PEARL posted a set of financials largely showing a standstill position for the year ended 31 December 2015 when compared to 2014. Revenue slipped 3,53 percent to US$8,4 million, weighed in the main by declining occupancy levels and pressure on rentals especially for the retail segment (both CBD and Suburban) of the property portfolio. This was aggravated by property expenses which soared 19.62% to $1.13m on the back of increasing voids and the accompanying costs of maintaining vacant buildings. Net property income resultantly declined 2.73% to $8.4m translating to a rental yield of 7.05%, down from 7.50% for 2014. Pearl had revised downwards the value of its investment portfolio by 4.10% to $135.02m, which was however not enough shoring up rental yields.
Office parks- office parks remain the biggest segment contributing 35% to the property portfolio and for 2015 its contribution to revenue, at 35% matched its size. Performance was strong with occupancy of 96% and rentals of $9.95/m2 up 2.05% compared to 2014. Management attributed this to very strong demand for one of its office parks where UN agencies are keen to take up space. Further to that, corporates in Zimbabwe have shown preference for out of town office space, hence this stellar performance is likely to be sustained.
CBD offices– CBD offices remain the problem area with very low occupancies of 50.35%, (down 3.67%) and increasing pressure on rentals that averaged $9.75/m2 (down 0.61%). The huge vacancies imply high operating costs which in turn translates to lower rental yields. CBD offices have thus been the biggest driver to the decline in yields and management is looking at reconfiguring CBD office space to smaller suites that can suit SMEs in a bid to mitigate this hemorrhage. Expectations are however that this segment can only reawaken once the economic fortunes of the country as a whole improve, businesses become profitable and demand for office space soars.
Industrial- The Industrial segment performed reasonably well with occupancies remaining high at 92.97% albeit having declined marginally from 93.51% in 2014. The albatross for this segment is the low rentals which are the lowest in the portfolio. For 2015 however, rentals did improve, adding 8.97% to $3.28/m2 and providing 16% of group revenue. The sector is yet another GDP play whose fortunes are inextricably tied to general economic conditions in Zimbabwe.
CBD retail – CBD retail suffered from vacations in 2015 with occupancies ending the year 16.79% down at 77.48% and rentals similarly declining to $9.14/m2 (down 4.09%). Like CBD offices, the segment is in need of reconfiguration of lettable space to make it palatable especially to small businesses. Management is alive to this fact and intends to pursue this strategy in the event that tenants who can take whole units are not secured. CBD retails has room for improvement if such innovations are undertaken.
Suburban Retail- Deflationary pressures that weighed down on retail sales translated to a decline in rentals for the segment by 6.83% to $9.27 despite occupancy remaining very high at 99.49%. This state of affairs is unlikely to change in 2016 and the risk remain high that rental collections will once more decline. Like all the units that are suffering, a turn in general economic fortunes for the country is the only viable stimulant for improvement in the segment. FinX
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