Kingston Properties Limited (KPREIT) has made its first purchase outside of the North American region as it purchased a fully tenanted 20,000-square foot property in the Aztec West Business Park, South Gloucestershire, England, for £4 million or US$5.08 million ($793.94 million).

The property, which is north of Bristol, the United Kingdom’s fifth-largest city, was acquired by KPRE (UK) Limited on December 12 and is home to firms in the aerospace, defence, engineering, financial services, media and environment services industries. The purchase was funded by a mixture of debt from KPREIT’s lending partners and from the proceeds related to the sale of 10 commercial units at the Tropic Centre One in the Cayman Islands.

“KPREIT is bullish on the UK and expects the economy to see growth in 2025 with increased government spending and continuing interest rate cuts. The sub-urban small office sub sector continues to show resilience and is expected to continue to see growth with the campaign for a return to the office in the UK. The tenants in the building range in services from insurance, shipping, service offices providers and one of the largest suppliers of affordable housing and care in the UK. The rapid growth of the service or flexible office industry since the pandemic signals the direction of the office for the future and bodes well for the continuing demand for office space,” KPREIT said in its Jamaica Stock Exchange (JSE) disclosure.

The United Kingdom has gone through some political instability over the last decade as it attempted to navigate Brexit, the UK exit of the European Union, and the aftermath of the COVID-19 pandemic and surge in energy prices. That instability saw the UK government go through five prime ministers in the last five years and a shock to the currency’s value from the disastrous mini-budget under Mary Elizabeth Truss.

However, KPREIT Chief Executive Officer (CEO) Kevin Richards believes that the UK is more politically stable today than two years ago and that the shock that the economy experienced was largely related to Brexit. Also, he pointed to the fact that the UK is still a developed economy and is home to numerous global businesses in different industries. The UK purchase has now further rebalanced the company’s investment property portfolio with the UK now representing seven per cent, the USA at six per cent, Jamaica at 42 per cent and the Cayman Islands at 45 per cent.

KPREIT got its initial start in Trinidad & Tobago in 2008 during its initial public offering (IPO).

“One of the things we’re doing as part of our risk management strategy is to manage weather-related events like hurricanes. Being heavily concentrated in Jamaica and Cayman, one hurricane can affect both territories. So, we’re diversifying geographically away from the hurricane belt. We have another UK deal in the pipeline,” Richards explained.

KPREIT acquired Tropic Centre in January 2017 for $351.24 million (US$2.73 million) with the company’s valuation of the property in December 2023 being US$3.35 million. The recent disposal of 10 of the 12 units resulted in the company recognising a gain on a sale of US$1.35 million. The company sold one residential unit at the Tropic Centre during the current fourth quarter (October to December) and expects to complete the final sale in January.

KPREIT had moved to put its Rosedale Warehouse property in the Cayman Islands up for sale during the second quarter but jettisoned that idea in the third quarter and decided to keep the property which last had a valuation of US$2.58 million in December 2023.

After nearly three years, the Gum Tree 5 mixed-use industrial development was fully completed in Q3 with KPREIT having three of the four units. It’s already leased one unit and is seeking to complete the lease for the other two units. KPREIT had paid an 80 per cent deposit or US$2.77 million on this property which had an initial consideration of US$3.13 million.

KPREIT has also been busy in its domestic market this year as it entered sale and leaseback arrangements with it completing two downtown Kingston transactions. KPREIT acquired 8-10 Duke Street from the VM Building Society (VMBS) for $510 million (US$3.23 million) and 6 Duke Street from VM Real Estate Holdings Limited for $380 million (US$2.41 million). KPREIT executed another sale and leaseback deal in November where it acquired a parking lot on East Street which is used by the building occupants from 6-10 Duke Street. 8-10 Duke Street is currently used by VMBS for its downtown branch, while 6 Duke Street is tenanted by KPMG, the company’s auditors. KPREIT’s largest shareholder is VM Investments Limited (VMIL) which owns a 23.0068 per cent stake. VMBS, VM Real Estate and VMIL are all owned by VM Group Limited which has two executives serving on KPREIT’s board.

All of these recent transactions should further fuel KPREIT’s rental income line which grew 22 per cent to US$1.15 million for Q3 and rose 30 per cent over the nine months to US$3.48 million. The growth in the rental income was influenced by the acquisition of the Grand Harbour Commercial Centre in the Cayman Islands during September 2023. The recent Duke Street acquisitions should help grow rental income by an additional eight per cent going forward.

During Q3, KPREIT recognised a US$592,737 fair value loss on its investment property and a US$115,926 impairment loss on its financial assets. However, the gain on sale from the Tropic Centre resulted in the company’s consolidated operating profit rising by 74 per cent to US$1.10 million. After accounting for higher finance costs and taxes, KPREIT’s net profit improved by 92 per cent to US$766,677 ($120.31 million).

For the overall nine months, operating profit improved by 51 per cent to US$3.17 million while net profit increased 39 per cent to US$2.19 million. Funds from operations for the period dipped 17 per cent from US$946,818 to US$787,271 due to timing differences. Trailing twelve months earnings per share was US$0.0060.

Total assets were up nine per cent over the nine months to US$77.38 million with investment properties increasing 13 per cent to US$66.75 million. The company also received a US$406,969 proceed from its investment in Polaris at Camp Creek LLC which owns a multifamily property in Atlanta Georgia. KPREIT is set to break ground on the 1.5-acre property in Cross Roads, Jamaica during this quarter and expects to complete the development in 12 months.

The company’s cash was US$3.51 million and US$1.34 million related to investment properties held for sale. KPREIT’s asset base likely stands around US$82.50 million following its recent purchase of the UK property, which is within striking distance of the US$100 million assets under management target it had set for 2025.

Total liabilities were up 20 per cent to US$27.80 million as the company tapped a US$5-million loan during the period from CIBC Caribbean Bank (Cayman) Limited which pushed its total debt to US$26.97 million. Shareholder’s equity/book value was up four per cent to US$49.56 million as the company paid a US$500,435-dividend during the period.

KPREIT’s stock price closed Tuesday at $9.19 which left it up 18 per cent in 2024 with a market capitalisation of $8.13 billion (US$51.88 million). Despite the company restarting its share buyback programme in April to purchase up to 4.42 million ordinary shares, it has not repurchased any shares in 2024 as the stock trades above book value. KPREIT’s total dividends paid in 2024 totalled US$1.44 million.