Sagicor X Fund pays down half its debt with Playa proceeds - Still bullish on tourism and leisure markets for future investment
Sagicor Real Estate X Fund Limited reported a slippage in net profit by two per cent at half-year quarter ending June, relative to last year.
But CEO Brenda-Lee Martin says the company expected improved results going forward, arising from the Playa deal that was concluded in June.
The company has also shed half of its near $22 billion debt load using cash acquired from the resort deal.
Playa Hotels and Resort NV has acquired the Hilton Rose Hall Resort and Spa, three of the Jewel hotels, part of the Jewel Grande as well as lands that were owned by the Sigma Real Estate Portfolio. And Sagicor Group, which held the properties through different vehicles, including X Fund, got 20 million Playa shares and US$100 million in cash under the deal that was valued overall at $39 billion.
The sale affected a year over year comparison, but Martin told the Financial Gleaner that X Fund expected to reap returns from its Play holdings as well as the Doubletree Orlando Hotel, which X Fund continues to own. Playa shares traded at US$10.35 per unit on Monday on the Nasdaq.
Sagicor X Fund also owns units in Sagicor Sigma Real Estate Fund which is now invested primarily in Jamaican non-hotel commercial real estate; units in the Jewel Grande, formerly known as Palmyra; and some Playa shares.
Reduction in debt
In its earnings report for the June quarter, X Fund reported a reduction in assets from $45 billion a year ago to $38.75 billion. The company also paid down $11.24 billion of its loans, which reduced its debt load by a half to $11.3 billion from just under $22 billion.
Martin said the US$100 million from Playa was paid to Sagicor X Fund as the cash portion of the sale Hilton Rose Hall Resort & Spa, which was owned directly by X Fund, and was "used primarily to pay down debt". Some was invested in repurchase agreements or repos.
The Directors said in the quarter's financials that cash proceeds from sale of discontinued operations of $12.7 billion was used to settle borrowings of $11.24 billion and to invest in repurchase agreements.
Sagicor X Fund earned revenue of $6.07 billion over six months ending June, up 2 per cent year on year from $5.95 billion. Profit dipped by a similar two per cent, from $785 million to $770 million.
For the second quarter itself, net profit improved to $277.5 million on revenues of $2.67 billion. This compared to net profit of $245.7 million on revenues of $2.79 billion at June 2017.
The company attributed the six-month reduction in profit to different factors including higher depreciation charges of $178 million, driven by renovation of its sole directly-owned hotel, DoubleTree Universal in Orlando, Florida; as well as a decline of $151 million in returns from the investment in Sigma Real Estate, due to a reduction in the number of units held.
X Fund now holds 7.17 billion units, down from 8.19 billion last year.
Even with the disposal of units and some resort assets, Sagicor X Fund closed the period with a higher book value of $24 billion, up from $20.7 billion a year ago.
Asked what investments the company is now targeted following the disposal of a some of its resort portfolio, Martin said the company was not prepared to disclose such information.
"Sagicor Real Estate X Fund is not prepared to comment on any specific new investment at this time, however, we constantly evaluate our options especially in the areas of leisure and tourism," she said.
X Fund has expressed interest in the business process outsourcing space in the past, but Martin, who was appointed CEO in June, said the company has no immediate plans to invest in that sector, and that X Fund has not taken a stake in Marlie Tech Park, a BPO project for St Catherine that sister company Sagicor Investments Jamaica is backing.