To investors in our public companies;
Beyond the health of the world population, COVID-19, otherwise known as the Coronavirus, has had a severe impact on world financial markets. To date, both the DJIA and TSX are down 25% and 31%, respectively, since their respective highs from earlier this year.
No surprise, the family of Firm Capital stocks have not been immune to this downturn, with Firm Capital Mortgage Investment Corporation (TSX : FC) (“FCMIC”); Firm Capital Property Trust (TSXV : FCD.UN) (“FCPT”); and Firm Capital American Realty Partners Trust (TSXV : FCA.U – TSXV :FCA.UN) (“FCUSA”) being down in the 9% – 33% range over the same period. As of today, all Firm Capital stocks are trading well below our published Net Asset Values or NAV, with both FCMIC and FCPT trading within a few pennies of their respective IPO prices of $10.00/share and $5.00/unit, respectively.
While we are not discounting the impact COVID-19 has had to the world population, we also want to acknowledge that a lot of the trading activity that has occurred over the past several days has been, in our opinion, out of “fear and greed” as opposed to straight common sense. History has shown that man as a whole has survived pandemics that have been further reaching and far more devastating than COVID-19 has been to date.
Combined with the actions of the various world governments in the past few days and weeks, the world as a whole will ultimately recover from this pandemic and return to a sense of normalcy. Further, once a pandemic ends, stock markets tend to rally…and really hard! For example, the S&P 500 after SARS ended in April 2003 had a 15% rally over the first six months and 21% rally after one year. The same applies to other pandemics such as Avian Flu (2006), Swine Flu (2009), and Cholera (2010).
The board and senior management of the various Firm Capital entities are, pardon the pun, “firm” believers in their stocks over the long term and as such feel that these declines in the market are unwarranted and unnecessary. For example:
* FCMIC is in the business of providing bridge mortgage capital for real estate;
* FCPT is in the business of leasing diversified commercial and residential real estate with its top ten commercial tenants accounting for approximately 32% of revenue that are focused on groceries, as opposed to fashion retail; and
* FCUSA is focused on providing debt and equity capital to the US multi-residential space.
All of these entities are defensive stocks in that they, by and large, provide the necessities of life – food and shelter. Further, we as the board and senior management can assert that none of these businesses to date have been impacted by COVID-19.
In addition, actions taken by our board and senior management to support our public companies support what we are stating. We have been acquiring stock in the open market despite the downturns putting “our money where our mouth is.” We are all believers in the entities that we operate here at Firm Capital.
While it is too early to tell how long this pandemic will last, you can be assured that your investment in any of our Firm Capital entities is not at material risk from this virus. We have a simple philosophy at Firm Capital: Protect Shareholders Capital At All Times! We always invest capital with this philosophy in mind.
FCMIC has been public for over 20 years and has never had a loan loss. FCPT has raised its distribution seven times in seven years. FCUSA was taken over at a critical time in its existence by the current senior management team and went from losing money to generating positive cash flow. We cannot predict the future, but we promise you that we won’t be impacted by this pandemic in a material way.
Please always feel free to reach out to me or any member of the senior management of our respective public companies with any questions or comments.
President & CEO
Firm Capital Organization
Tel: 416-635-0221 ext.231
163 Cartwright Avenue
Toronto, Ontario, M6A 1V5