Good morning, ladies and gentlemen, and welcome to the TAG Immobilien AG conference call regarding the interim statement on the first quarter of 2019. At this time, all participants have been placed on a listen-only mode, and 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. Welcome to TAG's Q1 2019 conference call. I think today we can make it quite short. The last call is not too long ago, just last month. We talked about the full year figures for 2018. Today, already the Q1 2019. I think most of you already had a chance to take a look at our press release and our presentation. Everything's, I think, clearly on plan. Operationally, it looks quite nice. Let's go through the presentation, which is also available on our website. Of course, afterwards, we have a lot of time to discuss any questions. Let's start on page four of the presentation. That's the highlights slide. A quick look on operational performance. Vacancy development in the first quarter, very comparable to last year.
A little bit up from in the retention units, 5%-5.2%, and in the total portfolio from 5.3%-5.6%. That's not unusual for a start in the year. As always, after inclusion of new acquisitions and with starting new CapEx programs for vacancy reduction. If you remember last year's development, a slight increase in vacancy, clearly the plan is, and our clear expectation is that we will reduce vacancy as in last year over the course of the year. Nothing unusual. Like-for-like rental growth developed nicely. The like-for-like rental growth, including vacancy reduction, picked up from 2.6% to 2.8%. The previous like-for-like rental growth was unchanged at 2.3%. A strong increase in FFO one. If you compare that year-on-year, that's a more than 12% increase compared to the previous quarter. FFO one increased by EUR 1.7 million to EUR 39.5.
Looking at NAV and LTV, I would say very normal development during a quarter without any valuation. Of course, there was, as in the past years, no valuation in the first quarter. The next valuation will take place at half year, the next full valuation. Therefore, NAV was up from EUR 17.32 at EUR 17.54. The LTV decreased by approximately 50 basis points because of our ongoing result and ongoing amortization from 47.3% to 46.3%. So far, no acquisitions and no disposals in the first quarter, or I should probably say no major acquisitions and disposals. If we take a look in our Q1 report on page six, you see that we have just acquired a small number of units, 35 units, and disposed some 12 units. Just slight disposals and acquisitions.
That's also very normal development for the start of the year, and should not set a trend for the full year. As always, we think the acquisitions as in the last years will pick up during the course of the year. Let's take a closer look at the income statement. I'm now on page six of the presentation. The net rents increased by EUR 2.5 million. Two main effects. First of all, mix effect from portfolio transactions. This was an increase by EUR 2 million. We had the closing of the largest part of the acquisitions last year, all in all, 2,500 units in the fourth quarter. So for the first time, these acquisitions have been in the clear. like-for-like rental growth contributed approximately EUR 0.5 million to the total net rent growth. Net rent to income increased by EUR 1.9 million. As we discussed, result of higher net rents, EUR 2.5 million.
As an opposing effect, we had slightly higher expenses from property management, mainly vacancy cost and also some impairment losses on rent receivables. Also a very normal effect for the start of the year as vacancy rate slightly increased. If you look at the development of other operating income and compare that with the previous quarter, you will see a strong reduction. If you remember, we had a one-off effect in the fourth quarter 2018, where we could release a provision for real estate transfer tax risks from prior years. This was an effect of EUR 6.2 million. Excluding this positive one-off effect in the previous quarter, you will see the numbers are comparable. I already mentioned valuation results was basically zero this quarter, and we will have the next valuation at half year.
Please understand that we can give you no concrete guidance for the next valuation at half year. We will discuss the first results with CBRE during the month of May. Generally, we expect that the positive trend from the past three years clearly will continue. We see no stagnation of prices or anything similar in our markets. Therefore, we expect definitely a positive development of the valuation result. I hope you can understand that it's too early to give an increased guidance in million EUR or in percentage. First expenses increased quarter-on-quarter by EUR 700,000, mainly due to the ongoing growth of our internal caretaker service. Mainly in this case in Salzgitter, we acquired, or we had an additional maybe 100 caretakers that started. Therefore, a clear trend of internalization in the caretaker service continued. Other operating expenses decreased by EUR 600,000.
Here we have one main accounting effect. For the first time, we had the application of IFRS 16, a new accounting standard that treats leasing contracts. Therefore we are from now on capitalizing leasing contracts in our balance sheet. If we take a look in the balance sheet, you will see approximately EUR 9 million of capitalized leasing contracts. In prior years, this was directly expensed in other operating expenses and for a certain part, also in expenses from services. This is an effect of approximately EUR 400,000 capitalized. Therefore our EBITDA increased this year or this quarter by EUR 400,000 because of the first time application of this new accounting standard. What you will see in a second when we discuss the FFO development, that we eliminate this effect from our FFO calculation. The FFO is unchanged.
We eliminated this EUR 400,000 increase in EBITDA because we think this pure accounting effect should have no effect on the FFO calculation. Let me say this, additionally, we will see how this is treated within the TAG group and perhaps during the course of the year, we will change this treatment, not from the accounting side, but perhaps from the FFO calculation. Not really a material effect. It would be approximately EUR 1.6 million for the full year. For now, the FFO calculation is unchanged and absolutely comparable with our FFO calculation in the previous quarter. Net financial results, cash after one-offs improved quite nicely by EUR 600,000 quarter-on-quarter. The cash tax expenses in the first quarter of 2019 were slightly higher than the previous quarter at EUR 1.3 million compared to EUR 500,000 in the fourth quarter 2018.
I'm now on the next page seven, and here you can see what I just mentioned. We included a new line reversal of effects from first time application of IFRS 16 leases at EUR 400,000 that I already mentioned, which is now deducted. This new accounting standard does not affect our EBITDA calculation or FFO and AFFO calculation. I already mentioned that the FFO increased by EUR 1.7 million, mainly as a result of our higher EBITDA, which increased by EUR 1.6 million. Not only the FFO increased, also the AFFO increased even a little bit stronger by EUR 2.3 million, is what the increase in the AFFO after all CapEx, so after capitalized maintenance and after modernization CapEx, in comparison to the previous quarter. Turning now to page 10, the financing structure.
As in the previous quarter, the interest rate or the average interest rate for the total financial debt was again reduced slightly from 1.92% at the end of the fourth quarter, now to 1.90% at the end of the first quarter 2019. There's still refinancing potential. If you look on the right side of page 10, you will see that we indicated a further refinancing potential. All in all, we have EUR 408 million of bank loans maturing or where the interest terms are ending in the next three years. The average coupons of these bank loans are between 2.6% and 3.7% per annum. If you look at today's financing positions for a 10-year bank loan, we talk perhaps about margins, I would say on average between 80 and 90 basis points.
If you purchase the 10-year mid-swap rate on top of that, which is currently around 50 basis points, we end up at approximately 1.4% for new 10-year bank loans all in. Therefore we should clearly have additionally refinancing potential in the future. Coming to page 12. A quick look at what we think very strong development of the financing metrics. It's not only the LTV that has been reduced over the last years and is meanwhile below 47%. Also, perhaps for us even more important, the cash metrics improved nicely. To give you here an actual number for the first quarter 2019, the ICR now strongly about 4 times at 4.6 times. The net financial debt in relation to the FFO now for the first time below 11 times at 10.9 times.
Net financial debt in EUR per square meter at a very low EUR 446 per square meter. Our valuation in the portfolio is unchanged at EUR 940 per square meter, which is from our point of view clearly conservative. Applying the current FFO of below 47%, this ends up to the EUR 446 per square meter, which is as far as we know, definitely the lowest net financial debt per square meter within the TAG group. On page 15 of the presentation, we give a split of rental growth and our CapEx allocations, starting with rental growth I already mentioned. The total rental growth including vacancy reduction increased from 2.6% now to 2.8%. The basis like-for-like rental growth is unchanged at 2.3%.
It's also unchanged, its split of this basis like-for-like rental growth, as you see in the small chart on the left. So rent increases for existing tenants from the [Mietspiegel] , for example, was 1.3%. The effect from tenant turnover was 0.9%. The modernization surcharge, so that means modernization programs for existing tenants, as in the previous years, still at 0.1%. This is clearly an outcome or result of our modernization strategy. As you know, the very largest part of our CapEx comes through vacancy reduction and not through modernization programs for existing tenants.
Therefore, if you look on the bottom right of page 15, it's perhaps not surprising that the largest part of our CapEx and maintenance growth in the first quarter and in the previous year to regions where we have higher vacancy in the quarter, in this case, especially the Chemnitz region, with a share of 20% of the total investment from the portfolio. Looking at the total investment, maintenance, and CapEx development in EUR per square meter, you see this in the top right of page 15. You see that we are in fact unchanged. Analyzing the numbers from the first quarter of 2019, we end up at EUR 19. That's actually comparable with the EUR 19.20 from 2018, and we expect to be this number in this region for the full year 2019.
On page 16, we see the development of vacancy rates, as I already said, slightly increased from the integration of the newly acquired properties that have, of course, a higher share of second apartments. It was more than 12% average vacancy rate that we acquired last year. Therefore, the development very comparable to what we saw last year, where we saw an increase in vacancy rates, a slight increase in the first quarter, and then the vacancy rate decreased in the upcoming quarters. That's also what we expect for 2019. Some final words on page 18 on the guidance. First of all, the guidance for the financial year 2019 is unchanged. The midpoint of the guidance is in absolute terms at EUR 155 million. If you look at the results for the first quarter of 2019, it's EUR 39.5 million.
We're absolutely on track, the guidance looks absolutely manageable. Remember that we have included disposals in our guidance, perhaps this is worth to make it a little bit more clear because we received here some questions after the full year conference call. You see that in the first bullet point that the guidance assumes, first of all, as always, no acquisition. Secondly, planned disposals of 2,100 units. These disposals lead to a total FFO reduction in the guidance of approximately EUR 3 million. We assume the closing of these disposals in the middle of the year, in June 2019. 719 units are already sold. That disposal that we published with the full year figures signed in December and closing as planned in June. Out of the 2,100 units, 719 units are already sold.
The 2,100 units or more include, as always, as in the previous years, 500 units from our ongoing development business. We will do the remaining part of these mainly non-core assets. What is left after the 2,100 less the 719 less the 500 in smaller parts. What we have seen is that we have here a lot of locations that we bring to the market, therefore it is perhaps the most likely and the best way to sell it in smaller parts. That should happen as our view, the expectation during the course of the year 2019. Anything else is unchanged. FFO I, as I said, at EUR 155 million. The dividend per share is for the financial year 2019, unchanged at EUR 0.80. We're paying out now the dividend after the AGM next month in May of EUR 0.75.
A dividend, which is, by the way, tax-free and compared with today's share price, that's a 5.5% dividend yield, which we consider, especially as it is tax-free, is a very attractive dividend yield. That's it from my side. A short overview about our first quarter results. Of course, I'm now happy to take your questions.
Ladies and gentlemen, if you'd like to ask a question, please press 9 followed by the star key on your telephone keypad. If you wish to withdraw your question, please press 9 star again. Please press 9 star now if you'd like to raise a question. The first question for today comes from Manuel Martin. He's calling from ODDO BHF. Over to you.
Good morning, Mr. Thiel. Just two questions from my side. One is a bit to refresh my memory. Could you remind me who were the sellers of the 2,500 units approximately, which TAG bought end of 2018?
Yeah. Good morning, Manuel. Looking at the disposals, I would say from the last three years, we have not one typical seller. Of course, we cannot disclose the names. Basically, I would say there are two types of sellers. Generally, these are private persons with larger real estate portfolios, as well as institutional sellers. The two types of sellers are, on the one side, sellers that are perhaps limited from a financial perspective. Then that's, of course, not easy if you're operating a portfolio with high CapEx rates. What you clearly need to do is to do modernization work and to modernize apartments, not a luxury modernization, but it helps in that.
This needs to be done, in most cases, especially at the beginning, in a first step, in full from the beginning. This is for us, as a listed company, not really a big issue. For, especially a private person or a smaller company, not always possible. The second type of seller is the type of seller that has enough cash, but is perhaps not the asset manager. For example, private equity companies sitting not directly in the regions where the properties are. That's what we think is very important if you really want to reduce vacancy, that you are close to the market. Therefore, that's our advantage that we have, that we combine on the one side, the financial power of a listed company, and the other side, really a very decentralized and very local asset management. There is not one typical seller.
There are these two groups, and within the groups, I would say, there are really different parties or sellers.
I see. Okay. My second and last question. There's a lot of discussion going on around Berlin, expropriation, et cetera. Do you experience any spillover effect to your locations on what's going on in Berlin?
Mm-hmm. Not a extreme trend in the last weeks since this discussion came up. We clearly see this spillover effect in our Berlin commuter belts, I would say, since the last two years, even three years. If you look at our like-for-like rental growth in the Berlin region, which is a Berlin portfolio, or a portfolio completely consisting of Berlin commuter belts or cities in Brandenburg and not in Berlin city, you will see that the like-for-like rental growth without CapEx programs, without vacancy reduction, was on average around 3.5%. We already see this spillover effect. Perhaps there will be an even stronger spillover effect if we see further regulations in the large cities like Berlin, and on the other side, no rent regulations. For example, in cities like Brandenburg or now in Ostkreuz or even Freiberg where our portfolios are located.
It's just a short period since we had this discussion. Generally, yes, the spillover effect, if this will come in the future from this discussion about expropriation or from further rent regulations, could be likely, but not really observable at the moment.
Okay. Thank you very much.
Thank you. The next question comes from Kai Klose, calling from Berenberg. Over to you.
Yes. Good morning. Just a quick question on the CapEx elements. As you mentioned, Mittelpunkt and Chemnitz. Could you indicate a bit about the volume and the type of investments you are doing there? I am just asking because in the last year you have been investing there already. Maybe you can give an indication how that has been progressing and also when you expect what additional spend contributes to positively on your CapEx there. Thank you.
Yeah, thanks for the question, Kai. Chemnitz is a region where we are very optimistic to reduce this. Interestingly, in the Chemnitz region included is also the quite small city of Döbeln, with a bit more than 20,000 inhabitants, which was, in the past, not really, let's say, the top location of the portfolio, but developing extremely positive in the last two years. Therefore, the CapEx programs also include a larger part, what we call Quartiersmanagement. For example, in Döbeln, we also built a small supermarket. Not because we want to achieve an extremely interesting return from this small supermarket, but this helps, of course, the quarter of the city to develop because it is attractive for tenants if things like what you need for your day-to-day life are available just around the corner.
There are a lot of programs, and this refers more to Chemnitz, for it is not a nursing home, it is more the idea of make it possible for elderly people to stay longer in apartment. When we for example modernize a full apartment block, and in the basement of the apartment block, we have a kind of nursing service, which is not our own service, but something external where we have a cooperation with. Very targeted programs, for example, for elderly people and in the case of Döbeln, more targeted programs for younger families.
Thank you.
Sorry, just to add this. The volume should be comparable with last year's volume in Chemnitz. Chemnitz is, besides Gera, definitely again 2019 the region with the highest CapEx because we have here nearly double-digit vacancy rates, and we should expect a reduction of the vacancy rate in Chemnitz, which was 9.6% at the beginning of the year, definitely more towards 9% or even lower during the course of the year.
Yeah. Thank you. That was to be my second question. Is it reasonable to assume that we might see a bit of a stronger vacancy reduction in both regions in the next year, once we have completed this, CapEx management activity.
It should already take place in the second half of 2019.
All right. Thanks a lot.
Thank you. If anybody else would like to ask a question, please press nine star now. Please press nine star now if you'd like to raise a question. Our next question comes from Thomas Rothäusler. He's calling from Jefferies. Over to you.
Hi, good morning. Just a question on refinancing. Can you give us a rough idea, rough schedule of what we can expect in the near future and what you have considered in the guidance?
Good morning, Thomas. First of all, in the guidance, there's not assumed any additional early refinancing. Guidance just assumed refinancing the bank loans to hand you. Any early refinancing of debt would lead to a higher FFO contribution in 2019. What you should perhaps not expect is a very large refinancing exercise. I think we have done this in 2017, in 2018. Looking at the current interest rates development, of course we have very attractive low rates and we don't expect that these rates pick up in the next months very extremely. Therefore, our strategy that we followed in the past, sitting as close to the maturities as possible to avoid higher breakage fees should also be something that makes sense for 2019.
Let's see how this develops during the course of the year. It could also be the case that we need to have a little bit more than necessary when we are refinancing acquisitions. I shouldn't expect EUR 400 million maturing bank loans in the next few years to be refinanced in the next month.
That's more topic for 2020 efficiently than you probably know.
That's a fair assumption.
Thank you.
Thank you. I'll repeat one more time that if any participants would like to ask a question, please press nine star. Please press nine star if you'd like to raise a question at this time. Mr. Thiel, it looks like we don't have any more questions for today, so back to you.
Yeah. Thank you, operator, and many thanks to you all to listening to our call. As always, if there are any questions left, please feel free to contact me or the IR department. We're happy to answer this. Have a nice day and bye-bye from Hamburg.