Sygnus Real Estate Finance plans to use its 1 Belmont Road property in New Kingston as a benchmark for building construction in the post COVID-19 era. 

Plans for the building are outlined in the company’s prospectus for its initial public offering (IPO).  The investment forms part of a suite of real estate transactions being entered into by the company with the aim of ‘unlocking value’. 

Vice President and Head of Real Estate and Project Finance at Sygnus Capital, David Cummings told Kalilah Reynolds on Taking Stock that the nine story building to be constructed at the location will take into consideration certain health and safety protocols now being emphasized during the pandemic.

The building will include five stories of commercial space and four levels for parking. Ground should be broken for the complex in another few weeks with a target completion date around late December 2022.

Vice President and Head of Real Estate and Project Finance at Sygnus Capital, David Cummings

“We designed this for the post pandemic world. So when you park your car in the cover parking to go to your office you won’t have to touch the building.  That means the doors will be touchless, the elevators will be touchless, the elevator controls will be touchless, all the bathroom fixtures will be touchless technology,” said Cummings.

“You won’t have to run around sanitizing door handles every 45 minutes or every hour as we’re doing now,” he added. 

 Cummings said the design will complement the Kingston skyline, and added that it will also include an infrared system to monitor the temperature of staff and clients.

“As you walk in it will take your temperature and only if it is elevated will an alarm go off and you will be pulled aside to have somebody do a secondary check…what we’re doing is creating a safe and secure environment,” he said.

He said dedicating that many levels for parking will also alleviate a big challenge now in the metropolitan area. 

“One of the things that we did in the design brief is to ensure that anybody who goes to 1 Belmont, you will be able to find somewhere to park,” said Cummings, adding that the strategy to build the high rise building falls within its plans to exit investments within a three to five year window. 

Doing its own developments represents one of the ways the company intends to unlock value across the real estate industry.

Innovative investments

Co-founder of Sygnus Group and Chief Investment Officer at Sygnus Capital, Jason Morris explained on Taking Stock that the process also involves doing strategic property acquisitions, deploying capital via joint venture agreements and deploying funds in investment notes.

According to Morris, Real Estate Investment Notes are a new term being taken to the market by the company.  They can be defined as a debt instrument customized to finance real estate transactions. 

Jason Morris, Co-founder and Chief Investment Officer

“So let’s say somebody had a project and when we look at it, it’s a very good project. Then we could invest in that using debt and we customize the debt using a preference share or it might be a profit sharing note, so for example a 5% coupon and we get 30-60% share of profit of that development,” he said.

Morris said the company will also be unlocking value through proprietary investment opportunities and strategic partnerships.

Other significant value properties that the company has acquired are the Mammee Bay hospitality property in St. Ann and the former French Embassy on Hillcrest Avenue in St. Andrew.

“We’re doing a wide cross section of combinations and looking at assets in hospitality, industrial, commercial,” said Morris.

Unlocking value at Mammee Bay

According to the SRF prospectus, since acquiring the Mammee Bay property for US$24 million, Sygnus Real Estate Finance has unlocked nearly J$800 million (US$5 million) in value. That was achieved through securing the property, master planning and enhancing the beach.  This does not include an additional J$110 million (US$710,000) from the sale of a sub-division of the property to Sandals for J$1.92 billion (US$12.4 million).

According to Morris, the acquisition of this property is a testament to the creativity and business ingenuity of the Sygnus team.  He explained that at the time of the acquisition, SRF was only worth about US$16 million, which is US$8 million less than the cost of the property.  However, Morris said they were able to negotiate a mortgage from the vendor, as well as convince the vendor to take shares in SRF as part of the payment.

“Think about how difficult it is for the vendor to lend you money to acquire the asset, then turn around and take shares, of which he has no idea whether the value of the shares is gonna be unlocked or not,” said Morris.

The Sygnus team said they’re now undergoing a suite of studies to come up with the best ways to optimize additional value from that property. They disclosed that pre-approval has already been received from the National Environment and Planning Agency (NEPA) for a wide range of options including a hotel, spa, restaurant, villa and houses. 

In the meantime, Morris said the company decided to spend the first two years looking at Jamaica based on the availability of land “ripe for value creation.”

He said the environment has been attractive with affordable taxes and real estate demand across both residential and commercial spaces.

Sygnus Real Estate Finance, incorporated in St. Lucia, started with a private placement in 2019 which saw them raise over US$16 million mainly from institutional investors. The company now has both debt and equity transactions across the country with more investment properties also in the pipeline.

The company is seeking to raise almost J$4 billion (US$25 million) from an IPO, which is now open, through the sale of 207 million ordinary shares to invest in real estate. The offer will close on August 20 or anytime it becomes fully subscribed. It’s up-sizeable by 38 million shares.

Just over 134 million shares are reserved with 72 million available to the public. Shares are priced at JM$19.30 or about US$0.13.  Existing shareholders get a discount, at JM$17.90 or US$0.12. Key investors also get a discounted price of JM$18.30 or US$0.12. A minimum of 1000 shares can be purchased.

Sygnus Capital is acting as Lead Arranger for the offer while Sagicor Investments and Scotia Investments are joint lead brokers. 

New episodes of Taking Stock with Kalilah Reynolds premiere Tuesdays at 7pm on YouTube and kalilahreynolds.com

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