FIRST Mutual Properties (FMP) recorded a 554,26% increase in revenue in the first quarter of this year due to improved United States-dollar business and rent reviews.
The increase was despite the occupancy level falling to 84,55%, mainly due to net lettings in the central business district (CBD) office sector, according to the company’s trading update for the quarter ended March 31, 2023.
The revenue in the period stood at $1,31 billion.
Company secretary Dulcie Kandwe said space absorption was insignificant during the month with demand for space remaining weak, especially in the CBD offices and suburban shopping centre sectors with supply continuing to outstrip demand.
Recent developments, being the Highland Park and Madokero, have added on to the available space, she said. This has continued to affect the setting of improved rentals in the sectors.
“Different players have resorted to either using purely United States dollar rental rates or quoting in purely Zimbabwean dollar currency having converted the rentals at the alternative market rates,” she said.
Kandwe noted that other players were reviewing the US dollar currency base rentals upwards and indexing to the local currency interbank rates instead of using the alternative market rates.
“New lettings are mostly being concluded solely in the United States dollar currency. Purely US$ currency rentals are discounted when compared to Zimbabwean dollar rentals payable at interbank rates due to the different exchange rates used,” she said.
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“There continues to be limited development activity on the property market being affected by the depreciating of the local currency and limited access to financing, with the majority of developments being mainly in the industrial or retail warehousing sectors.
“Owner occupied office park style buildings, high-rise flats, cluster houses and residential house conversions and new commercial developments especially in suburbs just outside the CBD and on major arterial routes are on the increase as investors seek to hedge value in property and improve balance sheet positioning.”
However, cluster house developments have been seen to be putting pressure on existing infrastructure being sewers and roads which also need upgrading.
“Net property income increased by 485,39% during the period due to improved levels of rental income which is the main component of the revenue,” said Kandwe.
Investment properties for the company in the period under review were valued at $137 007 billion, a 25,31% fair value gain from the December 31 2022 value of $109 334 billion and the growth was driven by rental income.
“Due to the excess supply of space, the commercial real estate industry is predicted to continue favouring tenants. While the use of US$ may boost business activity in crucial sectors, sustained growth and business confidence will rely on important macro-economic and monetary policies,” Kandwe said.
FMP is expecting rental returns to stay low because of the protracted price discovery process for leases and the limited potential for rentals to increase given the abundance of available space.
“In the near future, the primary objective is to safeguard the value and manage cash flow, as fluctuations in the market caused by currency devaluation have the potential to cause major disruptions.
“The group intends to achieve this by enhancing the quality of space to meet the demands of occupants, sustaining occupancy rates and earnings. Additionally, investments will be made in property developments to expand the property portfolio,” she added.
The board of the company declared the first interim dividend of $20,6 million, being $1,667 per share and an additional US$12 496, being US$0,001011 per share from the profit for the quarter.
The group continues to focus on rolling out green sustainability initiatives for selected properties following completion of net metering for First Mutual Property Solar system increasing generation and feeding into the national grid, while also enhancing waste management and separation of infrastructure at various sites with colour coded bins secured, internal colour coded bins and liners being secured by May 2023 for First Mutual Property Park.
