The Lagoon townhouses Cayman

The Lagoons in Georgetown, Cayman Islands.

The Lagoon townhouse complex in the Cayman Islands, a joint venture development between Proven REIT Limited and Infinity Capital Partners, is slated for completion and delivery of units in early 2023, a spoke person for Infinity Capital Partners advised
The complex comprises 13 residential units comprising nine two-bedroom and four three bedrooms townhouses in Georgetown, the capital of the country are all sold.
The units were priced at CI$520,000 for the two-bedroom units and $675,000 for the three-bedroom units. That amounts to US$624,000 and US$810,000. Converted to Jamaica dollar, put prices at JS$960,000 and J$1.247 million. The unit sizes range up to around 1,600 square feet for the three-bedroom units and slightly less for the two-bedroom units.

Real estate prices rise over 600%

Real estate values have climbed sharply in Jamaica since 2001, resulting in 639 percent returns based on selling prices of units to 2021, excluding ongoing income and expenses. Prices are based on properties in Kingston, the most active market in Jamaica, as such actual values may therefore vary in other areas of the country.

Dulwich studio & 2 bedroom units starting at $31,000 per square foot.

The data is compiled by based on selling prices of up-market units that include mostly two and three bedrooms units in gated residences, using selling prices per square foot of each unit. For this year, the average price of a number of units was used, which works out at $30,700 per square foot, compared to approximately $3,850 per square foot back in 2001.
Investors who bought properties using mortgage funding would have enjoyed greater gains than the above. A purchase using a 70 percent mortgage would have provided a gain of 2,130 percent. Persons like to compare local investments with the movement between the USA and Jamaican dollars. Data shows that an investment in the US dollar would have increased just 257 percent between 2001 and 2021.
The market is now more diverse than a few years ago, with prices per square foot as high as $67,199 for a 1,564 square foot 2 bedroom to be built by as the Residences of Terra Nova on Merrick Avenue, Kingston 10 on lands adjoining the Terra Nova Hotel, will set back investors by $105,098,454.

Interior of Model unit at East Oakridge apartment complex

Prices of a number of inputs in the building residential units have gone up since the latter part of 2020, with steel by about 30 percent and lumber more than doubling and had tripled early in 2021 over 2020 prices while shipping cost for many other inputs being up as well. Cement and labour costs remain fairly stable on a square footage basis, as would professional fees and government taxes. Some in the building industry see the increased prices for imported input pushing the cost of development above normal annual increases as such cost per square foot could climb above the normal for newer units coming to market.

Cement production surges with big Q1 profit

Three months after Caribbean Cement Company announced its 2020 record cement production of 940,000 metric tons results, approximately 78,000 per month, the company recently reports the production of more than 100,000 metric tonnes of cement in a month in March. It marks the highest monthly production in recent history, the company reported.
“The trend for this quarter is of a higher average than that of the past ten years and is in response to domestic market demand”, a release from the company stated.
In 2020, the company had sales of $20 billion, up 13 percent from $17.8 billion in 2019, with a profit of $3.2 billion, up from $1.9 billion. In the first quarter of 2020, revenues grew by two percent to $4.5 billion, but profit fell to $453 million from $1.1 billion in 2019. In the 2020 first quarter, there was a loss on foreign exchange of $282 million. The company reduced most of its foreign currency exposure. As such there should be minimal exchange losses in the 2021 first quarter.
The company reported sales of $5.77 billion in the September quarter sales were approximately 270,000 tons and in December 2020, quarter sales was around 310,000 resulting in revenues of $6.6 billion. estimate revenues to be slightly ahead of the December quarter and has upgraded projections of revenues to $26 billion for 2021 with a net profit of $7.2 billion for EPS of $8.50, up from $6.70 previously.
Cement production is one of many bright spots in the Jamaican economy in 2020 and the current year. The companies shares are listed on the Jamaica Stock Exchange and last traded at $73 with a PE of 8.6 times 2021 earnings and a projected stock price of $160 by early 2022.

Sharp slash to interest rates

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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

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.