How to rescue loss-making skyscrapers

 

PSSSF Commercial Complex

By 

Louis Kalumbia

Summary

·         Performance audit report on the management of property investment as implemented by PSSSF and NSSF 2021/22 shows that most skyscrapers had low occupancy levels, indicating that they were being operated in losses.

Dar es Salaam. Controller and Auditor General (CAG) Charles Kichere and real estate stakeholders have issued recommendations and opinions that will rescue loss-making skyscrapers owned by pension funds in the

country.

Both the Public Service Social Security Fund (PSSSF) and the National Social Security Fund (NSSF) have invested trillions of shillings from member’s contributions in erection of skyscrapers in the business city of Dar es Salaam and upcountry regions.

However, dubbed: Performance audit report on the management of property investment as implemented by PSSSF and NSSF 2021/22 shows that most skyscrapers had low occupancy levels, indicating that they were being operated in losses.

The CAG has issued recommendations in three areas of planning, operations and maintenance for the property investment.

However, experts are of the view that PSSSF and NSSF should design short term plans that will create occupancy demands and temporarily reduce leasing charges.

They also opined that competent privately owned entities could be outsourced to manage and operate skyscrapers, improve customer care as well as embarking into flexibility after conducting a comprehensive market analysis.

The CAG report lists PSSSF owned facilities and their occupancy percent in brackets as Quality Plaza (22); Twin Towers (40); PSSSF Plaza Mtwara (33); PSSSF Commercial Complex (35) and PSSSF Garden Avenue (48).

NSSF facilities and percentage of vacant space in brackets are Mwanza Hotel (100); WaterFront House (91); Julius Nyerere Pension Tower (80) and Mikocheni Apartments (68).

Both the CAG and real estate experts have outlined factors behind the reported trend as economic disruptions due to Covid-19, the government’s relocation to Dodoma, companies’ shift of preferences from the city centre as well as high leasing charges.

“Most commercial buildings which were rented by government offices currently have low occupancy, since most of them, especially ministries and its agencies have shifted to Dodoma,” reads part of the CAG report.

Contacted for comments, PSSSF public relations and education manager James Mlowe said the institution will clarify after the matter has been debated in Parliament.

However, NSSF public relations manager Lulu Mengele couldn’t provide details, but she provided assurance that a lot has been done since June 2022 when the audit was done.

In his recommendations, CAG Kichere recommends that PSSSF and NSSF managements should conduct and review feasibility studies for the property investments prior to execution of any property investment to establish investments baseline.

“They should strengthen funding mechanisms in place to ensure that expenditure for property investment does not exceed collected service charges,” says Mr Kichere in a report.

Furthermore, he recommends the entities to prepare and implement property investment asset disposal plans that should include initial investment cost, market value, gain and loss in order to realise investments returns for each property under their areas of jurisdiction.

He says the entities should also strengthen and upgrade the real estate management system for effective administration and management of all investment properties and strengthen revenue collection systems for effective collection from investments.

“They should also prepare strategies to improve performance on occupancy rates in respect to real estate properties in order to have sufficient return,” he says in another part.

However, Watumishi Housing Company (WHC) chief executive officer, Dr Fred Msemwa told The Citizen that ongoing economic recovery from Covid-19 and government’s policy measures to stimulate trade and businesses provide hope of real estate prosperity in the near future.

“Skyscraper owners should consider taking short-term measures that will stimulate demands. They include allowing clients’ co-leasing and change facilities use from commercial to residential that has a huge demand currently, therefore reaping big from the segment,” he said.

Skyline property manager Robert Makule said PSSSF and NSSF should temporarily reduce leasing charges in order to attract more tenants.

He said secondly, the entities should consider outsourcing experienced private firms to manage and supervise erected buildings, something that will lower operation costs and increase the organizations efficiency.

“Interestingly, out-sourced firm will be paid in accordance with the generated money. However, they are going to relieve the organisations’ burden of operating the facilities and experiences in the parastatals,” he said.

According to him, outsourced firms should also create an environment that will attract different groups of clients to lease in the facilities.

A real estate agent from RE/MAX firm in Zanzibar, Mr Ame Khatibu said PSSSF and NSSF should improve their customer service.

Improvement should include equipping residential buildings with furniture to attract foreigners intending to stay in the country for a short period, according to him.

“Buildings should be properly and regularly repaired and maintained. The entities should be flexible in terms of imposed charges according to market forces of supply and demand,” he said.

He said flexibility should involve changing building purposes, for instance those designed to be supermarkets could be converted to offices