Harare,(New Ziana) – Real estate firm, Zimre Property Investment (ZPI) returned to profitability in the half-year ending June this year, posting a net profit of $111.6 million from a loss of $200 000 in the comparable period.
While the Zimbabwe Stock Exchange-listed firm generally managed to up its performance, doubling revenue to $3.37 million after improvements in rental collections and occupancy at some of its properties, its major profit jump driver was fair value adjustment.
ZPI manages over 20 buildings and is also involved in major property and housing developments across the country.
Company chairman, Jean Maguranyanga said while the economic environment remained challenging, currency reforms initiated by government in the period “resulted in investment property values increasing substantially in Zimbabwe dollar terms.”
During the period, the government outlawed use of multiple foreign currencies in the country for everyday transactions and re-introduced the Zimbabwean dollar.
“As a result, there was a fair value adjustment of $121.80 million which gave rise to a profit of $116.57 million for the period,” Maguranyanga said.
“The corresponding period in 2018 had recorded a loss of $0.20 million.”
The currency changes however came with their fair share of problems for the sector which included contract re-evaluations and rentals which had been fixed in United States dollars.
“Contractors began to insist on contract re-evaluations to mitigate value loses, whilst revenues, particularly rentals could not be immediately adjusted to match the exchange rate and inflation spikes,” she said.
“There was therefore a loss of revenue values in real terms and property yields tumbled.”
Earnings per share recovered to 6.79 cents from a negative 0.01 last year.
Maguranyanga said leases had since been adjusted to “provide latitude for adjustments that embrace developments in the economic environment.”
In the period, the firm decided not to declare a dividend to focus on completing works at its shopping mall in Victoria Falls, which has since been completed.
“Currently the mall is trading at 60 percent of its lettable space and is expected to reach 90 percent by end of September,” Maguranyanga said.
In the outlook, Maguranyanga said the performance of the property sector was likely to remain subdued due to high costs and weak demand.
“We expect a turbulent time that will have some negative impact on rentals and property returns in this period as the economy adjusts to the new currency changes and other statutory interventions,” she said, while emphasising the firm remained positive about the future of real estate in the country.