Sinclair… the ability to convert commercial properties into residential units is particularly appealing given the shortage of residential properties
Kingston Properties Limited (KPREIT) is swiftly moving to acquire at least one property in the United Kingdom before the end of the year, seizing opportunities as expectations grow for cooling interest rates in the country.
The property management and development company has expressed its intention to acquire distressed UK properties for nearly two years but delayed due to rising interest rates and the anticipated availability of distressed properties in the commercial real estate market.
However, recent developments signal a shift.
Last week, the European Central Bank confirmed a widely expected reduction in interest rates, and on Wednesday, the US Federal Reserve announced it is projecting just one rate cut this year. It means KPREIT has now the green light to move on acquisition targets.
“We are looking to do more acquisitions, some in Jamaica and some in other markets and so by the end of 2024, our geographic market portfolio is going to look very different.
“Why I say it’s going to look different, we do plan as a strategy to monetise some of the assets. As you have seen from our Q1 results, we have listed some of our units in Cayman for sale and some of the units in Tropics Centre those have been listed and we have gotten some interest. We are looking for opportunities in the UK, we continue to scout in that market and we are hoping that we will be able to close on a transaction there soon,” CEO Kevin Richards told shareholders during the company 16th annual general meeting on Wednesday.
KPREIT is keeping watch on the US Feds, but it is also closely monitoring reactions to the 2024 United Kingdom general election scheduled for July 4, 2024, as the outcome will likely impact future interest rates.
“The Bank of England is attempting to remain neutral due to the election but is expected to cut rates by September. A reduction in interest rates is likely to stimulate the commercial real estate market,” Richards said.
“It’s not going to happen rapidly, but it certainly will send some signal of confidence in that environment. But for as long as interest rates remain high, we still see opportunities because rates are high and there are some commercial real estate holders who are in distressed situations. And so we are always scouting those deals and this is particularly why we need to move quickly on closing several acquisitions,” he continued.
The UK represents one of several markets in KPREIT’s sights as it aims to reach US$85 million in assets-under-management by the end of 2024 and US$100 million by 2025.
KPREIT is also active in Jamaica, progressing with a greenfield development on Rousseau Road in Kingston. It has obtained full approvals from the National Environment and Planning Agency (NEPA) and engaged a contractor for the construction of 14 warehouses, slated for completion next year.
In addition to its Jamaican ventures, KPREIT continues to explore sale and leaseback opportunities, a cornerstone of its strategy. Notably, the company acquired its current head office on Red Hills Road from Henkel and a property on Spanish Town Road through sale and leaseback transactions.
“We have another pending transaction that we hope to announce soon,” Richards disclosed.
The company is also finalising development works on Gum Tree, its second mixed-use industrial property in the Cayman Islands, its largest market by portfolio distribution at 55 per cent, followed by Jamaica at 38 per cent, and the United States at 7 per cent.
KPREIT holds a special interest in the UK market, drawn by its economic outlook and potential in both commercial and residential real estate sectors. The company has established a subsidiary in the UK as part of its broader strategy for geographic diversification.
“We see great potential in the UK economy and its real estate market going forward. The ability to convert commercial properties into residential units is particularly appealing given the shortage of residential properties,” noted Chairman Garfield Sinclair.
Looking ahead, KPREIT has reaffirmed its commitment to a core investment strategy focused on immediate cash-generating properties with high cash-on-cash returns in US currency. This approach, it says, prioritises investments that generate cash flow quickly over long-term projects such as greenfield developments or real estate partnerships.
“A lot of people believe that ground-up developments offer high returns, but our experience shows that investing in value-added properties can yield equally, if not higher, returns in a shorter time frame. Acquiring distressed properties, renovating, and repositioning them has proven more lucrative than ground-up projects, which influenced our decision to sell the Dumfries Road property in New Kingston last year,” Richards explained.
KPREIT continues to explore various funding options to support its ambitious development and expansion plans.
