Tue | May 24, 2022

Eppley Caribbean scouting properties for outsourcing, hospitality markets

Development Fund to get new mandate

Published:Sunday | January 16, 2022 | 12:05 AMKarena Bennett - Business Reporter
Fund Manager Justin Nam, Eppley Caribbean Property Fund.
Fund Manager Justin Nam, Eppley Caribbean Property Fund.

Eppley Caribbean Property Fund is seeking properties suitable for business process outsourcing and hospitality businesses, further diversifying its commercial portfolio. Since its acquisition by Jamaican company Eppley Limited, more than three...

Eppley Caribbean Property Fund is seeking properties suitable for business process outsourcing and hospitality businesses, further diversifying its commercial portfolio.

Since its acquisition by Jamaican company Eppley Limited, more than three years ago, Barbados-based Eppley Caribbean has been gobbling up properties, shifting the portfolio’s historic concentration towards assets for lease in the retail sector.

Eppley Caribbean operates two funds: the Value Fund, which consists of 16 properties across Jamaica, Barbados, and Trinidad & Tobago, and is listed on the exchanges in those three markets; and the Development Fund, which owns a combination of development lands and residential units in Barbados, St Lucia, and St Vincent & the Grenadines but is only listed in Barbados and Trinidad.

Eppley Caribbean is planning to reposition the Development Fund, giving it a new mandate, Fund Manager Justin Nam told the Financial Gleaner, while also moving ahead with its strategy of scaling and diversifying assets in the Value Fund portfolio, he said.

The revised mandate for the Development Fund was not disclosed.

Assets held in the Value Fund are split 20 per cent for office space; industrial use, 35 per cent; and retail use, 45 per cent. It holds the majority of its commercial assets in Jamaica - 53 per cent – which includes the Mall Plaza on Constant Spring Road in Kingston, Empire Shopping Centre in Kingston, Angels Industrial Estate in St Catherine, and 693 Spanish Town Road in Kingston.

Trinidad & Tobago, the most recent market for acquisitions, represents just five per cent of Eppley Caribbean’s holdings, while the remaining assets are held in Barbados.

So far, the decision by Eppley Caribbean to scale and diversify its holdings by asset type and geography has been paying dividends. Despite its tenants – which include KPMG, Island Grill, Sampars, Sagicor, and CIBC FirstCaribbean – being negatively impacted by the pandemic, Eppley Caribbean closed its 2021 financial year with earnings of US$5.7 million for the Value Fund, a record performance for the portfolio and a tripling of its FY2020 earnings.

“We are not at liberty to discuss specific plans for new acquisitions, but the mandate of the Fund is to acquire commercial properties throughout the English-speaking Caribbean,” said Nam.

“In recent years, we have significantly diversified the Fund’s holdings geographically, and we expect that trend to continue,” Nam told the Financial Gleaner.

When Eppley acquired the two property funds from Fortress Fund Managers and Altman Real Estate in May 2018, the portfolio consisted of 270,000 square feet of space across six properties. The portfolio has since tripled to 800,000 square feet across 16 buildings, and Eppley Caribbean’s assets are currently valued at US$127 million.

MANAGEMENT’S STRATEGY

Nam credits the growth of Eppley Caribbean to management’s strategy of purchasing large, high-quality commercial real estate assets that meet the criteria of producing funds from operation, or FFO, a dividend yield of 6 per cent in hard currency, plus capital appreciation over the long term.

In most cases, acquisitions are off-market deals that Eppley says it originates through its own relationships.

“We seldom engage in competitive bidding processes,” said Nam. “We continue to originate opportunities through our reputation of being an excellent partner for developers, families, and other real estate owners who are looking for an entity with a strong balance sheet capable of closing on relatively large transactions,” he said.

The acquisition of property for use in the BPO and hospitality sectors will be guided by similar criteria.

Nam did not detail Eppley Caribbean’s attraction to the sectors or whether the acquisitions are planned for the Jamaican market or elsewhere. The BPO sector was among the few that managed to navigate the ravages of COVID-19 without fallout or just limited impact. Jamaica’s outsourcing market has 87 BPOs in operation, which accounts for about 45,000 jobs, up 15 per cent over 2020.

The sector is said to have contributed US$780 million to the Jamaican economy in 2020 and is projected to grow at a compounded annual rate of 14 per cent from 2021 to 2031.

In the hospitality sector, historically, tourism has been a primary driver of foreign exchange earnings for Jamaica but lost most of its business at the height of the pandemic. Its recovery is ongoing.

“While we continue to assess opportunities on a case-by-case basis, our track record demonstrates an ability to complete purchases of high-quality real estate in all major Caribbean markets,” Nam said.

karena.bennett@gleanerjm.com