MMA Capital Management's (MMAC) CEO Michael Falcone on Q2 2016 Results - Earnings Call Transcript

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MMA Capital Management, LLC (NASDAQ:MMAC) Q2 2016 Earnings Conference Call August 10, 2016 8:30 AM ET


Michael Falcone - President and CEO

Dave Bjarnason - CFO

Gary Mentesana - EVP

Megan Sophocles - SVP


Gary Ribe - MACRO Consulting

Gabi Gliksberg - Private Investor

Ted Lou - Valley Financial Group

Greg Bennett - Private investor


Good morning, ladies and gentlemen, and welcome to the MMA Capital Management LLC Second Quarter 2016 Conference Call. My name is Keith and I will be your coordinator today. [Operator Instructions] Please note this call is being recorded.

Some comments today will include forward-looking statements regarding future events and projections of financial performance of MMA Capital, which are based on current expectations. These comments are subject to significant risks and uncertainties, which include those identified in the Company's filings with the Securities and Exchange Commission that could cause actual results to differ materially from those expressed in these forward-looking statements. The Company undertakes no obligation to update any of the information contained in the forward-looking statements.

I like to turn the call over to Mr. Michael Falcone, CEO of MMA Capital Management LLC.

Michael Falcone

Thank you, Keith. Good morning, everyone and welcome. With me on the call today are Dave Bjarnason, our Chief Financial Officer; Executive Vice President, Gary Mentesana; and Senior Vice President, Megan Sophocles. Dave and I will deliver our prepared remarks after which we will all be available to take questions.

The purpose of our call today is to review our second quarter 2016 results, and to provide an overall business update, including some insights into how we see our business moving forward.

With respect to our second quarter results, which Dave will review in detail later, we ended the quarter with $122.1 million of common equity, which represented $19.62 of equity per common share on a fully diluted basis, an increase of over 5% for the quarter and approximately 12% year-to-date. The majority of the Company's growth in diluted equity per share for the quarter was driven by a net increase in the fair value of our bond portfolio, with additional contributions from our joint venture investments.

During the quarter, we also repurchased approximately 286,000 of our common shares at an average price of $16.67 per share. We continue to buy back shares at a discount to our fully diluted common equity per share, realizing $0.12 per share of additional common equity from the program during the quarter.

As previously discussed this program has proven to be an important lever in our efforts to increase shareholder value. Following the increase in the reported equity per share for the quarter, we’ve been authorized by the board to increase the buyback price limit to $19.62 per share per fully diluted common equity per share reported in the second quarter financial statements. The increase to the buyback price will be implemented as soon as practicable during our next open trading window in full compliance of securities law.

A number of factors entered into our buyback price decision we may not always use the most recently published common equity per share as a maximum buyback price in the future but so far it is proven to be a reasonable way to acquire shares at a manner that is accretive to remaining shareholders by providing liquidity to exiting shareholders.

Across our US operations, we saw the advancement of the themes discussed in prior quarters. First we continued to see credit quality improve during the quarter, which along with a benign rate environment drove further increases in the fair value of our bond portfolio. Both our Leverage Bonds business and LIHTC businesses continued to meet or exceed our expectations.

Next we continued to see growth in our renewable energy finance business through continued strong orientation in the solar energy finance joint venture, including approximately $28 million of new loans during the second quarter and a 2016 year-to-date originations to approximately $107 million.

Due to the net withdrawal by borrowers in the second quarter, the UPV of loans funded through the joint venture increased by $8.8 million to $112.5 million. Although capital that the company and our joint venture partner have committed to this venture remain as a combined $100 million, the joint venture used $30 million line of credit to fund new originations and meet withdrawals for the existing portfolio without any additional partner equity. Remember that most of these loans are short-term construction loans, so as new loans are originated, old loans will pay off and the capital will be recycled into the new originations, the venture’s line of credit acting as a cushion to absorb any short-term cash requirements.

Investment returns on our solar construction loan joint venture continued to meet or exceed our expectations and are having a positive impact on our bottom line and cash flows at this point contributing approximately $1.7 million of GAAP income during the quarter, and $3.8 million year-to-date versus a $1.5 million contribution to income from all of 2015. In addition, we have $23.7 million of additional solar loans outside of the joint venture that began contributing to income in the first half of the year.

Finally, as mentioned on the prior calls, much of our 2016 expected returns in the GE transaction in general and TCE Fund 1 in particular will depend on the value realized from the sale of the acquired real estate with the first transaction expected to close beginning in Q3.

As Dave will explain year-to-date we have not recognized any asset management fees from or interest income associated with our loans to this venture given judgments we have made about revenue recognition requirements not being satisfied as of June 30. Because our assessment in this case is dynamic and is expected to change in future period, this will likely lead to some lumpiness in our fee recognition from the portfolio.

With respect to international operations, we continue to see challenges in the performance of the business in large measure due to the much reported struggles in the South African economy. For example, while we continue to see progress on the operational performance of our assets and even some strengthening of the [Indiscernible], other pressures such as information and general economic weakness are generally offsetting those gains.

We continue to focus our fund II capital raising efforts on development finance agencies and impact investors who are not as discouraged by the short term prospects in South Africa, and are hopeful that we will see results with the continued capital raising this summer. During the quarter, we closed a US-based foundation in the Fund II with a total commitment of $5.1 million.

Operationally the trends associated with our property management company in South Africa that we have noted in prior quarters continue to play out, and the first distribution of income from the management company JV occurred in the third quarter. As mentioned on prior calls, the underlying performance in many of our multi-family properties has consistently improved when we take over property management operations to our new joint venture.

This both adds to the value of the property management company and has the potential to stabilize and increase the value of the real estate portfolio. Further with the development of the public institutional markets for these properties, strong NOI growth through this rough patch, combined with potential cap rate improvement over time should realize value on the long run for both our fund investors and ultimately our shareholders.

Finally, as you may have seen in the Form 10-Q filed with the SEC yesterday, we have taken some steps to improve our disclosures, particularly those related to fair values and interest rate risk. We continue to review the potential use of non-GAAP metrics, but at this point we believe the risks of such disclosures outweigh the rewards. Given the evolving nature of our business and the required evolution of our disclosures we will continue to review additional ways to enhance disclosures and the appropriate non-GAAP measures over time.

With that, it's time to turn the call over to Dave for the financial highlights. Dave?

Dave Bjarnason

Thank you, Mike and good morning everyone. As I provide an overview of our results, I’ll refer to tables 1 through 5 in item 2 of our Form 10-Q so the extent that you have our filing in front of you, I would ask that you please turn to Page 3 of the filing, where you will find table 1, which is a balance sheet summary.

In table 1 and as Mike mentioned, you can see that common shareholders' equity was $122.1 million as of the end of the second quarter, which represents a $600,000 increase compared to what we reported at the end of the first quarter. While diluted common shareholders' equity per share increased by $1 in the second quarter to $19.62 per share.

Additionally we entered the second quarter with approximately $18.3 million of cash and cash equivalents, which is about $18.7 million less than was reported at March 31, 2016 with share repurchases and the funding of a solar loan in the second quarter driving most of the reported decrease in our cash and cash equivalents.

Turning to table 2, which begins at the top of Page 4 of our filing, we attribute in this table the reported increase in common shareholders' equity between net incomes, other comprehensive income, or OCI for short, and changes in common shareholders equity.

Between net income and OCI that is allocable to common shareholders, we saw a $5.4 million increase to common shareholders' equity in the second quarter, which was partially offset by $4.8 million of other decreases in common shareholders' equity that I'll discuss in more detail when speaking to table 4 of our filing.

Turning to table 3, which begins on the middle of Page 4 of our filing, you can see that we reported in the second quarter $265,000 of OCI that is allocable to common shareholders, which is about $450,000 more than we reported in the second quarter of 2015. OCI recognized in the second quarter was driven by $4.5 million of bond related gains, partially offset by the impact on OCI of consolidating a partnership associated with one of our bond investments. In this case, we acquired in the second quarter a general partner interest in a partnership that was the [Indiscernible] in one of our bond investments.

As a result, we consolidated the partnership for reporting purposes, which caused our bond investment to be eliminated and $4.2 million of related holding gains to reclassified out of OCI and into net income.

Turning to Table 4, which begins in the middle of Page 5 of our filing, other changes in common shareholders equity in the second quarter were driven primarily by share buybacks. As Mike mentioned, the company purchased approximately 286,000 shares in the second quarter and while this activity reduced total common shareholders equity, such buybacks drove a $0.12 increase to diluted equity per share given that our average repurchase price of $16.67 was below our reported book value per share.

Turning to consolidated results of operations, which begins at the top of Page 6 of our filing, table 5 summarizes net income that is allocable to common shareholders. The company reported $5.1 million of net income in the second quarter, which is about $2.2 million less than we reported in the second quarter of 2015. As you can see from table 5, this decline was driven largely by a decrease in net gains on bonds, loans and other assets. So the impact of this decrease was partially offset by increases in equity and income from unconsolidated funds or ventures and net gains transferred into net income from OCI due to consolidation for real estate foreclosure.

There are a number of factors that drove increases or decreases in revenues and expenses. With respect to net interest income, which is covered in more detail in table 6, this line includes interest income associated with all interest bearing assets, reduced by the interest expense associated with all debt obligations that we used to finance such assets.

As you can see in the first line of table 5, the amount of net interest income in the second quarter was approximately $500,000 less than we reported in the second quarter of 2015. The decrease in this case was driven primarily by the sale or run-off of our investments in bonds.

For the 12 months ended June 30, 2016 the unpaid principal balance of our investments in bonds declined from $230.3 million to $180.5 million.

With respect to fee and other income, which is covered in more detail on table 7, this line item includes asset management fees and reimbursements, income on our preferred stock investment, as well as other miscellaneous income.

As you can see on the second line of table 5, the amount of fee and other income that we reported in the second quarter was about $0.5 million less than what we reported in the second quarter of 2015. The main driver for this decline was the redemption of our investment in preferred stock in the fourth quarter of 2015, which caused no income on this investment to be recognized in the second quarter of this year. This decrease was partially offset by an increase in asset management fees and reimbursements that was tied to an increase in fee income for our property management business in South Africa, and reimbursements from our solar joint venture.

With respect to other interest expense, which is covered in more detail in table 8, this line item includes interest expense associated with our subordinated debt, as well as interest expense associated with senior debt that does not finance our interest earning assets.

As you can see on the fourth line of table 5, the amount of other interest expense that we reported in the second quarter, was about $630,000 less than was reported in the second quarter of 2015. This decrease was driven primarily by the restructuring of subordinated debt in the second quarter of 2015, which reduced our cost of funding. The decline in other interest expense was also driven by the termination in the fourth quarter of 2015 a financing associated with our investment of preferred stock.

With respect to operating expenses, which are covered in more detail on table 9, this line item includes salaries and benefits, general and administrative expense, professional fees and other miscellaneous expenses. As you can see on the fifth line of table 5, the amount of operating expenses that we reported in the second quarter was nearly $1 million less than we reported in the second quarter of 2015. This change was primarily attributable to one-time nonrecurring fees that we incurred in connection with the restructuring of our subordinated debt in the second quarter of 2015.

With respect to net gains on bonds, loans and our assets, which are covered in more detail on table 10, these amounts include realized gains or losses associated with the sale of such assets and the early redemption of bonds and loans, as well as include unrealized holding gains or losses associated with our derivate instruments that results in fair value adjustments.

As you can see on the sixth row of table 5, the amount of net gains that we reported in the second quarter was approximately $8.9 million less than we reported in the second quarter of 2015. This decrease is primarily attributable to the fact that we did not have any bond sales, bond redemptions or sales of real estate during the second quarter of this year.

With respect to equity and income from unconsolidated funds and ventures, which is covered in more detail on table 11, this line item includes our portion of the income or loss associated with certain unconsolidated funds and ventures in which we have an equity interest. As you can see on the eighth row of Table 5, the amount of equity and income from unconsolidated funds and ventures that we reported in the second quarter was approximately $2.1 million more than we reported in the second quarter of 2015. The increase in this case is primarily driven by the fact that our solar joint venture was established in the third quarter of 2015. Also driving this increase was a distribution that we received in the second quarter from one of our investments in a partnership that sold property that it held.

With respect to our net loss from consolidated funds and ventures that is allocable to common shareholders, which is covered in more detail on tables 12 and 13, the net loss for the three months ended June 30, 2016 increased compared to that reported for the three months ended June 30, 2015 primarily due to a $600,000 lower cost to market adjustment that we recognized in the second quarter related to a property held for sale.

Before turning the call back over to Mike, I wanted to briefly touch on disclosure enhancements that Mike referenced earlier that we implemented in the second quarter, as well as I want to provide you with a quick update on remediation efforts. With respect to disclosures we expanded both MD&A and the footnotes to our financial statements in several different ways in the second quarter.

In MD&A, and beginning on page 15 of our filing, we added a disclosure about the fair value sensitivity of our bond portfolio. And particularly you can see from our filing that we measured how the fair value of the bond portfolio would hypothetically change in the event of an instantaneous 100 basis points increase in performing bond market yield, discount rate and terminal capitalization rate assumptions while also assuming expected future cash flows of the bond portfolio were unchanged relative to those used to measure fair value for financial payment purposes.

As we disclosed on table 20, the fair value of the bond portfolio was estimated to decline by 8.4% in such a scenario. In MD&A and beginning on page 16 of our filing, we also expanded disclosures related to our contractual interest in TCE fund I. our goal with these enhancements was to provide more transparency into the carrying value of such interests. We also sought to provide more information about judgments we made related to revenue recognition. Given circumstances that existed as of June 30 of this year, you will see that we disclosed that we did not recognize in the second quarter any asset management fees or interest income associated with our $5.3 million loan to TCE fund I on the basis of our judgment that the GAAP threshold for revenue recognition was not met for either of these items.

However, as I mentioned before, this assessment is dynamic and will be made on an ongoing basis in any future reporting period. Lastly, in note 7 to our financial statements, which begins on page 40 of our filing, we unified and expanded upon disclosures we made about the fair value of our assets, liabilities and other financial instruments that are not measured at fair value on a recurring basis.

In particular, we consolidated our disclosures at fair value and to a single foot note, whereas previously we had two footnotes plus related disclosures in MD&A. we also refined and expanded upon disclosures related to valuation techniques that we used, significant un-absorbable inputs that are consumed in our fair value measurements and other information related to various financial instruments to which we are a party. Hopefully the expanded disclosures are helpful, but as Mike mentioned we will continue to look for ways to enhance the quality of our financial reporting.

In considering how to refine our fair value or other disclosures I should also point out that we were sensitive to the use or introduction of non-GAAP financial measures, particularly given the advice of council and the increased scrutiny of the SEC related to the use of such measures in public filings. We also considered the cost to liability and internal control aspects of introducing newer voluntary disclosures. Suffice to say the approach that we used to expand our disclosures this quarter reflect the careful consideration of these factors.

Lastly and with respect to remediation efforts, we made progress in the second quarter executing against the remediation plan that we disclosed in our 2015 Form 10-K and in our first quarter Form 10-Q. The steps we took in the second quarter are discussed in more detail beginning on page 66 of our filing, but at a high level all electronic spreadsheets that we used for financial reporting purposes have been evaluated, although identified gaps in internal controls associated with such applications are in process of being remediated.

We also implemented procedural enhancements that led to a portion of our management review controls, though remediation efforts are still on process for a portion of these types of controls. Further we initiated training for internal resources, who are responsible for internal controls and our financial reporting, but expect to complete such training by September 30, 2016.

All control enhancements that we have implemented or expect to implement are subject to continuous evaluation by management and testing by the company’s registered pubic accountants. I will provide another update on remediation efforts at our next investor conference call. With that I will turn the call back over to Mike.

Michael Falcone

Thanks Dave. Consistent with prior calls, I want to spend a few minutes talking about our view of the business in the quarters ahead. We continue to focus on maximizing the value in our Affordable Housing business and growing our Renewable Energy business. As discussed on prior calls our returns from our interest in the former GE LIHTC business are heavily based on the ability to monetize the underlying portfolio of real estate over time.

Additionally with the robust pipeline of good investment opportunities in the solar energy lending business, we are working to expand our access to additional capital to keep up with potential origination opportunities. We continue to see this joint ventures and the interest in fee based income streams they create passed for growth in the coming years. On additional item of notice, the current plan with respect to share buybacks, as it stands, the company adopted a 600,000 share buyback authorization for 2016 and as of this call it's just over halfway through this authorization. The share threshold is focused on maintaining a margin of safety with respect to the tax rules surrounding our NOLs and certain change of control provisions in the tax loss.

We believe that the buyback of our shares has been effective way to drive value for our continuing shareholders as seen by another incremental benefit of $0.12 of fully diluted common equity per share realized this quarter. The board has concluded that a buyback at our current trading price represents an attractive investment especially as we continued to trade below book value and continues to support the idea of an incremental return of capital to shareholders either buyback program.

We will not address an increase in the size of the 2016 program until we complete the current authorization. As discussed previously and during our last call, we continued to review ways to communicate our view of the infringing value of the company as individual components to help better frame that potential value the just for our shareholders but frankly we are doing, we are struggling to do so in a manner that meets regulatory reporting requirements.

We will continue to focus on this topic and continue to review an update our investor communications in the coming quarters. And finally, I would like to take a moment to mention the fact that Lisa Roberts the longtime Chief Accounting and Financial Officer to the Company was elected to our board last week.

As an organization, we remain a fairly complex financial story for our shareholders and as the board looked to expand, it was determined that another individual of a strong financial reporting background may attend at this point. To that and Lisa brings over 25 years of financial reporting and brought her finance knowledge the board of the last nine years of background at MMA Capital Management itself. We anticipate leveraging that background as the company continues to grow and changed the benefit of shareholders.

Before we take questions from our caller, I just wanted to reiterate that we remain focused on improving the per share value of the company with combination of the growth of our fee based platforms, share buybacks and strategic asset investments. And we believe that the current business landscape is favorable with respect to our plans, given that the favorable conditions have persisted for some time, it is important for us to remain vigilant for potential rough patches ahead. We hoped the business climate remains benign, we certainly can't expect current conditions to persist in depth that way. And the last, we're excited about our future, we remain committed to our shareholders and we thank you for your support.

We'll now open the call to questions. Operator?

Question-and-Answer Session


Yes, thank you. [Operator Instructions] And the first question comes from Gary Ribe with MACRO Consulting.

Gary Ribe

Hi, guys. It's been like you guys had a pretty quiet quarter, relatively speaking. I just had a couple of questions, if you guys could give us an update on the men you guys have and then also just on the solar JV, I think at the shareholder meeting you talked about looking at raising some outside capital and you're investing in the function almost like co-investing with that. I didn’t know if that's something that you guys are starting to ramp-up and look at your comments kind of alluded to at least in the press release alluded to some excitement there. I didn’t know if that's what you were alluding to or not?

Michael Falcone

Sure. Thanks, Gary. In terms of looking at raising this whole capital for the solar business, as you can see from the numbers, we are bumping up against sort of limit to the capital that we have. We also expect to close in this quarter, some of our first permanent loans in the solar business which as I will obviously different term, we're looking at sort of five year mini terms. So, we are actively looking to raise capital in that business to sort of essentially expand the front itself. We have where the business currently how that plays out and when that plays out remains to be seen. Capital raising is always quite a tricky business.

In terms of the land, there sort of three projects that come into mind when you say that. The first is Spanish Fort where we're sort of a limited partner in the joint venture. The joint venture is as steady as it goes right now. They were assets with the property they continue to assets in the projects. They continue to produce revenue, there's land available for sale. I'd say and some empty space to rent. I'd say we're making slow and steady progress there, nothing spectacular on the upside and nothing on the downside at this point.

In terms of Savannah, we are looking to sort of consummate a contract on that parcel, those kinds of contracts typically have particularly for the land typically have a very long option period. And so we don’t know and what really know until and option period runs whether that those parcels will sell or not. So, continued to sort of market and look for opportunity there but there is nothing that we can report at this time.

And finally, Russell 150 which is in Winchester Virginia, the developer on who we had sold that property to under an option contract, walked away from the option, was basically unable to get financing as we understand that, I guess we really don’t fully know the story there. We actually have sort of stepped in and taken over some of the land though and opportunities and obligations at least in the short term, mostly because there is sort of $14 million of roadwork needs to happen at that side. $7 million which the state will pay for if we sort of kept the work going this year. And so, we decided rather than sort of risking another developer falling out, we'd focus on moving that one forward ourselves at least for the time being.

So, we were optimistic that the value still remains fair, we're talking to potential buyers of parcels there and sort of. Well, we got more work underway. I suspect there may be a little more upside than down as a result of the option to fall.

Gary Ribe

Okay, great. And I guess would you, I guess for some the rules definitely how would you characterize some of capital raising efforts so far, is the appetite there?

Michael Falcone

Yes. We think it there the appetite is there but the sort of bare section between appetite and consummating deal is always a tricky one. So, we still have a lot of work to do on that front and we can make no promises that that business will attract, see additional capital come into it.

Gary Ribe

Perfect. Okay, great, thanks a lot guys.

Michael Falcone

Thanks, Gary.


Thank you. And the next question comes from Gabi Gliksberg with Private Investor.

Gabi Gliksberg

Hi guys, good morning.

Michael Falcone

Good morning.

Gabi Gliksberg

I was just one thing. Can you do a quick review of just the different vehicles in which MMA manages third party capital for a fee?

Michael Falcone

Sure. We have the Bank of America GE venture which comes out of the purchase of the GE low income housing tax credit business. We have the solar business, the sort of solar joint venture, we have three funds in South Africa and indirectly through the option that we have to purchase more as and grow, we have what we would expect to have in the future, tax credit funds that we are would be the general partner of when we take that back here about 20 or 30 of those, I've top of my head, I can't remember the exact number of how many different funds there are.

Gabi Gliksberg

Got it. On the last call we spoke a little bit of, I asked you about Morrison Grove and sort of trying to understand how you think about the value and he started talking about it a little bit and so maybe you could try to see if there's something you would put in the disclosures. Is that the area that seems to be the most complicated in terms of changing the disclosures and maintaining GAAP reporting?

Michael Falcone

No, there are lots of complications on that front. Dave, can you remind me, did we change any of the disclosure around the Morrison Groves option?

Dave Bjarnason

The short answer is "No". We considered whether to add any disclosure related to the option in terms of from a fair value perspective but going back to a couple of points mentioned earlier around introducing a non-GAAP measure and at MDNA. That was certainly one aspect that played into why we didn’t have the valuation there. We also consider whether or not that option merits fair value disclosure in the footnote and ultimately the term in that it was practicable for us to add disclosure related to that option in the financial statements. But I could just sort of pause there. So, the short answer is "No, we didn’t add anything like the MGM in this particular filing."

Michael Falcone

And one of the issues there relates to sort of internal controls. When we put a number in our financial statements, we have to follow sort of Sarbanes-Oxley's procedures to create those numbers and to be able to prove that the information that we're using is valid. In the context of the Morrison Grove transaction, we got some issues there that we're sort of sorting through. We're not saying that we're not going to disclose more, we're just not yet in a position to stack all the information up in a way that would allow us to disclose the option value at this time.

Gabi Gliksberg

What if it was less and I'm by no means securities expert but law expert. But if you talk more about the company Morrison Grove and what it is that they do and what it is that they own and how they make money. As opposed to putting a specific number in their financial statements about what that option is worth, that do and maybe a little bit better a job of having, the some of them ultimately is not seeing in final document and you or them, understand what their business might be worth found.

Michael Falcone

We are in the process of putting some of that stuff together. There is, it's going to sound simple and really quite stupid when I say this but for example one of the things that we want to do a better job disclosing you will know when I described the funds to you, I didn't speak to sort of assets under management in any particular fund or group of funds. We are actually now trying to systematize how we count assets under management whether it's original capital race, whether it's current GAAP value of the funds and we are just sort of sorting through different data there that we have and that we have to create frankly in some instances.

So, I suspect that that's something we are headed towards disclosing better and therefore we will do a better job I think. I am talking about Morrison Grove but we weren't ready for that this quarter.

Gabi Gliksberg

Sure. So, on that point I work on to mention that but for all those third party funds that has on deploy, I think that as we move more towards the investment management business in a year as a shareholder, so the way I think about your future is going to be based on your AUM performance of each fund and the fee arrangement you have with each of them. And that's obviously sort of all the most vital piece of information of any investment management operation. So, for all those third area where you mentioned third party capital, it would be very worthwhile I think for shareholders to get a better understanding of exactly how performance is calculated, how the fees are calculated and what performance is been in and what the original funds raised on those funds.

Michael Falcone

We agree.

Gabi Gliksberg

Great. All right, thank you.


Thank you. [Operator Instructions] And the next question comes from Ted Lou from Valley Financial Group.

Ted Lou

Good morning, Michael.

Michael Falcone

Good morning, Ted.

Ted Lou

I just like to take this opportunity to thank Lisa for coming back and joining the board. Many of our shareholders are extremely pleased and then I think it tells a good story about your firm at this point she is willing to come back. So, thank you very much.

Michael Falcone

Great. Thanks, Ted. I will pass it on to Lisa.

Ted Lou

Thank you.


Thank you. And the next question comes from Greg Bennett, a private investor.

Greg Bennett

Good morning. Great results. Thanks again. Michael, just get an idea of the tax credit business usually when the periods' up for of these or it's the GE or the legacy projects that you guys were involved when that date that anniversary trailer I think it's 15 years or whatever, do most of these properties go on the market and get sold at that time because of the limited partners people that are involved with tax credit want to have a monetize event, the out of it at that time?

Michael Falcone

Yes. The sort of length of time is typically closer to 17 years for a fund and then you have a year two of construction of all the assets and then 15 years of holding them and typically at the end of that 17 year total period, there's either a sale or a refinancing out of the investors, limited partner investors.

Greg Bennett

Is there any way on the disclosure where in the future you might be able to I guess as a shareholder looking out future what I view as the future pipeline for use possibly get to see or a participation in. Is there any way that between your legacy or with GE that you could kind of have a table that says these are assets that potentially could have a monetization event in the year 2018 or 2019?

Michael Falcone

Two points there. The first is we come to be the sort of control question and can we publish numbers in that regard that we can get enough comfort around. And so, we are continuing to work on that. I don't know ultimately if we will get there or not to be truthful. On the second piece of it we could disclose sort of absolute numbers of properties that are sort of coming due in any year. We ultimately don't control the sale and in most instances and it is also the case that probably nine out of 10 of these properties are likely not to have value. It's the sort of it's the stacking up of 10th property that creates value in our minds. And so that number in the aggregate could be a little misleading but we are continuing to try to figure out a better way to talk about these issues.

Greg Bennett

So nine out of the 10 properties that handed us your the expectation is that you may not get some sort of a backend fee, is that what you are saying that there is?

Michael Falcone

I mean, that's a sort of rough number but I think yes just as a sort of expectation matter, we think most of the -- the vast majority of properties really don't have value nor do we underwrite them for example as having value in the GE transaction. They are much smaller number of properties that have value than we now have interests in.

Greg Bennett

Okay. Thank you.


Thank you. And the next question is follow-up from Gary Ribe with MACRO Consulting.

Gary Ribe

Actually I think my question has been answered. Thanks guys.

Michael Falcone

Thanks, Gary.


Thank you. And as there no more questions at this present time, I would like to return the call to management for any closing comments.

Michael Falcone

Great. Thank you all very much for your time. I know a number of you are sort of regulars on this call. It would be useful when you had a chance to digest some of the new disclosures if you sort of let Brooks know how you view those disclosures, were they helpful, were they not helpful. We've obviously heard today some places where we still have work to do. Whether we can get there or not remain to be seen but we understand I think pretty well what the shortcomings are right now.

So, thank you all very much for your support and your feedback here and we are hopeful that what we have done so far is responsive but please if you get a chance offline to talk to Brooks, let us know what you think. That would be very helpful. Everybody have a good rest this summer and look forward to talking again. Bye.


Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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