(includes all investments of $500,000 or more)
Fire Capital is a $122 million India focused real estate fund launched in 2006. India recently enacted legislation authorizing foreign direct investment in real estate, subject to a host of directives related to the size of the investments, the types of properties being invested in, and the amount of time that the capital must be committed. In an effort to capitalize on this opportunity, Om Chaudhry, a local Indian professional with 10+ years of experience in real estate, and his partner, Gautam Gutali, a CFO and accountant with a 20-year history working with multinational corporations, formed Fire Capital Fund. Fire Capital invests $5 – $15 million in various residential and mixed use developments in partnership with local developers. What distinguishes Fire Capital from its competitors is its focus on smaller development projects and its approach of combining the expertise of its management team in partnership with local project developers. Fire Capital has invested in an integrated housing and commercial development project in Indore; a 150-acre township project near Avadi, a suburb of Chennai in southern India; a 500 acre integrated mixed use township in Bangalore and is currently investigating projects in Dehradun, Jaipur, Nagpur and Ahmedabad. Despite a significant amount of recent foreign investment in the real estate sector in India, there is still an extraordinary supply/demand imbalance that exists and demographic trends that suggest that this imbalance will continue for the foreseeable future particularly in mixed-use residential communities.
Golden Goal LLC is a youth soccer and lacrosse tournament park located in Fort Ann, New York (about 8 miles south of Lake George). Golden Goal is modeled after the very successful Cooperstown Dreams Park that was built ten years ago in Cooperstown New York for boys’ Little League Baseball tournaments. The Cooperstown project has been an incredible success, hosting more than 900 teams per summer, with a waiting list of several thousand teams. One of the three founders of Cooperstown, Dave Dinallo, formed Golden Goal to pursue his vision of creating a soccer/lacrosse tournament park for 10 to 15 year old boys and girls. His analysis showed that there are more than five times as many travel soccer teams in these age groups than there are little league teams and that lacrosse is the fastest growing youth sport in America. There are two driving assumptions to Golden Goal’s investment thesis. First, the demand for competitive youth baseball is transferable to soccer and lacrosse. Second, the attraction to competitive tournament play is directly correlated to the quality of the facility. In it’s first phase, Golden Goal successfully built a world-class facility with 8 fields (4 synthetic fields, and 4 high-grade real turf fields), 18 bunkhouses (enough to house 36 teams/650 players at any one time) and capacity to triple in size. By locating the facility within 8 miles of Lake George, a large and very desirable tourist attraction and less than 10 miles from Six Flags Great Escape indoor water park, Golden Goal hopes to make its facility a more compelling family vacation attraction than any other sports related facility. Golden Goal hosted its inaugural season in 2007 with 40 teams and is projecting more than 150 teams in summer 2008. Golden Goal is scheduled to host the prestigious US National Lacrosse festival (U15) in June 2008. Sonostar Capital is pleased to have partnered with Advantage Capital, a New York based investment fund to finance the project.
Javelin Pharmaceutical (JAV)
Javelin is a publicly traded specialty pharmaceutical company with a late stage pipeline of drugs that use proprietary patent protected licensed technologies to create novel routes of administration for existing pain medications. Javelin has three drugs currently in Phase III trials in the US and Europe: injectable diclofenac, a non-steroidal anti-inflammatory which has already received regulatory approval in Europe, intranasal morphine and intranasal ketamine. Because all three drugs are reformulations of existing FDA approved compounds, the risk for this company is not like an early stage biotechnology venture. Sonostar invested in a PIPE transaction in the fourth quarter of 2005. We expect the company to advance all three products to market in the U.S. by 2010. We believe that Javelin represents a compelling partnership or takeover opportunity for a large or specialty pharmaceutical company.
Keryx Biopharmaceuticals (KERX)
Keryx is a public company traded on the NASDAQ whose lead compound, sulodexide for the treatment of diabetic kidney disease, recently failed in its Phase III clinical trial. This surprising failure of sulodexide to achieve its targeted clinical endpoint has resulted in a sharp decline in Keryx’s stock price, and a loss to Sonostar. Keryx has two additional compounds in development: Perifosine, an AKT inhibitor which has several ongoing Phase I and II trials for various different cancer tumor types, and Zerenex, a drug for the treatment of elevated serum phosphorus levels in patients with end stage renal disease, which is currently in its final Phase II dosing trial.
Key Energy Services, Inc. (KEG)
Key Energy Services, a NYSE company, is the world’s largest rig-based well servicing company. KEG’s enterprise value as a multiple of EBITDA trades at a substantial discount relative to its peer group. In 2007, the company had adjusted EBITDA of $446 million and is projecting approximately $490 million in 2008. KEG trades at an enterprise value of less than 4.5 times projected 2008 EBITDA (versus more than 6 times for its peer group). The company believes that it will continue to have favorable pricing power given the current price environment for oil and natural gas, and it expects demand for rig services to remain strong. KEG has recently identified several tuck-in acquisition candidates and has instituted a $300 million share repurchase plan to take advantage of its strong cash flow generating position.
Network Solutions is one of the leading providers of domain registration and online solutions for small businesses and individuals. The company provides a portfolio of web-based services including web hosting, website design, email services, domain name registration, security, search optimization and marketing services. In February 2007, Network Solutions was acquired by General Atlantic Partners, a global private equity firm with approximately $12 billion under management. Sonostar Capital Partners made a modest co-investment with General Atlantic on terms which were not publicly disclosed. Sonostar Capital is enthusiastic about the growth opportunities for Network Solutions and is pleased to have the opportunity to co-invest with a firm of the caliber of General Atlantic Partners.
Night Operations Systems (NOS)
NOS is a Nevada based company that makes high intensity lighting systems (primarily handheld and vehicle mounted flashlights) for the military and law enforcement. Their two primary systems- the NOS 45A and the NOS 28A – are specialty, high powered lightweight flashlights that produce 3825 lumen and 2200 lumen, respectively. The flashlights are hand held or crew-served, weapon-mounted configurations which produce a beam that reaches up to 1500 meters. In addition to being more powerful, lighter weight and smaller in size than any existing high intensity flashlight system, the lights have complete covert capability when used in conjunction with Night Vision Goggles (NVG’s). Through the use of a proprietary patent protected thin film chemical coating on the flashlight lens, NOS is able to make the flashlight beam completely invisible to the naked eye while delivering a powerful beam of infrared light which allows a user who is wearing NVG’s to see as though it were virtually daylight. This technology will allow our forces who have NVG’s to have an unfettered ability to see in the dark. The light system has underwater applications as well, as NOS’s is the only system in the market that is completely waterproof and has been tested at depths of 160 feet. The strong management team at NOS is enhanced by an advisory board of prominent business, military and government leaders. The company has an existing portfolio of government, military and Homeland Security contracts and orders and is poised for substantial growth as it continues its development of improved high intensity lighting systems.
Register.com is a company focused on domain registration and other related value added services (web hosting, email services, website development, domain name auctioning and recovery, etc.) In late 2005, Register agreed to be acquired in a leveraged buyout led by Vector Capital for $203 million. Of this amount, $93 million came from retained cash in the company’s coffers. In the months leading up to the buyout, David Moore, one of Sonostar’s partners, was brought in as CEO to help stem employee defections, to oversee and stabilize operations and to shepherd the company through a competitive sales process. After the company was sold, David agreed to stay on as interim CEO to smooth the post acquisition transition and to work to improve the company’s operations. As a result of David’s involvement with the company and our belief in Register’s prospects, Sonostar joined the Vector-Barrington team with a modest co-investment in early 2006.
SmartPack Solutions LLC is a marketing business focused on the sale of moving supplies over the Internet and through partnerships with various brand partners in the “move” space. Smart pack was founded by Marc Byron, one of Sonostar’s partners and a successful serial entrepreneur. The vision behind SmartPack is to become the industry-leading provider of moving supplies and to create the lead aggregator of data from the pre-mover market. Since it’s formation, SmartPack has acquired one of the leading Internet providers of moving supplies, Box Bundles, and has put in place supplier agreements with International Paper, Weyerhaeuser and PCA. SmartPack has signed partnership deals with Budget, Pods, Penske, Costco and others and has put into place a number of initiatives designed to secure its position as the leading provider of moving supplies in North America. Most recently the company signed a multi – year licensing deal with UPS by which it became the exclusive licensee of UPS for online moving supplies. The company believes that it is well positioned for growth when the current real estate malaise lifts and the “move” market returns to normalcy.
Tigris is a start-up biotechnology company led by a high powered team of former senior Eli Lilly oncology executives who are focused on the development of compounds that will provide breakthrough therapies for cancer, infectious disease and women’s health concerns. Tigris has successfully in-licensed three novel, high profile cancer molecules, two of which are in pre-clinical toxicology studies and one of which is currently in Phase I trials being run by Tigris and by the National Cancer Institute. The company is actively pursuing other in–licensing and partnership opportunities.