The Jamaica Mortgage Bank (JMB) will, in a matter of months place a $1 billion housing bond, perhaps in two tranches, but will contain the offer to a select group of investors.
The state-owned bank, which is a financier of both private and public projects as well as provider of a secondary mortgage facility, had initially targeted the offer for July and another for December, but now says the first issue could be pushed back.
Checking market place
"We have some approvals to get and then we have to look at the market place to see whether it is feasible and sensible for us to issue it in July or maybe better to issue it in August or September," said JMB general manager Patrick Thelwell.
The proceeds of the placement will finance loans to different real estate developers for ongoing projects, and shore up the banks cash reserves, but $400 million will also pay down another bond which matures March 2010.
Thelwell says the price of the new bonds will be negotiated with buyers, but will likely be based on the going treasury bill rate. Treasuries last yielded 21.05 on the six-month, and 19.31 per cent on the three-month issue.
Interest will be paid quarterly on what will be a five to seven year issue.
"The way we fund ourselves is that we go to the market and issue bonds from time to time," Thelwell told the Financial Gleaner.
"Large institutions are who we usually target for our bonds."
But the bank also covers its expenses from project reflows, which the current Public Sector Bodies annual report says is an expected $598 million this fiscal year.
Thelwell said the institutions targeted for private placements include building societies, but suggested that the offers were not always confined to that narrow market which only has four players.
This year JMB is expected to funnel $300 million into Spanish Village, a residential development in St Catherine, which the bank is planning to take over; provide $260 million to the developers of the Stonebrook housing project in Trelawny; $80 million to the Non-Pariel residential project in Negril Westmoreland; and $67 million to Discovery Pointe in St Ann.
The Public Sector Bodies report compiled by the Ministry of Finance reported that JMB has committed $1.26 billion of financing to 14 projects, but would only disburse $990 million by the fiscal year end March 2010.
Concessionary rates
Thelwell also reported that since March when JMB went to the market with concessionary rates of 20 per cent on loans in a deliberate move to stimulate the housing sector, the bank has seen an "up tick" in the number of applications for financing of developments.
"We are up by 50 per cent, almost two times the number of applications we had received at this time compared to last year," he told the Financial Gleaner.
At present, the cost of loans for development purposes is in the region of 23 to 27 per cent, but is expected to climb higher inside the recession.
Rates for development
But Thelwell also said that historically JMB's cost of funds have averaged 21.1 per cent and that in effect the concessionary rate, for developments that cost less than $15 million, represent a "marginal subsidy".
"We are attracting projects from other institutions," said Thelwell. "We are 300 to 700 bases points below what other financial institutions are asking for similar projects and that is significant."
JMB last made a profit at year end March 2008, and has projected that losses will more than double last year's $21 million deficit to $47 million.
dionne.rose@gleanerjm.com
The Public Sector Bodies report compiled by the Ministry of Finance reported that JMB has committed $1.26 billion of financing to 14 projects, but would only disburse $990 million by the fiscal year end March 2010.