FIRST ROCK Real Estate Investments (FREI) will abandon Jamaican property development to become a real estate investment trust (REIT), pivoting toward rental assets in lower-risk Caribbean and Central American markets, CEO Ryan Reid said on Monday.

The strategic shift follows a challenging 2024 in which FREI reported a US$8.9-million net loss attributable to shareholders, driven by unrealised fair value losses and property disposals. Total assets fell 5 per cent to US$57.2 million, while shareholder equity dropped 26 per cent to US$25.6 million. The company’s bottom line has since rebounded, posting a US$539,000 profit in the January to March 2025 period, FREI’s first quarter. The company said it expects to post a profit for the full year.

The Hambani Estates luxury residential project — a 90 per cent complete development of standalone homes in Kingston’s upscale Kingston 6 district — has become emblematic of the risks driving FREI’s exit from Jamaican real estate. The development, which was financed through a US$10-million loan from Sagicor Bank through a two-year facility and matured in March 2025 after a one-year extension, had “some lots” placed under receivership after FREI missed payments.

Reid said all units are expected to be completed before October of this year and added that “the company is seriously working towards paying off” the existing debt to Sagicor with talks “pretty advanced where that is concerned”. It is understood that a local investment house is working with FREI towards that goal.

“At the appropriate time, the requisite communication will be made around the financing arrangement,” he added.

But he said the development at Hambani was valued at US$24.5 million by independent valuators with a forced sale value of US$20 million for the units.

“So the total equity net of the outstanding loan amount based on the forced sale value is US$11 million,” he pointed out.

He said when FREI got into real estate development, it was exhibiting a higher rate of return that REITs, but that has now changed.

“Now, what we’re seeing is a shift in market dynamics in Jamaica, where there are a lot of associated risks with respect to real estate development, be it financing risk, be it execution risk, be it sales risk,” Reid explained.

“Cash flows are important for the business, and as such, we started to shift towards commercially tenanted properties we had in Jamaica and then we started to shift beyond the shores of Jamaica into Cayman Islands and Costa Rica. Those performed quite well for us, and as such, we took a decision, a strategic decision, to change the model of the business towards being a real estate investment trust, where we acquired high value assets in jurisdictions where we enjoyed good results or good returns on our assets in these jurisdictions. As such, we have expanded, largely in Costa Rica, and we’re expanding in the Cayman Islands,” Reid added.

“So, that will be our thrust going forward. Real estate developments, in Jamaica, will not be a part of the strategic initiatives of the business [anymore], at least not for the short to medium term,” he said.

A REIT is a company that owns, operates, or finances income-generating real estate. Modelled after mutual funds, REITs pool capital from investors to purchase portfolios of properties, for example, offices, apartments, hotels, warehouses or real estate debt.

The transition for FREI will prioritise income-generating commercial assets across Jamaica, Costa Rica, Cayman Islands, and Florida. FREI exited non-core holdings in 2024, including the disposal of its 12 per cent stake in Premier Private Equity and non-income-generating properties. It also completed acquisitions like the Crown Square commercial complex in Grand Cayman, financed by a US$6.9-million facility from Cayman National Bank and a US$2.2-million vendor mortgage.

Reid added that in the last two years, the company has raised US$11 million in financing for transactions in Costa Rica and the Cayman Islands.

“We see these two jurisdictions as growth jurisdictions for the company and the jurisdictions that will allow us to achieve the goal of becoming a real estate investment trust,” he pointed out.

The company has been building KFC restaurants in Costa Rica with two completed in the first quarter of 2024 that are “performing in line with expectations”. In the first quarter, they generated US$259,000 in rental income, which was more than was generated in all of 2024. Another which began construction in March is now complete, Reid reported adding that tenants have taken possession of the asset, on a 20-year lease arrangement that will see rental income flowing to FREI as of this July to September quarter.

“And then a very first for the company, we undertook to do a warehouse development in Costa Rica for KFC, and that commenced roughly in March. I’m happy to say that completion is slated to be in two weeks from [Monday’s] date. This is a massive undertaking for the company again under similar lease term of 20 years and rental income payments will commence in September of this year. So we’re pretty excited about this and we’ll be communicating same in the coming weeks,” Reid said.

The company also realised its largest transaction in its history in December 2024 — the acquisition of Crown Square, an office complex in Georgetown, Grand Cayman, which leases space to various businesses including the police headquarters which should provide reliable income for FREI.

“We expect to see more of these going into this year,” stated Reid.

Among those future transactions the company is eyeing are two more in Cayman Islands.

“One is a 36,000 square feet commercial office building located in Georgetown, Grand Cayman. The building is 100 per cent tenanted and includes, entities like the Auditor General Department, Office of the Ombudsman, et cetera. The expected acquisition cost is roughly US$8.2 million and we’re targeting financing of 75 per cent and 25 per cent in equity,” Reid stated.

This transaction is expected to close before the end of the third quarter.

“Additionally, there’s a 46-room boutique hotel located in Grand Cayman, which just kisses the beach on the Seven Mile Strip. The total acquisition cost is US$20.5 million, our target financing of 65 per cent commercial bank debt, 25 per cent vendor financing and 10 per cent equity. This is a transaction that we’ve been working on since last year, but we are continuing our due diligence with a view to closing this transaction before the end of this financial year,” he said.

“So, these are some of the transactions that we are pursuing. These are some of the transactions that will see us accomplishing our goal of becoming a real estate investment trust, which we see to be more stable, and we see to be more in line with the expectations of our shareholders,” he said.