JZ Capital Partners Limited · LSE:JZCP
JZ Capital Partners — H1 2018 Earnings Presentation
36 slides from JZ Capital Partners's earnings presentation, November 2017
Slide 1: 2017 Interim Results Presentation
2017 Interim Results Presentation
Slide 2: Disclaimer
This Document and the presentation to which it relates (‘Presentation’) do not constitute or form part of, and should not be construed as, an issue for sale or subscription of, or solicitation of any offer or invitation to subscribe for, underwrite or otherwise acquire or dispose of any securities o
Slide 3: Contents
Contents About Us Financial Highlights NAV Validation Portfolio Review Outlook Appendix 3
Slide 4: About us
About us JZCP is one of the oldest closed-end Adviser is Jordan/Zalaznick Advisers, Inc. – investment companies listed on the Specialist founded in 1986 Fund Segment of the London Stock Exchange Led by Jay Jordan and David Zalaznick – invested together for more than 35 years Gordon Nelson (C
Slide 5: Financial highlights
Financial highlights Total NAV return • NAV of $829.4m (28/02/17: $848.8m) per share • Total NAV return per share of -2.7% per share • One-year shareholder return of 16.6%* Strong shareholder • Three-year shareholder return of 32.9%* return • Five-year shareholder return of 80.8%* • Discount narrowe
Slide 6: Share price and NAV per share performance
Share price and NAV per share performance Cumulative NAV total returns* Cumulative total shareholder returns* 21.2% 80.8% 5.7% 32.9% 16.6% 1 year 3 year 5 year -3.6% 1 year 3 year 5 year NAV to market price discount 43% 41% 33% 29% 8/31/12 8/31/14 8/31/16 8/31/17 *All performance figures assume re-i
Slide 7: Net asset value
Net asset value 13 12.5 12 11.5 11 10.5 $10.12 $0.18 $0.15 $0.01 $0.10 $9.88 10 $0.10 9.5 9 NAV per Ordinary Share Underlying Investments Change in CULS fair Expenses and Taxation Finance Costs Net Foreign Exchange NAV per Ordinary Share as of 28 February 2017 value Effects as of 31 August 2017 *Num
Slide 8: Balance sheet summary
Balance sheet summary $000 $000 Investments 31/08/17 28/02/17 US Micro-cap Investments 439,745 423,137 $000 $000 Investments 31/08/17 28/02/17 European Micro-cap 166,244 154,277 Total Assets 1,135,828 1,098,763 Investments - Liabilities (189,039) (138,921) Real Estate Investments 477,384 468,599 - Z
Slide 9: Major holdings
Major holdings Cost ($ 000) Value ($ 000) % of gross Company Type (31/08/2017) (31/08/2017) assets Design District Assemblage Real estate 102,001 98,781 8.7 Industrial Services Solutions vertical US micro-cap 33,257 78,851 6.9 Greenpoint Real estate 36,662 76,168 6.7 Healthcare Revenue Cycle Managem
Slide 10: Portfolio breakdown
Portfolio breakdown Micro-cap Portfolio by Industry Portfolio by Investment Type 10
Slide 11: NAV Validation
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Slide 12: Discount of NAV carrying value to actual exit value
Discount of NAV carrying value to actual exit value JZCP has seen valuation uplift relative to historical carrying values Discount of NAV Carrying Value to Actual Exit Value (All US Micro-cap Exits 2014-2017)* % NAV Discount 40% 36.6% 35% 33.2% 30% 25% 20% 14.2% 13.8% 15% 10% 5% 0% Four Quarters Thr
Slide 13: Gross MOIC on exits
Gross MOIC on exits Gross MOIC on Exits (All US Micro-cap Exits 2014-2017)* Multiple 3.0x 2.8x 2.5x 2.4x 2.0x 1.8x 1.5x 1.4x 1.0x 0.5x 0.0x 2014 2015 2016 2017 Multiple of Invested Capital * As of 31 October 2017. Includes Nielsen-Kellerman and K2 Towers realizations in October 2017. Analysis includ
Slide 14: NAV validation
NAV validation • Factor Energia • Founded in 1999, Factor is a leading independent supplier of electricity to small and mid-sized companies in Spain. • JZCP realized, at approximately net asset value, its majority equity interest in Factor held through EMC 2010. • Factor is being acquired by a publi
Slide 15: NAV validation, continued
NAV validation, continued • In October 2017, JZCP realised Nielsen-Kellerman (“NK”) and K2 Towers (“K2”) for a total gross value of $39.9m, representing a cumulative $13.4m uplift to JZCP’s NAV as of 31 August 2017. • Nielsen-Kellerman • Established in 1978, NK is a designer, manufacturer and distri
Slide 16: Portfolio Review – Micro-cap
Portfolio Review – Micro-cap
Slide 17: US micro-cap
US micro-cap Strategy: Verticals • Identify and purchase smaller businesses in “verticals” where an industry executive can add value via organic growth and cross company synergies • Sell vertical platform companies as one entity for a multiple expansion Strategy: Co-investments • Co-invest with know
Slide 18: US micro-cap verticals
US micro-cap verticals Industry sector driven “build-ups” created to add value through operational synergies across businesses and exit multiple expansion Industrial Healthcare Testing Services Revenue Cycle Water Services Solutions (ISS) Services Management Industrial Revenue cycle Infrastructure r
Slide 19: Significant US micro-cap co-investments
Significant US micro-cap co-investments Felix Storch George Industries Peaceable Street Orizon K2 Towers* Capital Provider of compact Manufacturer of Platform providing Platform established One of the largest and specialty highly engineered preferred equity to to invest in aerospace private cell pho
Slide 20: European micro-cap
European micro-cap Strategy • Value-oriented investment approach targeting micro-cap companies in Western Europe • Diversified investment focus: portfolio companies in six countries across five industries Management • Strategy coordinated by an experienced management team, which has invested in Euro
Slide 21: Fund III – portfolio companies
Fund III – portfolio companies Petrocorner Fincontinuo S.A.C Collingwood My Lender Strategic build-up to Independent salary- Operational van Niche UK-based Independent acquire 2-3% of backed consumer leasing (lease & motor insurance consumer lending Spain’s petrol station lending platform in service
Slide 22: Portfolio Review – Real Estate
Portfolio Review – Real Estate
Slide 23: Real estate
Real estate Strategy • Value-added investment strategy analogous to micro-cap investing • Developing and repositioning retail, residential and office properties in Brooklyn and South Florida neighborhoods with strong growth demographics Value Add • Reposition: Vacate under-market units through lease
Slide 24: JZCP’s current real estate portfolio: Brooklyn, NY
JZCP’s current real estate portfolio: Brooklyn, NY What we’ve purchased: • Williamsburg: Epicenter of positive shifting demographics in North Brooklyn • 12 mixed-use properties, located on most trafficked retail corridors • 57,000 sq. ft. residential / 157,000 sq. ft. retail • Two development sites
Slide 25: Redbridge Bedford value creation
Redbridge Bedford value creation Acquisition Underwriting (2012) 2012 Total Purchase Price $64.0m Total Capitalization at $83.0m Acquisition NOI at Purchase $2.1m Projected NOI at $6.7m Stabilization Projected Exit Cap 4.25% Current Base Case (2017) Projected Value at $157.0m Stabilization Total Pur
Slide 26: JZCP’s current real estate portfolio: South Florida
JZCP’s current real estate portfolio: South Florida What we’ve purchased: • Wynwood (Miami): rapidly increasing retail rents amid a thriving arts scene • Three prime retail assets • Three top development sites with substantial air rights • Design District (Miami): innovative fashion, design and arch
Slide 27: Esperante Corporate Center (valuation)
Esperante Corporate Center (valuation) Total Purchase Price $125.8m Reserves, Closing & $9.3m Financing Costs Total Costs $135.0m Stabilized NOI $10.5m Total Projected $135.0m Capitalization Stabilized Cap Rate 7.8% Base Case Exit Cap Rate 5.50% Base Case Stabilized $191.7m Valuation • Esperante is
Slide 28: Summary & outlook
Summary & outlook Strong balance sheet to take advantage of opportunities Strong pipeline of opportunities in the US, Europe and real estate portfolios Consistent validation of NAV Three post-period realizations approximately at or above NAV: Nielsen-Kellerman, K2 Towers, Share buyback framework
Slide 29: Appendix
Appendix Z CAPITAL PARTNERS LIMITED
Slide 30: JZCP investment activity
JZCP investment activity Since 28 February 2017 ($ millions) Real Estate Investments 23.2 Peaceable Street Capital 3.0 New Vitality 0.1 Jordan Health Products 4.5 Felix Storch 12.0 RAF (testing vertical) 1.3 European investments 7.8 Others 4.4 Total* 56.3 (*) Numbers subject to rounding 30
Slide 31: JZCP realisation activity
JZCP realisation activity Since 28 February 2017 Gross Proceeds ($ millions) Jordan Health Products - Dividend Recapitalization 7.6 Petrocorner & Collingwood - Distribution 1.7 Fidor - Sale 12.5 Bright Spruce Fund - Liquidation 4.6 Escrows 1.2 Other 0.1 Total* 27.7 (*) Numbers subject to rounding 31
Slide 32: Real estate: portfolio by neighbourhood (Brooklyn)
Real estate: portfolio by neighbourhood (Brooklyn) 32
Slide 33: Real estate: portfolio by neighbourhood (Miami)
Real estate: portfolio by neighbourhood (Miami) Rising retail rents amidst thriving arts scene Vibrant shopping and cultural scene; home to world’s most prestigious brands 33
Slide 34: Redbridge Bedford value creation (Apple store)
Redbridge Bedford value creation (Apple store - business plan execution) 247 Bedford at Acquisition Actual Delivered Apple Space 2012 Current Buyouts of 13 loft law tenants on the second floor of 247 Bedford Negotiated buyout with retail tenant Kings Pharmacy to make room for Apple signs for Apple 2
Slide 35: Redbridge Bedford value creation (N 4th St.)
Redbridge Bedford value creation (N 4th St. - business plan execution) 2012 • Negotiated retail tenant buyout of The Backer Group (see left), making room for retail tenants on N 4th St. • Negotiated several more loft law tenant buyouts and finalizing negotiations with others to build second floor re
Slide 36: Esperante Corporate Center (summary of opportunity)
Esperante Corporate Center (summary of opportunity) • Esperante is a permanent fixture in the • Esperante consists of 17 floors, over 250k sq. ft. of Downtown West Palm Beach skyline and one of office and retail space and an eight story, 250k+ only three existing trophy office buildings in this sq.