KPREIT seeking minimum $1.5b from APO
Published:Friday | April 8, 2022 | 12:11 AM
Real estate investor Kingston Properties Limited, KPREIT, is again tapping the equities market to raise $1.5 billion, the majority of which it has earmarked for the development of properties it already owns, and new acquisitions.
The real estate investment trust says it has a pipeline of robust deals for industrial, residential and office spaces across three jurisdictions, including greenfield projects. New acquisition and development plans aside, the company will also use $700 million from the equity raise to pay down debt.
To fund its growth plans, Kingston Properties has created another 200 million ordinary shares, which are being sold at $7.50 per unit, 66 million, or $500 million, of which have been reserved for VM Wealth Management, the lead broker and underwriter of the KPREIT additional public offering of shares, or APO, which will be on the market from April 19 to May 10.
Depending on demand, Kingston Properties may upsize the offer to $2.25 billion.
“It is difficult for us to predict when attractive and suitable real estate investment opportunities will arise, and given the overall macroeconomic environment, we believe the time is opportune for another capital raise to give us the flexibility of having adequate financial resources to take advantage of opportunities that may arise from time to time. Apart from the specific objectives outlined, we expect that the proceeds of this invitation will also assist us in this aim and better position us to move quickly as and when opportunity knocks,” Chairman of Kingston Properties Garfield Sinclair said in the offer prospectus, which was released on Thursday.
Kingston Properties’ investment strategy over the years has mainly been around identifying and acquiring value-added properties in jurisdictions that provide “better than average” risk-adjusted return on investment.
The company has been shifting way the condominium market in Florida, where it disposed of six units, and is now seeking out more greenfield assets in other markets.
The group, which is headed by Kevin Richards as CEO and Sinclair as chairman, comprises Kingston Properties Limited, KP (REIT) Jamaica Limited, KPREIT (St Lucia) Limited, KP Dumfries Limited, Kingston Properties Miami, and KPREIT (Cayman) Limited. KPREIT Cayman is now the direct holder of all investment properties located in the Cayman Islands, a market in which Kingston Properties has been expanding. The Cayman subsidiary evolved from a corporate restructuring under which a St Lucia-registered member of the group, Kingston Properties (St Lucia) Limited, was redomiciled and renamed.
Although Cayman Islands has a zero corporate tax rate and St Lucia’s rate for offshore companies has just shifted from one per cent to 30 per cent, Kingston Properties has said tax consideration was not the primary reason for redomiciling the subsidiary.
The value of the company’s investment properties across geographical markets in Jamaica, Cayman and the United States was last estimated at just under US$42 million, reflecting a nine per cent growth due largely to new acquisitions of a half-acre property on Dumfries Road in New Kingston, on which a multistory, multi-use commercial building will be constructed; commercial property on Spanish Town Road; and a 1.7-acre property at Cross Roads, Kingston, on which a mixed-use industrial building will be constructed.
Kingston Properties has not said how much of the APO proceeds will be used for the ground-up development projects, but has indicated it would be shifting money from its core investment activity – meaning properties in great locations with stable cash flows, and long-term, established tenants – towards more opportunistic or greenfield projects.
Its current portfolio comprises 65 per cent value-added holdings, that is, typically poorly managed properties that require upgrading, like the Dumfries Road property. The rest of its investment portfolio comprises stable cashflow properties, 29 per cent, and greenfield projects, six per cent.
The acquisition of the two open lots in Kingston jump-starts the company’s plan to more than double greenfield investments to 15 per cent of its investment portfolio, while bringing the stable cash generators down to 20 per cent.
“We have identified a robust deal pipeline, which will include a combination of value-added and greenfield opportunities in the industrial, residential and office spaces. We believe that as e-commerce and digital logistics platforms continue to grow, the demand for industrial spaces will increase. Small open economies such as Jamaica and the Cayman Islands that have a high propensity to import will see tremendous growth in this subclass,” Sinclair said.
Kingston Properties earned core rental revenue of US$2.98 million at year ending December 2021, but made a profit of US$3 million, aided by other gains and income. Its total assets have now crested US$50 million, rising 10 per cent above the prior year.