Property fund Ilam Fahari I-Reit #ticker:FAHR has issued a profit warning for the year ended December, alerting investors of a potential cut in cash distribution in the review period.
The Nairobi Securities Exchange #ticker:NSE -listed firm expects its net income for the period to fall by at least a quarter, blaming the weaker results on the impact of the Covid-19 pandemic on the property sector.
The firm had posted a net profit of Sh148 million in the prior year, meaning that its upcoming results announcement will show a decline of at least 25 percent to Sh111 million.
The property fund is required to distribute at least 80 percent of its net income to investors, with reduced earnings implying lower payouts unless the firm dips into its reserves.
“The expected lower than prior year earnings are mainly attributable to the revaluation losses recorded by the REIT properties against the backdrop of the Covid-19 pandemic whose impact continues to be a material valuation uncertainty in the short to medium term,” the fund said in a statement.
“In addition, there was loss of revenue from the anchor tenant at Greenspan Mall for a period of seven months during the year under review.”
The company made a distribution of Sh0.6 per unit (share) for the year ended December 2020, reducing it from Sh0.75 per unit the previous year as its net income fell 15.5 percent to Sh148 million.
The fund evicted Tuskys from its Greenspan Mall in Nairobi in 2020 after the troubled retailer defaulted on rent, reducing the firm’s revenue.
“On the positive side, the REIT Manager on-boarded Naivas Limited as the replacement anchor tenant with rental income accruing from August 2021,” the property fund said.