Sygnus Real Estate Finance Limited (SRF) has bagged a $200 million gain on the sale of 1.2 acres on Lady Musgrave Road that was sold for US$4.5 million or $697.99 million..

Sygnus REF Jamaica Limited, a subsidiary of SRF, had originally purchased 56 Lady Musgrave Road, a 0.6-acre property, for a consideration of $80 million in October 2020 as per the registered title but was recognised in its financial statements at $220.96 million. Sygnus REF then became the owner of 58 Lady Musgrave Road, a 0.63-acre property, in December 2022 for $284.06 million as per its financials.

Sygnus REF sold both properties on April 30 to Ripton International Capital Holdings Limited, a company with share capital of $1 billion and owned by Fritzwarien Rodgers. Rodgers received a NEPA (National Environmental & Planning Agency) permit on June 20 to construct a four-storey commercial development with basement-level parking and 31 offices across three floors.

This sale represents part of the closing in SRF’s first investment lifecycle. The sale was accounted for as part of a $1.31-billion disposal of investment property on SRF’s cash flow in its third quarter (March to May). SRF has been recovering some of its different real estate investments as seen by it collecting on its structured investment notes, called REINs, and creation of a lease participation investment (LPI) for its Spanish Penwood and One Belmont projects in Kingston.

“We’re working through other exits for the first investment lifecycle. Our strategy is to execute our investments using joint ventures. The reason why we don’t want to buy land per se is because using a co-development or JV is a more efficient use of capital. While you have the land and time passes, then your return on investment can start to depreciate. While in a joint venture, effectively, the land already exists, and you only need to deploy the capital to execute the joint venture when you’re ready,” said Jason Morris, co-founder and chief investment officer at Sygnus Capital Limited, at SRF’s earnings call on July 16.

SRF recognised a minor $39.19-million loss on a partial sale related to the Spanish Penwood investment in Q3 based on the pre-agreed sale price, but benefited from $18.46 million in lease income and a $20-million fair value gain on the LPI. With respect to One Belmont on Belmont Road, David Cummings, head of real estate and project finance at Sygnus Capital, noted that there were already four tenants in the building with two doing interior build-outs now. The first tenant should move in SRF’s Q1 (September to November) on the nine-storey building which was revealed to now be valued at $5.03 billion.

“What we intend to do is structure an investment where we hold part of that investment for lease income on a go-forward basis which will generate two forms of income. You will get lease income from it, but we also get capital gains from it. If you’re thinking of a building that is tenanted, and rather than us buying the building per se, we structure kind of a note that allows us to participate in the lease flows that the building has. If the value of the underlying building goes up, then the value of that note goes up because we could turn around and sell that to somebody else who would come in and own that [note],” Morris added, regarding the new investment structures to monetise the real estate assets.

SRF is now looking to begin the second investment lifecycle with the development of the Mammee Bay, St Ann and Lakespen, St Catherine assets. The Mammee Bay property received a recommendation made statement by NEPA on its application, which means that the plan has been sent to the St Ann Municipal Corporation for final approvals. That 13-acre beachfront property is now valued at $5.76 billion and had applied for 250 hotel rooms, nine bungalows with 21 villas to be built on the property.

SRF is also looking to begin construction on 55-acre Lakespen property in mid-2025 which is to be an industrial development. This property is worth $2.59 billion and is close to Wisynco Group Limited.

“In terms of the impact of Hurricane Beryl, as you heard me indicate with respect to One Belmont, we specifically designed that building with earthquakes and hurricanes in mind. So, we’re happy to report that after the passage of Hurricane Beryl, there is no damage to One Belmont. For other properties that have existing habitable structures on them, [they] also had no impact from Hurricane Beryl,” Cummings explained to shareholders.

Even with the major gains SRF has achieved this year, it is now looking to raise additional financing to take it to the new set of projects. It is currently seeking to raise a senior secured bond with a four-year tenure totalling $3.44 billion which opened on July 8 and is set to close on July 31, a month before its financial year closes. Tranche I is seeking to raise $1.904 billion with an option to upsize by an additional $640 million while tranche II is seeking to raise US$10 million ($1.55 billion). The proceeds will go to repaying debt owed by a subsidiary, refinancing existing debt and to fund a debt service reserve account.

A sinking fund is to be created as a method for repayment of the bond before maturity. This sinking fund will be funded from the proceeds of the completed industrial lots at the Lakespen project. It will be funded to the tune of US$25.9 million. The Mammee Bay property is to be used as collateral for the bond along with the sinking fund and reserve account.

SRF’s third-quarter report showed its net loss being reduced from $163.24 million to $136.02 million due to reduced management fees during the period. SRF’s nine months also showed a net loss of $456.15 million, but the audited financials are likely to be positive once the fair value gains on the revaluation of properties are accounted for.

SRF’s total assets were $14.64 billion with $9.89 billion as investment property and $700 million as cash. Total liabilities and shareholder’s equity were $7.29 billion and $7.34 billion, respectively, with a book value of $22.49.

SRF’s price closed Tuesday at $10.85/US$0.088 which leaves both securities up in 2024.The new 20,707,342 ordinary shares to be issued to Sygnus Capital have yet to be listed on the Jamaica Stock Exchange.

“In terms of prospective dividends, I don’t want to pre-empt anything, but what I would like to say is that we’re in a decent position, once the audited financials are complete, for the possibility of considering some form of distribution on those financial statements,” Morris closed, regarding the prospect of dividends.