SAGICOR Life Jamaica plans to raise up to $2.5 billion through the issue of shares in its Sagicor Real Estate X Fund.
The fund, which will acquire units in Sigma Real Estate portfolio of 12 properties, including three hotels, will also be listed on the Jamaica Stock Exchange (JSE).
The Initial Public Offering (IPO), which opens next Wednesday and closes on October 18, is offering 200- million ordinary shares (or 20 per cent of the company) at $5 each, of which 100 million stock units are reserved for subscription by Sagicor Sigma Unit Holders at $4.95 a share.
The company may also increase the offer up to 500 million shares (50 per cent of Sagicor X Fund) should demand exceed the lower target of $1 billion, but Sagicor Jamaica will hold on to a special share, which carries 51 per cent of the voting rights in the company, to ensure that the "structure of the investment is not subverted by investors who may acquire substantial interest in the company", according to the market prospectus.
The offer follows on a transaction earlier this year, when Sagicor's unit trust purchased 11 properties from it, along with sundry-related business assets and liabilities, valuing $9.8 billion. The unit trust later added a third hotel to its portfolio when it bought the former Royal DeCameron Fun Caribbean Resort (formerly Hedonism III) for US$12.5 million and rebranded it Jewel Paradise Cove Beach Resort and Spa.
Sagicor X Fund then entered into an option to purchase up to five billion units from the Sigma Real Estate.
The proceeds of IPO will also be used to develop a water park at the Jewel Runaway Bay Beach and Golf Resort property, and to position the company for future investment opportunities, according to a press statement issued by Sagicor yesterday.
Already the property portfolio, which includes a third hotel, Jewel Dunn's River Beach Resort and Spa, comprises commercial properties such as the R Danny Williams building, the Sagicor Sigma building in New Kingston, and industrial parks on Marcus Garvey Drive in Kingston and in Freeport, Montego Bay.
The hotel's most recent valuation placed them at a combined market value of US$84 million, while the other properties were valued at $5.3 billion.
"The real estate assets are held in the real estate portfolio of the Sagicor Sigma Funds Unit Trust, which is one of the ten unit trust portfolios managed by Sagicor," said Rohan Miller, executive vice-president and chief investment officer at Sagicor. "Shareholder's value will be created through the generation of net rental income and capital gains on assets which are currently valued in excess of $12 billion. Net income is expected to improve through operational efficiencies and revenue growth."
The Sagicor X Fund will pay dividends to its shareholders based on inflows from its investment in the Sigma Real Estate portfolio.
Sagicor Jamaica CEO Richard Byles, in explaining the value proposition for investors in the X Fund, noted that against the background of Sagicor's extensive experience in property development and real estate management there is tremendous growth potential from existing properties, and foreign exchange earnings from the Jewel properties.
The company claims that Sagicor X Fund also has an attractive expected dividend yield of eight per cent per annum over the next four years, above current Government of Jamaica four-year bond yield of 7.3 per cent and the average main JSE market dividend yield of 4.1 per cent.
Subscriptions in the upcoming IPO should be for multiples of 100 shares subject to a minimum of 100 shares.