Welcome to the Equites Interim Results presentation. Obviously, also welcome to everybody online. I see that the crew here is still a bit light but I'm sure they'll filter in. We wanted to start on time, obviously, because we've got quite a few people online and don't wanna keep them waiting. On that note, though, I suppose let's get going. We always try and start our presentation with something quite insightful in terms of what we're seeing in our world. We've often referred to the fact that we wanted to remain and still do want to remain a globally relevant sort of REIT, which is focused on the logistics space. I think with the turmoil that's happened in the world, I suppose, especially the financial markets in the last year, the interest rate cycle having gone where it's gone.
A question that we often get asked is, you know, "Is there still a future in what we're doing? I mean, surely there's enough warehouses now," kind of thing. The reality of it is that what we're still seeing is that the logistics property market certainly still has tailwinds. As I said, the environment is challenging. The macros are challenging. The interest rate cycle is probably against us. Probably, you know, depending on who you listen to, opinions vary from it being probably reached its bottom but maybe not quite. You know, obviously with events happening in the world, it takes nothing for things to carry on in a negative spiral. Notwithstanding all of that, the world does carry on.
To remain competitive in this new world of supply chain, which has evolved dramatically in the last 10 years, technology is an important factor. Especially in developed markets, maybe more so than our markets, where labor is a factor. A, it's expensive and B, it's unavailable. We're seeing more and more introduction of technology into the supply chains. To retrofit that technology into older non-specified warehouses, A, very expensive and B, it's not optimal. If you're spending the money on the technology, you might as well be spending the money on putting it into a facility that meets the requirements that will take you forward for the next 20 years. We really are seeing that.
We're seeing that also in the context of South Africa, where we're seeing load shedding having had a massive impact and energy security being a really important factor of people's sort of way forward. A lot of the companies that we obviously operate with have got 20, 30 sort of ESG requirements that they need to follow. While a lot of those requirements may have been on the back burner up to a year or two ago, what we're seeing is more and more, they're combining them into an energy supply security factor in South Africa to potentially make big decisions. Let's start with the period. I mean, obviously, like always, the South African market, important metric, DPS. We obviously gave guidance at year-end in May of between 130 and 140 for the year.
The interim dividend is obviously within that guidance and exactly where we sort of are expecting it at this point of our year. We continue to commit ourselves to paying out 100%. On the positive side, NAV's up slightly. Obviously when we unpack that and I think Laila might unpack it a little bit more in detail, the valuations both in the U.K. are starting to see ticks back up a little bit and in South Africa too, which is obviously, I think, also signaling that we've sort of probably plateaued out and the future will probably be more positive than it will be negative. In that vein, I mean, we were recently in the U.K. for work and, you know, the last year has been, you know, it's been challenging, let's say, there.
I mean, I remember last year in September sitting and having lunch with some chartered surveyors that were in the middle of doing some pretty substantial deals. Kwasi Kwarteng came out with his mini budget and that afternoon the world changed fairly dramatically. A lot of deals were canceled and the consequences of that process have sort of been felt through the rest of the year. I think that is really behind us now and we are starting to see those positive sort of green shoots coming through. In terms of our loan to value, 42.3%, slightly above where obviously we would have hoped it to be at this stage. But as you can see, the post-period transactions that have sort of happened take us back below 40% to 38.1%.
As we said in our year-end results in May and I think in our pre-close at the end of August, you know, that the flight path for Equites is really to get ourselves in and around that 35% mark. We feel that having a balance sheet with that kind of loan to value is absolutely vital to how we wanna position ourselves and how we wanna take ourselves forward. Through the presentation, you'll see all the various elements of activity that is happening that will look to take us through to that. We'd like to think that we'll get there by year-end but like everything, you know, transactions in the property sector are not like going to the supermarket and just going to the till and checking out.
You know, in South Africa, we have the challenges of Competition Commission, we have the challenges of due diligence in the U.K., we have many other challenges that basically go through a process of trying to get a pricing which is acceptable to us and acceptable to the buyer. There is a process but we are super confident that the process is well underway and that will be shown in the rest of the presentation. Final element in this obviously is from a liquidity point of view, the business is extremely healthy. I think later we'll talk about the very successful bond auction we recently had as well, which again is testimony to the fact that there is demand for our paper in the debt capital markets and that the underlying essence of our business and the long leases.
The quality covenants and the quality product, which obviously is getting better every year as we build more and more ESG compliant buildings and some of the smaller maybe older buildings are traded through the system. In terms of the strategy and again, I mean, I've sort of touched on pieces of it but maybe to go into a bit more detail. We concluded the Newport Pagnell deal. Now Newport Pagnell is a little village which is basically Milton Keynes. It's on the M1 highway in the U.K. As you're coming out of London, off the M25, basically on the M1, which would take you eventually all the way to Edinburgh if you carried on going. Milton Keynes is strategically really well located, highway exposure site. We've got two buildings, we've got planning consent and everything is approved there.
There's a couple of CPs still outstanding, linked mainly to getting the enabling works for the infrastructure around the site, with the local council. We'd like to think that before the calendar year is out, that all that will be bedded down and we'll be well on into construction. Obviously a really positive disposal for us in the sense that we get a significant amount of our working capital back and then we actually make a meaningful profit in October, November next year when we PC that on behalf of Panattoni. We obviously have been engaging with a view to selling the ENGL platform, which is the Equites Newlands Limited platform, which is the development platform we have in the U.K.
We'll talk to it in a little bit more detail in terms of what's in that again a bit later. We are probably at the business end of hopefully closing out a deal. We don't have 100% agreed deal on the table at the moment but we are engaging meaningfully with some parties that we would hope that will result in something positive being announced in the not too distant future. That obviously will be the end of our involvement in this massive pipeline of developments. The main reason obviously is that whilst we may have the capital to potentially keep that pipeline going for a few years more.
The reality is allocating capital to best in class deals in the U.K. with the current interest rate environment in the U.K., that allocation of our capital into those deals just doesn't make sense for us. The decision was made earlier in the year to move on and we’d like to think that we’ll make it work. Also importantly for our partners in Newlands, you know, it’s important for their business also to have continuity and carry on as well. We announced at year-end that we’d be closing all the cross-currency swaps. That has been done. We no longer have any of those open. They’re all closed. Also any income that we made out of them during the course of this financial year will not be distributed.
In terms of the disposal program and Riaan will go into much more detail on it. We've obviously got a ZAR 6.3 billion disposal program and the main reason you need that disposal program is that we've got a massive development program where we are, as I said earlier, bringing on some major and significant brand new facilities on very long leases to very, very good covenants. So far we've basically got ZAR 3.9 billion, which has basically been contracted and/or transferred. And then basically another ZAR 2.4 billion, which has been earmarked and is under negotiation in some way or form. That process obviously is what effectively gives us the confidence that we will get to the 35% loan to value taking into effect.
Also, what we're talking on the second one over here, you know, we still have basically ZAR 1.6 billion of money to be spent on contracted developments in SA, ZAR 1.3 billion by year-end. Over and above that, at the moment we currently have about, I think, 8 or 9 RFPs out. The new build activity and demand drivers in the South African marketplace are still significant. Whilst we probably won't win them all, we'd like to think that we'll get a chunk of them. That will obviously add to that CapEx requirement there as well. In that process with all the deal flow that's come through the system in the last year, 18 months, we've reduced our land holdings also subject to the.
Including the Newport Pagnell deal in the U.K., obviously, which was a significant land holding for us. We've reduced that to below 5% now. You know, if everything goes according to plan in the next sort of six-nine months, that will come off even more significantly than it currently is. Which is in line with what we had sort of declared to the market that we were basically wanting to keep our land holdings below 5% of the portfolio size. The other, I think, key metric for us in terms of strategy and looking forward is we really are looking to drive alternative income.
Obviously, that was first sort of mooted and put on the table, when we saw, you know, Prologis starting to afford clients the opportunity to fit out their warehouses through a contracted revenue stream to Prologis and obviously on different terms of engagement to a rental stream, more of an amortized stream. But obviously, at values that made obviously financial sense for them. Whilst obviously we don't wanna compete with the banks for this business but ultimately the safest place for us to finance something would be in one of the buildings we actually own. We've started investigating the opportunity of potentially doing, you know, things like the racking and the in-rack sprinklers.
Probably not movable things but more fixed things that actually go into our buildings, that improve the quality of our buildings and looking to create some revenue streams out of that, which potentially could be quite lucrative for us. The big mover, potentially for us, will be obviously the energy sale. You know, we've currently got about 1.5 million sq m of roof space inside the urban edge, which gives us the ability to generate a lot of energy potentially inside the urban edge where we don't fall foul of transmission risk, if you like. It becomes a lot simpler to do PPAs.
In Cape Town, we're about to go live with the first deal we've done, where we are actually producing energy in Parow and we are selling it back into the grid and it's being bought actually by the building in which we are the tenant. It's actually quite nice. We're getting points for being in a green building too, so I guess they're getting the energy from us. You know, that we feel with the amount of solar panels that we are installing and where our business is going, it's gonna create an opportunity for us to generate some decent extra income. The revenue, the return metrics on it are significantly better than they are in property. It will be a little bit sweeter for the time being.
Yeah, let's see. I mean, you know, obviously there's a lot of people putting energy in place and, you know, would we get to a situation where there may be too much energy in South Africa in two years' time? Who knows? It remains quite a key driver for us and it's also a key driver for us in terms of the ESG and the EDGE compliance certificates that we are looking to get for all our buildings. On that note, I'm gonna hand over to Riaan. He's gonna go into a bit more sort of finer detail of where we're at and what's actually happening on the ground.
My part's always the easy part. You know, those of you who followed us would have seen that over the past 10 years, we've continuously improved our property fundamentals, which are very much the foundation of our business and it's also what creates the sustainable and predictable income streams that translate into the dividend growth. Also, our disposal program has been another lever that has assisted us to sell some of our older buildings and further improve these fundamentals. Looking at the detail, our WALE is currently at 13.7 years. Our escalation profile is 6%. As you know, our biggest tenant is Shoprite and they've entered into 20-year leases and their escalation in those leases are 5%. If you were to exclude Shoprite, our escalation, say, would be around 7%.
Our portfolio grew in the period under review by 7.2% and the portfolio size is now ZAR 28.2 billion. At the period end, we had a small vacancy in Reading, which has subsequently been let. It's about 1,400 sq m. It was a bit of irritation. We struggled for a couple of years to let it but we're pleased to announce that it has now been let. 97% of our tenants are A-grade tenants. Obviously, a big focus when we enter into lease negotiations is on the creditworthiness of the tenant. Ultimately, our business is built on that and we've become quite sophisticated in our finance department in doing the necessary research. Something that's not on the slide but we always get asked about it.
In the period under review, we renewed five leases. Two of those leases were renewed at exit rental plus 7%. One was renewed at exit rental plus 8%. Two leases were ten-year leases that came to an end with 8% escalations and there were negative reversions on them. We were very pleased though that the majority of our leases over the period had good upticks in rental. The portfolio split and also from this slide you can see how it's changed from financial year-end February 2023. As you will see, 53% of our portfolio is now made up of SA Logistics. 21% U.K. Logistics. It's down from 25% due to the sale of the two Peterborough assets, the Coloplast and the DSV, in the period under review.
The Newport Pagnell and Tesco was held for sale at the period end. It constitutes 10% of the portfolio. SA Development, 6%. SA held for sale 4%. Land between SA and the U.K. now constitutes 5% of our total portfolio. We've communicated that we are looking to reduce our land holdings and we've been very successful in the period under review with the developments we've signed and also the sale of some of the Newport Pagnell assets in the U.K. The next slide deals with our very ambitious disposal program, which Andrea alluded to. We communicated this to the market at our May presentation. Firstly, as Andrea alluded, the main reason for the disposal program is to recycle capital, to reduce our LTV to about 35% and also to fund our South African development pipeline.
Now, when one announce a ZAR 6.3 billion disposal program, obviously great care needs to be taken to ensure that the disposal program is implemented without destroying shareholder value. Obviously then the second step is to have good criteria to pick the assets that you want to sell, because ultimately we're building a long-term business and we firstly would like to sell non-core older assets, those who may not be ESG compliant and in particular, assets that we don't think will in the future contribute to NAV growth. Pricing has been interesting. Property theory teaches us that there's a correlation between the interest rate environment and pricing and we see a very strong correlation in the U.K. As interest rates have increased, the property, logistics property and other property sector values have decreased.
We've seen about a 20% decrease in property values in the logistics sector in the U.K. In South Africa, we've seen similar devaluations in the B- and C-grade logistics, industrial type assets and also other sectors. We've not seen it in A-grade top-notch assets. That's confirmed in the concluded sales, which we've in this slide divided into three segments. Firstly, those which have already been implemented. ZAR 1.9 billion of sales already implemented, which was made up of ZAR 0.8 billion SA assets and ZAR 1.1 billion U.K. assets. Now, the two U.K. assets were sold subsequent to the devaluation in the U.K. and we sold them for at about 13% discount to book. The SA assets, however, there were three sales in this period.
One asset was sold at a 1% premium to book, other one at book and the third asset at 14% premium to book. It's very interesting where we still continuously see very good interest in our assets and we are able to sell the assets without destroying any shareholder value. The middle part of our program is the effect of post period end transactions. Those are transactions that have been concluded, written legal agreements signed. Mostly all the CPs have been met. There may be one or two small one outstanding. In that list, ZAR 0.5 billion SA assets, ZAR 1.5 billion U.K. assets. That makes up a total of ZAR 2 billion. That category of transactions were concluded at a 5% premium to our book values, which we're very happy about.
Then the third column is transactions that we're planning over the next three, four months. In some of the instances, we've already concluded heads of terms and in other instances, we are preparing to start the sale processes. We're getting the data rooms ready for the sale. We're planning to sell about ZAR 2.4 billion of assets in the next three, four months. We've set a target to bring down our LTV to 35%. However, if market conditions is such that we can't dispose of assets at round about our book value, then we would have a rethink because ultimately, especially in the U.K., a lot of our of our properties are coming up for rent reviews, which will see significant increases in the value.
We do think we'll be able to do this but we just wanna caution that we'll do it in a very responsible manner. That more or less conclude it. As I said, ZAR 6.3 billion and we're well on our way. We are about at ZAR 4 billion at the moment. Thank you.
Thank you. Okay. Thank you, Riaan. Morning, everybody. I have a few slides to run through. I'm not going to pause on my highlights slide because Andrea took us through these highlights. I'm gonna dive straight into the detail and let's start talking about the distribution statement. To start, we look at our gross property revenue and ultimately the net property income, which is the largest contributor to the distribution per share for the period or the distributable earnings for the period. If you look at this line item, especially the net property line item, you'll see that the growth was 15% from the prior comparable period. I'm sure a lot of you are looking at that property expense line item and wondering why that grew disproportionately. There are a couple of one-off items in there.
We're still investing heavily in our sustainability program. Those types of consulting fees are non-recoverable from our tenants. There are also some legal fees in there relating to a claim which was undertaken during the period, which is not offset yet as we hadn't reached a conclusion by the 31st of August. Some one-off items in there which result in that net property income growth being 15% compared to August 2022. If we look at the admin expenses for the period, the admin expenses have also grown slightly year-on-year or compared to the prior comparable period. This is due to an increase in headcount but also due to a reduced capitalization percentage to developments which are currently underway. Those two factors combined have resulted in the growth in admin expenses from August 2022 to August 2023.
Now, when you look at this, you can see that net finance costs have increased. I think I'm not being dramatic by saying dramatically from August 2022 to August 2023. When we look at what's happened to base rates, I think that is completely and fully explained through the increase in base rates. We'll touch on how Equites has managed to manage its cost of finance incredibly well later on. Despite all of our best efforts, we don't run a book that's fully hedged and we aren't immune to base rate increases both in South Africa. We are less exposed to it in the U.K. but definitely in South Africa, we are exposed to it and we'll touch on that a little bit and that's the reason driving the increase in net finance cost.
If you look at our notes in a little bit more detail in the interim financials, you'll also see that the percentage of capitalization has reduced quite significantly in the finance cost. You'll see that number has also come down, further contributing to the actual distributable finance cost number being higher than August 2022. There's an interesting number for the antecedent dividend, which is negative. This is because we bought back shares over the period. We have announced to the market historically that where we think that buying back shares is a valuable opportunity, we will look to do so. However, we're very considered in our approach and we won't compromise our loan-to-value in order to buy back shares. It really does have to be a very compelling investment case in order for us to allocate capital here.
The non-controlling interest has come down slightly despite the increase in the number of assets. Remember, those operating entities also have finance costs and other type of expenses coming through and that's why the number has decreased slightly. Predominantly, this relates to the Retail Logistics Fund as well as Plumbago Logistics Properties, where the DSV asset or the DSV campus sits. Okay. If we look at the distribution statement, it really does talk to how we arrived at the ZAR 0.6537, which is squarely in line with guidance. If we look at the bridge, I mean, you can. The major factor which really contributed to the growth or to the ZAR 0.6537 was the like-for-like property income. We have an average escalation of about 6% in the portfolio, which Riaan spoke to.
The like-for-like rental growth, however, was 5.4%. As Riaan said, there were some leases which were renewed above the exit rentals but there were some which were renewed slightly below. There was also a small vacancy in respect of one of those properties, which is in the like-for-like portfolio, which results in that 5.4% growth. The rent review in the U.K. was obviously very favorable for us and contributed ZAR 8 million to the distribution per share. The biggest detractor, I think comes as no surprise to anyone, is the exclusion of the cross-currency interest rate swaps. We communicated this very clearly at our results in May that we would be terminating all of these cross-currency swaps and that results in a negative ZAR 0.134, in terms of our distribution per share for the period.
The funding costs, again, our funding costs have increased. It's increased by about 150 basis points in South Africa and 130 basis points in the U.K. compared to August 2022 and that's what's contributed the ZAR -0.055 in South Africa. There are some other items in the DPS bridge which contributed to the decrease in the distribution per share and that results in the ZAR 0.654 for the period. If we just look at the balance sheet, that first line item, investment property, can't be viewed in isolation because if you look at what we've done over the period, we really have increased our held for sale line item. There was a large growth in that held for sale if you look at assets held for sale or properties held for sale in this recon.
Large growth in the number of properties held for sale, ZAR 1.6 billion and that really is in line with our disposal program. Instead of looking at the 23 billion, we refer to the portfolio value, which really includes land options, properties held for sale, as well as straight lining, which ultimately shows the 28.2 billion and that's what we look at as our total portfolio value. The assets held for sale in line with our disposal program. Once we are reasonably certain that a buyer has been identified and that we will dispose of that asset within the next 12 months, we transfer that asset to held for sale in terms of IFRS and that is really just showing we expect to sell these assets over the next.
We hope before the end of the financial period but in terms of IFRS, in the next 12 months. If you look at our loans and borrowings, those have grown, which again is not a surprise. We haven't accessed equity capital markets and despite the success of our disposal program, we have allocated a fair amount of capital to acquisitions as well as developments and the loans and borrowings have grown in line with the allocation of capital. If you look at share capital, there's an interesting dynamic which has happened during the year. We issued shares in March in respect of a land acquisition. We then bought back shares over the period and further issued some shares in terms of the conditional share plan.
You'll see that there's some movement in there which isn't always typical of what we'd historically show, which is just equity raised and some additional shares. I think it's important to pause on just our debt analysis because we have been significantly more sophisticated in how we think about debt as it's become a larger component of our lives. I wanted to highlight a debt auction, which we held recently, literally a couple of weeks ago or a few weeks ago, where we successfully placed ZAR 750 million in the debt capital markets. We raised ZAR 300 million in the three-year space at a margin of JIBAR plus 129 basis points and in the five-year space at JIBAR plus 139.
Now, there's a lot of bankers in the room and I think that you can attest to the fact that those are remarkable margins. I'm also looking over at Warren, who's smiling. He smiles every time I mention it. I think we did a remarkable job in terms of the ability to raise. To give further credence to this, we had the outcome of the Growthpoint auction. It was announced yesterday, so I can talk about it and I think it does show that our spreads are really just a few basis points wider than Growthpoint, which really does bode well for our ability to raise as well as where we're raising in terms of margins.
The proceeds which we raised, the ZAR 750 million, replaced debt of ZAR 600 million, which was raised at an average of 205 basis points. It does show again what that compression is really doing in terms of us minimizing our margins and managing to really maintain a low cost of debt. I'm not going to touch on the hedging bit because the next slide talks about it quite nicely. Just from a credit rating perspective, we wanted to just reaffirm. GCR reaffirmed their rating but they did change their outlook from positive to stable, which we think is fair given the economic climate as well as where we are as a business.
This was the slide which I thought was great because we talk about how our margins have come in and I think that you can see very clearly both in South Africa and the U.K., you can see base rates increasing significantly but you can clearly see that tightening of the spreads. In South Africa, our cost of debt is now 86 basis points above JIBAR. But in the U.K., our cost of debt is now 87 basis points below SONIA. I think if I were to just point out a slide in summary talking about how well we manage our cost of debt, this would probably be it. If we just look at the growth in NAV per share, our NAV moved from ZAR 1,665 to ZAR 1,673.
What we saw, which was quite encouraging, was that valuations both in South Africa and the U.K. seemed to have stabilized. Valuations in South Africa were up marginally by 1.7% and in the U.K., they were up by just over 2%. Again, nothing to write home about. We're not saying 5, 10% up but we are saying it appears to be stabilizing after a period of relative turmoil. We just wanted to touch on the Forex. As you know, we had to close out those cross-currency swaps over the period. We closed them out as they reached maturity. Those weren't always at the most opportune times, given where the exchange rate has been over the period and that resulted in quite a hit on Forex over the period as a result of closing out those instruments.
There were some other items, including the higher finance cost, which detracted from our distributable earnings, which detracted ZAR 0.14 from NAV, which ultimately took us to that ZAR 16.73. The loan to value, we speak about this a lot because I think if we were to really coin a phrase for the last six months in terms of balance sheet management, it would be consolidation and just managing this loan to value. I think if we look at how it's moved, we started the period at 39.7%. We disposed of assets in a very successful disposal program that Riaan took us through, which reduced that LTV by 4.5%. However, we were still allocating capital to investments over the period. We acquired the Cilmor asset from Shoprite. That went into our Retail Logistics Fund.
We were allocating capital to developments, again, predominantly in Retail Logistics Fund but a number of other developments which Andrea will talk us through a bit later on. There were some other items. Again, this includes the closure of those cross-currency swaps and the capital that we actually deployed to close those, which increased our loan to value by 2.4%, which takes us to that 42.3%, which we report at 31 August. The period after 31 August was remarkably busy. You would have seen SENS. There was Newport Pagnell, there was Tesco, a number of SA assets which contributed to that reduction of 4.2%, which takes us to our adjusted loan to value of 38.1%.
Importantly, it was essential for us to demonstrate to you what we've done over the period, what happened subsequent to 31 August and then our flight path, which will take us to the Feb 2024 number, which Andrea will talk through. We wanted to touch on ESG but it's a different type of talking about ESG this time. For a long time, we've said to you, ESG is part of our fiber. It's embedded in everything we do and I don't think we need to tell you that again. We put out a very detailed sustainability report a couple of weeks ago. If anyone wants some bedtime reading, I promise you it's riveting stuff. What we wanted to talk about today is really just what we're doing in terms of growing our alternative revenue sources.
The total solar installed grew by 116% compared to the same period last year. Compared to August last year, between all the new buildings we brought online and our solar projects on existing buildings, we've increased solar by 116%. In addition to that, we're commissioning an additional 8 MW of energy through a combination of grid-tied and hybrid solar systems with battery solutions. The CapEx on this will total ZAR 136 million. This is not to February 2024. This is all the projects ongoing. They will probably be rolled out over the next 12-18 months. Importantly, what we've done, we've looked at what these yields are and what these IRRs are and the average net initial yield on these projects are around 20% with IRRs of 19%.
These are amortizing assets, so the IRR is slightly lower than the initial yield but they present an interesting and compelling investment case. In addition to us doing the right thing, we do see this as an attractive alternative revenue source and as Andrea touched on earlier, we will see this as a growing part of our business going forward. That's it for me. I'm going to hand over to Werner, who will take us through the SA and U.K. market update. Thanks.
Okay. Good morning, everyone. I'm gonna go through the SA and U.K. logistics property market, also touch on a bit on our U.K. portfolio, some transactional evidence and where we see the yields in the market, et cetera. I think it's quite an exciting section. I'm gonna start off with South Africa. I'm gonna go back to Property 101 demand and supply framework to explain how we see the market in South Africa. I'm gonna start on demand. Occupier interest in this market remains extremely robust. You have national retailer, logistics property companies, logistics operators, 3PLs. Everyone is expanding their warehousing footprint. Obviously, there's a massive drive towards supply chain optimization, also links to omnichannel. I think the most recent development we completed for TFG is a case in point.
That facility was designed in a way to really have the ability to respond rapidly, not only to orders from their stores but also to orders online. That's quite a big trend. Also maybe just touching on fit-out. What we see in South Africa and that's where you can clearly see how serious these retailers take logistics, is the amount of fit-out and equipment that they put into these facilities. Obviously, getting that budgeted CapEx amount approved on a board level just demonstrates how serious they take it. I think people will be surprised how big that value could be as a total of the construction. Again, we don't play in that market. They install that equipment themselves. It just demonstrates their commitment to the property over the long term.
On the supply side, as we all know, there's been a phenomenal increase in supply of warehousing space over the last 5-10 years. It's been mostly pre-let driven. Speculative developments in South Africa is not like the U.K. market. That being said, if you put demand and supply together, your vacancy rate is still sub 1% and that is just a testament to the demand in the sector. We're of the view that as long as your vacancy rate for A-grade logistics facilities is under 5%, there should be attractive market rental growth in future. Touching a little bit more on rental growth. Over the last 3 years, it's been between 20% and 25%, moving from about ZAR 65 a sq m to between ZAR 80 and ZAR 90 a sq m on a net basis.
Whereas your all-in development cost for a warehouse has increased by between 10%-15%. That differential of call it 10%-15% between the two has resulted in landlords being able to develop at a higher yield. In our case, we've moved from development yields between 7.5%-8.5% to 8.5%-9.5%. Obviously, it bodes well for the current interest rate environment and again, it's all interconnected. Just something very interesting for us is, again, just touching on a little bit more detail on steel because it's such an integral part of developing a warehouse. We had a discussion the other day and they did a refreshed deep dive into how much steel contributes to the construction cost of a warehouse and that number is 45%.
Obviously, you have various items contributing that from the structural steel, your roof sheeting, your mechanical ventilation, your rebar going to the floor. There's a lot of variables that's been impacted by the steel. The second point on it is, although a lot of it is sourced in South Africa, steel is still priced in dollar terms. Over the next five years, even if there is no increase in the dollar-denominated steel price, the rand's weakness against the dollar will result in warehousing becoming more expensive to build. Now, tying that all back to the top, where we talked about the demand and the occupier market, as you have higher construction cost inflation, so long as your demand is strong in the market, you should see rental growth coming through.
All right. Then we move to the U.K. I think the overarching theme is that the outlook has changed from Feb to August. I think there was a lot of concerns with the terminal rates and the interest rate cycle by then. Although it's been a bit sticky and it's maybe a bit higher for longer, I think the sentiment has definitely improved that the next big move will be downwards, even if it takes a little bit more time. On the demand side, take-up has normalized. I think we also communicated to you all in May that was as expected. I mean, you had two-three years of a very strong market during COVID. A lot of online retailers taking up space.
That has normalized to about, what's the number? 12.5 million sq ft in the first half of the year. Savills have tracked quite a bit of inquiries, though, in the first half of the year, which should translate into some nice take-up numbers in the second half. Just the interesting thing is manufacturing is also starting to come through quite strongly. We think the electric vehicle industry could be a trend to keep an eye on. You had even Tesla partnering with DB Schenker in Milton Keynes, signing a lease there. We think that could be another big driver for demand for logistics space in future for battery storage, spare parts and the likes.
On the supply side in the U.K., due to all the specs that has been launched, let's call it during the 2022 year that completed in the first half of this year, that increased the vacancy rate from about 4% to 6.25%. However, if you look on a forward-looking basis at supply, your specs are reducing. The amount of deals that are being announced have reduced significantly. That's obviously a function of higher construction cost as well as funding cost. I think if you put the two again together, your vacancy rate, especially in East Midlands, should be somewhere in the region between 6% and 8%. Savills have tracked data going back to 1980, so 50 years of data that as long as your vacancy rate is sub 12%, there has been rental growth.
Moving to the investment market, prime logistics yields are sitting between 5%-5.25%. The Equites portfolio is currently at 4.5%, so some people might ask why and the reason is obviously we're sitting with leases that's between 15-20 years typically but they have five-yearly rent reviews. Your rent is flat for five years and then you get a big jump once off. In that 4.5% numbers, the values are giving us some benefit for being under-rented. Our reversionary yield that we estimate internally post the sale of Tesco is at 9%, sorry, is at 6%, which just shows that 1.5 percentage point increase in your yield, assuming a static valuation, which shows the embedded growth. Because most of our rent is still pre-COVID levels and there's obviously been tremendous rental growth in the U.K.
GXO, it's a very exciting case study. It's exciting deal that we've essentially only announced today, where we achieved a 39% increase on the passing rent. If you look at where the rent was in February compared to the property value that was independently valued, the yield was 4.3%. If you look at where the rebased rent or the higher rent is up to GBP 2.8 million, you move to a 6% yield on this property. Now, because this rent review is contracted with your tenant, you take it to the valuer and they look at it with a fresh new set of eyes and they have revalued at a 5.25% yield, which resulted in a 14% uplift on the property value.
In conclusion, I think the values are recognizing that this, our portfolio is under-rented but they want to see that it's that contractual rent review that actually comes through, because there's always still a little bit of uncertainty. That's on GXO. My last slide is just talking about the transactional market in the U.K. and I'm just gonna start off with, I'm zooming in quite a bit here on a particular type of warehouse in the U.K. What's not on this slide is your type of urban warehousing in London that's at lower yields. What's also not in this is high-yielding properties. It's our Tesco facility that we sold falls in that category. That lease commencement was in 1988.
Those type of properties are on yields of the region of, call it 6%-9% because there's CapEx provisions, vacancy provisions and it's much older buildings. If you look at some of the recently announced transactions that actually transferred in the market, they were at a weighted average net initial yield of 4.5%, which is similar to our portfolio's yield. The difference is our reversion yield is 6%, whereas across these four transactions it's about 5.76%. For the analyst that wants to do a bit of more research, I think the Coventry Logistics Park is a very good example of where the market is at. This development was recently completed. It's got 50-meter heights to eaves, big yards, all the ESG credentials that you want in a modern world. The reversion yield for that one was at 5.12%.
What that means is where your buyer takes obviously a view on where they think those rents will be once you go through rent review. That's a very interesting park and in conclusion, I think we are well-positioned for the transactional market for the U.K. disposals, as well as from a valuation point of view. Thank you.
Thank you, Werner. I think the other key metric there is you'll see in the averages, it's only eight years, whereas you'll see the WALE on our portfolio, it's 16 years, which obviously gives it even more credence, if you like. We're seeing it. I mean, we're currently going through two rent reviews. Yeah, we're extremely optimistic in terms of the outcomes of those rent reviews. What's quite strange is that tenants for the first time are wanting to early engage rather than late engage because they're worried that the market's gonna keep running away from them. It's a very interesting dynamic, which is different.
I mean, the flight path, I think we've made a big deal about this and I think the reason we've made a big deal about it is because it is absolutely critical to everything that we are thinking about our business at the moment. There's a complete understanding that without that balance sheet strength, for us to move forward will be extremely difficult. The flight path obviously is driven by sales but we do need to take into consideration deal flow and deal wins, developments and obviously the outlook to effectively utilize all of our land in South Africa. Obviously, as I said earlier, the outlook in the U.K. is more to sell it rather than actually develop it.
The amount of money that we're gonna be spending on developments effectively contracted is obviously about ZAR 1.6 billion but I wouldn't be surprised if we're not gonna be adding another ZAR 400 million-ZAR 600 million to that number in the next six months with the various RFPs that we're currently negotiating on. Just to give you some recollection of the Equites Newlands platform. As you can remember, the 10 sites that we control in the U.K., two of them have got planning consents and are out of judicial review as well and they're ready to go. Then we have two, which is Basingstoke down here and Thrapston, which is number three, which is over here, no, over there.
Those two sites will be going to committee, potentially at the back end of this year but more likely in the first quarter of next year, with a view to trying to get those plans across the line. You'll remember that the Thrapston application is being effectively seconded by DHL. They've sort of stood behind it. They're looking to put a 530,000 sq ft, which is approximately 50,000 sq m box in Thrapston. Again, it's an ESG-compliant building in which they're looking to collapse three leases into the one new box. The opportunity lies here but it obviously needs a buyer that's prepared to look sort of five-seven years out. The opportunity that lies in this portfolio is certainly somewhere between, I'd say GBP 1.5 billion-GBP 2 billion worth of top structure product once you get it through the process.
What's quite encouraging is that we started the process earlier in the year. The middle of the year seemed to go very quiet on us but we seem to have gained a very positive traction at this stage of the journey. As I said earlier, I mean, we would like to think that we will be in a position to announce something in the not-too-distant future on this. Obviously from an Equites point of view, what that will mean is that we will no longer need to allocate any more capital to this. As you can imagine, with 10 sites going through planning, even though each site may be drawing GBP 150,000, you know, a month in terms of planning fees that are ongoing.
If you multiply that by 10, it becomes a meaningful amount of money that would be plowed into the system over a period of time. In terms of South Africa, I think Werner alluded to earlier, I mean, the Witfontein, this is on the R21. We refer to that location as Riverfields. And in that park, we've got approximately 50,000 sq m facility for TFG that is complete and is actually live, fully operational. And it's an interesting building in as much as it's got a gable end full of doors as well. The side, on this side here, effectively all these doors are at 1.1 meters rather than 1.4 and that's for bulk loading, effectively referring back to Werner 's omnichannel operation that will be coming out of this particular facility.
What's incredible is the building's ready to go. It's the technology that needs to catch up from within and that's where that building is. TFG are spending an inordinate amount of money in terms of bringing their complete supply chain into the 22nd century and it's very exciting to be working with an organization that's got that forward thinking and that forward vision and for us to be included in that process. Next to it is basically Shoprite over here. This picture is actually quite old. That building is completely covered. We're actually pouring the floor as we speak at the moment. That internal and external hardstand will all be poured before we go home for Christmas this year, so the last pour is planned for the 15 December.
Obviously, God willing, with the rains in Joburg, one never knows, especially the external ones. It can be a challenge. Internally, we'll certainly be finished by the 15 December. That's a non-negotiable. The whole process, going back to sort of Werner's allocation to construction costs and it is always a challenge. I mean, with the load shedding and some of the coal-fired power stations, the byproducts of those coal-fired power stations is slag, which we use in our concrete to go into the floor. There's been a shortage of it because they haven't been burning coal. We've had to look at alternatives, sometimes at a bigger expense but we obviously try to manage that process. It's part of the fun of what we do or what I mean.
I enjoy the challenge, I enjoy solving the problems and whatever but ultimately never compromising the finished product. Jet Park has been a fantastic deal for us. I mean, we bought that site off Aveng. It was where they had their head office and their yard. We demolished everything. We obviously all the steel that was on that site got basically recycled, so we got the ESG compliance points for that. Over and above that, everything that was cementitious on that site basically got crushed on-site and basically got used as subbase on the site. As you can see from the site at the moment, we've got one, two and three facilities. We've got a fourth one coming up here. We've only got two sites left here and the site on the corner here is under offer.
Hopefully, we will get that deal signed before Christmas. But leaving just the one site, which will be approximately an 8,000 sq m facility in the middle. We've basically developed that out in sort of less than 18 months and so it's been a massive success. I think it's also become almost a landmark site, I think, in Jet Park. I mean, Jet Park has got, you know, some infrastructure that's managed, falling apart a little bit and some of the buildings are a little bit older and whatever. This is a gated community industrial logistics warehouse facility.
More importantly, we were also able through all the work we've been doing with Ekurhuleni to get the MEC to assist us in a process and I think it's Jones Road, I'm not sure what the road's called, that basically runs alongside us. We basically managed to get it completely retarred as well. Our clients are also benefiting now from a road which has got no potholes back towards the airport or back onto the R21, effectively. A great product. The Cilmor's Shoprite, that will PC at the end of the month. That was an existing facility which totaled about 55,000 sq m and that's all been increased now to about 102,000 sq m. The actual main warehouse and the Freshmark warehouse are finished and complete.
There's just some work that still needs to be completed on the yard area where they've got their truck wash and everything. Obviously, because it's all part of one contract, we couldn't exclude that from the transaction. That will PC at the end of the month and then the lease will kick in basically from next month, which is also, I think Riaan alluded to earlier, 20-year lease, 5% escalation. That sits in RLF. The one difference, obviously, just to go back to Shoprite Witfontein here, that's 100% owned by Equites. That sits in us. It doesn't sit in RLF. Again, it's a 20-year lease, 5% escalation. I think in concluding, we can firstly, obviously recommit to the 130-140 DPS guidance that we gave in May. We're confident that we'll be within that range.
We again recommit to the 100% payout ratio, so that's not changing any time soon. Obviously, again, we're recommitting to the reduction in the loan-to-value to get it into an area which obviously gives us the balance sheet strength. In terms of the prospects over and above that, the U.K. obviously, from an Equites point of view and from a South African cost of capital point of view, the allocation of capital to the U.K. is very difficult at the moment. I mean, you probably got a swap, a five-year swap trading somewhere between 5%-5.5%, depending on the day and depending on what's happening in the world. Over and above that, you can probably layer somewhere between 1.8%-2% for the bank fee on top of it.
Ultimately, you're coming in at debt sort of in and around the 7% mark. Now, the kind of assets that we and the quality of assets that we're looking at, even if we were to develop them through the Newlands platform, we'd be coming out probably at about 6.5% yield on those assets. The consequence of that is that your geared return that you got from the historic model that worked extremely well in the U.K. and allowed us to create that GBP 500 million pound portfolio at its height no longer works. However, in South Africa, with the long leases, the rental growth that Werner has alluded to that is really coming through quite strongly, the ability to do deals between 9%-9.5% yield.
The ability to also add on the energy component, which is a little bit of a sweetener, while it's in the context of a, let's say, ZAR 1 billion transaction, you know, you're probably looking at ZAR 20 million-ZAR 30 million. So it's not like it's gonna move the needle massively but it does move the needle in a positive way and especially in the early years. There is a lot of confidence in us with the quantum of RFPs that we're currently responding to and the return metrics that are being afforded in terms of allocating more capital to South Africa at the moment makes a lot of sense. Does that mean that everything in the U.K. is going? No, it doesn't.
It means that we've currently got obviously a very good facility with Aviva in the U.K., which is still nine years left on it. It's an extremely good interest rate. We've got a lot of assets in that portfolio that are gonna see some significant rent reviews coming through over the next sort of 18 months, two years. Obviously, we'd like to capture as much of that value as possible. Obviously, you know, ultimately, we have to be realistic about the fact that capital markets probably won't open in SA anytime soon. From that point of view, obviously, if opportunities arise for us to allocate capital to deal flow, we are constantly looking for alternative sources of equity capital to either come into joint ventures with us or to partner us in the various deal flows.
Fortunately, I think we've built a fairly good track record over the last nine and a half years that there are numerous people that obviously are very keen and interested to get involved at grassroots level with us and basically unlocking some value. Obviously unlocking the opportunity for them to house some capital in direct real estate rather than listed real estate at the moment. We're exploring all these opportunities. We're obviously in a very fortunate position that we've got a product that's still in massive demand. We've got a team that is young and hungry and the future in a very different way to what it looked like sort of maybe 18 months ago actually looks really rosy for Equites going forward. Very, very comfortable and very, very excited about the opportunities.
Just ja, the methodology is very different. The days of picking up the phone for a few hours and raising ZAR 1 billion, those are certainly gone. Hence, we've got to be more creative in what we do and how we do it. Obviously, management team, not just my co-executives but also the senior management team that we've managed to create in the organization are really starting to step up to the plate. As an organization, I think we're reaching a level of maturity that really bodes well for Equites and obviously its shareholders. Before I close off, obviously, I'd like to just wish Laila all the very best. For those that don't know, she will be giving birth next month, her first child.
Obviously, as an Equites family, we're very excited for her and we wish her all the very best. For the rest of you, I mean, we've got some drinks, coffee and some nibbles. Obviously, all the management and some senior guys from the team are here as well. Please feel free to engage and we are available for a chat. Yeah, thanks to everybody for coming and thanks to everybody online for listening. I hope we've answered a lot of questions. On that note, if there are any questions, I mean, Laila's got the iPad. Mel's got the speaker there. If there are any questions on the floor, I'd prefer to take some questions from the floor before we go online. Moesh.
Hey, guys. Two questions, right? Just from the U.K. side, I'm wondering what is your debt's expiry profile on pound debt?
Laila.
Sure. I mean, you know, we have the HSBC and Aviva facilities. The Aviva facility still has nine years left on it and HSBC expires at the end of next year.
2025.
Sorry, 2025. Not next year, end of 2025.
Okay. Both of those have swaps or hedges in place?
Well, Aviva is completely fixed. That's a fixed rate debt or term facility. Then HSBC, the first interest rate swaps on HSBC only come up for renewal in 2024. Mid-2024.
Okay, thanks. Would you say that you are planning on funding all the estate developments via the sale of U.K. income producing assets right now?
Partially and obviously partially through the South African sales as well of some of the non-core assets. We still have a few. I mean, as an example, we still own the hangar at the airport in Cape Town. It's an asset that's obviously yielded really well for us. The tenant's very happy. Going through a renewal process. You know, once we've renewed that lease, is that something that Equites will wanna hold for the next 5-10 years? Probably not. Could we deploy that capital into a brand-new ESG compliant logistics facility? Yeah, probably we could. So that's the kind of thinking that happens on a continual basis internally.
In the U.K., obviously, there will be some further sales that will occasion the ability for us to reduce the loan to value, which will obviously help in the process of also helping the, I suppose the business in the short term, in the sense that, you know, if you're able to sell U.K. assets at between 4% and 4.25% or 4.5% yield in the U.K., bring that capital back to South Africa and redeploy it in a development that you're gonna be doing at 9%-9.5%, obviously there will be a positive impact from that.
Okay, thanks.
Any other questions? No. Laila, have we got anything online? Look, van .
Most of the disposals here today have been from the U.K. Any reason for lower SA sales? Is it related to limited buyer, pricing difference, et cetera?
I would dispute. I mean, I think the quantum, the numbers are bigger and that's a factor of just the values. I mean, in the U.K., a 10,000-sq m warehouse is gonna be valued at probably 3.5-4 times the South African value of the same warehouse. You sell a Tesco's at just shy of GBP 30 million, you know, that's ZAR 700 million. Now, in South Africa, for ZAR 700 million, I mean, you'd have a 80,000 sq m or 50-70,000-sq m warehouse. You know, that's the fundamental difference. I don't think it's that there's less in SA. I think Riaan spoke to it extremely well in his part of the presentation, where the numbers that we've.
The yields at which we've been able to on sell some of our South African assets have been really good. In the U.K., we got hit in February with a valuation downgrade. It's slowly leveling out but the numbers are more or less there. In SA, what you're seeing is the sort of B and C grade facilities that are probably trading at north of double-digit yields. Riaan?
From two of the sales, all the other South African sales were off-market transactions. It just speaks for the desirability of the transactions. We've really been very encouraged by the interest in the assets and also the pricing achieved.
Yeah. I mean, there's no question that there is capital that wants to be in property in South Africa and but probably at the moment, not in the listed space. They are much more attracted to a direct proposition, if you like. That's both in buying out an outright property but we obviously are being approached on a continual basis for people to come in for a portion. They love what we've done with RLF in terms of Shoprite, what we've done with Eskom Pension Fund and what we've done with Imbali as well. You know, we've set the marker and people are interested. Very positive from that point of view. Anything else there, Laila?
Nazeem wants to know, will RLF development costs be funded within the JV? Are we introducing debt in that JV?
You can take it away.
Yeah. Take it. Yes. If you look at our NCI note in the interims, we do show the introduction of debt. We will be introducing debt in Retail Logistics Fund up to 30% of the value. Well, we can go to a 30% LTV basically in Retail Logistics Fund. That, in short, historically, that was completely ungeared but over the last six months, we've started introducing debt.
Yeah. I think part of that as well is strategically Shoprite didn't wanna dilute. The only other way we could have done it is by have introduced our equity into it but that would have resulted in a dilution for Shoprite. They're actually very happy with their position and being in a joint venture with us. It's worked really well for them. Yeah. That's been a real success story for both of us.
Yeah. From [Maira] and Nazeem, we used to work together and they both asked the same question. The quantum of one-offs with property costs, the amount relating to one-offs with property costs or timing differences, somewhere between ZAR 5 million-ZAR 10 million. I think Moesh would have also asked that question. Okay.
Okay. Great.
Maybe a question for Riaan. Has the property been relet for the Western Cape lease that expired at the end of August 2023?
We've actually concluded the transaction with respect to that property sale transaction, so we should give transfer post the Competition Commission approval. We expect transfer to go through in March, April next year.
Awesome.
Yeah.
Okay.
Fantastic. No more? We done? Any more? Vanny, you done?
No, I think that's it.
That's it.
There's some more detailed questions, so we'll just get back to those via email.
Okay. Awesome. Well, thank you guys. Thanks for attending. Really appreciate your presence and thank you everybody online and please join us for a cup of coffee and a chat.