Greystone Housing Impact Investors LP

I would like to welcome everyone to the Greystone Housing Impact Investors LP NYSE ticker symbol GHI fourth quarter of 2022 earnings conference call. During the presentation, all participants will be in a listen-only mode. After management presents its overview of Q4 2022, you will be invited to participate in a question and answer session. As a reminder, this conference call is being recorded. During this conference call, comments made regarding GHI, which are not historical facts, are forward-looking statements and are subject to risks and uncertainty 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 the use of words like may, should, expect, plan intent 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 our 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 our business please review the periodic reports and other documents filed from time to time by us with the Securities Exchange Commission. Internal projections and beliefs upon which we base our expectations may change, but if you 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 GHIs operating under this SEC regulation FD encourage you to take full advantage of the question and answer session. Thank you for your participation and interest in Greystone Housing Impact Investors LP. I would now like to turn the call over to Ken Rogozinski, Chief Executive Officer.

Good afternoon, everyone. Welcome to Greystone Housing Impact Investors LP's fourth quarter 2022 investor call. Thank you for joining. I will start with an overview of the quarter in our portfolio. Jesse Corey, our Chief Financial Officer, will then present the partnership's financial results. I will wrap up with an overview of the market and our investment pipeline. Following that, we look forward to taking your questions. For the fourth quarter of 2022, the partnership reported net income of 9 cents per unit and 15 cents of cash available for distribution per unit. For the calendar year 2022, we have reported net income of $2.62 per unit, which exceeds the 2021 fiscal year net income per unit of $1.53 by 71%. Similarly, our 2022 cash available for distribution of $2.37 per unit exceeds our reported $1.88 per unit for the 2021 fiscal year by 26%. We also reported a book value of $14.31 per unit on 1.57 billion of assets and a leverage ratio as defined by the partnership of 73%. On December 19th, we announced a quarterly distribution of 67 cents per unit, which consists of a regular quarterly cash distribution of 37 cents per buck, a supplemental distribution payable in the form of additional bucks equal in value to 20 cents per buck, and an additional supplemental distribution of 10 cents per buck payable in cash. The supplemental buck distribution was paid at a ratio of 0.0105 bucks for each issued and outstanding buck as of the record date. These supplemental distributions reflect the partnership's continuing intent to distribute the majority of the partnership's recent gains on the sale of its Vantage investments. The payment of a portion of the supplemental distribution in the form of bucks allows Greystone Housing Impact to retain additional capital to fund future investment opportunities at a low cost and is non-dilutive to current buck holders. In terms of the partnership's investment portfolio, we currently hold $1.27 billion of affordable multifamily investments in the form of mortgage revenue bonds, governmental issuer loans, and property loans. $116 million in joint venture equity investments, and $37 million in direct real estate investments. As far as the performance of the investment portfolio is concerned, we have had no forbearance requests for multifamily mortgage revenue bonds, and all such borrowers are current on their principal and interest payments. Physical occupancy on the underlying projects was 94.5% for the mortgage revenue bond portfolio as of December 31, 2022. Our joint venture partners sold three Vantage properties during 2022, generating a total of $659,000 in preferred return and $39.7 million in capital gains for the partnership upon sale. Additionally, two Vantage properties were sold in January 2023, and the partnership estimates that it will recognize $244,000 of preferred return and $15.2 million in capital gains in the first quarter of 2023. Excluding the two Vantage properties sold in January 2023, our remaining Vantage joint venture equity investments consist of interest in eight properties, three where construction is 100% complete, and the remaining five are either under construction or in the planning stage. With the three properties where construction is 100% complete, we continue to see good leasing activity, with one property having achieved at least 90% physical occupancy as of December 2022. We continue to see no material supply chain or labor destructions on the Vantage projects under construction. As we have experienced in the past, the Vantage Group, as the managing member of each project-owning entity, will position a property for sale upon stabilization. In addition, we have executed two commitments with the Freestone Development Group, one for a project in Colorado and one for a project in Texas. Both properties are in the planning phase. Finally, earlier this month, we executed an $8.2 million commitment to fund the construction of Velage Senior Living Carson Valley, a 102-bed seniors housing property located in Minden, Nevada. This is our first joint venture equity investment in the seniors housing market segment, and we are pleased to be working with Integral Senior Living, ISL Ventures, and their partner on this transaction. Integral Senior Living currently manages over 12,000 units of independent living assisted living, and memory care across more than 100 communities nationwide. In December 2022, we sold our 100% interest in the entity that owns the 50-50 student housing property in Lincoln, Nebraska to an unaffiliated nonprofit entity that specializes in student housing as their charitable purpose. As part of that transaction, the nonprofit assumed all of the properties existing indebtedness and the partnership took back a subordinate note in the amount of $4.8 million. Our single remaining student housing property at San Diego State continues to have strong occupancy level, and pre-leasing for the 2023-2024 academic year has begun. In December of 2022 and January of 2023, we closed on approximately $208 million in new MRB investment commitments. more than half of which were immediate full fundings. In addition, we continue to advance funds for the construction of affordable multifamily properties, securing our existing mortgage revenue bond, taxable mortgage revenue bond, governmental issuer loan, and property loan investments. With that, I will turn things over to Jesse Corey, our CFO, to discuss the financial data for the fourth quarter of 2022. Thank you, Ken.

As Ken mentioned, we declared a supplemental distribution in December 2022 payable in additional units at a ratio of 0.0105 units for each outstanding unit as of the record date. All unit and per unit metrics that I will discuss have been adjusted to reflect this buck's distribution on a retroactive basis. Earlier today, we reported earnings for our fourth quarter ended December 31st. We reported gap net income of $3.2 million, or $0.09 per unit, basic and diluted. And we reported cash available for distribution, or CAD, of $3.3 million and $0.15 per unit. Our book value per unit as of December 31st was, on a diluted basis, $14.31 per unit, which is an increase of approximately $0.57 from September 30th. This increase is largely a result of an increase in the fair value of our mortgage revenue bond portfolio caused by the modest stabilization of the municipal bond market during the fourth quarter. We mark our mortgage revenue bonds to market quarterly. However, such gains or losses do not impact our cash flows or reported net income, except in the case of impairments, if any. As of market close yesterday, February 22nd, our closing unit price on the New York Stock Exchange was $18.77, which is a 31% premium over our net book value per unit as of December 31st. We regularly monitor our liquidity to both take advantage of accretive investment opportunities and to protect against potential debt deleveraging events if there are significant declines in asset values. As of December 31st, we reported unrestricted cash and cash equivalents of $51.1 million. And we also had $34.5 million of additional availability on our secured lines of credit. At these levels, we believe that we are well positioned to fund our current financing commitment, investment financing commitments. We regularly monitor our overall exposure to potential increases in interest rates through an interest rate sensitivity analysis. which we report quarterly and is included on page 74 of our Form 10-K. The interest rate sensitivity table shows the impact to our net interest income given various scenarios of changes in market interest rates and other various management assumptions. These scenarios assume that there is an immediate rise in interest rates and that we do nothing in response for 12 months. The analysis based on those assumptions shows that at an immediate 200 basis point increase in rates as of December 31st, that is sustained for a 12-month period will result in a decrease of approximately $1 million in our net interest income and cash available for distributions, which is approximately 4.3 cents per unit. The projected decrease in net income in CAD from this analysis at a plus 200 basis point scenario is significantly improved from the 23 cents per unit result as of December 31st, 2021. which is due primarily to our execution of interest rate swaps during 2022. We believe this level of exposure is very low in comparison to our year-to-date net income of $2.62 per unit. I'd now like to share some current information on our debt investments portfolio consisting of mortgage revenue bonds, governmental issuer loans, and property loans. These assets totaled $1.27 billion. which is an increase of approximately 16% from September 30th, and such investments represent 81% of our total reported assets. We currently own 77 mortgage revenue bonds that provide permanent financing for affordable multifamily properties across 13 states. Of these mortgage revenue bonds, 37% of our portfolio value relates to properties in Texas, 26% in California, and 17% in South Carolina. The fair value of our mortgage revenue bond portfolio increased by $104 million from September 30th to December 31st due to approximately 85 million of net principal advances during the quarter with the remaining increase due to increased unrealized gains. We currently own 13 governmental issuer loans that finance the construction or rehabilitation of affordable multifamily properties across six states. Alongside a governmental issuer loan, we will also commit to fund an additional property loan that shares the first mortgage lien. Our property loan is typically funded after the funding of the governmental issuer loan is completed. During the fourth quarter, we advanced funds totaling $30.4 million for our governmental issuer loans, taxable governmental issuer loans, and related property loan commitments. In total, our mortgage revenue bond, governmental issuer loan, and related debt investments outstanding future funding commitments of approximately $394 million as of December 31st. As these commitments are funded over the next 30 months, they will add to our income-producing asset base. On the accounting front, I would note for the audience that we will be adopting Accounting Standards Update 2016-13, or the CECL standard, effective January 1st, 2023, for assets within the scope of the guidance. The CECL standard requires a transition from the current incurred loss model to an expected credit loss model, which will generally result in higher credit loss reserves than our current GAAP accounting. We are finalizing our assessment and implementation of CECL and will provide transitional disclosures in our first quarter 2023 Form 10Q. Turning to our joint venture equity portfolio, the portfolio consists of 12 investments as of December 31st. one of which is reported on a consolidated basis. The carrying value of our joint venture equity investments totaled approximately $116 million as of December 31st, exclusive of the one investment reported on a consolidated basis. We advanced additional equity under our current funding commitments, totaling $10.9 million during the fourth quarter. As Ken previously mentioned, two of the Vantage properties were sold in January 2023 at significant gains, which continues the trend of significant returns on joint venture equity property sales. We use debt financing facilities to leverage our investment assets, and such debt financing facilities had an outstanding principal balance totaling $1.06 billion as of December 31st. This is up from approximately $963 million as of September 30th. as a result of leverage on funding of our existing investment commitments and new investment commitments during the fourth quarter. We manage and report our debt financings in four main categories on page 64 of our Form 10-K. The first category is fixed rate debt associated with fixed rate assets and represents $263 million, or 25% of our total debt financing. As both the asset and debt rates are fixed rate, Our net return is not generally impacted by changes in either short-term or long-term market interest rates. The second category is variable rate debt associated with variable rate assets and represents $403 million, or 38% of our total debt financing. Variable rate indices and floors will vary, but we have effectively synthetically fixed our net interest spread against rising interest rates without the need for separate hedging instruments. Third category is variable rate debt associated with our fixed rate assets that have been hedged via SOFR-denominated interest rate swaps. These interest rate swaps limit our exposure to increased funding costs, resulting from rising short-term interest rates. This category accounts for $230 million, or 22% of our total debt financing. The fourth and final category is variable rate debt associated with our fixed rate assets no designated hedging, which is where we are most exposed to interest rate risk in the near term. This category represents only $166 million, or 16% of our total debt financing, and we regularly monitor our interest rate risk exposure for this category and may implement hedges in the future. We entered into three interest rate swap transactions with maximum notional amounts totaling $193 million in the fourth quarter. In addition, we entered into two additional swaps in January 2023 with notional amounts totaling $20 million. In both instances, our swaps were executed to take advantage of the inversion in the yield curve and to synthetically fix our interest costs for new debt investments. On our capital side, we continue to pursue exchanges of our existing Series A preferred units for newly issued Series A1 preferred units. to maintain our access to non-dilutive, fixed-rate, and low-cost institutional capital. We have successfully exchanged 37 million of our initial 94.5 million Series A preferred units held by financial institutions for new Series A1 preferred units to date. This has extended the earliest optional redemption date on the exchanged units to 2028 or 2029. February 2023, we received our first redemption notice for $20 million of Series A preferred units to be redeemed in August 2023. We are pursuing exchanges for the remaining $37.5 million of Series A preferred units that are nearing their optional redemption dates. In February 2023, we also issued $8 million of additional Series A1 preferred units to an existing investor under a separate offering. and we continue to pursue additional preferred unit issuances under our active offerings for both our Series A1 and Series B preferred units. I'll now turn the call back to Ken for his update on market conditions and our investment pipeline.