'Time to get creative'
WITH GLOBAL economies facing tough times, Gassan Azan Jr, chief executive officer of MegaMart said entrepreneurs have to be more creative in order to survive the times.
Azan sees the Build Own Lease (BOL) policy, which is being used for the first time in Jamaica in the impending construction of the $1.2 billion Mandeville MegaMart, as the way forward for future developments.
Speaking at the Manchester Chamber of Commerce monthly meeting last Thursday, Azan said: "The impact of the recession in the global economy, which began four years ago, is as devastating in the developed countries as it is in developing countries like Jamaica.
As such, Azan said his organisation was left with no choice but to get creative to gain funds to construct the Mandeville MegaMart facility.
"We approached Scotiabank with an innovative proposal to use their capital market unit to raise the capital required. The result was that, for the first time in Jamaica, a Build Own Lease was used to raise the $1.2 billion in equity financing from investors to construct the property at Bloomfield to MegaMart specifications."
At the end of the construction period, which is expected to last 11 months, MegaMart will lease the property for an initial 20-year period, with the option to renew the lease every five years after.
This arrangement, as disclosed by Azan, has many benefits which, according to him, include long-term financing which might not be readily available in the debt market. It provides the investor with cash resources to finance the business, which would otherwise have been tied up in the acquisition of real estate and construction.
"Many international superstores have already been taking this approach. Although we started the MegaMart chain of stores with 100 per cent equity financing, for us, the BOL approach is definitely the way to go for future endeavours," Azan said.
According to Azan, the Mandeville MegaMart will be the second largest in the chain and will have the biggest parking facility.
The Mandeville store is expected to provide jobs for 200 permanent employees. It will also provide business opportunities for small farmers in the parish Manchester to supply the store with their produce.