Kingston Properties Ltd (stock symbol: KPREIT) is offering Jamaicans a United States Dollar (USD) real estate investment option that provides geographic and asset diversification as well as a strong USD hedge against devaluation and inflation. Additionally, there is the potential for the real estate assets to appreciate in value while they continue to generate rental income, which would flow to investors in the form of dividends.
The Kingston Properties offering should be particularly attractive to pension funds as it provides an excellent way to invest offshore in a relatively liquid portfolio of real estate assets via a company listed on the Jamaica Stock Exchange. Investors have an opportunity to invest Jamaican Dollar (JAD) and receive dividends in USD. Kingston Properties has a target of 6-7% dividend yield and a policy of returning 90% or more of distributable income to investors as dividends. Traditionally, Real Estate Investment Trust's (REIT) have outperformed major asset classes (stocks, bonds) over the long term, according to research reports.
Chairman- Kingston Properties Limited
Garfield Sinclair, Chairman of Kingston Properties Limited, recently said he is proud of the company's track record of growth. "Over the past five years we have transformed the business into a REIT. We started with approximately 4,500 square feet under management. At end of March, 2015, we had approximately 79,000 square feet located primarily in Miami, USA and in Kingston, Jamaica." He noted that occupancy rates remain high in the 95 percent range and rent increases averaged three percent over the last for five years.
Executive Director, Fayval Williams said that "Kingston Properties Limited serves as an excellent option for investors when viewed in the context of its financial history and future plans." She highlighted that dividends declared in the March 2015 quarter was US$0.0029 per share for a total of US$200,000. This represents approximately 15.7 per cent increase versus the dividends declared in the March 2014 quarter of US$0.0025 per share.
Executive Director Kingston Properties Limited
KPREIT's revenues totaled $108 million for 2014, up from $91 million in the previous year. Original equity of $406 million, when the company listed on the Jamaica Stock Exchange in 2008, has grown to $851M (as at December 31, 2014). KPREIT has two wholly-owned subsidiaries: Carlton Savannah REIT (St Lucia) Limited, incorporated in St Lucia and Kingston Properties Miami LLC.
The company owns 15 units in the Miami Loft II condominium complex as well as a 19-unit residential complex in 'Little Havana', South Florida. This property is expected to be converted into condominiums. "The board's decision regarding the purchase is in keeping with the goals and objectives of expanding the investment portfolio with properties that meet the total return targets," Chairman Garfield Sinclair outlined in the 2014 annual report.
Kingston Properties has averaged three per annum increase in rental rates for its Miami properties in the last four years. Indeed, the location will provide great returns for KPREIT as Miami's real estate market reflected robust demand in 2014. Condominium sales marked their second strongest year ever in 2014 despite competition from new construction supply; condo prices registered 42 months of growth in the last 43 months, ending December 2014, with the average sale price for condominiums in Miami increased 8.6 per cent to $190,000 in Q4 versus a year earlier.
Taking it closer to home, the company recently signed a joint-deal with Cemex Jamaica Limited for the construction of 105 two-bedroom homes in Waterworks, Westmoreland by 2017. According to Williams, "The development will see the construction of 105 two-bed-room home, to cater to demand for housing in the tourism sector as reflected in our market analysis."
Regarding the underlying real estate environment, Jamaica's real estate market continues to grow, though at a reduced rate. The Real Estate Renting & Business Activities sector registered year-over-year quarterly growth in the range of 0.0 per cent to 0.3 per cent in 2014 (0.2 per cent to 0.4 per cent in 2013). Additionally, the construction sector, which includes both residential and non-residential projects, registered positive year-over-year growth for five of the last six quarters ended December 2014 in the range of 0.1 per cent to 1.2 per cent.
Sinclair sees this opportunity as very lucrative for investors "We've got a portfolio of assets we want to invest largely in the US, Miami and Cayman Islands. We are really high on South Florida where our US dollars investments are based now. The real estate market in South Florida is growing twice as fast as any other real estate market in the US. It has done really well for us. For the offer, we have put together a proposed portfolio of real estate assets worth up to US$35 million. Depending on how much is raised in the offer, we can cherry pick from this portfolio."
KPREIT hopes to raise US$25 million through a rights issue, which it expects to launch this month. The cash will help Kingston Properties get a foot in the Cayman real estate market via Park Place luxury condominiums and a mixed use residential and retail building in upscale Kreskill, New Jersey, just to name a few.