ZIMRE Property Investments (ZPI) is mulling disposal of its city buildings to focus on office parks outside the city centre.
This was disclosed by ZPI MD Edson Muvingi while speaking at an analysts and media briefing in the capital this week.
Muvingi said ZPI was relooking its business model and talking to buyers in the market, although the company would not rush to sell as the disposals had to make business sense.
“We may need to reduce our CBD (central business district) holding portfolio. We have very nice buildings in the wrong places,” he said. “We are talking to various people.”
Muvingi said his company had strategically built around the kopje area with a view that the CBD would expand in the western direction according to government’s plans. Government had initially mooted plans to construct a new parliament in the Kopje area of town, west of the capital but has since indicated the August house would be relocated to Mount Hampden.
He said in light of the fact that the CBD would be expanding in a different direction, ZPI was looking into office space.
Management said hawkers in the CBD had also affected business. Central Harare has been invaded by vendors who are now occupying various city blocks and pavements of many buildings selling their wares, as more companies close forcing workers into the informal sector.
Executives in the office parks are spared this inconvenience.
Management said the tough operating environment prevailing in the country had not spared ZPI.
Muvingi said his company was contending with high levels of debtors. “We are just like banks who are also lending to people who might never pay back,” he said.
He added the company’s problems had been worsened by pre-payments of VAT on rentals that too often do not come, which has the effect of hitting cash flows.
The operating environment was characterised by the constrained liquidity situation, negative inflation trend, declining revenues, increasing debtors, continued increase in voids and declining property values, he said.
ZPI reported an after tax prifit of US$252 000 from US$1,8 million in the full year to December.
Rentals stood at US$3,6 million, 7% down compared to FY13 owing to pressure from tenants to reduce rentals.
Project sales of US$2 million came from land stocks the company had, 26% down compared to the same period in FY13.
Revenue was not spared at US$5,6 million, showing a 15% decline from US$7 million in FY13.
The company collected 90% of rentals from tenants.
Muvingi said collecting rent from defaulting tenents was an uphill task. Analysts questioned management over the reluctance of real estate companies to revalue properties downward in light of the economic problems characterised by the biting liquidity crunch.
“The economic environment remains challenging. Property values are likely to remain depressed and it is unlikely that industry capacity utilisation will increase any time soon, thereby reducing demand for space and inhibiting any upward movement in rental.
“Therefore, development projects shall be exploited to enhance performance of the company,” the company said.