US$15.9-million Caribbean Mezzanine Fund almost fully deployed

US$15.9-million Caribbean Mezzanine Fund almost fully deployed

Observer Business writer

Sunday, September 15, 2019

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The US$15.9-million Caribbean Mezzanine Fund which is co-managed by investment company, Eppley Limited and NCB Capital Markets Limited is almost fully deployed.

This is two years after its launch in 2017. The full deployment of the fund, which was expected by year end, comes ahead of schedule and in line with Eppley's targeted returns.

The fund offers loans to companies with the option of taking a slice of the ownership as equity. It is the Caribbean's first mezzanine and credit private equity fund.

In a letter to Eppley shareholders at the company's annual general meeting on Tuesday last, Chairman Paul B Scott reported that, while Eppley received management fees from the fund, it also benefited for the first time from dividend income and fair value gains on its investment in the fund.

He also spoke of the many investment opportunities coming on the horizon. According to Scott, “As the dearth of risk capital persists across the Caribbean, we will see opportunities to carefully structure credit and mezzanine transactions, which provide badly needed capital to our investors and deliverstrong returns to our investors.”

Scaling the Caribbean Mezzanine Fund

As a result, the Eppley chairman reported that the company is now actively exploring how best to scale the fund with its co-managers NCB Capital Market. Eppley, which is listed on the junior market of the Jamaica Stock Exchange invests in credit opportunities in Jamaica, the Caribbean, and Central America, plans to invests only in areas it has a competitive advantage.

These include “investing in private markets like credit, mezzanine and commercial real estate, where our skills of originating, structuring and negotiating transactions are most highly rewarded.

“Eppley is now one of the largest commercial lessors in Jamaica.

“Our franchise benefits from a healthy recurring business as existing clients add assets. In addition, last year we attracted a few new large corporate clients. Lessees chose to do business with Eppley because leases provide an efficient, low-cost alternative to loans and yet are not widely available in Jamaica,” Scott told shareholders.

Last May the investment company purchased the common shares of Eppley Caribbean Property Fund, giving it management control of a US$38-million commercial real estate portfolio consisting over 200,000 square feet in the Eastern Caribbean. Eppley reports that it now owns the Empire Shopping Centre together with its joint venture partners through Retirement Road Holdings.

In late 2016, Eppley invested $63 million for a 50 per cent interest in the joint venture company. Today that investment is now valued at $127 million, mostly reflecting its share of the fair value gains of the property since acquisition.

Eppley Caribbean Property Fund

At the Eppley Caribbean Property Fund the strategy being deployed by Eppley is to significantly grow the size of the fund and to diversify its holdings throughout the English-speaking Caribbean. As a prelude, the company recently announced its intention to cross-list the fund on the Jamaica Stock Exchange.

In the future, Eppley expects its asset management business to evolve as it grows and diversifies.

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