eBusiness Weekly
Enacy Mapakame
Listed property firm, First Mutual Properties (FMP), recorded a substantial increase in revenue and net property income for the first quarter to March 31, 2023 although occupancy level declined.
FMP attributed the revenue increase to rent reviews and improved pure US dollar business recorded during the quarter.
Figures from the firm show that revenue jumped 554 percent to $1,3 billion on prior year level, which the group said was primarily driven by rent reviews and enhanced pure US$ business operations.
Despite the occupancy level falling to 84,55 percent, mainly due to net lettings in the CBD office sector, FMP managed to generate higher levels of rental income, leading to a 485,39 percent surge in net property income, which closed the period at $493 million.
Profit for the period surged to $26 billion from $1,9 billion recorded in the prior year period.
Property maintenance remained a priority for FMP, as $51,598,333 million was allocated to upkeep during the quarter.
The company’s investment properties also experienced significant value appreciation, with a 25,31 percent fair value gain from $109,334 billion at the end of December 2022 to $137,007 billion at the end of March 2023. This growth can be attributed to the steady increase in rental income.
During the period under review, the environment has remained challenging for businesses, with weak demand for space, particularly in the CBD offices and suburban shopping centre sectors.
Supply continues to outstrip demand, with recent developments such as Highland Park and Madokero contributing to the surplus of available space. Consequently, this has affected the ability to set higher rental rates in these sectors.
To navigate these challenges, various players in the market have adopted different strategies.
“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.
“Other players are reviewing the United States Dollar currency base rentals upwards and indexing to the ZWL interbank rates rather than using the alternative market rates. New lettings are mostly being concluded solely in the United Dollar currency.
“Purely USD currency rentals are discounted when compared to ZWL rentals payable at interbank rates due to the different exchange rates used,” said the company in a trading update for the quarter.
Despite limited development activity in the property market due to the depreciating local currency and restricted access to financing, FMP has observed certain trends.
There is an increase in owner-occupied office park style buildings, high-rise flats, cluster houses and residential house conversions. Additionally, new commercial developments are emerging in suburbs just outside the CBD and on major arterial routes.
These investments aim to safeguard property value and improve balance sheet positioning. However, the development of cluster house projects has put pressure on existing infrastructure, such as sewer systems and roads, requiring necessary upgrades.
FMP remains committed to navigating the challenging property market environment while capitalising on opportunities to enhance its portfolio. The company continues to focus on providing quality spaces and maintaining strong rental income growth, ensuring a solid foundation for its future endeavours.
“While the use of USD may boost business activity in crucial sectors, sustained growth and business confidence will rely on important macroeconomic and monetary policies.
“Rental returns are expected to stay low because of the protracted price discovery process for leases and the limited potential for rental prices 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,” said FMP.
