Good morning, and welcome to CPI Property Group's webcast covering our financial results for 2025. This is David Greenbaum, CEO of CPI Property Group. I'm speaking to you today from Prague, where the sun is shining, and suddenly it feels like spring outside our headquarters building, Quadrio, which many of you have seen in person or through photographs. Outside of our building, we have this large, silver, rotating head of the famous Czech author, Franz Kafka. Because it's a beautiful day, there's probably 100 tourists on their Easter holidays watching and taking photos of the rotating Kafka head. I hope that some of these tourists will be staying in our hotels, and after they're done, I hope they will spend money in our Quadrio shopping center. Please spend, tourists, and we love you, and thanks for coming to Quadrio.
Anyhow, it is a bright and sunny environment for hosting this webcast, and that reflects how upbeat we feel about the progress that we made in 2025. On that note, let me introduce my colleagues who have joined me on the webcast. 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 Transactional Legal. Stefano Filippi, Head of Corporate Finance. Mindee Lee, Head of Corporate Strategy. Petra Hajná, Group Sustainability Officer. Petr Mizera, Head of External Reporting. Markéta Večeřová, who handles our bank financing. Martin Matula, our General Counsel, and Moritz Mayer, who's responsible for capital markets and investor relations. You really have the whole CPIPG team here on the webcast.
After we're done with today's presentation, we will answer any questions that you would like to ask about our results in 2025 and our plans for 2026. As usual, we will do our very best to answer each question. To ask a question, please use the question tool on the webcast as we go along. We will compile the questions and reply to you at the end. Today, we will be referencing CPIPG's 2025 management report, 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 very best to sort it out. Okay.
Let's talk about CPIPG's performance in 2025, and I will also give you some perspective on how we're seeing 2026 before turning the floor over to Pavel to walk through the key figures. In general, 2025 was a year of stability and cautious optimism in European real estate. The operating environment improved as GDP growth picked up, especially in CEE countries like Poland and the Czech Republic. European interest rates were low, both base rates and longer term rates. Bond markets were open. Our unsecured credit spreads tightened, and bond markets became competitive with secured bank loans once again, which meant that banks were hungrier than ever and kept reducing the margins on our facilities. Transaction volumes improved. The group exceeded our disposal target, and we even saw signs that big deals are coming back. Our real estate portfolio continued to perform well.
Occupancy reached 93% for the first time since 2022, and like-for-like rental growth was 3%. I may sound like a broken record, but construction activity is limited in our region, which is an enormous benefit for existing landlords. For example, Bucharest saw no new office completions last year, which is the first time we have ever seen that since the data has been recorded. Prague office completions were also at a record low, and office vacancy in Prague is back to pre-COVID levels, just about 5.9%. Our retail properties have 98% occupancy, and we continue to see rising consumption and increasing disposable incomes across the CEE region. Our hotels are doing great, including the new hotels we opened in Budapest and most recently in Brno, and the residential segment in the Czech Republic is performing well.
We also did a lot of work on capital structure and corporate structure last year, and we continued into the first quarter of this year. We did a successful hybrid bond exchange, issued new hybrids, issued several senior unsecured bonds, and repaid expensive bonds and bank debt. We also simplified our group by unwinding some joint ventures, including our JV in Poland with Sona Asset Management. Disposals are another highlight. We sold EUR 1.1 billion of properties last year, and we plan to sell another EUR 500 million-EUR 750 million this year. We used the proceeds to reduce gross debt by EUR 220 million, but we also invested in CapEx, development, and acquisitions as part of our long-term strategy to generate higher returns and create value. Our net LTV was 49.5% at year-end, a slight decrease, but please keep in mind that we bought back shares in Q1 of 2026.
In general, our goal is still to bring the LTV down this year, and I expect we will make progress more towards the latter part of the year. More early bond repayments, tender offers, they're definitely part of our plans for 2026, and we are also looking very closely at our hybrid bonds, which are callable this summer. Like last year, we want to find a bondholder friendly solution which respects the important contribution of hybrid bondholders to our growth. Finally, our interest coverage ratio at 2.2x is still lower than we want and probably lower than the rating agencies want, and we all agree it's very difficult to improve the ratio when we're selling income generating assets. Our focus is very much towards shifting towards sales of non-income generating assets this year, and also towards investments that generate high returns and improve the quality of our portfolio.
We still have plenty of work to do on leverage, ICR, and simplifying our corporate structure. With liquidity of EUR 1.5 billion, which includes our recently upsized EUR 450 million revolving credit facility with Citibank as a new lender, with that EUR 1.5 billion of liquidity and limited bond maturities in the coming years, I believe we have some breathing space to execute on all of these priorities. Now let me turn the floor over to Pavel to discuss our key figures. Pavel?
Thank you, David, and good morning to all of you on the webcast. Moving to page five, where you can see our key figures for 2025. Our property portfolio stands at EUR 18 billion. It means a decline of about EUR 250 million as we sold properties for EUR 1.1 billion, but also made investments in CapEx, development, and acquisitions. We also had a positive valuation result for the first time since 2022, with values rising about 1%. Our LTV declined to 49.5%, moving in the right direction, and below the peak of 62.3% at the end of 2023. Contracted gross rents were EUR 906 million at year-end, which is a decline from EUR 917 million at year-end 2024, but an increase from EUR 898 million at H1 2025. That said, overall income figures are lower, with the EBITDA of EUR 703 million and FFO of EUR 275 million.
The decline in EBITDA and FFO is due to our sizable disposals and the time required until investments start to generate income or sales proceeds. Operational performance remains very healthy, with our occupancy increasing by over 1 percentage point to 93% for the first time since 2022. Our like-for-like rental growth was at 3.1%, above inflation, reflecting our continued ability to capture positive rent reversion. Our net ICR stood at 2.2x , which as David mentioned, is below our target. We have a clear strategy for how to regularly improve it again. While CPIPG has been very successful with disposals, we have sold EUR 4.5 billion of real estate since 2022. Our focus is shifting to selling more non-yielding assets, with proceeds used to repay high cost bonds and bank loans.
Our disposals in 2026 and 2027 are expected to come from land bank, residential development, and some income generating properties that are either mature, non-core, or where someone offers us a price that is simply too good to refuse. On top of our disposals, costs remain a clear focus, with operations optimized wherever possible. For example, we reduced our administrative costs by about 5% and recently internalized our asset management in Romania, which should lead to savings in the low millions of EUR. Finally, we continue to focus on developments which add yield and scale to our existing platforms. For example, small scale hotel developments in Hungary or retail parks in Croatia. With these types of developments, we achieve an average yield on cost of at least 7%-8%, well above our current portfolio average.
I am confident that all these strategies to tackle the ICR will eventually get the job done, but I do request some patience because it will take time to translate into our results. On the next page six, you can see an overview of our portfolio. There hasn't been a major change, but there have been gradual movements. Retail continues to grow as we complete small scale retail park developments. On the other hand, the share of offices has declined as we sold non-core smaller offices. The share of hotels declined due to sales of large hotels in Croatia, Hungary, and Austria. While we completed some small scale developments in Budapest and most recently in Brno, Czech Republic. Now moving to page eight. As already mentioned, occupancy increased with positive results in all segments, including offices.
Our rental income declined due to the disposals, while the average portfolio yield, which we define as the topped-up net initial yield, increased slightly to 5.7%. I will stop here for a moment and ask David to say a few words about our financing activity. David?
Thank you, Pavel. On page nine, 2025 was another busy year for financing. We raised about EUR 1.4 billion of new debt split between bonds and loans, and we repaid more than EUR 1.6 billion of bonds and loans. Our recent bond issues, whether in euros or sterling, have been very well received. We are also proud of the successful hybrid exchange that we completed last summer, converting old style euro and Singapore dollar hybrids into our new Type A euro hybrid structure. We followed that transaction with a new Type A hybrid in sterling that was used to unwind our joint venture in Poland. Through tender offers and make-whole calls, we repaid a lot of short-term debt, and now our liquidity of EUR 1.5 billion covers all our debt maturities through Q3 of 2027.
This is a pretty conservative way of looking at things, by the way, because we also have substantial secured loan maturities, which are covered in that equation, and we have faced no difficulties rolling over bank loans. In fact, it's quite the opposite. Our banks are actually competing heavily for bank loans. I hear from Markéta nearly every day that the competition is fierce. Our average cost of debt was basically unchanged, which is a nice achievement considering that legacy bank loans from 4-5 years ago, as they were rolled over, were being priced against higher base rates. I expect CPIPG to remain proactive in refinancing upcoming maturities early through tenders and open market repurchases of bonds. Certainly, with how our bonds are trading today, the buybacks look more attractive, and we are glad we issued bonds when we did.
Finally, I'm sure our bond investors want to know about our hybrid, which is callable in August of 2026, and which resets in November 2026. As I mentioned earlier, we're very focused on a bondholder-friendly solution. We're discussing options with our banks. We have a lot of smart banks, and I would just say we are working on it. We care about it, but it's still a bit early. I'd expect that we will keep in touch with you, and you'll hear more from us about this in the coming months ahead. Those are the financing highlights. Now I can turn it over to Michal to spend a minute on disposals. Michal?
Thank you, David. I follow up on page 10. Last year, we saw an improvement in transaction activity with the return of larger deals over EUR 100 million. Local money still continued to drive the market. We saw very good demand from local funds, familiar CTs, and private individuals. We also saw the interest of larger institutional buyers from London and outside of CEE region for the first time in a few years. We completed EUR 1.1 billion of disposals during 2025, which was above our billion target. The largest part of this amount is created by sales in hotel segment of about EUR 270 million and office with about EUR 260 million of divestments. On average, all disposals were completed slightly above their book value. Altogether, we sold more than 80 properties in about 45 transactions over the year.
The more significant deals included sale of a 50% stake in our Bubny land bank in Prague, as well as the sale of Marriott Hotels in Budapest and Vienna. As you can see from the charts on the right-hand side, we sold assets across all the countries in our portfolio and across all the segments. For divestment, we selected those assets which sale should strengthen the profitability of the remaining portfolio in the future. Mostly these are assets which would require substantial CapEx or big relative cost. As we already mentioned, CPIPG is confident that we reach or exceed our initial target of EUR 500 million disposals in 2026. We trust the final result could be between EUR 500 million and EUR 750 million.
So far, we do not see any significant impact in transactions caused by the conflict in the Middle East, but we are closely watching its impact on financial markets and buyers' perception. In terms of the progress so far in 2026, I will ask my colleague, Květa, to comment. Květa?
Yes. Thank you, Michal. First quarter of 2026 saw modest progress on disposals with EUR 72 million in closed or signed transactions. These relate mainly to two land banks in Croatia and Hungary, an office building in the Czech Republic, and small office in Italy. That said, I'm confident that second quarter of 2026 will see higher activity as we are close to signing two large disposals of over EUR 100 million each, and are in the active discussions on several large projects, along with many small other projects. The overall pipeline of potential disposals is large at more than EUR 2 billion, which gives us flexibility to choose the right opportunities and maximize prices. Between Michal and myself, this remains a big focus. Now let me turn the floor back to Pavel. Pavel?
Thank you, Květa. Now I am on page 11. We have covered most of the high level points, so now we can discuss the operations in more detail. Our net business income declined by 7.2% due to disposals, which reduced both rental and hotel income.
While our EBITDA declined by 5.8%, as we reduced our administrative costs by 5%. Cost reduction is still a big focus for 2026. FFO declined mainly due to the decline in rental and net hotel income as a result of our sizable disposals. As I already mentioned, our plan is to support the ICR through asset rotation, investment, and capital structure actions. The plans all have a timeline before they will be visible in the figures, and we believe that our FFO can improve from 2027 onwards. Net profit turned positive and as a result, the equity and EPRA NRV increased for the period. We reduced gross debt by EUR 220 million during 2025, and our net LTV slightly declined. The portion of secured debt relative to the total debt increased by 1% due to bond repayments, while overall secured leverage remains moderate at about 24%.
In total, 52% of our debt is unsecured, and we want to keep a healthy balance between unsecured and secured debt. The asset coverage for unsecured creditors remains high, with unencumbered assets to unsecured debt at 183%. Now, I will turn the floor back to David to discuss more about the real estate portfolio. David?
Thanks again, Pavel. I'm now on page 14, starting with offices. As most of you know, we continue to believe in capital city offices in the CEE region, where limited supply continues to favor existing landlords. Overall office occupancy improved in 2025 as our local teams worked with tenants, got creative, and in some cases, found alternative uses and new tenant categories. Prague, Warsaw, and Vienna have high occupancy levels in the mid-90s. We saw particularly strong performance in Vienna, with occupancy rising from 90% to 94%, and in Warsaw, which reached a new record of 96.5%. On page 15, net rental income in the office segment declined because we sold 16 office properties last year. Like-for-like rental growth was positive, over 2%. On average, our portfolio is under rented, about 10% below achievable market rents, according to outside experts.
On page 16, I will speak about our largest office portfolio in Berlin. While the German economic recovery is slow, we still believe Berlin is the right place to be. Startup funding in Germany increased by over 20% last year, and Berlin remains the number one city for startups in Germany. Still, the market in Berlin remains challenging. Office vacancy rose to 8.1% for the whole market, which is quite a bit higher than 2% or slightly below 2% that we saw pre-COVID. On the other hand, it's still quite low compared to many other major cities. The good news is, our portfolio is going against the market trend. Occupancy in our Berlin portfolio increased by 1.5%, and leasing volume increased by 75% in our portfolio, compared to a drop of 19% in the overall market. I believe a few factors are driving this outperformance.
First, as you can see on page 17, the average rent in our portfolio is EUR 11.64 per sq m, compared to the Berlin average of more than EUR 25 per sq m. Second, our space is flexible considering the type of structures we own, many of which are former factories that were long ago refurbished into offices, but with very flexible floor plans. We are able to subdivide our properties into small units quite easily, such as 1,000 sq m or less, which has been a strong segment of the market for leasing.
Plus, we're looking at alternative uses. For instance, we are right now implementing a commercial living concept with Limehome. We have a Pilates studio, a bouldering gym, and we're discussing other alternative uses such as schools. Finally, we expect to complete two small office developments during 2026 in Berlin, with one already fully leased and another in progress.
The portfolio size is also slightly increased as we completed a small acquisition at the end of 2025. Moving on to Warsaw on page 19. As I mentioned earlier, occupancy in Warsaw increased to 96.5%, well above the market, which is around 88%, reflecting the central locations of our assets, attractive price points, and the outstanding job our local team is doing. Like Berlin, we're seeing similar success in leasing smaller size units, and we're being creative with uses. For instance, turning the employee canteen vacated by Google into a restaurant in Warsaw Financial Center. The portfolio size declined during 2025 as we sold some of our oldest and smallest assets to developers for potential conversion to residential, in line with the market trend of stock being taken out of the market. Moving to page 22, Prague.
Overall market vacancy in Prague, as I mentioned earlier, declined to 5.9%, the lowest level since sort of pre-COVID, with new supply at record lows. Our portfolio has a high occupancy rate of 95%, with only a few minor spaces remaining. I should highlight that despite disposals of two offices in Prague last year, our net rental income increased by 2.4%, driven by higher net service income because of our energy business, which produces and sells green energy directly to our tenants.
This allows us to provide tenants with attractive pricing for energy, as well as fulfilling our environmental commitments. On page 25, Budapest. Our team increased occupancy by 2% as we leased up vacant space and as state tenants who were expected to leave the portfolio stayed in place, with many even extending their leases. As a result, net rental income increased by EUR 5 million to EUR 51 million.
Like Warsaw and Prague, we sold three of our oldest assets to optimize the portfolio. Finally, our recently introduced CPI Club offering with extensive services and ready-to-use flexible office solutions, car sharing, and other benefits. CPI Club has been very well-received by tenants. We have also been able to convert flexible office leases into long-term leases, demonstrating the benefits of our product and service offerings. The last market I will cover is Bucharest on page 27. The Bucharest office market saw no new completions during 2025, which is quite positive for landlords. Our portfolio occupancy is at 90%, which we hope to improve in 2026 as we have several promising leasing discussions going on right now.
Like-for-like rents grew 2.4%, and the weighted average lease term is more than five years, reflecting the long-term leases we signed with hospitals and clinics last year, which by the way, is another example of creative leasing. Absolute net rental income declined partially because we sold one office property in Bucharest last year. Now let's switch gears to retail on page 29. CPIPG is one of the largest retail landlords in Central and Eastern Europe. Retail parks are about half of our retail segment, plus we have regional shopping centers and other small retail formats such as grocery stores. Our retail segment has performed well in recent years, with occupancy now at 98%, which is effectively fully occupied. Absolute rents and like-for-like rents increased despite the disposal of a few non-core retail assets.
On the other hand, we added retail parks in Croatia and Serbia through developments and acquisitions, expanding our existing network in both countries. This network effect is something we really believe in. Our scale and experience makes CPIPG a preferred landlord for retailers. For example, we recently signed a lease with CCC and Action in Croatia, each for multiple locations, while Woolworth entered the market in the Czech Republic and Slovakia across multiple locations in our network. Looking at shopping centers on page 31. Our portfolio is focused on regional shopping centers covering people's daily needs. Most of our shopping centers are located in the Czech Republic, Romania, Poland, and Hungary. Our shopping centers continue to perform very well, with like-for-like tenant sales increasing by 2.6%. The affordability ratio, which is a tenant's cost for rent, services, and marketing divided by sales.
The affordability ratio is 9.5%, which is very healthy and supports rental growth in good times while protecting our tenants when things get tough. I'll quickly discuss residential on page 36. Residential assets are about 7% of our portfolio, with close to 80% located in the Czech Republic. Over the last few years, we've sold German and Austrian residential assets that we originally acquired with the S IMMO portfolio, hence the declining net rental income. We expect to continue to sell assets in non-core locations such as the U.K. On the other hand, we continue to invest in our Czech portfolio, and that's one of the reasons you see like-for-like rental growth of 10.4%. Now, I'll pause for a moment so Mindee can talk about hotels. Mindee?
Thank you, David. Moving on to page 39. CPIPG owns and operates one of the largest platforms of hotels in the CEE region, primarily in congress and convention hotels in capital cities. The sector has recovered well since COVID, with operational performance continuing to improve. Growth in visitors to Central and Eastern Europe continues to outpace the broader European average, which is also encouraging more investment activity. On page 40, you can see some of our hotel brands and a summary of the portfolio. Some of our hotels are owned and operated by CPIPG, and some are owned and operated through our joint venture with Best Hotel Properties. In general, we feel CPIPG has a big advantage as an owner/operator in our region, and we have been strategically disposing of hotels where we are not the manager, such as the Vienna Marriott Hotel and the Budapest Marriott Hotel.
In contrast, we opened two Mamaison hotels in Budapest last year, which have been very successful, and recently opened a Clarion Congress Hotel in Brno. On page 41, net hotel income of our portfolio declined to EUR 43 million, which is due to the loss of income from disposals, particularly the resorts in Croatia and the two Marriotts I already mentioned. Still, the portfolio continues to perform well. Occupancy grew year-on-year by 2 percentage points, and while the full year occupancy is still shy of the 2019 level, we saw that occupancy in the fourth quarter of 2025 actually surpassed that of 2019. Average daily rates, or ADR, also grew year-on-year, resulting in a RevPAR growth of 7%.
This was largely driven by a strong recovery in corporate demand. We are also pleasantly surprised with the performance of our new hotel openings, delivering better than expected results despite being in a ramp-up phase. Gross operating profit margins remain stable, averaging at about 35%, showcasing our advantage as owner-operator to maintain profitability. I will introduce the complementary asset segment on page 42 by mentioning that land has always been part of our group's DNA. We have a long history of buying land cheaply, holding it, and selling it over time. Last year, we sold 50% of our Bubny land plot in Prague after nearly two decades, crystallizing the valuation gain. In total, since 2022, we have sold more than EUR 400 million of land bank in Romania, Germany, and the Czech Republic, and you will continue to see land sales in 2026.
We have also been selectively undertaking developmental projects utilizing our land banks, and these are for development either to sell or to hold. Now, let me turn the floor back over to David to discuss some more specifics on our projects and recent investments in this segment.
Thank you, Mindee. I'm now on page 43. In the coming years, I believe you will hear a lot more from us about residential development. We intend to gradually develop our land bank into residential, both in the Czech Republic and Italy, that can be sold for very nice profits. The returns are well into the double digits. For instance, in the Czech Republic, we're talking about profits of 30%-40%. In Prague, we still have several projects ongoing. As most of you know, demand for modern residential assets in Prague is huge. It may sound old-fashioned to some of you, but the Czech mentality is still very focused around owning bricks. Recent surveys have demonstrated that Czech people trust investments in real estate above all other asset classes. Still, we are not a speculator.
All of our residential projects have a high level of pre-sales before we begin any construction. In fact, our projects in the Czech Republic are about 70% pre-sold. These units will be mostly completed in 2027 and are expected to generate sales proceeds of more than $350 million. We plan to continue gradually selling our residential assets in the U.K. and are also very focused on completing and selling our residential developments in Dubai. Between these two segments, the sales could be more than $600 million over the next few years. Speaking about Dubai for a moment, considering the conflict in the Middle East, we get a lot of questions about what we're seeing on the ground.
We invested in Dubai because we believe the emirate has emerged as one of the world's important global hubs for business and tourism, and so far, we have seen no evidence that this will change long term. Full-time residents of Dubai are staying, and frankly, the UAE government has done a wonderful job protecting people and communicating throughout the conflict. Real estate transactions continue to happen. We speak to the brokers, banks, and valuers regularly, and for now, it's simply too soon to tell how the region will be affected. Of course, it's all about the duration of the conflict. The one thing we can say is there are no panic sellers, and CPIPG, we continue to believe in Dubai. At the moment, we have 19 properties, 15 of which are still under construction. Four are finished, of which one is rented at a very nice yield.
Our plan is to continue focusing on sales, but I will admit it's likely to be slow until after the summer. As we've mentioned, we also developed a hold, such as extending our network of retail parks in Croatia and Serbia. These developments have brought us a yield on cost of around 7%-8%. We've developed hotels, we mentioned Budapest several times, and some small offices in Berlin. In total, our developments to hold should bring EUR 35 million of rental income over time. I'll speak briefly about land bank on page 44. Here, you see the photo of our Prague Bubny site once again. We already mentioned the sale of 50% last year. At the moment, we're still waiting for the master plan to be approved by the City of Prague.
In our view, the joint venture that we signed was necessary because the scale of the development, once the master plan is approved, is going to be huge, far larger than what we typically take on as a group. Finally, spending a moment on Italy on page 45. We see Rome as a new frontier, a long-term investment that can generate excellent returns. Over the past five years, CPIPG has acquired land plot around Rome, mostly in the south of Rome, but also in the north, located inside the Autostrada A90 ring road or just outside the ring road with excellent transport links. Residential supply is heavily constrained in Rome, with extensive heritage protections in the city center and a very tough permitting process. Rome's population is growing, particularly among 20- to 34-year-olds, and the housing stock is just old, mostly 1970s vintage, energy inefficient, with poor layouts.
Existing housing stock in Rome is generally valued at around EUR 3,000-EUR 3,500 per sq m, which is really about half of what you see in Milan or even in Prague. Overall, we see Italy as a long-term development opportunity, that will be realized or sold gradually over the next decade or so. Now, let me turn the floor over to Moritz to discuss capital structure and ratings. Moritz?
Thank you, David. I'm now on page 52. Just to quickly reiterate a few points. We have a total liquidity of EUR 1.5 billion, which cover all debt maturities until Q3 2027. We don't have any major near-term bond maturities. The only maturity are legacy S IMMO bond for EUR 150 million due in May this year, and a small short term of EUR 36 million, which comes due later this month. Bond maturities in 2027 are mainly related to the remaining stub of our April 2027 bond, with EUR 132 million, and the CPI Europe October 2027 bond for EUR 74 million. Whenever possible, we have repaid our bonds early, sometimes with cash and sometimes with new bond issues when the pricing is attractive. In general, we're looking at everything in the context of the ICR and leverage.
As most of you know, the ICR is the one metric that require more work, and we know our rating agencies are watching closely. Moody's reviewed our rating last December to resolve the negative outlook that was outstanding since July 2024. Ultimately, Moody's decided to downgrade us because it will take us time to improve the ICR beyond their typical outlook period of 12-18 months. We really see the sale of residential developments or development assets for sale in 2027 as critical to achieve a better ICR. A positive outcome from the Moody's downgrade was that the report highlighted that our business profile, operating performance, and liquidity warrants a higher rating, and that we're progressing on deleveraging. For S&P, we basically accept pretty much the similar discussion and over the near term.
Their negative outlook has been outstanding since May 2024, so I think a review in the very near term is likely. Finally, let me touch on the group structure on page 57. Over the last few years, we have made a lot of progress with the combination of our asset management teams and the squeeze out and delisting of S IMMO. During 2025, we unwound our joint venture with Sona, as David mentioned, and the small joint venture in Berlin. This year, we announced a voluntary offer for the remaining shares of Next RE in Italy, with Next RE being a small listed company, and the listing offer is expected to cost us between $13 million and $14 million, but it would basically help us a lot to reduce costs, complications, and the cost of maintaining a listed company in Italy.
Finally, we're continuing to analyze our options on how to further integrate CPI Europe and plan to make further progress during 2026. Personally, I believe reducing complexity is one of the most important things we can do. Finally, Petra, do you want to speak in a few minutes on ESG before we get to the Q&A?
Thank you, Moritz. This is Petra Hajná. I am the Group Sustainability Officer, and I would like to walk you through the ESG section beginning on page 65. CPIPG strives to improve our ESG reporting each year. 2025 was the second year of reporting in accordance with the Corporate Sustainability Reporting Directive and the European Sustainability Reporting Standards. Our sustainability statement, including EU taxonomy, was subject to limited assurance by our auditor, EY. Additionally, the environmental part of the report was verified by CI2, a regional partner for CDP reporting as compliant with ISO and GHG Protocol, and was awarded the CI2 Conformity Certificate. Another important achievement was the CDP climate change score of A-, which reflects our strong governance, transparency, and the implementation of best practices in climate management. Touching briefly on governance, page 66.
Just to remind you that we have seven members of our board of directors, of which four are independent. We face regular examination from many third parties, and our Group Compliance Officer, Lucie Salzmanová, is continuously enhancing our compliance training and systems using policies that are regularly reviewed and updated. Moving on to page 83, this is the big picture of our ESG strategy. CPIPG is focused on 15 clearly defined goals, six environmental, five social, and four governance goals. The environmental pillar focuses primarily on reducing greenhouse gas emission intensity, improving energy efficiency, increasing the share of certified buildings and waste recovery, while the social pillar targets green leases, employee training and satisfaction surveys, and gender diversity in senior management. The governance pillar is anchored in a group-wide code of conduct for suppliers and mandatory annual employee training on code of conduct and associated policies.
In a nutshell, all ESG targets were met in 2025. Let's now take a closer look at the individual ESG section. Starting with the environmental part on page 95. The group adopted more stringent environmental targets, which were validated by the Science Based Targets initiative in 2025. The targets are now aligned with the 1.5-degree scenario for Scope 1 and 2, and well below 2-degree scenario for Scope 3 emissions. All of our climate targets were significantly outperformed in 2025, mainly due to the transition to renewable electricity, operational efficiency measures and tenant engagement. The share of green certified buildings continued to grow in 2025, 50.3% of the portfolio by property value and 42.1% by GLA were certified, a year-on-year increase in both metrics. The vast majority of certified assets achieved BREEAM Very Good or higher, or LEED Gold or higher.
Green lease agreements remain a key engagement tool with our tenants. By the end of 2025, green leases covered 22% of total leased GLA, and the group continued to offer green leases for all new commercial leases and renewals. Finally, just a brief word on social aspects on page 107. As of the end of 2025, the group employed 2,138 employees with a distribution of 46% male and 54% female. Employees in the top management represented 2.1% of the total workforce, with women holding 40% of all top management positions. This figure exceeds the goal of filling at least 33% of senior management positions with women. Looking around the room today, we have exactly 40% of women in the room, so I would say we are on the right track. I could go on for longer, but I believe this covers the important points. David, please over to you.
Thank you.
Thank you, Petra. Okay, let's start getting to the Q&A. We are working through just compiling these, so just maybe give us a second. Moritz, do you want to start with the first one?
Yeah, sure. Could you please provide an update on the Berlin office portfolio? Specifically, it seems that there is some pressure on occupancy at Kreuzberg. Is this the case? Was there any improvement in rental rates in Kreuzberg? Can you provide an update on negotiations on Technische Universität Berlin lease? I will try to answer that directly. If you look at our three clusters in the Berlin portfolio, we've got what we call Westend, which is in the middle and central, and the eco parts, which are a bit outside, and then Kreuzberg. Kreuzberg is really, I would say, the most challenging cluster within the portfolio, simply because it was very well suited to the IT and creative industry, and you just see less leasing activity than before COVID. This is still the cluster where we need to do some work.
We're looking at alternative leasing strategies, so we're with the commercial living provider, and in discussions to add another one after the first one we implemented. We're also discussing with schools and other potential tenants. We're actively working on it, but it is still the most challenging cluster. Regarding Technische Universität Berlin, I haven't got the latest update about it, but I think we're still in negotiation and the lease was still running for some time. For people who aren't aware of it, Technische Universität Berlin is a long-term tenant with a very low historic lease. There will be soon a rent reversion or rent revision or lease negotiation coming up, and so there's a high potential to increase the rent, but it's still ongoing.
I would also expect, I need to check with the team, but keep in mind that in September, there are the local elections in Berlin. A new Senate. I don't expect any decision before new state government is elected, since ultimately they approve the budget for the university.
Okay.
The next question. Okay. Those are several questions. By when does management expect to get the short-term rating stable from current S&P negative outlook and improve the ICR given the tight headroom left under this maintenance covenant? Do we see this metric go below 2x levels in the first half of this year since the operational improvements are expected later this year? Also, what are your views on the office and residential real estate markets across CEE, especially in Czech, Germany and Poland? Do we see the occupancy rates further improving in this region? Also, please provide some color on the rental upside in Berlin.
I can start with this. I'll start with the second part of the question first. I think we've kind of now I think the question was populated in the webcast early on, so hopefully you feel like we have covered the office markets across CEE quite well. Do we see the potential for occupancy rates to increase further? Yes, I'd say across CEE, but you can already see we're at a very high level. As a landlord that has a lot of properties, and multi-tenanted buildings, actually, we like to keep some vacant space because it allows for flexibility in meeting tenant needs. I'd say we're in a pretty good position now across CEE. The one CEE market where we are hoping for some improvement this year is Bucharest, where as I mentioned, the occupancy is around 90%, and I do think there's potential you can see it increase.
We're not particularly concerned at all about supply factors, and it seems like the office demand is pretty strong. Berlin we've covered. Moritz mentioned it in the last question. Again, I think, we've always believed that our office portfolio in Berlin would respond differently than other office portfolios in more challenging economic environments because of the price point, which is still about half of the Berlin average, and also because of the flexibility of the space that we have. In general, I think we feel there's still a good potential for improvement in Berlin. There is also the possibility that you will see quarter-to-quarter fluctuations in Berlin as well. Residential markets we've talked about. Again, I think the residential market in the Czech Republic remains extremely strong. We also see a lot of opportunity in Rome, as I described. We still see lots of good potential.
When it comes to the ratings and sort of how we see the outlook stabilizing, the reality is that S&P has had us on negative outlook for a long time. We are in close discussion with them around the ratings, and we'll have to see what the outcome is. At the end of the day, our goal is to achieve stable and to go forward from there. You mentioned in your question, the tight headroom left under maintenance covenants. I'm not sure we see it exactly the same way. In fact, we think we still have quite a bit of covenant headroom. Do you want to maybe give some of the figures in the calculation, Moritz?
Yeah. We still have right EBITDA, so the covenant headroom is basically still 17%, and this would translate basically EBITDA would need to decline with more than EUR 100 million. I think we don't see that at the moment. We're pretty, as David elaborated earlier, as soon as we complete the development, we think there will be a lot of debt reduction, which should help the ratio.
We understand that our bondholders have been kind of bearing with us for a long time now as the capital structure transitions and we are still in that process. We are really strong believers that the game-changing year is going to be 2027. That's when a lot of these residential developments are finished. That's when we'll be selling them. They don't generate income. That combined with the activities that we're going to take this year around sales, around corporate simplification, and other things that we can do, we really see a good potential for an upswing, in our ratios really from 2027 onwards. I still see 2026 very much as a year in transition. Can we move on to the next question?
Yes. The next question. Are you planning for higher rates as a result of the conflict in the Middle East? Any options to mitigate?
Well, frankly, the best option to mitigate is to have done bond deals when we did. For the moment, we feel really, really comfortable about where we are. Some of the good pieces of information are we don't really have very much floating rate debt at all. If you start to see short-term rates increase, that's really not going to have a significant impact on us. The vast majority of our debt is fixed. We also don't have significant bond maturities in the coming years because we issued when we did. I think the risk, of course, is that, as higher rates, either whether it's base rates or longer-term rates, as we roll over the bank financing, that will translate into the ICR. Luckily, we have really done an excellent job of working on the margins on the bank financing.
It's definitely not a one for one increase because we've seen the margins come in as well, even though the base rates are slightly higher. The last thing I'd say is, the market seems to have gotten super excited about the idea of the ECB raising rates, but this is a supply driven issue, not a demand driven issue that you're seeing in the Middle East. I do wonder myself how much central banks raising rates is really gonna have any impact on the situation at all. I think some of the shifts in thinking might be more towards more economic weakness and the like. I'm not sure that the market is right on the path of rates, but I would say as a group, we are very well prepared. We have fixed rate debt, and we're ready for it.
The next question. Could you provide an update on the Globalworth structure? Could there be an unwind of the structure? Is there any discussion with Aroundtown to change the structure? What are the options in this regard?
I'd say there's no meaningful updates to share. What I can say is, we are really happy with how the Globalworth team is running the portfolio. It's very stable. They've managed their liquidity well. They've managed their ratings well. I'd say there's no pressure on us to do anything with Globalworth. It can simply continue running, as it is, and we think they're doing a good job. Now, we've told many of you over a long period of time that this kind of three-way marriage between us and Aroundtown and Brookfield is something that we would eventually want to resolve. We're studying ways to do that, but there's really no immediate pressure and no resolution on it yet. Again, we think the management team is doing a good job.
Okay. Next question. Can you explain why despite this EUR 1.1 billion disposal, cash flow from investing was negative? This is even before factoring the $333 million outflow in cash flow from financing for acquisitions of non-controlling interest, which I assume is the Sona payment and the Q1 2026 buyback outflow. How do you see your cash flow developing in full year 2026? What do you expect net disposals cash inflows to be from EUR 500 million-EUR 750 million disposal size? I may start. The cash flow includes the net disposal proceeds. Some of the bank debt was transferred to the buyer, and so you don't see the full amount. Then the net proceeds, you have the buyback of the $333 million is the unwind of the Sona JV, which was basically financed with the sterling hybrid we issued in October last year.
I think going forward, 2026, you will still see that we spent on development, cash, and investments, where we expected proceeds to be collected in 2027 and 2028, mostly.
Do you want to add anything, Pavel?
Maybe. I just don't want to repeat Moritz, but what I wanted to say is that EUR 1.1 billion of disposals, it doesn't mean unfortunately EUR 1.1 billion of net proceeds yet because in almost all transactions you have some kind of deductions like DPL, working capital adjustment, et cetera. Plus, there were a couple of transactions where we have a deferred payment, meaning that you can't see the net proceeds in our 2025 cash flow. I can say that money is already with us. It came in Q1 this year, so it has also impact on our cash flow. Maybe our expectations, I think that given our plan to dispose primarily non-yielding or low-yielding assets, and of course, non-yielding assets, they are mainly unencumbered. I'm hoping that net proceeds from our 2026 disposals will be rather closer to the carrying amount of those assets we dispose.
Thank you, Pavel. The next question, have you had any discussions with rating agencies, specifically S&P? Do you think you can maintain the BB+ rating with S&P? I think we covered it. I quickly just recap. I think S&P will review our rating given how long the outlook is outstanding and that we just published the latest set of figures. I think it's similar to Moody's, like a 50/50 chance. What is their take and what is their outlook horizon, and how do they see the ICR evolving? Is it the key metrics, as we progress on other initiatives as mentioned earlier or not? It's really hard to tell. Yeah. The next question, what development costs remain for the expected EUR 900 million development sales proceeds by 2028? Will you hold the Dubai assets post-completion or look to sell despite the currently depressed prices?
I'll take this one. When you reference the EUR 900 million of sales proceeds between the residential assets in Prague primarily and Dubai. Of that EUR 900 million, it's less than a 1/3 that we still need to spend in terms of completion. It's worth pointing out, and that's, I'd say, roughly split between Prague and Dubai. I think it's important for you to know that in Prague, the developments are really financed by banks. In Dubai, we're still in discussion with the bank around financing some of the remaining construction payments. That's kind of the story there. The base case scenario for Dubai is that we will dispose the assets once they're completed. Obviously, we're watching the market now and we're waiting to see what happens.
I would say that a great example of leasing is the fact that we leased one of our apartments in Dubai at about a 6.5% yield. We are open to renting the properties and leasing them if necessary and if that's better than sales or tides us over for a period. As I said earlier, I think it's still too early to have a view on how things are going to play out in Dubai. If the conflict comes to a reasonable end soon, then hopefully things will be a bit more back to normal in the fall.
The next question I guess is also for you, David. What options do you have for the 2026 callable hybrid?
I think most of you know the playbook really well of what we can do around the hybrid. If you had asked me in January or February before this recent market sell-off, I would have told you we would love to call them and issue a new one, do it nice and clean, call them simply, issue a new bond, have a fantastic, well-placed new issue. I think considering how things are trading now, clearly we're looking more back in the camp of doing some kind of exchange offer. I think most of you will remember the exchange offer from last summer, where we really tried to offer bondholders a package that was attractive, and which I think reflected our sort of feeling around the importance of the hybrid market to us and our desire to maintain a really good relationship with our hybrid investors.
Again, as I mentioned in my little talk earlier, the banks have been showing us ideas. We have lots of smart banks. We're just simply evaluating the options. What I would say is we are still highly motivated, A, to do the right thing, and B, to continue replacing our hybrids with the new style hybrids, so that we have consistency, we don't have two classes of hybrids, and because it does give us some equity credit at Moody's.
Thank you, David. The next question: how do you balance your development appetite with your deleveraging effort?
Well, at the end of the day, how do we balance deleveraging and development? I think the issue that we have found is that over the last couple of years, if you look at 2022 to 2024, we were making sales of assets almost as a replacement for liquidity to some extent. We had a big bridge financing outstanding. The bond markets were closed for a couple of years. Those sales, even though frankly, the sales that we made were things that we always intended to sell when we bought IMMOFINANZ and S IMMO. Even so, those disposals had a negative effect on our rental income, and I think we have found it's very difficult to budge the ICR when you're selling income-generating assets. Part of the idea of this kind of gradual shift to development is that we can generate returns that are well into the double digits.
I would just say when it comes to development, I think what you'll see is that we're taking it slow. When you talk about the balance, we're still very much focused on reducing leverage. When it comes to development, we're going to take it slow. We're very focused on for things that are development for sale, like residential, having a high degree of presales. I'd say conservatively, slowly, but we think it's really from just a pure math perspective, it's really necessary for us to do both things at the same time. We need to sell low-yielding and non-yielding assets. Those are great for repaying debt, and we need to try and generate a bit more returns through some of our investments. We think attacking the ICR from both of those perspectives will eventually get us to the right place.
Thank you, David. The next question: what is the current book value of the development properties in Dubai? Are there any other assets in the UAE? If yes, what is the total value? Is there any local construction financing against any of these properties?
The book value of our properties in Dubai at the end of the year was about EUR 330 million. It was basically more or less unchanged year-over-year. That's 2% of our property portfolio, by the way. It's a fairly small segment. We have 19 assets, of which four are completed. The rest are under construction. We don't have any other assets in Dubai, and frankly, at this moment, no plans to do anything else in Dubai. We're very much focused on completing these properties and selling them. We have been in discussions for some time now with a local bank about financing some of the remaining construction payments. That's something that continues to be discussed, and that I'm hopeful about. That's more or less the story.
The next question. Hi, thank you for the presentation. Can you spare a few words on development of valuation yields? What happened in 2025 and what do you expect in 2026, 2027? Also in connection with change of interest rates. Should I start?
Yeah. Go ahead.
Basically, you will find more towards the end in the financial statements of our management report. You'll find a sensitivity analysis for the different business segments as yields are changing. I would just note it's very hypothetical, right. Ultimately, the independent appraisers, they take their view and they not only look at the yield, they look a bit more dynamically at how it's moving. Not every interest rate movement is one-to-one reflected in the valuation. There are also several methodologies other than the DCF. Use comparable transactions, or income capitalization. Valuers ultimately decide on those. You'll find the details in the management report. The next question: how much like-for-like rental income do you expect in 2026? How much rental income do you expect in 2026 from development carried out in the prior years?
Pavel, do you want to take it?
Sure. I will take it. We expect our like for like for upcoming year, actually for this year in the low single digits, which is typical inflation. We are expecting some positive rent revision. I would say between 2%-3%, similar what we reported for 2025. Of course, we are expecting positive contribution or positive development coming from our completed development projects, mainly in Croatia and Serbia. Plus of course, we also expect additional contribution from recently completed development projects in Berlin in our GSG portfolio.
Okay. Thank you, Pavel. I think with that, we don't have any more questions.
With that, if there's no more questions, I would just thank all of you for joining the call. I know the last couple of weeks have been rough for our bondholders. Please rest assured we are watching the prices of our bonds every single day, and we are much happier when the prices are going up than when they are going down. We certainly intend to take actions that are supportive for our credit over the course of this year. Hopefully you understand that we continue to see our metrics in transition. We're taking some good steps. We have, I think some very good prospects and a very good performing real estate portfolio. Really, again, thank you very much for all the support, and you all know how to find us if you want to ask more questions.
Thank you very much, and have a great rest of your day.