ILAM Fahari I-REIT posts a Sh124mn loss on revaluation losses

NAIROBI, Kenya March 30-Listed property fund, ILAM Fahari I-REIT has posted a Sh124 million loss for the year ended December 31 2021 attributed to revaluation losses and increased vacancy at its Greenspan mall.

The performance is a huge drop from the Sh148 million profit posted in 2020.

The increased vacancy at Greenspan Mall resulted from Naivas, the new anchor tenant, taking up a smaller space; 37 per cent of the Gross Lettable Area (GLA) compared to that previously occupied by Tuskys, contributing to a further devaluation.

Tuskys occupied 48 per cent of the Gross Lettable Area, which accounted for about 40 per cent of the rental income collected.

ILAM Fahari I-REIT indicated that the year was particularly challenging owing to the financial difficulties experienced as a result of the failure of the anchor tenant at Greenspan Mall, amid the Covid-19 pandemic, having distressed Tuskys in November 2020.

This resulted in a direct loss of revenue but also occasioned reduced footfall in the mall and low collections from the rest of the tenants.

Consequently, the REIT Manager onboarded Naivas as the replacement anchor tenant with rental income accruing from August 2021.

“The real estate market continues to be impacted by the Covid-19 pandemic and economic downturn with most sectors, retail in particular, suffering immensely. This was exacerbated by the development boom witnessed over the past decade, which has put downward pressure on rentals and average rates in the office, residential, hotel, and retail markets,” said ILAM Fahari I-REIT’s CEO Einstein Kihanda.

Kihanda noted that the increased supply over the years caught up with and surpassed demand, resulting in the current “buyer’s” market, with landlords having to contend with offering tenant incentives to boost occupancy.

Distributable earnings declined by 24 per cent to Sh102.0 million compared to Sh134.4 million in the comparative period in 2020.

The reduction was mainly attributable to the loss of revenue from the anchor tenant for the first seven months of the year under review.

Rental and related income decreased by 13 per cent mainly due to revenue losses and an increased vacancy at Greenspan Mall.

Property expenses decreased by 6 per cent mainly due to a significant reduction in provisions for bad and doubtful debts.

This was, however, offset by increased provisions in irrecoverable withholding tax by the tenants.

In light of the challenges, the Board recommended, and the REIT Trustee approved, a distribution that is slightly lower than the prior year.

A first and final distribution of Sh 0.50 per unit will be paid to unitholders no later than April 30 2022. This amounts to a payout ratio of 89 per cent.