Greystone Housing Impact Investors LP (GHI) 2015 Q1 法說會逐字稿

At this time, I would like to welcome everyone to America First Multifamily Investors LP's, ticker symbol ATAX, First Quarter 2015 Earnings Conference Call. During the presentation, all participants will be in a listen-only-mode. After the speakers' remarks, you will be invited to participate in a question-and-answer session.

As a reminder, this conference call is being recorded. At this time, I would like to turn the conference over to Andy Grier from the Company.

Thank you. And welcome to the ATAX first quarter 2015 earnings conference call.

During the course of this conference call, comments we make regarding ATAX which are not historical facts are forward-looking statements and are subject to risk and uncertainties that could cause the actual future events or results to different materially from these statements.

Such forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of the words like may, should, expect, plan, intend, and other similar terms.

You are cautioned that these forward-looking statements speak only as of today's date. Changes in economic, business, competitive, regulatory, and other factors could cause our actual results to differ materially from those expressed or implied by the projections or forward-looking statement made today.

For more detailed information about these factors and other risks that may impact our business, please review the periodic report and other documents filed from time to time by ATAX with the Securities and Exchange Commission. Our internal projections and beliefs on which we base our expectations may change, but we will not necessarily inform you if they do.

Today's discussion will include non-GAAP, or generally accepted accounting principle measures, and will be explained during this call.

First, Chad Daffer, Fund Manager of America First Multifamily Investors Limited Partnership, will give you an overview of ATAX's strategic position and achievements. Followed by Craig Allen, ATAX's Chief Financial Officer, who will provide an outline of the financial results. Then we will open the call up for a question-and-answer session.

We signal that ATAX is operating under the SEC Regulation FD, and encourage you to take full advantage of the question-and-answer session.

Again, thank you for your participation and interest in ATAX. I will now pass the call to our Fund Manager, Chad Daffer.

Thank you, Andy. Welcome everyone to our first quarter 2015 conference call. This is the first conference call we've hosted. And we believe it's another opportunity for us to communicate to you how we are performing as a Company.

I'm going to begin with reviewing some of the highlights ATAX has reported during the first quarter of 2015.

In late January 2015, we purchased six mortgage revenue bonds totaling approximately $54 million. These investments are secured by 852 units located in three multifamily residential properties in Houston, Texas-- the three Series A mortgage bonds, each carry an annual interest rate of 6%; and three Series B mortgage revenue bonds, each carry an annual interest rate of 12%.

In February 2015, we borrowed approximately $33.3 million under three tender option bond trusts, securitizing these investments.

On March 30, 2015, we entered into a commercial purchase agreement to sell The Colonial partners. The sale is expected to be completed in the second quarter of 2015. We acquired The Colonial with an exceptional value, and we were able to do a moderate rehab to the property and enhanced its operations.

During the first quarter of 2015, we assessed the market value and determined its highest and best use, was to sell the property. The proceeds from the sale will be re-invested into our core multifamily housing investments.

I'd like to spend some time to update the operational and financial results of the individual residential properties, securitized by the mortgage revenue bonds held by ATAX and the multifamily properties in which it owns -- holds an ownership.

Our total stabilized properties have increased by 1,884 units, or up 37.3% since December 31, 2014. Two multifamily properties; The Colonial and the 50/50 Student Housing, stabilized during the first quarter of 2015. In addition, the total stabilized units increased to 72.7% of the portfolio by the end of March, compared to 58.2% at December 31, 2014.

In addition, we continue to be encouraged by our 92.1% and 91% physical occupancy rates for our stabilized and total units respectively at March 31, 2015.

On May 14, 2015, ATAX closed the unsecured line of credit of up to $50 million. This unsecured line of credit will allow us to continue to pursue our strategic initiatives, and provide an enhanced value to our unit holders. We plan to use the proceeds from this line of credit primarily to increase its investments in our core businesses of acquiring, holding, and selling a portfolio of mortgage revenue bonds, issued to provide financing for multifamily properties.

I'd like to conclude my company overview by talking about our investment pipeline. We believe we are building a robust pipeline of potential investment opportunities in our core business. We look forward to utilizing this pipeline to expand our core business and continue to focus on providing value to our unit holders by investing in multifamily properties.

I look forward to sharing our progress with you in the coming quarters. And at this time, I would like to turn it over to Craig Allen for a financial review.

Thank you, Chad. Good afternoon to all our unit holders and analysts that are listening to our first quarter of 2015 conference call today.

I want to start by giving you a quick overview of our balance sheet, move into the major changes we experienced in our statement of operations, and then conclude by reviewing the results of our CAD, or cash available for distribution, for the first quarter of 2015.

First, the condensed consolidated balance sheet. At March 31, 2015, our total assets were $773 million compared to $744 million at December 31, 2015. Our cash-on-cash equivalents decreased to $24.2 million at March 31, 2015 from $49.2 million at December 31, 2015.

In the first quarter of 2015, we purchased six mortgage revenue bonds, totaling approximately $54 million. These investments are secured by 852 units located on three multifamily and residential properties in Houston, Texas.

In February 2015, we borrowed approximately $33.3 million under three tender option bond trusts securitizing these investments.

At March 31, 2015, the overall leverage constraints of ATAX, which is defined as the total outstanding debt divided by the total partnership assets, was approximately 61% compared to approximately 59% at the December 31, 2014. We continued to focus our efforts on continuing to leverage our investments in a manner that will further enhance the value to our unit holders.

As Chad previously discussed, on May 14, 2015, ATAX closed on an unsecured line of credit of up to $50 million with its lead purchase, Bankers Trust Company. This unsecured line of credit will provide ATAX with another funding option that will allow us to continue our efforts to increase the overall leverage by investing in core multifamily investments.

Next, I would like to give you an overview of the results of our statement of operations for the quarters ended March 31, 2015 and 2014.

Property revenues increased approximately $1.2 million for the first quarter of 2015 compared to the first quarter 2014. This resulted as the completion and lease-up of the 50/50 property occurred in the third quarter of 2014. A full quarter of operations was realized in 2015 versus the quarter ended March 31, 2014.

Investment income increased approximately $1.8 million in the first quarter of 2015 compared to the first quarter of 2014. An increase of approximately $2.5 million in the first quarter of 2015 resulted as 14 mortgage revenue bonds were purchased subsequent to the first quarter of 2014, but was offset by a decrease of approximately $677,000 due to the sale and redemption -- and reduction of mortgage revenue bonds, MBSs, and PHCs during 2014.

A $2.8 million gain on the sale of a mortgage revenue bond was realized in the first quarter of 2014 and did not recur in the first quarter of 2015.

Interest expense increased approximately $1.8 million in the first quarter of 2015 compared to the same quarter of 2014. Approximately $724,000 resulted from the mark-to-market adjustment of ATAX's derivatives. Approximately $901,000 resulted from higher average debt principle. And an increase of approximately $175,000 was due to an increase on the annual effective interest rate.

ATAX's borrowing costs averaged approximately 2.6% per annum for the first quarter of 2015 compared to approximately 2.4% per annum for the first quarter of 2014.

General and administrative expenses increased approximately $537,000 for the first quarter of 2015 compared to the first quarter of 2014. This increase is the result of fees paid to AFCA 2 for the acquisition of mortgage revenue bonds secured by 12 properties and consulting fees, legal fees, and real estate taxes paid, through efforts to support the growth in ATAX's core business, investment in multifamily investments that we believe are excludable from gross income, for federal income tax purposes.

For the quarter ended March 31, 2015 and 2014, ATAX reported net income of approximately $2.5 million and $6.1 million respectively.

During the first quarter of 2015, ATAX reported approximately $2.5 million in additional recurring revenue when compared to the first quarter of 2014, as additional mortgage revenue bonds were purchased.

This was offset by a decrease in investment interest of approximately $677,000 due to sales of investments and principal reductions of investments, and also included the $2.8 million gain from the redemption of a mortgage revenue bond in the first quarter of 2014 that did not recur in 2015.

In addition, approximately $2.3 million of the increase in total expense in the first quarter of 2015, compared to the first quarter of 2014, is related to the increased borrowing cost, the adjustment of the derivatives to fair value, and increased administrative and professional fees.

Lastly, I would like to spend a few moments talking about the results of ATAX's CAD, or cash available for distribution. For the quarter ended March 31, 2015 and 2014, ATAX reported $0.09 and $0.12 respectively of CAD per unit.

For the quarter ended March 31, 2014, CAD includes approximately 3.7 cents of CAD per unit from the redemption of a mortgage revenue bond which did not recur in future quarters.

ATAX is focused on its core business of multifamily investments as a means to enhance the CAD during 2015. The $50 million unsecured line of credit will be used by ATAX as a new and additional source of financing for these investments, rather than utilizing the equity markets as a primary source. At the appropriate time, ATAX will consider returning to the equity market as a means to broaden its investor base and provide a more permanent form of capital to our Company.

At this time, I would like to open it up to questions

(Operator Instructions).

And our first question comes from the line of Dan Furtado with Philadelphia Financial. Your line is now open, please proceed with your question.

Pardon me. Our first question will come from the line of [Ronald Blaine], with ValueForm. Please proceed with your question.

Good day. I have a question. I'm asking on behalf of the 1,000 member of ValueForm group, of which, several doesn't own ATAX, including myself. I'm trying to get a handle on AMT, the alternative minimum tax, of what the percent was in 2014, last year, and what your best guess is for 2015, total year?

Yes it's about -- we think right now it's about 70/30.

Is that what your plan is for this current year we're going into right now?

That's 2014.

That's 2014, sir.

Right.

Going forward for the pipeline of 2015, the bonds that we purchased in the first quarter were non-AMT purchases. They are issued under the 501(c)(3) issuance. So those bonds will not negatively impact that analysis.

And of the bonds that we have in the pipeline from here on out, are a large percentage AMT bonds or private activity bonds. So I would anticipate by the balance of 2015, that we would have a little bit higher AMT amount than what we reported for 2015, sir.

Thank you.

Thank you. (Operator Instructions).

And we have a question from the line of Dan Furtado with Philadelphia Financial. Your line is now open.

Good afternoon, everybody. Thank you for taking my question.

Just a quick one. With the kind of recent pull back in the shares, the guild here, and what we think is a cheap valuation, what's management's opinion or philosophy towards buying -- from the management team's perspective, buying additional shares of ATAX? Thank you.

This is Chad Daffer. For my personal account, I have been adding to my own position as the stock price pulled back here.

I think we discussed yesterday as a management team about our parent company, Burlington Capital Group. Adding to their position, we think that the stock has real value at these levels. So I think we're aggressively buying when the window is open, I guess, to answer your question, sir.

Great. Thank you. Thank you for the response and best of luck to you this year.

Thank you, Dan.

Queue end. With no further questions in the queue, I'd like to turn the call back over to Craig Allen for closing remarks.

On behalf of ATAX, I would like to thank you for attending our inaugural earnings call. We appreciate your interest in the Company, and have a great day. Thank you all.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Everyone, have a good day.