UAP expects more property write-off

UAP Holdings chief executive Peter Mwangi expects more write-off on the firm’s property portfolio due to sustained softening of prices in the market.

Mr Mwangi said in an interview Monday that despite occupancy levels in UAP properties across the region rising, the prices have been dropping necessitating write-downs in values.

“The property market has been stagnating for the last couple of years and our sense is that looking ahead, property prices will continue to soften. We therefore think the prudent thing to do is to recognise these diminutions in value of properties when it happens,” said Mr Mwangi.

He said investments across the region continue to come under pressure, forcing the group to take a cautious approach to ensure the carrying amounts reflect the reality in the market.

“We keep testing our properties to see if the value we are carrying is relatable with what is in the market if such was offered for sale.”

In the half year period ended June 2019, UAP investment income declined 7.7 percent from Sh2 billion to Sh1.89 billion to reflect the impact of property revaluation.

This is a continuation of last year when a dampened property market led to lower returns from the property portfolio.

Added to the bear Nairobi Securities Exchange, UAP investment income decreased by 25.6 percent to Sh2.9 billion.

Depressed property market in Kenya and limited appetite for long-term property decisions by potential tenants in South Sudan saw UAP write down the values of its properties by Sh581 million last year.

Accounting standards require firms to carry out property valuations by independent valuers so as to reflect market realities.

Mr Mwangi said UAP-Old mutual tower in Upper Hill, Nairobi has now hit occupancy rate of 87 percent, way ahead the average 60 percent in the region.

“We are quite happy with improving the occupancy but we still have to recognise the depressed property prices,” he said.