Dear, ladies and gentlemen, welcome to the Q1 2020 Results Analyst and Investor Call of Innovia SE. At our customers' requests, this conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. I now hand you over to Rene, who will lead you through this conference.
Please go ahead.
Thank you, Alexandra, and welcome to our earnings call for the Q1 of 2020. Your hosts today are once again CEO, Rolf Buch and CFO, Helene von Roeder. The 3 of us are gathered here in a conference room in Bochum, of course, mindful of social distancing. I assume you've all had a chance to download the Q1 presentation. In case you have not, please go to our website and you'll find it under Latest Publication.
Rolf and Helena will lead you through this results presentation on the basis of the agenda on Page 3 of that presentation. And of course, we'll be happy to answer your questions afterwards. So let's get right to it, and let me hand you over to Rolf.
Yes. Thank you very much, Rene, and also a warm welcome from my side. We had a good start in this year as expected and as boring as all quarters. Organic rent growth was up 3.9% year on year for all 4 segments, and all 4 segments contributed to EBITDA total growth, which in total was €456,000,000 This is 6.1% more compared to Q1 last year. FFO increased by 10.5 percent to €335,000,000 on a per share basis.
Group FFO was up by 5.1%. There was no portfolio valuation in Q1 as always. So adjusted net asset value per share did not move much and is up 0.6% to EUR 52.23 We plan, as normal, the next portfolio valuation at the end of Q2. Market observation suggests that there is no material COVID-nineteen impact in our asset class. And assuming that trend continues, we expect a fair value growth broadly in line with H1 last year.
Of course, except for Berlin, where prices have remained flat, this flat this should not become should not come as a surprise given the unresolved situation with the rent freeze now firmly in place. If we ignore the burn in effect, the total fair value cost for the rest on H2 is expected to be broadly similar to H1 twenty nineteen in local currency. As per March 31, our LTV was 43% and our debt to EBIT multiple was 11.8. You will all have seen our new AGM date of June 30. We do not expect to see a substantial easing of corona restriction until then.
So the meeting will most likely be a virtual one. We have tried to do it in physical, but I think it is most likely that it will be virtual. To be very clear, our dividend proposal of €1.57 remains unchanged. And finally, the guidance for this year. We have done a SO bottom up forecast based on all what we know, and we are very confident that we will be able to achieve our original guidance, including EBITDA and FFO with one exception.
Because of lower fluctuation and because of delayed completion of some investment projects, we now expect our organic rental growth to be around 3.3% to 3.8%. The delayed completion is obviously a timing issue and the fluctuation will be probably tick up again after corona, so the decline in rental growth should be temporary. And with this, I hand over to Helene.
Thank you, Rob. Q1 was pretty uneventful, and we think that is a good thing in our business, especially these days. Our portfolio was 5% larger in terms of units, and that resulted from in 6.1 percent adjusted EBITDA total growth and 10.5% group FFO growth. Because of the higher number of shares, the group FFO per share was up 5.1%. So let's talk about the individual segments and start with the rental segment on Page 6.
Rental income increased by about 12%, predominantly including resulting from Hemla and also organic rental growth. Maintenance expenses were €79,000,000 which is in line with our expectation and not a bad proxy going forward. Operating expenses are impacted primarily by 2 things. The first is obviously, HEMBLA. As you know, we are in the process of putting the operations of Victoria Park and HEMBLA together, Hemblad together.
But at this point, we still have dual functions for most positions, and the synergies will only start coming through later in the year. The second reason is one that you will be familiar with at this point. The Swedish rents include ancillary expenses, so we have to show them both in rental income and in operating expenses, and that impact is even bigger now because of Hemble. It is obvious that in terms of cost, we remain on the right track if you look at our operations margin in Germany, which has increased to 78.2%. To those of you who compare this across the peer group, please bear in mind the very different maintenance levels.
Page 7 shows the main operating KPIs for the rental segment. Organic rent growth was 3.9% year on year, of which 1% came from the market, 2.3% from modernization and 0.6% from new construction. Vacancy remains very uneventful at a low 2.8%. Maintenance expenses were in line with last year. Capitalized maintenance were higher than last year, as expected because we have budgeted and planned for a number of targeted larger scale measures this year.
And with that, back to Rob.
So then let's move to value add segment on Page 8. The adjusted EBITDA came out at $37,200,000 and was almost 4% higher than last year. As I'm sure you know by now, this business does not change much from 1 quarter to the next and is more steadily growing addition to our rental business. While we are continuing to roll out our values value add strategy to a bigger part of the portfolio, we did have a decline in our external income Q1 this year. Part of that line item is a residential environment service you also see on the right hand side.
Because of the extremely mild winter and the absence of snow during the whole year, we had hardly any turnover from snow removal and de icing of sidewalks. So this explains the deviation. On Page 9, we show the result of the recurring sales segment. We sold 760 individual apartments sales segment. We sold 760 individual apartments for a cost proceed of $108,600,000 The average sale price increased by 6% year on year.
The fair value step up was 36.8% on average and in line with the prior year period in spite of a higher basis due to revaluation. All in all, recurring sales contributed 20 $6,400,000 of adjusted EBITDA. As a side note, outside the recurring sales segment, we sold almost 287 non core units in the Q1 with a fair value step up of close to 36%. To us, this is always a good indicator for unbroken strong demand through Q1, also including the disposal of a commercial unit. Back to Helene.
And finally, our Development segment on Page 10. The segment includes all new constructions of apartments by way of entirely new buildings, so excluding additions of floors on existing buildings. We distinguish between development to sell and development to hold for our own portfolio. The bottom line adjusted EBITDA was $11,400,000 in Q1 2020. This part of our business is less linear than the rental or the value add business.
So 1 quarter can be a bit different from another one as you can see in this very quarter. The volume for To Sell and To Hold was down, which impacted both the top line and the operating expense. The operating expenses were further positively impacted by the reversal of provisions that are no longer needed. The EBITDA was $11,400,000 and probably comparatively low based on what we expect for the remainder of the year. Page 11 has more color on our new construction activities.
We completed 122 apartments to hold for our own portfolio in the Q1 and no apartments to sell. But you already saw on the previous page that Q1 2020 was a slow quarter for our development activities. In our construction to hold, we now have identified potential for around 41,000 apartments based on the opportunities in our portfolio today. For 2020, we expect to deliver around 1300 apartments. The development to sell part is a useful addition to the 2 whole developments.
As I've explained before, we often rely on the higher margin from the Tussaud project to cross finance the land costs and make to hold developments more economically feasible. The pipeline for to sell is approximately 8,500 apartments. Our target for this year is to complete more than 300 apartments to sell. With that, on to Slide 12, the adjusted net asset value. The adjusted net asset value at the end of Q1 was EUR 50 €52.23 and was 0.6% higher than at the year end of 2019.
We do expect to revalue our portfolio as per June 30. And as in prior years, we will include approximately 2 thirds of portfolio via the 26 largest and most dynamic German cities, plus Sweden, plus Vienna. We continue to see meaningful value growth across all our regions except for Berlin, where prices have been flat, which we attribute to the continuously high level of uncertainty in Berlin. Not only is the expropriation debate still alive, but also the rent freeze is in place, while it is still unclear when the federal constitutional court will decide and exactly what the ruling will be, and the role of professional listed property owners is unclear in Berlin at this point. Unsurprisingly, this is having an impact on the transaction market, which has been all but dead.
With regards to COVID-nineteen, the market data we have seen so far does not show any impact. We will continue to closely monitor the transaction market, but assuming that there will be no material impact from COVID-nineteen by the end of H1, we expect the fair value growth broadly in line with H1 last year. H1 20 nineten like for like growth was 8.4 percent in Germany, 3.4% in Sweden and 3.8% for Vienna. To Page 13 and the LTV. Our LTV at the end of Q1 was 43.0 percent, so ten basis points below the end of 2019 and well within our target corridor.
We continue to believe that the range between 40% 45% is the right level for us, especially if we include the roundabout 8 year duration of debt and the fact that 96% of our liability side is fixed or hedged. The net debt to EBITDA multiple was 11.8 times for Q1 2020. While this is a bit elevated from the end of last year, we still think that it's at a reasonable level, especially if you consider for this number includes already the full debt, but not the full EBITDA potential, which is normal in a growing business. So we're not concerned. Page 14 gives a bit more color on the capital structure and debt instruments.
Interest cover ratio is now 5 times and thus very healthy above the minimum levels required in some of our debt instruments. Almost all debt is fixed or hedged, so any interest rate increase would affect our numbers only slowly as no more than 13% of the total debt become due in any given year because of our smooth maturity profile. You all saw the 2 bonds we issued a few weeks ago. Of course, that was at slightly elevated spreads than before corona and even since spreads have come down a little bit. But for us, it was very important to further derisk and to demonstrate to the market our strong access to liquidity even in adverse market circumstances.
The impact on our average interest rate is in the 2nd decimal. It gives us enough liquidity all the way until December when we will look to refinance the €750,000,000 bonds that has a 1.625% coupon. Page 15 is a page that we haven't shown for a long time. But given capital markets turbulence in the wake of COVID-nineteen had some people worried about our covenants, we've moved this page into the main part of the presentation. However, as you can see, there's clearly nothing to worry about.
We are a long way away from all of the required levels. Page 16, in the same vein as for the covenants, we've added another page to demonstrate why we are very relaxed about our financial situation. 1st, we have ample liquidity. In addition to a stable cash flow that easily covers our operating business expenses, we also have the funds we recently raised from the bond market plus the EUR 1,000,000,000 commercial paper program. 2nd, both the unsecured bond market and the secured financing market remain wide open for us.
3rd, our BBB plus rating from S and P and our A- rating from Scope are very safe, each with a stable outlook. And finally, interest rates remain low. And it appears that financing conditions, while elevated under corona, have begun to improve again. And with that, back to Ross.
Thank you, Helene. We have issued 3 releases especially with regard of what COVID-nineteen means for our business. Let me update you on where we currently stand. Our rental and value add segment are proving to be very robust. This is not a surprise.
We see fluctuation going down, but demand remaining very strong with more than 5,000 inquiries every day. So far, roughly 1% of our tenants in Germany have contacted us because of COVID-nineteen financial hardships. And in each case, we have found an amicable and pragmatic solution. The financial impact of this is immaterial. Very importantly, the April rent collection was in line with the months before corona and showed no meaningful increase in the default ratio, which is not a surprise.
Even if somebody is coming into problems, this is more a timing issue than an issue that he cannot pay his rent because the security net in Germany is very safe. Nobody has to leave his apartment because he cannot afford the rent. So the cash flow profile for this company is actually not long term impacted by corona. It might be effect from 1 month where the first tenants are not finding the right solutions to get the rent, but we can help them. So there is no material impact for the cash flow.
The imbalance between supply and demand stays actually stable because the death rate in Germany is very little. So all the underlying phenomenon still the same. Of course, in corona, we see some modernization projects, which are experiencing delays because we have some more time we are losing some time in the construction space. We expect to see small impact on our value add business from our Craftsman organization in this respect. In the recurring sales segment, we continue to observe strong demand for our condi units, and we think the impact of adjusted EBITDA contribution will be small.
While some notarizations will shift to a later point in time, we do see that our largely digital back office processes enable us to continue to run the business mostly as before. And finally, development. Here, we see some delays in project completions. Again, this is a construction part. And part of what we have planned for 2020 will move into next year.
Of this is but so this is a purely timing effect. So overall impact of the 2020 adjusted EBITDA should be small. Keep in mind that in our Development business, we have nearly no meaningful commercial development. That's why this is purely residential development pipeline. All in all, we are proud to see that the scale and the depth of our operation gives us a relative advantage over smaller players and enable us to continue operations, which is fully which are fully digitalized with very little interference from COVID-nineteen.
But obviously, COVID-nineteen is much more than it means to the number, and this is Page 18. In a way, COVID-nineteen somewhat crystallizes the responsibility we have. We employ 10,000 people and own more than 400,000 apartments. That's about 1,000,000 people to call their homes. This home is probably more important for them right now than it was ever before.
So COVID-nineteen lifts stakeholder responsibility for us to a new level, and we have been mainly focusing on 3 areas. First, our employees. We have implemented flexing working flexible working hours, home office solutions and other initiatives to give our staff the flexibility they need in these difficult times. Those that cannot work from home, of course, has been equipped with necessary protective gear to make sure that they are safe. 2nd, the service and infrastructure for our customers.
We run a mass operating business with 1,000 of touch points with existing and potential customers every single day. So it is crucial that we are able to continue to provide the best in class service. This also includes our ability to continue with our repair and maintenance services, which is fully operational. And finally, people we are looking for new places to live, and we are making sure that we can show them our apartments either in person or virtually. And third, our customers.
We are helping tenants in financial trouble, and we have put rent increases on ice for now to help our customers through these different times. And while we continue to manage the COVID-nineteen crisis for as long as it takes, we are also aware that the long term megatrends that housing markets faces are even more forceful because of corona. We cannot afford to slow down in our efforts for new construction, energy efficient modernization, CO2 reduction and preparing more apartments for the elderly. On Page we are now on Page 19. So while Corona will continue to dominate the headlines for a little bit longer, The efforts in fighting the pandemic and dealing with these consequences must not distract us from the long term challenges and given opportunities.
We drafted Page 19 before corona, but everything on this page is relevant in the current environment and will continue to be relevant long after COVID-nineteen is history. So we have said many times before, we see 3 dominating megatrends in our markets: urbanization with supply and demand imbalance energy efficiency and CO2 reduction and demographic change with an aging population. Our building is built for managing these megatrends. If we get it right, this will provide support for many, many years to come. The key success here is a careful reconciliation of stakeholder interests.
Our product is not a commodity like any others. And while we run a for profit business, this can only be successful in the long run if it is to the benefit of all stakeholders. Similarly, we can only be part of the solution and provide benefit to all of our stakeholders if we are economically successful. And that requires a long a strong performance in all these areas of ESG. While we can always do better, I think it is fair to say that we have been making good progress lately on this front.
Let's go to Page 20. Our 2019 sustainability report will be published at the end of this month, and it will be a good source of data to demonstrate our progress. Similarly, we have been stepping up our efforts in participating in various sustainability rankings to make sure that our achievements are more actually reflected. I have to admit, we probably neglected this point, and I personally reconnected this point in the past. We recently appointed a Sustainability Director who reports directly to me.
Among the main priorities for her are the further development of our ESG strategy, including a road map and developing a step plan in compliance with the Paris Climate Accord and for achieving CO2 neutrality by 2,050. We are looking forward to updating you as we go along, including the initiatives research towards energy efficiency that we have been conducting. With this to the guidance.
So on Page 21, you see our reiterated guidance for 2020, which is unchanged except for the organic rent growth line item. We took it down 20 basis points because of lower fluctuation and delayed completion of some of our investment of the range, but it is actually pretty binary. If rents in Berlin must be reduced to 120% of the rents ceiling in November, And it looks like this at this point, we expect to come out at the low end of our rental growth guidance. Similarly, in case rents are not reversed in Berlin, we expect to come out at the upper end. Everything else in the guidance is unchanged and confirms the confidence in our business even in this challenging environment.
With that, back to Rob.
Before we get to the Q and A, let me summarize the main points as you can see on Page 22. We had a good start into the New Year. This should not be a surprise. Our business is boring in a good way, and it remains predictable even under COVID-nineteen. Helene just showed you the guidance and nothing has really changed.
COVID-nineteen really does not attack our top line and that's why not the stability of the business. We are living in highly unusual times. And here at Vonovia, we feel a particular responsibility for our 10,000 employees and for our 1,000,000 customers. Every single day, we make sure we live up that responsibility. And finally, I want to emphasize again that while COVID-nineteen is a number of one priority right now, the long term megatrends remain.
Managing them successfully is more important than ever, and Vonovia will be sure to continue as a leader in finding solutions to the benefit of all stakeholders. Back to Rene.
Thanks. And I will pass it directly to Alexandra to kindly open the Q and A for us, please.
So now we will begin our question and answer session. You. The first question is from Chris Fremantle of Morgan Stanley. Your line is now open.
Yes, good afternoon. I just have a small question on the rental growth. I appreciate the guidance that you've given for 2020. You've talked also about in previous occasions, you've talked about the lag between modernization spend and the impact of that spend
on rental
growth coming through in future years. So my question would be, how much of an impact will the delays you're hinting at here affect your the organic rental growth for 2021? Any help you can give us on the quantum of that impact would be helpful, I think. Thank you.
So Chris, the way we look at it is like the key impact is that we couldn't get construction workers onto our construction sites. In Austria especially, there were a few weeks where the construction sites were closed because people couldn't adhere to the health construction sites up back up again? But it's not really that meaningful.
So we could be talking tens of basis points again for an impact or something more than that?
Hard to give you numbers. I'm really thinking more in months. So we had 7 weeks of lockdown. So it's like 2 months, 2.5 months. That's what I'm right now sort of like estimating.
Okay. That's helpful. Thank you.
The next question is from Jonathan Karnetour of Open Sachs. Your line is now
open. Good afternoon. Thanks for taking my question. Two questions, if I may. Can you hear me?
Yes, we can hear you.
Okay, great. So the first question, perhaps in same line as Chris. I just wanted to understand, currently, you're saying that you are not increasing rents for your tenants in the COVID environment, which obviously very sensible. Can you help us understand also if you expect that, that will have an impact in 2021? And for how long you would expect that to be in place?
So that's the first question. The second question is
more Can we do question by question? Can we do question by question? Because then I don't forget the first question. So probably the first question to answer. So you know the German law gives us a time frame.
So German law says that until June, the rent can be postponed, so 3 months from the law. So this means I think it is fair to say we have not declared it publicly, but it is fair to say that this also gives a corridor how long we do not send out in rent increase letters. Later the year, we will definitely send out this rent increase letters. So we are losing probably some rent increase for a very small period of time. That's why it's not meaningful.
To not send out the rent increase letters, we just see fear that in a moment where people are hot and panic because of COVID, we should not add a rent increase letter on top of it. We are not saying that we are stopping rent increase. We will continue to do rent increase because it's our right to get it and it's fair and it's modest. And this is the same for modernization. So we are just doing it a little bit later.
So in the like for like and increase in the end of the year, it will not have an impact.
Okay, fair enough. That's very clear. The second and appreciating that there are large cities and sometimes smaller cities. So the question may be different for 1 or the other. But how do you think about urbanization in a COVID environment?
I mean, you're obviously personal sentiment here, but are we peak urbanization? Or do you think people in Germany would imply about coming to cities and would perhaps try to work more remotely going forward to commute or anything?
No, I think we are not talking here about in New York, I mean, in Germany, we don't have cities like New York. So this is really mega cities. So we have bigger cities with also what we call cities is also the urban environment around the cities. So this is the and there I think there is no reason why people should not live there, especially keep in mind that medical treatment, which is probably showing for the people this is very important. I think Germany is good in it.
But of course, Germany is good in it in the big cities and not in the outside the big cities. So there might be arguments saying if you are closer to a medical hospitalization, a city is better. We also don't see that the hotspots for COVID-nineteen are necessarily in the cities. So the hotspot was which was in the media, I don't have a detailed analysis, was actually small towns outside the big city, Heinzburg, for example, or a beer brewery town in South Bavaria. So there is no indications that COVID-nineteen is more in the big cities.
But I think the mega trends, which pushes the people in the cities are beyond COVID-nineteen. I've always talked about it. It's the young people who wants to live in an environment. And if you talk, I'm again using my daughter, she is getting fed with the situation that she has to sit together with her parents in Gutersmohr. I can tell you, she will be the trust, but who will move against the city backwards.
Taking about the old people, I think the medical treatment is a very strong argument and it will get stronger and not weaker. And then the double income people with value education for them actually they have no chance, but they have to live in the big cities. So the fundamentals of urbanization stays the same, at least in Germany. I'm not talking about mega cities like Mumbai or Peking or whatever. But in the German urbanization trend, I don't see any change.
Thank you, Jeff. And by the way, if there is a change, we have so a big lack in demand in supply in these big cities, change must be really massive to change the parameter for our business.
Fair enough. Perhaps one last question. At the federal level, how do you see the current situation impacting the debate for politicians around what to do with housing, I. E, more regulations or more development, whatever it can be. Have you sensed any change in the regulation debate due to COVID-nineteen at this stage?
No, I think the only reaction on COVID-nineteen was typical for, I think, the reaction of the whole German government reacted to COVID-nineteen up to now, which I think was a good reaction up to now, was to ease the access to people to social welfare for housing. So there was massive easing because there was one group which was actually not well protected by welfare, which are the self employed people with a high salary. So engineer, artists. And they because of the COVID-nineteen, they lost their salaries immediately. From a good salary to 0.
And these people are not experienced of asking for welfare. And I think there was a low process, which are actually also a big part of the 1%, which called us, by the way, because they just don't know how to get to the system. And I think this system was eased, so the access is much simpler. And so these people will find easier access for temporary help to pay their rent. So this was the way how Germany actually reacted.
I think the debate which we have now and which I am pushing is that it is so definitely we will get massive public money into as a system to rebuild the country. And I think Germany can also afford it. So the state will spend a lot of 1,000,000,000 of money, not only to save us, but to rebuild it. And we have to make sure that this money goes into the right directions. So to be very clear, it is important to put this money in environmental sustainable investments and not in conserving the old ones.
So in my industry, we should not get subsidies for new oil heating systems, but we got we should get subsidies for more innovative heating systems, which are coming for renewables. That's why I think we as Vonovia, we have started before COVID-nineteen to invest in research and building up these renewable heating systems. I have the expectations that we will get help in this. And of course, we are pushing for this because I personally think that in a few months from now, politicians will stand up and will decide where we can spend money. And I think then the solutions has to be there.
And I think we as an industry, we have to bring solutions to the table that they can pick it and say this is good because this is sustainable.
Okay. Thanks. Very interesting. So just to confirm, no increased debate from the politicians about perhaps capping rent at the more federal level?
No, this doesn't make sense at all at the moment. We have this rent cap discussion, which is still in Berlin. Unfortunately, to corona, there's still not the abstract to normal control cargo in front of the court in Karlsruhe, which is a little bit surprising, but I was told that it will come soon. So I expect it coming in this month. But there is, of course, a small delay.
That's why I think Helena said that this is why we have to calculate most probably that the rent reduction in November will really take place because it's now very short to November. But we also see that in all the rest of the country, I think everybody is looking on what happens in Berlin, if they are looking at all at rent regulation at the moment because they are very busy rightfully with COVID-nineteen.
All right. Thanks very much.
The next question is from Kai Klose of Berenberg. Your line is now open.
I've got 2 quick questions. The first one is on Page 6 regarding the profitability and the merger or merging the operation of Hemla and Victoria Park. Could you indicate of which periods you expect these operations to be merged? I would expect for the full year for this year, but maybe a bit more precise. And the second question would be on Page 6 regarding the split of the organic rent growth.
You had 60 bps from a new constructions after 20 bps a year before. Could maybe just indicate on how many newly built units this refers to? Yes, it would be my 2 questions. Thank you.
So I think for the first question, it's relatively easy. We are planning in the moment to get the systems integrated in the end of the year 20 20. For this, of course, it would be most ideal to be able to travel from Stockholm to Malmo because the Victoria Park team is in Malmo and the Hemla team is in Stockholm. So in the moment, we don't know what happens in Sweden. If there will be a lockdown in a fully complete lockdown in Sweden after summer, this might lead to a smaller or to a later merger of the systems, which is, of course, for the EBITDA 2020 not meaningful at all.
But we don't see any fundamentals. This is just a delay. What I think we will see the whole year is due to COVID-nineteen, we see some delay but not change in the fundamentals.
Okay. And then looking at the second question, which is sort of like how many apartments does the $600,000,000 rent increase relate to? So ultimately, given it's a year on year number, it is the 122 apartments we mentioned on Page 11, plus those apartments that we have constructed over the preceding 9 months. And right now, we're just looking at each other. We don't have that number at hand, and we'll deliver it later.
Perfect. Thanks so much, Amit.
The next question is from Thomas Neuhold of Kepler Cheuvreux. Your line is now open.
Thank you very much for taking my questions. I have 2 minor questions. The first one is on this 1% of tenants contacted you for COVID-nineteen hardship. What are pragmatic solutions? Does it mean that the rent payments are postponed?
Or are you also granting rent reductions in some cases? Can you give us some color here, please?
So keep in mind, we have sent a letter to all our tenants telling them that we are available for discussion if they have problems. So that's why I think you have to take also the 1 percent in respect to this because we sent them a letter. It was not them contacting us first. I think a lot of them just wanted to know what happens. A lot of them was actually in the group of people I mentioned, which were not experienced with social welfare.
So the help is just telling them how they can get to social welfare. And a few of them have really financial problems. This also is related to the fuse commercial business, which we have in our business, which is not meaningful, but they are of course the percentage is higher. And this might be the solution of they pay the rent later after 3 months, they pay in an installment of the next 10 months, 12 months. But this has not a standard format.
But it is not it doesn't make any difference in our business.
Okay, understood.
It's a small percentage of the 1%, which really have real problems.
Okay. And the second question is on your
I think the 1% is a different signal, which I think is also important for you. And that's why we are mentioning it. It's for the politicians because the politician can see that the social welfare net in Germany is pretty stable because otherwise the percentage would be higher.
Okay. The second question is on the development to sell pipeline. I noticed that it is up roughly €400,000,000 compared to the end of last year. So the increase is roughly 10% compared to the end of last year. So the increase is roughly 10% in value.
However, the number of apartments increased by roughly 20%. Can you provide some more details on the new projects you added here, the pipeline which seemed to have lower selling price than the rest of the portfolio?
Yes. So predominantly, the effect is driven by the acquisition of Bimris. Remember, we announced it in the last call. And then on top of that, we have been buying a few additional small slots, which also included development of sales.
Okay. Understood. Thank you.
As there are no further questions, I hand back to the
speakers. Thank you, Alexandra, and thanks everybody else for joining. As a reminder, our H1 2020 results will come out on August 5. Until then, we'll be engaging quite a bit, obviously virtually for the time being. And our financial calendar on Page 50 of today's presentation shows our planned activities and the most up to date version of it is always online on IR website.
As always, feel free to reach out to me or the team with any questions or comments you may have. We're looking very much forward to staying in touch. That's it from us for today. Have a great day everyone and stay healthy.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect now.