Investing in real estate through unit trusts

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If you are interested in making money from the real estate market, and you do not personally have the funds to develop properties all by yourself, you can join others in doing so?. One way of investing in the property market is through real estate unit trusts.

Christopher Walker, CEO, JMMB Fund Managers, which offers a real estate fund as an investment product, points out that real estate in Jamaica has been resilient, even during the novel coronavirus pandemic, with growth in the construction and real estate, renting and business activities sectors, between July 2020 and June 2021, according to data from the Planning Institute of Jamaica (PIOJ).

He outlines, “For the quarter ending June 2021, construction grew by 18.3 per cent, reflecting an upturn in both the other construction and building construction components, while real estate, renting and other business activities was up by 2.5 per cent.”

He adds, “Additionally, real estate experts have also pointed to the potential boom expected locally and globally in industrial real estate. As such, JMMB Fund Managers remains cautiously optimistic, as we believe that this sector presents opportunities that can be leveraged to provide additional value for our clients, especially in commercial real estate, as we anticipate growth opportunities in the next five years in key areas of the economy.”

Small investors can participate in the industry by buying units in any real estate fund offered by the various financial institutions to diversify their investment portfolios to include residential and commercial real estate, even while investing in other assets, such as bonds and stocks/equities.

Walker notes that investing in a real estate fund allows clients to increased exposure to real estate, without the high entry point associated with this type of investment and the hassle of property management.

As at September 2021, the JMMB Real Estate fund has over J$3.7 billion in funds under management, which reflects a growth of over 500 per cent in the last five years. The growth in this fund is attributed largely to the increased interest in real estate investment by investors who are interested in diversifying their portfolio and preserving their wealth.

The overall strategy of the real estate fund is to “invest in a wide range of real estate projects — residential and commercial, directly and through partnerships, which allow for the consideration of a broader scope of opportunities which enhances our portfolio diversity and allows for better mitigation of risk and the prospect of higher return,” Walker outlined.

Investors in the fund will benefit from projects in the pipeline which include, according to Walker, two major partnerships with WISE Construction and Island Village. The partnership with WISE Construction will consist of a luxury home development, marking JMMB Fund Managers entry into the residential real estate market as a minority partner.

The housing project is earmarked for a one-acre property in the Kingston 6 area and will feature a mix of 38 apartments and townhouses under the name Signature Smart Homes. This partnership between JMMB Fund Managers and Wise Construction is financed through a combination of debt and equity.

On the commercial property side, JMMB Fund Managers through its Optimum Capital Fund and another partner have acquired Island Village located in Ocho Rios, St Ann.

In 2018, the fund management company also partnered with Proven REIT Limited on the acquisition of a 58,000 square foot of commercial space in the Portmore Pines Shopping Complex, in Greater Portmore, St Catherine.

The purchase, which was done via a sale with an existing lease transaction, was structured and arranged by JMMB Group through its capital markets unit and is now leased to business process outsourcing operator IBEX Jamaica Limited and retailers.

Walker stated, “This real estate fund is largely geared towards commercial property investment projects regionally and internationally, while also being keen on exploring a range of residential property investments, on a case-by-case basis.”