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JZ Capital crumples on 19% property writedown warning

31 October 2019

JZ Capital Partners shares slump by almost a quarter after US property and micro-cap stock investor warns its real estate assets could be over valued by $50 million to $150 million.

JZ Capital Partners (JZCP) shares slumped by almost a quarter today after the US property and micro-cap stock investor warned its real estate assets could be over valued by between $50 million and $150 million.

Shares in the Guernsey investment company dropped 114p or 24% to 361p as it postponed half-year results due next week while the properties were urgently reassessed.

The company, whose assets are managed by long-standing investment advisers David Zalaznick and Jay Jordan, said that in the course of examining real estate investment proposals it had been told by third party brokers that the value of its property holdings could be lower than the $443 million valuation ascribed to them in its last financial year ending 28 February.

‘At this stage of the examination, the company is unable to determine whether or not there has been a material diminution in the value of the company's real estate portfolio and there can be no certainty as to the quantum of any such diminution at this stage in the process, but, based on the information currently at its disposal, the company currently believes the aggregate reduction in valuation could be in the range of US$50 million to US$150 million,’ it stated.

That would represent a writedown of between 6.5% and 19.4% of its net asset value (NAV) at the end of September, analysts said.

The news follows an announcement by JZCP on 2 October that its real estate assets required additional investment for debt servicing and pre-development expenses.

Two days later it outlined a strategy of asset sales and scaling back new investments with the aim of returning capital to shareholders, who approved the plan at an extraordinary general meeting on 24 October.

Numis Securities said the shares now stood at a 52% discount below their net asset value and could fall further: ‘We remain wary of the fund due to its complicated capital structure, diverse multi-asset mandate, and concerns over corporate governance.’

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