It makes no sense

Berger Paints is worth more than $20 per share.

Berger Paints shares are worth more than $20 each, so why would any rational person recommend that shareholders sell them at $10.88? It simply makes no logical sense as the offer to buy is not a fair price for the minority shares.
Unfortunately, a number of small shareholders are likely to get their wealth sucked out by an awful and unfortunate recommendation by the directors of Berger Paints for them to accept an offer that is clearly not in the interest of minority shareholders.
According to the directors, Ansa Coatings International controls 51.01 percent of the issued Berger Jamaica’s shares and as a result of this Offer, its holding will most likely exceed 75%. That of course is not supported by facts and no evidence is put forth to support this view. What difference does this make anyhow? The vast majority of listed companies on the Jamaica Stock Exchange, are controlled by majority shareholders having more than 75 ownership without minority suffering unduly if at all. Why should that change now?
According to the directors, PwC Advisory has stated in the Fairness Opinion that the consideration under the offer is fair to the shareholders of BPJL from a financial point of view. PwC Advisory review procedures focused on evaluating the fairness of the offer on a stand-alone basis and not relative to the price attributed to other companies included in the LBOH Acquisition.
The circular does not reveal confirmation from any of the major minority shareholders that they intend to sell and thus take the holdings for the majority shareholder beyond 80%. The 80% threshold does not automatically translate to delisting. Argument is made about transfer tax and stamp duty for transferring shares if the company were to be delisted, but no mention is made that investors bought stocks in large quantities at prices that would make the cost of transfer fees an unimportant factor. The directors seem unaware of the regulation relating to delisting and it is not a simple as they state or would want investors to think.

New building in Montego Bay.

The reality is that even if the shares are to be delisted it will likely take months before that takes place.
An analysis who is not unconnected with a major minority shareholder, had this to say “Regarding Berger, the stock is controlled by about 4 to 5 minority shareholders who own roughly half (or a little more than) of the 48.99% remaining. I have it on very good authority that the parties have unanimously chosen to REJECT Ansa McAL’s offer.”
There are other smart investors who will not accept it as well, hence the chance of the offer doing well is slim, especially as the stock has been trading above the offer price. The above assessment mirrors IC Insider.com earlier comments that 6 shareholders hold more than 31 percent of the shares and they are unlikely to sell at the offer price. That would make the possibility of the offer getting shares up to even 70 percent very slim. In addition there are others who won’t sell either.

20 South, Apartment complex currently under construction in Kingston.

New buildings going up in Jamaica to add to paint sales

The average PE of the main market is 13 times this year’s earnings so even if we used the March results, the shares are worth in excess of $19. Add to that, improved earnings to June and the value grows even higher.
Jamaica suffered from a long period of minimal economic performance and now seems to be on a path to sustainable growth, against this back ground there are several buildings under construction presently that will result in increased demand for paint. Berger is set to reap huge benefits from the increased demand and shareholders will too. Interest rates have been sliding and will continue to do so making stocks more attractive than is currently the case. PE ratios will rise and so will profits, a combination that should put Berger in the $40 region in a year’s time so why would anyone want to sell under $11. Investors should be buying around the current listed price of $11 to benefit from a huge upside after the offer fails.

Construction boosting Montego Bay economy

The official data from the Statistical Institute of Jamaica show that activity in the construction sector grew 0.4 percent in the December 2016 quarter and 0.2 percent in the March 2017 quarter.

New NCB Financial centre being built in Fair View Montego Bay

IC Insider.com took a tour of Jamaica’s two cities to get a glimpse of what was taking place in the sector and we have the pictures to show.
Within the Montego Bay area, the region of Jamaica that is said to be the fastest growing in the country, most buildings are taking place around the Fairview area that is next door to Bogue. Commercial activity continues to attract more entities to the western region and they seem to be heading to this location. Building of NCB Financial Centre for the region is in full flight and could be finished very soon, based on where the construction of building reached. Sited two blocks just south west of the Scotiabank centre the building occupies two stories.

Two new buildings going up at Farview, the one to the right is said to be a shopping cenre and a warehiouse to the left

Also going up close by was what is said to be a shopping centre, but that seems to be more like offices that should be ready for occupancy shortly, based on the painting of the exterior. And next to that building is another, that IC Insider.com was advised is a warehouse.Lands have been cleared and marled for what looks like another building or two one of which is a site for Victoria Building Society.
Other the other side of town on the way to adjoin the Pye River cemetery are two new commercial buildings,

New bidong going up at Bogue in Montgo Bay

one fairy advanced and another just going up, and across from what seems a BPO operations.
On the return leg to Kingston, IC Insider.com spotted advanced construction at what is commonly known as Puerto Seco Beach. This is said to be a Guardsman development and seems to be a resort type facility, with restaurants and cabanas in addition to the beach and represents a major upgrading of the popular

Pueto Seco Beach main building

Puerto Seco Beach facilities. This development is set to generate increased business for the Discovery Bay, a town that has been undergoing increased business activities in recent years with more commercial activities and business.
Increased activity within the sector has a number of positives, including increased employment during the construction phase for both skilled and unskilled workers and for workers who are going to be employed in the commercial entities after the constructions are completed. The wider Montego Bay economy will benefit from the business that will be conducted by the increased number of persons who will be employed. Entities such as taxis, buses, shops, restaurants and of course the government who will be collecting more taxes will all benefit for the increase economic activities to be generated.
Wider afield cement producer Caribbean Cement and paint manufactures as well as suppliers of other construction goods, will benefit from the continuing growth in the construction sectors in the region

20 South signals new real estate trend

Hailed as “modern” and “environmentally-friendly”, the new high-rise development at 20 South Avenue is seen as a necessary addition to the Kingston and Saint Andrew landscape, home to 25 percent of Jamaica’s population.
The area is also home to the country’s capital city, housing the seat of power for the political and corporate world. As the economy and population grows there is demand for more space for commerce and residences. The corporate area has a unique features with the Caribbean Sea to the south with the rest wrapped by the Blue Mountain range.
Those two features place constrains on expansion and a premium on available property for development.
As the country’s population grows, and available space declines planners have to reimagine what adequate and sustainable housing development looks like. For Minister Daryl Vaz, speaking at the official launch of the 20 South development, stated that it is a viable solution to the increasing housing demands in Kingston and he encourages other developers to follow suit. Vaz indicated that improvement in the sewage system with more to come has allowed for the increased habitable rooms per acre, which allowed for the 10 story development, just a few minutes from the country’s best known and most expensive area, New Kingston.

20 South, Apartment complex currently under construction in Kingston.

20 South offers one bedroom apartments with prices ranging from US$166,000 (J$21.3 million) to US$200,000 (J$25.8 million), two bedroom apartments for US$245,000 (J$31.6 million), two-bedroom penthouse apartments for US$344,500 (J$44.4million), and three bedroom apartments for US$420,000 (J$54 million). Amenities includes: two security posts, electronic gate access, smart card access for lobby and elevators, an onsite managers strata office, infinity pool and rooftop, jogging trail and lounge, an onsite convenience store, back-up generator, and water tank. The price per square foot starts at US$200 (J$25,800) for a one bedroom unit up to US$265 (J$34,180) per square foot for a two-bedroom penthouse. Apartments located on the North/South Avenue section of the building as well as those located on the higher floors command a higher premium per square foot. These prices place the 20 South units above the average market price.
This development is being undertaken by AVS Builders Limited with Chinese firm ZDA Construction handling construction.
The average price per square foot for a typical residential unit ranges from J$18,000-$24,000 within the corporate area Debbie Cumming of Century 21 says. “While the price difference may be due to additional amenities, it also supports the notion that the Jamaican real estate market is undervalued,” Cumming notes, and went on to say “that people’s expectations have changed. Therefore, persons are more willing to pay a premium for conveniences like proximity to work and are less concerned about size and having a private (single-family) dwelling. The lowering interest rates also means that the decision to purchase, rather than rent, is becoming a more affordable and appealing option.”
20 South is not an anomaly. The Corporate Area will continue to welcome more of these developments as the city struggles to adequately house its citizens. Recently, there was groundbreaking for the Hampshire, an apartment complex located adjacent to the Golden Triangle.

The Hampshire Apartments complex being built by Guardian Life.

The Hampshire will house 66 units ranging from 706 to 1020 square feet in area. Like 20 South, amenities will include, but are not limited to, a recreational rooftop area and pool. Prices for these units start at US$144,950 (J$18.6 million), reports are that all units in the complex are be fully sold. At the groundbreaking ceremony.
The self-contained, amenity-rich, conveniently located high rise complexes meet the changing needs and expectations of prospective buyers. Young professionals make up a significant chunk of this market and are one of the driving forces behind these changes.
Investors in the real estate market have not had it as good as the current environment for decades. Counted amongst the positives are, the lowest mortgage rates since the 1970’s, thus making home ownership less costly than a few years ago, positive growth in the economy, that will increase purchasing power of individuals, improving business and consumer confidence levels, a growing stock market and an exchange rate that is stable supported by low inflation and high levels of foreign exchange reserves bot at the central bank and in the hands of ordinary Jamaicans.
The current climate suggests that whether you are looking for your next home or your next investment – or both – the real estate market is one to watch.

Contributed by Cherika Wilson.

97% of The Hampshire units sold

The Hampshire in Kingston, Jamaica.

‘The Hampshire’, in less than a week of its official ground-breaking, saw approximately 97% of the units sold.
According to veteran RE/MAX Elite Realtor, Anya Levy, this is not only an indication of the thriving Jamaican real estate market but the quality of the product and the strength of the location, developers, builders and pricing point which she described as the “sweet spot”. Buyers of ‘The Hampshire’ comprised mostly first time home owners and investors. ‘The Hampshire’ located at 9 Musgrave Avenue, in the Golden Triangle, one of Kingston’s prime residential areas. ‘The complex is strategically set in the heart of Kingston, Jamaica’s thriving commercial hub. Such a location promises superb dining, comfortable shopping, easy, hassle-free commuting and world-class entertainment.

Anya Levy of RE/Max elite

“Now is the time to plan out not just traffic flow, not just water and sewage infrastructure but let us have a plan for the security of the New Kingston area because with the regeneration of the area we can now build with security in mind,” Prime Minister of Jamaica, Andrew Holness stressed, at the groundbreaking ceremony of the developemnt. Holness further urged private investors to tap into the development of underutilized assets across Jamaica in a bid to foster economic growth by increasing the productivity of unused lands and infrastructures. He commended Guardian Life Limited on their bold move to develop the idle land. President of Guardian Life, Eric Hosin, who was present at the ground-breaking ceremony said the decision to venture into real estate development has been “well considered and well timed”. The eco- friendly apartment complex will sit on 1.23 acres of land.
“You can’t beat real estate, you can’t go wrong with this product,” Anya Levy said in an interview with ICInsider.com, as she explained that investors bought into ‘The Hampshire’ because the risk is nominal and that she has a lot of confidence in the development.
Completion of the development is scheduled for November 2018, comprises 66 units ranging from ‘super studios’ to single bedroom units with double bathrooms with sizes ranging from 706 to 1,020 square feet spanning across 6 floors. Some amenities the apartment complex will house include a rooftop recreational area with a pool and gym, 24- hour security, a coded main entrance, elevators, a standby generator, generous parking, a back-up water supply system and provision for air conditioner installations. The average property price in the area ‘The Hampshire’ is being developed, ranges between US$122,149 and US$220,000. The selling price for units start at US$144,950 (J$18.8 million) just under J$26,500 per square foot.
Developers of the complex are Guardian Life with architectural works by Michael Lake & Associates, contractors Matalon Homes.

 

Cement developments

Carib Cement silos.

There is some amount of excitement in the air, regarding developments in the Jamaican economy. Many investors are interpreting see the change signaling meaningful growth that will lead to increased demand for cement as developers increase their building activities to meet a growing demand for housing and commercial space.
According to Anya Levy of ReMax Elite realtors, demand is extremely high for space to accommodate Business Outsourcing Operations as foreign operations fall in love with the opportunities Jamaica is offering. The problem she states, is that the demand is mostly for 30-60,000 square foot space that is currently is in short supply. In a number of cases, existing commercial space is being converted to meet demand. But it is not only in the commercial arena that there is demand she states.
There are lots of residential units coming on stream. The Millsborough area in Kingston, is slated she says for some major developments for Townhouses in the US$500-600,000 price range. More units are expected that will be similar to the high rise 20 South building going up on South Avenue in Kingston, with another slated to be constructed next door to it. The story does not end there, Levy states that a number of units to be built in the country largest city, will be slated for the short term rental market.
All of this means more demand for cement. Investors expect, the country’s sole cement plant to benefit from the surge in demand that is expected to flow form these new developments as well as the office complexes to be built by Grace Kennedy and the Ministry of foreign affairs in downtown Kingston. Added to the list is the build out of 5,000 hotel rooms in the western side of the island and the many other smaller developments that are planned or started. It may be more than all of that, Levy intimated that she understands that a price increase is on the cards for cement.
Investors are keeping keen eyes on the operations of Caribbean Cement, with great expectations for a major rise in the stock price in 2017 with the company having cut cost and expected to reap increased sales from increased demand in the local economy with increased exports also expected. Against this background the RMOD arm of the Jamaica Stock Exchange wrote to the Company formally on Thursday, March 9, 2017, requesting their response for the reasons of an increase in “contracted” lease payment to Trinidad Cement and the increase in raw materials and consumables costs that rose by 33 percent and seems out of line with the increase in the sales.
The 2015 accounts show that US$22,500,000 (J$2,700,675,000) was due in lease payments in 2016. At an exchange rate of $128.44:US$1 the amount expensed in 2016 was $3,323,635,000 or US$25,876,946. The amount seems to conflict with the reduction by US$22,500,000 of the remaining lease commitment outstanding from US$66,500,000 to US$44,000,000 at the end of 2016.
According to information provided to IC Insider.com, the company who had promised a response by March 20, now indicates that a response is drafted for sign off by management.

Big Apartment complex for South Avenue

20 South Avenue just a few minutes walk to the heart of Half Way Tree square in Kingston, the former home of pre-owned car dealership operated by now Minister of Government, Daryl Vaz, is to be home to a major multi story apartment development.
The complex comprising what now looks like a ten story building, will include regular apartments and penthouses on 9 floors. IC Insider.com’s source states that the development comprises 90 apartments with Virtuoso being the architect who did the design. The property is owned by Commercial Centre Limited that is connected with Tewani Enterprises. The complex will comprise 1 bedroom, 2 bedroom and 3 bedroom penthouse units.
The property is currently screened off from prying eyes, but is decked out by a bright orange coloured crane for all to see, leading many to wonder what was going to be built on the site.
The property is within walking distance of one of the prime shopping areas in Kingston, including the popular Mega Mart store with it wide offerings. The project is being officially launched on Thursday.
The prices for the units are bound to set the standards for other new properties to be priced at within the Kingston area. The units come at a time when there has been some amount of stability in the value of the Jamaican dollar and low interest rates be paid on investments and could attract funds leaving these low yielding investments for a higher returns.

Kingston Properties buys Cayman

One of Kingston Properties units at Red Hills Rd, Kingston

Kingston Properties (KPREIT) completed the acquisition of a fully tenanted, mixed use building located in the West Bay Beach South area in the capital of the Cayman Islands.
“The building comprises offices, retail outlets and residences along the famous Seven Mile Beach corridor, an area that has seen significant infrastructure improvements, as well as new luxury resort and condo developments over the last three years,” KPREIT disclosed.
“This acquisition represents KPREIT’s first foray into the Cayman Islands, which is a country with a per capita GDP of USD58,856 and one of the leading financial centres of the world, offering a tax free environment with no property, income, corporation or capital gains taxes. GDP growth for the first half of 2016 is put at 3% on an annualized basis with unemployment of 3.9%.
KPREIT in their release to the Jamaica Stock Exchange indicated that “The fundamentals in Cayman are expected to continue to improve based on the growth in the Special Economic Zone near the South Sound, planned expansion of the International Airport, construction of a new cruise ship pier in Georgetown, expansion of the highway in the general West Bay Road area, along with continued resort and condo developments along the Seven Mile Beach corridor”.
“This acquisition is part of our strategy to continue to broaden our geographic reach as well as diversify the mix of property types in our portfolio. In addition, this continues KPREIT’s philosophy of multi-tenant rental properties as a means to mitigate vacancy risk, as well as hard currency rentals as a hedge against devaluation,” the KPREIT release stated.

C&W CEO Gary Sinclair and also chairman of Kingston Properties

For the nine months ended September 2016, KPREIT posted profit after-tax and comprehensive income of $131 million and $180 million, respectively. In the previous year, losses of $51 million and a loss in comprehensive income of $28 million, were incurred respectively, for the same period. The
For the third quarter 2016, group profit amounted to $14.0 million compared with a loss of $4.5 million for the similar period in 2015. Total comprehensive income for the quarter increased from $5.8 million in 2015 to $25.4 million in 2016. Higher rentals, net finance income and foreign currency translation gains in 2016 were primary drivers of the improved performance.
The group’s Investment Properties valued increased 56 percent to $1.93 billion at September last year, but mostly from acquisitions.
Kingston Properties which trades on the Jamaica Stock Exchange closed on Tuesday at $9 with 11,779 shares trading.

Jamaica National lowers loan rate

JNBS BuildWith mortgage rates on the decline, the local mortgage industry has received a further boost, following Jamaica National Building Society’s (JNBS) recent announcement of a reduction in rates to 8.5 percent for new mortgage applicants residing in Jamaica and across the Diaspora.
“The 8.5% offer spans across five JNBS mortgage product lines with a maximum of $20 million. The rate applies to Home Purchases and Construction loans, both having a 40 year repayment term; as well as Equity loans, Refinance loans, and Home Improvement loans,” Tiffany Gordon, Mortgage Sales Executive of the building Society, announced.
Jamaica National was silent on rates for existing borrowers but a reduction may well occur later in the year with interest rates on treasury bills declining from as far back as 2014 and continuing into 2016 with the last Treasury bill auction in January.

Real estate to get a boost

JNBS HWTThe real estate industry is set to get a boost as Jamaica National Building Society is set to announce a lowering mortgage rates, IC Insider.com has been reliably informed. The announcement could come as early as next week IC Insider.com has learnt.
Details were not available, but from indications it could result in the current flagship rate of 9.5 percent dropping to 8.5 percent. The move will be a welcomed for the society’s borrowers and will act as a stimulus to the housing market that has seen increased building cost as a result of the falling value of the Jamaican dollar pushing the cost of housing upwards. The decline will come against the background of lowering of repo rates by the country’s central bank and a continuous lowering of Treasury bill rates since early 2014.
The move by Jamaica National is expected to see other long term lenders following the JN lead and should result in an all round fall in borrowing cost for mortgages.

Jamaica economy crawls slowly

BOJ 3Real GDP is assessed to have expanded within the range of 0.5 percent to 1.5 percent for the June 2015 quarter by Bank of Jamaica, Governor of the bank, Bryan Wynter, said today.
The bank said the estimated outturn for the review quarter, “mainly reflects continued expansion in Mining & Quarrying, Hotels & Restaurants, Transport, Storage & Communication, Construction and Wholesale & Retail Trade”. There were estimated declines in Agriculture, Forestry & Fishing reflecting the impact of the intensification of dry conditions which started in the March 2015 quarter.
Given the anticipated impact of drought conditions, for FY2015/16 real GDP is forecasted to expand within the range of 1.0 per cent to 2.0 per cent. This projection is contingent on recovery in the mining and manufacturing sectors, assuming there is no recurrence of the production disruptions which occurred in the previous fiscal year. In addition, the economy is projected to continue to benefit from improvements in the business environment, consumer and business confidence as well as continued gains in external competitiveness.

New units being built at Montego Freeport in Montego Bay this year.

New units being built at Montego Freeport in Montego Bay this year.

The Jamaican economy squeezed out a small increase of 0.4 percent in the March quarter over the similar quarter of 2014, according to the Statistical Institute of Jamaica (STATIN), the official body tasked with the responsibility of collating such data. STATIN said then “growth was due mainly to a 0.6 percent increase in the Services industries” with all industries within the Services industries recording increased levels of output with the exception of Electricity & Water Supply and Producers of Government Services which fell by 2.8 percent and 0.1 percent respectively.