Durrant Pate/Contributor

Sygnus Real Estate Finance (SRF) has seen its investment income plummet in its just ended 2023 financial year, but is anticipating an improvement for the current 2024 financial year.

For the financial year ended August 2023, SRF recorded total investment income or core revenues of J$765.56 million, down 43.3 per cent from the J$1.35 billion recorded for 2022. This contraction in income was primarily attributable to lower gains on investment property and a lower share of gain on joint ventures.

As a result of the exit from two of SRF’s highest yielding REINs, the weighted average fair value yield on Real Estate Investment Notes (REINs) was 8.9 per cent compared with 11.1 per cent last year. The weighted average cost of debt was 7.2 per cent compared with 5.8 per cent last year, reflecting higher market interest rates.

The share of gain on joint ventures, which captures SRF’s 70.0 per cent ownership of the One Belmont development, amounted to J$340.22 million compared to a gain of J$546.29 million last year. Net investment income or core earnings for 2023 amounted to J$312.58 million, down from the J$983.59 million booked last year.

Lower total investment income

The reduction was mainly attributable to lower total investment income coupled with a year-over-year increase in operating expenses. Total operating expenses for the year closed on J$452.98 million, up 24.0 per cent or J$87.54 million, relative to J$365.44 million last year.

This rise in expenses was primarily driven by growth in management fees due to higher core assets under management (33.1% or J$72.96 million increase), growth in security expenses (120.0% or J$12.11 million increase) and growth in corporate service fees (23.2% or J$9.10 million). Management and corporate service fees collectively represented 75.4 per cent of total operating expenses.

As a result, net profit attributable to shareholders for the year went down to J$211.44 million coming from J$692.95 million last year. This was mainly driven by a 68.2 per cent or J$671.01 million reduction in net investment income.

SRF’s return on average equity was 2.7 per cent at 2023, compared with 11.3 per cent last year and an average return on equity of 22.9 per cent since inception over the past four years. Basic earnings per share (EPS) was J$0.65 for 2023 relative to J$2.20 last year, while diluted EPS closed the year on J$0.60 compared to J$2.06 last year.

SRF’s book value per share closed on J$23.89 for FYE Aug 2023, up 2.8 per cent from J$23.24 in 2022.

Climb in net foreign exchange losses

Net foreign exchange losses for 2023 rose to J$81.69 million, coming from J$38.74 million last year. A net foreign exchange gain or loss is recorded based on changes in the exchange rate on SRF’s net balance sheet exposure to foreign currency, which, in this case, is the USD since its reporting currency is JMD. The vast majority of SRF’s real estate investment assets were denominated in USD.

Completing real estate projects in 2024

For 2024, SRF is expecting to complete in excess of J$5.3 billion of real estate projects, including the J$3.7-billion Belmont Road nine-storey commercial tower, which is now 90 per cent complete. The company plans to partially exit the One Belmont investment in 2024, while completing the built-to-suit industrial warehouse facility on Spanish Town Road.

During the current new financial year, SRF is advancing the value-creation process for two major strategic projects, namely Mammee Bay in St Ann and Lakespen in St Catherine, and has commenced the assessment of new investments to replace those that are currently being exited.