SRF promising dividends on project payouts
A PROJECT in which Sygnus Real Estate Finance Limited, SRF, poured $1 billion via a real estate investment note, or REIN, is wrapping up and the company says it is exiting the arrangement with a big payout.
The project, a luxury residential development in Montego Bay, was completed back in October. Surreal at the Sugar-mill, as it is called, comprises 26 apartments, and two town houses.
The size of the expected returns or share of profit being collected by Sygnus Real Estate were not disclosed, but the company said this month that it has so far received payments on three of 20 units already sold.
“The units currently being sold are benefiting from price escalation,” the financing company said in its earnings report in relation to the other eight units.
Sygnus Group’s Chief Investment Officer, Jason Morris, says the returns from Surreal, plus other payouts from another two projects headed for closeout in 2023, would likely result in SRF shareholders receiving dividend payouts before the end of its fiscal year, that is by August 31.
Sygnus Real Estate was created by parent Sygnus Capital to discretely invest in real estate and was listed on the Jamaica Stock Exchange in October 2021.
In its first year on the market, SRF generated annual profit of $693 million, flowing mainly from a $716-million gain on investment property and $546 million from joint- venture arrangements.
Subsequent to that, its first-quarter performance for the period ending November 2022 descended into losses of $172 million.
SRF has paid no dividend since its listing, but when the company came to market, it did so with a policy of paying out up to 85 per cent of the earnings generated from its investments to holders of its shares.
It told prospective investors in its IPO that the plan was to pay dividends semi-annually, with the prospect of switching to quarterly distributions down the line.
Sygnus Real Estate has a portfolio of projects in various stages of execution. Speaking at the company’s quarterly earnings call this week, CEO David Cummings said the $3.7-billion, nine-storey commercial tower under development at Belmont Road in New Kingston was three-quarters complete and on track for finalisation in May.
SRF has already secured 10year renewable lease agreements for four-fifths, or 80 per cent, of the corporate office space on the tower, he said.
Additionally, the Us$8-million industrial warehouse facility that SRF is spearheading on behalf of local Caterpillar dealer IMCA Jamaica Limited at Spanish Town Road, Kingston, is 87 per cent complete and scheduled to wrap up in February.
As for the Montego Bay development, located near to Ironshore at Sugar Mill Road, Morris told the Financial Gleaner that sales of the remaining units are expected to be finalised around the time that the IMCA and One Belmont towers projects are heading towards closeout.
“We expect that the board will favourably consider paying dividends some time in 2023, after we have exited some of the projects that we have,” Morris said.
The company expects to complete four projects in 2023, a period that it says marks the completion of its first investment life cycle, which typically is about three to five years.
For the quarter ended November 2022, SRF Group reported investment income of $21.3 million, compared with negative income of $4.4 million in the comparative 2021 period. The turnaround was primarily driven by expansion in the REINS portfolio, which account for 19 per cent, or $2.63 billion, of the $13.8 billion invested in 16 real estate investment assets, SRF said.
Losses nearly doubled from $100 million to $172.5 million due to larger operating expenses and
foreign exchange impacts.
Referencing the $693 million of profit made at year ending August 2022, Morris said there was a characteristic “lumpiness of flows” into SRF, based on how the company’s earnings from its investments in developments and properties are booked.
“This value is typically reflected once at the end of each financial year, or when a project has been completed or fully exited. This results in uneven quarterly financial results, which are typically smoothed out by the end of the financial year when revaluations occur,” the CIO said.
Subsequent to the November quarter, Sygnus Real Estate completed the acquisition of another property at 58 Lady Musgrave Road in New Kingston. The purchase price was not disclosed.
The lot is adjacent to property it already owns at 56 Lady Musgrave Road, and adds to its holdings in the prime ‘Golden Triangle’, which includes the property that formerly housed the French Embassy.