Fri | Jun 22, 2018

Kingston Properties gets boost from Trump tax cuts

Published:Friday | May 18, 2018 | 12:00 AM
Kevin Richards, CEO of Kingston Properties Limited.

A Jamaican company with properties in Florida got a boost from the tax cut passed by the Trump administration last year.

"The so-called Trump tax cuts actually helped us ... we benefited from deferred taxes and this made us pick up little under $30 million in tax credits," said CEO of Kingston Properties Limited, Kevin Richards.

The real estate investment trust, which trades as KPREIT, owns properties in Jamaica, Fort Lauderdale and Miami, and the Cayman Islands.

In the March quarter, Kingston Properties reported a spike in net profit from $1.05 million to $37 million, after accounting for $29.3 million of tax credits. In the comparative period for 2017, the company paid more than $14 million in taxes.

Rental revenue rose 11 per cent from $50 million to $56 million in the comparative quarter.

"For the rest of the year, the target is to break the $200-million mark in rental revenue for the full year. The trend so far has been good and we anticipate that it will continue for the second quarter," Richards said Tuesday on the margins of the company's annual general meeting in Kingston.

Chairman Garfield Sinclair said in a statement accompanying the company's first-quarter earnings report that the tax credits related to the fair value loss on three appraised condo units in South Florida, and secondly, the amendment to the US tax code following passage of the Tax Cut and Jobs Act in December 2017, which reduced the corporate tax rate from 35 per cent to 21 per cent.

The amendments maintained the provisions of the 1031 Exchange Programme, which benefit KPREIT's US subsidiary, Kingston Properties Miami LLC.

Richards said on Monday that 1031 Exchange allows Kingston Properties to defer payment of capital gains taxes on the disposal of a property, provided that the full proceeds of the sale are reinvested in another property within a stipulated time frame, typically less than six months.

He noted that the company benefited from the Trump tax cuts through deferred taxes, which apply primarily when there is a fair value movement in KPREIT's property portfolio in the US.

"It's more a capital gains tax," he said.

neville.graham@gleanerjm.com; avia.collinder@gleanerjm.com