Eppley Caribbean Property Fund Limited reported BDS$1.9 million in net earnings for the year ended September 30, 2020.
Net operating income (NOI) attributable to shareholders, a key operating performance metric that measures the fund’s share of rental income less its operating expenses, declined 21 per cent to BDS$2.9 million.
Management said the decrease is mostly related to rent relief measures provided to tenants in Barbados whose businesses were directly impacted by a slowdown in tourism due to COVID-19.
“We expect the impact of the pandemic to be prolonged and its ultimate consequences remain uncertain.”– Eppley management
Funds from operations (FFO) attributable to shareholders, the measure of the Fund’s core operating profitability which includes interest income and expenses in addition to NOI, increased marginally to BDS$2.8 million.
Management said this reflects the value fund’s lower debt and higher cash balances during the year.
Overall, the value fund recorded a net fair value loss on its investment properties in 2020 compared to a large gain in 2019.
The most significant declines were related to retail assets in Barbados.
Management outlined, “While the Value Fund mostly has long-term leases in place at these buildings, these declines reflect our outlook on the rental market for tourism-related retail assets in Barbados over the medium-term.”
They added, “Fortunately, the remainder of the Value Fund’s portfolio has been remarkably resilient.”
Management said that, since taking control of the Fund, Eppley’s strategy has been to scale and diversify its properties by geography and asset type.
They commented, “Our plan has been validated by recent developments. Our recently acquired portfolio of industrial and office properties continued to perform despite COVID-19, with some buildings increasing occupancy and operating cash flow during this period.”
Management stated that all of the Funds Jamaican properties, including Jamaican retail property, produced strong results, “underscoring the quality and durability of these assets.”
Consequently, the company recorded fair value gains on its Jamaican portfolio and also on Barbados industrial and office assets this year.
The gains partially offset the reductions in the Barbados retail portfolio.
Despite operating earnings being slightly higher this year, the difference between the large fair value gain recorded in 2019 and the net fair value loss experienced this year led to an overall decline in net earnings in 2020.
Management commented, “COVID-19 has created an unprecedented shock to the global economy. Tourism dependent countries in the Caribbean have been especially hard hit.
“We expect the impact of the pandemic to be prolonged and its ultimate consequences remain uncertain.”
They suggested that the risks arising are mitigated by the Value Fund’s strong balance sheet.
Management noted, “At the end of the year we had over BDS$23 million of cash. Additionally, most of our properties remain unencumbered.
“The Value Fund is well positioned to respond defensively to risks that materialize or conversely to go on offence and acquire properties on favourable terms when these opportunities emerge.”
They disclosed that the company expects to make additional acquisitions before the end of the calendar year.
Management concluded, “Heading into next year, the Value Fund has a strong balance sheet and significant liquidity. We anticipate that its performance will improve due to acquisitions we’ve either just completed or expect to complete soon.”
Net assets at year end were valued at BDS $94.85 million