Greystone Housing Impact Investors LP(GHI) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q2 2024, the company reported net income of $5.2 million, or $0.19 per unit, and cash available for distribution (CAD) of $6.3 million, or $0.27 per unit [10] - The book value per unit decreased to $13.98, down $0.61 from the previous quarter, primarily due to a decline in the fair value of the mortgage revenue bond portfolio [10][11] - The company recognized a non-cash unrealized gain of $211,000 from interest rate swaps, with a compounded SOFR of 5.35% and a weighted average fixed rate of 3.49% on approximately $366 million in swap notional amounts [6][10] Business Line Data and Key Metrics Changes - The investment portfolio consists of $1.3 billion in affordable multifamily investments and $158 million in joint venture equity investments, with no forbearance requests for multifamily mortgage revenue bonds [7] - Physical occupancy for the stabilized mortgage revenue bond portfolio was 91.9% as of June 30, 2024 [8] - The company advanced $83.5 million for mortgage revenue bond investments and $19.5 million for governmental issuer loans during the quarter [15] Market Data and Key Metrics Changes - The muni investment grade index was down for the first half of 2024, while the high-yield muni index increased by 4.2% [21] - As of August 6, the closing unit price was $14.33, a 2.5% premium over the net book value per unit [12] - The 10-year MMD was at 2.54%, approximately 15 basis points lower than the previous quarter [22] Company Strategy and Development Direction - The company aims to capitalize on attractive investment opportunities while managing interest rate risks through a hedging strategy [46][51] - The focus remains on long-term holding of fixed-rate mortgage revenue bonds, with expectations that changes in fair value will not impact operating cash flows [11] - The company is pursuing additional issuances of preferred units and has reactivated its at-the-market offering to raise capital without price dilution [19] Management's Comments on Operating Environment and Future Outlook - Management noted that higher U.S. treasury yields and cost inflation have created challenges for affordable housing developers, who increasingly rely on governmental subsidies [22] - The company believes that initiating new projects now will position it favorably for future exits when supply may be limited [23] - Management expressed confidence in the investment pipeline and the ability to raise capital to fund attractive opportunities [51] Other Important Information - The company reported unrestricted cash and cash equivalents of $34 million and approximately $56 million available on secured lines of credit as of June 30 [13] - The outstanding future funding commitments for mortgage revenue bonds and related investments totaled $214 million, expected to be funded over approximately 24 months [16] Q&A Session Summary Question: Deployment rate and market attractiveness - Management indicated that the deployment rate was higher due to capital drawn from existing construction financing commitments and solid investment opportunities [26][27] Question: Cash level on the balance sheet - The company maintains lines of credit and cash reserves to be responsive to opportunities and cover potential cash needs [28][29] Question: Market issuance expectations - Management suggested that if the trend in rates continues, more muni issuers may enter the market, potentially increasing total issuance for the year [30] Question: Sale of mortgage revenue bonds - The sale was a unique situation due to the underlying project being sold, leading to a decision to sell the bonds rather than hold to maturity [33][34] Question: Extensions on governmental issuer loans - Extensions are common as project sponsors seek to optimize their loan amounts based on favorable rates locked in previously [36] Question: Post-June 30 book value estimates - Management noted that while they do not have exact numbers, there has been a reversal in rates that could lead to appreciation in the value of mortgage revenue bonds [38][39] Question: Preferred redemption funding - The redemption was funded through the general line of credit, with plans to assess future funding strategies based on liquidity [42][43] Question: Capital raising strategy - Management is open to raising capital to pursue attractive investment opportunities but will not raise capital solely for the sake of it [51]