Good morning, everybody, welcome. Welcome to the results presentation of NEPI Rockcastle for the year, for a pretty good year of 2022. It's my pleasure to have you all here, not only here at the JIC in Joburg, but also if you're online behind your laptops or just by phone. Thank you for joining us today, and I think we move right into the presentation of our results. Well, NEPI Rockcastle is still located in CEE in total. Very strong region. I think that has been proven another year in 2022, and we are growing in this region. We are growing by operational results, but also with the acquisitions we did by the year end. It proves that NEPI Rockcastle is the strongest player of retail real estate in the entire region.
We are delivering on our strategies, ladies and gentlemen. When we look at growth, I think the most important number for our investors is the growth on the distributable earnings for 2022. That's why I put it actually on top of this page, more or less. We will grow 51.5% versus the year of 2021. I will come to some specifics on this number on the next page. What was this, the main drivers? Main drivers here, obviously, is the turnovers of our tenants, so the performance of our very strong assets in these markets. A plus of 31.4% on turnovers has been obviously driving our business throughout the whole year. Actually, the first quarter, obviously, was still a bit under the impression of COVID restrictions.
Starting with the second, third quarter, it was amazing to see how customers came back into our shopping centers, enjoying shopping, and especially that the ticket per visitor went up dramatically. That all led to a 17% higher NOI, which is actually a record number for the company in its history. At the same time, we are delivering on our strategy when it comes to our developments. We have 240,000 square meters currently under construction or in permitting phase, which we will deliver actually until the year 2025. A lot of it comes already this year in 2023. The pipeline is in total EUR 677 million. EUR 35 million have been added in 2022 actually to our NOI.
That is mainly driven obviously by the acquisitions that we did in one of our core countries in Poland. When we later on come to investments, we go dig a little bit deeper into where did we allocate this investment and into what kind of assets we allocated this. Sustainability in our balance sheet is a core task for us as a team. After these acquisitions, we are at an LTV of 35.7%. I believe that is still kind of prudent if you compare this to the rest of the market. That has also to do, and Elisa will talk to it later on, with the valuation uplift that we saw in our portfolio on one side.
I think it's still prudent, and obviously our task for the future is to bring it back down below the 35% that we see kind of a hurdle for ourselves. There are no significant debt maturities that are coming up this year. I think as you know this company very well, now our numbers, the next maturity is coming up by the end of 2024 with a EUR 500 million bond that we will replace, and we will start doing this already throughout this year. I mean, we all know in what kind of interest rate situation the markets are currently. Fortunately, we are in a situation that we don't need to act in a way immediately and that we have time, and that we have a lot of liquidity that will help us.
100% of our assets are already now, and that has been an improvement to 2021, are now excellent or very good BREEAM certificated. We really work hard with our new ESG team that we've implemented into the company, to actually meet the criterias that we get also from European Union, following up with the Taxonomy and getting better ratings actually for the future to be bankable, and to fulfill actually the needs that also I think our planet deserves. What does this mean a bit in numbers on the operational side? I already explained EUR 0.5215 per share as distributable earnings, which is quite an uplift. Where does this come from? A part of this is related to the fact that we had a settlement here on the Sonata case.
You know that we had an arbitration case, which we lost, unfortunately, by the beginning of 2022. I was standing here and needed to tell you that we need to reserve EUR 37 million in case we would have to pay that amount. That obviously affected the distributable earnings of that year, of that former year. Now, we told you at the time we will fight this. We went to the Polish court, we appealed in front of the Polish court, put up a new case against it. At the same time, we had serious negotiations with our counterparty, let me call it this way.
I think we came to a really good result by bringing this amount down from EUR 37 million to EUR 16 million, and the difference goes to your pocket. It will go with the next distribution. That's why you see that we're saying, let's have a look at what is the real recurring result of the company for the year 2022. There you see we have an uplift on DPS of 20%. Actually getting closer and closer, let's say, to the best year when it comes to this was what? 2019. Where, why am I saying it's a record year? I think it's a record year because when you look at our NOI, the base of our business, EUR 405 million.
We're even a couple of EUR million above the year 2019. In that year, nominal, we still had a EUR 300 million investment in here of our office portfolio in Bucharest, which was sold. If you look at it like for like, which is pure retail, we have been growing 4.7% versus the best year that we had so far in 2019. EPRA occupancy. Well, what we saw, and I think Marek will talk about it in his presentation. You will see that what we see currently is that a lot of international retailers and local bigger retailers are moving into our jurisdictions.
There is a high interest of retailers to come to Central and Eastern Europe, it's driven by the fact that margins in this region for retailers are more profitable than if you would open a store, let's say, in Germany or in the Netherlands or in France. That's, that's quite simple. These are the... I'm talking about the big names. I'm talking about Inditex. I'm talking about Primark. These, like JD Sports and Nike. They are expanding into our region. We have the ones as well that were suffering by the fact that we have a war on the other side of the border. Big, big groups like LPP, which have lost 25% of their turnovers by moving out of Russia, by moving out of Ukraine. They need to replace these turnovers. Where do they go?
They go to Western Europe, but predominantly they come to us, and we are the biggest player in the region. That's also We have been profiting from this effect, and we could optimize actually here our vacancy, and now we are at 97.3%. I think that's a pretty good result if we look at the times we have currently. Okay, collection rate. I think it's a bit boring because every year we show a 100% collection. Let me not dig into this deeper. I think what is important that, and that's also why you see that retailers are really interested to work with us, that the efficiency, the turnover per square meter, goes up actually by almost 28%.
That is a big driver and a big argument, obviously, when you talk to retailers in these times. It showcases once more the really, the strength of the portfolio, the excellence of the asset. I think also a little bit, I'm looking at my colleague, Marius, of the asset management team of the company. Balance sheet. Well, with the acquisitions, with the uplift in valuation by the year-end, we are looking now at a plus of 13.8% on our value, EUR 6.6 billion. Accordingly, EPRA and NOI per share went up to EUR 6.84, a plus of 5% versus the former year. Unencumbered asset stays at the same level. No increase here. WAULT period, average maturity up to 4.6 years, so no concerns there.
I've already talked about our loan to value with 35.7%. That has to do obviously with the fact that we did additional acquisitions. At the same time, I believe this is still a very prudent number, and we have enough liquidity and resources to finance and to drive our business forward with a lot of innovation as well into the year of 2023. With this, ladies and gentlemen, I have the pleasure to hand over to my dear colleague, Marek, who will give you a bit more detailed insight, especially on how operations have been improving over the last year. Marek.
Thank you, Rudy.
Good luck.
Good morning. It's a pleasure to be here again and present what is the set of the record-breaking results for the group. Before I dive deeper into the numbers, if you were to summarize in a one sentence year 2022 in terms of the operations, I would say that we did manage to combine, you know, the very active, intensive asset management and leasing initiatives in the very supportive market conditions. I think this is what led actually to the performance you can see with collection, vacancy and turnovers of our tenants. Without those two, we wouldn't be able to be where we are today presenting to you what we present.
Now let me take you through the numbers and break down them a bit so we can get the understanding where the growth comes from and what actually sets the tone for our strategy going forward with our properties. First of all, of course, it's all about turnovers. I mean, if we don't have turnovers, we don't have tenants. You can see that there's a very good story to be told there because comparing 2022 to 2019, our tenants generated almost 12% more turnovers. We are comparing ourselves to record-breaking year of 2019, which is a great number. We are not catching up with 2019 levels. We are actually breaking each month the levels of 2019, and that's the way to go.
This is our approach, and this is where we want to take our properties further. When you break the turnovers per quarters, there's some interesting observations over there. You can see that already in Q1, we were almost at the level of 2019. Let me just remind you that last year at that time. Which seems like an ancient history. There were still some countries and properties when one would be allowed to enter only with QR code showing that you've been vaccinated. I mean, it seems for us like history, because a lot has changed over last year. Q1 was still, let's say, in a soft kind of restriction period. Yet we did manage to get to 2019.
After restrictions were lifted, you can see Q2, Q3, Q4, we are way ahead of 2019. One of the theories was that Q2 is actually delayed demand because of the lockdowns, et cetera. Q3 and Q4 has proven that no, that's not the case. The clients actually came back to the shopping centers, and they are spending more time, more money in our properties, which of course is great news. Looking at turnovers, they are of course linked to footfall, and we haven't really reached the number of 2019 yet. We are somewhere around -10% compared to 2019. At the same time, you would notice, and Rudy mentioned, the basket, the average spending increased by 27%, which is enormous number.
Our clients, we see that in our tenants, confirm they spend more time in shopping centers. They come less frequent, they spending more time, spend more money as well, which is a good sign. Another observation, the 10%, 11% of the footfall we lost, we call it the dead footfall. These are non-shoppers actually. Those are those people who just pass by, they don't really buy. I think that those are mainly the footfall that we lost. Of course, we are working hard to get it to 19 and higher. Still, we believe that this set of numbers is very positive and sets the good tone for the future.
Not only have we exceeded 2019 turnovers, this applies to almost all the categories. If you look at the graph on left-hand side, you can see the light blue colors. It shows the dynamics of turnovers of 2021 versus 2019. On right-hand side, you can see the comparison of 2022 to 2019. You can see how different those two years are. I mean, 2022 shows all the categories except for entertainment, showing big increases compared to 2019, whereas 2021 was a difficult year still for us. I mean, the change over year-on-year, 2022 to 2021, those are two different years for operations in a very positive manner. We are very happy to see all of the categories actually increasing, except for entertainment.
This is still a bit of a lag, driven by cinemas who haven't really come back to the full operational capacity that was before COVID. Slowly but surely, the cinemas are getting there as well. We see no category under any threat of not delivering what we expect the tenants to deliver. All the efforts like, well, supportive market conditions, plus all the asset management and leasing initiatives. That's very important to stress out asset management and leasing initiatives because supportive market conditions are important. If you don't have right people doing the right job, you don't get the numbers.
I think this is a huge, huge thank you to the leasing and asset management team because they really did manage to change around the leasing status of our properties. We did manage to get under 3% with EPRA vacancy. This is where we should be, probably under two, but we are slowly but surely getting there. Comparing to 2.1% of 2019, we are getting closer and closer. More importantly, and this is actually the number that we've been very often asked, and we are showing that number for the first time. There is question about how the releasing goes and what is the base rental uplift. We are happy to say that actually there are some good numbers there as well.
If you think about base rental uplift understood as the same unit, physically unit leased to the same tenant upon expiry or to a new tenant, then we are talking about with no physical change to the unit, then we are talking about the increase of 5.7%, and that is above the indexation, which was applied in January 2022, right? The indexation was about 3.5%. If you take the uplift in the rentals, where actually our effort goes and where the teams are actually thinking every day, well, how to make our property better?
Meaning we split the unit, we combine the unit, we change the tenant to better performance, et cetera, et cetera, to get the top of the offering in the market, then we go to as high as 25%. That's remarkable number. Of course, this 25%, I wouldn't, you know, encourage you to underwrite that kind of growth every year because this is very much opportunity driven. This is expiring. One year you can get higher, one year you can get lower. This only is a sign of, or proof of what I said before. We did manage to take the opportunity of supportive market conditions to get to as high as 25%. Now when you look about the number on blended basis, to take them to together, then we are at 8.7% above the indexation.
I think this is very important because this 25%, actually, this is where we spend most of the time, and this is where CapEx go. This is how we spend money, and this is how this money works for the investors. We are very happy about that. Importantly, this is 10%. Last year it was 10% of our GRI. It's not massive. It does not move that much neither. You need much more to steam the growth. Without that, we wouldn't be able to get the numbers right. I got a comment already that it's 5.7%, but actually inflation in Euro was 9.2%. That is inflation for 2022. We are talking about indexation in 22 of the inflation of 21.
In other words, the inflation that's there in EUR now, we will see the effect of that in the next year report for 2023. Let's not confuse those two, because the inflation triggers indexation, but that comes with a lag 12 months because indexations happen year after. Let's make it clear. We should see the effect of indexation in our numbers next year, of course. I believe this is very good set of numbers. Another important topic, we did manage to sign 10,000 lease agreements out of over 5,000 long lease agreements that there are there in the group, and that is about 230,000 sq meters out of 2 million before adding Torun and Gdansk. A lot of work done.
If you look at about what we signed, that half of the agreements are new leases. That actually ties up with, on this AM initiatives, 25% growth, because we are very much focused on changing the tenants, keeping the tenant mix fresh, appealing. It costs us more, takes more time and effort, but it's, as you can see, it's worth all the efforts. Now we show that slide, and we are very happy to be back to around 12%, 12.1% of OCR for 2022. That is in particular very important because we believe we are on the safe side of, let's say, OCR.
Market says around 15% is where the level between the good and not so good operational performance. The reason we believe 12.1% positions as well, is that this year it will be a year of cost challenges. It's all about managing the costs. We believe at 12.1% for last year with the same turnover dynamics, our tenants, the whole retail environment in our portfolio is well positioned to absorb additional costs should they arrive. We all can't say where the energy prices will land because the market is very volatile. By all means, this is a proper OCR. This is where it should land. If you look about the break of our biggest tenants, nothing changed there.
I mean, it's a stable set of tenants graded. They develop with us, they go west, and they account for almost 25% of our annual rent. We are very happy to report we continue discussions with all of them on various geographies. When it comes to expiry profile, you would notice that years 2024 up to 2026, it's about 40% of expiries. If you think about those expiries in light of what we said about how we can do the base rental uplift, we don't consider that as a threat. It's rather an opportunity for us to actually do what we have to do in order to make our tenant mix better. That translates immediately into turnovers and then into rentals.
It is not a low number, but we don't fear that because we know what our tenants produce, and these numbers are good, and we believe there is another opportunities coming upon those expiries. Again, we can confirm that in this, let's say, post-pandemic world, the main terms of lease agreements haven't changed. In two words, they are investable, they are bankable, guaranteed in Euro, et cetera, triple net leases. Nothing has changed here. There was a lot of questions, would that change or would that not change, flexibility of lease agreements? We really haven't seen that shift there in the market, and we don't expect that. When it comes to the demands from tenants, and Rudy touched on that, there are two main sources of tenants in our portfolio.
One is new entrants to the market. You know, whoever comes to see, they can't not meet us. Hence come the transactions that we signed, we actually opened last year. Some of you have seen Primark in Bonarka. Consecutively, we signed an agreement with Primark in Arena Budapest to open later this year. The team in Romania signed the first concept of Lefties for Romania. That's a new, very cool brand from Inditex. Epantofi, Modivo, this is online retailer emerging from Poland. We actually opened the first store, physical store with them in Zielona Gora. Since then, we opened, I think, 15 stores maybe across all the countries. Lovisa entered the market, Sports Direct, and we can go on and on.
I think the message we want to pass through is that there's no tenant that would get unnoticed should they cross the border. We can see the benefits of that. Of course, there is our beloved tenants, existing base of the tenants, and that Zara, that Reserved, that JD's half price of the world, and we continue cooperation with them. We opened the Paradise in Bulgaria. I mean, this store by Zara is like a mind-blowing, amazing store. We could speak the same about all the tenants. What we've noticed is that they, the tenant's concept change faster than it used to be. I mean, they reinvent them all the time.
When we open Zara today, and when you open Zara in two months' time, you can see already the differences. It's very important for us to really team up with those most imaginative guys so that we get the best of their performance, because this is key. Where the rents come from. I think it's a strong message. We do have newcomers. That's very important, and there's a lot of changes in tenant mix, but in a positive way, and that translates immediately to better performance and then NOI. That's all about tenants today. With that being said, I am very pleased to hand over to Elisa, because if she didn't secure financing for our CapEx work, we wouldn't be able to grow.
Let me hand over so she can reveal some secrets there.
Thank you, Marek, and congratulations to you and to the operational team for such a great achievement in the area of operational performance. I will refer to these extraordinary results in my presentation because financial performance is strictly dependent and interconnected with the operational performance. Now I would like also to thank you on my behalf for attending our results presentation and why the slide is here. I must say that it's a pleasure for me to be here today and share with you with much pride a set of very strong results delivered by NEPI Rockcastle this year. It is even more important for me and special, I would say, because this is the first year in which I acted as a CFO for the group.
I have been growing in this company with the mindset of, we are always delivering, and this is what we have done this year. This was yet another year in which NEPI Rockcastle delivered at least to the commitments that we have made to you. Now leaving aside the overview on the general results, for today I prepared a presentation, which is structured on three main directions. First of all, I would like to provide you with transparency into the group's numbers. Second, I aim for you to understand how the operational performance is complemented by a strong funding strategy, as we are better together, and I'm a strong believer of synergies. Last, I want you to further build the trust that your investment in NEPI Rockcastle is solid and sustainable.
Therefore, in my finance area, I will first cover the distributable earnings and the details behind. Second, I will speak about the funding strategy. Last but not least, I will speak about the valuation. Speaking about the distributable earnings, this is supposed to be the great news of the day because, as Rüdiger mentioned, we have a EUR 0.5215 distributable earnings for the year, much higher relative to 2021 and marginally close to 2019. I would like to point out that, after less than two years in which, due to the market conditions, we had a significant growth in our distributable earnings, this year we recovered and we restore great returns to you.
We re-engage for growth, and this is proof of the investments that we did in the, in the last part of the year, and this is also shown in our numbers. Going for the one of the most important slides of my presentation, I will guide you element by element of the, to the, through the driving forces of this year distribution relative to last year. The distributable earnings. This pointer doesn't work properly, but it's okay. For 2021 have been at EUR 34.42, and the operational performance and its credit to our operational team that we have a growth of almost 30% coming from the operational area. It's, it's credit to our finance team that we managed to optimize our finance cost, this contributing on their own with 3.5% in the growth in distributable earnings.
We have this element of taxes and corporate expenses, which are a minus element that I have also discussed and explained to you in Georg's presentation. On the corporate expenses, we are living in an inflationary environment, and we need where all the costs are going up, and we need to adapt and stay competitive. On the corporate income taxes, our portfolio became mature, and it became also profitable from a taxable point of view. Last year, as also Rüdiger mentioned, we put aside the EUR 35 million provision for the litigation in relation to Serenada, and the lack of it brought back this year EUR 0.0613 in the distribution, equivalent of approximately 18% growth. Shall we stop here? The distributable earnings per share would have been EUR 0.4868.
We have a good management of the one-off events, we negotiated with the counterparty in relation to the Serenada, bringing an additional 10% growth in the distribution. The growth in this distribution of this year is driven by three main pillars. Is the operational performance, is the area of funding taxes and corporate expenses and their impact, we have the good management of the one-off event. From the same chart, but from a cash flow perspective, the main idea here is that we generate enough cash flow in our operating activities to support the distributable earnings.
The only difference in between the cash flow from operating activities and the distributable earnings relate to the accounting of various expenses and their settlement. Then we come back to the provision for litigation, because last year we put aside EUR 37 million. We impacted the distribution without any kind of cash outflow existing in 2021. The release this year in the distributable earnings per share of EUR 21 million is actually financed via the cash flow from operating activities of last year. It's time for us to pay you back what we reserved last year. Moving forward to most probably the second-greatest news of the day, the dividend settlement.
The second part of the year distributable earnings per share is EUR 0.2932, we decided to declare a dividend corresponding to 95% payouts to be settled as repayment of capital. I will remind you that since our relocation in Netherlands and further to the voting in the extraordinary general meeting in November, the repayment of capital became the main and the default option of settling the dividend. The main advantage is that it is in cash and is not subject to withholding tax in Netherlands. Nevertheless, this year we decided to offer you an election, you can go and elect for a scrip dividend that is going to be subject to 100% payout ratio, we are also offering a 3% discount to the reference price.
You may also go for a cash distribution out of profits, which is a 95% payout as well in the same way as the repayment of capital. Just to remind you that if you don't elect anything, you will receive by default the repayment of capital. You need to elect to get the other two options. What I highlighted here is also about the tax treatment in Netherlands of these optionalities, the repayment of capital and the scrip dividend being exempted from withholding tax while the cash distribution out of profits being subject to 15% withholding tax. Being done with the distributable earnings and the dividend settlement, I will move to the funding strategy in which I will give you an overview of the main pillars of our finance strategy.
We are an investment grade rating company, where we have a triple B stable rating from S&P. They reaffirmed this rating in 2022, while Fitch decided on the ground of operational improvements and on the ground of conservative financial metrics to upgrade us to triple B plus. I think it's a great achievement in a context of a volatile market in which the majority of the real estate players are downgraded or they are staying put. The liquidity is solid, is at EUR 671 million, and this consists of EUR 250 million cash, with the remaining EUR 420 million committed revolving facilities and drawn. The LTV, as it was already mentioned, is at 35.7%. It's still safe in the context and comfortably within the debt covenants.
Our remaining debt terms is a very good one at 4.6 years. 95% of the debt is fully hedged. We optimized, despite the volatility and the difficult market context, our cost of debt to 2.3% relative to last year. Moving forward, the actions, the exact action and the implementation points in 2022 in the area of the funding were that we raised EUR 500 million bond for an eight-year terms at the beginning of January. We took action to extend maturity that became due in 2023 and take additional loans and additional funding that was available to us with good commercial terms in the average cost of debt of the group. The results are that we don't have significant maturities in 2023.
As Rüdiger mentioned, the first significant maturity is coming in 2024, the strategy is going to be put together. We have 91% of the portfolio staying unencumbered, we maintained our revolving credit facilities, which is a strategic buffer to bridge our growth projects in the area of development and acquisitions. The key message that I want you to convey in this liquidity and funding strategy is that the markets are challenging, our liquidity stays solid and strong. We are monitoring the markets. We are in contact with our funding partners, so that to be able to act at any given moment and when a window of opportunity is going to arise to make our liquidity even stronger and to fuel the growth of the company.
Going further, my last topic is about valuation. The good news here is that we continued the upward trend in the valuation area. Retail is detail, it's not by coincidence that the picture here is with an elevator going up and the other one going down, because these are the driving forces of our valuation. There was a widening in the valuation yield, putting pressure on the value of our properties, but our operational performance overcompensated this widening in the yields. This is how we go to EUR 142 million fair value uplift, which corresponds to 1.8% on a like for growth on a like-for-like basis.
I will remind you that these valuations are not done by management, but by international reputable advisors that actually are assessing and are validating our business as being a valuable one. Now that I'm done with my finance area and the three pillars that I covered here, I'm moving forward to the ESG portion, on which I committed last year that we will report every six months in this formula, and which became a top and strategic point on our agenda. Our efforts in the ESG area have been supported by strengthening our internal team and having a head of ESG inside the company. We also revised our targets in the area of the sustainability, and we defined the executive management KPIs related to sustainability and also cascaded down to the operational teams.
The efforts in the area have not been recognized in the way that we have at least 3 prizes in the area of sustainability. We are in the top 15 sustainality rated real estate management companies. Our rating is improving year on year. We have been awarded the Silver Award by EPRA. We are a AAA ESG rating leader by MSCI. There are at least 3 achievements that we are proud of. One of them is that our portfolio became 100% brand certified, and Rüdiger already mentioned about it. The second one is that we have strategic partnerships for sustainability mobility with Tesla and Enel. We are partnering with the best.
On the renewable, we became very careful with the securing renewable energy sources across our portfolio. There are at least five countries in which we have 100% secured renewable energy in the landlord controlled areas. Apart from that, we have a EUR 37 million investment in the photovoltaic plants. 10 of them have already been installed, this is for minimizing the carbon footprint and stabilizing energy costs. I have also visual in relation to this energy projects, I hope that I will bring the energy in the room by showing this visual. Thank you. I will turn the floor now to Rüdiger to tell you about developments and the way forward.
Excellent. Thank you, Lisa. I think that is pretty amazing. I'm really a fan, I have to say, that moving here into the production of energy with NEPI Rockcastle. I think over the next couple of years, you will see that this will become another business line within our business, actually. It's actually not only producing here in Romania, for example, we are producing 30% of the total energy consumption that we have over the year, we will produce with these installments. Obviously, this will bring down not only our CO2 emissions, but on top of it will bring up our profitability. It's good. I think it's good in the section of ESG, it's also good in the section of making money for the company. Let's come to our development pipeline.
I said it in the beginning, we have about close to EUR 680 million that are already under construction or where we are pretty close to start construction. We are in the final stage of permitting. Main drivers, obviously, here is Promenada Bucharest, and you just saw it also in the video where we've placed the photovoltaics already on top of the building. But as well, Craiova, city of 300,000 inhabitants in the heart of Romania, pretty much under-retailed, so not really relevant competition here. We like to go to white spots, obviously. There we are in the construction of about 64,000 sq m. I will come to this on the next slide.
Also the, let's say, our Vulcan Residence investment in the heart of Bucharest is well going. We have an, I think for now, quite a nice pipeline, and the next ones to come up. The only one that gets delivered out of this later than 2023 actually is the further development on Bucharest. When we talk about Bucharest, it's because we are adding here 58,000 square meters of mixed-use, meaning we add retail and we add offices. Currently, we also have a strong demand here by hotel operators that would like to enter the building in the future. That's just driven, obviously, by the excellent location in the CBD, in the richest part of the city.
In total, at the end, it should be around 100,000 square meters now. Fortunately, we have already discussed with the main retailers, and we have, let's say, terms agreed with 46% of them for the extension of the retail park, part. Construction is well underway. What is very important in these times, because we all saw that construction costs are rising, we had secured these costs already up front, so we are not impacted here, meaning our costs here are at the level of one year before. Promenada, in Craiova, I said, very interesting. You see it here actually on the picture. I think it's gonna be an amazing asset. That's actually where we also have photovoltaics, not only on top of the building, but we're using the total parking.
That's something we do new. It's a little bit of an adventure for our development and construction team, but I think this will be very efficient. That's where you again see this demand in the market, yeah? We talk about omnichannel. We all saw throughout COVID how online was, of course, improving because people couldn't go shopping in shopping centers. Look at this now, you know. Retailers had a learning curve also throughout COVID when it came to online retail, and they figured out that it's maybe not as profitable. It's part of the business, but it's not as profitable as if you operate physical stores. That's simply a matter of fact. You can see it here, we signed and terms agreed.
Means actually we have let 94%. We still have a couple of months to go until the opening. That's for us, a really good sign. What happened is actually that we had so much demand by retailers, especially by bigger retailers that are entering into the market. We just talked about Lefties, which is a concept of Inditex, which is very successful for years. It's a proven concept. It's not like a new concept they try out in our region. No. It's a very proven concept that already exists for years in Spain. We were always asking them, "Please, please bring this concept to our, to our shopping centers." Finally now they're coming.
One of their first locations, I think it's even the first location, is going to be with us in Craiova on 4,000 square meters. What happened is that demand was so high that we needed to decide what we're gonna do with that. We still had actually quite a sizable plot. What we will do is we will do, we will build another 10,000 square meters of retail park just adjacent to the shopping center. The target is to open it at the same moment as we open the shopping center. It's a bit of stress to our development and construction team, but I think they will, we will make it. This is also prelet already by 75%.
You can see that what we do in this market is really relevant. Bonarka City Center, that's also a bit more long-term. We expect this to finish in Q4 2024. Some of you with the last tour, investor tour, have been seeing the asset. I think everybody who has seen it's always difficult to show this on pictures if you don't see it live and in action. It's amazing on how this shopping center is changing because what we do is a full refurbishment of the total scheme, adding another around 4,700 square meters. One of the big openings we already had, so we opened, I think it's the second Primark in Poland that we opened in the shopping center.
It's already, of course, driving additional footfall now, but we were looking forward to finalize the whole project actually by 2024. The reason is we are doing this during opening, so we can only do construction in the night times. You can imagine this is a bit of operation on an open heart. It's working fine. Tenants are happy so far. Vulcan Residence, our residential project in Bucharest, we will complete actually construction in April. Facade is done. Flats are ready, we have sold so far 104, 105 units out of the 250. We're very positive that we will keep on selling until the year-end. Latest first quarter of 2024, we will have sold all the units and capitalized actually on the profit here.
We are not only working on new big developments. The daily task, I think Marek made it quite clear, is our asset management activities. This, for example, I just showcase it because to understand what the teams are doing like every day. This is only a EUR 5 million investment, but what you see here is that we are adding to this building 3,000 square meters GLA, and these 3,000 square meters GLA are already 100% let with three tenants. That's the bread and butter business we do. All of this adds on to the growth of our NOI. Let's come to investment. That was, of course, a very exciting year for Anka. Over there, and her team, the M&A team.
We saw during COVID, actually, we were all expecting that good assets would come to the market as there was stress in the market. Over these two years, actually nothing happened, not really a big transaction took place. The average ticket size during COVID was EUR 20 million for retail real estate in Central Eastern Europe. These were small retail parks. This is not our cup of tea, if I may say this way. There was not really interesting projects coming. That has totally changed. If the current market circumstances are not really favored in every sense, but in some sense they are. Now we see that more super good assets are coming to the market, and we were in the position, and we are in the position actually to have our company growing with this.
That's why we went into Poland, and there was the opportunity to acquire two top-class assets in the market. Let me start with Copernicus, which is in the city of Torun. The city is one of the rich cities in the country with 5.8% purchasing power above the average. The asset is absolutely dominating the city. It has been built 2005, but they did a full refurbishment and an extension. Old part and new part, brand new since 2015. The performance of the asset is outstanding and goes up to the level actually of the, at least the average of what we have in our portfolio. That's always our benchmark. We never just look at the price.
We always look at quality and where we can drive growth in the future with the asset. Of course, the second acquisition we did almost simultaneously is from, in Gdańsk. Gdańsk is the richest city of Poland in the northern part. It's actually called Tri-City because it compounds of three cities in itself, and it has a population of more than 1 million people, and it's really quite wealthy. You have, here we go, 23% above the average purchasing power within the country. You can imagine. The asset is located absolutely downtown. You need to understand Gdańsk is a historical city. There are more than 1 million visitors per year coming by plane just to see Old Town. Tourism, high tourism.
When you look at the turnover, turnovers, for example, in the summer, they're pretty much close to the turnovers in December. That is outstanding for an asset like this. But what am I talking? I think to show a map and a couple of numbers is exciting, but I would like to follow the idea of Elisa and give you more of a feeling of what these assets are about, and maybe can show you a little movie so you get a feeling also of architecture, location, and what it's all about. Maybe you go ahead. Yeah, very good. From Gdansk, absolute trophy asset. We are really a little bit proud that NEPI Rockcastle had a chance to acquire it. I think it's in the top five of all Polish assets.
With this, we are absolutely on the same level with the Unibail-Rodamco centers in Warsaw, or the Union assets in with like Magnolia. This is the type of asset. This is like, I mean, this is, gives us, especially in our second biggest market, these two assets will obviously strengthen our footprint and will give us even more meaning to our retailers, especially in Poland. We acquired the asset actually for EUR 250 million. And we are looking at an NOI for the next year of EUR 16.5 million. The target that we have for this asset is quite a higher number, because we see a lot of potential with this asset.
What was interesting that we acquired in December for EUR 250 million, and then we had our evaluators, third-party evaluators who were looking into it, and they really look at rent roll and all the details. I have to say, they gave us actually a fair value for the asset of EUR 268 million. That's how it's in the books now. We see a lot of potential here. Why? Because the center opened. Actually, it's kind of brand new. It opened in 2018, spring 2018. Then in 2019, it had double-digit growth on turnover. It went into the market, got its market share, but then, of course, COVID came. It happened what happened to every asset, that it could not move into the market further.
We are buying it now. Actually, I think from a momentum perspective, this asset will grow on turnovers without even doing us a lot of changes or investments. It's not necessary. The asset has a location and a potential which is absolutely outstanding. On top of this, already our asset management team is working on ideas how we can obviously optimize. When you look at the average rent per square meter, EUR 21.6. The asset was rented during a period of time where, let's say, tenants were not so bullish. All right? Even though it's a top location. We also see over time that we have a good uplift on base rent with the expiries that are coming up in the asset in the future.
I think this is a really good news for our portfolio. Copernicus, EUR 127 million investment. I said, it's very well located in the city. It's dominating actually the city. We bought with this an adjacent plot where we see potential to have the asset grow also in the future. We look here at an estimated NOI of around EUR 10 million in the next year. Let's have a look forward after this results of 2022. Of course, it's kind of a challenge for us as a team to say where this is leading. Of course, we have market circumstances. Not everything is colorful and nice. We know what kind of situation we are dealing with.
We have still an impact on inflation on the cost side. Everybody sees that. I think we also have been proving in 2022 that we have a tight cost control on our assets and also on our admin expenses. It is a fact that costs are rising, which is inflation. That's also for us. When we look forward, we see this rather positive. One of the reasons is the basis obviously always is the macroeconomics, the economics in the jurisdictions we work in. When you look and when you compare actually what is forecasted for the CEE region, that is still far above countries like the U.S. or U.K. or Germany. For sure, far above Western Western Europe. That's the underlying assumption obviously that we have.
When we look at this, we think that we can leverage even more our strong position in the region with our retailers, but also not only retailers, also on the cost side. I think we have good reasons here to keep costs under control, capitalize on the initial acquisitions that we did, and obviously not only the acquisitions, also the new assets that come to the market. We just saw Craiova opening in October this year as an example. This will all deliver obviously additional NOI, additional growth to our company over the next 24, 36 months. Maintaining a safe balance sheet. I mean, that has been, I think, a very successful strategy of the company, and we will definitely hold on to this, and we will work on that side as well.
ESG becomes a more and more important factor, as Elisa as well mentioned. As I said before, in Europe, this is a very important factor if you want to have a sustainable business also in the future. If you're not meeting the requirements of European Union tax harmonization and good ratings, then it will become difficult. That's why we're investing here. One of the investments is our EUR 37 million, it was in total I think now EUR 37 million investment into photovoltaics. The plan obviously here is to be innovative and not take this only to Romania. We have the potential of another eight countries to go to. You can imagine that is a magnitude that we can play with in the future.
We're looking at all of this, of course, we'd like to give a guidance for the year of 2023. We believe on a recurring basis. Let's take out the Serenada effect, because I think it's not so relevant. On a recurring basis, we are looking to generate another 11.5% of growth in 2023. That's what the team stands for, and that's what we believe in. I would like to pick up what Elisa said, because I'm at the end of the presentation, and she already said it. We started 2022, you started with a new management team. I think it's quite normal that there are uncertainties.
I would like to thank you as the CEO of the company, and I'm talking to not only the management team, but everybody in this company. We also like to thank you for your trust, and we like you for staying with us. When we look at what we have been, let's say, proposing now, on picking up scrip dividend, think about it. I think it's a really good investment to stay with us and not just cash out the money, but maybe think about to trust us further on. I think we at least kind of deserve it for the last year. Let's look at the next year. It would be great, if you would go maybe in this direction. We would really appreciate this. We want to drive this company further.
We want to grow on a sustainable level and with your, let's say, support by picking up more scrip maybe than just the cash, that would be a great commitment, and we'd be really thankful if you would go into this direction. With this, I close the result presentation as such. I'm really curious, and we as a team are curious on maybe questions you have. We can have this here in the room, obviously. We have microphones. We have, if you wanna call us by telephone, we are available and also online if you wanna type some questions, happy to answer your questions. Here's already the first question I saw. Maybe somebody can give a micro if needed. Yeah.
Hi. I've been involved with NEPI Rockcastle from day one. It's with great pride that I have a look at the results that you guys have come up with today. Fantastic. Well done. I really think that you guys have done a great job. I think that it's only just the start. I think that it's gonna go from strength to strength. Just on to you and your whole team, well done.
Thank you. Thank you, sir. You have a question over here.
Hi, good morning.
Good morning.
Thanks for the presentation. Just a quick one from my side. Thinking about capital management. In the announcement, you make mention of reducing your LTV to sort of within the threshold of 35% over the next 12 to 18 months.
Yeah.
Just given your capital commitments, can you maybe just elaborate in terms of how you intend to sort of manage that LTV?
Yeah.
Is it through disposals? Is it through greater retention of capital?
Yeah.
-in the form of a reduced payout ratio? Maybe just shed some color on it, please.
Yeah. No, good question. Obviously, as said, we don't have maturities currently coming up. We have enough liquidity. First of all, I think it's important to mention that we are not, let's say, in a situation where we need to move, make a move. Because the current situation is unfavored, that's totally true. Historically, we have been financing the company actually by debt, which comes from bondholders. The bond markets currently are, let me say it this way, are not really looking good. The yield, it's coming down from a 6.5% to more into the five-ish% area, but this is still incomparable, obviously, of how we have been doing this in the past.
Just to remind you, we had the EUR 500 million that we picked up in the market in January last year at a 1.75%, I think. You can see the spread is just enormous, That's why I think your question is absolutely relevant. How do we gonna deal with this? I think that in general, our financing costs over the future will look different. We all know we will not come back to a 0% inflation environment very soon. Therefore, interest rates will be different. It's the question on how we handle it and, you're absolutely right. We have a lot of instruments, actually, that we can look at.
One is obviously whether maybe bond markets might, in this inflationary scenario, they might come more down over the year. It's a question mark. We have possibilities of disposing tail end assets. Yes, could be an opportunity. We could raise equity. Yes. We could offer you scrip dividends, which I did. Yes. There is a lot of, I think, possibilities for us to deal with. At the moment, it's more the time, I think, to observe markets, and we have the time to observe markets and see where this goes, and then pick the right choices when they arrive. It's not the decision-making moment, fortunately, at this very moment. Okay, we see in the market a lot of our competitors. Most of our competitors are much highly more leveraged, 46%, 48%. I mean, look at Unibail.
We are not in this kind of situation, huh? Don't forget. I think that we have quite a skilled team around Elisa, and also with the partners we work with, long-term work with JPMorgan, Citi. Like, I mean, we have, I think, the resources to do the right decision at the right moment. I would also like to mention, we have a very strong board of non-executives that is very familiar with the banking sector. I think we'll pick the right choice there. Thank you. Yeah.
Cavello from Mazi here. Just two quick questions. In the previous results you mentioned looking at acquisitions in Western Europe. Is that off the table now given you've pursued the two acquisitions in Poland? The second question is on given where your debt levels are, why the introduction of the scrip dividend and then with the introduction of the scrip divvy, why if you opt for the capital option, are you taking 5% of the in terms of the payout ratio, or sticking to 100% as you did in the past?
I think, I know, but I think it's quite obvious, huh? We are incentivizing you to go for a scrip, and that's why you have a 5%. I mean, that's true. It comes with that we believe that this company has a lot of potential to grow. For this, we also, to be honest, we need cash. We need to keep also some money in the house. We are distributing more or less over the last years. We've always been distributing 100%. You can imagine we are just, like, living from our operational results. We finance everything out of our operational results, plus of course debt, but that's the reason why. We see potential in this company. I think you should see it positive.
We really believe in what we do, and actually, I think everybody comes every morning and is inspired by what we're doing. We like what we do. At the same time, if you don't have the resources, you can't go there. I think it's the time now where it's volatile markets. I know. There is a lot of complaining. At the same time, this offers opportunities, and we want to be able to go for these opportunities also in the future and not just got stuck. That's one of the reasons why we do this offering. Sorry, what was the first part of your question that was related?
Western Europe acquisitions.
Western Europe acquisitions. We are still looking into this market. I think there are also opportunities coming up in this market. We also said at the time that we know that our core markets are Central Eastern Europe, and that if we see opportunities coming up in this region. Unfortunately, I mean, it's, you know, it. You cannot make these kind of opportunities yourself. You know, we are not cooking it somewhere in an oven. You know, the assets have to come to the market. We were just, I think, very much our M&A team was very much in the front line of hearing the grass grow in the market, which assets come to the market, what could be a price of. We have been, I think, very active with our M&A team, specialized in our jurisdictions.
That's the outcome. You see the outcome that we have invested almost EUR 477 million, I think, in total we've invested this year. Where did we invest this? In Poland, with these two assets. Maybe it's not mentioned in the presentation, but especially in Romania, we bought out with EUR 50 million a JV partner, which was Carrefour, who owned 50% of the building. That's where we allocate money. Why? Because, for example, this asset, we already have a plan. It's already for two years in the cupboards to extend the asset to make it better, which was impossible to do with this partner. Because, I mean, Carrefour is Carrefour. They are food retailers, and they don't think about like a landlord, right? They think more like a retailer.
That's where we allocated another EUR 50 million to grow our business, first of all, within the countries. When you see the growth also on NOI, is this only related to the factory that people came back to our shopping centers? No. We started investing in 2020 together with the board. Already in 2021, we decided we go back on a growth path. We invest more money into our income-producing assets with asset management activities. Half a million here, EUR 1 million there, but with a high yield. That's how we drive NOI with our asset management team. You saw this with examples from Marek. That's how we drive value predominantly. At the same time, I think it's important to understand what is doing the market around us. Maybe that answers the question.
Further question.
Hi. Just from my side, two things. First one, the strong tenant turnover that you experienced in 2022, can you talk to what you're seeing so far in January and February? Has that momentum continued, or is it slowly weakened? The second question would be around the reduced. How do you look at potential share buybacks, given it's trading at a 20% discount to NAV relative to acquisitions, in the current environment?
Yeah. If it's okay, I would like to hand over the first question actually to Marek, who is very close to the source there. The second part, I think Eliza is the best person to answer this.
Thanks. Thanks for the question. I mean, if you look at January numbers, because we already have, of course, full January, we don't have the full February. I just checked on it yesterday, and it's very positive. There is the. We must remember it's a slow and lower base as well. January last year, like Lithuania, Slovakia, some other countries, we still had restrictions. When I saw in Ozas +27%, it's cool. I need to remember that first quarter is not quite comparable. By all means, the positive momentum continues in January and February. When we speak with tenants on, let's say, more or less formal way, they confirm that January was strong, so was February. That should translate in the proper Q1 results.
On your second question, indeed, we are trading now at the 20% to the NAV that we have just published. Our expectation is that on the ground of a good set of results and the potential that the company has, the share price to readjust. Nevertheless, what we aim to do is to incentivize the scrip dividend in this context and not to go for repurchasing shares currently. We have value-added opportunities that we want to pursue, and we consider that currently repurchasing the capital is not necessarily the priority number one. Nevertheless, we work with all the optionalities on the table so that to create growth for our shareholders. I wouldn't say that this is the main priority.
It's always an option. It depends on the share price.
Yeah. Yeah. Yeah.
I think we bought back like EUR 10 million we bought back in 2022.
Yes.
when the share price was rather low. I think it's a, it's an opportunistic more approach that we see here than really a strategy. The strategy is to grow the company. With buying back shares, it's a one-off. Okay. Further questions from the room here. Otherwise, I would ask the team whether we have maybe questions from telephone or we have somebody writing us.
Do we have any questions on the conference call? Delay. Maybe we can already switch to the messages that went through.
Yeah.
If we have a phone, we then take that one.
Yes, please. Go ahead.
A question for Eliza. Are there any plans to buy back bonds given current liquidity position?
It's almost the same answer as for repurchasing the shares. It's not necessarily among our top priorities to repurchase our capital, but it's an optionality on the table that we are always revisiting and considering.
The other side of the same question, is there any plans to issue new Euro bonds this year?
As Rüdiger mentioned, we have a maturity coming in 2024, for which we are exploring multiple optionalities for repayment. Should the debt capital markets going to settle, we may go for a bond issue to replace the one coming in 2024. If not, we are going to put up a strategy, a different one, so that's to ensure the repayment of that debt. There is no pressure, but it's one of the options that we are looking for.
A question for Rüdiger: Are there any plans for further M&A?
Depends. Depends on opportunities and how much cash you leave in my pocket, right? No, as said, the markets are changing at the moment, and I think NEPI Rockcastle is well positioned also to look into the future and further acquisitions. Of course, this needs to be, you need to look at it asset by asset. This is not something somebody could answer in general. Like, look at the acquisition of Forum Gdańsk. This is an absolutely top-class trophy asset. I think even you as an investor can be proud to own an asset like this. It's just amazing. This does not come to the market every day, right? We need to look carefully. We are observing the market, scanning the market. I think we are well connected in the industry throughout Europe, not only.
You have to understand that a lot of investors that own assets in Central Eastern Europe are not Central Eastern Europe investors. These are companies like Blackstone. These are companies like Union. They own these assets, so you need to be connected to this part of the industry, let me say, in order to make it fly. I think we are very well connected, and we are observing the market, but it's a matter of opportunities, as I said on one side, and the other side also of pricing. The pricing needs to be attractive enough, and the assets have to have the right quality for our portfolio. That's the only thing we'd be looking at.
A question for Marek. What is the indexation achieved in 2022, and what is included now in your guidance for 2023?
The indexation for year of 2021 that we applied in January 2022 was 3.5%-ish. I don't think we actually announced the budget assumptions for this year.
No, we didn't.
Allow me not to, but I think we have all access to the data. What I can generally say is that we have ambitions to pass the whole indexation as it will appear in countries. One needs to remember it differs from country to country. There are different models, but more or less, we should end up somewhere between 9% to 10%, depending on the country.
There is going to be an information. Rental escalation is named in our annual report to be published on 22nd of March. In that respective note, we are going to publish the indexation. Currently, it's not publicly announced in the market.
A question for Eliza again. Could you please elaborate on the valuations assumptions taken for the portfolio and more specifically on the exit yields and the RVs?
Of the?
Yes.
Of the, and the RVs.
Exit yields and the RVs.
You may find in our financial statements, the information in relation to the exit yields and the discount rates. I will speak in relation to the EPRA Net Initial Yield that we are monitoring. We have seen an expansion of that one of five basis points relative to last year. In the discount rate that the valuers are using in their valuation, they are putting on top of the exit valuation yields various risk premiums. More or less, the valuation yields have widened by approximately valuation discount, sorry, by approximately 10 basis points with the yield widening at 5 basis points. The assumptions on the RV are stated in the financial statements.
keeping you on the spot again.
Please go ahead.
To bring leverage down, what tools would you consider? Could you expect some disposals as well?
This comes again after the question about the LTV. Just to reiterate that we have an LTV of 35.7, we are speaking about 70 basis points excess of the threshold of 35%. Yes, our commitment is to go and deliver to below 35%. One of the optionalities to enlarge the equity base, and this is why we incentivize the scrip dividend. If this route is not going to be sufficient to go below 35%, we may also look for potentially strategic disposals. We are working together with the investment and the asset management team, you are going to see in the next 18 months this LTV brought down should not have any kind of significant disruptions in the market.
Let me add here, it's not very difficult to understand that this is currently not a market to sell. This is going to be more and more a market to buy. I think disposals are always an option, and you always have some asset that you could trade maybe for some better performing assets, I'm not saying. Generally, the market conditions, obviously currently in Europe are not, let's say, driven by the fact that people are bullish. That's why I would say this is really not one of the first options to look at. Also, we don't have as many great tail assets that we would like to dispose. Otherwise, our results, I think, would look a bit differently.
Fair enough.
Eliza again.
Go ahead.
Please comment on the rate at which new funding is secured, and relating to that, can you please elaborate about the timing and the form of the 24 bond refinancing?
The new secured funding, as I already mentioned, is within the average cost of debt of the group, which is now 2.3%, no alterations to this rate. This is because in the secured funding area, the commercial terms are a bit more attractive now relative to the debt capital markets. On the repayment of debt, we are going to ensure the right capital by the end of this year to refinance the portion maturing in 2024.
Please explain.
It's a key priority in finance.
Again for you.
Yeah.
Please explain the reason for the increase in current tax expense. Where will this number normalize over the next three to five years?
Okay. This was a question that I also got in the August presentation. We are heading towards an effective rate of 16%, but currently we are at 13%. The reason for having an increase in the corporate income tax is because our property portfolio matured, our fiscal losses have been utilized, and this is why now we became a profitable business from a tax point of view as well. This is how the situation is going to last, and expect an effective tax rate in the range of 13% to 16%.
A question for Rüdiger. What is the expected contribution from the residential development and related sales in 2023?
We're looking here actually of net, we should gain some EUR 12 million out of the sale of the, to put it bluntly, what we see as a, as a profit that we would look at by selling all the, all the apartments in the building. So this is a one-off. It's not obviously not recurring because we're selling it, so it's, we're not leasing those apartments. We really sell them off, and this will be a one-off, I think, additional income for you as investors by, most of it by the end of this year.
One question for Marek.
Marek, one question for you which refers to the groceries. On the turnover growth by category, grocery shows a growth of 145% on 2019. Could you please comment on the drivers of this?
Sure. Let's start with the definition. When we say groceries, by no means would we understand our hypermarkets, because as you would have noticed in the presentation, we exclude those because they either do not report or they report on annual basis. We find this not really relevant. The groceries category as such, which our exposure to them is very low, although they grow fast, those are actually the small grocery stores who very often are specialized. When we say specialized small stores, we have bio stores, healthy food, et cetera. This is a new fashionable way of living to spend more money on this healthy stuff, so we can see the small tenants benefiting from that. Hence the high increases. Yet again, that's a small portion, and please don't think that this is hypermarkets into. That's not the case.
These are the small specialized stores which we have here and there.
Again for Marek. What explains the lower occupancy level to 2019 base in light of the NOI performance?
What explains again?
The lower occupancy level.
Mm-hmm.
It's marginal.
To 19, compared to 19 base in light of the good NOI performance.
2.7. I think it was 2.7, then it was 2.1. The question is why there is still delta of 0.6% given the good performance. I think that comes as well a bit with what we experienced during the COVID, which was a bit slowed down in leasing market up until, let's say, Q2 of last year. It really picked up in Q3 and then sped up. We can see we made a huge progress going from four down to 2.7. Our actually budget was a bit more aggressive, but I think that we can get to 2019 levels this year given the good performance of our tenants. I hope that explains, if I understood correctly, the question.
There we are.
Okay.
We are on a good way to get there.
Let me add here. I mean, just roughly look at a couple of result presentations and compare our occupancy level with the rest of the market. I think, we're well situated here, bringing actually. That's also part of the growth of the NOI, bringing the vacancy down. I think we have more opportunities here in the future as well.
Yes, last one, maybe here to understand that there is no such thing as no vacancy, because always.
Thank you.
When you get to 2%, it's actually what we call between 1% and 2%. This is a natural vacancy which you keep for different reasons. Either it's strategic because you want to expand or do whatnot, then goes into vacancy. Very often, this is the turnover of tenants, we end up in a period where before the one new one opens, the other one is already not there, and then it adds up to 2%. I think anything around 2% is a very good result. As said, compared to our peers, it's much, much better. I think one needs to look at it in relation to the market.
A question for Rüdiger. Do you continue to plan investments in the residential segment?
Again, that's very opportunistically driven. We had the opportunity at Vulcan, and maybe to explain one more time, we will not become a resi developer, nor a pure office developer. We are retail real estate that goes through our veins, that's the blood, and that's what we understand best. Obviously, let's say for example in Vulcan, you investors, you own the plot, we have the shopping center on top of it, and we had additional land, and we could not develop anything that is going into the retail. It is a super highly condensed area of living in the city, and that's why we said that is an opportunity to do some residential here. I think our team has been proven, has been proving that we can also do resi.
It's from a, let's say, development perspective, not such a big challenge for our team because part members in our team, they came actually from the resi development part. Are we looking to do this in the future? We still have, for example, next to Mega Mall, we have a part of the plot where we could do additional resi in the future, some more plots maybe as well. This is not one of our strategic targets to do more on resi, unless it is a high-yielding, very nice add-on to our NOI that we do in retail real estate. Why not? That's doable, but it's at the moment we don't have also in our development pipeline, what you've seen, there is no resi project in this EUR 680 million.
Even though we have an add-on pipeline, if you wanna say so, where we have some plots where we could do something in the future, but that is not currently very much the target. The target is to optimize, actually the income-producing, portfolio that we have now. We've added some, assets now to the portfolio, which I think will drive our business. Plus, let's say, the developments we put to the market. That's what the team is focusing on.
A question for Rüdiger and Eliza: What are your key ESG performance drivers and your strategic directions medium term?
Okay. What are my KPIs? They are pretty much related to everything that we're talking here about today. We are motivated. I think we are generally motivated. Of course, for us accounts the same thing. I think we're very transparent on how the team here gets remunerated, and you just have a look at it and you will see that everything that you would be interested in that drives the business, I think that's what's about.
The question was.
Maybe I misunderstand the question.
ESG KPIs.
This is part of the ESG, but the question was more general on ESG and-.
Yeah, and actually it ties into it because even ESG became a KPI for not only for me and then Eliza and Marek, but actually for the total team. We have defined by the end of last year, we have redefined actually what we wanna deliver on ESG over the next couple of years. We have defined the strategy. The strategy was approved by the board, and now we are executing on this strategy. That's that's our task. Everybody in this company is involved into it. It's not that we created a nice ESG department and they just do a little bit of reporting. No. It's really cascading throughout the whole organization. Even when you look at our developments, it's a different story. Even when you look into our acquisitions.
Now we're looking much more into topics of, okay, when we go for a development, how does this look like from an ESG perspective, all the way to, what kind of materials are we using in the building? Is this renewable? So forth and so forth. That becomes a different drive, a different drive in the company. Does it explain somehow the question, I hope?
We hope so.
Hope so. Good.
A technical question for Eliza now. Does the 2.3% current cost of debt include hedging costs?
Yes, it does.
Um.
Shall you look in our financial statements, you will see that we derived a lot of fair valuation on our hedging instruments because we secured them at very competitive cap rates, and now they show their value.
Unfortunately, we are out of time. We thank you everybody for the questions. If there are any remaining questions, we'll address them separately by email after the presentation.
Thank you.
Thank you very much. Thanks, everybody. Thanks for joining this result presentation and looking forward to be back here, in Joburg, in August for the next result presentation. Thank you.
Take care.