Business

Kingston Properties Limited (KPREIT) says it has tied down a deal to acquire 19 apartment units in a Miami condominium complex, its second announcement of asset purchase in two weeks.

The Miami acquisition is expected to close later this month.

KPREIT did not disclose the name of the seller, but said it has a binding agreement to buy the apartments at US$2.7 million (J$243 million), or an average of US$142,105.

The 19 units cover 16,000 square feet of space on what is called the Loft II building, located on 2nd Avenue, downtown Miami, South Florida.

The building comprises 496 residential units of one- and two-bedroom apartments that range in size from 646 square feet to 1,153 square feet, according to online real estate listings, and are priced for sale from US$120,000 to US$390,000.

The 35-storey condo complex was designed by architects Cohen, Freedman, Encinosa and completed in December 2007.

KPREIT said in a stock market filing that the US$2.7 million buy price for the 19 units amounted to a 19 per cent discount on prevailing market prices, based on data tracked by Altos Research.

"Once you do a transaction of a certain size, you are able to make different deals with sellers and we managed to negotiate a discounted price of 19 per cent below the current market value ... that we thought was very good," KPREIT Executive Director Fayval Williams told Wednesday Business .

The apartments are occupied by tenants with one-year renewable leases, KPREIT said.

Its other purchase target, a warehouse in Kingston, is also tenanted by distributor DiverseyLever Jamaica Limited, which has a five-year renewable lease.

Disclosures by KPREIT suggest the warehouse is about a J$178 million deal, a price the company has not confirmed.

First-year projections

According to Williams, revenue projections from the two acquisitions are estimated at approximately $43.5 million in the first year after purchase.

The acquisitions would provide KPREIT, a nascent operation started two years ago, with its first ever top line or core earnings, assuming the deals are consummated.

Its first asset purchase, seven apartments in a Trinidad hotel, fell through last year. The current acquisitions are being financed from the proceeds of the resale of those apartments to the developer.

The company has been able to report profits over the period, accumulating surpluses of $24 million that were generated from finance income on paper investments.

The company has also paid out dividend to shareholders totalling a combined US$0.002 per share in three distributions since December 2008 - amounting to US$137,600.

Revenues for the real estate trust companies mostly come in the form of rental income from properties acquired.

Going forward, KPREIT, which now trades at $4 on the Jamaica Stock Exchange, said it will continue to focus primarily on investing in properties with strong cash yields and the opportunity for capital appreciation.

The company is also on the hunt for joint-venture deals with property owners or institutions that may have a preference for owning real estate properties via the REIT structure.

"We may acquire real estate properties for cash, but we are also particularly well positioned to appeal to sellers wishing to contribute their ownership of property for equity in a diversified real estate operating company that offers liquidity through access to the public equity markets," KPREIT said of its business strategy in the periods ahead.

sabrina.gordon@gleanerjm.com