By Farai Mabeza
THE Insurance and Pensions Commission (IPEC) has called for the formation of real estate investment trusts due to a large portfolio of property investments held by the insurance and pension sector.
IPEC’s commissioner of insurance, pensions and provident funds, Tendai Karonga, told an annual shareholders and investors forum last week that the insurance and pension sector had over $1 billion worth of assets invested in properties.
“In a bid to enable the pension funds to unlock small parcels of liquidity from their commercial properties, it is critical that the capital markets players develop real estate investment trusts,” Karonga said.
Real estate investment trusts would result in the indirect ownership of properties through shares whose value is based on the value of the underlying property, he said.
“Where a fund has a liquidity need, instead of selling the whole property, which is difficult in the prevailing economic environment, the same fund would only sell a small parcel of shares with a value corresponding to the liquidity need,” Karonga said.
Apparently, most of the properties are in central business districts, where occupancy is now around 20 percent due to the poor state of the country’s fragile economy, which has experienced company closures and increasing unemployment.
A sector report by the Real Estate Institute of Zimbabwe for 2016 said commercial office and large retail space were the most affected by the current economic environment.
“The shrinking of the economy has resulted in an oversupply of offices in the CBD (central business district) as a result of downsizing, closure and re-location of companies from CBD areas to office parks and cheaper converted residential units especially in the areas closer to the CBD,” the report said.
Residential space also continues to open up due to non-affordability of rentals caused by retrenchments, company closures and migration to new developments such as Hopley, Stoneridge, Southlea, Caledonia and other new settlements where people are setting up temporary structures.