TIDMJZCP TIDMJZCN TIDMJZCC
JZ CAPITAL PARTNERS LIMITED
(a closed-end investment company incorporated with limited liability under the
laws of Guernsey with registered number 48761)
Q3 2016 Interim Management Statement
19 December 2016
JZ Capital Partners Limited (LSE: JZCP.L, the "Company" or "JZCP"), the London
listed fund that invests in US and European micro-cap companies and US real
estate, today releases its Interim Management Statement for the period 1
September 2016 to 30 November 2016.
Results Highlights
* Net Asset Value ("NAV") of $849.6 million (31/08/16: $873.0 million)
* Pre-dividend NAV per share of $10.28 (31/08/16: $10.40)
* Net valuation uplift across US and European micro-cap and US real estate
portfolios before expenses, finance costs and foreign exchange effects
* Semi-annual dividend of 15.5 cents per share paid on 25 November 2016
+ Including previously paid dividend of 15 cents in June 2016, implied
dividend yield of approximately 4.8%, based on the stock price at 30
November 2016
* $36.7 million invested, including:
+ $7.5 million further investment in Peaceable Street Capital
+ $12.9 million to acquire a prime development site in the Wynwood
neighbourhood of Miami, Florida
+ $9.6 million invested in two properties located in Brooklyn, New York
* $27.1 million realised, including:
+ $8.4 million from the sale of Southern Petroleum Laboratories
+ $10.1 million from the refinancing of our US micro-cap water vertical
+ $3.1 million from the refinancing of Metpar
* At the end of the period, the portfolio consisted of 35 micro-cap
investments across nine industries and four major real estate "assemblages"
(59 total properties) located in New York and South Florida
David Zalaznick, Founder and Investment Advisor of JZCP said: "We are pleased
with the steady underlying performance of the portfolio, which provided an
increase in NAV before finance costs, expenses and foreign exchange movements.
The greatest contributor to the decline in our overall NAV was the dividend
payment for the quarter.
Our strong balance sheet provides us with a robust platform to source
investments with compelling value-add opportunities and we remain confident in
the outlook for our diversified portfolio."
Net Asset Value
Pre-dividend NAV per share for the quarter decreased from $10.40 to $10.28 as
finance costs, expenses and foreign exchange movements exceeded portfolio
write-ups. In addition, JZCP paid a dividend of 15.5 cents per share on 25
November 2016. For the past twelve-month period, including a previously paid
dividend of 15 cents in June 2016, the implied dividend yield, based on our
stock price at 30 November 2016 is approximately 4.8%.
NAV Returns
Net Asset Value per Ordinary Share as of 1 September 2016 $10.40
Increase/(decrease) in NAV per share due to Capital Gains and Income received
/accrued on Investments
+ US Micro-cap
0.08
+ European Micro-cap
0.03
- Real Estate
(0.06)
- Other Investments
(0.03)
Other increases/(decreases) in NAV per share
- Change in CULS fair value (0.02)
- Finance Costs
(0.05)
- Foreign exchange effect
(0.02)
- Expenses
(0.05)
Net Asset Value per Ordinary Share (before dividends paid) $10.28
- Dividends Paid (25 November 2016)
(0.155)
Net Asset Value per Ordinary Share as of 30 November 2016 $10.13
The US micro-cap portfolio had a net increase of 8 cents, primarily due to a
write-up at our healthcare revenue cycle management vertical (12 cents) and
co-investment Salter Labs (1 cent). Offsetting these uplifts in valuation were
decreases in value at: co-investment Medplast, which was written down to match
sale proceeds received post-period (3 cents), our legacy Nationwide Studios
business (1 cent) and our ISS vertical (3 cents).
The European micro-cap portfolio had a net increase of 3 cents, primarily due
to write-ups at JZI Fund III, L.P. portfolio companies Petrocorner (1 cent) and
S.A.C (1 cent).
The real estate portfolio had a net decrease of 6 cents, primarily due to a new
mortgage encumbering both the Williamsburg Retail and Bedford Avenue
assemblages, which exceeded the value created, causing a reduction in
unrealized gain.
Finally, our other investments had a net decrease of 3 cents, primarily due to:
a write-up at Metpar to match refinancing proceeds received (3 cents) offset by
a write-down at Spruceview (6 cents).
The chart below summarises the cumulative total NAV returns and total
shareholder returns for the most recent three-month, twelve-month, three-year
and five-year period. Total NAV returns for the one, three and five-year
periods are diluted by the issue of Ordinary Shares (September 2015) at a
discount to NAV.
Since Since Since Since
30/11/2016 31/08/2016 30/11/2015 30/11/2013 30/11/2011
Share price GBP5.07 GBP4.53 GBP3.93 GBP4.45 GBP3.38
(in GBP)
Dividends paid - $0.155 $0.305 $0.95 $1.57
(in USD)
Total - 14.7% 35.7% 31.8% 90.4%
Shareholders'
return (GBP)1
NAV per share $10.13 $10.40 $9.51 $9.94 $9.08
(in USD)
Implied 4.8% 5.2% 5.7% 4.1% 3.1%
dividend yield2
NAV per share - (1.1)% 9.7% 12.0% 30.8%
total returns 1
NAV to market 37% 43% 38% 27% 42%
price discount
______________
1. Total returns are cumulative and assume that dividends were reinvested
2. For 30/11 dates in 2016, 2015 and 2013, implied dividend yield is
calculated as the addition of the dividend paid in November and June of
each respective year, divided by the stock price at such 30/11 date. For 30
/11/11, implied dividend yield is calculated as the addition of the
dividend paid in November 2011 and July 2011, divided by the stock price at
30/11/11. For 31/08/16, implied dividend yield is calculated as the
addition of the dividend paid in June 2016 and November 2015, divided by
the stock price at 31/08/16.
RECENT ACTIVITIES
On 25 November 2016, JZCP paid a semi-annual dividend of $13 million, or 15.5
cents per share.
Significant Investments and Realisations
US Micro-cap Investments - Verticals
Industrial Services Solutions ("ISS") Vertical
During the period, JZCP's ISS vertical completed the add-on acquisition of
Control Products Louisiana, which required no cash from JZCP. Since inception,
ISS has made 26 acquisitions.
US Micro-cap Investments - Co-investments
In October 2016, JZCP invested a further $1.8 million in Tech Industries, to
fund the acquisition of a manufacturer of complex aviation components.
In September 2016, JZCP invested a further $7.5 million in Peaceable Street
Capital, a specialty real estate finance platform.
European Micro-cap Investments - JZI Fund III, L.P.
In November 2016, JZCP (through its commitment to JZI Fund III, L.P.) acquired
ERSIndustries, a one-stop shop providing engineering expertise, steel
procurement, local manufacturing and on-site assembly of pre-fabricated,
reinforced steel modules for major international infrastructure projects.
Real Estate Investments
In September 2016, JZCP invested $12.9 million to acquire a prime development
site in the Wynwood neighbourhood of Miami, Florida.
In September 2016, JZCP invested $3.6 million to acquire another building on
the Fulton Mall in Downtown Brooklyn, New York, adjacent to our other
properties on the Fulton Mall.
Also in September 2016, JZCP invested $6.0 million to acquire another building
on North 6th Street in the Williamsburg neighbourhood of Brooklyn, New York,
adjacent to our other properties on that block.
Realisations
In November 2016, JZCP received net proceeds of $10.1 million from the
refinancing of our US micro-cap water vertical.
Also in November 2016, JZCP received further proceeds of $1.4 million from the
refinancing of our original property in the Williamsburg neighbourhood of
Brooklyn, New York.
In September 2016, JZCP received proceeds of $8.4 million from the sale of SPL,
a leader in oil & gas measurement and laboratory services.
In September 2016, JZCP received proceeds of $3.1 million from the refinancing
of Metpar, a manufacturer of restroom partitions, which was a significant
uplift to the company's carrying value of $0.8 million.
In December 2016 (post-period), JZCP received net proceeds of $25.6 million
from the sale below carrying value of US co-investment, Medplast.
PORTFOLIO SUMMARY
At 30 November 2016, the Company's portfolio consisted of 35 micro-cap
investments across nine major industries and four major real estate
"assemblages" (59 total properties) located in New York and South Florida.
% Gross Assets
($'000) At 30/11/16 At 29/02/16 30/11/2016
US Micro-cap Portfolio 434,652 386,173 39.3%
European Micro-cap Portfolio 152,790 168,797 13.8%
Real Estate Portfolio 454,704 366,158 41.1%
Other Portfolio 21,482 64,320 1.9%
Total Private Investments 1,063,628 985,448 96.1%
Listed Corporate Bonds 12,734 13,036 1.2%
UK Treasury Gilts - 45,608 0.0%
Cash 28,694 91,937 2.6%
Total Listed Investments (and 41,428 150,581 3.8%
Cash)
Total Investments (and Cash) 1,105,056 1,136,029 99.9%
Other Current Assets 546 3,551 0.1%
Total Investments (and Cash) 1,105,602 1,139,580 100.0%
At 30 November 2016, 3.8% of gross assets was invested in "liquid" assets,
which consists of cash and corporate bonds. These asset classes are valued at
prices quoted by third parties. The remaining portion of the portfolio was
invested in private investments in US or European micro-cap companies or real
estate. These investments are valued at fair value by JZCP's directors each
quarter.
We value our privately held businesses carefully. Our average multiple used for
our US micro-cap businesses is 8.3x trailing EBITDA. In addition, we do not
have substantial debt in these businesses. The multiple of debt senior to
JZCP's position is approximately 3.3x EBITDA.
Top Ten Investments
Our ten largest investments as of 30 November 2016 are summarised below:
% Gross
Asset Valuation Assets
($000's) Category 30/11/2016 30/11/2016
Design District Assemblage Real Estate 90,214 8.2%
Industrial Services Solutions US Micro-cap 82,619 7.5%
Vertical
Fulton Assemblage Real Estate 68,281 6.2%
Williamsburg Retail Assemblage Real Estate 66,388 6.0%
Factor Energia European 61,399 5.6%
Greenpoint Real Estate 56,981 5.2%
Healthcare Revenue Cycle US Micro-cap 51,964 4.7%
Management Vertical
TierPoint US Micro-cap 46,813 4.2%
RedBridge Bedford Real Estate 39,778 3.6%
Roebling Portfolio Real Estate 34,177 3.1%
Top Ten Investments 598,614 54.3%
Remaining Assets 506,988 45.7%
Gross Assets 1,105,602 100.0%
Balance Sheet
Below is a summary of JZCP's balance sheet as of the relevant dates:
($000's) 30/11/2016 29/02/2016
Cash and cash equivalents 28,694 150,581
Investments & other assets 1,076,906 988,999
(-) Other net liabilities (202,502) (185,771)
(-) ZDPs due 2016 - (44,217)
(-) ZDPs due 2022 (53,459) (57,854)
Net Asset Value 849,639 851,738
At 30 November 2016, "other net liabilities" includes $56.3 million from the
issuance of Convertible Unsecured Loan Stock ("CULS") in July 2014, which
carries an interest rate of 6%, and $97.2 million from a six-year term loan
with Guggenheim Partners, which carries an interest rate of LIBOR plus 5.75%.
For further information:
Ed Berry / Kit Dunford +44
(0) 20 3727 1046 / 1143
FTI Consulting
David Zalaznick
+1 212
485 9410
Jordan/Zalaznick Advisers, Inc.
Teresa Le Couteur-Tembo +44
(0) 1481 745741
JZ Capital Partners, Ltd.
About JZCP
JZCP is a London listed fund which invests in US and European micro-cap
companies and US real estate. Its objective is to achieve an overall return
comprised of a current yield and capital appreciation. JZCP receives investment
advice from Jordan/Zalaznick Advisers, Inc. ("JZAI") which is led by David
Zalaznick and Jay Jordan. They have worked together for 30 years and are
supported by teams of investment professionals in New York, Chicago, London and
Madrid. JZAI's experts work with the existing management of micro-cap companies
to help build better businesses, create value and deliver strong returns for
investors. JZCP also invests in mezzanine loans, first and second lien
investments and other publicly traded securities. For more information please
visit www.jzcp.com.
END
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