Sagicor Real Estate X Fund charting new future
FOLLOWING the deconsolidation from Sagicor Group Jamaica Limited (SJ) at the end of September, Sagicor Real Estate X Fund Limited is now planning its next moves with an independent board and $7.38 billion in current assets.
X Fund saw a significant improvement in 2022 from its Doubletree by Hilton Hotel (DTO) in Orlando, Florida, which brought in $7.07 billion in revenue and $566.98 million in net profit, as it maintained an average 92.8 per cent occupancy throughout the year. This is well above the US$39.7 million ($5.28 million) of revenue and EBITDA (earnings before interest, tax, depreciation and amortisation) of US$11.1 million in 2019 from 91.4 per cent occupancy.
With tourism rebounding quickly in Florida, X Fund is looking to improve revenue and the average daily rate (ADR or earnings from rental property) in 2023 by increasing its mix of new and profitable business and putting more attention on group business activities.
“The state of Florida has continued to thrive with transient travel and has seen higher demand in group business. The hotel has seen great success with soliciting weddings and other social events. The transition in the mix of business for more groups will produce approximately two million United States dollars (US$2,000,000.00) in additional sales from prior year,” stated the annual report.
While Doubletree by Hilton Hotel in Orlando’s business grows, the focus of the now independently governed X Fund will be on building out its real estate investment portfolio. Apart from Doubletree by Hilton Hotel in Orlando and its five per cent unit ownership in the Sagicor Sigma real estate portfolio, X Fund has no other real estate investments following the disposal of the Hilton Rose Hall hotel in September and its interest in Playa Hotels and Resorts in January 2021. X Fund saw a 23 per cent uplift in consolidated revenue to $7.12 billion, with consolidated net profit falling 35 per cent to $465.91 billion. However, net profit attributable to shareholders went up 24 per cent for 2022.
“With these changes X Fund will bolster its governance structure as it seeks to expand its activities and embark on its growth strategy. We continue to carefully monitor the current economic environment as we assess real estate investment opportunities not focused solely on tourism, but also in other viable, commercial real estate ventures. We will keep you, our shareholders, informed of any key real estate acquisitions of existing properties for income generation or lands for development,” read the statement of Chairman Vinay Walia and Chief Executive Officer BrendaLee Martin.
Martin is no longer an executive of Sagicor Group Jamaica Limited as of September 2022, with Sagicor Life Jamaica Limited no longer being the investment manager of X Fund. It was not stated if there was any change to the single special rights redeemable preference share which carries 51 per cent of the votes on a poll in general meetings. The 2013 prospectus noted that Sagicor Life Jamaica provided management services under an administrative services agreement which was 0.95 per cent of the net asset value of X Fund’s portfolio.
However, it was noted that X Fund entered into a management services agreement with Sagicor Property Services Limited (SPS) to provide investment advice, property management, and consultancy services. SPS will receive an annual fee of 0.75 per cent of net average assets between December 2022December 2023, and 1.50 per cent going forward starting in 2024. SPS is also entitled to an incentive based on the group’s performance. For the period, X Fund’s expense under this agreement with SPS was $43.14 million, with $35.03 million paid to SJ separately as professional fees.
“During the third quarter of the year the SPS entered into a management service contract with Sagicor Real Estate X Fund that is expected to increase its profitability significantly. For 2022 SPS recorded an increase in total revenues, with net profit growing by approximately 239%. The primary revenue sources for SPS are fee-based income from the various services offered,” stated the SJ 2022 annual report.
X Fund acquired an additional 162.79 million units in the Sigma Real Estate portfolio for $350 million. That acquisition brings the total units of Sigma Real Estate portfolio owned by X Fund to 564.71 million units with a total value of $1.30 billion. The six per cent appreciation in the unit price from $2.16 to $2.29 translated to an unrealised gain of $76.99 million for the period. The net asset value of the Sigma Real Estate portfolio was $24.3 billion at the end of 2022 with 14 properties in its portfolio, including two newly acquired ones.
For 2023 the Sigma Real Estate portfolio will seek to acquire commercial units at New Brunswick, St Catherine, luxury villas Bessa at Oracabessa in St Mary, and commence development planning for a commercial village in Portmore.
“Sagicor Real Estate X Fund Limited will enjoy the benefits from the indirect management of the diverse array of investment properties, facilitating ease in asset liquidation, effective risk management, and strong performance,” the X Fund report stated.
As it outlines these new projects and plans the hope is that the entity will return to a growth path and restore its asset base, which has eroded over time and was smaller at the end of 2022 than it was at the end of 2017.
At the end of 2022 X Fund’s consolidated asset base stood at $28.65 billion, with shareholders’ equity at $19.10 billion.
X Fund’s consolidated asset base stood at $47.69 billion with shareholders’ equity of $22.69 billion in 2017. This was spread across a 38 per cent stake in the Sagicor Sigma Real Estate Portfolio, and 15 per cent ownership of the Jewel Grande Montego Bay, the Hilton Rose Hall, and the Doubletree by Hilton Hotel in Orlando hotel properties.
X Fund also posted earnings of $13.18 billion in revenue and $2.74 billion in consolidated net profit in 2017. This was at a time when it declared $0.14 in dividends and $0.30 in the prior two years. No dividend has been declared since then. The Sagicor Pooled Funds and Sigma Global Funds own 86.86 per cent of X Fund as per the top 10 shareholder list.
X Fund listed in September 2013 after raising $1.43 billion in equity financing at $5 per share. It returned to the market in September 2015 with a rights issue in which it raised $5.20 billion at a price of $6.95 per share. While X Fund’s price traded at $15 at the end of 2017 with a book value of $10.12, X Fund is currently trading at $8.59 which is marginally above its book value of $8.52. The price at the end of 2019 was $9.29, but it fell to a low of $5.80 in March 2020. X Fund’s annual general meeting will be held on May 26 at 9:30 am Jamaican time.