Fortress Caribbean Property Fund: Do We See Rats Jumping Ship?
There is the old saying that one should always follow the money. In the case of Barbados one can say that when the money-class in Barbados begins certain machinations others less positioned should sit up and take careful note.
A report which appears in the Barbados Today makes for interesting reading – Fortress Fund initiates major move to safeguard investors as property market sags. While the newspaper has done a good job of reportage, it is unfortunate the dearth of financial analysis by the Barbados media. Another indicator one can use to measure the quality of our education system and media fraternity, another blog perhaps.
Barbadians have always been spoiled by the idea that property value and rental income will never decline. The fact that the report by Barbados Today acknowledges that principals at Fortress Fund are warning about negative impact on the real estate market is interesting for many reasons.
PROPERTY FUND PROPOSAL
The big question BU has for Geoffrey Cave and Son is how could property values not have declined in the last five years?
The Fortress Caribbean Property Fund is proposing to split the fund into two, a Value Fund to comprise of income producing assets and Development Fund to include “properties held for development and resale”. The BU household encourages BU brainiacs to explain how the propose split to shareholders is designed to ameliorate the concern which Fortress Fund has about the Caribbean Property Fund. Note the share price has declined from about $2.50 in 2008 to about $0.50 – Performance as at 31 July 2013.
Will the existing shareholders not continue to be stuck with the slow performing properties shifted to the Development Fund?
Continuing the point about when rats begin to jump ship the need for those in the environs to take note. Knowing the way Barbados operates BU is of the view that senior management at Fortress have reacted based on information which is not currently available to other investors and potential investors.
There are a couple properties in the portfolio which have caught the eye:
The Fund owns Limegrove Hillside Villa 6 and title will be legally transferred in the near future. The Fund has possession of the unit during the year and commenced rental of it, to defray costs, in July 2011. The unit is listed for sale with multiple real estate agents. Real estate available for re-sale was adjusted to its net realizable value of $1.35 million, resulting in a $457,000 impairment loss (2011 – nil).
The Fund purchased a 35% interest in this 3.92 acre site with spectacular views of the Grenadines. The land has been classified as an investment in an associated company and is carried at cost which is lower than its net realisable value. The Fund’s portion of the cost is $3.0 million. A spectacular 5 star new hotel at this resort will be opened in the early part of 2013 and it is anticipated that there will be substantial interest in this lot at values well above current carrying cost.
Thanks to Due Diligence for doing the research for this blog.