Derrimon to sell Drax Hall lands to REIT managed by Different Capital

Derrimon Trading plans to sell a 12.36-acre parcel of land in Drax Hall, St Ann, to an entity managed by Different Capital at roughly 40 per cent below its independently appraised market value – in a move that would shore up cash flow for the supermarket operator.

Documents obtained by the Financial Gleaner show that the parcel is owned by Arosa Limited, a subsidiary of Derrimon Trading. The land was independently valued by V.B. Williams Realty Co Ltd at US$7.8 million, or roughly $1.25 billion, with a forced-sale value of US$6.24 million.

Different Capital, co-founded by investment banker Christopher Williams and businessman Gary Matalon, intends to raise $1 billion through a private placement of funds from high-net-worth investors. From the raise, the investors in the REIT will acquire the property for some $741.6 million. It forms part of plans to prepare the land for a 70-unit residential development. The company, formed last year, writes its name as a lowercase ‘d’, and describes itself as a commercial realtor and REIT manager.

“We are the manager of the property,” said Williams in an interview. “The REIT will own the property... we expect about 200 shareholders to participate in the offering.”

Williams spoke generally about the project but declined to provide financial details of the share issue, due to the matter being before the Financial Services Commission.

Contacted for comment, Derrimon Trading Chairman Derrick Cotterell said the company chose this route to maximise the value of the Drax Hall property.

“Different has been engaged as the REIT managers. They will execute the development on behalf of the REIT shareholders,” Cotterell told the The Gleaner.

Cotterell did not immediately respond to queries about the price it paid for the land, or the rationale for selling it below market value.

Last month, Derrimon indicated that it would abandon its US$2.5 million plan to upgrade the manufacturing operations of subsidiary Arosa, aiming to conserve cash as it works to reduce its debt, which currently exceeds its capital. Up to March, it operated with a $2.3-billion working capital deficit.

The private placement comprises up to one billion common shares priced at $1 each and is being conducted by exempt distribution rather than a public offer. The memorandum states that the investment is available only to accredited investors, under the Financial Services Commission’s exempt distribution framework.

Promoters are targeting an internal rate of return of 16.8 per cent over an investment horizon of up to 36 months. Financial projections contained in the memorandum estimate revenue of $1.6 billion from the sale of subdivided lots, generating project profit of $657.5 million.

Unlike traditional income-producing REITs, the Drax Hall vehicle would initially focus on development rather than rental income. Investors are not expected to receive regular dividends, and returns are intended to be generated through phased lot sales, a bulk disposal, or a possible future listing on the Jamaica Stock Exchange. If no listing is achieved, the structure provides for a long-stop hold period of 36 months, after which the vehicle would be wound up and net proceeds distributed to shareholders.

The development envisions transforming the property into a branded community centred on bungalow-style homes. VM Wealth Management Ltd has been appointed arranger, broker, registrar and transfer agent for the offer.

neville.graham@gleanerjm.com