Good morning, everybody, and welcome to our first half results presentation. My name is Ian Brown, part of the Investor Relations team here at Tri Tax. I'm very pleased to be joined here today by the Chairman of Tri Tax Big Box, Aubrey Adams Colin Godfrey, our CEO and Frankie Whitehead, our Finance Director. Before I hand over to Aubrey for some opening remarks, I will quickly run you through some housekeeping points. The team will run you through the results presentation, and thereafter, there will be an opportunity for analysts and investors to ask questions.
There are 2 ways ask questions, you can input them into the web chat by pressing the Q and A button. Or if you would prefer to ask your question in person, please use the raise your hand button. I will announce your name and then unmute your line. Please do remember to unmute your own device. Finally, in November, we will be hosting a seminar for Vestas, which will provide further details on our development program.
And more details of that seminar will be published on our website in the coming weeks. This session is being recorded, and a replay will be made available on the Tri Tax Big Box website. And with that, I will hand over to Aubrey.
Ian, thank you, and a very big welcome from me to everyone. Good morning to you all. Welcome not just from me but also from the Board of Big Box. As my first set of results as Chairman, I'm particularly pleased that we've produced a fantastic set of figures. In fact, I think they're probably a record.
And I obviously can't take any credit for that, but credit is due to Colin and his team. But could I just acknowledge also the role of Richard Dusan, who was the Chairman from whom I took over. Richard was Chairman when Big Box first was launched, And he had the vision and foresight to see the potential for big boxes. And that has flown through Into the strategy, a very clear strategy to invest in the very best assets in the class. And I think history has shown that, that has always produced the most consistent results over time.
These Results not only produce a fantastic return, an excellent return for shareholders, but also form the base for future expansion of the business. And it puts us in a particularly good position to take advantage of what is clearly a very strong market. So you will hear more about this from Colin. So at that point, can I hand over to Colin?
Thank you, Aubrey, and good morning, everyone. It's a real pleasure to be presenting the interim results to you this morning for TriTaxis Big Box and to provide you with an update on further great progress that we've made so far this year. As usual, I'll start with a brief introduction and then come back later to provide strategic update, after which Frankie will run through the financial results and outlook. Ian will then coordinate the Q and A. You'll hear from Frankie in a moment that once again, we've delivered a really strong set of For the half year, it's the strongest first half performance we've delivered to date, and we remain really positive throughout the outlook for our business.
This performance is the direct consequence of our strategy and it's based upon Our decision is to focus on a high quality portfolio of investment assets in the logistics space and to control Land and create investments in house through development. And we will be reaping the benefits of these decisions for many years to come. And the confidence that we've got in our future performance is also supported by our track record. You can see here On the graph that we have grown both contracted rents and NAV over the last 5 years, and this has underpinned an improving earnings per share position, which in turn Supports our attractive dividend. It's fair to say that over the last 7.5 years, we've never been more excited about the future than we are today.
Why? Because we're incredibly well positioned To take advantage of the market opportunity, having laid strong foundations for success, which is already showing through in our performance. And this is Based on the very favorable ongoing fundamentals of our market, which I'll touch on later, combined with the benefits of A high performing, resilient and strategically positioned portfolio, set to leading in house expertise And of course, the UK's largest logistics land portfolio. And these combined allow us to drive performance by executing a clear strategy, which is underpinned by our focus on enhancing ESG and maintaining financial discipline. And as you've heard me say before, All of this means that we're really well positioned to capture the great opportunity ahead of us to deliver growing returns over the short, medium and longer terms.
We'll return to the theme of delivering our strategy in a few minutes. But first, I'll hand over to Frankie to run through and financial results. Frankie?
Thank you, Colin, and good morning, everyone. I'm pleased to be presenting a continuation of the strong performance recorded in 2020 as we report on our 2021 interim results. Our market conditions have become even more favorable over the past 6 months. And as Colin has said, this has led to us recording our strongest half run performance Since IPO, it's a period where growth in net rental income has helped to deliver a 23.6% increase our adjusted earnings per share, up to 4.03p and we have increased the dividend for the first half. Further attractive levels of capital growth across our portfolio has seen a NAV increase by 10.6% 294.2p.
And as a result, we have delivered a double digit total accounting return across the first half of the year. This next slide highlights the growth in our income stream, which is a driving factor behind growth in the overall earnings. The group net rental income increased by 10.9%, largely driven by recent development completions. We've added a total of £8,500,000 to our contracted annual rent roll, which increases to £189,000,000 as at the period end. Now operating costs have remained stable on a relative basis represented by a net cost ratio which remains unchanged At 14.1 percent, the adjusted earnings per share has increased to 4.03p which includes €8,900,000 of development management fees received in the period.
And in line with our policy, the dividends for the first half Total 50% of last year's full year dividend. This equates to 3.2p per share, which is a 2.4% increase. Based on adjusted earnings, the dividend payout ratio equates to 79%. And excluding any additional development management fees Received in the period, this ratio increases to 87%. Moving on to Slide 10, which shows that our income performance has been matched with continued strong levels of capital growth.
The strength of our market, along with our development and asset management activity, has been drivers to performance, And Colin will outline aspects of this later in the presentation. The total portfolio value has increased to GBP 4,900,000,000 driven by valuation surplus generated of over £300,000,000 which equates to capital growth of 7.3% across the first half. This has helped deliver growth of 10.6 percent in NAV and we reported closing EPRA NTA of 194.2p. Our rent collection continues to be strong. We have now collected 100% of all rent due for 2020 And 99.5% of rent due for the first half of twenty twenty one.
The LTV has remained steady at 30%. And this performance culminates in a strong total accounting return of 12.5% reported across the 6 month period. This next slide sets out the detail behind our attractive level of earnings growth, driven by an 8,600,000 increase in net rental income. Starting on the Starting on the left hand side, which is the half one twenty twenty earnings position. As you can see, a significant part of the income growth is generated by our recent development completions.
Elsewhere, our investment activity And last year's disposal activity broadly offset one another. And as presented in the 3rd to last column, This generates an adjusted EPS before growth in other operating income of 3.69p which is an increase of 13.2% over the period. The 87% dividend payout ratio referred to on a previous slide is calculated against this 3.69p adjusted earnings figure, excluding the additional development management fees. And it's this payout ratio which we will pay regards to when determining our future dividend level. The increase in development management fees by £5,900,000 or 0.34p Sees a 23.6% increase in adjusted EPS up to 4.03p.
To put some additional color on the D and A income itself, this next slide sets this out. Firstly, this income is real cash profit and it is an additional benefit following the TriTax Symmetry acquisition. In the majority of cases, a fee or profit share is received in exchange for us providing development management services to third parties. It's therefore reflective of the experience and expertise within our development team and there is no TPBR capital required as part of this. It is more variable in nature, however, and therefore, more challenging when it comes to forward guidance.
Whilst regarding to between £3,000,000 to £5,000,000 per annum over the medium term, there will be periods when we are outside of this range. We see the GBP 3,000,000 to GBP 5,000,000 as the recurring level. And therefore, in terms of how we think about the relationship between this form of income and our dividend, We will only factor DMA income into our payout ratio at levels within this range so as to remove any potential volatility. Since the Symmetry acquisition, £22,000,000 of additional income has been delivered under these contracts, So it provides an attractive return to our shareholders. Now returning back to our net asset value performance.
This slide sets out the detail behind our strong NAV growth. The continuing strength of the investment market has caused yields to tighten Approximately 14 basis points across our portfolio, which alongside the rental growth captured has led to the investment portfolio adding 14 point 4P2 performance. Our development assets have added a further GBP3.6 billion and we are expecting To add to the value delivered from the development component of the portfolio during the second half. When noting the impact of the operating profits And dividends paid, this takes us to the closing EPRA NTA of 194.2p. Now thinking more about the future and looking to the significant opportunity that rests within our ownership of the UK's largest logistics focused land bank.
This rental income bridge sets out the potential we have to grow today's passing rents from £175,000,000 as shown on the left hand side By approximately 2.5 times, up to an estimated GBP447,000,000 This shows a live picture And therefore, there will be a few small presentation differences when compared to slides 3536, which are dated as at the balance sheet date. So moving from left to right, we currently have pre lit developments under construction, which is set to add £14,000,000 to passing rent, as well as the opportunity to capture further £12,000,000 through the portfolio's rental reversion. In terms of providing further visibility on the current or soon to be current developments, the orange section in the middle of the page Shows £8,000,000 of potential rent, which is currently under offer, which we hope to conclude in the coming weeks. In addition, a further £11,000,000 of potential rents can be generated from our Spectris program, which is either under construction or where we are aiming for construction commencement prior to the year end. Taking all of this into account, this gets us to the orange bar totaling 220,000,000.
So within our current development pipeline, plus the reversion, we have the opportunity to grow passing rents by £45,000,000 or 26%. And in respect to that current development pipeline, the timelines to reach preclinical completion span approximately the next 18 months. Finally, the purple bars show the potential from our near and future development pipeline. More than £200,000,000 of additional rents is capable of being generated from this, which is well positioned considering nearly £50,000,000 is allocated again Tax. The development portfolio is building in terms of its momentum and the opportunity presented here Gives us confidence about delivering growth over the long term.
And there is upside on top of all of this in the form of future rental growth, Tax. Moving on to the final slide from me this morning. We are looking to capitalize on an extremely strong market backdrop and our land bank provides us with competitive advantage to help us do this. In terms of capital expenditure, I reiterate previous guidance of targeting €200,000,000 to €250,000,000 of CapEx per annum into development. We expect to be right at the top of this range in 2021.
We have balance sheet capacity to commit to near term development opportunities And we seek to recycle capital through investment disposals when it's right to do so and when we're able to redeploy those proceeds in a timely manner. From an earnings perspective, I'll provide some color on how we expect to grow our income through our current development pipeline. But whilst not forgetting the organic income growth, we're able to capture with a large part of the portfolio being subject to review over the next few years. And finally, we will target a dividend payout ratio of at least 90% of adjusted earnings. And in line with our policy, any potential increase to this year's annual dividend will be determined as So that concludes the financial review where the execution of our strategy Has led to another excellent set of financial results.
And I shall now hand you back to Colin.
Well, thank you, Frankie. So Frankie's Describe our really strong performance in the first half of twenty twenty one and our positive outlook. And I'll now spend a few minutes just looking at what's behind all of that and why our consistent strong performance is set to continue into the long term. Essentially, as you've heard me say before, It's all about the strength of our market and how our strategy and our expertise are aligned to make the most of that to drive income growth. I'll start with some of the strong market drivers and then update you on continued value delivery both through active asset management and from our development activities.
So let's Look at the key themes we're seeing from our occupiers and how that drives our business. Firstly, e commerce continues to accelerate. It's predicted that the UK will need a further 60,000,000 square feet of logistics space by 2025. If take up continues at recent rates, then the level is likely to be much higher than that. Secondly, with disruption to be a more regular feature of trading activity, businesses are planning to improve supply chain resilience and reliability, increasing their space requirements.
And finally, there's a growing awareness and focus on enhancing ESG performance, not just in terms Of environmental factors, but we also work sorry, but also the working environment and employee welfare, As demonstrated by our research survey with Savills, and I'll talk to this a little more a bit later, but Big Boxes are very well placed making a very significant contribution in this area. And for us, all of this translates to growing A long term need for high quality logistics space capable of helping our customers respond to these dynamics. And these occupier drivers are part of the ongoing market backdrop, which support the strong trading that we continue to experience. Here on Slide 18, I'll walk you Through some of the dynamics that are evident in our market right now. At the beginning of the year, unsatisfied demand was equivalent to around 4 years of take up.
But despite constrained supply, H1 2021 witnessed the strongest first half take up performance to date. Supply has significantly lagged demand and this has left the vacancy rate And its lowest level ever at only 2%. There are only 3 buildings available to let that are over 500,000 square feet, one of which we understand actually is being offered for an occupation, but only one of which is new and completes next spring. The supply and demand imbalance continues to drive rental growth and agency forecasts have strengthened for the next few years. And improving rental growth is encouraging investment demand as commercial property allocations pivot away from traditional sectors into logistics.
This has produced the highest level of first half investment activity recorded ever, Driving further yield compression, which is good news for our investment assets as well as our development land. Importantly, the structural changes that we're seeing are still in their infancy in our view. This gives us the confidence in a significant scale and duration of the opportunity, which is really positive feature of our future. It's worth reminding you that we have designed our strategy to align with the long term Drivers that we're seeing in the market. Again, you're familiar by now with this chart, but I'll just highlight a few key points.
In essence, There are 3 key components to our strategy. You can see at the top of the triangle that we've deliberately built A portfolio of high quality assets attracting great customers, I believe, is the best in Europe. We've also built the capabilities to add value to these assets through direct and active management. And we apply our skills, insights and innovation Gain from being the UK's largest investor in logistics to develop our land portfolio at an attractive yield on cost. I really want to emphasize the point at the bottom here.
This strategy is underpinned by a very disciplined approach to capital allocation with sustainability being embedded across the portfolio. And that leads me neatly onto the next slide, which gives an updated snapshot on our strong sustainability position and the progress that we continue to make. We handpicked and built a modern and sustainable portfolio. 92% of our floor space has an EPC rating of A to C. Also, 49% of total floor space is certified to BREEAM Very Good OR Excellent, well above the industry average.
This is a critical factor because our portfolio in redundancy means that we don't face significant future CapEx Tax. We generated 8 90 megawatts of solar PV power for our tenants in the first half of twenty twenty one, avoiding over 200 tons Carbon admissions, and we're leading by example the aim of developing only net zero carbon buildings. DPD at Vista, which completed very recently, is our first example. Every year, we poll our occupiers and what's important to them, And we've seen a notable increase in ESG as a key factor in their decision making, with nearly 70% saying it was very important to them And that's up from around 50% 4 years ago. And we're seeing this activity being reflected in our ESG ratings, which continue to improve, including the recent increase in our Sustainalytics and Facility for Good Ratings.
So ESG remains at the very heart of our thinking and it's embedded into our actions. And to return to the first of the 3 key elements of our strategy, Our high quality assets. This slide updates on the strategic composition of the portfolio at the half year, which is very little changed from December. The investment portfolio represents around 90% of GAAP and the development portfolio approximately 10% And this balance has been a conscious decision. The investment portfolio consists of foundation assets At around 72% of GAAP, these provide our low risk income with modern buildings, strong locations and long term high quality customers.
Added to which we have value add assets at approximately 19% of GAAP, which provide Good capital and rental growth potential through active management, for example, lease reviews or property improvements. It's worth saying that in 7.5 years, none of our buildings suffered a vacancy at lease expiry, We currently enjoy 0 vacancy. And this really speaks to our building demand and the consequent reliability of the income that we've Benefited from. Allied to the investment portfolio, of course, is the UK's largest land portfolio for logistics, which took over 10 years to assemble and nurture. And from this, we can create investments In house, controlling timing, quality of build, tenant caliber and attractiveness of returns.
There's been no better time to control such a logistics focused land portfolio given the strength of current market dynamics, but we believe that this will only improve into the future. And it's worth remembering that our land is held primarily through option agreements, which is capital efficient and flexible. And this means that the potential for our development portfolio is far greater than the current capital allocations suggest. As Frankie said, this has the potential to more than double the size of the business, as we can see here by the potential income growth breakdown on the right hand pie graph. The key takeaway here Is that the quality of our investment portfolio underpins returns, delivering long term dependable and growing income.
And this combines very neatly with our development land portfolio, which provides the potential to further enhance returns in a controlled way. And the next three slides provide an update on how our active Asset and Investment Management is driving value from within the portfolio and that's the second element of the 3 part strategy. So here on Slide 22, this captures the way
that we're
embedding rental growth with active management into our business, complementing one another. And the key to this is the strength of our customer relationships and our understanding of their businesses. We're a customer led business in our thinking. For us, this activity breaks down into 4 key components: Rent reviews, which compound our income building improvements, including extensions and sustainability initiatives Lease Regis and Reletting and, of course, selectively buying and selling investments. And you can see in the pie charts We've created an attractive blend of upward only review types with a third of our portfolio subject to open market rent reviews and half Inflation linked.
And whilst most rent reviews are 5 yearly, 12% of our rents are reviewed annually, which is attractive. The light shaded section on the lower graph shows how contracted uplifts will grow our inflation linked hybrid and Tax. Fixed rent reviews at a minimum of 1.4% per annum over the next 2 years. And then the darker shaded area Shows the additional growth potential from open market and inflation linked rent reviews and levels higher And the contracted minimums and this reflects the potential for over 3% per annum over the course of the next 2 years. On this next slide, you can see what we've done in the first half of twenty twenty one.
37% of our portfolio is subject to rent review this year. That's 21 properties, of which 12 have been reviewed during the first half, along with 2 from the previous year. We're making really good progress so far, having delivered £3,800,000 Increase in contracted rent in the first half through a blend of inflation linked and open market rent reviews, and this equates to 2.2% Like for like growth annualized. Like for like ERV growth has also been attractive at 3.8% over the 12 months to 30th June, with the portfolio now 6.5% reversionary. We expect further progress as we conclude the remaining reviews this year.
And as you can see on the right here, there's a further 27% of the portfolio due for review in 2022. So there's really significant potential to capture an attractive level of rental growth over the course of the next couple of years. This is another great example of how we use our Management skills to actively create value. We have a really strong track record of acquiring attractive assets off market using our experienced relationships and reputation. And during the period, we acquired off market An 872,000 square foot logistics facility at Avonmouth near Bristol for £90,000,000 The purchase reflected an attractive Net initial yield of DKK5.1 for nearly 13 years unexpired term and rent reviews with CPIs as a minimum.
Let's to Accolade Wine is the number one wine company by value of UK sales. The facility is the largest wine production Warehouse Distribution and Innovation Center in Europe. And at the half year, investment was valued at more than 50 basis points lower and the purchase yield. This opportunity was the result of the strength of our relationships in the market and also our ability to move swiftly. And we see a number of opportunities to deploy our asset management and ESG capabilities to further enhance the value of the building.
So that's given you an insight into our investment activity in the first half. And I'll spend the next few minutes updating the great progress that we're making in the 3rd key element of our strategy, the development portfolio. This map provides a reminder of the scale and strategic positioning of our land portfolio. As I said, it's the largest logistics focused land portfolio in the UK. It incorporates 25 sites across all of the key logistics locations in the UK.
And as I mentioned earlier, it's capable of delivering 40,000,000 square feet. That's more than double the size of our current investment portfolio. Earlier, Frankie gave you a feel for the magnitude of the opportunity in demonstrating the potential rental growth from our land portfolio. This portfolio is therefore a key competitive advantage, allowing us to create assets in a capital efficient way and capture unprecedented levels of demand At a 6% to 8% yield on cost, significantly above the current prevailing market prime yields of sub 4%. And I'm pleased to report that we're making very good progress consistent with our guidance as shown here On Slide 26, we're building momentum in our development portfolio as you can see here on the right.
We achieved practical completion of 700,000 square feet in the period, adding £5,500,000 to passing rent. We have 2 Significant transactions totaling 1,000,000 square feet in solicitors' hands and we commenced 600,000 square feet of speculative construction in the first half. We also expect to commence a further 900,000 square feet of speculative construction very shortly. So in total, we have line of sight on a potential GBP 19,100,000 of additional rent that we expect to deliver within the next 18 months. And on top of that, we received a further 2,400,000 square feet of planning consents during the period, maintaining our 100% track record of planning success.
This increasing activity underpins our expectation for greater letting activity in the second half this year and beyond, which is excellent news. Slide 27 breaks down the phasing And scale of our development pipeline. First, you can see our current development pipeline where we're currently constructing buildings and expect to generate rental income within around 12 months. This amounts to 3,500,000 square feet And includes Amazon at Lithowrook, which as you know, is Europe's largest and most prestigious logistics facility. It was a terrific achievement for us to have Delivered practical completion on this building earlier this week.
Next is the near term development pipeline where we've received or submitted an application for planning consent. This is estimated to provide over 10,000,000 square feet and we expect to be able to begin construction on these sites over the course of the next 3 years. Further ahead is our future development pipeline, which has the potential to deliver an additional 28,000,000 square feet on land held under option. Land values are growing, particularly in key locations and for land with planning consent. And with a deep pool of auction band, We control a long term supply which will support our future growth.
So the key takeaway Here is the scale of the opportunity and the development potential within the business. With such a strong market, we're very confident in our ability to deploy Our annual target of GBP 200,000,000 to GBP 250,000,000 which equates to approximately GBP 2000000 to GBP 3000000 Square Feet of space per annum, as Franky mentioned earlier. And we'll be delving into this area in greater detail at our Capital Markets Day in November, As mentioned by Ian. So turning to our final And a brief summary of the key points from today's results and update. We've made a really strong start to 2021, We're on track to deliver our 8th consecutive year of growth.
We have a strong balance sheet, clear strategy And the financial discipline to deliver attractive and sustainable performance. Our market is in great shape, delivering both attractive rental growth and capital value growth. This is supported by structural change, a driver which we believe will underpin our sector for the longer term. There are material barriers to entry Tax. And our unique position and expertise means that we're well placed to take advantage through our high quality investment portfolio and the UK's largest development land portfolio.
As a consequence, we are confident in delivering Long term income and value growth for our stakeholders. That concludes this morning's presentation. Thank you for listening. I'll now hand over to Ian. He will open up the session to your questions.
Thanks, Colin. And as I mentioned at the beginning of the call, so if you've got a question, there's 2 ways to answer it. You can put it in the you can press the Q and A box and type your question there or you can press the raise your hand button and we will unmute your line and you can ask your question that way. We've had a couple of questions come through as the presentation has been going on. So I'll just rattle through a couple of those that have come through first.
The first one is, I've seen you've delivered 2.2% rental growth in the first half. How should we think about that moving forwards?
Okay. Thanks, Ian. I think I'll take that one, Frankie. So look, I think it's important to remember that much of our rent reviews are 5 yearly and backward looking to sort of lower Historic inflation and lower rents, obviously rental growth has been on the up. We've generally delivered a sort of 2% to 3 Percent annual rental growth for the business.
We think that's an appropriate level given the lower risk, high quality nature of our assets and income. Of course, as you just heard me say, ERV growth in the 12 months to the 30th June was 3.8% in our portfolio, with rental growth accelerating in the market more generally, which speaks to a growing opportunity for us to capture. And of course, Rent reviews are just one component of delivering total returns for our shareholders. There are other components to income growth Across our business as well. And these building blocks really altogether produce Attractive total returns.
And obviously, we think about that in the context of including our development portfolio as well, which has the huge potential to grow our income. So As we shared on one of the slides, I think it was Slide 21. So it's really about a more rounded Composition and contribution to total return that rent reviews are part of as part of our overall the way we think about Income Growth.
Great. Okay. And we've got a question from Paul May online. So I'm going to Paul, I'm going to open up your line, and I hope we allow you to talk. So Paul, if you unmute yourself, we should go to you.
Hi, guys. Can you hear me okay?
Do you have a name?
Good. Great. So good morning. Just a few questions just around the development opportunity. I So the first one, I think you highlighted €246,000,000 of potential new rent coming from the total development opportunity.
Just estimating that to be around €3,000,000,000 to €4,000,000,000 CapEx given the 6% to 8% yield on cost and obviously, you still need to buy the land Tax through the auction. Just wondering thoughts on financing of that moving forward. Next one is just around the time frame. I appreciate you've had an acceleration of the developments probably since you acquired DBS. And The total pipeline or total opportunity has increased.
I just wondered around the timeframe, I think I recall it was around 8 to 10 years when
you acquired DBS, If I
recall correctly, it seems to be sort of extending. Is that just simply a case of the pipeline has got bigger? Or is it just being cautious? And then just finally on the development side of the England development team, I think again, I recall when you acquired DBS, the incentive for management Kind of tied them in for, I think it was something like 6 to 8 years, but I'm wrong on that. I can't remember exactly.
Just wondered How the development situation looks, whether you've sort of got that expertise now brought in house or whether there's an expectation to continue or extend the sort of the TriZax symmetry situation. Thank you very much.
Well, thank you, Paul. If I may, I'll take those in reverse order and perhaps take the last two and Then Frank, you can answer the first one. As to development team, you're actually right. It was an 8 year contractual arrangement at the start of the relationship in February 2019. And That remains the case in terms of timeframe.
But of course, you did see us come back and announce to the market a change in the incentive program for the management team. I think This is really important in the context of a market where individuals and teams With strong expertise in the logistics space, we're in high demand, and we were having quite a lot of knocks on the door with some of our key members of that team. They're all really happy. It's a highly focused team. I think that's being demonstrated in the progress we're making now.
So there's no change to the timeline expected there. And of course, the incentive plan that we have in place does incentivize that team both to the 8 year anniversary, but also beyond that, Paul. So there is the expectation that, that will continue, assuming all things continuing in a positive manner. As to the timeframe over which we're looking at The sites, you're absolutely right. It was an 8 to 10 year timeframe on the sites.
It hasn't really changed much. We're still looking at it On the basis of a 10 year program, we have added some sites since we acquired the Symmetry platform, But they've been sites that we believe that we can accelerate through the process, partly because local authorities Come to us and encouraged us to bring the planning application forward or because that site has already been allocated for employment uses in the local plan process. So They wouldn't necessarily because their new sites go into the back end of the time horizon. So we're still looking to a 10 year projected time horizon. Of course, as time goes by, if we do continue to add sites, they may well project the time horizon out a little bit further, but that's great news in the context of a longer term Backdrop of the market looking positive.
As for the CapEx financing, I'll hand you over to Frankie.
Yes. Thanks, Colin, and hi, Paul. I think if we look at the CapEx target of £200,000,000 to £250,000,000 per annum into development, I think we're extremely confident of self financing that through a combination of The balance sheet leverage and the recycling of capital, I mean, I think we demonstrated our ability to dispose well last year. We made nearly £150,000,000 worth of disposals ahead of book value. And I think you will see us doing more of that Disposing of investment assets in the 4% and the 5% and recycling that capital into the 60% and the 70% is very good business for us.
So you will see us doing more of that. Clearly, we have further tools in our disposal over the longer term And we've had strong support from shareholders today. We have no plans to raise equity at the moment. I think if a scenario was to present itself where effectively we're able to accelerate that development pipeline beyond those parameters And we could demonstrate enhancing and accelerating returns to our shareholders. That may be a situation where we would look to present that to our shareholders, but we are in that current position at the moment.
Just to sorry, possible to follow-up. You still audible? Sorry, just checking you still hear me.
Yes, I hadn't missed you yet, Paul,
sorry. So I'll just monopolize it. So just to follow-up on that, just tying all of the things together because you've got yourselves into an extremely advantageous position With the land plots you have and the opportunity you have and the potential development of scale, the market is very strong. Appreciate you say your expectation is that this strong structural market continues for some time. Just trying to see, is there an opportunity to increase that development CapEx on an annual basis Given the strong market, given the land plots you have, given the potential you have within the business, maybe you'll say, actually, we can't because of planning, so that's fine.
But it's just a tri tie up CapEx spend per annum, time line, development opportunity, revenue opportunity. And as you say, in terms of equity issuance, it's advancing to issue equity if that is expanding the pipeline and delivering things on a faster timescale. Just wondering what the sort of thoughts are there and what positioning is? Thank you.
Should I? I think you'd
like to take that.
Yes. So I think For the near term, Paul, that £2,000,000 to £3,000,000 square feet per annum, that £2,000,000 to £250,000,000 of the CapEx is positioned based on The current and the midterm development pipeline, I. E, the maturity of the sites, where they are within the planning regime and the associated times within that. As I said, I think we're very confident of self financing that. Over the near to medium term, Is there an ability to increase that level?
Yes. Will we have appetite for that? Yes. I think in the context of a larger portfolio overall Clearly within the context of our investment policy limits, up to 5% of stake as a portion of JV. And we look to do that provided back to the share provided it's in shareholders' interest and provided we are we can illustrate an ability to accelerate And enhance overall return.
So starting off at that level, but yes, an ability to ramp that up over the medium term.
And just if I can add to that, we currently have over 9,000,000 square feet of planning consented sites across the UK. It's important to note that those sites Typically, I've either already had CapEx in infrastructure to open them up or Don't require a significant amount of infrastructure. It's one of the joys of our portfolio actually. I mean, apart from Hinkley, We don't really own very, very large, highly strategically sensitive sites, which are either contentious from a planning point of view or going to require a very, very significant amount of money in terms of infrastructure costs. So this is a really important feature and it's something that when Phil Redding joined us, he commented on specifically, he was really, really encouraged by this.
He said this is a real feature Yes. Of your business that you're not presenting strongly enough to the market. So I think we're in great shape in terms of the balance between planning consents And the ability to react to the current market strength, get on-site and vertically build these buildings Tax in the near in the current and near term.
Great stuff. Congratulations, Gomes. And yes, great stuff. Tax.
Thanks, Paul. So just turning to the web chat. We've got a question from Tom You asked about construction cost inflation in the market. And are we Experiencing any? And do you expect this feeds into rental inflation?
Well, thank you, Tom. Yes, we are seeing a combination of both the delays in obtaining materials and also cross price inflation. There's also a bit of cost inflation in labor in certain instances. I think it's a simple supply demand imbalance situation really, Tax. Tax.
Which have conspired against the market. I think there's a Tata steel factory, which is sort of closed For upgrading, there's a fire on another major facility, etcetera, etcetera. It's almost a perfect storm, including the Suez situation, which came which is sort of There comes a confidence to create a squeeze in the market. We believe that there's probably something like a 12 to 18 month Tax. That typically is what most of the commentators in the market are suggesting.
Overall, we're mitigating most of this impact. And our current projects Benefit from fixed price contracts with suppliers, so we're protected there. We are also, remember, a large scale developer And we can therefore achieve pricing advantage and priority on the delivery of Key materials. So I think the smaller operators are struggling a lot more to have the product delivered on time. So far, this is having very little impact on our current development pipeline.
We're talking about full week Time delays that we're seeing on a few of our buildings, and again, not all of them. And we believe that Through a combination of buying well, managing costs against the acceleration of rental growth in the market, of course, which is offsetting some of these cost increases, We're really confident we can continue to deliver developments within our stated 6% to 8% target yield range, which of course, is the most important metric, and we can't continue to keep it under review.
Great. Next question comes from Please could you provide the split of the 7.3% portfolio value uplift between Like for like capital growth and developments.
Put it on for me. I'll give you in ratios, Puneet, if that's okay, it's slightly easier. 40% driven through rental growth and asset management, 40% broadly through strength of the market and yield compression and the remaining 20% coming from Development gains. Great. And the next
question from Andrew Williams is, do you have a breakdown as to what measure of inflation RPI, CPI mix is used for the inflation part of the portfolio, please?
I have that here. Yes.
Thanks, Frankie.
So as Colin talked to you, Around 50% of the failure is inflation linked. That comes up between 30% of that being RPI and 20% being CQI.
Great. A question is coming from Julian Livingston Booth. Tax. Can you elaborate on your appetite to acquire additional land sites? The first question.
And then on the second, On tenant demand, are you seeing an increase in breadth of tenants looking at your space? Or is it simply a case of existing tenants wanting more space?
Thank you, Julian. Firstly, additional land, we have really deep rooted Relationships in the market with landowners and you need local market intelligence. We have our eye on other sites. We are particularly, but we're very particular about the sites that we look to acquire. They've got to be the right Tax.
It's really interesting looking at the drivers and seeing that decentralization, if you like, from the sort of the original concentration on the Golden Triangle. And of course, we call that the regional distribution network. That's, if you like, Pushed out occupier demand into locations where they can attract and retain Appropriate levels of staff at the right pricing points, but of course also hours coming into play. So it's important to think about these things in the context of where you're looking to acquire your Science. So we do quite a lot of intelligence gathering in that regard.
The balance between all of those factors and of course being able to acquire the sites typically through options, which are, of course, very capital efficient, better than the track pricing point. So we control the process and, hopefully, therefore, got line of sight on delivering value through the planning process, giving planning consent and also through occupier interest before we move ahead and Spend significant sums of money on infrastructure and of course on building buildings for tenants. So you will see us acquiring more land, But very, very selectively. The next point on tenant demand is I think it's a broadening and a deepening. We are seeing new tenants coming on to the horizon.
There are some big names globally, which you won't mention specifically, but you probably know who some of them are, You are new coming in new into UK market. There are also, of course, relative fledgling e commerce companies that are growing quite fast that are taking larger space. Not many of those have really reached the point where they can occupy a very, very large logistics So we typically tend to let our buildings to strong balance sheet companies that have been around for quite some time. But I think Over the course of the next few years, that could start to change. So it is a broad complexion, but I think it's really interesting to note that As well as the pure play, e commerce driven demand, we're also seeing a lot of demand from companies And retailers, by way of example, who are transitioning their businesses from a more traditional platform as Retail high street sales decline and e commerce sales grow, then wanting more efficient buildings to be able to optimize Their supply chain networks, of course, with automation, with data centers, etcetera, being vested within the buildings.
And of course, Also to cope with the increased levels of disruption that we're seeing evident in the market in recent times. Hopefully, that's helped, Julian.
Great. And then the next question comes from Tom Busson. So I'm going to open up
Tags. Hello, can you hear me?
We can. Good morning.
Good morning. Tax. I've got 2 questions around sort of the pre let side of the market. The first one, please do correct me if I'm wrong, but I think over the past sort of 2, 3 years, The only predest I think I can think of are DPD, Co OP and Amazon. Is that right?
No, that's not correct. There have been a number of others, Tom, just to give you a feel, build to suit take up was over 6,000,000 square feet In the first half of this year, which obviously is substantially more speculative take up than those three buildings you just mentioned, There are quite a few others. And we are aware of another 6,300,000 square feet of buildings that are built to suit, which are also under offer against the backdrop of relatively low slide levels coming Great. So it's quite a favorable level. But the point probably that you were sort of alluding to there, It is quite interesting that we have seen a level of take up in speculative Supply by speculative lettings.
And that's really because the supply of built to ship buildings has been constrained By virtue of the barriers to entry that I mentioned earlier in the presentation, and that's really good news because whilst we will continue to see New supply coming into the market, it's in a controlled way. And that means that we're very confident that supply, inspectative supply won't overreach The levels of demand that are currently in the market, as I mentioned earlier, there's 4 years' worth of demand in the market right now against the backdrop Of recent run rates, I. E, it will take us 4 years to meet market demand at the recent level of supply delivery. And of course, there's new demand coming on to the market all the time. So the situation is very, very favorable for continuation in An upward trend in rental growth and we believe that we'll continue to outstrip inflation even if inflation starts to pick up.
Tax. And maybe if I can use Phase 1 a little bit as maybe an example. Is that one where You are very confident that you have a turn in line now, but I think PC is August well, is this month. That obviously is unlikely to go into sort of a pre debt arrangement, but we'll go as a spec Sort of letting even though, I mean, the stars are 98% lined up, if I can put it that way.
Yes, that's Good example, Tom. So that building, which is, if you like, perspective construction, but It's being funded entirely by our development partner, Vericruz. We've taken no risk on the construction of that building, although we were supportive All the principles, bearing in mind that this is London's and if not Europe's most prestigious Industrial Logistics site inside the M25 next to the returns. And 450,000 square feet, it is you're absolutely right, is targeted for practical completion Probably at the beginning of next month, early next month, I would say. And we are currently in solicitors' hands At an advanced stage on the letting of that building, so it could be a pre let, But it might be a letting that takes place shortly after the building is completed.
But currently, we're Very confident and it's on track.
Okay. Okay. And then just finally, I mean, I think you have answered this question already, so I apologize for repeating it. But Going back to your answer, I think from the previous questions around the broadening and the widening of the customer base. And I think you said that even that's the case, there's probably not that many new sort of companies that can or add Scale to go into 500,000 square foot sort of warehouse.
Still on the pre led markets, I mean, are you still sort of very confident that you'll be able get that sort of incremental demand for such large amounts of stakes?
Yes, yes, we are, Tom, Because as I've mentioned, first half take up of this year, all time record, over 20 600,000 square feet of space. That was only constrained, as I mentioned, on the pre letting side Because there just weren't the opportunities for pre let's be produced quickly enough and the market's become quite This is something I've talked to you before whereby the market is moving so fast and Companies are having to deal with the disruptive aspects and modernize their supply chain networks. It's not an easy thing to do when you think about New staffing, how customers are driving the way that we shop, all the other challenges of Coming out of old leases to consolidate into larger logistic buildings, it's quite a sophisticated process. But what essentially happens is that companies wake up, realize that they need a new facility or several new facilities and they want them now. They're not typically willing to wait very long.
If you sit there and say to us, it's going to take sort of 3 years to deliver your building And they know that they can get one within 6 months, then they'll go for the shorter term option so long as it meets their requirements. So this is one of the reasons why we have seen more speculative starts on-site, but it's most definitely in a controlled level against the level of total take up. And I think in our own business, the majority of our Letting has been pre lettings in the past, and we do expect for that to continue in the future. We've currently got over 9,000,000 sorry, 16,600,000 square feet of live Interest in our development portfolio and whilst Some of that will fall away because it's in competition with other sites. I think it's talks to the depth of interest.
And all of that, Tom, is For pre letting activity, now some of it we may feed in some speculative construction against the backdrop of that Pre let demand and of course, knowing that a tenant wants a certain size building and if we start to construct it, it potentially accelerates their ability to occupy that building. So if you like taking away some of the pre let demand and then feeding it into the spec side, but it's an intelligence led process.
Okay. Great, great. Thank you.
Brilliant. Okay. I think In fact, we've run out of time, so I think we're going to pause there, Colin, if you want to sort of wrap up. If there are any other further questions, please You get in touch with the Investor Relations team, the details of which are on the Big Box website. And a transcript and a replay of this session and the presentation that we Ferd, you will be available shortly on the Big Box website as well.
Well, look, it remains for me to thank everyone for taking the time to join us this morning And to all the analysts that cover our stock and, of course, for the continued support of our shareholders and of our Board. And we hope to see you in person sometime soon. Appreciate you joining. Bye bye.
Thanks.