JZ Capital Partners Limited · LSE:JZCP
JZ Capital Partners — FY2016 Earnings Presentation
39 slides from JZ Capital Partners's earnings presentation, May 16, 2017
Slide 1: 2017 Annual Results Presentation
2017 Annual 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 Strategic Initiative: New Policy to Allow for the Repurchase of Shares 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 per • NAV of $848.8 m (29/02/16: $851.7 m) – after paying $25.6 million in dividends share of +2.7%* • Total NAV return per share of 2.7%* per share • Strong three-month shareholder return of 6.1%* • Strong one-year shareholder return of 42.8%* Strong shareholde
Slide 6: Share price and NAV per share performance
Share price and NAV per share performance Cumulative NAV total returns* Cumulative total shareholder returns* 86.3% 25.3% 42.8% 39.9% 8.5% 2.7% 1 year 3 year 5 year 1 year 3 year 5 year NAV to market price discount 46% 38% 34% 27% 2/29/12 2/28/14 2/28/16 2/29/17 *All performance figures assume re-in
Slide 7: Net asset value
Net asset value 11.5 $0.77 11 $(0.05) $0.12 10.5 $10.42 $(0.39) $10.15 $(0.18) $10.12 $(0.305) 10 9.5 9 NAV per Ordinary Capital Gains and Change in CULS Expenses and Finance Costs Other Foreign NAV per Ordinary Dividends Paid NAV per Ordinary Share as of 29 Accrued Income on Fair Value Taxation Exc
Slide 8: Balance sheet summary
Balance sheet summary $ 000 $ 000 Investments 28/02/17 29/02/16 US Micro-cap Investments 424,502 386,173 $ 000 $ 000 Investments 28/02/17 29/02/16 European Micro-cap 154,277 168,798 Total Assets 1,098,755 1,139,580 Investments - Liabilities (138,913) (126,198) Real Estate Investments 468,599 366,158
Slide 9: Major holdings
Major holdings Cost ($ 000) Value ($ 000) % of gross Company Type (28/2/2017) (28/2/2017) assets Design District Real estate 91,986 92,628 8.4 Industrial Services Solutions vertical US micro-cap 33,257 83,754 7.6 Greenpoint Real estate 37,213 74,275 6.8 Healthcare Revenue Cycle Management vertical U
Slide 10: Portfolio breakdown
Portfolio breakdown Portfolio by Vintage* Portfolio by Investment Type Portfolio by Industry *Excludes cash. Vintage measured by date of investment. 10
Slide 11: Strategic Initiative: New Policy to Allow for the Repurchase of Shares
Strategic Initiative: New Policy to Allow for the Repurchase of Shares
Slide 12: New Policy to Allow for the Repurchase of Shares
New Policy to Allow for the Repurchase of Shares • JZCP’s board of directors has discontinued the current dividend policy and asked shareholders to authorise a new policy to allow for the repurchase of shares • As of 28 February 2017, our stock was trading at a 34% discount to NAV and had an implied
Slide 13: NAV Validation
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Slide 14: 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 35% 32.7% 30% 29.0% 25% 20% 15% 10% 7.9% 7.5% 5% 0% Four Quarters Three Qua
Slide 15: 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 2.0x 1.8x 1.5x 1.4x 1.0x 0.5x 0.0x 2014 2015 2016 Multiple of Invested Capital * As of 28 February 2017. Analysis includes full exits of US micro-cap businesses only (eight full exits from 2014-2017).
Slide 16: NAV Validation – European Micro-cap Portfolio
NAV Validation – European Micro-cap Portfolio • JZCP completes the secondary sale of six assets at NAV (announced in Feb. 2016) • In February 2016, JZCP sold its stake in the first five assets (Docout, Ombuds, One World Packaging, Toro Finance and Xacom) at NAV, receiving proceeds of $81 million • I
Slide 17: Portfolio Review – micro-cap
Portfolio Review – micro-cap
Slide 18: 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 19: 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 20: Significant US micro-cap co-investments
Significant US micro-cap co-investments George Industries Peaceable Street Orizon K2 Towers Capital Manufacturer of New platform Platform established One of the largest highly engineered providing preferred to invest in aerospace private cell phone components for equity to commercial and defence tow
Slide 21: European micro-cap
European micro-cap Strategy • Value-oriented investment approach targeting micro-cap companies • Investment focus on financial services outsourcing, including non-bank lending Management • Strategy coordinated by an experienced management team, which has invested in European micro-cap deals (UK, Ita
Slide 22: European micro-cap
European micro-cap Recent Events: • Winn: JZCP completes second step of secondary sale announced in February 2016 • In February 2016, JZCP sold its stake in Docout, Ombuds, One World Packaging, Toro Finance and Xacom • JZCP sold its stake in Winn following regulatory approval: net proceeds of $21.9
Slide 23: Fund III – Portfolio Companies
Fund III – Portfolio Companies Petrocorner Fincontinuo S.A.C Collingwood Strategic build-up to Independent salary- Operational van Niche UK-based acquire 2-3% of backed consumer leasing (lease & motor insurance Spain’s petrol station lending platform in service) company in company market Italy Denma
Slide 24: Portfolio Review – Real Estate
Portfolio Review – Real Estate
Slide 25: 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 26: 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 27: Redbridge Bedford Value Creation (Acquisition Underwriting)
Redbridge Bedford Value Creation (Acquisition Underwriting) Total Purchase Price $64.0m 2012 Total Capitalization at $83.0m Acquisition NOI at Purchase $2.1m Projected NOI at $6.7m Stabilization Projected Exit Cap 4.25% Projected Value at $157.0m Stabilization • We purchased a prime retail asset in
Slide 28: Redbridge Bedford Value Creation (Valuation)
Redbridge Bedford Value Creation (Valuation) Total Purchase Price $64.0m 2016 Closing, Financing & $83.7m Construction Costs Total Costs $147.7m Total Projected NOI $11.3m Total Projected $147.7m Capitalization Stabilized Cap Rate 7.7% • Current market ground floor retail Base Case Exit Cap Rate 4.0
Slide 29: 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 30: 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 $191.7m Valuation • Esperante is
Slide 31: Summary & Outlook
Summary & Outlook Strong balance sheet to take Strong pipeline of opportunities in advantage of opportunities the US, Europe and real estate portfolios Positive total NAV return per Long-term track record of NAV share in 26 of past 32 quarters growth Authorization of new policy to allow for re
Slide 32: Appendix
Appendix Z CAPITAL PARTNERS LIMITED
Slide 33: JZCP investment activity
JZCP investment activity Since 29 February 2016 ($ millions) Real Estate Investments 89.5 Peaceable Street Capital 21.3 Jordan Healthcare Products 13.5 George Industries 12.6 Orizon (f.k.a. Tech Industries) 8.6 PPS (healthcare revenue cycle management vertical) 1.4 Shannon Safety (testing vertical)
Slide 34: JZCP realisation activity
JZCP realisation activity Since 29 February 2016 Gross Proceeds ($ millions) Bright Spruce Fund – Partial Realisation 44.5 Medplast – Sale 25.6 Winn – Sale 21.9 Water Vertical – Refinancing 10.2 Southern Petroleum Laboratories – Sale 8.4 RedBridge Bedford – Refinance 5.3 Metpar – Sale 3.1 Dental Ser
Slide 35: Real estate: portfolio by neighbourhood (Brooklyn)
Real estate: portfolio by neighbourhood (Brooklyn) 35
Slide 36: 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 36
Slide 37: Redbridge Bedford Value Creation (Apple Store - Business Plan Execution)
Redbridge Bedford Value Creation (Apple Store - Business Plan Execution) 247 Bedford at Acquisition Actual Delivered Apple Space 2012 2016 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 247
Slide 38: Redbridge Bedford Value Creation (N 4th St. - Business Plan Execution)
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 39: 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.