The Development Bank of Jamaica (DBJ) is seeking a strategic investor for the planned privatisation of Jamaica Mortgage Bank (JMB) through the sale of its shares to the general public within the next year.

In a recent advertisement in the Jamaica Observer, the DBJ highlighted that it is seeking a strategic investor to take a stake in JMB Developments Limited, the proposed privatisation vehicle to be listed on the Jamaica Stock Exchange (JSE). JMB Developments is the wholly owned subsidiary of JMB and is currently inactive as per the 2021 audited financial statements.

“JMB Developments Limited is the proposed privatisation vehicle. Yes, the current divestment plan anticipates that the lending portfolio of the Jamaica Mortgage Bank will be transferred to JMB Developments Limited prior to an offer being made to the public. Therefore, it is expected that JMB Developments Limited will be actively operating that business at the date of the public offer,” said David Wan, acting manager of DBJ, in an e-mail to the Caribbean Business Report.

The strategic investor would get 40 per cent of the shares reserved specifically for them. The advertisement stated, “The strategic investor should be interested in owning a strategic stake in a financial institution focused on real estate development funding.”

Investors to be shortlisted must score a minimum of 70 per cent from three criteria areas. There is a 40 per cent weighting towards demonstrating availability and source of capital, a 40 per cent weighting to track record of success in business and a 20 per cent weighting to market knowledge or expertise in the real estate or real estate finance sector.

Interested parties should not already be licensed by the Bank of Jamaica (BOJ) or the Financial Services Commission (FSC) or hold a stake greater than 10 per cent in a licensee or group with a licensee. However, a potential investor that owns a licensee pursuant to the Microcredit Act will be eligible for consideration. Clarifications should be submitted by April 23 and the expression of interest by any potential investor should be submitted by April 30.

An IPO is the first time shares of a company become available to the general public. An offer for sale is where an existing shareholder sells shares to the public and no new capital is raised for the company whose shares are being sold.

The JMB is owned by the Jamaican Government as a statutory corporation with a primary function to mobilise loan funds for on-lending to public and private sector housing developers and other lending institutions. JMB also provides mortgage insurance on behalf of the Jamaican Government. JMB is currently led by General Manager Courtney Wynter with a staff complement of 28.

The planned privatisation would see JMB sell shares it owns in JMB Developments with the intention to list them on the JSE. The advertisement highlighted that the purpose of privatisation would be to raise funds for the Government’s coffers, deepen the financial mortgage market, widen the ownership base of JMB Developments and assist JMB Developments to achieve strategic objectives which may lead to the eventual expansion of its current product offerings. The previously announced broker for the offer was Sagicor Investments Jamaica Limited. There were nine projects in St Andrew featured in JMB’s 2021 annual report.

According to the Jamaica Public Bodies Estimates of Revenue and Expenditure for the year ended March 2024, JMB’s total income grew 68 per cent to $530.16 million for the audited year ending March 2022. Its profit before tax doubled from $120.76 million to $241.26 million with net profit rising 87 per cent to $202.62 million.

JMB’s loan book was valued at $4.37 billion in March 2022 along with its land portfolio of $475.89 million relative to its total assets at $5.28 billion. This loan portfolio was funded by $2.58 billion in bonds and loans from $2.73 billion in total liabilities. Total equity grew nine per cent to $2.54 billion.

The estimated March 2023 financial performance was for revenue to increase to $618.94 million, but for profit before tax to contract to $198.40 million due to a rise in finance costs. The loan portfolio was estimated to have grown to $6.21 billion with total assets at $7.16 billion. Total liabilities and shareholder’s equity were estimated at $4.44 billion and $2.72 billion, respectively.

Other public-private partnerships mentioned on the DBJ’s website include Nutrition Projects Limited, Central Wastewater Treatment Company, Jamaica Solid Waste Management and Ministry of Justice — Judicial Court Complexes PPP. The Jamaican Government is currently seeking development leases for Bath Fountain Hotel & Spa, Milk River Spa and Agricultural Marketing Complex.

The Government divested its interest in Wigton Windfarm Limited in May 2019 when it sold its entire shareholding for $5.5 billion at $0.50 per share. Earlier this year, Finance Minister Dr Nigel Clarke announced plans for the Government to create a special purpose vehicle (SPV) that would own the Government’s different stakes in infrastructure-based companies. These include a 20 per cent stake in TransJamaican Highway Limited, 10 per cent stake in South Jamaica Power Limited and 19 per cent stake in the Jamaica Public Service Company Limited (JPS).

The Government would own 100 per cent of that SPV and sell an interest in it to the public via the JSE. This is somewhat similar to what has occurred in Trinidad & Tobago with National Enterprises Limited (NEL) that was formed in August 1999 to consolidate the Government’s shareholdings in selected State enterprises and facilitate public offerings on the Trinidad and Tobago Stock Exchange. Today, over 5,000 Trinidadian investors own one-sixth of NEL’s issued shares. NEL owns companies in natural gas, energy-based manufacturing, telecommunications, power generation and 51 per cent of publicly listed National Flour Mills Limited.