Kingston Properties Limited (KPREIT) recorded a 92 per cent year on year increase in earnings before finance costs and a ten-fold rise in net profit for the third quarter ended September 30, 2020.
The company, which has changed its functional currency to US dollar, reported net profit in the third quarter of US$413,552 compared to a profit of US$41,367 in 2019.
However, for the nine-month period to September, net profit amounted to US$70,154 versus US$155,256 the prior year or a decline of US54.8 per cent.
In addition, the group recorded an income tax credit of US$10,773 in 2020 compared to an income tax charge of US$23,633 in 2019.
The group did not record other comprehensive income consequence on the change in the functional currency of the group to USD from Jamaican dollar
CEO Kevin G. Richards said group rental income increased by 39.7 per cent year on year for the three months ended to $567,352 compared to $406,013 for the same period in 2019.
Richards said the higher year on year figure was mainly due to the acquisition of the Harbour Centre Office Building in the Cayman Islands, and a return to full occupancy at the Grenada Crescent property and the W Fort Lauderdale condo units.
For the first nine months of the financial year, group rental income increased by 16.5 per cent to $1,470,821.
Management noted the containment measures employed by various countries to combat the COVID-19 pandemic, such as lockdowns and travel restrictions, continued to have an impact on economic activity and employment in many countries, however the group managed to record growth in this third quarter.
Richards said, “We continue to experience great resilience in our operations with higher than expected occupancy and consistency in rent receipts especially since the gradual lifting of restrictions in the jurisdictions in which we own properties.”
He said these conditions, along with the enacting of the Economic Substance Law in the Cayman Islands and the increasing thrust towards warehousing and logistics, supported the group’s decision to acquire two properties during the third quarter, namely the Harbour Centre and a warehouse property in the industrial belt of Kingston, Jamaica.
Despite these acquisitions, the group ended the quarter with a cash position of US$4.7 million, representing just over 10 per cent of total assets.
Richards said the cash “will allow us to take advantage of investment opportunities that meet both our strategic focus and riskreward metrics.
Group operating expenses increased by nine per cent to US$255,165, from US$233,989 the prior year due to the acquisitions.
The CEO said the increase is mainly due to higher broker fees and staff costs.
Meanwhile, the group continued to record declines in direct property costs such as homeowners’ association fees and property taxes with the disposal of condos in the US.
Net operating income saw an 81.5 per cent increase year on year for the third quarter of 2020 moving to US $312,587, while increasing 25.5 per cent for the first nine months of 2020 to US $666,523 from US $530,886 the prior year.
Richards said these results demonstrate the group’s efforts to boost efficiency in operations, with NOI margin at 54.7 per cent, which is above the global average for REITs of approximately 48 per cent.
Total assets stood at US $44.9 million as of September 30, 2020 compared to US$22.0 million the previous year, an increase of 103.8 per cent largely from the proceeds from a renounceable rights issue held in the fourth quarter of 2019.
Total loans payable was approximately US $14.4 million as at September 30, 2020 compared with US $7.3 million at September 30, 2019 representing a 97.7 per cent year on year increase in borrowings.