LIVINGSTONE MARUFU
First Mutual Properties (FMP) was in the red during the six months ended June 30, 2021, posting a loss of ZWL$705.9m from a profit of ZWL$5.72bn in the same period last year due to Covid-19 induced lockdown which saw the majority of employees working from home.
This exacerbated the already bad situation as clients were already leaving the central business district (CBD) for leafy suburbs due to lack of parking spaces and congestion.
In a statement accompanying results, FMP chairman Elisha Moyo said the successive lockdowns killed the appetite for space in town as most businesses occurred in residential areas during lockdowns.
“The Covid-19 pandemic continues to impact business performance as the various lockdowns during the period restricted our ability to complete all rent reviews, while some of our tenants continued to struggle to meet their current lease obligations,” Moyo said.
“This resulted in the collection rate declining to 68% from 77% but an improvement from 57% at Q1 2021.”
He said space absorption remained subdued during the period with continued supply-demand imbalances, pending full recovery of the productive sectors to support demand for space.
“The excess supply of space is mainly historical space redundancy, with the sectors worst affected being the CBD offices, high-density suburban shopping centres and the specialised industrial sectors,” Moyo said.
He said corporates have maintained leases despite the Covid-19 pandemic and a gradual shift to a hybrid of remote working and office presence.
The demand for retail warehousing, light industrial properties and office park properties remains strong.
Moyo said the property market seemed to have made price discovery of rentals with rentals predominantly indexed to foreign currency as landlords seek to preserve value of cash flows.
There are very few transaction activities going on as property investors hold onto real estate to preserve value, he said.
The group’s inflation adjusted net property income after administration expenses grew by 11% to ZWL$43.14m from ZWL$38.81m driven by growth in inflation adjusted revenue of 45% to ZWL$204.23m from ZWL$141.1m.
Moyo said the revenue predominantly comprises rental income.
Rental income growth has been sustained by a stable growth in the occupancy level, closing the period at 89.48% from 88.52%.
He said there are limited options to recycle into new assets as the current stock in the market has relatively aged requiring significant capital to upgrade.
Moyo said the demand for quality real estate remains high, with investor appetite skewed towards real assets as high inflation expectations remain.
The commercial development activity also remains limited due to the supply-demand imbalances with the majority of development activity remaining in the industrial or retail warehousing sectors, while limited owner-occupied office park-style buildings.
The residential sector development activity remains strong, mainly supported by the informal sector of the economy and the Diaspora community.
Moyo said independent property valuation conducted by Knight Frank Zimbabwe as at June 30 2021 valued the property portfolio at ZWL$9.76bn, being a 14% decrease in value in inflation-adjusted terms from December 31, 2021, of over ZWL$11bn.
FMP is at the pre-construction stage of the Arundel Office Park extension with the design development of the architectural plans completed and undertaking environmental impact study, before seeking the requisite approvals by the local authority ahead of commencing the tendering process.
“We expect the tender process to commence and be completed in H2 2021 with site mobilisation in Q4 2021. The project implementation has been impacted by the Covid-19 pandemic; however, the necessary plans to ensure the project is expedited are in place once approvals by the local authority are granted,” Moyo said.
