Home' Trinidad and Tobago Guardian : September 6th 2015 Contents The Sagicor Real Estate X Fund
Ltd (X Fund) started life on the
Jamaican Stock Exchange
when 20 per cent of the fund
was offered to the Jamaican
public via an IPO at J$5.00 per
share in October 2013. That exercise raised
J$1.49 billion. This figure was equivalent to
about TT$80.4 million.
The shares made its debut on the JSE on
November 15, 2013. Subsequently, the share
price rose to J$7.00 at the end of February
2014. In 2015, the closing price peaked at J$8.51
on August 5, 2015.
The X Fund is incorporated in St Lucia as
an international business company. More than
67 per cent of its shares are owned by Sagicor
Pooled Pension Funds Ltd, which is admin-
istered by Sagicor Life Jamaica Ltd (the major
subsidiary of Sagicor Group Jamaica Ltd).
Through its subsidiary, X Funds Properties
Ltd, the X Fund owns Sagicor Sigma Real
Estate Funds, which was its major asset. This
fund offers ten portfolios that cater to a wide
range of investment policies and strategies
across the spectrum of risk tolerance levels.
For example, the portfolio with the lowest
risk is the money market fund, while the liberty
or diversified investor funds both have mod-
erate risk. Among the funds that have the
highest risks are the optima and venture funds.
Investors select a specific fund to help them
achieve well defined goals, which have time-
based horizons, such as, short, medium or
The first year
In 2013, the X Fund had only one trading
month. During that period it generated rev-
enues and profit of J$942.2 million; this entire
sum related to net capital gains on financial
assets and liabilities from the Sigma Fund.
In 2014, further net capital gains generated
J$985 million in revenues; this was reduced
by net capital losses on loans payable of J$33.56
million and J$340,000 on capital losses on
investment securities. Foreign exchange gains
of J$6 million allowed the net capital gain to
come in at J$957.1 million.
Revenues were supplemented by modest
interest income of J$5.64 million. The bulk of
this figure (J$4.6 million) comprised interest
income from securities purchased under agree-
ments to resell. Interest from bank deposits
was J$751,000 while interest from investment
securities was J$274,000.
After deducting operating expenses, com-
prising entirely of interest expenses of J$22.4
million, the pre-tax profit came in at J$940.4
million. Taxation reduced this figure by J$18.9
million, leaving an after-tax profit of J$921.5
With 1,495,337,000 shares outstanding, this
figure translated into EPS of J$0.62 (2013:
Half-year to June 2015
Total assets increased from J$8.82 billion as
at June 2014 to J$14.22 billion as at December
2014. This measure rose further to J$21.19 bil-
lion as at June 2015. This recent increase was
due to its purchase of the Hilton Rose Hall
Hotel, which has 489 rooms and cost US$85.5
This acquisition was financed entirely with
debt. The first portion of US$42.3 million was
a secured bond made by X Fund, which net
proceeds were invested in X Fund Properties
Ltd as equity. Then, X Fund Properties Ltd
raised mortgage-backed bonds in two tranches
totalling US$46.75 million. The excess funds
were used to refurbish the hotel.
Over this same period, the Sigma Real Estate
Portfolio grew from J$8.828 billion to J$9.40
billion last December and ended on June 30,
2015 at J$9.985 billion.
Total revenue for the half-year to June 2015
registered at J$2.8 billion from J$410 million
in the comparative 2014 half-year. Most of
the increase (J$2.35 billion) resulted from the
inclusion of its new hotel acquisition.
This same element contributed additional
costs in the form of hotel expenses (J$1.52 bil-
lion), depreciation (J$92.6 million), interest of
J$323 million and other operating costs of J$60
million. In addition, taxation consumed J$142
These changes allowed the X Fund to record
a net profit of J$686.8 million compared with
J$410.3 million. These results reflect EPS of
J$0.46 versus J$0.27 for 2014.
On June 23, 2015, the X Fund paid an interim
dividend of J$0.16.
The hotel sector
All indications point to a resurgence in the
Jamaican tourism trade.
For the first 5 months of 2015, stopover
tourist arrivals rose by 4.2 per cent. The largest
increase was seen with arrivals from the UK,
which registered at 23.3 per cent while arrivals
from the USA rose by 7.2 per cent. On the
other hand, visitors from Canada were 5.4 per
cent fewer than during the 2014 period.
Visitors from the USA and Canada account
for 83 per cent of all arrivals. This statistic
suggests that there is a need to vigorously tap
the European, Chinese and Asian markets.
The United Nations World Tourism Organ-
isation (UNWTO) forecasts global tourist
arrivals to grow by 3.0 to 4.0 per cent in 2015.
The strongest growth areas are the Americas
(up by 4.0 per cent) and Asia (up by 5.0 per
Most of the transactions in the hotel sector
are conducted in US dollars; consequently,
these holdings provide an excellent source of
US dollars to the fund. In the case of Jamaican
hotels, mainly personnel costs and local foods
and beverages are paid in local currency.
This equation strongly suggests that those
hotel properties are net earners of foreign
exchange. In the event of any devaluations of
the Jamaican dollar, which is the reporting
currency, this would generate a beneficial result
The Aimbridge Hospitality LP already man-
ages the fund s three Jewel resorts and will
also manage the recently acquired Hilton Rose
The three Jewel properties, which are lodged
within the Sigma Fund, alone had a December
2014 value of J$11.7 billion. In addition, they
have a total of 741 rooms and boast 75 per
Commercial real estate holdings
The Sigma Fund also owns the R Danny
Williams property in New Kingston, which
enjoys 99 per cent occupancy and has 150,294
square feet of rentable space.
The three Sagicor Industrial Parks located
at Norman Road, Freeport and Marcus Garvey
Drive together with 78 Hagley Park Road com-
mand a total of 525,848 square feet of rentable
space and enjoys 88 per cent occupancy.
In addition, it owns another Sagicor property
located at Montego Bay Commercial Centre
and the Sagicor Sigma building at Knutsford
Boulevard, New Kingston.
As noted in the directors half-year review,
efficiency initiatives can enhance both prof-
itability and competitiveness. Benefits include
higher net rental yields (for owners) and lower
accommodation costs (for tenants).
New rights issue to partly fund
purchase of Florida hotel
On July 24, 2015, the X Fund announced its
intention to buy a convention hotel in Orlando,
Florida with an expected acquisition date of
September 2015. Financing will use a mixture
of debt and equity.
On that basis, the Board, on August 3, 2015,
approved a rights issue. Existing shareholders
were allowed to buy 2 new shares at a pref-
erential price of J$6.95 for every 5 shares then
held. This exercise would see the fund issue
598,134,700 new shares.
Very strong demand for this issue, which
is a signal of investor confidence, has encour-
aged the directors to respond positively; they
then agreed to allow shareholders to buy an
additional 149,533,675 shares at the same price.
The offer closed on September 2, 2015.
Before expenses, the enlarged rights issue
would raise J$5.196 billion or about US$44.178
The proceeds from this rights issue would
be invested in a new entity, X Fund Properties
LLC, incorporated in the USA.
This company will then buy the Double
Tree Hilton, which is located at the entrance
to the Universal Theme Park in Orlando, Flori-
da. This hotel has 742 guest rooms and encom-
passes over 62,800 square feet of meeting and
The purchase price is set at US$75 million
with about US$43 million (US$44.178 million
less estimated expenses) being financed with
equity and about US$32 million via debt. A
US based institutional lender is expected to
supply the debt portion, probably using the
hotel as security.
In the prospectus, the fund estimates that
25 per cent of its after-tax profits would be
paid out as dividends.
Lessons for the local property funds
Is it that Sagicor is "lucky" or proactive to
have entered the property market, especially
ones that are tourist-related, at the right time?
This X Fund seems to be growing by leaps
and bounds. Finding profitable properties and
raising money, either equity or debt, seems
to a special forte of the Sagicor sponsored
fund; perhaps, they can teach their local cousins
a thing or two!
Local stock market investors have had only
ltd opportunities to invest in property funds,
especially with one fund in the process of
being closed (Praetorian) and another prospec-
tive fund (Stallion) having a failed IPO. Perhaps,
this is a good opportunity for regionally minded
investors to diversify their portfolio into this
exciting but cyclical field?
(Next week's article will deal with Sagicor
Group Jamaica's half-year results.)
SEPTEMBER 6 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG13
Sagicor X fund
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