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JM | Nov 7, 2020

Kingston Properties Limited report modest 3rd quarter financials

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The company reported a 10-fold increase in net profit in the third quarter of 2020. (Photo: Facebook @KingstonProperties)

 By Durrant Pate

Kingston Properties Limited (KPREIT) is reporting modest third-quarter financials posting a 92% profit before net finance charges of US$346,584, up from US$180,988 recorded in the same quarter in 2019.

For the first nine months of the year, profit before net finance charges rose by 66.7% to US$735,978, up from US$441,482 for the same period last year. The figure for the first nine months of 2019 included a loss on disposal of investment properties in Florida totalling US$92,388, as well as an impairment loss on financial assets of US$52,978.

In its just-released unaudited group financial statements for the third quarter and nine-month period ended September 30, 2020, KPREIT points to almost 250 per cent increase in net finance costs.

Ballooning net finance costs

In 2020, net finance costs amounted to US$676,597, which was 2.5X the prior year’s figure. KPRIET Chief Executive Officer, Kevin Richards explains that, “the year on year increase in finance costs primarily results from realized and unrealized foreign exchange losses arising from the translation of local currency balances held at the end of the reporting period as the group held higher than normal Jamaican dollar cash balances.”

Kevin Richards, CEO of KPREIT. (Photo: Facebook @KingstonProperties)

These sums, he adds were earmarked for a property acquisition in Jamaica as well as the undertaking of capital improvement projects on certain of our properties. Richards states that the unrealized exchange losses were however partially offset by higher interest income from our investment of cash on hand.

Over the period the group recorded a profit before income tax of US$59,381 compared with a profit before income tax of US$178,890 for the corresponding period in 2019. The lower figure in 2020 resulted from higher net finance costs during the year when compared to the prior year.

Ten-fold net profit increase

Net profit in the third quarter of 2020 amounted to US$413,552 compared to the small profit of US$41,367 in 2019. This represents a tenfold increase, while the year to date net profit in 2020 is down 54.8% to US$70,154 versus US$155,256 recorded for the prior year.

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. Investment properties increased by 90.4% year on year to US$39.0 million, following the acquisitions of the Harbour Centre Building in Cayman and the warehouse property in Kingston as well as the higher fair value improvements on two properties in Jamaica.

Photo: Facebook @KingstonProperties

The increases were, however, offset by declines in fair values and disposals of condos in Florida. 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%. This massive increase in total assets came 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% year on year increase in borrowings. The increase resulted from collateralized bank financing which we used to facilitate the acquisition of both the Rosedale Warehouse units and the Harbour Centre Building both in Cayman.

Modest increase in rental income

KPREIT reported rental income of US$1.47 million, 16% more than the US$1.26 million reported for 2019. However, for the quarter, there was a 40% rise from US$406,013 in 2019 to US$567,352.

In his quarterly and nine month report to shareholders the KPRIET CEO explains that, “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-tel units.”

Operating expenses rose 10% to US$804,298 relative to the US$732,003 posted for the same period last year. The company reports that this is due to an increase in broker fees and staff costs.

Gain on disposal of investment property totalled US$14,405 for the period relative to the previous year’s loss of US$92,388. Impairment gain on financial assets amounted to US$5,802 relative to a loss of US$52,978 reported in the previous year.

Management fees amounted to US$46,813, which is 1% below the 2019 amount of US$47,490.

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