Tue | Jul 17, 2018

KPREIT eyes bargains in US cities

Published:Friday | May 19, 2017 | 12:00 AMSteven Jackson
Kevin Richards, CEO of Kingston Properties Limited.

Kingston Properties Limited (KPREIT), which earns from commercial and residential real estate investments, is now eyeing Michigan, Georgia, and Texas for further incursions into the United States markets.

KPREIT is currently invested in Jamaica, Cayman Islands and Miami.

"We kind of have our eyes on Georgia and Texas, but we still are looking for the right deals," said CEO Kevin Richards. "But we are also looking to expand in the region," he told the Financial Gleaner following KPREIT's annual general meeting on Tuesday.

Kingston Properties remains Jamaica's only listed real estate investment trust. At the AGM, shareholders approved a stock split that will boost its issued shares from 160 million to 321 million. It's meant to increase the float for the stock, which is currently held by 91 per cent institutional investors and rarely sell, management explained.

Chairman Garfield Sinclair said Detroit, a city in Michigan, was also an area of interest based on KPREIT's strategy of buying initially for capital appreciation and secondly for rental income.

The current investment properties are spread 54 per cent in Florida, 32 per cent in Jamaica and 14 per cent in Grand Cayman.

The directors indicated that six years ago when the group invested in Florida, the market offered discounted properties and that Detroit offers some of those benefits today.

"So we are now eyeing markets like Detroit, that is in a similar situation to where south Florida was six years ago," said Richards.

Detroit came to prominence in the 1950s as the home of US automotive assembly. However, as the sector waned in subsequent decades so, too, did the city's prosperity - a slide that culminated in Detroit filing for bankruptcy in 2013.

"It may be a laugh now, but it has potential for capital appreciation," added Sinclair on Detroit. "The idea in the property business is that you buy low. You never buy fully priced stuff. So get in low, but not that you are buying things that are falling off a cliff, but things that have the potential of coming back."

It's a strategy that earned the company 11.53 per cent return on equity - that is, total comprehensive income to average equity - for its 2016 financial year, which was its highest return in three years.

The profitability of the company dipped, however, in the first quarter ending March 2017, when earnings fell to $15.3 million from $130.5 million for the same period in 2016. Total comprehensive income totalled $1.52 million for the first quarter of 2017 compared with $98.9 million a year earlier.

KPREIT annual report indicates a desire to continue diversifying in the Caribbean, but at the AGM the executives revealed nothing concrete.

The value of investment properties on its balance sheet totalled $2.5 billion at March 2017, a substantial 49 per cent climb from $1.68 billion in a year.

The increase reflects the addition of the mixed-use building in the Cayman Islands as well as the office and warehouse complex on Spanish Town Road in Kingston. Both properties were acquired in January 2017.