FCJ turns to warehousing for cash
Published:Friday | August 12, 2011 | 12:00 AM
Avia Collinder, Business Writer
Factories Corporation of Jamaica (FCJ) would prefer to lease or sell its empty factories to manufacturers or call centre operators, but investors are not biting.
The agency has now turned more aggressively to warehousing as a means of earning income from 364,353 square feet of idle inventory - which amounts to about one-fifth of the 1.8 million square feet it has under management - but says these are being structured as short-term arrangements.
"Warehousing is our bread-and-butter line," said managing director Horace Sutherland.
"Our mandate is to provide space for manufacturing and we are always looking for manufacturing companies, but the FCJ is not on the government budget and we cannot sit with empty space on our hands. The contracts for warehousing are renewable, but if a manufacturer wants the space they will be given notice," said Sutherland.
The warehousing contracts will run for six months to a year, he said, at prices equivalent to what an investor or business would pay for operating or manufacturing space.
Rosh Marketing Limited has been using space in the Garmex complex, leased at US$350 per square foot per year, plus maintenance costs to store furniture and appliances distributed to companies locally, said Sutherland.
Other locations are now attracting prices of US$225 per square foot, depending on location and on what Sutherland describes as the "economic cost" of the facility.
FCJ is also trying out a new incentive plan to drive business to its factories - an extension of the 'rent free' component of contracts in exchange for retrofitting of the space using their own funding.
"We are giving them six months to a year free so they can recover costs," he said.
Two un-named companies in Montego Bay have accepted space on this basis, said Sutherland.
Usually, investors get two to three months rent free - from the date of possession of the space to start-up of business, he said.
FCJ at yearend March 2011 made profit of about J$100 million - the figures are still to be audited - which is trending just a "little below" the 2009-10 results, Sutherland said.
The finance ministry report on public bodies, however, reported audited net profit of J$321 million for FCJ in 2009-10 and had projected profit of J$305m at yearend March 2011.
Sutherland said FCJ is open to other 'rent-free' arrangements with companies across the broad spectrum of industry, even as he reports limited success in selling some inventory.
Lot 19 Naggo Head in Braeton Avenue, St Catherine, for example, was sold to Dyna Metro Inc for J$21 million, he said, while offers have been received for four additional parcels inclusive of land and buildings.
The FCJ portfolio in January 2011 held assets valued at J$4 billion.
It has listed properties for sale located across Kingston, St Catherine, Trelawny and Clarendon. Negotiations for some lots kicked off in the final quarter 2010, but few deals have emerged.
Sutherland said earlier this year that an offer of J$1.4 million was accepted from Caribbean Producers Jamaica for Lots 17H & 18H in the Montego Freeport, St James; that negotiations were advanced on a Delisser Avenue property in Yallahs, St Thomas. An offer of J$18.5 million was made by Stanmark Producers Limited for Lot 2 of the Yallahs Industrial Estate, and Universal Freight Handlers has made an offer of J$140 million for property at 76 Marcus Garvey Drive, in Kingston.
Cabinet has approved the Stanmark sale "and we are now just waiting to close the deal," Sutherland said Thursday.
The deal with Universal Handlers is awaiting subdivision approval for the property from the Kingston and St Andrew Corporation, he said.
"This property is part of the overall Garmex property. Before this deal can be closed and the property transferred, a subdivision of the property has to be done so that a separate title can be prepared for this section."
In total, 13 properties were put up for sale last year, which are expected to bring in about J$589.2 million, according to Sutherland, who says the estimate is equivalent to the properties' book value.
He said last year that valuations would have been done to determine the market price as purchase offers are received.
Properties that have had no takers include: Lot 7 Hague, Trelawny; Lots 10 & 12 Nanse Pen; 2A Torrington Road, Kingston; 225 1/2 Marcus Garvey Drive, Kingston; 36 & 38 Valdez Road, St Catherine; and Hayes Free Zone, Clarendon.
The proceeds are to be invested in the development of new factory space.