mashonaland holdings limited

Imara Investors’ Conference28th 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

Zimbabwe Real Estate( 1898)

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 portfolioin 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 & PropertyCompaniesNominee 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


Year2013 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!


Where are the Cranes?

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 forthe economyAnticipated 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 atdifferent 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 openmarket 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


Where We Are

Destiny Beckons…… Harare in a couple of years?

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

We Dare To Dream!

Our Contact Details

Our Contact DetailsPhysical Address12th Floor ZB Life Towers77 Jason MoyoHarare

PostalPO Box 717HarareZimbabwe

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

Economy & Finance