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Kingston Properties to launch US$8m rights issue next week

Published:Thursday | July 16, 2015 | 10:24 AMCamilo Thame

Kingston Properties Limited (KPREIT) plans to launch-rights issue next Wednesday, hoping to raise US$8 million ($940 million).

"We will be launching with the option to upsize," KPREIT Executive Director Fayval Williams told the Financial Gleaner.

The real estate investment trust's chairman, Garfield Sinclair, had previously signalled that the rights issue - which will offer more than three shares for every two existing stock units in issue - would aim to raise up to US$25 million, if the market was willing to take up the offer.

KPREIT has even identified real estate assets worth up to US$35 million to invest the proceeds of the rights issue.

"Depending on how much is raised in the offer, we can cherry-pick from this portfolio," Sinclair said in a statement issued by the company this week.

The press release named Park Place luxury condominiums in the Cayman Islands among the proposed properties, but it did not reference the Miramar townhouse and apartment complex in Miami, where KPREIT already has 15 units in the Miami Loft II condominium complex, as well as a 19-unit residential complex in 'Little Havana', South Florida.

It did, however, mention a mixed-use, residential and retail building in upscale Kreskill, New Jersey.

"We are looking to venture into a part of the US on the east coast, close to the Manhattan environment," said Williams. "It is in a part of New Jersey where incomes are strong, which provides the necessary support to retail."

While the remaining shares which have yet to be issued, give KPREIT the ability to raise close to US$30 million, or $3.5 billion at the current trading price of $8 - the stock price rose from $7 since the rights issue was first announced in May - the target at the lower end of the offer may seem ambitious.

Back in 2008, the company fell woefully short of its US$17.4-million target for its initial public offering. It raised $406 million - the equivalent of US$5.7 million then - having managed to sell just shy of a third of the stock put up for sale.

Sinclair believes the current environment and the company's financial history puts it in a much better place now than seven years ago.

"We think that there is increased pension fund demand for relatively liquid investments in real estate, which also provides a foreign-exchange hedge," he said to shareholders during the annual general meeting held at the Courtleigh Hotel in Kingston in May.

KPREIT on average has seen 22 per cent annual sales growth over the past four years. The company also managed to reduce its property expenses from 44 per cent of revenue in 2010 to 31 per cent last year, while cutting administrative expense as a proportion of sales in half during that period - it stood at 22 per cent in 2014.

As a result, the REIT accumulated $264 million in retained earnings up to the end of last year, having paid out more than US$450,000 in dividends to date.