- Strategic projects underway: Arundel Office Park extension, student accommodation, Zvishavane mixed-use development
- Net loss of US$60.5 million, largely due to market challenges.
- Revenue rises to US$4.34 million, supported by rental income, property valuation growth.
Harare- First Mutual Properties (FMP) is set to complete its flagship project, Arundel Office Park extension, whose scope involves building a double-storey office block with a basement, providing a lettable area of 2,616.5 square meters, which is underway.
The Group has strategically positioned itself to generate shareholder value by pursuing various projects at varying execution stages.
Upon completion, the project is expected to generate significant rental income. Beyond rental income, FMP can explore additional revenue streams. Parking, for instance, could generate handsomely per month and the company can also charge tenants for utilities and services, lease space for billboards or signage, and collect property management fees.
However, there are challenges to consider. Zimbabwe's commercial property market is highly competitive, and economic fluctuations may impact rental income and property values. Regulatory changes could also affect the property market.
To mitigate these risks, FMP should focus on maintaining high occupancy rates, monitoring market trends, and adjusting rental rates accordingly. Effective property management and maintaining a strong reputation will be crucial in ensuring the project's success.
Assuming successful project execution, the Arundel Office Park extension is poised to generate significant income for FMP. With careful management and strategic planning, this project can contribute substantially to the company's growth and profitability.
According to Elisha Moyo, the group's chairperson, "Significant progress has been made on the project, and it is nearing completion." This statement accompanied the half-year financials.
In addition to Arundel Office Park, FMP is pursuing other projects.
One notable example is a 388-bed student accommodation building near the Chinhoyi University of Technology, which is at an advanced stage of fitting furniture and biometric security features, with completion expected in August 2024.
FMP serves as a co-investor and Project Manager in this development.
Furthermore, in Zvishavane, the Group is also a co-investor and Project Manager in the development of mixed-use duplex clusters, three to four-storey apartments, and student hostels.
This project is divided into three phases, with Phase A comprising 6 duplex flats and 20 blocks of double and triple-storey flats already underway and targeted for completion by September 30, 2024.
Meanwhile, net property income stood at US$2.38 million, while revenue amounted to US$4.34 million, with rental income remaining the main source of revenue. This growth was fueled by an average occupancy level of 89% and a timely rental collection rate of 56%.
The Company remains committed to providing its tenants with quality and safe products (properties) and spent US$412,169 on maintenance in the first half of the year.
Despite these positive developments, the group recorded a loss of US$60.5 million.
Several factors may have contributed to FMP's loss, including currency fluctuations, high supply, operating costs, and project execution challenges. Currency fluctuations may have negatively impacted revenue due to the difference in rental payments (USD) and operating costs (local currency).
Increased voids and migration to office parks and suburban sites might have reduced demand for FMP's properties.
Maintenance expenses ($412,169) and other operating costs may have contributed to the loss.
Delays or cost overruns in ongoing projects could also have affected profitability.
An independent property valuation conducted by Knight Frank Zimbabwe as of June 30, 2024, valued FMP's property portfolio at $124,829,000 (FY 2023: $121,579,000). The growth in rentals was in line with market developments, responsible for the growth in the property portfolio's value by 2.7%.
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