High interest rates stifle property market growth
Brian Benza | Friday January 22, 2016 15:46
Despite the prevailing low interest rates regime prescribed by the Bank of Botswana’s accommodative monetary policy, a late 2014 liquidity dearth has pushed up the cost of funds for banks leading to higher interest rates on commercial loans. In its 2015 annual report, PrimeTime says adding to the existing challenges in the domestic market primarily the limitation of its size, supply issues and the intensity of competition for good quality investments has been the difficulty in securing funding.
“The terms on offer from the commercial banks are stifling activity with some lenders raising interest rates on existing facilities when the opportunity has arisen.
With our traditional route of funding now proving prohibitively expensive, we are looking at alternative means of raising debt, which will offer greater flexibility to enable the growth of the company while at the same time offering us better value. This may include raising a bond in the local market,” said the company.
Sitting on a portfolio worth P764 million, PrimeTime is one of the biggest property companies in Botswana with top grade properties in the CBD as well as shopping malls and offices in Gaborone, Francistown, Ramotswa, Gantsi and in Zambia. PrimeTime is expecting a P71 million cash injection from the disposal of its two properties in Francistown with the funds to be channelled towards financing new projects.
“As part of our intended plan to grow and diversify PrimeTime’s asset base, we are busy with a number of projects.
“The sales of Blue Jacket Square and Barclays Plaza in Francistown to the BPOPF are close to completion.
“While these properties have proved to be ‘cash cows’, which is good for the likes of a pension fund, they are likely to show limited growth going forward. The combined sale price of P71 million represented an excellent return on our initial investment and will enable us to redeploy the proceeds into projects that we believe offer far greater growth potential in the long-term,” said the company.
With Gaborone including the new CBD increasingly getting oversupplied, PrimeTime is looking to diversify its portfolio with the construction of a new P100 million mall in Pilane.
The completion of the shopping centre is not due until the middle of next year, but PrimeTime says it has agreed heads of terms or signed leases on 90 percent of the first phase.
Amongst the tenant mix to already agree terms are Choppies, FNB, Puma, Clicks, Jet, Mr Price, Beaver Canoe, Style and Bata, as well as Cashbuild.
“Our view remains that there are still opportunities to be found in Botswana, but we will have to work harder to find them.
“The Mochudi/Pilane area has long been in need of a well-designed retail centre, as this demand led project has demonstrated,” said the company.
Despite the seemingly oversupply in the CBD, PrimeTime says it may still have appetite for more offices in the district as has identified a niche which they believe works well for a variety of occupiers.
The company’s expansion into Zambia is also gaining traction with their investments into that country being structured through a Mauritian subsidiary, primarily for tax efficiencies.