Good morning, everybody. Welcome to Redefine's pre-close update for the year ending August 31, 2023. I might be making an age-appropriate statement now, but I must tell you that 2023 so far has been the quickest year of my life. I'm sure for you guys similarly. Without any further ado, our conversation this morning will center around three key aspects. I will take you through our strategic overview. Leon Kok, our Chief Operating Officer, will talk about the South African property asset platform. I will then take you through the Polish asset platform. Ntobeko Nyawo, our Chief Financial Officer, will provide you with some financial insights. We will then also allow for any questions you may have thereafter. Okay, just moving on to our strategic overview.
What we are experiencing at the moment is a very interesting momentum shift, where we are certainly sensing that the commercial real estate fundamentals are beginning to build a positive momentum. I'll run through some examples just to illustrate my point. The organized business and government plan to remove obstacles to inclusive economic growth and job creation, for example, we believe will provide much-needed confidence back into the system. Public service inefficiency, we know there's lots of proof of it anecdotally, has created constructive capital investment opportunities for the private sector. Just two simple examples I'll make, one being the whole renewable energy expansion into solar by Redefine, for example. Also where, municipal collapse is offering now opportunities for private sector to step in and provide services such as firefighting here in Johannesburg.
The upward trajectory of inflation, we know is beginning to taper off, which brings with it predictable interest rate expectations, which is very welcome, although we do anticipate elevated rates to remain for some time. Then very, very importantly, despite the sluggish economic growth, we are seeing that Redefine South Africa and Polish portfolios are demonstrating, and Leon and I will be taking you through some of this, but remarkable operational resilience is coming through in absorbing the headwinds we faced during financial year 2023. You'll see the operating metrics, although subdued, are all improving across all sectors. Okay, just in terms of what keeps us awake at night, here is a very, very detailed analysis of opportunities and risks.
I think what is absolutely important is that the overlapping aftershocks of the pandemic, elevated inflation, the energy crisis, as well as the resultant higher funding costs, have all been absorbed and are now in our base. We are now experiencing a platform that we believe will give us that position for the upside as we move to 2024. In terms of responding to market dynamics in the second half of financial year 2023, you'll see that we have been very, very hard at work at responding to a lot of market shifts. Preserving value through organic growth and asset optimization, you will see, is going to be illustrated in due course. Our reliance on municipal supplied utilities, we are actively working on reducing.
Looking creatively to recycle non-core assets into growth sectors such as self-storage and even into logistics in Poland, will also be demonstrated as we take you through the presentation. In terms of optimizing capital, there's been a lot of work on proactive renewal of maturing debt facilities, also extending the debt maturity profile, and Ntobeko will be talking to you about that. Absolutely critical in this environment is the vigilant management of interest rate risk through the cycles, and very importantly, diversifying funding sources to limit that concentration risk. In terms of operating efficiently, preservation of profit margins, you will see, will come through the numbers in terms of our focus on efficiency, tight cost control, as well as alternative energy producers. We are intensifying our efforts to retain and attract tenants through offering added value.
Our digital ratio is improving, and that is to simplify our processes as well as to transform the tenant experience. In terms of our staff engaging talent, we are on a continuous process to attract, retain, and develop a pool of key talent to provide that internal pipeline of scarce property skills. In terms of employee wellness, we have programs that we actively encourage participation in, as well as that whole work-life balance, which is so important in a post-pandemic environment. In terms of growing reputation, we continue to reduce our consumption of energy through efficiency interventions and, very, very importantly, collaboration with our tenants as well as solar PV expansion. In terms of our non-financial information, here we're looking at strengthening our oversight and reporting, because this will become more and more important as we journey along in terms of sustainability reporting.
Okay, in terms of our strategy in action, we have done what we said we would do, and we will continue doing so. In terms of investing strategically, EPP is now back to a cash-generating investment proposition. We have restructured the ownership of our government-tenanted office portfolio. Very, very pleasing, we have stabilized our asset values. In terms of optimizing capital, and Ntobeko will talk about how we've materially reduced balance sheet risk. Very recently, in fact, last week, we issued ZAR 1 billion Green Bond, which has taken the total issuances in this financial period to ZAR 4.2 billion. Most importantly, we've secured the renewal of all loans maturing in 2023. In terms of operating efficiently, the digital ratio is a pleasing 20.5%.
The South African portfolio is now delivering organic growth and stable operating margins in the difficult environment of high administered costs, as you know. We have lifted our tenant retention levels across the board. In terms of our staffing, we have shifted our focus from transformation to inclusivity and impact. We have launched a future fit skills program for senior leadership, and we've aligned EPP's employee value proposition to Redefine's Group one. In terms of growing reputation, we have completed our climate risk management assessment for South Africa as well as Poland. We've advanced our ESG strategy through collaboration with key stakeholders. I just wanna add that we are, on the October 4th, embarking on a ESG roadshow, and I'll encourage each one of you to please participate and attend that roadshow. It will be very, very informative.
Then lastly, you'll note that we have reduced our consumption of grid supplied energy. Just looking ahead, as I said earlier in my opening remarks, there is cause for optimism that the property cycle has bottomed, and we firmly believe that 2024 will be that turning point in the cycle for the upward momentum. Redefine's business has been stabilized. There is a moderate improvement in all our operational metrics, but very importantly, navigating the effectiveness of the structural energy transition, the expected shift of the interest rate cycle, as well as responding to evolving stakeholder needs, will all be critical to positioning Redefine for its growth trajectory beyond 2024. What I'm gonna say now is let's opt for the upside, not only for Redefine, but for the country, and most importantly, for the REIT sector as well.
I'm now gonna hand over to Leon, who's gonna talk about the local operations. Thank you.
Good morning, everybody. In terms of our South African dashboards, certainly you will note, as Andrew said, that we've seen a marked improvement in all our operating metrics. I'm very pleased to talk to the scorecard, and you'll note an improvement across all our metrics. After this, we'll delve into the individual sectors. In terms of our occupancy, you can see a continued improvement on that, so we're just sitting shy of 93%. On the right-hand side, we've given you an analysis of where that vacancy sits across the sectors. Now, traditionally, we report the occupancy per GLA, but on the right-hand side, we also try to give you an indication of what exactly is vacant. You'll note that per GLA, our vacancy sits at 7.1%.
If we applied an assumed rental that we think we can achieve for the vacant space, the vacancy is actually only 5.8%, which speaks to the vacancy sits in the lower quality assets. Particularly if you look at that retail sector where the occupancy or the vacancy has increased a bit, that sits in our motor dealerships and some of the office components that is vested within some of our retail malls. From a through rate point of view, we don't believe that presents significant opportunity from a revenue point of view. At a GMI level, that vacancy is only actually 2.7%. Similarly, on the office front, a bulk of our vacancies sit in the B and lower grade assets. In terms of the renewal reversions at -7.5%, continued decline in that.
You'll see in particular in the office space, we're starting to see that metric reverting closer to the positive we would like it to be eventually. Although for the medium term, we continue to expect a marginal negative reversion on that front. In terms of our tenant retention, the point Andrew made, you can see that we continue to be very healthy retention levels, which is a combination of many things. Obviously from a on the leasing front, very active there to ensure that we are proactive with our lease renewals, but as well as some of our sustainability interventions which create that stickiness for tenants to keep within our spaces. In terms of the renewal success rates, I'm very pleased with that number.
Typically, you would see as you progress in the year that number would be lower simply because there's more deals being done the longer you are in the year. 70.3% does speak to the second half, in particular, being very active. You can see on the right bottom-hand side of the slide, we've given you analysis of where our renewal reversions sit. I thought it's quite interesting to note that it's not all negative. 65% of the deals we've done by lease, number of leases or rent as GLA, it's actually been flat to positive. Yes, admittedly, it is at the smaller pockets where we managed to achieve that flat to positive reversions, and the bigger reversions sits typically in the big space.
In my mind, that's very, very encouraging that there is definitely positive momentum on the leasing front. In terms of the lease escalation in force at 6.3%, I think given the inflation environment that we operate in now, safe to assume that hopefully that would have bottomed and we can start to see in the next medium term to start progressing that to move up slightly. In terms of the unexpired lease term, again, at 3.5 years, we're quite comfortable that it doesn't present any meaningful challenges from a lease expiry profile point of view. Just in terms of our sustainability initiatives, particularly focused on the environmental front, and to remind you where our environmental initiative sits is around electricity, water, as well as waste. We've been very active.
Again, we thought it'd be interesting just to show you what we've been doing, and in particular, how that supports our intention to retain tenants and attract tenants. On the renewable energy front, the installed projects, we're just over 40 MW. The installations in progress, if we complete that by towards the end of this financial or this calendar year and early next year, we'll be touching on the 50 MW installed capacity. You can also see there are very exciting feasibilities under progress, particularly in the retail and industrial front. The industrial opportunity, I think, will be further enabled once we've got further meaningful progress on the ability to wheel energy. Speaking about wheeling, we've got two very exciting projects on the solar wheeling front.
We've alluded to before on the industrial front, we've been selected to be part of a pilot project in the City of Cape Town, and we're well advanced to press the green button on that project to install a 5.9 MW installation on our DC at Brackengate. The offtakers will be two of our retail malls within the Western Cape. That will be a very nice opportunity for us in that we're gonna be the generator as well as the offtaker in that solution. We're really looking forward to that. In terms of the office portfolio, we've entered into a power purchase agreement to procure 39 million kWh per annum. The effect of that, obviously subject to the generator reaching financial close and progressing with that project, is estimated to be December 2024.
Now, 39 million kWh per annum roughly is about 17 MW installed capacity. We're gonna be one of few offtakers in that project, so very excited about that. The benefit of that, of course, is that we enter into a fixed rate that will be subject to a manageable escalation and your entry rate per kWh is substantially lower than what you would pay Eskom. In terms of our Green Star Rating progress, particularly where we are quite pleased about is on the retail and industrial front, where you can see we've made meaningful progress to enter those sectors also now within our program of certifying our buildings. The real benefit of Green Star certification for us is that it really entrenches from a property management point of view, the initiatives and the practices that drives the Green Star rating.
It's not so much to chase the Green Star, but more importantly, to get our teams to really understand what are the behaviors that enable a building to be sustainable. We're also extremely proud about our Net Zero certifications. We've got three office buildings that receive that accreditation, and that certainly is a first, not just for the SA REIT sector, but also within South Africa. In terms of our water efficiency, remember on the Propelair toilets, these are air-enabled toilets that use substantially less water. Per flush, it roughly saves six liters of water per flush relative to a conventional toilet. Now, you would see Andrew made the point that in collaboration with our tenants, this exactly is an initiative like that. All efficiency interventions is directly to the benefit of the tenant in that they obviously pay less for the utilities consumed.
Same goes for our LED lighting program. We've retrofitted a meaningful number of lights over the last number of years, and there certainly is much work to be done on that front. Then on the waste management side, very good progress being made, and that's roughly about 50% on average, if you look between the three sectors of our waste generated at our buildings are now being recycled. Again, we can only do that in collaboration with our tenants. We just touched on the individual sectors. On the retail front, you'll see that slight uptick in vacancy, and again, the point we make, that firmly sits within the motor dealerships as well as in our office space. It's roughly about three motor dealerships that have gone vacant during this period.
Again, from a revenue point of view, the impact of that is fairly minuscule. On the renewal versions, you'll see continued improvement on that front, so at a -3.8%. Certainly in terms of the retail metrics, we are very confident that going into 2024, we'll be in a far better position to get that number to revert far closer to a 0%. In terms of tenant retention, similarly an improvement, as well as on the renewal success rate. The weighted average lease escalation is staying flat there at a 6%, and certainly that will be a target for us in the current environment to start negotiating at a higher escalation going forward. On a like-for-like footfall, these percentage increases on a 12-month basis.
As at Q3 , 2023, we've seen a 6.7% increase on the prior October or May's twelve months performance. You can see a continuing increase in footfall. Similarly, that's a flow-through to what we've seen on the income turnover improvement of our tenants. That's behaving at a similar level. At our rental sales ratios at a 7.3%, it certainly is, in my mind, very not demanding at all, and certainly bodes well from a lease negotiation point of view. We hope that that number will trend closer to a 7% to be more in line with the SAII average. Obviously, one of the factors that impact that point is the total cost of occupation. We do acknowledge the cost, the additional costs associated with load shedding that is typically borne by the tenants.
On the office front, again, you'll see that the vacancy numbers steadily is coming down, so we're very pleased by that. Similarly, for the renewal reversions. In fact, the -14% at Q3 , in the last two months up to the end of July, we've done some really exciting deals. I'm very confident that the number we're gonna print at year-end will be lower than that even. That certainly, in my mind, is definitely a positive indicator and indicative of underlying leasing activity. In terms of our tenant retention, similarly staying very high. Again, the fact that our portfolio is more skewed to P- and A-grade stands in good stead in terms of tenant retention. Same goes for the renewal success rates. Typically, you would see, as I mentioned before, that your renewal success rate deteriorates as the year move on.
In fact, in the last six months, we've done some very good deals that managed to bring that renewal success rate up. Similarly, on the average lease escalation at that 6.7%, we're hoping that we start doing deals between 6.5%-7%. It should remain flat at that level, if not trending upwards. Lastly, on our industrial portfolio, again, a very stable performer. It's certainly in the last nine months have continued with that performance. You'll note at half year we showed that slight elevation in vacancy, and we made the point that was just a single warehouse that had gone vacant, and that we were confident of reletting. At Q3 , the vacancy has improved to 4.1%.
In fact, in the last two months, that has gone even down further. I'm quite confident that by year end we will print a similar number to what we had in FY 2022. Again, speaking to the resilience of this sector for us, and again, the condition of the assets that drive that demand. In terms of renewal reversions, which is very encouraging, is that we start seeing a positive reversion in the industrial front. That whereas in the past, we haven't really seen market rentals behaving similarly to come with that demand. The demand we've seen in the industrial sector certainly allowed us to be more aggressive on the lease negotiation. Same goes for our tenant retention, a healthy short of just shy of 95%, as well as the renewal success rate.
Our weighted average unexpired lease term at 5.2 years certainly will stand us in good stead going forward. With that, I'll hand over to Andrew to take us through Poland.
Thanks, Leon. Okay. Just moving on to EPP for starters. You'll note that the retail market fundamentals are improving on an ongoing basis in Poland, and that is on the back of inflation that is now cooling off. Interest rates, and I'm talking about local interest rates, that have been placed on hold, which is very, very positive from a consumer sentiment point of view, which will benefit the retail sector in particular. The trend of value retailers expanding continues to dominate the Polish retail landscape, and we're very pleased with the like-for-like footfall for the period January to May this year, where we've seen about a 6% increase in terms of footfall. More importantly, turnover for the retailers has gone up by 9%.
You'll note that the best retail category performance of the period is service retailers up 27%, entertainment up 32%, but DIY down, and I think that's a kind of a global trend, down about eight odd percent, with household appliances following suit. In terms of being discretionary purchase items in what has been quite a challenging time for consumers during the first half of 2023, I'm talking about the calendar year in particular. Very pleasingly, rent collection for both the retail and the office sectors continued to be very strong, with a collection rate of 99%. In terms of the ESG journey within EPP, we are progressing very nicely on energy efficiency audits to comply with the EU taxonomy that's coming. We have initiated a pilot project to establish the feasibility of the cost of converting two properties to Net Zero.
Waste management is an area where we are focusing recycling efforts in a big way. Just lastly, we have progressed, and we hope in the next year or so to be installing solar panels on most of the rooftop buildings within the retail properties of EPP. In terms of the core portfolio, you'll see from a priority point of view, what is preoccupying management at the moment is the takeover of the M1 Group property management and leasing operations when the M1 master lease comes to an end in April next year. High energy and service charges are being mitigated through power purchase agreements and very importantly, a concerted effort on reducing consumption, where over the last two or so years, we've managed to reduce energy across the portfolio by about 20-odd%.
I've already spoken about installing solar PV plants, but another focus point would be improving our operating margins and looking how we can enhance our digitalization efforts through rolling out loyalty apps as well as customer data systems. In terms of the Metro claim, we are awaiting the outcome of an arbitration process, which should be known by about mid-October. At this point, there's no real update at this point in time. Just a note that the only major debt that is maturing in 2024 will be the Henderson joint venture, where EPP share is EUR 45 million. We've provided you with EPP's core portfolio trading stats on this slide, and you'll note that most of them, if not all, are trending the right way. Vacancy, for one, a very pleasing 1.9%.
Then on the next slide, we've also provided you with the joint venture's trading stats as at 31 May. The one blemish, if you like, will be the Henderson JV vacancy at 13.8. You'll see there is a footnote that I just need to draw your attention to in that thirteen point eight percent has been reduced, as we speak, to 8.7% due to good letting activity during the month of August, in particular. Moving on to ELI. We're happy to report that valuations have remained firm, mostly due to indexation of leases and also some market rental growth, which has offset the negative impact of higher yields. Development activity across the sector has slowed down, mostly due to higher funding costs, with the bank requiring higher pre-let levels.
Which is actually a good thing, because this roots out speculative developers who have been very, very aggressive in the past on tenant installation incentives, et cetera. That is coming to an end now. In terms of rental rates, they continue to rise. Then you'll note that the GLA of the portfolio has increased by just under 190,000 sq m, where we completed six developments during this period. The average occupancy is 70-odd% at a cost of EUR 151 million, and that's for 100% of ELI, by the way. Leasing activity continues. You'll note that we've renewed leases totaling just under 22,000 square meter , but very, very pleasingly at an average rental rate of just under EUR 5 per square meter , which represents an almost 7% growth.
New lettings of 11,000-odd sq m were recorded at an average of EUR 4.44. That represents a rental increase of just under 10%. You'll note that even on new developments, coming back to my point earlier about no longer having speculative developments to compete with, we are seeing good lettings at EUR 4.45 per sq m. ESG within ELI is also a focus area in terms of looking at ways to reduce operational carbon emissions, et cetera, in terms of construction through the use of prefabricated elements and local suppliers, et cetera. Our new developments all have a BREEAM certified level of either very good or excellent. We're continuously looking at green solutions that will reduce tenant operating costs on an ongoing basis.
In terms of the value uplift on the six developments I spoke to earlier, you'll note an 11.5% uplift was achieved. As we speak, there are three fully let developments of just under 88,000 sq m in progress at a cost of EUR 82 million. Okay, just moving on to the core portfolio from a priority point of view. You'll note vacancies are high, and that is mostly due to the six odd developments that came on stream in 2023 that are roughly 70% let. That percentage will reduce in time, and you'll note that all the other metrics are trending in the right way. We will continue to secure pre-letting on land holdings, another area of focus for us to develop at attractive yields. Yields have picked up in the last while, given the better rental environment.
We will continue to recycle assets to fund new developments at accretive yields. The portfolio refinancing at lower margins and reducing amortization, if applicable, is an ongoing process. Lastly, we will take advantage of the robust tenant demand by letting available spaces and undertaking quality low-risk developments in the sizable key logistics hubs within Poland. Moving on to self-storage. As you know, we're very, very excited by this expansion opportunity. The market is still in its infancy, and we expect to grow and develop that market as we go along through a number of developments that are underway. As you will note, there are five developments currently under construction at a cost of roughly EUR 40 million. In terms of Poland's growth prospects in this market, it is largely underdeveloped.
If you have a look at about 1.7 facilities per million population is extremely low, if you look at the average of 10.9 facilities per million as a European average. We're not saying it's gonna get to 10.9, but even if we double or triple it is fantastic growth from where we are right now. So the demand is underpinned by robust micro-business needs, very importantly, not just individuals representing 48% of overall users. This is above the EU average of 29%. That, for us, is very encouraging.
We are competing with a number of single site operators, et cetera, which for us is the real opportunity, where we can offer institutional grade facilities such as the Stokado facility in the picture over here going forward in the key nodes of Warsaw, Kraków, Poznań, Gdańsk, as well as in Wrocław. Okay, just in terms of ESG, we will similarly look here to ensure that our investments in developments in major cities are in line with best practice from an ESG perspective. Okay, I'm gonna now hand over to Ntobeko Nyawo, who's gonna take you through some financial insights. Thank you.
Thank you, Andrew. Good morning, everybody. I think if you just from our earnings profile, our focus is really just around stabilizing our margins and really improving the quality of the earnings that we're generating through the period. If you look how we work out our group net operating profit margin, which in FY 2022 for the South African portfolio printed at 78%, very stable. We expect it to print similarly in FY 2023 at 78%. The way we work that out, it's actually just before, it's after administration cost, but before our funding cost. We've seen a very pleasing improvement of our net operating margin in EPP since its transition and its restructure from 65% to 73%.
Also pleasing is if you look at our distributable earnings quality from 2021 to now in 2023, where non-recurring income has remained firmly below 1%, and the improvement in terms of recurring income in 2023, we expect it to sit at 99.7% of our earnings, which bodes very well for the quality of our earnings. Just in terms of the sensitivities, in terms of our earnings, I think you will see the large drivers is largely just around what will happen to our funding cost, and we do share those sensitivities with you. In terms of our offshore euro rate, if it were to move by 0.5%, that will have a ZAR 0.004 impact on our DIPS.
In terms of the local funding, you look at in terms of the local euro rate, if it were to also move by 0.5%, you will have a 0.3 cents impact on the DIPS. On the ZAR side, it similarly, you will also see a 0.3 cents impact on distributable income sensitivity if it were to move by 0.5. Then on the operational rent side, it will really be if you look at the indexation that we achieve in Poland, if it were to move by 1%, that will have an impact of 0.4 cents on our earnings.
Very well controlled, I think, cost management. You can see that our administration cost, if they were to move by 1%, you will have a 0.1 cents impact on our earnings. If we move along to just the balance sheet management, I think for us, our focus is to really build a balance sheet that supports a sustainable growth of our simplified asset platform. With that, you know, we're very pleased to report that we've maintained a very stable liquidity profile as at ZAR 4.5 billion as at the end of May 31, 2023. Andrew touched on this in terms of the environment that we're in. You know, we've seen an uptick in our funding cost in the weighted average cost of debt.
That increased across the group by 70 basis points to 6.7%. That's largely just been on the back of the increase of our funding rates in JIBAR as well as in the EURIBOR during the period. What we've maintained, which is also part of our gradual reduction of our see-through gearing, is we've maintained a 2.4% debt amortization of our offshore debt in Europe. In terms of the values, Andrew touched on this. I think, we're in the process because we value our properties twice a year independently. At the moment, we're expecting a relatively very stable outcome in terms of that.
What supports our liquidity profile as well is that the business has really remained quite strong in terms of its cash collections, both in South Africa as well as in EPP. If you just break down the cost of debt in terms of the ZAR funding, which has moved up by ninety basis points to 9.6%, and in EPP, that has moved up by ninety basis points to 3.5%. I think in this environment, we also pay quite a careful attention to our hedging, which we've maintained very healthy at about post the refinancing of Echo Marcelińska, the tenor was maintained. It was increased to two years. But as at the end of the quarter, we're sitting at 79% of our group debt, which was hedged for 1.5 years.
If we move along to our maturity profile, I think if you look for the next four years up until FY 2027, we've got a very low risk debt maturity with an average somewhere between 10% to about 16% in each of the given years maturing from FY 2024 up to FY 2027. I think just in terms of just to highlight our proactive dealing in terms of the maturities in 2023, the last time we spoke, we had one thing left, which was just the refinancing of Acorn Massalin, which we subsequently concluded by extending those for a further five years. We do share with you the margins that we closed those deals at between 2.5% to 2.66%.
Those loans are hedged for 75, up to 75% for around about the hedging rate of about 3%. That takes in your all-in cost of debt in these to about 4.5 or roughly about 4.7% range. In the period when we also on the SA side, we did repay a small note of ZAR 500 million, which was in preparation for a very successful issuance of a further of our Green Bond, which Andrew touched on. The outcome of it, which I think we had to upsize due to the bids that we received, of which were close to ZAR 1.9 billion of bids that we received. We upsized our allocation to about ZAR 1 billion .
We split and show you the margins in terms of what those tranches each fetched in the market. What is pleasing for us is in terms of the outcome, was also that compared to our previous issuances on this, we really saw some very nice spread contraction, especially on the long-term tenor of seven-year, where we achieved 170 basis points margin above three-month JIBAR, which was a 30 basis points spread contraction from our previous issuance. Just touching on our LTV, I think in the period that we're in, we're expecting that we'll come, we'll print an LTV of 41.5%, which is just slightly outside of our medium-term target range of 38%-41%.
The real impact in terms of debt is really on the back of a weaker rand. At the opening of the financial period, the rand to the euro was sitting at 16.96 level. Since then, it has weakened by about 24.5% to 21.12 level. You can see that is really the impact in terms of where the rand, if it stays elevated, we expect that it will print slightly just outside of our range. If the rand starts coming back, that will also improve accordingly.
In terms of the sensitivities to the LTV further than just the currency or the Forex movements, really just around the property valuations, is that if we're in the SA property values, if you were to have a 1% movement, which will be an absolute amount of ZAR 0.6 billion, you will have a 0.3% impact on the LTV. Similarly, on the EPP values, if they were to move by 1%, which would be an absolute amount of ZAR 0.2 billion, you will have a 0.1% impact on our group LTV.
We also give the sensitivity in terms of our investment in the JVs, which if we move by 3%, being an absolute amount of ZAR 0.6 billion, we will then expect an impact of 0.1% on the LTV. I think just one thing to call out in terms of the Mall of the South, which is an option that comes up in December, later in the year after the financial year end, that impact we still estimated at about 1.1%. In this period, I think we're also pleased that our ability to cover our debt service remained quite stable with our ICR being forecast to remain at a healthy 2.4x in terms of interest cover ratio.
The see-through LTV impacted slightly as well by the Forex movement. You will see that it has come out, it's coming out at 48.6%. That will continue with our gradual reduction strategy, which I spoke to earlier, in terms of keeping amortizing our European debt at about 2.4%. If we move along just to deal with the trading update for 2023, I think we're pleased that, you know, largely our operating metrics, as Leon alluded to, is very pretty stable in an elevated. It's offsetting the impacts of the higher interest rate. We're expecting our FY 2023 distributable income per share to be in line with the guidance that we provided of between ZAR 0.48 and ZAR 0.52.
I think when we touch on that, also it is important to look at in terms of, there are some early green shoots in terms of where the interest rate cycle is at. You know, inflation in South Africa in July printed at 4.7%, very close to the medium target range. We are starting to see that even globally. Also in Europe, inflation is cooling off, and we're expecting that hopefully this will be a shift in the interest rate cycle, which will bode very well for the impact in terms of our cost of funding over the period of time.
Absolutely, in this environment, I think for us to continue to support our organic growth, the focus will be on our operating margins in both our SA portfolio as well as in our offshore portfolio. Then liquidity, just to make sure that the balance sheet risk is kept at a rate where we believe it's a very strong balance sheet. We'll continue focusing on making sure that the healthy liquidity position is maintained.
We expect to maintain that through the period, and I think it's pleasing with the outcomes that we've seen when we went to the market on the debt capital markets to raise a bond with the resounding success that it was, with a very strong demand in terms of our credit that also priced quite decently. In terms of capital allocation, I think our focus will be on developing our long-term growth opportunities, which Andrew's touched on in our Polish logistics, as well as exploring and developing our self-storage market segments in Poland. Just also as a closing point, I think continuing for us in terms of sustainability, improving our sources of energy, and also bolstering our business resilience by investing in renewable energies across the portfolio will also be a key focus.
With that, we'd like to thank you, and we'll ask Andrew just to moderate on the questions. And then we thank you very much.
Thanks, Ntobeko. Okay, we seem to have quite a few questions this morning, which is good. Between myself, Leon, and Ntobeko, we'll attempt to answer them. If any of the questions that we have provided answers to don't meet your expectation, please reach out to us via our investor relations email, and we will come back to you. I'd also like to ask all of you, please, if you haven't already done so, please follow our LinkedIn page for very interesting insights into Redefine on an ongoing basis. All right, the first question is from Tyler Ginsburg. The question is: How can you substantiate the claim that the property cycle has bottomed given economic headwinds in both South Africa and Europe? Tyler, I think let's split the answer by talking firstly about Poland, not Europe, but Poland specifically.
You may recall from our earlier points that I made around Poland that consumer sentiment is shifting positively. You're seeing it in the statistics coming through from a trade and a footfall point of view. As the consumer sentiment improves, and remember, Poland is a consumer-driven economy, it bodes very well for economic growth into 2024, where consensus forecasts are well over 2%, having dodged, this year, a recession. From a South African point of view, we do take the point, yes, the economic headwinds are still there. We do have sluggish growth. We do know that. However, look at the fundamentals of our property metrics, and you'll see that we are not sliding any longer. We've actually bottomed and, in fact, are, in most cases, improving our operating metrics, despite the difficult situation we find ourselves in.
More importantly, what Ntobeko said earlier, given that inflation printed where it did, about a week or so ago, it is very, very encouraging for us that we are very close, if not at the peak of the South African interest rate hiking cycle. As you know, the property cycle follows the interest rate cycle very, very closely. That's how we make that claim amongst a whole lot of other things in my opening remarks about why we should be positive about the retail sector and, more importantly, the real estate sector in South Africa. Okay, just upon, Damian raises a question with regard to electricity wheeling. Is the strategy to move to a zero net? If so, is consideration given to acquiring sites purely for solar generation and storage? I'll let Leon answer this because, Damian, this is a subject of ongoing conversation and debate.
Damian, with regards to energy wheeling, the real opportunity for us there is to unlock latent potential in existing assets. Let's take, for example, the pilot project in the city of Cape Town. Our tenant in the warehouse there, typically a warehouse tenant, the load is quite low relative to the generating capacity of the roof on that site. Our tenant there roughly has a load of [1600] kW, and the roof can generate, or we can install a capacity of close to 6 MW. That will allow us then to generate off that roof 6 MW, and then the wheeling enables us to transfer that generation to where the demand sits, typically in the retail or office environment.
No, the strategy is not to acquire additional sites, but rather to unlock the potential on existing sites, either in our industrial roof space or on lands, excess land that is not necessarily suited to development of property, but could potentially lend itself to ground-mounted solar farm.
Thanks, Leon. Okay, just moving on. Surain Naidoo asks: Please give a little insight into CapEx for the year, total and the split between South Africa and Poland, as well as spending plans on the new Polish self-storage business. Surain, I'm not too sure if Ntobeko can answer the first part of your question quite yet. As you know, we are still in the throes of finalizing our numbers for the year ended August 31. We're not quite yet there. I can just talk about the Polish self-storage business for a minute and say that we've committed EUR 50 million of equity to this venture. Plus, let's just work on the basis of another EUR 50 million of debt.
That's a total of EUR 100 million over a period of about three-four years, maybe five, dependent on zoning and such things coming through that may retard or delay us in the process, which will be rolled out in due course. Nthabeko, have you got any insight on the other, first half of the question?
Andrew, thanks. Surain, I think we will, to Andrew's point, allude to this in the year-end. If you look at our LTV pipeline, we do project CapEx, which has a 0.2% factor on our LTV for the remainder of FY 2023, and we'll unpack that in full in our year-end results.
Thank you. All right. Moving on, Damian again asks, "The continued discount to NAV that has persisted since COVID in the SA REIT market is concerning." By the way, we share your concern, Damian. "I recall Andrew suggesting a longer term foreign listing to improve liquidity." Damian, that's a pipe dream that will come in due course. Maybe our offshore assets lend themselves to that. We will assess that on an ongoing basis as we are. You note that foreign REITs have recovered significantly. What actions are being undertaken to remediate this, notwithstanding local market conditions? For us, Damian, it's simple. We manage the variables under our control. That speaks to organic growth, it speaks to recycling capital and not resorting to very, very dilutive equity raises.
We will continue to build our business with the limited resource we've got through very strategic and selective deployment and allocation of capital, and very importantly, make sure that we are running as an efficient business as we possibly can through digital interventions and through choices around renewable energy, for example, wheeling, solar PV, and then obviously, a strong focus on collaborating with our tenants to ensure that we responsibly use our utilities as well. In terms of the next question that comes from Mohamed Lunat, it's a long question, so forgive me if I read this. "I'm trying to understand what the property sector is telling us. Yields of around 10% seem reasonable for the current interest rate environment, but the sector is trading at close to 50% discounts to NAV.
Reversions are still negative, and the interest bill is rising, but admittedly is close to peak. Earnings are not going to be rising at a rapid pace for a number of years. If you were an outside investor, would you pay NAV for a property company like Redefine? Because then your yield will be 5%. I would not pay the full NAV because I will want a double-digit return. My concern is that NAVs are too high and the risk that they need to come down is the question. I think, Mohamed, in that very lengthy question, to get to a share price equal to NAV, Redefine needs to get its distributable income per share to about 60 cents per share, in our view.
We look at it on a total return basis to give you that double-digit return that you're asking for. Buying the shares at this current price, you can very easily get to double-digit returns, Mohamed, without worrying too much about our NAV. For us, over the medium to longer term, our objective would be to get to that 60-odd cents per share to get back the share price to the NAV level. We are confident in our valuations, by the way. They have been through a very robust review process. By the way, they are all independently valued, 100% independently valued every year.
More importantly, if you look at all properties that we've been selling, none have been at levels lower than book, which then confirms to us that NAV is still a realistic value measure on our balance sheet. All right. Moving on, Damian again asks, "What is the primary reason for the significant decrease in WALT for EPP and ELI?" Damian, if I can just draw your eye to the 2022 column. For EPP, you'll note there's a footnote. It did include two properties that have been since removed, put into the M1 JV, which skews the FY 2022 comparative. The half-year comparative is in line, if you like, with the M1. In terms of ELI, the reason for the decrease is mostly due to development activity.
Those six properties I spoke of that came online, 70% are occupied, is what has caused that WALT to decline in this period. Pranita asks, "Thank you for the update." You're welcome, Pranita. "Can you please provide some insight into the persistent weaker reversions in EPP's portfolio?" I think, Pranita, you need to firstly contextualize that reversion. I don't think we made it that clear in this presentation. We will at the year-end. It's on a very small component of the tenant base that you are seeing that, and these are historically high-end fashion type tenants that are reverting negatively in that there's been a shift, if you like, to the value retailer. But we'll give you more insight into that as part of the year-end. Denise asks, "Are you selling assets?" The short answer is, Denise, every asset is for sale at the right price.
We are not actively disposing of assets to remedy any balance sheet issues at this point. We are selectively selling some non-core logistics assets, for example, in Poland, which we will recycle into new developments at accretive yields going forward. But there's nothing on a for sale list per se. However, if we are approached, we certainly consider every offer very, very seriously, because deleveraging and also liquidity in this environment is absolutely critical. Okay. Tom Olani is asking us: How do your company measure ESG factors, and what impact does ESG factors have on your financial performance? Tom Olani, if I can please appeal to you, come to the ESG roadshow on the October 4th. I am sure Annelize Giliomee will be answering all of your questions and more.
Alistair Anderson is asking: Did you consider buying any assets from distressed SA funds in the past year, or is your strategy to buy offshore assets rather? Would you say private groups are more likely to risk capital on underperforming assets? For example, Rebosis has had malls for sale, and private buyers have stepped in. Alistair, our strategy is one of continuously improving our property portfolio while preserving our loan-to-value within reasonable ranges. As a consequence, we haven't been looking at buying any of the distressed assets. Yes, we have been deploying capital into Poland. You would note from the conversation in Poland, the logistics expansion continues through development activity as well as self-storage. But here in South Africa, we are optimizing what we've got to remain relevant to our user needs.
I can't speak for private buyers of distressed malls within Rebosis. I would, however, imagine that they are very highly geared, which wouldn't suit our intentions of maintaining a LTV at a reasonable level. Okay, Michael Klöpper asks: A competitor recently reported negative growth in Poland. Why do you believe your Polish operations fared better? Firstly, Michael, I'm not too sure who that competitor is, but what I can talk about is the quality of our retail and our logistics assets. They are prime assets. They are in prime locations, and they are managed by fantastic people. So for that reason, we are able to report positive outcomes in that market.
Myburgh Barker asks: Can you please clarify the all-in cost of the new Echo and Marcelińska facilities with respect to hedged portion thereof appears to be a base rate of 3% plus a margin of 2.5%, all-in cost, 5.5%. Is the three-month EURIBOR the reference rate for the 25% unhedged plus a margin of 2.5%? He's asking Ntobeko to please clarify how does he get to 4.5%-4.7%. Okay.
Thank you, Andrew. Just to clarify, I think what I was referring to is if you look at the Echo facility, the margin is 2.5%. Then you plus with the 75% of the hedged rate at 3%, which works to your all-in of 4.75%. Then on Marcelińska, which is a smaller facility at EUR 45 million, that margin is right. It's actually about 5.12%. But in reference to our average funding portfolio in Poland, the all-in is somewhere between 4.75% and 5.5% over the period. Thanks.
Thanks, Ntobeko. Okay, Zintle asks: How does the turnover figure for the South African retail portfolio look like? I'll hand off to Leon Kok.
As I mentioned, our footfall growth for the 12 months up to May was 6.7%. The turnover figure has slightly performed better than that. It sits at 8% growth on a corresponding 12 months in the prior period.
Okay, thank you, Leon. Matthew Marder asks: What is the payoff period for a solar installation? Will this translate into higher earnings over the longer term, considering the initial capital outlay? Leon, do you wanna respond?
Certainly. Matthew, just in terms of our solar installation, we don't typically look at a payback period, but if you wanted to translate it, the yield on the installation, depending on what node, and again, what the Eskom or the prevailing municipality tariff is, our yield typically year one ranges between 14% up to even 18%. Our average payback for solar installation is anything from four-seven years. Your question about will it translate into higher earnings over the long term, I must remind you that we've commenced with our solar installations way back, even before it was popular, as early as 2015. That's why our fleet is so sizable at this point. What it does, it helps us to mitigate the higher than inflationary increases that we have seen from Eskom over the last while.
It certainly is another lever to enable us to manage that operating margin that Ntobeko was referring to.
Thanks, Leon. Okay, Damian, thank you. Damian just. He actually didn't ask a question. He just said, "I wanted to congratulate all on maintaining dividend guidance despite the fundamentals being as difficult as they are." Thank you, Damian. It is a delicate balancing act, and to be brutally honest, we were tripped up earlier on in the year with calling the interest rate cycle. We've learned our lesson. We know where we went wrong, and we will endeavor never to repeat that again. Etienne from Truffle says, "You indicated that you need to get DIPs to ZAR 0.60 per share." I saw my colleagues there, Etienne, as I was saying it, have their eyes stretched. "How do you plan to get to this level given rising funding costs?" Now, you will note, Etienne, I didn't say I'm gonna do it next year.
This is not earnings guidance for 2024. This is our medium-term objective to get the share price back to close to NAV, which was to answer the question. I would like it back tomorrow, but clearly, I have to be realistic. We have got constraints economically as well as from a funding point of view. Very importantly, we are looking on an ongoing basis at all aspects of our business to ensure we're getting the highest and best use of each one of them. That's how we will get there in time, in conjunction with operating as efficiently as possible. Okay, so that's all the questions. I wish to thank each and every one of you for your attendance this morning. As I said, if you have any further follow-up questions or you want clarity, my colleagues will be in Cape Town for the property tour.
That kicks off tomorrow. Please make use of that opportunity to talk to them. If you need other questions answered and you're not on the property tour, please, email us at investorenquiries@redefine.co.za, and we will respond. With that, thank you very much, and have a fantastic day further.