UNLIKE last year when statutory reserve ratios were changed frequently at short notice and compulsory bonds with colourful acronyms introduced, companies’ and individuals’ participation on the property market has been relatively more stable since dollarisation.
However the property sector, which boomed during high inflation, has suffered significant reduction in values since dollarisation.
The Francis Nyambiri-led Pearl Properties’ has been “innovative” and “stable” during the interim period ending June 30 and is looking forward to prosperity during the full financial year end.
Property values across all sectors have been on a decline in the first half of the year. Liquidity on the market remained low with mortgage finance non-existent resulting in the market being a buyers’ market.
During the financial period under review, Pearl Properties pursued internalisation of property management function be more responsive to tenants’ requirements and expectations.
The group is also renegotiating most of the lease agreements with tenants and refurbishing existing properties.
“The dollarisation of the economy saw some changes in lease structures. Monthly rent reviews gave way to quarterly and bi-annual and in some instances yearly rent reviews,” said Nyambiri.
He said the property market was negatively affected by low business activity resulting in some tenants failing to meet their rental obligations.
Capacity constraints saw tenants’ right-sizing or relinquishing excess space resulting in an increase in voids. Pearls voids averaged 5%.
“The limited reinvestment in maintenance over the past decade has now created an urgent need for refurbishment and replacement of major building components such as lifts and air conditioning systems, he said.
Pearl said construction costs declined after the onset of the multi-currency environment.
Whereas many property companies were generous with their revaluations,
Nyambiri said rental income during the period under review was US$1 989 000, an increase in rentals per square metre from US$0,28. Administrative expenses of US$723 000 were incurred during the period, with the major expenses being staff costs, office costs and shared services costs.
“The company will continue to implement strict cost management measures,” he said.
The company achieved an operating profit before fair value adjustments of US$2 160 000, arising from rental and investment income. Nyambiri said the company would also continue diversifying revenue streams and generating positive cash flows.
Investment properties were revalued as at June 30 (desktop valuation) by independent valuers Knight Frank Zimbabwe.
“The investment properties were revalued at US$69 656 000, resulting in an impairment of US$19 114 000. This impairment is a reflection of the current economic conditions, where property values have declined by 20% to 30% across board,” he said.
The loss after tax for the period is US$11 278 000 of which US$11 248 000 was attributable to equity holders of the parent company.
Annualised rental yield achieved for the period, based on the December 31 valuations was 4,48% compared to 1,21% achieved during the same period last year.
Pearl’s total assets were valued at US$77,3million with a decline arising from the impairment of investment properties to US$69 675 000.
Equity investments appreciated by 449% over the period, due to the recovery of the stock market as well as new investments required.
Property, plant and equipment increased to US$1,74 million. Development properties included therein increased by US$264 000, a reflection of the current period cost spent on the completion of TM Northend.
Going forward Nyambiri said the company was focused to meet the challenges presented by the new environment and to maximise opportunities as they arise.
“Growth strategies will be pursued in trading stock, acquisition of redevelopment sites and land bank and refurbishment of existing properties to reduce deferred maintenance.