Jernigan Capital Inc. (JCAP), a merchant bank and advisory firm serving the self-storage industry, has signed a stock-purchase agreement with accounts managed by NexPoint Advisors L.P., an affiliate of investment adviser Highland Capital Management L.P. Under the agreement, Highland has committed to purchase $100 million of series A preferred stock from JCAP at $1,000 per share over a two-year period. JCAP can increase that commitment to $125 million at any time during the period, according to a press release.
JCAP must sell and issue a minimum of $50 million of series A preferred stock by the end of the two-year commitment. The stock may be issued in minimum increments of $5 million once per month, subject to the company’s satisfaction with various conditions.
Issuing the stock in small increments “allows the company to ‘match fund’ its development investments to the benefit of all stockholders,” company officials said in the release. “The company believes that the Highland commitment, together with proceeds from A-note sales, will finance up to $200 million of additional self-storage development investments by [JCAP] over the next several quarters, adding an estimated $8 to $10 to the company’s book value per share.”
“We have continued to lead the market in providing 'smart' funding for high return, state-of-the-art self-storage facilities in underserved submarkets of leading United States cities,” said Dean Jernigan, chairman and CEO of JCAP. “Highland’s commitment, together with the developing A-note market—evidenced by our recent A-note sales—provides us with flexible, reasonably priced funding sources for our robust investment pipeline.”
“After an initial ramp-up period, we have continued to deliver outstanding investments in new, high-quality and well-located self-storage facilities built by top-notch professional storage developers,” added John Good, president and chief operating officer for JCAP. “Our growth and ability to create value has been limited only by uncertainty regarding our access to reasonably priced capital. The Highland commitment removes that uncertainty and clears a path to maximize our opportunity to deliver market-leading returns during this development cycle. In addition, we have now established our access to A-note leverage at costs that are less than those forecast at the time of our IPO, providing us with additional funding momentum. We intend to take full advantage of our $600 million pipeline for the duration of this unprecedented development cycle.”
Shares of series A preferred stock are entitled to a cumulative cash distribution equal to 7 percent per year on the liquidation preference amount. They are payable quarterly in arrears on Jan. 15, April 15, July 15 and Oct. 15 each year. The shares also will be entitled to a participating dividend. JCAP’s board of directors has established an ownership limit of the company’s common stock for the buyers of 17.5 percent of its outstanding common stock, the release stated.
As part of its investment, Highland will receive a seat on JCAP’s board. The company is expected to appoint Highland’s co-founder and president, Jim Dondero, or managing director, Matt McGraner, as its seventh board member. In addition, Highland will have certain pre-emptive rights in connection with future issuances of common stock, allowing the company to retain its common ownership position, the release stated.
“We are excited to be partnering with Jernigan Capital to focus on the compelling opportunities in the self-storage sector,” Dondero said. “We believe that self-storage development is currently a top idea in commercial real estate and that Jernigan Capital is the best partner for this exceptional development opportunity. We are a significant holder of JCAP’s common stock and look forward to substantially increasing our investment in JCAP’s highly regarded management team and robust pipeline.”
Founded in 1993, Highland Capital Management is a global alternative-credit manager. It has approximately $17 billion of assets under management. The company specializes in alternative investments and credit strategies. Its client base includes corporations, endowments, financial institutions, foundations, governments, high-net-worth individuals and public pension plans. Headquartered in Dallas, the firm also maintains offices in New York; Sao Paulo; Seoul, South Korea; and Singapore.
Jernigan Capital is a commercial real estate finance company that provides financing to private developers, operators and owners of self-storage facilities. The company offers financing for acquisition, ground-up construction, major redevelopment or refinancing. The firm intends to be taxed as a real estate investment trust and is externally managed by JCap Advisors LLC.
- BusinessWire: Jernigan Capital Procures Equity Financing Commitment