Colonial SFL, Socimi S. A. (COL) Earnings Call Transcript & Summary

Thank you. Good afternoon, everyone. It's a pleasure to be here again in order to share with you the results for 2022. I'm Pere Viñolas, CEO, and I am with Carmina Ganyet, Chief Corporate Officer; and Carlos Krohmer, Chief Corporate Development Officer. I'm on Page 6 of the presentation, which is a summary of the main highlights of the results for 2022. After the end of the year, basically, we can share these numbers regarding 2022. First of all, our recurring profit rose 26% to a new number of EUR 161 million. Second, our EPS growth, 21%. That is EUR 0.298 per share. The EBITDA grows 14% to EUR 283 million. Our revenues grew 13%, 7% like-for-like, EUR 354 million. So first comment on our main highlights, strong cash flow as the main message for our results. Second row, resilient values. So the gross asset value grows 5% compared to the year before. In terms of like-for-like, it would be 1%. Disposals in line with appraisal values for a total amount of EUR 500 million, roughly speaking. The NTA remaining at 11.83%, minus 1.7% compared to 1 year before. And the net disposal value, growing 15% to a new number of 12.7. So second row of main highlights, resilient values. Third row, solid balance sheet, loan-to-value 36.9%, that is including recent disposals. Liquidity of EUR 2.6 billion, again, including disposals. Fixed cost as a percentage of total debt at 100%. So mainly all of the debt hedged. Cost of the debt, average cost of the debt at the year-end 2022, 1.6%. So again, solid balance sheet as a summary for this year. These are the main highlights. I will enter into details, of course, for all of these numbers. Page 7, just to summarize and maybe emphasize some of these KPIs. Behind these numbers, first of all, what is being a driving force is the Letting Volume. The letting volume at the end of the year is 177,000 square meters. This is the second highest number in the group's history, well above our average. As you know, this has been a trend not only for 2022, also for 2021, 2020. So we are in a structural process of a strong letting of our prices. As a consequence of that high occupancy, 96% occupancy. Maybe it's good to highlight extraordinary performance of Paris $99.8 million. And if we translate this letting volume and high occupancy [indiscernible] 3 messages. First of all, full pricing power. So a 5% indexation impact in our annualized gross rental income, 7% in the case of Madrid and Barcelona. This is here in Spain is enjoying a higher effect of indexation. ERV growing 5% for the group, 6% for Paris. And Release Spread of 6% for the group, 8% for Paris. Page 8, I would like to highlight maybe what's the main driving forces in this performance that we see for Colonial before entering into [indiscernible] A number of messages I would like to share with you. First of all, what is clear at the end of year 2022 is that Colonial is delivering strong cash flow growth, but in particular with full pricing power. So to the question of to what extent inflation is being passed through clients. Roughly speaking, we are passing everything. So full pricing power as we could expect from the kind of clients, buildings and contracts, leasing contract that we have with our clients. Number two, this cash flow growth that is offering this full pricing power. It also shows a very healthy like-for-like growth. I would like maybe to emphasize that beyond being a good number, as you will see now that more or less all of the data in the sector is already available to put it in a way, we are at the high end. We are leading the growth in terms of like-for-like gross rental income in our set. The third message is that this full pricing power, this healthy growth in our gross rental income is producing the level of inflation hedge that we would like to have. That means that the cash flow growth Colonial is offsetting the impact of the yield expansion that we have experienced so far. That's an important message, full inflation hedge by now. Message #4 in the meantime, this is having the support not only of our existing assets, but also from the new projects that are delivering its additional also. But as a consequence of all of this, basically, we are enjoying an NTA that by the end of 2022 remains mainly resilient. If we -- it would include factoring the dividend already paid, I would say that the number at the end of 2022 is a number -- the same number of 2021. And this Brazilian NTA allows me to go into the next step, which is regarding capital structure, what can we say? Well, first of all, we've been achieving some divestments. First of all, these divestments are real. In the moment, where there's a lot of speculation or talking about what companies should and most of all can do, we are effectively delivering already done divestments. And second, divestments that are done mainly roughly speaking at NTA. So this is confirming a little bit the health of our assets, and in particular, of their valuation. With these divestments, we can confirm that we are comfortable with the evolution of our capital structure. And we would like to highlight 2 things about our capital structure beyond the LTD number and the rating, which is already normal. The first is that I think that we enjoyed outstanding financial hedging structure. We basically have all of our capital structure, our debt are fully hedged. But not only in terms of the picture as of today, but more importantly, going forward into the long term. We can enjoy as of today, of a secure very low interest rate for a number of years that after a number of years, is just slightly above 2%. This number projected into the future. We believe that it's even more important than whatever number we can say about today. And maybe as a conclusion, and I think that is an interesting thought out of this, maybe we like also to share to what extent is relevant the net disposal value number because of this. In the NTA, there's a lot of discussion about what may happen to the value of the assets because of the debt because of the rising interest rates because of a number of things. But then there are a number of hedging strategies that are not really seen there are seen when you look at the net disposal of value and what is happening to our net disposable value is that it's growing at a double-digit number, reflecting this quality check on the health of our debt. So the message is that behind these numbers, there is strong cash flow growth with full pricing power, resilient asset values where you can see pricing power offsetting rate shift, solid NTA benefiting from the polarization of the market and financial costs on the control in terms of 100% of current debt at fixed costs. These are our highlights for today. Now as usual, we'll enter into different sections to go more in deep. And now I ask Carmina to step in to go into the section about financials.

Okay. Thanks, Serra. In this section, we are going to see deeper the main financial indicators and mainly showing the full benefit of polarization. In Page 10, you can see how this 2022 results shows a double-digit profit growth with an increase of EBITDA of 14%. Our recurring net profit increasing 26%. And as a result, the earnings per share increasing 21% along with a very resilient valuation, showing gross asset value increasing 5% with a like-for-like 1% positive, showing also an NTA growth of minus 1.7% positive. If we add the dividend, mainly the NTA remains flat. And as Pere mentioned before, with a significant growth on net disposal value of 15%, up to EUR 12.72 per share. And all this recurring profit increasing 26%, mainly is beating the EPS, the upper end of the guidance as we guide during the year. So we are in the upper end of the range -- of the guidance and mainly the main impact of the recurring profit is due to the additional revenues. And what are the main impacts of these additional rents, you can see in Page 12. Basically, first, we are increasing income in the comparable portfolio with 7%, driven by indexation, rental growth and letting new spaces. Additionally, we are also increasing rent, thanks to the project pipeline and the renovation contributing with additional 7% in the growth on the revenues. Basically, 14% stands to the right strategy on prime assets with prime clients. And the third traditional impact is due to the fact of additional acquisitions, mainly Pasteur in Paris and the third quarters of Danone in Barcelona, contributing additionally 4% growth. And on the opposite side, you can see here in the chart, the impact of the disposals with minus EUR 16 million. So mainly the rental income variance increased 18%, thanks to the pricing power and new acquisitions and net disposal, the total gross rental income increased 13%. And as Pere mentioned before, the 7.2% delivered in 2022 is the highest like like-for-like growth in the sector. So we are beating our bids. And also this year, we are beating our historical like-for-like growth in the last 5 years, as you can see in the page in page 13. When we look at more granular analysis, the main impact of this like-for-like growth in Page 14, you can see here how the gross rental income increases in Paris, 13% in the portfolio average, including in Paris total 17% growth with outstanding like-for-like 7% total portfolio and positive in all the markets, 8% in Paris, 6% in Madrid and 9% in Barcelona. And when you look at the main driving forces of this like-for-like growth, mainly it's a combination of indexation, a combination also of pricing power. So we are increasing rents above the indexation, as you can see here, and on top, additional occupancy rates. So pricing power at the end, it's not all the passing to the indexation. It's also having the best portfolio, the best assets in prime location and the scarcity at the end helps to this additional rental growth above the indexation level. And following in the next page, in Page 15, you can see also a little bit more of details of how we have succeeded the divestment strategy. We have divested more than EUR 500 million, in line with the price of value, all has been done in a very narrow investment market conditions with a successfully large volume of EUR 500 million. You can see here the -- mainly the net initial yield that this disposal has been sold below 3%. In average, 83% of the disposal has been asset in Spain, 17% in Madrid. And you can see here the split between secondary Landplots and mature assets. So in a -- I'm not the best assets, which, as you can see here, secondary Landplots and mature assets significantly in Spain. And as of today, 75% of the asset program has been executed in 2023, EUR 84 million has been executed during 2022. And the rest, we have an advanced and high visibility to complete the program above EUR 500 million. One was also the main important driving forces of resilient value and positive NTA impact in 2022 has been delivering part of the project pipeline we've had in place during the year. In Page 16, you can see how we are operating value through these project pipeline. You can see here 2 examples, one in Paris-Biome and the other in Spain, in Madrid, Velázquez, creating in a blended capital gain of [indiscernible] 40% in Biome and 90% in the Velázquez. So this is also part of our beauty of this project pipeline being completed and being impacted very positively in the NTA in 2022 valuation. On the next page, you can see the details of our updated growth asset value. Basically, the message is that the valuation remains resilient with 1% like-for-like. Higher cash flow due to the indexation due to the rental growth because of the scarcity of the product in our market. So this pricing power at the end offset the yield expansion that has been included in the last appraisal valuation in December 2022. On top, we are adding additional -- in valuation -- additional value coming from the project delivery. And on the opposite side, you can see here the -- sorry, and also on top, sorry, you can see here the impact on the net acquisition. So like-for-like of valuation growing 1%. Additional cash flow being offset by yield expansion. And on top new acquisitions with an increase of gross asset value of 12%. And also here, we have included a detail of the markets, how this valuation has been impacted in the different markets, but mainly the message is that the strong value performance delivered in the Paris and the City and CBD market. As opposite, this performance has been much more better than the secondary, as you can see in the details of the valuation impacting in the second half of the year. If we look at our capital structure, in Page 18, what Pere mentioned, so the fact that we have completed this disposal program, enhanced the capital structure, enhance the profile of our liquidity with more than EUR 2.6 billion of liquidity. The net debt after disposal is below EUR 5 billion and the loan-to-value pro forma after disposals remained below 37%, 36.9%. And how is performing this capital structure in a way we would say, thanks to the financial policy, we have secured the cost of debt. So today, all the debt 100% post disposal is fully hedged, and this profile of hedge is in the appendix, you will see more details, remains in this level until 2025. Thanks to the positive mark-to-market in a very, I would say, interesting levels of rates and also thanks to the bonds at fixed cost at a very interesting level. So the stable financial cost remained in the rate of 1.7% and projecting this cost of debt thanks to the hedge remained below [indiscernible] So fully hedged position in a very interesting level of cost of debt with a very solid liquidity covering future financial needs, close to 4x the future maturities this year, for this year and for the next year and 70%, as you can see the profile of debt maturity expires matures after 2026. So stable zones in financial costs, very interesting levels of cost of debt and very solid capital structure and liquidity position. And finally, all this impact, positive impact on cash flow, positive impact on project delivery, positive impact also in capital structure shows -- it shows in our NTA remaining flat, as you can see in Page 20. You can see here the impact of pricing power with a very positive impact on the NTA. Also product delivery is adding additional impact on the NTA and all-in has been offset partially with a negative impact due to the fact and expansion yield with the price of valuation at the end of this year. But if you look at the NDV and when we included the mark-to-market of the debt, the NDV increases 15% with a very positive impact of EUR 1.86%, almost EUR 1 billion, thanks to the mark-to-market of the debt and also of the hedge. So Resilient NTA remaining flat, including the dividend and a very positive 15% growth on net disposal value, thanks to the fact of this financial policy, very proactive hedging all the capital structure in this for the following [indiscernible].

Thank you, Carmina. Now we'll enter in the section about operations, which are the driving forces regarding our outperformance. Carlos Krohmer, please step in.

Thank you very much, Pere. So as you have seen, the performance has been very strong on cash flow and on value and what is behind all of the performance. And basically, let's start with Page 22. One of the main drivers is polarization and Colonial strategy that is focused on this scarcity play. When you look today at the market, what you can see is that the market segments where we are active, that is the CBD of the cities and they are the high-quality product, there's a clear scarcity of product, just 0.4% of grade A product in the CBD of Paris and around 2% or below 2% in Madrid and Barcelona. And this faces a demand that is looking for the best products in the best locations, both on the rental market and as well as on the investment market. And this is what basically explains that we are having such a strong outperformance -- if we switch to the next page, we start to see first factual figures regarding the Colonial portfolio. We have signed, as Pere already said, 177,000 square meters, second highest volume in our history, well above the normal letting activity that is in a year, something around 100,000 to 120,000 square meters. So very, very high activity and in every single market. Moreover, we are signing contracts with long maturities until the first exit is 6 years on average, and on the expiry of contract that is mostly the case because all of the tenants are really loyal to our product it's 9 years. If we go to the next page, on Page 24, we see even a better way of how the polarization is a trend in the market is benefiting the operations of Colonial. When we look at Paris [indiscernible] , our share of the Colonial portfolio is 2.6%. But out of all of the take-up that has happened in 2022 in Paris [indiscernible], we have taken 4% of this take up. So we are really capturing market share, how much 140 basis points. If we look at Madrid, we can look at the total market, the total -- the share of the Colonial portfolio on the total Madrid market. It's 6% out of the total take-up for the full Madrid market, we have captured in 2022, 11% of the take-up. So here, even 500 basis points of outperformance of capturing higher market share. And are we doing this? At what prizes are we doing this? We are setting really the benchmark. We have signed contracts above 1,000 in Paris and contracts at the maximum rent we signed in Madrid was at 40. On the next page, on Page 25, when we look and analyze the full contract activity of the full portfolio in terms of price performance or rental price growth, we see another year of really again stronger in the growth, the same as the previous year. In 2021, we have at 5% of ERV growth. We again repeat 5% on year-by growth and especially highlighting on the office contracts in Paris, we have even plus 6%, so really a very high number. And on the release spreads, we remain also in a very strong territory of 6% total release spreads in this year, again, Paris outstanding with a strong business. On the next page, on Page 26. We see that we are clearly benefiting in terms of occupancy of this high letting activity, as I said, 177,000 square meters. And I would like to underline that our clients have a very high loyalty. On average, the client loyalty in our portfolio is 17 years and more than 75% of more than 5 years with us. And at the end, this really allows us to maintain very high occupancy levels as Pere mentioned, Paris is almost fully occupied. Madrid at 96%, a blended portfolio at 96%, so very high level. When we look then on Page 27, what is the space available to be let in the coming months, we have like 4 groups, we have 4.4% of availability, 1.7% is assets increasing to renovation program. What we can say already today is that as of today, out of the vacancy of 1.7%, that part of this corresponds to Ortega y Gasset and Diagonal, we have Ortega y Gasset 100% let and Diagonal 530 is one of the best assets in Barcelona, 89% let. And then the rest of the 4% is 0.7% CBD Madrid. Again, here also 2 of the assets that explain part of the vacancy regulators in Castellana as of reporting date today already 100% let the 1.1% CBD Barcelona and 0.9% secondary Barcelona. And last but not least, Grade A, high quality, what is behind one of the features that is behind is really highest ESG standards and in particular, sustainability standards. We are one of the few companies that really have a decarbonization plan that is not only -- we are not only at here to science-based target, it's also validated and approved by science-based target of 1.5% degree pathway. And on the CDP that is the most sophisticated rating on carbon emissions, we are within the 1.5% companies that have the maximum rating worldwide. So 19,000 companies across industries are being rated across all industries, just 283 A rating, we are one of them, and we are one of the 6 companies in Europe real Estate companies that hits this A rating, nobody else has this. On GRESB, we are also very high, 90 on 100 on investment portfolio, 96 on 100 in Development portfolio and Moody's also. And as a consequence, obviously, the liability side, our financing side, all of the bonds were converted into green bonds, what is really also an important competitive advantage.

Thank you, Carlos. Let's now move into the next section, which is about the positioning of the company into the future. Just before entering into the details because this presentation usually is a lot about numbers just understood remind on our strategic positioning. In the case of Colonial, it's originally been very, very simple. Our idea is that positioning in the prime end in terms of assets, in terms of clients, in terms of contracts. Deliver better returns in terms of cash flows, in terms of risk attached to the cash flows in terms of resilience. This is not a strategy that is a new. It's not so that we discovered that, and we want to do now into the future. It's something that we've been doing for a number of years, and that has been delivered. And we believe already [indiscernible] in the past. So in everything that we do every day, it's aiming at even enhancing the quality of our assets, the quality of our clients, the quality of our contracts because this is that will allow us to deliver the numbers, numbers that we want to deliver. More short term and looking into the future, this long-term strategic portion of the company is obviously benefiting from the polarization that is obvious in the market. Any of the numbers we've been disclosing today, you can compare them with what is available in the market in terms of rental growth, in terms of like-for-like rental growth, in terms of EPS, in terms of occupancy, in terms of like-for-like gross asset value in terms of NPA, I think that in all of them, a ranking can be produced and look at the evidence. This is a picture, and maybe my point is we can talk about numbers, but it's more importantly, a decisional strategic positioning behind this that is well on track for a number of years. Messages that I would like to share into the future, in the next months and maybe years. The positioning of colonial is simple. Number one, we want to deliver rental growth, cash flows, incremental cash flow. And in the Page 30, you can see already that this is happening, and you can witness this looking at the ERV growth that is growing substantially in all our markets, Paris, Madrid and Barcelona. On Page 31, of course, a driving force of our rental cash flow growth has to do with indexation, with inflation and the way there is pass-through to our contracts and clients and maybe to share here a few numbers. As you can see in this table on Page 31. Maybe starting on the right-hand side, the CPI for Spain was 5.7% over 6% at the end of the year was also 5.9%, almost 6% for Paris where ILAT reference is used. Of course, the way indexation is translated into our P&L has a sort of a delay effect because the indexation comes at different moments of the year when each contract has its revision. So in year 2022, we already signed contracts or let's put it this way. We're already invoiced our tenants with -- as a result of the signed contracts with a 5% indexation impact. That already happened during the year 2022. But out of this 5%, only 3% was able to make it, let's put it this way to be part of the P&L effect of 2022. -- while 2% of this indexation slips into the following year, into year 2023. So that means that it is an energy that only part of indexation is already captured in the year 2020. This also is slightly different if we look at Spain or if we look at France. In the case of Spain, this, let's say, inner city, it goes faster mainly because of a couple of reasons. One is that contracts in Spain are all of them linked to CPI, which is published on a monthly basis, and that means that translation from new data available to effective new invoicing is really quick or at least quicker. In the case of France or Paris, our contracts are mainly indexed to ILAT, mainly on a quarterly basis, not so speedy. And therefore, you can see that whatever was already indexed during year 2022 in France, let's say, majority of this did not show up on 2022 numbers. It will be crystallized in 2023. So indexation remains a driving force in our numbers. especially for 2023. Behind ordinary that going this way indexation, the other driving force of the projects we are involved in. So first of all, you can see the renovation program on Page 32, a number of projects that are being delivered. Here, the fundamental number is what you can see at the bottom right of this page. The projects that we've been finishing have meant EUR 39 million of secured rents, out of which only 25 are being included in the P&L of 2022. And if we would account for all of the renovation programs, even those that are not being -- that have not been secured yet, then the number of our top-up GRI would be $46 million. So we have the potential of going from 25% to 46% out of which 39 are already secured. On Page 33, you can see a number of examples of these different renovation programs. Let's remember that for us renovation program means a number of activities that happen in existing assets that are being renovated to through specific projects. And you can see a number of examples here of assets that have already been fully delivered and fully let. Maybe it's worth mentioning on the right-hand side of Page 33, a couple of projects that mainly were done by the end of the year, beginning of this year, Ortega y Gasset and Diagonal 530, which means additional rents that have been captured in the beginning of 2023, and therefore, are reducing also the vacancy of the company. If beyond the renovation program, we talk about the pipeline. As you know, we have a strong pipeline, mainly already delivered but not yet producing all of the cash flows that they could produce. As of 2022, the number of gross rental income included in the P&L was only EUR 60 million as opposed to a maximum EUR 82 million that this pipeline can produce. And out of this EUR 82 million, already EUR 55 million have been secured. So in Page 35, you can see a number of examples. Many of them classical, so there are no major news. Maybe the most recent news would be Plaza Europa, 34, where we are in the process of delivering in the next few months or I would say, weeks almost. This building at the time that it will be fully let to a cosmetic company and also to a family office company. More into the future, already known the Foundation, carlier project for Louvre-St-Honoré. So basically, this idea of Colonial producing incremental cash flow can be seen through indexation, through ERV growth through renovation program deliveries through pipeline deliver. Last but not least, on Page 36, individual example of spend as the next project to be included in our pipeline. And as a conclusion of this, mainly that the message is that we have strong visibility for EUR 500 million figure in terms of top-up gross rental income for our company at the moment that we are still producing a number well below 400. The second idea about the future is to talk about our capital structure. While this rental cash flow is happening, we are enjoying a capital structure, which is pretty secure, which has, let's say, full protection regarding interest rates. It's already well known that we have 100% of our debt at fixed costs. Here, what we want to highlight is, as I said at the beginning, not the static number of what the number is today. More importantly, projecting this into the future, how much of our debt will remain 6, 4 years from now. And 4 years from now, we will still be enjoying 93% of our debt will be fixed. Another numbers, assuming that floating rates are what they are today or they will be today according to markets. After 4 years, our costs will still be well below 2.5%. So in front of us, we have a number of years of incremental cash flow that will leave hand-in-hand with a very secured unlimited cost of funding. This cost of funding, by the way, I mentioned this at the beginning, has an important value that sometimes has low visibility because of market practice of being so much focused on NTA. And then we are all very much concentrated in saying that our NTA is resilient at the same time that our net NBV is growing 50% -- 15% on 5. I think that this is a number that is worth emphasizing. And another quality comment on capital structure. Of course, here, there is a question of to what extent Colonial can additionally protect their -- its capital structure with disposals that can be really been done, to what extent Colonial enjoy owning liquid products, liquid assets. To what extent also these disposals can be done at appraisal values. And here, what we would like to highlight is at the moment where many of us are having plans on disposal. One thing is to have plans and another one is executing. And basically, we have seen that we have very fast, very efficiently moved into this direction. And we have already delivered around EUR 500 million in the last year. And with a number of examples happening have been shown in this page. Most of these assets have been located in Spain so far and are basically a combination of secondary assets, land plots or nonstrategic assets or mature assets. And basically, this is being done very much close to NTA. So we have liquidity and we have value. And so as of today, we already have delivered a substantial part of what we would like to do during this year. And this, as Page 40, more or less want to show. It's a little bit part of our usual strategy where we buy or sell our assets on an ordinary basis in a liquid unsecured environment and in very strong terms in terms of pricing relative to appraisal values. Well, as a result of all this, what's happening so far is that we are showing a 41 an NTA that remains mainly resilient in 2022. Also enjoying from the fact that this NTA is validated or reconfirmed with a disposal of EUR 500 million of prices in line with this NTA. So as a very, let's say, simple summary is very high visibility on increasing cash flows and rent together with an important resilience that can handle any fluctuation that can happen in the market in very good terms. Page 43, it's a little bit about conclusions. Maybe I won't repeat what I just said. So about this message of strong cash flows and resilient values. I think that what we've seen in this presentation is that during 2022, Colonial has been delivering strong cash flow growth with full pricing power. This cash flow growth has been able to offset the impact of yield expansion. Together with the delivery of the alpha creation of our projects that has led to a resilient NTA, which is a little bit a result of our prime positioning. This NTA has been validated or reconfirmed with real divestments in line with this NTA at time that we are supported by a capital structure with a fundamental quality values in terms of hedging and more over-projecting the hedging into the future. A word on guidance for this year, we are, of course, more conscious of year 2023 is a year with a certain level of uncertainty still attached now. Situation has improved a lot in the last 3 months. But you know us very well. We want to be usually quite prudent in assessing what the future may tell us. So regarding EPS, we envisaged between 4% and 10% EPS growth on continued operations. Our guidance for recurring EPS would stay between $0.28 and $0.30. Let's not forget that this is in a world where divestments have been happening. So in drilling the effect of these divestments. And finally, the dividend that we see for 2022 to be paid in 2021. It's -- the number that will be proposed to the general holders meeting is $0.25, maybe workman these days fully in cash. And second, growing 4% compared to the year before. That means consistent with the, let's call it, tradition of Colonial of having a dividend per share that grows on a regular basis through the year. Well, this has been the presentation for today. As usual, we'll be very happy to answer any questions that you may have. Thank you very much.

[Operator Instructions] First question comes from Markus Kulessa from Bank of America.

I hope you can hear me well. I have the first question on the disposals on Slide 15. Just to understand if the EUR 420 million remaining they have been signed. When you say agreed, does it mean they have been signed or...

Which slide do you say, Michael, sorry, can you even...

Yes, Slide 15 on the disposal, I think it was Slide 15. Just to understand, of the EUR 420 million remaining, how much have been efficacy signed already because you're saying that you have agreed for...

Yes. So EUR 75 million for this, roughly speaking, because we cannot really be specific have already been executed. So let's say, let's put this way, the cash is in the company already. That means, let's put this way, well above EUR 300 million. And there will be very roughly speaking, another EUR 100 million with very high visibility. High visibility means an asset where PROMESA event is done in France, which you know what this does mean in terms of probability of execution. So well above 90%. And another asset where we are in a very well advanced diligence process, and we are very highly confident of. So out of this EUR 421 million, 75%, let's say, a little bit in excess of EUR 300 million executed on cash in 25% with very high visibility either because we already signed promise demand or because we are in advanced stages of due diligence.

Okay. And the 2.6% cap rate is on the full EUR 500 million. Net initial yield.

Yes. Yes.

Okay. Second question would be on your portfolio valuation over 2022. To understand well, looking at H2 only, but we have seen cap rate compression, looking at the net initial yields you report the pet initial yields in Barcelona and Madrid.

No. What you have to -- what is the input for the valuation is the cap rate, so the valuation yield. So the yields that they use the praise us to do the valuation, and we have had, on average, on our portfolio at 25 basis points yield expansion.

Also in Spain, okay? On -- My last question would be on your -- on the like-for-like rent growth. So I understood well in the 7% like-for-like growth in 2022, 3% comes from indexation, not 5%. So only the 3%? And then my figure or sub question is for '23, do we -- will we have a 6% indexation impact, as you show in Slide 31? Or will it be spread also and we're going to see a lower indexation impact than the 6%, which is the phase value of ILAT and CPI.

Maybe I'll try to answer in 2 separate answers. First of all, the important thing to understand is out of the 5% captured, as Pere explained in 2022, on the like-for-like of 2022, just 3% is indexation. So we have still a part remaining part of full year impact that will come in 2023. And the second thing that we show here and this is especially relevant for Paris that is all of the contracts that will be renewed in Q1 2023. In Spain and France, the references are for Spain, 5.7% and for Paris, 5.9%. When we remain with the same pricing power that we have had so far that we have been able to pass through put indexation, all of the contracts that are due in the indexation window in the first quarter, that is quite a relevant part it's more than 35% of the contracts will be reviewed with this indexation reference that as you can see, especially in the case of Paris is much higher than the indexation reference that we saw on average last year, that was about 3%. Apart from this, then you have to make your own numbers where you could see the like-for-like rental growth. We do not guide specifically on this, but we say we have several engines that give us supportive and a positive view on ongoing like-for-like rental growth, indexation and ERV growth that has to come through.

The next question comes from Fernando Abril from Alantra.

I have a couple of questions, please. First, on release spreads. So clearly, still positive quarter-by-quarter, but slowing down, Q4 is plus 2%. Obviously, you are capturing inflation and therefore, probably reversionary potential is now lower. So what do you expect release spreads to be in 2023? And then second question, Pere, you mentioned that most of the asset sales you were targeting have already been completed? I don't know how much is left for 2023, if any.

Okay. On the release spread, I think it would not be wise not knowing how inflation will evolve to guide specifically on a release spread number. But having said this, at the end, apart from what happens with indexation and our average contract rents, what we have to look at is to what extent we are able to pass through rental growth that we have done. And what is the reversionary potential of our portfolio. And still today, we have a quite significant reversionary potential of our contracts of our portfolio in general by letting up available space and also a price effect. And so we expect to have an ongoing positive respread. What will be the exact level it's in the current environment, very difficult to guide and to specifically say. But we are positive on this front.

Fernando, the question regarding disposals to be more specific and to read the chart on Page 15 in a different way. So we did almost EUR 100 million in 2022 in the second quarter. And then very quickly, in 2023, we've already done more than EUR 420 million -- almost down because we are including the agreed and high-visibility ones. At the very least for 2023 would also have a number of EUR 500 million crores at the very least, we would be adding another EUR 100 million to this number of EUR 120 million that you are seeing here. And depending on, let's say, opportunistic approach to where the market is, we could even do more than these numbers. So maybe this number of an additional EUR 100 million, maybe even EUR 200 million or EUR 300 million, depending on the opportunity. So to be specific, for 2023, the initial goal is to do EUR 500 million, out of which EUR 300 million and so have already been executed. Another EUR 100 million has high visibility and agreements sign on maybe another EUR 100 million or less than EUR 100 million would be a pending issue. EUR 500 million in total as the initial objective, depending on the situation market and an opportunistic approach, we could milage to enlarging this because of the benefits that we are enjoying doing this transaction at the level that we are doing so far.

Okay. Just a quick follow-up, Carlos, -- correct me if I'm wrong, but the repression potentials coming from prices have halved in '22 now. I mean, you had EUR 20 million last year. Now you have EUR 10 million, obviously because of inflation. So I don't know if this EUR 10 million of reversionary potential could be captured already in 2020?

Look, this is a static number. So if we look at the spot balance date 31st of December 2022, and we compare the passing rents with the market rent, this is at EUR 10 million. So this is right, what you said, but this does not take into account is what will happen during 2023 with indexation, what will happen in 2023 for the best product regarding years. And as we guided or as we explained, we think that with our scarcity strategy, we can be here the people that most benefit of it take of it. So this is how we see Yes, it's static, but we have a very important dynamic effect these days.

Operator Instructions] The next question comes from Ana Escalante from Morgan Stanley.

I would like to ask about the difference in the EPRA net initial year and the top-up net initial yield according to your disclosure, I can see that the rent-free periods and other incentives have increased significantly during the year. that I believe that's behind the explanation of the difference. Could you please comment a little bit on that and whether you see rise incentives in new leases or new development completions coming into the investment portfolio?

Yes. Yes. Thank you for the question, Ana. First, a clear answer. No, there is no increase in incentives. What is the explanation? The explanation is a change in mix. So when you deliver projects and especially, we have delivered a huge project of Biome in France. And if we are in a market where the incentives play a role, even though we are signing at the lowest level of incentives for the segments that we are then we have immediately after putting the assets into operation during some months rent-free period. So the change that you can see. So you cannot compare really net initial lease or pet initial lease from 1 year with another because the perimeter is different. And as we have shown, we have delivered a far earlier and a far better rent than expected to be on project that one of the main drivers, and this is explaining this. So again, we can go in too much detail in a one-on-one session. Incentives are remaining tight in our portfolio at the lowest level of the market as it is normal for the first product. The changes that we are seeing these changes in perm.

Thank you very much. There are no further questions. Dear speakers, back to you.

Well, thank you very much for the attention, and we are very happy to have the opportunity to share these results. We believe so far. Hopefully, we'll come back with more during 2023. Thank you very much, and have a good day. Bye-bye.