Timothy
Business Writer
First Mutual Properties reported inflation beating revenues for the half year to June 2021 on the back of repricing of rentals, the property concern said this week.
In financial statement released this week, chairman Elisha Moyo, said the company’s revenue, which predominantly comprises rental income grew by 369 percent in historical terms.
This was ahead of year-on-year inflation of 106 percent for the period under review.
Moyo said the growth in revenue was driven by the repricing of rentals during the period, with the focus on indexing rentals to foreign currency in line with the provisions of Statutory Instrument 85 of 2020.
He added that the rental income growth has been sustained by a stable growth in the occupancy level closing the period at 89.48 percent, slightly ahead of 88,52 percent prior year comparative.
Despite being able to reprice rentals, Moyo said the various Covid-19 related lockdowns during the period had restricted the company’s ability to complete all rent reviews.
“Some of our tenants continued to struggle to meet their current lease obligations,” Moyo said.
“This resulted in the collection rate declining to 68 percent (HY 2020: 77 percent), but an improvement from 57 percent at Q1 2021.
Unpacking some of the issues bedevilling the property sector, Moyo said space absorption remained subdued during the period with continued supply demand imbalances, pending full
recovery of the productive sectors to support demand for space.
The subsectors worst affected were CBD Offices, high density suburban shopping centres and the specialised industrial sectors.
However, demand for retail warehousing, light industrial properties and office park properties remains strong, according to Moyo.
Away from occupancy levels, Moyo said transaction activity remains subdued, as property investors hold onto real estate to preserve value.
“There are limited options to recycle into new assets as the current stock in the market has relatively aged requiring significant capital to upgrade.
“Demand for quality real estate remains high, with investor appetite skewed towards real assets as high inflation expectations remain,” added Moyo.
While commercial development activity also remains limited due to the supply demand imbalances, Moyo said the majority
of development activity remains in the industrial / retail warehousing sectors, while limited owner occupied office park style buildings are ongoing.
“The residential sector development activity remains strong, mainly supported by the informal sector of the economy and the Diaspora community,” Moyo pointed out.
Going forward, and for First Mutual Properties in particular, Moyo said the Group continues to scout for opportunities within the market to further grow and differentiate the property
portfolio, with additional strong emphasis on improving the performance of the existing property portfolio, and sustainably managing operating expenses.
Bongani Ndlovu