Greystone Housing Impact Investors LP(GHI) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q2 2022, the company reported net income of $0.75 per unit and cash available for distribution (CAD) of $0.76 per unit, marking a solid performance [7] - Year-to-date net income reached $1.79 per unit, surpassing the entire 2021 fiscal year net income of $1.56 per unit [7] - Year-to-date CAD of $1.74 per unit is approaching the reported $1.92 per unit for the entire 2021 fiscal year [7] - Book value per unit as of June 30, 2022, was $14.65, a decline of approximately $0.70 from $15.35 as of March 31, 2022, attributed to a decrease in the fair value of the mortgage revenue bond portfolio due to rising market interest rates [17] Business Line Data and Key Metrics Changes - The investment portfolio includes $1.08 billion in affordable multifamily investments, $108 million in joint venture equity investments, $59 million in direct real estate investments, and $14 million in seniors and skilled nursing mortgage revenue bonds [10] - No forbearance requests were reported for multifamily mortgage revenue bonds, with physical occupancy averaging 95% as of June 30, 2022 [11] - The company advanced funds totaling $22.3 million under mortgage revenue bond commitments during Q2 2022, with remaining commitments of approximately $121 million [24] Market Data and Key Metrics Changes - The year-to-date return on the Bloomberg Municipal Index was negative 9% as of June 30, 2022, correlating with an 8.4% decline in the book value of the mortgage revenue bonds [47] - Year-to-date muni mutual fund outflows totaled a cumulative negative $76 billion as of June 30, 2022 [48] - The 10-year MMD is currently at 2.14%, and the 30-year MMD is at 2.83%, both lower than the previous quarter [49] Company Strategy and Development Direction - The company aims to expand beyond its traditional investment footprint in Texas by seeking experienced joint venture partners and exploring other asset classes [53] - The management is focused on delivering cost-effective capital solutions to affordable housing developers, especially in light of rising construction costs [51] - The company is evaluating opportunities to enhance its joint venture equity investment segment while adhering to the limitation that 75% of its assets must be invested in mortgage investments [72] Management's Comments on Operating Environment and Future Outlook - The management noted challenges due to rising interest rates and construction costs, which have made affordable housing deals tighter in terms of margins [66] - The company expects that the lead time for project sponsors to close deals has lengthened due to the current macroeconomic environment [68] - Management remains optimistic about the demand for affordable housing units and the tools available to developers to bring new projects into the pipeline [65] Other Important Information - The company reported unrestricted cash and cash equivalents of $104.6 million and $50.5 million available on secured lines of credit as of June 30, 2022 [19] - The company plans to adopt the CECL standard effective January 1, 2023, which may result in higher credit loss reserves [27] Q&A Session Summary Question: Interest cost outlook and hedging details - Management discussed two interest rate swaps in place, with the company now receiving payments from counterparties due to rising short-term rates [60] Question: Leasing activity and rent increase visibility - Management expressed satisfaction with leasing activity and expects rent increases for 2022 to be consistent with the previous year's double-digit increases in key markets [62] Question: Impact of rate volatility on the pipeline - Management noted that rising rates and construction costs have slowed the pipeline, requiring project sponsors to work harder to make transactions financially feasible [68] Question: Distribution policy and commitment to shareholders - Management acknowledged the importance of distributions to shareholders and stated that the Board is mindful of tax implications while making distribution decisions [86]