Jernigan Capital (JCAP) 1 Aug 192019 Q2 Earnings call transcript

Greetings and welcome to the Jernigan Capital Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. President Finance. Vice Senior Corak, of Corporate David Thank you Mr. you may begin. Corak,

SVP the everyone, My second Corak, and morning, Jernigan name Corporate welcome David call. Good conference to Capital Finance. earnings quarter is of XXXX

is remarks. all are be time, opened conference At floor questions your mode. participants being X, in August Today's XXXX. Thursday, following this for The listen-only will recorded, management's prepared

with in questions defined that Laws. Company's begin, prepared materially remarks other SEC your please by due implied to the or as statements remember and management's those our Private from Reform may we Actual business. Litigation forward-looking to forward-looking Before answers contain XXXX associated differ Securities Act statements the the and and risks by stated results of could Securities Federal uncertainties

statements to are the is this measures we encourage call statements qualified in release. filings the reconciliation cautionary A non-GAAP our included GAAP review. in the by of SEC, contained with forward-looking the financial you which earnings latest press Company's on These provided to

press find on call webcast audio of replay www.jernigancapital.com. can reports and release, conference You website this at our SEC our

In Chief Senior Good, over Officer; President myself, Perry, CEO; Kelly have and Good. John? turn Mr. addition to we CFO. John Jonathan on the call Luttrell, I'll and Vice to floor President and now Investment today the

Thanks, David. Good morning, everyone.

and last The in second interests quarter first of we of originated call, for our New new of productive three investments the Since another MSA. these XXXX profits rights was refusal, us. York development for quarter being all

avoid earn prevailing in we originate highly developers where, sub-markets, we cap excess healthy investments supply. yields can with development to continue new over development rates and We believe, experienced

exceeding we've the February, capital and those in development. XXXX, investments to allocating XX% annual range, of new we're which these criteria. our in believe committed three new our hitting for provided guidance investment fit targets of we We midpoint Today, capital

level for and of However, disciplined be of new development in development selection and we down, winds in investments, our our to the cycle development investment moderate. expect to

interests to not During wait with engage we the did to over quarter, desire financed. have we until a developer's we to season close acquisition Instead, expressed the was sell. rental in discussions of in who developers projects any the chose

end a which of construction months, to and completing had and resolved we addition previously to to successfully forward our full project continue portfolio. the service to that be look next will the believe Miami investment quarter, great few it loan the property. that, we placing we in the that we Subsequent took Miami in ownership of dispute, We that and reported, property

continue to We buy to expect next to months. XX of evaluate numerous over the out opportunities interests the developers

our dealing in such While of issue continues that nicely. certain we're elevated of and happy the portfolio fundamentals, to with the our report supply lease-up markets to impact elevated self-storage on sector's supply

the XXXX effectively experienced of season. XX% properties is rental investment As rental season have now completed. one today, Approximately development of our full

of this our which age points have open underwriting running of properties These been for XX of least occupancy, primary average XX.X% basis leasing portfolio occupancy X,XXX or XXX our points is weekend. season. have between basis at properties an ahead Physical given focus, our April one and X is of added for that past physical approximately the initial

Kelly that, about results operations. our over by second delighted optimistic the In moving to we're summary, prospects and things business to our I'll we're way about turn talk the in With our quarter, performed forward. of

were items, on our additional which expectations provide results few our adjusted several on share $X.XX, guidance. of everyone. and reported share John you, which $X.XX are earnings quarter both of end Overall, and there but per hello earnings some I'll color. quarterly of came items our quarter, a above line for above the of Thank second night, we Last high noteworthy per the in

with for First, primarily of fair construction driven above rates, came the favorable portfolio. by This along on range. of better-than-expected movements $X interest was in quarter midpoint value overall the our progress million our

interest higher-than-expected fundings expense income. our guidance fee sold our guidance, came additional by the in the below loan Second, during end And more stock lastly, high than driven and as of income program our our ATM common expected midpoint for we interest exceeded quarter.

our our this midpoint, million EPS been above fair would have even midpoint have guidance adjusted of if all would Taking consideration, EPS the $X and into value quarterly been of $X.XX range. in

guidance to on the of the remaining part for year. Moving

As quarter, progress our construction remain timing track. of the second the end on of and of deliveries

better interest budgeted. rates visibility have is impact or the over on in portfolio line than performing greater balance the And now we operating of year. slightly market Our of the

of have before now prospective acquisitions had season we than the developer began. more clarity we on interest rental Additionally,

Based expect we've issued determined guidance And interest currently developer We a during February. on our buy that it throughout these we we in now near-term property. forecast, adjust acquisitions builds developer to value adjusted acquire these when income as is to contract swapping EPS we appropriate have our communicated, dilutive as have fair and at initially and interest lease-up of the for interest accretion than earnings, EPS we when guidance ranges. which our factors, rate NOI, on our more effect previously interest lease-up, we're property

is our offset, an additional of our tightening ahead EPS all of effect rates income. more adjusted increased guidance from by midpoint this than range in schedule, fee construction, full the guidance and increase developer of year net The lower of EPS the interest dilution near-term and that of This range. though, is is

to balance Turning the sheet.

March share at under our XX.X% the value issued program common premium an to quarter, per share. we During XX was second of $XX.XX, $XX.X book our a million average which price of stock ATM

facility, quarter net activities, at XX% well just end. gross leverage, credit end. as $XX drawn and measured These to activities current under our help our to at by utilized capital continue quarter also notably, for with million assets We our debt us funding at position stood

supplement the part ample our contained and Our capital in to for remaining commitments uses our reflects table year. of of fund capital the sources

will the company the the since we prudently with best and done sources of have range our maintain inception, of of our obligations to of seek add that to levels XX% the value in debt continue capital assets. funding XX% gross to we As match to

we form That's the over for and Q&A. of it will have remarks, turn prepared in we now all

question Instructions] is Tim [Operator go The Riley you. Thank B. Hayes, first sir. from FBR. Please ahead,

the the the good taking Thank up the questions. half around my Hey, everyone. you should picking morning, encouraged comments the to pipeline for year. be hear pace I in and of appreciate back acquisition that

to up the construction projects, peers price more this starts, some quarter on cases. sellers earlier even have calls that have acquisition Some noted expectations sell exit in of in your before pipelines have have become picked willing as rationalized conference their and

second trend? half wondering if maybe Just the if pipeline for size willing, you're And seeing buyouts year? for of you're this your the

Yes, Jonathan. is Tim, this

developed for in everything you think And being I merchant that being our intent of is I developers think good projects that, the developers this on future. XX some XX% think, have coming been at with to those when to us, by that estimate a built about us cycle, post CO. the months in are point average, is sell

higher, percentage greater for us, XX%. that I is than think,

we mark. XX-month in have at in our mark, service look just placed XX/XX/XXXX, portfolio will assets you properties that to use had of were they XXXX, if XX that by and of XX hit when the that our end age the So would

the trend into to holds, would of that think and continue those we up the that assuming continue conversations, that, I balance pick expect XXXX. to So year on

income high Okay. there? acquired or have outsized income? those an you Or I prepayment Great. relative pretty guidance. early then the Was interest have that in would And income asset any interest modification to loan which appreciate comments. was this this your reflect does during quarter, just would an quarter decreased there expectation

quarter. quarter, had of we that in a Good saw line fee so with quarter, about question, little the $XXX,XXX bit recognized Tim. some and kind total during There were last modification higher, maybe income we this what

and As nature. a episodic circumstances in those and are reminder, specific facts are

We also closed quarter. closings that had we in that the earlier set development have through we loan investments some

we projected. of that than earning were this big some deploy income are had the drivers able start and to And initially quarter. Those capital on sooner we so

then you your largely Kelly. commitments been greater City New thanks new York pointed as Okay, in the area. recently, And out, have

there, more was has any seeing up interested Just And there? new pipeline picked if little trends control future the the wondering you supply if even legislation, you bit impact area. as you that can development rent you're talk in about keep that multifamily think a of recent the

Yes. the those movement I area up the don't any population think on metro major control. characteristics that unlike are New -- densities and the York really I don't the in the impact see a in country. there across demographics other The just is rent

there. so most as New trend continue happens we York. recent our have as been investments up to just that that long then So as continues, be on bullish long It

say, where parts what of think them a would and you obviously to or are York, we look the programmatic cycle, if we call Again, partners, about now would to be Mid-Atlantic country. and our right opportunities in a other New but also continue half we have, the developers about the in in at dozen, I I

York. particular across from the in goal So it of bit Timothy just deals you’re as why to activity on surge New timing little Hayes seeing happens getting us a these of line Paul a

to internalization I’ll Okay. then I believe, formally more process, in there. The appreciate sneak the I the going one October. queue. in I’m comments and hop in, begins

just If be at conversations to – comments point? been that have And be any there’s any color if would wondering Just made appreciated. around progressing? how this

required the offer requires special is manager JCAP, and that is appoints Under Yes. then committee agreement SEC agreement in committee is It’s the agreement, to since offer, the management before under communicated the have IPO as the think a the for the time, make can reject special that And We’ve we’ve that closed or evaluate to the the to outlines – management SEC that that to the counter is later noted, an process John, file. no X. what we the filings, the through Board process Tim, point accept, set company’s for in you made I internalization. this October offer. and thanks begin that on that for either all process than filing the question. forth since every

proxy to when special at from internalization its opinion required asked has there a in and course. a statement, the be think produce a I comment a a and It’s really going will the be all on then obtain parties, the meeting was If terms And the to designed statement. that fairness committee nationally stockholders of process special investment that and an process upon agree the – the this for call Once proxy run to will approve time, that’s bank. to the the until recognized transaction. is and on be happened, committee manager we’ll will nothing that’s described result everything issue fair then transaction,

guys. comments the Appreciate Okay.

from Please question a Todd Thomas, have Markets. KeyBanc ahead, We Capital sir. go

Thanks. us is do in expect XXXX. acquisition appropriate you morning. partner to to Good here. assets comments back Wanted think how the you and your of an own to might you for And range developer think for circle the Hi. additional do assumption What heading increase in buyouts? that many to consider terms of your into interest

be – while think that coming – would on the Yes, we buyouts. – have four heated question, think Todd. that of that’s current I don’t year, would and range. a a conversations this a discussions. you the would – And that progressed, heels you have I you may can the of have developer of give up in indicated or expect, the I we I XX as can out to rental range specific earlier great season, know while would

I upper the towards end range? that think you’re that probably of

comment me lines. let those make a Todd, Yes, quick along

developer process, when all control can’t people and come us. along, the told they we we’ve to or this is control really of As if in

the lease-up evaluate And all so of really in we stage light of properties. of this of

the spot and as of as and think, just consistently kind when this I think earlier been, I of to lease alluded up, And is between somewhere somewhere think XX XX% hold said, quarters, a in year, So Jonathan that occupied, that to XX I four disclosed pretty Jonathan plus XX last potential we, months sweet indicated the those to property over discussions. earlier, for has of that those several begin. a trend properties conversations we we that hit range. And would the physically of

upper But terms I the that we discussions – at of what I happens, of the think that. up control probably number don’t range. of in ultimately ends end

took you down Okay. the the helpful. though appears be you And possession store that that That’s there Are headed have road? you’re today, one then others watching Miami where quarter after of it you that in end. could as

construction, delayed go things we’ve think propensity long project if a the a with discussions, the I that’s from episodic, delivery, ended I upon think period and of propensity and eaten depends toward into accordingly. always a has reserves, prolonged – has it been There’s developer, really. was Not and than it’s with lease-up to how generally taking in up have standpoint. adjust more economics maybe modifications get our properties been our – move And

As did that. you Miami not the interest loan that we that remaining loan and know, profits only had, in we that, was have a construction

really that a So different situation like any not we with out working portfolio, situation where situations have our was than with of that completely the respect to up things of we to but more type typical rest is, don’t the what expect our developer. end

you comment if Okay. general. could lastly, maybe And then development on in activity, just just wondering

was maybe heading developer think XXXX. which is maybe on context, if you’re read slowing your working as Just their their they’re specifically, though, development in But or partners your of are partners, worked curious you industry, the that your pipelines have updated to at not your that with, entire outlook all? curious, about pace get I and of into if representative down with changing

cycle the on deliveries as XX% more but be to bit XX from have mean, been the the on think a far. in that occurred markets. range pretty if down. I wind XXXX, is the thus only Yes, consistently We our been top all commentary focus XXXX, maybe will is other I And to you’ve markets, starting looks in XX%. it Todd. calls that little the of down

looking not a nationwide really not and from at basis XX relevant on non-top to it markets particularly in goes we’re is us. what So

the have are developers standpoint yields carefully. in much on of bank’s like, banks find and have appealing I feel from more markets of sector to banks them. think the looking probably we that believe opportunities, of commented and feel We things are kinds get has our certain can been that they the We of believe they starts, But new lot, that developers. source that capital those to in some will a this, underwriting where friends at tightened the primary

at have those and Jonathan find collaborating sites With submarkets. a respect they’re are where as to perhaps earlier, new a have of asking developers, guiding them submarkets, an – where submarkets we’re to potential really a you six developers. amount and us And delivered, with little seen about is programmatic said our point, we on we’re supply them those demand, insufficient where go to they there in

obviously I that continue this we good which And of I collaborative, part our knows couple to closely an and follows developers, will about continue in these be submarkets of us. we’ll new those. produce that And model. everybody of very $XXX to close who And We for won’t careful that pipeline, years programmatic we business look just some for do to underwriting were between a by running shrunk to – under as very and development. long projects of there’s as that mean, are us very continue believe and large level we’ll our really exists, pipeline is real a but us believe. prudent has company and million important opportunities, need those where and that’s a ago, evaluation has, relationship that of all

slowdown the color factors. add can bit more front, think to a I that to just attribute you Todd, three probably on the little macro really

challenge. John then and more weighing to, just the that equity be has to locations think and markets, in general, find some development I have deals on the early local zoning funding cycle. harder was which on tighter, lastly, cycle to It’s underserved the bank I acquisitions. to alluded which in you they’re sites, they’re financing, in new – then, obviously, of this the focused think that fundamentals pivoted, And a getting is pockets of pencil late continues absorption on find. to supplies And or harder the harder makes in

development cycle that close. factors bringing a are a you of host have this So to

you. Thank Okay.

a sir. go question Please ahead have James. Hughes, Jonathan Raymond We from

of and South fundamentals project the on that from Hey, hoping overall maybe us construction give that’s pipeline be could wholly supply in it? also, some in morning. deliveries I was And Florida, on pressure see and bottoming when the is comment What details finishing owned? Miami stage good then new you now there? you will who project, on new

has the Florida building the largely fire to process Jonathan, certificate that was property is South technical that ventilation it we’re the out. There the that. And completed. of in confusion occupancy, some before Yes, fix that the made legal to the were designing meet with with system respect be in it’s in to is to that There requirements – and involved a of the one has with code. do bidding gets for parties

contractor matter that with continues The everything with It’s the work on very is And of going done. and getting permitting us. through us work very cooperative be general that well. project and process to a just going

commented think back the maybe an of dealing an inspection in with for that or are the not XXXX, in have process jump of August It I is that to process a first and There takes hoops while. call through. we’ve a permitting activity County conference of faint very our since lot effort you the heart. Miami-Dade

really general? XX.X% the is, property should process. I Yes, in say, tail And the South comment that within on completed. in very the let couple supply Jonathan would be so three next we’re end of of And entering months. level at lease-up I’ll Florida,

Yes.

they’ve to but navigate open come generally at the really of been out Florida to ground of And interesting, have -- has measured get online function on slower they’ve a up the pace. to Jonathan, and South having process, been slower CO. been or deliveries boards, projects been been because a have permitting So the has that

XXXX assets in service. of flow XXXX, back, been XXXX, board, placed So starts much Florida. measurable new and too steady, it’s aware of being the if down a meaning you really Not look really, South planned into on

to a that pretty data drop going Our be it’s significant suggest in XXXX. off

think have see the I to a push off. that we going drop pretty this should of you’re be So final year, deliveries substantial

or a to for point And X.X are self-storage add that facility, existing projects build a like even Miami-Dade ago So then development Dade, Miami-Dade I’d an distance is to is our Yes. One a years site. so on X.X zoned comments it’s Jonathan’s the restriction there or two less self-storage lot in County. perhaps of new site Miami zoning, self-storage, that in think facility, mile I County particular, than bit a if a not to site’s from X.X developer mile if for within, notwithstanding entitled little is self-storage mile three on

So be suppliers existing difficult. very, place to new drawing you circles when finding around a going start sites, develop to very

Florida we about is Keys. Beach our within from a projects. really the locations that, already MSA the supply define we’re when done. that’s legal in people in of at location kind all looking geographic Florida, And good feel disrupting you whole location prime West some we a big, like MSA. that and runs -- the South of coming portfolio, It down have So the and new protections feel happens other to huge of we’ve South what what the general, the in our against start way And Palm and in area we MSA, notwithstanding

what I’m say, distributions that negotiation that about upon but I of you’re this color. structure, you on following can capital commentary actions color limited give that be corporate can Appreciate part internationalization me. all just any the or strategy? question from you more other us could earlier like process, or address process, And Tim’s in one and the operational realize

other adopted we stages, of for is question. or each model that several was in stage When business back the over that XXXX, Thanks involves an evolutionary or time, going an business Yes, a we a stage. several good model Jonathan. company different is be period began to That evolving from the question. the a phases and

the investment in with of hands ventures development largely ventures effectively So, the control those in new that stage and structures joint was were of the in the our these developers. initial developers, are loan joint

leverage policies, evolutionary we adopted, particular So of headcount distribution policies, stage that policies fit all that policies, at personnel, time, capitalization that process. our

than ownership be As in of owning, into longer-term value four the properties. knows maximizing focus stage been we sheet, by on in marked everybody we preeminent stage last is we we've for of and years. along, the call a our which on process is – move believe portfolio been shifting the balance and going But type of are our self-storage I'll model next business That the and operator operating a stage, different we've evolutionary that which of stage. acquiring to business what properties is

evaluate and our a we more operator, they'll So, to – that we growth shareholder our those continue policies, think think, as as have policies and that become evaluates maximization of we more those I need think all we'll ensure I sustained own an the I company to of accomplish goals, policies ongoing basis. so. changes, on best of extent the And we REIT, equity and evaluate to more that do adjust Board of true to always the to an value as appropriate owner possibility for properties

and doing making management the value. the that judgment so situation that it's on on in And things maximize think shareholder Board value that a team keyed and keyed calls is very and very a of I in that a

All the right. color. time. the for Appreciate Thanks

further comments. no to time. this back are There for the at ahead, the I'd sir. over like Please John to Instructions] go [Operator Good, floor closing turn questions CEO,

the we'll everybody and interest participating for Thanks you talk thanks questions. and for in call, to And quarter. your in next for the Thanks continued thanks JCAP. Bye.

today's teleconference. concludes This

lines disconnect for Thank this at participation you good day. may your have and time. your a You