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Kingston Properties’ rental revenue rises 58%

Kingston Properties Limited (KPREIT), for the three months ended March 31, 2021, reported an increase in rentals by  58 per cent to US$709,695 year-on-year, due to the acquisition of new properties and increased occupancy.

The company increased its portfolio of properties during the second half of 2020 and achieved full occupancy at its Grenada Crescent property in Jamaica. In addition, it attributed the jump in rental income to increases in rents at some of the properties. 

CEO of KPREIT Kevin Richards, in comments attached to the unaudited financial statements, said he maintains a “cautiously optimistic outlook” on the company’s performance for the rest of the year given “hopeful signs of recovery, with jobs growth in the US and the reopening of hotels and tourist attractions in several Caribbean economies resulting from the encouraging vaccine roll-out programmes in these countries”.

Kingston Properties CEO Kevin Richards (File photo)

He added that the real estate investment trust has the financial cushioning of capital it raised in a rights issue in 2019.

Profit boost

KPREIT also reported other income gains of US$437,660, which increased by 123 per relative to the corresponding period a year earlier.

Group net profit after taxes climbed 390 per cent year over year to US$623,338 at the end of the quarter. 

Funds from operations (FFO) amounted to US$420,779 for the first quarter.

Group operating expenses, which include direct property and administrative expenses, increased by 7.2 per cent to US$272,035 from US$253,269 the prior year. 

However, the reduction in the company’s condo portfolio during 2020 resulted in a 50 per cent reduction of both property taxes and homeowners association fees. The net effect of all this was a 122.8 per cent increase in operating activities before gains, moving from US$196,421 in 2020 to US$437,066 in 2021. 

Kingston Properties reduced its condo portfolio in 2020 by selling units at Midblock Condominiums in Miami, Florida, USA (File photo)

Net operating margins, accordingly, expanded from 43.6 per cent in 2020 to 61.7 per cent in 2021. 

The Group recorded profit before net finance charges of US$672,272 in the first quarter, primarily due to increased rental revenue, an increase in the fair value of investment in a US based real estate fund, in addition to higher fee and property management income. 

Actual interest expenses year-on-year decreased by 21.0 per cent despite higher loan balances in 2021. Richards outlined that this was mainly due to the reduction of the group’s borrowing costs on its debt in both Jamaica and the Cayman Islands.

Total loans payable of approximately US$13.5 million as at March 31, 2021, represented a 50.2 per cent year over year increase, which primarily resulted from financing the purchase of the Harbour Centre building in the Cayman Islands and extinguishing the Terrabank loan in the US. 

Increase in asset valuations

Management noted that with the acquisition of both an industrial property in Jamaica and a multi-storey office building in the Cayman Islands in the second half of 2020 and one in the first quarter of 2021, along with a higher fair value improvement on a property in Jamaica, the value of investment properties increased by 66.0 per cent year on year to US$39.7 million. 

During the quarter under review, the company acquired an office building in New Kingston on a sale and leaseback agreement for a consideration of approximately US$1.2 million. The property is slated for development in the future. 

Total assets stood at US$44.4 million as at March 31, 2021, compared to US$39.5 million the previous year, an increase of 12.1 per cent. 

KPREIT’s variable rate facilities were also repriced to rates ranging between 2 per cent and 3.95 per cent per annum, resulting in an overall reduction of interest costs. 

Management stated, “We continue to maintain fairly conservative debt ratios as part of our risk management strategy, however, while interest rates remain low we will continue to judiciously pursue the leveraged expansion of our property portfolio.”