KPREIT gears up for property purchase with new US$5-m loan
Q2 profit surges
Kingston Properties Real Estate Investment Trust (KPREIT) appears to be one-step closer to executing on its long-discussed plans to acquire at least one property in the United Kingdom before the close of 2024, having secured US$5 million in new loan from First Caribbean International Bank.
The property management and development company which made the disclosure in its recently released second quarter report, said the loan will be used for “the purpose of acquiring an investment property”.
The loan matures in 15 years and is at a fixed rate of interest of 5.98 per cent for the first two years and Secured Overnight Financing Rate (SOFR) – which is a benchmark that financial institutions use to price loans for businesses and consumers plus 3.5 per cent thereafter. The SOFR is at a floor of 3 per cent.
Debt owed by the company rose to US$26.4 million as at June 30, 2024.
The new development comes amid surge in KPREIT’s profit for the second quarter ending June.
KPREIT has reported a 48 per cent jump in profit for the second quarter of 2024 with revenues also growing 40 per cent to US$1.22 million, with growth largely being attributed to the addition of units at the Grand Harbour Commercial Centre (GHCC) and increased rental rates across several of its properties.
Over the past months KPREIT has been busy growing its property portfolio, and it’s paying off.
By the end of June, the occupancy rate across its properties hit 92 per cent, owing to a diverse mix of tenants, including financial institutions, logistics companies, manufacturers, and government service providers.
Quarterly profit has swelled to US$476,869.
KPREIT’s growth isn’t just about acquiring more properties; it’s also driven by smart management and value maximisation. The Trust has been focused on identifying value-added opportunities within the commercial real estate market, improving property management, and enhancing rental income. These efforts have contributed to higher rental rates and increased property values across the portfolio.
For the first half of 2024 KPREIT’s rental income rose by 34.7 per cent to US$2.33 million. However, this growth came with a 27.6 per cent increase in operating expenses for the quarter, which rose to US$447,450 from US$350,567 in Q2 2023.
“This rise in costs is mainly due to inflation-driven increases in property insurance, staff costs, and higher property management fees following the GHCC acquisition,” said Kevin Richards, CEO of KPREIT.
Despite these higher expenses, KPREIT recorded a profit of US$476,869, up 48 per cent year on year. For the first six months of 2024 profit reached US$1.43 million, up from US$1.15 million in the same period of 2023.
The rise in profits was somewhat tempered by higher finance costs, which grew to US$698,529 from US$473,308 last year due to increased loan balances associated with the GHCC financing. However, KPREIT’s strategy of moving from variable to fixed-rate debts has helped stabilise interest costs in a volatile global market.
By the end of June 2024 KPREIT’s investment properties had grown in value by 47.8 per cent, reaching US$57.6 million compared to US$39.0 million the previous year. Total assets under management also rose by 25.9 per cent to US$76.3 million.
KPREIT’s cash holdings decreased from US$8.8 million to US$5.5 million, as funds were deployed into new income-generating properties and value-enhancing upgrades, such as the energy-saving improvements at Harbour Centre.
Looking ahead, Richards says the company is poised for growth. The trust plans to sell certain assets to free up liquidity for new acquisitions while continuing to focus on larger, higher-yielding properties. The recent acquisition of GHCC will continue to drive rental income growth in the coming quarters, and KPREIT is also preparing to break ground on its first greenfield project in Jamaica — a small bay warehouse complex in the Cross Roads area — with all regulatory approvals in place.
“In addition to the impending transactions, we are constantly assessing global markets for opportunities to strengthen and achieve greater geographical diversification in the portfolio,” Richards added.
With these developments, KPREIT is on track to reach its medium-term target of US$100 million in assets under management and generate more than US$2 million annually in Funds From Operations (FFO). The trust is also eyeing opportunities in global markets, having recently established a subsidiary in the UK in anticipation of expanding its geographical footprint.