Mon | Mar 30, 2020

UDC restructures

Published:Friday | August 20, 2010 | 12:00 AM
The Jamaica Pegasus hotel on Knutsford Boulevard, New Kingston, is one of the prized assets owned by the UDC, but is considered as non-core and is, therefore, up for sale. - File
Joy Douglas, general manager of the Urban Development Corporation. - File

Avia Collinder, Business Writer

Determined to wring greater value from its investment holdings and maximise gains from its$42 billion worth of assets to pay for its core operations, the Urban Development Corporation (UDC) is reorganising its business to strengthen investment and asset management.

The organisational revamp has been prompted by a management audit by Price-waterhouseCoopers (PwC), the UDC's General Manager Joy Douglas told the Financial Gleaner.

But they also follow from a disappointing year in which the profit-making agency chalked up nearly half a billion dollars in losses at yearend.

The J$487 of losses came on the back of high adminis-trative expenses that rose by more than J$300 million to top J$1.1 billion, and underperforming subsidiaries and operating units, from which there was a near J$600-million decline in income.

The numbers, which were reported in the Public Bodies Report 2010/11, are still subject to audit tests.

A return to profit of more than J$3 billion is projected for this year.

UDC, a powerful state-owned agency, rolls out capital projects valued at around J$5 billion annually.

The corporation is now on the hunt for a manager for its Estate Department, a position which Douglas said has not been filled since a consulting arrangement with an unnamed management company ended.

The manager will be required to administer the land bank, its increased holdings of real estate, which the UDC is building in keeping with a directive from the Government. Other responsibilities of estate manager include valuations, surveys and the maintenance of UDC's land boundaries.

New departments

In its bid to maximise returns from its vast real estate and other holdings, the UDC has also created two new departments: facilities management and economic development.

The facilities management unit will oversee and maintain UDC-owned buildings, the motor-vehicle fleet, and stocks and other assets, with the exception of rental property.

The Economic Development Department will manage key services and incentive programmes administered by the UDC.

"Economic development is a new area and a part of the programme of urban redevelopment," Douglas said.

The new department will be the driver for investment attraction and will administer projects under the Urban Tax Relief Act.

Its overarching objective is to promote and extend the financial health of the organisation by expanding fund-raising. The new department will also undertake reviews of UDC's holdings, as well as its past, current and future projects to identify their economic and commercial potential.

These new moves are in addition to the corporation's ongoing effort to offload major property holdings, including the Jamaica Pegasus and Oceana hotels in Kingston and the abandoned former Forum hotel in Portmore, St Catherine.

The divestments follow a 2008 Government directive for the UDC to return to its core function of planning and development of designated areas as mandated by the UDC Act of 1968.

Beefing up land bank

As part of that shift in focus from its previous heavy involvement in activities such as real-estate ownership and management, housing and hotel operations, the organisa-tion has also been beefing up its land bank. The Government has ordered the corporation to acquire lands that are considered strategic to urban planning and development.

The corporation's general manager said the building-out operational capacity is outlined in the UDC's 2010 corporate strategic plan and is the direct result of the PwC management audit which showed that assets could be better managed and returns further maximised.

The audit also showed, Douglas said, that the corporation's human resources needed further development.

The UDC was taken off the central government's budget in 1987 and is required to be self-financing. Projects are financed by retained earnings, grants from the Govern-ment, loans from commercial banks and international lending institutions primarily for infrastructure and other developments. Income is also derived from the return on invest-ments in land and buildings, property sales and project-management fees.

The UDC frequently seeks investment partners for its projects. Current initiatives include the development of the historic Spanish Town district in St Catherine, Port Royal in Kingston, the town of Falmouth in Trelawny and Port Antonio in Portland.

The Falmouth plan involves land-use management, beautification of the town and improved traffic management in preparation for the arrival of the world's largest cruise ship, the Royal Caribbean's Oasis of the Seas, in January 2011. A new port is being built in the town by the Port Authority of Jamaica with part funding from the cruise line.

In May last year, the corporation unveiled a plan for the development of the Caymanas property on the outskirts of Kingston and bordering St Catherine. Projected to cost some US$3 billion, the idea includes a 1,000-acre industrial estate, sporting facilities, as well as some 4,000 new homes.