Kingston Properties targets Cayman Islands for $2 billion rights issue


Kingston Properties targets Cayman Islands for $2 billion rights issue

Friday, November 15, 2019

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Kingston Properties (KPREIT) has outlined an ambitious investment plan for the proceeds of its $2 billion renounceable rights issue, which opens next week.

Some 355,871,765 of new shares are being offered at a subscription price of $5.62 each, starting November 18 with the rights issue closing on November 29. The lead broker and arranger is VM Wealth Management and is underwritten by Victoria Mutual Investments Limited.

The proceeds of the rights issue will be invested in office and warehouse properties in Jamaica and in the Cayman Islands. The current round of fund-raising will be focused on a number of properties in both Jamaica and the Cayman Islands that Kingston Properties believe will allow it to achieve its strategic objectives.

Commenting on the investment plans, Kingston Properties Chairman Garfied Sinclair remarked, “we have identified as possible acquisition targets a compelling portfolio of properties in the Cayman Islands covering the fast-growing Seven Mile Beach stretch, the re-emergent George Town office district and the ever-expanding industrial area with close proximity to the recently expanded and upgraded Owen Roberts International Airport.”

Sinclair emphasised that “our experience in these markets and investing in these asset subclasses will provide us with the best medium- to long-term risk adjusted returns. As the company continue to rationalise its South Florida condominium portfolio, we are obviously aware of the economic headwinds being faced by the US economy and will position ourselves for any new opportunities that arise in that market, which remains the world's largest and most vibrant economy.”

According to Sinclair, “our entry into the US real estate market in 2010 during a cyclical downturn resulted in some solid acquisitions at good discounts from which we are still reaping the benefits. We intend to remain opportunistic, should there be another US market downturn from which we can extract acceptable yields.”

In Jamaica, Kingston Properties plan to invest approximately $50 million dollars in its New Kingston building, as part of an effort to modernise and make it more efficient, which will ultimately lead to a reduction in the maintenance cost for our current and prospective tenants. Similar improvement works are slated for its other properties in Jamaica and the Cayman Islands.

In addition, the company is finalising the process of receiving full Special Economic Zone (SEZ) status under the Special Economic Zones Act for the New Kingston building, which is to be occupied by a notable business processing outsourcing operator, and this is expected to be concluded before year end. Also Kingston Properties will continue to focus on warehouse properties where it has experienced the greatest demand.

Since its incorporation in May 2008, Kingston Properties has pioneered the publicly-listed real estate investment company segment on the Jamaica Stock Exchange.

Over those 11 years, the company has achieved tremendous growth in both assets (up 431 per cent) and shareholder value (up 270 per cent), paid out 30 per cent of its cumulative net profit as US dollar dividends while the stock price has appreciated by 276 per cent since inception.

At its annual general meeting in May 2019 the board advised shareholders of its multi-pronged strategy to:

(1) significantly increase equity base over the next three years, which the impending rights issue will partially fulfill;

(2) insulate operating results against the impact of incessant foreign exchange volatility, which will result in the 'dollarisation' of its financial statements for the full financial year; and

(3) in order to drive the above, increase the square footage under management to 1-million square feet within the next three years.

The company has been geographically diversifying into growing economies, which continue to pay off, with net operating income rising by 23 per cent year-on-year up to June 30, 2019 to $46.8 million and earnings before interest and taxation for the same period showing an increase of 154 per cent to $61.3 million.

— Durrant Pate

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