Tea and condiments manufacturer Jamaican Teas Limited is banking on flows from real estate sales to finance its factory expansion.
Jamaican Teas CEO John Mahfood said the 30 apartments being developed by the company’s property arm at Belvedere in Kingston is projected to bring in $800 million of revenue.
The apartments are expected to hit the market in June.
Its returns are to be utilised both as financing for the 20,000 square feet of manufacturing space that JamTeas wants to add to its Kingston plant, as well as pay down the company’s debt.
Speaking with the Financial Gleaner ahead of JamTeas’ annual general meeting on Tuesday, Mahfood said the company was in the midst of property or built facilities that can be transformed for its manufacturing purposes.
Essentially, the company is looking to grow its production space by two-thirds, up from the current 30,000 square feet that’s spread across two factories to 50,000 square feet. Its current facilities are located at Bell Road and at Montgomery Avenue in Richmond Park. The latter and smaller facility houses the company’s dry-pack operations for soups, seasonings and drinks in a 10,000 square feet facility that Mahfood said is “bursting at the seams”.
“We really need that space and we have to secure it already built or to be developed. As it is now, we have a duplication of efforts and a drain on resources. We pay double for security, warehousing, utilities and just the sheer effort to manage two locations,” he said in an interview.
He also disclosed that the company’s hunt for a new location is being pursued with consolidation in mind. The company wants to operate the entire 50,000 square feet of old and new production space from one complex.
The Belvedere residential real estate development got under way in 2020. It’s original completion date in October 2021 was set back by the pandemic. But the one-year extension still wasn’t enough.
Now, Mahfood says that the project, which was expanded from 25 residences to 30, is expected to wrap up construction at the advent of summer.
“We found that we could increase the available density to 30. This was approved. It will make the project more viable,” said Mahfood.
“We’re on the final stages of construction and we’re confident about the completion by the end of June 2023,” he said.
The units, which were originally priced between $14 million and $20 million, will hit the market at $28 million instead.
“The proceeds should be about $800 million. That will allow us to fund the construction and the purchasing (of new factory space) and to pay off the bank loans,” Mahfood said.
The sale of the units at Belvedere is one of two crucial moves at JamTeas that have been bugged by delays.
The other is the spinning off of the manufacturing arm of the company to form Caribbean Dreams Foods Limited, CDFL, a wholly owned subsidiary of Jamaican Teas.
Both Mahfood and CEO of the manufacturing division, Dianna Blake-Bennett, were pressed by shareholders seeking an explanation for the delay in establishing the spin-off that should have started business in March 2022, and was to list on the main market of the Jamaica Stock Exchange by summer of 2022.
A new timeline for March 2023 was floated later but that, too, has been missed.
Blake-Bennett reported that the spin-off project was hit by several snags, including the procurement of manufacturing licences and the settling of regulatory arrangements.
Mahfood said the hurdles had to be cleared so that CDFL would be allowed to import some of its inputs duty-free and successfully pursue its export programme.
The manufacturer currently produces teas, soups, spices, among other food items under proprietary brand Caribbean Dreams, and Tetley teas under licence. Part of the preparations to launch the new unit included negotiating the transfer of the rights to produce the Tetley brand from Jamaican Teas to Caribbean Dreams Foods.
Mahfood now says CDFL is expected to be fully operational by October, coinciding with the start of JamTeas’ next financial year.
So far, for its current financial year, at the six-month mark ending March 2023, JamTeas recorded a profit of $48 million, which was less than a fifth of the $252 million earned for the similar period in 2022. This was despite strong growth in sales, which rose 14 per cent to $1.33 billion.