Sagicor X-Fund now focused on diversified real estate investments CompanyWednesday, July 28, 2021
BY DAVID ROSE
Following the early exit of its multi-billion-USD investment in Playa Hotels and Resorts, Sagicor Real Estate X-Fund Limited has shifted its focus back to Jamaica as the country undergoes an explosion of construction activity during the novel coronavirus pandemic.
X-Fund originally became a 15 per cent shareholder in Playa in June 2018 when it disposed of two Jewel Hotel properties and most of its Sigma Real Estate holdings to gain exposure to the growing company which has operations in Mexico, the Yucatan Peninsula, Dominican Republic and along the north coast of Jamaica. However, the pandemic and Playa's depressed results forced the company to sell its Playa stake in January for US$96 million (J$13.6 billion).
With its Double Tree by Hilton (DTO) in Orlando serving as the only real estate investment,
X-Fund's leadership has decided to look at different types of investments in the space rather
than in the hospitality segment, which has been significantly impacted by the pandemic.
DTO saw its occupancy fall from a high of 77 per cent at the start of Q1 2020 to an all-time low of 12.9 per cent during Q2 when the world was shut down. Thanks to the reopening of the global environment, DTO saw occupancy hit 70.3 per cent during Q1 2021 with an EBITDA (earnings before interest, tax, depreciation and amortisation) of US $698,694. DTO's occupancy peaked at 91.4 per cent during its 2019 financial year (FY).
“We're seeing a return of group business and our outlook is very positive for that property [Double Tree Orlando]. In Q4 2020 and into Q1 2021, we see occupancy picking up again which is good. We see positive EBITDA during these periods as well. Going into Q2, the performance is even stronger and will be reflected in our Q2 results when those are published,” stated X-Fund CEO Brenda Lee Martin at the company's virtual annual general meeting held last week Friday.
Part of the shift for X-Fund to return to a path of profitability is also to focus on traditional buy-and-hold investments which can generate cash flow for the business. X-Fund recorded a net loss attributable to shareholders of $202.1 million during its first quarter which was driven by the $233.1 million loss driven by its disposal of Playa.
Various Sagicor-related funds have been investing heavily in real estate with the Millennium Mall in Clarendon being opened recently along with the development of a new Plaza along Camp Road.
“With regards to the inflow from the Playa shares, these will be redirected into real estate investment opportunities not solely focused on real estate, but in other viable options. Within real estate, we see good opportunities across several sectors including logistics parks, commercial, residential and leisure. We'll be looking at everything. We're focused on reducing earnings volatility by seeking traditional brick and mortar investments that will deliver positive, predictable cash flow and returns to shareholders. We have some bonds which remain outstanding and it is our intention to pay them from the proceeds from the Playa sale,” stated Lee Martin.
When posed with the question around X-Fund possibly investing in the US$285-million New Fortress Energy deal and pipeline projects, Chairman Christopher Zacca deferred his response, but noted that some announcements should be made in the next three months.
“The whole area of logistics and warehousing is a big one for us at X-Fund. The industrial belt along the North-South Highway and Mandela Highway is an area we're looking at in terms of logistics expansion and investment. Nothing is off the table, but the primary focus of the management and board is to develop real estate developments. X-Fund will look in Jamaica, the Caribbean and USA for accretive investments. Buy the property or land, develop them and sell them for a profit. That's the primary focus, but each investment is treated on its own merit. We're not restricted to any particular currency and will look at the best use of shareholders' money,” stated Zacca.
In closing, the chairman noted that he remains bullish on the prospects of the company especially with the current real estate market in Jamaica and the region. X-Fund hasn't paid a dividend since the 2017 FY with its 60.81 per cent controlled JamZiv Montego Bay Portfolio Limited controlling the $13.6 billion net proceeds of the Playa sale.
“We are confident in the future of the company from a financial perspective,” he said. “We believe this
year will actually show a turnaround. It is our intention to return to a path of dividends as soon as possible. We will look to earn any income that is risk-adjusted return for investors and that doesn't exclude USD returns.”
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