June 23, 1999
The Financial Editor The Daily Gleaner 7 North Street Kingston Dear Sir I wish to respond to some of the statements made in an article of June 18, 1999 in the Financial Gleaner, entitled "A Debt to the Market". The statements by themselves are misleading and would convey an inaccurate picture to your readership, and I therefore wish to correct these inaccuracies. I make particular reference to the value of the Citizens Bank building and to the statement made that the acquisition of the building was done at "a high price". I am not certain whether the comment is intended to mean that the price paid by Finsac was too high, based on the market value of the building. If that was the intention, it should be noted that the value attributed to the building in the transaction was based on a valuation of the property less a discount, for which we bargained with Life of Jamaica. The article went on to state that the transaction was "questionable", given that Finsac had "other assets like the Workers Bank headquarters, which is on the market at rock bottom prices" which we could have used for the Union Bank headquarters. First of all, I am not sure of the source of this information, since Finsac has not placed this property on the market as there are certain logistical and other issues to be resolved. We have of course entertained discussions with persons who have approached us and expressed interest in acquiring that building, given that we intend to dispose of it as soon as those issues are settled. All discussions have been based on market value, as assessed by reputable valuators. I am therefore puzzled by the reference to "rockbottom" prices. Before taking a decision that the property would eventually be placed on the open market, one of the things which we had to do was an assessment of the future needs of Union Bank, and whether the Workers Bank building was in fact suitable for the headquarters of Union Bank. As it turns out, it is not, hence our decision to use the present Citizens headquarters as the Union Bank headquarters, being the building in the Finsac portfolio best suited for the purpose. In passing, I should say that I find the comment that we should in effect ignore technical considerations in siting the headquarters of the third largest local bank mystifying, to say the least. These considerations affect the bank’s ability to conduct its operations efficiently and profitably and therefore cannot be ignored. Another consideration is the need to be able to transfer assets to the eventual purchasers of the insurance portfolios to back the liabilities assumed, and the possible use of the Workers Bank building in this process. We are still exploring this option and the possibility exists that this building may be utilised in this way, if the acquirer so desires. The primary reason for our involvement in the transaction was and remains the desire to assist the liquidity of the portfolio of the LOJ managed funds, and thereby reduce the need for LOJ to provide liquidity support to these funds. However, against the background of all the above facts, purchasing the Citizens building at a fair value was not inconsistent with our overall plans. Certainly, taking the properties to the open market would have been another alternative. However, apart from the fact that it is in the best interests of Union Bank that its landlord is a ‘friendly’ party, there is no guarantee that the property would have been sold at a price and within a time frame which assisted the funds. You would of course appreciate that while the properties would be on the market awaiting a purchaser, LOJ would be helping to provide liquidity to the funds to its disadvantage. In those circumstances, a quick sale was ideal. We are satisfied that the transaction allows us the opportunity to maximise value all around. It is critical that commentators understand that we cannot engage in short term planning, given the nature of our mandate and what we intend to achieve. We recognise that our policies will sometimes be criticised by those who do not appreciate all the circumstances, and it is for this reason that I have decided to take the time to advise the public of all the relevant circumstances. I trust you will accord this letter the same prominence as the article. Yours faithfully,
PATRICK HYLTON MANAGING DIRECTOR
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