In this August 5, 2008 Gleaner photo, chairman of Carlton Savannah REIT (Jamaica) Limited, Garfield Sinclair, inserts CREIT on the Jamaica Stock Exchange board, witnessed by Fayval Williams, executive director of the real estate trust company, and chairman of the JSE, Curtis Martin. - File

Carlton Savannah REIT Jamaica Limited (CREIT) has sold off the sole investment used to woo stock-market investors in the company - seven-apartment units in a newly built hotel in Trinidad and Tobago - but says it is on the hunt for opportunities.

The disposal, which the company said came at the request of its Trinidad partner, Balton Properties, leaves CREIT with cash and nothing else.

Balton was said to need full control of the hotel, the Carlton Savannah based in Port-of-Spain, in order to secure alternative financing to complete the hotel and spa, having failed to sell off all the units.

"These new arrangements required that the entire hotel be used as security and has therefore prompted them to propose to repurchase all units which had been sold, including the REIT's seven-apartment units," the company said in a stock-market filing on Monday.

Gain

CREIT also informed the Jamaica Stock Exchange that Balton had accepted the developer's offer to repurchase the units at a price per share equivalent to $7.41. This according to market sources represent a $1.50-per-share gain for the company.

"We have put the transaction on a per-share price basis so that investors can understand the value of the return for the units relevant to the market price at which the CREIT shares now trade," said Fayval Williams, executive director and one of the conceptualisors of the REIT, a first for Jamaica. Other principals include her husband, Leo Williams, and Chairman Gary Sinclair.

CREIT's detailed disclosure on Monday and the company's assurance that it had deals pending have not been enough to calm all fears.

Mark Croskery, chief executive officer of Stocks and Securities Limited, said that while CREIT will book a 25 per cent premium on the sale price, there is no indication that the company plans to share the windfall with stockholders, but appears intent on pumping it all back would into new investments.

CREIT, whose 68.8 million outstanding ordinary shares currently trade at $4.50 on the Kingston market, had total assets of $531 million at June 2009, of which property under construction accounted for $380.7 million, while assets in the form of cash and cash equivalent stood at $150.6 million.

It reported nil revenue after more than a year in operation.

At the $7.41 repurchase price per share, the transaction with Balton would be worth about $509.8 million.

"Once the transaction is completed, we will have cash to redeploy into other properties," said Williams.

The shares were listed on the stock exchange in September at a price of $5.91 with $6 being the highest price it traded since.

Stocks and Securities

Stocks and Securities in the past three months has had the CREIT stock on negative stock watch but was prepared to reverse the rating pending disclosure of the company's strategy going forward.

"SSL in our write-ups of the prospectus rated this investment as negative and in our following quarterly write-ups gave it negative rating particularly based on the yield initially, which we felt was way under market conditions for Jamaicans using the GOJ US dollar yield curve or Jamaican yield curve," said Croskery.

"Going forward, if a capital distribution is not done, then the outlook on the stock will be solely based on what the board of the CS REIT places these funds in."

Pending those disclosures, the securities firm said it was prepared to reserve judgement.

CREIT is expected to close the sale to Balton Properties by October 9.

"Shareholders are probably better off now, given the company will have the liquidity and will be ahead of the game, but again this will now depend on what they plan to invest the money in," said John Jackson, financial analyst.

"Real estate has its advantage but investing in a company, like Pan Jamaican, where they can find great returns for the next couple of years would be good," Jackson added.

The Carlton Savannah comprises 55 three-bedroom apartments of which 43 were sold.

CREIT initially planned to purchase 16 units, but scaled back the acquisition to seven after a disappointing take-up of $407 million from its public offering.

Target short

The IPO fell way short of its $1.254 billion target.

While Williams said she did not know the other purchasers of the other 36 apartments, she told Wednesday Business that Balton had also secured deals with them.

Carlton Savannah was originally expected to open in October 2008 but was delayed at least three times within the last year.

CREIT eventually announced that there was a soft opening on June 1.

Its seven units were projected to earn revenue of US$1.61 million in the first year of operation, increasing to US$1.69 million in the fiscal year 2010-11.

sabrina.gordon@gleanerjm.com