Good morning, everybody, and welcome to Harworth's half year results presentation, covering the first 6 months of 2023. I'm Lynda Shillaw, Chief Executive, and I'm delighted to be joined by Kitty Patmore, our Chief Financial Officer. It's great to see so many of you join us in the room here today, and I would also like to welcome everyone who's watching online, too. This slide shows here is the agenda for this morning, and I'll begin with an overview of our performance during the H1 , commentating on the market backdrop and reporting on the progress that we're making in delivering our strategy. I'll then hand over to Kitty to take you through the financials, and then I'll provide an operational update and our outlook for the remainder of 2023 and beyond. We'll then close the session with some Q&A.
Just a reminder, if you're watching online, you can submit questions through the webcast page, and we'll aim to answer as many of these as we can at the end. So before I talk about the H1 , and because I think it's important, given the speed at which both our markets and wider economic factors have changed since the pandemic and through half to H1 2023, I'm going to spend a few moments talking about Harworth's unique attributes as a business, as a context for both our H1 2023 performance, but also unlocking the long-term potential of the business. These are central to our strategy, and they underpin our resilient operational and strategic performance throughout the cycle. So firstly, we have the unique skill set of Harworth, regenerating large, often dirty and complex sites.
We've got decades of unrivalled in-house expertise in areas such as acquisitions, planning, remediation, infrastructure development, and building delivery. As a long term through-the-cycle business, we have the patience to do this where necessary over a longer period of time, which means that we can unlock the potential of challenging sites where others have struggled or avoided them altogether. Secondly, we have an extensive land bank, which we largely own or control, and which we have successfully grown through targeted acquisitions. Our consented residential and industrial and logistics pipeline alone has a GDV of GBP 2.4 billion, and there is significantly more latent value across our longer term unconsented pipeline. Next, as I'll come onto shortly, we focus on structurally undersupplied markets.
Almost 60% of our portfolio relates to the industrial and logistics sector, where drivers of demand remain largely intact and supply, particularly in our regions, remains low. We have a strong financial position and low gearing. We have significant available liquidity and no refinancing requirements until 2027. And finally, we're a responsible business, and we're guided by the Harworth Way and our Net Zero Carbon commitments. We're leading the way in supporting new homes, jobs, and investments across our regions. So together, these factors are what makes Harworth such a successful and sustainable business, provides us with a platform for growth, and enables us to deliver long-term value to our stakeholders and deliver large-scale regeneration that has a lasting and positive impact. So turning now to today's results.
Harworth has had a strong H1 in which we progressed our strategic objectives and delivered a robust operational performance. This was underpinned by the resilience of our through-the-cycle model and the sustained demand for our serviced, residential, land, and industrial and logistics assets. I'd like to pick out just 3 key takeaways from these results. Firstly, our management actions and the sustained demand for our products have resulted in an uptick in valuations during the H1 , while our EPRA NDV remains broadly stable over the period. Secondly, our markets remain generally in good shape, with resilient demand for industrial and logistics products and the BTR sector continuing to grow, particularly in single-family and regional markets. The headwinds facing the traditional house building sector are well publicized, but we're seeing a good level of demand for our differentiated and de-risked serviced land product.
Finally, as I've already touched on, we have a really strong financial position with low financial gearing and significant available liquidity. Combined with the fact that we own or control most of our sites and can therefore determine the timing and pace of development, this gives us a huge amount of flexibility and firepower. Delving a little deeper into our focus markets and starting with industrial and logistics. As I've mentioned, the structural drivers of demand seen in recent years remain, with the growth of e-commerce, onshoring and nearshoring, and an increasing focus among occupiers on securing modern, sustainable spaces. The chart on the left uses data from Savills, and it shows that although take-up of industrial space in the H1 of 2023 was lower than the record-breaking levels we've seen in recent years, it was broadly in line with the pre-pandemic average.
There also continues to be a diverse range of sectors driving demand, with manufacturing accounting for a record proportion of take-up in the H1 . The decline in demand during the H1 saw a corresponding rise in supply, and Savills estimate a market-wide vacancy rate of 6.3% as at June 2023. So this has increased from about 3% a year ago, but it's broadly in line with the long-term pre-pandemic average, and it's expected to gradually fall as speculative development in the market is curtailed. The chart on the right-hand side shows that this correction is already taking place in the market, with levels of spec building in the H1 much closer to the historical pre-pandemic levels. Finally, it's important to consider regional dynamics.
Across our focus regions of Yorkshire and Central, the North West and the Midlands, vacancy rates remain below the national average, with less than a year's supply based on current takeup, underpinning the particularly favorable supply and demand dynamics of our regional markets. In residential markets, consumer demand remains subdued, and as a result of higher mortgage rates, challenging affordability and lower consumer confidence, albeit interest rates appear to be nearing their peak. Reporting from house builders suggests reduced construction volumes over the coming year and a more selective approach to land acquisitions.... Despite this, we've seen good levels of demand from a wide range of house builders, both national and regional, and the charts on the left of this slide indicate one of the main reasons why.
The UK's challenging and complex planning system is constraining the supply of land for new homes, with planning decisions taking longer than ever before, and the lowest number of decisions for major residential sites delivered in over a decade. Against this backdrop, you can see why our, why our consented serviced land product is attractive to house builders, as it's de-risked from both a planning and a cost perspective, allowing house builders to quickly start on site. Turning to Build to Rent, this segment has continued to see strong growth, demonstrating the defensive nature of the product and the acute shortage of rental homes in the UK. Savills reports that investment volumes in the sector had a record-breaking Q2 in 2023, bringing the total investment in the H1 to GBP 2.1 billion.
The UK's BTR stock now stands at over 88,000 homes, representing a growth of 12% in the last year alone, with regional markets growing faster than London, and as you can see here from the chart on the right. Despite this, only 11% of the build stock is single-family, and transactions remain focused on multifamily, which have accounted for around 60% of investment over the last year. Our BTR single-family homes and our affordable homes portfolios of sites are particularly well positioned to address the acute supply imbalance as these markets mature. So before I hand over to Kitty, I want to take a moment to review our strategic scorecard. It shows the progress that we've made against all 4 growth drivers of our strategy to reach GBP 1 billion of EPRA NDV.
Starting with direct developments, earlier this year, we completed 110,000 sq ft at Gateway 36, and we're now on site with 166,000 sq ft at the Advanced Manufacturing Park, which is already 44% pre-let. We're continuing to see good levels of occupied demand for these sites, which are in prime locations and have both just become part of the UK's first investment zone. In terms of accelerating sales and broadening the range of residential products, we continue to see good progress here, with 92% of our budget of plot sales for the year now either completed, exchanged, or in heads of terms. Our single family BTR portfolio is progressing towards exchange, and we've been securing these all-important planning consents across a number of sites.
Our affordable housing product, launched in April, has received strong levels of interest, and we are working to select our preferred investors. In terms of scaling up land acquisitions and promotions, we've acquired land representing 1.1 million sq ft of industrial and logistics space and 700 plots, which is continuing to refill that hopper, maintaining our land supply and supporting our growth strategy. And finally, the transition of the investment portfolio to 100% Grade A is well underway, with GBP 70 million disposals so far this year of older assets, where we've maximized through our asset management initiatives values. Importantly, these were completed in line with December 2022 book values, proving the ability of our team to secure sales in a changing market.
Combined with the addition of new space through our direct development activity, this means that our investment portfolio is now 29% Grade A. So as you can see across the bottom of this slide, over the last 2 years, and despite the challenging macro backdrop, we've made a lot of progress operationally, and we're making good progress towards our GBP 1 billion goal. And with that, I'd like to hand you over to Kitty to take you through the financials. Thanks, Kitty. You're going that way.
Thank you, Lynda, and good morning, everybody. I'm pleased to be reporting a resilient financial performance for Harworth during the H1 , and now I'd like to take you through this in some more detail. Starting with our income statement, sales of serviced land and property, in addition to income from rent, royalties, and fees, resulted in group revenue of GBP 18.2 million in the H1 . This was a decrease from the GBP 62.6 million reported in the prior year period, where we had accelerated development sales into 2022, and which included a large sale at our Waverley land site. This year was therefore a return to our normal development land sales profile, with infrastructure works over Q2 and Q3, preparing for year-end sales.
Combined with the investment portfolio sales, which as we execute the development strategy, will become increasingly important to our funding, total property sales during the period were 44% higher than the same period last year. Revenue from the income generation portfolio reduced following sales of investment properties, but rent increased on a like-for-like basis. Looking forward, 98% of budgeted sales for the year are either completed, exchanged, or in heads of terms, creating a strong revenue pipeline into the H2 . Administrative expenses increased by GBP 3.4 million from the prior year period. This was principally due to a provision for bad debt and impairment of lease incentives caused by the recent administration of one of our tenants in our investment portfolio, and also due to higher salary costs resulting from increased employee numbers last year to support our growth strategy.
Headcount growth has materially slowed now in 2023. Revaluation movements are an important component of our performance and seen in both the income statement and the balance sheet. In the income statement, we can see increases in the fair value of assets held for sale and investment properties. These consist predominantly of our Investment Portfolio, our Strategic Land, and our natural resources portfolio, but do not include any changes in the fair value of our development properties. Tax charges decreased due to lower unrealized gains on investment properties, and all these factors combined result in a profit after tax of GBP 2.8 million, compared to GBP 79.1 million in the prior year, which was heavily influenced by valuation gains, and as I previously flagged, the bringing forwards of land sales into the H1 of 2022 to take advantage of the market conditions....
Finally, the board has decided on an interim dividend of GBP 0.00444 per share. This represents a 10% increase on last year's interim dividend, in line with our dividend policy. Our EPRA NDV remained broadly stable year-on-year, and was GBP 631.3 million as at thirtieth of June, equating to GBP 1.957 per share. This is the result of a modest increase in valuations being offset by small increases in net operating costs, interest expenses, and tax, through an increase in net debt. Net debt was GBP 63.7 million, increased from its position at the end of 2022, largely due to spend on site infrastructure and development works, is in line with normal, and expected to decrease with the completion of land sales and lettings in the H2 .
In fact, net debt as of the reporting date, has already reduced to GBP 53.6 million, with post-period sales proceeds. Combined with the dividend, our broadly flat EPRA NDV movement led to a positive total return of 0.1% during the period. I'll come on to talk more about our valuations in a second, but I thought it might be good to look at the EPRA NDV per share movement as a bridge from year-end 2022 to June 2023. There are 3 key points to take away. First, EPRA NDV has remained broadly flat at 195.7 pence per share. Secondly, the main component of the growth is from our value gains, which has added, have added 2.3 pence to EPRA NDV per share in the period.
The biggest reduction is GBP 0.013 from our losses excluding value gains, which means our net rental service charge and fee income, less the operating cost of the business. These have increased recently due to higher overheads, as well as lower one-off fees during the period, and following sales from the investment portfolio. I do expect that rental income and fees will offset operating costs again, as we execute the strategy, and direct development projects complete and become rent-producing, supported by development management and planning fee income. Now, looking at our valuation movements in more detail. This slide shows the component parts of our GBP 7.5 million valuation gain for the H1 of the year, which compares the gains of GBP 110.3 million in the H1 of 2022.
Starting with residential, the land market was stable during the H1 , and as Lynda has covered, supply of serviced land remained constrained, and house prices were maintained in our regions. Progress towards development land sales on our major development sites continued to demonstrate demand for our serviced land product, and underpin our valuations. However, costs of construction increased over the period, and this offset the gains from our management actions to result in a modest loss of GBP 2.2 million. In industrial and logistics, following significant investment yield increases in the H2 of last year, the market remained stabilized over the H1 , with small outwards yield movement and increases in market rents. Management actions progressed sites towards development and supported valuations, although, again, costs of construction increased, albeit at a lower rate compared to last year.
Combined, this resulted in a small revaluation loss of GBP 2.3 million on major developments. Across both portfolios, strategic land valuations increased due to the progression of planning applications and site strategies. Investment portfolio property yields moved in line with the market, and our management actions, securing sales, new leases, renewals, and rent reviews, resulted in a GBP 2.5 million value gain, and reflected an initial yield moving 30 basis points to 5.9%. Although sales transacted at book value, we incurred some small losses on sale due to transaction costs and some minor adjustments to site-wide infrastructure costs, which were allocated to prior period sales. This slide provides a breakdown of our GBP 738 million portfolio as at thirtieth of June, 2023.
Industrial and logistics land and properties, shown here in shades of green, now account for around 60% of our portfolio by value, with residential land and property, shown here in shades of blue, accounting for most of the remainder. The table on the right-hand side summarizes, for each segment, the GBP per sq ft, and, for industrial and logistics sites, and the GBP per plot for residential sites. And it shows quite clearly the significant value that we generate by taking sites through the planning system, putting in place infrastructure and services, before, in the case of industrial and logistics, developing them and letting them to occupiers. It also shows the huge potential value of our currently unconsented strategic land pipeline, which has increased due to acquisitions in the half, and now represents 33 million sq ft of industrial and logistics space, and around 21,000 residential plots.
The chart on this slide bridges the increase in our net debt position from GBP 48.4 million at the end of 2022, to GBP 63.7 million, as at June 2023. Here, the main driver was an increase in development spend and acquisitions, as we continued to progress our growth strategy. This was largely offset by sales proceeds realized during the period, and which have continued over the summer. This chart shows the headroom afforded by our cash position and revolving credit facility, which I'll provide some more detail on now. Our financing strategy remains to be prudently geared, with a target net loan to portfolio value at year end of below 20%, and a maximum of 25% during the year.
At June, our net loan to value was just 8.6%, slightly higher than at the end of 2022 and prior year period, but well within our target levels. Post-period end, sales proceeds have continued to reduce our net debt position. In summary, the H1 saw a robust financial performance for the group, and we remain in a strong financial position, with low loan to value and cash and available facilities of GBP 163.5 million, and no major refinancing requirements until 2027. With that, I'd like to hand you back to Lynda to take you through the operational review.
Thank you, Kitty. Now I'll provide some more detail on our operational progress during the H1 . Slide 16 provides an overview of our 37 million sq ft industrial and logistics portfolio, well over half of which is held freehold or in joint ventures. Over 5 million sq ft of this space has a planning consent, and includes mature sites, such as Advanced Manufacturing Park and Gateway 36. Both of these have been hugely successful schemes, and as I said earlier, we've seen good levels of demand at these sites during the H1 as we've brought forward the next phases of development. Our planning consents also include sites such as Chatterley Valley, where site preparation works began towards the end of 2022, for what will eventually be 1.2 million sq ft of employment space at the heart of the Ceramic Valley Enterprise Zone in Staffordshire.
Over 7 million sq ft of development is progressing through the planning system, including Gascoigne Wood in North Yorkshire and Skelton Grange in Leeds, where we continue to make progress. During the period, we acquired Parkside East, a site with the potential to deliver 0.8 million sq ft of employment space at junction 22 of the M6. This site was allocated in the recently adopted St. Helens Local Plan and forms part of a wider regeneration area supported by the council. Harworth is now developing a master plan, which will be submitted for planning approval shortly.
Table on the top right shows the potential Gross Development Value to come from a selection of these sites, which could be as high as GBP 1.7 billion, demonstrating a significant pipeline of development over the medium term and signaling the potential value that we can unlock as we continue to assemble schemes and work them through the planning process. Turning to our residential portfolio, which has the potential to deliver over 28,000 housing plots, of which over 6,500 have a planning consent. Our residential land sales are typically weighted towards the H2 of the year. Therefore, the focus in the H1 has been on progressing transactions and carrying out land preparation and infrastructure works across our development sites.
Shortly after the period end, we completed a sale to Barratt and David Wilson Homes of a land parcel at Thoresby Vale for the construction of 174 homes. As we mentioned earlier, we're continuing to see a really good level of bid activity and pricing across several of our sites. Acquisitions added 700 plots to the pipeline, and planning was secured for just under 400 homes at our site in Killamarsh, in Derbyshire, which is now being marketed for sale. As a master developer, we pride ourselves on investing in residential sites to provide great infrastructure, amenities, and green space for residents. One of the highlights during this period has been the opening of a new 50-acre park at our Cadley Park development in Derbyshire, providing an extensive green space for residents and the local community to enjoy.
Finally, as we touched on earlier, our service residential land product is a key differentiator for us, and we've continued to see good levels of demand, with an average of 7 house builder bids received for each land parcel that's been marketed so far this year, which is in line with the average number of bids we typically receive, and importantly, average bid prices are ahead of book values. Staying with residential, one of our key strategic objectives is to broaden the range of our products. Offering these products alongside a traditional service plot product have many benefits, and while by value, they account for only a small proportion of our portfolio, they provide us with important diversification. They allow us to accelerate the delivery of our residential sites, and they give us the opportunity to control, build quality, innovation, and sustainability.
All of this is critical to retaining a sense of place, preserving land values, and meeting our Net Zero Carbon goals. Some of our budgeted residential sales for the year relate to our single-family Build to Rent portfolio. Here, we're now starting to see our Reserved Matters planning applications come through for several of the sites, enabling us to progress towards exchanging contracts with our preferred investment and construction partners. As a reminder, this is one of the first portfolios of scale in the UK, and it's been a complex process whereby all sites in the portfolio have had their master plans reformulated to change the housing typology to institutional quality BTR units that don't need to be retrofitted. Owing to the planning environment, timelines for the portfolio become protracted.
However, for us, this is not about delivering just any transaction, and it's about ensuring that we manage the risks as the market has shifted around us. But it's also been critical throughout for us to identify partners whom we can develop a long-term relationship based on shared values and ambitions. Our affordable housing portfolio comprises approximately 400 homes that meet the National Planning Policy Framework criteria for affordable housing, which entails social rents, affordable rents, and a range of intermediate rent for sale, and for sale products such as shared ownership. We've good levels of interest so far in the portfolio, which will allow us to further accelerate the delivery and enhance the vibrancy of our residential sites. So looking further out, we're now preparing planning applications for our first small-scale pilot programmes of our Net Zero Carbon products at the Waverley and Prince of Wales sites.
We're also looking at senior living opportunities across a number of our sites, and we look forward to updating you further on these plans in due course. During the period, we accelerated our plans to reposition the investment portfolio with a proportion of Grade A space within it, rising from 18% at the beginning of the period to 29%. This was driven by a significant sales programme of assets, where we'd maximize value through asset management or development initiatives. The sales totaled GBP 52.1 million in the H1 , with a further GBP 17.9 million of disposals completed after period end, and all prices were broadly in line with the December 2022 valuations. Sales were made to a broad range of buyers, including occupiers, highlighting the ability of our team to find investor pools in a challenging market.
In addition, over 90% of the floor space sold was EPC C-rated or below, with over 40% D-rated or below, meaning that these sales have significantly improved the energy ratings of our remaining portfolio. Our investment portfolio sales programme has effectively concluded now, and we'll likely explore further selected disposals as direct development work is complete and our Grade A space enters our portfolio. So looking now at our GBP 240 million investment portfolio in some more detail. This portfolio delivers an annualized rent roll of GBP 15.8 million, reduced over-- and this is reduced over the 6 months due to the previously mentioned sales. Continues to deliver robust final financial metrics, and you can see from the chart at the top right of this slide, that the occupier base is diverse.
It's focused on those sectors that are currently driving demand, such as manufacturing and third-party logistics. You can see from the bottom right of the slide, that the operational metrics remain strong, with a long weighted average unexpired lease term of 12.5 years, a low vacancy rate of just over 1%, when excluding direct development work that was completed in the prior 12 months, and a 98% rent collection. During the H1 , we completed 277,000 sq ft of lettings, adding GBP 0.9 million of annualized rent, and all transacted at premiums to previous passing rents and ERVs. Occupier Ilke Homes, which represents 7% of headline rent roll, entered administration during the period, but has remained in occupation to date. The related space is therefore classified as occupied for the purpose of the vacancy calculation.
The group is currently exploring options for the site, including reletting, refurbishment, or redevelopment of the unit. So we now turn to the outlook. Harworth is a long-term, through-the-cycle business. Most of our sites will be in development, planning, or land assembly through the next few years and well into the next decade. Our land bank is significant, with the ability to deliver over 37 million sq ft of industrial and logistics space and 28,000 homes. And our nearer-term sites have a combined Gross Development Value of around GBP 2.4 billion. Crucially, we have the team and the specialist skill set to look through the near-term market conditions and deliver these schemes, and where we need to, invest to create future value and returns that we can unlock from our sites.
The economic outlook for the UK is likely to remain challenging in the near term, although there are encouraging signs that the inflationary pressures are easing and interest rates are approaching their peak. For the industrial and logistics market, the structural drivers of demand remain largely intact, while supply remains constrained, particularly for Grade A energy-efficient buildings, and also across our regions, where supply represents less than a year of demand. For residential, while affordability challenges are weighing on house buyer demand, our sites are located in the more affordable regions, and house builders remain attracted to our serviced land product, which has planning approval and all the necessary infrastructure, and is de-risked and ready to build on from day 1. At the same time, our new residential products, such as BTR and affordable housing, will provide resilience and exposure to significant growth markets.
To conclude, our business is resilient, and we continue to make progress against our strategy, with our management actions driving and preserving value across our portfolio. With that, I would like to open it to any questions, and we'll take those from the room first, and then we'll move on to those from the webcast. Thank you for listening this morning. We got gone cold.
Good morning.
Oh, it's cold.
Good morning, Lynda and Kitty. Colm Lauder from Goodbody. Thank you for your time this morning. Great detailed presentation, as always. Just to pick up on a couple of points and just maybe ask if you could define them in a bit, in a bit more detail, and particularly on that 98% of budgeted sales figure. Obviously, at the halfway point, it's a very strong number, but you obviously, you referenced that it's either completed in legals, contracts exchanged, et cetera. Could you perhaps give us a breakdown of that 98% in terms of how much is completed, how much is in legals or heads of terms, and also your views on timings around those completions? Thank you.
Do you want to go?
Absolutely. It's broadly, Colm, about sort of 50% that's completed already, with about sort of 50% to go towards the end of the year. This is not untypical for us, for a sales profile, actually. I've looked back and over the last couple of years, we've actually been at 98% of budgeted sales for the last couple of years at this point. Prior to that, it was lower. Very, very consistent level, and for us, it's all about doing the infrastructure on our sites over the H1 into sort of Q3 and the tail end of the year, and then completing sort of those sales as we get towards the end of the year.
There will be some completions that will complete between now and the end of the year, but we are always quite back-ended as we get into December, and I expect that to be the case again this year. So there's lots of work to do between now and the end of the year to close those sales out. Again, that's nothing that we're not used to. We're always sort of working through getting sites sort of progressed and sort of dotting the I's and crossing the T's on the contracts at this time of the year. So very much sort of as a business progressing as normal.
Okay, great. Thank you. And maybe just one other point as well on sales, and obviously related to the industrial and logistics asset sales, could you perhaps give us a bit of detail on the yields achieved on those disposals? Obviously, the portfolio yield comes back to 6.6 from 7 over the 6 months. Any guide on what the average yield of disposals was?
Yes. T hese were assets, as Lynda's already referenced, which were probably sort of more secondary in nature, out of the portfolio. They were assets with lower EPC ratings, lots of tenants, multi-let in almost all instances. I think over the course of the sales, we've removed sort of about 100 tenants from the portfolio, so it's really sort of moving the portfolio forward to being sort of units that are more institutional-grade, both in terms of quality, but also for management and rental income qualities, too. So these assets were towards sort of the higher yieldings end of the portfolio that we had before. So, sort of well above that sort of 6% that we have across the portfolio at the moment.
Okay. Thank you. That's all from me.
Good morning, guys.
Good morning.
Thanks for the presentation. Colin Sheridan from Davy. Just a few more from me, if I can. Just maybe to start on the rental environment and tenant demand, in particular, if you could maybe just give us a feel for those units in the investment portfolio that have just complete or are to be complete, what's the outlook looking relative to sort of recent history on tenant demand there? Then, just a question on land buying as well, which you've obviously flagged today. A lot of talk about land market in relation to the home builders, but where you're buying land, have you seen similar trends in that part of the market, or are you seeing something else going on there?
F inally, I know, Lynda, you mentioned the planning environment as at a sort of national level, and we're pretty up-to-date with all the kind of challenges going on there. But, you know, Harworth, specifically, it's clearly an area that you guys specialize in. Are you feeling a little bit more comfortable about planning than maybe some of home builders and other construction companies that are struggling with that at the moment?
W e'll save planning till last, shall we? Okay. So where are occupiers? I think it's fair to say, sort of occupier demands through probably the Q1 of this year was pretty okay. You know, we were sort of seeing, you know, reasonable sort of levels of viewings. And then, like, as the market, you know, was still uncertain and, like, you know, sort of no sign of immediate improvements as we moved into Q2 , it did quieten down a bit, and I think that's quite widely documented by all the major agencies. Interestingly, you know, the, the sites were all different. The Advanced Manufacturing Park has been pretty hot, actually, sort of throughout, you know, the last 12 months.
We've got a lot of interest for bespoke building for occupiers, pre-let interest, as well as sort of the units that we're bringing forward speculatively. Gateway 36, we had an early let-in. You know, we've got a unit in heads. And what we've seen over the last sort of month or so is occupier viewings really, really tick up. So the occupiers are coming back, you know, sort of into the market. What they are is more cautious, so there's inordinate amount of due diligence going on. Transactions are taking longer to get over the line, but rents are still pushing on. So we're still sort of seeing rental growth and, and, you know, and we're quoting rents and sort of issuing term sheets, you know, sort of ahead of ERVs. So it feels solid.
It just feels slower, is what I would say. And, you know, sort of some of that is just due to, like, you know, the sort of $64,000 question, you know, as to how long is this gonna go on for? Are rates gonna really sort of start to come in? I think there's probably a general acceptance that underlying inflation might be sort of with us, you know, sort of, and higher interest rates for a bit longer. But occupiers can't pause their decisions if they need new space indefinitely, and that modern Grade A space is actually attracting occupiers because of all of the attributes that it has. You wanna say anything else?
No, I would agree.
Okay. T hen we had land market trends. So one of the big challenges in land market is there isn't a lot transacting. And actually, you know, you haven't got a flood of sort of sellers waiting to put their land on the market. In fact, you've actually got people sitting on there saying, "Actually, you know, sort of we'll wait until things get better because we, we don't actually need to sell." And the land market, it's always different to sort of selling, standing buildings. So we have got acquisitions teams in our regions as well in the center. We've got real specialists in this with big regional networks. We're still managing to sort of assemble sites and ecount sites pretty much in the same way that we've done sort of, you know, in previous years.
You know, it's a, it's patient, it's a long game. It's about our flexibility and our ability to take a, take that long-term view. We're acquiring at or around or marginally above agricultural prices when we're assembling, you know, sort of, you know, sort of land. And, you know, sort of we are seeing a good response to the teams on the ground where people have got land to sell. So I think actually what always helps is when they know they're working with a counterparty who's got a track record of transacting. You know, we don't mess about. If, you know, it's the right land for us, and it, and it meets our underwrite criteria, we transact.
I think also, 'cause we're buying, if you think about sort of the valuations, we're buying early stage sort of strategic land.
Yeah.
T hat's quite different from land that you want to sort of build on-
Yeah
immediately. So our Strategic Land sits at sort of GBP 5,000 a plot or sort of-
Yeah
GBP 6 a sq ft. So it's, it's right sort of down there.
Yeah.
I think it's about finding the right sites-
Yeah
isn't it?
Yeah.
Because when we're looking at the underwriting, it's not necessarily, you know, about getting the cheapest sites. It's about getting the right sites that we can drive the right value from going forward.
They've got to stand a chance, you know, sort of, of being allocated in the longer term. So not every site that we buy today will have... So Parkside, for example, has an allocation. Not every site that we buy, in fact, the vast majority don't. So we actually look at, you know, if you look at 5-year planning cycles, which planning cycle do we aim to have that land, you know, sort of allocated in? But let's say, it has to stand a chance of getting an allocation, which is, it's part of our skill set, assessing that. And then planning. It's really torturous, actually. And, you know, it's been, I would say, challenging, you know, probably for the last decade plus. And that's really because-
while governments keep trying to reform it, they're sort of not reforming it effectively. And I think I said, when we presented our full year results that, you know, to really support growth in the UK economy, they've got to sort planning out. They've got to sort planning out to, for making investors feel confident to invest and occupiers feel confident to sort of come into, into places. And I think things like the investment zones are, while there's not a huge amount of government money sort of being allocated towards them, they're a positive move because at least what starts telling an investor and an occupier is that actually, you know, the development and the investment is welcome there, and it's supported. But it's really hard, and I was talking to a very senior planning officer, only last week.
He said 25 years ago, like, it was nowhere near as complicated as it is today. And what that means is basically, you know, just applications are taking a lot longer to work through the system. There's an awful lot more expert views that need to be taken by planning officers to be able to make a recommendation. And that's just something that you, to be honest, you've got to embrace and invest in, otherwise you'd never put an application in. I think the startling stuff was the stats that came out, the analysis React News had done the other week, you know, which shows that since 2016, major applications, whether they're resi or employment, for employment, have dropped off quite significantly.
Then what is going through, which is a reduced number, is taking longer, and that's sort of one of the things that's supporting, you know, sort of the market dynamics at the moment.
Thanks, guys.
John Mozley, Liberum. Could I ask you 2 questions on the housing side, please?
Mm-hmm.
In the statement you say you're seeing on average, something like 7 bids per plot.
Yeah.
That's roughly what you saw this time last year. That sort of feels slightly out of sync with the words that every house builder uses at the moment, so I'd be interested in what your comments are around that. The second question is on the Build to Rent portfolio. Obviously, that's taken rather longer than we all hoped initially. Is it still roughly the same shape as it was when it was initially outlined to us?
Okay. Great.
Do you want to just start?
A bsolutely. I mean, I think as the sort of what we've seen is that we've spent a long time sort of building a portfolio where we've got sites in the right locations the house builders want to be on. So if I think about sort of our Ironbridge site, which a number of you have been to, it's a really special location that has the opportunity to outperform the market. Our Waverley site, our Coalville sites, we've got proven market demand in those locations. So over the course of this year, this summer in particular, we're always out sort of marketing our sites. We don't always go far and wide. We sometimes select sort of a number of house builders that we know that we want to work with to come and bid.
I think absolutely what's encouraging from the numbers that we look at is that we are continuing to get the house builders interested in those sites, and I think that's down to the product, and that's down to the locations and working with Harworth and those relationships that we've built over a number of years. So bids are remaining sort of relatively steady. I think we talked a little bit about year at year end about seeing some of the regional house builders starting to bid a bit more, and I think more recently we're seeing the nationals sort of come back in. So we've been able to maintain that mix. And the bid levels that we're getting are all in line with or ahead of book values as well.
T hose serviced land values are also holding up, too, John.
A mix of conditional and unconditional bids, you know, so it's pretty, pretty much what you would expect. I think you've also got to remember, the regional markets are, you know, much, much more affordable as a multiplier of salaries, and the house builders are keeping sites moving. And in some regions, like the North West, there's a real scarcity of allocated sites, you know. So, so there is like, you know, there are some... It's very local, actually, sort of some of what is happening.
D efinitely. On projects where obviously, as you say, it's taken a little bit longer than we expected, I think we initially sort of underwrote it in the H1 of last year. We marketed it, and the market was particularly strong at the time that we went out to market, and then that market sort of adjusted quite rapidly as interest rates sort of came up. The way that we look at it now, it's still actually in line with that original underwrite that we did in the H1 of last year, because we didn't necessarily underwrite the froth that was in the market initially.
I t's always been for us about giving us the optionality of accelerating scales, sales, giving us diversification away from sort of the house builders and benefiting from the development fees that we can deliver. So, so we still have the optionality to sort of put sort of sites back almost to the house builders, if the house builder demand is stronger. So, it's not that it's, it's changed shape, but we still retain the optionality that was there in the 1st place, I suppose. And continue to think that it looks attractive when we look at the investment into the Build to Rent sector, to continue to bring that product forward. So it's now very much about sort of knocking down those final planning hurdles and then getting it to completion.
I think the difference that probably isn't, you know, necessarily like understood is what I referred to today. We actually re-masterplanned those phases for an institutional quality, 2025 reg compliant, you know, sort of BTR product. So we're not taking like what was originally sort of there and actually just pushing it through and then saying, "No, we can do either." You know, it was really quite specific. We wanted to make sure that we actually had something that was high quality that would be delivered, and that's the thing that, as we've taken it through Reserved Matters, that's taken quite a lot of time, actually.
Yeah.
Any more questions? Right.
We done.
Any on the-
We 've just got 1. Thank you. So you've got 1 question at the moment through the webcast. Just a reminder, if you'd like to submit any questions, you can still do it through the browser, and we'll read out as many as we can. The 1 question is, what are the management team's views on the current discount to NDV that the share price is showing? And what actions can the management team take to close this discount for shareholders?
God, that's a loaded question. Well, you can imagine, like, probably, our investors were not very happy about it, and we think it really doesn't reflect the underlying—well, A, the performance of the business, but B, actually, you know, that superpower, which is an amazing long-term land bank, not just to get us to the 1st billion, but sort of keep going sort of into the future. As a management team, it's very difficult because we can't control what's going on. And it's not just Harworth. I mean, the point here is like, you know, the whole of the sector is being impacted. UK plc is pretty sort of investment off at the moment. For me, this is about sticking to the knitting. It's about continuing to execute our strategy. We are long-term through the cycle.
This is just a part of the cycle that nobody likes, including us, and actually make sure that we consistently deliver, we consistently perform, we keep our eye on the cost base of the business. We're really sort of closely in touch and attuned to the markets. As Kitty said, that flexibility that we have in the product that, you know, sort of we can now deliver across our sites is really important. Making sure we secure pre-lets to get some of the bigger and earlier phases, the way of some of the bigger sites we've got coming on stream, like Cottam and Wingates, we're really focused on at the moment. But, but for us, it's about continuing. It's heads down, it's continue to deliver, hopefully continue to outperform, and get through this sooner rather than later. Would you add anything?
No, only that we'll continue to sort of work with shareholders to understand sort of the business model, improve our disclosures, and
Yeah
and deliver on the strategies you're saying.
Yeah, which hopefully, again, you know, you've seen as investors, we've gradually sort of begin to like, you know, to improve those disclosures over the last sort of years, and we'll continue to do that.
Great. Thank you. That's all the questions we have from the webcast.
Great. Thank you, everybody.
Thank you.
Thanks for listening.