Saturday 4 July, 2020

KPREIT will continue to boost cash holdings amid COVID-19

Kingston Properties Limited (KPREIT) says it expects varied recovery responses in its main markets of Jamaica, the Cayman Islands and the US during the coronavirus (COVID-19) pandemic. 

Overall, the company is expecting a prolonged period of low interest rates globally, as many economies struggle to recover from containment measures such as lockdowns, curfews and travel restrictions.

Furthermore, economies such as the Cayman Islands that were experiencing robust economic growth before COVID-19 should see a quicker return to their growth trajectory, KPREIT noted.

As part of the strategy during this period, KPREIT said it will continue to boost cash holdings to ensure sufficient coverage over the next two to three years, should there be a delay in the rebound globally.

“The additional cash on hand is also available to take advantage of any cash flow positive opportunity that may arise in this period,” the company led by CEO Kevin Richards said in its annual report.

The company raised $2 billion in a rights issue in late 2019.

It was stated in the annual report, “While we continue to monitor the economic variables of the countries within which we own properties, we are also evaluating the measures each country adopts to curb the spread of the virus.”

KPREIT is active in South Florida, where total condominium sales rose by 4.6 per cent, year over year, to 7,104.

However, as at March 2020, condo sales decreased year over year by 0.6 per cent and is expected to be hit significantly as buyers are unable to view prospective deals due to the coronavirus.

As at March 2020, sales of luxury condos priced over $1 million rose year on year by 46.8 per cent to 91 transactions the company quoted from its research sources.

In the main market Jamaica, the real estate market saw a slight uptick in 2019 as demand continued to be driven by a stable economy with low mortgage rates.

The Real Estate Renting & Business Activities sector according to STATIN registered a growth of 0.8 per cent year on year as at May 2019 (Global Property Site, STATIN).

KPREIT said, “with the maintenance of low benchmark interest rates, we anticipate further reductions in key lending rates to spur demand for housing as well as commercial spaces.”

The main areas of demand remain in the provision of office spaces to satisfy the needs of the burgeoning business process outsourcing (BPO) sector and warehouse spaces to meet the demand of players in the distribution and manufacturing sectors.

In the Cayman Islands data from the Economics and Statistics Office (ESO) indicates there was a 12 per cent increase in year on year property transfers to the second half of 2019 to 1,042. Where beachfront condos are concerned, the company cited falling sales due to a lack of inventory rather than diminishing demand.

During 2019, the number and value of building permits in the apartments, government projects and other building intentions category in Cayman saw bullish year-on-year increases, the company said.

Referencing the J$2.0 billion raised in 2019, the company said it was part of a strategic push to increase the company’s equity to J$10.0 billion in three years.

The funds will be deployed in cash-flow generating properties in Jamaica and the Cayman Islands in the immediate term.

Additionally, funds have been earmarked for capital improvement projects at some properties. An 8,000 square foot warehouse space was also acquired in December 2019 in the Cayman Islands which is fully tenanted and expected to increase the earnings and reach of the group.

KPREIT said the global pandemic, COVID-19, is being keenly monitored by the group.
 

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