JZ Capital Ptnrs Ltd Interim Management Statement

 
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 
 

(END) Dow Jones Newswires

December 19, 2016 02:00 ET (07:00 GMT)