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VOL. 131 | NO. 221 | Friday, November 4, 2016

Jernigan Capital Earns $5M Q3 Profit

By Andy Meek

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Dean Jernigan is one of those CEOs who’s happy to spend big chunks of earnings calls with analysts leading a deep dive into the macroeconomics of his public company’s industry.

DEAN JERNIGAN

In the case of his Jernigan Capital – a Memphis-based provider of capital to self-storage entrepreneurs, which posted third-quarter net income of $5 million this week after a loss in the year-ago period – there’s definitely a bellwether aspect to be observed. Jernigan, for example, talked about seeing a trend of shrinkage in living spaces – homes and apartments – that translates into better demand for the self-storage business, and by extension, companies like his.

We’re seeing homeownership slip a few percentage points, he observed, and people are not only sizing down to apartments but apartments are getting smaller. “That,” he told analysts, “speaks volumes about demand getting better for us.”

Jernigan Capital, its namesake chairman and CEO said, is taking “full advantage of this strong development cycle,” leading to results like its third-quarter profit of 84 cents per share. That bested the consensus estimate of three analysts polled by Zacks Investment Research who were looking for 46 cents per share.

The first wave of Jernigan Capital-financed self-storage developments opened their doors during the second quarter and, according to the company, “quickly exceeded lease-up projections.” The same was true in the third quarter, which saw two more of its self-storage projects open their doors and exceed their original lease-up projections.

According to Jernigan Capital president and chief operating officer John Good, the company has a pipeline of $600 million in additional projects in various stages of underwriting. Leasing continues to outpace projections on the company’s six operating self-storage projects, partly the reason why company decided to bump up its full-year guidance.

The company increased full-year 2016 earnings per share guidance to a range of $2.40 and $2.52, where it previously had been $1.93 to $2.23. Adjusted earnings per share guidance was increased to between $3.01 and $3.12, where it previously had been $2.50 to $2.78.

“The firm has seen solid earnings estimate revision activity over the past month, suggesting analysts are becoming a bit more bullish on the firm’s prospects in both the short and long term,” reads a Zacks research note published in recent days.

Jernigan is a businessman with deep ties to Memphis. He’s a founder of the Memphis Redbirds Baseball Foundation and AutoZone Park with his wife, Kristi, and he relocated Jernigan Capital’s headquarters to 6410 Poplar Ave. in 2015 on the heels of the company wrapping up its IPO and closing the book on its first quarter as a public company.

He also has more than three decades of experience in the self-storage industry. He founded Storage USA in 1984, eventually taking it public and growing it from a single property to more than 570 at its peak. After selling the company, he became the CEO of U-Store-It, which became CubeSmart.

He retired as CEO there in 2013 and launched Jernigan Capital.

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 56 437 16,061
MORTGAGES 76 508 18,556
FORECLOSURE NOTICES 8 56 2,461
BUILDING PERMITS 241 876 33,390
BANKRUPTCIES 64 301 10,314
BUSINESS LICENSES 15 125 5,303
UTILITY CONNECTIONS 17 125 6,273
MARRIAGE LICENSES 19 98 3,511