MMA Capital Management Investor Presentation June 30, 2016 NASDAQ: - - PowerPoint PPT Presentation

MMA Capital Management Investor Presentation June 30, 2016

NASDAQ: MMAC www.MMACapitalManagement.com

3600 O’Donnell Street, Suite 600, Baltimore, MD 21224 (443) 263-2900

• This presentation contains forward-looking statements intended to qualify for the safe harbor

contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements often include words such as “may,” “will,” “should,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “seek,” “would,” “could,” and similar words or expressions and are made in connection with discussions of future operating or financial performance.

• Forward-looking statements reflect our management’s expectations at the date of this

presentation regarding future conditions, events or results. They are not guarantees of future

• performance. By their nature, forward-looking statements are subject to risks and
• uncertainties. Our actual results and financial condition may differ materially from what is

anticipated by the forward-looking statements. There are many factors that could cause actual conditions, events or results to differ from those anticipated by the forward-looking statements contained in this presentation. They include the factors discussed in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015, which was filed with the Securities and Exchange Commission (“SEC”) on March 15, 2016.

• Readers are cautioned not to place undue reliance on forward-looking statements in this
• presentation. We do not undertake to update any forward-looking statements included in this
• presentation. The statements in this presentation are for the convenience of our shareholders,

capital partners and other stakeholders and are qualified in their entirety by reports that we file with the SEC.

2 MMA Capital Management, LLC

Disclaimer

• Company Overview
• Mission, Values and Performance
• Our Business
• Future Growth

3 MMA Capital Management, LLC

Table of Contents

• MMAC makes and manages investments in affordable housing and

renewable energy. Leveraging our extensive knowledge in these fields, we invest for our own account and co-invest with our institutional capital partners to generate attractive, risk-adjusted returns.

• We have four business lines:
• Leveraged Bonds
• Low-Income Housing Tax Credits (“LIHTC”)
• Energy Capital and Other Investments
• International Housing Solutions
• We derive revenue from returns on our investments as well as asset

management, performance and other fees from the funds and ventures we manage.

4 MMA Capital Management, LLC

Company Overview

• Mission Statement – We partner with institutional capital to create and manage

investments in affordable housing and renewable energy.

• Value Statement – The key to our long-term success is our commitment to

performance built on our core values of integrity, innovation and service.

• Performance – We measure our financial performance based on our ability to grow

equity value per share on a GAAP and economic basis over the long-term.

• From a GAAP perspective, we focus on diluted shareholders’ common equity per share as
• ur key performance metric.
• From an economic perspective, we focus on the realizable value of our net assets on a per

share basis. However, because this is a secondary, non-GAAP measure, we do not report it publicly.

5 MMA Capital Management, LLC

Mission, Values and Performance

$0.57 $5.25 $7.95 $12.51 $17.43 $18.62 $19.62 $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 3/31/2016 6/30/2016

Diluted Common Shareholders' Equity Per Share (split adjusted)

• Since 2012, MMAC has focused on growing shareholder equity by

executing transactions to grow its business lines, deleveraging its balance sheet and returning cash to shareholders through share buybacks.

6 MMA Capital Management, LLC

Our Business – Recent History

$0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 $2,000,000 Assets Liabilities & Equity Assets Liabilities & Equity Assets Liabilities & Equity Assets Liabilities & Equity Assets Liabilities & Equity Assets Liabilities & Equity Assets Liabilities & Equity 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 3/31/2016 6/30/2016

Balance Sheet Data (in thousands)

MMAC Balance Sheet Evolution: 2011 to 2016

Assets Common Equity Preferred Equity in a Subsidiary Noncontrolling Interests Liabilities

• Since the inception of our share buyback program in 2013, MMAC shares
• utstanding have decreased by nearly 25%.
• Shares outstanding decreased from 8.1 million at December 31, 2012 to 6.1 million

at June 30, 2016.

• Over the same period, MMAC shares have increased in price by over 800%.
• The MMAC share price increased from $2.00 on December 31, 2012 to $18.15 on

June 30, 2016.

• As a result, our market capitalization has grown by over 575% since the end
• f 2012.

7 MMA Capital Management, LLC

Our Business – Market Capitalization

$- $20,000,000 $40,000,000 $60,000,000 $80,000,000 $100,000,000 $120,000,000 12/31/2012 12/31/2013 12/31/2014 12/31/2015 3/31/2016 6/30/2016

MMAC Market Capitalization

• MMAC is led by a team of seasoned real estate, renewable energy and

investment professionals, primarily based in the US and South Africa.

• Our Senior Management Team averages 21 years in the real estate, renewable

energy and investment businesses and 11 years with MMA.

• We have approximately 25 employees in the US and 30 employees in

South Africa.

• In both the US and South Africa, we employ investment officers, asset managers,

accountants and administrative staff who are dedicated to our long-term success.

• In addition, there are approximately 120 employees in our property management

venture in South Africa.

8 MMA Capital Management, LLC

Our Business – Leadership & Staff

• MMAC has four business lines:
• Leveraged Bonds
• Low-Income Housing Tax Credits
• Energy Capital and Other Investments
• International Housing Solutions
• Across these business lines, our earnings are primarily derived from investing for our
• wn account and co-investing in the funds and ventures we manage.
• We invest for our own account in leveraged bonds, LIHTC properties and renewable energy
• projects. For these investments, we earn interest income, fees, realized and unrealized gains

and residuals from asset sales.

• We co-invest alongside our capital partners in the renewable energy and affordable housing

funds and ventures we asset manage in the US and Africa. The earnings on these co- investments depend upon the structure of the fund or venture and the returns on its underlying investments.

• In addition to these own account and co-investment returns, we also earn:
• Asset management and other fees. We earn management and other fees in connection with the

affordable housing, LIHTC and renewable energy funds and ventures we asset manage in the US and Africa.

• Performance fees. We have the opportunity to earn performance fees (a.k.a., carried interest or

promote) on the affordable housing and LIHTC funds and ventures we asset manage in the US and Africa.

9 MMA Capital Management, LLC

Our Business –Business Lines

• Through its Leveraged Bonds business line, MMAC invests in tax-exempt bonds that are

leveraged to generate attractive risk adjusted returns.

• Our bonds are primarily collateralized by affordable multifamily rental properties.
• We execute total return swaps (“TRS”) in this portfolio to achieve a target return in the mid-teens.
• As of June 30, 2016, our bond portfolio consisted of 35 bonds that were owned directly or

through TRS positions.

• The fair value of these bonds was $273 million, or 102.4% of their unpaid principal balance (“UPB”)
• f $267 million.
• The weighted average rate we collected on the bond portfolio was 6.0%.
• On a fair value basis, 79% of the bond portfolio was secured by multifamily rental properties, 10%

by community development district bonds, and 11% by other municipal bond investments.

• The underlying multifamily bonds had a weighted average debt service coverage ratio of 1.07x.
• As of June 30, 2016, the notional balance of our TRS positions was $157 million.
• The weighted average rate we paid on our TRS positions was SIFMA (the Securities Industry and

Financial Markets Association 7-day municipal swap index ) plus 1.6%.

• The pay rate is variable and is based on SIFMA and resets on a weekly basis.
• We partially hedged the variable interest rate risk with a SIFMA interest rates swap with a notional

balance of $8 million and a 2.50% SIFMA cap with a notional balance of $45 million.

10 MMA Capital Management, LLC

Leveraged Bonds

• In our LIHTC business line, we primarily own and manage investments in affordable housing in the

US.

• Our LIHTC business line has interests in three portfolios (described further below):
• The BANA Venture;
• Morrison Grove Management; and
• Our own account portfolio.
• As of June 30, 2016, these three portfolios had investments across the US in approximately 950

affordable housing properties totaling over 87,000 units.

• We expect to create value for MMAC shareholders through fees, interest and residual value derived from

these investments.

• BANA Venture
• At the end of 2015, MMAC partnered with affiliates of Bank of America, N.A. (collectively, “BANA”) to

acquire the General Electric Capital Corporation LIHTC portfolio.

• As of June 30, 2016, the BANA Venture indirectly owns interests in approximately 650 LIHTC properties.
• We provided a limited guarantee to BANA of the tax credits expected to be generated by the portfolio.
• As of June 30, 2016, we also had a loan to the BANA Venture with a UPB of $5.3 million.
• Morrison Grove Management (“MGM”)
• MGM is a LIHTC asset manager with a portfolio of investments in approximately 300 affordable housing

properties.

• MMAC has a secured loan to MGM which allows us to participate in MGM’s net operating cash flows. As
• f June 30, 2016, the loan had a balance of $13.0 million and a 11% base rate plus contingent interest.
• MMAC also has an option to acquire MGM during a five-year window starting in late 2019.
• Own Account Portfolio
• As of June 30, 2016, we had the following limited partnership interests and loans to LIHTC properties:
• Senior mortgage debt with a notional amount of approximately $20 million; and
• Five limited partnership interests, which had a combined carrying value of $14.6 million.

11 MMA Capital Management, LLC

Low-Income Housing Tax Credits (LIHTC)

• In our Energy Capital and Other Investments business line, MMAC manages its US

Renewable Energy business through a wholly owned subsidiary, MMA Energy Capital, LLC (“MEC”).

• The Company launched MEC in late 2014.
• MEC is focused on short- and medium-term renewable energy project lending.
• MEC provides late-stage development, construction, and permanent term loans to

renewable energy projects, primarily solar.

• MEC originates loans through a joint venture and for our own account.
• We are a 50% investor in a joint venture which at June 30, 2016 had investments in 14

late-stage development and construction loans that had a fair value of $109.8 million.

• We have a $50 million equity investment in the joint venture.
• Our joint venture partner has a $50 million equity investment and also makes available $30

million of leverage to the joint venture.

• At June 30, 2016, the loans held for our own account had a carrying value of $26.4

million on our balance sheet.

• Within this business line, we also manage investments in real estate, land and solar

assets retained from the sale of legacy businesses.

• The carrying value of these investments was $27.4 million as of June 30, 2016.

12 MMA Capital Management, LLC

Energy Capital and Other Investments

MMAC manages its International Affordable Housing business through our wholly owned subsidiary, International Housing Solutions, S.à r.l. International Housing Solutions manages three investment vehicles:

• South African Work Force Housing Fund (SAWHF) – SAWHF began operations in April 2008 and

ultimately raised $154 million of Limited Partner (“LP”) capital from five different investors with an additional participating debt commitment of $80 million from the Overseas Private Investment Corporation (“OPIC”). As of June 30, 2016, it had made 35 investments and was expected to finance approximately 27,500 units of affordable for-sale and rental housing in South Africa.

• IHS Residential Partners – IHS Residential Partners began operations in November 2013 and is a venture

with a large North American institutional investor. As of June 30, 2016, the partners had contributed approximately $60 million to the venture, which financed investments in eight different properties totaling just under 2,100 rental units.

• IHS Fund II – Fund II began operations in July 2014 and as of June 30, 2016, has raised $99 million of LP

capital from eight investors. IHS Fund II also has an additional participating debt commitment from OPIC for $80 million. Capital raising is expected to continue through early 2017. As of June 30, 2016, it has made six investments, representing a total of 1,630 rental units.

For each of these investment vehicles we are paid asset management fees, earn a return on our co- investment, and have the opportunity to earn performance fees after various investment hurdles are met. IHS also is the majority partner in a property management business focused on rental housing in South Africa.

13 MMA Capital Management, LLC

International Housing Solutions (“IHS”)

Moving forward we expect to grow our common shareholders’ equity per share by:

• Staying true to our mission and values.
• Collecting income on our investments in affordable housing and renewable energy

projects.

• Earning asset management and performance fee income on our funds and ventures in

the US and Africa.

• Managing, buying and selling balance sheet and fund assets to maximize returns and

minimize loss.

• Exploring opportunities in related spaces.
• Maximizing after-tax earnings by taking advantage of our net operating loss carry

forwards.

• Managing our overhead at a scale so that we are not compelled to transact if market

conditions are not favorable.

• Opportunistically purchasing our shares in the marketplace when we think they are

undervalued.

14 MMA Capital Management, LLC

Future Growth – Key Drivers

We believe all businesses are a work in progress and need constant innovation to

• succeed. Those innovations often come as a result of asking important questions about

the business. These are some of the important questions we are asking ourselves:

• How do we get the most value out of our current investments?
• Can we create additional investment funds in our areas of expertise?
• Given recent tax law changes, what is next for our renewable energy finance

business?

• Can we develop scale in South and Sub-Saharan Africa?
• What are the opportunities that we can pursue based on our organization’s skill set

and capital structure?

15 MMA Capital Management, LLC

Future Growth – Important Questions