Thu | Dec 7, 2023

Eppley to spend up to $520m to acquire shares in development fund

Published:Friday | January 27, 2023 | 12:21 AM
Justin Nam, general manager of Eppley Limited.
Justin Nam, general manager of Eppley Limited.

Eppley Limited, a Jamaican company aligned with the Musson Group, will spend up to BDS$6.8 million, or the equivalent of about $520 million, to acquire outstanding shares in a real estate fund that it controls and manages, called Eppley Caribbean Property Fund Limited SCC–Development Fund.

The company wants to purchase 20 to 60 per cent of Eppley Caribbean Development Fund shares in an offer to shareholders in Barbados that runs from January 27 to March 27.

The listed shares in the fund company are largely held by or through institutional investors in Barbados.

“The offer ... would result in a consideration ranging from BDS$2.3 million to BDS$6.8 million,” said General Manager of Eppley Limited Justin Nam, in response to Financial Gleaner queries.

Eppley Limited will utilise subsidiary Eppley Fund Managers Limited, which manages the development fund, to purchase the shares. Its offer price is BDS$0.21 per share.

Eppley Caribbean Development Fund currently trades on the Barbados Stock Exchange and the Trinidad & Tobago Stock Exchange under the symbol CPFD. It holds eight properties, of which four are lots for development and four are residential units. The properties are located in Barbados, St Lucia, and St Vincent & the Grenadines.

Eppley Fund Managers also manages a separate and distinct segregated fund with 16 developed properties called the Eppley Caribbean Property Fund Limited SCC–Value Fund. That fund currently trades on Jamaica Stock Exchange under the symbol CPFV, as well as the Barbados and Trinidad exchanges.

The current transaction is unrelated to Eppley Caribbean Value Fund.

The development fund will remain listed in Barbados and Trinidad & Tobago after the deal.

“There are no immediate plans to cross-list on the Jamaica Stock Exchange. The intention is for the development fund shares to remain listed on the Barbados and Trinidad stock exchanges upon expiry of the offer, regardless of the number of shareholders who accept,” Nam said.

Eppley will finance the share purchase from its cash resources, in addition to “attractively priced” credit facilities, Nam added.

“The transaction will provide shareholders who accept the offer with the ability to monetise their investments in a thinly traded security at a meaningful 34 per cent premium to the weighted average price of the development fund shares over the last year and a 24 per cent premium to the closing price on January 25,” he said.

CPFD is currently trading below its net asset value of BDS$0.35 per share, based to the latest quarterly financials, which means Eppley is offering to buy the shares at a discount to their book value.

The fund’s net assets were last estimated at BDS$19.02 million, compared to BDS$18.82 million the year before.

“Eppley has patient capital with a long-term, value-focused investment philosophy. The tender offer demonstrates Eppley’s confidence in the underlying value of the development fund’s assets and provides an opportunity to deploy capital at scale, in line with our strategic objectives,” Nam said.

Eppley Caribbean Property Fund Limited SCC was formerly Fortress Caribbean Property Fund Limited SCC until its acquisition in 2018 by the Jamaican company, which acquired the fund’s unlisted controlling shares from Fortress Fund Managers Limited and Alleyne, Aguilar & Altman Limited, also known as Altman Real Estate.

Eppley also took over the management of the two funds that Fortress controlled – a value fund and a development fund, both of which dealt in real estate.

Then over three years ago, Eppley Limited issued new shares in the value fund and offered them to stock market investors, leading to the August 2019 listing of Eppley Caribbean Property Fund Limited SCC-Value Fund on the Jamaica Stock Exchange, in addition to its continued presence on the Barbados and Trinidad exchanges.

The 2018 deal with Fortress and Altman excluded the listed shares of the two funds, which remained in the hands of individual and institutional investors.

There are 54.35 million CPFD shares in issue from the Eppley Caribbean Development Fund’s unlimited store of authorised capital. The top shareholders include Massy Barbados Limited; Caribprop Limited; FirstCaribbean, through different accounts; Bank of NT Butterfield & Son; Republic Bank, through different accounts; and Caona Investments Limited; among others.

A year ago, Nam had disclosed that Eppley was in the process of repositioning the development fund and would be giving it a new mandate, but not what its new remit would be. It’s unclear whether the current transaction to acquire a portion of the listed shares is meant to facilitate those plans.