Kingston Properties Limited (KPREIT) is moving ahead on its real estate projects in the Cayman Islands and Jamaica as it continues to expand its portfolio across different subcategories of the asset class.

KPREIT owns investment properties in the industrial, office and mixed-use spaces in the two Caribbean jurisdictions along with investments in multi-family properties in the United States of America. The real estate investment company acquired a 1.50-acre property in Cross Roads and entered into an agreement to acquire three of the four units at the mixed-use development Gum Tree 5 in the Cayman Islands last year.

Following its $1.55-billion additional public offering (APO) in June, KPREIT is ready to get its Cross Roads project underway as it found a joint venture (JV) partner for the mixed-use industrial development, which will house small bay warehouse units.

“We have entered into a JV agreement with Relmac Construction Limited, an experienced developer, to complete a mini warehouse complex. The project is expected to be completed in 15 months at a cost of approximately US$2.7m,” KPREIT CEO Kevin Richards said in an e-mail to Jamaica Observer.

KPREIT will not acquire the fourth unit at Gum Tree 5. However, for the other three units, which are set to be completed by the end of the year, it is currently in advanced discussions with a prospective tenant. The company had a US$1.23-million deposit on the property at the start of the year, which has increased to US$3.96 million as of the third quarter report.

Gum Tree 5 and the Cross Roads projects are KPREIT’s current greenfield developments.

The company’s value-added acquisition of the 232A Spanish Town Road office and warehouse property in 2021 is 100 per cent leased while it is working on the planned scope of the half-acre property on Dumfries Road, which is set to be a multi-storey commercial building. KPREIT’s near 100 per cent occupancy during the third quarter saw its consolidated rental income rise by 12 per cent to US$857,596, with the year-to-date performance up at the same rate to US$2.47 million.

When asked about other prospective opportunities amid the rising interest rate environment, Richards responded, “We have several opportunities in the pipeline that we have identified as strong prospects to add to the portfolio and negotiations are ongoing. Given the increase in interest rates and concerns around a possible recession, we remain cautious about the types of deals we pursue. We’ve also benefitted from our experience of picking up excellent deals during times of market disruptions.”

KPREIT is almost completely out of the Florida condo market after selling one of the remaining two units at W Fort Lauderdale in October for US$1.75 million. Despite this reduction in investment properties, KPREIT’s USA segment assets are up eight per cent to US$6.92 million as it holds a 45 per cent stake in Polaris at East Point Partners LLC and 38 per cent in Polaris at Camp Creek Partners LLC, both multi-family property investments in Atlanta, Georgia.

“We still believe the US is a very important market for us to participate in and continue to seek out opportunities in that market. You will recall that our focus is to exit the condo market to reduce earnings volatility. We are targeting multi-family properties as the demand for rental property is greatest during periods of high interest rates. The partnership arrangements have worked extremely well for us especially in terms of value-add properties and entering new markets,” Richards added.

While KPREIT’s third-quarter net profit declined 14 per cent to US$386,395, its nine-month net profit improved eight per cent to US$1.45 million. Its funds from operations also improved seven per cent to US$958,421. With a focus on decreasing its finance costs arising from variable interest rates and foreign exchange movements, KPREIT refinanced its US dollar loan to a Jamaican dollar loan with its banking partner FirstCaribbean International Bank (Jamaica) Limited.

KPREIT’s total assets are up 20 per cent year over year to US$58.61 million, which includes investment properties valued at US$40.03 million and US$6.95 million in cash and cash equivalents. Total liabilities are down 14 per cent to US$15.44 million as the company repaid its US$4.47-million ($700-million) bridge loan to VM Investments Limited during the quarter.

Shareholders equity increased 39 per cent to US$43.16 million largely due to the US$9.63 million in proceeds from the APO.

KPREIT’s share price is down 23 per cent year to date to $6.96 as the broader market experiences a general decline. With its share buy-back programme still in effect, the company repurchased 112,621 shares between November 3 to 7 for $6.90 to $7.32 and repurchased 250,000 shares on November 10 for $7. Shareholders were also paid a US$0.001 dividend totalling US$884,609.29 on Tuesday, which brought the total dividend payments to US$1.43 million for the year at a yield of four per cent.

KPREIT is currently working on achieving the green certification for its various properties. It has already completed 95 per cent of the initiatives under the Green Business Jamaica programme with the National Environment and Planning Agency (NEPA). This has resulted in one of its three local properties receiving a silver status from NEPA. It plans to eventually receive international certification.

Offering an outlook on 2023, Richards noted, “There is great uncertainty going into 2023 given the continuing hikes in benchmark interest rates by the monetary authorities in an effort to curb inflation. Uncertainty surrounds whether a deep recession is likely and for how long interest rates will remain high.”

“We still believe in the real estate asset class as being one of the most resilient asset classes during times of market disruption. The Cayman Islands with its high per capita income and accommodative economic policies should fare well, which will be supportive of the real estate sector. Since their introduction of economic substance laws, there has been a rapid growth of the population, which has led to a rise in demand for housing and services. We will continue to monitor the US economy to see the impact of the Fed’s action reducing inflation.”