First Mutual Properties F24: Declining collections, tenant pressure, valuation losses

HARARE – First Mutual Properties posted a robust 31% increase in revenue, climbing from US$6.9 million in 2023 to US$9.03 million in 2024. This upturn was largely fuelled by a spike in property services income and enhanced rental yields, particularly from USD-denominated leases, which now represent approximately 80% of total rental income. Net Property Income (NPI) rose an even more impressive 62%, reaching US$4.84 million from US$2.98 million the previous year, signalling improved cost containment and stronger property-level profitability.

Despite these positive operational trends, FMP reported a pre-tax loss of US$49.6 million, a stark reversal from the prior year’s substantial gain. This was primarily driven by a US$52.6 million fair value loss on investment properties, contrasting sharply with a US$91.5 million gain in 2023. These wild swings highlight the outsized impact of valuation methodologies and currency reporting changes—more accounting mirage than operational malaise.

The fair value of FMP’s investment properties fell from US$179.8 million in 2023 to US$132.9 million in 2024, a reflection not of deteriorating fundamentals but rather a recalibration tied to the shift from ZWL to USD reporting. Valuations were independently conducted by Knight Frank Zimbabwe, using income capitalization and discounted cash flow techniques. However, assumptions such as vacancy rates, discount factors, and rental growth now behave differently in a dollarized environment, making comparisons murky but necessary.

The company’s rental collection rate slipped from 85% in 2023 to 75% in 2024, underscoring tenant struggles in an economy still feeling the pinch. Businesses earning in Zimbabwean dollars but paying rent in hard currency face growing financial pressure, while informal market competition draws some tenants away from traditional real estate. Vacancy pressures, particularly in the office segment, further compound the problem, although retail and industrial assets remain relatively resilient.

Even as headwinds mount, FMP invested US$945,231 in property maintenance, reaffirming its commitment to asset quality. Office properties remain the largest but most vulnerable segment, with rising vacancies. Retail spaces, especially in strategic locations, continue to perform well, while industrial properties offer stability, though with limited upside in the current environment.

Cash from operations dipped to US$768,050 from US$1.5 million in 2023, signalling tighter liquidity. Meanwhile, capital expenditure continues, funded in part through an increase in total borrowings to US$1.9 million. A notable facility for the Arundel Office Park expansion carries favourable terms—base rate minus 1%—and intercompany loans totalling US$775,417 provide flexible funding. The company’s decision to suspend dividends reflects a cautious prioritization of liquidity and growth over short-term payouts.

Operating in Zimbabwe means navigating one of the most volatile monetary ecosystems globally. The Zimbabwe Gold (ZWG) currency lost 48% of its value against the USD in 2024. Although the multi-currency system has created some stability, high inflation and currency mismatches persist. In the real estate sector, rising construction costs, a shift toward suburban office demand, and preferences for flexible lease terms have all added new layers of complexity to property management.

Despite the turbulence, FMP is not standing still. The Arundel Office Park expansion—a US$21 million project—will add over 2,600 square meters of premium space to its portfolio. The company is also exploring residential developments, including student housing and townhouses, alongside mixed-use projects blending retail, residential, and office spaces. These initiatives are aimed at capturing new demand patterns while diversifying income streams.

FMP’s future is far from risk-free. Key concerns include valuation volatility, continued tenant defaults, renewed currency instability, and constrained access to affordable capital. These risks could impair cash flows, limit portfolio growth, and weaken financial ratios. To counter these threats, FMP is focusing on tenant retention strategies, sectoral diversification, stringent cost control, and partnerships with institutional investors to co-develop major projects.

Last Word: Resilience With a Dash of Realism

First Mutual Properties’ 2024 performance underscores the duality of operating in Zimbabwe: resilience and risk, ambition and adversity. While headline losses tell a sobering story, a closer look reveals a company that is operationally sound, strategically focused, and financially prudent. Going forward, stakeholders should place greater weight on cash flow strength, occupancy trends, and project execution rather than accounting profits. If FMP can continue adapting while navigating Zimbabwe’s turbulent waters, it may very well emerge not just as a survivor, but a leader in reimagining real estate in challenging African markets.

In comparison to its peers, First Mutual Properties (FMP) shows the highest revenue at US$9.03 million, outperforming Mashonaland Holdings (US$7.04 million) and Tigere REIT (US$1.69 million), yet it trails significantly on profitability due to a US$57.3 million valuation-driven accounting loss. While Mashonaland delivered a modest profit and Tigere maintained a clean, debt-free balance sheet with a 99.1% dividend payout ratio, FMP opted to suspend dividends in favour of liquidity preservation. Tigere leads in operational metrics with a 100% occupancy and collection rate, a 92% USD rental base, and growing asset value—underscoring strong tenant quality and cost discipline. By contrast, FMP and Mashonaland face declining collection rates and rising vacancy pressure. Despite these challenges, FMP boasts the largest asset and investment property base at US$136.95 million, suggesting a stronger growth platform if macroeconomic risks can be better managed and its development pipeline successfully executed.

Details FMP (2024) Mash Holdings (2024) Tigere REIT (2024)
Revenue $9.03 million $7.04 million $1.69 million
Net Property Income (NPI) $4.84 million $5.41 million Not disclosed ($1.32M est.)
Profit After Tax ($57.3 million)* $3.73 million Not disclosed
Total Assets $136.95 million $94.91 million $36.05 million
Investment Property Value $132.95 million $91.6 million $33.26 million
Collection Rate 75% Not disclosed 100%
Dividend Declared None $200,000 99.1% payout ratio
Debt Level U$1.9 million U$5.4 million No external Debt
-finx