8 months ago
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Sygnus Real Estate Finance Limited, SRF, has reached the ‘exit and reaping phase’ of its investment cycle on its first round of developments.
Chief Investment Officer of Sygnus Capital, Jason Morris, says this will now trigger three actions: the orderly exit from projects undertaken since the company was founded in 2019; the reaping of funds and payment of dividends to shareholders; and the commencement of a second three- to five-year investment cycle, concentrating on key assets and joint ventures.
Morris announced to shareholders at the company’s annual general meeting on Thursday that there will be a temporary reduction in management fees charged by Sygnus Capital.
Sygnus Capital provides management services to Sygnus Real Estate.
For the next two years, Sygnus Capital will be reducing fees for core assets under management, or CAUM: in financial year 2024, it will fall by half a point to one per cent; and, for 2025, the fee will be billed at 1.25 per cent of CAUM. It will revert to the two per cent range in 2026, Morris said.
“We’re voluntarily aligning ourselves with shareholders by reducing our management fees during this period and, as we get to the other end of the management life cycle where we are aggressively deploying capital, we will normalise,” he said, pointing to the 18- to 24-month time frame that it takes to get real estate projects going.
The delayed payment of dividends also came up for discussion.
At SRF’s last annual general meeting in 2023, Morris committed to paying dividends in the ensuing year. But project delays and changing market conditions have scuppered that, and Morris is now seeking to manage expectations.
“I gave a commitment last AGM and I fell on my face,” he said in acknowledgement.
“I’m not going to give any other commitment, except to say that we are pushing hard to make the first distribution,” he added while appealing for shareholder patience.
Sygnus Real Estate booked net profit of $211.4 million for the financial year ended August 2023. It made a loss of around $133 million in the first quarter ending November.
At last report, the real estate company had $11.6 billion worth of properties in its portfolio.
Morris says, as the next investment cycle commences, the primary area of focus for over the 18- to 24-month period will be the two largest assets on the company’s books: Mammee Bay, a 14-acre beachfront property valued at nearly $6 billion; and Lakes Pen, slated for an industrial park, valued at nearly $3 billion.
“They are two strategic assets, and our time and attention will be primarily focused on those two; not that we’re ignoring the other assets, or we are not monetising them, but I just want to highlight the substantive nature of those assets. They’re large,” Morris said.
If the company spends more time on monetising those assets, then the rewards will be greater, he said in appeasement.
Alongside the focus on the large projects, Sygnus will be looking to do joint venture arrangements as the primary mode through which it would tackle other new projects.
The hunt is on for potential joint venture partners.
“Anybody and everybody, if you have good land in a good location and you want to unlock the value, ‘link wi’,” he said in invitation. Come and link up the real estate team, we can unlock the value for you,” Morris said.
Two of the projects tackled in the first cycle were Spanish Penwood, an industrial warehouse complex, and the One Belmont corporate office complex, both commercial developments in Kingston.
Regarding the exit from Spanish Penwood, Morris said that SRF still has 17 per cent of that project to exit. However, the company may end up retaining that 17 per cent stake, Morris noted, saying it might be more valuable to SRF to hang on to it.
Meanwhile tenants of One Belmont complex are said to be in the process of customising their office spaces as they take possession of the nine-storey building.
Morris said SRF will also not be completely exiting that investment. Instead it will be structuring a yet-to-be-determined instrument that will allow institutional investors, SRF shareholders and the company itself to benefit from cash flows generated from leases.
English (US) ·