More diversification

More diversification

Sagicor Real Estate X Fund confidently targeting big commercial, real estate developments

BY DURRANT PATE
Observer Business Writer

Wednesday, June 17, 2020

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Sagicor Real Estate X Fund Limited is rising from an indifferent first-quarter performance and is confidently pushing forward with a more diversified investment holding that will include commercial and significant real estate developments.

With a generated net loss attributable to stockholders of $2.77 billion for its just-released first quarter compared to a net profit of $69 million in the prior year, Sagicor X Fund has made the bold decision to diversify outside of tourism. Tourism has taken a battering because of the closure of the sector in Jamaica and worldwide due to COVID 19.

In an exclusive interview with the Jamaica Observer's Business Observer yesterday, chairman of Sagicor X Fund, Christopher Zacca, emphasised that while the fund has had a setback on its tourism interests, in particular a non-cash impairment charge of $3.88 billion on its investment in associated company, Playa Hotels and Resorts, he is very confident of a brighter future for shareholders.

Zacca's said his confidence is anchored on the fact that Sagicor X Fund is being positioned as the main real estate development arm of the Sagicor Group.

“This is very exciting as it speaks to the need to raise additional capital and to do a lot of developments locally, regionally and even in the United States, as we did with Double Tree Orlando (DTO),” Zacca stated.

The Double Tree Orlando hotel, which is owned by Sagicor, was among the bright sparks, as it had an excellent first quarter considering the impact of COVID-19.

The hotel continues to outperform comparable properties in the Orlando market with occupancy levels of 77 per cent for the quarter. Despite COVID-19, Sagicor is confident about its tourism holdings, which includes Playa. Playa operates four of the larger all-inclusive resorts in Jamaica as well as hotels in the Dominican Republic and Mexico. Sagicor X Fund also owns the Jewel Grande Montego Bay.

DIVERSIFICATION

Zacca told the Business Observer, “we are going to diversify our operations and ramp up once the economy starts to rebound in Jamaica, the Caribbean, and the US. Sagicor X Fund will take the lead in real estate developments and take development risks with the high associated returns we expect.”

Based on the forward-setting plans being put in place at Sagicor X Fund, Zacca confident spoke of improved profitability, declaring there is room for confidence and optimism pointing to the fact that even with the impairments, Sagicor X Fund book value of $10.33 is way above its current trading price.

Also, he highlighted that the fund is liquid, having generated cash in the just-ended quarter.

SHAREHOLDER'S CONFIDENCE

Zacca encouraged shareholders in the X Fund to look to a bright future and not be daunted by the current challenges with COVID-19, which he said: “shall pass”.

He pointed out that the Sagicor Group, which is the biggest shareholder in X Fund with equity of 29 per cent, is no less confident than before.

“We are confident (Sagicor Group), I would want shareholders to be confident too, we are looking to the future,” Zacca declared.

The Sagicor X Fund chairman stated that his confidence is also boosted by the fact that concerns over the liquidity challenges of Playa, which the X Fund has a 15 per cent interest, has been addressed.

Playa recently secured additional financing of US$224 million, of which US$204 million was by way of additional debt financing and the sale of US$20 million of its ordinary shares at US$4.10 per share in a private transaction.

X FUND FINANCIALS

The unprecedented downturn in business activities has led to a reduction in Sagicor X Fund earnings for Q1 2020. Total revenue for the quarter was $1.34 billion, down 25 per cent from the $1.78 billion recorded for the same period last year.

Hotel revenue had been on an upward trend until the latter part of the quarter when the group began to experience a significant reduction in demand for travel and leisure activities. Direct hotel operations segment, which comprised DTO and local hotel, contributed $1.56 billion, 11 per cent down on the prior year.

There were some positives in that when the tourism sector reported significant losses, Sagicor X Fund's hotel business generated net profits of $60 million. Measures have taken immediate steps to curtail operating and non-critical capital expenses to limit further loss in value.

Jewel Grande Montego Bay recorded a profit for the quarter, contributing net income of $0.04 billion to the X Fund, compared to a loss of $0.03 billion in the prior year.

The group's total assets were $45.22 billion at March 2020 and $49.22 billion at December 2019. Stockholders' equity as at March 2020 was $23.16 billion, down 9.31 per cent from $25.54 billion as at December 2019.

The reductions were mainly due to the impairment of investment in Playa. Market capitalisation at March 31, 2020 was $17.38 billion, compared to $22.43 billion at December 2019, reflecting the reduction in the share price.


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