Hello, ladies and gentlemen, and welcome to today's analyst and investor update of CA Immo. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to the company. Please go ahead.
Thank you for joining. This is Keegan Viscius, and today I'm joined by my colleague and CFO, Andreas Schillhofer. We continue to operate in a challenging market environment, characterized by lower occupational demand, illiquid transaction markets, longer decision-making lead times, shifting preference across buyers, investors, and lenders. On top, we face macro headwinds from slower growth expectations, sticky inflation, falling confidence, lower hiring expectations, and tighter monetary policy. Against this difficult backdrop and the negative valuation results, we're pleased to deliver stable operational performance and a positive net result. Operationally, across the portfolio, we've achieved higher GRI, 12% increase year-on-year, with annualized in-place GRI of 6% year-to-date. We've had a positive sales result from disposals sold at a premium to book value.
In the first six months, we closed 6 disposals, totaling EUR 381 million in proceeds at a 31% premium to book. In Q3, we've already closed three disposals, totaling EUR 162 million in proceeds at 56% premium to book. We have two more disposal signs that are expected to close later in H2. On the occupancy front, we remain flat at 90%, as of the current vacancy, around 30% has already been signed with future lease start dates. The general tone of the leasing market can be characterized by thinner demand, a higher focus on quality locations and quality products, slower decision making, but still tolerance for higher rents, and we see the ability to push rents up in the best buildings.
We've signed 50,000 sq m of new leases in the first 6 months of the year, with rents up around 10%, with incentive packages across the board, stable, averaging around 22% across all of our markets. On the development side, our pipeline remains on track, on time, and on budget. We have two projects under construction, and we expect to hand over to the main tenant occupying 100% of the building at Hochhaus in Berlin in early October, where we're six months ahead of schedule and under budget. The second project that we have under construction in Berlin, Upbeat, is on track with the groundbreaking ceremony expected to be held in September. We're 100% leased and already 50% of costs are tendered, giving us good visibility and cost certainty for the rest of the development pipeline.
Stopping here, I'll hand it over to Andreas, and thank you for joining us.
Thanks, Keegan, and also welcome from my side. Hope you're all well. Very happy to present to you our half-year numbers. Despite challenging markets, we were again able to deliver a solid performance and in particular, a strong EBITDA, thanks to the highly profitable business system. Let's move to page 4 to look into a few numbers in more detail. Rental income was up 12%, period-on-period, and reached EUR 118.2 million, mainly due to project completions and rent indexations. We continued our active capital rotation and closed the sale of six strategic buildings and land plots, leading to sales results of EUR 100 million, which is substantially above the prior year level and mainly related to the sale of the land plot in Munich, called land plot.
As a result, the EBITDA stood at EUR 184.6 million, significantly up by over 100%, again, due to the exceptionally high sales results in the first half. Results for the period were positive, with EUR 30.5 million, but obviously down by around 94%, mainly due to a very negative revaluation loss this time, compared to a gain in the first half of 2022, which I will explain in more detail later. Let's now go through some details and bridges. Let's move to page 5. This shows the rent spread and clearly underpins why the top line is growing year-on-year.
Due to strong letting activity as well as revaluations coming through, our continuing income producing assets delivered another EUR 8.5 million of additional rental income in the first half, compared to the prior year period. EUR 8.1 million was added in H1, compared to the previous year, due to completed development projects, mainly the ONE tower in Frankfurt and the cube in Berlin. Rental income was reduced by EUR 3.9 million due to low sales as a result of our ongoing capital rotation. So clearly, sales activities were concentrated on development completions and higher rental income from managing efforts. Overall, income increased to EUR 118.2 million, 12% up to prior year period. Also worth mentioning, our NOI margin is at around 81%, which is down 8 percentage points compared to the same period last year.
The lower NOI contribution is mainly related to Tower One in Frankfurt, which is still being leased up and hence any related costs. So for example, agency costs or vacancy costs reduce the NOI margin. This is a temporary effect. It should go away once the tower is leased and tenants have moved in. Let's now move to our results from revaluation. As in previous years on page 6, you can see a full external valuation was carried out on the key date, June 30, 2023. This year, we changed appraisers as part of our standard rotation. The entire portfolio was valued by Jones Lang.... Total revaluation gain amounted to EUR 53.7 million, and the revaluation loss to EUR -200.3 million.
This resulted in a net revaluation loss of EUR -146.6 million, which applies a circa 2.5% markdown of our portfolio compared to end-of-year book value in 2022. This result obviously reflects the significant downturn in the market environment of properties compared with the previous years, in particular, related to long-term economic consequences of the COVID-19 pandemic, or i.e., work from home trends, the effects of the war in Ukraine, sharp rise in inflation, and thus, consequently, higher interest rates, as well as lower economic growth. This has had and still has an impact on the real estate market, mainly in the form of declining transaction volume and obviously higher cap rates across all risk data classes.
As you can see also, page six, the largest, by far the largest contribution to the valuation result was attributable to the investment property at negative EUR 141.6 million, followed by active development. Over 80%, Germany accounted for the largest share of the valuation result in the first half of the year, followed by the 11% and Austria, 7%. This is intuitive, as Germany also benefited most from the yield compression in the last cycle. The main driver of the negative valuation result was the decompression, which was to some extent counterbalanced by higher rental assumptions, but obviously could not compensate for this. Overall, like for like GRI here, the top of our portfolio increased from 4.3% in Q2 2022 to Q, including Q3, 2023, Q2 to 2023 to 4.9%.
So you can also refer to page 17 of the deck for the numbers. Let's now move to the FFO bridge, page 7. At the bridge, you can see that overall, FFO 1 decreased by EUR 21 million, or 28% in the first half of 2023. This decline is mainly attributable to the missing FFO 1 from our sole remaining platform, as well as to lower recurring distribution to our joint venture in Mainz-Finthen, which is being wound down over time. We still have two joint ventures in mind, and which we expect to sell the remaining land plots in the next 12-18 months. Unlike in the P&L, where the remaining activities are shown as discontinued operations, the FFO 1 statement still includes the contribution from Romania for last year.
On the positive side, EUR 3.9 million of FFO 1 was added, which is this case here on page 7. That figure includes obviously higher FFO coming through from newly completed development, but also various effects, such as occupancy and rent indexation, but also lower FFO coming through as a result of sales. On the indirect expense side, we are EUR 2.2 million higher than last year period. This increase of EUR 2.2 million has to be seen in the context of strong inflation-driven salary indexation at the beginning of the year. Such impact was counterbalanced by further organization streamlining, resulting in an FTE decline from around 368 FTEs at the end of last year to now as of June, 339 FTEs.
Let's move to page 8, and let me give you some guidance and expectations for the remainder of the year. We expect FFO 1 for the financial year 2023 to exceed EUR 100 million. The decline compared to last year reflects in particular, the sale of our remaining platform and other non-strategic assets, which will however improve the portfolio and earnings quality of CA Immo going forward. We also raised our EBITDA expectation from over EUR 200 million to over EUR 250 million, on the basis of further secure profitable sales activity for the remainder of the year. Let's move lastly to the balance sheet on page 9. So you can see here, net income producing decreased by 3.5%, reaching EUR 2.8 billion.
Again, mainly as a result of the revaluation loss, sale of assets, and also some transfers of assets to the held for sale category. IP under development also slightly decreased to EUR 590 million. Again, due to the transfer of assets internally, but also counterbalanced by continued investment, mainly into our two standing construction sites in Berlin, Brandenburg, plus in Happy. Cash increased to EUR 953 million, which is around EUR 130 million higher compared to Q4 2022, mainly due to early payment of the Berlin deal, that is closing in Q3. IFRS NAV per share stood at 39.95 EUR, which applies a less than 10% discount of current share price to IFRS. 22% smaller compared to earlier this year, also to most of our peers.
PE ratio was at 36.2%, similar to Q4. Our Net LTV stood at 29.6%, slightly down compared to Q1, and any certain five sales proceeds coming in. All 23 remaining maturities are either already contractually agreed or in final negotiations with the respective lenders. If you move to the financing section, you can see the details on page 11. With respect to 2024 maturities, we intend to pay back the 2024 bond of EUR 175 million with KfW.
... The remainder of the 2024 maturities mainly relate to project financing in Germany, in particular, for the Mobil Plaza Plus, where all our financing and switch into a long-term, asset financing has already been contractually agreed. That's for my side. This concludes our presentation, and let's move over to Q&A. Thank you.
Ladies and gentlemen, if you would like to ask a question now, please press nine and the star key on your telephone keypad. In case you want to cancel your question, press nine and the star key again. Please press nine and the star key now to state your question. Our first question comes from Stefan Scharff. Please go ahead.
Yeah, good morning from Frankfurt, Stefan here. I have one question about the letting performance. It was good in the first half of the year, and you mentioned that you could even let out your properties 9% over the expected rental value. Perhaps you can say a bit more here, how you calculate or how you adjust the expected rental value.
The market rent, also as indicated by our valuers and what we think is the rent achievable in the property. I think overall, when looking at our budgeting and our planning for the year, we plan a headline office rent or, or leaseback rent, together with an incentive package, as well as incentive, as assumption on void and leasing and other costs. And this is based upon our market view and triangulated against external data from our valuers and, other advisors. That is the benchmark, and this is where ultimately, the premium or discounts, comes from.
Okay. Okay, I see. So, in Germany, we have been hearing now, in recent weeks or last days, that some developers went bust. What could that mean for your business and also for the relationship to banks, for financing some developments? What is your impression here?
I think this will ultimately create an interesting opportunity for us. We've been very disciplined over the last years in terms of external investment. We didn't do any... Now, in hindsight, it's easy to say, but we didn't do any top of the market M&A, whether that was public or large private platforms. And we selectively acquired only small assets in our core markets where we have strong conviction. So we went into this period of uncertainty with a strong balance sheet and a high-quality portfolio. And we've transacted almost EUR 3 billion and really focused the business over the last number of years, exiting multiple markets and increasing the underlying fundamentals. So I think we're entering this challenging environment from a position of strength and also a very liquid balance sheet.
We've leaned and streamlined our development pipeline, which now, you know, in Q4, we will be handing over one of the two remaining office developments that's 100% leased. As I mentioned, it's already 100% occupied for six months ahead of schedule on timing, and we're under budget. And we'll be left with only one development that's left in our pipeline, where we're again 100% occupied. We have secured financing in place for the duration of the construction period, which will then roll over into an investment loan. We have a high quality credit tenant, and 50% of the works are already tendered. So we have really high cost certainty as to the future expenses there, and we have no leasing risk.
So, you know, we have a really streamlined portfolio, strong balance sheet, unlike some of the project developers who typically tend to operate with a lot more secured, as well as subordinated, higher leverage financing. We see also an opportunity to potentially be acquisitive again in the future years at attractive prices and to be able to rebuild our pipeline and selectively expand our footprint.
Mm. I see. I see. How do you see the progress in selling non-core assets in the second half of the year?
We've closed almost EUR 500 million worth of real estate year to date. We have two additional assets that are signed already and will close during the course of September and, and October. We have two more deals that are... One deal that is in exclusivity, a second deal that will be entering exclusivity soon. I would say, you know, in some of our markets, we've accounted for roughly 50% of transaction volume year to date. So for instance, in Vienna, it's highly advanced, a sale of our headquarters building at a material premium to book value. I think it has been a very calm summer, so a very quiet summer. The market is in certain areas we see more activity in the smaller lot sizes.
So that's also why you see the properties in our, in our pipeline, being typically less than 10,000 sq m. So we're trying to match the product that we want to divest, to where we do see liquidity and, and special buyers. But it's a challenging market. We had ad hoc announcements about, the intention to strategically divest our Hungarian exposure, unlike the Romanian platform, which, had a bit of a different profile. You know, this is something that is going to be harder and most likely be a, by asset sale over the next number of years. But we still see the ability to, to get stuff done. So earlier this year, we closed the sale of one of the Serbian assets. That's a transaction that we have been working on since pre-COVID.
We're in exclusivity multiple times, but eventually managed to get it over the line. So definitely the tone at the moment is a slower, it's a slower transaction market for the second half of the year. You know, we're focusing on selling what we can out of the list at this moment, and we still attract, you know, I feel are interesting prices.
Okay. Okay, I see. Thank you.
Thank you.
The next question comes from Jacob. Please go ahead.
Hey, guys, good morning. It's Jacob from the thanks for the presentation and for the answers. I wanted to follow up on Stefan's question. What is the volume of the sort of remaining assets which you would consider dismantling? I mean, how much is still in the pipeline because already, I mean, in 2022 and 2023, a huge amount of them in a very adverse market.
Yeah. You know, page 28, you know, when you think about the principle of our capital rotation program, we want to monetize where no future value creation exists, where the expected incremental rate of return is below our target, or where non-strategic in terms of location, sector, size, quality, and potential. So I think when looking at it, we want to continue to divest our non-office assets, which are mainly two hotels, one in Berlin, one in Frankfurt. We still see liquidity in the hospitality sector. That's something that we plan on working on during the course of early next year. We plan to continue to divest the residential land plots in the portfolio.
So that is out of the joint venture that we have in mind, where we've been selling and have three remaining plots to divest, which we anticipate over the next 12-18 months. As well as the Munich residential portfolio, which after the sale of Rathausstraße earlier this year, again, highly successful, where we achieved pricing of roughly EUR 3,000 a square meter for open market resi prices, for buildable area. We only have one final project left, which is the Eggarten development, which is a joint venture together with a local Munich partner that will be built during the course of 2024-2025. Mostly then we'll expect to sell that. And then otherwise non-strategic, in addition to the residual Hungarian and Serbian assets, there's a small number of subscale office properties that we have.
For instance, a retail first Grasa in Vienna, as well as some assets in Prague and Warsaw. So I point you to the annual report where, you know, we give a detailed breakdown of the individual assets and their size. And, you know, kind of under 10,000 sq m is something that for us is also kind of seen as non-core, even if the event it's in a, it's in one of our tier one markets.
Thanks, Michael. On another point which you already touched on, the investment dynamics. When do you think, or what would you like to see to maybe consider learning more acquisitive? And based on sort of your presence in the markets in Germany and in CE, are you already seeing maybe sellers being more willing to accept the new level of prices and some opportunities in the quality that you would be potentially looking for emerging or not yet?
We're starting to see it. I mean, on page 24, we set out kind of what our organizational priorities are for the year. You know, we still see accretive, highly accretive internal investment opportunities, organic investment opportunities that are more attractive than external investment. Now, that could be buying back our stock at a discount, which we continue to do, but also looking at future development projects in our prime Berlin pipeline. So, we've got Alpha 2, which is one of the pipeline projects of about 20,000 sq m, just adjacent to the KPMG Hochhaus building. As part of the Berlin deal that we did that closed in Q3, we acquired a small plot directly adjacent to the Berlin Central Station, where about 5,000 sq m of GLA can be constructed.
All of those tier one Berlin developments, we still see even in this new market normal, when you look at widening yields, higher costs of financing, higher costs of equity, the ability to underwrite double-digit IRRs over the investment horizon. So, you know, when thinking about the allocation of capital, the primary focus for the moment is internal investment, returning capital to shareholders through the buyback, and selectively looking at external. I think what we're seeing is, you know, German newsflow in particular, every day, every other day, there's an announcement about an insolvency of predominantly project developers. And we believe that this will grow opportunities for us to invest externally at attractive prices. We're having some discussions. We're starting to see.
We spend a lot of time screening the market, but at this point in time, we haven't seen anything that we want to pull the trigger on just yet. But we feel that's the direction of travel, over the next 12-18 months.
Thanks. Thanks. In terms of reacting on these opportunities, do you think it would be mostly maybe smaller individual asset plots? Or do you think there could be a juncture when you could potentially consider doing some kind of like big transformative deal has taken place from 15 years ago. The purchase of the rail reserves from Deutsche Bahn in terms of the sale and the future of this company. Also, one thing to ask you about, if you think about the next 3-5 years, where would you see CA Immo? Do you think that at some point during that time there could be a period when it would make sense to materially reconfigure the portfolio to look at M&A opportunities?
Is this the sort of near term outlook more of company which will be operating better as but maybe fewer of them, and, as such, maybe a full, you know, bubbling from current level over that period would be the base case or?
Yeah, I think what it would be over the next three to five years is increased concentration in our core markets, in particular, Berlin, as well as the focus in Munich. And that will also come through organic growth. Just when you look at the two developments that we're completing right now, Hochhaus as well as Upbeat, which will hand over around end 2026, and that's almost EUR 50 million a year of gross annual income for two income producing assets on long leases with effectively what will, what will be very limited expenses to run. So, you know, hyper accretive, and ability to drive economies of scale. And then we have another three near-term potential development projects and four kind of medium-term development projects in that core Berlin sub-market and very prime locations.
And that's either ground up developments like or the small Humboldthafen site that we acquired. And, but it could also be, for instance, the redevelopments of some of the aging houses where, you know, our basis is very low versus what we see in the market. So, you know, in the next 3-5 years, my expectation is we will, in a base case, continue with the trajectory that we've gone on, increasing our footprint in particular Berlin, as that expands organically, shrinking in the Central European markets, in Hungary, Serbia, for instance, as well as some of the other, the others where we're actively selling. And I think that there's still enough market scale for us to do that. When you look at a market like Berlin, it's 20 million square meters of stock.
So even if we have, you know, a doubling of the size of our portfolio there, you know, we don't believe that we see any concentration risks. And again, we have very high conviction on it. I think, you know, in the public space, we wanna maintain our kind of close leverage targets. So I think now we are, you know, in a very comfortable position in terms of our balance sheet.
And it gives us room to lever up in the event that we see attractive opportunities, but also at the same point in time, you know, we believe very strongly that we are very single sector, multi-geography player, but we do want to be concentrated in these core Northern European markets rather than, for instance, expanding into the Nordics or going into, well, France or Spain or Italy or something like that. So we still see, we still see room to grow in our core markets, where we have the relationships, the team on the ground, the market knowledge, the experience, the pipeline, and that's kind of the priority in the first instance.
And again, like I say, you know, we look at individual transactions that are coming across our desk, whether that's, you know, motivated sellers or the banks, who are, who are starting to pick up the phone. I think, you know, our view is if you're still talking to the owner, it's too early, but when you start talking to the lender, then it starts to get interesting, and those, those calls are starting to happen now. I believe we will see the opportunity for accretive, accretive bolt-on platform. So maybe a small project developer, for instance, who has a nice pipeline and a good team. That's something we would be absolutely interested in.
What I don't think we should be doing at this point in time, when you mentioned, like transformative M&A, is like large public or private transactions, where you have to go through a lot of hoops to ultimately acquire something where you only want to own 30% of the business, and where you would have to do a lot of divestment of non-core assets. I think you can build a business through selective and targeted acquisitions more accretively and more cost efficiently over the next couple of years.
Thanks. Thanks very much for the inaudible. So helpful. One more from me. On the lending dynamic, are you seeing any material differences in the spread banks are asking for and maybe willingness and availability of funding in Germany versus CE?
I mean, yeah, as you know, we are mainly doing good financing in Germany because that's where we get the best and effective terms. I mean, I said it in my comment on the financing. I mean, we have, as you know, in the maturity profile, we have a couple of good financings upcoming just this year. Which some of them have already been agreed, and one in relation to an asset in Munich, which is Kontorhaus. We're in the middle of negotiation, and I think, you know, we get the message from banks that they would like to do business with us. We are one of their core clients. They like our portfolio, they like our assets, and from our perspective, banking margin. So let's leave the rate aside.
I think they have jumped a little bit, but not massively. I mean, you can really get bank financing for really good assets. And for someone like us, let's say between 100 and 120 basis points changing margin. And it obviously has in the heyday been below 100, but I think that is something where we still feel comfortable and obviously, which is comfortable better than any secured financings which you would be able to do right now, if at all.
Thank you. Thank you very much, and congratulations.
Thank you.
Okay, so at the moment, there seem to be no further questions. If you would like to state another question, please press nine and the star key on your telephone.
Okay, thank you.