BANK of Jamaica (BOJ) has purchased the former French embassy on 13 Hillcrest Avenue in St Andrew for US$7.965 million ($1.25 billion) from Sygnus Real Estate Finance Limited (SRF), which continues to optimise its real estate portfolio.

The transaction was registered on September 18, according to National Land Agency records, while SRF’s audited financials noted that the sale was completed on October 3. Charlemagne Holdings Limited, SRF’s wholly owned subsidiary, had purchased the property in November 2021 from the State of France for US$6.50 million ($1.01 billion) and subsequently leased it to The Attorney-General’s Chambers, which remains its current tenant. It’s unknown what the Jamaican central bank will do with the 3.2-acre property that has a mixed commercial/residential use.

This is SRF’s second notable sale this year, following the sale of 1.2 acres of land at 56-58 Lady Musgrave Road, also in St Andrew, to Ripton International Capital Holdings Limited for US$4.5 million ($697.99 million). SRF has also listed the 0.5-acre property at 26 Seaview Avenue, St Andrew, for sale, with the current carrying value being $291 million.

These sales occur at a time when SRF moves to wind down its first investment life cycle that has seen it complete two major development projects, namely Spanish Penwood and One Belmont. Spanish Penwood, a 2.85-acre property at 443-445 Spanish Town Road, St Andrew, was sold for $650.54 million during the 2024 financial year (FY), which resulted in a loss on disposal of $77.28 million. However, SRF subsequently entered into a lease participation arrangement (LPA) which gives it the right to benefit from one third of the lease income generated from the property. SRF spent $385.70 million to acquire this beneficial interest through the LPA.

With respect to One Belmont in New Kingston, St Andrew, SRF has substantially completed the nine-storey corporate office building at 1-3 Belmont Road, Kingston 5, and is currently completing aesthetics such as landscaping work currently. Five floors on this property have been effectively leased, with the first tenant to occupy the space next month.

However, as it relates to the monetisation of this asset, it is yet to be publicly announced to shareholders. At last Friday’s earnings call Jason Morris, co-founder and chief investment officer of Sygnus Capital Limited, noted that SRF would retain an economic interest in the property while monetising the underlying value attached to it. SRF has a 70 per cent stake in Audere Holdings Limited, which is the joint venture company that owns One Belmont that is now valued at $5.80 billion.

These investments were completed under SRF’s first investment life cycle, which can be described as the first project period for the company to unlock value in real estate through different avenues. The company’s second investment life cycle will focus on a 14.4-acre property at Mamme Bay, St Ann, and a 55-acre property at Lakespen, St Catherine. These assets will focus on the themes of hospitality and industrial segments.

“We have received additional studies that we had alluded to, so we continue to make very good progress towards a decision phase with this particular property. Once we get to that milestone, of course, we will be able to update you on how we will be unlocking the value of this magnificent beachfront property,” said David Cummings, head of real estate and project finance at Sygnus Capital.

SRF got preliminary approvals from National Environmental & Planning Agency (NEPA) to develop a hotel with 250 rooms and nine bungalows, with 21 villas. This property is valued at $5.79 billion.

The Lakespen property sits in the industrial belt of St Catherine, with the earnings call noting that construction is being targeted for mid-2025. However, Cummings mentioned that the process of approval between NEPA and St Catherine Parish Council can take between four to seven months, which is separate from the design phase of what will be the industrial real estate asset which is envisioned.

SRF is also set to explore opportunities for the 0.9-acre property on Montrose Road where it has a 51 per cent interest in joint venture company Monadh Rois Holdings Limited.

SRF’s interest income from its real estate investment notes (REINs) went down 29 per cent to $180.07 million during the 2024 FY ending August 31 as some of the real estate projects these REINs funded were completed and sold. After accounting for higher interest expense, the net interest expense increased 208 per cent to $202.78 million.

Despite deriving higher fair value gains on its real estate assets and benefiting from reduced operating expenses, SRF still recorded a consolidated operating loss of $130.88 million. After accounting for the share of profit from its two joint ventures SRF’s profit before tax improved 140 per cent to $362.61 million, with net profit rising 49 per cent to $315.08 million.

Total assets increased five per cent to $15.85 billion, with its investment properties valued at $9.26 billion and cash increasing to $900.97 million. Total liabilities five per cent to $7.74 billion, with the company raising US$25.90 million ($4.11 billion) — consisting of US$15 million and $1.76 billion — between August and October in a private placement. Shareholders equity four per cent to $8.12 billion with the book value at $24.85.

SRF’s stock price closed Tuesday at $11.50/US$0.0495, which leaves the Jamaican-dollar security up 12 per cent in 2024 while the United States-dollar security is down 29 per cent year to date. SRF will consider its first dividend today at its board meeting, following the recent sale of different assets. SRF is also working with JSE on issuing the payment-in-kind shares to Sygnus Capital and subscription warrants to general shareholders.

While SRF currently remains only invested in Jamaica, future Caribbean prospects are not very far for the real estate company. It will look to deepen access to flexible capital and add value to the Jamaican real estate market through joint ventures, co-developments, and REINs. With respect to two REINs that did not perform, Morris noted that the Ocean’s Edge development has received good offers so far. Ocean’s Edge Country Club was a real estate development in Ocean’s Edge that didn’t pan out and has been put into receivership, with 16 unfinished townhouses being managed by Business Recovery Services Limited which is the receiver/manager.

“As a specialised alternative investment company dedicated solely to the real estate asset class, SRF aims to play a leading role in broadening access to flexible capital for the purposes of unlocking value in real estate assets across the Caribbean. SRF has made progress toward this goal by partnering with owners of strategic real estate assets via joint ventures. During the upcoming financial year SRF will increase its collaboration with owners of strategic assets under joint ventures or joint investments to unlock value in real estate assets,” stated SRF’s report on the potential opportunities in FY 2025.