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JM | Dec 5, 2020

Eppley Caribbean buys back more shares on open market

/ Our Today

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Up to one million additional shares to be bought back

Nicholas Scott

Real estate investment company Eppley Caribbean Property Fund Limited is continuing its shares buyback programme, having so far bought back more than half-a-million shares.

The company reports that, based on current trends, the shares bought back at present are running in line with its share buyback policy, which was announced last year.

Eppley Caribbean Property Fund, which is the largest listed real estate mutual fund in the Caribbean, which also trades on the Barbados and Trinidad and Tobago stock exchanges, bought back a total of 64,268 shares during the period November 24 – 30, 2020, under its ‘Share Buy Back’ programme.

Since February of this year, the company has bought back just over 560,000 shares on the Jamaica Stock Exchange, where they are traded. The shares were repurchased on the open market via its broker, NCB Capital Markets Limited.

Eppley intends to purchase up to an additional one million shares on the open market from time to time.

SOURCE OF FUNDING FOR SHARES BUYBACK

The source of funds for purchasing these shares on the open market will be cash from the company’s segregated account. Eppley spent just over $6 million to purchase these shares on the open market at an average price of around J$48.40.

The Jamaica Stock Exchange in downtown Kingston.

The purpose of the share buyback is to unlock significant value for shareholders by acquiring shares at a price equivalent or below the company’s net asset value per share. This is in keeping with the strategy previously disclosed in its prospectus in June last year when Eppley successfully sold 97.4 million shares to the public at a cost of J$46.18 per share.

The company also notified shareholders of the shares buyback plan in its 2019 Annual Report. When the initial shares buyback was announced Eppley indicated that it intends to purchase up to an additional 500,000 shares on the open market from time to time.

Having got the 500,000, Eppley has upped the ante in seeking to double the amount of shares to buy back.

The company’ net operating income (NOI) took a major hit  because of COVID-19 going down by 21 per cent to BDS$2.9 million for the just ended 2020 financial year in September. 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.

FAIR VALUE LOSS

Eppley’s value 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 the company’s retail assets in Barbados.

“…Fortunately, the remainder of the value fund’s portfolio has been remarkably resilient. Since taking control of the fund, Eppley’s strategy has been to scale and diversify its properties by geography and asset type”.

Nicholas Scott, chairman of Eppley Caribbean Property Fund Limited

While the company’s value is mostly tied up in long-term leases, the decline experienced reflects Eppley’s outlook on the rental market for tourism-related retail assets in Barbados over the medium-term. These charges are recorded in its share of profits using equity accounting since Eppley owns minority stakes in buildings most impacted.

Company Chairman Nicholas Scott reports that, “fortunately, the remainder of the value fund’s portfolio has been remarkably resilient. Since taking control of the fund, Eppley’s strategy has been to scale and diversify its properties by geography and asset type”.

In his forward message to shareholders, Scott said the plan has been validated by recent developments making reference to the recently acquired portfolio of industrial and office properties, which continues to perform despite COVID-19, with some buildings increasing occupancy and operating cash flow during the period under review.

JAMAICAN PROPERTIES REPORTING STRONG RESULTS

He stated that the Jamaican properties, including the Jamaican retail property, produced strong results underscoring the quality and durability of these assets.

“Consequently, we recorded fair value gains on our Jamaican portfolio and our Barbados industrial and office assets this year,” the Eppley chairman added.

However, these 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.

Scott noted that the current COVID-19 environment creates additional downside risks for the fund. Nevertheless, these risks are mitigated by Eppley’s strong balance sheet. At the end of the year the company had over BDS$23 million of cash.

Additionally, most of its properties remain unencumbered so that the company is well positioned to respond defensively to risks that materialise or conversely to go on offence and acquire properties on favourable terms when these opportunities emerge.

Scott is expecting that the performance of the fund will improve in subsequent quarters, pointing to the recent acquisition of two large industrial assets in Jamaica, one of which was acquired shortly before the end of the  financial year-end and the other acquired thereafter.

The additional income from these new acquisitions, the Eppley chairman explained, will be reflected going forward. He noted that the company expects to make additional acquisitions before the end of the calendar year. 

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