Howard Mitchell, the recently appointed chairman of Sagicor Real Estate X Fund Limited, has made a commitment to shareholders that the company’s board will be more assertive in real estate investments as it seeks to restore dividend payments.

X Fund’s only direct real estate investment is its ownership of DoubleTree by Hilton Hotel (DTO) in Orlando while holding five per cent ownership in Sagicor’s Sigma Real Estate unit trust which had a net asset value of J$26 billion at the end of 2023. X Fund also held $3.13 billion in repurchase agreements and $2.85 billion in short-term investments.

However, X Fund has not made any new direct real estate investments following the sale of its 25 per cent stake of the Jewel Grand Montego Bay Resort and Spa in September 2020 and sale of its 15 per cent stake in Playa Hotels & Resorts NV in January 2021. The absence of new investments has also been matched by no dividend payments since the $0.14 dividend in September 2017, nearly seven years ago. The Playa investment occurred in June 2018.

“The board has given itself a mandate, recently, that we will be a little more proactive as we’re coming out of this … with COVID and the high inflation rate, which we hope has now been stabilised. So, we will be looking at more real estate opportunities, but we have a fiduciary responsibility for the funds of shareholders. What we want to do is to have a safe harbour while we review these assessments,” Mithcell told shareholders on Tuesday at the company’s 11th annual general meeting (AGM).

The X Fund AGM held at McNamara Corporate Services Inc in Gros Islet, St Lucia, but had its shareholders and board members at a satellite location by the AC Hotel by Marriott in Kingston, Jamaica.

Mitchell is X Fund’s fourth chairman since it was formed in May 2011. Mitchell joined the board on March 1 and took over from Vinay Walia who resigned on the same day. Mitchell’s appointment comes at a time when X Fund is charting a new path as an independently governed company following Sagicor Group Jamaica Limited’s (SJ) decision to sell its remaining 20.75 per cent stake in September 2022.

His push for greater assertiveness was made clear as he ended the meeting while mentioning that there will be a greater focus on considering dividends again, a comment supported by Camisha Sinanon, SJ’s vice-president of group accounting, who explained that the X Fund Group’s consolidated position no longer has an accumulated deficit. Mitchell currently has 200,000 ordinary shares in X Fund, the second chairman to own shares following its first chairman Richard Byles.

However, Mitchell was reserved about 2024 considering a national election in the United States of America and possibility of general elections in Jamaica. He added, “So, you will be seeing, hopefully, a more assertive, not aggressive stance in our investment strategy, but we are taking our time to minimise the risk.”

X Fund’s DoubleTree property saw 2023 revenue improve four per cent to US$48 million (J$7.37 billion) on the ADR (average daily rate) improving from US$125.66 to US$128.95. However, the property’s EBITDA (earnings before interest, tax, depreciation and amortisation) dipped by three per cent from US$13.2 million to US$12.8 million as the property experienced a US$800,000 increase in property insurance premiums, a 15 per cent increase in utility costs and higher staff costs from a competitive environment. These all translated to net profit dropping 32 per cent from J$566.98 million to J$383.09 million.

Despite that 2023 experience, X Fund is comfortable in restoring capital expenditure which will see it spend US$1.4 million to build out a 10,000 square feet (sq ft) outdoor pavilion to increase its MICE (meetings, incentives, conferences, and exhibitions) revenue. The project should be completed by early September and should have a two-year payback period. This is based on a deliberate shift from transient guest to groups which can generate more revenue across the property. The property already has 62,000 sq ft of meeting space.

“We’re actively looking at a deal right now and we do take into consideration the need to earn a certain level of return before we finalise on anything. We’re looking at deals across the region. We’re not confining ourselves to Jamaica and we’re looking at direct ownership,” said X Fund Chief Executive Officer Brenda Lee-Martin on the plans for real estate investments in 2024.

Former chairman Walia mentioned at the 2023 AGM that X Fund was looking to invest in commercial real estate during the year. However, the CEO explained that the 2023 deals presented didn’t garner the desired capitalisation rates for their return on investment.

“We have been looking at [real estate] deals over this past year, but we did not finalise on any of those deals for various reasons. The cash was invested, in this high interest rate environment, we got returns for the cash that we had invested. As we look forward to the future, other opportunities when we are expecting some reduction in interest rates, we expect to be translating that into real estate opportunities,” she added.

X Fund is currently looking to the Sigma Real Estate unit trust increasing its commercial property interest later in 2024 through the future acquisitions of commercial units at New Brunswick Commercial and Residential Complex and Portmore Promenade which should begin construction in Q4 2024. Sagicor Group Jamaica owns 70 per cent in Bailey Williams Limited, the joint venture which owns the New Brunswick real estate. Bailey Williams had $5.8 billion in total assets and $73.25 million in net assets in 2023.

“They will be adding some investments to their portfolio, the first of which is New Brunswick Village. It is located in Spanish Town. It’s a new commercial property that is at practical completion. The Sigma Real Estate portfolio will add about 64,000 sq ft of rented space to their portfolio mix,” Lee-Martin noted during her presentation.

X Fund’s first quarter saw revenue climb nine per cent to J$2.22 billion due to improvements in DTO’s revenue. Despite higher expenses during the period, X Fund’s consolidated profit before tax grew 13 per cent to J$256 million. Net profit dipped seven per cent to J$129 million due to increased taxes.

Total assets grew one per cent during the quarter to J$31.33 billion with cash resources of $2.33 billion. Total liabilities and shareholder’s equity were J$10.40 billion and J$20.92 billion, respectively.

The stock closed Wednesday at $7.64 which leaves it down five per cent in 2024 with a market capitalisation of J$17.14 billion. X Fund’s book value is J$9.33.