Jamaica Mortgage Bank eyes $5 billion in residential housing projects

Jamaica Mortgage Bank eyes $5 billion in residential housing projects

BY AVIA COLLINDER Business reporter collindera@jamaicaobserver.com

Saturday, January 16, 2016

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Wynter, CEO of the Jamaica Mortgage Bank (JMB), indicated on Wednesday that the state mortgage lender has made commitments of some $1.5 billion for new residential housing projects since the start of the fiscal year. The bank also has in the pipeline another $3 billion for low and middle income developments across the island.

To date, in total the bank has signed contracts valuing more than $2.3 billion including syndication with National Commercial Bank (NCB) for student housing.

For the fiscal year 2015/16, residential housing construction commitments of more than $630 million included middle income residential housing units in the St Andrew and Montego Bay areas.

The lion’s share of existing commitments from the mortgage bank, however, is going to student housing developer 138 Student Living Limited (138SL) for the second phase of its high-rise development on the Mona Campus of the University of the West Indies.

138sSL is currently building 1,584 new student residence units — spanning 11 new high-rise blocks — at the Mona campus in Kingston under an agreement with the university to finance, build and operate through a 30-year concession agreement.

JMB assumed the role of lead banker in a syndicated construction loan agreement valued at $1.7 billion with NCB to undertake phase two of the project. JMB’s portion was not disclosed.

In relation to the new loan, Wynter commented: "Through a Public Private Partnership (PPP) model, the JMB as lead bank, together with our partner the National Commercial Bank, agreed to provide 138SL a 15-month facility to construct four buildings consisting of 576 state-of-the art dormitory rooms. The deal was structured in two tranches to facilitate a win/win position for all parties and to ensure that phase two is completed on schedule, and on budget." He said the loan was sufficiently secured by various types of security, including cash.

John Lee , chairman and CEO of 138SL, told
Caribbean Business Report that the terms of the second loan are better than the first which was disbursed at 13.5 per cent. "The terms are better. The interest rate relates to risk. Having performed (completion of phase one) the rate went down to 11 per cent. That has to do with performance and general direction of interest rates in Jamaica."

Performance also enabled the raising of new funds through arrangers CIBC and Victoria Mutual Wealth Management, which led to the settlement of the first JMB and NCB loan. Lee said that the primary participants in the bond were pension funds.

Wynter commented that the previous loan of $1.35 billion to 138SL for phase one, also made with NCB for the first phase of the project, "was totally repaid on schedule" from the proceeds from long-term bonds issued by 138SL.

As indicated by the student housing developer’s prospectus, in September 2014 138 SL obtained the construction loan to be repaid by the long-term loan at the end of the 15-month tenure. Interest was repayable at 13.5 per cent fixed for 15 months from the initial drawdown. It was anticipated that the construction loan would be renewed for phases two and three.

The agreement then assumed that construction costs for 1,584 units (300 square foot each) would be built over three phases at a cost of $7,377 per square foot.

The total construction costs were also inclusive of structuring and loan-processing fees of 3.5 per cent.

The agreement for the senior construction loan included the option to extend the maturity date by up to six months "in certain defined circumstances" with an extension fee and a step-up fee of 25 basis points each per annum.

The old loan was secured, the 138SL prospectus states, by way of a promissory note, assignment of certain rights under the concession agreement, assignment of Contractors’ All Risk Insurance, and assignment of 10 per cent of performance bond given in accordance with the concession agreement.

In its latest financials, 138SL disclosed new funding sources in the form of a CIBC-raised bond of $4.3 billion. Up to 30 September 2015, $3.3 billion was not disbursed, the financials state.

Additionally, under an arrangement with Victoria Mutual Wealth Management, $2.4 billion is being targeted. The amount disbursed as at 30 September 2015 was 153.9 million.

The financials state that the long-term note issued with JCSD Trustee Services Limited through CIBC is for a 15-year tenor carrying interest at six months weighted average treasury bill yield plus 350 – 450 basis points subject to an agreed cap.

It also said that to reporting date, the drawdown from Victoria Mutual was for a six-month tenor and a fixed interest rate of 6.5 per cent.

Long-term cash flows for 138SL are exclusively from monthly student housing fees paid by UWI students. Lee said earlier that more than 80 per cent of students who use the units are non-Jamaican.


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