First Mutual net property income grows 55 pc

Enacy Mapakame

Listed property firm – First Mutual Properties (FMP) net property income after administration expenses grew 55 percent to $175,9 million for the year to December 31, 2021 against prior year.

This was driven by a 39 percent growth in revenue that closed the year at $594,75 million compared to $427,15 million recorded in the previous year.

Revenue growth was sustained by repricing of rentals and stable occupancy levels during the year under review.

Generally, the property market remained subdued during the year especially the commercial space in central business districts (CBD) as businesses downsized operations, adopting remote working in line with Covid 19 regulations or moving to office parks and suburban offices. The market experienced supply – demand imbalances that limited space absorption.

“The excess supply of space is mainly historical space redundancy, with the sectors worst affected being CBD offices, high density suburban shopping centres and the specialized industrial sectors,” said group chairman Elisha Moyo in a performance update for the year under review.

“However, the aging products are mostly affected by the unsustainably high investments required to revamp and modernize the product. There has been a gradual shift to a hybrid of remote working,” he said.

During the year under review, inflationary and exchange rate pressures also continued to erode the real value of rentals resulting in property owners adopting rental pricing models by shortening rent review periods.

For FMP, Mr Moyo said the group worked closely with tenants to ensure mutually beneficial and sustainable business relationships. As part of initiatives to improve its facilities and tenant retention, the group committed $25 million and $15,8 million towards maintenance and improvement respectively during the year.

Average occupancy level was at 89,93 percent, slightly above the 89,67 percent recorded in the comparable year.

As a result of effective tenant relationship management strategy, FMP enjoyed an improved collection rate of 82 percent compared to 80 percent in the prior year.

At $22 billion, the group’s property value was 135 percent above prior year following an independent valuation done by Knight Frank Zimbabwe as at year end. The increase was driven by growth in rentals as capitalization rate remained unchanged during the period.

The favourable economic projections are expected to stimulate demand for real estate, as economic activity improves. FMP is also looking at further investing into its existing portfolio to improve long term return profile.

Moyo said: “We will continue to scout for opportunities within the market to further grow and differentiate our property portfolio in order to improve the long term return profile.”