FMP portfolio gains value on occupancy rise

FIRST Mutual Properties (FMP) says the value of its real estate portfolio appreciated by $8 million in the half year to June 2018 on the back of improved occupancy and new acquisitions.
Despite persistent pressure on occupancy levels in the local market, FMP’s rates improved to 74,84 percent from the 2017 year-end position of 70,94 percent, driven by “significant leasing efforts during the period”.
“Following an independent property valuation by Knight Frank Zimbabwe, the property portfolio appreciated in value by six percent to $145 million from $137 million. The growth was mainly attributable to fair value gains on the back of improved occupancy levels and recent acquisitions,” Elisha Moyo, the FMP board chairman said.
“On a like for like basis, excluding property acquisitions concluded during the period amounting to $2,025 million, the fair value of the property portfolio grew by five percent compared to December 2017,” he added.
The FMP boss said the company will continue to allocate capital for refurbishments and maintenance to preserve existing assets and improve earning potential of the portfolio.
Rental income for the half year was $3,95 million, up seven percent from $3,7 million in the prior period.
“The growth in rental income is attributable to new lettings in high value space, increased turnover based rentals in retail properties and new rental income from recent acquisitions,” Moyo said.
FMP’s rental yield increased to 6,76 percent from 6,34 percent in 2017, while average rental per square metre for the portfolio was $7,61 up from $6,94.
Income return for the property portfolio improved from 3,59 percent to 4,35 percent, driven by a higher net operating income resulting from rising rental income.
Moyo noted that this solid performance translated to a nine percent increase in operating profitability, showing the benefits of creating and maintaining a diversified property portfolio and active asset management strategies to sustain performance in the challenging operating environment.
Zimbabwe’s property market has been characterised by high rent default levels as well as high void rates.
FMP indicated that inherent problems of low productivity in the productive sectors, inadequate infrastructure, changing structure of the economy and tenant preferences were affecting CBD office and industrial sectors due to low demand for rental space.
Continued pressure on occupancy levels is expected in the short term as the market is expected to remain an “occupiers market” due to excessive supply of space and lack of quality assets to absorb either expanding businesses or new entrants.
“Developments going forward are very much dependent on post-election issues such as international engagement, stability, peace and a national focus on development. These will determine the trajectory of the economy and consequently the property sector performance,” said Moyo.
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