ILAM Fahari I-REIT’s net profit slumped by 16.2 percent to Ksh.123.9 million for the year ended December 31, 2021, compared to a profit of Ksh.148 million in 2020.
The loss is anchored on the continued vacant spaces at Greenspan Mall resulting from Naivas, the new anchor tenant, taking up a smaller space; 37 percent of the Gross Lettable Area (GLA) compared to that previously occupied by Tuskys.
“Increased supply over the years has 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. In the retail sector, the situation has been exacerbated by the financial stress that some tenants have experienced leading to closures and downsizing,” said ILAM Fahari I-REIT’s Chief Executive Officer Einstein Kihanda.
Revaluation losses were recorded by the property portfolio upon the advent of COVID-19 whose impact continues to be a material valuation uncertainty in the short to medium term.
Property expenses decreased by six percent 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.
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,
REIT Manager onboarded Naivas as the replacement anchor tenant following Tuskys exit, with rental income accruing from August 2021.
“Better performance and increased foot traffic is expected going forward, after the new anchor tenant opened their store in February 2022,” said the firm in a statement.
The firm’s management and the Trustee have proposed and operational restructuring of the Reit and its completion process will be subject to, inter alia, regulatory and unitholder approvals.
This even as the board recommended a dividend of Ksh.0.50 per unit amounting to an 89 percent payout ratio which will be paid to unitholders by April 30, 2022, no later than 30th April 2022.