Good morning, everybody, and welcome to today's presentation of Sirius Real Estate's interim results for the period ending September 2022. My name is Andrew Coombs. I'm Chief Executive Officer of Sirius Real Estate, and I'm joined this morning by Alistair Marks, our Chief Financial Officer. Together, we'll take you through this morning's presentation. If I could start by asking you to turn to page three and remind you that Sirius now operates in both the German and the U.K. markets. We are an on-balance sheet, best-in-class owner and operator of mixed-use light industrial business parks on the edge of key towns in Germany and the U.K. The group currently operates nearly EUR 2.5 billion of property, approximately EUR 2.1 billion of which is wholly owned by the group.
We go across to page four, you can see that reflected in the comment in the bottom left-hand corner. We move on to Germany on page four. Sorry. Germany, as we know, is the largest economy in Europe, it's recently announced a relief package worth up to EUR 200 billion to fight soaring energy costs, namely Germany's defensive shield. We go across to page five, we can take a look at the Ukraine and specifically the situation with the German gas reserves, which are now more than 99% full to capacity. Gas continues to be supplied from a range of different sources other than the Nord Stream source, which is now no longer supplying any gas to Germany.
As previously explained, Sirius secured gas supplies for most of its customers at fixed rates back in 2020. Those fixed rate agreements do not expire until the end of December 2023. If we go across to page six and look at the U.K., the point that I would draw your attention to here is the central point in the top row, which is that strong rental growth potential, the point being that the U.K. market is driven principally, where industrial is concerned, by chronic supply constraints. Unlike Germany, the U.K. suffers from a shortage of industrial property, and that is not the only, but it is one of the things that drives the growth potential in terms of improving rates and increasing rent roll. Let's go across to page seven and look at the highlights.
Firstly, I'm pleased to confirm to you that Sirius continues to trade in line with expectations. When I talk about expectations, I'm talking about the consensus that we publish on our website, which is the consensus of a number of brokers that report on the company. That consensus creates an expectation of EUR 97 million of FFO for the current financial year and a dividend of EUR 0.0534. That is the consensus that I'm referring to when I say that we are trading in line with expectations. The company has a strong balance sheet. We are continuing to achieve good rental growth. Of course, we have a very well-covered dividend. The highlights I'm about to take you through are underpinned by yet another strong operational performance from the company.
If I can start with the FFO, which has increased by 47% to EUR 48.5 million. We are now within sight of our ambition of achieving a run rate of in excess of EUR 100 million of FFO. That's really important because it's the FFO that drives our dividend. As you know, we have a policy to pay 65% of FFO as dividend. That, of course, is why that dividend is so well covered, because we're only paying 65%. The reason we reserve the other 35% is because we're able to reinvest it in our organic growth programs, which typically get a return in terms of yield on cost of more than 20%. You can see that the dividend has increased by just over 32% to EUR 0.027.
If you look at the rent roll growth in Germany at 2.4% in six months and in the U.K. at 4.1% in six months, you can see that we have got reasonable rent roll growth in both markets. If we turn to the balance sheet, not only do we have EUR 138.6 million of unrestricted cash at period end, but Alistair was also successful in renewing the Berlin Hyp loan that is due for renewal in November of next year. He was successful in agreeing the terms of that loan very early. Whilst that loan is not due to renew until November of next year, we already know what those terms will be.
What that means is that when those terms kick in, our all-in debt cost will increase from 1.3% to 1.9%. That won't happen until November of next year, next financial year, we'll have about six months of that effect, then it will be the year after that we take the full effect of that. As you will see, 97% of our debt is now on fixed rates. We have less than 13% of our total debt that is up for renewal in the next three years. That, of course, before the Berlin Hyp agreement would have been 13%. It's now 13%.
We believe that over the next three-four years, what we should be able to do through rent roll increases is ease our way from the luxuriously low interest rates that we've experienced for several years now into a more normalized world. By holding our debt at roughly 2% for the next three-four years, we believe that will give us the time to increase the rent roll and increase the revenues in the business to be able to accommodate, in the future, the increased cost of lending. What we focused on this period is getting certainty in terms of fixing the interest rate and getting certainty in terms of making sure that 87% of the debt is effectively locked down for the next five years.
What I'll do now if I may, is turn to page eight, the income statement, and hand over to Alistair.
Thanks, Andrew. As far as looking at the profit for the period, we've reported a profit before tax of almost EUR 76 million, which given the climate I think is a very good result. It's slightly down from where it was last year. The reason why it's down is because the revaluation increases is slightly lower than what we saw in the H1 last year. I think the key thing to note in the P&L is the FFO. If you look at FFO to September 2021, that was running at EUR 33 million, which annualized is about EUR 66 million. We set out an ambition to get to EUR 100 million. If you annualize what we've actually achieved in the first half this year, that's EUR 48.5 million, that's at EUR 97 million.
We are within a whisker of getting to that EUR 100 million FFO mark within a year, from EUR 66 last year. That's a 47% increase. Obviously, a lot of that has come from the fact that we acquired BizSpace, and if you break it down, probably about 60% of the increase comes from that acquisition. The other 40% is coming predominantly from organic growth as well as a bit of contribution from acquisitions that we acquired last year. That organic growth is very much being driven by the rent roll.
If you look at rent roll September 21 compared to what it is now, we've seen a 7.5% increase in the like-for-like rent in the U.K., and almost 12%, sorry, 7.5% in Germany, and almost 12% in the U.K. since we actually acquired BizSpace. That is pretty phenomenal growth in a 12-month period, which is obviously the key driver behind that organic growth increase in the year. If you flip over to slide nine, you'll see how that translates to a per share basis. As you know, we did raise some equity in order to do the BizSpace deal. The per share metrics aren't quite as good as what they are just purely on a EUR basis.
Still, you can see the FFO is, FFO per share is now running at EUR 0.0415 for the six months, which translates to a 65% payout dividend of EUR 0.027. That is almost 32%-33% increase from last year. Obviously, the equity did contribute to us actually getting the BizSpace acquisition, but the fact that we've been able to drive the per share by 33% means that shareholders are seeing a very good benefit from that transaction combined with the organic growth.
Flipping over to the balance sheet, I would say normally the balance sheet isn't high on people's priorities as far as when they're looking at our results, I think this time round it is extremely relevant in the fact that the strength of it now is nothing compared to what we've had in the past. We've improved it so much for many reasons. I'd say the key reasons to start with is if you look at the assets. We've now got EUR 2.1 billion of assets. We think they're still fairly conservatively valued at a 7% yield in Germany and 8.7% in the U.K.. People are concerned about yield expansion. I think there is still quite a bit of room before the market reaches where our properties are valued at.
There's quite a decent cushion there to be able to absorb that. I think that's one of the key things in the balance sheet. That conservative valuation obviously will help us if there is some yield expansion. I think more importantly, when you're looking at it from a risk point of view, almost 1.6 billion of those assets are unencumbered. If there is any issue with the debt whatsoever, having EUR 1.6 billion of unencumbered assets is a massive thing as far as being able to deal with that. Not that I'm expecting any issues, but that is a big thing to have to have in our repertoire. And also the cash position. We've kept a lot of the cash that we raised last year.
We've still got EUR 162 million in total, about EUR 138 million is free. That obviously puts us in a very strong position as well, should we need to do anything in the future, even looking at potential opportunities. Also on an LTV basis, whilst that has ticked above the 40% mark that we've always said, it is coming back down, and we do have a strong ambition to bring that below the 40% mark. I think if you look at all of the other metrics on the debt, in particular the interest cover, unencumbered assets, et cetera, et cetera, that isn't the most important metric, I don't think as far as the debt is concerned.
It is coming down and we still do have an ambition to get that below 40%. Flipping over to page 11, we have seen valuation increases, and you can see that on a per share basis, the NAV per share has increased from 108.5 to 110.7 on adjusted NAV basis. I think that is, from what I read this morning, one of the few companies. We are one of the few companies that are showing NAV growth at the moment still. I still think there's a lot more to come in the future.
I think the key thing to note as far as total shareholder returns are concerned is if you add up the blocks in here which relates to profit, recurring profit as well as valuation gain, we get to about 5.6% as far as the NAV growth coming from profit and valuation, NAV growth in the first six months, which if you annualize that is in excess of 10%. Even in uncertain times, we are still running the business at close to a 10% total shareholder return, and I think we will continue that, fairly close to that in the second half this year. On that note, I'll pass back to Andrew to talk about our ESG strategy.
Thank you, Alistair. I'm pleased to tell you that the company in Germany will this year reach net zero for its Scope 1 and 2 emissions. We'll do this in a number of ways, including having moved our head office in Berlin to a gold ESG building and also converted the majority of our fleet across Germany, fleet of vehicles, into hybrid vehicles. We're also very proud of our record on diversity and inclusion. We refer to it as our policy of belonging. We're proud of the fact that we now employ 37 different nationalities across the group, and the balance of female staff sits at 51%. We will be publishing our first standalone ESG report in December.
This will be a prelude to our company report in June of next year, where we'll highlight some specific, in particular, environmental, targets for the group. Prior to that, the next key event is the publication of our first standalone ESG report, which should be out in December. If we go across to page 13 and start to have a look at the organic growth in Germany. As you've heard, the rent roll growth is 2.4% on a like-for-like basis. This has been achieved predominantly by rate. What we've been able to do is lift the embedded rate per square meter on a like-for-like basis from EUR 6.32 per square meter per month to EUR 6.53 per square meter per month.
One of the ways in which we've done that is whilst our tenants in Germany are moving out at an average of EUR 7.40 per square meter per month, we are attracting in the period new tenants at a rate of EUR 8.63 per square meter per month. I'm pleased to tell you that, post end of the period, if I take October specifically, we're selling to new customers in Germany at an average of EUR 9 per square meter per month. We've got good rent roll growth here. The rent roll growth is coming absolutely from increase on price.
We are actually slightly down on our overall sales volume, having sold in the period just under 80,000 square meters of new tenants compared to just under 84 in the prior period, say, in the same period prior year. However, whilst on a monthly basis, the sales volume is down by EUR 26,000, the price effect is up by six times that. What you are seeing at this point is an active strategy of managing price and increasing price, executing on pricing power. This is not about maintaining occupancy. The number one priority is price. We will need to return to an occupancy-led strategy at some point in the future, but at this point in the cycle, the important point is to lift price as fast as possible. Therefore, this is a price-led strategy at this point.
If we go across to page 14, what you can see is we've had EUR 8.2 million in move-outs. In terms of the other move-ins, the uplifts on existing tenants, and of course, the organic growth program, we've been able to attract nearly EUR 11 million of additions to the rent roll. We have EUR 10.9 million plus EUR 8.2 million. Going across to 15, you can see the asset recycling that's taken place in the period. As you can see, what we've done is we've disposed at roughly a 32% premium to book value. How have we done that? Well, we've taken a piece of non-income producing land in Germany and sold it at four times its value.
We've also done is we've taken an asset in Magdeburg, which is significantly challenged going forward, and we've been able to sell that at in excess of valuation. What have we then purchased? We purchased three new assets in Germany, and we've immediately replaced the net operating income that we lost from the sale of the property in the U.K., the land and Magdeburg. We lost that EUR 1.4 million of NOI, but what we've done is we've replaced it with acquisitions that immediately provide EUR 1.6 million of NOI. Most importantly, we've got a blend of assets that are not challenged, a blend of assets that have 46% vacancy, and that at the moment produce an annualized rent roll of EUR 2.3 million.
We believe we can drive that with good asset management to in excess of EUR 4 million. This is very disciplined, intelligent selling of assets at above book value to recycle the proceeds into things that can feed that FFO growth that we're so passionate about. We go over to page 16. Alistair, could you talk through valuation movement, please?
What we've seen in the valuations in Germany, this period is that they have increased from EUR 1.62 million up to about EUR 1.65 million. That has predominantly come from rent increases. There has been a slight expansion in the gross yield from 6.9% to 7%. As I've mentioned to you before, we think that is quite conservatively valued.
The one thing I'd like to point out on this is if you know our Sirius model, what we actually do with our assets is we transform assets which are generally valued on a high yield that normally have issues with them, and we invest CapEx into them with a lot of other asset management activities to transform them into much more desirable assets which are generally valued and can be sold at a much tighter yield. If you look at the way the portfolio is split at the moment, we've got 62% of the portfolio still in that value-add category. Only 38% is mature. As we go through this CapEx program and transform those assets, there's gonna be more assets that are gonna be in the mature category, which can be valued and can be sold on a much tighter yield.
If you look at what we've actually sold in the past, we sold a lot of mature assets. We're generally getting around about 6% gross yield, or just over, for those mature assets. If you look at the market history, there's transactions in the 5s, early 5s as well. That's why I think that 7% is quite conservative in the fact that even the mature assets, I think, are valued conservatively. Well, more importantly, those value-add assets, when we transform them, they will come in quite significantly regardless of what happens in the market. You can see that on page 17. If you flip over, the top two slides, as we showed in the past, show the movement in the period.
What you will see is that the value-add and the mature split, we've actually had more rent increase and more valuation increase in the mature assets than we have percentage-wise on the value-add. We've had 3% increase in the rents on mature, 2.4% increase in the value on the mature, and only sort of 1.6% increase in value and 2.1% increase in the rents on the value-add. The reason for that is that we had some large move-outs in the value-add assets, which we will replace quite quickly. Whilst all of those value-add assets go through the transformation, you can still see the mature assets are still going up. The rents on the mature assets are still going up. Inflation is really helping us in Germany on those mature assets.
Once we get it to mature, it doesn't stop there. There is still growth that will come from that. If you look at where we are at the end of the period, there's been EUR 75 million worth of assets that have moved from value-add into mature. You can see that's the EUR 1,032 million is the 62% of value in value-add, and the EUR 622 million is the mature. I think the key thing going forward with these assets is if you look in the vacancy, 284,000 square meters to go. If you look at how that vacancy is split up, there's 95,000 square meters of that, which is going through the CapEx program.
Half of it is vacant space we've acquired, about 38,000 square meters of that is space we've acquired back recently from tenants leaving, which we're looking to upgrade before we relet. 5% of the, of the 16 is going through the CapEx, 2% is structural vacancy, there's about 9%, which is the real vacancy of space that's ready to let. If you look at what's actually occupied from what's available to let, it's above 90%. What we do historically is we keep on topping up that CapEx program through acquisitions and asset recycling. We transform those space through the CapEx program, it goes into the ready to let, we let it up, that keeps down. It's a continuous cycle.
We will going forward, there's gonna be more space coming from asset recycling, but more importantly, we'll also look to top that up through vacated space that we can upgrade. We make just as much from upgrading poor quality space we get back and reletting at a higher rate than we do dealing with that suboptimal space. There is still a lot more to go, and I would estimate there's at least EUR 20 million to come from the rent roll, partly from the CapEx program, but also with inflation over the next two to three years from that. That is a key element of the strategy going forward. Flipping over to that CapEx program, we can see this is the CapEx program since the start. We started this back at the start of 2015.
We've identified over 450,000 sq m of suboptimal space, which most of it we've acquired, which has gone through the CapEx program. We've transformed 400,000 of it to date. We've invested EUR 60 million into that. We've achieved EUR 26 million rent, 44% based on a 79% occupancy. 40%, 44% return on cost. I think that will increase to close to 50 when we get that occupancy up to the mid-80s, is what we're expecting. I think the key thing is on the valuation. We've had, since we started this CapEx program, EUR 724 million increases in valuation since this started. EUR 452 million of that has come from rent increases. We've invested EUR 60 million into this space.
I would say that this CapEx program has been a big chunk of that EUR 452 million over the last six or seven years. This is a key element of the business, but there's still quite a bit to go. As I said, there's still 58,000 square meters left in here. We're looking to invest another EUR 15 million into that to realize EUR four and a half million from that. I mentioned the other CapEx program of vacated space. That is another 37,000 square meters on top of this, which we're looking to invest about EUR 6 million into to get another EUR 3.3 million of rent. That's the 95,000 square meters I said, 5% of the vacancy that is going through the CapEx program. I'll pass back to Andrew to talk about the U.K..
Thanks, Alistair. Again, with the U.K., you can see the like-for-like rent roll has increased by 4.1% over this six-month period. What you can also see is on the rate per square foot like-for-like at 12.64, up from 11.67. That is an 8.5% increase in the rent roll in a six-month period. I think that probably underlines some of the opportunity that we saw in this business a year ago. Of course, it is in part driven by the chronic undersupply of space in the U.K. in this category. It's also driven by some of the things that we put in place in the U.K. now, which are similar to our platform in Germany.
To realize that increase, one of the things that we've had to do is sell to new customers at in excess of GBP 20 per sq ft. As you can see, people are moving out at just over GBP 15 a sq ft. What we're actually doing is we're selling them at just over GBP 20 a sq ft. Again, this is a price-led strategy. The occupancy has gone down by 3.5%. It's gone down by 3.5% because we are reasonably uncompromising on price. We understand the value of this space. What we are prepared to do is strip back 3.5% of occupancy to realize a net growth of 8.4% in terms of the overall rent roll.
You know, again, please expect more of this to come, whereby we prioritize price at this point in the cycle. This is not an occupancy-led strategy. This is a price-led strategy, because at this point in the inflationary cycle, the most important thing in our view is to make sure we lift our prices. If we go across to page 20, what you can see is EUR 8.5 million in move-outs, you can see that coupled with EUR 10.3 million of move-ins and uplifts in terms of rent and price. If we go across to valuations, what you can see is there has been a 20 bip increase in the gross yield and a 60 bip increase in the net yield. Some of that increase in the net yield is obviously driven by the 3.5% drop in occupancy.
What that means is that due to yield shift, these valuations have gone back GBP 26.2 million. Due to revenue growth, they have gone up by GBP 34.2 million. Net net, we see a small increase in values in the U.K., again, driven by this concept of making sure that you report increased revenues, make sure that you get the valuation benefit on those increased revenues, and provided you start a period like this being reasonably conservatively valued, what you should be able to do through good asset management is you should be able to drive your revenues hard enough to beat the yield shift. That is exactly the strategy and the tactics that we'll be using in future periods.
If we go across to page 22, what you can see is some old news about Camberwell that we sold at a 36% premium to the last reported book value. That was an even more significant premium when you consider that we bought it together with the rest of the business at GBP 8 and a quarter million and sold it for GBP 16 million. The premium there is 94%. It's 2% net yield. It's a great asset. You know, our view was if you've got assets in your portfolio that can be sold at those kind of prices, you shouldn't be in the business of keeping them. You should be in the business of crystallizing that as quickly as possible and recycling the revenue. I'm delighted we did that with the timing that we did.
If I'm honest with you, it would probably be a little bit more difficult to do that today. Maybe we'd get 3% or 4% rather than the 2%. I'm very, very pleased that we cracked on and disposed of that asset as quickly as we did. If we go across to page 23, Alistair has talked about the FFO ambition that we launched on our capital markets day four years ago. It was very much an ambition. It didn't have a definite timing around it, but we always sort of insinuated that it was a sort of five-year thought process.
Despite COVID, despite a number of other challenges, here we are, very much inside the five-year term, and it looks like we should be able to realize that ambition, in terms of run rate, towards the end of this year. It's really, really important that we don't stop there, and that's why when you go across to page 24, you see the new medium, to long-term ambition set out. Lots of people look at that and think, you know, "Why are you doing that? Look at what's ahead of you. You need to focus on your balance sheet. You need to be able to steer the ship through choppy waters that are ahead." I would agree with that.
However...One of the things that has determined the success of this group is daring to think beyond the challenge that sits in front of you. This is not about next year or the year after. This is about the next five years. This is about the ambition of the group. The ambition continues to be to grow that FFO line because income is what we're valued on. Income is what pays the bank. Income is what pays the dividend. Income cannot be argued with. Continuing the focus on the income line and making sure we grow the income line is at the heart of the success of this group. What this slide reflects is that continuing ambition. Not a pause because of a problem, not a pause because, you know, we've got EUR 100 million in sight, but actually a continuation of the momentum.
Whilst we can only see the journey to the first EUR 12 million past EUR 100 million, that doesn't matter. Four years ago, when we launched the EUR 100 million ambition, we were at EUR 48 million, EUR 100 million seemed a very long way away. The challenge in all of our thinking now is how do we fill the gap between the EUR 112 and the other EUR 38 million that we need to find? That may well take years to solve. The important thing is it frames our thinking. What it does is it reminds us of what our ambition within this organization actually is. Don't look too closely at the individual numbers. Understand the principles, the principles that we are factoring in increased overheads, that we are factoring in additional expense, that we can only see the first 24% of this journey.
It's all about concentrating our thinking, medium and longer term, to how we solve the other 76% of the issue. Alistair, would you like to talk about banking?
Okay. Before I go through this, can I just get a couple of changes on this slide? There was a couple of typos in here. Firstly, the top is 97% of our debt is fully fixed rather than the 94 on the slide. Also our interest cover, as you will see up there, is 8.3 and 7.8, which is probably slightly different in the deck.
Oh, you've got the updated. Sorry. Forget everything I've just said then. Let me start with this slide. Yeah, if you look at the debt, comparing it to September 2021, what people do tend to focus on is the net LTV, which has gone from 37% to 41%. As you can see, it is coming down. As I said to you, the key thing for this is that the other metrics, particularly things like the unencumbered assets, we've had EUR 600 million increase in the unencumbered assets. We've had the weighted average debt expiry increase to five years. We've seen that interest cover increase again. It's still at 8.3 times. As I've sort of mentioned at the top, 97% of the debt is actually fixed.
If you look at our position now compared to where it was, even though there is a slight increase in the net LTV, all of those other metrics, combined with the fact that we've increased our operating cash flow by 50%. Also, we've moved from secured debt with amortization to unsecured debt with no amortization. Our cash flows have never been in a stronger position as where they are now. All of those metrics combined with that cash flow, I think we are in a much stronger position now, even with the slightly higher net LTV than what we were previously. Obviously, our ambition and our stated policy is that we would keep it below 40%, which is certainly well within our thoughts, and we will get there.
I think if you look at this company at the moment, we have never, ever been in a stronger position balance sheet-wise, cash flow-wise than where we are at the moment. That gives us such a fantastic foundation, not only to keep on growing, but to deal with anything that comes towards us over the next few years. If you flip over to the summary, just to summarize, what I think we've seen this year or this period is we've continued to see strong organic growth, not just organic growth, but strong. I can see that even getting better in the second half than what we had in the first half. Obviously, that feeds through to the dividend. We're seeing that mainly coming from the like-for-like rents, but FFO is continuing to grow.
The dividend obviously is 32% more than what it was last year, and we should be able to continue that in the second half as well. In addition to that, we're seeing valuation increases as well. Whilst there is a lot of yield expansion happening in the market, we are not seeing a lot of that because of where we're positioned, because of what we actually do to the assets, and exactly the fact that we are valued on a fairly conservative yield to start with. I've just talked about the balance sheet. That is one of the key things for where we are at the moment, as well as being able to deal with anything.
If there were any opportunities that would come about because of the strength of our balance sheet, I think we would be in a very good position to strike should that opportunity arise. That's obviously underpinned by the unencumbered assets. The LTV, obviously, the weighted cost of debt will increase, but the big increases aren't coming till four and six years' time when the bonds. We have got a very good runway before we start seeing a lot of that interest rate increases. Obviously that early refinancing of the Berlin Hyp facility indicates the strength of our relationships with the banks as well, which is another key element of our balance sheet.
All of that put together, I think we're in a very good position, A, to keep things going, deal with anything that will come our way over the next few years, and also be at the top of the list when it comes to being able to strike when the opportunities are there. I think we are in a very good position to be able to deal with that.
Okay, if we just look at the outlook. Again, the post-year-end trading is in line with expectations. We have attractive sector dynamics which continue to drive demand. In the U.K., that's the chronic shortage of supply. In Germany, it's the strength of the platform and the maturity of the business. If we look post-period into October, we are selling in both jurisdictions, new clients in, at in excess of 30% of the underlying average rate per square meter embedded into the portfolio in the U.K. and Germany. The new business rates that we're selling at are typically more than 30% the above the rates that the existing customers are paying. That's only one part of the equation. You've got to look at the move-outs, and you've also got to look at the rate that you're renewing at.
30% above on new business is a very healthy, dynamic. We are benefiting from the decisions that we made a couple of years ago. The decisions, you know, when everything was rosy, and we were thinking, what could go wrong? The decisions like locking in the price of gas and utilities until December 2023. We will benefit in the future from the impact of all the work that we did this year in acquisitions. We have still got the acquisitions of this year and last year to catch up in the P&L in terms of the full effect. We are continuing to look at acquisitions, but we are not acquiring anything at the moment. We are sitting and waiting patiently, preserving the strength of our balance sheet.
We are staying in conversations, watching the market, doing all the work, but we are not intending to leap in at this point unless we see something that is spectacularly accretive. We have the opportunity to capture, significant reversion through the use of our platform, especially in Germany. We think that Sirius remains well-placed to continue to deliver both a progressive and well-covered dividend as well as other attractive returns for shareholders. If we had to sit tight for two-three years, we have enough cash on our balance sheet. We do not have any banking arrangements that are likely to catch us out in a way that we can't deal with.
We do have 260,000 square meters of vacant space within the portfolio that we can apply CapEx to get the kind of organic returns that we're used to getting. We have the cash available and the cash flows to be able to fund those programs. If we did not acquire a single asset, or if we did not renew a single banking arrangement for the next 2.5 years, this vehicle can still trade and produce healthy returns. That's the thought I'd leave you with. Thank you very much indeed.
Yeah. Miranda Cockburn, Panmure. Could you just talk a little bit more on the price-led strategy? Obviously, it's going well at the moment, and you're securing above existing rates. Just concerned in terms of moving into sort of more of a recessionary environment, whether or not you're gonna be able to keep driving the prices forward.
When people hear price-led strategy, they think putting the prices up full stop. That isn't how we operate. Part of our price-led strategy might actually be getting a customer to pay less money but a higher price. It could be decanting a customer out of an existing space, putting them in a smaller space, so their overall monthly rental reduces, but they actually pay more per square meter for the space they take. It could be giving them other value-added services that are valuable for them, that enable them to cancel contracts with other suppliers, but increase their spend with Sirius. What it isn't, is just greedily increasing price and using inflation as an excuse to do so. What it is a pressure internally that says, "Look, the world outside is seeing prices go up.
We need to make our prices go up." The challenge is to do so in a way that makes sense for customers so that we don't see, you know, our occupancy fall by more than our price goes up. We can live with our occupancy falling at this point as long as the compensation in price is greater than the loss of occupancy. There will come a time whereby, as inflation reduces and stabilizes, we move more towards the occupancy-led strategy than we do the price-led strategy. At this point, we're leading on price.
Thank you.
Morning. Yeah, Matthew Saperia from Peel Hunt. Following on, I think, from Miranda's question, can you remind us how much of the German or how indexation works across the German portfolio and how much of the REM role is exposed to that? Do you have an idea of how much reversion there is in the portfolio? 'Cause I'm assuming that, to your point, you're not just putting up rate because you can, but there must be an element of marking to market as you deal with customers and you're bringing new ones in and retiring old ones and moving them around as you just alluded to.
Alistair, do you wanna take that?
I'll take that. Yes, as far as the actual contractual increases are concerned, more than 90% is either indexed, inflation-related, or there's a specific increase, 2%, 3%, 4%, 5%, or a step rent within the actual agreement. All of it is contractual. I'd say half of it relates to inflation, the other half is specifically stated in the contract. As far as the reversion is concerned, there are a number of tenants within the portfolio that are obviously paying below market prices. What I would remind you about is that part of our transformation process on the site, includes not just transforming the space that we actually invest into, but that deals with a lot of the messy stuff and the stuff which brings the whole site down.
Not only does it actually transform the space we invest into, it upgrades the whole site in general, and that allows us to also push prices up because tenants are coming into a much nicer site in general. Whilst the market is great, whether it helps or hurts, has a little bit of an influence, that investment, that transformation is far greater as far as being able to push rents up is concerned, as compared to what we get from the contractual increases as well as the market is concerned. There is reversion, no question about it. Some of that reversion naturally will come, and you're seeing that coming through on renewals, as well as when we replace tenants. Also we will accelerate that with that CapEx program by identifying the poor quality space and upgrading that before we relet it.
This is a very active management that actually, that active management adds more to the pricing than just the market forces, is the key point that I'm trying to make.
Morning, it's James from Peel Hunt. Obviously you've got this platform which is really impressive and you do a lot of lettings direct with tenants themselves. I think you might say during the early stage of COVID, you saw pretty good insights what tenants were looking for and early trends. I'm just wondering if you've seen any changes recently. You know, are tenants looking for more buildings that are cheaper to heat given energy costs? Are they looking for more affordable buildings given inflation, or is it very much just business as usual?
They're looking for certainty. Give you a really good example in the U.K. The U.K. business just over a year ago was selling in a way where what they were doing is they were selling customers flexibility. You take flexibility to a small customer now and they say, "Thanks. What I wanna know is what I'm gonna have to pay for the next two, three years. I don't wanna have the flexibility to, you know, pay extra to be able to go in six months. I wanna know what you're gonna be charging me for electricity and gas in a year's time." You know, it's a little bit like at the beginning of COVID in Germany, we saw ambition turn to fear.
People in their search language stopped, you know, looking for, you know, certain terms that reflected the ambition of their business, and what they started to reflect is fear and safety. What people are reflecting in particular in the U.K. right now is a flight from flexibility and a return to more certainty. More certainty, particularly around price. If you think about it's logical, isn't it? You know, inflation now, depending on which number you look at, could be anything from 8.8% to 11%. What people have heard time and time again is it changes every month. What we're seeing with our customers is, in particular in the U.K., we're seeing them concerned about not what they're being told today, but what might happen above and beyond that in the future.
That's one of the reasons why they are so receptive to propositions that give them certainty belong, beyond the typical 12-month lease length in this portfolio.
Got a quite, couple of questions from the online. The first from Nicolas Lyle at Stanlib Asset Management, which he's got two questions, one of which I think has partially been answered already. The first of which is regarding the acquisitions mentioned on slide 15, it would be great if you could provide assumptions behind your stated EUR 4 million of annualized rental income objective. The second is, how far will you let occupancy drop in the UK before you change your strategy from pricing to occupancy-led?
Firstly, where the assumptions on the EUR 4 million are concerned, if you were to just very simply look at the 46% vacancy, and if you were to assume that the dynamics remain roughly the same on those three assets, but you could fill them to 100% instead of 54%, that would get you to your EUR 4 million. That's not actually what we plan to do. We plan to do better than that. But the comment around the EUR 4 million is very much a conservative estimate of what you could get the annualized rental income on those three assets too, with the kind of asset management initiatives that we've used to underwrite these acquisitions. EUR 4 million, as you can see from the math, is not a particularly challenging number.
If we look at, you know, occupancy, we don't want occupancy too full, and we ideally want to operate in the 85%-90% corridor. Should occupancy drop below 85% in a portfolio, then we would be reviewing the strategy. It's not as simple as saying, you know, there is a hard floor on occupancy because it's very much about local markets, it's about pricing elasticity, it's about all sorts of things. Generally, you wanna be in the 85%-90%. If you start ticking down to 83%, 84%, you're probably putting your pricing strategy under quite a lot of quite a lot of strain. However, I go back to, you know, it being a numerical equation. If you're driving price by 15% and you're there, then maybe not.
If you're on single-digit pricing increases and you're dipping below that 85 and heading towards 83, that I would say is your red zone, where if you're not thinking about changing strategy, it's unlikely that what you're doing is going to work.
Thanks, Andrew. The last question we've got here is from Robbie Fox from Aberdeen. A year on from acquiring BizSpace, has that gone to plan? Is there an opportunity to use it as a platform on which to do accretive expansion in the U.K.?
Well, I think, you know, we are pleased, with the progress with BizSpace. You know, part of what we do as a group is, you know, we try and challenge ourselves further and further. There are things that we would have liked to have seen go better. I think generally we are pleased with the progress that's been made. Of course, you know, we didn't get involved, you know, with a GBP 400 million business in the U.K. to run a GBP 400 million business in the U.K.. You know, BizSpace is roughly where Sirius was just over 10 years ago. Of course, timing is, you know, like all these things, absolutely key.
At the moment, you know, what we're looking at doing is battening down the hatches and making sure that we can get as much certainty around everything to do with the group as possible. We will be patient, and we will watch carefully. What we are looking to do longer term is add scale to the U.K. business, but we appreciate that right now probably isn't the time to do that. We need to be patient, and we need to make sure that we wait until that time is right. I'd kinda divide that answer into, you know, into two parts. I would say there is a long-term aspiration to build scale in the U.K., but, you know, the time is not right now. Thank you very much indeed.