Jernigan Capital — Investor Presentation (July 2018)
35 slides from Jernigan Capital's investor presentation, Jul 9, 2018
Slide 1: Investor Presentation July 2018
1 Investor Presentation July 2018
Slide 2: Safe Harbor Disclosure Regarding Forward-Looking Statements
2 Safe Harbor Disclosure Regarding Forward - Looking Statements This presentation includes "forward - looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Sect ion 21E of the Securities Exchange Act of 1934 and other federal securities laws, our future performance,
Slide 3: Company mission: capital partner for self-storage
3 provides debt and equity capital to private developers, owners and operators of self - storage facilities. Our mission is to be the preeminent capital partner for self - storage entrepreneurs nationwide by offering creative solutions through an experienced team demonstrating the highest levels of
Slide 4: Investment Highlights
4 ▪ $475+ million pipeline of investments in underwriting; $200 to $230 million new investments estimated for 2018 ▪ 2018 to date: ~$175 million loan commitments closed and additional $9 million invested in developer buyouts ▪ P otential for full asset ownership at compelling long - term yields thro
Slide 5: Experienced and Aligned Senior Management Team
5 Experienced and Aligned Senior Management Team ~ 8.0% Management and Board Ownership Creates Significant Alignment of Interests ▪ 32+ years in the self - storage industry ▪ I nvested over $3 billion of capital in the self - storage industry ▪ CEO of CubeSmart from 2006 to 2013 ▪ Chairman and CEO o
Slide 6: JCAP's Competitive Advantages
6 JCAP’s Competitive Advantages Limited Availability of Bank Financing ▪ Continued post - recession hangover of commercial banks ▪ Regulatory hurdles diminish the profitability of self - storage loans for banks ▪ Dodd - Frank, Basel III and HVCRE reserve requirements ▪ Allocation p reference to stab
Slide 7: High ROI Business Model Executed in Top Self-Storage Markets
7 High ROI Business Model Executed in Top Self - Storage Markets Providing Innovative Financing Solutions for the Self - Storage Industry Attractive Risk - Adjusted Returns Through Equity Participations Deve l op m ent Investments G r ound - up C onstruction Major R e d eve lopm e nt ▪ F ocus on pro
Slide 8: Development Project Investment Timeline
8 Development Project Investment Timeline ▪ Below is an example of a typical timeline for a 72,000 net rentable square feet development project with total cost of $10 million ▪ Key assumptions include: ▪ 9.0 % yield on cost and a 5.5% cap rate at stabilization ▪ JCAP lends 90% of total cost and rece
Slide 9: Significant Built-in Fair Value Accretion
9 Significant Built - in Fair Value Accretion Source: Company estimates (1) Based on fair value estimates as of 3/31/2018 and closings as of 6/29/2018. 2018 projected capital commitments per the midpoint of the Company’s 2018 guidance range. All amounts less Highland’s 25% share of book value accret
Slide 10: Value Accretion Sensitivities
10 Value Accretion Sensitivities (1) Closed loans as of 6/29/2018 (2) All amounts less Highland’s 25% share of book value accretion ▪ Tables display potential future fair market value (“FMV”) accretion and intrinsic value per common share ▪ Using current fair market value estimates for closed loans
Slide 11: Predictable Dividend That Tracks Value Creation
11 0.5x 2.5x 2.4x 1.5x 0.4x 1.4x 0.8x 0.5x 0.3x 1.2x 1.5x (2) 1.6x 2.8x 2.6x 2.0x 0.6x 1.6x 1.0x 0.7x 1.0x 1.5x 2.2x (2) 0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 1Q16-1Q18 2018E EPS Coverage AEPS Coverage Predictable Dividend That Tracks Value Creation (1) Quar
Slide 12: Selective Underwriting
12 Selective Underwriting $10.4 billion Investments Reviewed $ 1.3 billion Term Sheets Issued $928 million Signed Term Sheets $888 million (~9% of Evaluated) Closed Investments* Stringent Underwriting Process Based on Management’s Extensive Experience and Successful Track Record Investing in Self -
Slide 13: Operating property occupancy by facility
13 (1) Months open and physical occupancy as of 6/28/18 (2) Orlando 1 (51,235 NRSF) was at 86.2% physical occupancy on 7/18/17. On 7/19/17 a 42,730 NRSF addition opened for business. O ccu pancy reflected is for combined facility (3) Property opened to partial leasing October 9, 2016. All floors ope
Slide 14: Jacksonville, FL – Ground Up Development
14 Jacksonville, FL – Ground Up Development Initial Underwriting Current Expectations Est. Cost to Build $9,029,927 $9,029,927 Development Yield (2) 10.98% 12.58% Length to Stabilization 36 months 36 months Stabilized Cap Rate 5.75% 5.50% Stabilized Value $17,246,654 $ 20,646,708 Profit to Heitman J
Slide 15: Attractive Investment Portfolio
15 Attractive Investment Portfolio % On Balance Sheet / % Joint Venture Status of Development Investments ▪ C/O LTV: 72% ▪ Stabilized LTV: 56% ▪ Development investments currently represent 82% of investment portfolio ▪ ~48% of development investments expecting C/O within the next 12 months Notes: Pe
Slide 16: High Quality Self-Storage Properties Located in Attractive Markets
16 High Quality Self - Storage Properties Located in Attractive Markets Notes: Percentages and Company’s market average are weighted based on committed total investment amounts (1) Source: Census Bureau (2) Other markets include Austin, Baltimore, Charlotte, Chicago , Columbia, Fort Lauderdale, Hous
Slide 17: Recent Investments
17 Recent Investments REIT Level Investments Closed 4/1/2018 – 6/29/2018 Orlando 5 Rendering Kansas City Rendering Date Closed MSA Investment Type Units NRSF Commitment 4/6/2018 Minneapolis 3 Development C/O expected Q4 2019 863 86,100 $12,883 5/1/2018 Miami 9 Development C/O expected Q3 2019 761 70
Slide 18: Supply / Demand Balance: Top MSAs
18 Supply / Demand Balance: Top 50 MSAs 26 42 53 66 199 254 352 400 - 440 390 - 430 190 - 230 132 134 135 136 138 139 141 142 143 145 - 50 100 150 200 250 300 350 400 450 2011 2012 2013 2014 2015 2016 2017 2018E 2019F 2020F Facility Count Facilities Delivered Generation V Deliveries Needed Source: C
Slide 19: Current Investment Pipeline
19 ▪ Executed term sheets for investments in 3 separate self - storage development projects for an aggregate capital commitment of approximately $39 million (1 ) ▪ Maintain a robust $ 475+ million pipeline of additional investment opportunities in top 50 U.S. markets ▪ Supported by strong developer
Slide 20: Well-Positioned for Growth Following Record Investment Year
20 $42 $123 $123 $123 $81 $102 $511 $511 $200 - $230 $123 $225 $634 $ 834 - $ 864 14 24 56 0 15 30 45 60 75 $0 $200 $400 $600 $800 $1,000 $1,200 2015 2016 2017 2018E # of Investments Total Investments (3) $ Projected $ On Balance Sheet $ Heitman JV Cumulative # $1,743 $6,532 $12,191 $28,380 to $30,1
Slide 21: Bridge Refinancing Case Study: Miami Portfolio Investment
21 Bridge Refinancing Case Study: Miami Portfolio Investment Property Summary Investment Summary & Highlights ▪ Bridge financing provided to take out existing construction debt and certain equity capital partners on a portfolio comprised of three operating properties and two properties under constru
Slide 22: Five Wholly-Owned Properties
22 Five Wholly - Owned Properties Summary & Highlights ▪ 100% resulting ownership of one Orlando, one Jacksonville, one Pittsburgh, and two Atlanta facilities ▪ ~ $12 million aggregate purchase price for the developer interests in the five properties ▪ ~8.7% estimated weighted average cash investmen
Slide 23: June 2018 Follow-On Offering
23 June 2018 Follow - On Offering Structure of the Investment Common shares of $18.50 per share Offering Size $81.3 million ne t proceeds or 4,600,000 shares Use of Proceeds To pay down outstanding amounts under credit facility, to fund development investment commitments, as well as for general corp
Slide 24: Estimated Capital Sources and Uses
24 Potential Potential Source Proceeds Timing Mortgage refi. / capital recycling $60-70 million Q1 2019 Additional sales of assets ~$20 million Q1 2019 Series B Preferred ATM issuances ~$10 million Q1 2019 Secured debt on individual properties $25-30 million Q1 2019 Joint venture distributions $5-10
Slide 25: Appendix
25 Appendix
Slide 26: Portfolio Detail
26 Portfolio Detail Note: Represents portfolio as of 3/31/2018 (1) Cash investment represents the sum of the funded principal balance of the loan (net of unamortized origination fees), cash consideration (inclusive of transacti on costs), assumed liabilities, and net property working capital acquire
Slide 27: Portfolio Detail - Continued
27 Portfolio Detail - Continued Note: Represents portfolio as of 3/31/2018 (1) Represents principal balance of loan gross of origination fees (2) Facility had received certificate of occupancy as of 3/31/2018 (3) Facility had achieved at least 40% construction completion but had not received certifi
Slide 28: Portfolio Detail - Continued
28 Portfolio Detail - Continued (1) Note: Represents portfolio as of 3/31/2018 (1) Represents principal balance of loan gross of origination fees (2) Facility had achieved at least 40% construction completion but had not received certificate of occupancy as of 3/31/2018 (3) These investments contain
Slide 29: Portfolio Detail - Continued
29 Portfolio Detail - Continued (1) Note: Represents portfolio as of 3/31/2018 (1) Represents principal balance of loan gross of origination fees (2) Facility had received certificate of occupancy as of 3/31/2018 (3) Facility had achieved at least 40% construction completion but had not received cer
Slide 30: Portfolio Detail - Continued
30 Portfolio Detail - Continued Note: Represents portfolio as of 3/31/2018 (1) Represents principal balance of loan gross of origination fees (2) Facility had received certificate of occupancy as of 3/31/2018 (3) Facility had achieved at least 40% construction completion but had not received certifi
Slide 31: JCAP is an Equity REIT, Not a Mortgage REIT
31 JCAP is an Equity REIT, Not a Mortgage REIT Typical Mortgage REIT ▪ Higher corporate leverage, including leverage of junior debt ▪ No equity participation ▪ Structured finance arbitrage rather than property focus ▪ Communication with borrowers only when problems or reporting of covenant complianc
Slide 32: Heitman Capital Management Joint Venture Overview
32 Heitman Capital Management Joint Venture Overview ▪ On March 7, 2016, JCAP, through its operating company, entered into a limited liability company agreement to form a real esta te venture (“JV”) partnership with an investment vehicle of Heitman Capital Management for an initial total commitment
Slide 33: Highland Capital Series A Preferred Overview
33 Highland Capital Series A Preferred Overview ▪ On July 27, 2016, JCAP entered into an agreement with NexPoint Advisors, L.P., an affiliate of Highland Capital Management, LP, to issue up to $125 million of Series A Preferred Stock Investor Funds managed by NexPoint Advisors, L.P. Structure of the
Slide 34: Credit Facility Overview
34 Credit Facility Overview Investor KeyBank Capital Markets, Inc. and Raymond James Bank, N.A. Structure of the Investment Senior secured revolving credit facility Investment Size Up to $100 million debt capital, e xpandable up to $200 million with accordion feature, upon satisfaction of certain co
Slide 35: Series B Preferred Stock Overview
35 Series B Preferred Stock Overview ▪ On January 26, 2018, JCAP issued $37.5 million of Series B cumulative redeemable perpetual preferred stock (“Series B Preferred Stock”) through a public offering ▪ On March 29, 2018, JCAP entered into a Distribution Agreement among JCAP, the Operating Company a