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Cash Plus places confidence in local assets, but will it all end in tears?
Dennise Williams
Friday, August 24, 2007
HILL. Cash Plus is in its first phase of development
Recent high-ticket purchases valued at well over $14 billion (US$212 million) by the Cash Plus Group, known for paying 10 per cent per month on sums loaned to it by clients, has garnered mixed reactions from the investing public.
On one hand, the firm has been applauded for its strong show of confidence in the Jamaican economy. On the other hand, critics say that the actions of the firm are reminiscent of the actions taken by banks and insurance companies in the 1990s.
On the heels of the announcement it had acquired the Hilton Kingston Hotel, news broke within the space of the last three weeks that Cash Plus bought the Drax Hall Estate from the cash-strapped Dyoll Group, local carrier International Airlink from private interests and hardware firm Mainland International from the Myrie family.
Cash Plus also announced that it would spend US$750 million to develop the 800-acre Drax Hall property, located near the Runaway Bay area of St. Ann.
"What Cash Plus has been doing is good from a local investor point of view; we can't depend solely on foreign companies to invest in this country," said Orville Johnson of Today's Money. "The recent purchases demonstrate investor confidence in the economy," he added.
Johnson noted that the assets mentioned were solid from a demand point of view. "The Hilton is a solid property and there is a gap for airlift across Jamaica and into the Caribbean. So there is good potential there." Even so, Johnson noted that without the opportunity to view the Cash Plus financial statements, he could not fully endorse the company's activities. "Without knowing what is on its balance sheet and profit and loss statement, it is difficult to assess the impact of the recent purchases," he surmised.
A financial analyst located in New Kingston, who spoke anonymously stated, "You can't assume any of these recent purchases are on Cash Plus's balance sheet. You would have to see the balance sheet first."
And this analyst expressed concern with the liquidity of the alternative investment scheme. "One thing I know is that if you are a financial institution, you need a certain level of liquidity. Are the properties that Cash Plus is investing in able to generate enough liquidity?" The analyst pointed out: "Remember when Sandals was involved with Air Jamaica? It was said that buying an airline is the best way to become a millionaire, if you started out as a billionaire. And what I know about real estate is that it is not a liquid asset."
Johnson agreed that there could be liquidity risk with the assets involved. "The question is what percentage of its total portfolio do the recent real estate purchases represent?" Without published statements, that question cannot be answered in a transparent fashion.
He also questioned, "How will the US$750 million development of Drax Hall impact the cash flow of the firm? Without knowing the actual cash flow of Cash Plus, it is hard to make an assessment."
Upon completion of the development, the value of the property, now approximately US$110 million, will move to over US$2 billion, Carlos Hill explained in a July 30 interview with the Jamaica Observer. Additionally, Hill said Cash Plus has already retained a securities firm to underwrite a US$250-million bond offering, which will be used to complete the first phase of the development.
FINSAC II?
Then there is the lingering presence of the financial sector meltdown of the 1990s.
"Those of us who were in the industry during the meltdown of the financial sector," Johnson said, "¯will remember that one of the problems that the banks and insurance companies faced was an overemphasis in real estate."
The New Kingston broker added, "I remember in the 1990s, different subsidiaries in a group would buy assets and that was shown to not work out too well." Johnson added, "Only time will tell if Cash Plus can continue to meet their monthly commitments to people. I haven't heard anything bad about the firm, in fact, people praise them. There is just one further step that the firm should take - publish its accounts."
The five-year-old company is a diverse "conglomerate" spanning telecommunications, real estate, hospitality and international shipping interests.
Dennise Williams
Friday, August 24, 2007
HILL. Cash Plus is in its first phase of development
Recent high-ticket purchases valued at well over $14 billion (US$212 million) by the Cash Plus Group, known for paying 10 per cent per month on sums loaned to it by clients, has garnered mixed reactions from the investing public.
On one hand, the firm has been applauded for its strong show of confidence in the Jamaican economy. On the other hand, critics say that the actions of the firm are reminiscent of the actions taken by banks and insurance companies in the 1990s.
On the heels of the announcement it had acquired the Hilton Kingston Hotel, news broke within the space of the last three weeks that Cash Plus bought the Drax Hall Estate from the cash-strapped Dyoll Group, local carrier International Airlink from private interests and hardware firm Mainland International from the Myrie family.
Cash Plus also announced that it would spend US$750 million to develop the 800-acre Drax Hall property, located near the Runaway Bay area of St. Ann.
"What Cash Plus has been doing is good from a local investor point of view; we can't depend solely on foreign companies to invest in this country," said Orville Johnson of Today's Money. "The recent purchases demonstrate investor confidence in the economy," he added.
Johnson noted that the assets mentioned were solid from a demand point of view. "The Hilton is a solid property and there is a gap for airlift across Jamaica and into the Caribbean. So there is good potential there." Even so, Johnson noted that without the opportunity to view the Cash Plus financial statements, he could not fully endorse the company's activities. "Without knowing what is on its balance sheet and profit and loss statement, it is difficult to assess the impact of the recent purchases," he surmised.
A financial analyst located in New Kingston, who spoke anonymously stated, "You can't assume any of these recent purchases are on Cash Plus's balance sheet. You would have to see the balance sheet first."
And this analyst expressed concern with the liquidity of the alternative investment scheme. "One thing I know is that if you are a financial institution, you need a certain level of liquidity. Are the properties that Cash Plus is investing in able to generate enough liquidity?" The analyst pointed out: "Remember when Sandals was involved with Air Jamaica? It was said that buying an airline is the best way to become a millionaire, if you started out as a billionaire. And what I know about real estate is that it is not a liquid asset."
Johnson agreed that there could be liquidity risk with the assets involved. "The question is what percentage of its total portfolio do the recent real estate purchases represent?" Without published statements, that question cannot be answered in a transparent fashion.
He also questioned, "How will the US$750 million development of Drax Hall impact the cash flow of the firm? Without knowing the actual cash flow of Cash Plus, it is hard to make an assessment."
Upon completion of the development, the value of the property, now approximately US$110 million, will move to over US$2 billion, Carlos Hill explained in a July 30 interview with the Jamaica Observer. Additionally, Hill said Cash Plus has already retained a securities firm to underwrite a US$250-million bond offering, which will be used to complete the first phase of the development.
FINSAC II?
Then there is the lingering presence of the financial sector meltdown of the 1990s.
"Those of us who were in the industry during the meltdown of the financial sector," Johnson said, "¯will remember that one of the problems that the banks and insurance companies faced was an overemphasis in real estate."
The New Kingston broker added, "I remember in the 1990s, different subsidiaries in a group would buy assets and that was shown to not work out too well." Johnson added, "Only time will tell if Cash Plus can continue to meet their monthly commitments to people. I haven't heard anything bad about the firm, in fact, people praise them. There is just one further step that the firm should take - publish its accounts."
The five-year-old company is a diverse "conglomerate" spanning telecommunications, real estate, hospitality and international shipping interests.