Eppley Value Fund makes St Vincent acquisition

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Eppley Caribbean Property Fund Limited SCC - Value Fund has made its first acquisition in St Vincent and the Grenadines.

Eppley Caribbean Property Fund Limited SCC-Value Fund (CPFV) has made its maiden voyage into St Vincent and the Grenadines where it acquired a 77,057-square-foot commercial property in the Eastern Caribbean island.

The acquisition took place in October through ECPF Property Holdings (St Vincent) Limited which acquired the fully tenanted property from International Property Investment Company Limited (IPIC). This represents the fourth territory where CPFV has a real estate investment and brought the overall property portfolio to 1,220,632 sq ft.

Although the acquisition was revealed as a subsequent event in CPFV’s 2024 audited financials, there were no additional details mentioned on the purchase price for the property. The only property mentioned in CPFV’s portfolio is one by Glen, St George, St Vincent which was added during the year for BDS$746,008 (J$58.67 million).

The final acquisition details are likely to be revealed in the company’s first quarter report to be published by February 14. IPIC was incorporated in February 2023 while ECPF (St Vincent) was formed in September 2023, with both entities being business companies.

CPFV currently boasts a property portfolio across Jamaica, Barbados and Trinidad & Tobago with its Jamaican real estate portfolio representing 70 per cent of its investments as at September 30. This is a sharp contrast to five years ago when the company’s entire real estate portfolio was concentrated in Barbados which now only represents 28 per cent of the portfolio. Apart from three properties, every other property is fully tenanted with an average occupancy of 96 per and a normalised NOI (net operating income) yield at 8.2 per cent.

“The Value Fund’s strategy remains anchored on the principle of scaling and regional diversification. The Fund Managers are actively pursuing opportunities to acquire income generating real estate that meets the Fund’s strategic objectives. One such opportunity was completed subsequent to the year end, as mentioned above, and will further diversify the Fund’s geographic footprint to a new territory. The Value Fund is also focused on identifying opportunities to increase NOI from our existing portfolio. The Fund will continue to work closely with its partners to optimize the use case and tenant mix for its portfolio,” said chairman Nicholas A Scott in the 2024 annual report.

An improvement in occupancy, increase in rental rates and recent acquisitions pushed CPFV’s net operating income attributable to shareholders up by 69 per cent to BDS$10.34 million (J$813.03 million) with funds from operations (FFO) attributable to shareholders rising by 13 per cent to BDS$4.39 million (J$345.04 million). These are metrics used by real estate companies to compare their portfolios against other real estate portfolios with FFO being the metric to reference cash flow for these companies.

For the 2024 financial year (FY) ending September 30, CPFV’s total investment income dipped 12 per cent to BDS$18.96 million (J$1.49 billion) as its fair value gains dipped four-fifths to BDS$2.64 million. The prior period had a BDS$7.02 million (J$541.38 million) fair value gain on its 693 Spanish Town Road property in Kingston, Jamaica. However, CPFV benefited from a 33 per cent rise in net rental income to BDS$5.77 million and relatively unchanged interest income.

CPFV also saw a 294 per cent increase in its share of profit from its joint ventures from BDS$2.47 million to BDS$9.74 million. That was largely due to the BDS$16.92 million (J$1.33 billion) fair value gain from ECPF Property Holdings (Jamaica) Limited which is the vehicle that holds the 20 commercial offices leased to JN Bank from the sale and leaseback arrangement. ECPF itself recorded total comprehensive income for the year of BDS$16.85 million. ECPF Property Holdings (Jamaica) is 50 per cent owned by CPFV and the Caribbean Mezzanine Fund II (CMF II). However, ECPF Molynes Property Holdings Limited recorded a BDS$4.20 million total compressive loss due to a BDS$4.60 million fair value loss on the property held by Chalmers Commercial Limited.

Despite those modest gains, CPFV’s expenses grew by a third to BDS$5.08 million due to an 84 per cent rise in interest expense to BDS$2.86 million from having a higher debt balance. As a result, CPFV’s profit before tax decreased 22 per cent to BDS$13.89 million with net profit declining 21 per cent to BDS$13.75 million.

Total assets improved by 16 per cent to BDS$182.61 million with investment properties at BDS$103.61 million and joint venture investments at BDS$45.13 million. After investing BDS$1.33 million in 2023, CPFV invested another BDS$1.75 million into its 693 Spanish Town Road property which is now fully tenanted and has a 6.8 per cent NOI yield.

Available cash also improved to BDS$18.88 million as it benefited from BDS$2.16 million in distributions from its joint ventures while also accessing loans during the period. Total liabilities increased 36 per cent to BDS$51.63 million due to the cellular company increasing its debt by 37 per cent to BDS$48.63 million. ECPF Industrial Property Holdings Limited, a Trinidadian based subsidiary, received a TT$20 million loan during the year which was used to assist in the acquisition of a 50 per cent stake in a joint venture in Trinidad & Tobago. Total shareholder funds also improved nine per cent to BDS$130.98 million with the fund paying BDS$4.30 million in dividends and reporting a net asset value of BDS$0.97.

CPFV’s stock traded down 21 per cent on Tuesday to J$29.10 which left the stock down 26 per cent in 2024 with a market capitalisation of J$3.94 billion. CPFV also declared a dividend of BDS$0.02238 totalling BDS$3.03 million to be paid on March 26 to shareholders on record as of January 15. The larger dividend wouldn’t just benefit Eppley Limited which has a 20.09 per cent interest in CPFV but would bring the total dividends with respect to the 2024 FY to BDS$0.02988 or BDS$4.05 million which is a 92 per cent FFO payout ratio.

Development Fund builds cash

The Development Fund (CPFD) has moved to build up a substantial cash position which has quadrupled its cash from BDS$1.11 million to BDS$4.49 million. This occurred as it completed the sale of two properties in Barbados during the year which brought in BDS$2.31 million in cash.

CPFD has cut its portfolio of properties from nine in 2022 to four properties at the end of September. This is part of the strategy to divest underperforming properties and minimizing expenses. The annual report also stated, “The Fund Managers [Eppley Fund Managers Limited] will be assessing opportunities for the Development Fund to earn additional returns on its cash and has already identified opportunities to improve income.”

Eppley Fund Managers has the largest interest in CPFD where it owns 47.20 per cent of the cellular shares after it increased its position in April 2023. CPFD recorded a net profit of BDS$75,026 for 2024 compared to a net loss of BDS$209,575. However, CPFD noted that it won’t pay dividends until it repositions its investment focus.

CPFD’s asset base marginally improved to BDS$19.23 million for the 2024 FY as its available real estate was worth BDS$7.06 million while it lent more funds to Eppley Fund Managers during the year to assist with its acquisition in CPFV. Total liabilities were BDS$753,310 with shareholder’s funds at BDS$18.48 million.

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