Greystone Housing Impact Investors LP (GHI) 2015 Q4 法說會逐字稿

At this time, I would like to welcome everyone to American First Multifamily Investor LP's, NASDAQ ticker symbol ATAX, 4th Quarter 2015 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. After the speaker's 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 call over to Craig Allen, ATAX's Chief Financial Officer.

Thank you. Welcome to ATAX's 4th 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 differ 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 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 economics, 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 statements made today.

For more detailed information about these factors and other risks that may impact our business, please review the periodic reports and other documents filed from time to time by ATAX with the Securities and Exchange Commission. Our internal projections and beliefs upon which we base our expectations may change, but we will not necessarily inform you if they do. Today's discussion will include non-GAAP measures and we will be explaining those during this call.

Thank you for your participation and your interest in ATAX, and I will now turn the call over to Chad Daffer, ATAX's Chief Executive Officer.

Thank you, Craig. I'd like to welcome everyone to our 4th Quarter 2015 earnings call. This will be our 4th call, thank you for joining us. We're encouraged by the performance of the Company and the related cash available for distribution.

Cash for the 4th quarter of 2015 was $0.19 per unit. Year-end 2015 was $0.53 per unit. I'd like to talk a little about a few notable transactions from the 4th quarter of 2015. In addition to our multifamily tax exempt on addition to our tax exempt bond portfolio, we invested in eight bonds for approximately $50 million in par amount value. The bonds are collateralized by five properties, totaling 709 units.

We also completed the sale of Bent Tree and Fairmont Oaks apartments, earning approximately $4.8 million in tier two income, and $1.5 million in interest income. In closing our position in these two remaining consolidated variable rate interest entities, we are now out of that business. We also invested $17 million into two new construction multifamily housing properties through the creation of a new ATAX subsidiary.

And more recently in January of 2016, I'm pleased to report the sale of our three remaining mortgage-backed securities. This trade will close our MBS position, providing liquidity for our future investments. At this time, I'd like to turn it back to Craig Allen to discuss ATAX's 4th quarter financial results.

Thanks, Chad. I'd like to take a few minutes just to expand upon what Chad has just discussed. There were many notable transactions during the 4th quarter of 2015 that impacted ATAX.

Chad mentioned a few of these transactions, but I thought I would spend just a couple moments and talk about a couple in a little bit more detail. The first, as Chad mentioned, in January of 2016 we accomplished and completed the sale of our three remaining mortgage-backed securities positions and we have eliminated the segment from our business.

In addition, we have also with the sale of our two consolidated VIE properties, we have eliminated ATAX's consolidated VIE segment as well. And finally, we continued to effectively utilize the various sources of liquidity available to us to leverage the transactions during the 4th quarter of 2015.

There were a few other important metrics of note during the 4th quarter of 2015 that we believe are important as well. First, total revenue increased to $20.8 million from $11.7 million for the 4th quarter of 2014. Next, net income increased to $13.3 million, or $0.14 per unit, from $2 million for the 4th quarter of 2014, or $0.04 per unit. And cash available for distribution increased to $0.19 per unit compared to $0.09 per unit for the 4th quarter of 2014.

For the year ended December 31st, 2015, the following metrics are of importance. Total revenues increased to $64.6 million compared to $45.6 million in 2014 for an increase of 19.7%. Net income increased to $26.6 million from $15 million in 2014. And total assets increased to $872.5 million from $744.2 million in 2014 for an increase of 17.2%.

Contributing to this increase in total assets in 2015 are the following. First, we purchased 22 mortgage revenue bonds with a par value of approximately $183 million. We exchanged a mortgage revenue bond and other assets for the deed to a property in the amount of approximately $44 million, and we sold approximately $16.2 million of two MF property real estate assets, Colonial and Glen Place.

Next, cash available for distribution increased to $0.53 per unit from $0.40 per unit in 2014. As we discussed in our previous earnings calls, our focus has remained on earning CAD per unit that exceeded our distribution per unit. The strategies we have employed throughout 2015 have proven to be successful. For the year ended December 31st, 2015, we estimate that approximately 92% of the net interest income earned by the partnership is federally tax exempt. We will be continuing to refine this estimate until we release the K1s to our unit holders on March 15th of 2016.

For the year-ended December 31st, 2015, we estimate that approximately 11% of the tax exempt interest income is subject to AMT tax treatment by our unit holders. Again, we will continue to refine this estimate until we release the K1s to our unit holders on March 15th of 2016.

Thank you for your continued interest in ATAX, and I'd like to turn it back to Chad for some closing remarks.

Thank you, Craig. Looking back at our efforts in 2015, ATAX has successfully navigated many tasks that will not appear in our financial statements. We spent a lot of time addressing the regulatory changes of Volcker, the Volcker Rule, Dodd-Frank; by doing this, it enhances our ability to continue to execute with our banking partners on our debt instruments that are utilized within ATAX.

We also, with the issuance of our consent of solicitation statement, this gave us the opportunity to talk with many of our unit holders, sharing with them how things have progressed at the Company and our vision of the future. From these conversations, eight proposals were successfully passed by our unit holders, resulting in an amendment and restated limited partnership agreement. We also closed in 33; our third Freddie Mac tax exempt bond securitization, with the trust sizing at just over $105 million. By way of this transaction, we mitigated the threats of interest rate risk and provided liquidity for future ATAX investments.

In closing, we're pleased by the results of 2015, but encouraged by the opportunities we see in 2016. I look forward to discussing the results of the first quarter with you in the near future. I'd like to thank each unit holder for their interest in ATAX and their support of our company over the last 30 years. At this time, I'd like to answer any questions you may have.

(Operator instructions) Lenny Mandel with Benjamin F. Edwards & Co.

I've owned ATAX for, my clients and I, for over a decade, and I can't be more pleased. I do have one question, only one. So, if you declared a $0.53 dividend, how come we?re only paying out $0.50?

The $0.53 that we reported was cash available for distribution, not the actual cash that was distributed. On an annual basis, we do declare a $0.50 per unit distribution, or $0.125 per quarter.

It's merely a metric that's used. Internally it's a non-GAAP metric that's used that we believe is the best comparison to the cash being distributed. But the differential there is $0.53 earned internally versus $0.50 per unit distributed to our unit holders.

(Operator instructions) Dominique Gabriel with Oppenheimer.

I just had a quick question on some of the moving pieces in the P&L and getting to reoccurring underlying CAD. Could you kind of help us walk through what you see basically going forward for 2016?

During 2015, we started, or we embarked upon, a strategy that looked at all of the segments within our business, and as you all know, all of what we do is considered to be transactional, and the most transactional -- we have different pieces within our balance sheet, our income statement, that are more transactional than others.

Number one would be mortgage revenue bonds, which is probably the most transactional, and it's been our history at the Company to buy and hold those long-term. While we always consider the highest and best use for those assets, it's typically our position that we'll buy and hold those. Now, the most transactional would be our MF property segment. And the MF property segment is we continually look at that segment and consider the highest and best use of those assets that are in that segment. We actively manage those, we own those in our portfolio and we've talked about the MF property segment in previous calls as well, too.

We consider all of our CAD to be repetitive and recurring in nature, and as we've mentioned to you in previous calls as well, too, that our strategy and our goals will remain focused on the $0.50 per year CAD.

As we talked about in the past, I think our core discipline is this predictability of income and clipping coupons for our investors on a tax exempt basis. And so, in achieving that we've moved towards that strategy in a couple different paths; one we look at either originate multifamily housing bonds off our platform. For developer clients we look to acquire bonds in the primary or secondary market. We also will go long fee simple real estate. We make bids, underwrite and make bids on a number of properties on an ongoing basis with the goal of identifying below replacement real estate with markets that we think we've either traded in in the past or have a positive feeling about the future with the goal of two things; restructuring the capital structure and restructuring the ownership structure so that we can end up with the long-term tax exempt, fixed rate bond that will give us the opportunity for securitization down the road.

As you've seen in other cycles, as back in 2005, 2006, we had very similar market metrics fee simple real estate world that we're experiencing now. A lot of fast moving money, pursuing our asset class, and for that reason, sometimes our assets and our REO are more appealing to us on an eval basis than maybe what the buy-side is. And when we see those opportunities, it's tough for us to not evaluate what's the highest and best use and maybe move out of those positions on a fee simple basis or on a collapse of the bonds and a fee simple trade and maximizing the opportunities that are on the balance sheet.

We think we're in that cycle again; I think we're going to be able to show to our investors not only in the trades that we've completed, but some of the evals and possible sales we're looking at in the future that will reinforce that belief, and we're pretty excited about what we see in 2016. Right now it's better to be a seller of bonds and real estate than it is to be a buyer, in our opinion, unless there is a credit story that you can find value in replacement of dirt or improvements. And those, we're always chasing those, but in this environment it's pretty difficult to find them until things get a little bit more challenging for some of the developers. So it's based on highest and best use and where we're at in the cycle is the short answer, my friend.

Have you guys seen any deterioration in the markets that you play in currently?

You know, it's interesting. We're going to put our supplemental up on the website here in the next day or so, I'm not sure what day it will go up. Obviously, everybody that looks at our portfolio and recognizes the challenges in the energy markets look at Texas as a possible weakness in our markets.

I think that you will see, at least in our research that we got from third parties and folks on the ground in those cities, both San Antonio, Austin, Dallas still look to be very strong. We've supported that with some market data. Houston, we've read and thought we'd showed a little bit of weakness. I'm not sure that if we had a new construction opportunity in Houston that I would be very aggressive on it right now. The deals that we do have under rehab in Houston have a long history of B&C properties we think there's a lot of demand for. Take a look at our analysis of the Texas markets and I'd love to hear your thoughts as well, I know you see a lot of activities on those markets and I'm sure that you have some opinions on the weakness as well.

But as far as across the country, I think what's evidenced by most markets are showing good strength both in occupancy and rental growth. We feel that some of the markets for the competitive A luxury properties, I think are getting a little overbuilt. Where we've tried to hit singles and doubles on workforce housing and student housing and rehabs of Bs in an A location. I think that strategy is still very sound. I wouldn't want to be under construction of new markets of luxury class A property in an A property zone.

Dan Davis with Stiefel.

Congratulations on what looks like a great quarter. Do you have a net asset value or a book value on a pre-unit basis?

Yes. The book value would be slightly more -- it would be in the low $5 range, low to mid $5 range. Yes, it would be low to mid $5 range.

(Operator instructions) Our next question --

It's interesting, your question. I think the folks that are active in trading ATAX probably are also active in maybe some of the other mortgage REIT sector.

I know we've been under pressure for a couple -- our stock price has been under pressure for probably three different reasons over the last 90 days of trading. I think we saw tax selling at the end of 2015. The open of 2016 markets saw broader markets weakening because of China's challenges, and then the changes in the federal home loan bank requirements for mortgage REITs to access capital under their program provided weakness to the mortgage REIT sector.

I've always argued and will continue that that's not the appropriate sector for us to be thrown into as a comparable, but unfortunately, people do that and our stock has traded off for that. I think as you know, if you take a look at some of the other mortgage REITs, they've traded well below book for six to nine months and continue to show weakness. I was pleased to see that the folks who are following our filing of our K and the stock performed a little bit, but I think for the good, bad or otherwise, that those are the reasons that we've seen weakness in our stock price other than the underlying fundamentals of our credit portfolio or what's going on at our company.

In more specificity to the value, it's approximately $5.19, $5.20 as an NAV.

Ronald Lane with Value Forum.

Good quarter, good year. Before I ask my questions, I'm going to offer you some information, which consider a gift from me personally as a former resident of Houston during the last oil bust in the middle 1980s, but our adviser just came back from a three day conference talking about energy only, which of course still drives most of the economy and a good part of the economy in Houston.

Oil is on the uptick, most people think it's going to about $50 a barrel with some -- we're at middle upper $30's right now. Long-term, two or three years, they're thinking about $80. We are not going to see the over $100 barrel any time soon, meaning the next few years, but Houston is very much more diversified than it used to be with huge medical complexes and all the rest. So, depending on your property, if it's in the right part of town, I would not back off that city at all. We own a property REIT there that's doing very well.

Questions; you mentioned this, but I wasn't able to take notes on it. AMT percent this year compared to last year was what for the year, not the quarter?

Yes. For the year we would estimate AMT to be about 11% in 2015. We're still firming that up and it looks to be right around 11%.

What was it in 2014? Do you have that, Chad?

I think in 2014 it was right around the 9% range if I remember right.

Because the reason I asked, I'm looking at my notes when we first started with you about three years ago, and I don't know if it came from your or Andy, but I was told at that time that the AMT was higher than it is now, but it would come down as the old bonds became a smaller percent of the total.

So, come down from where it used to be, but you did have an increase in AMT from 2014 to 2015 if that's correct what you just gave me, the latest. Second of three questions. Tax free, I didn't get the percent of this year versus last year.

Sure. It's fairly close, the year-over-year. We're running about, we would estimate about 92% this year in 2015, and it's really on top of where we were in 2014. 2014 was right around 91%.

Last question. I'm familiar with one of your complexes in Gainesville, which is home of the University of Florida. I know you deal with low-income apartments, which is what gives you tax-free status for the bond the way I understand it. Do college students qualify as low-income? I know they should, at least, but do they qualify from a legal point of view?

There's three different kinds of properties that we have in our portfolio and it depends on the land use restriction agreement and how the bond was structured and how the property was capitalized.

One, if it's structured as a private activity bond, low-income housing tax credit property under section 42 and 142D of the tax code, you're going to have very defined restrictions on students not being allowed. Number two, if it's done through a public facilities corp or a governmental issuance, it's a little bit more driven by the locale and highest and best use of the asset, the county assessor's involvement, the state laws, how an independent state law reads, and so it's a little bit more of an opportunity to be aggressive on what residents quality and what residents don't.

Number three, if it's a 501C3 bond, if it's an acquisition rehab, it defaults back to the tax code in 142, and the set asides as defined by the codes for affordability, and if it's a new construction piece, we deal with -- they have what we call Safe Harbor, which allows you to bring affordable properties into the marketplace under a new construction C3 execution that allows you to have a little bit higher AMI and lower restrictions on affordability.

I wish it was an easy answer for you, and if you can't sleep and you want to discuss it for about an hour some evening I'd be glad to get on the phone.

Based on this complex, I would say it falls into category two because it's fairly close to the university and they have a lot of college kids living there, but it wasn't built for that purpose, so somehow they --

No, the property in Gainesville is financed with pre-1986 old 80-20 bonds before the tax reform act of 1986, and I don't want to bore you with all the details.

The set aside restrictions for affordability were much more lax than the current restrictions are, and so basically that operates as a market rate property with very few restrictions on it. So every property is a little bit different based on how the debt is structured.

Gentlemen, keep up the good work. Thank you.

This concludes our Q&A session for today. On behalf of ATAX, I would like to thank you all for attending our 4th Quarter 2015 Earnings Conference Call. Have a great day.