KPREIT eyes five-fold increase in property portfolio
Kingston Properties CEO Kevin Richards.
Kingston Properties Limited (KPREIT), which on November 8 issued the prospectus for a new renounceable rights offer, is hoping to raise $2 billion.
A successful offer would more than double KPREITs market capitalization of around $1.9 billion and pave the way to finance new real estate deals for the company.
Kingston Properties has been geographically diversifying with good results and intends to continue to do so, according to CEO Kevin Richards.
He told Loop News that the medium to long-term strategy being executed will include the sourcing of funds for continued growth while finding a shield for KPREIT from foreign exchange volatility.
Richards said, "at our annual general meeting in May 2019, we indicated that the board agreed on a multi‐pronged strategy, the first of which is to significantly increase our equity base over the next three years, which this impending rights issue will partially fulfil.
"Also on the agenda, is insulating the company’s operating results against the incessant foreign exchange volatility, which will result in the change of our functional currency to US dollars for this full financial year."
Richards further added that a third prong of the strategy being pursued is to quadruple square footage under management to one million square feet within the next three years.
Current square footage under management is 153,000 of which 36 per cent is residential, 27 per cent office, 30 per cent warehouse and industrial and seven per cent retail.
Richard noted, “our core investment strategy for this rights offer will be focused on office and warehouse properties in Jamaica and in the Cayman Islands. We believe that our experience in these markets and investing in these asset sub‐classes will provide us with the best medium to long term risk-adjusted returns.”
The company intends to continue the reduction of its South Florida condominium portfolio, in the face of economic headwinds being faced by the US economy but indicates it will position itself for any new opportunities that arise in that market, which remains the world’s largest and most vibrant economy.
Locally, it plans to invest approximately $50 million dollars in the Grenada Crescent building as part of an effort to modernize and reduce maintenance costs. Similar improvement works are slated for properties in Jamaica and the Cayman Islands.
The company is also finalising the process of receiving full Special Economic Zone (SEZ) status under the Special Economic Zones Act for the Grenada Crescent Building, which is to be occupied by a notable business processing outsourcing operator.
The $2 billion raised will be focused on a number of properties in both Jamaica and the Cayman Islands the company outlined in its prospectus.
Some 355,871,765 of new shares in the capital of the company are being offered at a subscription price of J$5.62 each.
The offer opens on November 18 and closes on November 29. The stock closed at $5.90 per unit on Tuesday, November 12.
“We have identified as possible acquisition targets a compelling portfolio of properties in the Cayman Islands covering the fast-growing Seven Mile Beach stretch; the re-emergent George Town office district; and the ever-expanding industrial area with close proximity to the recently expanded and upgraded Owen Roberts International Airport,” KPREIT said in its prospectus.
“In Jamaica, we continue to focus on commercial real estate opportunities, especially in the warehousing sphere, where we have experienced the greatest demand,” the prospectus further noted.
KPREIT’s investment properties are currently valued at J$2.7 billion.
Year on year, to June 30, 2019, net operating income for KPREIT rose by 23 per cent to $46.8 million and Earnings Before Interest and Taxation for the same period showing an increase of 154 per cent to $61.3 million.