accessible to all of our tenants.
As a result of these efforts, occupancy has recovered to 96%. Finally, in the Czech Republic and Slovakia, one of our tenants, an electronic chain operating 16 units, filed for bankruptcy. Thanks to proactive monitoring and swift action of our local teams, we rapidly reallocated 14 of our affected units. The remaining two spaces are under negotiation, but we have already achieved an average rent increase of 9% through the process, demonstrating both the resilience of our portfolio and the strength of our local living capabilities. All of these examples just add to the point that CPIPG has very high-quality local teams. We know our tenants, we are creative, and we are doing everything possible to drive the performance. Now, let me turn the floor back to David. David?
Thank you very much, Květa. Okay, so now I will spend some time walking through our portfolio segments and the performance in more detail. On page 17, I can speak about office, which is 44% of our portfolio. CPIPG is primarily focused on capital cities of Central and Eastern Europe. If you look at Prague, Warsaw, Bucharest, and Vienna, the story is stable. There is limited new office construction, and working from home is not a factor. Occupancy is steady in the low 90% range in all of those cities. On the other hand, Budapest and Berlin have been more challenging, along with Dusseldorf, which is actually not a core city for CPIPG, but in all cases, we're making good progress.
On page 18, you can see that office net rental income declined by 4.4%, but we've also sold 35 office properties in the last year, so it's no surprise that income is lower. Like-for-like rental growth was slightly positive, and we continue to see about 10% reversionary potential, particularly in Berlin and Warsaw. Speaking of which, we can discuss Berlin on page 19. CPIPG owns 41 properties in Berlin with more than 1,500 tenants. Our portfolio consists mostly of red brick historical properties in prime Berlin locations, which were factories before the World Wars and were later converted by the city of Berlin into offices for SMEs. CPIPG acquired the portfolio around 2014 and invested significantly in the quality, leasing, and positioning of our assets in order to take advantage of rising demand from the IT and creative sectors.
Our space in Berlin is more flexible, more affordable, and definitely more interesting than a shiny office tower. For many years, Berlin delivered superb growth in rent, occupancy, and value. Plenty of real estate groups saw this trend, and many new developments were started. As the German economy weakened, Berlin also suffered, particularly the IT and creative sectors. New supply came into the market, vacancy in the city of Berlin rose from about 2% to more than 7%, and occupancy in our portfolio dropped from over 90% to about 86% as of H1. The fact is, Berlin is still the most interesting, vibrant, cool city in Germany. People from all over the world still want to live there. Plus, we're seeing signs of optimism for the German economy.
Technology investment is gradually coming back, and occupancy in our portfolio rose slightly from the end of last year, including strong demand for smaller spaces of about 1,000 sq m or less. Leasing volume almost doubled, which is a trend we continue to see, as the level of inquiries we are receiving for new spaces is increasing. As you can see on page 20, the average rent in our Berlin portfolio rose again but remains below the Savills estimated ERV. By the way, EUR 11.6 per sq m is less than half of the Berlin average. We're being creative with our leasing, looking at alternative uses. For instance, we recently signed an agreement with Limeh ome for a commercial living space in one property, and we recently opened a bouldering gym, or I guess you can call it a rock climbing gym, in another property.
Like Květa said, creativity in leasing makes CPIPG different. On page 22, Warsaw, the performance here has also been good. We continue to believe that the market underestimates the potential for Poland, which is a large country with a robust economy where Warsaw is the center of gravity for business activity. Occupancy at 94% is well above the market. We have a huge share of the leasing volume in the market. Our properties are green and very well located. Construction in Warsaw was heavy in the pre-COVID times, but now new supply is limited. Plus, obsolete or badly positioned properties are being taken out of the market through residential conversions. We are optimistic that the good conditions in Warsaw will continue.
One project we hope to proceed with in the coming years, subject to pre-leasing and financing, is the redevelopment of our property, Prosta 69, into Like On, which will meet the strong tenant demand for new high-quality properties. Moving on to Prague on page 25, the market remains good. Office occupancy was 94%. Rental income increased despite us selling two properties during the year. As you can see on page 26, we have quite a diversified tenant mix in Prague. We also have a diversified pool of assets ranging from modern buildings to more historic refurbished properties. Construction in Prague remains very limited. This is a city where you do not see many cranes in the skyline. We're very confident about how our portfolio in Prague is positioned. On page 28, Budapest, Květa touched on this a little earlier. Budapest is a challenging market for two reasons.
First, because the economy has been weaker than other CEE economies. Second, because of a government program underway which encourages state-owned and state-linked companies to move from privately owned into publicly owned office space. With 37% of our tenants in Budapest from the public sector, this is a factor we have been watching very closely. I'm happy to say that so far we have not lost any meaningful government tenants, and in fact, many have extended their leases. At the same time, we are investing in tenant experience and being extra creative with leasing. Local investors are still active. We sold one office property in Budapest this year. We've been able to increase occupancy slightly to 86%, and our team is really doing everything they can to further improve the performance.
Bucharest, on page 29, we have 12 properties with an occupancy of 92%, which is well above the market where vacancy is 12%. Office construction in Bucharest is very limited, so we're optimistic about future performance despite some economic uncertainty. Our team on the ground is super creative. For instance, 14% of our tenants now come from the medical and pharmaceutical sector, largely reflecting hospitals and private clinics. These tenants tend to take long leases at good rents, and we're now well recognized as a specialist in this part of the market. We also sold two properties in Bucharest this year to local buyers, which is a good reflection of the demand. I tend to spend the most time on offices because that's where our investors often have the most questions. Now I can move on to retail, which is the easy part.
On page 30, you can see a snapshot of retail, which is 28% of our portfolio. CPIPG has 293 retail properties, including retail parks, shopping centers, hypermarkets, and others. Our properties cater to the daily needs of people living around the CEE region, with a focus on basic necessities like groceries, drug stores, pet shops, shoes, and clothing. The portfolio has 98% occupancy, which reflects the fact that our region, the CEE region, is not oversaturated with retail properties like you see in many other places. Like-for-like rental growth was 3.4%, and our new retail parks in Serbia and Croatia were already making positive contributions. If you look at shopping centers in the Czech Republic on page 32, the performance speaks for itself. Sales are up more than 3%, footfall is basically the same, and with an affordability ratio of 11%, our centers offer great value to tenants.
On page 33, just a reminder that our shopping centers are located in the regions of the Czech Republic. We have the largest network in the country serving the daily needs of people. Similarly, on page 35, we have more than 150 retail parks across the CEE region. The retail park format has been extremely popular, and we're now seeing tenants who previously only wanted to be in shopping centers looking for space in retail parks. Occupancy in the retail parks is close to 100%, and we will continue to make investments in this space. Residential on page 37, this is mostly about our Czech residential portfolio, CPIPG , which operates mostly in the regions of the country where housing is scarce, including Ústí nad Labem, Liberec, and Ostrava.
Pavel mentioned earlier that this portfolio is under discussion for sale to CPI Europe as part of an overall asset and resource reallocation within the group. Demand for housing in the Czech Republic is very strong, which drove like-for-like rental growth of 9.9%. Refurbishments to our properties also contributed to this growth, with more planned for the future. Outside of the Czech Republic, our residential portfolio in Germany has mostly been sold, and we're making good progress on sales in the UK. Now, let me turn the presentation over to Mindee , who will discuss hotels and complementary assets. Mindee?
Thank you, David. On page 40, we continue to see improvements in the operational performance in the hospitality sector, noting also the outperformance in CEE capital cities compared to Europe overall. The sector's resilience and further growth potential have also resulted in a significant increase in the investment activity. On page 41, you can see that CPIPG owns hotels across the CEE region, mostly in the Czech Republic. Some of our hotels are owned and operated, and some are owned and operated by our JV with Best Hotel Properties. In general, we feel CPIPG 's greatest advantage is as an owner-operator, and we have been strategically disposing of hotels where we are not the operator, such as the Vienna Marriott Hotel that Michal mentioned earlier and the Budapest Marriott Hotel. We also undertake selected new hotel developments to organically expand the portfolio.
We recently opened the Mamaison Chain Bridge Budapest in July, which has performed tremendously well during the summer months. Moving on to page 42, the net hotel income of our portfolio totals EUR 21 million for the first half of 2025. This is slightly lower year-on-year because of the sale of the JV stake and other hotels. Overall, the portfolio continues to perform well and showed steady improvement. Occupancy grew year-on-year, and while average occupancy is still somewhat behind 2019 levels, we note that in some cities, such as in Budapest, Warsaw, and the regional Czech cities, the hotel occupancies there have surpassed pre-pandemic levels. We strive to improve on the average daily rates, or ADR, and the portfolio overall achieved a record growth of 4% year on year.
Our focus will be to capture further opportunities in the travel recovery and target more meetings, incentives, conferences, and events business, which we now see coming back on a larger scale and where our conference hotels are well positioned for. Lastly, I wanted to highlight the robust investment activity in this sector in the CEE market. The investment volume reached over EUR 682 million in the first half of 2025, predominantly due to large transactions in Prague by local investors. This underscores the stabilization of yields and possibly compression, which alongside growing top lines should support the positive valuation outlook. Next, on page 43, I will comment on complementary assets, land, and development. In general, we see land as a strategic investment with long-term potential.
We have been very successful in holding and selling land banks over time, which have been acquired at attractive prices, and we are patient in utilizing our land banks. We selectively put our land to use by undertaking development projects for sale or to hold or add value through obtaining relevant permits, which we may then sell the project or proceed to develop it. Since 2022, we have also successfully disposed of close to EUR 220 million of land bank in Romania, Germany, and the Czech Republic. Jumping to page 44, our land bank totaling about EUR 1.9 billion is primarily in the Czech Republic, mostly in Prague, and also in Italy, mostly in Rome. In Prague, we own a significant brownfield plot in Bubny, strategically located near the city center.
The site area is over 200,000 sq m, and it's expected to be one of the largest brownfield redevelopments in the region in recent times. The group acquired the plot almost two decades ago. Initial progress on the changes to the master plan was slow but has significantly sped up in recent years. The city of Prague is also motivated to finalize the master plan soon, with the new Praha-Bubny railway station just opened in August. There's general excitement but also pressure to redevelop the area. The long wait has increased the valuation throughout the years as the development potential becomes clearer and is supported by overall market increases. I'm now on page 45. Similarly, in Italy, the majority of our land bank is in and around the periphery of Rome. The land banks here are predominantly zoned for residential use with some commercial usage.
Most of the sites have been acquired at attractive prices, usually through the workout of non-performing loans and the acquisition of the associated property holding entities. Again, the strategy here is similar: to progress on obtaining the relevant permits and then either dispose of the land with planning or develop the projects ourselves or with a partner. All in all, we see long-term value and potential of holding land banks and continue to believe in the strong demand for modern residential units in Rome and in Prague, where the markets are supported by solid fundamentals of population growth and a shortage of supply. Now, let me turn the floor over to Moritz to discuss capital structure, liquidity, and ratings.
Thank you, Mindee . I'm now on page 51. Our liquidity is strong with EUR 1.6 billion split across EUR 1.2 billion in cash and about EUR 400 million in our fully undrawn RCF. As you can see from the maturity profile, we have essentially dealt with the maturities in Q2 2025 and also cover all potential maturities in Q2 2026 and partially into Q2 2027. As previously mentioned, we face no issue with rolling over secured debt, which represents about half of the maturities in Q2 2026. As such, unsecured bond maturities are covered for the next two years. The maturity profile should also further improve as we successfully issued the five-year EUR 500 million bond with a coupon of 4.75% in July and repurchased EUR 180 million of notional of our expensive Q2 2029 7% coupon bonds.
In addition, we currently have a tender ongoing for our USD private placement notes maturing in Q2 2027, Q2 2028, and Q2 2029 which cost us nearly 7% in euro terms. Subject to the final offer results on the US dollar private placements, this will extend maturities while also having a positive effect on the ICR with expected annual interest cost savings of up to EUR 11 million. It's not a game changer for the ICR, but it is part of our continued efforts to improve the ICR. Since we already spoke about the ICR, it's probably best to move to ratings. Our dialogue with rating agencies is regular, as you might expect, with the last discussion in early July when we presented our plans for our liability management to the rating agencies ahead of the new issuances.
When looking at our rating ratios, we feel we're making progress in the right direction. Operations are solid with a stable occupancy at 92.2% and solid like-for-like rental growth of 2.6%. Leverage is declining and within the requirements for the rating by S&P at about 58% as per their calculation, and Moody's at the upper end of the rating guidance of around 55%. The new hybrid received equity treatment, which reversed some of the negative effects from the change in the hybrid treatment following last year's downgrade to high yield. The first positive net valuation result since Q2 2021 is also a positive indication and hopefully gives some additional comfort. Coming back to the ICR, our average cost of debt increase has significantly slowed down with only 0.1% in H1 2025, with the average cost of debt at 3.65%.
Given lower and stable rates, our debt is 96% hedged, improving financing conditions and modest debt maturity. We continue to be focused on repaying cross-debt as well as investing CapEx to increase returns to add yield to the portfolio. Hence, our expectation is that the ICR will improve over the coming years, with this year marking the low point. We remain focused on analyzing any potential action to support the ratio further. To summarize it, as you know, S&P downgraded us to high yield in May and Moody's in July last year. Both ratings have a negative outlook, which, as we understand, typically lasts 12 months- 24 months. The operating environment is stable, disposals are on track, and as Pavel described, we are actively working on further simplification and cost reduction and making steady progress on the leveraging. With that, now let me turn it over to Petra.
Thank you, Moritz. This is Petra Hajna. I am the Group Sustainability Officer and would like to walk you through the ESG highlights. Starting on page 69, during the first half of 2025, the group published its comprehensive sustainability statement for the year 2024. This marks a significant milestone as it's our first report to be substantially enhanced to comply with the stringent requirements of the Corporate Sustainability Reporting Directive and the European Sustainability Reporting Standard. The statement receives limited assurance from Ernst & Young, reflecting our commitment to transparency, accuracy, and accountability. Still on page 69, we are pleased to announce that the group further strengthens its science-based environmental targets. Our updated short-term targets are for Scope 1 and 2 greenhouse gas emissions a 46.2% absolute reduction for 2019-based year by 2030, equivalent to 46.2% reduction per square meter of property portfolio.
For Scopes 1 and Scope 3, greenhouse gas emissions, fuel and energy-related 76.3% reductions per megawatt hour from 2019-based year by 2030, covering all sole electricity. For other Scopes 3, greenhouse gas emissions a 27.5% absolute reduction from 2019-based year by 2030, equivalent to a 27.5% reduction per square meter of property portfolio. These targets were validated by the Science-based Targets Initiative during the first half of 2025, aligning these with the more ambitious 1.5 degrees global warming scenario for Scope 1 and Scope 2, an advance from our previous alignment with these targets well below 2 degrees. Further to our goal to increase the share of green buildings, we are pleased to report that green-certified buildings accounted for 48.7% of the total portfolio value. Several new photovoltaic installations have been implemented across the group, including locations in the Czech Republic, Croatia, and Slovenia.
We also appreciated an opportunity to speak at various conferences and workshops in the region to share our ESG colleagues' experience and journey during the first half of 2025. Moving on to page 71, the group has succeeded on the bond market with EUR 500 million five-year senior unsecured green bonds issued in July 2025. So far, the group has issued seven green bonds, one sustainability-linked bond, and one sustainability-linked bond. In January 2022, the group introduced a sustainability finance framework combining both sustainability-linked and green bond framework. The framework is available on our website. The Green Bond Impact Report is an integral part of the half-year management report starting on page 72.
As of 31 July 2025, 100% of net proceeds from issued green bonds were allocated to eligible assets, mostly to certified green buildings (88%), followed by equity investment (representing 6%) and sustainable farming with the CEF certificate accounting for 4%. The environmental impact of the green bond portfolio for green buildings represents annual greenhouse gases reduction of almost 21,000 tons CO2 equivalent for year 2024. Renewable energy projects, photovoltaic plants, represented annual greenhouse gases reduction of more than 1,000 tons CO2 equivalent last year. According to the Green Bonds Framework, CPIPG is committed to verifying its reporting by an independent third party. Sustainalytics has reviewed the Green Bond Impact Report as part of the annual review process performed in August 2025, and the annual review letter could be found on our webpage.
That covers the ESG section, and I believe now we are ready to go to the Q&A section. David, please, do you want to take over from here?
Okay, now for the fun part. We'll do our usual way of doing this. We have received a bunch of questions. I would say many familiar names asking questions, some new names asking questions, which is always fun. What we'll do is we'll read out the question. We always read them out verbatim, okay? We're going to read them out for better or for worse, and we'll do our very best to answer. Who's going to start with the reading?
I will start with the reading. The first question: Hi there, could you please comment on the repayment schedule of the vendor loan to CPI Europe as part of the sale of the Czech RESI portfolio? Also, have you discussed the transaction with the rating agencies? If yes, what's their take on the deal? Many thanks. I mean, I probably take the first part. Rating-wise, it's an intergroup transaction, so from a consolidated picture, nothing changes. For the intergroup or the group liquidity, flexibility increases. We think overall it's a rating positive, while we haven't specifically discussed it with the rating agencies further. Do you want to?
are several questions on this transaction. What I would say is the way to really think about it is reallocation of assets and resources. I think you're all familiar with the fact that CPI Europe is making disposals of non-core assets, and they will have quite a bit of cash, we believe, in the coming quarters ahead. They have the resources to invest. They see the potential benefit of this transaction. They see the upside in the transaction. Certainly, we're happy to extend them a vendor loan and be repaid over time as they make sales, and we can use that cash to tender for bonds and do the other things that we want to do as a company. Really, from our perspective, it's a really smart, intelligent reallocation of assets for both companies.
Okay, thank you, David. The next question: Can you please split like-for-like rental income growth by segment? Pavel, do you want to take?
As we said during our presentation, the total like-for-like growth was 2.6% in H1. When it comes to the segmentation of that growth, the residential segment was the champion with 9.9%, so mainly our residential portfolio in the Czech Republic, followed by the retail segment where we report 3.4% and office with 1.3% of like-for-like growth.
Thank you, Pavel. The next question: What is the benefit of the sale of the Czech residential portfolio for CPI Property Group?
I think we kind of answered this one, Moritz. It's really about, as I said, asset and resource reallocation. CPI Europe is making disposals. We'll have the cash to invest. We're happy to be repaid over time. For CPI Europe, this is a good opportunity to execute on their new strategy, which involves diversification. These are fantastic assets in the Czech Republic. Everyone can see how strong the market here is. The Czech residential assets delivered strong like-for-like rental growth. It makes sense for CPI Europe. We, as CPIPG, will have the benefit of being repaid through this vendor loan over time.
Thank you, David. The next question I skip, it's again on the vendor loan and the following: What is your current thinking about bond tendering, given your focus on the ICR?
My current thinking is that I'm thinking about it all the time. That's really it. We've done a bunch of tenders as a company. I went through it today in the presentation. CPI Europe did a tender. CPIPG did a tender in euros. We're going through this U.S. private placement tender right now. This is on our mind all the time. I think you should expect us to remain active in that space.
Thank you, David. The next question: Please provide more color on the office market in Germany and CEE, especially regional cities in Poland.
Hopefully, I covered that during the presentation. Generally, the office market in Germany, you know, none of us are willing to declare victory and say that things are really completely turning around. It remains one of the more difficult countries in Europe, but we believe Berlin is the best place to be. We believe we have the right assets. Yes, we have some non-core assets in Dusseldorf, but even there, we see the performance improving. You can see it in the occupancy change. I think we feel like things are getting marginally better, which is overall helpful for Germany. Again, we think our Berlin portfolio is different, we manage it differently, and we think that gives us an advantage. As it relates, hopefully, I've covered the other cities. In Poland, we really see Warsaw as the center of gravity in the country. That's the place to invest.
Not just Warsaw, really CBD of Warsaw. That is our continued focus. Regional cities in Poland have never been a focus for our group in terms of the office market. Of course, we're invested in Globalworth, who also has some exposure to regional cities in Poland. I'd say the regional cities are definitely more challenging than Warsaw, but as I understand it, Globalworth has made some nice progress on thinking creatively around leasing there too. Hopefully, you know, we're past the worst point for the regions too.
The next question, I think it covers again.
there's a lot of discussion around the size of the vendor loan. All of this needs to be negotiated with CPI Europe, but the value of the residential portfolio is more than EUR 800 million. There's not a lot of debt on the portfolio at all. It's relatively easy to work out how large a potential vendor loan could be, but we need to agree all of these terms with CPI Europe and ensure that this is structured in a way that is very comfortable and flexible for them as well.
I jump to the next, I think it's the eighth question. In the deck you use, CPI Property Group continues to address maturities early while optimizing financing costs to support our ICR.
Would the Czech RESI dropdown lead to more cash at your hold call and have proceeds for bond or hybrid buybacks?
That is the goal.
That was short and quick. On the corporate structure, you mentioned reducing complexity remains a priority. What are your plans and timeline to do this, and does it include merging the hold call with CPI Europe?
There are a few things that we have done around reducing complexity, and I think you'll continue to see us take more actions over the course of this year and into next year. The first part of it is just really practical in the sense that our local operating teams are unified. We have made a lot of changes in terms of the full-time employees of the company and really thinking about redundancy and different functions. We have been pursuing integration wherever we can, and I think you can see that in the reduction in administrative expenses relative to last year, but we're going to continue really working on the operational efficiency that remains a big priority. Structurally, the squeeze out of that EMA was a very, very important step, and the combination into CPI Europe was another important step.
We are looking at a huge range of other options that could lead us to further simplification, including eliminating JVs wherever we can. I would ask you all to just stay tuned. This is daily work for us. We are making slow but steady progress, and we're very focused on how to achieve further integration in the future.
Thank you, David. The next question: Hi, we've completed disposals. It looks like EBITDA is down 7.3% when external financing is only down 1.8% and net debt - 2.9%. How do you intend to stabilize your ICR and prevent further rating downgrades is your EUR 1 billion plan disposals lead to a similar outcome? I will try to answer. I think it's a combination of things. We're really focused on costs. As I mentioned, you don't see that in the H1 numbers, but we're focused on repaying our most expensive debt. For example, the 7% coupon bond for which we tendered and which we did last year to focus on liquidity. I would also say that you see us continuing to invest in the portfolio. David mentioned earlier the retail parks in Croatia; they have attractive yields with 8.5%.
We're also trying to grow the top line to add yield and not only shrink. We're also, with further sales proceeds, focused on leveraging repaying cross-debt. I think it will take some time, and you will see the figures over time. You should see a positive effect, basically. The next question, I think we already answered. There have been press reports on selling some of your Prague land bank and the chairman exiting. How much could this land bank be sold for and any comments on the chairman exiting?
Just to make a few corrections to this question, the Chairman of the company is Edward Hughes. He's an independent member of the Board. Our Board is, as most of you know, now 50% independent, which is something that we're quite proud of and something that's quite a change from several years ago. I think what you are referring to is the founder of the company, Radovan Vítek. As a reminder, of course, the shares are no longer held by Mr. Vítek. They're held by his family trust. We have also seen the reports that he might be contemplating a sale. We read the news just like you. Frankly, as the management team of the company, we are not involved in whatever discussions Mr. Vítek might be having. There's really not much that we can comment on.
What I do know is that this is someone who cares about this company. He understands what this company needs, which is to be investment-grade again. Frankly, he wants to do everything he can to help support us. I'm sure if he chooses to do something, it will be in the best interest of the company. That much I'm sure. As it relates to selling land bank or other things in Prague, I mean, Mindy Lee described earlier how we see the potential for Bubny in Prague. There is a lot of excitement around the development of Bubny these days. At the end of the day, we are absolutely willing to consider making sales if we receive the right pricing on things, but it's also about timing. We see huge potential for this site. We're not in any rush to sell it.
I would just say, you know, we'll wait and see is kind of the answer I'd give.
Thank you, David. The next question, I think it's a couple of questions. Good morning. Thanks for the presentation. Please find below my questions. You mentioned financing was positive to ICR. Where do you think the ICR will be at the end of Q2 2025? Should we expand further tenders in Q2 2025 with cash on hand? The press mentioned that Mr. Radovan is looking to sell CPI Property. Can you comment on any ongoing process? I think.
The first question, we mentioned the financing was positive for ICR. Absolutely, that's why we did it. We don't provide predictions or forecasts, but what I'd say is we're doing everything that we can to make it a positive trajectory between H1 and year-end. Should we expect further tenders in 2025 with cash on hand? Yes, that is our plan. We'd like to continue buying back bonds, again, whether we do tenders, open market, or purchases. We sometimes receive inbound inquiries from investors. We bought back a lot of our foreign currency bonds that way earlier this year. We continue to look at that, absolutely. The third part around the prep speculation, again, we don't really have any comment except to say that we know that our shareholder understands the group really well and wants to help us.
The next question, I jumped because it was already there before. Following, can you give more color on the Berlin office market and your specific portfolio? Market trend seems negative while Germany macro has been challenging. Are you prioritizing occupancy or rental growth?
I went through this a little earlier when I described Berlin. I would just say we believe we can do both in terms of prioritizing occupancy and rents. There's still a lot of upside. If you look at the pricing of our portfolio on average, if you look at the affordability of our portfolio, if you look at the ERV that's settled, estimated, we continue to see potential for increasing rents. It's fair to say that we don't think rents in our portfolio are likely to increase at the same pace that they have in the past. You're probably going to see a little bit less like-for-like rental growth than the super strong numbers that we were putting up years ago, but we still see the potential for growth in rent, and we still see every potential for increasing occupancy in the portfolio.
We really benefit from the fact that this Berlin portfolio has more flexibility. For instance, manufacturing is a significant component of the portfolio because of the kinds of spaces we have. We're able to have a lot of family-owned precision manufacturing companies and the like, some of whom have been making products in our buildings for a very, very long time. We have a bit more flexibility. We can be more creative, and we still see lots of potential in Berlin.
Thank you, David. The next question, I think it's again on the, yeah, I had that before. How much of the portfolio was revalued, and what guidance can you give for either H2 or the full year?
For H1 financial segments, we revalued approximately 65% of the portfolio in terms of the value, so let's say two-thirds of our portfolio. Regarding the guidance, I think we can't give any guidances or projections, but what I would say is that looking at the market, looking at the performance of our portfolio, I am optimistic.
Thank you, Pavel. The next question, I jump again since it was answered, the following as well. What was the thought process behind tapping the hybrid? Do you see potential to further utilize the hybrid market to reduce the minority interest?
The thought process behind tapping the hybrid was at the beginning of July, when we looked at doing the new senior unsecured bond issue to repay expensive debt. Because of the pricing of the bonds and the price at which, you know, hopefully the generous price, by the way, at which we agreed to buy back the old bonds, the effect was marginally ICR positive. It was still worth doing. It also extended maturities. Once we added a little bit of hybrid into the mix and used some of that hybrid to repay debt, it has an even better effect overall on ICR and LTV. Tapping the hybrid made sense because as part of the overall package, it really helped enhance the ICR benefit and the leverage benefit. This was not part of our original plan.
Frankly, one of our banks, who's extremely active in the bonds, came to us with an inquiry for the hybrid. We always take these taps super seriously because I think most of you know, I'm very sort of familiar with how the bond market looks at things. We do care about the technicals of our bonds and how they're trading. I know that hybrid, particularly right after the exchange, it was a challenging moment to do something. Frankly, we had an offer on the table. It was a good offer at a good price. We saw the benefit in terms of using this to enhance our overall capital structure. We understand that some investors were not like super happy that we did the tap, but we hope you'll see the benefit as we continue to deliver better results.
Okay, thank you, David. I think there is one more question. Do you generally provide third-party vendor loan financing or other non-cash financing to complete asset sales? Is this something you would consider?
I'd say generally not. There have been very few instances where we have agreed to provide vendor loan financing. I would say vanishingly few instances, and it's not our preferred way of making disposals.
Thank you. I think there was one more. What should we expect as dividends for full year 2025?
I will only be able to answer that question later this year in Q4. That's when we always make the decision. We have, to remind all of you, distributed significantly less than our distribution policy called for for the last three years. I think it's fair to assume that we will distribute quite a bit less than our policy once again, but it will depend on the performance. You know, Michal and Květa, I'm looking at both of them. They need to keep getting the disposal done. I'd say we haven't made any decision on that yet. Obviously, we're watching the impact on our capital structure very closely.
Okay. I think that's all the questions I can see.
Thank you all very much. We appreciated all the questions. We appreciate your time. You all know how to find us if you want to ask any follow-up questions. Thank you, and we appreciate your interest in CPI Property Group. Have a great day.