Good afternoon, ladies and gentlemen, and thank you very much for joining Delta's interim results presentation for the six months ended 31 August 2023. Please remember to submit your questions by clicking on the appropriate tab underneath the logo in the top right-hand part of your screen. On conclusion of the presentation, management will address these questions. I'll now hand you over to Ms. Bongi Masinga, CEO, for proceedings. Over to you, Bongi.
Thank you, Morné. Before we kick off, I'd like to welcome Mr. Fikile Mhlontlo, who joined the group with effect from 18 July this year as CFO, and you will all recall I became permanent on the 4th of October this year. This will be the first set of results that he'll be presenting on. I'll kick off today's proceedings with an update on our strategy and key milestones that we have reached in this regard. I will also provide more color on our portfolio and operational optimization initiatives before handing over to Fikile, who will be taking us through our debt strategy and achievements, as well as a financial overview. We're coming to the tail end of the REIT reporting season, and it is important for us to remember how Delta has differentiated from other landlords.
As the only specialist sovereign-underpinned REIT on the JSE, both our challenge and opportunities are relatively unique. What I am very excited about is that we have a stable leadership team and significant depth in property and financial experience across all levels of the business to continue our drive towards achieving maximum return on capital, consistent with a diversified, risk-managed real estate investment portfolio, while being a landlord and employer of choice. The impact of high interest rates, low economic growth, load shedding, above-inflation municipal cost increases, and an oversupply of office space is a common theme amongst listed REITs. Especially in the office sector, we have noticed a trend of traditional B-grade tenants upgrading to A or even P-grade space as a result of intense pricing discounts.
A key focus during the period under review was on tenant retention through strategic capital allocation and ongoing improvement in tenant relationships. As a sovereign underpinned fund, investors inadvertently overlay our investment case with a certain sentiment towards government. Regardless of what that sentiment might be, government's track record as a consistent occupier and payer, even during COVID, speaks for itself. As a result, and notwithstanding both portfolio and external macroeconomic challenges, we are pleased to report an improved performance across most key metrics compared to the 2023 financial year. Following legacy events, the new board of Delta at the time approved a turnaround strategy premised on rebuilding trust with all stakeholders, optimizing the group's balance sheet and operational efficiencies, and building the right team and culture to address leasing and business development head-on.
A touchstone of this strategy is our disposal strategy of non-core assets, the reduction of debt, and negotiating longer lease terms and renewals with key tenants. After an in-depth analysis of the portfolio, ZAR 2.2 billion of properties were identified as non-core, of which ZAR 1.5 billion are currently being held for sale. Despite the challenging market conditions, I am happy to share that there are currently various offers under negotiations, and at least six properties are expected to have transferred by financial year-end. Operational milestones include our consistently strong rental collection, which provides the group with solid cash flows. We also improved the weighted average lease term as a result of new tenants onboarded and lease renewals.
Debt of the amount of ZAR 92 million was amortized during the period, and we anticipate that ongoing settlement of debt through disposals will have a demonstrable impact on debt maturity levels and LTV. In order to deliver our objectives, we have made great strides in building a culture of accountability, where challenges are met head-on and with urgency. In the short term, we focus on addressing small problems before they become big. In order to do this, regular and open discussions are needed, which we have implemented with our largest stakeholder, DPWI, our funders, and staff. Investors often ask what Delta will look like post-conclusion of our portfolio disposal strategy. Over the medium term, we will evolve into a smaller but much more sustainable REIT, with core properties of around ZAR 4.7 billion and strong headroom for growth.
Key ratios such as loan-to-value, interest cover ratio, will be within covenant levels at a projected 44.2 for LTV and 2.5 x cover, respectively. Important to note is the impact that disposal will have on vacancies. With the current core portfolio occupancy rate sitting at relatively 89.6% after disposals. Net operating income from the core portfolio will amount to an estimated ZAR 296 million in today's terms. Also, it is important to note that the bottom line benefit from a smaller, more concentrated portfolio is estimated at around ZAR 10 million per month. It is a common misperception in the market that we are having a fire sale. Our disposal strategy is strictly to reduce debt.
Properties that are earmarked to transfer in the short term have all been disposed of at a minimum discount and a minimal discount to book value, or in some instances, at a slight premium to book value. This speaks to the fair valuation of our portfolio as much as it demonstrates our resolve to engage with serious buyers at a market-related price. Capital expenditure to retain existing tenant remains a key focal point for Delta. During the interim period, CapEx amounting to ZAR 26.2 million was implemented. This expenditure was funded from operating cash, apart from ZAR 6.6 million, which was funded by a Nedbank facility, especially earmarked for capital projects at our Poyntons Building in Pretoria. The capital expenditure is related mainly to tenant installations and upgrading of air cons, lifts, and fire equipment.
Our key focus areas for the remainder of the financial year include the conclusion of current offers under negotiation, as well as expecting bulk disposal, particularly the Free State portfolio. We have also increased marketing efforts to attract new tenants with positive traction in this regard. As mentioned earlier, we continue to pursue the renewal of bulk leases that will significantly improve the group's average weighted lease expiry. Moving on to operational highlights. During the period under review, 23 office leases with an aggregate GLA of almost 100,000 m² were renewed, and new leases with a total GLA of just over 5,500 m² were signed, and 100 parking bays were renewed for between three and seven years. These renewals and new leases were at market. Occupancy of the core portfolio amounted to...
Occupancy within the core portfolio, assuming all else equal, and we've disposed everything that we wanted to dispose, will have 89.6%, compared to an overall SA REIT portfolio vacancy rate of 34.5%. As a result of our strong collections drive, arrears reduced by almost ZAR 21 million to ZAR 120 million at the end of the reporting period. Post the reporting period, we managed to do an additional ZAR 36 million in collection, notably from eThekwini and the NPA. As can be seen from the graphic representations, despite significant improvement in our weighted average lease expiry, the bulk of the sovereign leases expire in financial year 2024. We are currently in rigorous renewal processes with DPWI and user departments, and remain confident of a positive outcome in this regard.
Key delivering of our turnaround strategy is creating a culture of accountability and urgency among all staff members. We recognize that this is a journey, and in order to attract top talent, consideration should be given to not only remuneration, but other incentives such as training and development, as well as career advancements. To date, we have invested significantly in attracting the right talent with the requisite depth of experience in especially the property finance and property management teams. We have also prioritized the challenges identified as part of an independent staff survey, especially around ongoing communication and engagement, with very encouraging results and feedback from both tenants and employees.
Key operational focus areas for the next six months include, which, by the way, I think there's about three months left of the six months, include lease extensions, especially those that are on a 12-month basis, ongoing tenant retention initiatives, as well as seeking tender opportunities. We are further expanding our relationship with collection agencies to recover the ZAR 120 million in arrears due to the fund. This concludes the operational review of the presentation. I now hand you over to Fikile, who will take us through the financial highlights or the financial results, our debt optimization process, and the financial overview.
Thank you, Bongi. The financial highlights are including the following: as highlighted already by the CEO, the weighted average debt maturity has improved to 10.9 months, compared to February 2023, where it was sitting at 6.3 months. The weighted average lease expiry has improved to 15.8, coming from 13.2. The SA REIT LTV improved to 60 from 61.4. Investment property as a value sits at ZAR 6.9 billion, a marginal decline out of disposals, which at the same time was sitting at around more or less the same number other than the disposal for ZAR 44 million that related to Standard Bank Greyville.
The SA REIT net asset value per share is sitting at ZAR 3.70 compared to ZAR 3.60 in February. So there has been an improvement in collections. We're sitting at 101.5% in terms of collection, just collecting over 100%, including collecting arrears, as indicated by the CEO, and our B-BBEE rating sits at level one. Interest Cover Ratio sits at 1.3. In terms of the income statement, in terms of financial performance, we have closed with ZAR 573.752 million compared to ZAR 631.747 million in the previous year.
There is a decline of 9% at a revenue level, and that decline of 9% is caused largely by reversions, mainly out of the Limpopo portfolio, that went through a reversion in the recent past. And in terms of the net operating income, we're sitting at ZAR 350 million. What you will note is that the property operating expenses are at ZAR 219 million compared to ZAR 239 million in the pre-previous period, and there has been an improvement of ZAR 20 million in that area, largely because of cost optimization or in cost-saving drives on the side of the company. Then what also we see is that administrative expenses are sitting at ZAR 50 million, more or less the same as was in the prior year at ZAR 49.9 million.
Really a marginal increase of just over 1%, and because again, of the same reasons of company as part of its strategy, emphasizing the cost optimization. What you will see also in the numbers is the finance costs, which are quite increased by 13% from the previous year period, and again, is a factor of interest rate increases, and the bottom line sits at ZAR 94,139,000. And as we sit there, we've got a tax expense and sit with a bottom line of ZAR 56,425,000. What also you'll also see in these numbers is the fair value adjustment, impact of the fair value adjustment.
There was a negative charge in the previous period, because of the intervention that was done purely because to bring the assets in line with where the market was. And this, the risk and the issue that had arisen in the prior year has not arisen in this year. We have stuck with our policy of valuing our properties once per annum, which will happen in February. In the balance sheet, the most important numbers that we need to take note of is the assets, and our assets once again, are sitting at ZAR 6.9 billion, being investment property.
And also, we will also take note of the investment in listed security, and that listed security take into account the foreign exchange at the end of the period, taking into account the price of the share. It actually has ended up to ZAR 109 million, an improvement from the ZAR 91 million as of February, and impacting the line that I've indicated being the fair value adjustment in the income statement. What also stands out is the fact that debtors have substantially decreased due to collections, as has been covered already in this presentation.
As we go to equity and liabilities, it is important to note that the equity position of the company is at ZAR 2.6 billion, which is a substantial headroom, which is quite important in evaluating the status of the balance sheet. Also worth noting is the non-current liabilities at ZAR 1.4 billion, and current liabilities at ZAR 3 billion. Again, our current liabilities are impacted by the way our debt is structured. It's important that I'll cover a little later some of the developments around debt and how we are funded. So this issue of current liabilities being in the position they are is a matter of the debt maturity period. Going to debt, just unpacking our debt.
Our debt sits slightly over ZAR 4 billion, but you will then take note that there was debt renewed during the course of the year of ZAR 3.1 billion, and that debt was structured from being month on month into a 12-month period, one portion of it, and another portion being on a 24-month. And that was a great achievement by the company. There has been an overall debt repayment that sits at ZAR 91 million, as referred to earlier on by the CEO. What also is going to happen around debt management is that one of the listed investment that I covered earlier that is in the process of being disposed. It will go a long way to reduce the debt. Also, in renewing the debt-...
There was also a saving that was in terms of the interest rate, a 0.5 downward adjustment. And what also, if you are also overall looking at debt in terms of split, sits with three different financial institutions. We're thankful to them for ongoing, say, working with us, and of which our Nedbank is a bigger funder in overall. So again, LTV is sitting at 60%. The ICR, being Interest Cover Ratio, 1.3, impacted by the interest increase in interest costs during the period. And also, we have interest swaps, which are impacting positively in terms of the interest rates, in that our weighted average cost of debt is 10.1%, as a benefit of that.
We are re-engaging the financial institutions to renew the existing arrangements as they fall due, as we have articulated, and those are inclusive of Nedbank, State Bank of India, Bank of China, Standard Bank, and Investec. So in terms of the strategy around debt management is refinancing, is funder diversification where possible, amortization, renegotiations, long-term maturity and monitoring covenants on an ongoing basis. Thank you. And CEO, you can conclude.
Thank you, Fikile. Despite significant economic headwinds, in particular the office sector, we have made solid inroads in the delivery of our stated strategy. Our priority over the short to medium term remains the successful execution of our disposal strategy at or close to book value, as well as the renewal of leases with our major tenants. We will continue to grow our corporate culture to become increasingly nimble, while remaining pragmatic and solutions-oriented in our engagement with potential buyers, especially specialists in the office-to-residential conversions. Most importantly, ladies and gentlemen, as a significant shareholder in Delta myself, I am looking forward to curing our financial covenants in the medium term with the prospect of resuming distribution payments. I thank you, everyone.
Thank you very much, Bongi and Fikile. Ladies and gentlemen, please remember to send through your questions. The first question we have is from Trevor Matthews. He's asking: What is the reason for the remeasurement of the CMH building? Was it as a result of a new tenant or changes in the structure of the building? And was there a backdated refund to the existing tenant?
Well, the reason for the remeasure was, it was long coming. I suppose for a while, a lot of what was charged as office space was actually, parking bays, and we had to remeasure. And with CMH, every five years, even though they've signed a very long-dated lease with us, every five years, we do relook and go to the market. They did ask that we must remeasure. The office GLA didn't look correct in terms of how they are operating, but most importantly, they have also reduced quite significant space in terms of what they were occupying. And that was the result. There was a bit of payback that we had to make, and you know, but it was not cash outlay.
It was just a slight reduction in the rent for a period, and then we kick back to... We resume the normal re-rental charges.
Thank you very much, Bongi. There are no further questions from the webcast. Ladies and gentlemen, this webcast will be available on the same dial-in link that you used earlier to dial into the presentation during the next 24 hours, as well as the presentation will be on the company's website, deltafund.co.za. Thank you very much for your time. We now conclude the meeting.