138SL, UWI renegotiating 2015 concession agreement

138 Student Living Jamaica Limited, a provider of university student accommodations, is renegotiating the terms of the concession agreement it has with the Mona campus of The University of the West Indies, in the midst of wrapping up talks with bondholders over a reprieve on the principal repayment of the debt.

The company, through 138 SL Restoration, expanded its arrangement with UWI Mona with a 30-year concession agreement to finance, build and operate an additional 72 student residences on Gerald Lalor flats, as well as to operate the rebuilt Irwin Hall which currently has 384 rooms.

Like the first concession in 2014 for the development and management of the George Alleyne Hall and Leslie Robinson Hall, the 2015 agreement promises 138 Student Living returns of 12.5 per cent on investment.

The renegotiation of the second agreement was disclosed to shareholders last week.

Chairman Ian Parsard said in an interview with the the Financial Gleaner that 138 Student Living wants terms in the 2015 contract to be more clearly specified but provided no details.

“There has been agreement on a few very important items and the discussions continue to be productive and amicable as we look to conclude on more items,” Parsard said.

The concession agreement guarantees a certain level of revenues for 138 Student, which, if not realised from normal operations, can be claimed from the university.

The COVID-19 pandemic has had a dramatic impact on the company, with students mostly being lectured online amid the restrictions on gatherings and people movement, and the student housing company has been seeking compensation to cushion the fall-off in rental income.

Since January, 138 Student Living has seen steady improvement in occupancy levels, which increased from 15 per cent to 45 per cent at the end of March.

That in turn helped to boost the company’s earnings by 15 per cent to $101 million for January-March, on revenues of $282 million.

Occupancy levels for the April-June third quarter were “slightly below” the March second quarter, “due to the summer break”, the company said. It operated 1,464 rooms and 1,692 beds at its four UWI Mona locations over the period.

“For Irvine Hall specifically, there was a decline of 8.0 per cent from the prior period, January to March 2021,” Parsard said a statement accompanying the third quarter results.

138 Student Living made a profit of $117 million in April-June from revenues of $269 million. The numbers reflect a fall-off from $131 million profit and $33 million in revenue in the comparative 2020 period.

Since January, the development company has been holding discussions with bondholders for a 12-month reprieve on principal repayments, in order to sustain the business during the troubled period.

Those discussions are nearing conclusion, CEO Cranston Ewan said in an update to shareholders at the annual general meeting last Friday.

“These discussions are at a very advanced stage and the outcome is expected shortly. Based on where we are at, we anticipate the support of our noteholders,” Ewan said.

While meetings are being held with external parties, 138 SL have also been holding discussions internally about how it can grow revenues amid the COVID-19 pandemic.

The company wants to deepen its business in the short-term rental market and recently hired a marketing manager to secure more bookings from business and conference groups.

“This area offers some very real opportunities in the future. Our intention is to deepen our foray into this area, our focus is on significantly improving our guest experience, “ said Ewan.

“We already seeing a number of reservations and bookings coming for early 2022 from groups and conference. We see the confidence building in this area again, and we anticipate improvement in both short term and student rental as vaccinations continue,” he said.

138SL operates 1,464 rooms at its four locations on the UWI Mona Campus. Of that, 144 rooms are dedicated to short-term rentals.

karena.bennett@gleanerjm.com