ALTERNATIVE asset manager Eppley Limited has further deepened its interest in the Eppley Caribbean Property Value Fund Limited SCC, as it became the largest shareholder in the value fund following a $1.14-billion (BDS$14.40 million) investment last month.

The investment was done by its Barbadian subsidiary, Eppley Fund Managers Limited (EFM), which bought 25,285,470 value fund cellular shares (CPFV) on September 13 across Jamaica Stock Exchange (JSE) and Barbadian Stock Exchange (BSE). EFM bought 9,570,565 shares from General Accident Insurance Company Jamaica Limited and 6,742,737 shares from Musson Investments Limited at $46 (BDS$0.58) on JSE. Both companies are connected to Musson Jamaica Limited, a company which is chaired and controlled by Paul B Scott who also chairs Eppley’s board of directors. Overall, EFM bought 16,303,402 shares on the JSE on September 13 for $750.42 million (BDS$9.47 million).

While the company’s disclosure didn’t identify who sold the cellular shares on BSE, EFM filed a prospectus supplement to Barbados Financial Services Commission on September 30. That supplement displayed a new list of the 10 largest owners in the value fund which revealed Massy (Barbados) Limited, a holding company subsidiary of Massy Holdings Limited which previously owned five million shares, was no longer on that list of shareholders. That left 3,972,068 cellular shares which were purchased from other significant shareholders who owned the shares on BSE. Thus, EFM bought 8,972,068 shares at BDS$0.55 ($43.21), which brought the total transaction cost to BDS$4.93 million ($387.72 million) on BSE. The net asset value (NAV) of the value fund was BDS$0.88 on September 13. EFM is the fund manager of Eppley Caribbean Property Value Fund Limited SCC.

Thus, EFM became the single-largest shareholder with an 18.66 per cent interest in the value fund. After accounting for the Paynter (Jamaica) Limited stake of 1,939,362 shares which it acquired after selling its interest in Empire Shopping Centre, Cross Roads, during 2019, Eppley collectively controls 27,224,832 shares or 20.09 per cent of the value fund. While this would normally be accounted for as an associate stake under accounting rules, EFM already owns the 20 common shares of the segregated cell company.

Thus, it is possible that Eppley will consolidate the value fund’s financials for its third-quarter report which is to be released by November 14. EFM acquired 24,335,503 cellular shares of the development fund in April 2023 and increased its overall interest to 47.20 per cent of the fund. Eppley recorded a gain-on-bargain purchase of $229.12 million on its Q2 2023 consolidated financials, and consolidated the development fund. EFM purchased the development fund shares at BDS$0.21 versus the net asset value of BDS$0.34.

“We have consistently communicated to our investors that ECPF [Eppley Caribbean Property Fund] provides the ability to own a diversified portfolio of high-quality commercial real estate assets across our region, and to earn attractive, reliable income and capital appreciation. Our significant investment in ECPF supports this belief and evidences our willingness to invest significant capital alongside our investors in this transaction and in the future — if the opportunity arises and is consistent with our investment,” said recently minted Eppley Chief Executive Officer Raymond Donaldson in the press release.

Eppley Caribbean Property Fund Limited SCC is a segregated cellular company which has a core and different cells (companies) which contain different businesses. The assets and liabilities of each segregated cell (company) are legally separated from each other.

Eppley Limited made its first foray into real estate during 2016 when it entered into a joint venture called Retirement Road Holdings Limited, which owned the Empire Shopping Centre. Since then, its move to manage and develop the Eppley Caribbean Property Fund has borne fruit as asset management income has become its second-largest source of income after interest income from other credit products. That asset management income is also composed of Caribbean Mezzanine Fund II, which it co-manages with NCB Capital Markets Limited. This line item is likely to be bolstered even further when joint venture company Capital Infrastructure Group Limited begins its first project through Rio Cobre Water Limited. Capital Infrastructure Managers Limited is co-owned by Eppley and Pan Jamaica Group Limited.

For the overall six months, Eppley’s interest income climbed two per cent to $223.06 million but net interest income contracted 26 per cent to $51.26 million due to higher-interest expense. While consolidated net profit was down 68 per cent to $110.78 million, normalised net profit would only be nine per cent lower after excluding the one-time gain from the development fund purchase.

Eppley’s total assets were down four per cent to $6.74 billion, with loans receivable decreasing to $863.97 million and lease receivables down to $1.37 billion. Total liabilities declined three per cent to $4.75 billion while total equity was $1.99 billion, with equity attributable to shareholders at $1.25 billion.

Eppley’s stock price closed at $36.71 on Tuesday, which leaves the stock down 2.54 per cent year to date with the market capitalisation of $7.07 billion. Eppley and CPFV’s next quarterly dividend consideration will take place before November 14.

With respect to the company’s 7.50 per cent preference share, Nicholas Scott, vice-chairman of Eppley, noted at the annual general meeting (AGM) held last Thursday that the company would be looking to either pay off the maturing preference share or refinance it with another instrument. He also noted that there wasn’t a consideration to shrink the company’s debt due to it be underleveraged.

There was a 260,539 share trade last Tuesday at $6.60, which is a 10 per cent premium to the maturity price, with only $0.075 in preference share dividends remaining on the instrument. Eppley’s 7.50 per cent preference share matures in November at $6 with $500 million to be paid out to preference shareholders. Eppley’s 5.0 per cent (Jamaican-dollar) and 6.0 per cent (United States-dollar) preference shares matured last year but the company issued two new preference shares that mature in 2027.