- Third dividend declared
- 65% of GLA stable tenants
- Rental revenue: $790,523
- Net Property income: $861,949
- Forecasted 5-7% yield on NAV
Harare- Tigere REIT, a leading real estate investment trust in Zimbabwe, recently released its half-year results for the period ending 30th June 2023. These results offer a fascinating insight into the company's financials, operations, and strategic direction.
One of the most noteworthy aspects of Tigere REIT's half-year results was the declaration of its 3rd dividend, which was composed of an 80% USD component and a nostro component. This dividend is a testament to the company's strong financial position, with a cash balance of $465,403 and generating $476,333 from operational activities, enabling it to pay dividends of $463,562.
Tigere REIT has a strong pipeline of projects that span a wide range of industries, reflecting the company's commitment to diversification. As part of this strategy, Tigere REIT plans to double its portfolio within the next three years. One of Tigere REIT's competitive advantages is its REIT structure, which exempts it from income tax. Additionally, Tigere REIT has focused on acquiring newly-built assets that require low maintenance and capex.
Within the Zimbabwean commercial property market, industrial real estate constitutes a critical part of the value chain, and Tigere REIT intends to explore this sector further. The company believes that new, high-quality office buildings are likely to attract high rentals.
Tigere has a tenant expiry profile of 65% of GLA expiring in 2028 and beyond. This means that a significant portion of the Gross Lettable Area (GLA) of Tigere's properties has tenants whose leases are set to expire in 2028 and beyond. This metric is important because it reflects the stability of Tigere's tenant base and its future income stream.A high percentage of tenant expiry in the distant future means that the property is likely to have a stable income stream for a prolonged period, as most of its tenants have a long-term commitment to occupying the space. This stability reduces the risk of income fluctuations and vacancies, providing Tigere REIT with a steady cash flow, which is essential for a successful real estate investment.
In contrast, a property with a low percentage of tenant expiry in the distant future may have greater risk, as it has a higher likelihood of encountering lease expirations and vacancies in the short term. This instability can make it challenging to maintain consistent cash flow and may cause stress on the property's financial performance.
In summary, having a tenant expiry profile of 65% of GLA expiring in 2028 and beyond is a positive indicator of Tigere REIT's financial stability and long-term investment potential. It reflects the company's ability to retain quality tenants, which translates into a more predictable and steady income stream.
Tigere REIT has a strong track record of financial performance, with rental revenue of US$790,523, net property income of US$861,949, and total comprehensive income of US$567,392. The revenue analysis shows that the split between USD and ZWL is almost 50/50 in Q1 and Q4, but this is expected to shift to over 75% USD in the forecast period.
Cost management is a key part of Tigere REIT's strategy, with the company using bulk discounts in procurement and adhering to maintenance schedules. Property cost analysis reveals that property rates and insurance make up 24%, property management systems comprise 32%, cleaning accounts for 31%, while other costs and power management constitute 7% and 6%, respectively.
Tigere REIT's dividends will continue on a quarterly basis, with a payout ratio of 80% or more of net income. The company plans to fund its growth through a yield-accretive rights issue or long-term debt funding structures.
Tigere REIT's cash balance of $465,403 and cash generated from operational activities of $476,333 demonstrate the company's strong financial position, which it leverages to fuel its growth and expansion. Tigere REIT is committed to promoting ESG and sustainability initiatives, including solar and energy efficiency projects, as well as the Tigere Education Trust, which funds students interested in real estate.
One of Tigere REIT's core objectives is to create value for its investors, with a forecasted 5-7% yield on NAV. The company aims to leverage economies of scale in the management of its properties to achieve this objective.
Tigere REIT's half-year results reveal a company that is committed to sustainable growth and expansion, with a strong pipeline of projects, a focus on cost management, and a commitment to promoting ESG initiatives. Tigere REIT's competitive advantages, including its REIT structure and newly-built assets, position it as a leader in the Zimbabwean real estate investment market. Investors can be confident in the company's ability to generate returns and prioritize sustainable growth, making it a top choice for those looking to invest in the sector.
Also, ZimRe Holdings Limited (ZHL), a diversified group with interests in insurance, agro-processing, and real estate, is planning to enter the Zimbabwean REIT market with its Eagle Real Estate Investment Trust (REIT). ZHL's entry into the REIT market could provide a significant challenge for Tigere REIT, which has established itself as a leader in the market.
ZHL plans to launch two signature developments in Mazowe and Victoria Falls, which will unlock some value from its investment property portfolio. The developments will be undertaken through its Eagle REIT, which will enable both local and international investor participation, providing an opportunity for investors to diversify their portfolios.The entry of ZHL's Eagle REIT into the market poses a challenge for Tigere REIT. However, Tigere REIT's strong financial performance, diversified portfolio, and commitment to sustainable growth and expansion give it a competitive advantage over its rivals. Tigere REIT's focus on newly-built assets that require low maintenance and capex, its tenant expiry profile, and its emphasis on ESG initiatives position it well in the market.
In conclusion, ZHL's entry into the Zimbabwean REIT market with its Eagle REIT highlights the potential for growth and expansion in the real estate sector. While this development presents a challenge for Tigere REIT, the company's strong financials, operational success, and commitment to sustainability make it well-positioned to maintain its leadership position. It remains to be seen how the market will react to ZHL's entry, but the increased competition is likely to benefit investors looking to invest in the Zimbabwean real estate sector.
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