Story originally published on Daily Memphian.
Self-storage company Jernigan Capital has announced it is buying its external adviser JCAP Advisors to bring it in-house and will “right-size” its annual dividend, lowering it by 34%.
The Memphis-based company also announced its namesake leader, Dean Jernigan, has retired on Dec. 31 as a director of the company.
Jernigan, executive chairman and director who founded the company in October 2014, has a long history in the self-storage industry, founding Storage USA in Memphis in 1984 before selling it 2005 to Extra Space Storage for $2.3 billion.
Jernigan, who was CEO of Jernigan Capital until November 2018 when he handed over the reins to current CEO John Good and president and COO Jonathan Perry, will remain a consultant for the company on a non-exclusive basis, according to a release. He issued a letter to the board of directors announcing his retirement.
“On April 1, 2015 we started with a strategy and execution plan, and we were given $100 million to try to make it work,” Jernigan wrote. “Since that time, we have collectively built, literally and figuratively from dirt, a billion dollar plus self-storage portfolio that is pound-for-pound the best in the world. JCAP has assembled, with your continued support, a world-class JCAP team, which has aligned with leading developers, asset managers and capital partners. The Company is in great hands.
“John (Good) has been here since the beginning and has been the co-author of the story to date. He is highly respected by the institutional investment community, our lenders, sell-side analysts, REIT CEOs and other thought leaders in the sector and, most importantly, our team. Jonathan (Perry) is considered one of the preeminent self-storage industry talents – a 25-year veteran who is universally lauded by operators of all sizes as one of the great investment minds in the sector. Together they form a dynamic pairing of senior executives who, I am highly confident, are poised to do great things with JCAP in the coming years."
The company will acquire all the assets and liabilities of JCAP Advisors in exchange for nearly 1.8 million operating units of the company with a value of approximately $31.6 million based on the closing price of its common stock Dec. 16.
Another $13.5 million in stock is issuable contingent on numerous conditions, including that the company’s stock trades at a daily weighted price of $25 a share for at least 30 days prior to Dec. 31, 2024. The 52-week range for Jernigan Capital’s (NYSE: JCAP) stock is $17.52-$22.20.
The transaction is expected to close during the first quarter of 2020.
A special committee approved the transaction as being fair to shareholders who are not affiliated with the company or JCAP Advisors.
Harry J. Thie, chairman of the special committee, said the “internalization transaction” to bring JCAP Advisors in-house will net annual savings of $17.8 million in calendar year 2020 and will eliminate the base management fee, incentive fees and termination fees.
The transaction, Thie said in a release, completes “a complicated business plan and transformation from a finance company to an owner-operator of an extremely high-quality portfolio of well-located self-storage properties.”
CEO Good will resume the role as chairman. He has more than 28 years of experience working with senior management teams and boards of directors of public companies in the real estate investment trust (REIT) and financial services industries.
Good graduated from the University of Memphis with a BBA in accounting, cum laude, in 1980, attained his CPA designation and worked with a large regional CPA firm before earning his law degree, with honors, from the University of Memphis School of Law in 1987.
"Dean (Jernigan) has been a visionary in the self-storage industry for nearly 35 years, and it has been the greatest privilege of my business life to have partnered with him in building JCAP,” Good said in a release. “Given that he and his family will continue to be one of our largest stockholders, we expect he will continue to maintain a keen interest in our growth and will, in a consulting role, continue to contribute in a material way to the success of the Company.”
The board of directors also determined that, based on its “accelerated transition to an equity REIT,” the new annual dividend rate will be 92 cents per share of common stock, down from the current $1.40 a share.
“We have consistently advised the market and our stockholders that at such time as the Company is focused more on the ownership and operation, rather than the financing, of self-storage properties, it would be appropriate for the Company to adopt a dividend policy that resembled that of an equity REIT rather than a mortgage REIT,” Good said in a release.