Mashonaland Holdings says the property market remains hamstrung by lethargic demand across all sectors of the market owing to low economic activity in the economy.
Mash Holdings is a property investment and development company in Zimbabwe, providing solutions to the retail, commercial and industrial sectors.
The company said in its interim financials to June 30, 2022 that while the Covid-19 restrictions eased during the period under review, the prevailing global headwinds and internal fiscal and monetary policy issues have further delayed full economic recovery.
“Despite the faltering economic activity, the occupier submarket’s retail and industrial sectors have remained relatively resilient.
“The office sector, however, remains subdued, particularly in the CBD, with new lettings being recorded through innovative solutions providing flexible and miniaturised office space,” said Engineer Grace Bema, the company’s chairman, in a statement of the financials.
She noted that the development submarket has been the most affected as construction costs remain on an upward spiral in both currencies.
“As a result, the submarket continues to be dominated by residential property projects and a few small sized commercial developments,” said Bema.
She added that the high interest rates on mortgage lending coupled with declining disposable incomes, however, continue to act as hindrances against further growth in residential sector developments.
Bema, however, noted that the middle to high income residential properties continue to present investors with an avenue for value preservation as the inflation trend remains uncertain. She said the high demand against a static supply has seen property values in this market segment going up.
During the period under review, rent reviews and improved occupancy drove the company’s revenues, which grew 51 percent to $709 million in the interim period to June 30, 2022 compared to $471 million achieved during the prior year same period.
Bema said the group’s net property income as a percentage of revenue decreased from $83 percent to 78 percent due to increases in property expenses.
“Property expenses increased by 98 percent driven by maintenance works, which the Group continues to implement to ensure continued quality of space so as to attract and retain tenants,” she said.
She noted that maintenance works were also carried out at Chiyedza House to support the growth of the flexi-leasing facility.
Bema said the group’s operating profits for the period under review grew 204 percent to $800 million from $263 million driven largely by foreign exchange gains of $503 million which were realised on foreign currency balances held by the group following receipt of deposits on the disposal of Charter House.
She noted that the group’s collections percentage remained resilient at 97 percent due to continuous credit control interventions which sought to ensure timely realisation of value from rentals in the hyperinflationary environment.
Bema said during the period under review, the group performed an open market valuation of its investment properties and the investment property portfolio was valued at $32,5 billion, an increase of 7 percent from $30,5 billion from the valuation done in December 2021.
“The increase was mainly due to an aggregate fair value gain amounting to $2,3 billion. The fair value gain represents the group’s partial realignment of rentals in the highly inflationary environment to protect returns,” she said.
In terms of property development projects, Bema said the group completed the acquisition of the 4ha Pomona property in the first quarter of the year and the company has since appointed a full project team to work on the designs and requisite statutory approvals.
“The group is targeting to commence construction works in October 2022 and an anchor tenant has been identified for the development project and has signed an Agreement to Develop and Lease (ADL),” said Bema.
She said on the Mashview Gardens, the group completed construction work on the 1st phase in August 2022 and has since commenced works on phase 2 and 3 of the project and the project is targeted for completion in the last quarter of the year.
On the 12 Van Praagh Day Hospital project, Bema said construction works on the development commenced in the second quarter of the year and the project has a duration of 14 months and a target completion date of August 31, 2023.
In Ruwa, on the Windsor Park residential stand sales, Bema said the group had concluded agreements of sale for 15 of the 24 fully serviced medium density residential stands.
She said funds raised from the disposal of these stands are anticipated to create further liquidity to support other strategic development works.
Bema indicated that despite a number of challenges facing the property sector, the Group remains focused on delivering on its projects pipeline which will support cash flow generation to enable portfolio diversification.
She said the strategic focus will also remain targeted at portfolio performance optimisation, portfolio diversification and increasing operational efficiencies to ensure sustained business growth.