Jernigan Capital (JCAP) Update

On Monday JCAP announced full year 2015 results and capital deployment activity. Click here to view the PR.

Updated Investor Presentation that I highly recommend anyone interested to read. Click here to view the Presentation.

Highlights:

  • Closed $175.7 million of investment transactions during nine months between IPO and year-end;
  • Created robust pipeline in excess of $600 million at March 7, 2016, including $119.4 million subject to active term sheets;
  • Obtained up to $110.0 million of additional private capital in joint venture with funds managed by Heitman Capital Management LLC (the “Heitman Joint Venture”);
  • Executed term sheet for secured credit facility for up to $60.0 million expected to close in late March 2016;
  • Created substantial potential value in profits interests in development projects and elected fair value accounting to allow for reporting of value in profits interests; and
  • Positioned company for future growth with experienced team having broad skill-sets and platform designed for substantially greater investment portfolio.

Quotes from PR of significance:

  • “I am very pleased that in nine months from a standing start we were able to consummate $175.7 million of high quality investment transactions that will provide impressive returns to our shareholders as these investments mature, as well as develop a robust pipeline for future value creation,” commented Dean Jernigan, Chairman and Chief Executive Officer of Jernigan Capital, Inc. “We are extremely excited about the Heitman Joint Venture and the expected capital it will add to our platform. Companies which I have led have done several joint ventures with Heitman-managed funds, and we view the Heitman commitment to be a ringing endorsement of our business model and ability to create value for our owners. While we have faced certain challenges that are common to early-stage public companies, we have aggressively solved those challenges by obtaining accretive capital from world class real estate investors who believe in our ability to create value and by building an outstanding team and platform that can absorb substantial growth and deliver exceptional returns in the future.
     
  • “Based on prevailing cap rates and projected property operating results at stabilization, we believe we have created between $20.5 million and $28.5 million of additional shareholder value through our profits interests in our development investments (including those made through the Heitman Joint Venture), which we believe translates to a current implied value of our common stock between $19.50 and $21.00 per share. We expect shareholders to see this value creation in coming quarters as existing development projects are completed and we reflect the value of our profits interests in those projects through our fair value adjustments in our financial statements.”

My take: The company deployed significant capital in 2015 that should ease the concerns of investors concerned about the lack of speed the company was showing in generating such capital. With the Joint Venture with Heitman, in addition to another $60M credit facility that should be closing soon, the company remains well capitalized to continue deploying capital to generate significant cash and returns for shareholders. My original thesis is still very much alive.