An affiliate of NexPoint Advisors L.P., an investment advisory firm, has entered an agreement to acquire Jernigan Capital Inc. (JCAP), a merchant bank and advisory firm that also owns self-storage facilities, for approximately $900 million in cash. The deal was unanimously approved by the JCAP board of directors, though it still must be approved by company shareholders. Subject to customary closing conditions, the transaction is expected to be complete during the fourth quarter, according to a press release.
Under terms of the deal, holders of JCAP common stock as well as those holding units of operating company interests in Jernigan Capital Operating Co. LLC (the entity through which JCAP conducts its investment activities) will receive $17.30 per share in cash. Holders of the company’s Series B preferred stock will receive $25 per share, plus accrued dividends, the release stated.
“Since our initial public offering in March 2015, we have built from the ground up a best-in-class portfolio of newly constructed ‘Generation V’ self-storage facilities in some of the best submarkets in the United States, along with a development platform that is the first of its kind in our sector," said John Good, CEO and chair of JCAP. “We believe this transaction with NexPoint validates the quality of the portfolio of self-storage properties and the corporate platform we have built, and accomplishes the goal of maximizing value for our stockholders during a very difficult time for all of us. We are certain today’s announcement is in the best interests of all of JCAP’s stakeholders.”
“NexPoint has long admired and supported Jernigan Capital’s unique self-storage business model and platform,” added Jim Dondero, founder and president of NexPoint. “We plan to build on this vision as a private company, maintaining unparalleled asset quality and continuing the current growth trajectory. With our combined expertise, scale and financial strength, we are well-positioned to execute this vision and further expand the company’s national footprint.”
NexPoint has previously shown interest in self-storage. As of December 2019, its affiliates had invested or loaned approximately $211 million in the sector, including a $125 million preferred-equity investment in JCAP. Affiliates had also placed approximately $77.4 million of equity investment directly into self-storage developments, according to a Dec. 23 filing with the Securities and Exchange Commission, in which NexPoint Real Estate Finance Inc. (NREF) announced its intent for an initial public offering of up to $115 million. NREF is a real estate investment trust (REIT) specializing in middle-market loans for hospitality, multi-family, office and self-storage properties.
In February, JCAP acquired its partner interests in several self-storage properties. At the time, it owned, either alone or with its joint-venture partner, 28 self-storage facilities representing 35.2 percent of the net rentable square feet in its investment portfolio.
Under its agreement with NexPoint, JCAP will discontinue its regular quarterly dividends. Though the company doesn’t expect to host a conference call and webcast to discuss its financial results for the second quarter, it will still announce earnings on Aug. 6, according to the release.
JCAP is a publicly traded REIT listed on the New York Stock Exchange. The company provides financing to private developers, operators and owners of self-storage facilities, offering funds for acquisition, ground-up construction, major redevelopment or refinancing. The firm is externally managed by JCap Advisors LLC.
NexPoint is a registered adviser to a suite of funds and investment offerings, including a closed-end fund, a business-development company, an interval fund and various real estate vehicles. It’s part of a multibillion-dollar global platform that specializes in alternative investments.