Sun | Dec 3, 2023

Sygnus Real Estate takes lead on Lakes Pen industrial development

Published:Sunday | January 23, 2022 | 12:06 AM
Jason Morris, co-founder and chief investment officer of Sygnus Capital.
Jason Morris, co-founder and chief investment officer of Sygnus Capital.

Real estate financing firm, Sygnus Real Estate Finance, SRF, which chalked up a $100 million loss for the quarter ended November 30, 2021, is now leading the buildout of an industrial and logistics park in the Lakes Pen area of St Andrew that was once being led directly by businessman Gassan Azan. SRF has completed the acquisition of 55 acres of Azan’s more than 400-acre property, part of the sprawling divested Bernard Lodge lands on which the serial entrepreneur has been developing an $11 billion high-tech farming venture in two phases since around 2019.

Last year, SRF spent US$6 million or more than $940 million to also acquire 100 per cent of the shares of Azan’s Lakes Pen Holdings Limited, the special purpose vehicle being used to oversee and drive the industrial development.

The real estate finance company, which is part of the Sygnus finance group in which Azan is major investor and key shareholder, is reporting that the company booked a gain of $1.31 billion on the transaction involving the former sugar cane lands that run alongside sections of the east-west leg of Highway 2000. The property sits at the south-east corner of Azan’s cutting edge agri-venture on the Bernard Lodge lands that he has said in the past, is intended to supply his MegaMart super stores as well as his chain of supermarkets in the Dutch Caribbean.

“The gain that you see is that the use of the land was changed to become industrial when the land was purchased so the value was changed,” co-founder and Chief Investment Officer at Sygnus Group, Jason Morris, explained the real estate gain in comments to the Financial Gleaner.

“We can do warehouse, light manufacturing, logistics. We’ve already completed the master plan and feasibility study, so we know the best way to unlock the huge value that we think exists in the asset,” Morris said of the industrial plans for the area that now joins the growing property portfolio of the real estate finance outfit.

He says SRF has engaged the services of an international logistics consulting firm based in Washington DC in the United States to advise on the way forward. Morris is not naming the consultants at this time citing competitive reasons. He is also not disclosing the findings of studies so far, but says the matter will now go before SRF’s investment and risk-management committee for approval to move to the next stage of the planning.

The real estate company booked total comprehensive income of $1.81 billion at the end of its financial year at August 2021, largely on the back of the $1.31 billion gain on the Lakes Pen deal.

Of the three-month $99.95 million negative bottom line to November, Morris said there will always be a “lumpiness” that is characteristic of SRF’s business, with cycles of investment and good revenue flow from projects. The company made net profit of $25.2 million for the previous corresponding quarter.

Morris says SRF is getting ready to close at least four real estate development projects with sales revenues to flow from those transactions. At the same time, he is downplaying talk of difficulties executing other projects, pointing out that the company’s strategy allows for using the proceeds of completed projects to fund others.

“We have four assets that we’ll be exiting in short order, so that little matter of dry powder to pull the trigger on is not an issue. In addition, there are lines of credit,” Morris said.

Its Ocean’s Edge development at Discovery Bay, St Ann, with 16 ocean-front units, is over 80 per cent complete with all units sold or under offer, the company is reporting. The target completion date is March/April 2022. Its eight luxury apartments at Norbrook in St Andrew are also reported to be 80 per cent complete with all units sold or under offer and with a similar completion timeline. In Montego Bay, St James, the Surreal at the Sugar-Mill project with 26 units is set for a March/April completion. In Kingston, SRF’s Spanish Penwood project at Spanish Town Road, an industrial warehouse and offices project which began in June 2021, is set for completion in July this year.

“Our strategy is not to hold on to assets. We come in, look at how we can unlock the value, sell and exit and move on to the next project, in a word, wash, rinse and repeat,” Morris said.

SRF also recently broke ground for One Belmont, a nine-storey office complex nearing the outer edge of New Kingston with completion set for early 2023.