Gov’t Considering Legislation to Facilitate Real Estate Investment Trusts

Prime Minister, the Most Hon. Andrew Holness, says his Administration is considering a proposal for legislation to facilitate Real Estate Investment Trusts (REITs) in Jamaica. 

“REITs are something that we actually have discussed internally in the Government, and it is being considered,” he stated. 

Mr. Holness was delivering the keynote address at a recent symbolic groundbreaking ceremony for the development of a $3.7 billion ‘One Belmont’ Class-A corporate building on Belmont Road in Kingston. 

The Prime Minister pointed out that “our research shows that the asset class of real estate, even during the pandemic, grew at approximately 5.2 per cent”, noting that this “is amazing”, 

“So real estate is very important… and a very, resilient asset to have in your portfolio, it would appear, even during the pandemic,” he further stated. 

Mr. Holness said that if the real estate industry continues to grow throughout the pandemic, it will “drive [Jamaica] out of the fallout in economic activity and lead to a stronger and better recovery.”

Against this background, Co-Founder and President of the Sygnus Group, Berisford Grey, in his remarks, indicated that REITs legislation will “attract international capital for Jamaica.”  

“You’d have emerging markets and investors coming to invest in Jamaica. With specific laws governing REITs, whether it’s a private or public vehicle, there’s tremendous value in terms of pooling real estate together, getting the ordinary investor in, getting the pension funds in, and letting them take a long-term view on the asset class,” he contended. 

Mr. Grey informed that in the United States, public REITs comprise 5.5 per cent of the economy, noting that “that’s approximately US$1.5 trillion worth of value that is held by the public investor in the US market.” 

“Imagine a world in which the public of Jamaica hold 5.5 per cent of value in real estate trust; that would probably be about $800 million of publicly traded value, which the ordinary investor, pension funds, and others can get out,” he further argued. 

Additionally, Mr. Grey said Jamaica’s real estate stock can be “packaged into a REIT that is sponsored by the Government or by a public-private partnership.”

In this regard, Prime Minister Holness said he is encouraging the renewal and building of residential and commercial stock. 

“There are some lovely buildings in downtown Kingston. [But] one of the complaints we [have] had to deal with within the Government is the health environment in the office spaces,” he pointed out.

Mr. Holness noted that there are many sick buildings, “because we have not replenished our commercial building stocks with great speed.”

“So I’m all for the renewal of our building stock; it is necessary [and] important that it be done,” he added.

However, Mr. Holness emphasised the importance of persons’ understanding that although the lack of adequate infrastructure is a “binding constraint on [the country’s] growth”, the renewal and building process “cannot be done in a haphazard way.”

He said the Government has taken note of complaints about the methods used by developers, which are “changing the nature of areas and infringing on privacy.” 

Additionally, the Prime Minister said it is important to bear in mind that new modernised buildings can potentially spur discord regarding the “perceived high-quality buildings and outdated and inflexible secondary stock that could suffer from a decline in demand.” 

Consequently, he advised that the Administration will be providing guidance on how to treat with the various issues presented.

“There are two forces that we have to pay close attention to, one is the economics behind it, and there is strong economics driving the developments in Kingston. We need that development to keep our economic recovery going, as I have said; but importantly to renew the built environment. At the same time, we have to respect people’s property rights, and it doesn’t make sense that we renew, and then end up with a concrete jungle,” he stated.

Mr. Holness maintained that the environmental and governance concerns in the renewal of Kingston are important, adding “we hear the cries of the concerns and I give all the citizens, all the residents who have been raising these concerns, the assurance that [they] will be addressed.”  

The Prime Minister indicated that the Government intends to reposition Kingston the English-speaking Caribbean’s premier city of culture, lifestyle and sports, trade, e-commerce, and finance. 

Against this background, he encourages the private sector to be innovative when taking calculated risks. 

“We want the private sector… to be risk-takers; but the risk has to be very well controlled. That is why we have strong anti-corruption and regulatory frameworks to ensure that risk-taking is done within the bounds of reason,” he stated.

Mr. Holness said his Administration has a fundamental belief in partnering with the private sector to facilitate its growth and development, as it benefits citizens at all levels.

“What we have to do, as a country, is to begin to read, recognize and respect the value and importance of each member of that partnership. The engineers, architects, lawyers, people who are doing the conveyancing, the excavator operator, [and] the man mixing the cement on the site, will all benefit,” he said. 

The Class-A corporate development will comprise five levels of approximately 79,000 square feet of corporate office space and four levels of parking.

The project is being jointly spearheaded by Sygnus Real Estate Finance and Audere Holdings Limited. 

Construction, which is being executed by Build Your Dream Construction Limited, is slated for completion by April 2023.