Rental income remains First Mutual’s main source of revenue

FIRST Mutual Properties board chairman, Mr Elisha Moyo, says the demand for infrastructure and other supporting assets, with investors focusing on owner-occupied office park-style buildings, largely reflects market confidence in the country’s economic prospects as rental income remains the main source of revenue.

In a statement accompanying audited financial results for the year ended December 31, 2023, Mr Moyo noted that the supply of space in the Central Business District Offices and suburban retail sectors remained high, driven by increased vacations/migration to office parks and suburban office sectors.

He said most tenants shifted to paying rentals in US dollars, however, in line with the country’s laws where the multicurrency system subsists, most tenants paid operating costs using local currency, especially for utilities that were billed in local currency.

“Property transactions have also remained low as some economic agents use property as a hedge against currency volatility. The market has seen an increase in the development of residential stands, cluster houses and high-rise flats.

“Further, investors are focusing on owner-occupied office park-style buildings and the conversion of residential properties into offices in the suburbs surrounding the CBD and on major arterial routes,” said Mr Moyo.

He added that there has been a significant increase in the development of industrial and warehousing properties in the country.

To that end, he said there is a need for supporting infrastructure, including water, power and roads to support the densification-oriented type of development.

The group has strategically positioned itself to generate shareholder value by pursuing various projects at varying execution stages.

“The group’s flagship project is the Arundel Office Park extension, whose scope involves building a double-story office block with a basement, providing a lettable area of 2,616.5 square metres, which is underway.

“Significant progress has been made on the project and it is nearing completion with glazing, wall and floor tiling, solar installation, lift installation and internal finishes now remaining.”

Mr Moyo notes that the group is a co-investor and project manager in constructing a 388-bed student accommodation building near the Chinhoyi University of Technology.

“In Zvishavane, the group is also a co-investor and project manager in the development of mixed-use duplex clusters, three to four-story apartments, and student hostels, with the proposed designs having been approved by Zvishavane Town Council.

“The project is in three phases. Phase A, comprising six duplex flats and 20 blocks of double and triple-storey flats, is already underway and completion is targeted for the 30th of September 2024.”

According to the report, the Group’s inflation-adjusted Net Property Income rose by 295 percent to $17,714 billion (FY2022: $4,484billion) while inflation-adjusted revenue was up 193 percent to $40,932 billion (FY2022: $13,952 billion).

“Rental income remains the main source of revenue. In historical terms, revenue grew by 1,115 percent from $2,102 billion in December 2022 to $25,539 billion mainly due to timeous rental reviews and stable occupancy level that averaged 88,07 percent for the year under review compared with 85,52 percent last year.

“Management continued to engage the tenants for timeous rental payments. For 2023, the collection rate achieved was 85 percent (FY 2022: 86 percent). The company is committed to providing its tenants with a quality and safe product (property).

“To this end, $4,827 billion and $187,87 million were spent on maintenance and improvements, respectively during the year.”