Jernigan Capital Reports Full-Year Earnings per Share and Adjusted Earnings per Share Above Midpoint of Guidance Range; Introduces 2019 Guidance

MEMPHIS, Tenn.–(BUSINESS WIRE)–Jernigan Capital, Inc. (NYSE: JCAP), a leading capital partner for
self-storage entrepreneurs nationwide, today announced results for the
quarter and year ended December 31, 2018 and introduced earnings per
share and adjusted earnings per share guidance for 2019.

Fourth Quarter Highlights include:

  • Earnings per share and adjusted earnings per share of $0.87 and $1.04,
    respectively.
  • Continued transition to property ownership by purchasing the developer
    partner’s interest in New York City 1 facility – the Company’s seventh
    wholly-owned self-storage property.
  • Completed construction and commenced leasing of nine additional
    Generation V self-storage development properties in which the Company
    has an aggregate committed investment of $100.5 million.
  • Increased amount of revolving credit facility from $100 million to
    $235 million, with an accordion feature permitting expansion up to
    $400 million and extended term by up to 3 ½ years from July 2020 to
    December 2023.
  • Issued an aggregate $20.3 million of common stock under the Company’s
    at-the-market (“ATM”) programs at an average share price of $21.16, a
    15.1% premium to the Company’s reported book value per share on
    September 30, 2018.
  • Commenced a new $75 million ATM program.

Full-Year 2018 Highlights include:

  • Earnings per share and adjusted earnings per share of $2.10 and $2.92,
    respectively – $0.09 and $0.11, respectively, above the midpoint of
    guidance ranges provided with the Company’s third quarter 2018
    earnings release.
  • Net income attributable to common stockholders of $36.4 million, a
    177% increase over $13.1 million reported for full-year 2017; annual
    adjusted earnings of $50.4 million, a 222% increase over $15.6 million
    reported for full-year 2017.
  • Originated 14 on-balance sheet development property and bridge
    investments for an aggregate committed investment of $184.4 million.
  • Completed construction and commenced leasing of 24 additional
    Generation V self-storage development properties in which the Company
    has an aggregate committed investment of $236.0 million.
  • Continued execution of business plan to own newly developed
    self-storage properties in top markets through buyout of developers’
    interests in six facilities – the Company wholly-owned seven
    self-storage facilities as of December 31, 2018.

“2018 was an outstanding year for the Company,” stated Dean Jernigan,
Executive Chairman of Jernigan Capital, Inc. “Our portfolio of
state-of-the-art Generation V self-storage properties continues to
mature nicely, with 24 development properties commencing operations in
2018; our developers have now delivered and commenced operations at 42
of 69, or about 61%, of the self-storage projects we have financed.
Further, we are excited to now have 100% ownership of seven new
self-storage facilities located in great markets, furthering our
objective to own a substantial majority of the facilities we finance.”

“I am also extremely proud of the team we have assembled at JCAP,” Mr.
Jernigan continued. “During the year, we added two key individuals to
our senior team in Jonathan Perry and David Corak, two board members in
Rebecca Owen and Randy Churchey and saw a seamless succession of senior
management as John Good moved to Chief Executive Officer and Jonathan
Perry took on the role of President in addition to his existing role of
Chief Investment Officer.”

John Good, Chief Executive Officer of the Company, added, “Our fourth
quarter results reflect another quarter of excellent execution in all
aspects of our business. We posted 146% growth in total revenues, 358%
growth in earnings per share and 352% growth in adjusted earnings per
share compared to the comparable quarter in 2017. Moreover, our capital
activities during the quarter left us with an outstanding balance sheet
poised for additional growth as we move into the new year. During the
fourth quarter we upsized, extended and lowered pricing on our secured
credit facility, while adding two key new banks to our banking
syndicate. In addition, we issued $20.3 million of common stock under
the company’s ATM programs at a healthy premium to book value and
consensus NAV. In December, we launched a new $75 million Common ATM
program. Our investment commitments including 2019 commitment guidance
are now fully covered through mid-2020 and we have positioned ourselves
to maintain conservative leverage levels in the range of 25% to 30% of
total assets for the foreseeable future.”

“We expect 2019 will be another tremendous year for JCAP, as the
outstanding efforts of our team over the past four years continue to
enhance shareholder value and provide investment opportunities in both
the development and operating property arenas,” Mr. Good continued. “As
the development cycle winds down and transitions to the acquisition
cycle, so too does our business model shift from originating ground-up
development investments to acquiring the Generation V facilities that we
have financed since our IPO. Having already purchased our developers’
interests in seven facilities on balance sheet and in four facilities
within our joint venture in January of this year, we expect continued
momentum in our strategic shift from lender to owner.”

Financial Highlights

Earnings per share and adjusted earnings per share for the three months
ended December 31, 2018 were $0.87 and $1.04, respectively. Earnings per
share and adjusted earnings per share for the year ended December 31,
2018 were $2.10 and $2.92, respectively, which are $0.09 and $0.11,
respectively, above the midpoint of the Company’s annual guidance range
reaffirmed in the Company’s third quarter 2018 earnings release.

Net income attributable to common stockholders for the three months
ended December 31, 2018 was $17.2 million, an increase of $14.5 million,
or 537%, over the $2.7 million net income attributable to common
stockholders for the comparable quarter in 2017. Net income attributable
to common stockholders for the year ended December 31, 2018 was $36.4
million, an increase of $23.2 million, or 177%, over the $13.1 million
reported for the comparable period in 2017.

Adjusted earnings for the three months ended December 31, 2018 were
$20.6 million, a 534% increase over the $3.3 million adjusted earnings
for the comparable quarter of 2017. Adjusted earnings for the year ended
December 31, 2018 was $50.4 million compared to $15.6 million for the
comparable period in 2017, a 222% increase.

Total revenues for the quarter and year ended December 31, 2018 were
$9.7 million and $31.2 million, respectively, representing increases of
$5.7 million, or 146%, and $19.0 million, or 156%, over total revenues
for the quarter and year ended December 31, 2017, respectively. Annual
revenue was $1.4 million higher than the top end of the Company’s annual
guidance range reaffirmed in the Company’s third quarter 2018 earnings
release. The increase in revenues is primarily attributable to the
increase in the outstanding principal balances on the Company’s
investment portfolio and the increase in rental and other
property-related income derived from the six self-storage facilities
that the Company owned during the year.

General and administrative expenses, excluding fees to the manager, for
the quarter and year ended December 31, 2018 were $1.7 million and $7.3
million, respectively, compared to $1.5 million and $5.9 million for the
comparable 2017 periods, respectively. Included in these amounts were
stock-based compensation expense (“SBE”) of $0.3 million for the three
months ended December 31, 2018 and 2017, and $1.8 million and $1.3
million for the years ended December 31, 2018 and 2017, respectively.
The increase in SBE was primarily due to additional restricted stock
grants to certain officers and employees of the Company’s external
manager during 2017 and 2018. General and administrative expenses also
increased as a result of annual compensation increases as well as the
addition of a senior executive employee at the Company’s external
manager during 2018. Fees to manager for the quarter and year ended
December 31, 2018 include $0.7 million of incentive fees.

Net income attributable to common stockholders and adjusted earnings for
the quarter and year ended December 31, 2018 also includes increases in
the fair value of investments of $18.9 million and $42.9 million,
respectively, compared to increases of $1.7 million and $10.8 million
for the comparable periods in 2017. This represents a $17.2 million, or
990%, and $32.1 million, or 297%, year-over-year increase from the
quarter and year ended December 31, 2017, respectively. This increase is
due to the high volume of on-balance sheet development investments we
made in 2017 that began increasing in value in 2018.

Subsequent Events

On January 18, 2019, the Company entered into a loan agreement with
respect to a term loan with a principal amount of $9.2 million, which is
secured by the Company’s wholly-owned self-storage facility in
Charlotte, North Carolina.

On January 28, 2019, Storage Lenders, LLC (the “SL1 Venture”), the
Company’s real estate venture with Heitman in which the Company has a
10% interest, purchased 100% of the Class A membership units of the LLCs
that own the Atlanta 1, Jacksonville, Atlanta 2, and Denver development
property investments for an aggregate purchase price of $12.1 million.
The SL1 Venture now wholly owns the self-storage properties through
these LLCs. On February 27, 2019, the SL1 Venture closed on a $36.1
million term loan secured by these four properties.

Capital Markets Activities

On December 28, 2018, the Company entered into an amended and restated
senior secured revolving credit facility of up to $235 million, subject
to borrowing base requirements, with a syndicate of banks led by KeyBank
National Association, Raymond James Bank, N.A., and BMO Harris Bank N.A.
The credit facility, which has an accordion feature permitting expansion
up to $400 million, subject to certain conditions including obtaining
additional commitments from lenders, has a three-year term that expires
December 28, 2021 and two one-year extension options to extend the
maturity of the facility to December 28, 2023. Advances under the credit
agreement bear interest at rates between 225 and 325 basis points over
30-day LIBOR.

As of December 31, 2018, the Company had no borrowings under its secured
revolving credit facility and currently has $21.0 million outstanding
under the Credit Facility and $118.0 million in total availability. The
Company expects such availability to increase over the remainder of 2019
as the Company adds existing on-balance sheet operating properties to
the borrowing base, and the Company’s on-balance sheet self-storage
investments continue to achieve certificates of occupancy and commence
lease-up.

As of December 31, 2018, the Company had issued all authorized shares of
Series A Preferred Stock for $125.0 million in gross proceeds pursuant
to the terms of the Purchase Agreement. During the fourth quarter, the
Company issued $20.3 million of common stock under the Company’s ATM
programs at an average share price of $21.16. On December 7, 2018, the
Company entered into an Equity Distribution Agreement for a new $75.0
million Common ATM Program, $74.0 million of which was available at
December 31, 2018.

Dividends

On October 31, 2018, the Company declared cash and stock dividends on
its Series A Preferred Stock. The cash dividend of $2.2 million was paid
on January 15, 2019 to holders of record on January 1, 2019. A stock
dividend of 2,125 shares of additional Series A Preferred Stock was
issued on January 15, 2019 to holders of record on January 1, 2019 for
an aggregate value of $2.1 million pursuant to the terms of the Stock
Purchase Agreement.

On October 31, 2018, the Company declared a cash dividend on its Series
B Preferred Stock. The cash dividend of $0.7 million was paid on January
15, 2019 to holders of record on January 2, 2019.

Additionally, on October 31, 2018, the Company declared a dividend of
$0.35 per common share. The dividend was paid on January 15, 2019 to
common stockholders of record on January 2, 2019.

First Quarter and Full-Year 2019 Guidance

The following table reflects earnings per share and adjusted earnings
per share guidance ranges for the three months ending March 31, 2019 and
for the full-year 2019. Such guidance is based on management’s current
expectations of Company investment and acquisition activity (including
fair value appreciation, the expected timing of construction progress
and receipts of certificates of occupancy, and the assumptions regarding
the timing of acquisitions of developer interests), the operational and
new supply dynamics of the self-storage markets in which the Company has
invested, and overall economic conditions. Adjusted earnings is a
performance measure that is not specifically defined by accounting
principles generally accepted in the United States (“GAAP”) and is
defined as net income attributable to common stockholders (computed in
accordance with GAAP) plus stock dividends to preferred stockholders,
stock-based compensation expense, and depreciation and amortization on
real estate assets. For more information about our calculation of
adjusted earnings, see “Non-GAAP Financial Measures” below.

       
Dollars in thousands,
except share and per share data
Three months ending Year ending
March 31, 2019   December 31, 2019
Low   High   Low   High
Interest income from investments $ 7,850 $ 7,950 $ 36,000 $ 37,000
Rental revenue from real estate owned 1,350 1,400 7,000 7,300
Other income   35     40     140     160
Total revenues $ 9,235 $ 9,390 $ 43,140 $ 44,460
G&A expenses (1) (4,015) (3,875) (17,550) (16,250)
Property operating expenses (excl. depreciation and amortization) (800) (750) (3,500) (3,300)
Depreciation and amortization on real estate assets (1,125) (1,025) (4,850) (4,350)
Interest expense (1,350) (1,250) (9,500) (9,000)
JV income 135 155 450 500
Other interest income 20 30 80 120
Net unrealized gain on investments (2)   5,000     7,000     30,000     40,000
Net income 7,100 9,675 38,270 52,180
Net income attributable to preferred stockholders (3)   (5,060)     (5,040)     (20,300)     (20,150)
Net income attributable to common stockholders 2,040 4,635 17,970 32,030
Add: stock dividends 2,125 2,125 8,500 8,500
Add: stock-based compensation 345 325 1,800 1,750
Add: depreciation and amortization on real estate assets (4)   1,185     1,075     5,150     4,630
Adjusted earnings $ 5,695 $ 8,160 $ 33,420 $ 46,910
Earnings per share – diluted $ 0.10 $ 0.22 $ 0.82 $ 1.46
Adjusted earnings per share – diluted $ 0.28 $ 0.39 $ 1.52 $ 2.13
Average shares outstanding – diluted 20,700,000 20,700,000 22,000,000 22,000,000
1)   Includes $2.0 million (low and high) and $9.4 million (low) / $8.4
million (high) of fees to Manager for the three months ending March
31, 2019 and for the year ending December 31, 2019, respectively.
2) Excludes $0.05 million (low and high) and $0.2 million (low and
high) of unrealized appreciation in fair value of investments from
the real estate venture which is included in JV income for the three
months ending March 31, 2019 and for the year ending December 31,
2019, respectively.
3) Represents both cash dividends and stock dividends (which stock
dividends will be paid out in either shares of the Company’s common
stock or additional shares of Series A Preferred Stock, at the
option of the Series A stockholders) estimated with respect to
outstanding shares of Series A Preferred Stock, as well as cash
dividends estimated with respect to outstanding shares of Series B
Preferred Stock.
4) Includes $0.06 million (low) / $0.05 million (high) and $0.3 million
(low and high) of depreciation and amortization on the real estate
assets wholly-owned by the real estate venture, which is included in
JV income for the three months ending March 31, 2019 and for the
year ending December 31, 2019, respectively.

The guidance above is based on the following key assumptions regarding
the Company’s business activities in 2019:

  • Projected closings on $85 million to $115 million of new self-storage
    investments for the full-year 2019, including acquisitions of
    developer interests (on-balance sheet and JCAP’s proportionate share
    in the SL1 Venture), new development property investments, new bridge
    investments and joint venture investments;
  • Fundings of approximately $200 million to $230 million on the
    Company’s closed and projected investment commitments during the year
    ending December 31, 2019, including cash payable for the acquisitions
    of developer interests; and
  • Utilization of the Company’s credit facility over the course of the
    year with expected borrowings at year-end of between $120.0 million
    and $160.0 million.

Of the estimated $30.0 million to $40.0 million of fair value
appreciation in 2019, the Company expects $5.0 million to $7.0 million
to be recognized during the first quarter, $7.5 million to $10.0 million
to be recognized in the second quarter, $7.5 million to $10.0 million to
be recognized in the third quarter, and $10.0 million to $13.0 million
to be recognized in the fourth quarter. The Company’s 2019 fair value
guidance reflects updated estimates of the timing of construction
completion of the self-storage facilities underlying certain of our
development investments, as well as the timing of stabilization of
facilities in which we have invested. Timing of fair value appreciation
is heavily dependent upon construction progress and the timing of
construction completion, both of which are subject to factors outside
the control of the Company’s development partners. Moreover, when the
Company acquires the developer’s interest in a self-storage project that
the Company has financed, the Company no longer accounts for such
investment on the fair value method, so acquisitions of developer
interests have a potential material effect on future fair value
recognized in our financial statements. As such, the amount and exact
timing of fair value recognition is subject to change.

Refer to the Company’s Fourth Quarter 2018 Supplemental Information
Package for more information.

Conference Call and Webcast Information

The Company will host a webcast and conference call on Thursday,
February 28, 2019 at 11:00 a.m. Eastern Time to discuss the financial
results and recent events. A webcast will be available on the Company’s
website at investors.jernigancapital.com. To listen to a live broadcast,
access the site at least 15 minutes prior to the scheduled start time in
order to register and download and install any necessary audio software.
The replay of the webcast will be available on the Company’s website
until Thursday, March 14, 2019.

Supplemental financial and operating information as of and for the
quarter and year ended December 31, 2018 is available on the Company’s
website under Investor Relations – Financial Information – Quarterly
Supplemental Information.

To Participate in the Telephone Conference Call:

Dial in at least 15 minutes prior to start time.

Domestic: 1-877-407-0792
International: 1-201-689-8263

Conference Call Replay:

Domestic: 1-844-512-2921
International: 1-412-317-6671
Passcode:
13681073

The replay can be accessed until midnight Eastern Time on Thursday,
March 14, 2019.

About Jernigan Capital, Inc.

Jernigan Capital is a New York Stock Exchange-listed real estate
investment trust (NYSE: JCAP) that provides debt and equity capital to
private developers, owners and operators of self-storage facilities with
a view to eventual outright ownership of facilities we finance. Our
mission is to maximize shareholder value by accumulating a multi-billion
dollar investment portfolio consisting of the newest, most attractive
and best located self-storage facilities in the United States through a
talented and experienced team demonstrating the highest levels of
integrity, dedication, excellence and community.

Forward-Looking Statements

This press release includes “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995,
including statements relating to our full-year and first quarter 2019
guidance and the assumptions underlying such guidance, our ability to
successfully source, structure, negotiate and close investments in and
acquisitions of self-storage facilities, our ability to fund our
outstanding future investment commitments, our ability to own and manage
our real estate assets, the availability, terms and our rate of
deployment of equity capital and our ability to increase the borrowing
base of our credit facility. The ultimate occurrence of events and
results referenced in these forward-looking statements is subject to
known and unknown risks and uncertainties, many of which are beyond our
control. These forward-looking statements are based upon the Company’s
present intentions and expectations, but the events and results
referenced in these statements are not guaranteed to occur. Investors
should not place undue reliance upon forward-looking statements. For a
discussion of these and other risks facing our business, see the
information under the heading “Risk Factors” in the Company’s Annual
Report on Form 10-K, and those set forth in the Company’s other reports
and information filed with the Securities and Exchange Commission
(“SEC”), which are accessible on the SEC’s website at www.sec.gov.

Non-GAAP Financial Measures

Adjusted Earnings is a non-GAAP measure and is defined as net income
attributable to common stockholders plus stock dividends to preferred
stockholders, stock-based compensation expense, depreciation and
amortization on real estate assets, loss on modification of debt, and
other expenses. Management uses Adjusted Earnings and Adjusted Earnings
per share as key performance indicators in evaluating the operations of
the Company’s business. The Company is a capital provider to
self-storage developers and believes that these measures are useful to
management and investors as a starting point in measuring its
operational performance because they exclude various equity-based
payments (including stock dividends) and other items included in net
income that do not relate to or are not indicative of its present and
future operating performance, which can make periodic and peer analyses
of operating performance more difficult. The Company’s computation of
Adjusted Earnings and Adjusted Earnings per share may not be comparable
to other key performance indicators reported by other REITs or real
estate companies. Reconciliations of Adjusted Earnings and Adjusted
Earnings per share to Net income attributable to common stockholders and
Earnings per share, respectively, are provided in the attached table
entitled “Calculation of Adjusted Earnings.”

 
JERNIGAN CAPITAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
   
As of
December 31, 2018 December 31, 2017
(unaudited)
Assets:
Cash and cash equivalents $ 8,715 $ 46,977
Self-Storage Investment Portfolio:
Development property investments at fair value 373,564 228,233
Bridge investments at fair value 84,383
Operating property loans at fair value 5,938
Self-storage real estate owned, net 96,202 15,355
Investment in and advances to self-storage real estate venture 14,155 13,856
Other loans, at cost 4,835 1,313
Deferred financing costs 4,619 2,004
Prepaid expenses and other assets 3,702 776
Fixed assets, net   233   182
Total assets $ 590,408 $ 314,634
 
Liabilities:
Senior loan participation $ $ 718
Secured revolving credit facility
Term loans, net of unamortized costs 24,609
Due to Manager 3,334 1,484
Accounts payable, accrued expenses and other liabilities 2,402 1,138
Dividends payable   12,199   5,474
Total liabilities 42,544 8,814
 
Equity:
Series A preferred stock 122,137 37,764
Series B Cumulative preferred stock 37,401
Common stock 204 144
Additional paid-in capital 386,394 276,814
Retained earnings (Accumulated deficit)   1,728   (8,902)
Total equity   547,864   305,820
Total liabilities and equity $ 590,408 $ 314,634

Contacts

Jernigan Capital, Inc.
David Corak
(901) 567-9580
[email protected]

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