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ZIMRE Property Investments (ZPI) says it will dispose some of its buildings in the CBD as the company restructures its portfolios to focus more on the lucrative office parks and new property development projects.

Managing Director Edson Muvingi told analysts this afternoon that the company is making strategic acquisitions outside the city as corporate demand for space has shifted outside the CBD.

“We gly believe that we need to reduce the CBD portfolio so we are considering disposing some buildings and we are currently engaged with potential buyers who are offering prices slightly close to current market value,” he said.

Muvingi said capital raised from such disposals would be channeled towards acquiring more strategic land for office parks and development.

ZPI buildings in Harare’s CBD include the NetOne building, Fidelity Towers among others.

Meanwhile, Muvingi said developments projects will be pursued in the year to enhance performance of the company as property values are likely to remain depressed in the challenging economic environment.

Meanwhile the company’s projects income for the year ending 31 December 2014 declined 26 percent to $2.03 mln from $2.75mln in 2013.

“Rentals contributed 63 percent to total revenue and it will be difficult to grow while projects had a 40 percent contribution due to low uptake but we will continue to negotiate for long term mortgages,” he said.

In the year under review, revenue was down 15 percent to $5.69mln compared to $6.67mln last year largely as a result of depressed rental income which dropped 7 percent to $3.61mln from $3.87mln in 2013.

FD Nyasha Zhou said the drop in revenue was due to a decline in major components of revenue streams while projects income declined as no project sales were recorded in 2014 compared to 2013 where Tynwald residential stands were sold.

Zhou said the 7 percent decline in rental income was largely affected by the increase in the level of voids which increased to 19percent for the year compared to 14 percent in 2013.

He said tenants are failing to pay current rental rates and are re negotiating existing contracts for possible downward rental reviews.

The significant downward review of rent resulted in portfolio rentals averaging $6.59 per square metre down from $9.16 per square metre in 2013.

“This has resulted in declining revenues as well as the average rental rates achieved while capital values of properties were negatively affected as valuations are largely based on capitalization of net income receivables,” he said.

However, due to the subdued revenue performance, operating profit was 44 percent lower as the company realized $1.1mln compared to $1.9mln achieved in 2013.

Zhou said an increase in voluntary lease surrenders contributed to the rise in both portfolio voids and debtors.

The value of investment properties in the year were down 0.9 percent as independent valuators placed their values at around $50.3 mln compared to $50.8 mln in 2013.

Total administration costs increased 15 percent to $2.95 mln from $2.55 in 2013 and these included provisions for doubtful debts of $537.331 and impairment of assets amounting to $220.957.

ZPI property manager Stephen Kapfunde said in terms of the projects, the company is currently developing 3 projects of which two are in Harare and one in Masvingo.

In Masvingo, the Rhodene project, disposal of stands is progressing well and the company expects an increase in the uptake.

To date 220 stands with a value of $4 mln have been sold and the project has a total market value of $6.96mln.

In Harare’s Tynwald, he said uptake has been very good and what remains are a few institutional stands and those reserved for development. He said projects in the pipeline include the Tynwald shopping Centre, proposed construction of budget hotel or lodges in Victoria Falls.

Others are the construction of the Borrowdale Office Park at a cost of $13ml on land acquired in 2013 while the Maitlands High Density Development, a joint venture with CFI aims to develop 2800 high-density residential stands on 188 hectares in Harare South. The project is expected to commence by June this year.

The Zimre Park extension project however was delayed by regulatory approvals.

Looking ahead Muvingi said the company hopes to embark on an aggressive collection strategy including execution on sureties and core- principal debtors.

Source : Financial Gazette