I would like to welcome everyone to America First Multifamily Investors L.P. NASDAQ's Ticker Symbol, ATAX Fourth Quarter of 2018 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. After management presents its overview of Q4 2018, you will be invited to participate in a question-and-answer session.

As a reminder, this conference is being recorded. On behalf of ATAX and its management team, thank you and welcome to ATAX fourth quarter of 2018 earnings conference call.

During 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 events 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 use of words like may, should, expect, plan, intend, focus 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 ATAX actual results to differ materially from those expressed or implied by the projections or forward-looking statements made today.

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

Internal projections and beliefs upon which ATAX base its expectations may change, but if they do, you will not necessarily be informed. Today's discussion will include non-GAAP measures, and will be explained during this call.

We want to make you aware that ATAX is operating under the SEC Regulation FD and encourage you to take full advantage of the question-and-answer session. Thank you for your participation and interest in ATAX. I would now like to turn the call over to Chad Daffer, Chief Executive Officer of ATAX..

Thank you. Good afternoon, and welcome to the ATAX fourth quarter 2018 earnings call. This afternoon, I'd like to share with you a few of my thoughts on the fourth quarter, the economy interest rates, and a few notable transactions for the quarter.

Then Craig Allen, ATAX's CFO, will present the partnership financial results, and then we're looking forward to taking your questions. I'm very pleased to report strong fourth quarter closing a great year for the partnership in 2018 earning $0.73 per unit of cash available for distribution for our investors.

More details will follow with Craig in just a minute. In the fourth quarter, economic data remains strong with gross [ph] domestic product above forecast of 2.6% unemployment at historically low levels below 4% and improving wage growth.

This prompting the [indiscernible] Federal Open Market Committee increased Fed Fund rates for the fourth time in 2018, increasing short-term rates resulting in higher cost of borrowing for the partnership. FOMC has since stated they will be patient in determining future rate hikes, pending changes, and economic data.

Given this change in policy and with the FOMC on hold, this enhances the possibilities of continued economic expansion and stable lending markets into 2019, both playing important roles in the strategic growth of the partnership.

A few notable transactions occurred in December of 2018 with the sale of three Vantage properties by the ATAX development partner. ATAX loans and equity investments were repaid at closing from sale proceeds. The properties were Vantage at Judson, Vantage at Corpus-Christi, and Vantage at New Braunfels.

These investments date back to 2014 with a strategic decision by management to create new revenue streams for the partnership, while staying true to our core credit discipline of multifamily housing.

To start with conceptual discussions with our partner in 2014, consent of our investors in 2015, execution of design, build, and finance of projects in 2016, lease up and stabilization in 2017 with the ultimate sale and proof-of-concept in 2018. I'm proud of our ATAX team, very thankful for our partners and pleased for our investors.

At this time, I'll turn it over to Craig Allen, CFO to present the partnership financial results..

Thanks, Chad. What I'd like to do is just walk you through some notable items on the balance sheet and the income statement and expand a little bit on what Chad had talked about regarding our CAD for the year and a little bit more on our Vantage transactions as well too.

Over the past seven to eight quarters we've been able to realize net total assets of approximately $1 billion. We ended the year, December 31st at about $983 million in total assets. Mortgage revenue bonds. We continue to invest in mortgage revenue bonds which make up a vast majority of our balance sheet.

At 12/31 of 2018 about 74.5% of our total assets were comprised of mortgage revenue bonds. And again we keep referring back to when we began this growth trend or growth pattern back in 2012, 12/31 of 2012, 35% of our assets were comprised of mortgage revenue bonds.

So in that span of about six years, we've more than doubled the percentage of mortgage revenue bonds in our portfolio.

At the present time we have about 77 mortgage revenue bond positions totaling about $732 million, and we are geographically dispersed from Washington in the northwest to Florida in the southeast, Maryland on the East Coast, to California and Texas.

We spend a reasonable amount of time taking a look at the geographic dispersion of our portfolio and again, we are centered predominantly in California, in Texas, Florida, and then we're filling in as we get into the Mid-Atlantic states and in the upper Northwest as well too.

For the year, we transacted four mortgage revenue bonds and acquired those with principal value of about $42 million on a year-to-date basis, and that's reflected in that 75% of assets that we talked about just a little bit ago. We have mortgage revenue bond redemptions that happened throughout the year as well too.

For the year ended 12/31/2018, approximately $79 million of mortgage revenue bonds redeemed there were about 14 bonds in total that were redeemed in the normal course of business. Our MF properties portfolio, and that's a multifamily real-estate that ATAX owns in its portfolio is approximately $64.6 million at December 31 of this year.

We have MF properties that are located one in California, which is a student housing multifamily project, as well as Nebraska and that is also a student housing asset.

Moving on to some transactions in the fourth quarter, we have transactions rather substantial transactions, and as Chad said, they were proof-of-concept transactions that began in late-2014 and early-2015, and each quarter thereafter we've reported to you that that we were beginning a diversification of our assets and our portfolio as we entered into the Vantage projects.

Those were prototypical 288-unit, multifamily market rate projects. We we're fortunate in working with our partner Vantage to realize three sales. One was a loan product for ATAX, and that was Vantage at New Braunfels, a 288-unit project.

The next was an equity investment that ATAX made in the first quarter of 2016, Vantage at Corpus-Christi, and then another was a mortgage revenue bond that was redeemed -- and that was the Judson mortgage revenue bond. So those are the three significant transactions that occurred in the fourth quarter of 2018.

A little bit more color on the investment in what we call investment in unconsolidated entities, or what we also refer to as Vantage. On December 31 of 2018, we had nine projects. Those nine projects were approximately they represented approximately 2,600 units of multifamily units. Those nine projects are three were located in Texas.

Two were located in Nebraska, two were located in Tennessee, one in South Carolina and one in Florida just as some background and some history in on December 31, 2016, we had invested in three projects and all three of those projects were in Texas, fast forward to 2017 at the end of the year in 2017.

We had three projects in Texas, one in South Carolina and one in Florida. And then, again in 2018, we had nine projects at the height we've had 10 projects prior to the sale of Corpus-Christi.

To give you an idea of how we've -- how we've invested in these projects, we began -- today we've invested approximately $78 million of equity in the Vantage projects ranging from about $19 million of investment in 2016 to incrementally investing about $42 million in 2018.

During that time period, we also invested in two Vantage projects and in the form of loans, and this would be prior to making equity investments that would be New Braunfels and Vantage at Brooks and we've contributed about $15.9 million.

And both of those both of those projects have sold New Braunfels have sold in sold in Q4 of 2018, and in our 10 case, the footnote number 25, we disclose a subsequent event in which Vantage of Brooks successfully sold in January of 2019.

Each earnings call, we talk about our strategy of trying to move closer to 100% fixed in our debt financing, knowing that we probably will never get to the point that we are 100% fixed rate and 0% variable, but what I thought I would do is just real briefly tell you where we started in 2015 and where we are today.

So in 2015, 68% of our debt was in variable rate product, and 32% was in fixed rate product. Fast forward to 1231 of 2018, AND our fixed rate is comprised of -- is 62% of debt, and our variable rate is 38% of debt. So we've almost completely switched those around again, 68% variable and 15%, 38% variable today.

So again, the strategy was becoming more fixed rate and helping to control our interest rates sensitivity as well too. That takes us into the results of our interest rate sensitivity analysis. We measure the interest rate sensitivity all the way up to a 200-basis point increase in rates as if that was done all at one time.

And in a 12-month period we did nothing to react to that increase. Going back to September 30 of 2017, THE impact to the fund at based upon a rate increase of 200 points would result in a decrease in CAD of about $1.6 million or about $2.7.

Again, fast forward to December 31 of 2018, the most recent quarter we just closed and our interest rate sensitivity has decreased from negative one point $6 million down to only a negative $968,000 or a CAD impact of minus $1.6.

So we have been able to realize the strategy that we implemented and that we continue to try to improve upon of reducing that interest rate sensitivity by reducing that from a minus $2.7 down to a $1.6.

On the revenue front, for the fourth quarter, we reported revenue of $23.1 million compared to $21.9 million in the fourth quarter of 2017, and on a year-to-date basis $18.4 million versus $70.4 million in 2017. That's a revenue increase of about 16% year-over-year. Net income basic and diluted $0.22 for the quarter versus $0.23.

So virtually no change quarter-over-quarter 2018 versus 2017 and on a year-to-date basis 2018 we reported $0.60 per buck compared to $0.44 cents per buck for 2017. Moving to CAD, Chad alluded to the very good year that we had related to cash available for distribution.

On a quarterly basis, we were flat year-over-year because of strong transactional activity in Q4 of 2018 versus 2017. We reported $0.25 of CAD in Q4 of 2018. On a year-to-date basis, $0.73 per buck in 2018 versus $0.60 in 2017. So, a very good year, year-over-year $0.73 versus $0.60.

Each call, we like to end by telling you what the net book value and underlying value of ATAX is, and was. And again, just as a reminder, that book value does have some lumpiness what we call lumpiness in it. And that lumpiness can be the result of mark-to-markets that may occur.

It can be a little bit lumpy due to the number of units outstanding at the time, it can be a little bit lumpy during -- due to just some transactional activity as well too. At September 30 of 2018, we reported net book value of about $4.81, that's increased as of December 31st of this year to $5.03 per buck.

So again, another positive trend that we have to report really due to the outstanding year that we had on a net income per share and as well as a buck per unit basis as well too. With that we'd like to turn it over to you for questions, and we'd be happy to answer those that you may have at this time..

[Operator Instructions] Our first question comes from David Walrod with Jones Training. Your line is open..

Good afternoon, guys..

David, good afternoon..

Hi, David..

Of your projects remaining with the Vantage program, how should we think about the pace of sales in 2019 going forward? It looks like according to your K that a handful have been completed, others are still in the process of being constructed, so how should we think about that?.

David, the strategy that we tried to implement from the start in working with our partner what we thought that we had the capacity to expand and drive this part of our business where we'd have four properties under construction, we'd have four properties in stabilization, we'd have four properties being teed up for sale and four or more properties in the pipeline.

With the activity in the fourth quarters of '18, kind of with -- we proof-of-concept in the first -- we have four properties that we'd put in the marketplace, our partners sold three of those assets in the fourth quarter, one leaked into the first quarter of 2019.

But I think as long as the market stays strong, interest rates stay low and we can continue to stabilize these assets within a reasonable timeframe and the markets are strong, I'm optimistic that our partner and ourselves will come to the table and allow us to continue to take the premium out of the market when it presents itself.

And so that's kind of the global strategy and that we're kind of proofing that out here as this effort evolves..

Okay, that's helpful.

And then in the multifamily, can you talk about just how that's going, and any potential asset sales in that from that bucket?.

No, we only have a couple left.

Right now, we're continuing to evaluate the options out on our student housing property out in San Diego California, suites on for sale, we -- right now, I think we continue to improve on the operations of the property, and we will probably evaluate that as for potential sales sometime after stabilization going into the fall semester.

The other property is a long-term hold with really no interest in our part in moving out of that position..

Okay, and then my last question is just on the dividend.

You guys have been very consistent, but obviously have been out earning it, can you just give us some updated thoughts on maybe how the Board is taking with the dividend?.

At this time, David, we've had no discussions about increasing or decreasing the dividend at this time. This is fourth year in a row since Craig and I and the new management team has taken over the platform and we're optimistic about '19 with no discussions from the Board on either increasing or decreasing that distribution..

Okay. That's it from me, thanks a lot guys..

Thank you, David..

And our next question comes from the line of David Rothschild with -- he's a Private Investor. Your line is open..

Yes, my question sort of reference the frame on the dividend, I guess, the other thing I would just ask is you did the $0.73 in CAD, do you think that can be consistent now going forward a little bit or what's your outlook for 2019?.

David, the asset class that we deal in is obviously cyclical. We are at the late stages of an economic expansion. We'll continue to try and take premiums out of the positions in our Vantage product and our MF product and grow our mortgage backlog.

This was an outstanding year for me to tell you that that will be a consistent year going forward, I think, would be a stretch. But we're optimistic about being able to continue to meet the dividend year-over-year..

Okay. Well, I guess, as an investor I'd encourage you to at least look at maybe increasing dividend just a small amount, because it's been flat for a lot of years. But thanks for the good work..

Thank you, David..

Thank you, and our next question is from Ed Fleming, he is also a Private Investor..

Chad, good afternoon.

How are you?.

Good, Ed, thank you..

So first of all, I want to congratulate you and your team on a great fourth quarter in 2018. It really looks to me like your multi-year focus on the mortgage revenue bond acquisitions as well as your Vantage development are really going quite well.

From my perspective, unless I'm mistaken, it looks to me like ATAX is probably at the best position that it's been in, I don't know how many years, in terms of your ability to consistently generate CAD going forward.

What are your thoughts on that?.

This was the fourth year. We're confident about '19. Our business has transitioned since 2015 when we took an effort on to kind of reposition the balance sheet with the efforts with our Vantage partners, and setting to diversifying our income streams. We feel better about where we're at than we have in a long time on our total business.

Our mortgage book business right now is under a little bit of pressure as you look at our originations being down year-over-year as we shared with our investors over the years that we will continue to underwrite and evaluate opportunities, but in the event that the marketplace does not give us opportunities that meet our credit profile or our leveraged yield targets, that we will back away from and not deploy capital.

So we will continue to look and try to diversify revenue streams to meet or exceed that 50% dividend target, and I think we're in a good place. I think the market stayed strong, the economy continues to give us opportunities.

We're optimistic [ph] about hopefully the yield curve will shift a little bit and give us a little bit of steepness and the opportunity to get back in and really drive the mortgage book growth, but I think overall I'm in agreement with you that we're in a good place as far as our performance, our access to capital and our asset class has been very strong obviously..

Oh, that's great. I appreciate it, keep going, appreciate your dividends and your discipline in terms of your strategy. Thanks, Chad..

Thank you. Thank you, Ed..

[Operator Instructions] Our next question is from the line of Thomas London with Oppenheimer. Your line is open..

Yes, hi, Chad, how are you?.

Good, Thomas, thank you..

Congratulations on a great year. Hey, could you shed some light on the ATM program? I see you began it in August last year, terminated it.

Are there any plans to reestablish it, and can you kind of expand on exactly what that is?.

No, I'd be glad to, thank you. The ATM program we implemented was obviously just to the access capital on a lower cost basis and a common follow-on offering. We've had great relationship with our friends at John Trading in implementing this program and testing the market.

As you've seen and heard of us discuss our CRA preferred over the last couple of years, there's certain rules and regulations that prohibit having two offerings in the marketplace at the same time on a private basis. Therefore, as you can imagine, we're probably going to pursue the opportunities in the preferred market here in the months to come.

In order to do that we need to -- terminate, is a strong word -- put the ATM on hold during that -- as we pursue the CRA preferred equity that we placed in the past. I think to-date we're about $94.5 million in the preferred. Based on the current market value, we have another $25 million to $30 million that could possibly be placed.

We just can't be in the market at the same time based on SEC regulations..

Got you..

So that's the reasons why we've been in and out. It's a great program, and it gives us an opportunity to raise common on a much lower cost basis. We just can't be in the market for both products at the same time..

Okay.

And another question, given the change, I guess, in the mix of your portfolio, over the years you've had tax exempt dividends, is there any negative effect because of the change in the mix of the portfolio?.

On the surface, you would say yes. I think, for the 2018 we're about 93% tax exempt about 7% taxable. Remember that the investment in our Vantage product is only about 10% of our balance sheet. Therefore, it doesn't move the needle as great as you would think quarter-over-quarter, year-over-year.

I don't think that we are going to -- I mean, as we talk with investors and when we did the proxy back in 2015 allowing us to deploy capital into the Vantage-like products, they were very confident, and as long as we stayed in our core credit discipline, given drift into other type of asset classes, sometime somewhere between 80% and 85% would be some type of an acceptable level for us on a taxable basis, I mean tax [indiscernible] basis, and the balance of it, 15% to 20% being taxable.

So that's the guidance that we received from some of our investors. I'd be interested in hearing your thoughts offline at some point in the future if that would be acceptable to use..

Sure. And then one last question, something small here, I know the impaired securities was up a good bit for 2018, and you shed a little light on that, I think it was up about a half-a-million or something….

Yes, this is Craig..

Hi, Craig..

We owned some -- we owned an investment called PHC Investments, and the PHCs we had to write those down on a permanent basis, took a small impairment charge during the year.

We've had -- it's not credit-related, we've had no interruption of cash flows from those investments, but it was just an adjustment due to non-credit related events in the marketplace..

Okay. Thank you, guys. Have a good year this year as well. Thank you very much..

Thank you..

Thank you..

Since I'm not showing any further questions, this does conclude today's conference. Thank you for your participation, and have a wonderful day. You may all disconnect..