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ZPI mulls project disposals

ZIMBABWE Property Investments (ZPI) says it would be better off generating more revenue from project disposals than it would from rental income in this current economic environment.

Report by Our Staff Writer

 
At an analysts’ briefing, FD  Nyasha Zhou said the current economic challenges —  characterised by liquidity problems — had presented fewer opportunities for upward movement in rentals.

 
He said future rental growth would be dependent on increasing leased space as well as reducing voids. ZPI’s average rentals per square metre were at US$7 for offices, US$15 for retail and US$1,50  for industrial space.

 
MD Edson Muvingi said ZPI would increase the contribution of retail space to the group’s total rental income.

 
While average rent collection was 100% during the period, the collection curve, however, continued to oscillate, indicating the persistent debtors’ problem emanating from the current liquidity challenges.

 
Portfolio voids moved slightly to 10,4% from 10% the same period last year, a reflection that tenants were moving out of properties a little bit faster than last year.

 
The lack of effective demand for new space had the effect of curtailing new large-scale property developments, confining most projects to refurbishments and small re-development.

 
Zhou alluded to the fact that debtors remained a problem as businesses face liquidity challenges and consequently, voids were rising, particularly on office and industrial space.

 
Zhou said the results showed that the group had reached a peak in terms of rental charges for both retail and office space and growth would have to be achieved through increasing the portfolio size.
The rentals were reflective of the struggles tenants faced, and that side of ZPI’s business was characterised by rising debtors and voids.

 
In terms of projects, sales of the ZimRe Park project in Masvingo were slow, in line with the economic challenges. To date,  35% of the 338 residential stands had been sold. This means that 46% of the total cost of US$4,9 million had been recovered.

 
The company would be able to recover the full amount of the cost at 67%.

 
The group was also developing high-density housing in Tynwald.

 
The project comprises 258 high-density residential stands of between 180 to 200 square metres at an average price of US$9 000 per stand.

 
The estimated cost of the project is at US$2 million, while expected earnings are US$2,6 million.

 
Zhou said the project was awaiting final council approval and the expected start date is November.

 
Muvingi added that more than half of the project had been subscribed, as the high densities were generally high yielding areas.

 
Council had only approved just 50% of the proposed Adylinn cluster house project, which was lower than the 80 units ZPI applied for.

 
The company had to revisit the plan and revise  the cost estimate to US$3,5 million and the expected earnings to US$4,5 million. The average price per unit would be at US$110 000 as the stand sizes were now bigger.

 
However, Muvingi said the group had sent back an application to council for reconsideration.

 
ZPI reported a 52% jump in revenue from US$1,9 million in 2011 to US$2,81 million in 2012, driven by the business and office rental  segments which contributed 66% of the total revenue in the period under review.

 
There had been an improvement in expenses, which were down 2,4% to US$758 874, leading to what Zhou said was a massive 75% increase in operating profit to US$1,47 million.

 
On the balance sheet, investment properties were up 23% after an asset, ZimRe Centre, which was the subject of a loan agreement, moved back into its portfolio. The short-term borrowings, at US$221 796, were now almost paid up, he said.

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