Sygnus Real Estate Finance (SRF) Limited has entered into letters of intent for three floors of its $3.7-billion One Belmont location on Belmont Road which covers 60 per cent of the five-floor development.

The joint venture (JV) project is being executed through Audere Holdings Limited where SRF has 70 per cent interest, with the Tavares-Finson family holding the remaining interest. One tenant intends to lease two floors, with the remaining floors seeing strong expressions of interest by various entities. It is currently 21 per cent complete with the full structure set to be completed by September and the entire one-acre property completed by April 2023. One Belmont has five levels of office space and another four floors of 310 parking spaces.

Despite the success seen with SRF’s central project, its second quarter had a net loss of $24.79 million relative to the $973.21 million net profit in Q2 2021. However, the 2021 period had a $913.40-million gain on investment property and a $109.70-million gain on disposal relating to the Mammee Bay property where it sold 15 acres to a third party. The six months had a net loss of $124.74 million compared to $998.45 million.

“We are not surprised. We would have communicated in the IPO (initial public offering) prospectus that the financial statements of SRF will be lumpy. If we step back and look at any real estate project, there’s no project that you’ll do where you make money up-front. SRF is not buying buildings which are already completed and then earning lease income. That’s not our strategy. Our strategy is to find real estate assets and invest at the stage of the life cycle of the investment where we can make the maximum amount of money possible. To unlock the value from land, you have to take it, think about how you’re going to optimise it and deploy capital into it where you’ll unlock the value over time,” stated co-founder and chief investment officer of Sygnus Capital Limited Jason Morris, in an investment briefing call on Tuesday.

One Belmont is the only new property in the vicinity which has gotten approval by the Kingston and St Andrew Municipal Corporation (KSMC), who drew the brakes on approvals or changes for several projects, including The Ascent at Oxford Road. The Ascent was supposed to be Jamaica’s tallest commercial building as a 26-storey building.

During the period, SRF exited a real estate investment note (REIN) called Project Trinity, in St Catherine, valued at $52 million. The company also entered into a short-term lease at the former French Embassy on Hillcrest Avenue with a tenant who will move into one of the floors on One Belmont upon its completion. The property underwent some renovation works, including paving over the surface as the company develops the master plan through its investment manager to unlock the full value of the property.

While some attendees during the call expressed concern about the company’s varying quarterly performance, Morris reminded them that SRF is in real estate financing and will be receiving capital from some of its REINs between summer and September as the various projects are completed. The Ocean’s Edge in Discovery Bay is completely sold out, Norbrook Wasser (‘Water’ in German) should be complete by summer while the 35 per cent complete Spanish Pennwood property on Spanish Town Road should be complete shortly as the final pieces of the property arrived on the island. The REIN on SRF’s balance sheet at the end of February was $1.80 billion.

“No, we have not faced any delays as we’re very strategic in the way we approach the various phases of our projects. Our approvals have been in line with our expectations, to date. We expect to exit these three projects here by the summer, all things considered. The delays were caused by the supply chain challenges caused by COVID-19,” stated vice-president at Sygnus Capital and head of Sygnus Real Estate and Project Finance David Cummings.

When asked about how SRF will mitigate the impact of the various commodity price runs including cement and steel, Cummings said, “There’s several things that we typically do in a scenario which include forward purchase contracts. Where we get indication that a commodity like steel is going up, we’ll work with the project manager and work out the amount of steel required before entering into a contract to lock in steel at a given price. That way, we’re able to bake in those prices and retain as much of the financial predictions that we made. It gives us guaranteed availability at guaranteed prices.”

While neither Cummings nor Morris gave a final comment on the Mammee Bay project, Morris explained that the decision will be taken by June on what will be done with the property. They both expressed jubilation at the notice of flights for the Ian Fleming International Airport which they believe will enhance the value once developed.

SRF’s Jamaican dollar stock price declined by 4.67 per cent to $15.53 while its United States dollar price remained flat at US $0.1470 on Tuesday. This is below the book value of $22.34 at February and IPO price of $19.30 or US$0.1270. SRF’s total assets stood at $10.25 billion with shareholders equity of $6.77 billion. Debt to equity stands at 0.21 times compared to the 2.5 times limit.