Okay. Good morning, ladies and gentlemen. Welcome to Equites' interim results for the financial year to February 2023. It's obviously again a great pleasure to have you guys here. I do believe we made a bit of a faux pas today, in that we are doing this presentation on a religious holiday which obviously has resulted in our Jewish brothers and sisters not being here today. Apologies to them up front for it. It was an honest mistake and we have put in place measures that we won't do this again. I think we've done this before on a Muslim holiday as well. We didn't learn from our mistake first time around. Apologies for that to everybody concerned.
We have put in place measures that we don't do it again thing. Notwithstanding that, I think let's get on with the presentation. Obviously,, very pleased to see you all here. Let's start again where we always start and really again, it goes down to the Equites strategy and what is it that we wanna be. I mean, we've always prided ourselves and I think the statement that we put out there is on the left-hand side of the page, and I think it's been in every presentation for I don't know how many years now, and really we reiterate it. Equites wants to be a globally relevant REIT that operates in the logistics sector.
We think that every year that goes by, we become better at it. Every year that goes by, that memory bank, that intellectual capital that is being captured and harnessed within the team as the team has grown. w e're 42, I think or maybe even 43 people now in the team. We have grown, and we've brought in some incredible talent, and that talent is performing remarkably well. I mean, I think, Leila can I announce that we've employed our first employee in the U.K. as well, who will be starting on the 14th of October? The opening of the U.K. office is actually a reality now.
From there, that team will probably grow to three or four people, probably within the first year, to manage what we're doing and what we're trying to achieve in the U.K. All important stepping stones. You know, people can't believe that we run a ZAR 10 billion portfolio in the U.K. from Cape Town. That's what we've done. Obviously we've got massive ambitions there and we will look to grow it, but obviously do it in a way that is meaningful to shareholders.
Also that we obviously always remain best in class in terms of the assets that we have, but also how we execute to get them, but most importantly, how we execute to maintain and run the operation, which is ultimately the most important thing. The pipeline in SA has never been stronger. I mean, we listed in 2014. The market was fairly buoyant. There was certainly a lot of money around in 2015 and 2016, if I remember right. We had some memorable capital raises in those years.
The world is very different we were in the U.K. a couple of weeks ago, you know, what sort of came through in the U.K. as well is obviously there was a momentary sense of panic after that mini-budget. Notwithstanding that, we remain fairly confident that things will calm down, that the short traders will have made their money, and that they can go away on Christmas holidays and get their bonuses, and they've taken away the caps on the banking bonuses as well. They tried to take away the tax rate, but they've put that back. Thank God. All these sort of temporary blips obviously are not good in the short-term for our market.
In a weird way, you know, we all knew that it was coming sometime. Let's not fool ourselves. Hopefully, the consequence of that is that we, in the next sort of 6-12 months, reach a level of stability which will afford the markets to continue. I think in SA, what we've seen obviously is a level of really good fiscal discipline, I think. Coupled with that, obviously the receiver has also been collecting admirably and the level of activity we've seen in SA really talks to the fact that they've over collected that tax. T hat really does tie in quite well with the level of activity that we're seeing.
I mean, our new business team are literally running off their feet with the quantum of potential deal flow that may be coming through the system. I suppose the biggest challenge to the SA business remains probably the availability of land, and we'll talk to that in a little bit. If we can just, you know, again, reiterate the group strategy. In SA, it's acquiring assets from time to time. It's very difficult to acquire assets because very few people develop assets to the specification and the quality that Equites would expect and want. From time to time, some stuff does come up. Invariably it's priced pretty aggressively and in that moment in time, we will make decisions.
The other point, obviously, which is very important to us, has been our development business in SA. We've developed some seriously world-class facilities, and we continue to do so. Obviously we've created some fantastic relationships with really high- caliber organizations, you know, from the TFGs to the Shoprites to the Super Groups, to mention some. Obviously, we are very proud of the fact that these organizations that have got the ability to talk to everybody, they keep coming back to us because they believe that what we offer them is best in class and we provide a solution that is very difficult to match and beat. The final element obviously remains that we are very much focused on that A-grade sort of client.
You know, we've come through two years of COVID. I think in pre-close we spoke to it a little bit, but what we can tell you is that in 2020, I think our book was about ZAR 1.4 billion. In 2021, our book was about ZAR 1.6 billion. Technically we collected about ZAR 3 billion over those two years in rental. We invoiced ZAR 3 billion in those years. At the end of COVID, and I'd like to think we are at the end of COVID, what I can tell you is that the amount of money that we've written off from our book is less than ZAR 2 million. I think that really talks to the strength of the actual portfolio.
It talks to the strength of the underlying clients that pay us rent, and it also talks to the quality and caliber of real estate that we offer these clients that are able, even in very difficult times, to run very successful operations. That’s the first part. In the U.K., obviously, when we entered that market, we entered it for a rand hedge, but we were acquisitive. The market became obviously too expensive for us, and we’ve sort of gone up the food chain, eventually creating a relationship with the Newlands team.
A highly successful team of developers that have, in different guises, have been in the market for many years and have brought a level of experience and quality of entrepreneurship that really marries extremely well with the Equites culture and the Equites way. In the U.K., we effectively control 13 tracts of land, and we'll get into more detail of that later in the presentation. The opportunity for us obviously is to unlock that land. When we unlock that land, we can do three things with it. We can either sell it if we get a good enough price for it.
We can do turnkey developments for owner-occupiers or for owners of property that are happy to take vacancy risk and are wanting us to build units for them speculatively, where we give them a fixed price and we make our margin and we move on. We have the final element, which is obviously the one which is probably closest to our heart, is the one where for the right client, the right building, the right location, the right type of lease, that Equites decides to maintain ownership of it to continue to build this wonderful portfolio that we've created in the U.K.. Those really are our two prongs of attack. We often get asked, you know, are you looking at other countries in Europe? Are you going elsewhere?
As things stand at the moment, we believe that the opportunities afforded us with the available capital that we have. I think we are well-placed to execute and deliver on that. You know, there's no point spreading yourself thin. Ultimately, opening up in another jurisdiction comes with complexity. You know, it's not every country has got its own quirks, its own tax regimes, its own laws, its own ways of operating. You know, it takes time to understand those things, get on top of them and understand how to deliver and provide on those things. So the answer to that question at the moment is no. But in the future, could it happen? Absolutely, it could, but certainly not in the short term. Obviously, why are we here is effectively encapsulated in this slide.
You know, from a South African shareholder point of view, obviously very important is that DPS is 4.1% up on the same period last year, which we are obviously very pleased with. You know, the market in the period with interest rate fluctuations and the uncertainty around processes in both U.K. and S.A., as I explained earlier, will remain in place for the time being. We are pretty confident that we're gonna give guidance also that we will stay within that 4%-6% band for the year. The NAV narrative is one which is obviously very important to Equites.
It's the one that really speaks to the underlying business at the end of the day. You know, the positive side here is that, for the first time in sort of since before COVID, we've actually seen the South African portfolio sort of improve in value, which is obviously very pleasing and is a function of some other things that will be spoken about a bit later in the presentation. Then in the U.K., we've seen the completion of the Hermes facility up in Barnsley, and some of you would have been on the trip in the U.K. in June, would have actually physically seen that property.
The uplift in value on that was obviously very meaningful and mitigated a lot of the loss in value that the U.K. portfolio has seen in the period. What I would like to talk to on the U.K. valuations obviously will be challenged, will be discussed just now. Loan to value remains obviously really good, 33.3%. The balance sheet remains strong. Portfolio is getting bigger. There's more income producing property coming through the system and then obviously that married with a 13.9 years of lease expiry profile. We'll talk to the development pipeline a bit later on in the presentation and the consequence of that development pipeline coming through in the next sort of, let's say, 18 months to completion.
Some of those leases are 20-year leases, and there's some 10- and 12-year leases in there. Once those properties come through the system, we'll probably see that 13.9-year sort of probably go back closer to 15 again. At the moment, it's still really powerful at 13.9 years. Then obviously the portfolio from prior period. This is compared to sort of August last year, obviously substantially up to ZAR 26.3 billion. Key things that we're fairly proud of, obviously, the Canelands and the Wells Estate acquisitions with Shoprite are fairly important. I think, they will also afford the opportunity to extend them. The Canelands facility is currently about 55,000 sq m and will become 90,000.
The Wells Estate facility is currently about 15,000 sq m, and that will also become about 90,000 sq m. Great development pipeline coming through the system there. Also, I think it really talks to what I spoke about earlier, Shoprite really, you know, believing in our relationship, believing in our partnership. Those two properties obviously will go into the Retail Logistics Fund, which is our joint venture with Shoprite. From a treasury point of view, obviously, we run a really well-heeled treasury function within Equites. You know, we managed to close out a substantial refinancing position with Aviva on the back of Hermes being completed.
We got a ten-year fix on that at a sub 4% interest rate, which obviously is very pleasing and it underpins the U.K. debt profile, which is great. In terms of leases, you know, as I said, this really talks back to valuations as well. We've been driving extremely hard. I mean, as we stand at the moment, Equites has no vacancy in its portfolio. Well, it does have a small vacancy actually in the U.K., but yeah, it's like 1,000 sq m in the U.K. In South Africa, we have literally no vacancy. What we're seeing is also where product has come vacant, we've normally got two or three people that are wanting it even before it's become vacant.
The ability to negotiate sort of and hold your ground in terms of achieving rentals has been, you know, for the first time in quite a few years, and I think Riaan will talk to that in a bit more detail later, has been really positive. Obviously, we're really pleased with the empowerment transaction with Mabel, and we've got the Nedbank team here as well that were instrumental in providing the funding to Mabel as well to undertake that transaction. You know, the fact that Nedbank took a positive view on us working with a team and empowering a team, obviously, I think gives us a good feeling as well because, you know, Nedbank wouldn't have undertaken that piece of business if they thought it was bad business.
I'm sure that the Black entrepreneurs that will be driving that process and driving that business are gonna be massively successful over time, and which is obviously very important to Equites' position as a, I suppose, a big brother within the property sector. ESG remains. It's completely ingrained in our culture. I mean, we've been on this journey for probably about three or four years. We've employed a full-time ESG officer from the beginning of this calendar year. The quality of work that's coming through the system is just going from strength to strength over and above that. Obviously, the freeing up of the 1 MW that went to 10 MW, which has become a 100 MW on the power supply.
You know, we currently sit with about 1.4 million sq m of roof space inside the urban edge. You know, all things being equal within the next 3-4 years, that will probably be north of 2 million sq m. Now, to cover those roofs with PV panels and create electricity inside the urban edge is a game changer. The pleasing thing is that the City of Cape Town has obviously taken note of us, and they've chosen us as one of their guinea pigs in terms of the new wheeling energy wheeling exercise that they will be undertaking. That will open up, we believe, a whole new avenue of thinking, a whole new avenue of potentially revenue.
While we use the energy to provide energy for our clients as part of a carrot to attract the quality caliber clients, we believe that the quantum of energy used in our DCs is not massive, but our roofs are big. The opportunity to over-create energy is there. That I think in the next sort of 18 months, 2 years, is gonna spill over into a new source of revenue for us, which I think could be very interesting. Obviously, the development side of our business remains absolutely integral to our business. In SA, we did 2 spec buildings in the previous financial year, which were both let pre-completion. We're currently doing 3 developments. One of them has already been let, and two of them are basically under offer term sheets.
Legally binding term sheets with all the commercial are sitting with our counterparties' lawyers waiting for a signature, effectively. We hope by the end of October to have those closed out. Once those are closed out, we are already preparing the next round of speculative stuff that we'll bring onto market. Our speculative business is always quite a muted amount of business. We do it because we feel that there's certain clients that do leave it to the last minute, and we don't wanna lose out on that business. Ultimately, our primary business does remain the pre-let business.
You know, we will be undertaking, you know, over the next sort of 18 months in excess of 400,000 sq m of developments, sort of if you add everything that we've basically included. On that note, I'm going to hand over to Wynand . Wynand 's going to give you a little bit of an overview in terms of the research and the data coming out of both SA and the U.K.
Thanks, Andrea. Morning, everyone. I'm gonna start off with more of a global picture of supply chains and globalization. We're going back quite far in time to 1970. I think what's very interesting is how globalization have increased since then, but the pendulum is kind of swinging back, and there's been a bit of stabilization, and that's around 2009 when the GFC came through the system. There's many reasons for that, including labor arbitrage. You had China opening their economy, other factors, like, that supported their production, manufacturing, and exports. There's various factors really driving that trend of globalization. I think the world became a very interconnected place, and I think one thing that's very evident from the pandemic is that it's also some issues with being this interconnected.
I think it's well documented at the moment that the textbook model of supply chains being low cost, lean, just in time has really collapsed. It's all moved now to diversified supply chains, inventory levels, really to kind of mitigate against any supply chain issues. Three common strategies that we're seeing from occupiers and businesses is really to shorten the supply chain, reduce its reliance on imports, and to increase inventory levels. I think on that last one, inventory, it was also very evident in the JSE-listed retailers that released the results for the last month, how they increased inventory levels to kind of hedge against the global turmoil. We just expect this whole trend of nearshoring, diversified supply chains, and high inventory levels to really support demand for warehousing space.
Okay, I'm gonna just touch on two themes in the U.K. logistics market. Graham and Ashley is dialing in. They're obviously very plugged into the market on a daily basis, in discussions with occupiers and agents. I think two points that I wanna really highlight is how broad the occupier market is in the U.K. I think a lot of market participants were very surprised how strong the take-up were. It's that red bar. It's really essentially non-online retailers that's taking up space. That increased by more than 50% in the first half of this year, where the portion of online-related retailers really, too, actually their take-up has reduced by about 50% in the first half of this year. Just really demonstrate how broad the occupier base is in the U.K.
It's not just e-commerce. Obviously, it's trends, like I said in the previous slide about nearshoring, onshoring, and then also supply chain optimization, as well as Brexit. My second point I wanna focus on is property valuations versus rental growth. It's well documented that yields have moved up about 50 basis points over this period. Assuming a static rent, that equates to about a 10% reduction in your property's value. It's very interesting that 50 basis points has also been applied to our U.K. portfolio's valuation on a like-for-like basis. We didn't lose 10% because of rental growth. On a net basis, we've been down 2.9%. We still expect very strong rental growth to come through in the occupier market, lack of supply.
I think another new theme that's kind of emerging in the U.K. market that Graham and Ashley will touch on is that speculative developments are starting to taper down. I think developers realized that they might not be compensated enough for taking on that risk due to increase in funding costs and the kind of turmoil in the market. As a consequence, by next year, the new supply that will come into the market might be reduced compared to expectations. In the SA logistics market, I think the main theme really is the huge requirement from occupiers for modern DC space. It's all driven by supply chain optimization. E-commerce really has a small impact on that, and it's mostly driven by Takealot.
The national vacancy rate has been reported at less than 1%. Our portfolio is fully occupied, as Andrea alluded to. I mean, that's 1.3 million sq m of space. That's really a lot of space. I think it just again demonstrates the importance of a DC in supply chain optimization. I think over the last two years, we had construction cost inflation between 30%-40% on a combined basis over a two-year period. That has been passed on to higher rentals. I think that with a mix of a lack of available A-grade space in South Africa, it really assisted rental growth this year. It's really essentially surged by 15%-20%.
We signed three new leases over the last period that were all at rentals between ZAR 80 to ZAR 90 a sq m, and that's all single-phase buildings. It just demonstrates again the level of demand in the market out there. The last point is just especially on the sustainability elements of these types of DCs, and it's exactly in that kind of field that we're playing with our national and multinational tenants. Thanks, Andrea.
We've put this into the presentation. We had this in pre-close, so some of you will have already seen it. I'm not gonna labor on it too much. I wanna go through it very quickly. I think the points that we're trying to sort of get across when we talk to the market and the market says, "Yeah, but is ZAR 80 or ZAR 85 or ZAR 90, is that a sustainable rent?" To be totally frank, it is. The reason it is is that ultimately an occupier looks at what he looks at. He looks at his total cost of operation. That's not just rent. There's a whole other range of functions that need to be included in that.
The process of being in an Equites-specified building is that with a 15.5-meter clear height. I'm gonna go on to the next slide because obviously it sort of in a chart form, it's probably a little bit easier. I won't go in order. I think the 15.5-meter is probably one of the most important metrics. Most of our competitors will only go to 15.5 meters if the client specifies it up front, and there would be a premium associated to that rental. From Equites' point of view, that's our standard spec. We go to 15.5 meters.
If you take a 15.5-meter building and you compare it to a building which most of our competitors will build, probably between 12 and 13 meters, we get two extra racking positions into that warehouse as opposed to our competitors. The consequence of that is that a ZAR 65/sq m building will be more expensive to operate than a 15.5-meter building at eighty rand a square meter. That's the first point that needs to be taken into consideration. The second point, which is obviously quite important, is that we took a view when the 1 MW process came into play a few years ago, in terms of PV on the roof, that we weren't gonna monetize that at the time.
We were gonna actually use it as a carrot to attract customers, and that's worked extremely well, especially in an environment where, you know, you've got Eskom applying for 30% increases in electricity. All of a sudden, you've got clients that benefit from daytime sunlight and the reduction of the cost of electricity as a consequence. Also, because we've put the PV panel, we've been forced to also put generators into all our buildings. The reason you do that is if you need to have a ring. For PV to work, you need to have a ring. If you don't have a ring, the PV basically switches off. The consequence of that is that we're in situations now where even with load shedding, the generator comes on, but it only idles, so it's not using massive amounts of diesel.
The PV then is providing electricity for the building. There's been massive mitigation in cost for a lot of our customers as a consequence of that. The sustainability element is something, and Riaan will allude to it probably in his presentation a bit further on, is something that he's been using a lot in terms of what can we do to renegotiate a lease and extend. Very, very key part of our business. Other key part is obviously the top 150, 60-meter yards. You know, if you wanna build something for Shoprite, reality is they need 60-meter yards because they've just the volume of trucks. I mean, I stand to be corrected, but the Centurion facility up, it's 165,000 sq m.
I think it's got basically two trucks going in and out of that facility every minute. You know, you can imagine the volume of flow of vehicles, and that's 24 hours a day. It's just constant. If you don't have the commensurate yard space for these ever bigger trucks moving goods around and also storing and whatever, effectively you lose the efficiency of actually having made the investment effectively. The other key metric obviously is the floor. There's two elements to the floor. It's not just the flatness of it. As you can imagine, if you've got forks at 13 meters in the air and the floor's not flat, those forks could be pointing down, could be pointing sideways, could be pointing up.
If you're trying to put those forks into the bottom of a pallet 13 meters away and they're not flat, it's a challenge. You wouldn't wanna be giving that to anybody to do. The other key metric is obviously that with the height, the point loads that come through the goods that are being stored on this rack obviously are elevated, and hence you have to have a floor that can take those point loads in terms of the weight structures. All our floors are designed to 90 kilonewtons as a minimum. However, by just putting base plates on the bottom of your racking, you can actually take that standard floor to about 110 kilonewtons, which is also quite important.
Other issues or other things that we provide external canopies of 7 meters in front of docks, but 18 meters in front of on-grade. That means that when the interlinks come in, they can be offloaded in a thunderstorm at night in complete safety. What it does is it just, again, improves the efficiency of the operation. You don't come to a standstill because of external circumstances. We also mechanically ventilate all our facilities and the reason for that is obviously the natural ventilation obviously comes with a dust problem, but it also comes with a vermin problem. A lot of our blue chip clients, especially those in food, but not just in food.
I mean, adidas didn't take too kindly to the bird-proofing coming away and birds coming in and defecating all over their boxes, you know? They ended up having to employ a whole bunch of people to actually wipe boxes down, which again is a cost to them, which they didn't want. I mean, those are examples of why and the learnings that we've taken from many years of being in this market, listening to our client base, and looking to improve the product on a constant basis. Other key metric is, you know, we obviously are very proud of the fact that we have these fully repairing and maintaining leases so that we can pass on a lot of cost to clients.
You know, passing on a cost to a client. Legally, yes, you can do it, but you also wanna try and maintain a relationship with a client. What we've seen, especially with some of the early buildings we inherited, is that what happens is that sometimes clients feel that they were short-changed in terms of how the development was executed, and certain things are failing because they weren't done properly on inception. It creates a lot of tension between client-landlord relationships. We've spent a lot of time actually rethinking our warehouses. How can we mitigate costs for clients as much as possible? There's two elements that we've put a lot of effort into.
The first one, obviously, is the floor. All our floors now are designed on either a 24 x 24 or a 32 x 32 grid with no saw cuts. We don't have any of these channels that need to be filled by polyfiller, and that has to be refilled probably on an 18-month basis, maybe 2 years at most. What happens is a lot of clients don't do their maintenance, and then the floor fails, and then we get them to tell, "You've got to pay for the fixing of it," and it creates a whole host of tension. By having taken that away and only having sort of armored joints, construction joints around each panel, what it's done, it's reduced the amount of time you need to spend and the cost of maintaining that floor.
The floor costs a little bit more up front, but over its 20-year lifespan, it brings so many benefits. Also, it's not just the benefits in terms of the cost of the maintenance, but it's also when we're doing the maintenance, we have to shut down whole areas of the warehouse, which means that the client can't operate completely optimally because he's got a whole bunch of strangers in his warehouse sort of doing maintenance work. That's a key element. The other big one, I think, which was an irritation for clients is on external facades, plaster and paint. In South Africa, we've got extreme heat and we sometimes get proper cold, especially up in Gauteng.
The consequence of that is your plaster does crack, and the paint fades, and every 2-3 years, you've probably got to give it a refresher. Even though the office component is quite small in one of our warehouses, it's always gonna be ZAR 300,000 to ZAR 400,000 to do that. Ultimately, we've taken that all away. We don't use plaster and paint on any external surface. We only clad, or we use glass and whatever. Consequence of that is it always looks pretty, it looks beautiful, and you take away the maintenance issue. It sounds like a soft issue, but I can tell you, in client relationships, the team will attest to that. It really has helped massively.
Obviously the cladding, sorry, the tilt-up panels are a security issue and also speed up the execution on the build. These are key metrics in terms of what we do and why we do them. I think, you know, our competitors will do some of these, but I don't think there's anybody in South Africa that does all of them. The final point in terms of the development, you know, a big issue around what we do is linked to landholding. As you can see, at financial year 2021, we had over 112 hectares of land, a significant land holding. As you can see, we're gonna get to year-end here with 45, but on the basis that we've actually acquired another 16. That deal hasn't transferred yet.
It's waiting for a couple of regulatory things to be put in place. What we're trying to show in this chart is that we couldn't have done the Shoprite deals, we couldn't have done the TFG deals, we couldn't have done the Sandvik deals if we didn't have this land. We put ourselves in a position to execute on those deals, and we put ourselves in a position to be able to get 20-year leases and 12-year leases and 15-year leases. Without that land, we could have never done that. I think the usage of the land really attests to the success of that strategy. It was a bold strategy.
The consequence of it is that we are continually looking to add portions of land where we think it's the right areas. We believe that R21 has been massively successful for us. It's a key area where we would like to look to sort of improve and increase our footprint. You know, and the Meadowview area, sort of the Longmeadow area has been successful for us. You know, the engagement and the joint ventures that we've done with the Atterbury team at Waterfall have been really positive. What we've got at Lordsview, you know, we've slowly started chewing up that land as well. We're creating these park environments where we control a lot of the area.
We're very influential in homeowners or sort of property owners associations to ensure that commensurate security and maintenance and environment is kept. All this feeds to creating a really high caliber environment. It's industrial, but yet if you come to some of our parks, you'll be blown away by how beautiful they are and how well-kept they are. What does that do? It talks to an international client base that feels safe working in one of our buildings. As you can see, the consequence of all of this is that, you know, our land holding is now less than sort of between 2%-3% of our portfolio. The intention is that our portfolio is only gonna get bigger.
You know, if we were to be put ourselves in a position to have 100 hectares of land again at some stage, while it was probably 6% or 7% at the time, in the future, it will probably maintain and stay at 2%, 3%, or 4%. The intention is to constantly look for the right parcels of land and look, because that really is the future of our business. Without it, the ability for us to constantly bring brand-new product and maintain the longevity of leases and keep that blue-chip client in our base obviously will dissipate. On that note, I'm gonna hand over to Riaan, and he can take you through what happens every day.
Thank you, Andrea. I think this slide summarizes our impeccable property fundamentals, and it is these fundamentals that ensures the sustainability and predictability of our rental streams. I think also it illustrates the strength of our core business. Now, in these environments, inevitably, we're all getting phone calls inquiring about our share price and certain macroeconomic conditions. I think this shows that our business has never looked better. We've managed to grow our portfolio significantly over the past period, but with that growth, we've maintained and improved our WALE to a level which is unrivaled. Our vacancy level shows that our business partners are happy to do business with us, and when our leases do expire, they want to stay in our facilities.
We are continually attracting more and more A-grade tenants that are obviously in line with what we want in our portfolio to ensure the sustainability of the income stream. Fortunately, when we look at our pipeline, we are well-placed to continually improve these fundamentals, and we really think that bodes very well for the future. This slide talks to the portfolio split, and you'll see that we're very much still a South African-dominated business with 62% of our portfolio being SA- based. 53% are logistics, South African logistics assets. 4% is landholdings, and 4% is developments currently underway. The U.K. makes up 38%, with 34% being logistics properties and 4% being land. Now, a couple of years ago, we thought that the U.K . Portfolio will start dominating.
This has not happened primarily because of the strong growth of our South African portfolio. As Andrea showed you in the previous slide, we've been very, very successful in rolling out pre-let developments to blue-chip tenants, and we've also made some very important and strategic acquisitions over the past two years through the acquisition of the DSV campus, as well as the growth of our Shoprite portfolio. We can see when we look forward over the next two years that South African part of the portfolio will continue to grow very strongly. I mean, it's already in the market that we are concluding a 90,000 sq m agreement for a 90,000 sq m facility for Shoprite at Riverfields, and there are also many other deals that we'll be announcing over the next period.
The business is certainly very well-positioned to capitalize on the many opportunities that we have in both SA and the U.K. We are continually focusing on improving the quality and longevity of our income stream, and we do that simply through two methods. Firstly, by extending leases when they come up, and where we are leasing properties to tenants that doesn't meet our requirements to replace them with A-grade tenants. Then being very active through our development pipeline in concluding pre-let agreements because the benefit of a pre-let as opposed to a speculative development is that in a pre-let, you're working with the tenant, the tenant is investing significantly into the building, the building is being designed for that tenant, and it's normally a long-term view a tenant takes.
Obviously, it is in the interest of the tenant to get the certainty of a long-term lease. Also we are fortunate in the position that less than 10% of our leases are expiring over the next two years. Given the nature of our business, being a business based on single-tenanted buildings, we are able to meet regularly with our tenants, and we have time on our side to ensure that we understand whether the building suits the needs of the tenant, whether it may be too small, too big. Also we have some insight through these meetings on how that business is doing. That gives us the opportunities to be proactive and to
Even if a tenant may need to vacate the building, that we've got 1 year to 18 months notice to ensure that we can replace that tenant. Now, this is a new slide, and I think, you know, when you look back over the last 8 years, the market has supported us tremendously. We've raised more than ZAR 10 billion of fresh capital over the period, and that's enabled us to grow our business significantly. But we know that every analyst and every shareholder looks very carefully at how the capital is deployed. We've just taken the last 2 years to show you that we've deployed close to ZAR 11 billion into our business, and we've converted that allocation to product with an average lease profile of 16 years.
Now, that illustrates that we have kept our discipline in sticking to our very, very strict investment criteria and that in deploying this capital, we've continually improved our property fundamentals because it's very simple. The better the fundamentals, the better funding rates Warren and Leila can access from the debt market, the more participation we get in our DCM programs, and ultimately, the better our shareholders' return becomes. We always say how simple our business is, and actually that illustrates the simplicity of the business, and also the strength of where we at at the moment because of what we've done over the past eight years. Yes, the rental growth, I think in the pre-close, and also Andrea has strongly alluded to the fact that we are now seeing significant rental growth in the South African market, around 15%-20%.
We've concluded leases at over 80 ZAR a sq m in all three centers we operating in, Durban, Cape Town and Joburg. We've listed about eight reasons there as to why we're seeing the significant growth. I wanna just very briefly pause on three. Firstly, the availability of the type of facilities that we are developing is at an all-time low. Secondly, the ESG requirements have all of a sudden became very, very important for all our tenants. If you have 97.5% of A-grade tenants, mostly multinationals, South African-listed companies, the incentive schemes of the executive are being linked to ESG. Companies have got global targets on emission, on doing cleaner business. The facilities that we've created lends themselves to improving the ESG elements.
We've invested ZAR 3 million to ZAR 4 million over the past period in investigating, getting experts on board to ensure that we can improve the ESG credentials of our building. Obviously through COVID, not a lot of decisions were made. Companies sat on their hands because it was very difficult to predict where the world will be going, and we're now seeing that as a result of that, people are again focusing on the optimization of the supply chain. The result of all of this is that we see the growth and we see increasing demand for the products, and that's why we've been able to convert our land holdings into income-producing facilities during a very quick period.
I think that's probably one of the slides we're the most proud of. I mean, I think it illustrates the strength of our business. Thank you very much. Leila. People came to listen to you, huh?
Thank you very much. Hi, everybody. Riaan said our business is really simple. I'm going to take you through some really simple financial metrics. I mean, if we just start off, I think Andrea alluded to it right at the beginning. We've grown distribution per share by 4.1% over the prior comparable period. This is in line with our guidance, and we're very proud of a very stable distribution per share growth. Our NAV per share is up by 0.8%. Now, when we look at NAV per share, we're comparing this to the Feb 2022 results. Our NAV per share grew from ZAR 1,861 to ZAR 1,877, and we'll touch a little bit around the factors on what drove the NAV per share growth. We're maintaining a 100% DPS payout ratio.
Our LTV sits at 33%, which is conservative. It's ticked up slightly from February, but still very well within our target range. We had ZAR 1.4 billion in liquidity at 31 August. If I jump straight into the balance sheet, I'm going to touch on a few items. If we look at investment property, you'd see that investment property moved by about 3% from February to August. Now, it may seem like we didn't do an awful lot, but I think what you'll see later on when we touch on the pipeline slide, you'll see that a lot of the transactions we've been working on will actually come to fruition in the second half. You'll see a massive jump in that IP line in the second half. If you look at trading properties, you'll see that there was a slight decrease.
Now, trading properties is something which has become a feature on our balance sheet. It relates to the turnkey developments which we do in the U.K. The reason for the decrease is we sold the land at Hoyland Plot 2 to Arrow, and that just resulted in the decrease. Cash and cash equivalents. At Feb, we were sitting quite cash flush because if you recall, we did an equity raise just before the period end. We tried to manage our balance sheet as lean as possible, and that's why there was the decrease in cash and cash equivalents. It doesn't have any bearing on our liquidity position because we still have a significant amount of undrawn facilities. Held for sale. We don't have any assets held for sale at this point in time.
We disposed of the assets to Mabel, as Andrea alluded to at the beginning of the presentation. Then in other assets, there's one line item which sticks out in particular. Accounts receivable has increased quite dramatically. Again, that relates to the Arrow development, the turnkey development at Hoyland. During the construction phase, we are spending the money, and at the end of the construction, we'll receive all of that cash from them. That will happen in December 2022 or January 2023, definitely before we report year-end results. If we look at loans and borrowings, it's increased from ZAR 9 billion to ZAR 9.3 billion, and that's in line with our capital structure and how we fund the increase in investment property. Then just one other point right at the bottom, the non-controlling interests.
As you all know, we have the joint venture with Shoprite, we have the joint venture with EPPF, and you'll see that non-controlling interest line item has grown slightly as a result of these joint ventures. There was a note, a further note, the equity to shareholders. I thought we should just touch on that. During the six months, we've had no accelerated bookbuilds. The only increase relates to the DRIP, where there was some take up on our reinvestment program, as well as the shares which were issued in terms of our conditional share plan scheme. Not too much of an increase in that number for the period. If we touch on the distribution statement, again, I'm just going to touch on some highlights.
If you look at gross property-related income, that includes the revenue as well as income from foreign exchange derivatives. That includes cross-currency interest rate swaps, as well as the foreign exchange hedges over the period. Property-related expenses has grown in line with the growth in revenue. However, it has ticked up slightly as a percentage. If you look at the income statement, you'll see that. The reason for that increase is we have undertaken sustainability audits at our own cost. We've been speaking about these for quite a while, so that's sitting in there, which is a once off for all intents and purposes. We've also increased the frequency of our valuations. As you'll recall, we now value our properties externally every six months. Unfortunately, those services aren't very cheap, and that's now sitting in our property-related expenses as well.
Then there's some additional property costs, mainly once-off, which we think will be washed out or flushed out after this period. Our admin expenses are reasonably flat. As Andrea alluded to, we are opening an office in the U.K. We don't expect this to jump dramatically, but there may be a slight uptick as a result of increased administrative costs both in South Africa and the U.K. If you look at the net finance cost, that number is increasing. As you know, and we've been saying this for a long time, as we grow our portfolio and particularly we grow the percentage of income producing assets in our portfolio, we expect that number, that negative number, to keep increasing. You'll start seeing that net finance cost naturally ticks up over time.
The other income or loss, it's a small item, relates to some insurance recoveries, which we include in that line item. The antecedent dividend is really tiny. As I said, there weren't many share issues during the period, and that results in a small antecedent dividend. We then adjust for non-controlling interests. We arrive at our distributable earnings, and then we get to the number that everyone cares about the most, our distribution per share of ZAR 0.8158. My team has said to me that in every presentation I say we love our bridges, so I'm going to say it again. We love our bridges because it illustrates quite nicely how we arrive at our DPS growth.
If we just touch on a few key items, we are a property business, and fundamentally we believe that our underlying property should be delivering the majority of our DPS growth. If you look at it, we had SA like-for-like net property growth of 6.5%, which contributed 4.6% to our DPS growth. There was some portfolio activity during the period. There was the disposal of the assets to Mabel. There was also a development with a small rent- free, and that detracted 0.6% from our DPS growth. U.K. cash flow hedging, I think Warrie's done a phenomenal job. This is where we hedge our distributable earnings. If you remember, we have a progressive hedging policy. Matthew, you're nodding at me from the front.
We basically trade FECs over different buckets of our distributable earnings, and that worked out quite well for us. It added 1.2% to our DPS growth. Funding costs. Unfortunately, rates have moved out dramatically. Over the six months that we're looking at, rates have moved out by 150 basis points in South Africa and 125 basis points in the U.K.. Now, while we all are hedged, we aren't fully hedged, and as a result of the unhedged portion, those funding costs have reduced our DPS growth by 1.3%. There's some other items which takes us to our total DPS growth of 4.1% for the period. The LTV bridge, I'm going to touch on a few key items.
There were some developments during the period which we funded out of our debt facilities that increased the LTV ratio by 1.8%. There was the FX impact. I'll touch on that a little bit more in the NAV, but that also increased our LTV by 0.6%. The SA disposals. We spoke about the 6 assets which were disposed to Mabel. That reduced our LTV ratio slightly. The portfolio uplift reduced the LTV ratio slightly. There were some other items which pushed that up, and that takes us to our LTV ratio of 33.3% at period end. The NAV bridge. I think the most pleasing point on this whole slide is that for the first time, we're starting to see some SA portfolio uplifts.
What we saw is that on a like-for-like basis, the SA portfolio was up, and that contributed ZAR 0.32 to our NAV per share. U.K. developments. This block refers only to the Hermes uplift. If you recall, we completed this development during the period, and that's the fair value uplift on Hermes. And there are some other options which we had to fair value as a result of our U.K. restructuring, very small, that also sits in that line item. On a like for like basis, the U.K. portfolio was down. Now Andrea touched on it, where there's some pressure on U.K. valuations. What we found is that during the period, on a like for like basis across the U.K., prime logistics yields moved out by 50 basis points.
In our portfolio, some of that was offset, however, not entirely, and that resulted in a 26% decrease in our NAV per share. The net FX impact, if you think about our business, we have U.K. assets, we then have in-country debt, we have some cross-currency swaps, which adds to the synthetic gearing. Overall, 40%-50% of our U.K. business is still relatively unhedged. When the currency, when the rand strengthens, as it did over the period, that will result in an decrease in the NAV. Over the period, that was a 26% decrease in NAV per share. There's some other items which take us to 1,877. I'm not gonna touch on valuations too much because I think that we've done an awful amount of work in terms of making sure that our valuations are as transparent as possible.
I just want to reiterate that 100% of our portfolio is valued externally, both in South Africa and the U.K. at February and August every single year. What we do see, and what I do want to point out, is that if you look at the SA valuation and you look at the average rand per sq m, it sits at ZAR 12,300 per sq m. That's probably at or below replacement cost. If you were just to do an overall reasonability test, I think it bodes well where our valuations are sitting right now. In the U.K., what's always interesting for us is that if you look at a value, rand per sq m value in the U.K., it's more than 3 x that of South Africa.
When we're expanding and growing in the U.K., you can see the clear shift on a rand per sq m basis. Okay, I thought that it was interesting and very pertinent to just touch on how we're managing a very challenging macroeconomic environment. I'm not gonna touch on all of it, but I do want to highlight a few key areas. There's an undoubted increase in the cost of funding. Rates are moving out on a daily basis. We don't know where base rates are going to settle, and for us, it's very important to stick to our treasury policy. 86% of our drawn facilities are currently hedged, and we are looking for opportune moments to increase that hedging where it makes sense.
As the bankers in the room know, it's incredibly expensive right now to increase that hedging, but we are looking to take advantage of opportune moments as well as other strategies. Historically, we'd look at interest rate swaps only. Now we're looking at caps and other options and strategies which make more sense for us. A very keen focus on just managing that cost of debt. From a liquidity point of view, we hold significant funds in our cash reserves and buffers and undrawn facilities, and then funding the pipeline. I don't think it's a secret that equity raises are off the table right now, given where our share price is. We have to think about alternative ways to fund our pipeline.
We're actively looking at our entire portfolio, identifying areas for disposal, whether it be in the SA portfolio or the U.K. portfolio, and alternative strategies to fund the pipeline. Economic and valuation uncertainty, we don't know where valuations are going to settle, particularly in the U.K. What we do on almost a weekly basis is just stress test our U.K. valuations, make sure that we're within ranges for covenant perspectives, which is not a problem for us at all, but also just to test where our LTVs will go given various scenarios. For all intents and purposes, we aren't concerned about where those will end up. From a capital allocation point of view, Riaan, and I'm going to go back to this because Riaan said our business is reasonably simple. We have to be incredibly mindful of how we allocate capital.
I think that's the single most important thing for us to do right now. When the cost of debt and equity moves, we have to be very mindful about how we price future developments and how we make sure that those still meet our minimum hurdle rates. At the moment, all developments going forward are assessed based on what we expect our cost of capital to be, given the very challenging macroeconomic environment we face. Okay, treasury management. I'm skipping the first slide because I want to point out a couple of highlights. Laurie's looking at me because I've skipped over that slide. I think very importantly, what's important to us firstly is that we're still very comfortable with where our LTV is. Even though it's moved from 31.5 to 33.3, we're very comfortable with where it's at.
We still feel that we have a fair room to go. We're comfortable within the 30%-40% band, and 33.3% for us is incredibly manageable, and we think that even given our pipeline, we're very comfortable with where that will go. The other point that I just wanted to draw your attention to is that if you look at the ZAR all-in cost of debt, and you look at how it's moved. It's moved from 7.25% - 7.78%. It's moved by about 50 basis points in South Africa, despite an increase of 150 basis points in the base rate. I think we're doing an incredible job in terms of just mitigating the increase in the cost of debt, and the same thing for the GBP all-in cost of debt.
Again, I think it was a 25 pip movement, in a period where there was a 125 pip increase in the Bank of England base rate. Then just in terms of the percentage of total debt hedged, I did allude to it earlier, 86.2% is hedged, and the average term of hedges is 2.4 years. I have to note that this is before we concluded the Aviva facility. That's actually something which I should have spoken about. Just, we managed to conclude an Aviva facility on the 31st of August. Now, the reason that this is important is because not only did we upsize a significant U.K. funding facility, we upsized by about GBP 40 million. We also managed to secure the facility at an all-in rate of under 4%.
Now, anyone who's been watching U.K. Gilts, because this facility was linked to U.K. Gilts, it's a 10-year fixed facility. Anyone who's been watching U.K. Gilts understands that that is an enormous feat for us. We'd love to say that it was all brilliant planning, but I think it was brilliant planning and a little bit of luck. We're very comfortable with where we've managed to lock in that facility, and we think that it will take us through an incredibly turbulent time in the U.K., where we don't have to think about repricing. It's locked in, and we have that sitting there for 10 years now. Okay. Quickly from an ESG perspective, Andrea said that ESG is ingrained in the very fiber of what we do. I think it has to be as corporate citizens.
I think each and every one of us sitting here has heard ESG every day for the last year. What we're incredibly proud of is that if you look at how far we've come over a reasonably short period of time. Now, to illustrate, that first point says that we've generated 8.3 MW of solar energy or renewable energy in the portfolio in the first six months. We've added 5 new solar plants to our portfolio in the last six months. We started off the period with 8 MW. We've now added 5 more, and this is mainly on existing facilities, some new facilities. This is a 36% increase in the amount of solar that we're generating over the first six months. In no way is this slowing down. In fact, it's speeding up.
What Riaan and the team do is, on a regular basis, go to engage with tenants to understand where this is feasible, where they are, where ESG is an imperative for them, and we try to come up with solutions that are mutually beneficial to both us and to the tenant. I think that where we're going in terms of renewable energy generated is phenomenal. As a side note, we managed to reduce our carbon emissions or to avoid carbon emissions of 3,189 tons of carbon. All of our new builds, we've said this time and time again, all of our new builds are either EDGE certified or BREEAM. I think a new development is that the majority of our buildings are actually advanced EDGE, which instead of being 20% more efficient, it's now 40% more efficient.
We are trying to push the envelope. Social is very important to us, and the social element of ESG often gets overlooked. For us, 71% of our SMMEs in our AmpCore incubation program is female owned or driven. For us, that's incredibly important in terms of narrowing the gender gap, but as well as making true and meaningful contributions to empowerment and upliftment in the country. We had a sustainability-linked loan with Standard Bank, as you would recall. One of those was to increase our ESD spend with SMMEs. We've managed to blow that out of the water, and we've increased our spend by 122%. We've met all of our sustainability link targets according to that facility, but I thought that this was an important one to highlight.
I spoke about this in the pre-close, so I'm not gonna speak about it too much more, but we sort of wanted to illustrate that we are sitting with our tenants, engaging with them, understanding what their requirements are, and really offering them a number of solutions when it comes to renewable energy. I think when we have one-on-ones or post this presentation, we can chat about this a lot more. For now, I'm gonna hand over to Ashley and Graham.
Hey, everybody, welcome from the U.K. I hope you can all hear us loud and clear. Look, thank you, Laila. We're just gonna talk through a few slides, a bit of an update on some of the sort of core assets and the portfolio. Ashley's gonna work through Hoyland first of all, but before we sort of talk about the scheme at Hoyland, I thought I'd just sort of provide a bit of U.K. perspective on where we see the market at the moment. Wynand and Andrea sort of touched on a few sort of points this morning. L ook, the clear sort of issue, if you like, in the market at the moment is where the capital markets are.
The last couple of months have clearly been, you know, challenging that the capital markets are in a bit of turmoil. You know, the big sort of Western economies are clearly trying to combat inflation, and that's sort of leading to interest rate rises, which is causing the debt buyers to have increased costs and look closely at pricing. You know, there's clearly some uncertainty around the capital markets at the moment. I think Laila touched earlier that that's probably led to a sort of 50 basis points decrease or increase in yields, which I would, you know, tend to agree with. That's really only one part of the story.
You know, yes, there is a price correction going on at the moment and there's a bit of uncertainty in the capital markets. I think it's important perhaps just to sort of reinforce the occupier side. You know, we have seen no downturn at all in demand for logistics space. Probably quite conversely, we're actually still seeing strong demand and continued take-up, and there's probably a number of drivers for that. I think the U.K. economy, while possibly heading for a recession, although there's some data suggesting that we might avoid that, it is still performing reasonably well and internet sales are continuing to sort of drive demand. As Wynand sort of touched on earlier, you know, that is only one aspect of the U.K. market.
The market is a lot broader and stronger than that, and we're continuing to see a lot of onshoring. There's a lot of occupiers who have sort of space abroad, whether it's China issues, whether it's Ukraine, whether it's Brexit, that those sort of issues are leading to sort of increased levels of onshoring in the U.K. I would think if you then look at a number of sort of big global sort of customers that we have a good relationship with, there's been a lot of talk in the press over the last 12 months about where Amazon are. You know, we're quite close to Amazon. We talk to them regularly. I believe they're close to starting to look at value again and talking to us about deliveries through 2025 and beyond.
Then I was with DHL just yesterday, who still have a mandate to replace their aging portfolio in the U.K. with more sustainable buildings as well as attracting new customers. They were telling us only yesterday that they believe, you know, that they're probably looking at take-up levels of 2 million to 3 million sq ft per annum, and that's just one major customer. You know, I think the U.K. market is really sort of balanced in two halves. Yes, there's a bit of uncertainty around the capital markets, but the occupier side is still very strong. I think then if you add into the mix as well that the planning system in the U.K. continues to be challenging and is slow, and that leads to a sort of very constrained supply of land.
I think the spec development sector has started to sort of slow up so that there's not a lot of spec development sort of coming through. A number of spec schemes have been put on hold. If you are able to advance sites through the planning process, put your infrastructure in, and you're ready to talk to the market, ready to talk to customers, you know, we believe that you're still in a very strong place. I'll talk a bit at the end of the presentation about our portfolio because that's important as well about pricing. I'll refer to that at the end of the presentation.
Perhaps if we just go through some of the sort of key sites, and I think the first one is Hoyland, and I'll hand over to Ashley to talk through that.
Okay, thank you. Morning, everybody. I think we'll have a look at the first slide. A picture of the Hoyland Evri or Hermes, as it has now rebranded to Evri. This building, some of you may have seen this on the U.K. visit. It's 31,000 sq m. This is the third distribution hub that they have, that Hermes, Evri have put into their network. This one is just in Hoyland, which is just South of Barnsley in the North of England, complementing two others, of which we built the one in Rugby, which is their Midlands center. This is obviously critical to the Evri supply chain. It's going to be. They're fully fitted out there.
They're sort of mobilizing it now and it should be fully operational before Christmas. If you just go to the next page or slide and have a look at some of the metrics. This reached practical completion in July. It'll be fully operational at the end of the year. To give you a sense of scale, it does 1.1 million parcels a day, and those parcels can be anything from a bottle of perfume up to, you know, these things like sofas and beds that they'll actually push through this facility as well.
Equites has got the benefit of a 20-year lease with 5-year rental increases, and on completion it had a capital value of GBP 107 million, which gave a valuation uplift of 43%, taking into account its development profit that Equites had, as well as giving it a yield on cost of 5.1% and a net initial yield on completion of 3.3%. What was important is we think this is already significantly reversionary in the market, so the rents are really moving on, back to Graham's point about supply and demand. The implied equivalent yield we think is currently around 4.5%, looking at current rents in Barnsley.
As you can see on the plan there's actually three schemes. The other two are with Arrow Capital Partners. If we just turn to the next slide. We've got a CGI of what the development look like completed. You've got the Evri building at the back there, and then in the foreground we've got the two sheds that are being built for Arrow Capital Partners. If you just turn. All the roads that you can see there, they've been put in as well as part of the infrastructure package to bring connectivity to the motorway, which you can sort of see running in the background along to the back of the Evri unit. If we just turn to the next page.
I'm afraid we took these photographs on a rather dull day in the north of England, but it gives you a sense of those buildings going up. You can sort of see the one is following behind the other with the steel cladding on the back one and just the steel units on the front one. Those were taken about a month ago, so that unit's going to be completed by the end of the year. We should, as Laila said earlier, be getting our profit and cash delivering ZAR 5 million of profit and ZAR 20 million of net cash to Equites, probably sort of flowing through in January before year-end. Those units just from our perspective and Equites perspective are fully de-risked now.
Those units have been sold, so whilst we are funding the development, there's no risk of tenancy or occupation of leases. There's a balancing payment on completion, which will come into the group and the occupation risk and getting tenants lies with the funding partner, Arrow. Okay, turning to the next slide. This is Basingstoke, which probably won't be, which is familiar to people in the room. We've talked about this for a while, going back to the history of planning and checkered history of planning. This is three units. If we sort of turn to the master plan on the next page. We've got these effectively forward sold as a land sale to Lidl.
Again, Arrow Partners are under contract to purchase Plots 2 and 3. The planning here is that it went forward i n May this year with an officer's recommendation for approval, and such is the politics of planning in the U.K. that actually it frustratingly got turned down on a narrow technical point regarding visual impact and landscaping, both of which we think we can overcome at appeal. We are sort of going for a technical review with the Planning Inspectorate. That hearing will be held throughout October with a decision expected in early December. On or around the sixth of December, we should get a decision on planning here. As I said, the land for Lidl is a land sale. We have to put the infrastructure in before we get payment, but that is a sale that's contracted.
The Plots 2 and 3, again, that, you know, is subject to an announcement by Equites on the SENS announcement last night. There's a dispute. They are under contract, but there's a dispute that a formal nullification provision was not met, and they're challenging that contract. We disagree with that and we've agreed, both parties have agreed to enter into an arbitration process to understand the outcome of that. I won't say any more about that because obviously it's commercially sensitive, but I'm sure we can, you know, Andrea will discuss that with those people that need to. So that's Basingstoke. Hopefully we'll get good news on that at the end of the year and we'll be building that and progressing that through next year.
I should have said at the start, we own 1/3 of the land there and 2/3 is under option. We are exposed because we've acquired 1/3 of the site and then 2/3 is fully under option.
Okay, thanks, Ash. If we turn to the next slide, there's a CGI of our scheme at Newport Pagnell, which is Milton Keynes. You can see the M1 motorway there to the left-hand side of the scheme. Hopefully, you guys are familiar with the M1, but it's the main North-South arterial route that links the North and the Southeast and London. Prime site.
You know, this is a scheme we've been working on for a while and we successfully took it through planning in the summer, got a positive outcome at committee, and we're just waiting for the judicial review period to expire, which expires in about the middle of November. If we actually just turn to the next slide, there's a few sort of bullet points and a site plan of the scheme that we got consent for. So we're actually, as I say, we got outline permission. We're now working through what we call reserved matters in the U.K. The scheme has outline which deals with the principle of development and the quantum of development.
What we're now working through is the reserved matters, which is things like the color of the cladding on the building, the sort of level of landscaping and sort of minor matters like that. We're currently working through those with the officers of Milton Keynes City Council. We have significant interest in this scheme. We're currently discussing terms with a number of parties. You know, we firmly believe that towards the end of this year we will be able to announce a deal here. We have a lot of interest here and there's a number of options that we can look at and we're just exploring those with our partners in South Africa.
The capital value there, we believe is in the order of GBP 200 million, which, you know, is a significant scheme for us in the U.K. Yeah, and look, the last bullet point there is we have a lot of interest, as I say, and we will work through with the Equites team, you know, what we believe is the right deal for the joint venture and also for, you know, the Equites shareholder base. We're very excited about Newport Pagnell. If we could turn to the next slide, please. You probably would've seen this slide before. It sort of sets out the U.K. portfolio, the 13 sites that we sort of have been working on for a while now.
You know, the sort of three bullet points on the left there just highlight 1.4 million square meters of floor space, 50 million sq ft with a gross development value in the order of GBP 3 billion. So a sizable portfolio. You know, we're the team are sort of making really good progress on a number of opportunities. Yeah, I think a few sort of highlights without going through every single scheme that's sort of listed there. We believe that the scheme at Thrapston will go to committee in quarter one next year with an officer recommendation for approval. It's well known now because it's been part of the planning process that we have DHL lined up for quite a sizable pre-let of about 800,000 sq ft.
We're continuing to push sort of discussions with them and agree commercial terms, which we're just sort of reviewing at the moment. We're waiting really for planning to come through and then we will then know with certainty the timing of the scheme and what the build costs will be. We haven't agreed commercial terms with them yet because we don't want to, but they are supporting the planning process and very much want this building as soon as we can deliver it. That is a really exciting opportunity. All the other schemes, you know, we are continuing to progress through the sort of planning process. We know we have quite strong interest in a number of schemes.
You know, at Peterborough we have two occupiers wanting to come in and support the planning process there. I think I've touched on previously when I was out in South Africa about the scheme at Egham, which is actually gonna be a data center opportunity. We've now selected a party there. Probably towards the end of the year we'll be looking to announce a deal there, which is sort of concluding commercial terms with that party and we'll then sort of take forward a planning application next year with them supporting us. You know, we're still very pleased with where we are with that portfolio. What I touched on at the start of my sort of slides was just where we are with values and where we are with the market.
I think it's important to understand that, you know, most of those sites are held under what we call options. If there is movement in the capital markets that affects land values, then we will draw down the land at the time we have planning. You know, if we're hopeful that we can take some of these sites forward through next year, we will be drawing those sites down, you know, off the current market values, which, you know, are sort of 30% perhaps lower than where they were at the beginning of the year. That's quite an important point. I think what's also important is, you know, we firmly believe that there's gonna be a lot of rental growth in the U.K. market.
You know, we've seen strong rental growth, sort of 10%-15% over the last 12 months. We believe construction costs will probably level off. You know, the capital markets are what they are, and there's been a bit of movements in those. The only sort of piece in our arsenal that we have some control over, if you like, is rents. Everybody we speak to is also of the opinion that we're gonna continue to see strong rental growth. That really comes down to the supply and demand dynamics as well, that you know, there's still strong demand, not a lot of supply. We believe we can really move those rents on. We believe that portfolio is in good shape.
I think when we go through 2023, if we can get through announcing deals on Newport Pagnell, hopefully resolve and overcome planning at Basingstoke, rotate capital out of those opportunities, we believe there will be significant new opportunities through 2023. We also believe that the state of the current market will mean that those opportunities will probably be low capital intensive opportunities. By that, what I mean is we're not having to buy land and take significant planning risks. We can control that via options again, where you've got a fairly low capital entry to control that option, and then you take it through the planning process and draw down the land when you have planning. You know, we believe there will be further opportunities now that a number of overseas entrants have perhaps paused.
We're excited about the current portfolio and the opportunities that we see in front of us. That probably concludes the U.K. presentation. I'll hand back to the team in South Africa.
Graham, that was very insightful and obviously from our point of view, I mean, we were with Graham and Ashley and the rest of the team a couple of weeks ago and, you know, for all its challenges, we still remain massively positive U.K.. We just see the supply side really coming towards us and assisting us in growing our business. Let's just run through a final slide effectively in terms of what are the prospects for us. As you can see, there's significant developments coming through the process. As I said earlier, in terms of, sorry, Parow spec and Meadowview site 14 spec, those two are currently in full-blown negotiation. The Jetpark number 6, that was a spec.
We've signed a deal with a Spanish company called Normet, which is great. Cargo Compass is complete. TFG's extension is complete. Obviously the TFG extension on that particular facility is to accommodate also a lot of their furniture business which will be going into that facility. The Riverfields facility will be looking to accommodate a lot of movement of their inventory holding away from Cape Town and basically bringing it to Gauteng. That's a function of their business probably being 70% in the greater Gauteng region.
They were historically warehousing sort of 80% in the Cape, which occasioned a massive supply chain imbalance, so the time it took for an order to be fulfilled in Joburg from Cape Town was becoming too long, and obviously, the cost of it was just going through the roof with where diesel prices are going. That's interesting. I think the one that we sort of put in here, and Riaan alluded to it in his presentation, that there's a new 90,000-square-meter facility coming in Joburg, that's what we call Shoprite Riverfields. The commercial terms of that deal are basically have been agreed. We're just trying to finalize the last bit of dotting i's and crossing t's.
It's not completely signed off yet and hence this is the first instance in which we are sort of putting it out there specifically if you like. But again, it's a testament to Shoprite's trust in us, Shoprite wanting to deal with us. The difference with this one is that because we control the land in Riverfields, we are retaining 100% ownership of this one. It's not going into our joint venture platform. Again, once signed, hopefully it'll be a 20-year lease with the same sort of metrics as the other ones. We've got Canelands and Wells Estate. I think we've spoken about those extensively.
The other transaction that we did, it was actually an existing building which has let to Motus, which we've actually bought back from them. Strangely enough, that was a building that Motus bought from us was in the original Intaprop portfolio transaction that we did in 2015. They had an option to buy, they decided to exercise it, and so we sold it to them and we've actually bought it back, I think, 5 years later at the same price we sold it to them 5 years ago. Great building, great location. We control the whole node and hence it was important for us to get ownership for that reason. In the U.K., obviously Hoyland's Plot 2, you saw the photographs. PC date is set for the 17th of December.
In terms of, you know, my latest construction program that I've received, we're still all on target, so that's exciting there. Obviously, Basingstoke Plot 1 and Basingstoke Plot 2 and 3, Plot 1 being the Lidl transaction. You know, should we get the favorable outcome in December on the planning, and we're very hopeful that we will get that, then we will kick into gear in the new year. Post that, there will be a six-week judicial review period, which will take us probably till the end of January, and then we will kick off everything effectively from February. In terms of Plot 2 and 3 we did put out a notice last night in terms of the cancellation note that we got from Arrow.
Obviously, we fundamentally disagree with the cancellation note, and, you know, we will go through a process now in arbitration to try and resolve it. I'm fairly confident that some reasonable heads will come to prevail in that process. I think to say more than that at this stage would probably be inappropriate, but notwithstanding that, I suppose your worst-case scenario is that if for whatever reason the cancellation note was upheld, we would be left with 18.7 acres of land in a prime spot on the M3 on the junction, which will be extremely valuable and, you know, life does go on. The sun will come up tomorrow morning, and then we will deal with it appropriately. We are still fairly confident that it will resolve itself.
We'll leave it at that. In terms of strategy and outlook, you know, I mean, I think the medium-term outlook remains massively promising. As Laila alluded to, capital markets in the short term are probably closed. However, we are, as a management team, exploring multiple opportunities in terms of finding the necessary equity to fulfill our ambition both in the U.K. and in SA. We have got multiple sort of prongs of attack in that regard. We will invariably find the right solution which will allow us to fulfill that ambition, but secondly, also to do it in a way that, you know, we what we don't wanna do is destroy existing shareholder value. That I think is very important.
The vacancy rates obviously are at all-time low, so the ability to put product into the market remains absolutely critical at this stage, and as they say, make hay while the sun shines. You know, it's not often that you get to say this. You know, we always like to sort of kick ourselves, you know, as other people being better than us. You know, I stand here in front of you today and I'm a lot more confident in terms of the sort of the medium-term outlook of our SA business than I would have been maybe two or three years ago. I think the U.K. has got its challenges. Invariably, it's a developed economy. It's a very powerful economy. It's politically a very powerful country.
Invariably, they will sort it out and they will come out the other end, I'm sure. Where we are as South Africa at the moment, I mean, the energy crisis, I think, has pushed the boundary in terms of opening up that energy world to the private sector. You know, South Africans are a resolute bunch and I think some of the clever ideas that are coming through the system at the moment in terms of how we can bridge that gap and create a platform of energy that will allow South Africa to reach its potential and create the jobs necessary for its population that doesn't have jobs at the moment.
I think everything that we're seeing, everything that we're reading, everything that we're interacting would talk to a much more positive outlook, which obviously is really reassuring for us. The U.K. business obviously affords us this ability to create capital as well. You know, Basingstoke affords capital. I mean, Newport Pagnell, you know, we put the slide there. We still haven't decided in terms of the exact strategy on that. Is that a hold or is it a sell? The reality is that there is merits to both. But we will make the appropriate decision at the appropriate time.
Invariably, whether we hold or we sell or we do it, you know, we do a forward funding with someone that wants to own the finished product, depending on how that evolves, invariably, Equites will still get either a notional gain like we did from the Evri deal with that significant uplift, or we'll get a cash remuneration on the back of placing it with a third party if that is what we feel is the best solution for our business. Obviously, on the total return, we obviously have been pushing that quite hard in the last couple of years. We are very big believers in NAV as an integral part of our business.
The unfortunate reality is where we are today. I think it would be probably not very clever for us to give you a reassurance of the guidance that we sort of we had or the outlook that we'd given on there. The U.K. market at the moment has obviously got a lot of vagaries in it. In terms of valuations, yes, we've lost 50 basis points. The situation in the U.K. is very strange in as much as the valuers, when they come to value, they value on the basis of a willing buyer, willing seller. What we may get in the short term in the U.K. is some forced sales because of some redemption issues that some of the funds may have.
If we look at 2008 as an example, in 2008, the loss of valuations took probably about 18 months to actually come through the system. The system, basically, it doesn't give you all the upside of the valuation on the way up, but at the same time, it doesn't take it all the way away from you immediately on the way down. It, the system allows for a little bit of a smoothing. We're not anticipating U.K. valuations to fall off a cliff because the system won't allow that to actually happen. Will we see some distressed sales at values that might catch the eye? I think probably yes.
However, I also do think that the top end of the market, which is where we are playing, will probably settle at somewhere between 4%-4.5% in time. The quantum of money that still wants to be in the sector is still there. Everybody we spoke to two weeks ago in the U.K. was, "We just wanna see what happens for now, but we're there." We're seeing a lot of the Asian capital coming back to the U.K. market as a function of this. We're seeing a lot of the sovereign wealth money coming in, and we're seeing a lot of Middle Eastern money coming back into the market.
A lot of the views there are that they are coming in as equity buyers, 100% equity buyers with a view to then levering the product at some stage in the future when the capital markets permit it at rates that make sense. I suppose the beauty of the U.K. market is that it's got these deep pools of capital that are always looking for opportunities and different pools come at different times with different metrics, different understandings. Us having the presence that we have and the platform that we have in the U.K., we are starting to get noticed by the relevant platforms, if you like, and starting those engagements. That's a very positive thing from us.
While the South African portfolio, we believe, will continue to show some growth as we go through the next 6-12 months. I think we're gonna see the few leases that we are renewing will be renewed at very good levels, and I think it'll give the South African valuers a lot more comfort to start allowing for those valuations to come through.
As I said earlier, we are maintaining our 4%-6% guidance for the full year, and everything seems to be very much on track, you know, from closing out financial positions with various hedgings, but also with the strategy of making sure that we also are looking at our portfolio now, especially in SA, in terms of looking at the non-core assets. While we always thought we would do that in the next sort of 18-24 months, we've probably got an opportunity at the moment with where valuations are going up.
We're achieving really strong rental growth in terms of the renewals, and as we place those into the market, we'd like to think that we will get really good values for those assets. I think that really sums it up. We're gonna take some questions. If there are questions also for the U.K. partners, they're still online and obviously can take those. Mel's got the microphone. If you do have a question, Mel, I think Kundayi in the front has got his hand up.
Thanks, man. Thanks for the results, guys. Just three quick questions focusing on the South African portfolio. The first one may be for Riaan. I think you mentioned that new rents you've signed in the three regions have been around ZAR 80 per sq m. It's just a question around what the expiry rents were on those particular leases. The second question is around just the average rent per square on the South African portfolio, broadly speaking. You can give a range. And the last question may be for you, Andrea, is just around given the rising costs of debt locally, well, internationally, but locally, and also building costs, what do you think happens to development yields going forward?
You wanna take the first one on the rentals?
Just on the rentals, obviously there are three types of renewals. When you have a building that has been let to a tenant over a 10-year period and you get to the end of the period, you will see some reversion because the last four, five years there hasn't been the strongest of growth. On the longer-term leases, we've seen small reversions, but any lease which were renewed off a 5-year basis or newly entered into, there clearly we're seeing very little resistance from tenants when you talk between ZAR 80 to ZAR 90 because of the lack of the availability and the other elements I've mentioned. On average, we see rentals settle between ZAR 80 to ZAR 90.
Obviously, some of the newer stuff that will be coming online next year is even at higher rentals where it's singl- phase buildings and not specialized. We're really seeing that the market is starting to accept those type of levels of rent.
On the yields, Andrea? Sorry, repeat the second question.
The second question was around the average rent per square on the portfolio in general given where the market is, the South African portfolio.
It's difficult for us to give you that because obviously we have single phase, we've got the cross dock, and then we've got a couple of specialist buildings. Let's exclude the specialist buildings. On the single phase, I think your average is probably sitting at the moment below 80% as an average. You know that the single phase is probably the one where we will, I don't think we'll experience any reversion on renewal, especially if this level of growth sort of continues, which we don't see it sort of slowing down in the sort of medium term because of availability factors. On the cross dock facilities, your average rental is probably sitting in the high 90%.
Y ou're doing new deals on cross- dock probably over ZAR 100 a square because obviously, you know, with 25% site cover the land is not free and you do have to cover it with concrete and put some stormwater capacity on that external hardstand. Your GLA that you can apportion those costs to is obviously smaller and hence that. O n the reversion thing, and I think that's what you're really alluding to in terms of the size of our portfolio, the escalation that we've got fixed in, and what that will occasion in terms of increase in rental like for like year on year.
The one thing is rental reversions are certainly not something that keep any of the management team up at night. That I can assure you. There will be some from time to time, but as a product of the whole portfolio, it'll be very, very small. In terms of the development and the cost of funding, the challenge, obviously, especially with the blue-chip clients, is that they're looking to keep their starting rentals as low as possible. So obviously, we are trying to push those as a function of that. I think we'll probably have more success on maybe not pushing the rental, but maybe pushing the escalation clause. From an Equites perspective, I think the escalation clause probably more important. Again, it's a function of the size of our portfolio.
Even if we start collecting rent from a client, we're slightly maybe losing money in that first year. If we've got 10 or 15 or 20 years of a guaranteed escalation at a level which was better than what we were achieving before, what that does is I suppose that loss is bedded into the existing portfolio, that escalation becomes the kicker for us over time. You know, as a REIT, I think the escalation clause is probably fundamentally important. Obviously, you're not gonna be doing deals at 2% yield. I mean, but fundamentally, the escalation clause is really important. Our focus is if you don't wanna give us more rent, well, then you must give us more escalation.
Like every deal is a negotiation and Riaan and his team are obviously very adept at. Also, you know, sometimes you sit there and you argue with someone for 25 basis points or 50 basis points on an escalation clause. When you actually show them what the material quantum is on an annual basis, all of a sudden it gets people to calm down a little bit, you know. There's a perception that it's crazy, and obviously, probably on a compounded basis over 20 years, it probably can become crazy. In the short term, there are ways and means to getting there, but remains positive.
Could I ask about development yields as a result of?
Yeah, that's what I was talking about d evelopment yields are not going. The escalation is what we're fighting for.
Hey, guys. One question, right? Obviously, it's probably a bit more related to the U.K. side of things because you're seeing changes in the interest rates there. Are you guys expecting to renew any of your cross-currency swaps in the next three years? Just kind of worried about what that might do to your net finance costs. Thank you.
Thank you. W hat you see, and especially in 1H, we didn't taper off those cross-currency swaps because we secured the Aviva facility right at the end of the period. That was on 31 August, and we expect that Aviva facility to then replace some of those cross-currency swaps. Our strategy doesn't change. Yes, the interest rate differential may not be as wide as it was. That's why we've always said that we favor in-country funding instead of the cross-currency swaps. For us, it is really just building up the U.K. business as quickly as possible so that we can separate the jurisdictions where we raise finance and really match the in-country finance with the in-country assets as far as possible.
As quickly as we can do that, we're trying to really roll it off and to just make finance match the assets in those respective jurisdictions.
You guys planning on actually removing those cross-currency swaps?
I wouldn't say removing. They still have a space. They're still for as long as we're using South African capital to fund some of the U.K. assets, it has a space. But again, as that starts rolling off and as we can use more in-country funding, we expect that to reduce. Okay.
Hi, guys. Thanks for the presentation. Maybe another one on the U.K. business and the announcement last night. The SENS referred to the Arrugas submitting a revised proposal. Can you give us a sense of how far the revised proposal was relative to the original terms?
John, I think that would be inappropriate for us to put that in the public domain, so.
Yeah. I think let's just say we didn't accept it. Let's leave it at that. T he point I made, the underlying piece of land will remain a very valuable piece of land. You know, we don't need to do a deal or have a gun put to our head to do a deal. We will do the right deal for Equites. You know, we did an exceptional deal, and there is a level of opportunism that's out there at the moment. We believe that we have grounds to be successful in the arbitration. At the same time, one needs to be sensible through a process. That's really. Any other questions there?
There's one online question.
Take it.
I'm gonna ask it, Wynand can answer it. Nazim is just asking, on the 43 hectares of land by the end of the year, what would this translate into capitalized interest, and what is the annual run rate to reduce converting to income, given our positive view on net new demand? Just to paint some context on the capitalized interest first, I think that part of the reason we're showing that slide is to illustrate how quickly we are utilizing land. I think Andrea addressed that very, you know, quite comprehensively when he spoke about it. We wouldn't have been able to enact those developments if we didn't hold the land. By dropping off to the level where we expect it to get to Wynand, you can just touch on, yeah.
T he bottom line is that we've demonstrated how we've deutilized our land holdings. Nazim, to answer your question, I mean, 45 hectares of land, let's say, or whatever that movement is, it's an estimate, but it will be, let's say, ZAR 500 million to ZAR 600 million of land, and we capitalize it borrowing, let's say, borrowing rates at 8.5%-9%. That will give you your number. Also new deal flow will come through, and that will start reducing. It's a bit of a moving target. I think what we're trying to demonstrate is we are building a track record of essentially converting land into development opportunities, securing long-term leases.
It's just becoming a smaller portion of our distributable earnings over time.
Agreed. As we add, we're adding the Shoprite assets TFG, we're adding all of these new income-producing properties that just becomes a smaller proportion of the total income generated. It becomes a smaller number in proportion. Andrea, just in terms of the run rate, do you have a view on?
Well, I mean, realistically speaking, I think you could take an average of somewhere between 2 and 3 years. There'll be instances where a piece of land comes on and it's gone within 2 or 3 months, and there may be some that may take, you know, maybe 4 maybe. I mean, I don't think we hold on to land, sort of. I think the most we've held on to a piece of land before we've sort of executed it was probably about 5 years.
Again, it's been the exception rather than the rule. I'd say 2 or 3 years. I think current market conditions. I mean, you know, there is also a strong possibility that we get to sort of March, April next year, and based on the new business that we are currently talking about, which is still very early stages. You know, if we even execute on 50% of what we're talking to at the moment, we potentially might not have any land by sort of March, April next year. You know, that's really where we are at the moment. You know, we are actively looking. At the same time, the big challenge, especially up here, is water, electricity, sewage.
If you can get those three to your site, you've done well.
Yeah. Last question from online.
They're just asking for what our expectations are on rental growth in South Africa and the U.K. in the next 2-3 years. It's from Ridwaan Loonat at Nedbank.
Okay. I mean, again, it's personal opinion. I mean, I don't see the supply side in the U.K. being resolved in any time in the next 3 years, at least. Probably, you know, that is, you know, supply. I mean, demand really needs to almost go to zero. I mean, we had a first half of the year with 27 million sq ft of take-up, the highest ever. The 55 million that was taken up last year is probably, that record's gonna probably be broken this year. So the take-up ain't stopping, but the new product that's coming online is certainly reducing and has reduced dramatically this year compared to last. You've got that imbalance and, you know, to put a building up, you can't just snap your fingers and it's up tomorrow morning. It takes time.
that imbalance is going to be there for, I think, for the foreseeable future. As a consequence, you know, you're gonna end up, I think, being in an auction space with a lot of people. Even if the U.K. goes into deep recession, you know, we don't foresee the big organizations having balance sheet problems and seeing sort of people going bankrupt. We don't really see that. You might see the SMEs may be impacted more by that, but obviously we don't really play in that world, and that world doesn't really operate in the space, in the size of space that we operate in. The U.K., I mean, I wouldn't be surprised if we see double-digit growth in rentals for at least the next three years.
You know, I may be over-optimistic, I don't know. In SA, I mean, I think we've seen a big jump as a consequence of probably three years of complete horizontal movement coupled with building cost inflation as well, which has come through. I think the interest rate cost is a new element that's now come into play and the lack of land which is ready to go, especially for buildings of let's say, 30,000-35,000 sq m or bigger. I think in that segment of the market, I just see rental growth probably also being, you know, at least double-digit.
I think there's gonna be a lot of pressure on that escalation clause in any negotiation, as a function of where interest rates are at the moment.
Okay. I think that's it.
Okay. Awesome.
Thank you.
Thank you, guys. Please hang around. I mean, we're all here, so any questions, please feel free to come and have one-on-one chats, and we'll hang around for a bit and yeah. Thank you for joining us and yeah. All the very best.