With an asset base of US $44.87 billion ($6.57 billion) and a target of one million square feet (sq ft) owned and under management by 2022, real estate investment company Kingston Properties Limited (Kpreit) has advanced its plans to realise these goals by signalling another round of equity funding in the form of an additional public offering (APO).

After raising $2 billion in their first fully subscribed rights issue last December, Kpreit intends to return to the equity market to fund their next round of acquisitions which Chief Executive Officer (CEO) Kevin Richards believes will be ripe for opportunities. This comes after the company acquired Harbour Centre in the Cayman Islands and warehouse property on Ashenheim Road earlier this year for US $15.3 million. It also brought the companies total property ownership to 290,027 sq ft across their portfolio distribution among Jamaica, Cayman and the United States.

When asked about the decision to follow through with an APO instead of the traditional rights issue, Richards pointed to the “opportunity for institutional investors who want to buy a sizeable volume of shares in the company but were unable to do so in a renounceable rights issue where the uptake by existing shareholders was fully subscribed”.

Kpreit’s top 10 shareholders own 87 per cent of the existing shares in issue and consist mainly of unit trusts, insurance companies, pension funds and other institutional investors.

As part of this upcoming capital raise, the company is planning on doubling its authorised share capital to two billion shares at an upcoming extraordinary general meeting. This move by Kpreit’s board signals that the company is looking to raise more than $2 billion in their next equity issue. The company had set a target of $10 billion in equity by 2025 and is halfway near that target with US $29.97 million in equity at the end of September.

With 322.3 million unissued shares at the end of December, a capital raise between $6 – $7 would net anywhere between $1.93 – $2.26 billion for the company. The company’s most recent trading price was at $7.48 while their rights issue had a six per cent discount at $5.62. Kpreit is the ninth best performing stock for 2020 with a 13 per cent increase in its share price against a backdrop of the overall market being down by more than 25 per cent.

Although Richards was unable to discuss any upcoming deals, he pointed to one transaction which is in the early stages of discussions and might be exercised in the new year.

“The company is currently in the final stages of exiting its condos in Florida which it has been downsizing due to lower returns on income,” Richards informed.

There was also mention of possible acquisitions in April when forbearances and other protections in place end for properties in the USA. This has become more suitable as the second round of stimulus remains stalled in the American legislatures prior to the recently held presidential elections.

Kpreit’s most recent financials have revealed the success of their acquisitions as rental income grew by 40 per cent to US $567,352 while net profit rocketed by 900 per cent to US $413,551 for the third quarter. A major reason for these increased gains has come down to the new properties in its portfolio along with its Grenada Crescent property being fully tenanted after a law firm left in January.

The company’s finance costs stabilised in the third quarter as the company’s Jamaican dollar (JMD) cash balance was virtually eliminated following the Ashenheim acquisition. Kpreit’s finance costs had risen 207 per cent to US $866,237 for the nine months mainly as a result of the devaluation of the JMD. Kpreit will also benefit from lower interest costs shortly as one of its loans moving to a floating interest rate on a metric which has fallen sharply this year.

“Kpreit is a solid choice for an investor looking for real estate exposure in a company which pays USD dividends, trades below book value and has a share buy-back programme to enhance shareholder value.

“We are building a strong cashflow generating business where the funds can be used for further acquisitions or declare as dividends. Part of the plan to increase the equity of the company may involve some strategic alliances. We want to stay in a healthy cash position going into 2021 because that’s when opportunities are going to arise in acquisitions,“ Richards said.