Stanley Motta Limited (SML) CEO and Chair Melanie Subratie says despite the devastating economic impact resulting from the novel coronavirus outbreak the company, which was accorded Special Economic Zone (SEZ) status in March, stands to achieve stable earnings.

“58 Half-Way-Tree Road is a SEZ. Tenants can’t move out as easily because they can’t go and operate like this anywhere else. If they want the special economic zone privileges they have to be located here. It is definitely an advantage in the commercial real estate space,” Subratie told the Jamaica Observer following the company’s annual general meeting last Friday.

“Every single building here is leased and the rent leases are not going to change. Unless we build a new building, the revenue is probably going to stay the same. We have secure cash flow for the next four years, and if people are paying, then that’s what’s important and that’s what keeps us safe,” Subratie added.

SEZ companies benefit from a reduced corporate tax of between 7.5 per cent and 12.5 per cent instead of the regular 25 per cent for other local companies. This status also includes duty-free importation, general consumption tax-free importation, and no requirement to pay additional stamp duty. It also allows the company to have income tax-free profits for an indeterminate period.

The 58 HWT complex, one of the largest business process outsourcing (BPO) facilies in the English-speaking Caribbean, operates at 100 per cent occupancy. The facility consists of 230,000 square feet of office space rented predominantly to BPO firm Alorica and a range of other service provider tenants, including a child care facility, automated teller machines and financial services, health care, and a range of food and beverage options.

“We spoke to all the tenants when COVID-19 first hit and we figured out a payment plan for three months, and we accommodated pretty much everyone as much as we could,” Subratie told the Business Observer.

“That has now ended, and everyone is paying 100 per cent of their rent. Which is a good position to be in. The truth is, all investment in property is about cash flow. So when you sign a lease, you’re basically saying, ‘These people promise to pay me this amount of money every month for the next three years,’ ” she said.

For the six-month period ended June 30, 202o, SML achieved revenues of $224.9 million, up 9.1 per cent over the previous corresponding period, and revenues for the quarter-end of $112.6 million, an 8.9 per cent increase over the previous corresponding quarter. These increases were mainly attributed to the depreciation of the Jamaican dollar. All rental contracts are in US dollars.

The company’s net profit, however, was cut to $29.3 million in the quarter-end, from the $44.7 million recorded in the previous corresponding quarter.

Subratie added that while the economic repercussions of the novel coronavirus pandemic have brought into sharp focus the need to preserve value, all Stanley Motta’s debt is long term and therefore poses little risk to the business during this time.

“As they say in a downturn, leverage kills. I think it’s important to note that companies that have leverage should make sure that they check their debts, and that is something we did immediately and we were slightly lucky that there was a miscalculation in the Development Bank of Jamaica loan. We have actually been overpaying for a year and a half, which meant that we now have a moratorium on interest payments for the next 17 months,” the CEO said.

She further indicated that SML is currently creating a development plan for its underutilised space.