Kingston Properties invests in private equity fund

Kingston Properties Limited, KPREIT, has invested US$1 million in a real estate fund based in the United States, which gives the real estate investment trust measured exposure to the American market.

“We invested the sum in a real estate private equity fund based out of Florida,” said Kingston Properties CEO Kevin Richards.

Kingston Properties itself holds investments in Florida but has sold various assets over time to reduce its exposure in that market after condominium prices softened. The proceeds were redeployed into commercial real estate in Jamaica and the Cayman Islands.

The unnamed equity fund, while based out of the state, invests in office buildings across South Florida.

The target return is 8.0 per cent, which Richards said was a conservative estimate as its historical returns are as high as 16 per cent.

“To get the quality assets we want in the US, we have to pursue opportunities such as these. Private equity has a better structure, as we get to develop relationships with the partners for future deals,” he said.

The yield would outperform that of many dividend paying real estate stocks, listed on the US equities market. There were, however, eight real estate stocks with forward dividend yields near or above 10 per cent as of Monday.

Kingston Properties acknowledged that the pandemic has negatively affected real estate rentals across the hemisphere, but said it generated higher revenue due to its strategy of buying into actively rented properties. Its outlook for 2021 is somewhat optimistic, based on “hopeful signs of recovery”, such as jobs growth in the US, the reopening of hotels and tourist attractions in several Caribbean economies, vaccine roll-out programmes, and accommodative monetary policies of central banks around the world.

In November 2019, Kingston Properties raised $2 billion in a rights issue, funds it said have now almost been totally deployed into new investments. In February it gained shareholder approval to conduct an additional public offering of shares, which is yet to be executed.

At the close of the March quarter, the company made a profit of US$623,000 that erased a net loss of US$215,000 in the 2020 period and was more than 10 times better than the near US$60,000 recorded in the 2019 pre-pandemic period. Revenue for the quarter amounted to US$710,000, up from US$450,000 in 2020 and US$455,000 in 2019.

The company closed the quarter with assets of US$44 million, spread geographically across Jamaica US$36.2 million, Cayman Islands US$18.4 million, and United States US$4.7 million. The differential between total assets and the geographical breakdown is due to a near US$15 million of intercompany adjustments and eliminations.

steven.jackson@gleanerjm.com