Recent purchases should bolster income which took hit because of COVID-19

Having recently purchased two prime industrial properties in Kingston for an undisclosed sum, regional real estate and mutual fund outfit Eppley Caribbean Property Fund Limited (CPFV) has its eyes set on making additional acquisitions before the end of the calendar year.

The two properties recently added to CPFV’s portfolio are located at 105-107 Marcus Garvey Drive and 693 Spanish Town Road.

These new purchases saw the company taking advantage of opportunities to buy assets at depressed market prices.

CPFV, which is the largest listed real estate mutual fund in the Caribbean, said its income in the current December quarter and moving forward should show vast improvement given the recent acquisitions.

Trading on the Jamaica, Barbados and Trinidad & Tobago stock exchanges, the mutual fund owns 13 buildings in Jamaica and Barbados comprising more than 670,000 square feet.

NET OPERATING INCOME HIT BY COVID-19

The company’s earnings took a nose dive because of COVID-19, with net operating income (NOI) going down by 21 per cent to BDS$2.9 million for the just-ended 2020 financial year in September. The decrease in Eppley’s NOI was as a result of rent relief measures provided to tenants in Barbados, whose businesses were directly impacted by a slowdown in tourism, as a result of the global pandemic.

The value of the real estate and mutual fund company, which is based in Barbados, took a hit as it suffered from 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 CPFV’s retail assets in Barbados.

CPFV’s value is mostly tied up in long-term leases with the company having a soft outlook on the rental market for tourism-related retail assets in Barbados over the medium-term. However, the mutual fund’s chairman, Nicholas Scott, has stressed that Eppley was fortunate the remainder of its portfolio has been remarkably resilient.

Since taking control of the Fund, Eppley Limited’s strategy has been to scale and diversify its properties by geography and asset type. Scott told shareholders that this strategy has been validated by recent developments, pointing to the recently acquired portfolio of industrial and office properties, which continues to perform despite COVID-19.

Some buildings, he said, have seen increasing occupancy and operating cash flow during the period under review.

JAMAICAN PROPERTIES LEADING GROWTH

Scott cited the Jamaican properties, including the Jamaican retail property, for producing 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,” he said.

However, these gains only 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 said though the current COVID-19 environment creates additional downside risks for the fund, these risks are mitigated by CPFV’s strong balance sheet. At the end of the year, the company had over BDS$23 million in cash.

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