First Rock presses pause on new investments
First Rock Capital Holdings, a two-year-old investment company with a bias towards real estate, scored a profit of US$1.25 million at half-year, despite stumbles in the rental market.
The company reported reduced June quarter flows from its Costa Rican commercial and residential holdings, where corporate tenants had reached out to First Rock requesting a reprieve amid a coronavirus-induced deterioration of business.
“Other property owners in that market were giving some forbearance, so we gave some accommodation. Some leases were renegotiated, which meant a reduction of the rent, or in some cases, there was a deferment,” said First Rock CEO Ryan Reid. “Our financial year ends in December, so we should not see us going beyond that,” he said.
The company’s total investment income at half-year topped US$2.76 million. The Costa Rican flows would have added another US$20,000, Reid said, absent the rent deferments.
First Rock’s new acquisition, a controlling 75 per cent stake in microlender Dolla Financial – which was acquired from SSL Growth Equity at the end of March for US$500,000 – buttressed the company’s earnings in the June quarter. It booked a US$180,000 net gain on the acquisition and another US$170,000 in dividends, Reid said.
Still, the company also provisioned over US$100,000, around 80 per cent of which relates to Dolla, in case its loans go sour during the pandemic. Dolla operates in Jamaica and has a subsidiary incorporated in Guyana that is set to go operational later this year.
Profit in the June quarter topped US$421,000.
“Over the last year and a half, we’ve been pursuing projects that are generating income. Case in point is the Dolla transaction. We’re very much happy with that acquisition because, in fact, Dolla Financial was able to pay a dividend to its parent company during the quarter,” Reid said.
“This is part of our diversification strategy. We invested in real assets, spreading the risks such that if one investment were to fall off, there would be another to lend support,” he said.
Reid says First Rock is now in “settle-and-hold mode,” preferring to cautiously go with existing commitments rather than take on new investments in an uncertain environment.
“We have Bamboo Avenue to deal with, and Seaview Avenue is to come on stream, so there is no big appetite to venture further at this time,” Reid says of the pending residential and commercial real estate developments.
Since the company became operational in early 2019, it has invested a combined US$33 million in real estate holdings and developments, as well as the acquisition of equity stakes in various businesses. First Rock still has US$5 million of funds in its kitty awaiting investment opportunities.