Shakeup in Southern Africa

Zambia real estate investor acquires new commercial properties, boosting elevator maintenance market.

Zambia, a landlocked country in southern Africa, expects a major shakeup in its commercial and non-commercial property segment, as well as its elevator maintenance market, after one of the biggest property development companies in the country, Real Estate Investments Zambia Plc (REIZ), announced it is acquiring three real estate properties in the country’s capital, Lusaka.

The acquisition consists of two malls and a shopping center — all of them falling within the medium- and low-rise buildings category.

In a communication to shareholders, REIZ said it intends to acquire the income-generating real estate properties of Acacia Park, owned by LM&C Properties; Jacaranda Mall, owned by Ancona Properties Ltd.; and Lewanika Mall, owned by Forli Ltd.

Acacia Park comprises tenants such as FNB Zambia, Zanaco PLC, AB Bank Zambia, Eco Bank Zambia, Access Bank Zambia, United Bank of Africa and Mint Lounge that require heavy utilization of vertical-transportation (VT) equipment.

The Jacaranda Mall also has tenants ranging from grocery stores, restaurants and banks such as Shoprite, Hungry Lion, Nandos, Debonairs and Bata, all of them attracting a high number of customers that require efficient and modern VT solutions. Lewanika Shopping Centre has leading retailer Shoprite as the anchor tenant. Some of the businesses include commercial shops, chain stores, bars, a stadium, restaurants and offices, with key tenants including Hungry Lion, Eco Bank, Indo Zambia Bank, MTN Zambia, Nandos and Mobile City.

REIZ, which is incorporated in Zambia, is one of the leading property market players involved in investment, development and restructuring of commercial and non-commercial property for leasing. Louis Pulu, REIZ’s company secretary and finance manager, said:

“The properties under consideration align with the company’s core investment strategy, offering significant potential for rental income, capital appreciation and overall portfolio diversification. The acquisition of the properties will broaden REIZ’s real estate portfolio further by the acquisition of performing assets across the different segments in its portfolio. The properties are situated in highly desirable locations known for their growth potential and strong rental demand, a factor that will provide stability and consistent cash flows over time.”

Moreover, Pulu explained that the acquisition will not only “unlock additional value and generate higher returns for REIZ shareholders” but “is projected to contribute significantly to the Company’s overall financial performance.” The three properties “will not only generate substantial rental income but also drive capital appreciation, bolstering the net asset value per share.”

The acquisition deal will, however, be subject to shareholder approval, regulatory approvals by the Securities and Exchange Commission, Lusaka Securities Exchange, Competition and Consumer Protection Commission and the Zambia Revenue Authority.

Zambia’s VT market is dominated by Zal Elevators Ltd., Mishktmb Electricals & Elevators, Schindwe Lift Zambia Ltd., Sky Lift Zambia Ltd., Lift & Shift Trucking, African Mechanical & Superlift Ltd., Concorde Construction and CSM Holdings Zambia.

REIZ’s new acquisition comes at a time when the company reported a profit of ZMW67.7 million (US$ 3.1 million) after tax for the year ending December 31, 2022, compared with a loss of ZMW324.5 million (US$ 15 million) in 2021.

The group and company earned a profit mainly because of an increase in the fair values of the investment properties and reduction in finance costs, an official REIZ statement said. It said the value of other properties owned by the company have increased due to improved group occupancy rates, which stood at 76.2%, as of December 31, 2022, compared to 66% for a similar period in 2021.

REIZ’s transaction may have been one of the biggest since 2018 when REIT Growthpoint Investec African Properties purchased Manda Hill.

The depreciation of the local currency, Zambian Kwacha, against the U.S. dollar by 8.5% in 2022 also contributed to the increase in fair values of investment properties that are valued in U.S. dollars. The increase in revenue in U.S. dollar terms was due to improved occupancy at the company’s own Arcades Shopping Mall and Counting House.

By the end of 2022, the fair value of REIZ’s investment property portfolio had increased to ZMW837 million (US$38.7 million) from ZMW757 million (US$35 million) in 2021 on account of the increased occupancy levels and the depreciation of the local currency against the U.S. dollar by 8.5%.

Earlier, in March 2023, REIZ signed a new property management agreement with Napoli Property Investment Ltd. involving REIZ’s property portfolio. Through the agreement, Napoli will provide property management services for at least nine properties including Arcades Shopping Centre, Central Park, Counting House Square, Deloitte Square (formerly Abacus Square), Nyerere Road, Judiciary Building, Eureka Park, Southview Park and Parkway. The management service contract, to be reviewed after every year, will be offered at a fixed percentage of 18% of the gross rental income, management fee subject to a minimum of US$20,000 per month exclusive of all operating expenses. The total estimated management fee will be US$240,000 to US$514,000 annually.

Previously, Napoli managed East Park Mall, Acacia Park, Lewanika Centre and Jacaranda Mall, which have since been acquired by REIZ. Napoli and REIZ Plc are related because they have a common shareholder, Gillian Casilli. Casilli is a shareholder in Napoli and LM & C Properties Ltd. LM & C Properties Ltd. is a shareholder in REIZ Plc.  

The acquisition by REIZ comes shortly after global independent real estate consultancy Knight Frank released a report showing an increase in the number of investment properties that have come onto the market in both the commercial and residential sectors in Zambia. The report says property acquisitions are more likely to increase “as a result of an improved economy in the longer term.”

REIZ’s transaction may have been one of the biggest since 2018 when REIT Growthpoint Investec African Properties purchased Manda Hill. REIT, which is listed on the Johannesburg Stock Exchange, is an international property company with assets on three continents. It owns and manages a diversified portfolio of 559 property assets with its group property assets totaling US$ 6.9 billion.

Zambia’s retail market is steadily recovering from the effects of COVID-19, which saw some retailers reduce their floor space in various mall locations, hence reducing the volume of VT users.