The real estate sector has been adversely affected with most firms struggling to keep and attract new tenants. Some firms with property holdings in the hospitality and entertainment sector have had to suspend collection of rentals and lease payments as the covid 19 restrictions halted business for almost half of the year 2020.
And one of Zambia’s leasing property firms – Real Estate Investments Zambia PLC (REIZ) who are the owners of landmark properties like Arcades Retail Centre, Central Park, Eureka park among others has recorded a loss of K29.9 million (about US$1.4 million) for 2020 compared with a profit of K19.8 million in 2019 mainly due to the adverse impacts of Covid-19 pandemic.
In a statement of financial results made available to the Zambian Business Times – ZBT for the year ended 31 December 2020, REIZ Company Secretary Louis Pulu said the Covid-19 pandemic had a significant adverse impact on the business and on the group’s revenue.
Pulu said the company had no option but to stop invoicing tenants in the hospitality and entertainment sector for a four-month period as most of them particularly bar owners, cinema operator, night clubs and casinos were temporarily shut down by government in a bid to halt the spread of the corona virus.
Restaurants had their operations curtailed in the interest of the public’s health and safety. “In addition, in an effort to assist the group’s tenants cope with the effects of the pandemic and the ensuing adverse economic conditions, further measures such as rental discounts and capping of the Dollar rental invoices in Kwacha were introduced,” he said.
Pulu said these reliefs resulted in revenue reduction of K17.2million. He said whilst these measures negatively impacted on the group’s top line it ensured the Board of Directors desire for having sustainable clients for the future.
Pulu said the deprecation of the Kwacha by about 51% percent during the year created a major mismatch between the group’s dollar denominated obligations and the aforementioned measures, which effectively rendered the group’s income in local currency.
“Some of the other key drivers of the group’s performance include the K151 million exchange loss in 2020 as compared with K41million in 2019 brought about by the Kwacha depreciation and an increase in finance costs by 76%, again driven by the depreciating Kwacha, from K22.8million in 2019 to K40.2million,” he said.
Pulu said the fair value of the Group’s investment property portfolio increased to K 1,179 million, up from K1, 041 million mainly due to the 51% depreciation of the Zambian Kwacha against the United States Dollar (USD) from ZMW13.95/$1 as at 31 December 2019 to close at K21.15/$1 as at 31 December 2020.
He said the fair value of the Group’s investment property portfolio was determined by external independent and professional property valuation experts, Knight Frank Zambia Limited, who possess appropriate internationally recognized professional qualifications and have requisite experience in the location and category of the properties that were valued.
Pulu said the Group recorded an increase in net cash generated from operating activities to K47 million, from K32 million for the same period in prior year representing an increase of 46% mainly attributable to a higher recovery on receivables in 2020.
He explained that overall, the Group experienced a slight decrease in cash and cash equivalents during the period to K6,070 in 2020 from K6,094 in 2019.
“The Group is expected to perform better in 2021 as most of the rental concessions previously granted to tenants were either reduced or removed completely as they were no longer deemed necessary. However, it is worth noting that concerns remain over the persistent pandemic climate, and the disruptions brought about by the Covid 19 virus,” he said.
Pulu further said it is anticipated that the planned vaccines roll out during the year will restore confidence in consumer patterns bringing about increased economic activity.
