THE Revitus Property Opportunities Real Estate Investment Trust (REIT) Fund is targeting a profit of US$3,2 million over the next five years as it prepares to list on the Zimbabwe Stock Exchange (ZSE) next month.
The initial public offering (IPO) was launched on November 15 and closes on December 7.
During this period, the fund is seeking to raise a total amount of ZWL$48 551 520 000 (US$8,4 million) through offering 121 378 791 units at a subscription price of ZWL$400 per unit.
On conclusion of the IPO, it is envisaged that the entire issued units of the fund totalling 368 326 243 will later be listed on the ZSE slated for December 15 with trading of the REIT being done three days later.
Speaking at an analyst briefing last week, Revitus REIT fund manager Brighton Mutingwende said the fund sought to revitalise the dilapidated buildings in the central business districts (CBDs) of Harare and Bulawayo, which are its current assets.
Under this plan, the group is targeting to renovate Chester House, Electra House, Africa House, Atlas House in Harare and Pioneer House in Bulawayo.
“The project is set to start with a 10-month refurbishment of Chester House. The current market value of the properties is US$12 million and the buildings should be able to give profits of US$3,2 million in a period of five years,” Mutingwende said.
“The vision is informed by the issue of revitalising and refurbishing the buildings in the CBD. We have seen that the buildings in the CBD are dilapidated. If you look at the occupancy levels, analysts in the room can testify that the occupancy levels are declining. If you look at the current trends in office occupancy, you will see that companies are moving away from the CBD. It doesn’t necessarily mean that the buildings do not have financial propositions.”
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The National Railways of Zimbabwe Contributory Pension Fund is the promoter of the fund.
The plan in setting up the fund was to use it to raise money that could be channelled towards refurbishing its properties to boost rental income streams.
It is envisaged that net rental income is expected to grow to US$4,48 million in five years, a 12x from the amount it will get after the first year.
Thus, profit after tax is supposed to be 14x to the expected US$3,2 million over the same timeframe, with expenses expected to remain significantly lower.
“We have a roadmap to refurbish the buildings within a space of three to four years from 2024 going forward. We are going to start with Chester House, which we should be done with this building. It is a 10-month project, so we are trying to raise funds to make sure that we start the project by the beginning of 2024,” Mutingwende said.
“So, far the market value of these buildings is US$12 million and the properties are meant to create more value by the end of at least five years.”
Mutingwende said the group had confidence in the local currency as it has been using the Zimdollar to invest in 90% of its properties with the end asset being a US dollar asset at the end of the projects.
“The issue here comes down to timing. If you look at our timing, we have started this project at a time when the Zimdollar is stable. I know we can do better as an economy, but if you compare other cycles of the economy to this one, it is a bit stable against the US dollar,” he added.
“The second thing is we are heavily invested in properties and more than 90% of the properties and projects have been executed through the Zimdollar, though the end product would be a US dollar product. We are confident and we are going to ride on the existing relationships to make these projects a success. We have done these projects and we have always achieved what we wanted through the Zimdollar.”
NRZ Contributory Pension Fund chief financial officer Chipo Hlanganani said the group had brought up residential use of the CBD as a target for the assets.
“As the NRZ Pension Fund, we have high exposure in high-rise offices. We also have hotels in Harare, Bulawayo and even in the region, and we have realised that there is high demand for accommodation space,” she said.
“So, with experience and the performance of these hotels, we realised that there is an investment case that we want to partake in. We realised that we need to remodel these office spaces.
“Remember we constructed these offices for corporates which have since moved out of the CBD and this is the most appropriate use so far based on the experience we have.”
She said as the NRZ Pension Fund, they were investing in the CBD.
“We are also applying to the high-rise offices, but we have hotels also in any case, there is also a need to remodel the same properties from the current office space. Then we constructed these properties for corporates. The only point we wish to go back to is the accommodation and lodging apartments,” Hlanganani said.
The group has managed to complete its projects in Zimdollar due to local currency stability in the period under review,
According to the group’s latest report, the property subsector will be one of the key beneficiaries of economic recovery.
“Investments in new property developments are on the back of investor’s need to preserve value and grow it in the long term. Investments in currently distressed properties will allow capital appreciation and growth in earning capacity as the economy recovers,” Hlanganani said.
According to the group’s financial position forecast, total assets are expected to grow from the current US$18 million in the first year to US$35 million in the third year.
The fund will become the second REIT to be listed on the ZSE, after the Tigere Property Fund REIT as the bourse seeks to grow by leveraging on new products and services.