Kingston Properties Limited, KPREIT, which operates a listed real estate trust, expects to double its market capitalisation with a $2-billion rights issue.
It would take the market capitalisation to $3.8 billion from the current $1.8 billion as at Monday. CEO Kevin Richards acknowledged that the figure represents the bullishness of the market and confidence in Kingston Properties’ growth trajectory.
“There is a lot of interest in Kingston Properties by institutional and retail investors,” he said in a Financial Gleaner interview. “We will be doubling in size, so we will be a totally bigger company by year end,” he said.
The move would rapidly increase its market size, then its assets through acquisitions, followed by increased revenue from new rentals. Richards added that the fundraising forms part of plans by the company to increase the market cap over about three years to $10 billion via a series of measures. “This represents the first prong in the strategy,” he said.
If Kingston Properties raises the $2 billion, the amount would represent more than three times its previous rights issue back in 2015. At the time, the company set out to raise roughly $1 billion in what was its initial rights issue but raised $650 million instead, Richards recalled.
The planned rights issue opens on November 8, and investors can expect the release of a prospectus within a week, according to Richards. The rights issue will assist in financing new real estate deals for the company. Kingston Properties wants to purchase commercial real estate property in Jamaica and the Cayman Islands simultaneously disposing of up to another five condominiums in Florida, the United States, currently up for sale. The rights issue would finance the bulk of the acquisition.
The company said that it will continue to diversify its portfolio in the event of a softening of the real estate market. It is a strategy that the company started in its sale of condos in Florida and redeployment of capital in Jamaica and the Cayman Islands.
KPREIT’s notice on the Jamaica Stock Exchange stated that the rights issue would allocate 1.1 new shares for every existing share at a subscription price of $5.62 per new share. Some 321 million of the 1 billion units are currently in the hands of investors. The rights issue will grow those shares to 676 million units.
“The rights issue will be in respect of an additional 355.87 million new ordinary shares, subject to individual shareholder holdings as at the record date, in the capital of the company,” added the notice.
The top 10 shareholders, most of which are institutions, hold over 79 per cent of the shares in issue. The stock traded at $5.95 midway Tuesday, some way from its 52-week low of $5.00. It hit a high of $8.45 in April this year.
Shareholders in Kingston Properties Limited recently approved a resolution to increase the authorised share capital of the company to 1 billion units from 500 million units as an initial step towards raising funds via a rights issue.