Ladies and gentlemen, thank you for standing by. Welcome to the half year 2023 results presentation for Peach Property. At our customer's request, 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. May I now hand you over to Stefan Feller? Please go ahead.
Thank you, Annika, and good morning to everyone from Zurich. Welcome to the presentation of Peach Property Group's results for the first half year, 2023. Thank you for joining us. Present today is our CFO, Thorsten Arsan. I hope you had already the chance to download the presentation from our website. Otherwise, you can find it, as well as our semi-annual report, in the publication section on the website, ready for download. Thorsten Arsan will start with an overview of our operational performance in 2022, or the first half year in 2023. Sorry for that. After that, I will lead you through our financial figures and the year-to-year update before Thorsten concludes with an update on our full year 2023 guidance. In the end, we will be happy to answer any questions you may have.
Now, I would like to hand it over to you, Thorsten.
Thank you, Stefan. I'm happy to welcome you to our results call for the first six months of 2023, and thank you for your interest in Peach Property. Let me start with some of the highlights for the first six months of the financial year, 2023. The growth in market trends also boosted our rent income, which reached EUR 59.8 million, representing a 3.6% growth on a like-for-like basis. This is the continuation of the positive trend of the last financial year. Furthermore, I would like to highlight the positive development in our profitability. We were able to further increase our funds from operations, which is the FFO I , to EUR 9.5 million, which is approximately 9% higher than in the same period last year.
At the same time, our active cost management and efforts to optimize our cost structure began to show the first results. In the first six months, we improved our adjusted EBITDA margin by more than 300 basis points compared to the first half year of 2022. The turnaround in interest rates, high inflation rates, massive increases in building material prices, and the shortage of skilled labor continued to weigh heavily on the entire real estate sector in Germany. We were forced to adjust the valuation of our portfolio by around 3.8% to around EUR 2.5 billion, and recorded two valuation charges of approximately EUR 98 million in the first half of the year. This led to a negative operating result of EUR 70 million and a negative pre-tax result of EUR 92.1 million.
Thanks to the mandatory convertible bond, which we issued in January 2023, and which was fully converted into equity in April of this year, our equity ratio increased slightly to 40.1% as of June 2023. Approximately 3.8 million new shares were issued for the conversion, which, together with the negative valuation results, led to a decrease of approximately 20% in the NTA per share to EUR 51.9 as of the end of June 2023. Despite the difficult times in the German real estate market, we were pleased that we continued to get positive feedback from our tenants, demonstrated by a further increase in the satisfaction rate with the handling of tenants inquiries to a high 79%.
Let's move on to slide five. Now a few words on the German real estate market in the first half of this year. The environment remains unfriendly and continues to be influenced by the sharp and rapid rise in interest rates in the second half of 2022. This led to a massive reduction in market activity, both in terms of real estate transactions, but also in terms of lending. While transaction volumes were only around 50% of the long-term average, mortgage lending reached an 18-year low during the first half of the year. However, there were also signs that the market started to stabilize.
Inflation rates have come down, the pace of interest rate increases slowed down, and the sentiment in some areas, such as the second chart from the left in the second row, which shows the German Real Estate Finance Index, appears to be improving on a low level. As the transaction market is currently focused on smaller portfolios, with deal sizes below EUR 50 million, we think there could be opportunities in the second half of this year to realize one or the other smaller disposals within our portfolio. The market also seems to be stabilizing in terms of price corrections. The largest German online real estate platform, ImmoScout24, recorded slightly rising prices in several market segments in the second quarter of this year. One of the main drivers of this development is the strong and sustained upward trend in market rents.
Let's take a look at slide six on the markets, on the rental market trends. On the left, you can see a mapping of our top 10 locations and the growth in quoted rents registered on ImmoScout24. Many of our key locations continued the strong upward trend in market rents that began in the second half of last year. The growth trend is broad-based, with an average increase of more than 5% year-on-year observed for North Rhine-Westphalia and Germany as a whole. The index of residential rents published by the Deutsche Bundesbank also continue its growth path, showing an increase of 6.2% on a year-on-year basis for the second quarter. This trend is clearly working against the correction in capital values. That's definitely one of the reasons why we are quite optimistic about the future development of the valuation of our portfolio.
Over the long term, as shown in the charts to the right, the German House Price Index construction costs very closely, and as well as we all know, construction prices have been rising quite strongly recently. Another reason why we are pleased with the positioning of our portfolio and the focus on affordable housing, is the continuous under supply in the German housing market. Let's turn to slide seven. As you all know, this is not a new issue, but the situation is basically getting worse by the day. Higher financing and construction costs continue to slow new construction. Experts see the completion of new apartments for this year in the range of 250,000 units, well below the government target of 400,000 units. The cumulative shortfall in new housing will exceed 500,000 units this year.
Experts expect it to rise further to at least 700,000 units in the next few years. This is quite likely, given that the number of building permits for new homes in the first half of this year was almost 1/3 lower than last year. A development that will have an additional impact on the number of new home builds over the next two to three years. Demand for our products will therefore remain strong in the coming years. Now, I would like to give you an overview of our business performance in the first half of the year, starting on slide nine. Our portfolio remained virtually unchanged in terms of residential units and floor space compared to the end of 2022. At the same time, our rent income increased to EUR 59.8 million, approximately 4% higher than in the same period last year.
The market value of our portfolio decreased slightly due to the revaluation charges, while the gross rental yield and the net rental yield increased slightly to 4.7% and 2.9% respectively. Let's talk about rental growth on slide 10. As mentioned, on a like-for-like basis, we achieved 3.6% rented growth in the first six months of this year. It's quite likely that this will accelerate a bit in the second half of 2023, based on rent increases implemented in the sixth month of this year. Our average in-place rent per square meter increased to EUR 6.11, compared to EUR 5.98 at the end of last year.
In the first half of this year, we once again demonstrated our ability to relet units at EUR 7.09 per square meter, or even slightly, which is slightly above the market rent of EUR 7.04 per square meter. Market rents also continuing to grow, our portfolio still has room for further rent increases. On average, our in-place rent per square meter is still approximately 17% below the market rents. On slide 11, we can see the evolution of the vacancy rate in our portfolio over the last few years. We have made significant progress in reducing our vacancy rate, which is driven by our large acquisitions conducted between 2019 and 2021. A vacancy rate of 7.2%, we recorded a slight increase of 0.3 percentage points compared to the end of last year.
Compared to the same period last year, the vacancy rate is approximately 0.4 percentage points lower. While we continue to target a vacancy rate below 4%, it will take us a bit longer to get there, as we have reduced our CapEx budget in the current environment of higher construction and financing costs. With that, we come to slide 12. In the first six months of 2023, we invested approximately EUR 10 million, of which approximately 60% was spent in fluctuation-related CapEx measures. We renovated approximately 800 units, well below the level of roughly 1,400 units in the same period last year. For the second half of 2023, we expect a slight pickup of our CapEx, which would result in a total CapEx spending for 2023 of around EUR 30 million, or EUR 70 per square meter.
This is the same, still a reduction of approximately 50% compared to last year, and demonstrates how closely we look at the cash expenditures and check for really the necessity and profitability. This is not only the case for Peach, but for the whole real estate industry. On slide 13, I would like to comment on the valuation of our portfolio. The turnaround in interest rates, high inflation rates, massive increases in the price of building materials, and the shortage of skilled workers continue to have a strong impact on the entire real estate sector in Germany. We also had to adjust the valuation of our portfolio by approximately 2% to approximately EUR 2.5 billion, and recorded the valuation charges of approximately EUR 98 million in the first half of this year.
With an average value per square meter of just about EUR 1,400 and an in-place rental multiple of just over 19.1, our valuation parameters appear under demanding for highly sought after products, such as affordable housing. Looking at the broad market in Germany, it seems that the valuation in Tier 2 locations proves to be more stable, with less volatility in our semi-annual valuation results. Let me round up the first part with a few words on tenants in your living space project on slide 14. Construction is in full swing, and also on the sales side, we make good progress. As of 30 June 2023, 28 residential units representing over 50% of the sales volume have been authorized. We have further reservations in place for another 9% of the sales volume.
We expect the project to be completed by the end of 2024, beginning 2025. Unfortunately, the general cost increase also had an impact on our project in Berlin III. In the reporting period, expected overall capitalized project costs increased by EUR 8 million, due to additional expected costs for civil engineering and cultural heritage requirements, as well as general price increases. For this reason, we have to book an impairment of EUR 2.9 million in the first half of 2023. Now, I would like to hand over to Stefan Feller, our head of IR and ESG management, for a comment on our financial performance, as well as an update on ESG.
Thank you, Thorsten. Let's start with slide 16, and the development of some key financial figures. As Thorsten mentioned, the highlights are our improved profitability. FFO I grew by about 9% year-on-year, and our adjusted EBITDA grew about 12%. Compared to the first half of last year, the environment in the German real estate market has completely changed, and the sharp rise in interest rates since then has also left its mark in our portfolio. Driven by the recorded devaluation charges of approximately EUR 98 million, the operating income was down more than 45% year-on-year, and we had to report a loss after tax of EUR 76.1 million.
Together with the 3.8 million new shares issued for the conversion of the mandatory convertible bond issued in January 2023, the NTA per share decreased by 20% compared to the end of 2022. Thanks to the additional equity from the mandatory convertible, our equity ratio increased to 40.1%, while the LTV remained more or less stable at 55% compared to the end of last year. With that, let's move on to our debt profile and KPIs on slide 17. In the first half of 2023, we continued our active capital management. The proceeds from the mandatory convertible bond enabled us to repay the remaining amount of our first Eurobond ahead of its maturity. As a result, we do not have any significant maturities until 2025. Nevertheless, the refinancing of upcoming maturities remains high, high on our priority list.
In May, we issued a new 50 million Swiss francs convertible bond. The convertible bond has a coupon of 3% and is convertible from December 2023 onwards at the price of CHF 15 per share, and it matures in 2026, if it's not converted before. Just a few days ago, we closed another secured financing. The volume is approximately EUR 33 million and has a maturity of five years. This shows that the secured financing market in Germany is still active, and that's why also we started negotiations to roll over the secured debt maturing in 2024 and 2025. During the first half of 2023, our interest coverage ratio increased to 1.61 from 1.55 at the end of 2022.
Although more than 90% of our debt stack is fixed rate, the higher interest rates in the variable portion, such as our RCF, resulted in a slightly higher weighted cost of debt of 2.8%, up to 2.7% at end of December 2022. The weighted average maturity as of June this year was at 3.4 years. Let's turn to slide 18 and some background on our cost trends. As you know, we are currently pursuing an active program to improve our cost structure and our operational efficiency. This has already had an impact in the first half of the year. We were able to reduce our administration cost per square meter by almost 40% on an annualized basis. This is mainly the result of the in-sourcing of janitorial and property management services.
Another example is the creation of an in-house tax department, which, among other things, helped to reduce other operating expenses by almost 50%, 15% year on year. On the other hand, continued cost pressure led to higher costs from our external service providers. That's the main reason for the increase in maintenance cost per square meter to approximately 9 EUR on an annualized basis, compared to 8.30 EUR during the last financial year. Nevertheless, we were able to significantly improve our adjusted EBITDA margin by around 370 basis points in the first six months of this year, which increased our adjusted EBITDA margin to 53.7% at the end of June. This is well above the levels in the last few years and demonstrate good progress towards our 2025 margin target of around 56%.
Now, let me round out my part with a few words on ESG, starting on slide 20. ESG and sustainability remain key topics for us. We stepped up also our efforts on transparency of our non-financial reporting and published in May 2023 for the first time, a separate sustainability report in accordance with the well-known GRI standards. The report elaborated on the impact of our business activities on the environment and our various stakeholders. Let's move on slide 21. One of the most important ESG issues in the German real estate market in recent months has been the amendment to the German Building Energy Act, which we believe will have a significant impact on ESG CapEx planning over the next few years.
While some of the details of the law are still unclear, and the final legislation is not expected to be passed by the Bundestag until the autumn, we believe it's important to highlight some of the key elements of the new law. First, new heating system must be operated with at least 65% renewable energy going forward. Functioning heating system can continue to operate without restrictions and can be repaired if necessary. While the new law will come into effect by 1st of January 2023, therefore, most likely existing buildings will not be subject to the regulations until a municipal heating plan is in place. This should be the case in 2026 for municipalities with more than 100,000 inhabitants, but only in 2028 for the remaining municipalities.
The current phase-out date for the use of fossil fuels in heating system is expected at the end of December 2044. The landscape of available subsidies is still quite open. For landlords such as Peach, at least a basic subsidy of 30% of the investment cost and an additional modernization levy of about 10% should be available. In principle, this new law is in line with one of our key pillars of the decarbonization path, which is to switch to a CO2 neutral heating supply and increase the share of district heating. Once all the details of the new law are known, and there is more clarity in the subsidies available, we will double-check and update, if necessary, our cost estimates for the decarbonization task.
Tenant satisfaction, that brings me to slide 22, is another important element of our ESG strategy and remains a top priority for Peach. In the first six months of 2023, our Peach Point was resolved by approximately 82,000 tenant tickets. That's about 60% more than in the same period last year. Despite this increase in the number of tickets, we have continued to improve the response time of the Peach Points. When an issue could be resolved directly through one of our 15 Peach Points, it took us only seventeen and a half hours to resolve the issue. This is 12% less time than in the same period last year. The response time of our system partners was also reduced by almost 1/3.
The satisfaction ratio of all tenant feedback received in our digital property management system increased to 79% in the first half of 2023. Again, well above our target satisfaction rate of 75% and a very high rate in Germany. With that, I will now hand it back to Thorsten to conclude our call with an outlook for the second half of 2022.
Thank you, Stefan. Assuming that the market environment remains unchanged, we are currently confident that we will achieve the targets for 2023, that we set at the beginning of the year, with a rental income in the range of EUR 121 million-EUR 122 million, and the FFO I at the lower end of the range of EUR 21 million-EUR 22 million. No final decision has been taken yet. It's rather unlikely that we will pay a dividend for the financial year 2023. We are on track to achieve our midterm financial targets, which we first presented in March 2023. Given the current market environment with rising market rents, a like-for-like growth of at least 3.5% on an annual basis seems to be achievable.
With the progress made in the last six months and the continued focus on costs and efficiency, we are also confident of achieving profitability in line with the target set for 2025. Future asset outgrowth and the LTV ratio will depend very much on how we refinance the Eurobonds that becomes due in 2025, something which is obviously a top priority for us in the coming months. We turn now to slide 25. In connection with the refinancing of our EUR 300 million Eurobonds due in 2025 and optimization of our capital structure, we will carefully evaluate potential opportunities for the sale of real estate portfolios outside of the core locations of our portfolio. In general, our considerations also include an evaluation of all relevant strategic options for the bond refinancing assessment of the ideal and appropriate capital structure going forward.
Operationally, we will continue to focus on cost control and efficiency improvements in the second half of the year. In this context, we are pleased that Marcus Schmitt, an experienced COO, took over the operational management in Germany in this July. Finally, I believe that with our focus on affordable housing, Peach is very well positioned to benefit from the trend of rising market rents against the backdrop of the lack of affordable housing supply and the growing population, and an increase of number of households. We intend to capitalize on this potential by continuing to further increase our interest rates, as well as materializing the potential we have between in-place rent and market rent whenever it comes to fluctuation. Now we are happy to take your questions. Operator, please go ahead.
Thank you. If you do wish to ask an audio question, please press star one one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing star one one again to cancel. There will be a brief pause once questions are being registered. The first question comes from the line of Stefan Scharff, from SRC Research GmbH.
Yeah, good morning to Zurich. Here's Stefan from SRC Research. My first question would be about your CapEx. It was always about EUR 30 per square meter in the years before. Now you go down to EUR 17 per square meter, and perhaps you can give us a bit more color here, how you bring down your CapEx, and what this means to bring down the vacancy rates in more challenging economic times. The second question is quite similar. We have a recession here in Germany on the horizon, and perhaps you can say a bit more about how you attract tenants and how they are still able and willing to pay the rents. Yeah, how you feel the situation here in Germany?
Yeah. Thank you, Stefan. Yeah, question number one with regards to CapEx. We need to look at page 12 of our presentation. Yes, we had EUR 32 last year. Two years before, we had more mid-20s to 26, 25. This year we will be at around 17. It's basically impacted by the fact that liquidity is there is a kind of shortage, so it's more difficult to get liquidity. Even if you get it, it's significantly more expensive, i.e., maybe you got a secured loan one and a half years ago at 1%, now it's 4.5%. This has an impact on how much we spend. Last year that was kind above our average with EUR 32 per square meter. This had an impact on the vacancy rates, which came down more than 1%.
We just mentioned it, our vacancy rate got slightly up towards the year-end. It's just 0.3% basis points, but nevertheless, you see there is a correlation between spending CapEx and reducing vacancy. That's the kind of arbitrage that we have to closely follow and observe in the coming months, because it's for sure, we, we don't want to further increase the vacancy rate. At around 7%, is that what we think, without spending too much CapEx is possible. That's something we closely observe in the coming months. Where we have also, let's say, constructive dialogue that we just started with our new CEO, what, what can we do and what is the ideal amount that we spend and in which location?
That is the main focus for the, for the next, for, for the second half of this year. It also leads to the second part of your question: How can we attract tenants? What we basically see is that the demand for affordable housing is getting bigger on a daily basis. All units that are basically lettable, if we can let them, and we have shown it, whenever we have fluctuation, we can increase the rents by roughly EUR 1 per square meter. In our segment, affordable housing, I think that's the, the place to be currently in the real estate sector in Germany. Even, yes, it's, it's, these are challenging times with inflation, recession is coming up, everything is getting more expensive.
We've seen it in our, let's say, yeah, with this rental payments. We have a loss of 2.6%, which is higher than last year. There is, tenants are fighting to pay rents, but given the effect with inflation and recession, but basically in our segment, whenever there is a flat that you can let, it's lettable. We are confident that we can increase the rents and continue at least 3.5% like-for-like per year, and let's say remain the vacancy rate at least stable.
Okay. If we think about your debt maturity profile, there's not too much coming in this year and next year, but in 2025, in November 2025, the big EUR 300 million bond is coming, which has a coupon of 4.4%. You know, what is the level on the financial markets at the moment? Your net yield is a bit below 3% at the moment. How you tackle this issue for the next two years to refinance your debt? Perhaps also, which role play the unencumbered assets, which are at almost EUR 500 million?
Yeah. Yeah. I mean, as you rightly pointed out, there's nothing left to refinance this year. Next year, it's EUR 31 million. There we are already in discussions with the existing lender to extend the loan. I think there we can make it tick the box. Then, as you rightly pointed out, year 2025, it's roughly EUR 600 million that we have to refinance. It's one big secured loan, where we about EUR 215 million, where we already in negotiations with the existing lender, and the target is to extend the existing loan mid next year, one year in advance, so that we can basically, yeah, split the 2025 refinancing into partially refinance already, at least the secured loan, in 2024.
Yes, the bond is, as you said, it's 4.4%. Two years ago, we basically thought that we can, by refinancing that one, materialize financial synergies by reduce the coupon. As of today, that's not possible, for, I think, more than 18 months now, the unsecured bond market is for sub-investment grade issuers for the all industries closed. That's something we have to assess. As we have seen in January, February this year, we already had a EUR 250 million bond that was due, that we refinanced with a mix of an equity raise, taking up new secured loans. There are a variety of opportunities that we are currently assessing. I don't have the exact answer right now, and the bond is due November 2025, there's a bit time.
As mentioned before, that took priority to assess all kinds of opportunities, disposal. As you mentioned, we have an unencumbered asset pool where we can take up additional loans. We have demonstrated by the end of last year that we are willing to raise equity in order to refinance debt. I think all these ingredients will play or could play a role in refinancing the EUR 300 million bond.
Okay. In your press release today, you mentioned that you might sell some smaller parts of your portfolio. Perhaps you can give us here more about the size and/or more about your schedule, or are there some negotiations underway?
Yeah. I mean, that's something with our new COO, who started last month to define which is our core portfolio, which is non-core. From a rough number, so I wouldn't be surprised that at the end of this exercise, we say that we would be willing to sell up to 10% of our total portfolio, assuming that we achieve economically reasonable and appropriate prices. There is no pressure to sell something already this year. It's more that it is one ingredient for refinancing the bond in 2025.
Okay.
As I said, I think up to 10% somehow, which I would assume a reasonable effort to do.
2,500 flat, but not in this year, meaning this year a bit and next year a bit, and to split it up a bit between the years.
Exactly. It's one ingredient for the bond refinancing in 2025.
Okay, I see. Thank you.
You're welcome, Stefan.
Thank you. The next question comes from the line of Adrian Saidi from Hauck Aufhäuser Lampe. Please, go ahead.
Yes. Can you hear me?
Yes, I can.
Okay. Hi, Thorsten. I just have a question about, the remainder of the hybrid bond in Swiss francs. As far as I know, there is still EUR 40 million outstanding, and you pay about 10%. That means to me that the average cost of debt will drastically burst in the second half of 2023. What are your plans to do with that?
Yeah, you, you are correct. The hybrid bond is still with CHF 45 million outstanding. If you pay the interest on the hybrid, yes, basically, it, it would be a cash out, but it's not an interest payment as such because the instrument is treated as equity. These payments, if we make any payments under the hybrid, they are basically classified in terms of IFRS, not as interest payments.
Okay. By the way, we were told that the raised funds from the 3% convertible will be used to repay the outstanding hybrid bond. What about those plans?
Yes, they, they are still in place. I mean, with the proceeds from the convertible, we reduced the hybrid by CHF 13 million. These were the people who were willing to switch from the old instrument into new instrument. The remaining funds, they are still on our account, so they are designated to repay the hybrid. Question is, what is the right timing to repay the hybrid? I mean, you see our LTV is 55%. It's by the end of June, we further, let's say, reduce it or repaying the hybrid with the proceeds from the convertible would increase the LTV by around about 1.8%. It's, it's a question of timing.
I think we will wait until we have more certainty what is still done for the second half of this year.
Okay, let me. [crosstalk] Yeah. Okay. There is no plan to redeem it at the, the next call date, which is, as far as I remember, the 23rd of September, right?
There is no formal decision yet, but since we want to get more certainty on the valuation result, it might be that we don't repay, but as said, there is no formal decision yet.
Okay, thank you.
You're welcome.
Thank you. The next question comes from the line of Andreas von Arx from Baader-Helvea. Please, go ahead.
Yeah, good morning. I have 4 questions. Should I go one by one?
Yes, please. Good morning as well.
Yeah. Good morning. The first one will be on your cost savings. I mean, end of last year, you indicated that you would do cost savings of mid-single-digit millions . Now, in the first half, we have seen EUR 2 million roughly. So it's kind of EUR 4 million still that same run rate. Why is the number of employees roughly unchanged compared to year-end? The question is, I mean, are these now the measures that you wanted to do in efficiency-wise, or that you can do, or is there even more to come?
Yes, you are correct.
EUR 2 million in the, in the second half.
Yeah. You are correct. The number of employees is basically increased or some unchanged where it is the end of last year. As you can see, the percentage of personal expenses of rent income went down from 16.8% to 16.3%. What we basically did, this was also communicated last year. We, for example, build up an internal tax department. This basically incurs personal expenses, but reduces other operating expenses, which were down by roughly CHF 1 million, in terms of percentage of rent income from 9.9% to 8%. This was basically kind of insourcing, building up internal expertise and internal tax department, also housekeepers and the property managers, at the same time, cutting external costs.
Overall, as you can see, the EBITDA margin increased from 50% to 53.7%. It's we overall save costs, and we shifted from external to internal, while insourcing.
Okay. You know, that sounds more like fine-tuning than a real game changer going forward. Your increase in profitability going forward will, as I, as I see, it depends mainly on increasing the rent and less on lowering the cost. Would that be fair assessment?
No, no, that's not really a fair assessment. It's both. It's increasing the rent, which is one top target, but also being cost efficient. I mean, the EBITDA margin also takes into account increasing the rents. We reduce the costs. We will continue to do so. For example, you have seen, there's basically, we also started to somehow kept the cost of the management board. The CEO left us. There is a CEO in Germany with a different type of, of income. There are various things we are looking at. We also try to figure out whether we can reduce our costs for IT. Of course, the personal expenses that can be saved. That's something we will continue to assess, and it's both about increasing the rents, but also at the same time, reducing the costs.
Okay. Now on the valuation, I mean, of course, it's being done by an external party, but I guess you also have noted that basically all other larger listed players have had negative revaluations, more or less, double of what you are showing in the first half, I mean, as in percentage of, you know, the portfolio value. Is there a risk that, you know, your external value might, you know, more come closer to what we have seen at all other external values in the second half, and therefore, you know, you might see actually more significant revaluations in the second half as compared to what we might see up here?
Yeah. To be honest, I don't see a risk that we have to face a higher risk of getting further, let's say, revaluation losses than our peers. I mean, I know the numbers you just mentioned, but I think if you compare it, you cannot only consider the last six months, I think you have to consider the last 18 months. We've been more conservative in increasing the values last, in the first half of last year, and also being more aggressive by taking down the values in the second half of last year. If I basically look at the, let's say, the last 16-18 months, we are in line with our peers, especially with peers who have a similar portfolio as we have.
I think overall, with the value per square meter of EUR 1,400, I don't feel that our portfolio has not the right value, so I feel very comfortable with our valuation results.
You would expect, a kind of revaluation that would be similar to your competitors, and you do not see risks as in the last few years, you have made significantly higher initial revaluations when you acquired a new property?
Yeah. Yeah, I mean, I don't see a risk that our valuation results should be more conservative than the ones from our peers. I mean, for us, it's too early to quantify what would be the result for the second half of this year. I mean, there are signals that the values might have reached the bottom and that it's getting on a very low basis up again, or that it's stabilizing. Others say there might come between 2%-3%. For us, it's too early to quantify, but we feel comfortable with the valuation results we have over the last 18 months, and we don't see that we are more aggressive than our peers.
Okay. With regards to your 2025 FFO guidance, I mean, if you would refinance on current market conditions, EUR 400 million bonds, would you still be willing to commit to that FFO guidance on current market conditions, or would that be not possible?
Yeah. I mean, the FFO, 50% FFO guidance that we gave will be highlighted on the respective page without the impact of potential refinancing. If the interest rate environment remains where it is, and that we have to pay, let's say, significantly more than currently, it might be that we have to revise the FFO guidance.
Okay. Did I get that correctly now on the call last question, that you are not ruling out another equity issue in the second half?
I mean, I said we are assessing all kind of opportunities to refinance the 2025 bonds. I mean, this doesn't mean that we have to refinance it this year. If you ask for equity raise this year, I don't see it. Means that the bond is due November 2025, as of today, I wouldn't rule out any, let's say, capital market instrument to refinance the bonds until November 2025. There is no need of a equity raise this year.
You would not rule, I mean, that's, but I guess that's not your priority, or you just wanna be on the safe side and not ruling that out, I guess. It's that kind of picture.
I mean, I don't see the necessity as of today. If everything changes and we have a fundamental change in, I don't know, interest rate environment or the rest, I don't see it. Basically, I don't rule out anything.
Great. Okay, thank you very much. That's it. I give it back to the queue.
Yeah. Thank you, Albert.
Thank you. Once again, ladies and gentlemen, if you do wish to ask an audio question, please press star one one on your telephone keypad to register your question. The next question comes from the line of Ines Charfi from PGIM. Please go ahead.
Hi, thank you. Just on the possibility of asset disposals and looking at the unencumbered assets, are you constrained by any covenant there in terms of how much you can dispose of? And also same question on, around the LTV. Do you have any maintenance covenants that might restrict what you can do around there?
Yeah, thank you, Ines, for the questions. Question one, of course, there are no restrictions in terms of disposals, i.e., if we dispose something from the unencumbered pool, anyway, there is no secured debt on it. Let's assume we partially dispose something which is secured by a financing. Of course, we can dispose, but then, depending on the LTV, let's assume we dispose something for EUR 10 million, we basically have to, we have an LTV of 50%, we would need to repay the loan by EUR 5 million and get EUR 5 million free cash flow. There are no restrictions in terms can we dispose secured assets. It's just that the, the free cash that comes to us is lower, since we have to proportionally also repay the secured loan.
The second question in terms of LTV, I mean, we have individual LTVs for secured loans, but there is sufficient headroom. Our, let's say, capital market instrument, which will most likely replace the EUR 300 million bonds, he has, of course, also a LTV covenant, which is standard in the market, but it's not maintenance, it's incurrence-based , and it's not an investment grade limitation, sub-investment grade, so where you have significantly more flexibility.
Okay, thank you. I just wanted to check on the also on the chart where you show the maturity, so page 17. Just clarifying, obviously, there's a bond, EUR 300 million there, and then the, c an you confirm that small unsecured, is that the draw on the RCF?
Exactly. It's 41. No, no. It's [crosstalk] actually 20. The CHF 41 million is the RCF, and the Schuldschein that we have stated is included in the main covenant, i.e., the CHF 586.
Yes.
Yeah. The, the shiny blue is our full time. The more, let's say, heaven blue is, is the bond, and the EUR 41 million is the RCF that we have drawn or have drawn. I mean, we've included it into our press release. We find the EUR 33 million secured loan that we should be able to draw within the next two weeks, and with that, we would further reduce the RCF in first instance.
Okay, great. Thank you. My last question was, on the development projects. Do you disclose how much debt is attached to that at this stage?
In the segment Development?
Yes.
Yeah, there's hardly any secured debt right now. It's only minimum amounts, since we just started to construct, and so far the construction costs have been, let's say, covered by the advance payments that we get. There is an individual secured loan on that one, so the funding is basically from or the construction costs for the development will be funded by advance payments that we get by, which are due whenever someone is signing a contract, that's 20% of the purchase price. The difference is then will be covered by a designated secured loan by Sparkasse, which is hardly any drawn yet because we just started to construct, and we first take the 20% advance payment.
Okay. Okay. Thank you.
You're welcome.
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