The property sector is beginning to feel the impact of Covid-19 pandemic with listed firm, Mashonaland Holdings Limited, recording a significant decline in rental collections as tenants are classified as non-essential services.
Rental collections for the month of April fell to 70 percent from 95 percent as most tenants were not present in their offices.
Zimbabwe implemented a national lockdown effective 30 March as part of efforts to limit the spread of the pandemic.
This resulted in businesses adopting the working from home strategy, although the lockdown restrictions were later reduced to allow business to operate but in line with health and safety guidelines to limit the spread of the virus.
“Essentially, the lockdown prevented over 70 percent of the group’s tenants from being physically present in the leased premises, as they are classified non-essential.
“The major impact has been a drop in collections levels for April 2020, which closed at 70 percent down from the average of 95 percent, which was testament to the group’s strong tenant base,” said Mashonaland Holdings in a trading update for the second quarter to March 31, 2020.
However, the firm recorded improved performance for the quarter albeit a challenging business environment.
Rental income closed the period pegged at $20,1 million, an increase of 44 percent compared to same period last year.
The group attributed this to a positive impact of rent reviews during the quarter.
“In line with market practice, the group was reviewing rentals on a quarterly basis in an attempt to salvage value,” said the group.
During the period under review, occupancies grew to 79,2 percent which was 3 percent up compared to the comparable period year period.
Property expenses to revenue ratio for the quarter was 17 percent compared to 18 percent achieved during the same period in the prior year as minor repair and maintenance expenses were incurred during the second quarter under review.
The group spent $472 000 on refurbishment of existing investment properties while $1,1 million was also spent as consultancy fees for various projects.
According to the group, administrative expenses to revenue ratio for the quarter was 26 percent compared to 31 percent which was achieved in the previous period.
Meanwhile, the construction of the 25-cluster houses in Westgate is expected to commence in Q3 of 2020 and cost management measures, including pre-purchases of raw materials, will be put in place to ensure successful delivery of the project.
While the business environment is expected to remain challenging, management says the company will continue to pursue measures that help preserve shareholder value.
However, the impact of the Covid-ID 19 pandemic cannot be overlooked as capacity utilisation across the economy has reduced due to the Covid-19 induced lockdown.
As such, rent reviews are becoming more difficult as the tenants’ rent paying capacity continues to erode.