Home » Business » Voids Reflect Nature of Environment – Old Mutual

An increasing number of tenants are failing to pay rentals due to the worsening liquidity crunch and joblessness

THE local unit of Old Mutual Plc said the increase in property voids reflect the nature of the country’s environment which was presently unstable.

An increasing number of tenants are failing to pay rentals due to the worsening liquidity crunch and joblessness, while others are re-negotiating existing contracts for downward rental reviews, a real estate concern has said.

Old Mutual property voids have grown to 19 percent from 17 percent last year, as the operating environment in the country continues to deteriorate.

The company said it was difficult to predict what could happen in this environment by the end of the year and would take each month as it comes.

Speaking at the company’s Annual General Meeting, group chief executive officer, Jonas Mushosho said despite the economic environment, his team would work hard to meet their targets.

He said their clients had an option to either reduce their space or move out and when their lease comes for renewal, both parties would negotiate the rentals.

“The voids reflect the nature of this environment it is a very difficult environment. Our view is that we are in the property business for the long term we do not make short term decisions. We know that businesses go through different cycles and therefore we engage our tenants in ways that are beneficial both to ourselves and them in the long term,” he said.

Many tenants and estate agents said there has been a marked increase in the number of tenants moving out of residential and commercial properties as they could no longer sustain current rentals.

Reports during the first quarter of the year also said some tenants were either in arrears, not paying utility bills or paying their rentals late.

Mushosho said the performance of the group in the first quarter of the year was generally satisfactory.

He however said the group would not be forced to take short term decisions as it is in the property business for the long haul.

“We run an integrated and diversified group and therefore the group has capacity more than other entities to absorb shocks that happen in a difficult environment, therefore, in that regard, our first quarter performance has been very satisfactory. Both the life and banking business posted very good results,” said Mushosho.

The group owns market leader Old Mutual Life Assurance and CABS, the country’s largest mortgage lender and is second largest financial institution by deposits. Other Old Mutual subsidiaries include Old Mutual Securities, Old Mutual Property, Old Mutual Investment Group and Old Mutual Custodial Services.

The increase in voids and declines in rentals was also revealed by property companies that announced results for the year to December 2014.

Zimre Property Investments (ZPI) said rentals contributed 63 percent to total revenue for the year to December 2014 but warned it would be difficult to grow this revenue line.

During the same period, FML Holdings said its rental income decreased by four percent to US$7,5 million from US$7,8 million as average income per square metre fell to US$7,57 from US$8,28 in 2013.

Pearl Properties’ rental income for the year ended December 31 2014 was down 3,47 percent to US$8,7 million, from US$9,012 million in 2013. Rental yield as a result was 7,5 percent from 7,8 percent.

Mashonaland Holdings’ revenue in the four months to January 2015 was 17 percent below prior year at US$2,1 million compared to US$2,5 million the previous year largely due to high void levels and downward review of rentals.


Source : Financial Gazette