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First Mutual revenue growth surges



FIRST Mutual Properties has reported 554% revenue growth to ZW$1.3 billion for the first quarter ended 31 March 2023, compared to the corresponding period last year.


This increase was recorded despite the occupancy levels dropping to 84.55%, by 5 percentage points from 89.99% recorded in the same period last year. The company attributed the decline to net lettings in central business district office space.

“Space absorption was insignificant during the month with demand for space remaining weak especially in the CBD offices and suburban shopping centre sectors with supply continuing to outstrip demand,” said the company.

First Mutual added that the Highlands Park and Madokero developments added onto the available space, which continued to affect the setting of improved rentals in sectors.

Due to the decline in foreign currency rates, businesses in the property market have resorted to use either purely United States dollar rental rates or quoting in purely Zimbabwe dollar currency, having converted the rentals at parallel market rates. Other players reviewed the US dollar currency base rentals upwards and indexed to the Zimdollar interbank rates rather than using the alternative market rates.

“New lettings are mostly being concluded solely in the United States dollar currency. Purely USD currency rentals are discounted when compared to ZWL rentals payable at interbank rates due to the different exchange rates used,” said the realtor.  

In the quarter, foreign currency exchange rates fell by 35.9% using the Dutch auction interbank exchange rate and 35.3% on the alternative market.

The company added that the depreciating local currency and restricted access to funds continued to affect development activities on the property market, with the majority of developments being mainly in the industrial/retail warehousing sectors.

As investors sought to hedge value in property and improve balance sheet positioning, owner occupied office park style buildings, high-rise flats, cluster houses, residential house conversions, and new commercial developments in suburbs just outside the CBD and on major arterial routes increased.

“However, cluster house developments have been seen to be putting pressure on existing infrastructure being sewer and roads which also needs upgrading,” added the group.

Meanwhile, net property income increased by 485% during the period attributable to improved levels of rental income, which is the main component of the revenue.

A total of ZW$51 million was applied to property maintenance during the quarter.

Rental income growth also fortified the valuation of investment properties to ZW$137 billion as at 31 March 2023, a 25% fair value gain from the 31 December 2022 value of ZW$109 billion.

The real estate company projected rental returns to be low because of the prolonged price discovery process for leases and the limited potential for rental prices to increase given the abundance of available space.

The company said it would safeguard the value and manage cash flow to avoid major disruptions caused by market fluctuations in the market triggered by currency devaluation.

“The group intends to achieve this by enhancing the quality of space to meet the demands of occupants, sustaining occupancy rates and earnings. Additionally, investments will be made in property developments to expand the property portfolio,” said the group.

The board declared a first interim dividend of ZW$20.6 million being 1 667 ZW cents per share and an additional US$12 thousand being 0.001011 US cents per share from the profit for the quarter ended 31 March 2023.

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