Sat | Jan 19, 2019

Eppley to acquire more property to boost investment

Published:Wednesday | January 9, 2019 | 12:00 AMSteven Jackson/ Senior Business Reporter
Nicholas Scott, managing director of Eppley Limited

Eppley Limited, which manages real estate assets mainly in Barbados through a listed entity, Eppley Caribbean Property Fund Limited, is contemplating acquiring more properties valued at up to US$20 million to bolster its return on investment.

The fund managers want to diversify the portfolio with assets from other territories and, in the process, reduce its exposure to Barbados. The fund made a loss in its 2018 financial year.

"We are continuously exploring transactions to grow and diversify the Value Fund. Our focus is on income-producing real estate assets in the English-speaking Caribbean valued at between US$10 million and US$20 million," stated Nicholas Scott, chairman of the fund, in a statement to shareholders contained in the annual report.

Eppley Caribbean Property Fund operates two funds - the Value Fund, which comprises six operational properties located in Barbados, and the Development Fund, which contains mostly undeveloped lands in Barbados, St Lucia, and St Vincent and the Grenadines.

For the financial year ending September 2018, the Value Fund recorded a loss of US$400,450, while the Development Fund made a loss of US$1 million.

In May 2018, Eppley Fund Managers purchased shares from Fortress Fund Managers and Altman Real Estate and renamed the fund Eppley Caribbean Property Fund Limited. Scott is managing director at Eppley Limited, which offers credit and financing services, especially to the insurance sector.

The strategy behind the acquisition sees the local entity buying into the Barbados economic downturn through real estate with the expectation that restructuring of the portfolio, along with economic recovery, will lead to increased shareholder value. But Eppley also wants to grow the portfolio to other territories.

"Today, our portfolio is too heavily weighted to Barbados and to retail. We believe that our Barbadian assets are well positioned to appreciate as the economy recovers. However, the Value Fund's experience in Barbados since 2008 should serve as a stark warning to expand our geographic reach beyond a single island and to spread our exposure across all classes of commercial real estate," added Scott in his preface to the financials.

The fund, formerly Fortress Caribbean Property Fund, was incorporated in 1999 under the Mutual Funds Act of Barbados. In 2013, the fund was given approval to split into two separate funds with separate accounts and shareholding. It resulted in each share being replaced by one share in the Value Fund and one share in the Development Fund, the financials indicated. The shares trade on both the stock exchanges in Barbados and Trinidad and Tobago.

"Changing the trajectory of the fund will require fundamentally addressing both the root causes of its recent declines: the performance of its property portfolio and the discount of its share price to net asset value," said Scott.

The management led by Scott plans to turn around the operation in part by raising the net asset value, acquiring properties, and disposing of developmental lands. The company stated that the Development Fund successfully disposed of several properties in 2018, including Lion Castle Lot 21, Apes Hill land, Rockley Cane Garden land, and a unit at Villas on the Green. All sales were done at or near carrying cost. The fund executed two main acquisitions last year, the purchase of a 30 per cent stake in the Emerald City Mall and an increase in its stake in the Cave Shepherd Building to 36 per cent from 24 per cent.

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