NIF refusing to sell to bargain hunters

The National Insurance Fund (NIF) has been trying for up to three years to divest several real-estate assets, but says the offers from would-be buyers have not been enticing.

Still, even as the state agency is preparing to put yet another property on the market - the 226-room Breezes Rio Bueno hotel in Trelawny - it is doubling down on plans not to discount the prices below the properties' market value despite admission that its stance against bargain hunters might have hindered deals placed on the table.

"People have been expressing interest, but when the moment comes to pay, there is no money," said Audrey Deer-Williams, NIF senior director for investments.

"They do not have the wherewithal to buy," she said.

Deer-Williams has been trying to sell commercial and resort properties in Montego Bay and Portmore since the start of this year, including the former Breezes Montego Bay hotel, which has been vacant since 2009.

High-end real estate in Jamaica is still being described as a buyer's market by real-estate interests, but the government fund manager said the sale price of NIF assets would not be set by investors seeking bargain basement deals.

"It is not going to happen," she said.

Since the debt exchange (JDX) event in February 2010, which cut six points on average off government financial securities, interest earnings have fallen for the fund.

NIF has been reconfiguring its asset portfolio, including its real-estate holdings to make up for the declining interest income brought on by the bond swap.

The restructuring of the real-estate asset portfolio includes the sale of underperforming assets, concurrent with acquisition of other properties in Kingston and Rio Bueno to complement existing holdings.

NIF's total real-estate portfolio is valued at approximately J$6 billion in commercial, resort and residential properties, or 10 per cent of total assets.

The state agency is sole owner of the Rio Bueno property in Trelawny, as well as other resorts such as El Greco Resort in Montego Bay and Point Village Resort in Negril.

The NIF is the agency responsible for investing pension receipts and operating the now J$62-billion fund from which public pensions are funded.

Deer-Williams said in January that NIF was looking to the upper-income market for the bulk of real-estate returns for the fund from which 28,524 Jamaicans are paid pension benefits.

It is estimated that the fund is facing a more than J$1-billion shortfall on interest income, post JDX.

The JDX shaved approximately J$40 billion off the Government's debt by calling in some J$702 billion of locally held securities and replacing them with new bonds at lower rates and longer tenors.

CEO of La Maison Property Services, Edwin Wint, said real estate in Jamaica is primarily a balanced market except for the top-end value segment - comprising property priced above J$40 million - which may be characterised as a buyer's market in most instances.

"Investors, especially pension funds, are seeking to diversify their portfolio mix by increasing property holdings as interest rates and returns fall on money-market instruments," said Wint.

"Property, as a class of investment, is the only investment medium to give a return on an income stream, as well as return on the appreciation of the capital value and, if well selected, offers a reasonable security of income and security of capital, which investors clamour for."

Rio Bueno was a top performer in the NIF property portfolio, but problems arose with the management contract. In April, NIF ended its 11-year partnership with John Issa's SuperClubs group. The Breezes name belongs to SuperClubs.

Deer-Williams said again this week that the 226-room property will be put on the market when the valuation and preparatory work are finalised.

The NIF has already acquired two connected pieces of private property already in use by the hotel at a cost of US$275,000 (J$23.38 million) to ensure there are no roadblocks to a deal when a buyer is identified.

The fund acquired the hotel in 2000 for US$23 million.

Other NIF properties on offer include the skating rink and a "large" shop at Portmore Mall, and property located in Naggo's Head in St Catherine; plus the Montego Bay hotel co-owned with the National Commercial Bank.

The former Breezes Montego Bay, a 124-room hotel on which the valuation is US$14.32 million (J$1.23b), is being marketed by WIHCON Properties Limited on behalf of the owners.

In 2009, the NIF had placed on the market a 2.5-acre residential subdivision and 7,400-square foot lot in St Ann, as well as shop spaces in the Portmore Mall.

According to Deer-Williams, no sales have been concluded since that year.

austanny@yahoo.com