Rental arrears choking Mpico

Listed property management and development firm Mpico Limited plc says government still owes it K2.1 billion in rental arrears, a situation it says is constraining its business.

Figures presented at the firm’s 51st Annual General Meeting in Blantyre on Friday show that government rental arrears decreased to K3.5 billion as at December 31 2023 from K6 billion during the same period in 2022 due to payments made by government during the year.

Further payment was received post year end, leaving rental arrears at K2.1 billion as at February 29 2024, according to published financial statements.

During the year, the group and the company received promissory notes amounting to K5.1 billion and K1.4 billion, respectively from the Malawi Government being part settlement of rental arrears.

Speaking in an interview on the sidelines of the AGM, the firm’s board chairperson Edith Jiya observed that although the level of arrears has reduced, it still remains a big challenge and is affecting their operations.

The Old Mutual Malawi plc chief executive officer said: “It still remains a big challenge for our business because we get constrained if payments are not coming on time and it impacts on our operations in terms of how we maintain buildings and also it constrains us when we need to develop new properties.

“With recent inflation levels at over 30 percent, fortunes of the real estate market are depressed. We are looking at how we begin to be more resilient because if our property is not well diversified, we will continue to face problems.”

During the year under review , the group posted a 13 percent decline in profit after-tax to K7.07 billion in 2023 from K8.14 billion in 2022 on account of a once-off deferred tax adjustment of K2.6 billion following de-recognition of prior year deferred tax asset relating to investment properties.

This is also in the wake of a limited rental income growth year-on-year due to economic challenges, which resulted in rental income marginally increasing by one percent to K6.9 billion in 2023 from K6.8 billion in 2022.

Regardless, the occupancy rate for the group continued to hold at 91.24 percent during the year under review, which the firm has attributed to the prime location of the property portfolio, refurbishments and good customer care.

Minority Shareholders Association of Listed Companies secretary general Frank Harawa observed that Mpico’s performance “has not been impressive” during the year, saying there is a lot that needs to be done for a turn-around.

He said: “Unless we improve occupational issues and the rentals are paid, the future may remain flat.”

The group has 27 properties in the country, mainly in Lilongwe and Blantyre, according to published financial results.

In a separate interview, Knight Frank managing director Desmond Namangale said most real estate customers are shifting to modern property which is associated with urbanisation, thereby affecting some players.

He said: “Buyers and renters are increasingly looking for properties that provide convenience, security and comfort.

“Additionally, there is a growing demand for environmentally-friendly and energy-efficient homes. These customer preferences align with global trends in the real estate market, where there is an increasing focus on sustainable and smart living.”