In a statement announcing the company’s financial results for the financial year ending December 2009, Zimre chairman Buzwani Mothobi said the valuation utilised current rentals which were achieved during the period under review.
“The company’s investment properties
were revalued at US$24,72 million by
Messrs Knight Frank as at December 31 2009, compared to US$42,23 million the year before,” he said.
“It is anticipated that relative price stability has been reached and that any future movement of values is likely to be upward, since all transactions are now recorded in US dollar, unlike in 2008.”
The group’s total income for the reporting season amounted to US$2,65 million which was described as “a good outturn” during a year when the economy was recovering from a decade long decline.
“The major contribution came from rental income despite being forced by market conditions to charge subdued rentals,” Mothobi said.
Operating profit amounted to US$1,53 million. This was achieved through various measures deployed to manage and contain cost escalations.
The group said the “excellent operating performance” was adversely affected by the negative fair value adjustments on investment properties amounting to US$11,28 million which was recognised through the profit and loss account.
Positive fair value adjustments on listed equities of US$582 000 were said to be not enough to make up for the erosion brought about by the fair value adjustments on investment properties.
Investment projects, made up of development land, meant for resale for the year ended December 31 2009 amounted to US$1,06 million.
During the period under review, Zimre said demand for office and industrial space remained depressed resulting in low rental rates and a higher risk of voids.
The average rental rates achieved for
the portfolio were between US$4,50 and US$5,50 per square metre for offices and between US$9,50 and US$15,00 per square metre for retail space.
“Collective levels averaged 68% for the period, showing an improvement from the June levels of around 50% but still lower than targeted levels of about 80%,” said Mothobi.
The group said various measures had been put in place to ensure amounts owing were collected within a reasonable period.
Mothobi said payment plans by tenants owing had been entered into, however in light of the severe liquidity crisis, there has been several business closures and constraints on tenants’ ability to meet rental obligations.
The group said a bad debt provision of US$168 000 for the period under review was reflective of the collection problems.
Zimre said service charges from the various authorities and public utility companies were still high and not commensurate with the level of service provision.
This has the effect of increasing the tenants’ occupation costs affecting cash flow and tenant payment capacity.
“We reiterate the view that the current tax legislation levying tax on accrued rental income where the revenue authority collects tax on invoiced amounts is detrimental to property business operations as Value Added Tax and income tax are paid upfront, straining operations,” Mothobi.
Zimre said it was urging Zimra to “seriously reconsider opportunities for cash-based taxation to stimulate investment in this sector”.