Mash Holdings sidesteps Covid-19, but..

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Tawanda MusarurwaListed property firm, Mashonaland Holdings, managed to post improved second quarter to June 30, 2020 income on the basis of rental reviews implemented in the prior quarter, but moving forward these numbers could be depressed as the Covid-19 pandemic is yet to subside.

The group put aside rental reviews in the quarter under review due to the economic hardships being experienced by its clients as a result of the pandemic.

And the effect of this move could be felt in the third quarter going forward.

For the second quarter, the group reported an improvement in rental income, which rose 21 percent to $77,71 million compared to the same period in the prior year.

“The uplift was mainly due to the quarterly reviews that were implemented from February 2019 and continued into the current financial year.

“New lettings also had a positive impact on the rental income growth for the quarter ended 30 June 2020,” said management in a Q2 trading update.

“Rent reviews were, however, temporarily suspended for the period May to June 2020 in a bid to assist tenants during the lockdown period, notwithstanding the runaway inflation.”

Zimbabwe’s reported Covid-19 cases have exceeded 5 000, and with effective treatment or vaccine yet to be brought to market, the pandemic is nowhere nearing its end.

The health pandemic has largely dragged down the property market, in particular the office sector, which has seen reduced demand for space as businesses have been affected by the slow-down in economic activity due to the Covid-19 induced lockdown that was implemented at the end of March.

But despite cases increasing during the second quarter in the country, Mashonaland managed to maintain prior quarter occupancy levels.

Occupancy levels at 30 June 2020 increased by 3 percent to 79,2 percent compared to the same period in the prior year.

Management also said they remain focused on implementation of cost containment efforts, which led to a reduction in expense to revenue ratios.

The cost containment measures saw the group’s property expenses to revenue ratio for the quarter decline to 16 percent compared to 18 percent, which was achieved during the same period last year.

And administrative expenses to revenue ratio for the quarter ended 30 June 2020 stood at 26 percent compared to 27 percent achieved in the previous year.

Covid-19 also did not have any drag effect on occupancies.

Mashonaland’s occupancy levels have remained unchanged at 79,2 percent from the quarter to March 31, 2020.

But general demand remained suppressed.

“The conversion of the development pipeline into leases has been affected by the lower demand for rental space, especially in the CBD office sector where the Group has the highest Gross Lettable Area (GLA) concentration,” said the group.

“In addition, the Covid-19 pandemic has had the following impact on the business: Average collections to revenue decreased from 95 percent in the previous quarter to 91 percent in the quarter ended 30 June 2020.

“Tenants’ rent paying capacity has been negatively affected by the Covid-19 related restrictions. This in turn has affected the inflation-hedging attribute of real estate investments in the Zimbabwean market.”

Over the second quarter, Mashonaland spent $10,6 million on property development projects.–

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