PEARL Properties’ rental income for the first two months of the year 2013 was 6,43% ahead of budget at US$1,5 million, but property expenses were 24% above budget.
Management attributed this to its deliberate effort of prioritising the quality of its properties while insisting the expenses were overall insignificant.
Finance executive Peddy Chigunduru told analysts recently the group would this year focus on operational efficiencies and cost management as well as increase focus on debtors’ management.
The group launched a real estate company, Oyster Real Estate, in order to diversify income streams and utilise existing skilled human capital. Chigunduru said this would manage costs by improving the revenue per employee.
In the year to December 2012, Pearl Properties’ rental income rose 9,4% from the previous financial year from US$8 million in 2011 to US$8,8 million. MD Francis Nyambiri said rental growth ranged from 0% to 10% as rental negotiations were difficult.
Rental yield, as a result, was down from 12,2% to 8,6%. Rentals per square metre were up 11,6% to $8,18 while expenses/rental income were at 18,4%.
Chigunduru said the increase in rentals per square metre were as a result of rental reviews and new lettings of vacant and refurbished space.
Occupancy levels were at 78,9%, an improvement of 1,8%. Chigunduru said there was strong demand for industrial warehousing while demand for CBD office was still under pressure.
In terms of the operating environment, Nyambiri said residential developments were dominant while mortgage finance was limited. He added that the construction cost-to-value ratio was relatively high as it was cheaper to buy than build.
The group had acquired an additional 20 000 square metres of retail suburban space and 30 000 square metres of new office park.
Management expected growth of fair value adjustments to further slow down after growing significantly immediately after conversion to the multi-currency system.
Nyambiri said property values on the whole were slowing but increases were noticeable in the lower end of the residential market.
Pearl’s operating profit in the year ended December 2012 dropped from US$5,5 million in 2011 to US$4,7 million, with management attributing this to the declined investment income.
The group had to sacrifice dividends this year in anticipation of planned property refurbishments and developments which would require cash.