Read the First Mutual Properties Limited 2018 Annual Report

We have extracted the financial summary from the 2018 annual report of First Mutual Properties Limited listed on the Zimbabwe Stock Exchange under the share code First Mutual Properties Limited is a real estate company with vested interests in the development and management of commercial properties in the major towns of Zimbabwe.

The following is an excerpt from the 2018 Annual Report:


In 2018, the Zimbabwean property market remained subdued, typified by available space supply exceeding demand, and the resultant low investment in commercial developments in the market. Most businesses were cautious on their expansion or set up plans in Zimbabwe, leading to limited uptake of the space. Infrastructure, particularly in the Central Business District (“CBD”) and industrial areas, is in dire need of refurbishment. The departure of a significant number of businesses from the CBD has seen occupancy levels continue to decline.

Furthermore, rentals remained flat during the year. This has had negative effects on the real yields against the backdrop of rising inflation. Despite the general low demand for space, retail assets were the exception to the trend with high occupancy levels. Landlords, including your Group, continued to explore innovative ways to preserve value in the face of the rising inflation.

Transactions within the property market were concentrated around the residential sector, where property investors achieved quicker financial closures on smaller transactions and obtained scale through volumes. Currency volatility triggered a rise in the demand for properties as investors sought to preserve value. However transactions remained low as sellers were not willing to dispose for the very same reason; value preservation and currency risk. In addition the commercial real estate market was characterised by the following:
•An aging stock;
• Limited availability of new product offering;
• Growing sentiment for the development of new stock despite the excess supply of space; and
• Speculative developments within the office sector as some investors took a long-term view and provided new product offering to the market


The Group had a positive performance for the year in spite of the tough operating environment. An increase in profit for the year of 139.57% was realised in addition to improved occupancy levels. Investment property grew by 6.32% driven by acquisitions and fair value gains.

Rental income increased by 8.86% to US$ 8.014 million (FY2017: US$ 7.362 million) driven mainly by new lettings, with occupancy levels improving by 5% to 76.10% (FY2017: 70.94%) and an increase in turnover rentals on retail space. Property expenses, at US$1.988 million, were up 24.93% for the year driven by investment in maintenance programmes to improve the quality of space aimed at attracting new tenants and retaining existing ones. Net property income marginally fell by 2.03% to US$6.034 million (FY 2017: US$6.159 million) due to ongoing investment in maintaining the infrastructure. Administration expenses rose by 27.71% to US$3.590 million in 2018 from US$2.815 in the prior year largely reflecting the cost inflation.

An independent property valuation conducted by Knight Frank Zimbabwe as at 31 December 2018 valued the property portfolio at US$146.150 million, being a 6.32% gain on the prior year, on a market value basis. The marginal gain was driven by property acquisitions, while fair value gains of US$6.265 million were realised in the retail and residential sectors. The Group’s strategic land bank also appreciated in value.

In the face of a difficult broader macroeconomic environment the Group still recorded positive results for the year propelled by the resilient diversified property portfolio, posting a 139.57% increase in profit for the year of US$ 4.060 million (FY2017: US$1.695 million).

The general outlook over the long term remains positive with real economic growth estimates for Zimbabwe of ranging between 3.7% and 7% for 2019. Despite the challenges around debt to GDP ratio, limited availability of foreign currency, fiscal deficit, multiple tier pricing and cash shortages, forecasts remain positive against the backdrop of the Government’s policy changes targeted at containing the fiscal deficit, promoting investment and increasing production.

In the short term, the market is projected to remain an occupier’s market due to excessive supply of space and the lack of quality assets to absorb either expanding or new market entrants. Rental rates are, however, expected to rise in the short term, as property investors seek to maintain real rental values in the face of rising inflation. Development activity in the commercial property sector is expected to remain low as demand for new space remains subdued due to lethargic economic growth. In contrast, residential development activity is expected to remain strong. Real estate markets are positively correlated to macroeconomic performance. Therefore, any economic recovery is expected to have a trickle-down effect on the property sector.

Your Group remains alive to the developments in the economy, and will continue to adapt its strategies in order to preserve shareholder value and achieve sustainable returns.