IT started back in 2014 as a public-private partnership with The University of West Indies (The UWI), Mona: One company contracted to build and operate student housing facilities on the grounds of one of the premier tertiary institutions in the English-speaking Caribbean.
This is how 138 Student Living (138 SL), the Jamaica Stock Exchange-listed company, got its start. For a period of 30 to 35 years the company would manage the Gerald Lalor Hall at Mona — with a capacity of over 1,400 residents in single- and double-occupancy at The UWI under a build, operate, transfer agreement.
Following a capital raise with debt and equity, and issuing a request for proposal to engineers, 138 SL began construction of the housing with local contractors Prime Development Limited and Chinese-owned ZDA Construction Ltd. The company would have also been involved in the construction of the New Irvine Hall housing under 138 Restorations, a subsidiary company.
Looking back from then to now, Ian Parsard, chairman of 138 SL told the Jamaica Observer, “So it’s the first 20 per cent of the life of the central agreement. So we have the next 80 per cent where we’re looking to now continue to run a world-class operation, providing student housing in a safe environment and with the kind of facilities youngsters of today desire, which is plenty of Internet service and those other amenities.”
At the beginning, the above-average price point resulted in a slow take-up of the rooms, before more students from The UWI students and faculty, as well as students of the Norman Manley Law School; University of Technology, Jamaica (UTech); and students at other tertiary level institutions close by began occupying the facilities. By the end of 2019, the occupancy rate had reached 99 per cent.
“Well, in terms of the growth in the early years, one can appreciate that this being a novel idea and, of course, it would come at a price higher than the standard hall of The University of the West Indies, it took a little while to get the occupancy going. And so in the early stages, based on the fact that we had excess capacity, the idea was born to bring on short-term rentals to help close that gap, and also [to accept] the University of Technology students,” CEO Cranston Ewan shared.
However, a few months into 2020, occupancy rates started to fall as the onset of the COVID-19 pandemic sent students packing. Like other tertiary institutions, The UWI resorted to virtual learning to reduce the spread of the contagion. Occupancy at the four residential halls operated by 138 SL — Leslie Robinson, George Alleyne and Irvine halls and Gerald Lalor Flats — fell “overnight” to about 20 per cent.
At the height of the pandemic revenues declined by 35 per cent, resulting in the company’s net profit in 2021 dipping to $244.56 million, down from $316.78 million a year earlier.
Not resting on its laurels, the board and management at 138 SL embarked on a number of initiatives while looking for short-term opportunities to plug the fall-off in revenue. One such was boosting short-term rentals and another, offering storage to students who had left their property on halls.
“We didn’t lay off any staff [and] that was important for us because we recognise that whenever the business comes back up, we’re going to need critical staff and our staff are so committed to the business, we also want to show that level of commitment to our staff,” Ewan told the Business Observer.
While noting that the staff were receptive to the changes, he added: “Some of us, we took cuts in our pay and worked less hours during the period of time and we managed our costs in that period of time. We closed off certain sections of buildings, shut them down totally, so that you don’t have the overhead cost and really just managing the business during that period of time and look for opportunities and that carried us through until the country reopened.”
While the company could exercise its right to ask The UWI to cover lost revenue, it instead engaged in discussions to find a solution, according to Parsard. Recognising that COVID-19 was a never-before-seen phenomenon in this century, both parties reached a mutual understanding “And so, while on both sides there might have been solutions available in the contract, we both agreed that we would kind of sit down and make concessions with each other and work through the rough times to set the platform where we’re able to both benefit in the longer term. And that’s exactly what happened with the university,” the 138 SL chairman stated, commending the UWI leadership team for its understanding.
While Parsard does not think the company can be fully “insulated” from shocks, he explained that the lesson learned from COVID is about being nimble, flexible and fast.
Today, 138 SL has seen a rebound with occupancy rates rising to 90 per cent as the incidence — and possibly, reporting — of the virus declines. Still catering to a majority of The UWI students, the company’s accommodations also meets the needs of some 140 UTech students.
It may be for this reason Parsard notes that the buildings are “well ought after as a destination”.
“Outside of that, also we do operate a very viable short-term rental, which provides a substantial amount of income,” Ewan revealed to the Business Observer.
This, he said, is especially true when students vacate residential halls during summer breaks and “we fill that gap with short-term rentals”. In addition, 138 SL also hosts high school athletes during the staging of the Inter-Secondary Schools’ Association Boys’ and Girls’ Athletic Championship. The company also offers accommodations to delegations from overseas universities and visiting faculty while opening its doors for overspill from the Mona Visitors’ Lodge.
Still, with demand set to rise on account of student population growth, Ewan is eyeing what he calls “unbuilt capacity” — the opportunity to construct more buildings.
“So when you speak about capacity you’re talking about the land space. And there’s also the demand. And so with that demand, you’re able to justify the supply,” he said.
His colleague, Parsard, said that capacity can be realised as The UWI positions itself to be a full-experience institution.
Additionally, he said there are opportunities locally and regionally that the company is considering as it looks to expand. While tight-lipped on what those opportunities are, Ewan said the aim is to get 138 SL on a stable footing before considering other plans.
“I think it will be premature so to do. In fact, we even looked at opportunities outside of Jamaica, prior to that, and we have good, ripe opportunities. But I think, you know, as the saying goes, you have to dance a yaad, before you dance abroad… and once that is done, then, you know, the sky’s the limit,” the CEO said.
In the meantime, the company will pursue raising additional capital to take advantage of those opportunities while paying down its debts and beefing up its capital structure. Just last week Monday at an extraordinary general meeting, 138 SL’s shareholders approved the company’s increase in share and issue of new shares through an additional public offer.
“…during that COVID period we did have to go through a restructuring exercise with some of our loan note holders. And having done that process, looking at the obligations that we have coming up, the directors do not think it is wise to be able to go back to for a second round of restructuring of those loan notes,” Parsard explained.
“Having gone through the challenges of COVID [and] having come out I’m now hopefully looking at what is going to be a much brighter side as we continue the operations of 138 [SL]. When you look at the current value of the share of 138, this provides an opportunity for shareholders to actually own more of the company — and given where the price is at, our feeling is that it’s a real bargain… Those are the main reasons why we’re looking to set the foundation for a capital raise,” he added.