JZ Capital Partners Limited · LSE:JZCP
JZ Capital Partners — H1 2018 Earnings Presentation
35 slides from JZ Capital Partners's earnings presentation, Nov 8, 2018
Slide 1: 2018 Interim Results Presentation
2018 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 Share Buyback Policy & Tender Offers 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 $813.4m (28/02/18: $837.6m) per share • Total NAV return per share of (1.6)% per share • April 2017: JZCP’s board of directors discontinued the Company’s dividend policy and asked shareholders to authorize a new policy to include the repurchase of share
Slide 6: Share price and NAV per share performance
Share price and NAV per share performance Cumulative NAV total returns* Cumulative total shareholder returns* 9.2% 10.3% 11.0% 1 year 3 year 5 year 1 year 3 year 5 year -13.9% -0.6% -3.8% NAV to market price discount 41% 37% 33% 26% 8/31/13 8/31/15 8/31/17 8/31/18 *All performance figures assume re-
Slide 7: Net asset value
Net asset value 12 11.5 11 10.5 $0.36 $0.44 $9.98 10 $0.03 $0.07 $0.11 $0.04 $9.82 $0.03 9.5 9 NAV per Ordinary US and European Real Estate Change in CULS Expenses and Finance Costs Net Foreign Appreciation from NAV per Ordinary Share as of 28 Micro-cap Investments Fair Value Taxation Exchange Effec
Slide 8: Balance sheet summary
Balance sheet summary $000 $000 Investments 31/08/18 28/02/18 US Micro-cap Investments 453,456 488,258 $000 $000 Investments 31/08/18 28/02/18 European Micro-cap 121,431 103,457 Total Assets 1,118,703 1,156,472 Investments - Liabilities (190,493) (196,086) Real Estate Investments 461,065 463,391 - Z
Slide 9: Portfolio breakdown
Portfolio breakdown Portfolio by Investment Type US micro‐cap ‐ 40.6% Real Estate – Brooklyn, NY ‐ 24.7% Real Estate – South Florida ‐ 16.5% Portfolio by Industry European micro‐cap ‐ 10.9% Real Estate – Brooklyn, NY ‐ 24.7% Other Investments ‐ 1.5% Real Estate – South Florida ‐ 16.5% Industrial ‐ 1
Slide 10: NAV Validation
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Slide 11: Discount of NAV carrying value to actual exit value
Discount of NAV carrying value to actual exit value JZCP has seen significant valuation uplift relative to historical carrying values Discount of NAV Carrying Value to Actual Exit Value (All US & European Micro-cap Exits 2014-2018)* % NAV Discount 25% 23.5% 21.0% 20% 15.5% 15% 14.3% 10% 5% 0% Four Q
Slide 12: Gross MOIC on exits
Gross MOIC on exits Gross MOIC on Exits (All US & European Micro-cap Exits 2014-2018)* Multiple 4.0x 3.5x 3.5x 2.8x 2.9x 3.0x 2.5x 2.0x 1.8x 1.6x 1.5x 1.0x 0.5x 0.0x 2014 2015 2016 2017 2018 Multiple of Invested Capital * As of 31 August 2018. Analysis includes full exits of US & European micro-cap
Slide 13: Successful realizations and refinancings
Successful realizations and refinancings • Bolder Healthcare Solutions (BHS) – March 2018 • BHS was acquired by a subsidiary of Cognizant, one of the world's leading professional services companies. • BHS offers a full suite of healthcare revenue cycle management services to the hospital and physici
Slide 14: Portfolio Review – Micro-cap
Portfolio Review – Micro-cap
Slide 15: US micro-cap
US micro-cap Strategy: Verticals • Identify and purchase businesses in “verticals” where an industry executive can add value via organic growth and cross company synergies • Sell vertical companies as one entity for a multiple expansion Strategy: Co-investments • Co-invest with known private equity
Slide 16: 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 Services Flexible Water Testing Solutions (ISS) Packaging Infrastructure Services Industrial Acquisition strategy Water infrastructure
Slide 17: Significant US micro-cap co-investments
Significant US micro-cap co-investments Deflecto Peaceable Street ABTB K2 Towers II George Industries Capital Diversified, global Acquirer of fast Private cell phone Manufacturer of Platform providing manufacturer and casual and quick tower company highly engineered preferred equity to distribution
Slide 18: Significant US micro-cap investments
Significant US micro-cap investments Felix Storch Avante Orizon Priority Provider of compact Build-up of healthcare Platform established Provider of same day and specialty equipment, service & to invest in aerospace express courier refrigerators and installation companies and defence services other
Slide 19: European micro-cap
European micro-cap Strategy • Value-oriented investment approach targeting micro-cap companies in Western Europe • Diversified investment focus: portfolio companies in seven countries across five industries Management • Strategy coordinated by an experienced management team, which has invested in Eu
Slide 20: Fund III – significant portfolio companies
Fund III – significant portfolio companies Petrocorner Alianzas en Fincontinuo S.A.C Collingwood My Lender Aceros Build-up strategy Italian salary- Operational van Niche UK-based Independent Steel in Spain’s petrol backed consumer leasing (lease & motor insurance consumer transformation station mark
Slide 21: Portfolio Review – Real Estate
Portfolio Review – Real Estate
Slide 22: 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 23: JZCP’s current real estate portfolio: Brooklyn, NY
JZCP’s current real estate portfolio: Brooklyn, NY • Williamsburg: Epicenter of positive shifting demographics in North Brooklyn • 12 mixed-use properties, located on most trafficked retail corridors • More than 2oo,000 sq. ft. retail and 10,000 sq. ft. residential • Two development sites situated a
Slide 24: Williamsburg Retail Collection
Williamsburg Retail Collection Current Basis (2018) Total Purchase Price $249.1m Total Capitalization at $257.6m Acquisition Total Development & $139.1m Carry Costs Current Basis $396.7m Future Capitalization (at stabilization) Future Construction, $58.5m Leasing & Carry Costs Total Costs $455.2m Pr
Slide 25: Williamsburg Retail Collection
Williamsburg Retail Collection • With over 225,000 SF of leasable area and a well curated collection of high profile tenants, a retail portfolio of this size and scale having a common ownership is unprecedented in the submarket and very unique in NYC • Toms, Sephora, Aland and The NorthFace are now
Slide 26: JZCP’s current real estate portfolio: South Florida
JZCP’s current real estate portfolio: South Florida • Wynwood (Miami): rapidly increasing retail rents amid a thriving arts scene • Three prime retail assets • Three top development sites with substantial air rights • 90,000 sq. ft. office over retail building to be delivered end of year. 33% prelea
Slide 27: CUBE Wynwood Development
CUBE Wynwood Development Current Basis (2018) Total Purchase Price $5.85m Total Capitalization at $6.2m Acquisition Total Development & $33.0m Carry Costs Total Costs $39.2m Projected NOI at $3.6m Stabilization Stabilized Cap Rate 9.18% Base Case Exit Cap Rate 5.50% Base Case Valuation $65.5m • Esti
Slide 28: Esperante Corporate Center
Esperante Corporate Center Current Basis (2018) Total Peak Equity $35.0m Distributed Proceeds to ($14.0)m Date Current Equity $21.0m Current Debt $115.0m Current Basis $136.0m Projected NOI at $9.9m Stabilization Stabilized Cap Rate 7.3% Base Case Exit Cap Rate 6.0% Base Case Valuation $165m • Renov
Slide 29: Share Buyback Policy & Tender Offers
Share Buyback Policy & Tender Offers
Slide 30: Return of capital
Return of capital • In April 2017, JZCP’s board of directors discontinued the Company’s dividend policy and asked shareholders to authorize a new policy to include the repurchase of shares • Our stock had been trading at a significant discount to NAV in spite of a dividend yield consistently in exce
Slide 31: Summary & outlook
Summary & outlook Increased liquidity from realizations – Significant cash resources $164.2m in total gross proceeds (March – from successful realizations October 2018)* Two realizations above NAV during the Consistent validation of period, one realization above NAV post- NAV period and one sign
Slide 32: Appendix
|Z CAPITAL PARTNERS LIMITED
Slide 33: Major holdings
Major holdings Cost ($ 000) Value ($ 000) % of gross Company Type (31/08/2018) (31/08/2018) assets Design District Assemblage Real estate 124,901 105,221 9.4 Industrial Services Solutions vertical US micro-cap 48,250 91,168 8.1 Fulton Mall Assemblage Real estate 58,180 78,740 7.0 Greenpoint Real est
Slide 34: JZCP investment activity
JZCP investment activity Since 28 February 2018 ($ millions) Real Estate Investments 34.9 Deflecto 24.5 Industrial Services Solutions 15.1 European Investments 14.7 Flexible Packaging Vertical 10.0 Testing Services 9.1 K2 Towers II 4.2 Avante 3.5 Nationwide Studios 2.7 Others 2.1 Total* 120.8 (*) Nu
Slide 35: JZCP realisation activity
JZCP realisation activity Since 28 February 2018 Gross Proceeds ($ millions) Bolder Healthcare Solutions – Sale 105.7 Paragon Water Systems – Sale 16.1 New Vitality – Dividend 0.3 Esperante – Cash Flow Distribution 0.1 Flatbush Portfolio – Refinancing 0.5 Escrows 2.1 Total* 124.8 (*) Numbers subject