Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Greystone Housing Impact Investors LP (GHI, Financial) reported cash available for distribution (CAD) of $0.27 per unit, indicating positive cash flow despite a net loss.
- The company holds a substantial portfolio of $1.32 billion in affordable multifamily investments, which are performing well with no forbearance requests.
- GHI's interest rate swap portfolio is currently a net receiver, potentially adding $0.12 per unit in CAD if current rates hold.
- The company has a strong liquidity position with $37.3 million in unrestricted cash and $55.6 million available on secured lines of credit.
- GHI has entered a new construction lending joint venture with Blackrock Impact Opportunities, providing a dedicated pool of capital to capitalize on market opportunities.
Negative Points
- GHI reported a net loss of $0.23 per unit for the third quarter, significantly impacted by $9.7 million in non-cash, unrealized losses on interest rate derivatives.
- The company's leverage ratio is high at 74%, which could pose risks in a volatile interest rate environment.
- The fair value of GHI's interest rate derivatives declined sharply due to a 100 basis point decline in the three-year swap rate.
- The company's stock is trading at a 14% discount to its net book value, reflecting market concerns.
- There is uncertainty regarding fiscal policy changes with the upcoming change in administration, which could impact credit and new issuance.
Q & A Highlights
Q: With the new change in administration happening next year, are there any foreseeable issues within fiscal policy that might affect current credit or new issuance?
A: Kenneth Rogozinski, CEO: It's too early to tell pending the results of the House race. Historically, there's been bipartisan support for the low-income housing tax credit program. There might be legislative changes to improve the program's efficiency, but whether it becomes a priority is uncertain, especially with potential sunsetting provisions of the 2017 tax cuts and Jobs Act.
Q: Can you expand on the Blackrock partnership and how you envision deploying this capital?
A: Kenneth Rogozinski, CEO: The product offered remains the same, with fixed and floating rate construction loans taken out by Freddie Mac forward permanent loans. The partnership with Blackrock provides a dedicated pool of capital, allowing us to fund loans without raising capital through traditional means, ensuring a stable and reliable source of capital.
Q: How has recent rate volatility impacted demand for loans?
A: Kenneth Rogozinski, CEO: Interest rates haven't significantly impacted demand for our core lending products. Sponsors with allocations of private activity volume cap and low-income housing tax credits continue to pursue deals, even in a higher interest rate environment. We still see inbound inquiries from sponsor relationships.
Q: What are your thoughts on capital deployment into year-end and 2025, and do you expect the MRB portfolio to continue growing?
A: Kenneth Rogozinski, CEO: We require assets to be accretive to our current dividend yield, which is around 12.5%. We aim to find transactions that meet investment criteria, particularly with the Blackrock JV, to demonstrate our ability to commit capital to new construction lending opportunities.
Q: With the book value being higher than the stock price, does it make sense to do share buybacks?
A: Kenneth Rogozinski, CEO: We prioritize making accretive investments over share buybacks. As long as we see opportunities that offer better returns than buying back shares, we will focus on deploying capital into new investments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
