Mashonaland Holdings Limited

Imara Investors’ Conference
28th May 2014
Mashonaland Holdings Limited

Presentation Outline
A. Property Market Overview
B. Mashonaland Holdings Ltd
C. Financial Highlights
D. Property Market
E. Market Outlook and Our Prospects
Mashonaland Holdings Ltd

Real Estate - Overview
Zimbabwe Real Estate – Today

Real Estate - Overview
 Liquidity challenges and lack of access to capital
 High interest rates on mortgage finance
 Increasing land prices
 High costs of servicing and construction
 Depressed rental markets and capital values
 Consequently, we have not had significant supply
of new stock for over 15 yrs

Challenging environment
We are not afraid……

Company History
 Incorporated in July 1966
 Listed on the ZSE 1969 The first property company
 Purchased vast tracts of land in Ruwa in 1987
 Rationalisation of Group operations – unbundling -2000
 Reconstruction 2003

 We are a property development and investment company
 We hold and internally manage a substantial property portfolio
in terms of GLA and value by local standards
 Mash spearheaded the Ruwa development, a sprawling
settlement about 25km from Harare amongst other developments
Who we are…..

Top Five Shareholders
 ZB Life Assurance 28.56%
 Africa Enterprise Network 18.77%
 Mashonaland Holdings Ltd 8.58%
 Roy Turner 7.72%
 Fed Nominees (Pvt) Ltd 6.66%
Total 70.29%

Shareholder Classification
40.16%
23.36%
9.29%
10.59%
6.08%
9.88%
0.64%
Pension funds
Other corporate bodies
Investment, Trust & Property
Companies
Nominee Companies
Non‐residents
Resident individuals
Insurance

Financial Review
2013 2012 2011 2010
Revenue ($000) 7 692 7 396 5 626 4 059
% Growth 4% 27% 38% 69%
Fair Value Adj. 6 034 13 893 20 202 10 819
Profit before tax 11 738 19 362 23 788 13 177

Investment Properties
Market Values – Trend Analysis
Year
2013 2012 2011 2010 2009
Market Value (USD) 103.5m 95.6m 81.4m 61.3m 50.1m
% Movement 8% 17% 33% 22% ‐

Investment Properties
Category M.V. ($000s) Percentage G.L.A. Percentage
Office/retail 75 770 73 48 850 46
Specialized 2 200 2 2 100 2
Industrial 10 330 10 47 200 45
Residential 3 650 4 3 150 3
Retail 6 085 6 3 878 4
Development Land 5 447 5 - -
Totals 103 482 100 105 178 100

Cash flows
2013 2012 2011 2010
Cash & cash equivalents
($000s)
5 248 4 719 2 183 920

Ratio Analysis
2013 2012 2011 2010 Market
Operating profit to revenue 63% 68% 64% 58% 45%
Growth in Investment 8% 17% 33% 22%
EPS – cents 0.58 1.00 1.97 0.35
Net Asset Value -cents 6.20 5.63 4.66 2.57
Debtors to revenue 11% 9% 8% 9% 12%
Voids 15% 8% 8% 10% 22%
Rental Yields 8% 9% 7.3% 8.5% 8%

The Real Estate Markets
The Rental Market
The Developments Market
Developments Outlook
Our Strategy and Business Risks

Rental Market Challenges
 The rental market is depressed with downward rent reviews for the
first time since the economy dollarised
 High vacancy levels – averaging 22% for a typical institutional
portfolio
 Defaulting tenants

Values are falling off – For now..
 Property values threatened.

Office Sector
 This sector has the highest level of vacancies.
 Over the past few years, companies have been progressively
downsizing.
 Some companies have been forced to close shop
 Service Charges are one of the biggest challenges, accounting
around 30 – 45% of net income, largely as a result of utility charges
 Rental Yields are around 8%

Industrial
 Vacancies are lower for the industrial sector, especially for small
industrial bays and for locations close to the CBD.
 The demand for industrial space has been more from small enterprises
than from traditional industrial giants, a reflection of changing industry
patterns.
 There has also been more demand for warehousing than for
manufacturing, an indication of the rising dependency on imported
goods.
 Yields are higher for this sector, around 12% for well located units.

Retail
 Vacancies are relatively lower for small retail units and for retail
space on office towers located in CBD although even these tenants
are increasingly under pressure
 Whilst retail has underperformed in some locations, well located
retail units with turnover based rentals have seen significant growth
 National retailers, with superior stocking and marketing strategies
have led this growth in rent
 Rents for these large retailers are usually based on Gross Turnover
 Demand for new strategic sites by large retailers is testimony to the
existence of unsatisfied demand in this sector

Development Markets
 Costs of construction per unit have been converging with market
values giving stronger argument for developments and re-
development projects.
 Activity has been most in the residential sector with servicing of land
and individuals’ home development mostly prevalent.
 Resurgence in institutional property development although on a
small scale
 A few speculative developments – a good sign
 We still need to see cranes dot the skylines of our cities!

Development Markets – Supply
Side Constraints
 Low savings for organic growth by the traditional developers
 Lack of adequate offsite infrastructure
 High servicing costs for land

High Costs of Funding Projects
 Abandoned/Protracted Projects
 Reverse Yield Gap

Development Markets –
Demand Side Constraints
 Low demand for business premises
 Lack of clarity on expectations
 Restrictive mortgage rates for prospective homeowners
 High occupancy costs for premises against deteriorating margins. It
all begins in the rental market subsectors.

Market Outlook
Even in the face of these challenges we think growth will still come for
the economy
Anticipated economic growth (4.2% for 2014 and 4.5% for 2015) will
come from the following factors;
 Pro-Investment policies
-This will boost investor confidence
- Capital inflow (Long term finance with less risk premium)
 Infrastructure renewal and expansion.
 Innovative funding techniques for real estate investments and
infrastructure
 New opportunities in untapped specialist markets e.g. storage and
health
 Decentralisation as office developments in the suburban areas
increase

Our Prospects
 Mash has over the years acquired a diverse land bank and we are at
different stages of the development lifecycle for the various projects
 Our land bank measures 58.5ha of prime land.
 The land bank covers our growth areas;
 Office parks
 Residential for on selling
 Industrial with high initial yields
 We are also positioned to exponentially expand this land bank for
selected projects through our strategic partnerships and open
market acquisitions

Funding Options for Developments
 Debt
 New Equity Arrangements
 Internal Resources
 Joint Ventures
 PPP for infrastructure projects

Key Portfolio Risks (Current Business)
 Event Risk
 Tax and Legislation
 Investment quality
 Tenant risk
 Valuation risk
 Building Location
 Depreciation and Obsolescence

Key Risks (Development Portfolio)
 Building Costs
 Changes in rental yields
 Changes in interest rates
 Time

Recollection..
 Whence we come

Destiny Beckons……
 Harare in a couple of years?

Infrastructure
 We will build bridges
 we will build rivers,
 we will build oceans…….

Our Contact Details
Our Contact Details
Physical Address
12th Floor ZB Life Towers
77 Jason Moyo
Harare
Postal
PO Box 717
Harare
Zimbabwe
Telephone
+263 4 253600/1 +263 4 705806/7
Fax
+263 4 705269
For more information on us please go to www.masholdings.co.zw

Mashonaland Holdings Limited

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