Property rentals to remain subdued

HARARE - Property rentals in Zimbabwe are likely to remain subdued due to high tenant default levels, Zimre Property Investments Limited (ZPI) said.

The listed realty group said the failure by tenants to pay rentals, coupled with the prevailing liquidity crisis, is hampering rental revenue growth.

Its chairperson Buzwani Mothobi said — in the group’s financials for the year ended December 2013 — the continued rise in rental arrears and voids forced companies to increase provisions for doubtful debts.

During the period under review, ZPI recorded an increased void rate from 10,92 percent to 14 percent.

“Associated with the failure to pay for occupied space was a significant increase in portfolio voids due to tenant business failures,” Mothobi said.

This comes as Knight Frank (KF), another leading player in the property industry, last year said most Zimbabwean firms were struggling to pay rentals with the level of arrears generally high.

In its 2013 report on Africa’s realty industry, the global property firm said “more than a year after it came on stream, the 12 000 square meter office space in the Joina City development... remains more than 50 percent un-let.”

According to KF uptake of office space in Zimbabwe has been very poor due to the depressed economic climate in the country.

“Void rates are increasing and rents are depressed. Tenant viability is questionable in the current difficult economy, putting at risk the security of income streams,” said KF.

Meanwhile, ZPI’s total revenue increased 28 percent to $6,67 million during period under review from $5,2 million recorded in prior year.

“Projects execution has to-date been your company’s distinct competitive advantage in line with the strategic thrust adopted after the introduction of the multi-currency system,” said Mothobi.

Rental income contributed 56 percent to total income while projects income for the year amounted to $2,76 million, up from $1,31 million in 2012, reflecting a 110 percent growth. Rental income was $3,87 million from $3,81 million in 2012, a 2 percent growth.

Other operating expenses, which include the cost of stands sold, went up by 113 percent as more stands were sold in 2013 compared to the previous year.

Thus, the property company recorded an operating profit of $1,96 million. Residential stands in the Zimre Park Masvingo project generated $3,8million after having sold 172 of the 388 stands.

“The lack of mortgages has slowed down uptake as most purchases are cash buyers,” Mothobi said.

Based on the land area, 46 percent of the project has been sold and 61 percent of the capital cost recovered from the achieved sales.

Comments (1)

mari hapana

mou - 20 March 2014

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