Fri | Apr 16, 2021

KPREIT to execute APO and share buy-back

Published:Friday | March 5, 2021 | 12:10 AM

Kingston Properties Limited will be buying back up to half of a per cent of the company’s shares over the next two years, which would amount to more than three million units, but potentially more if its new share offer is executed as planned. It...

Kingston Properties Limited will be buying back up to half of a per cent of the company’s shares over the next two years, which would amount to more than three million units, but potentially more if its new share offer is executed as planned.

It would be the fourth share buy-back to be executed by the company in seven years. The last one, which targeted 0.75 per cent of outstanding shares for repurchase, was initiated in 2018. The repurchase option expired in 2020.

“The share purchase programme has been an ongoing exercise since 2014. The buy-back amounts in the recent past have been very small volumes and the price varies from time to time. It is only exercised in instances where the stock is trading at a level we deem to be undervalued,” Kingston Properties CEO Kevin Richards told the Financial Gleaner.

The real estate investment trust currently has 677.6 million ordinary shares in issue on the market, valuing the company at $4.9 billion. At $7.04 on Thursday, the price of the Kingston Properties stock, which trades under the symbol KPREIT, is tracking close to its one-year high of $7.80. Its low point was $4.50.

The company, which has seen an uptick in rental income throughout the COVID-19 pandemic, experienced a spike in annual revenue, from US$1.69 million to US$2.1 million, but suffered blows to its bottom line. Profit fell 72 per cent to US$612,725 for the financial year ended December 2020. The previous year’s results benefited from a large fair value gain of US$1.6 million on KPREIT’s investment properties, boosting earnings that year to US$2.2 million.

Property acquisitions

Kingston Properties’ assets climbed by more than US$5 million to US$45.6 million, but having spent over US$15 million on the acquisition of new investment properties, the company’s cash resources declined by two-thirds to $4.9 million, even with additional inflows from new borrowings. Its new purchases included two commercial properties, Harbour Centre and a four-acre site at East Ashenheim Road in Kingston.

The KPREIT share repurchases will be financed from cash flows and conducted on the open market through the company’s stockbrokers, Kingston Properties said in a market filing on the Jamaica Stock Exchange this week.

The announcement comes shortly after KPREIT stockholders approved plans for the company to increase its authorised capital to two billion units and sell shares on the market via an additional public offering, or APO, the proceeds from which will fund new real estate projects or deals.

In one instance, the company will be removing shares from the market through the buy-back, while under the other transaction it will be adding shares to the market.

Richards has not said whether the company has plans to exercise its repurchase option simultaneous with the APO, but noted that the company’s advisory was really a disclosure to notify the regulator and shareholders of the continuation of the share-repurchase or buy-back programme, in a signal that the company does not intend for them to conflict.

The equity raise forms part of KPREIT’s stated goal to raise $10 billion in fresh equity capital and have one million square feet of property under management or control by 2022. The precise fundraising target under the APO target is unknown. The real estate company last raised $2 billion on the market via a rights issue just over a year ago.

Its assets in Jamaica account for 47 per cent of the overall portfolio, while Cayman Islands accounts for 41 per cent. The Florida market, where Kingston Properties is looking to transition from low-return condominiums into properties that generate a higher return on investment, has dropped over the course of last year from 20.5 per cent to 12 per cent of the portfolio.

karena.bennett@gleanerjm.com