Attached files

file filename
EX-32.2 - EXHIBIT 32.2 - MMA Capital Holdings, Inc.mmac-20170331xex32_2.htm
EX-32.1 - EXHIBIT 32.1 - MMA Capital Holdings, Inc.mmac-20170331xex32_1.htm
EX-31.2 - EXHIBIT 31.2 - MMA Capital Holdings, Inc.mmac-20170331xex31_2.htm
EX-31.1 - EXHIBIT 31.1 - MMA Capital Holdings, Inc.mmac-20170331xex31_1.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



 

For the quarterly period ended March 31, 2017



OR



 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________



Commission File Number 001-11981

MMA CAPITAL MANAGEMENT, LLC
(Exact name of registrant as specified in its charter)



 

Delaware
(State or other jurisdiction of incorporation or organization)

52-1449733
(I.R.S. Employer Identification No.)

3600 O’Donnell Street, Suite 600

Baltimore, Maryland
(Address of principal executive offices)

21224
(Zip Code)

 

(443) 263-2900
(Registrant's telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act:



 

Title of each class
Common Shares, no par value

Common Stock Purchase Rights

Name of each exchange on which registered
Nasdaq Capital Market

Nasdaq Capital Market



Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,”  “accelerated filer,”  “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



 

 

 

 

 



Large accelerated filer

 

Accelerated filer



 

 

 

 

 



Non-accelerated filer

 

Smaller reporting company



 

 

 

 

 



Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes No

There were 5,898,479 shares of common shares outstanding at May 4, 2017.





 


 





 

 

 

 



 

 

 

 

MMA Capital Management, LLC

Table of Contents



 

 

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

1



 

PART I – FINANCIAL INFORMATION

2



 

 

 

 



Item 1.   

Financial Statements

24



 

 

 

 



 

(a)

Consolidated Balance Sheets at March 31, 2017 and December 31, 2016

24



 

 

 

 



 

(b)

Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016

25



 

 

 

 



 

(c)

Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2017 and 2016

27



 

 

 

 



 

(d)

Consolidated Statements of Equity for the three months ended March 31, 2017

28



 

 

 

 



 

(e)

Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016

29



 

 

 

 



 

(f)

Notes to Consolidated Financial Statements

31



 

 

 

 



Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

3



 

 

 

 



Item 3.

Quantitative and Qualitative Disclosures About Market Risk

66



 

 

 

 



Item 4.   

Controls and Procedures

66



 

 

 

 

PART II – OTHER INFORMATION

68



 

 

 

 



Item 1.

Legal Proceedings

68



 

 

 

 



Item 1A.

Risk Factors

68



 

 

 

 



Item 2.   

Unregistered Sales of Equity Securities and Use of Proceeds

68



 

 

 

 



Item 3.    

Defaults Upon Senior Securities

68



 

 

 

 



Item 4.   

Mine Safety Disclosures

68



 

 

 

 



Item 5.   

Other Information

68



 

 

 

 



Item 6.  

Exhibits

68



 

 

 

 

SIGNATURES

 

 

S-1



 

 

 

 

EXHIBITS

 

 

E-1



 

 

 

 





 

i

 


 

Cautionary Statement Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q for the period ended March 31, 2017 (this “Report”) contains forward-looking statements intended to qualify for the safe harbor contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Forward-looking statements often include words such as “may,” “will,” “should,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “seek,” “would,” “could,” and similar words or expressions and are made in connection with discussions of future events and future operating or financial performance. 

Forward-looking statements reflect our management’s expectations at the date of this Report regarding future conditions, events or results.  They are not guarantees of future performance.  By their nature, forward-looking statements are subject to risks and uncertainties.  Our actual results and financial condition may differ materially from what is anticipated in the forward-looking statements.  There are many factors that could cause actual conditions, events or results to differ from those anticipated by the forward-looking statements contained in this Report.  They include the factors discussed in Part I, Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Form 10-K”).

Readers are cautioned not to place undue reliance on forward-looking statements in this Report or that we make from time to time, and to consider carefully the factors discussed in Part I, Item 1A. “Risk Factors” of the 2016 Form 10-K in evaluating these forward-looking statements.  We do not undertake to update any forward-looking statements contained herein, except as required by law.



1

 


 

 

PART I – FINANCIAL INFORMATION



MMA Capital Management, LLC

Consolidated Financial Highlights

(Unaudited)

___________________________________________________________________________________________________________





 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



As of and for the period ended

(in thousands, except per common share data)

1Q17

 

4Q16

 

3Q16

 

2Q16

 

1Q16

Selected income statement data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

$

2,523 

 

$

2,804 

 

$

3,840 

 

$

3,039 

 

$

3,142 

Non-interest revenue

 

6,337 

 

 

3,840 

 

 

4,655 

 

 

3,941 

 

 

3,358 

Total revenues, net of interest expense

 

8,860 

 

 

6,644 

 

 

8,495 

 

 

6,980 

 

 

6,500 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating and other expenses

 

17,025 

 

 

17,529 

 

 

17,556 

 

 

16,403 

 

 

15,673 

Net (losses) gains from bonds and other continuing operations

 

(4,716)

 

 

18,977 

 

 

(1,105)

 

 

2,248 

 

 

13,310 

Net (loss) income from continuing operations before income taxes

 

(12,881)

 

 

8,092 

 

 

(10,166)

 

 

(7,175)

 

 

4,137 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit (expense)

 

258 

 

 

(530)

 

 

(43)

 

 

(34)

 

 

(72)

Net income from discontinued operations, net of tax

 

42 

 

 

81 

 

 

1,285 

 

 

83 

 

 

83 

Loss allocable to noncontrolling interests

 

9,137 

 

 

8,799 

 

 

13,099 

 

 

12,256 

 

 

12,457 

Net (loss) income allocable to common shareholders

$

(3,444)

 

$

16,442 

 

$

4,175 

 

$

5,130 

 

$

16,605 

Earnings per share data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income allocable to common shareholders:   Basic

$

(0.58)

 

$

2.72 

 

$

0.68 

 

$

0.81 

 

$

2.55 

Diluted

 

(0.58)

 

 

2.62 

 

 

0.64 

 

 

0.81 

 

 

2.52 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average shares:  Basic

 

5,937 

 

 

6,034 

 

 

6,174 

 

 

6,289 

 

 

6,523 

Diluted

 

5,937 

 

 

6,408 

 

 

6,549 

 

 

6,289 

 

 

6,882 

Market and per common share data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market capitalization

$

135,725 

 

$

112,589 

 

$

110,300 

 

$

111,051 

 

$

104,209 

Common shares at period-end

 

5,921 

 

 

6,008 

 

 

6,133 

 

 

6,196 

 

 

6,480 

Share price during period:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

High

 

23.50 

 

 

19.10 

 

 

19.25 

 

 

18.93 

 

 

16.44 

Low

 

19.00 

 

 

17.10 

 

 

17.78 

 

 

15.46 

 

 

13.70 

Closing price at period-end

 

23.25 

 

 

19.00 

 

 

18.22 

 

 

18.15 

 

 

16.27 

Book value per common share:  Basic

 

20.32 

 

 

20.86 

 

 

21.53 

 

 

19.71 

 

 

18.75 

Diluted

 

20.32 

 

 

20.75 

 

 

21.34 

 

 

19.62 

 

 

18.62 

Selected balance sheet data (period end)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

29,979 

 

$

45,525 

 

$

21,741 

 

$

18,283 

 

$

36,941 

Bonds available for sale

 

152,385 

 

 

155,981 

 

 

179,435 

 

 

182,831 

 

 

192,928 

All other assets (without consolidated funds and ventures ("CFVs")

 

178,639 

 

 

166,785 

 

 

183,507 

 

 

155,697 

 

 

140,882 

Assets of CFVs

 

196,707 

 

 

205,908 

 

 

204,221 

 

 

211,235 

 

 

208,284 

Total assets

$

557,710 

 

$

574,199 

 

$

588,904 

 

$

568,046 

 

$

579,035 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt (without CFVs)

$

227,530 

 

$

230,042 

 

$

233,306 

 

$

216,430 

 

$

218,273 

All other liabilities (without CFVs)

 

30,445 

 

 

30,120 

 

 

27,129 

 

 

25,580 

 

 

24,631 

Liabilities of CFVs

 

53,574 

 

 

53,714 

 

 

52,899 

 

 

48,116 

 

 

47,034 

Noncontrolling equity

 

125,862 

 

 

134,999 

 

 

143,511 

 

 

155,806 

 

 

167,594 

Total liabilities and noncontrolling equity

 

437,411 

 

 

448,875 

 

 

456,845 

 

 

445,932 

 

 

457,532 

Common shareholders' equity

$

120,299 

 

$

125,324 

 

$

132,059 

 

$

122,114 

 

$

121,503 

Rollforward of common shareholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shareholders' equity - at beginning of period

$

125,324 

 

$

132,059 

 

$

122,114 

 

$

121,503 

 

$

116,170 

Net (loss) income allocable to common shareholders

 

(3,444)

 

 

16,442 

 

 

4,175 

 

 

5,130 

 

 

16,605 

Other comprehensive income (loss) allocable to shareholders

 

352 

 

 

(20,901)

 

 

6,930 

 

 

265 

 

 

(9,685)

Common share repurchases

 

(1,770)

 

 

(2,321)

 

 

(1,190)

 

 

(4,776)

 

 

(1,768)

Other changes in common shareholders' equity

 

(163)

 

 

45 

 

 

30 

 

 

(8)

 

 

181 

Common shareholders' equity - at end of period

$

120,299 

 

$

125,324 

 

$

132,059 

 

$

122,114 

 

$

121,503 

2

 


 

 

Item 2:   Management’s Discussion and Analysis of Financial Condition and Results of Operations 

INTRODUCTION

___________________________________________________________________________________________________________

MMA Capital Management, LLC, the registrant, was organized in 1996 as a Delaware limited liability company.  Unless the context otherwise requires, and when used in this Report, the “Company,” “MMA,” “we,” “our” or “us” refers to MMA Capital Management, LLC and its subsidiaries.

The Company partners with institutional capital to create and manage investments in affordable housing and renewable energy.  We invest for our own account and co-invest with our institutional capital partners.  We derive revenue from returns on our investments as well as asset management, performance and other fees from the investments, funds and ventures we manage.

The Company operates through three reportable segments – United States (“U.S.”) Operations, International Operations and Corporate Operations.  Refer to Notes to Consolidated Financial Statements – Note 14,  Segment Information” for more information about the revenues, operating profit and loss and total assets for each of our reportable segments.    

U.S. Operations

Our U.S. Operations segment consists of three business lines: Leveraged Bonds, Low Income Housing Tax Credit (“LIHTC”) and Energy Capital.  The Other Investments component of “Energy Capital and Other Investments” was re-allocated to our Leveraged Bonds business line in the fourth quarter of 2016.    

Leveraged Bonds 

In our Leveraged Bonds business line, we primarily own and manage bonds for our own account that finance affordable housing and infrastructure in the U.S.

The bonds we hold are primarily fixed rate and unrated.  Our bonds are also generally tax-exempt and collateralized by affordable multifamily rental properties.  Substantially all of the rental units in these multifamily properties, which may be subsidized by the government, have tenant income and rent restrictions.     

The Company also has a smaller portfolio of other real estate bonds.  This portfolio includes municipal bonds that finance the development of infrastructure for a mixed-use commercial development and are secured by incremental tax revenues generated from the developmentThis portfolio also includes senior investments in a trust collateralized by a pool of tax-exempt municipal bonds that finance a variety of non-profit projects such as healthcare and educational facilities, as well as a subordinated investment in a collateralized mortgage-backed security that finances multifamily housing. 

The Company has financed its ownership of a majority of its investments in bonds through total return swap (“TRS”) agreements.  These financing arrangements enable the Company to retain the economic risks and rewards of the fixed rate bonds that are referenced in such agreements and generally require the Company to pay a variable rate of interest that resets on a weekly basis.  The Company has also executed TRS agreements to synthetically acquire the total return of multifamily bonds that it does not own.    The Company has hedged a portion of the interest rate risk associated with its TRS agreements and other sources of interest rate exposure using various interest rate risk management agreements.  

Table 1 provides key metrics related to all bonds in which we have an economic interest, including bonds in which we acquired an economic interest through TRS agreements (such bonds and TRS agreements are hereinafter referred to collectively as the “Bond Portfolio”)See Notes to Consolidated Financial Statements – Note 5, “Debt” and Notes to Consolidated Financial Statements – Note 6, “Derivative Instruments” for more information about how TRS and interest rate risk management agreements are reported in the Company’s financial statements.    

3

 


 

 

Table 1:  Bond Portfolio - Summary





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

At March 31, 2017



 

 

Unpaid

 

 

 

 

 

 

 

 

 

 

 

 



 

 

Principal

 

 

 

 

 

 

 

Wtd. Avg.

 

Number

 

Number of



 

 

Balance 

 

 

Fair

 

Wtd. Avg.

 

Wtd. Avg.

 

Debt Service

 

of

 

Multifamily

(dollars in thousands)

 

 

("UPB")

 

 

Value

 

Coupon

 

Pay Rate (6)

 

Coverage (7)

 

Bonds (8)

 

Properties (8)

Multifamily tax-exempt bonds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

170,418 

 

$

182,844 

 

6.42 

%

 

6.42 

%

 

1.16 

x

 

22 

 

20 

Non-performing (1)

 

 

21,127 

 

 

18,423 

 

6.42 

%

 

3.37 

%

 

0.90 

x

 

 

Subordinated cash flow (2)

 

 

9,620 

 

 

9,424 

 

6.78 

%

 

1.25 

%

 

N/A

 

 

 

 ─

Total multifamily tax-exempt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

bonds

 

$

201,165 

 

$

210,691 

 

6.42 

%

(5)

6.09 

%

(5)

1.13 

x  

 

28 

 

22 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Infrastructure bonds

 

$

27,050 

 

$

24,466 

 

6.75 

%

 

6.75 

%

 

0.64 

x  

 

 

N/A



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other bonds

 

$

17,404 

 

$

17,858 

 

4.83 

%

 

4.83 

%

 

N/A

 

 

 

N/A

Total Bond Portfolio (3), (4)

 

$

245,619 

 

$

253,015 

 

6.34 

%

(5)

6.07 

%

(5)

1.07 

x

 

34 

 

22 



(1)

Includes bond investments that are 30 days or more past due in either principal or interest payments.  

(2)

Coupon interest on these investments is payable only to the extent sufficient cash flows are available for the debtor to make such payments.  As a result, debt service coverage is not calculated for these investments.    

(3)

Includes nine bonds with a combined UPB and fair value of $71.6 million and $76.2 million, respectively, that were financed with TRS agreements that had a combined notional amount of $72.9 million and that were accounted for as derivatives at March 31, 2017.  The Bond Portfolio also includes eight bonds with a combined UPB and fair value of $86.1 million and $91.1 million, respectively, that were financed with TRS agreements that had a combined notional amount of $80.9 million and where the transfer of underlying bond investments  was accounted for as a  secured borrowing

(4)

Includes the following bond investments that have been eliminated for financial statement purposes: (i) an investment in a performing multifamily tax-exempt bond that, at March 31, 2017, had a UPB of $12.2 million and a fair value of $13.0 million and is subject to a TRS agreement with a notional amount of $9.8 million; and (ii) two investments in defaulted multifamily tax-exempt bonds that, at March 31, 2017, had a combined UPB of $11.2 million and a combined fair value of $11.4 million of which one is subject to a TRS agreement with a notional amount of $5.1 million.    Underlying real estate with a carrying value of $25.9 million at March 31, 2017 had been recognized in our Consolidated Balance Sheets as a result of the consolidation of the corresponding real estate partnerships.    

(5)

Excludes the effects of subordinated cash flow bonds.    If the Company had included the effects of subordinated cash flow bonds in the determination of these amounts, the weighted average coupon for total multifamily tax-exempt bonds and for the total bond portfolio would have been 6.44% and 6.36%, respectively at March 31, 2017, and the weighted average pay rate for total multifamily tax-exempt bonds and for the total bond portfolio would have been 5.86% and 5.88%, respectively at March 31, 2017. 

(6)

Reflects cash interest payments collected as a percentage of the average UPB of corresponding bond investments for the preceding 12 months at March  31, 2017.

(7)

Calculated on a rolling 12-month basis using property level information as of the prior quarter-end for those bonds with must pay coupons that are collateralized by multifamily properties or incremental tax revenues in the case of infrastructure bonds

(8)

As reported in our 2016 Form 10-K, the Bond Portfolio contained 31 bonds, which included 25 multifamily tax-exempt bonds that were collateralized by 20 affordable multifamily rental properties.    The Company updated the Bond Portfolio in this Report to include bond investments that are discussed in footnote four of this table.  In this regard, had such additional bonds been included in the Bond Portfolio at December 31, 2016, the Bond Portfolio would have contained 34 bonds, including  28 multifamily tax-exempt bonds that were collateralized by 22 affordable multifamily rental properties.



The fair value of the Bond Portfolio as a percentage of its UPB increased from 102.5%  at December 31, 2016 to 103.0%  at March 31, 2017 primarily as a result of a decrease in the first quarter of 2017 of both market yields on certain bonds and capitalization and discount rates on certain properties that collateralize our bond investments.  The weighted-average debt service coverage ratio of the Bond Portfolio improved from 1.05x  at December 31, 2016 to 1.07x  at March 31, 2017.   



4

 


 

 

Other Investments of the Leveraged Bonds Business Line

At March 31, 2017, we owned, or were an equity partner in, three direct investments in real estate consisting of two land parcels and a town center development.  The carrying value of these investments was $26.8 million as of such reporting date.    

LIHTC 



In our LIHTC business line, we primarily own and manage limited partner (“LP”) and general partner (“GP”) investments in affordable housing communities in the U.S.  In this regard, we provide asset management and administrative services to a limited liability company formed in 2015 by the Company and a commercial bank (“TC Fund I”) that acquired limited partnership interests either directly or through fund investments in approximately 650 affordable properties.  We also acquired several direct real estate investments in connection with the formation of TC Fund I.  Through this business line, we also have loan receivables from, and an option to purchase, a tax credit asset manager.  At March 31, 2017, the tax credit asset manager had approximately 240 properties under management.  Additionally, we made guarantees through this business line to some of our institutional investors related to the yield on the funds, the receipt of tax credits and the performance of the underlying assets.     

TC Fund I

As consideration for providing asset management and administrative services to TC Fund I, the Company is entitled to an asset management fee of 2% per annum on the initial capital contribution of $211 million by the investor with which the Company partnered to form TC Fund I.  This amount accrues quarterly in advance, bears interest at 6% per annum compounded annually and is to be paid solely from cash flows received by TC Fund I from its portfolio of limited partnership investments.  Asset management fees are generally payable to the Company by TC Fund I after payments are made by TC Fund I to: 1) repay any tax credit losses funded by the investor; 2) redeem any investor member voluntary loans; 3) repay any mandatory loans made by the Company to fund investor tax credit losses; 4) pay any expense loans; 5) establish any required reserves; and 6) pay any accrued guarantee fees.  By their nature, investments of TC Fund I are generally expected to break-even from an operating cash flow perspective.  In this regard, excess cash flows to TC Fund I are generated primarily from residual events that generally occur at the end of the tax compliance period and are generally outside of the control of the Company in terms of if, and when, they occur.

At March 31, 2017, the Company was contractually due $5.4 million for asset management and administrative services rendered to TC Fund I through such date.  The realization of this receivable is dependent upon the occurrence of residual events relating to affordable properties that are outside of our control in terms of when, and if, such events will occur and are highly subjective in terms of projected value.  As a result, this receivable has not yet been recognized in the Company’s financial statements because it was assessed at March 31, 2017 not to be reasonably assured of collection.  This assessment, which the Company makes each reporting period, considers various factors that include, but are not limited to, the length of time until the Company expects to receive payment and the priority of payment of such amounts in TC Fund I’s cash distribution waterfall

In connection with the formation of TC Fund I, the Company also provided a limited guarantee of tax credits that are expected to be generated by TC Fund I’s portfolio of investments.  In consideration for providing this guarantee, the Company is contractually entitled to receive $4.2 million in guarantee fees from TC Fund I and, on December 31, 2015, recognized a guarantee fee receivable for this amount in conjunction with recognizing a liability of equal size related to its obligation to stand ready to perform under this guarantee.  The guarantee fee receivable bears interest at 6% per annum, compounds annually, and will be paid solely from cash flows received by TC Fund I from its portfolio of limited partnership investments.    At March 31, 2017, the Company had been paid $3.1 million in connection with this receivable (including accrued interest) while the carrying value of our guarantee obligation to TC Fund I was $3.7 million.   

To cover certain costs associated with the organization of TC Fund I, the Company lent $5.3 million to TC Fund I upon its formation.  This loan accrues interest at 9.5% per annum, compounds annually and will be repaid by TC Fund I after it pays accrued guarantee and asset management feesAt March 31, 2017, this loan, which had a carrying value of $0.2 million, was on non-accrual status given, among other factors, the timing and amount of cash flow projections for this loan and its payment priority in TC Fund I’s waterfall.  The non-accrual status of this loan is re-assessed by the Company each reporting period.

Interests in and Obligations to a Tax Credit Asset Manager

Prior to the sale of substantially all of our LIHTC business in 2014, we “syndicated” tax credits by forming LIHTC funds that purchased directly or indirectly the limited partnership interests in multiple Lower Tier Property Partnerships (“LTPPs”).  We raised capital from institutional investors, which comprised virtually all of the equity of the LIHTC funds, and the LIHTC funds used this capital, and sometimes interim debt financing, to purchase the limited partner interests in the LTPPs.  We were the general partner of,

5

 


 

 

and managed, the LIHTC funds and usually retained an interest of between 0.01% and 1.0% in each of them.  The remaining 99.0% to 99.99% interest in each LIHTC fund was typically held by one or more large financial institutions.

We provided two general types of guarantees in connection with these transactions: (1) LIHTC fund-level guarantees where the Company, directly and indirectly, guaranteed the investors return on investment (“Guaranteed Funds”); and (2) individual indemnifications to specific investors in non-guaranteed LIHTC funds related to the performance of specific LTPPs.   Because the LTPPs and the LIHTC funds (as well as any intermediate entities) are pass-through entities for federal income tax purposes, the equity owners of the LIHTC funds receive the tax benefit of the credits generated by the LTPPs.  In order for the investors in the Guaranteed Funds to benefit from low-income housing tax credits, the LTPPs in which these entities invest must operate affordable housing properties in compliance with a number of requirements in the Internal Revenue Code (the Code”) and the regulations under it.  Failure to comply continuously with these requirements throughout a 15-year recapture period could result in loss of the right to those low-income housing tax credits, including recapture of credits that were already taken, potentially creating a liability under our guarantees.  The execution of these guarantees caused the Company to consolidate the Guaranteed Funds for financial reporting purposes.

As consideration for providing these guarantees, the Company received upfront guarantees fees of $28.9 million that were initially deferred for financial reporting purposes and that are amortized into earnings over the contractual life of such obligations.  However, because the Guaranteed Funds have been consolidated by the Company for reporting purposes, certain fees and other payments received from these entities are not classified as revenues in our Consolidated Statements of Operations but rather as income that is allocated to us from CFVs.

When the Company sold its LIHTC business in 2014 to a tax credit asset manager, it agreed to indemnify the tax credit asset manager from investor claims related to those guarantees and, therefore, we continue to be obligated on our guarantees to investors in these funds.    As part of this transaction, the Company also provided a subordinated loan and received an option to purchase the tax credit asset manager in the future.

The UPB of the subordinated loan to the tax credit asset manager was $13.0 million at March 31, 2017.  This loan is non-amortizing and has a maturity date of June 30, 2025.  This loan bears interest at a base rate of 11% that is paid quarterly and contingent interest up to an additional 13%.  From the time of the sale of our LIHTC business through March 31, 2017, the Company received principal and interest payments of $8.7 million from the tax credit asset manager.  The receipt of such amounts are reported by us as a deferred gain in the Company’s Consolidated Balance Sheets (or classified in “Other Liabilities”) since the corresponding conveyance of the Company’s LIHTC business could not be treated as a sale for financial reporting purposes.     

The option price to acquire the tax credit asset manager is $12.0 million, subject to various purchase price adjustments.  The tax credit asset manager primarily manages LIHTC investments on behalf of third party investors and for its own account.  Our purchase option for the tax credit manager may be exercised between September 30, 2019 and September 30, 2024, though it may be accelerated for certain events.

Direct Real Estate Investments

At March 31, 2017, the Company owned two real estate investments that it acquired on December 31, 2015 in connection with the formation of TC Fund I.  These investments, which consist of two 99% LP interests, had a carrying value of $4.7 million at March 31, 2017.

At March 31, 2017, the Company also owned a 0.01% and 1.0% GP interest in two partnerships that own affordable multifamily properties that collateralize three of our bond investments that we financed with TRS that had a combined notional balance of $14.9 million.  The acquisition of such general partner interests in 2016 resulted in the consolidation of these partnerships for reporting purposes and, as a result, the Company recognized the affordable multifamily properties on its Consolidated Balance Sheets, which had a combined carrying value of $25.9 million at March 31, 2017.  See “Table 1:  Bond Portfolio Summary” for more information.

Other Investments of the LIHTC Business Line

At March 31, 2017, the Company owned taxable senior mortgage debt with a UPB of $13.2 million that primarily finances various affordable housing investments in TC Fund I.

Refer to Notes to Consolidated Financial Statements – Note 7, “Fair Value” for more information about the fair value measurement of certain of our contractual rights and obligations that we maintain through our LIHTC business line.

6

 


 

 

Energy Capital

In our Energy Capital business line, our wholly owned subsidiary, MMA Energy Capital, LLC (“MEC”), originates debt capital directly and through multiple ventures with a leading global private investment firm and an alternative asset manager (hereinafter, the “Solar Ventures”) to develop, build and operate renewable energy systems throughout North AmericaThe Solar Ventures include Renewable Energy Lending, LLC (“REL”), Solar Construction Lending, LLC (SCL”) and Solar Permanent Lending, LLC (“SPL”)MEC provides loan origination, servicing, asset management and other management services to the Solar Ventures and is entitled to receive reimbursement for most costs the Company incurs in executing its responsibilities as administrative member for the Solar Ventures.  In this business line, we also manage legacy solar assets. 

The Company made an initial $75 million capital contribution into REL in November 2016 that was comprised of solar energy loan investments, including our membership interests in SCL and SPL, in exchange for a  membership interest in REL.  At March 31, 2017, the Company’s investment in REL, which represented  an 85% ownership interest, had a carrying value of $77.1 million.  We received $0.4 million in cash distributions from REL during the three months ended March 31, 2017.   

At March 31, 2017, the UPB of loans that were funded through the Solar Ventures was $131.1 million.  Such loans that were outstanding at March 31, 2017 had a weighted-average tenor and coupon of 19 months and 11.05%, respectively.

Additionally, at March 31, 2017, the Company had a subordinated loan receivable with a UPB of $11.5 million from a residential solar power provider in the U. S. that filed for bankruptcy protection on March 13, 2017 under Chapter 11 of the U.S. Bankruptcy Code.    On April 20, 2017, the bankruptcy court approved the sale of the borrower’s assets for an amount less than the UPB of borrower debt obligations that are senior to that held by the Company.  Given this development and other considerations, the Company does not expect to recover any of this loan’s UPB or its unpaid interest and related fees.  In this regard, the Company recognized an incremental fair value loss of $5.4 million in the first quarter of 2017 in conjunction with adjusting the carrying value of this loan to reflect revised expectations for no recovery.

Refer to Notes to Consolidated Financial Statements – Note 7, “Fair Value” for more information about the fair value measurement of certain of our contractual rights and obligations that we maintain through our Energy Capital business line.

International Operations

We manage our International Operations segment through our wholly owned subsidiary, International Housing Solutions S.à r.l. (“IHS”).  IHS’s strategy is to raise, invest in and manage funds and ventures that invest in residential real estate.  This includes four private real estate funds and a publicly-traded real estate investment trust (“REIT”)IHS earns asset management fees from all five investment vehicles and also invests as a limited partner in the four funds it manages and is entitled to special distributions based on the funds’ returns.    

IHS currently manages five investment vehicles. 

·

South Africa Workforce Housing Fund (“SAWHF”) is a multi-investor fund that began operations in April 2008.  SAWHF is fully invested, having raised $154 million of LP capital from five different investors with an additional participating debt commitment of $80 million from the Overseas Private Investment Corporation (“OPIC”).  Since its inception, SAWHF has made 35 investments involving approximately 30,000 units of affordable for-sale and rental housing in South Africa.  SAWHF is currently in the process of exiting its investments as it will mature in March 2018 (although the maturity of SAWHF may, subject to the consent of the investors and OPIC, be extended for up to two additional one-year periods).    



·

International Housing Solutions Residential Partners Partnership (“IHS Residential Partners”), a single-investor fund with a large North American institutional investor targeted at the emerging middle class in South Africa,  began operations in November 2013.  At March 31, 2017,  IHS and its partner had contributed approximately $68.0 million to the venture, financing investments in seven different projects totaling just under 2,100 rental units and one undeveloped land project.  We do not anticipate this venture making new investments.



·

IHS Fund II was formed for the purposes of investing, directly and indirectly, in housing development projects in South Africa and in other selected countries in Sub-Saharan Africa.  IHS Fund II SA and IHS Fund II SSA (collectively “IHS Fund II”) are established as two separate funds for making investments in South Africa and in other countries in Sub-Saharan Africa, respectively.



7

 


 

 

o

IHS Fund II SA (“IHS Fund II SA”) is a multi-investor fund targeting investments in affordable housing, including green housing projects, within South Africa.  IHS Fund II SA began operations in July 2014 and, at March 31, 2017,  had raised approximately 1.1 billion rand (or, approximately $101.5 million) of LP capital from 10 investors.  IHS Fund II SA also has an additional maximum participating debt commitment from OPIC for $80 million.  At March 31, 2017, IHS Fund II SA had closed 13 investments that represent a total of 3,438 affordable for-sale and rental housing units in South Africa.



o

IHS Fund II SSA (“IHS Fund II SSA”) is a multi-investor fund targeting investments in affordable housing, including green housing projects, within Namibia and Botswana.  IHS Fund II SSA began operations in July 2014 and, at March 31, 2017,  had raised approximately $34.7 million of LP capital from two investors.  



·

Transcend Residential Property Fund Limited (“Transcend”) is a REIT that was listed on the AltX of the Johannesburg Stock Exchange in December 2016.  The primary strategy of Transcend is to acquire multifamily residential properties, with a focus on housing opportunities that are affordable, lifestyle enhancing and located in well-situated and high growth urban areas of South Africa.  At March 31, 2017, Transcend owned a portfolio of 13 properties that have approximately 2,500 units and that were previously part of the SAWHF portfolioAt March 31, 2017, SAWHF owned 89% of the common shares of Transcend.    

In managing these funds, we are paid asset management fees and,  in most cases, earn a return on our co-investment and have the opportunity to earn performance fees after various investment hurdles are met.

MMA also owns a 60% interest in IHS Property Management Proprietary Limited (“IHS PM”), which provides property management services to a  substantial portion of the properties in our IHS-managed funds.

Corporate Operations

Our Corporate Operations segment is responsible for accounting, reporting, compliance and financial planning and analysis services.    This segment has interests in cash, certain interest rate derivative instruments, leases, furniture, fixtures, equipment and various prepaid assets.  The primary obligations of this segment include senior and subordinated debt that had a total UPB of $123.3 million as of March 31, 2017.  





8

 


 

 

SUMMARY OF FINANCIAL PERFORMANCE

___________________________________________________________________________________________________________

Net Worth

Common shareholders’ equity decreased from $125.3 million at December 31, 2016 to $120.3 million at March 31, 2017.  This change was driven by $3.1 million in comprehensive loss that is allocable to common shareholders and $1.9 million in other reductions in common shareholders’ equity. 

Diluted common shareholders’ equity (“Book Value”) per share decreased to $20.32 at March 31, 2017, which represents a decrease of $0.43 per share of Book Value compared to what we reported at December 31, 2016This decline was primarily attributable to a net loss from operations. 

Refer to “Consolidated Balance Sheet Analysis” for more information about changes in common shareholders’ equity and other components of our Consolidated Balance Sheets.

Comprehensive Loss

We recognized a  comprehensive loss that is allocable to common shareholders of $3.1 million in the first quarter of 2017,  which consisted of a  $3.4 million net loss that is allocable to common shareholders and $0.3 million of other comprehensive income that is allocable to common shareholders.  In comparison, we recognized $6.9 million of comprehensive income that is allocable to common shareholders in the first quarter of 2016, which consisted of $16.6 million of net income that is allocable to common shareholders and $9.7 million of other comprehensive loss that is allocable to common shareholders. 

Refer to “Consolidated Results of Operations” for more information about changes in common shareholders’ equity that is attributable to a  net loss from core operations that is allocable to common shareholders.

9

 


 

 

CONSOLIDATED BALANCE SHEET ANALYSIS

___________________________________________________________________________________________________________

This section provides an overview of changes in our assets, liabilities and equity and should be read together with our consolidated financial statements, including the accompanying notes to the financial statements.

Table 2 provides a balance sheet summary for the periods presented.  For presentational purposes, assets, liabilities and equity that are attributable to noncontrolling interest holders of CFVs are presented in Table 2 as separate line items because the Company generally has a minimal ownership interest in these consolidated entities.  For the periods presented, CFVs were comprised of consolidated property partnerships and certain LIHTC funds in which we guaranteed minimum yields on investment to investors and for which we agree to indemnify the purchaser of our GP interest in such funds from investor claims related to those guarantees.  See Notes to Consolidated Financial Statements –  Note 13,  “Consolidated Funds and Ventures,” for more information about CFVs.  

Table 2Balance Sheet Summary 



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



At

 

At

 

 

 



March 31,

 

December 31,

 

 

(in thousands, except per share data)

2017

 

2016

 

Change 

Assets  

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

29,979 

 

$

45,525 

 

$

(15,546)

Restricted cash (without CFVs)

 

29,690 

 

 

33,920 

 

 

(4,230)

Bonds available for sale (1)

 

152,385 

 

 

155,981 

 

 

(3,596)

Investments in partnerships (without CFVs)

 

109,245 

 

 

106,418 

 

 

2,827 

Other assets (without CFVs)

 

39,704 

 

 

26,447 

 

 

13,257 

Assets of CFVs (2)

 

196,707 

 

 

205,908 

 

 

(9,201)

Total assets

$

557,710 

 

$

574,199 

 

$

(16,489)



 

 

 

 

 

 

 

 

Liabilities and Noncontrolling Equity

 

 

 

 

 

 

 

 

Debt (without CFVs)

$

227,530 

 

$

230,042 

 

$

(2,512)

Accounts payable and accrued expenses

 

4,272 

 

 

7,821 

 

 

(3,549)

Other liabilities (without CFVs) (2)

 

26,173 

 

 

22,299 

 

 

3,874 

Liabilities of CFVs (1)

 

53,574 

 

 

53,714 

 

 

(140)

Noncontrolling equity related to CFVs

 

125,814 

 

 

134,954 

 

 

(9,140)

Noncontrolling equity related to IHS PM 

 

48 

 

 

45 

 

 

Total liabilities and noncontrolling equity

$

437,411 

 

$

448,875 

 

$

(11,464)



 

 

 

 

 

 

 

 

Common Shareholders' Equity

$

120,299 

 

$

125,324 

 

$

(5,025)



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

Common shares outstanding

 

5,921 

 

 

6,008 

 

 

(87)

Common shareholders' equity per common share

$

20.32 

 

$

20.86 

 

$

(0.54)



 

 

 

 

 

 

 

 

Diluted common shareholders' equity (3)

$

120,299 

 

$

132,490 

 

$

(12,191)

Diluted common shares outstanding

 

5,921 

 

 

6,384 

 

 

(463)

Diluted common shareholders' equity per common share (4)

$

20.32 

 

$

20.75 

 

$

(0.43)



(1)

Assets of CFVs include affordable housing properties that had a carrying value of $25.9 million and $26.2 million at March 31, 2017 and December 31, 2016, respectively, and that were owned by partnerships that have been consolidated for reporting purposes.  Such properties secured Company bond investments that had a UPB of $23.4 million and $23.5 million at March 31, 2017 and December 31, 2016, respectively.   However, because the noted partnerships have been consolidated by the Company, such bond investments have been eliminated for reporting purposes in conjunction with corresponding liabilities of CFVs.   

(2)

Deferred revenue balances associated with financial guarantees that were made by the Company to 11 Guaranteed Funds have been eliminated for reporting purposes in conjunction with prepaid guarantee assets of CFVs because the Company has consolidated such Guaranteed Funds for reporting purposes.  The unamortized balances of such deferred revenue and prepaid assets, which are equal and offsetting, was $8.3 million and $8.6 million at March 31, 2017 and December 31, 2016, respectively.

(3)

Diluted common shareholders’ equity measures common shareholders’ equity assuming that all outstanding employee common share options that are dilutive were exercised in full at March 31, 2017 and December 31, 2016.  In this case, liabilities recognized by the

10

 


 

 

Company in its Consolidated Balance Sheets that relate to options that are dilutive would be reclassified into common shareholders’ equity upon their assumed exercise.  These liabilities are measured at fair value and, therefore, are sensitive to changes in the market price for the Company’s common shares.  The carrying value of liabilities that relate to all outstanding employee common share options was $8.9 million and $7.2 million at March 31, 2017 and December 31, 2016, respectively.

(4)

The assumed exercise of outstanding employee common share options at March 31, 2017 was anti-dilutive by $0.18 per share.  Accordingly, diluted common shares outstanding and diluted common shareholders’ equity per common share at March 31, 2017 are reported in the table above at the same amounts as common shares outstanding and common shareholders’ equity per common share, respectively.   



Common Shareholders’ Equity

Table 3 summarizes the changes in common shareholders’ equity for the periods presented.

Table 3Changes in Common Shareholders’ Equity



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the three months ended

 

 

 



 

March 31,

 

 

(in thousands)

 

2017

 

2016

 

Change

Net (loss) income allocable to common shareholders

 

$

(3,444)

 

$

16,605 

 

$

(20,049)

Other comprehensive income (loss) allocable to
   common shareholders

 

 

352 

 

 

(9,685)

 

 

10,037 

Other changes in common shareholders' equity

 

 

(1,933)

 

 

(1,587)

 

 

(346)

Net change in common shareholders' equity

 

$

(5,025)

 

$

5,333 

 

$

(10,358)



 

 

 

 

 

 

 

 

 

Other Comprehensive Income (Loss) Allocable to Common Shareholders

Table 4 summarizes other comprehensive income (loss) that is allocable to common shareholders for the periods presented.

Table 4:  Other Comprehensive Income (Loss) Allocable to Common Shareholders





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the three months ended

 

 

 



 

March 31,

 

 

(in thousands)

 

2017

 

2016

 

Change

Bond related activity:

 

 

 

 

 

 

 

 

 

Bond fair value adjustments

 

$

(311)

 

$

2,662 

 

$

(2,973)

Increase in accumulated other comprehensive income ("AOCI") due
to equity in losses from LTPPs

 

 

1,118 

 

 

1,129 

 

 

(11)

Reclassification of net unrealized gains on sold or redeemed
bonds into net income

 

 

 ─

 

 

(2,055)

 

 

2,055 

Reclassification of unrealized bond gains into net income due
to consolidation or real estate foreclosure

 

 

 ─

 

 

(11,442)

 

 

11,442 

Other comprehensive income (loss) related to bond activity

 

 

807 

 

 

(9,706)

 

 

10,513 

Income tax expense

 

 

(243)

 

 

 ─

 

 

(243)

Foreign currency translation adjustment

 

 

(212)

 

 

21 

 

 

(233)

Other comprehensive income (loss) allocable to common shareholders

 

$

352 

 

$

(9,685)

 

$

10,037 

Other comprehensive income (loss) that is allocable to common shareholders for the three months ended March 31, 2017,  increased compared to amounts reported for the three months ended March 31, 2016 primarily as a result of the foreclosure and sale in the first quarter of 2016 of a multifamily property that secured a nonperforming bond investment that resulted in a $11.4 million reclassification of unrealized bond holding gains out of AOCI and into our Consolidated Statements of Operations. 

11

 


 

 

Other Changes in Common Shareholders’ Equity

Table 5 summarizes other changes in common shareholders’ equity for the periods presented.

Table 5:  Other Changes in Common Shareholders’ Equity





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the three months ended

 

 

 



 

March 31,

 

 

(in thousands)

 

2017

 

2016

 

Change

Common share repurchases

 

$

(1,770)

 

$

(1,768)

 

$

(2)

Purchases of shares in a subsidiary (including
   price adjustments on prior purchases)

 

 

(207)

 

 

 ─

 

 

(207)

Director and employee share awards

 

 

44 

 

 

181 

 

 

(137)

Other changes in common shareholders' equity

 

$

(1,933)

 

$

(1,587)

 

$

(346)

Other changes in common shareholders’ equity reported for the three months ended March 31, 2017 increased compared to that reported for the three months ended March 31, 2016 as a result of price adjustments that were recognized in the first quarter of 2017 in connection with shares previously purchased in a subsidiary. 



12

 


 

 

CONSOLIDATED RESULTS OF OPERATIONS

___________________________________________________________________________________________________________

This section provides a comparative discussion of our Consolidated Results of Operations for the three months ended March 31, 2017 and 2016 and should be read in conjunction with our financial statements, including the accompanying notes.  See “Critical Accounting Policies and Estimates” for more information concerning the most significant accounting policies and estimates applied in determining our results of operations.

Net (Loss) Income Allocable to Common Shareholders

Table 6 summarizes net (loss) income allocable to common shareholders for the periods presented.

Table 6Net (Loss) Income Allocable to Common Shareholders



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the three months ended

 

 

 



 

March 31,

 

 

(in thousands)

 

2017

 

2016

 

Change

Net interest income

 

$

2,523 

 

$

3,142 

 

$

(619)

Fee and other income

 

 

4,830 

 

 

2,539 

 

 

2,291 

Operating and other expenses:

 

 

 

 

 

 

 

 

 ─

    Other interest expense

 

 

(1,226)

 

 

(1,042)

 

 

(184)

    Operating expenses

 

 

(8,129)

 

 

(6,263)

 

 

(1,866)

Net (losses) gains on bonds, derivatives, loans and other assets

 

 

(3,296)

 

 

3,093 

 

 

(6,389)

Net gains transferred into net income from AOCI due to consolidation
or real estate foreclosure

 

 

 ─

 

 

11,442 

 

 

(11,442)

Equity in income from unconsolidated funds and ventures

 

 

2,044 

 

 

4,461 

 

 

(2,417)

Net loss allocated to common shareholders related to CFVs

 

 

(487)

 

 

(735)

 

 

248 

Net income allocated to IHS minority interest holder

 

 

 ─

 

 

 ─

 

 

 ─

Net income allocated to IHS PM minority interest holder

 

 

(3)

 

 

(43)

 

 

40 

Net income to common shareholders from continuing operations
   before income taxes

 

 

(3,744)

 

 

16,594 

 

 

(20,338)

Income tax benefit (expense)

 

 

258 

 

 

(72)

 

 

330 

Net income to common shareholders from discontinued operations,
   net of tax

 

 

42 

 

 

83 

 

 

(41)

Net (loss) income allocable to common shareholders

 

$

(3,444)

 

$

16,605 

 

$

(20,049)



Net Interest Income

Net interest income represents interest income earned on our investment in bonds, loans and other interest-earning assets less our cost of funding associated with short-term borrowings and long-term debt that we use to finance such assets.

Table 7 summarizes net interest income for the periods presented.

Table 7:  Net Interest Income





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the three months ended

 

 

 



 

March 31,

 

 

(in thousands)

 

2017

 

2016

 

Change

Interest income:

 

 

 

 

 

 

 

 

 

Interest on bonds

 

$

2,520 

 

$

3,254 

 

$

(734)

Interest on loans and short-term investments

 

 

414 

 

 

437 

 

 

(23)

Total interest income

 

 

2,934 

 

 

3,691 

 

 

(757)

Asset related interest expense:

 

 

 

 

 

 

 

 

 

Bond related debt

 

 

(411)

 

 

(295)

 

 

(116)

Notes payable and other debt, non-bond related

 

 

 ─

 

 

(254)

 

 

254 

Total interest expense

 

 

(411)

 

 

(549)

 

 

138 

Net interest income

 

$

2,523 

 

$

3,142 

 

$

(619)



13

 


 

 

Net interest income reported for the three months ended March 31, 2017 declined compared to that reported for the three months ended March 31, 2016 primarily due to the financial statement consolidation of certain property partnerships in 2016, which caused certain bond investments of the Company to be eliminated for reporting purposes.  This decline was partially offset by a decline in our cost of funding associated with non-bond related debt, a decrease that was primarily driven by the early redemption in 2016 of senior debt of the Company  

Fee and Other Income

Fee and Other Income includes our asset management fees and reimbursements as well as other miscellaneous income.

Table 8 summarizes fee and other income for the periods presented. 

Table 8:  Fee and Other Income



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the three months ended

 

 

 



 

March 31,

 

 

(in thousands)

 

2017

 

2016

 

Change

Asset management fees and reimbursements

 

$

4,519 

 

$

1,892 

 

$

2,627 

Other income

 

 

311 

 

 

647 

 

 

(336)

Fee and other income

 

$

4,830 

 

$

2,539 

 

$

2,291 

Fee and other income reported for the three months ended March 31, 2017 increased compared to that reported for the three months ended March 31, 2016 primarily as a result of an increase in management fees recognized in the first quarter of 2017 in connection with IHS Fund II SA and IHS Fund II SSA as the amount of capital committed to these funds increased during such reporting period.  The reported increase in asset management fees and reimbursements was also partially attributable to: (i) the strengthening of the South Africa rand (“ZAR”) relative to the U.S. dollar (“USD”), which increased the USD-equivalent of ZAR-denominated fee income; and (ii) increases in the amount of reimbursement income received by the Company from our Solar Ventures.    

Other Interest Expense

Other interest expense represents our cost of funding associated with senior and subordinated debt that does not finance our interest earning assets.

Table 9 summarizes other interest expense for the periods presented.

Table 9:  Other Interest Expense







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the three months ended

 

 

 



 

March 31,

 

 

(in thousands)

 

2017

 

2016

 

Change

Subordinated debt

 

$

(1,115)

 

$

(1,042)

 

$

(73)

Notes payable and other debt

 

 

(111)

 

 

 ─

 

 

(111)

Other interest expense

 

$

(1,226)

 

$

(1,042)

 

$

(184)

Other interest expense reported for the three months ended March 31, 2017 increased compared to that reported for the three months ended March 31, 2016 primarily as a result of an increase in the UPB of non-asset related debt due to the (i) consolidation of certain property partnerships, which caused certain bond investments to be eliminated for reporting purposes and corresponding Company debt obligations to be reclassified as non-asset related debt and (ii) issuance of additional non-asset related debt to refinance certain other debt obligations of the Company.      

14

 


 

 

Operating Expenses

Operating expenses include salaries and benefits, general and administrative expense, professional fees and other miscellaneous expenses.

Table 10 summarizes operating expenses for the periods presented. 

Table 10:  Operating Expenses





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the three months ended

 

 

 



 

March 31,

 

 

(in thousands)

 

2017

 

2016

 

Change

Salaries and benefits

 

$

(5,870)

 

 

(4,080)

 

$

(1,790)

General and administrative

 

 

(592)

 

 

(700)

 

 

108 

Professional fees

 

 

(1,809)

 

 

(1,435)

 

 

(374)

Other expenses

 

 

142 

 

 

(48)

 

 

190 

Operating expenses

 

$

(8,129)

 

$

(6,263)

 

$

(1,866)

Operating expenses reported for the three months ended March 31, 2017 increased compared to those reported for the three months ended March 31, 2016 primarily due to an increase in the share price of the Company in the first quarter of 2017, which drove a $1.0 million increase in the amount of stock compensation expense that we recognized during such reporting period,  and an increase in the number of employees      

Net (Losses) Gains on Bonds, Derivatives, Real Estate, Loans and Other Assets 

Net (losses) gains on bonds, derivatives, real estate, loans and other assets includes unrealized gains or losses on loans, realized gains or losses associated with the sale of bonds and loans and the early redemption of bonds and loans.  Such amounts also include unrealized holding gains or losses associated with our derivative instruments that result from fair value adjustments.

Table 11 summarizes net (losses) gains on bonds, derivatives, real estate, loans and other assets for the periods presented.

Table 11:  Net (Losses) Gains on Bonds, Derivatives, Real Estate, Loans and Other Assets