Sharp slash to interest rates

Bank of Jamaica slashed their overnight policy interest rate by a hefty 50 basis points to 0.75 percent per annum, effective 20 May 2019.
This decision reflects Bank of Jamaica’s assessment that inflation will remain low for until the end of 2020 as well as provide added stimulant for faster economic growth.
The reality is that there is a huge disparity between the move by the central bank and government policy. While the central bank lowers the rate to stimulate the economy, the government has artificially helped in keeping bank lending rates much higher than needed by taxing customers of banks by high taxes on banks that is resulting in interest rates being around 3 percent points higher than they should. This is where the focus needs to be and not on lowering on savings rate.
Low inflation is here to stay, despite the central bank’s continued focus on an excessively high 4 to 6 percent range. The lowering of interest rates is hurting savers particularly pensioners who have to rely on savings.
According to Bank of Jamaica, the decision is intended to stimulate an even faster expansion in private sector credit which should lead to higher economic activity, consistent with the inflation target. The move also comes at the same time that the bank announced the lowering of the cash reserves that commercial banks need to keep with the central.
What are the implications, investors looking for yields on local bonds will be getting less on the dollar for savings. Stocks will become more attractive as dividends in a number of cases are paying more than Treasury bill rates that sits at 2 percent per annum. Real estate will benefit from more demand as an alternate form of investing.

Eppley Carib Property considers JSE listing

Eppley Caribbean Property Fund is now being managed by Eppley, a Jamaican listed company

Eppley Caribbean Property Fund SCC announced its intention to cross-list the cellular shares of the Value Fund (“the Value Fund Shares”) on the Jamaica Stock Exchange.
The Value Fund Shares are currently listed on the Barbados Stock Exchange and the Trinidad and Tobago Stock Exchange and the believes that cross-listing the Value Fund Shares on the Jamaica Stock Exchange will enhance liquidity and make them available to wider universe of investors.
The Board of Directors has authorized ECPF’s fund managers, Eppley Fund Managers Limited, to evaluate the process of cross-listing the Value Fund Shares with the support of ECPF’s attorneys, investment bankers and other professional advisors.
If a decision is made by the Board of Directors to cross list the Value Fund Shares, Eppley expects that the cross-listing is likely to take place by the end of the second quarter of 2019 subject to any relevant regulatory approvals.
Eppley Caribbean Property Fund SCC (“ECPF”) is a closed-end mutual fund that invests in real estate across the Caribbean. ECPF has two segregated cells, namely the Value Fund and the Development Fund both of which are listed on the Barbados Stock Exchange and the Trinidad & Tobago Stock Exchange

Jamaican Government cuts transfer tax to 2%

Effective April will government will reduce transfer tax from 5 percent to 2 percent, the Minister of Finance Dr. Nigel Clarke told Parliament, in his maiden budget presentation.
The minimum business tax for all businesses and asset taxes for non-financial businesses will be abolished effective April. The taxes were a nuisance and discriminatory in nature, lacking equity as they did not equate to the size of all businesses in the country, resulting in smaller businesses bearing a larger burden than larger ones.
The threshold for filing GCT will be moved from $3 million to $10 million, a level below which no GCT return will have to be filed. The minister stated that the change will result in 3,000 businesses not having to file GCT returns.
Stamp duties relating to certain transactions will be removed and substituted by a simple fee of $5,000, equal to the cost of providing the service. They will also abolish ad valorem stamp duties and replace them with a flat fee of $5,000.

Anya Levy of ReMax Elite Realtors

The amount on which estate tax is payable, will move from $1 million to $10 million effective April. The Minister stated that the measures will result in $14 billion in taxes being given up, by the government.
The minister also stated that the primary surplus will be lowered from 7 percent of GDP to 6.5 percent and was arrived at in discussion with an IMF staff.
IC Insider .com spoke to two noted individuals within the real estate market who are positively impacted by the news on stamp duty and transfer tax reduction. Deborah Cumming of Century 21 said “that is fantastic news, it will make a tremendous difference to the industry and the economy.” While Anya Levy associate broker at ReMax Elite. “that is fantastic, it will give incentive for sellers to move their properties and increase volume. It’s the right move and government will make up the taxes given up by increased volumes.”

Banks love Turks & Caicos most

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Turks & Caicos Islands is the destination by far, that banks and non-banks are most bullish about, according to data disclosed by the KPMG Carib Tourism 2018 survey.
Following Turks & Caicos, the financiers were bullish on Cayman Islands, then Jamaica, Antigua and Barbuda with Bermuda in fifth spot.
“When we looked at which destination in the Caribbean financiers are most bullish about there were 16 different destinations put forward of which only 7 were nominated by both bank and non-banks,” KPMG said. KPMG went on to state,”this further corroborates the position seen in recent years that the financing landscape has changed and that the new landscape involves financiers favoring a small number of jurisdictions for whatever reason rather than financing projects across the entire region”
The survey stated that airlift was the number one factor that considered important followed by ability to recover for hurricanes speedily.
“For banks the second most important issues were the ability to recover from hurricanes (88 percent) and outdated infrastructure (88 percent). Non-banks were unanimous (100 percent) in terms of the importance of crime and the ability to recover from hurricanes.”

Strong appetite for funding hotels

KPMG 2018 Caribbean Tourism survey findings showed a strong appetite by financing new and existing tourism related projects within the Caribbean region.
The findings stated that, “one of the most positive set of results the was in response to a question as to what appetite financiers had for issuing senior debt for different types of tourism related projects in the Caribbean.”
Nearly 90 percent of banks and all nonbank respondents said they had a positive appetite for issuing senior debt to existing hotels for refinancing, expansion and renovation. Approximately 86 percent of non-banks had a positive attitude towards financing acquisitions as did 67 percent of non-banks. Not surprisingly, new builds were a more difficult category to register a positive attitude but 33 percent of banks and 43 percent of non-banks had a positive appetite for new builds. “These are really high percentages, particularly for financing existing hotels and acquisitions. Whereas previously financing applications for new builds were almost dismissed entirely, a sufficient critical mass of financiers are now willing to consider such applications,” KPMG team stated.

T-bill rates drop again

Rates on Government of Jamaica Treasury bills fell again in November, with the latest offer resulting in the rate on the 91 days instrument falling to 4.26 percent from 4.58 percent previously and the 181 days rate slipping to 4.89 percent from 5.11 percent.
In April the 91 days rate was at 5.71 percent and fell in August to 5.49 percent before dropping sharply in September and October to reach 4.58 percent then.
In April the 182 days rate was at 6.4 percent and fell in August to 5.99 percent before dropping sharply in September and October to help push the current rate under 5 percent. As indicated in the attached chart the rates seems headed for 4 percent for the 182 days instrument and should be there by January or February if current trends continue.
Investors in equities, Money Market Instruments and real estate should pay keen attention to this critical development that will have profound implications for values in the market.

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 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 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 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 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, 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.