Jamaican Teas exits low income housing, looks downtown for cheap properties
J'can Teas exits low-income housing, looks downtown for cheap properties
Jamaican Teas CEO John Mahfood says the group, which operates a real estate arm, will never again pursue a low-income housing development, in the face of losses on its Orchid Estate project in St Thomas.
The development, done by subsidiary H. Mahfood and Sons Limited, suffered delays in securing titles and other approvals, but was finally completed last November.
The late receipt of splinter titles and property tax certificates contributed to losses on the project, Mahfood said at Jamaican Teas' annual general meeting on Wednesday, but he did not disclose the extent of the overruns. It meant that Mahfood and Sons was locked into prices that later proved inadequate to cover costs, he added.
Acting Chairman of Jamaican Teas John Jackson also blamed delays on the late distribution of mortgage loans by the National Housing Trust to buyers of the Orchid Units. The agency would not pay out the funds until all documentation and titles were available, which Jackson described as a "culture of rubber-stamping".
Mahfood said he would "never again do another low income project" - especially in circumstances where the property is outside of Kingston - but would leave such ventures for companies that were "larger and more efficient".
Instead, Mahfood and Sons will be focusing on upper-income developments, such as its $250-million project at Ports View Road in upscale Manor Park, on which construction will begin this year.
"We will start in another couple months. It will be 18 super studios," Mahfood told the Financial Gleaner.
Jamaican Teas, meanwhile, is also looking to acquire what the CEO describes as under-
valued property in downtown Kingston to convert into warehouses for rental.
Mahfood expects such properties to appreciate in value once the Government solves the "problem of parking in downtown Kingston".
Mahfood and Sons acquired its second Harbour Street property in 2017 for $32 million and is currently in negotiations to purchase a third on the same stretch, he said.
Mahfood's personal interest in downtown Kingston properties was sparked eight years ago.
"In about 2010, my father had a property downtown on Harbour Street and he was trying to sell it. There was no interest. It was about six or seven thousand square feet. He was trying to sell it for $5 million and nobody was interested, so I said ... rather than giving it away, I would buy it. One day, I felt, the market downtown would start to turn," he recounted.
"We had it valued last year - and it's valued at $35 million," he said.
Still, he notes that properties downtown are still generally undervalued, primarily because of a lack of parking space.
"Even though there are buildings going up, like Digicel and GraceKennedy, they are building their own parking facilities. That might be good for them, but it does not help the overall state of the market downtown," he added.
For now, the properties being acquired by Jamaican Teas, he said, can only be used for warehousing, based on their condition, but Mahfood adds that in time," maybe in 10 or 15 years", he aims to convert them to office and commercial space for restaurants, and possibly residential use.
Meanwhile, the company is also selling off some assets as it reinvests. During 2017, Jamaica Teas offloaded warehouse space on Spanish Town Road in Kingston for $160 million, with some of those proceeds poured into equity investments, and is now selling property used for its Western Union outlet in Savanna-la-Mar, Westmoreland.