PEARL Properties recorded a US$1,1 million loss during the half-year period to June 2016 as the property sector remained subdued owing to weakening aggregate demand, declining occupancy levels, increased evictions and defaults.
The company suffered a huge setback after reporting a profit of US$1,5 million in the same period last year.
“The property sector fundamentals remained depressed due to weakening aggregate demand, increasingly affecting the ability of tenants to service their lease obligations. Increasing defaults, declining occupancy levels, increasing evictions and voluntary space surrenders continue to prevail in the market,” said the company in a statement accompanying its financial results.
In the short term, Pearl Properties said prospects for growth and improvement in the occupancies was minimal due to the weakening economy.
As at June 2016, the company’s properties were valued at US$131,5 million from US$135 million, representing a 2,6% drop from the December 2015 valuation.
The company said persistent liquidity and deflationary pressures adversely affected the performance of the property portfolio as tenants felt the macro economic pressures.
The occupancy level declined to 71,85% from 78,54 (FY2015) with vacations spread across the property portfolio.
As a result, the company’s revenue declined by 2,41% to US$4,1 million from US$4,2 (HY2015) driven by rental income that fell by 4,96% to US$4 million from HY2015 (US$4,2million).
“The worst affected sectors remain the central business district office sector and the industrial sector.Whilst demand for CBD retail remains relatively strong,tenants are requesting downward rent reviews to remain in operation.,” said the company.
Tenant arrears declined marginally to US$2,35 million FY2015: US$2,4 million as tenants struggle to meet lease obligations, resulting in difficulties in collections.
The positive correlation between economic fundamentals and the performance of the real estate will determine the performance of real estate going forward, the company said.
“However,the group is positioned to maximise on opportunities that arise within the market when the economy turns around.Opportunities to pursue leveraged growth of the property portfolio will be actively tracked,targeting the development of the existing land bank,to enhance the value and long-term sustainability of the property portfolio returns,” the company said.