At this time, it's my pleasure to hand over to Martin Thiel, CFO and Co-CEO. Please go ahead, sir.
Yeah, many thanks and good morning all. Many thanks for diving in into our conference call for the Q1 2024 results. As always, I will try to give you a brief overview about our results and latest developments, and after that we, of course, have a lot of time for, for Q&A. So let's start on page number four, which is, a summary slide, so where we want to show you the highlights, the, from our point of view, most important developments in the first quarter. Firstly, FFO1 increased year-on-year by 5%, so we came out at an FFO1 of EUR 44.6 million in comparison to the previous year that's around EUR 2 million more, so a 5% increase year-on-year. We think a good development that we can grow our rental results even in this quite elevated interest rate environment.
German portfolio showed quite solid performance, like-for-like rental growth, including the impact from vacancy changes was 2.4%, so a little bit more than in full year 2023. Vacancy rate slightly up by 20 basis points, but we notice now for many years that the first quarter, in terms of vacancy reduction, is always a little bit weaker, so 20 basis points up. But if you compare that with one year ago, so March 2023, where vacancy rate was 4.7%, you clearly see the positive trend. Looking into Poland, quite strong sales results in Poland, so we handed over more than 800 units in the first quarter of 2024. And also on the sales side, the quarter was quite strong. So in terms of units, it was a little bit less than in the previous quarter. So we sold 636 units.
For example, in the previous quarter, it was 709 units, and in the quarter one year ago, 972. But as prices have increased in Poland very strongly, so we see currently a year-on-year increase of around 20% to sales volume. So the cumulative sales prices were at EUR 118 million, so more than in the previous quarter and even more than in the first quarter one year ago due to this strong increase in sales prices. Rental business in Poland was also very strong, like-for-like rental growth is still above 10%, 10.1% exactly. If you look at the vacancy rate of the portfolio, the rental portfolio in Poland, which now comprises 2,600 units, it was at 9.8% compared to 7.2% at year-end 2023. But don't be confused about this increase in vacancy rate.
This was purely driven by new apartments that came into operations as well at the end of 2023, and additionally in the first quarter of 2024. So looking at apartments that are in operation for a longer time, so at least more than one year, the vacancy rate is 2.6%. So just a temporary impact from new apartments coming into operation. Looking at disposals in Germany, we had basically after the balance sheet date quite strong disposals, at least in our sizes. So we sold from January to May 2024, 780 apartments in Germany. The total sales prices are above EUR 67 million, and we expect net cash proceeds, so after repayment of respective bank loans of nearly EUR 16 million, the average gross yield of the units that we sold was 5.3%.
You should expect a closing of these disposals mostly at the end of the second quarter this year, perhaps a little part at the first at the third quarter 2024. The LTV was reduced in the first quarter by 140 basis points. We are now almost at our LTV target. A quite strong reduction from 47% at year-end 2023 now to 45.6%. This was purely driven by the high cash generation that we had, especially in the Polish sales business. Any impact from disposals will come after the balance sheet date. Therefore, it was, from our point of view, a very successful quarter in terms of deleveraging. If you look at the cash metrics, which have been always quite strong in our company, they improved further.
So net debt to EBITDA is now at around 8.7x, and the ICR is still at 6.7x. So that's quite a good value if you compare that within the sector. On page five, you'll find further highlights on the German business. I don't want to get that much into details. Just a quick note on page six, where you'll find more KPIs on the Polish portfolio. We have changed our presentation a little bit and have here a more clear separation into the rental business and the sales business. And we also included additional figures regarding the sales business. So we are disclosing, you see this on the bottom right, for the first time an NTA for the sales business, also net debt for the sales business.
And if you look in the appendix on pages 22 and 32, you find also some additional information on the sales business, which is perhaps helpful in understanding this business. So for example, in the appendix, we show also historical sales results, EBITDA. Perhaps this is something which is helpful for you in, yeah, in understanding the business and its perhaps future development a little bit more. Let's go to page number eight, where we show the development of the EBITDA, FFO, and AFFO. Also the EBITDA development was quite positive. So an increase quarter-on-quarter, if you compare that with the fourth quarter 2023 by EUR 7 million. The fourth quarter of 2023 was, when it comes to the German business, a little bit weaker as we had some higher maintenance and also some receivable write-offs. The Polish rental business is contributing quite stable.
EBITDA already at EUR 3.2 million in this quarter, and you should expect increasing EBITDA contribution from the Polish rental business in the following quarters. As this business is growing, I will come back to that in a second. Quarter on quarter, FFO I increased by EUR 5.5 million. So this is clearly an outcome of the good EBITDA development. We had even a little bit better financial cash results, which seems to be surprising. But please remember that last year we still had at least a part of the bridge loan from the ROBYG acquisition on the balance sheet. So therefore, we are now benefiting from a little bit lower financial costs than in the previous year. Let's come to page number 10, and I was already referring a little bit to financing costs.
If you look at the average cost of debt that we have, which is also shown on the slide, it is still at 2.2%. If you compare that with the average cost of debt end of last quarter, it's the same number. If you compare that with the average cost of debt one year ago, it's nearly the same number. So I think at that time it was around 2.1%. So that means in this interest rate environment, we're able, let's say, at least to limit the increase in average financing cost. And if you look at maturing debt, you see this on bottom left of the page. The average coupons of the financial debt that is maturing in the course of 2024 stands at 2.97%. Average cost of debt of financial debt that is maturing next year stands at 2.8%.
Looking at current financing conditions, for example, for new mortgage-secured bank loans in Germany, it's around 4%. For a Polish mortgage-secured debt, it's perhaps more around 5%. So that means, yes, we will see an increase in our average cost of debt, but not materially. So we're really able, yeah, to keep this in balance. As I said here, LTV has been reduced quite strongly. Financial ratios like ICR and net debt to EBITDA are in strong shape. And we are very happy that this was also seen by S&P. Perhaps you have noticed that S&P confirmed some weeks ago the triple B minus investment grade rating and changed the outlook from formerly negative now to stable.
And we can also tell you that we are in discussions with our second rating agency, with Moody's, where we are still non-investment grade rating at Ba1, and stable outlook. So I mean, extremely difficult to predict any outcome here, but we are rather confident that we are also on a good way. Looking at LTV development going forward, of course, important will be any further valuation declines in the coming quarter. We have not yet received any results from the half-year valuation, which is understandable because we are still in May. But we think, and that's unchanged compared to what we said with the full year figures, that the vast majority of any portfolio devaluations should be behind us.
So we have already devalued our German portfolio by around 16%, perhaps some more percentage points in a low single-digit number, but we'll follow in the course of 2024. We can't give you an exact guidance. Is this more in the first half, or is anything additional to come in the second half? But that we perhaps still are within the total 20% as a rough ballpark number, total devaluation, that seems for us very clear. We see this on the transaction market. When we compare current valuation levels to our sales prices, we see this also by simply looking into our current portfolio metrics. The portfolio in Germany already stands at a gross yield of 6.3% and a value per square meter of only EUR 1,060.
So therefore, we are quite confident that we will not have any major negative impact from further devaluations from the German portfolio. And when it comes to the Polish portfolio, which is, of course, smaller, but here we have the opposite. So here we should expect a clear positive trend when it comes to valuations in the next quarters. Yeah, page 12 and page 13 shows the development in operational terms of the German portfolio. I already mentioned that we are in a total like-for-like rental growth of 2.4%, slightly above what we have achieved last year. And page 13 shows the vacancy development. You see, when you look at the first quarter 2024 and compare that with the first quarter of 2023 or 2022, always a small increase of 20 basis points.
So we expect a similar development like in the previous years, slight increase in the first quarter, perhaps stable towards the second quarter. And then in the third and fourth quarter, we should see a development that clearly is a vacancy reduction for the full year. Looking a little bit more into Poland, I'm now on page 15 of the presentation. We again saw quite strong like-for-like rental growth year-on-year of more than 10%. We expected in the course of 2024, rents will stabilize a little bit more, which is perhaps understandable after the very strong increase that we had in the last two years. So if you remember, we saw in the market and also in our portfolio 20% like-for-like rental growth in 2022, around 10% in 2023. So rents were up by almost 30%.
So therefore, we would be not surprised if the like-for-like rental growth is coming down in the course of 2024, that rents are stabilizing on a very high level. But looking forward, we are still very much convinced that we continuously will see a good and sustainable like-for-like rental growth in the Polish portfolio. Perhaps on a more, how should I say, sustainable number, so something around 4%, 5% like-for-like rental growth as we have seen before the war in Ukraine started, before inflation picked up, that should be a very natural number for us. I already mentioned, don't be confused about the higher vacancy rate now of 9.8%. This is due to new apartments that came into operations in Łódź. The vacancy rate for units in operations for more than one year is already down at 2.6% as of March 2024.
Page number 16 shows the development of the Polish build-to-hold portfolios, the rent portfolio. The message we want to send out here is clearly that we are investing again. We know that for quite a while or for nearly one and a half years, we stopped investments in new construction stages as refinancing was the first priority. This is now done. So we are constructing again. There are 1,200 units under construction currently and further 900 units in preparation. In preparation means that construction is going to start very shortly. The midterm target is unchanged. We want to get to 10,000 residential units by year-end 2028, which will be then at the latest then a quite meaningful portfolio for us. On page number 17 and page number 18, you see overviews about our sales results and the revenue recognition in Poland.
I already mentioned that prices were up quite strongly, 20% year-on-year that we had in terms of the total sales volume, a very successful quarter with EUR 118 million. And just to give you an impression about the strong cash inflow of the Polish sales business, the net financial debt in our Polish sales business is currently even negative. So we have currently more cash in the balance sheet than debt. This is simply a result of the strong inflow from customer prepayments, from sales results that we had in the past quarter, as this business is running very well. And finally, on page 20, some words about the guidance for financial year 2024. First of all, all the guidances are confirmed and unchanged.
If you look at the run rate for FFO I, we are even, if you simply multiply that by four, slightly above the guidance. So that looks very much achievable. Of course, interesting is the dividend. We simply ask you here for some more patience. So we will look at that clearly in the course of the next quarters, and we will come back to you at the latest with the Q3 results when we publish the new guidance for 2025. This will be, as always, in November of this year. Clearly, we see here market conditions improving. So we see, I think that's fair to say, some more interest on the transaction market. We also see still good financing conditions with our banks, perhaps slightly improving financing condition on the unsecured side. So this all looks good.
But I mean, we have achieved now a lot in terms of deleveraging. We have really delivered our company toward LTV very close to the LTV target. So therefore, we think it's worth waiting a little bit with this decision, a little bit more. But we will clearly come back to that not too late. That's it from my side as an overview of the first quarter 2024. Again, we think quite successful in terms of operational development with growing results in rental and in the sales business, and also successful in terms of deleveraging as we are now with our LTV very close to the LTV target. And as a third perhaps key message, we're starting to invest and to grow the rental portfolio important again, which would be, when looking to the future, very important for future results. So many thanks so far.
And we are, of course, very happy to take your questions.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and one at this time. Our first question comes from the line of John Vuong at Van Lanschot Kempen. Please go ahead.
Hi. Good morning, Martin. Thanks for taking my questions. If I remember correctly, last quarter you said you aimed for EUR 100 million of sales in Germany or net proceeds, if you will. You're already now over half.
Is this EUR 100 million still the right target, or is it a bit on the conservative side?
Yeah. Good morning, John. You're right. As a kind of internal target, we have the EUR 100 million net cash proceeds. And just to remind you what was the reason for that, if we assume a further devaluation of around 4%, something like that in the course of 2024, to get to a total devaluation of 20% with the help of the dividend suspension and the help of this EUR 100 million net cash proceeds, we would be exactly at our LTV target of 45%. If we achieve a little bit more, yeah, of course, we would take it. Looking into the sales results until May with EUR 60 million, it's right. It looks as if this EUR 100 million is at least achievable.
So perhaps we, we're able to sell even a little bit more.
Okay. That's clear. Now maybe moving on to the Polish sales business. The units sold has slowed down compared to Q4 as well as Q1 last year. But from my understanding, the sales guidance hasn't changed. That still remains at least 3,000 units. Could you highlight what the drivers were for this weaker Q1 and what gives you comfort that this guidance is still attainable?
Yeah. Well, first of all, talking about that, perhaps it's better to give a sales guidance in terms of sales volume than in purely units number. But we're still confident that we achieved the given guidance. And why do I say this? I mean, we are clearly now optimizing prices. And by the way, not only us, also other developers are doing this. And so we are increasing prices.
As I said, we increased prices, and this is true for the whole market, by 20%. So selling a little bit lower number of units is perhaps the right strategy when you get then higher prices and, maximize your sales volumes or the cumulative sales prices. At the moment, and in Poland, the challenge in the sales market is not the demand side. This is very strong. The challenge is for us and other developers to get enough product to the market, to get the building permissions in time, to get the zoning in time. I mean, Poland, in this regard, is clearly much better than Germany, but also, you know, how should I say it, a little bit more bureaucratic than perhaps one or two years back. That's simply the background. Yeah. We are maximizing prices.
So don't put perhaps too much into the slightly reduced number of sales. The sales volume is perhaps the more important figure.
All right. So to understand correctly, essentially, the units are going to be a bit lower for the rest of the year, but because of higher sales price, the turnover is going to be higher compared to last year?
Yeah. I first of all, again, we're not changing our sales guidance. So the 3,000 units, so it should still be a good estimate. What is then perhaps better than some months back when we published the guidance is the development of the sales prices. So, when we assumed sales prices for 2024 in 2023, we were not expecting that demand is that strong. So we are positively surprised that this increase in sales prices continues.
As you know, an apartment that we sell today, so in 2024, and when then the construction for this project starts, will be the sales revenue then 18 months later. So what we sell today basically feeds the P&L results 18 months later. But of course, the cash is already there. And this is also the reason why we have this strong liquidity position in our sales business in Poland.
Okay. That's very clear. Thank you. That's it from my side.
Our next question comes from the line of Marios Pastou with Bernstein. Please go ahead.
Hi. Good morning. Thank you for taking my questions. Just firstly, on the 780 apartments that have been sold year to date, I think you mentioned pricing on the first wave that happened in the first quarter.
I just wanted to check if you're able to comment on pricing versus book value for the remainder or for the total amount sold. Then just secondly, on the CapEx on slide 12, I see it scaled back to 2021 levels on an annualized basis in Germany. Again, just trying to think how we should think about this for the year as a whole. Thank you.
Yeah. Good morning, Marios. To answer your question, also for the full disposal, so until May 2024, the development was very similar. So perhaps slightly below book value, but to the latest book value, yeah, to the December book value, but not really a huge difference.
When it comes to the development of CapEx, you should not read too much into a reduced CapEx spending per square meter in the first quarter of 2024. Also, CapEx has a kind of seasonality more driven by the question which projects are under construction or in place. So for the full year, we expect a similar level like 2023, so more EUR 17 per square meter compared to EUR 13 that we have realized in the first quarter.
Very clear. Thank you. And just a follow-up to the apartments sold, are you able to comment on the buyer groups for the units?
Yeah. Yes. Yes. We, of course, are. And unchanged to what we've seen in the last, I would say, two years, the buyer group is really mixed.
So when I look at buyers in the last 12, 18 months, including the buyers that we had now in the recent transaction, there was not really a change. So a little bit of everything. So a kind of buyer that you can put into a family office camp, also a private equity buyer, the more local buyer. So we're still hesitating to say there's one specific buyer group who's buying it at the moment. What is true is that it's more buyers who use a little bit more equity than others. And also as an additional buyer group, companies that do a privatization business are perhaps a little bit more on the market.
Perfect. Thank you very much.
The next question comes from the line of Andres Toome, Green Street. Please go ahead.
Hi. Good morning.
So my first question is around your FFO, which seems to be coming in quite strongly in the first quarter. And in terms of the growth rate that you're seeing year-over-year, I was just wondering, as it's sort of running quite a bit ahead of the full-year guided pace, is there anything here to do with the timing of costs, or would you say that the full-year guidance is perhaps rather conservative at this point?
Yeah. Good morning, Andreas. Perhaps the fair answer is that both is true. So when we look at the guidance as of now, that should be, how should I say it, absolutely achievable. Also honestly, in the first quarter, we had a little bit less maintenance than in the previous quarters, which is then again a kind of seasonality.
but despite the disposals that we have done in Germany and the still ongoing growth of our portfolio in Poland, yeah, we are very confident that the FFO I for 2024 should be in a good way.
Understood. And then, my second question was just around like-for-like rental growth. As you're sort of seeing Mietspiegel prints coming out in your markets, would you say these are rather stable, or could there be some sort of upside to current like-for-like rental income pace?
So there should be clear upside. And if you look at the guidance for total like-for-like rental growth, we are at 2.3%-2.7%. And most of that increase compared to the previous year is coming from what we call basic like-for-like rental growth.
So that means rental growth for Mietspiegel, where we expect that this year is, if we really look only at that component, perhaps some 40 basis points better than 2023. So clearly, we see that trends are picking up.
Thank you. That's it from my end.
The next question comes from the line of Stéphanie Dossmann with Jefferies. Please go ahead.
Yes. Hello. Most of my questions, Martin, but maybe a follow-up on the housing sales business in Poland. What kind of level of operating margin do you target in this business going forward? I understand that prices are very strong, so.
Yeah. Good morning, Stéphanie. So when it comes to the sales business, we are still confident that we are quite close to the 30% gross margins. As you said, sales prices have increased quite strongly.
Now we see a little bit more construction costs picking up, but on a moderate level. What is picking up quite strongly is land prices. I mean, we're not the only one who has detected that the Polish sales market is very strong. So more and more companies are buying land again. Here, our advantage is that we still own a very sizable land bank, as I see in our publication. So it should be one of the largest land banks in Poland, which is clearly an advantage. But also we need to buy land because land that you buy today is then perhaps something that is going into revenues in three or four years. So this will be, on the cost side, the more challenging factor, land prices, whereas on the demand side, we still see a very good development.
When it comes then to the rents, it's still unchanged that we stay in the 7%-8% gross yield for projects that are finished. So I think when we look at all the projects that have been finished until today, we're exactly at 7.5%, if I remember well, and gross yield that we have actually achieved. So therefore, margins in Poland, yields in Poland still look strong.
Okay. Thank you. And a follow-up again also on the investment market. In Q1, it remained quite muted. How does it look like in Q2? You say that the buyer mix is unchanged, but do you see more interest from investors? Do they feel or do you feel that they agree on prices, or do you struggle to achieve good pricing on your disposals?
I mean, how do they negotiate prices?
Yeah. We see more interest. That's fair to say. But I mean, you know us. We are still careful with predicting disposal volumes and results because it's one thing that they have interest in. The second thing is that they really see signed larger portfolio transactions. And, I mean, there are some transactions that have been on the market, but still, the number is quite small. But yeah, looking forward, we are more optimistic than in the past. And when it comes to disposals, clearly, also, this is something which is volatile. So for quite a while, you're working on some transaction, and then it's not going through, or oppositely, then you have the chance to sign it after perhaps longer negotiations.
So it's extremely difficult to predict exact sales numbers quarter by quarter in Germany currently. But yeah, it's fair to say that we see more interest. So we're positive on the second half of the year.
Thank you.
The next question comes from the line of Céline Soo-Huynh from Barclays. Please go ahead.
Hi, Martin. I've got two questions here for you. The first one is on the 2026 convertible bond. How are you thinking about this? I know it's a bit early, but, you know, any early indication about this? And the second question is more about the long-term situation for you. It seems like your situation is under control for you this year, according to your scenario of 20% peak-to-trough valuation decline, leading you to a 45% LTV. How are you thinking about funding and reloading growth from there? Thank you.
Yeah. Good morning, Céline. Well, to answer your question regarding the convertible bonds 2026, basically, you gave the answer. It's still a little bit early. So that's still more than two years. So August 2026 is the maturity date. So we will look at that carefully, but it's too early to say we have already decided for one way. The good thing is this is the last material maturity that we have in the balance sheet. So if you compare that with the situation one and a half years ago, we still had the bridge loan ahead of us and other refinancings. Now, when we look into the maturity profile, most of the debt that is maturing in the future is mortgage-secured debt, whether this is Germany or Poland, where the financing access is still and unchanged very strong.
Then it's we're basically left with the convertible bond. So we will look at that carefully, but it's still two years to go. Regarding your question, funding future growth, and future growth at T&G means that we're primarily looking into Poland. Well, we have now developed a very natural way to grow the Polish rental portfolio as the sales business is producing quite a lot of cash. So we're taking this, and that's basically what's currently already happening, and use this as equity for the next rental project. We are taking on additional, local financing mortgage secured in Poland. If you remember our last publication, we disclosed that we have signed the first material mortgage secured loan in Poland, which was EUR 19 million.
So therefore, to get to this 10,000 units as the midterm target, we have developed a way from own cash flow plus financing on the portfolio that will lead us to this number. If we are in a situation at some point in time where we have then two stable investment grade ratings, then, of course, we could additionally look at the bond market to fund further growth in Poland. But that's still a way way to go. So therefore, this would then be something additional where we have then the possibility to do perhaps a little bit more. But beside this, the way towards the 10,000 units is already very clear, even without any, you know, larger capital market transactions.
And Martin, can I follow up on this? How are you thinking about new equity to fund growth?
Well, it's not needed for this natural growth, or however I should call it. So that means constructing apartments from our existing land bank. I mean, new equity. And I think that's an answer that perhaps every company would give you. If there's something larger, a larger opportunity is on the market, then, yes, this would be one of the options. But it's not needed, you know, for the base case scenario.
Thank you, Martin.
The next question comes from the line of Kai Klose with Berenberg. Please go ahead.
Yes. Good morning. I've got two quick questions if I may. The first one is on page 23 of the presentation. You mentioned, on the right-hand side, that the expenses from property management decreased also due to lower receivables.
Could you give a bit more clarity on that? Is this a continuous trend, or was it, specifically for Q1? And the second session on that page, the increase in net income from services you mentioned was due to higher results from Craftsmen services. Is this also a level which we can expect quarterly for the remainder of the year? And the last question would be on the FFO statement where we had an increase in the cash taxes. Is this seasonal, or is this something we can expect as well to remain relatively higher than the year before?
Yeah. Good morning, Kai. I'm starting with the answer on the write-down of receivables. We had a little bit more in the fourth quarter of 2023. Why did we do this?
Because the fourth quarter is the year where you have where we sent out every year most service charge bills. So simply, as in the previous years, the total volume of outstanding receivables increased. And as you know, a lot of our tenants have now received a higher service charge bill because of increasing heating costs than in the past. So we decided to be here a little bit more conservative. But it was not that material. If I remember well, there was perhaps EUR 1 million more than in previous quarters. As of now, it seems as if this is not really a big big issue. So if you look at total impairments on our rent receivables, they're still at 1.2%-1.3% of total net rent. So still very low. So this is more, how should I say it, a year-end impact.
Indeed, the cash taxes in Germany in the first quarter 2024 were a little bit higher, but that was simply a reflection of the fact that we had roughly EUR 1 million taxes that we needed to pay for previous years. So also not a large amount. For the full year, if you look at our guidance, we predict a slight increase in cash taxes. But that's lower than if you take the first quarter and multiply it with four. If I remember well, we predicted an increase in cash taxes by EUR 3 million or EUR 4 million year-on-year. So to answer the question directly, in the second to fourth quarter 2024, cash taxes should be a little bit lower. And net income from services, yeah, that's still developing quite well, especially also the energy business is running very well.
We have still expanded our Craftsmen and Caretaker service. So therefore, we expect an improved result from services for the financial year 2024, but compared to 2023. That's correct.
Just last one, maybe, from my side on this, services business. You mentioned that there's higher results from Craftsmen and other services. Is it that you had more Craftsmen working for you, or?
Yeah. Yeah. But perhaps it's a bit misleading if you point out here too much of Craftsmen service, and then we just refer to other services. We should have better written, higher results from especially the energy business. So that's part of other services. So the Craftsmen number has also increased a little bit. But the main driver of net income from services, as in the past years, is the energy business, as well as the multimedia business.
Got it. Thanks so much, indeed.
Our next question comes from the line of Thomas Neuhold, Kepler Cheuvreux. Please go ahead.
Good morning. Thank you very much for the presentation. I have only one question left, and it's on your long-term capital allocation strategy. Obviously, you still have a lot of work to do to reach the 10,000 units target in Poland. But it seems to me that the fundamentals in Poland are currently even stronger than in Germany. I mean, if I compare that, the yield of cost of 7%-8% for a new product versus the 6% yield of your standing assets in Germany, and also that the rental growth rates, which are clearly higher in Poland than in Germany.
So I'm wondering if prices should stabilize in Germany and the investor market opens up, if you would consider selling a bigger portion of your German portfolio in order to reinvest the deposits in Poland and increase or speed up your long-term development targets in Poland.
Yeah. Good morning, Thomas. First of all, we still like the German market. Clearly, at the moment, our preferred capital allocation is Poland. Simply, the numbers are convincing. Yeah. As I said, 7%-8% gross yield on a new constructed apartment in Poland's largest cities. So that means not only 7%-8% gross yield at the start, also the years going forward, basically zero CapEx, very, very small maintenance requirements, not any investments needed in energy efficiency of the building, in a strong economy. So that's all very strong.
But just to complete the picture, we're not ruling out that at some point in time, we also look at acquisitions in Germany again, perhaps not now, but yeah, we also see the good fundamentals in the German market.
And that also then leads perhaps to the answer, if you ask us, where are we right now in preparation of selling a huge part of the German portfolio? No, this is not the case. Perhaps it's not the case because the possibility is not really there at the moment. This could be something that we think about, let's say, 2025 or thereafter, but not now.
So we have developed a clear strategy without any too large disposal in Germany from the cash that we generate with the Polish sales business and additional debt that we take on in Poland to grow the rental portfolio to the size that we want. And that's still the base case.
Thanks a lot, Martin.
The next question comes from the line of Manuel Martin, ODDO BHF. Please go ahead.
Thank you, Martin. Just one question from my side. On the vacancy in your portfolio, given that rental markets are improving, and you already said that vacancy might still improve in your portfolio, which has come down already to 4.2%, maybe you can give us a bit of trajectory there. What could be the image of or the picture of the vacancy rate going forward?
And how does it relate to the structural vacancy rate, of the locations where T&G is present? Is T&G close to the structural vacancy rate, or is there still a bit of, room? Thank you.
Yeah. Good morning, Manuel. And, the answer is very clear. We we still have room to improve the vacancy rate. So we are at currently 4.2%, in the in the residential portfolio. If you look at the guidance given for this year, I think that the midpoint of the vacancy reduction guidance is around 30 basis points from the start of the year. So that would bring us from 4.0%- 3.7%. If you apply this as a run rate for the next two or three years, yeah, that could be a good estimate. But the structural vacancy rate is really more and more something below 3%.
And we see this development in some locations that are very prominent. So I think the best example, and meanwhile, is our portfolio in Gera, where the vacancy is around 2.2%. And if you look in presentations some years back, vacancy in Gera was close to a double-digit number. That shows us that also in Germany, and especially also in our portfolio, the secondary locations are developing also very well. So we are very confident that we have not reached the kind of minimum vacancy already. So there will be room for further improvements in the next two or three years. That seems to be very clear for us.
Okay. Thank you. So in the average, sorry, my bad. Yeah, the structural vacancy rate overall is something below 3%, then?
Yeah. It should be.
I mean, you know, it's difficult to define a number which represents exactly the structural vacancy rate. But that we can go at some point in time below 3%, that's, I think, quite visible.
Okay. Good. Thank you.
Our next question comes from the line of Simon Stippig, Warburg Research. Please go ahead.
Hi. Good morning. Thank you for the presentation and the opportunity to ask some questions. First one would be, again, on the disposals in Germany. In regard to your Q2 2024 disposals, could you comment on how many transactions those were and also what geography you sold them? And then also here, what rent decline are you targeting for the full year?
Y eah. Good morning, Simon. Yeah, I can. We can give you some numbers.
So out of the total sales proceeds of EUR 65 million or EUR 67 million, there was one larger transaction. Please understand that I can't give you the exact number, but something one or slightly above EUR 20 million. Then there was one transaction that was between EUR 10 million and EUR 15 million. And there was one transaction between EUR 5 million and EUR 10 million. And the rest was a little bit smaller. So EUR 1 million, EUR 2 million, EUR 3 million deals. So it was not one huge transaction that led to the EUR 67 million sales proceeds. Yeah. In our heads, two, three a little bit larger transactions. The rest was quite granular. And we sold across our regions. So that was then as our portfolio is located to the last, largest part in East Germany.
East Germany, there was something, for example, in Dresden again, that changed not that much compared to the profile of the sales structure that we had in 2023, or 2022.
Great. Thank you. And then, also one on the services business. I just wonder this year, there will be, the discontinuation of the Nebenkostenprivileg. And do you see any risk, especially in the multimedia business from that?
Yeah. That's already included, in our projection for 2022. You're right. That is a change in law. If I simplify it a little bit, where the tenant now, in some cases, can choose. It takes the cable TV from the landlord where perhaps previously had an obligation to take it. And now he can choose to, to take another cable TV provider, not our multimedia company, if he wants. So that's already included.
When we published the guidance for 2024, the impact was, if I remember correctly, about EUR 1 million less income that we expected. Perhaps we are better than that because not many tenants are changing. But we assumed a reduction in light of this new law.
Okay. Great. That's clear. And last one in regard to your JV in Poland. Could you comment on the status there?
Yeah. So we have no projects or additional projects that we put into the JV in 2024. So that means there are three or four projects that we started in 2023 with our JV partner in Poland. Our continuing apartments are under construction. We are selling apartments. And just to give it a dimension, we were not putting the whole sales business into the JV.
So, if I remember that correctly, the total JV sales volume, all projects, are including land bank or unit construction, are perhaps for 3,000 units. So we get the 50% share. And the total volume of potential sales that we have when we did take together apartments under construction, land bank, is clearly much higher. So that's more something around 15,000 units. So the JV is for us an additional part of the sales business, but it's not a strategy to put the full sales business into the JV.
Great. Thank you.
All clear. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Martin Thiel for any closing remarks. Yeah. Many thanks all for your questions. Many thanks for listening into our call.
As always, if there are any questions left, please feel free to contact us directly. Thank you for listening, and hope to see you soon on the road or at the latest, within our next call in August with the half-year results. Many thanks.
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