Marcella Scarlett, Business Reporter
With more than half of the Sagicor Sigma Real Estate Portfolio being hotel properties, income to the X Fund will be heavily influenced by the performance of the seasonal tourism sector.
Sagicor has made an offer of shares in the Sagicor Real Estate X Fund at J$5 per share. The offer closes October 18.
For 2013, Sagicor Jamaica Group is projecting that 79 per cent of real estate revenue will come from the hotel properties. By 2017, the company expects that the hotels will earn 84 per cent of revenue for the portfolio.
Sagicor also projects that net profit will more than triple from J$591 million to J$1.86 billion in the same period.
"We have made our projections on conservative room rates. These rates are below US$300 and from what we are seeing these targets are attainable," said Rohan Miller, executive vice-president of Sagicor Life Jamaica Limited.
"We have made our projections based on occupancy of under 80 per cent for all properties and we are operating at more than that right now," Miller said.
The offer document for the Sagicor Real Estate X Fund shows projections of occupancy levels rising from 62 per cent in 2012 to 76 per cent in 2017 and average daily room rates increasing from US$196 per night to US$259 per night.
The Sigma Real Estate Portfolio currently owns three hotel properties, each operated under the Jewel brand. The Jewel Dunn's River has been in operation since 2010 and the Jewel Runaway Bay was acquired in June 2012. The third property, the Jewel Paradise Cove was acquired in May 2013 and is currently being refurbished. They represent 59 per cent of the portfolio.
The nine other properties in the portfolio fall in the categories of industrial/warehouse - 15 per cent; office/retail - 23 per cent; and an empty lot earmarked for residential development - three per cent.
"The earnings from the tourism component are generated in US dollars and provide a hedge against devaluation in the local currency," Brenda-Lee Martin, assistant vice-president at Sagicor Jamaica, told investors at a briefing at The Jamaica Pegasus hotel.
For 2013, Sagicor is projecting total revenue from the hotel properties to be US$37.12 million and expenses of US$31.96 million. The company expects net profit of US$5.14 million.
Most of the profits for this year will come from Jewel's Dunn's River (US$3.6m), with Jewel Paradise Cove projected to make a loss of US$25,000, but turn a profit in 2014. The latter property is expected to open for business next month.
"We expect that all the hotel properties will be profitable. Just like Dunn's River - in the first year, we made a loss of just under a million, in the second year, we broke even and in the third year, we see where we made profits of over US$3 million," Martin said.