The Sunday Mail
Livingstone Marufu
LOCAL firms are increasingly tapping the burgeoning property sector in order to unlock value and hedge their investments as stocks and fixed-term investments on the money market continue to lose their appeal.
Local Government, Public Works and National Housing Minister Saviour Kasukuwere chats with City of Harare acting town clerk Ms Josephine Ncube and Reserve Bank of Zimbabwe governor Dr John Mangudya at the ground breaking ceremony of Homelink’s Tynwald Housing Project in Harare last week – Picture by Kudakwashe Hunda
In a volatile market where the Zimbabwe Stock Exchange (ZSE) has slumped by more than 12 percent since the beginning of the year, a combination of pent-up demand from local home seekers and freed-up land for investments – particularly in peri-urban areas – has created a lucrative investment avenue for investors.
Most local companies are beginning to leverage on their long-term assets to invest in the property sector.
Fidelity to embark on US$80 million housing project
Listed life assurance concern Fidelity Life Assurance has been able to take the plunge and is beginning to make rich pickings.
The company’s investments in the Southview Park project, which was launched in 2013 in Harare South, is now paying dividends.
To date, more than US$30 million has been realised in cash sales, deposits and instalment payments from the sale of 4 600 stands from the earmarked 5 300 stands.
About 700 housing stands are still on the market.
The project is set to be completed before the end of the year.
What has however been particularly encouraging for Fidelity is the overwhelming support that the Fidelity/ Athena Estate bond – an instrument that was put on the market last year to raise funds for the Southview housing project – got from investors.
The bond has a three-year tenure at a rate of 10 percent per annum.
It also has a prescribed asset status, which implies that it is easily tradable.
Fidelity Life Assurance of Zimbabwe managing director, Mr Simon Chapereka told The Sunday Mail Business last week that he was bullish that if the company were to come up with another bond, it will be similarly supported.
“Currently we have sold more than 4 600 stands on cash and instalment basis. We still have another 700 stands to sale but at the rate they are selling, we believe that by year end they might all be sold.
“To date we have received cash of over $30 million from the stand sales – cash sales, deposits and instalment payments.
“At the rate at which development is taking place, we are confident that the deadline will be met. We faced challenges from the incessant rain between January and March 2015, no development could take place due to the excessive rains,” said Mr Chapereka.
In terms of total profitability, the South View Park project, which sits on a 323-hectare piece of land, is expected to bring in US$57,2 million net profit by 2022.
Buoyed by the runaway success of the project, Fidelity is planning perhaps one of the country’s major housing development projects at Langford Estate in Waterfalls after acquiring 831 hectares from CFI Holdings through a land for debt swap deal.
About 11 000 stands are earmarked for development at the property.
Added Mr Chapereka: “About $80 million will be required to service the land. We are going to use internal resources plus the cash generated from Fidelity Life Southview park to fund the development. We are also evaluating other external sources of funding to help fund the project . . .
“We are sure that the market would not have problems supporting this project if we were to come up with another bond. However, we are clear that if we have to raise a bond for this project, we have to retire the $12,7 million – which by the way we have started servicing.
“The Langford Estate project is going to benefit immensely from the Southview project – capital equipment is already in place, we are going to connect the water and sewer from the Southview project unlike the Southview project where we had to pipe 11,7 kilometres to access water and 6 kilometres to do the sewer connections. The management team has obtained experience in managing such projects.”
Fidelity Life’s venture into the property sector has positively impacted on its balance sheet.
In results for the year ended March 31, 2014, Fidelity reported that its revenues had climbed 56 percent to US$38,3 million from the corresponding period.
While insurance premiums from its core business contributed US$16,1 million, property sales weighed in with US$18,2 million.
Underlining the negative performance of other alternative investments, the group’s asset management company made a loss of US$36 000 as it was “affected by the negative ZSE performance”.
There are real prospects that Fidelity Life’s property division will dwarf the life assurance business of the group, which is the core business, but Mr Chapereka last week insisted that its property development arm will ably complement its assurance business.
“The nature of our liabilities is that they are long term, we have to find assets which matchs (sic) the profile of our liabilities.
“Properties are long-term investments; so are our life policies. We think property investments are good investments if you get it right. We think we have got it right. We have the right mix. . .
“We are invested in the money market, prescribed assets, equities and in subsidiaries who operate in asset management, financial services, health insurance and funeral services. We are also invested in operations outside Zimbabwe,” he noted.
