Good morning, ladies and gentlemen, welcome to the TAG Immobilien AG Q1 Statement 2020. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Mr. Martin Thiel.
Many thanks, good morning, everybody. This is Martin from TAG. Good to hear you again. Very much welcome to our Q1 conference call. Today, what are the topics we want to discuss with you? Of course, the Q1 results, but perhaps even more interesting in these days is the impact of the COVID-19 crisis on our business. Additionally, we want to report on the development of our business in Poland as well in the presentation that you hopefully have in front of you, which is also available on our website. Let's start with page number four. That's the highlight slide for the first quarter of 2020. Looking at the operational performance, which refers solely to the German portfolio, the vacancy rate in the residential units is up by 30 basis points from 4.6 at the beginning of the year to 4.9.
That's a development which is not unusual for the first quarter. We'll come to that a little bit later. Like-for-like rental growth, including vacancy reduction, basically stable and positive at 2.3% compared to 2.4% in the financial year 2019. Quite strong increase in FFO by EUR 2.8 million quarter-on-quarter now at EUR 42 million, and that translates into EUR 0.29 per share. Looking at the EPRA NAV and LTV, as expected, no major changes in the first quarter as we had no valuation in the first quarter. The EPRA NAV, or now called EPRA NTA, Net Tangible Assets, so without any goodwill, without any intangible assets, at EUR 20.23. LTV at 44.6% compared to 44.8% at year-end 2019, that's basically unchanged. Positive news from our side regarding acquisitions. We were able to acquire in Germany 865 units in the first quarter at an attractive nearly 8% gross yield.
Also Poland looks very positive in this regard. We were able to secure land banks and projects of more than 1,100 units in the first quarter, mainly in Poznań as our second location in Poland after Wrocław. Looking at the disposal side in Germany, this is not really a material business that we have there, 48 units disposed. Poland was also, in this regard, successful with 205 units in the first quarter of 2020, which is an exceptionally good number for a first quarter of a developer. That's, let's say, the quite normal picture from Q1, and I think definitely good numbers. Now on the next slide, on page number five, where we'll take a look at the COVID-19 business update. Putting that more generally, the good news is that we see really limited impact from the current COVID-19 crisis.
Let's start with how we behave in this environment. Of course, as a big landlord, like other companies, we have definitely responsibility not only for our employees, also for our clients, for our tenants. Therefore, we voluntarily decided since the middle of March 2020 to stay away from any rent increases on the basis of adjustments to local comparative rents. That means ongoing rent increases from the local Mietspiegel have been paused since March 2020. For us, this is clear. It's on one side a commitment and a sign that we show to our tenants in these days, which we consider to be something which is sensible. On the other side, of course, we see this as a kind of temporary situation.
Therefore, yes, it's very clear at some point in time, we have to get back to normal, and that this is also something that happens by now in June or July, that we go back to a kind of normal mode. Therefore, we don't expect here any material effect on our like-for-like rental growth for the full year. We're doing no terminations due to loss of income caused by the Corona crisis. That's clear. That's also more or less what the law already says. We have no evictions of inhabited apartments right now. Increased social engagement for nonprofit organizations is something which is also very important for us in these days. That's basically nothing new. You know that we are in locations where we really have a big focus on what we call neighborhood developments.
The social engagement has always been part of our business, but we clearly increased that now in the last weeks. Coming to the numbers, we think it's really good news to show you that the vacancy rate is stable and that we have no material impact on rent payments. For example, looking at the vacancy rates in the course of the first months of the year, we started at 4.9% in January in our residential units, which is by far the highest share of our portfolio. We've been stable in March and April and basically also stable in May. 5.0% is the vacancy rate at the beginning of the May 2020. Looking at rent receivables, they are basically on the same level compared before, no material increase.
The deferral of net rents so far has been really limited to just 0.4% of our tenants in the total residential units ask us for a rent holiday and are currently not paying the rent. Looking at the commercial units, which is a small size of our portfolio, it's approximately 8.5% of the total commercial tenants who ask us for a rent holiday and are not paying the rents. Looking at the absolute amount, you see this is a quite manageable amount. It's approximately EUR 100,000 per month that we currently have suspended or deferred regarding the residential units and approximately EUR 70,000 per month for the commercial units. This is really a limited number, and so far we don't expect any changes in that, especially not any increases in the coming weeks.
Looking at the next slide, of course, in these days, liquidity position and maturities is something important to look at. You see also in the balance sheet that we have enough cash, that we have unchanged figures before EUR 120 million of credit lines fully undrawn. That, for us, it's absolutely not a problem and absolutely as planned that we pay out the dividend, which is, by the way, tax-free again after the AGM on the 22nd of May 2020 of EUR 0.82 per share. Good news that we were able to do bank loan refinancings in March and April 2020. This was something that basically happened right in the middle of the crisis, and that was something where we were of course happy and proud of that our banks are still fully committed to us, and also the conditions were very favorable.
Looking at the terms, EUR 143 million new bank loans in five contracts with different German banks at an average interest rate of 1.17% for a 10-year maturity on average. That's of course definitely positive for us and reduces our average cost of debt. There are no major upcoming maturities in the next two months. What we have in 2020 as maturities is EUR 65 million all in all, taking into account the bank loans, corporate bonds and some commercial papers. For 2021, it's EUR 46 million. Basically, or the most part of it is bank loans. That puts us in a very stable financial and liquidity position. Looking at our business in Poland, also here we have definitely positive development. The business in Poland has not been materially affected. The most important news is that the construction sites are still running.
I will come back to that a little bit later in more detail. That we want to build up a pipeline of eight to 10,000 residential units in Poland, and therefore the construction sites are important for us so that we stay in our plans and that is so far without any delays. Of course, the second quarter shows so far reduced sales from apartments. In the first quarter, as I have said, we sold 205 units in Poland. That was in January and February, approximately 80 to 90 units per month on average, whereas in March and April, we have seen this to a number of around 30 units. This is something that we consider to be temporary, and that is more something that is then linked to restrictions that you have in Poland as well as in Germany.
People at the moment simply are not leaving the house if they not have to. Visiting apartment, visiting construction sites for them is, of course, nothing that is that easy as it has been in January and February. As the situation turns also in Poland, not only in Germany, more and more positive, we expect that the Q3 sales will be back on a level that we expected. This should be clearly something temporary. Also important, the acquisition processes for new land banks and projects continue. A lot of that is done also from Germany, but the largest part is done from our colleagues at Vantage Development in Poland. Therefore, the current travel ban.
That means that the borders between Germany and Poland are not open is for us not that important as we have a good team in Poland who is then responsible for the acquisition processes, and that continues. This is an update regarding the impact from the COVID-19 crisis. Again, we think good news is that we are really stable and this business model is, as we expected, also very resilient. Looking into our financial statements for the first quarter, and I'm now on page eight of the presentation. First of all, you see here a detailed split on page number eight regarding the P&L from Germany and the new P&L, the ones from Poland. We do this to give you here full transparency, how the effects are. Of course, the effect from Poland in the first quarter is limited.
The numbers are small, but perhaps interesting to see the effects here in detail. Commenting on the development on the first quarter, generally a very positive development with increased net rents, a slightly decreased net rental income. This is something which is in the first quarter, not that unusual. We had here higher maintenance costs. We had temporarily higher cost of vacant real estate. Therefore, that's basically in plan. Looking at the net income from sales result in Poland, you see that we have here a negative result of 700,000 units. Don't be confused. Don't assume that we have here sales losses. This is the effect of the purchase price allocation that we have to do in our consolidated financial statement on TAG level. EUR 1.6 million additional cost of goods sold were implemented here.
This EUR 1.6 million is a net number, so after deferred taxes. Looking at the local P&L in Poland, the net income from sales has been positive. That was a result or a net income positive of EUR 1.5 million. This is really purely something, if you want, technical or accounting-wise, a negative result. We have no portfolio valuation result in the first quarter. As usual, the next portfolio valuation was done at half year. We'll do this again twice this year. Looking into potential effects from this portfolio valuation at the end of the first half, we have not really final results so far, but for us it is very clear that we expect a very similar result as we had in the second half of 2019 or in the first half of 2019.
Looking at the absolute amount we had in the last two half years, around EUR 200 million valuation gain. If you ask me, well, what is a good estimate for that? Perhaps a similar number should be something that we also expect. Please understand that this is more or less a preliminary thought on that. Very clear is we don't see in the market here any negative effect on purchase prices from the COVID-19 crisis. Therefore, when we talk with our valuer CBRE, the positive trend that we have seen in German residential, and especially in the B and C locations where we are in, should also continue for the first half of 2020. Very clear, the second half of 2020 has more uncertainties. If you look what we see today in the market, do we expect here a material negative development?
No, that's definitely not the case. Of course, everything, and I think that's true for nearly every business, depends on the further development of the COVID-19 crisis. Commenting on the net financial results, an increase or an improvement of EUR 500,000 quarter-on-quarter due to cheaper refinancings. Also the tax effect or the cash tax effect was more positive than in the fourth quarter of 2019. We had approximately EUR 1.4 million reduced taxes. Now on page number 9, which shows the overview of the EBITDA, FFO and AFFO calculation. Important to explain how we calculate FFO 1 and FFO 2 in 2020. Looking at the FFO 1, this is an FFO 1 that is purely generated by our German business. If you want so, this is the old TAG, so purely the German business.
Therefore, FFO 1 in 2020 is completely comparable with FFO from 2019. All the results from our business in Poland, which is mainly Vantage Development, is included in FFO 2. You see on the left side in the FFO 2 calculation that, of course, on the one side, as in the past, the net income from sales in Germany are included in FFO 2. New, the results from operations Poland is included and contributes to FFO 2. How we calculate this result from operations in Poland is shown on the right side of slide number nine. That's basically the net income from Poland after minorities, without any effects from the purchase price allocation. If necessary, this was not the case in Q1, if there are any deferred taxes and if there are any larger one-offs, we would exclude them.
The idea behind that is that, A, the result from Poland is completely included in the FFO 2, and B, this result is a cash result from disposals. Looking at the developments in the first quarter of 2020, I already said strong increase in FFO by EUR 2.8 million. The AFFO increased from EUR 19.4 million to EUR 21.3 million, an improved EBITDA adjusted margin. Looking at the result from operation in Poland now after the effect from the purchase price allocation, this was already a positive result of EUR 700,000 for the first quarter of 2020. On page 10, you see the balance sheet development. Just one small comment on that. For the first time now we have a goodwill in our balance sheet from the purchase price allocation of Vantage.
This purchase price allocation is still preliminary, but for now, we have a goodwill of around EUR 18 million. Not really a significant large number, but just something to point out because it's also important for the NAV calculation that is here on the next page, on page number 11. Where the two calculations on the left side, the, as EPRA announced, new calculation way, the EPRA, if you look at that exactly, Net Tangible Assets value in EUR per share. That excludes not only the goodwill, but also other intangible assets. Other intangible assets, that's basically IT software, which is not really a huge number. That leads then on a fully diluted basis to an NAV of EUR 20.23. If you want, the old definition from 2019 would lead to an EPRA NAV per share, fully diluted of EUR 20.37.
That's not really a material difference. The main difference is now the goodwill that we have in our balance sheet. I'm coming to page 12, the financing structure. You see here the full maturity profile, that includes all the debt that we have now taken over from Vantage, from our business in Poland. This debt is not really significant when looking at the amount. The total bank loans at the end of the first quarter have just been EUR 6 million, the bonds that Vantage issued in the past amounted to EUR 24 million, EUR 30 million of debt.
Comparing that with the cash that Vantage has in the balance sheet of the first quarter, which was EUR 46 million, that leads then to the fact that we have a positive net debt in Poland that is coming into our balance sheet now at the end of the first quarter. As already said, LTV, on our LTV targets of 44.6% was the exact number, and there's still refinancing potential. When I refer to maturities, when looking at the effects from the COVID-19 impact, this is something different compared to the refinancing potential, as we have substantial bank loans where not the maturities are in 2020 or 2021, but we have bank loans where the interest terms are ending. We are then, from our side, able to reset that.
We are able to cancel the contracts if we want, that is, of course, something that we are planning in this environment with still lower interest rates. Still EUR 294 million of German bank loans maturing in the next up to three years, that should give us additional financing cost savings. Let's go to page number 15, where we show the development of rental growth and also the CapEx that we spent. We had increased CapEx in the first quarter, annualizing that, we have been at EUR 16.80. You see this on the top right of page number 15. That adds up to total investments, including the maintenance cost of EUR 23.6 per sq m. That is more than in the financial year 2019, EUR 20.40 was here the number. You should not expect that we have for the full year really a material increase compared to 2019.
The full year numbers should be something perhaps a little bit below the current level. That means that the CapEx strategy is unchanged. We're not changing that to any large material modernization project, especially not for existing tenants. We're doing more modernizations regarding vacancy reduction. You know already from the last financial year that we did a lot in the Chemnitz region. As announced already in the last call, we are doing now more in the Berlin region, and there the focus is on the 3,000 units that we have in Brandenburg an der Havel, which is part of the Berlin region, where we started already at the end of last year, but more material in the first quarter, a modernization program to reduce vacancy. Like-for-like rental growth was in total at 2.3%. That compares very well with the financial year 2019.
Also the like-for-like rental growth without vacancy reduction was stable at 1.9%. As I said, for now we don't expect here really a material impact on the fact that we voluntarily suspended rent increases for now, as we assume that this is something that is temporary and perhaps already in the third quarter we will come back to a modus which is then more normal. For now, we thought that's something that we have to do as part of our social responsibility for our tenants. Turning to page number 16, vacancy rate development. Well, it's not unusual for the first quarter that we have an increase in vacancy rate. Generally, the increase at all was not very strong. The increase was 30 basis points between January and March.
If you compare that with the financial year 2019 and 2018, you'll see, yes, also in these years there have been increases, 20 basis points in the first quarter of 2019. The 30 basis points like in 2020, in 2018. For what reason ever, there's a kind of seasonality in that. Looking into our region, yes, of course, we have in Berlin and Chemnitz the modernization programs, plus the seasonality, plus what we really see as an effect, and that's true especially for a region like Rostock, that we have in this region quite a lot of apartments that rent out to students. Greifswald, for example, is a city with a big university or Rostock, where we have, of course, in this regard, an impact from the COVID-19 as many students are not now renting their apartments.
Therefore, that's not really material, but explains in this region a certain increase of vacancy rates. As I said, this is nothing unusual for this time of the year. I'm now on page number 18. A quick comment on our acquisitions in Germany in the first quarter 2020. First of all, for us, very good to see that acquisitions are still working. Yes, of course, looking for, if you want some more technical perspective, it's difficult to do due diligence processes in these days, but that still works. We were able to sign in January and March contracts for 865 units. Closing has already taken place, in the end of March and the end of April. These acquisitions will contribute to the FFO from the second quarter onwards. The gross yield that we achieved was still very attractive at 8%.
Looking into our acquisition pipeline for the full year 2020, we're optimistic. We see portfolios on the market that are interesting for us. Of course, difficult to give you concrete guidance, but we should at least achieve what we have done in the last year or even in the year before. Therefore, also acquisition markets are still open. If you ask me, well, do we see an impact from the COVID-19 crisis on portfolios on the market? No, not really. We don't see any forced sellers. We don't see any drops in purchase prices, which is then, on the other side, of course, good news for our valuation. It's more or less an ongoing process, but also this should be good news that these markets are not closed.
I'm on page number 20, and you see here from page number 20 onwards some slides regarding our business in Poland. Some of that, some of the content you already know. The strategic rationale, to start with this, of our Poland expansion is very clear. We want to build up here in a very promising market, which is the residential current market in Poland, a portfolio of 8,000 to 10,000 letting units in the next three to five years. We're doing this in the large cities in Poland. So far, we have two locations here, which are Poznań and Wrocław. Other locations in the western part of Poland are also very promising, and we are working here on concrete acquisitions. Perhaps in the second quarter, we can already report here on further acquisitions in other locations.
Looking at our plans, you see here on the bottom of page number 20, a summary of what we are planning and what we have on current projects. The total projects that we want to have in the build to hold projects until the end of 2024 is at least 8,600 units. Looking at the build to sell projects, this number should get up to 4,600 units that we want to build and to sell in this time. Out of this total volume of 13,200 units, you see this on the very right-hand side, 5,700 units are current projects. That means we have already acquired the land banks or secured, or these projects are already under construction, and 7,500 units are planned projects. Planned projects, to the very large part, doesn't mean that this is something far away.
These are really concrete projects we are working on, and we clearly expect that in the course of the financial year 2020, we can really announce more concrete about these acquisitions. It's not a far away pipeline. This is something that should be very close. Looking at the midterm effect, as you can see this on page number 20 on the bottom left, looking at the build to hold project. We should achieve an estimated EBITDA contribution from the letting plan on between EUR 30 million and EUR 35 million out of these 8,600 units. From the build to sell projects, the total EBITDA contribution from sales will be between EUR 50 million and EUR 55 million. You should expect in next years, a year-by-year stronger cash flow from our activities in Poland. How are we achieving this? You see this on 21.
That, of course, big part of that is Vantage Development. That's the company that we acquired last year when we signed the contract. The closing was in January this year. We're very happy with our acquisitions so far. First of all, the first good news is that the whole team is still on board. You see on the left side that Vantage has around 100 employees in different departments. Not only the CEO, Edward Laufer , and CFO, Dariusz Pawlukowicz are still on board. Also, as I said, the whole team in the different departments is there with us. That's, of course, something that is very positive that we really can build up our portfolio on the knowledge of these people. Looking at the results from Vantage for the financial year 2019, that's shown on 21 on the right side.
The numbers were even a little bit better than expected. Vantage achieved revenues from sales of EUR 84 million in EBITDA of nearly EUR 14 million, the net income after taxes, after increased costs, which is really a cash result of EUR 11.3 million. This was something that was definitely positive for us after the closing. On page 22, you see more details on our build to hold pipeline. Further details on the number of project stages and so on. That's most interesting is on the bottom left of page 22, how or at what point in time do we expect that projects are completed and when rent starts. You see that we will expect and have the first rents towards the end of the financial year 2021.
We expect that we have around 500 units, which are currently already under construction then in 2021, ready and rented out. The number year by year increases up to the 8,600 units that I already mentioned, which would then be finished more or less towards year end 2024 or at the beginning of 2025. Page 23, on the next slide, you see basically the same structure for the build to sell pipeline. The timeline of sales shows you that in 2020, we will have again strong sales results and strong cash inflows from Vantage via the disposed units. This disposal business in Poland is something that we clearly want to continue.
If we look mid to long term in our business of Poland, of course, the last part of the cash flows will come from the residential for rent business, but this residential for sale business or disposal business will always be a part of our business in Poland and this is how we expect that to translate into cash over the years. On 24, some words on our financing strategy. First of all, for 2020, the financing needs are quite moderate. As I said, Vantage has in its own balance sheet a strong cash position of more than EUR 46 million. Clearly, we expect strong cash inflows in 2020 from the disposals. Therefore, what we currently are planning is that we will downstream to Vantage up to EUR 50 million for further projects. I think that's important.
This financing, if needed, of up to EUR 450 million, is really for new acquisition. To put it the other way around, the existing projects at Vantage for 2020 are fully financed, there's no need. Of course, as I said, the plan is to acquire further land banks, to acquire further projects, and therefore we expect up to EUR 50 million that we will get via shareholder loan from TAG to Vantage in Poland. That's not really a material size that is needed. Mid to long term, from 2021 onwards, the financing needs will be between EUR 150 million-EUR 200 million. That's something that we have to finance, and we have two ways to do that. That's on the one side, similar to what we do here in Germany, secured financing at Vantage level via mortgage or bank loans.
As a second option, and that's clearly the attractive to do that, we have the possibility of unsecured financing at TAG Holding level, for example, via corporate bonds or promissory notes as we did in the past. Of course, we have a certain foreign exchange risk and for now, we are not under pressure to do something right now, but we are currently working on our strategy. When we look at the historical developments between the euro and the Polish zloty, that has been very stable over the last three to five years. The idea behind it is to have more hedging strategy, which is not a full hedge of the full complete foreign exchanges. We don't think this is necessary, but of course, we want to do something that will really prevent it from suffering unexpected peaks in the exchange rate or unexpected losses.
This is something that we want to implement from 2021 onwards. Some final comments on page number 26. That's the guidance slide. Looking at the German guidance for the financial year 2020, the guidance is unchanged. We clearly committed and clearly confirm our FFO guidance between EUR 168 million and EUR 170 million. We also confirm the dividend guidance for the financial year 2020, then paid out at the AGM in 2021 of EUR 0.87 per share. New is the guidance that we give on the business in Poland. As I said, the business in Poland for 2020 is solely the disposal business. We expect here sales revenues between EUR 80 million and EUR 85 million and a result from operations, and that's exactly the result that I explained a moment before, of around EUR 10 million for 2020.
This will then be part, this EUR 10 million, for our FFO II, and if you divide that through the current number of shares, that translates into a value per share of EUR 0.07. From 2021 onwards, Poland will then contribute to the FFO 1 of TAG, but as pointed out, for 2020, we will have on one side some cash flows, but on the other side, only an FFO 2 contribution from our business in Poland. That's it from my side so far. Resuming that again, first, that's the most important news for today. We don't see really any impact from the COVID-19 crisis on our business. Everything is running more or less as expected. Q1 was a good quarter with an FFO that increased quarter-on-quarter by really EUR 3 million.
The business in Poland is already successful in the first quarter and is something that we regard as very promising for the next year. Thank you very much so far. Of course, now, we're happy to take your questions.
Ladies and gentlemen, if you would like to raise a question, please press Nine followed by a star on your telephone keypad. If you would like to withdraw your question, press Nine and Star again. We have first questions coming in. First to raise a question is Mr. Thomas Neuhold from Kepler Cheuvreux. Please go ahead.
Good morning. Thank you very much for the presentation, taking the questions. Actually, I only have two on the Polish business. Firstly, strategy-wise, you plan to increase the number of units quite strongly in the next years in Poland. You also do quite high CapEx requirements. What impact will this have on your capital recycling strategy in Germany and also your acquisition policy in Germany? Do you plan to slow down the acquisitions in Germany a little bit and rather focus on Poland or do you plan to increase also the disposals in Germany in order to finance the expansion in Poland or do you want to increase the debt of company a little bit? That's the first question.
Yeah. Thank you very much, Thomas. To say this very clearly, Poland is something additional. There are no plans to sell assets in Germany and take this as financing for new acquisitions in Poland. I mean, the German market is as it is. You know that from the past, it's very competitive. Therefore, do we expect significant large transactions in the market in Germany? That's perhaps nothing that is really realistic. Again, as I said, we are still optimistic that we are able to deliver for 2020 on similar acquisition sizes than in 2019, 2018, and perhaps even a little bit more. That's one side, and these German acquisitions, on the other side, will be also financed via disposals in Germany, but really in sizes like you know from us from the past.
The second, a new external growth opportunity is Poland, where we see really, yes, of course, also competitive market, but not really comparable to what we see in Germany, especially not in this institutional residential for rent sector that we are now entering as perhaps one of the first institutional landlords in Poland. We definitely have enough financial power to do acquisitions in Germany. On top of that, what we do in Germany, and again, if you look at the absolute volumes that are necessary, it is up to around EUR 50 million for 2020, and then annually around EUR 150 million, perhaps up to EUR 200 million from 2021 onwards. This is something that based on a current GAV of EUR 5.4 billion, should be absolutely manageable for us.
The second question is on the build-to-hold pipeline in Poland. The average rent levels seems relatively high, EUR 10, EUR 11. I know the apartment size is not that big, so we're talking about a total rent of maybe EUR 450-EUR 550 per apartment per month. Still, you have quite ambitious rollout plans, and you bring roughly, I would say, in terms of 1,000-1,500 new apartments to mid-sized Polish cities. Do you think there's a risk that you might not be able to let out the apartment at this price tag?
Well, the prices that we are putting into our business plan are really prices that we currently see in the market and also currently see with the Vantage product. That's interesting to know that Vantage already in the past sold around 30% of its apartment to people who rented the apartments out afterwards. These were then mostly private people who bought three, five, or even a bit more apartments and rented it out. On the rent level of EUR 10 or EUR 11 per square meter is something that we already observe in the market, that's not a pure assumption. Of course, not only with Vantage apartments, also with other apartments that we observe in the markets of Wrocław and Poznań. Compared to our German portfolio, I mean, this is clearly higher.
You know that our average rent in Germany is EUR 5.40, it's first of all, a different product. In Poland, we're talking about newly constructed apartments, and secondly, in Poland, we are really talking about the large cities. Perhaps except Wrocław, we're talking about then all the other cities that have then 600,000 to 800,000 people living there, like Wrocław, like Poznań. The apartment size is smaller than in Germany. Whereas in our German portfolio, we have on average 60 to 65 squares per square meter. In Poland, in a rental apartment, we're talking about sizes of perhaps 40 to 45 sq m. That's the difference. We see that the demand in the market. We were very optimistic that we're able to do this, and again, it's not concentrated only on one location like Wrocław.
We've already entered the second location, Poznań, and a third or fourth location will follow quite soon. It should be also a very well-diversified approach.
That's good. Thank you.
The next question comes from Mr. Sander Bank from Barclays. Please go ahead.
Hi. Morning, team. Two or three questions from my side, and I'll ask them one by one. The first question is a bit back on the funding strategy for Poland and how you expect to do that going forward. Appreciate the outlay in itself is not too high. just kind of thinking about it, because in total, you're looking for at least for the to-hold pipeline to EUR 600 million, which is more than 10% of the existing portfolio. Are you just fully using your further valuation growth to lever up again and get those proceeds? How are you thinking about that?
Yeah. Thank you for the question, Sander. For us, it's clear that also equity is at a certain point of time an option. There's surely nothing to think about that in the short term. You've seen that the financing needs for 2020 in Poland are very limited. Therefore, there's not equity for our business in Poland needed. Yes, of course, if we are realizing that the clear plan, also that the pipeline in Poland in the next years, that is a clear option for us. Using valuation gains in Germany to keep the LTV on that level only is perhaps nothing that is in line with our thoughts of how, let's say, a stable financing structure should be.
Okay, perfect. That's very clear. The other question I had is on your potential rating. I was wondering if you've had, since in the last couple of months, if you've had contact with the rating agency and what they're saying about the current rating, and then if there's any potential for improvement, or is it more expected to be stable going forward?
Well, first of all, the rating should be definitely something stable. In these times, of course, it's difficult to think about upgrades. Would that be something realistic? I don't know. We have clearly expectations that we are very well positioned between our Ba2 rating at Moody's, that the trend was clearly more towards an upgrade, and perhaps this is still something that is realistic. We have no detailed discussions so far with the agency in the last weeks. We will do this in summer again as planned. Of course, Moody's has received, as it is common after each quarter and after each full year, our cash forecast, our business plan. On this was all, from my point of view, very well received. We have definitely not received any negative comments on our business, whether this is the German or the Polish business.
Therefore, if you ask me, we feel very well positioned within Baa3 and perhaps in a world where the COVID-19 crisis is not that dominant as today, the trend should be clearly more towards an upgrade.
Okay. The development business in Poland is not having an impact on that potential rating, i.e., they do not require you to have a lower LTV to compensate for the slightly higher development risk that you eventually take on?
No, that's not the case.
Okay, perfect. Very last question, just on the rental growth. I know this question has been asked many previous times as well, how do you think about that going forward? Do you still expect 2% base rate plus 50 basis points from vacancy reduction and modernization? Is that the ongoing run rate, or is that something that ultimately is just going to trend more towards the 1.5, 2%?
No. That's not the case that we are expecting mid to long term a lower like-for-like rental growth. Really, the underlying fundamentals have changed. If you ask us, well, what do you see regarding vacancy rate development? It's clear that staying on the level that we had at the beginning of the year in these times is very good news from our point of view. Clearly, we expected already that we had a reduced vacancy rate at the end of the first quarter, but that's not really a material difference. Yes, potentially, we have some delays in vacancy rate reduction during the course of financial 2020 as a result of the COVID-19 crisis. That's nothing that we consider as something that is mid to long term the case.
What we see in our markets is also in these times, a very good demand, a very healthy demand, and we feel very well positioned even in a time where we have perhaps tougher times in terms of higher unemployment rates and so on, because we really offer affordable housing with a base per-meter rent of €540, and that should be something that is also very much searched from potential tenants in the future.
Great. Thanks very much.
The next question is Mr. Kai Klose from Berenberg. Your line is open.
Yes. Hello, good morning. I've got three questions coming. The first one is on page 28 of the presentation in the appendix. You had in, if I see this correctly, in all locations, an increase in vacancy rates. Was that expected, or is it something which was maybe not because of the crisis, but somewhat more than you expected to see? Second question would be on the acquisitions you did in Germany on page 18. Could you maybe elaborate a little bit more on the seller of those two portfolios and what you expect, or how quickly you expect the properties to be upgraded? The third question would be, we had a lower cash tax rate, if I see that correctly in the FFO calculation. Is it something which then we should expect for the remainder of the year, or was it something specific for the first quarter?
Thank you.
Thanks for the question, Kai. To start with the third question, you should expect similar cash taxes in the second, third, and fourth quarter because the cash tax expense in the fourth quarter of 2019 was higher than normal. Therefore, what we have today in our books or in the first quarter, that's something that from our point makes sense to cancel into our model for the remaining part of the year. Answering the question regarding vacancy rates. Yes, that's basically something that we expected for the first quarter, it's not unusual, as I said, that we have a kind of seasonality for what reason ever, a lot of people are leaving the apartment in January and February. That has been the case also in the last two years, as you see from our chart. That's not really a surprise for us.
As I said, perhaps the only impact from COVID-19 was in some regions where we have a higher proportion of students. The main example here was the Rostock region, where we in fact really had an increase in vacancy rate by 80 basis points. Here we are not offering, let's say 100% student homes, but we offer apartments that a lot of them are used by students, and therefore as universities are shut, we saw here in Schwerin the only unexpected increase. Generally, that's not really far behind our plans, to put it like this. Commenting on the acquisition, the type of seller. Well, there's not one special type of seller on the market where we're buying from. I would say, as I think I also said in the past calls, there are perhaps 2 type of sellers.
In this regard, these were more local sellers who are very well familiar with the market, but perhaps what is lacking to some extent is the financial power to modernize apartments. You have to do this in many cases in a first step from equity. That's, as a listed company, not the problem. There we're very optimistic that we can improve vacancy rates, increase rents quite soon, as we're really able to do the modernization and refinance that then afterwards with our banks when we have the increased cash flow. The second type of seller, which is not the case in acquisitions, is the more institutional seller with a lot of financial power, but not that, let's say, locally in the market. This combination is something that we consider to be really advantage of our structure.
We're acting very decentralized, very locally, but with the financial power of a listed company.
I see, and thank you. Last question would be on page 10 on the balance sheet. Just to clarify the real estate inventory, which went up quite strongly. You had a footnote on the right-hand side. Does this reflect Vantage Development activity, or is it from the consolidation of Vantage as a corporate?
That's from the consolidation as Vantage as a corporate.
I see. Thank you.
Thank you. Mr. Thiel, there are no further questions at the moment.
Thank you very much from our side that you joined our call. As always, if there are any questions left, please feel free to contact us. Happy to hear you at least in the next days and weeks via virtual conferences. Stay all healthy and have a good day. Thank you very much.