Jamaican Teas steering clear of low-income houses after St Thomas flop
Jamaican Teas' Orchid Estate development in St Thomas (via Propertyadsja)
After disappointing sales at Orchid Estate in St Thomas, Jamaican Teas is steering clear of developing low-income houses, opting instead to focus on higher-priced real estate.
Speaking at the company’s annual general meeting at the Jamaica Pegasus on Wednesday, Jamaican Teas CEO John Mahfood lamented incurring losses while developing the two-bedroom units in Yallahs.
“We will not be doing low cost housing in the future and certainly not outside of Kingston. We believe that should be left to major developers who are very efficient,” Mahfood stated.
He cited issues such as delays in approvals from local government, issuance of titles and finalizing property tax as the reasons for not seeing the return on investment anticipated from the project.
“We experienced about a two-year delay in that project and that impacted greatly on the cost and the fact that we got tied into certain selling prices that were too low,” said Mahfood.
John Jackson, a non-executive director of Jamaican Teas, was however, more candid with his comments.
“We have a chronic situation in Jamaica, a scenario I call the ‘rubber stamp mentality’ that says, if you don’t rubber stamp it, it can’t be official,” Jackson said.
“People just push paper and frustrate due process. And we talk about the high crime rate, that is due to injustice and due to the fact that people frustrate people who are legitimately going about their own business,” Jackson added.
Physical completion of Orchid Estate occurred in November 2017.
“We worked hard at trying to finish the Orchid Estate. It is finally complete and we are just wrapping up now and doing remedial work,” Jackson said.
Jamaican Teas, through its subsidiary Mahfood and Sons, purchased Orchid Estate for $63 million in 2013, with plans to develop over 70 houses. The first set of houses were initially being sold for $6.5 million, with escalation taking the units built later to $8.5 million.
The company was quite optimistic about the prospects for the development amid plans by the government to construct the Yallahs Bridge, making travel to and from St Thomas much easier.
Nonetheless, Mahfood believes that in the current economic climate, there are opportunities for upper-income, one and two-bed apartments.
“There is a significant shortage of one and two-bedroom apartments that people need not only to live in but as investment opportunities,” Mahfood said.
In the meantime, Jamaican Teas is focused on a developing 18 one-bedroom apartments on Portview Road in Manor Park, St Andrew with a sale price of $15 million each.
Mahfood is also looking to acquire a property in downtown Kingston to convert into warehouses for rental. He believes properties downtown are generally undervalued due to lack of parking space.
As for the tea-making segment of the business, which the company is widely known for - that is showing more positive results, particularly on the export side.
In 2017, the company grew export sales to 54 per cent of total revenues compared to 50 per cent in 2016 and just 39 per cent when the company listed in 2010.
Its strongest sales growth came from the United Kingdom, followed by Guyana and Trinidad & Tobago.
Trinidad, the US and Barbados serve as Jamaican Teas’ largest export markets.
“Part of this sales growth is attributed directly to the introduction of additional herbal teas to these markets,” Jamaican Teas stated in its 2017 annual report.
Mahfood also shared that one of its top selling products in Trinidad, Tulsi, was recommended by the late Sushil Jain.
“He is of Indian decent and we were talking about the success we have in Trinidad. In fact Trinidad is a fast growing market for us and now the largest growing for us in the Caribbean,” Mahfood shared.
“Tulsi, Neem and Cinnamon Mint are major products for us in Trinidad and outsells all the sales of other products combined,” said Mahfood,
In the meantime, Mahfood said the company was rigorously promoting and selling to the Caribbean, with the redesigned Tetley brand.
“That is really how you stand out in a very busy supermarket. I’ve heard that most people when they go into a supermarket they necessarily go with a list but they pick up your products based on looking at the shelf and deciding which one they are going to buy.”
Overall, Jamaican Teas saw a 21 percent increase in revenues from $1.3 billion in the 2015/16 financial year to $1.5 billion during the year ended September 2017.
For the full year, audited net profit increased from $118 million to $196 million.
Jamaican Teas is the manufacturer of the Tetley and Caribbean Dreams branded teas and grocery items.