LISTED property giant, First Mutual Properties (FMP) will focus on value preservation and cashflow management as part of new strategies to survive Zimbabwe’s highly volatile operating environment.
The grand plan also comes at a time when FMP is still recovering from the effects of delayed rental reviews during Q2 2020, meant to ease the impact of Covid-19 on tenants.
“Value preservation and cash flow management remain critical in the immediate to short term as the impact of Covid-19 on rentals, occupancy levels and cash flow generation evolves, as the macroeconomic environment remains uncertain,” FMP said in a trading update for the quarter ended September 30.
“To this end, as occupiers reassess their space requirements, the group will actively seek new tenants and improve space quality in line with occupier requirements to sustain occupancy levels and earnings.”
Despite the relative stability of performance across all sectors, there are growing concerns over productivity losses and threats to collaborative efforts in the execution of tasks, innovation and workplace culture, as the current remote working period is drawn out, FMP said.
In Q3, FMP’s profit for the quarter plummeted to ZWL$105.4m from ZWL$775.1m prior comparable period.
Revenue declined to ZWL$91.5m in the reviewed period from ZWL$103m in the same period last year.
Occupancy level for FMP remained flat at 88% as deliberate efforts to improve space quality continue to yield positive results.
Collections improved during the period to 84% as the business actively engaged tenants with arrears to reduce their obligations.
FMP said the property market fundamentals remained depressed due to the difficult macro-economic climate and low business confidence.
Overall, the market remains susceptible to low demand for rental space, increasing vacancy levels and increasing defaults, it said.
Transactions within the property market continue to be concentrated around the residential sector.
Commercial transaction activity remains subdued due to constrained local currency liquidity.
Development activity also remains low because of price volatility and weak demand for space.
Revenue for the quarter increased by 674% compared to the same period in the prior year, driven by rent reviews.
Net property income grew by 607% during the reviewed period due to deliberate efforts to reinvest earnings into maintenance works, to improve space quality for leasing purposes and tenant retention.
A total of ZWL$7.7m was spent during the quarter on property maintenance.
Administration expenses to revenue ratio stood at 32% for the quarter remaining unchanged compared to the prior period. Investment properties as of September 30 2020 stood at ZWL$9.2bn.
FMP has a significant property portfolio, comprising some 117 250 square metres of lettable space made up of office parks, retail shops, commercial and industrial property.
It owns and manages 41 buildings in the major economic hubs of Zimbabwe, including high-rise commercial buildings, industrial and warehouse properties and retail outlets.
FMP also has a residential trading stock of two- and three-bedroomed garden flats in Avondale, Harare.