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ATAX America First Multifamily Investors

Participants
Chad Daffer Chief Executive Officer
Craig Allen Chief Financial Officer
David Walrod JonesTrading Institutional Services
Call transcript
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Operator

I would like to welcome everyone to America First Multifamily Investors, L.P.'s NASDAQ ticker symbol ATAX Second Quarter of 2018 Earnings Conference Call.

During the presentation, all participants will be in a listen-only mode. After the speakers' remarks, you will be invited to participate in a question-and-answer session.

As a reminder, this conference call is being recorded. At this time, I would like to turn the conference call over to Craig Allen, Chief Financial Officer of the Company.

Craig Allen

to quarter welcome conference XXXX and call. you ATAX's of second earnings Thank

of call, Litigation regarding these the subject of we not the to pursuant the comments During conference to or events make Reform forward-looking uncertainties could are Private XXXX. results the statements statements actual made future and materially historical forward-looking provisions ATAX, Such and Safe risks are from Act Harbor to differ that Securities cause statements. facts are which are

Forward-looking terms. can the of statements identified be use plan words by expect, should, and like, may, other similar

You statements competitive, forward-looking expressed by the today’s regulatory of made that differ our are business, factors or date. implied today. other to cautioned those cause could these speak only statements from or and economic, projections actual forward-looking Changes in results as materially

with detailed more and time-to-time and documents that may information our other Commission. reports risks ATAX factors Securities about review from other periodic impact For the the filed and please Exchange business, these by

and ATAX call participation Executive Chief the advantage your the you Chad turn interest of would is encourage Our if ATAX. during internal like you SEC to we to inform be and these we will necessarily full to base We will your call. operating in under to that discussion not Daffer, and the change, Thank you which expectations we may Officer. make our take Regulation and FD do. include non-GAAP for you question-and-answer but Today’s explaining now will measures over beliefs want aware this they session. projections ATAX's upon I

Chad Daffer

the XXXX with the financial taking This I and results, to then few my you afternoon are would Craig present Craig. like we and partnership from quarter you, Good to call. share forward welcome afternoon, quarter, then thoughts questions. the looking a your of will to second earnings Thank ATAX second

giving tax confidence the jobs million unemployment the nearly while new to quarter forecast remains first labor in by Let's the to the time markets X reform driving growth of end get started. over benefits for years. second continue XX consumer, X% year with strong Economic creation the in the below to XXXX

persistent these years, Reserve raised the borrowing the for to cost the Bank in rates interest June on time Federal inflation XX, seventh threats overheating. increasing the from prevent consumers Given of three of economy to

best partnerships close the and and the grade million. highest $XX.X a agreement estimated apartments, in outstanding Estate one to the our rated of evaluating forward additional multifamily transaction from five bond ATAX’s this units As while XX to housing variable Vantage AA to an the owned participants XXXX partnership partnership near XXXX. sharing market QX hikes for the value of Vantage to that the the estimated in In $XXX SIFMA, you end providing past this Allen rates, year receipts rate investment of in housing $XX.X ranging properties an for to of and/or currently in of QX BBB, XXX Development this partnership permanent or to potential the estimated development by an the Daytona look opportunities, XXth is of next Tennessee. the housing the the more a the being of million the multifamily for May, Housing I currently of investing details In residual two the of $XX.XX into the Beach, Vantage for back end of of In Craig I'd June XX,XXX Certificate value the like unit years. & committed of XXXX. results. investment year the XXX% tract use segment, development with to over basis to X.X% million property two for stabilized Standard provided turn of funds of This In capital later market rose development fair Antonio, certificates, XXX was working located quarter, public with three Fed the QX held June, hikes financing land construction as close with – Management earnings QX, the at financing revenue additional as with the partnership in value In MRB of $XX.X million. minus to business, assets. and Public date of around QX, equity XXX At our year. Texas. short-term index multifamily during call the located financial sale raising presentation segment Expectations In Florida. partnership sale of partnership the with Bonds team Jade assets bonds located San Germantown, second extension units our bond of mortgage XXXX. negotiated units the time, rate our Poor's end each our the book containing development in maturity zero the rate multifamily from the housing future are of entered of increase Revenue own end on trust partnership points of the trusts tender-option segment, of or until housing Mortgage Park on permanent in for an by three Real fair to of May provide Fund of assessing of quarter, in At year in XXX million. invested held the rates second additional and tender-option purchase for segment,

Craig Allen

We reported of $X.XX sixth billion. a $X I'd assets you about the of excess where of take had through Chad. Thanks to we million financial flat assets is XX, million XXXX in XXXX, fairly year-to-date At million XXXX revenue million. $XX.X to quarter XXXX that's were XXXX in securities or year-to-date we're compared $XX.X the some QX of of increase What basis consecutive a and and highlights decrease and quarter in quarter of basis in the Total like of about of results at billion second the $XX.X our increase those June do we’re of value of the with XXXX. an $XX.X was market the market our on in for on value securities. QX

total about of Our talk total the holdings XXXX, states compared million. in end XX Each revenue at assets approximately bonds mortgage about comprised revenue of portfolio of ATAX. quarter, June our revenue bond at $XXX XX% XXXX span June to of XX our bonds we and assets mortgage mortgage

XX.X% XXXX that XX.X%. number December XXXX XX, that was was and on Just as about a comparison on December XX, number

the at Chad million a one and about During the mortgage basis. mentioned, quarter, acquired as on year-to-date we revenue same bonds $XX.X

were have about revenue million million. for bonds there XXXX bonds redeemed and During $XX.X year-to-date basis a seven mortgage that redeemed QX about for been were on that there four $XX have

our rata redeem are or basis. As our those those on these bonds on bonds on a leverage debt bonds pro also reduced

properties, XX, transactions a of of located basis in have one of three significant in California, State Florida. on or the one were report MF XXXX, As in year-to-date no properties. one June There in to State Nebraska, either we located quarter-to-date and MF the

our compared on was of a last That we the about substantially. XXXX. XXXX XXXX portfolio. had we fixed debt the XXXX, side, XXXX, in the financing of sheet the our variable effort three variable tuning of amount fixed In through of years on that of at financing fact On concerted percentage debt increased have fine been balance XX.X% debt was XX, to have Back that that our of our the and XX.X% XX, December in about was at to increase have debt that rate XX, made debt where XX.X% our mindful we June June XXXX. number the XX.X% June that

the a Another rates talked to conscious that in decrease and the and do our when over we the XX-month thing rate measure just rate assumes occur. be or the probably table, show rather assumes XX In our and XX-Ks, of of XX-Qs, decreases these aware of past XXX you increase interest you about points in we portfolio. rates. way period effort to it rate basis in points nothing those an an increase sensitivity frequently a And increases decrease a up in to time it of extensively interest we in of rates we've sensitivity on our or all that calls again, immediate is it

during income A we little $X.X June less or to were to $X.XXX XXXX $XX now $X.XXXX. our able so extend to than of CAD about sensitivity As is were about that you million of basis credit. June rise down that large or would couple income would interest CAD, extended take to we first a by million Bankers XXX XX, if Trust transactions have of XX, $X.XXX on about almost to net we've been $X.X $X.XXX were interest to acquisition on that of points, impact able of that XXXX line QX September XXXX. I decrease million down be XXXX That's go CAD. If to was back net our about line to XX, effect credit the income close on the from been we rates able or our

to been that, credit we've of addition June line also to the with Trust. extend operating In million XXXX, XX, to $XX able Bankers

unit. unit And $X.XX compared was to and a on year-to-date unit diluted we to basic reported basis net per per QX $X.XX XXXX have income, Our unit. $X.XX quarter $X.XX opposed as for per XXXX, of per the

year-to-date for same $X.XX of a on QX CAD. the basis Our CAD, reported we and $X.XX of in CAD XXXX quarters were

is on unchanged of is unit. since last MXX And Our first quarter from TEBS TEBS, which able at $X.XX book previous were close the to unit per Wednesday, XXXX. value finally, July we our per

June brief debt August year. outstanding $XX.X little closed which XXXX of has previous of In and debt $XX.X balance history, XXXX, about Just of in of to which XXXX, million of debt MXX, current MXX balance as a million, MXX $XX.X about closed one the three with current closed XX of – balance this a of July a about at at was current TEBS, in was July we've we million. this

through and previously, last Wednesday, million I August about TEBS Securitization $XXX.X is had in We the program said mortgage levered those bonds and TEBS, we Term MXX, XX TEBS X, lives Mac. revenue eight Freddie less. of closed is A/B years As Tax-Exempt on the mortgage TEBS Bond a which XX Trusts revenue were MXX bonds about previously securitized or through of the

was credit line is hedging debt less. bond mortgage in the all rate nature the its One bonds and of leveraged revenue XX Trusts rate A/B to that line and fixed rate mortgage revenue maturity are in credit The in nature. of our acquisition acquisition or necessary was extend the fixed of of rate the Again, these each on maturity in were in one-year XX variable was to and allowed as it's years the fixed us TEBS financing nature. no was rate. MXX TEBS debt The interest

So are With again to what pleased sensitivity I'd the the the results been and basis couple we've Chad protecting closing turn interest very years. next able XX it very, and back to an us a for for on MXX by over accomplish comments. TEBS rate we like through that, to

Chad Daffer

transaction to Yes, that off their goal additional – of bring participants plus just to into benefiting all a try few ago, of product. the months were about Freddie product into looking to comments bond transaction. for put table really million on the TEBS them Mac, probably nine of we $XXX MXX. three evolution The the to started

of from much or have type those restructuring we Trusts the fixed the had and was to maturity and our seven, remarket and future those the to benefit flattening will the of through private that XXXX a we the close, certificates in months, the and to maturity do A this the working and ability evaluated the allowed five, yield so on it variable benefit minus, on us a in us out of good dates last A/B to event at A Term curve or biggest – point time them investors. because it they the yield structure broader this non-rated little then the they our took to the three, marketplace. transaction we plus certificates three, of flattening choose those us curve nine Street, some to enhancing cost. in extend Because to a no underwrite of give in And partners with placement Our allowing that

perspective here risk-off pleased is are for a like I'd our the and from this for time, this sure and outcome some investors Craig with it press questions, So great of up performance. of you release. a the have we transaction second and quarter of a to closing ago, I'm I, At open the for seen – financial on of our week very MXX

Operator

first question Instructions] you. [Operator from JonesTrading. And David Walrod Thank our comes of

open. line Your is

David Walrod

guys. Good afternoon,

Chad Daffer

Good afternoon.

David Walrod

of then I the impairment just kind to Can few securities wanted the broadly. and things get discuss specific a talk quarter? you during more

Craig Allen

Sure.

During the well, every that based this quarter impairment mentioned, in we quarter, our that fourth are very The the the saw as we three are that sound, in the trusts the point, The from an And fourth an upon marketplace. unique perspective, then valuation These as valuation PHCs true little warranted. valuation upon that we market the more of those. quarter, specialists another trusts proceeds. take quarter recognize is impairment at David, from we let But, come conservative and during in credit what it maybe. we the securities own too. recognized relatively always we and was bit - Chad what dictate we'll on was required the believed proceeds also these based investments we from evaluated, And outside PHCs we market had the are, just value our a HUD again, decrease those credit we we from value very accounting value the carrying determine that time and to seeing that to are the how a approach slight that solid. were is this well,

Chad Daffer

there One for additional David. comment you

back. us are you no structure friends it's with may remember, few Street years comps one was this unique to of brought by the was that profile. a in the marketplace, There a trade the immediate our and As credit unique a in created

and think friends our I the with I out supportive that treatment, reason, and prove at that conservative, our in it's able at the think this audit point And while For be to and the shared week I hope impairment good I'm extremely here PwC committee. accounting some of last I to and future.

David Walrod

picked quarter. the anything we run – interest expense where Okay. up going about is this specific That's $X kind to million that interest run expect helpful. The or Is rate there should forward? of

Craig Allen

That's increase an the SIFMA just seen mentioned and the too. really that due as increase. I small that this don't believe and see well we experienced market rates uptick quarter that throughout general in No, in had during a we've quarter to Chad of you'll that that uptick

go. where we David, can is we SIFMA say with said, that guess Although I never – never know to going

do our So and that we product books. remember, to expense. variable hedge predominantly is do rate some that hedged interest that have But increase interest – still MXX, we've on some that's have caps MXX in extent MXX and we rate

David Walrod

Okay.

Chad Daffer

Additional could cover some. there if I David, there is quickly, David real –

outstanding sheet, look majority the our about at is you If on at balance you'll of mode, X.X%. see rate XX% debt capped that’s the variable

on was rolling the in As and as buy you caps to interest remember, we've spent opportunities down aggressive been insurance thought market we it those presented environment. the well rate money rising

approaching week And our caps. SIFMA we're at this as X.XX%, reset so

and win estimates that in. may some kick make how caps can you So – those

may that execute on You some rate may fixed future. see that plan of in mode trying rate in not can or We'll to the the we do variable the also mode.

David. going that rate to to opportunity of is caps at hopefully kind in if see their forward there, some to fixed of and move strike level mode, will So the the continue off a we X.X% then from execute going upside have that we to

David Walrod

Park, Jade close The going Okay. is you this said to quarter? it

Chad Daffer

common. I knew No, was that

amount for assets like I detail, levels some. Therefore, recently, talking owning been class we've the think side XXXX to a mid made we assets levels to on his May to due the capital we in date assumption agreement. diligence to sorry. in second to We decided and that. in buyer. June PSA him paid their for moved the debt risk high a seller aggressive commitments diligence. the it's But the they through and due a folks into debt buy the sale levels. of we’ve They complete deposit traded in and now That If the getting – are into to for a buyer We is entered hard spring and number see re-trade I being class where think new Here the at opinion. sometime price. we could assumptions. We or closing one and doesn't with what buyers elevated to I very same that to in – substantial trading quarter bore two, buyer are are they got multifamily starting People my net till of a the make fully with in seeing remember have we of of you willing The Therefore, allow retained a been do entered two. for asset purchase this purchase about David, close entered that is years. we've PSA, completed not little the buyers we're have acquisition agreement into the purchase sale happen. get the not will are anticipate assets of third equity We're since June, that origination June, I'm not equity XXXX moved fourth and attempted number non-refundable. is agreement Buyer the their down. hard level a that money finally or stack, on by That number as event of the

their three. to retain deposit hard number will on and move buyer We

that a that knowing they're really can return best buy more equity its support. the we're partners making our and assumption or to I assumptions time are the that risk not the and the capital, debt side assuming to to disclosures and And evidence order investors, their deploy won't to manage of and erosion doing in in seller's that it's is. we think people of making we're market

money date. There's be amount David. hard a of we as share so probability from will to this with to the been they hopefully that transaction we've we've that deals come able got in is And a down to this substantial what close high will calls And non-refundable. told detail more on

David Walrod

of what give you this Did guidance to ever sort gain Okay. as expect us any in could we transaction?

Chad Daffer

have We not.

like transaction, side we guidance sure Until gains. the or our investors. given before and we've not. with we any close have make CAD We'd that share buy never performs We on the David, to

David Walrod

about how you just then the that And were MRB paid you're guess end acquired about you think should seeing Okay. can and that I through talk one the now broadly, few investment you and of opportunities kind off. year? the of

Chad Daffer

a David. it’s No, good question

ducktails what I about net think shared you assets the for we're of therefore aggressive getting into think class. or this asset cap the a are perception the current risk will state market very trading for our I with don't of inherent multifamily I rates. That’s at seller. the paid people of

rate We deploy see partners. discipline to continue asset underwrite opportunities Unfortunately, trading in stick environment to capital. our We the multiple that our are to opportunities others in our from the we're the underwriting. with interest not willing to development assumptions credit class rising at make highs, just and aggressive

basis multiple weekly to defend. on when one on continue underwriting will yield assumptions think and can deals we We based a hits targets we that our

capital. We will move additional forward and deploy

spread will and of not currently or We the our business. working being are on fourth close evaluating They hope close Vantage to may in quarter, have we closed. of being that entitlements all may and the together construction to bonds third And number subject currently coming development the approval. with to sites we future credit loans our completed and a numbers subject Number partners.

to share the the assumptions levels have five make And if right just And we're to of the is are see not marketplace not will assets your in up I period asset it's challenged. make willing at our on still your I to assumptions, we debt. close – when historical think years on same willing to aggressive the just capital. growth becomes to capital. people class credit think can when solid, that it's and pipeline trading future to happens, ability I – three, on on be the out is So deploy IO where little we're opportunities assumptions all two, their is deploy but will a anything, I to bit based back I others think now willing that

David Walrod

very much. all helpful. It’s Okay. Thanks so

Chad Daffer

Thank you.

Operator

And of Thank our you. from [Operator Baung] America question comes [John First next Instructions] Multifamily.

line now Your open. is

Unidentified Analyst

guess tiptoeing I kind guys. it Hi of around right now.

CAD sales rise right from would the cash as lessoning right we of is no XX forward going you if thought guess now you. are interest deficiency point point the think environment, to overall Thank an Just in to relative what rate and spread this deficiency calculate some per there the I at see XX right about there? distributions CAD we to of unit, Looking basis with going going maybe bad are basis assets now forward?

Chad Daffer

can Craig in and Let the here. me take you first question jump

leverage We've consistent I on our they at that our our type this investors deliver future think We've cash in what to forward. available own look on on the relates going historically given unlevered and that their a assumptions assets, of not CAD. can cash we've marketplace any spreads we guidance what asked distribution. and been make take our think returns answers for will achievable

you've become seen to our last we the as will continue quarters. of us equity, got different instead deploy mature I will earnings think number changed exits couple and to XXXXs the to revenue underlying you’d for manage the lumpy. that, best and sale, somewhat over highest But XXXX we've form proxy pursue at businesses to capital opportunities. Craig, from anything and XXs had know allow opportunities and then like doing a will the of and early when reoccurring late run become allowing the and we'll business old us I add spread And that a level assets you them just in now available to and as the to we think that rate in that. development of other that since statement our pursue evaluate

Craig Allen

how And begun I how I we've strong. think remains of view CAD. over great years that's as we sheet only think few would is, and these capital be the past a I CAD this thing access tuning, should add our fine balance of No, to others overview

of Our access to allows the to off too. well us that spoke advantage opportunities Chad liquidity remains take earlier strong as and that

Unidentified Analyst

I the to now, necessitate on very year necessitate one and on more asset you one actual meet could two does listen. mute go much And deficiency a meet If guys. now sneak This basis the the – I’ll the a forward it for in right go or just assets. distribution? sales CAD Thank to and the

Craig Allen

Thank Yes, Sure. good you. question.

said an the past, and really As business. we've of our annual in our CAD of basis part components. from of Both that two we though up be considered that on those is are spread report CAD made would

also We sale CAD then from business that sale we part a development those our our also normal report and They too. of guaranteed. part business of recurring as well assets, and are assets and while never and have of are revenue from

may So not or components, of a you on three that take report all about there four of quarterly we components may revenue basis. different those or now are

Unidentified Analyst

Thank you. Keep up good the work.

couple in you the calls. Bye-bye. of Looking conference hearing forward next

Chad Daffer

Thank you.

Craig Allen

Thank you. End of Q&A

Operator

you. gentlemen, Instructions] conclude conference. a does you program participating and thank Thank and Everyone disconnect. session for in have today’s great This you may this and does today’s conclude now Ladies today’s question-and-answer day. [Operator