Pulse's lease payments increase 99,900% and it's still a bargain:
PULSE INVESTMENTS Limited, a modelling agency and entertainment outfit, has extended its longterm lease with Samurai Investments Limited to 50 years, a company that is also controlled by founder Kingsley Cooper.
Pulse’s market filing about the lease did not name the landlord, but its audited accounts list identifies it as Samurai.
The previous lease was for 49 years at $1 per year. Cooper told the Financial Gleaner there were 38 years left on that contract, and that effectively, the new agreement extends the lease by 12 years to 50 years.
Pulse Investments itself is a 23year-old company incorporated in 1993, but the business has been around for about 37 to 38 years. The company was previously known as Pulse Entertainment Group Limited.
The current lease, while still priced at ‘peppercorn’ rates, is now $1,000 per year. It covers the Pulse complex at Trafalgar Road on the cusp of New Kingston, as well as Villa Ronai at Stony Hill, St Andrew, where expansions and improvements to the property are under way. Those properties are now estimated to be worth $1.39 billion.
Comparatively, commercial property on the New Kingston periphery is currently priced at US$12-$18 per square foot per year, or $1,500 to $2,300 per square foot.
Samurai is also the management company for Pulse Investments, which now pays Samurai $44 million per year for its services.
Under the terms of the lease, which should now extend to year 2066, the rental was paid in advance, which means “Pulse has full control of the properties going into the foreseeable future,” the company said in its market filing.
Pulse, which is now headed by CEO Safia Cooper, announced the extension of the lease alongside its half-year financial results, when it reported net profit of $155 million off revenues of $188 million. Profit is up 17 per cent, while revenue expanded 24 per cent year-on-year.
Safia succeeded Kingsley as head of the company in January 2016. Kingsley, who owns 73 per cent of the company, remains as its chairman. He told the Financial Gleaner that he recently added a new title as Pulse’s head of property development and special projects.
Pulse Investments’ main source of income is through advertising entitlements, which are programmes it packages and sells to broadcasters. It
currently has $492 million worth of entitlements to collect on, which are registered as receivables on its balance sheet.
Other sources of revenue include model agency fees, sponsorships, shop rentals, and hospitality services offered by Villa Ronai. Pulse said some of the boost in revenue at half-year ending December 2016 was due to the opening of the new Peter Tosh Museum in October, and on the modelling agency side, the successful debut of newcomer Alicia Burke as well as the earnings of the more established model Jeneil Williams.
The works under way at the investment properties include 52 guest suites at Villa Ronai and 19 guest rooms at Trafalgar Road.
Over the company’s financial year ending June 2016, Pulse spent more than $40 million on additions to the properties, which was more than double the near $16 million it spent in FY2015. At half-year ending December, it invested another $30 million in the projects.
“Under the terms of the extension, if any of the two leases is terminated prior to the end of 50 years, the company and its shareholders will be compensated to the full value of the leasehold improvements and investments – including capital appreciation – made by the company in the properties to date, as well as any new investments made in the future,” Pulse noted in its statement to shareholders.
It expects the current improvements to grow revenue by around $240 million per year, assuming 66 per cent occupancy on average.