10-Q 1 mmac-20180331x10q.htm 10-Q 20180331 10Q

 



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, 2018

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 5,701,423 shares of common shares outstanding at May 3, 2018.



 


 

 





 

 

 

 

MMA Capital Management, LLC

Table of Contents



 

 

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS



 

PART I   FINANCIAL INFORMATION



 

 

 

 



Item 1.   

Financial Statements (Unaudited)

25 



 

 

 

 



 

(a)

Consolidated Balance Sheets at March 31, 2018 and December 31, 2017

25 



 

 

 

 



 

(b)

Consolidated Statements of Operations for the three months ended March 31, 2018 and March 31, 2017

26 



 

 

 

 



 

(c)

Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2018 and March 31, 2017

28 



 

 

 

 



 

(d)

Consolidated Statements of Equity for the three months ended March 31, 2018

29 



 

 

 

 



 

(e)

Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and March 31, 2017

30 



 

 

 

 



 

(f)

Notes to Consolidated Financial Statements

32 



 

 

 

 



Item 2.

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



 

 

 

 



Item 3.

Quantitative and Qualitative Disclosures About Market Risk

63 



 

 

 

 



Item 4.

Controls and Procedures

63 



 

 

 

 

PART II  OTHER INFORMATION

64 



 

 

 

 



Item 1.

Legal Proceedings

64 



 

 

 



Item 1A.

Risk Factors

64 



 

 

 



Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

64 



 

 

 

 



Item 3.  

Defaults Upon Senior Securities

64 



 

 

 

 



Item 4.

Mine Safety Disclosures

64 



 

 

 



Item 5.

Other Information

64 



 

 

 



Item 6.

Exhibits

65 



 

 

 

 

SIGNATURES

 

 

S-1



 

 

 

 













1

 


 

 

Cautionary Statement Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2018 (this “Report”) should be read in conjunction with our 2017 Annual Report on Form 10-K for the year ended December 31, 2017 (“2017 Annual Report”), filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”), to which reference is hereby made.  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.  For a discussion of certain of those risks and uncertainties and the factors that could cause our actual results to differ materially because of those risks and uncertainties, see Part I, Item 1A, Risk Factors of our 2017 Annual Report.

Readers are cautioned not to place undue reliance on forward-looking statements in this Report or that we may make from time to time, and to consider carefully the factors discussed in Part I, Item 1A. “Risk Factors” of the 2017 Annual Report in evaluating these forward-looking statements.  We do not undertake to update any forward-looking statements contained herein, except as required by law.



2

 


 

 

PART I – FINANCIAL INFORMATION



MMA Capital Management, LLC

Consolidated Financial Highlights

(Unaudited)

___________________________________________________________________________________________________________







 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



As of and for the quarterly period ended

(in thousands, except per common share data)

1Q18

 

4Q17

 

3Q17

 

2Q17

 

1Q17

Selected income statement data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

$

2,895 

 

$

1,666 

 

$

1,817 

 

$

2,131 

 

$

2,420 

Non-interest revenue

 

220 

 

 

224 

 

 

794 

 

 

451 

 

 

297 

Total revenues, net of interest expense

 

3,115 

 

 

1,890 

 

 

2,611 

 

 

2,582 

 

 

2,717 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating and other expenses

 

9,279 

 

 

13,355 

 

 

20,737 

 

 

12,610 

 

 

13,320 

Net gains (losses) from bonds and other continuing operations

 

3,136 

 

 

(3,181)

 

 

9,595 

 

 

2,002 

 

 

(4,584)

Net loss from continuing operations before income taxes

 

(3,028)

 

 

(14,646)

 

 

(8,531)

 

 

(8,026)

 

 

(15,187)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit (expense)

 

790 

 

 

1,977 

 

 

(384)

 

 

(1,580)

 

 

1,413 

Net income from discontinued operations, net of tax

 

20,578 

 

 

6,680 

 

 

5,655 

 

 

5,500 

 

 

1,193 

Loss allocable to noncontrolling interests from continuing operations

 

 ─

 

 

11,346 

 

 

12,716 

 

 

11,056 

 

 

8,554 

Loss allocable to noncontrolling interests from discontinued operations

 

 ─

 

 

151 

 

 

465 

 

 

466 

 

 

583 

Net income (loss) allocable to common shareholders

$

18,340 

 

$

5,508 

 

$

9,921 

 

$

7,416 

 

$

(3,444)

Earnings per share data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income allocable to common shareholders:  Basic

$

3.25 

 

$

0.94 

 

$

1.69 

 

$

1.26 

 

$

(0.58)

Diluted

 

3.25 

 

 

0.89 

 

 

1.69 

 

 

1.16 

 

 

(0.58)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average shares:  Basic

 

5,650 

 

 

5,838 

 

 

5,871 

 

 

5,893 

 

 

5,937 

Diluted

 

5,650 

 

 

6,223 

 

 

5,871 

 

 

6,275 

 

 

5,937 

Market and per common share data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market capitalization

$

153,699 

 

$

134,274 

 

$

143,952 

 

$

132,428 

 

$

135,725 

Common shares at period-end

 

5,746 

 

 

5,618 

 

 

5,836 

 

 

5,881 

 

 

5,921 

Share price during period:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

High

 

30.58 

 

 

26.60 

 

 

25.05 

 

 

24.00 

 

 

23.50 

Low

 

23.85 

 

 

23.70 

 

 

18.00 

 

 

22.00 

 

 

19.00 

Closing price at period-end

 

27.20 

 

 

24.30 

 

 

25.05 

 

 

22.85 

 

 

23.25 

Book value per common share:  Basic

 

31.05 

 

 

24.49 

 

 

23.26 

 

 

21.69 

 

 

20.32 

Diluted

 

30.82 

 

 

24.48 

 

 

23.26 

 

 

21.69 

 

 

20.32 

Selected balance sheet data (period end)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

33,444 

 

$

35,693 

 

$

29,356 

 

$

33,505 

 

$

28,264 

Investments in debt securities (without consolidated funds and ventures ("CFVs")

 

157,824 

 

 

143,604 

 

 

142,951 

 

 

151,662 

 

 

152,385 

All other assets (without CFVs)

 

222,098 

 

 

163,557 

 

 

160,820 

 

 

135,750 

 

 

148,534 

Assets of discontinued operations

 

 ─

 

 

61,220 

 

 

65,862 

 

 

66,763 

 

 

69,729 

Assets of CFVs

 

 ─

 

 

127,812 

 

 

136,507 

 

 

148,359 

 

 

158,798 

Total assets

$

413,366 

 

$

531,886 

 

$

535,496 

 

$

536,039 

 

$

557,710 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt (without CFVs)

$

205,099 

 

$

209,427 

 

$

209,233 

 

$

209,130 

 

$

224,082 

All other liabilities (without CFVs)

 

29,854 

 

 

27,580 

 

 

25,562 

 

 

21,894 

 

 

21,757 

Liabilities of discontinued operations

 

 ─

 

 

17,212 

 

 

15,603 

 

 

15,701 

 

 

18,868 

Liabilities of CFVs

 

 ─

 

 

50,565 

 

 

48,320 

 

 

47,458 

 

 

46,842 

Noncontrolling interests

 

 ─

 

 

89,529 

 

 

101,052 

 

 

114,309 

 

 

125,862 

Total liabilities and noncontrolling interests

 

234,953 

 

 

394,313 

 

 

399,770 

 

 

408,492 

 

 

437,411 

Common shareholders' equity

$

178,413 

 

$

137,573 

 

$

135,726 

 

$

127,547 

 

$

120,299 

Rollforward of common shareholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shareholders' equity - at beginning of period

$

137,573 

 

$

135,726 

 

$

127,547 

 

$

120,299 

 

$

125,324 

Net income allocable to common shareholders

 

18,340 

 

 

5,508 

 

 

9,921 

 

 

7,417 

 

 

(3,444)

Other comprehensive income (loss) allocable to common shareholders

 

9,160 

 

 

2,154 

 

 

61 

 

 

768 

 

 

352 

Common share repurchases

 

 ─

 

 

(5,694)

 

 

(1,161)

 

 

(982)

 

 

(1,770)

Common shares issued

 

4,125 

 

 

 ─

 

 

 ─

 

 

 ─

 

 

 ─

Cumulative change due to change in accounting principles

 

9,206 

 

 

 ─

 

 

 ─

 

 

 ─

 

 

 ─

Other changes in common shareholders' equity

 

 

 

(121)

 

 

(642)

 

 

45 

 

 

(163)

Common shareholders' equity - at end of period

$

178,413 

 

$

137,573 

 

$

135,726 

 

$

127,547 

 

$

120,299 

3

 


 

 

ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 



INTRODUCTION

___________________________________________________________________________________________________________

Overview

MMA Capital Management, LLC 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 primarily invests in debt associated with affordable housing and renewable energy.  We focus on investments with attractive risk-adjusted returns that generate positive environmental and social impacts.  Our investments, other assets and liabilities are organized into three portfolios:

·

Leveraged Bonds – This portfolio primarily includes tax-exempt mortgage revenue bonds that are leveraged to generate attractive risk adjusted returns;

·

Energy Capital – This portfolio consists primarily of investments that we have made through joint ventures with our institutional capital partners in loans that finance renewable energy projects; and

·

Other Assets and Liabilities – This portfolio includes certain loan receivables, cash, real estate-related investments, subordinated debt and the balance of the Company’s assets and liabilities.

Commencing on January 8, 2018, we became externally managed by Hunt Investment Management, LLC, an investment adviser registered with the SEC (our “External Manager”).  In conjunction with this change, and as further discussed in the 2017 Annual Report, we completed the sale of the following businesses and assets to the Hunt Companies, Inc. (the Hunt Companies, Inc. and its affiliates are hereinafter referred to as “Hunt”):

·

our Low Income Housing Tax Credit (“LIHTC”) business;

·

our international asset and investment management business;

·

the loan origination, servicing and management components of our Energy Capital business (including certain management, expense reimbursement and other contractual rights that were held by the Company with respect to this business line);

·

our bond servicing platform; and

·

certain miscellaneous investments.  

The Company received a $57 million note from Hunt FS Holdings II, LLC, an affiliate of Hunt, as consideration for the sale of the aforementioned businesses and assets (this sale transaction is hereinafter referred to as the “Disposition”).

In conjunction with the Disposition, the Company’s option to purchase the LIHTC business of Morrison Grove Management, LLC (“MGM”) was also converted into a purchase and sale agreement pursuant to which the Company agreed to complete the purchase of MGM subject to certain conditions precedent.  In addition, the Company signed an agreement to acquire from an affiliate of MGM certain assets pertaining to a specific LIHTC property and acquired a $9.0 million senior note from affiliates of MGM.  Hunt has the right to elect to take assignment of the purchase agreements related to MGM and, subject to the terms of such agreements, could acquire the MGM LIHTC business and property directly from MGM and its affiliates.  If this were to occur, Hunt would acquire the $9.0 million senior note from us.

Given these changes to our business model and effective the first quarter of 2018, we operate as a single reporting segment.  As a result, we no longer operate, or present the results of our operations, through three reportable segments that, as of December 31, 2017, included U.S. Operations, International Operations and Corporate Operations.     

Leveraged Bonds Portfolio

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

The bonds we hold are 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.     

4

 


 

 

The Company also has a smaller portfolio of other real estate bonds.  This portfolio includes: (i) municipal bonds that finance the development of infrastructure for a mixed-use town center development and are secured by incremental tax revenues generated from the development, (ii) a subordinated investment in a collateralized mortgage-backed security that finances a mixed-use multifamily housing property and (iii) a tax-exempt bond that is fully secured by U.S. Treasury notes. 

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 also has 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 variable 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 6, “Debt,” and Note 7, “Derivative Instruments,” for more information about how TRS and interest rate risk management agreements are reported in the Company’s financial statements. 



Table 1:  Bond Portfolio - Summary







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

At March 31, 2018



 

 

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 (5)

 

Coverage (6)

 

Bonds (7)

 

Properties (7)

Multifamily tax-exempt bonds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

168,604 

 

$

177,340 

 

6.42 

%

 

6.42 

%

 

1.20 

x

 

21 

 

19 

Non-performing (1)

 

 

9,890 

 

 

8,005 

 

6.45 

%

 

2.69 

%

 

0.88 

x

 

 

Subordinated cash flow (2)

 

 

9,620 

 

 

10,073 

 

6.78 

%

 

1.54 

%

 

N/A

 

 

 

 ─

Total multifamily tax-exempt
   bonds

 

$

188,114 

 

$

195,418 

 

6.43 

%

(4)

6.22 

%

(4)

1.18 

x  

 

25 

 

20 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Infrastructure bonds

 

$

26,825 

 

$

21,191 

 

6.75 

%

 

6.75 

%

 

0.62 

x  

 

 

N/A



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other bonds

 

$

14,845 

 

$

15,486 

 

5.12 

%

 

5.12 

%

 

N/A

 

 

 

N/A

Total Bond Portfolio (3)

 

$

229,784 

 

$

232,095 

 

6.38 

%

(4)

6.21 

%

(4)

1.10 

x

 

29 

 

20 



(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 $70.7 million and $74.3 million, respectively, that were financed with TRS agreements that had a combined notional amount of $72.1 million and that were accounted for as derivatives at March 31, 2018.  The Bond Portfolio also includes 10 bonds with a combined UPB and fair value of $96.2 million and $101.1 million, respectively, that were financed with TRS agreements that had a combined notional amount of $96.9 million and where the transfer of underlying bond investments was accounted for as a secured borrowing

(4)

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 6.39%, respectively, at March 31, 2018, and the weighted-average pay rate for total multifamily tax-exempt bonds and for the total bond portfolio would have been 5.98% and 6.01%, respectively, at March  31, 2018

(5)

Reflects cash interest payments collected as a percentage of the average UPB of corresponding bond investments for the preceding 12 months at March  31, 2018.

(6)

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. 

(7)

As of December  31, 2017, the Bond Portfolio was comprised of 29 bonds, which included 25 multifamily tax-exempt bonds that were collateralized by 20 affordable multifamily rental properties.    



5

 


 

 

The fair value of the Bond Portfolio as a percentage of its UPB decreased from 102.5% at December 31, 2017 to 101.0% at March 31, 2018, while the weighted-average debt service coverage ratio of the Bond Portfolio was 1.10x at December 31, 2017 and March 31, 2018.   

Interest Rate  Risk Hedge Positions

We use interest rate swaps and caps to hedge interest rate risk associated with this portfolio.  The net fair value of these financial instruments was $2.2 million at March 31, 2018.

Energy Capital Portfolio

In our Energy Capital portfolio, we invest in loans that finance renewable energy projects.  These loans include late-stage development, construction and permanent loans.  We invest in these loans directly and through multiple ventures with a leading global private investment firm and an alternative asset manager (hereinafter, the “Solar Ventures”) to enable developers,  design and build contractors and system owners to develop, build and operate renewable energy systems throughout North AmericaThe Solar Ventures include: Renewable Energy Lending, LLC (“REL”); Solar Construction Lending, LLC (“SCL”); Solar Permanent Lending, LLC (“SPL”); and Solar Development Lending, LLC (“SDL”).  Our External Manager provides loan origination, servicing, asset management and other management services to the Solar Ventures.    

In November 2016, the Company made an initial $75.0 million non-cash capital contribution into REL that was comprised of solar energy loan investments, including our membership interests in SCL and SPL, in exchange for a membership interest in REL.  As a result of this exchange, our interest in REL provides us with an indirect interest in SCL and SPL.  As stipulated in the governing documents of REL, our partner will make 100% of the incremental capital contributions to REL until it has funded 85% of the equity invested and will receive 100% of the capital distributions from REL until it has received a return of all of its contributed capital, thereby causing our ownership interest in REL to fluctuate.  At March 31, 2018, our investment in REL had a carrying value of $76.6 million, which represented a 57% ownership interest.    

Upon the formation of SDL, the Company and its capital partner each agreed to contribute 50% of the initial and incremental capital contributions to the partnership.  However, during the third quarter of 2017, the partners agreed that the Company would fund 10% and our capital partner would fund the remaining 90% for a particular portfolio of loans, thereby causing our ownership interest in SDL to decrease in percentage terms.  At March  31, 2018, the Company’s investment in SDL had a carrying value of $9.6 million, representing a 10% ownership interest.     

At March 31, 2018, the UPB of loans that were funded through the Solar Ventures was $205.5 million.  Loans outstanding at March 31, 2018, had a weighted-average remaining maturity and coupon of 10 months and 8.9%, respectively.

Other Assets and Liabilities Portfolio

In our Other Assets and Liabilities portfolio, we manage the Company’s cash, loan receivables, real estate-related investments, subordinated debt and other assets and liabilities of the Company.  An overview of the primary assets and liabilities within this portfolio follows.

Cash

As of March 31, 2018, we had $33.4 million of unrestricted cash and $15.9 million of restricted cash.

Hunt Note

As consideration for the Disposition, Hunt agreed to pay the Company $57 million and to assume certain liabilities of the Company.  The Company provided seller financing to Hunt through a $57 million note receivable from Hunt that has a term of seven years, is prepayable at any time and bears interest at the rate of 5% per annum.  The unpaid principal balance on the note will amortize in 20 equal quarterly payments of $2.85 million beginning on March 31, 2020.  

Real Estate-Related Investments

When the Company conveyed its international asset and investment management business to Hunt, it retained an 11.85% ownership interest in the South Africa Workforce Housing Fund (“SAWHF”), along with related financing for that investment and a foreign currency hedge agreement for risk management purposes.  SAWHF is a multi-investor fund managed by IHS that began operations in April 2008, and is currently in the process of exiting its investments by its amended maturity date of April 2019.  The carrying value of the Company’s investment in SAWHF was $13.6 million at March 31, 2018.

At March 31, 2018, we owned one direct investment in real estate consisting of a land parcel.  This investment had a carrying value of $3.5 million as of March 31, 2018. 

6

 


 

 

At March 31, 2018, we were an equity partner in five real estate-related investments consisting of (i) a 68.4% ownership interest in a mixed-use town center development whose incremental tax revenues secure our infrastructure bond investments and (ii) four limited partner (“LP”) interests in partnerships that owned affordable housing and in which the ownership percentage associated with these investments ranged from 74.25% to 98.99%.  The carrying value of these five investments was $22.7 million at March 31, 2018. 

Deferred Tax Assets

Deferred taxes arise from differences between assets and liabilities measured for financial reporting versus income tax return purposes.  Deferred tax assets (“DTAs”) are recognized if we assess that it is more likely than not that tax benefits, including net operating losses (“NOLs”) and other tax attributes, will be realized.  As of December 31, 2017, the carrying value of our DTAs was $140 million, although these assets were fully reserved because management determined that, as of such reporting date, it was not more likely than not that the Company would realize its DTAs.  The Company’s DTAs remain fully reserved as of March 31, 2018.  

Debt Obligations

This portfolio includes the Company’s subordinated debt, notes payable and other debt.  The carrying value and weighted-average yield of these debt obligations at March 31, 2018 is provided below in Table 20.

Interest Rate Risk Hedge Positions

We use interest rate swaps and caps to hedge interest rate risk associated with debt obligations in this portfolio.  The net fair value of these financial instruments was $4.2 million at March 31, 2018.

Interests in MGM 

As consideration for the sale of our LIHTC business to MGM in 2014, the Company received an option to acquire the LIHTC business of MGM, which primarily manages LIHTC investments on behalf of third party investors and for its own account.   As noted above, this purchase option was converted on January 8, 2018, into a purchase and sale agreement that requires the Company to complete the purchase of MGM subject to certain conditions precedent.  On January 8, 2018, the Company also (i) executed agreements to acquire from an affiliate of MGM certain assets pertaining to a specific LIHTC property and (ii) purchased a $9.0 million senior loan from an MGM affiliate.  This senior loan, which is secured by assets of MGM, bears interest at 11% payable quarterly.  The unpaid principal balance of this loan, which was $9.0 million as of March 31, 2018, is payable in full in June 2020.  Hunt has the right to elect to take assignment of these agreements and settle directly with MGM, including purchase of the $9.0 million senior loan from the Company. 

Our External Manager

In conjunction with the Disposition, we entered into a management agreement with the External Manager (the “Management Agreement”) that took effect on January 8, 2018.  At the time of the Disposition, all employees of the Company were hired by the External Manager.  In consideration for the management services to be provided by the External Manager, the Company will pay the External Manager (i) a base management fee, which is payable quarterly in arrears and is calculated as a percentage of the Company’s GAAP common shareholders’ equity, with certain annual true-ups, and (ii) an incentive fee equal to 20% of the total annual return of diluted common shareholders’ equity per share in excess of 7%.  However, for the first and second quarters of 2018, the base management fee is fixed at $1 million per quarter.  The Company also agreed to reimburse the External Manager for certain allocable overhead costs.



7

 


 

 

SUMMARY OF FINANCIAL PERFORMANCE

___________________________________________________________________________________________________________

Net Worth

Common shareholders’ equity increased from $137.6 million at December 31, 2017 to $178.4 million at March 31, 2018.  This change was driven by $27.5 million in comprehensive income that was allocable to common shareholders and by $13.3 million of other increases in common shareholders’ equity. 

Diluted common shareholders’ equity (“Book Value”) per share increased $6.34 per share in the first quarter of 2018 to $30.82 at March 31, 2018. 

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

Comprehensive Income

We recognized comprehensive income that was allocable to common shareholders of $27.5 million in the first quarter of 2018, which consisted of $18.3 million of net income that was allocable to common shareholders and $9.2 million of other comprehensive income that was allocable to common shareholders.  In comparison, we recognized $3.1 million of comprehensive loss that was allocable to common shareholders during the first quarter of 2017, which consisted of $3.4 million of net loss that was allocable to common shareholders and $0.3 million of other comprehensive income that was allocable to common shareholders. 

Net income that we recognized in the first quarter of 2018 was primarily driven by the Disposition.  In this regard, $20.6 million of net income that we reported in the first quarter of 2018 was attributable to discontinued operations.  Refer to “Consolidated Results of Operations” for more information about changes in common shareholders’ equity that is attributable to net income allocable to common shareholders.

Other comprehensive income that we reported in the first quarter of 2018 was also primarily attributable to the Disposition.  Refer to “Consolidated Balance Sheet Analysis” for more information about other comprehensive income.

Other Considerations

As further discussed in “Introduction – Overview” in Item 2 of this Report, the Company sold certain business lines and assets to Hunt and converted to an externally managed business model by engaging Hunt to perform management services for the Company.  By executing this strategic transaction, the Company no longer recognizes:

·

asset management fees and expense reimbursement revenues from international operations, LIHTC and renewable energy funds that we previously managed;

·

investment income associated with conveyed equity co-investments in previously-managed funds;

·

guarantee revenues or expenses associated with our LIHTC business line;

·

various legal and other professional fees that are incurred in the normal course to manage the previously managed investment funds;

·

employee salaries and benefits (other than stock compensation expense associated with unexercised options that were not conveyed and that is reported as a component of “Salaries and benefits” expense in our Consolidated Statements of Operations); and

·

other income and expense associated with conveyed interests and employees.

The Disposition also resulted in the deconsolidation from the Company’s Consolidated Balance Sheets on January 8, 2018 of all guaranteed LIHTC funds and derecognition of nearly all other CFVs that were recognized in our Consolidated Balance Sheets at December 31, 2017.  As a result, the Company will no longer recognize in future reporting periods revenues, expenses, assets, liabilities and noncontrolling interests associated with such CFVs.

In place of the aforementioned revenues and expenses, and notwithstanding revenues and expenses associated with assets and liabilities of the Company that were excluded from the sale transaction, the Company recognizes interest income associated with its loan receivable from Hunt and will recognize various costs set forth in the Management Agreement, including base management fees, incentive management fees and reimbursements to the External Manager for certain allocable overhead costs.

Information that is provided in this Report’s “Consolidated Balance Sheet Analysis” and “Consolidated Results of Operations” should be reviewed in consideration of the aforementioned changes.    

8

 


 

 

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 presentation purposes, assets, liabilities and equity that were 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 guaranteesHowever, the Disposition resulted in the deconsolidation from the Company’s Consolidated Balance Sheets in the first quarter of 2018, of all guaranteed LIHTC funds and derecognition of nearly all other CFVs that were recognized in our Consolidated Balance Sheets at December 31, 2017.  See Notes to Consolidated Financial Statements – Note 14, “Discontinued Operations,” and Note 15,  “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)

2018

 

2017

 

Change 

Assets  

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

33,444 

 

$

35,693 

 

$

(2,249)

Restricted cash (without CFVs)

 

15,870 

 

 

21,271 

 

 

(5,401)

Investments in debt securities (without CFVs)

 

157,824 

 

 

143,604 

 

 

14,220 

Investments in partnerships (without CFVs)

 

122,432 

 

 

128,820 

 

 

(6,388)

Loans

 

66,299 

 

 

736 

 

 

65,563 

Other assets (without CFVs)

 

17,497 

 

 

12,730 

 

 

4,767 

Assets of discontinued operations

 

 ─

 

 

61,220 

 

 

(61,220)

Assets of CFVs (1)

 

 ─

 

 

127,812 

 

 

(127,812)

Total assets

$

413,366 

 

$

531,886 

 

$

(118,520)



 

 

 

 

 

 

 

 

Liabilities and Noncontrolling Interests

 

 

 

 

 

 

 

 

Debt (without CFVs)

$

205,099 

 

$

209,427 

 

$

(4,328)

Accounts payable and accrued expenses

 

4,137 

 

 

6,098 

 

 

(1,961)

Other liabilities (without CFVs) (1)

 

25,717 

 

 

21,482 

 

 

4,235 

Liabilities of discontinued operations

 

 ─

 

 

17,212 

 

 

(17,212)

Liabilities of CFVs

 

 ─

 

 

50,565 

 

 

(50,565)

Noncontrolling interests related to CFVs

 

 ─

 

 

89,529 

 

 

(89,529)

Total liabilities and noncontrolling interests

$

234,953 

 

$

394,313 

 

$

(159,360)



 

 

 

 

 

 

 

 

Common Shareholders' Equity

$

178,413 

 

$

137,573 

 

$

40,840 



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

Common shares outstanding

 

5,746 

 

 

5,618 

 

 

128 

Common shareholders' equity per common share

$

31.05 

 

$

24.49 

 

$

6.56 



 

 

 

 

 

 

 

 

Diluted common shareholders' equity (2)

$

188,947 

 

$

146,915 

 

$

42,032 

Diluted common shares outstanding

 

6,130 

 

 

6,002 

 

 

128 

Diluted common shareholders' equity per
   common share

$

30.82 

 

$

24.48 

 

$

6.34 



(1)

Deferred revenue balances associated with financial guarantees that were made by the Company to 11 guaranteed LIHTC funds have been eliminated for reporting purposes in conjunction with prepaid guarantee assets of CFVs because the Company has consolidated such guaranteed LIHTC funds for reporting purposes.  The unamortized balances of such deferred revenue and prepaid assets, which are equal and offsetting, were $7.5 million at December 31, 2017.  The 11 guaranteed LIHTC funds and related deferred revenue were deconsolidated as of March 31, 2018.

9

 


 

 

(2)

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, 2018 and December 31, 2017, respectively.  In this case, liabilities recognized by the 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 $10.5 million and $9.3 million at March 31, 2018 and December 31, 2017, 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)

 

2018

 

2017

 

Change

Net income (loss) allocable to common shareholders

 

$

18,340 

 

$

(3,444)

 

$

21,784 

Other comprehensive income allocable to
   common shareholders

 

 

9,160 

 

 

352 

 

 

8,808 

Other changes in common shareholders' equity

 

 

13,340 

 

 

(1,933)

 

 

15,273 

Net change in common shareholders' equity

 

$

40,840 

 

$

(5,025)

 

$

45,865 



 

 

 

 

 

 

 

 

 

Other Comprehensive Income Allocable to Common Shareholders

Table 4 summarizes other comprehensive income that was allocable to common shareholders for the periods presented.

Table 4:  Other Comprehensive Income Allocable to Common Shareholders





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the three months ended

 

 

 



 

March 31,

 

 

(in thousands)

 

2018

 

2017

 

Change

Bond related activity:

 

 

 

 

 

 

 

 

 

Bond fair value adjustments

 

$

(3,347)

 

$

(311)

 

$

(3,036)

Increase in accumulated other comprehensive 
income due to equity in losses from LTPPs

 

 

 ─

 

 

1,118 

 

 

(1,118)

Reclassification of unrealized gains to operations
   due to impairment

 

 

(135)

 

 

 ─

 

 

(135)

Recognition of unrealized holding gains due to
deconsolidation of consolidated LTPPs

 

 

9,415 

 

 

 ─

 

 

9,415 

Other comprehensive income related to bond activity

 

 

5,933 

 

 

807 

 

 

5,126 

Income tax expense

 

 

(256)

 

 

(243)

 

 

(13)

Cumulative translation adjustment

 

 

3,483 

 

 

(212)

 

 

3,695 

Other comprehensive income allocable to common shareholders

 

$

9,160 

 

$

352 

 

$

8,808 



Other comprehensive income that was allocable to common shareholders for the three months ended March 31, 2018, increased compared to other comprehensive income for the three months ended March 31, 2017, primarily as a result of (i) the recognition of unrealized holding gains associated with bond investments that were no longer eliminated for reporting purposes in the first quarter of 2018 due to the derecognition of corresponding lower tier property partnerships and (ii) the reversal of a $3.4 million cumulative translation adjustment due to the sale of our international asset and investment management business in the first quarter of 2018.  These increases were partially offset by $3.3 million of unrealized holding losses associated with bond investments that we recognized in the first quarter of 2018.             



10

 


 

 

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)

 

2018

 

2017

 

Change

Common share repurchases

 

$

 ─

 

$

(1,770)

 

$

1,770 

Common shares issued

 

 

4,125 

 

 

 ─

 

 

4,125 

Net change due to change in accounting principles

 

 

9,206 

 

 

 ─

 

 

9,206 

Foreign exchange gains

 

 

 ─

 

 

 ─

 

 

 ─

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

 

 

(73)

 

 

(207)

 

 

134 

Director and employee share awards

 

 

82 

 

 

44 

 

 

38 

Net change due to consolidation

 

 

 ─

 

 

 ─

 

 

 ─

Other changes in common shareholders' equity

 

$

13,340 

 

$

(1,933)

 

$

15,273 



The amount of other changes in common shareholders’ equity for the three months ended March 31, 2018 increased compared to that reported for the three months ended March 31, 2017, primarily as a result of (i) a $9.2 million transition adjustment to retained earnings that we recognized in connection with the adoption of new accounting standards on January 1, 2018 (see “Adoption of New Accounting Standards” within Notes to Consolidated Financial Statements – Note 1, “Summary of Significant Accounting Policies”) and (ii) the issuance of 125,000 common shares to Hunt in the first quarter of 2018. 

11

 


 

 

CONSOLIDATED RESULTS OF OPERATIONS

___________________________________________________________________________________________________________

This section provides a comparative discussion of our Consolidated Results of Operations for the three months ended March 31, 2018 and March 31, 2017 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.

For presentation purposes, income (losses) that were attributable to noncontrolling interest holders of CFVs are excluded from our comparative discussion of our results of operations because (i) the Company has a minimal ownership interest in these consolidated entities and (ii) such income (losses) do not affect the measurement of diluted common shareholders’ equity per common share, which is a key metric that is used by management to evaluate the Company’s financial performance.

In this regard, the discussion and analysis of consolidated results of operations herein is focused on income (losses) that are allocable to common shareholders.  Additionally, income (loss) that was attributable to businesses or assets that were conveyed by the Company in the Disposition were reclassified for all reporting periods and are presented as discontinued operations.  See Notes to Consolidated Financial Statements – Note 15, “Consolidated Funds and Ventures,” for more information about income (losses) that were attributable to noncontrolling interest holders of CFVs

Net Income Allocable to Common Shareholders

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

Table 6Net Income Allocable to Common Shareholders



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the three months ended

 

 

 



 

March 31,

 

 

(in thousands)

 

2018

 

2017

 

Change

Net interest income

 

$

2,895 

 

$

2,417 

 

$

478 

Fee and other income

 

 

220 

 

 

297 

 

 

(77)

Operating and other expenses:

 

 

 

 

 

 

 

 

 

    Other interest expense

 

 

(1,036)

 

 

(1,188)

 

 

152 

    Operating expenses

 

 

(8,243)

 

 

(5,850)

 

 

(2,393)

Net gains (losses) on real estate sales and operations, derivatives
and loans

 

 

2,309 

 

 

(3,296)

 

 

5,605 

Equity in income from unconsolidated funds and ventures

 

 

827 

 

 

2,095 

 

 

(1,268)

Net loss allocated to common shareholders related to CFVs

 

 

 ─

 

 

(1,108)

 

 

1,108 

Net loss to common shareholders from continuing
   operations before income taxes

 

 

(3,028)

 

 

(6,633)

 

 

3,605 

Income tax benefit

 

 

790 

 

 

1,413 

 

 

(623)

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

 

 

20,578 

 

 

1,193 

 

 

19,385 

Net losses allocable to noncontrolling interests in CFVs
related to discontinued operations

 

 

 ─

 

 

583 

 

 

(583)

Net income (loss) allocable to common shareholders

 

$

18,340 

 

$

(3,444)

 

$

21,784 

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.

12

 


 

 

Table 7:  Net Interest Income





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the three months ended

 

 

 



 

March 31,

 

 

(in thousands)

 

2018

 

2017

 

Change

Interest income:

 

 

 

 

 

 

 

 

 

Interest on bonds

 

$

2,538 

 

$

2,497 

 

$

41 

Interest on loans and short-term investments

 

 

968 

 

 

331 

 

 

637 

Total interest income

 

 

3,506 

 

 

2,828 

 

 

678 

Asset related interest expense:

 

 

 

 

 

 

 

 

 

Bond related debt

 

 

(611)

 

 

(411)

 

 

(200)

Notes payable and other debt, non-bond related

 

 

 ─

 

 

 ─

 

 

 ─

Total interest expense

 

 

(611)

 

 

(411)

 

 

(200)

Net interest income

 

$

2,895 

 

$

2,417 

 

$

478 



Net interest income for the three months ended March 31, 2018 increased compared to that reported for the three months ended March 31, 2017 primarily due to (i) interest income on a $57 million note receivable that we recognized in the first quarter of 2018 in connection with the Disposition and (ii) the recognition of interest income on a $9.0 million senior loan in the first quarter of 2018 that we acquired from an MGM affiliate.  These increases were partially offset by the reclassification of bond related debt that was reflected in Other interest expense in the first quarter of 2017.

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)

 

2018

 

2017

 

Change

Asset management fees and reimbursements

 

$

176 

 

$

191 

 

$

(15)

Other income

 

 

44 

 

 

106 

 

 

(62)

Fee and other income

 

$

220 

 

$

297 

 

$

(77)



Fee and other income for the three months ended March 31, 2018 declined compared to that reported for the three months ended March 31, 2017 primarily due to the recognition in the first quarter of 2017 of non-recurring fees that we earned in connection with extending the maturity date of certain loan receivables.   

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)

 

2018

 

2017

 

Change

Subordinated debt

 

$

(719)

 

$

(1,115)

 

$

396 

Notes payable and other debt

 

 

(317)

 

 

(73)

 

 

(244)

Other interest expense

 

$

(1,036)

 

$

(1,188)

 

$

152 



13

 


 

 

Other interest expense for the three months ended March 31, 2018 declined compared to that reported for the three months ended March 31, 2017 primarily as a result of our discounted purchase of $26.4 million of the Company’s subordinated debt in 2017.  This decline was partially offset by increases in cost of funding that were driven by (i) the issuance of debt in the third quarter of 2017 that was used to finance our purchase of an 11.85% ownership interest in SAWHF and (ii) an increase in variable interest rates associated with our subordinated debt.

Operating Expenses

Operating expenses include salaries and benefits, management fees and reimbursable expenses payable to our External Manager, 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)

 

2018

 

2017

 

Change

Salaries and benefits

 

$

(1,304)

 

 

(3,804)

 

$

2,500 

External management fees and reimbursable expenses

 

 

(2,519)

 

 

 ─

 

 

(2,519)

General and administrative

 

 

(348)

 

 

(362)

 

 

14 

Professional fees

 

 

(3,214)

 

 

(1,460)

 

 

(1,754)

Other expenses

 

 

(858)

 

 

(224)

 

 

(634)

Operating expenses

 

$

(8,243)

 

$

(5,850)

 

$

(2,393)



Operating expenses for the three months ended March 31, 2018 increased compared to those reported for the three months ended March 31, 2017 primarily due to (i) the recognition in the first quarter of 2018 of management fees and reimbursable expenses that were payable to our External Manager, (ii) an increase in professional fees that was largely driven by the Disposition and (iii) the recognition of a $0.4 million impairment loss on certain equity investmentsNet increases in operating expenses associated with these items were partially offset by a reduction in salaries and benefits due to our conversion to an externally managed business model as all Company employees were transferred to the External Manager at the time of the Disposition.

Net Gains (Losses) Relating to Derivatives and Loans

Net gains (losses) relating to derivatives and loans (collectively, “Net Gains)  includes losses on loans and unrealized holding gains or losses associated with our derivative instruments that result from fair value adjustments.

Table 11 summarizes Net gains (losses) for the periods presented.

Table 11:  Net Gains  



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the three months ended

 

 

 



 

March 31,

 

 

(in thousands)

 

2018

 

2017

 

Change

Net gains on derivatives

 

$

2,309 

 

$

2,039 

 

$

270 

Net losses on loans

 

 

 ─

 

 

(5,335)

 

 

5,335 

Total net gains (losses)

 

$

2,309 

 

$

(3,296)

 

$

5,605 



Net Gains for the three months ended March 31, 2018 increased compared to those reported for the three months ended March 31, 2017 primarily due to $5.3 million of non-recurring fair value losses that we recognized in the first quarter of 2017 associated with a subordinated loan that the Company made to a residential solar power provider that filed for bankruptcy protection in March 2017.  This net increase was also partially attributable to an increase in net gains on derivatives, which was primarily driven by a net increase in the fair value of derivative instruments that we use to hedge interest rate risk. 

Equity in Income from Unconsolidated Funds and Ventures

Equity in income from unconsolidated funds and ventures includes our portion of the income associated with certain funds and ventures in which we have an equity interest.

Table 12 summarizes equity in income from unconsolidated funds and ventures for the periods presented.

14

 


 

 

Table 12:  Equity in Income from Unconsolidated Funds and Ventures





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the three months ended

 

 

 



 

March 31,

 

 

(in thousands)

 

2018

 

2017

 

Change

U.S. real estate partnerships

 

$

119 

 

$

180 

 

$

(61)

Solar Ventures

 

 

416 

 

 

1,915 

 

 

(1,499)

IHS-managed funds

 

 

292 

 

 

 ─

 

 

292 

Equity in income from unconsolidated funds and ventures

 

$

827 

 

$

2,095 

 

$

(1,268)



Equity in income from unconsolidated funds and ventures for the three months ended March 31, 2018 declined compared to that reported for the three months ended March 31, 2017 primarily due to a decline in the amount of loan origination and related fees that were earned by the Solar Ventures.

Net Income to Common Shareholders from Discontinued Operations 

Net income from discontinued operations primarily includes income and expenses associated with businesses and assets that were sold by the Company in connection with the Disposition. 

Table 13 summarizes our income from discontinued operations, net of tax related to the sale of certain businesses and assets.

Table 13:  Net Income to Common Shareholders from Discontinued Operations