Irma hits Kingston Properties

Friday, November 17, 2017

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The aftermath of Hurricane Irma forced Kingston Properties Ltd to shutter operations in the US for at least 10 days and contributed to the underperformance of the group for the third quarter ending September 30, 2017.

KPREIT posted net profit of $3.04 million for the quarter, a decline of roughly 78 per cent compared to profit of $14 million the group posted a year earlier.

“During the quarter, rental revenue at the W Ft Lauderdale property in the US was lower than planned due to higher-than-expected vacancy at the property consistent with the seasonal nature of the property as well as the effect of Hurricane Irma on property ,” chairman of KPREIT, Garfield Sinclair told shareholders in a statement adjoining the company's financials.

It added that, as at end of the quarter, approximately 49 per cent of the group's rental revenue was generated in the US, down from 60 per cent last year, due largely to a shift in focus to property markets outside of the US. Net profit was also impacted by finance cost, which quadrupled to $11.4 million compared to $2.9 million year over year.

Group net finance cost was $30.7 million for the nine months ended September 30, 2017, compared with net finance income of $18.9 million for the same period in 2016.

“The current year's finance cost includes interest expense and commitment fees of $31.2 million versus $4.8 million in the same prior year period; this is due to higher borrowings in 2017 versus 2016,” Sinclair explained.

“In addition, the group recorded net foreign currency translation gains of $190,432 for the nine months ending September, compared to gains of $21.8 million during the same 2016 period. This was due to significantly higher foreign currency holdings at the 2016 balance sheet date, as well as the accelerated pace of devaluation during the first nine months of 2016 compared to 2017,” he continued.

Investment properties remain the largest component of KPREITs' balance sheet assets, amounting to $2,519.3 million versus $1,932.1 million at the end of the first nine months of 2016.

According to Sinclair, the increase is primarily as a result of additions to the portfolio during January 2017, representing a year over year increase of 30.4 per cent. The company's portfolio composition by geography shows that the US market now accounts for 53 per cent of the investment portfolio, Jamaica 34 per cent, and the Cayman Islands at 13 per cent. It compares with 2016 records that showed the US market at 70 per cent and Jamaica 30 per cent.

The company, which predicted growth on its Jamaica and Cayman Islands properties in 2017 by 1.5 per cent and 2.5 per cent respectively, said it remains optimistic in its outlook for both economies, and will continue to seek out opportunities in those markets given higher net yields on assets in those areas and more favourable tax regimes in those markets vis--vis the US.

— Karena Bennett




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