At this time, I would like to welcome everyone to America First Multifamily Investors, L.P. NASDAQ ticker symbol ATAX Second Quarter 2017 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..

Thank you. Welcome to ATAX's second quarter 2017 earnings conference call. During the course of this conference call, comments made regarding ATAX, which are not historical facts are forward-looking statements and are subject to risk and uncertainties that could cause the actual future revenue or results to differ materially from these statements.

Such forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of words like, may, should, expect, plan and other similar terms. You are cautioned that these forward-looking statements speak only as of today's date.

Changes in economic, business, competitive, regulatory and other factors could cause our actual results to differ materially from those expressed or implied by the projections or forward-looking statements made on today's call.

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

Our internal projections and beliefs upon which we base our expectations may change, but we will not necessarily inform you if they do. Today's discussion will include non-GAAP measures and will be explained during the call.

We want to make you aware that ATAX is operating under the SEC Regulations FD and encourage you to make full advantage of the question-and-answer session. Thank you for your participation and your interest in ATAX. I will now pass the call to Chad Daffer, ATAX's Chief Executive Officer..

Thank you, Craig. I'd like to welcome you all to the ATAX second quarter 2017 investor call. This afternoon I would like to share a few of my thoughts on the second quarter. Craig will presume the partnership financial performance and prior to taking your questions I'll close with a few of my thoughts on the balance of '17 and beyond.

The third quarter domestic market performed well with equity setting new highs on the shoulders of solid corporate earnings and the possibility of a [indiscernible]. Health reforms, tax reforms, infrastructure spending, deregulation of the financial sector all played its roles and let market and equity space with a new high at the end of the quarter.

Bond market participants observed the Federal Reserve Bank increasing fresh [ph] bonds for the third time in six months to 1.25% despite modest economic growth and low inflation there. With this the yield term continues to flats closing the quarter at 92 basis points spread between the two years and the 10-year treasury.

Given these market conditions we continue to work towards achievement of our strategic goals, repositioning with the balance sheet with the listing of four real estate assets, three from the sale, a property student property in San Diego California; Eagle Village, a student property in Evansville, Indiana; residents of DeCordova a senior property in Granbury Texas; residents of Weatherford, a senior property and Weatherford, Texas.

The proposed sale of each of these assets will be evaluated with a goal of reinvesting sales proceeds back into our four-investment discipline of [indiscernible] multifamily, revenue bonds. We continued our work in mitigating interest rate risks and overall risk profile for the partnership.

We continued partnership negotiation of new fixed rate financing programs and actively managing our interest rate caps, we feel we've advanced the reduction and the risk profile at the platform level and at the project level. I look forward to sharing with you more details on each of these efforts in the months to come.

At this time, I would like to have Craig present the second quarter financial performance of the partnership..

Thank you, Chad. What I would like to do is highlight a few significant transactions for the quarter and then talk to you a little bit about our balance sheet and some results of operations as well too.

The first significant event I would like to talk about really just happened about 30 minutes ago, we issued an 8-K with the SEC announcing the fact that we closed on $20 million of additional Series A preferred units. As I said we did just file that with the SEC and a press release has gone out a little over half hour ago.

Again, to remind you this is low cost 3% non-dilutive, non-cumulative and non-voting mezzanine capital. Today we have raised about $77 million and have up to an additional $23 million yet available under our private placement memorandum.

Next, during the quarter our operating line of credit with Bankers Trust was increased from $7.5 million to $10 million and we have extended the maturity on the operating line of credit to May of 2019.

Also, we have a $50 million unsecured line of credit with Bankers Trust that we utilized to acquire mortgage revenue bond investments for periods between 270 days and 540 days. We have extended the maturity on the unsecured line of credit through May of 2019 as well.

Also during the quarter, we refinanced two mortgage loans totaling $7.2 million through June of 2019 at the same rate with no prepayment penalty and no extension fee and those two mortgage loans were for the MF Properties of DeCordova and Weatherford. Another significant transaction during the second quarter related to interest rate caps.

During the quarter, we rolled down two existing interest rate caps on M31 which is also known as TEBS II, we rolled that down from a 3% cap to 1.5% cap on about $92.6 million of notional value. The term on that roll down is two years and the counterparty is Barclays Bank.

On M33 or TEBS III, we rolled down the 3% cap to 1.5% and the notional value of that roll down is about $83.4 million with a three-year term and the counterparty is Barclays as well too. One of the things that we think we've done a fairly good job at is spreading the counterparty risk on the interest rate hedges that we have.

We now have six counterparties, we have Barclays, Wells Fargo, Bank of New York, Deutsche Bank, Royal Bank of Canada, and SMBC Capital Markets.

The other thing that we're looking at is we've looked at the variable rate versus fixed rate debt financing that we've carried on our balance sheet and in past quarters Chad and I've discussed the refinement of the balance sheet coming back to our core investment and also trying to insulate ourselves if you will, against rising interest rates.

Back in December of 2016 our debt financings were made up of approximately 44% fixed rate and 56% variable rate instruments. We've moved that now to June 30th of 2017 to 54% fixed rate versus 44% and 46% variable rate versus 56% on December 31st of last year.

By doing this and by rolling down our interest rate caps we've further insulated ourselves against rising interest rates. On page 53 of the 10-Q that we just filed there's a table that reflects a change of interest rates and the effect on the partnership income from rates decreasing by 25 basis points to rate increasing by 200 basis points.

We believe by doing what we've done we've insulated ourselves to the point that we're comfortable with the rate risks that we're assuming and again the rate table on page 53 assumes two things; it assumes number one, that rates will change immediately on day one and not happen over a period of time and secondly, it assumes that as those interest rates rise that for a period of 12 months that ATAX would do nothing in response to that.

Again, we monitor interest rates and where we think the forward yield curves might be going or might be heading and then we take the appropriate action to limit the amount of interest rate risk that we're willing to absorb and thus the roll down of our interest rate caps in Q2.

Our mortgage revenue bonds at June 30, were approximately $768 million, and we owned mortgage revenue bonds in 15 states. Our MF property portfolio is about $99.5 million and we own MF properties in five states.

At June 30, our total assets have increased to just slightly over a $1 billion of $1.02 billion from December 31 of 2016, and when our total assets were $867 million. Our total mortgage revenue bonds have increased from $680 million in December of '16, and $759 at March 31, to $768 million, little bit more than about a percent increase.

The interesting statistic that we talk about though every quarter is the percentage of our mortgage revenue bonds to total assets. On December 31, of 2012, 35% of our assets were held in mortgage revenue bonds.

At June 30, of 2017, 75% of our total assets were held in mortgage revenue bonds, an increase of over 100% growth in our mortgage revenue bond portfolio during that period of time. Our total revenue for the quarter increased to $16.2 million for Q2 of 2017 versus $14.9 million a year ago in Q2 of 2016 an increase of almost 9%.

And on year-to-date basis our revenue has increased from 29.9 million in 2016 to $32.3 million for the first six months this year, an increase just slightly more than 8%. And our net income basic and diluted was $0.06 for the quarter versus $0.15 a year ago.

One thing I might add though a year ago the $0.15 included a gain on a sale of an MF property the Urbaridam [ph] in the second quarter. Our caps for the first three months of this year was $0.10, our cap for differed six months is $0.24.

We have talked a little bit about net book value in the past and I thought I give you some color as what that looks like for the quarter ended June 30. Our net book value per unit is $5.07 per unit up from $4.65 per unit at December 31 and on March 31, our net book value per unit $4.95 per unit.

Again, as we have talked about in the past the net book value is a little bit -- it can be a little bit misleading for ATAX in that -- the net book value will increase by a couple of factors and the first factor obviously being the volume that we can put on the books on the asset side of our balance sheet versus the cost of funding.

So, it's just that net interest spread but more than not its driven by the carrying value of the assets and mainly the mortgage revenue bonds from quarter-to-quarter. So, there can be what we call some lumpiness or some ups and downs in that net book value based upon what the carrying value is at any given time.

Those are the highlights for the quarter -- for the second quarter 2017. I'd like to toss it back to Chad for some closing remarks..

Thank you, Craig. As we come to the end of 2017 to be honest, I'm optimistic about the credit fundamentals of the multifamily housing markets. In particular the affordable housing markets.

Just buy new and preserved over housing [indiscernible] not meeting the demand; for this reason, opportunities will exist in the marketplace for those of us who understand the risks, have access to capital and can execute.

In the months to come, a potential housing crisis is on the rise, people need safe, clean and affordable housings and [indiscernible] caring of our seniors and the development of our new families.

I ask you please [indiscernible] reps asking them for support, the state federal legislation to provide resources for public private partnerships for the development and privatization of affordable housing. Thank you for support to ATAX. I'd like to take your questions at this time..

[Operator Instructions]. And our first question comes from David Walrod from Jones Trading. Your line is now open..

Can you talk a little bit, you mentioned in the press release with the 20 million in the preferred, can you talk about your timeframe for completing the additional 23 million?.

Right now, David with the press today explained that we got to $100 million offering that has been presented, we're at 77 million that’s been placed, leaving 23 million outstanding; of the 23 million that's outstanding we're currently in underwriting with banks that have already made investments.

So, we feel the credit approval is on the horizon with tickets to be written sometime between now and year end. And as we get cleaner -- clarity on the execution of those dates, you'll see press releases as the tickets have be written and placed..

And then on the properties that you talked about, that you listed for sale, I guess can you just kind of big picture what the environment is like and how quickly you anticipate completing those transactions?.

As you know, if you look at our real estate portfolio there's five or six assets there that we've held for different reasons, either waiting for a cycle to come to us, having some things that we like to see fixed at the project level; always knowing that at some point in the future we would have an opportunity to either sales on our free sample sales or restructure the cap, restructure the ownership structure in the long term fixed rate multifamily housing revenue.

In our opinion cap rates, appetite for rehab products, the markets are strong, as we've ever seen. In some cases, its 306 types of levels, we're going to test the market on the four properties that I identified, DeCordova, Weatherford for sale and Eagle Village.

We're fairly optimistic that we've good color on what the markets will deliver for us the sale price and we'll move forward with the sale at some point in the future after the competitive marketing and [indiscernible] process and so I would hope that all four of those will get really, really strong bids.

We will move to closing some time in the third and the fourth quarter of this year with redeployment into our core asset, shift decline with multifamily housing revenue bonds, starting in the first quarter of '18, if not sooner..

And our next question comes from Patrick Marsh from Alex Brown. Your line is now open..

One question I had, I noticed that you only rolled your caps down on two of your outstanding tabs programs and you have a third one that is out there as well, just a reason why you guys chose only rolled the two down versus all three?.

That’s a great question Patrick. As you saw [indiscernible] two and three we rolled down from 3% strike to 1.5% strike all in an effort to mitigate interest rate risk and predict our cat in the event of a rising interest rate environment on Sifna [ph]. M24 a test launch is currently being negotiated for restructuring.

We have had multiple discussions with our good friends of [indiscernible] about this topic, and we would hope to have some clarity on the structure and pricing and timeline for execution in the next couple of weeks.

And once we enter into a term sheet with those terms available, I assume that we would issue a press release, tell them about the economics of the transactions and the benefits to our investors..

One another quick question, as you guys have been moving more from the floating to the fix rates that Craig was referring to earlier, most of that has been done through this term AB structure.

Is that vehicle you anticipate using for additional fix rate financing as you go forward?.

It is in today's environment. As we talked about our concerns about the rising interest rate environment, interest rate volatility on the shore of the curb, being able to dictate on a longer basis, long term is a relative term I guess.

We are working towards, when we started just a couple of years ago 100% of our interest rate risk on a bearable rate, since that time we executed two structures on a fixed rate loan, decreasing our exposure to interest rate volatility platform level, partnership level by about 50%.

And so as long as we have access to this type of products and we can [indiscernible] the right structure in the right pricing so we can get our credit profile to hit the optionality we need in our bond financing programs we will continue to grow that part of our business for the obvious reasons.

Fixed change, partnerships change and so we have always got to be proactive and try and diversify that service provider group and always be in negotiation with new and improving products to hope to fill that slot and help leverage the portfolio better..

[Operator Instructions] Our next question comes from John Bond [ph] a private investor. Your line is now open..

Quick question on CAD. I see this quarter look at total CAD per unit I'm looking at the press release at $0.10, distribution is $0.125, so you are roughly like $0.025. If we annualize that, that’s about 0.10 per CAD and I guess that’s pretty close what you did this year.

Is it a logical assumption if CAD this quarter was 6 million that you'd have to sell other -- you got to sell real estate and realize the profit for 6 million to meet your CAD, add another capital acquisitions or sales?.

I think very interesting question, is usually asked on about every one of our calls, so it's a good question we'd like to address. Historically we've never given any type of guidance on earnings.

I think in the past we've shared with folks that they could make their assumptions on assets available for investment on the balance sheet; sale proceeds from unleveraged assets and investment proceeds from completion of replacement of a CRA preferred stock.

That'll give you a total number of proceeds for investment that when invested and leveraged I think our assumptions would probably give you an addition that we would be able to have a run rate in north of $0.50 at some point in the future. Depending on the assumptions, depending on the timing, like I said that's how I would address that question.

As far as the balance of this year, I think you exactly correct that you will see other asset sales in the event that we get adequate pricing and close in a timely fashion that will add to our total revenue [indiscernible] John..

John this is Craig. The other thing I would say too is that as we've discussed in previous calls, we remain focused on what we call earning the distribution or earning CAD. In 2015 we earned $0.53 CAD, in 2016 $0.50 CAD and just to add to what Chad said, we remain focused on all our efforts to earning CAD in 2017..

But is that pre-proposed you got sales of assets that generate I don't know a surplus over, because I know already I asked this on previous calls, and obviously I'm pressing on it, but does that necessitate sales of assets to generate a necessary deficiency in CAD that you're having from operation?.

I think on the short-term John, the answer is yes, but math is -- I think you may be correct, math assumption. I think long term once those transactions are completed and deployed, hopefully the answer is no.

Now that's I say hopefully in response to not knowing where the yield curve will be at that time, not knowing what our cost of leverage would be at that time, not knowing what the spreads will look like at that time.

And so, I think short term I think we could by looking at the balance sheet you could get comfort in the assumptions that we've made to cover CAD [indiscernible] take a look at the once we deploy those sale of proceeds from those transactions that we would look to exceed the $0.50 at some point in the future on a recurring basis..

And finally, are we to assume that the two properties that are not being marketed right now, I assume that's going to be contributory to CAD but without giving too much in terms of what the asking prices are?.

I think there's four properties and I think that we've had the pleasure of holding and fixing and waiting for cycles to come to us in the appropriate markets where we're evaluating the sale of these assets for a definite gain on sale of these assets.

Now, if it's not, we'll reevaluate potential sale, but we are testing the market with the anticipation of a positive outcome from the sales of these assets contributing to CAD in the balance of '17..

[Operator Instructions] At this time, I am showing no questions on the phone line. Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program, you may now disconnect..