First Mutual properties revenue declines

Published: 26 March 2018

First Mutual Properties, a subsidiary of First Mutual Holdings, posted reduced revenues for the year ended December 31, 2017 as the sector suffered from increased voids and downward reviews on rentals.

Revenue for the period was down 4,73 percent to $7,41 million from $7,98 million on the back of a 4,6 percent drop in rental income to $7,36 million. There were also no property sales this time around against sales of $240,870 prior year comparative.

Management said the decline in rental income was dragged lower by tenants requests for rent reductions and decline in occupancy levels.

"Some rent reductions were consented to, with a view to preserving occupancy levels. Despite this, overall occupancy levels dropped by 1,16 percentage points to 70,94 percent," the Company said.

Tenants are also struggling to pay rentals with trade receivables growing to $3,43 million from $3,0 million prior year comparative.

Property expenses increased to $1,59 million from $1,47 million with maintenance costs increasing in line with increased voids which requires the owners to maintain the properties. Also down were finance costs to $126 479 from $296 125. The company recorded positive results for the year posting a 48,75 percent increase in profit after tax of $1,69 million.

This was however boosted by lower fair value adjustment on properties. Prior year property values were adjusted downwards by $1,52 million but in 2017, the negative adjustment was by $0,59 million only.

"On a like for like basis, the portfolio market value declined by 0,03 percent."

The group however bought two new properties at a total price of $2 million. One of the properties located in Belgravia Harare, is earmarked for commercial use and the other property located in Chivhu will remain tenanted to a major retailer in the country.

Going forward, management said the global spotlight and early signs are indicative of increased demand for space, especially in the Office Park sectors.

The Company's strategy going forward is to pursue diversification by sector and location, achieving growth through pre-let acquisitions and developments in diverse locations and repositioning poor performing assets.

There is belief that the proposed macro-economic policy changes and international re-engagement efforts will stimulate growth within the productive sectors of the economy, this is then expected to stimulate demand for space through stimulating spending.

In addition, significant investment in infrastructure will spur economic recovery, drive employment levels and spending power, necessitating growth in the property sector.
- the herald

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