First Rock Capital Holdings’ decision to geographically rebalance its portfolio should help the company alleviate risks, according to THE ANALYSTS of Taking Stock  with Kalilah Reynolds.

First Rock now holds 68% of its total assets in Jamaica, 10% in Cayman, 16% in Costa Rica and 6% in Florida. They’re now planning to realign the allocations to be more equally weighted across jurisdictions.

CEO Ryan Reid disclosed the plans to shareholders at their virtual annual general meeting recently.

Senior Wealth Advisor at Ideal Portfolio Services, Orick Angus

Senior Wealth Advisor at Ideal Portfolio Services, Orick Angus, said the move forms part of efforts to manage unwanted risk as the company seeks other investment opportunities in real estate in the Caribbean and the United States.

“I remember in the prospectus, they had outlined what the portfolio would be comprised of.  It was more income producing, developments producing and capital gains so I guess the company is now in a better position where they are able to capitalize on some of those gains and make use of some of those income and not overly expose themself to any undesirable risk,” said Angus.

He said there will always be a need for an actively managed portfolio to be realigned or rebalanced. In First Rock’s case, he said it’s a good strategy, especially as the company has a lot of deals in the pipeline and is in need of capital to fund some of those deals.

“I support that move in full,” he added.

Jamaica heavily weighted

Meanwhile, Assistant Manager of Private Equity at PROVEN Management, Julian Morrison said it’s not concerning that the largest part of the portfolio is in Jamaica.  Reid had also noted at the AGM that Jamaica’s position will not likely change even with the realignment.

Assistant Manager, Private Equity at PROVEN Management, Julian Morrison

“If it was a portfolio of stocks that were being managed it means that the level of rebalancing would be more frequent but given that it’s a real estate portfolio, the discipline around that is under a different type of time horizon. The fund is young and they have a longer time horizon and they have many other things that they can execute,” said Morrsion.

“It’s good to start where you know because that’s where you have the relationships and that home field advantage.  You understand the risk factors, you have the relationships in that market so that’s a good way of managing the risks especially in the beginning of the life of the fund,” he added.

By the end of this financial year, First Rock is targeting an asset base of US$50 million with its asset diversification strategy to be used to help meet the goal.

The company had realigned its focus solely on real estate investments as it executes on new developments across the region. 

The company initially expected to hit the asset target within five years of becoming a public company, having listed on the Jamaica Stock Exchange (JSE) in February 2020. However, Reid said they are looking to accelerate that plan. 

Over the past year, the company has executed major real estate deals in Costa Rica, the Cayman Islands and Guyana, costing millions of dollars.

The company had closed out the 2020 financial year with a balance sheet of US$35.82 million. 

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