• Rental income increased 39.9% to US$648,049, supported by Cork Corner and stronger Chegutu property earnings
• Investment income declined 29% as US$1.3 million was deployed into the property development pipeline
• Pfuma targets US$2.5 million in annual distributable income, with US$620,000 still required in the final quarter

Harare- Pfuma Fund's rental income has increased 39.9% to US$648,049 during the third quarter of 2026, reflecting an accelerating transition from interest earning investments into income generating commercial properties. The growth followed the addition of Cork Corner in Avondale and stronger variable rental income from the Chegutu property, lifting the contribution of rentals to total quarterly income to 67.1%. The shift places greater emphasis on the fund's ability to generate recurring property income as capital previously held in liquid investments is committed to developments and acquisitions.

According to Pfuma Fund's unaudited trading update for the quarter ended 30 September 2026, issued by Arctic Blue Asset Management, investment income declined 29% to US$317,085 as the fund continued deploying cash into its development pipeline. Total income reached US$965,134, while net distributable income increased 14.6% to US$752,372. The fund invested another US$1.304 million in developments during the quarter and declared an interim dividend of US$677,135, representing 90% of distributable income.

The changing income composition reveals the financial consequences of Pfuma's expansion strategy. Capital previously generating immediate interest returns is being redirected towards assets that require development expenditure before producing rental income. Consequently, the pace of construction, tenant occupation and rental commencement will increasingly determine earnings growth. The current investment income provides a cushion during the transition, although its contribution will continue declining as development expenditure increases.

Cork Corner has strengthened the fund's existing rental portfolio following its acquisition for US$6.94 million, effective 19 August 2026. The fully occupied commercial property comprises approximately 1,203 square metres of lettable space and was acquired at a gross property yield of 7.8%. Its established food service tenants and weighted average lease expiry of approximately 4.58 years provide greater rental visibility than developments awaiting completion and tenant occupation.

The acquisition was financed through the issuance of 69.4 million additional units, increasing Pfuma's total units in issue to 540.75 million. This introduced a larger capital base against which future earnings must be assessed. The transaction increased the number of units by approximately 14.7%, meaning aggregate rental growth must translate into stronger income per unit to demonstrate value creation for existing investors. Pfuma previously projected a 16.7% improvement in annualised rental income per unit from the acquisition, although the latest trading update does not separately disclose Cork Corner's actual quarterly contribution.

Chegutu's stronger variable rental income also contributed to the quarterly improvement, indicating that existing properties are benefiting from tenant trading activity. Rental income increased by approximately US$184,762 from the second quarter, while investment income declined as development capital was deployed. The increase in property earnings more than compensated for the reduction in investment returns, strengthening quarterly distributable income. Sustaining this performance will depend on the continued contribution of existing properties and the conversion of developments into occupied rental assets.

Pfuma's financial position provides a useful measure of the returns being generated from its expanding portfolio. The fund reported a net asset value of US$54.07 million, equivalent to approximately US10 cents per unit. Net distributable income reached US$1.88 million during the first nine months, against total income of US$2.49 million, producing a distributable margin of 75.4%. During the third quarter, the margin improved to approximately 78%, supported by stronger rental income and relatively contained property expenses.

The fund's annual targets provide a clearer indication of the performance required during the final quarter. Pfuma expects total income of at least US$3 million and net distributable income of US$2.5 million for 2026. By September, it had achieved 83.1% of the minimum income target and 75.2% of the distributable income objective. The remaining requirements amount to US$506,040 in total income and US$619,946 in distributable income.

The distributable income target is the more demanding measure because property expenses and administrative costs must be absorbed before earnings become available for distribution. Assuming quarterly expenses remain around the third quarter level of US$212,762, Pfuma would need approximately US$832,708 in fourth quarter income to achieve its annual distributable target. This is below the US$965,134 generated in the third quarter, suggesting the objective remains achievable if recent property earnings are sustained.

The declared dividend of US0.1252 cents per unit reinforces Pfuma's income distribution proposition, although the 90% payout leaves limited internally generated resources for development and maintenance expenditure. As liquid investments are depleted, the fund will need completed properties to replace declining interest income while generating sufficient cash to support regular distributions. Additional acquisitions financed through new units will also require income growth capable of compensating for the expanded unit base.

Zimbabwe's commercial property market provides opportunities for this strategy, particularly in modern warehousing, distribution facilities and properties supported by established retailers. Pfuma identified strong demand for modern logistics space against an ageing industrial property stock, with businesses increasingly seeking customised developments and sale and leaseback arrangements. High borrowing costs, limited long term financing and largely United States dollar denominated construction expenditure continue to influence project economics.

Pfuma's third quarter demonstrates progress in building a larger rental income base, with the Cork Corner acquisition and improved Chegutu performance contributing to stronger distributable earnings. The next measure of execution is the return achieved on the US$1.304 million invested during the quarter and the wider development pipeline. Completed projects must generate rental yields sufficient to replace declining investment income while covering maintenance, administration and future capital requirements.

The fund's transition is progressing under relatively favourable income conditions, with the quarterly performance already exceeding the revenue required to achieve its remaining annual targets. Sustained growth in distributable income per unit will ultimately provide the clearest evidence that Pfuma's development spending is creating value. The commercial priority is converting its expanding asset base into reliable rental earnings capable of supporting dividends without continued dependence on returns from undeployed capital.

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