IPO could be upsized to rake in US$18.5 if oversubscribed
Regional investment outfit, First Rock Capital Holdings is seeking to raise up to US$12.32 million in an Initial Public Offer (IPO) for up to 106 million shares in the start-up company.
The shares, which goes on the market on January 13 is being offered at a price of J$ equivalent of US$0.12, which at the current exchange rate would amount to J$16.67 per share. The IPO is slated to close on January 31. The minimum subscription is 1,000 shares.
While the IPO is for 106 million shares, the company has reserved the right to upsize the offer by an additional 53,041,666 shares in the event of an oversubscription. This would see the IPO increasing to 159 million shares and the capital raised increasing to US$18.48 million.
Sagicor Investments Jamaica is the one of the arrangers for the IPO and lead stock broker while the co-arranger is Sygnus Capital Limited. The basis of the allotment will be on a first come first served basis, subject to the discretion of the Board of Directors.
It is the intention of the company to apply to the Board of the Jamaica Stock Exchange for admission of the shares to be traded on the main market as well as the US dollar market. First Rock Capital Holdings is an international business company duly incorporated under the laws of Saint Lucia.
The company invests primarily in real estate assets including income generating investment properties, development projects (greenfield and brownfield), real estate linked financial instruments and opportunistic private equity investments. Its primary aim is to provide its shareholders with a tax-efficient vehicle, offering an enhanced level of income, above average dividend yield and preservation of capital through the diversification of real assets.
Use of IPO funds
The capital raised from the IPO is to be deployed in accordance with First Rock’s strategy for realising targeted return on equity, while operating within a robust risk management framework. The company currently intends to focus initially on three target jurisdictions namely Jamaica, the Wider Caribbean and the United States of America.
Within these jurisdictions there will be an emphasis on both commercial and residential real estate. Eighty per cent is invested in commercial real estate and the remaining 20% in residential real estate. Deployment of the IPO proceeds will focus on three areas with the lion’s share of 64% in income producing assets. These are real estate assets, which will be acquired solely for the purpose of generating rental income.
The other areas are development projects, which involve the acquisition of property (green and brownfield) for commercial and or residential developments, which would amount to 23% and the balance of 13% on capital gains, which from time to time, opportunities will arise whereby, properties, may be acquired and held for capital appreciation and ultimate sale.
First Rock strategic objectives
First Rock focuses on creating an opportunity for shareholders to invest in a diversified portfolio of real estate assets, and thereby benefit from dividends from the company’s real estate activities, without having to buy, manage or finance properties themselves.
These strategic objectives are to be carried out in a number of ways such as the purchase and/or improvement of existing income producing properties, purchase of properties for development whether solely by the company or, on a case by case basis, with selected strategic partners for immediate sale upon completion or rental/income generation and the purchase of greenfield and/or brownfield properties with the intention of making further development or redevelopment for capital gains (less than 12 months)
In addition, First Rock prudently leverages its portfolio assets for efficient management, enhancement of yield and/ or to capitalize on pipeline opportunities. The debt to equity ratio on any given asset is not expected to exceed seventy-five 75%. As an ongoing funding strategy following the IPO, First Rock will consider market opportunities primarily in Jamaica, for the issue of short to medium term structured notes and debt.
The First Rock Group recorded a profit attributable to shareholders of US$218,261 over the twenty-three month period August 2017 to September 30th 2019
The Company has three wholly owned subsidiaries: (i) First Rock USA LLC, a limited liability company incorporated in and under the laws of the State of Florida, USA; (ii) First Rock Capital Latam, Sociedad Anónima, a corporation incorporated in and under the laws of Costa Rica; and (iii) First Rock Capital Cayman Limited, a limited liability company incorporated in and under the laws of the Cayman Islands, which together with the Company forms the First Rock Group.
The subsidiaries were formed in Cayman, USA and Costa Rica to create greater transparency and monitoring of the assets and income in said jurisdictions. They also facilitate the ease of doing further business in the jurisdictions as well as solidifying the Company’s presence.
The First Rock Group recorded a profit attributable to shareholders of US$218,261 over the twenty-three month period August 2017 to September 30th 2019. Total income during the reporting period was US$993,894 which comprised mainly of US$217,080 in interest from real estate linked notes and other financial instruments, US$393,042 in property revaluation gains and US$374,301 in foreign exchange gains. It is a key strategy of the First Rock Group to acquire properties at discounts to market value to not only realize revaluation gains, but also from a risk mitigation viewpoint in the event the asset is to be sold
Investment properties profitability is expected to further increase in the fourth quarter of the 2019 financial year, as First Rock Group begins to realise rental income portfolio of properties acquired to date. The company is optimistic that the target return on equity of eight per cent will be achieved by the end of the year.