Listed property firm — First Mutual Properties — registered a 674 percent surge in revenue to $53 million (in historical terms) for the quarter to September 30, despite the challenging property market.
The property firm attributed the revenue growth to rent reviews as well as enhanced occupancy levels although the market has overally remained challenging.
“The property market fundamentals remained depressed due to the difficult macro-economic climate and low business confidence. Overally, the market remains susceptible to low demand for rental space, increasing vacancy levels and increasing defaults.
“Transactions within the property market continue to be concentrated around the residential sector. Commercial transaction activity remains subdued due to constrained local currency liquidity. Development activity also remains low because of price volatility and weak demand for space,” said FMP in a trading update.
Despite the challenges experienced on the market, net property income for the quarter grew 607 percent, due to deliberate efforts to reinvest earnings into maintenance works, to improve space quality for leasing purposes and tenant retention. According to the property firm a total of $7,7 million was spent during the quarter on property maintenance.
Administration expenses to revenue ratio stood at 32 percent for the quarter remaining unchanged compared to the prior period. Investment properties by end of the quarter were valued at $9,2 billion.
Occupancy levels improved 5 percentage points to 88 percent on the back of net lettings in the Central Business District (CBD) office and retail sectors.
At 84 percent, rental collections also improved by 3 percentage points compared to the same period last year, despite the economic challenges compounded by Covid-19 impact.
“The impact of Covid-19 on business operations during the quarter has been minimal, with the major impact experienced in Q2 2020 where rental reviews were delayed to ease the impact of the pandemic on our tenants,” said FMP.
Like other sectors in the economy, the performance of the property sector will largely be hinged on the general performance of the economy as well as the impact and duration of Covid-19.
Currently market conditions are expected to remain highly volatile and rapidly changing, dictated by the trajectory of broader economic fundamentals and public health conditions, with occupiers reassessing space requirements.
For FMP, value preservation and cash flow management remains critical in the immediate to short term as the impact of Covid-19 on rentals, occupancy levels and cash flow generation evolves, as the macroeconomic environment remains uncertain.
Said FMP: “To this end, as occupiers reassess their space requirements, the Group will actively seek new tenants and improve space quality in line with occupier requirements to sustain occupancy levels and earnings.”