…as revenue rose 137% in first 5 months
First Mutual Properties says its revenue for the first 5 months to 31 May 2022 rose 137% to ZW$364.15 million from ZW$153.45 million in the comparative period last year despite a challenging operating environment.
The property market continues to experience low demand for space, with the central business district office sector worst affected, while the retail and industrial segments of the market remained resilient with steady demand.
Managing director Chris Manyowa told shareholders at the company’s annual general meeting that property expenses are generally chasing the environment.
The market is characterized by inflationary pressures and exchange rate volatility, which has seen a surge in prices of goods and services both in US dollars and ZW$.
Property expenses increased fourfold to ZW$204.74 million from ZW$40.96 million in the same period last year.
“In terms of the utility maintenance costs that we incur in maintaining portfolios and the utilities that we consume, property expenses were up 400% in sympathy with what we all know about what is happening in the economy,” he said.
The allowance for credit losses climbed threefold to ZW$19.7 million from ZW$5.57 million previously.
“This is attributed to the risk of default that we are seeing in the market given the operating economic environment.”
Net property income was up 31% to ZW$139.7 million from ZW$106.9 million. He said it was not growing so much and was mainly weighed down by property expenses and allowances for credit expenses.
There was quite a huge jump in other income. It increased from ZW$3.10 million previously to ZW$267.98 million. Manyowa said this was underpinned by “foreign exchange gain because of the significant US dollar rent income that we receive for the portfolio.”
On the ratios, he said the rental yield is actually on an upward trend, sitting at 4% as of the end of May 2022. The collection rate is slowly going up. It could do better, sitting at 72%. On May 31, the comparative period, it was 63%.
He stated that occupancy levels are generally stable at 89.60%, up from 88.85% in the comparable period.
“The portfolio has got 43 buildings and they are generally maintaining the occupancy level, which is quite stable. Also, that is the function of the input of reinvesting that we are doing just to maintain the portfolio and make sure that we retain the old tenants that we have,” he said.
“We do have occasional people who go and vacate, but we still have people who stay.”
On property developments, the company has just completed a project in Mbare – dubbed Mbare Retail Warehouse. It was a joint venture project between Gain Cash and Carry Supermarket, an institutional investor, and FMP, sinking about US$260 000. The total construction cost of the Mbare Retail Warehouse is US$500 000.
“The tenant is onsite doing tenant fit out and we are targeting an entry yield of 8%, which is quite competitive in the market analyzing the sort of US dollar returns on the market,” he said.
Also, the company is finalizing and working on the Arundel office park project. This comes as all the detailed building plans are completed and approved by the city fathers.
“We have gone to tender and we are currently finalizing the decision on the awarding of the tender. The fundraising is already lined up and is going to be a combination of debt and equity. “
He said construction is expected to commence in early Q3 2022, which is August and thereabouts.
The AGM endorsed, on a historical basis, ZW$12.87 million paid as directors’ fees for the past year, as well as the remuneration of ZW$4.8 million paid to Ernst & Young Chartered Accountants (EY) for the past audit.
Shareholders re-appointed EY as auditors of the company until the conclusion of the next Annual General Meeting.
Also passed the motion to pay out the declared dividend at 1,6196 cents per share – Harare