Sagicor shuffles resort, property assets - Transfers kick-start new unit trust fund
Published:Friday | July 5, 2013 | 12:00 AM
Sagicor Jamaica group has consolidated all resort assets into a newly created real-estate portfolio launched late last year under fund manager Sagicor Sigma Unit Trust.
The shuffle grows the value of real-estate holdings at Sagicor Sigma to J$12 billion and the number of assets to 12, according to Rohan Miller, executive vice-president and chief investment officer.
The latest transfer, done as a non-cash transaction, related to Jewel Dunn's River Beach Resort & Spa in Ocho Rios, which was acquired three years ago as an investment property by the insurance group under subsidiary Sagicor Pooled Investment Funds Limited (SPIFL).
The unit trust portfolio also holds two other resorts - Jewel Runaway Bay Beach & Golf Resort acquired in June 2012, and Jewel Paradise Cove Beach Resort & Spa, also located in Runaway Bay, which was acquired two months ago in May.
Both were direct acquisitions of Sagicor Sigma for its nascent Sigma Real Estate fund (SRE), according to Miller.
Alongside Jewel Dunn's River, Miller said other real-estate assets held by SPIFL have been transferred to Sagicor Sigma, and that SPIFL was issued with SRE units in return - indicating that SPIFL, the vehicle used by Sagicor to manage pension funds, has essentially become an investor in Sigma unit trusts.
Sagicor Life Jamaica, in a restructuring of the group last year, transferred operational responsibility for Sigma Unit Trust from its wealth-management subsidiary, Sagicor Investments Jamaica Limited, to itself.
The Sigma Real Estate portfolio was created in late 2012 with the sole purpose of holding the real-estate assets of the merged operation. It did not exist before the transfer, Miller said.
To acquire SRE units, investors must purchase no less than J$500 million worth of units and retain them for at least three years. The SRE units at last disclosure were trading at J$1.09 each.
Worth billions
Miller did not specify the value of the hotel at transfer, nor the amount of units issued to SPIFL for all the transferred assets. However, Financial Gleaner calculations indicate that the three resorts are worth about J$7 billion.
The transfers do not affect the value of the pension-fund assets, which has effectively swapped one asset class for another, according to the investment officer.
The assets belonged to the pooled funds before they were transferred and the pooled funds now own the same assets, but through units, he said.
The impact is expected to be positive given the merger of the operations under one portfolio with greater diversity and efficiency.
A new vehicle for sagicor
For now, Miller confirmed, SPIFL is the only entity that owns SRE units, the value of which have grown 11 per cent since the real-estate fund's market debut, according to the weekly performance report published in the press by unit sellers.
"The fund is a new vehicle. We are developing a way in which we can expand this beyond Sagicor," he said.
"We are working on a structure that will allow the wider public to participate in the real-estate investments of Sagicor and its real-estate portfolio. It is now open to institutional investors at J$500 million minimum."
Hotel properties now comprise 59 per cent of the J$12-billion SRE portfolio. That estimate provided by Miller places the value of the three resorts at about J$7 billion.
The portfolio forms a part of Sagicor's real-estate strategy to offer investors access to both the commercial office and industrial park segments, as well as to the tourism sector, Miller said.
The foreign-exchange earning component of the Sigma Real Estate is also a good hedge against devaluation and inflation, he said.
At Sagicor Life Jamaica's annual general meeting in May, Chairman R. Danny Williams reported that Jewels Dunn's River made US$1 million the first year, US$2.5 million the second year, and US$3.5 million the third year of acquisition by Sagicor.
He said that there were losses associated with Jewel Runaway Bay, but that the property was expected to turn a profit before long.
The 225-room Jewel Paradise Cove, which at one time operated as Hedonism III, was acquired in May from Development Bank of Jamaica and other owners (See related story on Page 6).
The acquisition brings the total number of rooms and suites under Sagicor's proprietary brand, Jewel Resorts, to 741. All three properties are being managed by Aimbridge Hospitality.