$700m loss estimated for Luana development
Newly installed acting managing director of the Housing Agency of Jamaica (HAJ), Gary Howell, says the agency will take a $700-million hit on its Luana Gardens development in St Elizabeth.
The units were built at a cost of just over $11 million each and are now being sold for $3.8 million to $4.2 million, said Howell.
The development was financed by the Chinese government.
It was previously stated by Minister Horace Chang that the units had initially been priced for the market at $11 million, but this has been clarified by Howell, who told the Financial Gleaner that the figure related to the construction cost of each unit.
Howell, who previously served as senior manager for sales and services at HAJ, was tapped to act as managing director after the sacking of the five senior managers amid concerns of mismanagement at the state-run agency.
The acting MD was speaking in an exclusive interview with Financial Gleaner to discuss the way forward for the HAJ.
Luana Gardens forms part of what should have been a larger development of some 800 units aimed at low-income earners, funded in part from the US$71 million sourced by then Prime Minister Bruce Golding from the Chinese government to undertake several real estate and other ventures.
A condition of the loan was that Chinese construction firm China National Compete Plant Import and Export Corporation (COMPLANT) act as developer.
However, with the funds splintered to complete other projects, "we ended up doing a smaller solution because of the available cash," Howell said.
Luana Gardens comprises 70 studio units and 26 land lots, which are being sold for $1.5 million to $2.5 million.
"We will take roughly a
$700 million hit on the development," said Howell. This despite the fact that the agency still has at least another $200 million to collect from purchasers.
For Howell, the thrust right now is to complete all the HAJ's outstanding projects by the end of the calendar year.
"The Vistas in Runaway Bay, St Ann, is expected to generate in excess of $1 billion and that is why we are looking at completing these, so we can generate some cash there," he said, noting some additional funds are also to be collected from the Hills of Boscobel development in St Mary
Whitehall III in Westmore-land, comprising 600 solutions, should also be complete "by December," said Howell.
Whitehall has some 154 studio units, 430 residential lots and a few agriculture lots, which are now being titled, he said. That project started in 2011 with funds borrowed from NHT and HAJ internal resources. Some $500 million has been spent so far on infrastructure.
"We are had some challenges in terms of financing and infrastructural issues, but we expect to overcome them and complete it by calendar year end," he said.
The Hills of Boscobel development, with 259 solutions, should be completed before the year-end deadline.
The HAJ's stream of income comes largely from sales and mortgages.
Total revenues for 2015-16 amounted to $943 million "largely from the mortgages and sales of housing developments," the acting MD said.
This marks an increase over the $800 million reported for the previous year, of which $500 million came from sales and $300 million from mortgages.
"So, we are a bit better than last year," Howell said.
The HAJ has racked up losses of some $2 billion over the past three years, but Howell is adamant better days are ahead as the agency pushes to restructure.