Sabrina Gordon, Business Reporter
Gary Sinclair, chairman of Carlton Savannah REIT. - File
Brokers yesterday said that take-up of the J$1.254 billion initial public offering (IPO) by a Jamaican-based real-estate investment fund has so far been slow, but that offer could still prove a major success by the time it closes on Friday.
"There has been a lot of enquiries, but the uptake has been low," an analyst at one brokerage house told Wednesday Business.
The sentiment was echoed across the market.
Raise investment cash
The offer was launched a week ago by Carlton Savannah REIT (Jamaica) Limited, a vehicle being used by a group of Jamaican entrepreneurs to raise cash for investment in the Carlton Savannah, a luxury, business-type hotel being developed in the Trinidad and Tobago capital, Port-of-Spain, to take advantage of growing demand in that city for top-end corporate travellers.
Under the plan, Savannah REIT - whose chairman is Gary Sinclair, former president and chief operating officer of the merchant bank, Dehring Bunting & Golding - is to acquire 16 of the hotel's 55, two-bedroom suites as well as its health club and spa from the developers, the Port-of-Spain-based Bolton Properties.
Projected profits
The other key Jamaican directors are Fayval Williams, fund manager and independent investment adviser who has held senior posts in several United States mutual-fund com-panies and at Jamaica Money Market Brokers, and Nicole Foga, a corporate lawyer touted for her expertise in telecommunications.
The company, whose offer to the market is at $5.91 per share, projects net profit of US$1.61 in its first year of operation, increasing to US$1.69 million in 2010-2011. It projects earning per share of US$0.01.
Recommended buy
Scotia DBG Investment - Sinclair's former bank that was acquired last year by Bank of Nova Scotia - which is one of the brokers on the offer, has recommended the stock as a buy, primarily for investors seeking a US-dollar hedge.
They project that total returns in US dollar terms could go as high as 11.5 per cent per annum.
"While the price appears high for an IPO, the additional benefits that are associated with the issue could make it affordable for those investors looking for the aforementioned hedges," said Christopher Chin-Loy, who heads the stock brokerage unit at Scotia DBG.
But the uniqueness of the investment may make some Jamaican investors hesitant, he suggested.
Most real-estate portfolios to which equity investors have tangential access are those operated by insurance companies.
"Rather than approaching it as a high or low-risk investment, investors may stay out simply on the basis of uncertainty," Chin-Loy said.
Reluctance to take plunge
Officials at NCB Capital Markets, lead broker for the IPO, said that investors - institutions are expected to be the major takers - may be reluctant to take the plunge because of a lack of familiarity with this investment type and the Trinidadian real-estate market.
Leo Williams, who helped to craft the Carlton Savannah REIT initial public offering. - File
The lack of suitable benchmarks against which to judge the investment may help to breed result uncertainty, they said.
Nigel Sinclair, research analyst at Guardian Asset Management Limited, believes that it is a good buy.
"With prospects for positive growth in the Trinidad market and a guaranteed return for the first two years, this should act as a sweetener to woo investors," he said.
Leo Williams, husband of Savannah Carlton REIT's board member Fayval Williams, and one of the conceptualisors of the IPO, was confident that it would reach its target.
He said that there were signs that things were picking up after the long holiday weekend.
"It is offered at a discount with a P/E of 10.7 per cent compared to the market of 14 per cent," said Williams, himself a noted financial analyst. "We expect to meet our target, or even for it to be over-subscribed."
sabrina.gordon@gleanerjm.com
