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JZ Capital slides on $108m writedowns and warning of further property losses

10 February 2020

Lengthy wind down of 12-year-old US-focused investment company likely after total real estate losses in past year rack up to $252m (£195m).

Shares in JZ Capital Partners (JZCP ), the troubled US property and micro-cap investment company, have slumped 13% to a nine-and-a-half year low after warning it will have to write off the full value of its two biggest real estate investments.

The Jersey-based fund dropped 39.4p to 270.6p, leaving shareholders nursing a 43% slump since it first warned about the over valued properties on 30 October, making a full but lengthy wind-up of the portfolio increasingly likely.

In a statement the company said preliminary valuations for its projects in the Fulton Mall, Brooklyn, New York, and the Miami Design District, which had already been written down by $18m and $62m respectively, would have to written off entirely with a combined write down of $102m.

New appraisals of three smaller properties would knock off a further $6m, taking the total hit to net asset value (NAV) to $108m since the end of last year.

This is unlikely to be the end of the bad news as ‘the company has yet to receive several appraisals from properties which represent a significant portion of JZCP’s net asset value. The company will issue further reports regarding the updated valuations of these properties as necessary.’

Today’s write downs lower the end January NAV per share by 16.8% or $1.39 from their 31 December level to $8.27 and take total real estate losses in the past year to around $252m (£195m) or $3.25 per share.

However, with an eye to further write downs, JPMorgan Cazenove analyst Chris Brown estimated the current NAV was actually $6.86 per share.

He said JZCP fund managers David Zalaznick and Jay Jordan urgently needed to sell the Greenpoint investment in New York, or make other disposals, to cut net debts of around $198m or 37% of the official NAV.

Today’s fall leaves the shares on a discount of around 43.5% to Brown’s NAV estimate but the analyst cautioned any bargain hunters that this was unlikely to offer good value. ‘With the likelihood of further bad news to come on the real estate portfolio this discount is not sufficiently wide for the risks involved, in our view. 

‘It will be a long wait, in our view, before any further capital is returned to ordinary shareholders, but over the longer term it seems that a full realisation is now inevitable,’ said Brown.

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