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Kingston Properties wary of global pandemic effects

Kingston Properties Limited (KPREIT) indicates that as the year progresses it will proceed with caution, in line with conditions evolving due to COVID-19.

Kingston Properties CEO Kevin Richards

In the company’s annual report, released this week, directors noted that despite the reasonably stable outlook in the US economy coming out of 2019 (despite recession risk that was expected in late 2020), the events since the start of 2020 have upended those projections.

Meanwhile, the company is planning to conserve cash in case any opportunities arise in the medium-term.

A previous memo from the company indicated it had enough cash to deal with any volatile flows from tenants in the coming months. The company said it will have sufficient cash balances to handle delays in rental collections.

KPREIT raised $2 billion through a rights issue in November 2019.  The funds were intended to grow its portfolio, especially in Jamaica and Cayman.

Current square footage under management is 153,000 of which 36 per cent is residential, 27 per cent office, 30 per cent warehouse and industrial and seven per cent retail.

In November investment properties are currently valued at J$2.7 billion.
The prospectus for the rights issue last year had indicated new targets as including properties in the Cayman Islands “covering the fast-growing Seven Mile Beach stretch; the re-emergent George Town office district; and the ever-expanding industrial area with close proximity to the recently expanded and upgraded Owen Roberts International Airport.”

In Jamaica, the intent was expressed to focus on commercial real estate opportunities, especially in the warehousing sphere.

In their analysis in the annual report, directors noted that Jamaica, as an open economy, will continue to hitch its fortunes to the ability of its major trading partners’ ability to combat the spread of COVID-19, directors commented, in the report, noting that already the IMF is forecasting a contraction of GDP of 5.6 per cent for 2020.

Unemployment is expected to rise and reverse the multi-quarter trend of declines in the unemployment rate due to the shuttering of most hotels due to travel restrictions.

With the decline in tourist revenues and remittances the supply of US dollars is likely to contract and could bring the exchange rate under pressure. Interest rates are expected to remain low and benchmark interest rates marked eight consecutive years in single digit territory, it was noted.