Kingston Properties has announced November 8 as the date for its $2 billion renounceable Rights Issue.

The real estate investment trust company is seeking to raise approximately $2 billion by offering to its existing ordinary shareholders the opportunity to participate in the rights issue at a rate of 1.106 new shares for every ordinary share already held at a subscription price of $5.62 per new share.

The rights issue is in respect of an additional 355.87 million new ordinary shares in the company, which was approved by shareholders at their annual general meeting last August.

Kingston Properties last executed a rights issue in 2015, which raised $650 million at $7 per share. Then in 2017, Kingston Properties executed a two-for-one stock split.

Kingston Properties plans to use the proceeds of this latest rights issue to purchase commercial real estate property in Jamaica and the Cayman Islands.

REDUCING EXPOSURE IN THE US

The company earlier indicated that the new acquisitions will focus on commercial real estate, including an undisclosed number of offices, warehouse and industrial spaces. While looking to seek out these new real estate acquisitions, Kingston Properties is also disposing of about five condominiums in Florida, currently up for sale.

This is being done deliberately to reduce its exposure to US residential properties. The real estate company once owned 27 apartments in Florida, but reduced that number to 18. That market suffered from an oversupply of luxury condos.

Kingston Properties currently holds $2.58 billion of investment properties, with its most recent acquisition being the former Caldon Finance building in New Kingston.

“Every year we raise funds to buy properties, so these acquisitions are part of our business model,” said Kingston Properties CEO Kevin Richards. “In the past, we accumulated bank financing and this time we are deciding to raise funds by way of equity in a rights issue,” he noted.

LATEST FINANCIALS

The results of the first half of financial year 2019 saw continuing improvement in Kingston Properties net operating margin with higher rental revenue and a reduction in expenses.

The company posted a 6.0 per cent increase in rental income for the six month period ended June 30, 2019 to $112.9 million compared to $106.5 million for the same period in 2018.

Rental income for the quarter ended June 30, 2019, improved by 5.9 per cent to $53.6 million. This occurred despite a higher vacancy rate in some of its properties when compared with the prior year.

Operating expenses, which include direct property expenses and administrative expenses, increased from $32.7 million for the three months ended June 30, 2018 to $34.7 million for the same period in 2019, an increase of 6.2 per cent.

Profit before net finance charges was $38.9 million in the second quarter of 2019 compared with $14.0 million in the same quarter in 2018.

For the first half of 2019, this line item amounted to $61.3 million compared to $24.1 million in 2018, an increase of 154 per cent year on year. The figure in the first half of 2019 includes a fair value gain on investment property of $23.8 million, a loss on disposal of investment properties following the sale of two condo units in Florida, as well as, an impairment loss of $4.2 million due to the Group’s adoption of IFRS 9.