FML eyes property sector

Ndamu Sandu

FIRST Mutual Asset Management (FMAM) fund manager Nyasha Chasakara says the society is awaiting approval from regulatory authorities on its property restructuring.



face=”Verdana, Arial, Helvetica, sans-serif”>The parent company, First Mutual Life Society (FML), awaits demutualisation before listing on the Zimbabwe Stock Exchange (ZSE).


He said the idea was born out of the realisation that most pension funds and a few individual investors wanted property exposure but were failing to find flexible vehicles which would allow them to easily trade their investments.


“The trend elsewhere in the world was that institutions were now coming together in property developments through property funds,” Chasakara said.


The new initiative offers institutions the ability to invest in a vehicle that not only gives them good returns but also allows them to liquidate their investments in the short to medium term.


“We are affording institutions the ability to invest in a vehicle that gives them the flexibility to own properties and trade their units,” Chasakara said.


He said the initiative, already popular in South Africa, helps institutions that are not capable of developing properties on their own.


“For an institution to develop huge properties on its own now is very difficult due to the ever-rising cost of construction,” said Chasakara.


He said FML was putting together a structure that would allow it to develop new properties, as it already owns land in strategic areas.


The property vehicle would be listed on the ZSE and would therefore be able to raise new capital to develop new structures.


FML, which is diversified, owns industrial, office parks, high rise buildings, shopping centres and residential areas.


Its asset management company operates five unit trust funds and manages the rentals received from these properties.


Among its major office parks is the Arundel Office Park in Mount Pleasant.

On the disparity between the rate of rentals and inflation, Chasakara said the society had managed well as it had adjusted to the volatile environment by being innovative and flexible.


He said: “The trend is that rentals are now inflation-linked, offering the flexibility needed to maintain good returns.”


Chasakara said some tenants had agreed to pay rentals that are inflation-linked because of the quality of buildings the society owns.


In the case of its shopping centres spread around major city centres, he said tenants were willing to pay rentals based on their turnover.


“You can afford to command good rentals that are inflation-linked if you are in the right area that offers a conducive environment for tenants,” Chasakara said.


“Most of our leases were renewed at the beginning of the year at reasonable terms.”


In its annual report for the year ending December 31 2002, the fund achieved a rental return of 7,8 % and capital appreciation of 389%.


The society said rentals had not moved in line with inflation as they had increased by an average of 40% whereas inflation stood at 198% for the financial year.


FML said it would continue investing in real assets where 90% of their funds are invested with between 35% and 40% invested in property.


At their recent results briefing to clients FMAM managing director Godfrey Jowah said the society had deliberately exposed itself to property because of the highly inflationary environment which pays those in real assets.


He said while between 35% and 40% of the funds were invested in property in the UK pension funds, insurance firms invest between 5% and 10% in property while in South Africa the figure ranged between 15% and 20% of the total assets.


It was not immediately clear what the minimum investment in the property vehicle would be but FMAM already operates unit trust funds whose minimum investment ranges from $10 000 to $200 000.