KPREIT rights issue to fund property buys
Real estate investment trust Kingston Properties Limited is going after new property purchases in Jamaica and Cayman Islands, while simultaneously disposing of up to another five condominiums in Florida that have been put up for sale.
The new acquisitions will focus on commercial real estate, including an undisclosed number of offices, warehouse and industrial spaces to be financed by the proceeds of a new rights issue.
Shareholders of the listed company, which trades under the symbol KPREIT, will vote on August 2 on the rights issue and the proposed increase in the company’s authorised share capital from 500 million to one billion shares.
“Every year we raise funds to buy properties, so these acquisitions are part of our business model,” said Kingston Properties CEO Kevin Richards.
“In the past, we accumulated bank financing and this time we are deciding to raise funds by way of equity in a rights issue,” he said.
Kingston Properties’ latest financials show that total loans payable grew 43 per cent to $1 billion at March 2019 from $701.5 million a year earlier.
The company is going after commercial real estate in line with its strategy to reduce its exposure to the residential property market, particularly in the United States. Any plans for future acquisitions in the US will also likely focus on commercial properties, said Richards.
“There was a time when 70 per cent of our portfolio was condos in Florida,” he said. “Now we have four or five condos on the market for sale.”
Kingston Properties once owned 27 apartments in Florida, but that number has now been reduced to 18, Richards told the Financial Gleaner. He explained that developers once built properties in Florida to meet the demand from local and Latin American buyers, but the residential market has softened over the years.
“There is now more supply than the high level of demand that existed in prior years,” he said.
Kingston Properties last executed a right issue in 2015, which raised $650 million at $7 per share. Then in 2017, KPREIT executed a two-for-one stock split. The shares are now trading at or around $6, which is a dollar off their year-to-date high of $7.
The company holds $2.58 billion of investment properties, with its most recent acquisition being the former Caldon Finance building in New Kingston.
The company said that since its portfolio shift away from investments in southern Florida, there has been a steady rise in its net operating income year-on-year. Occupancy levels remained fairly high across its portfolio during the March quarter, averaging 95 per cent. It was a modest improvement over the 93 per cent occupancy recorded in the first quarter of 2018.
Kingston Properties attributed the improvement to the strong rental markets in both Jamaica and the Cayman Islands.
CORRECTION: This story has been updated to remove reference to the fundraising target under the rights issue. KPREIT has not said what target it is aiming for.