LCAP SPAC – Mall Renovator Making SPAC Money Moves

dead jcpenney mall

Intro to Lionheart SPAC (LCAP)

Although nothing to do at all with a Lion’s heart, Lionheart Capital is an interesting choice for a sponsor. LCAP SPAC is sure to do an interesting property tech deal and should definitely be paid attention to. Lionheart Acquisition II raised $200M with a half warrant per unit this summer. The main goal of this blank check company was to combine something like a merger with other businesses. According to the company informs that their management team “has an extensive track record of acquiring attractive assets at disciplined valuations, investing in growth while fostering financial discipline and improving business results.”

Management Team

Ophir Sternberg is the CEO and Chairman of Lionheart Capital, established in 2010. He has over 28 years of experience of developing and investing in all sectors of the real estate industry. In 2019, the company completed in surplus of 20 real estate transactions across the entirety of North America. Under Mr. Sternberg’s guidance, Lionheart Capital completed many important real estate repositions and transactions, including the Miami Beach Ritz-Carlton project, which amounted to a total sell-out value exceeding $560 million.

In addition to that, there was a $30 million purchase and a $120 million sale of the Seagull Hotel, Miami Beach (largest hotel sale in Miami Beach of that year). Both the corporation and CEO Mr. Sternberg are presently working on a few other projects right now. This includes retail properties in Miami’s Design District, two different oceanfront condominium towers located in Pompano Beach (Florida), and more. Some interests he’s invested in are NASDAQ and also media companies such as Forbes.

Trevor Barran is the Cheif Operating Officer (COO) of Lionheart Corporation (SPAC). Previously he served as COO of Out of the Box Ventures since its establishment in 2017. Trevor is a very qualified individual, graduating from Princeton University with a degree in Aerospace Engineering. Mr. Barran brings over 20 years of experience executing and developing operational and investment strategies across the financial services, tech, healthcare, and real estate industries. This includes the last 10 years gathering and developing real estate properties as a senior member of the corporation. From about 2013 to 2019, Mr. Barran served as CEO of Lionheart Nica S.A, Real Estate, a subsidiary of Lionheart Capital.

He began his career in 1998 at the Mitchell Madison Group, Inc. Basically a management consulting firm focused on refining performance for large companies. This firm was eventually sold to USWeb/CKS Corp. for roughly $300 million in 1999 and eventually grew to over 8,500 employees.

Paul Rapisard is the CFO and Secretary of Lionheart Corporation. He previously served as CFO at Lionheart Capital & Out of the Box Ventures, a position he’s held since 2019. Mr. Rapisarda is an experienced investment banking professional with more than 25 years of working in and for a variety of companies. Before working with Lionheart Capital, he served also as CFO but at Etrion Corp. (TSX:ETX), a dual-listed (Canada/Sweden) solar energy development company (from Oct 2015 to Dec 2017). This specific corporation is part of the Lundin Group (13 companies in the energy and mining sector).

Mr. Rapisarda was the man who managed all finance functions, including financial reporting, treasury & cash management, regulator/SEC compliance matters, and more. Prior to this, he worked for Garrison Capital Advisors LLC (a financial advisory/consulting services company). Then from 2008 to 2014, he worked for another dual-listed company, Atlantic Power Corporation (NYSE:AT). He served as Executive Vice president-Commercial Development there. The company was a portfolio company controlled by Arclight Capital Partners, a private equity firm.

Sectors of Focus

Ritz-Carlton properties compose a large portion of Lionheart

It seems that Lionheart Capital is mainly focused on pursuing property technology with this SPAC. This is an industry focused on utilizing technology and digital tech related services in the real estate industries. So far Lionheart hasn’t invested in any big time companies or anything. But they do have a community meal program near a Night Club in Ontario (more information can be found here). The following are potential real estate companies that Lionheart Corporation could target:

JCPenny – Lionheart Capital has already gained ownership of many JCPennies nationwide. With substantial real estate assets with significant potential in a turnaround, JCPenny is an interesting target. This store brand is related to Retail & Commercial projects, so for Lionheart Capital its quite suitable. Lionheart has a lot of experience in renovating malls and pursuing growth strategies to ignite growth.

Zumper – Opened in 2014, Zumper is a leading corporation in the digital real estate industry. Thier valuation is estimated to be around $100 to $500 mil, as of early 2020. This company would give Lionheart a good foothold in the renting/rental sector of the real estate industry.

Niido – Founded in 2016, this company allows people to buy and sell real estate using advanced technology and services. They currently have raised $200 mill in funds, and sponsored by Brookfield Property Partners. This is a good company to target in its early stages, with its stable growth.

Sponsor Deal Analysis

Lionheart is formally sponsored and was created by Lionheart Capital. So far, the Lionheart Sponsor has acquired 2 deals/organizations: NowRenting (Sep 2019) & PadMapper (Feb 2016).

An interesting fact is that both of these organizations are owned by parent organization Zumper (a target that Lionheart could invest in). NowRenting is cloud based so its very easy for customers to use their rental software. PadMapper, if you go to their website, you can easily find rentals as it has a unique feature of searching in popular cities of the US (very flexible this way).

Zumper has raised over $140M to date and seems like a prime target for Lionheart. Zumper provides a rental marketplace designed for renters, landlords, and property managers. It was founded in 2012, driven by a mission to make renting an apartment as easy as booking a hotel. The company is headquartered in San Francisco in the Silicon Valley scene.

Deal Flow Insights

Last year (2020), Lionheart made a deal to co originate loans with another company – Schroders. According to Bloomburg these corporations will “invest in other distressed real estate opportunities that may bring in a safe, attractive return.” Apparently due to the pandemic impacts, there are great opportunities in the real estate market. Since the “loan-to-value ratios” are “no higher than 75%” its believed the risk is very low (making these loans relatively safe).

Out of the Box Ventures (a subsidy of Lionheart Capital) has also fired up deals with the effects of COVID-19 and the resulting pandemic. One of malls they own is Lakeside Malls, in Michigan, and due to social distancing and such they’ve had to limit the amount of people that can shop and navigate restrictions. Not only that, but they had to close their stores early 2020 when many small business were closing too. But just like the loans that Lionheart made, Out of the Box ventures is confident in the community of Lakeside Malls so they believe business will be back to normal in no time.

Conclusion on our Findings

Lionheart Corporation is led by a mediocre CEO and a team that has most of its experience in mall-based retailers. Both the SPAC and Lionheart Capital has a bright future ahead and I don’t see them running into any deadline problems. Lionheart is clearly an opportunist, and will likely take advantage of retail displacement due to COVID. Also Lionheart Capital is taking full advantage of the retail real estate deal flow during the Pandemic, so they definitely know what they’re doing. Finally, with subsidiary’s such as Out of the Box Ventures, Lionheart Capital is sure to expand their horizons, whether its in the real estate sector or any other sector.

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