Good afternoon, everybody. Welcome to Redefine's group annual results for the year ended 31 August 2023. Before I begin, I just want to touch on our theme for this financial cycle. You'll see that we are talking about opting for the upside. Throughout the presentation, you'll note a trend that for us signals that Redefine is at the bottom of the property cycle and well poised for the time that interest rates do start easing. We are not relying on the interest rates as a panacea for all of our challenges. In fact, we are looking at the variables under our control, and we are maximizing each opportunity within each challenge, and that's what we call opting for the upside. Today, our conversation, as you see, will take the usual format, where I will be talking about the overview.
Leon Kok, our Chief Operating Officer, will talk about the South African portfolio under investing strategically. I will then touch on our Polish operations. Ntobeko Nyawo, our Chief Financial Officer, will be talking about optimizing capital, operating efficiently, as well as engaging talent. Then I'll take over and close the session with growing reputation as well as our usual conclusion. Good. Just looking then at the overview and focusing on the variables under our control, I think it's worthwhile just pausing and reflecting as to who we are and where we are.
You'll note that Redefine's repositioning, which has happened over a number of years now, is finally coming together in a very crystallized and crisp form, in the form of 62% of our group asset base being invested here in South Africa, and then the balance, 32 odd %, invested in Poland, principally in the retail sector through EPP. As you know, in South Africa, we have a very well-diversified domestic portfolio exposed to the traditional asset sectors. Looking at key financial outcomes, and I don't want to detract here from what Ntobeko is gonna say. I'm just trying to reinforce here that robust operating metrics are supporting our stable financial outcomes. We are very pleased with our NAV per share, growing ZAR 0.46 odd to ZAR 7.66 per share.
Our total assets are just under ZAR 100 billion, at ZAR 99.4 billion. That's about ZAR 7 billion up on last year. Our distributable income per share, slightly down on last year at ZAR 0.515, principally due to the higher interest rates that we've largely absorbed through 2023. We have a dividend per share, which is slightly up on the prior year at ZAR 0.438, and that's mainly as a consequence of the dividend payout ratio moving from 80% in the prior year to 85%. Our occupancies, Leon will talk about a lot more from a South African perspective, but holding up at just over 93.3%, lower from an occupancy point of view at 93%.
Our Polish occupancy is growing very nicely, as you can see, going from 96.5% up to 98.4%. Our loan-to-value ratio is on the high side, driven principally by strong euro versus ZAR translations. Ntobeko will unpack that in due course. You will see a very healthy liquidity position with ZAR 5.5 billion available to us through undrawn facilities as well as cash on hand. In terms of strategic outcomes, and this slide here speaks specifically to the variables under our control that we are actively managing, and you'll see that they are all positive statements. Our property asset platform has increased by ZAR 7.9 billion to ZAR 96.8 billion. Asset values have stabilized in both South Africa as well as Poland.
Our logistics platform has grown through development activity to just under 1 million sq m. Our balance sheet is solid. Our credit metrics have been maintained. Our funding sources, we are very pleased to report, have been broadened through ZAR 4.2 billion worth of listed green bonds. Our debt maturity profile going forward is flat, with no significant debt maturing over the next four or so years. In terms of operating efficiently, you'll note our operating profit margin has been maintained in South Africa despite the administered costs being a big challenge at 78%. Our tenant retention rate in South Africa has improved 0.7% to 92.8%.
Very pleasingly, you'll see that EPP's operating profit margin has increased by 9% to 74%, but so has its contribution to the overall Redefine Group distributable income, which Ntobeko will explain. In terms of engaging talent, our staff are highly engaged with a score of 90%. That compares to a benchmark of around 60-odd%. Our ethical culture maturity score has been maintained at the 88th percentile. Our learnership program, which is in its 10th year, will deliver 411 graduates by the end of this year. Ntobeko will take us through an audio visual clip on that point. In terms of growing reputation, I'm very proud to report that by GLA, 56% of our South African portfolio is Green Star certified.
EPP and ELI are 83% and 80% respectively BREEAM-certified. Our retail tenants, with a combined occupancy of roughly 574,000 sq m, have been actively engaged to collaborate on environmental and social initiatives. This is just the start. We're gonna be rolling this out far more aggressively in the new year because there is so much more we can do as a collective when it comes to responsible consumption behavior and the like, to reduce our carbon emissions. In terms of the claims that Metro AG instituted against the M1 joint venture, I'm happy to report that those claims have been dismissed through a final and binding award by the tribunal in the international courts based in Poland. Okay. I'm now gonna hand over to Leon, who's going to be talking about the South African portfolio. Thank you.
Thanks, Andrew, and good afternoon, everyone. I'm very pleased to report today on a number of very positive outcomes within our South African portfolio. Just a snapshot of what the group look like. Our property assets under management, just under ZAR 100 billion at ZAR 96.8 billion, split roughly 65%-35% between South Africa and Poland. The GLA under management is just over 6 million sq m of space. In South Africa, we've got 3.8 million sq m, and in Poland, 2.2 million sq m of space. It really is a significant portfolio. From a capital allocation point of view, during the period we expended ZAR 6 billion. As you can see, roughly 1/2, or just less than 1/2, was the distribution during the year.
Our development and capital expenditure within South Africa and Poland is roughly split based on what the portfolio composition is, so 60% in SA and 40% in Poland. The bulk of the SA spend being spent on the SA office portfolio, and you'll see in a minute the effect that it had in terms of our outcomes from the SA office portfolio. For me, the point to make on the South African portfolio is that we are well diversified in quality assets. If you look at, for instance, on our tenant grade, 71% of our tenants are what we classify A grade, so significant tenants and tenants that are typically able to meet their rental commitments, and those are the tenants that we so desperately try to keep and retain.
Ntobeko Nyawo will also speak about our collection efforts, which have been very healthy over the period. You can similarly see the impact of the active asset management that's undertaken over the last five years. The number of properties at, in 2019 at 302, and it's down to 241 properties now as we speak. For me, the most significant point to make there, though, is that our average value per sq m has certainly improved back to, at a 2019 level. That's not a function of valuations necessarily shooting the lights out, but more a function of the properties that we currently own is of quality, and certainly through that, have managed to increase that average value per square metre.
From a risk management point of view, you can similarly see that our lease expiry profile over the next four or five years is fairly undemanding, and we're reasonably comfortable that we can absorb any shocks that those lease expiries may present within the normal course of business. Let's move on to some of the key outcomes. For me, a fantastic achievement was that renewal reversions, which is certainly progressively becoming better. Last year, we posted a negative 12%, and this year it comes at a minus 6.7%. You'll see the biggest driver of that in a minute when we touch on office. From an occupancy point of view, the slight blip in the increase in vacancy there is a consequence of our retail and industrial portfolio, and we'll touch on that now.
Another point to make here is that if you just look at that level of letting activity, albeit down on the prior year, simply as a function of the portfolio size being smaller, but also the number of leases that came up for expiry during the period was lower than the previous year. Still, we concluded letting of over 745,000 sq m during the period, of which roughly 40% was new deals. Certainly in my mind, indicative of a very healthy and active market. We've similarly managed to retain that average unexpired lease term, which again speaks to the defensive nature of the portfolio in general. The two areas that we focus on religiously from a property management point of view is our tenant retention and renewal success rates.
Those are the two measures that we measure ourselves on. As you can see, at a negative reversion of 6.7%, we're not desperate to do stupid deals. In terms of what we managed to achieve, I think those retention levels at a high 90% is fantastic, and similarly with our renewal success rate touching on close on 80%. Someone earlier said that our non-core disposals is surprisingly low, but as Andrew answered, is that all the heavy work in terms of our disposal activity is already in the base and undertaken over the last number of years. At ZAR 650 million, roughly, from a South African point of view, is relatively low, but again, it speaks to the good work we've managed to do over the last number of years.
The other feature that we're very proud of is that installed solar PV capacity, roughly 35 MW of installed capacity as we stand with a further 9.5 MW in progress. Now, you may have seen a number before we quote that we actually got 40 MW of installed capacity, and that 5-MW difference is simply more to the south, which we will acquire in December, and which we installed that large, in fact, one of the top five biggest solar rooftop installations in South Africa or in the African continent. That will certainly stand us in good stead going forward to mitigate some of the cost challenges that we anticipate from an energy point of view. In terms of the property values, you'll see that largely overall, the portfolio has remained flat, and again, I suppose, indicative of having a diversified portfolio.
Retail and industrial proving reasonably strong, and on the office front. From an income point of view, slightly negative on the valuation front. If you look at the weighted average exit cap rates, largely stable to what we've printed last year in August 2022. On the retail front, again, a portfolio that is well diversified from a format point of view. Roughly 80% of our portfolio sits in regional and convenience centers, and then the one super regional Centurion Mall. From a valuation point of view, as you can see, a fairly consistent performance in terms of across the three formats. The number of tenants at 2,600 tenants and GLA just over 1 million sq m of space. Again, indicating that it is a portfolio of scale that will certainly stand us in good stead from a defensive point of view.
As you can see that, active occupancy, a slight blip in that, and the reason for that two percentage point move is largely within what we call the other format, or principally our motor dealerships. If you can look at the right-hand side, the vacancy by type there, the other, that 23% is three motor dealerships that during the period has gone vacant as a consequence of some of the consolidations happening in that subsector. In terms of our other formats, regional, convenience, super regional, a very good and solid performance. The other big point to make on the retail front is the real impact is not necessarily gonna be on letting a vacant space, given how low it is and in our view, how low value that vacant space is. It's more on the renewal reversions.
Over the last year, we've made a concerted effort to make sure that we be deliberate in those renewal conversations, particularly being supported by good growth in trading density as well as footfall stats. We are certainly gonna target that metric for the 2024 year to see how best we can get that as close as possible to a flat outcome. As you can see, 20% of our lease expiry or our lease by GMR is coming up for renewal this year. That's gonna be a key focus point for the team. Again, you'll notice on the solar PV capacity, the bulk of the installation sits in our retail portfolio, simply given that this is the sector that allows, given the access to roof space and good demand on site for application of solar PV.
Our weighted average lease escalation staying flat at 6%. Obviously, in the current environment, we'll be operating with elevated inflation levels, but also supported by good performance. Excuse me a sec there. We are anticipating that at escalation, there certainly is opportunity for us to eke it up slightly, I would suggest. On the office portfolio, a fantastic pie chart to look at is that one on the right, our value by grade. 95% of our portfolio is now invested in A and premium grade space. Again, if you look at the outcomes, that is certainly what's driving that. The improvement in most of our metric is given the quality of the underlying portfolio.
As you can note, there's a marginal detraction in fair value that we experienced over the period as a consequence of certain income assumptions, but also some of the early renewals that we've conducted in some of our larger properties. That has obviously caused a bit of an impact on the near term income. Our active occupancy at 88.6% compared to 85.6% last year. I think that is a phenomenally good outcome. If you just look on the right-hand side, the Redefine vacancy at 11.4% compared to a SAPOA average, and that is the September 2023 report at 15.5%. Just cast your eye down some of those notes. In Rosebank, we are posting a 3% vacancy versus SAPOA at 12%.
Bryanston, 7% versus SEPO at 20%. Sandton, which is often catching the headlines for all the wrong reasons, our portfolio sits at 9% versus SEPO average of 19%. Now again, that speaks to the quality of the underlying portfolio, which is similarly reflected in our letting activity. We've concluded deals just short of 230,000 sq m of space during that period, and 44% of those were new deals. As you can similarly see, our weighted average lease escalation, where there was a trend certainly reducing a bit. We believe that it's stabilized at the 6.8%, and in fact, there's opportunity to potentially get it back to that 7% level. On the retention side, the renewal success rate, again, that speaks to the underlying quality of a portfolio.
Now, in our office portfolio, we're very proud of all those Green Stars we have. For us, the real benefit of that, again, it's an indication of quality, and again, it's an indication for us, or another kind of tool within our arsenal to attract tenants and to retain tenants, because that's through that initiative, it certainly help us to manage our properties better and engage with our tenants around consumption of energy and water. On the industrial portfolio, another portfolio that has proven to be very defensive and a stable and steady performer over the last number of years. If you just look at the distribution by type, the bulk of our assets sit within logistics, modern logistics, and high-tech industrial. That certainly will stand us in good stead.
You can see that in that valuation performance across the board, where all our properties generally have done reasonably well from a valuation perspective. On the outcome front, that small increase in vacancy to 4.8% is a consequence of Gugu, where Isuzu vacated. We relocated Isuzu from Gugu up to our S&J property, or we built a new facility for them at our S&J estate. So that's kind of caused that blip. Seventeen Winnipeg, which was the other big mover last year, we've managed to fill during the year. Unfortunately, it's just a bit of a timing issue, but we're reasonably confident that the Gugu facility is well located and there's reasonable demand, and we had a number of inquiries already.
The other big point to make here is on the renewal reversion activity. 94% of all our deals done in the industrial space was either flat or positive. Now, that certainly speaks, in my mind, to a very active property management and leasing environment and speaks to the quality of our portfolio. In other words, the tenants are prepared to pay the expiry rent or in fact even achieve a slight improvement. That +2.1% certainly is, in my mind, a phenomenal outcome in a very, very tough and competitive environment. In terms of the weighted average unexpired lease term, maintaining it at 5.3%. That certainly gives us some tenure within our lease expiry profile and will bode well for the entire South African portfolio to eke out growth within the next financial period.
A weighted lease escalation at 6.5%, staying steady, and then on the retention level, similarly quite high. The other pleasing factor to note in the industrial portfolio is that increase in Green Star certifications from 15 to 27. Again, that speaks to our endeavors and efforts to see how better we can manage our properties in, particularly in the industrial space, in collaboration with our tenants. The solar install capacity is relatively small within this space, which is a pity because you've got access to a lot of roof space. For us, the big catalyst to really unlock the solar opportunity within the industrial portfolio is our ability to wheel. We are reasonably well advanced in a number of jurisdictions in terms of trying to embed a framework that will enable wheeling.
Obviously, Eskom-to-Eskom sites is well documented, and we're already participating in one such initiative. For us, the real catalyst here is gonna be when there's wheeling gonna be available or allowed on scale throughout our portfolio, and there is ample opportunity within our industrial portfolio. Just lastly, to close off the South African stuff, we're giving you a snapshot of our alternative income streams. I think one of the cool features here is our new 3D screens, the most prominent one which is at our Alice Lane space. Please check it out. It's very exciting. This for us is simply just an initiative to see how better we can enhance the income generating ability of our assets, not necessarily through traditional GLA letting, but through other opportunities. With that, I'll hand over to Andrew.
Thanks, Leon. Okay, let's talk about Poland. As you can see, our property asset platform is just under ZAR 37 billion, and it has a total GLA of just under 2.25 million sq m. Okay. Just looking at EPP's core portfolio, you'll see that it's a steady situation. We haven't added to the portfolio. However, in rand terms, you'll see quite a big boost in valuation terms going from ZAR 16.8 billion to ZAR 19.2 billion, principally as a consequence of valuations remaining firm, but also then Forex coming through. In terms of EPP's core portfolio, and I must say that this is a very, very healthy and pleasing performance during a period of unprecedented inflation as well as high interest rates.
As you know, Poland is expected to just dodge recession in 2023 for the calendar year, coming out at roughly, I think, 0.2% positive GDP growth. Next year, looking to really start the recovery, coming out at about 2.4% at this stage from an expectation point of view. Having said that, you'll note occupancy is at a healthy 98.4%. I'd like to suggest that there's some churn in the portfolio that is natural, and you'll never get to 100% occupancy. That is a standout achievement in these challenging times. Rental reversions, despite the headwinds faced economically, maintaining at 7.2% negative. That's the only real negative here. The rest are all positive, as you can see.
The rent to sales ratio is at a healthy 9.5%. Footfall has grown. We're very proud of our BREEAM rating there of 83.3%. We believe that this portfolio has done very well in a challenging environment and will benefit from what's to come going forward. Not mentioned on the slide, but is a factor that needs to be considered, is that there will be politically a change in ruling party, which will be very positive for retail particularly, and certainly also for logistics as EU-friendly policies are rolled out, et cetera, et cetera, which is expected to unlock frozen funds. Even there may be hints at phasing out the trading ban on Sundays, which we hope will happen, which was, by the way, a pre-election promise.
In terms of the joint ventures, all of them doing very, very well. None of them are standing out as battling, but I do want to just focus your eye on Galeria Młociny. Unfortunately, we don't have comparatives on this slide. It is available if you look at last year's presentation. Młociny was flagged as a property that required intense focus, and you can start seeing the benefits of that focus coming through now in terms of occupancy at 97.5%. Positive renewal reversions, albeit on a small component of the overall gross leasable area, and as you can cast your eye down, all the metrics are very, very positive. At 10% like-for-like footfall, for example. Rent to sales ratio is work in progress. It's still high at 12%.
We do believe as trading picks up, that sales ratio will improve to under 10% in due course. In terms of logistics, we continue to expand. As I said earlier, we are now at just under 1 million sq m of GLA. We completed nine developments during this period, which added 275,000 sq m to the portfolio. Of the nine properties that were developed, six were 100% let, three were at an average 53% occupied, and that would impact it, where you can see on the overall occupancy of ELI slipping about 1%, in its occupancy down to 92.5%. We are confident that we will let up that space in due course.
However, I must just caution that the development pipeline is starting to slow up, and that is mainly as a consequence of bank funding being very, very circumspect around speculative developments, which is good because it is actually assisting in the reduction in the previous generous tenant installation allowances and the like. Suddenly the costs that we saw that were coming through on the construction side have been cooled off, impacted on market rentals positively with indexation playing its part, but the rentals holding up. You'll see renewal reversions up 6%, the indexation rate at 7.6%. That is a function of the EU inflation that played its part there. All the rest of the metrics from tenant retention by GMR at 90.1% to our renewal success rate, all very positive.
This is a portfolio now that is of scale at just under 1 million sq m, but also benefiting from a growth in market rentals, something we haven't seen in this market for a very long time. In terms of self-storage, this is a very, very small component, 0.2% of our overall asset base. However, it has the capacity to become significant as we grow with the developing sector. As you will see there, we have got a net lettable area of 19,000 sq m. It was supplemented by the acquisition of TopBox, which added 4,500-odd sq m in Warsaw. That's a developed property. Six developments are underway, which will grow that net lettable area by a further 26,000-odd sq m.
That pipeline, although secured, will probably take between three and four years to build out. Please don't think that we're gonna have spent our entire EUR 50 million commitment all in one go. It's gonna probably take us four, say, years to get to that point. Okay, just looking forward at 2024. I don't need to remind you that we are already two months and six days into FY 2024. I had to remind our staff about that this morning as well as myself, that the new year has already begun. As you'll see, our focus is starting to shift to the evolving market dynamics. They haven't changed, they have just evolved, and they are moving, and we're keeping pace with that. We'll be looking, going forward, to further preserve value through organic growth and asset optimization.
The reliance on municipally supplied utilities is an ongoing focus through innovative solutions. This is where ESG is very, very important, as well as that collaboration with our tenants in terms of how do we together work on consumer behavior, because that's probably your biggest mover when it comes to saving on your carbon emissions and also your costs. Selective deployment of capital. It goes without saying that we will be absolutely responsible with how we recycle proceeds from non-core assets. Besides growth sectors, yeah, but I just want to make the point that when we are in that position of allocating capital, we won't just look at allocating capital to assets. It could well be if it's sizable, it could well be to the repurchasing of shares, it could be paying down debt. Ntobeko was nodding furiously about paying down debt. He's right.
It is probably the best place to allocate capital. Once again, I need to remind everyone that we are in a property business, and that is the principal focus going forward, where we need to look. Opportunities will come our way and we are alive to every one of those. Good. I'm gonna now hand over to Ntobeko, who's gonna talk about. Thanks.
Thank you, Andrew. Good afternoon, everybody. I'm really pleased to be sharing with you our results for FY 2023. Really just starting on the balance sheet side, I think you can see that our credit metrics have remained very stable with an LTV coming out at 41.1%, which is just slightly outside our medium term target range of 38%-41%. Largely on the weak rand, which I think we saw the rand depreciating in the current period by about 20-odd%. I'll unpack that just shortly in the next slide. If you look at our liquidity profile as well as the interest cover ratio, stable at 2.4 x.
Our liquidity, if you look at access to committed but undrawn facilities as well as cash on hand, it's at ZAR 5.5 billion. I think in this environment, you could also quite clearly see that to protect against the higher interest rates, we've got 77.1% of our total group debt that continues to be hedged. I think also one of the pleasing things for us is that if you look at the sources of cash, our business is able to generate cash flow, and that also continues to support our liquidity profile into the foreseeable future. If we look at the cost of debt from a group average, it's coming out at 7.1% compared to 6% last year. That's a 110 basis point increase.
Just breaking that down between the rand-denominated debt coming out at 9.4%, which is an increase from 8.7%. Our euro hard currency debt coming out at 4.6%. Just the percentage of debt then that is hedged between the rand-denominated debt and improving to 86.7%, and then the Forex slightly coming to 63.8%, but maintaining a very healthy tenor of debt at 3.6 years. Just to look at the LTV, I think Andrew touched on the weaker rand. That's really what you see having an impact of 0.4%.
Otherwise, the other two big items that you see, it's the 3.2 improvement to the LTV just coming from cash that we generate, as well as then our continued commitment and rewarding the investors with a consistent payout that also taking out and having an impact of 2.9%. We do provide the sensitivities that we usually provide, which are probably the you know other than looking at the property values outcome, their impact, we also then also just provide the other sensitivities just around what happens with the foreign exchange movements. Our focus, I think, on a see-through gearing point of view is continues largely based on two aspects.
One is, you know, if our payout ratio is between 80%-90%, there'll be earnings retention. Also the underlying euro debt in EPP amortizing at 2.5, that will help us in that path which peaked in FY 2020 at 54.2, and our focus will be to try and bring that down over a period of time. I think it's, for us, if we look at our funding maturity profile, it's very, very low, and you could see it's very flat. I think just couple of points to call out here is that we've completed all our FY 2023 maturities, and now we are proactively dealing with FY 2024 maturities and those being about 14% of group debt, which shows you the profile. The bucket that is coming out is not significant.
If you look, we've got so much optionality. We've got ZAR 5.5 billion of liquidity. If really there were any short-term shocks in the market, we could be able to deal with some of this quite comfortably. Also in this environment, the focus is just on the margin of debt, which I think we're pleased that we've maintained in SA at about 2%. In EPP, that's where we've really seen a slight uptick in the margin. I think that was largely just on the two big refis that we did of Echo and Masilale that saw our margin in EPP going to 2.5%.
Then I think we continue just, and I'll touch on this in the next, in a couple of slides as well, is that we've got, we've really lowered our concentration risk. We've got a very meaningful presence in the bond market. We're pleased with our last bond, which was ZAR 1 billion, which is a part of the ZAR 4.2 billion that Andrew spoke about earlier. That ZAR 1 billion was oversubscribed at green bond by 1.9x . What was pleasing for us was to see market appetite really going into the long-dated tenors, which improves our funding and matching rate in the balance sheet.
We're also very pleased to report that Mall of the South acquisition, the funding for that has been secured, and we are proactively with the team just working on the refinancing of Henderson, which EPP has got a 30% exposure in. Just to talk about hedging. I think this, in an elevated interest rate environment, for us, our preference is really to shorten our hedging tenor so that we don't bake in the higher costs, and it gives us flexibility as we expect the rates to start normalizing that we could also just benefit from that. I think that is quite evident, even if you look at the curve, that the longer-dated swaps are actually very expensive.
We're very careful with this, but I think we're doing it within a very sound guardrails of our group policy, where, as a minimum, we would like to keep about 75% of our debt hedged. That work for us is ongoing work, and I think we do share with you here just one of the points where there is opportunities closer to some MPC settings, where you could take a bit of a margin off from JIBAR like we did a subset of about ZAR 1.4 billion, where we thought it was quite attractive. We'll continue to build that in line with to just protect against the high interest rates and not bake in the pain.
If you look at our funding sources, really for us, I think across the group, this is one of the work streams that receives a lot of attention from the team, and you could clearly see from each type of debt, be it the bank debt, be it the presence in the bond markets, and we've also started to introduce some DFI funding. It really give us a low concentration risk in terms of having an ability to really tap into various sources of funding to continue funding our business.
I think in terms of optimizing capital, our focus really for 2024 remains just around looking and making sure that the facilities that are coming up for debt will be renewed, and we are proactive on that, as well as looking where there's an ability within reasonable commercial lines just to extend that maturity profile. We look at that quite carefully. The interest rate cycle, given where it is, requires very proactive management like we've demonstrated. I think just to manage concentration, we'll continue to diversify our funding sources. If I move on to just operating efficiently, where really our biggest focus is the sustainability of our operating margins in the longer term.
Just from some highlights for FY 2023, I think the number that we show here for Active SA of income margin at 81.8%. The only difference between this number and the profit operating margin of 78% is really just the overheads. We watch both these aspects because I think in the environment we're in, also even our operating cost structure requires a proactive management, while also the positive footprint of our SA and EPP portfolio is quite pleasing, as you can see from these very high and improving, especially if you look at EPP sitting at 88.7%.
I think we do also think the quality of the earnings that is supported by that is that we don't rely on any one-off items to produce our distributable income. It's very small if you look at our ZAR 3.5 billion in terms of what is non-recurring. That for us is also a pleasing aspect in terms of the quality of our results. Some of the work that we do in terms of just continuing to put efficiency and focus on the business. One, in terms of our continued investment in technology, that is playing out with improvement in the digital ratio.
Also dealing with the demand side of electricity, you could see some pleasing consumption reduction in EPP that came out at 10.7. All of these things for us underpin what we really the last four aspects that it's our ability to collect cash. You can see in South Africa, the average collection rate at 100.1%, which is very pleasing for us, as well as also a very good collection rate of 99.1% in EPP. We don't see, I think, just if you look at the net arrears, if we're to recalculate that number for SA ending at 11.4 at 31 August.
Some of the collections that we made, we just released it to some tenants in industrial. That number would be around about 5%, which is where longer term, even the pre-COVID levels in terms of net arrears we'll see. We're pleased that we're able to collect and, our business is continuing to generate cash. I think just touching on the solar outcome. For us, even though financially you can see that initially it is very attractive at 18.1%, but I think the points that, Leon made around improving our energy mix, collaborating with tenants to change behavior and reduce consumption, would also support the sustainability of our operating margins in the longer term.
Just to touch on some sensitivities, just in terms of, I think interest rates, it's something that we've discussed quite a bit, but you could see that a hike of 50 basis point will have a 0.7 impact on the earnings. If we just unpack the earnings, a little bit, I think for us a pleasing outcome is just the improved contribution of EPP that we see on the first block at ZAR 202 million, which really post the restructure of EPP, has restored EPP to yielding.
You could see also some of the positives just, which are from the organic growth in SA that 90 from Active Properties, as well as some of the properties that we acquired, they're coming in at 47. Really, the bigger story is on the impact, which is all of these things are helping us to maintain the impact of ZAR 369 million, which is as a result of higher funding costs coming through in our net funding expense line. I think for our NAV, for us it's quite pleasing that we grew the NAV to ZAR 7.6 per share. Yes, this is largely driven by the Forex movement, which you can see they're coming in at ZAR 0.64.
I think for me, what is pleasing is that we also, even having absorbed, which is our ongoing and stabilized, our payout in terms of dividends, that we're able then to still grow the NAV to ZAR 7.66. Just on the dividend policy, I think for FY 2023, for us to peg at 85% payout ratio, just given the healthy liquidity profile that we're seeing, it's right in the middle of our 80%-90% distribution range.
I think what is very important for us here is that consistently, these are the things that when we talk with the board and engage just around setting a payout ratio, we look at the earnings that are supported by cash, we look at liquidity, we look at the gearing levels across the group. But also more importantly for us, we also just do wanna preserve value and not leak any of this in terms of a tax leakage. So we are pleased that at 85% payout ratio, there has been no tax leakage in terms of FY 2023. I think this question has come up in our previous discussions with you.
We do consider DRIP on a case-by-case basis, but for FY 2023, there is no DRIP that will be offered on the distribution that is being made in FY 2023. In terms of the focus items, just on operating efficiently here, I think for us, one, to preserve the margin, it goes without saying, because that's where we look at efficiencies, we look at disciplined cost control, and also we continue to roll out our renewables, but that gives us the platform then to engage on consumption and change behavior over a period of time.
Our efforts in terms of what we're doing for the tenants, I think that also to drive retention is our first priority in terms of the longer term profile of our margins. I think our investment in technology is an important factor because we just shared with you some of the highlights there, some of the outcomes and the things that we've delivered in FY 2023 with a singular focus of transforming the tenant experience to say, "How can we serve our tenants a bit better?" Those are the aspects that we work with, and we are pleased that our digital ratio has improved to 23% in the current period.
I'll just cover engaging talent, where I think really for us the focus is just around the diversity of thought, so that we continue to drive the consistent delivery strategy that you're seeing playing out even in these results, which actually just stems to the fact that we're very clear focusing on what we believe we can control. Those are the variables under control. We are retaining people. If you look at our retention rate in South Africa, playing out at 86.7%, as well as in Poland at 88.1%. We've introduced a net promoter score, which between South Africa and Poland, if you look at the footnote in terms of the scale, it means that it's in the good range.
Our focus in terms of the things that we're doing, strengthening the bench talent, hopefully we'll take that to also improve to a greater space. I think the big thing for us here is also on the future fit, the things that we're doing so that we've got enough skill set to navigate the current environment and strengthen our focus on the variables that are within our control. As a closing remark in this, before I queue up the video to play, is that really this is our 10th year where about 411 learners have come through our learnership program. That is a huge impact, and that is changing lives, and we're pleased that that will continue.
I'll really let the video that we'll cue up before Andrew comes back and then just show you some of the impacts that we've had in changing lives.
Redefine's purpose is to create and manage spaces in a way that transforms lives. We believe transforming lives begins with the right partnerships and a focus on people and empowering job creation. It is our people-centric approach that has enabled our certification as a top employer for the last eight years. Being a top employer means always investing in people, in expanding their minds, sharpening their skills, and brightening their futures through a learnership. This explains why our learnership program is part of the Redefine brand's fabric. The learnership program forms part of our efforts to achieve the UN SDGs, particularly UN SDG four, quality education, UN SDG five, gender equality, and UN SDG eight, decent work and economic growth. The Redefine Learnership program is a key collaboration in our business.
It comprises structured NQF levels two, three, and four learning and practical on-the-job training in various departments within our business. We launched the program with only five learners in 2013. It has grown substantially, and 2023 saw over 14,300 applications, with acceptance subject to a rigorous selection process. The statistics on this amazing initiative speak for themselves. For every learner who completes the program, the impact on other family members can be a multiple of four or more, meaning we are transforming lives on an even bigger scale. The true power of learnerships is only really felt when you hear from the learners and mentors themselves, those who have completed the program, those who have applied their knowledge at Redefine and beyond, and those who have served imparting knowledge to these deserving young minds. Here's what they have to say.
My experience with the learnership has been very transformative. I've gained a lot of hands-on exposure to the field of real estate and gained some practical insights into the facilities management sector.
I would say my experience was very enriching in my professional life and personal life as well.
I really appreciated the opportunity to apply everything else that I've learned, and the theory that I've gained from varsity.
The program has allowed me to build relationships with other colleagues outside the Cape Town region.
Well, what sets the Redefine Learnership apart from the others is that you get 80% on-the-job training and 20% on theory, which gives you a good basis going forth.
The fact that I got to come here, and I was exposed to different departments, for me, that was it for me. 'Cause I told myself, "I'm still in a very exciting stage in my career, so I don't want to focus on one thing.
The program has taught me a lot. It has taught me that working and learning can be done, and my time management should be managed properly, and I can take that experience everywhere I go.
What I've learned is, once a learner will always be a learner. You never stop learning.
Teamwork, collaboration, and communication, as well as time management, is key in any business.
Effective communication and collaboration is the key when you're working with very diverse teams and different people.
Definitely not to take anyone for granted. There's wisdom everywhere.
The learnership program continues to impact my career in terms of growth. I'm able to take on more responsibilities, and I'm able to do things that I never thought I would do.
I'll be forever grateful for the opportunities and knowledge that I gained during the learnership. The experience that I gained during that time can never be unlearned.
Ideally, my dream job, I'd like to be a seasoned, facilities manager or
Go into the realm of asset management within real estate investment trusts.
My dream job is urban landscape design.
Working at Redefine put me in the spot where I can see all the buildings, and working in facilities management made me see the inside and outside of the building. That solidified my intention to be an architect.
I have so many hopes for the future for myself because I believe the future has many possibilities, and I know for sure that I have so much potential that I haven't fully tapped into.
The advice I'd give to potential applicants is that they should be enthusiastic about this opportunity. Don't be afraid to ask questions, be proactive in their growth and learning. Be a sponge. Take everything that your line manager tells you and your colleagues tell you. Just take it in and work with it.
My advice to potential learners is to put your best foot forward. Ask the questions and never be shy if you do not understand.
With the right attitude, you can go far. Work hard, absorb as much knowledge as you can from your seniors, your peers, especially in class, there's a lot that you learn that apply to your working environment, and to just be completely engaged.
Okay, we're back now, and I'm sure you'll agree with me that video clip is something to be proud of. I want to thank all of you for supporting us in that very important endeavor to grow our own talent in a sector where you know there is a very shallow pool of property expertise. Sorry, I just wanted to make the point on this slide here. Leon did talk about the Mall of the South rooftop, but this picture here gives you a very good appreciation as to what 5.1 MW of solar rooftop capacity looks like. Okay, just in terms of our vision, which is to be the leading South African REIT. The best way to demonstrate that is through recognition from recognized independent external agencies.
I'm not gonna go through this, but all I can say is please look at it. You'll see our trophy cabinet is full. We are very proud of this. We do not set out with the objective of obtaining these recognitions. This is merely supporting our statements around our vision and also supports our belief that a strong ESG proposition underpins sustained value creation for all stakeholders. I'm happy to report that EPP has been fully integrated into Redefine, and you'll similarly see a lot of progress being made similarly on the ESG front. In Europe, it is especially important to deal with the EU Taxonomy that's coming in 2028, as well as debt funders' energy efficiency requirements that we are already being exposed to, and we are very well-positioned to deal with both those two issues.
In terms of socio-economic development in action, this is part of living our purpose to create and manage spaces in a way that transforms lives. You'll see that we are very active in both South Africa as well as in Poland, and we will continue to roll out our strategy in this regard. In terms of looking forward from a 2024 focus point of view, we will continue to implement multi-pronged and sustainable energy, water and waste solutions. It's not just to reduce reliance on grid-supplied energy, municipal and water and waste services, but it's also equally important from an efficiency point of view that we focus on this, given that a lot of these elements are administered in terms of tariffs, et cetera, which is outside of our control, so we are down to managing consumption.
Creating sustainable socio-economic impacts through SMME development, as well as direct involvement with the communities in which we operate at our properties, is an ongoing focus across the group, building sustainable partnerships, which I alluded to earlier, with tenants, suppliers, and community-based organizations, absolutely important to further our ESG endeavors going forward. Just in terms of wrapping up, we have got our work cut out for us in 2024 around navigating the effectiveness of the structured energy transition, managing the expected shift of the interest rate cycle, and very importantly, an ongoing focus on responding to evolving stakeholder needs. In financial year 2023, I'm sure you'll appreciate when I say that we have faced down a number of market-shifting dynamics this past year. We do know that these dynamics evolve.
They do not dissipate, but what gives you that sense that they are dissipating is that we are responding and adapting to them on an ongoing basis. As you can see, the overlapping aftershocks of the pandemic are largely behind us. Our operating metrics have now stabilized, and this is a function of adapting to changes in user behavior that's coming through, particularly around the offices, which is very pleasing as well as our retail statistics. Elevated inflation has been a landlord's friend in terms of driving higher escalations on the leasing front. We'll see more of that to come here in South Africa as well. More importantly, we have absorbed into our cost base the higher costs. We've maintained our margins. Very, very important. We are looking to improve those margins through efficiencies going forward.
The energy crisis in both Poland as well as in South Africa has created opportunities for us on the renewable energy front. The higher funding costs for Redefine have been largely absorbed in financial year 2023, and in terms of our outlook, which I'll get to, you'll see that we believe that what we are still doing, we can absorb the residue of that impact playing out into 2024 financial year. In terms of constrained liquidity, you would have heard from Ntobeko there. We have broadened our funding sources largely off the back of a very strong ESG presence in terms of the green bonds. Just in terms of outlook, we are looking to maintain our guidance that we did for financial year 2023 at ZAR 0.48-ZAR 0.52 per share. Our payout policy, as Ntobeko said, we'll maintain at 80%-90%.
We believe that we are opting here for the upside in terms of building on the positive momentum that you would have seen in the stabilized operating metrics. We've given you a couple of variables over there that can play out positively and negatively. We need to be balanced here, but we believe that through managing the variables under our control, and this is by no means easy, we will have a flat outcome for financial year 2024. In terms of the real estate investment clock, I thought I'd include this here because I firmly believe that Redefine. We've been quoted in the press wrongly by suggesting that it's the sector.
I'm suggesting this is a Redefine prediction, where we believe that in terms of the clock, we're at five o'clock and the clock will strike six o'clock for us as Redefine during calendar year 2024 as interest rates begin to ease. As you know, we have a year end that ends in August. I'm inclined to think that interest rates will start easing in the latter half of calendar year 2024, which will impact on 2025. That's one of the benefits, by the way, of having higher gearing. We've taken the brunt of the higher interest rates into our numbers already, but as those interest rates start falling, we will get a disproportionate benefit, if you like, that will flow to the bottom line. I also wanna add that this clock turns very, very slowly.
When I joined Redefine in January 2011, we were at six o'clock, so I would have gone full circle here in about 14 years. Property is a long-term asset class. Patience is required. I thank you for your patience. I thank you for your confidence in us, and I thank you for always supporting us, even though sometimes we do agree to disagree. In terms of our investment proposition, we believe it's compelling. We have a simplified, high-quality asset platform which is diversified. Our funding model, as you would have seen, is backed with solid credit metrics. Our staff are engaged, they're passionate, they're innovative, and that's playing out in everything that we are doing here, and very importantly, consistent delivery of strategy. In essence, we do what we say we will do by putting people and ESG at the heart of that.
With that, I wanna thank you. So thank you for your time as well as all your support during the past year. As you can see, you have a team here that are opting for the upside by believing that 2024 will be the turning point for Redefine. With that, I'm gonna now hand over to you for any questions you may have. I see we already have a couple, and I'm very pleased to see that most of them are actually for my colleagues. I'll read out the questions and then I'll volunteer a colleague here to respond on behalf of the reporting team here. The first question is from Mweisho from SBG Securities. He is asking, and thanks for all the kind words there, Mweisho.
I won't repeat them, but his question is, "What is RDF's change in cap rate being in offices from peak to trough since 2019?" Mr. Kok.
The second one?
Oh, sorry, Leon. Okay, so Leon wants to answer both your questions, Mweisho. The second question is, "What drove the 2.9% premium office grade devaluation on slide 13? What impact do you feel load shedding is having on office demand from tenants?
Mweisho, thanks for the question. It's quite a difficult comparison to make to compare 2019 exit caps with 2024 given the change or 2023 given the change in portfolio. The number as printed in our 2019 result was an exit cap of 8.6, and obviously, as we show you now, is 8.8 in 2023. Now, a factor that would have driven that is that we don't hardly have any secondary properties in the current portfolio, whereas in 2019, there was roughly about 15% of the portfolio invested in that metric. I think that marginally move out in terms of widening of cap rate is understated somewhat given the change in portfolio. Yes, we went from 8.6 to 8.8.
In terms of what drove that 2.9% devaluation in our premium office grade, as I alluded to, was principally driven by three large early renewals we've done on significant tenants within that premium grade office category that obviously in the near term, because we only renewed, it would have had an impact on the income assumption, but with that, we've got extended tenant. In terms of your question around what impact the load shedding has on demand for office tenants, I don't have any hard data to support my views, but I think principally there's two factors, a positive and a negative.
On the positive front, that net positive for office demand is that clearly people that do not have the ability to sort themselves out from a backup electricity point of view at home is kind of forced back to the office when load shedding occurs. Obviously, they don't have access to Wi-Fi and charging of laptops and such like. That's the positive. On the negative front, and from our own experience, certainly load shedding does exacerbate traffic congestions at peak times. Again, that's a bit of a negative, I suppose, for someone that has choice whether to work in the office or not. Those two kinda compete, but on balance, apart from the bigger macro impact of load shedding in terms of sentiment, I don't think there's specifically a positive or a deep negative associated with load shedding with offices.
Clearly, what is important, an office without a backup power solution is a no-go, and that is your ticket to the game. All offices must have backup power.
Okay. Thanks, Leon. Okay, we're moving now on to Francois du Toit from Anchor, and he's got a couple of questions. I think we'll deal with each one, Ntobeko.
Yes.
The first one is: I see there's a new cross-currency swap in place, replacing the one that matured in the H1 of 2023, and it's priced at Euribor +1.6%. Do you expect to refinance the other maturing cross-currency swaps on similar terms over the next year? Would you anticipate closing cross-currency swaps in light of existing euro-denominated leverage levels?
Okay, Francois, I think in the environment we're in, we think it's prudent for us just to refi the cross currencies. You're right. We do fund them. I mean, if you take the Euribor where it is and the margin of 1.6% at about, say, between 4.5%-5%, and we do expect that that's where the market will be pricing and that's where we'll be able to refi the ones that are also coming up for maturities.
Thanks. Thanks, Ntobeko. Francois' second question for Ntobeko is: With the Henderson JV debt maturing this year and the Galeria Młociny debt maturing in FY 2025, what do you expect funding costs will be in these two joint ventures by the end of FY 2025, assuming Euribor 4%, and will it be fixed or floating mortgages?
Francois, look, it will depend on where the rates go in Europe, but I think just given what we're seeing, our view is that it will probably be somewhere between 5.5% to not more than 6% at the end of FY 2025 in those two JVs. I think also it's important that the ZAR 3.1 billion for Henderson we only have a 30% exposure to that.
Thanks, Ntobeko. Francois, just bear in mind when Ntobeko quotes those percentages, it's an all-in rate.
Yeah.
It's your base rate of 4% plus a margin. The margin, which I suspect is your real question, is about 200 basis points. Okay, we'll move on to Pranita Daya from SBG Securities. She's got two questions for us. Can you give us an idea of your diesel spend and recoveries per sector? Quite honestly, Pranita, we actually forgot about that because we've absorbed it into our cost base and we're getting on with life. Someone like Leon, I think, or Ntobeko can answer that question. The other one is. What type of distributable income growth do you expect over FY 2024 for EPP? Ntobeko, are you gonna talk about EPP's contribution, and then Leon, you're gonna talk about diesel consumption.
No, it's up to Ntobeko. Ntobeko can take both.
Take both.
By the way, Leon's very good at delegating, not only upwards to me, but also sideways.
Yeah.
Sorry, Ntobeko.
Yeah, thanks. I think we expect EPP to grow in the region between 3%-5% in FY 2024. I think that's largely with an assumption that the indexation that we'll achieve on their rental will be somewhere around 4.5%-5%. That's what we expect for EPP. Andrew, if I just deal with the diesel. I think, Pranita, for diesel in FY 2023, we spent about eight million liters at an average price of ZAR 21 per liter. That works out to the gross cost of about ZAR 168 million.
With a recovery ratio of about 75, then the unrecovered portion at 25 works out to about ZAR 42 million, which has got about 1.2% if you look at the current earnings of ZAR 3.5 billion. Per sector, we can provide you that detail, but I think, office will be slightly higher than 75, and then retail will be just a little bit less just because of the common areas.
Thanks, Ntobeko. Okay, moving on to Mahir Hamdulay. Mahir, it's good to see that you're mentioning your company as Redefine, huh? The last I checked, you were with Absa, but anyway. Thank you for that accolade. He wants us to confirm now the EUR income contribution from EPP in FY 2023, as well as the cash back component. He also wants us to confirm the MOTS carrying value. That's Mall of the South carrying value, acquisition value, and indicative terms of funding. He's also asking, how does the cost of funding compare to the forecast NOI/NPI yield? Ntobeko, can I give that question to you?
Yes, Andrew. I think I'll deal with the last components of it, and then maybe Leon, you can help with the NOI. I think in EPP in FY 2023 in euro terms produced EUR 41 million of earnings. Out of that, what we cash flowed out of it back to SA was about EUR 35 million. You can see that is slightly ahead of the range we had given when we last spoke. It's more than 60%. It's about 80%-85% of what. Then the others were retained just to continue with the refinancing of debt and the other things that need to be done in EPP. The other parts of the question on MOTS.
I think the carrying value of MOTS is around 1.8, if I'm not mistaken. Then the funding terms, it was three months. It's a five-year facility that we've secured, which is at a margin of 1.45 over three months JIBAR. Which JIBAR, I think at the moment, you know, it's at about 8.3 + that 1.45. That is the all-in cost of the deal in MOTS.
In terms of how the cost of funding compares to the forecast NOI yield. For budget 2024, the MOTS acquisition will be slightly accretive. Our forecast NOI yield is marginally ahead of the cost of funding that Ntobeko just spoke about.
Great. Thank you, Leon. Okay, Francois du Toit's got another question. Impressive solar installation on Mall of the South. Thank you for the recognition, Francois. His question is, how much of that mall's electricity needs are met by this plant, and how much did this plant cost, and was there any battery storage included? Leon?
Sure. Francois, the solar PV installation in Mall of the South cost us ZAR 45 million. Unfortunately, that installation does not or did not include any battery storage for various reasons. We are still trying to work around the feasibility on exactly how a battery storage solutions can potentially supplement that installation. In terms of how much of the electricity needs are met, is roughly 25%-35% of the mall's needs. Obviously, in the middle of the day, in fact, you know, on a perfect day from a weather point of view, we are actually producing more than what the mall need, but on average, over a seven-day, 24/7 cycle, that total consumption is only between 25% and 30% of the consumption.
Okay. Thanks, Leon. Okay, so Chris Logan from Opportune has a question for us, and he asks, on your net asset value of ZAR 7.66, you are on a 52% discount at your current price of ZAR 3.58. What do you ascribe such a wide discount to, and any ideas on creating value given this 52% discount? Chris, it's a difficult question 'cause we ask ourselves the same question on a daily basis. You know, the wide discounts, perhaps a discount greater than the average for the sector and so forth. The one thing we can pinpoint is our see-through LTV. We acknowledge it's high, we are gonna work on it, and when opportunities do present themselves to reduce it, I can assure you, we will definitely look at that.
Organic growth, similarly, but as you would have seen, stabilized operating metrics now will provide that platform going forward to get organic growth momentum into the business. From opportunities, Chris, what I think you're alluding to is buying back shares. Just to be absolutely clear on this, we are not for a minute adverse to buying back shares. What we need to do is apply trade-off thinking should we be in a position to have surplus capital at our disposal that will enable us to consider the best allocation of capital. Now, clearly, at a 52% discount, Chris, you are absolutely right in your thinking, buying back shares makes absolute sense. We get it. Unfortunately, we're not in that position with our LTV sitting at 41.1%, and a share price where it sits in terms of raising further equity.
Should we be in a fortunate position that we have surplus capital that we can pay down the debts attributable to those assets that could be sold? Yes, we would obviously factor into all the various opportunities that responsible capital allocation allows us for. There may be opportunities to buy share, properties at discounts, which may also be an option. Chris, we are alive to this. We're thinking about it on an ongoing basis. Then the last question that I see is from Zinhle Simelane from MSM Property Fund, and she wants Ntobeko to talk us through the debt reduction progress within EPP as well as the EPP portfolio. Another question is, would you say the distribution of EPP earnings was within your expected 79%-89% of distributable income range given in FY 2022?
60%.
Um-
Sorry.
Sorry, Ntobeko, you take that.
Yeah, let me take that one, Andrew. So Zinhle, I think let me do the first part of your question. I think if you look at where our group see-through LTV peaked at 54.2% in FY 2020, we've made very decent progress and reduced that by 6.9 to the 47.3 print that you see in the current year. I think some of the things that we continue to focus is some retention of earnings in EPP. That's why we don't distribute outside of our range. Also the most important is that EPP debt amortizes roughly about 2.5%, and that gives you a 0.5% reduction in that path.
Why you don't see this year is largely just because of the currency that has worked that out, but that will be our focus going forward. I think when we spoke of where we expected EPP in FY 2022, where we expected it to distribute in FY 2023 was at about 60%. The 85% that you see now is actually ahead of what we initially spoke about. Restoring EPP is ahead of what we projected.
Thank you, Ntobeko. Okay, the next question is from Nick Gillingham, and his question is from Signalam, and his question is: Can you comment on the recent like-for-like revenue growth of tenancy in the Polish shopping malls? There is anecdotal evidence that it has turned negative. Nic, I'll refer you to the EPP core presentation, where we do provide EPP specific comparators going back to 2019 by year from 2023 versus 2022 down to 2019. That is in our malls. It's not for the Polish sector after all. If you still have difficulty with that in terms of your source of information versus ours, we'd be happy to take that offline with you.
Nicolas Lyle from Stanlib asks, "Could you please provide us with more information on negative reversions in EPP, and when do you expect these reversions to turn positive?" Nick, if you look at the core portfolio of EPP, that's principally where the negative reversions sit at about 7.2% or so. We do believe that it's on a very small part of the GLA. In fact, there's a footnote there that I think refers you to how much it is in relation to the overall portfolio. It is really a small component. We believe that the worst is over, given that, as I said, EPP has been trading through very close to a recessionary environment this past year, and we believe that it will start turning positive. I'm saying in FY 2024, that is.
We've got another question from Zinhle, and this is, "Talk us through the impact of the battery and PV hybrid installation at Kwena Square. Has it yielded in diesel and electricity cost savings?" Leon, you can answer.
Certainly. Zinhle, Kwena is quite an interesting one. We actually had to install battery when we constructed this shopping mall, given that COJ could not give us a sufficiently big connection to the grid. We actually had to supplement the electricity at peak demand levels, the electricity capacity of that center. That's why there is a battery hybrid solution in Kwena. Most certainly, we also have our solar PV generator tied. During periods of load shedding, we can run on solar PV as opposed to diesel, we've achieved significant diesel cost savings.
Thank you, Leon. A question from Suren Naidoo from Moneyweb. He's asking, "What is Redefine see-through LTV?" That is 47.1%, Suren. Ndanaya Faku is asking, "Talk us through the diversification of income streams going forward." Ndanaya, I'm assuming you're looking at our alternative income streams. We've set ourselves, sure, quite a number of years ago, a target of ZAR 100 million. We are getting close to it now. I'm talking about a minimum five-year journey. It is not going to shift the dial significantly, but what it is going to do, it's gonna add value to our properties without us having to rely on our tenants' income or support. That is very, very important. It is a supplementary, if I can use that term, initiative.
It's by no means going to replace rental income in due course. We are a property business, we are a REIT, and we'll always be one. In terms of Anas Madhi's question from Ihaga. His question is, "Is the intention still to reduce your sharing in Community joint venture to 25%, and over what period?" Anas, just to go back, the two pressure points for our see-through LTV would be the Metro and the Community joint venture within EPP. If I could dispose of them at a price that makes sense, I would, I can promise you, and it's something we are looking at. It doesn't mean to say they are for sale. Market dynamics at the moment need to first settle. For example, the Metro joint venture has a master lease with Metro AG, which will run its course to April next year.
We need to get through this patch of uncertainty in terms of getting a proper handle on operating costs before we can even be in a position to entice a potential investor. The community joint venture is a very solid one, and we believe is capable of realizing book value or carrying value. Should I sell it at a crazy discount today and reduce my see-through LTV? I think considering all the trade-offs, I don't believe it's in anyone's best interest at this point in time. It is on our radar, and we will update you as and when we are in a position to confidently complete a disposal which will significantly improve our see-through LTV to a level closer to the regular LTV ratio, a range between 35%-41-odd%. Good. Well, thank you very much. It seems like we've exhausted all your questions.
If you have any more questions, I urge you please to reach out to us via our investor relations email. We look forward to engaging with you on our one-on-ones. Drop us a WhatsApp or email if you really need something urgently answered. Ntobeko, Leon, and I are here, and we are at your disposal. Just in closing, thank you very much. We appreciate your support, your patience, your confidence, and more importantly, I'm gonna challenge all of you to start thinking like us here at Redefine for our sector and start opting for the upside. As a sector, we need to start attracting new inflows, and the only way we're gonna do it is if we support one another in a positive way.
I know we can't have our blinkers on and look past the realities that we face, but if we can collectively work on a way to attract very necessary inflows back into the sector, not only will our lives tremendously get improved, but so will yours. Please, let's opt for the upside, and thank you, and all the best. If we don't see you, have a wonderful festive season as well. Thank you.