MMA Capital Holdings, Inc.
Q4 2015 Earnings Call Transcript

Published: 17 Mar 2016

[Operator:]

Good morning, ladies and gentlemen, and welcome to the MMA Capital Management LLC Fourth Quarter and Full Year 2015 Conference Call. My name is Andrew, and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will facilitate a question-and-answer session at the end of this conference call. This conference is being recorded. Some comments today will include forward-looking statements regarding future events and projections of financial performance of MMA Capital which are based on current expectations. These comments are subject to significant risks and uncertainties, which include those identified in the Company's filings with the Securities and Exchange Commission that could cause actual results to differ materially from those expressed in these forward-looking statements. The Company undertakes no obligation to update any of the information contained in the forward-looking statements. [Operator Instructions] I would now like to turn the call over to Mr. Michael Falcone, CEO of MMA Capital Management LLC.

[Michael Falcone:]

Thank you, Andrew. Good morning, everyone. Welcome and happy St. Patrick's Day. With me on the call today are Dave Bjarnason, our Chief Financial Officer, and Executive Vice President Gary Mentesana. New to the call this time is Megan Sophocles, the Senior Vice President who has taken over many of Earl Cole’s responsibilities. As many of you know, Earl has recently retired after nearly 30 year career with us. Dave and I will deliver our prepared remarks after which we will all be available to take questions. The purpose of our call today is to review our fourth quarter and full year 2015 results, and to provide an overall business update, including some insights into how we see our business strategy moving forward. With respect to our fourth quarter results, which Dave will review in detail later, we ended the quarter with 116.2 million of common equity, which represented $17.43 of equity per common share on a fully diluted basis, an increase of over 12% for the quarter and over 39% for the year. The majority of the Company's growth in diluted equity per share for the year was driven by a net increase in the fair value of our bond portfolio, as well as from net gains on asset sales, derivatives and extinguishment of liabilities. During the fourth quarter, we also repurchased approximately 92,000 of our common shares at an average price of $12.98 per share. For the year, we were able to repurchase approximately 680,000 shares at an average price of $11.33 thus completing our prior buyback programs. Since all of the 2015, repurchase activity occurred at a discount to our reported fully diluted common equity per share, we realized approximately $0.55 per share of additional common equity from the program. As previously discussed this program has proven to be an important lever in our efforts to increase shareholder value. Further, as of year-end the company continued trade at a discount to reported equity per share and therefore we've adapted a new program for calendar year 2016 for up to 600,000 shares. In addition, as of this call we've increased the buyback price limit to $17.43 per share with fully diluted common equity per share reported on our December 31, 2015 annual report. While we may not always use the most recently published fully diluted common equity per share as the maximum buyback price in the future, it has so far proven to be a reasonable way to limit the price on the shares we acquire. Across our U.S. operations, we continue to see credit quality improve during the fourth quarter, which along with a benign rate environment drove further increases in the fair value of our bond portfolio. Our Leveraged Bonds business continues to generate cash flow benefits consistent with, or above, our goal of mid-teen returns. And the remaining assets, including the loan we hold from the sale of the LIHTC business, are performing as expected. In addition, we fulfilled our additional commitment to the Renewable Energy Finance business by investing 25 million of additional cash into the new solar energy lending joint venture during the quarter aimed at committed capital of both the company and fundamental advisors to $50 million each for the venture. Investment returns on our solar construction loan joint venture continue to meet or exceed our underwriting expectations and are having a positive impact on our bottom-line and cash flows at this point, contributing approximately 1.5 million of both cash flow and GAAP income during 2015, with much of that income generated in the fourth quarter. We anticipate that our solar joint venture will be able to fully deploy the 100 million of joint capital invested early this year and that should result in our $50 million contribution experiencing low double-digit returns for the entire year. We will continue to explore opportunities to add some leverage to the portfolio in an effort to raise the returns on invested capital to further increase returns on investments. In addition, we're working to deploy capital in a solar lending joint venture later in the year, creating another income stream that should contribute to our 2016 results. Separately during 2016, we also expect to begin our fee managing income and cash flow from our Bank of America joint venture and GE asset acquisitions during the first half of 2016, much of which will depend on the value realized from the sale of the acquired real estate. Finally, as we reported on our third quarter call, our preferred stock investment in a private national mortgage lender and servicer was redeemed by its issuer on October 30th, including 6.8 million of cash collateral associated with terminated total return swaps that financed such investment. This redemption caused the return of roughly 18 million of cash to the Company, and resulted in the recognition of a pre-tax gain of 5.2 million in the fourth quarter, which again was fully offset by our NOLs. With respect to international operations, while we're pleased with the efforts of our team in South Africa, we are not satisfied with the performance of the business in large measure due to the much reported struggles in the South African economy. As the economy weakens so does the performance of our Housing Funds in South Africa, rand volatility has made investments in South Africa less attractive to institutional investors. We’ve focused our fund to capital rising on developing finance agencies and impact investors we're not as discouraged by the short-term prospects in South Africa. Only time will tell if in this environment we can raise anymore capital and fund too in the 130 million we've raised to-date. One bright spot is the underlying performance as many of our multifamily properties seems to be improving as we take over property management operation in our new joint venture. If we can generate strong NOI growth through this rough patch and combining NOI improvement with the expected development of the public institutional market for these properties we should be able to realize both value and an exit strategy in the future for our fund investors and ultimately our shareholders. Finally, as discussed on our third quarter call on November 12th, we reached an agreement to acquire all of the interest in the company's subsidiaries and affiliates held by one of the Co-Founders of IHS including approximately 4.4 million of outstanding debt. The purchase was at a significant discount and therefore we reported a net gain from this transaction in the fourth quarter of $3 million. One remaining item of note before turning the call over to Dave, this was our first annual filing in which our external auditor was required to express an opinion related to our internal controls over financial reporting. This requirement was triggered because we are now an accelerated filer given that our market capitalization climbed above 75 million as of June 30, 2015. Something I think we all of agree was good news. As we disclosed in our filing, we determined that as of December 31, 2015 we have deficiencies related to certain aspects of our internal control environment that we accessed is material weaknesses. Dave will address these control deficiencies in greater detail later in the call. But for now let me share two observations on the matter. First, these control deficiencies do not result in any of the statement of our consolidated financial statement as of and for the fiscal year ended December 31, 2015. And two, as we also disclosed we have established a remediation plan that we are now executing and that we are confident will address these deficiencies this year. We take this matter seriously and our remediation efforts represent a critical priority for us that we will address as quickly as possible in the months ahead. With that it's time to turn the call over to Dave for the financial highlights. Dave?

[Dave Bjarnason:]

Thanks Mike and good morning everyone. I would like to provide an overview of our results, I’ll refer to Tables 1 to 5 in Item 2 of our Form-10K. So to the extent that you have our filing in front of you, I would ask that you please turn to Page 13 of the filing where you will find Table 1 which is our balance sheet summary. In table one you can see that we reported on line 17 a common shareholders' equity of $116.2 million which represents a $25 million increase compared to what we reported as of December 31, 2014. $11.3 million of this increase is attributable to our performance in the fourth quarter of 2015. In focusing on significant changes in the balance sheet summary on line 1 you can see that our holdings of cash and cash equivalents declined $7.8 million in 2015, in this case we generated $10.8 million of net cash inflows from investing activities that were more than offset by $18.5 million of net cash outflows associated with financing and operating activities. Our restricted cash holdings that we report on line 2 declined by $9 million in 2015 primarily as a result of our substitution of cash for non-cash collateral. With respect to our bond portfolio which we report on line 3, the unpaid principle balance of our holdings was $223.4 million and have weighted average pay rate of 5.4% as of December 31, 2015. In 2015, we realized $15.3 million in cash proceeds due to the sale of redemption of certain bonds in our bond portfolio. The carrying value of our investments in partnerships which we reported on line 4 increased $54.4 million in 2015 primarily as a result of capital contributions that we made in 2015 into our solar joint venture, while the carrying value of other aspects that we reported on growth six, declined approximately $24.6 million in 2015, primarily as a result of real estate sales and the redemption of loans held for investment. The carrying value of our investment in preferred stock that we reported on line five was reduced to zero at December 31, 2015 as it was fully redeemed at par in the fourth quarter of 2015 by the issuer of that security. As we further discussed in note three of our financial statements in the Form 10K, we recognized a gain $5.2 million related to this redemption in the fourth quarter of 2015. The carrying value of our debt outstanding which we reported on line nine declined approximately $52 million in 2015, primarily as a result of our redemption of debt funding associated with our investment in preferred stock and the partial redemption of our subordinated debt. Finally, the carrying value of other liabilities that we reported on line 11 increased $9.3 million in 2015, primarily due to the recognition of a tax credit guarantee obligation in December related to the GE transaction and due to the collection of principal and interest payments associated with seller financing that we provided in connection with the sale of a portion of our LIHTC business. Turning to table 2, which begins at the top of Page 14 of our filing, we attribute in this table a reported increase in common shareholders' equity between net income, other comprehensive income and other changes in common shareholders' equity. In looking at this table, you can see that between net income and other comprehensive income that is allocable to common shareholders. We saw a $29.8 million increase to common shareholders' equity in 2015 or to the sum of line 22 partially offset by $5.1 million of other changes in common shareholders' equity that I'll discuss in more detail when speaking to table 5 of our filing. Of the reported increase to common shareholders' equity in 2015, $11.3 million of such increase was attributable to our performance in the fourth quarter. Turning to table 3, which begins on the middle of Page 14 of our filing, this table provides a slightly modified presentation of our income statement. Overall you can see that on line 14, we reported $17.8 million of net income allocable to common shareholders, for the full year 2015 of which $7.7 million was recognized in the fourth quarter. As far as key drivers of net income that is allocable to common shareholders I would make the following observations, with respect to net interest income which is covered in more detail in table 6. This line includes interest income associated with all the interest bearing assets, reduced by the interest expense associated with all debt obligations that we used to finance such assets. As you can see on line 5 of table 3, the amount of net interest income that we reported in 2015 was approximately $1.7 million less than we reported in 2014. The decrease in this case was driven primarily by the collection in 2014 of approximately $3 million of delinquent interest associated with two non-performing bonds, one-time items of which are partially offset by a net increase in net interest income that was attributable to our bridge loan and solar loans that we made. Excluding the impact of these items, net interest income declined marginally in commensurate with changes in our bond portfolio and funding mix. With respect to fee and other income, which is covered in more detail on table 7, this line item includes income on our preferred stock investment, asset management fees and reimbursements, as well as other miscellaneous income. As you can see on line 2 of table 3, the amount of fee and other income that we reported in 2015, was approximately $3 million more than what we reported in 2014. This increase was driven primarily by our deconsolidation of the South Africa Workforce Housing Fund or SAWHF, meaning during the period SAWHF was consolidated for financial reporting purposes which was the case until December 31, 2014. Asset management fees and reimbursements were reported through line 8 of this table or as an allocation of income for CFVs. However, effective January 01, 2015, when we no longer consolidated the SAWHF for reporting purposes, all fees earned in 2015 were recognized in line 2 of table 3. With respect to other interest expense, which is covered in more detail in table 8, this line item includes interest expense associated with our subordinated debt, as well as interest expense associated with senior debt that does not finance our interest earning assets. As you can see on line 3 of table 3, the amount of other interest expense that we reported in 2015, was approximately $6.5 million less than was reported in 2014. This decrease is driven primarily by the restructuring of our subordinated debt in the second quarter of 2015, which caused the accounting yield of such debt to decline from 6.9% to 1.6%. And thus, our reported cost of funding from such debt declined. With respect to operating expenses, which are covered in more detail in table 9, this line item includes salaries and benefits, general and administrative expense, professional fees and other miscellaneous expenses. As you can see on line 4 of table 3, the amount of operating expense that we reported in 2015 was about $5.4 million more than we reported in 2014. This change is driven primarily by an increase in employee incentive compensation, foreign exchange losses and an impairment loss that we recognized on our co-investment in SAWHF. With respect to net gains on assets and derivatives, which are covered in more detail in Table 10, this line item includes net gains and losses associated with our bonds, our loans, our derivative instruments, sales real state and the extinguishment of recognized debt allegations. As you see on row five of Table 3, the amount of net gains on assets and derivatives that we reported in 2015 was approximately $12 million more than we reported in 2014. This increase is driven primarily by sales of real estate and the redemption of our investment in preferred stock. Finally, with respect to net losses of consolidated funds and ventures that are allocated to common shareholders which are covered in more detail on Table 11, this line includes revenues, expenses, net gains and equity and losses from lower tier property partnerships, consolidated funds and ventures. As you can see on row eight of Table 3, the amount of net loss that we reported in 2015 that was allocated to common shareholders was approximately $12 million less than we reported in 2014. This decrease is driven primarily by the deconsolidation of SAWHF and not the profit entities. Tuning to Table 4, which begins at the top of Page 15 of our filings, other comprehensive income for the full year of 2015 was approximately $12 million. As reported on line one of this table most of this income is driven by the net increase in the fair value of our bond portfolio, a net increase of which were sealed by improvements in property operations, declines in market yield and certain bond market house. Finally and I am turning to Table 5, which begins in the middle of Page 15 of our filing. Other changes in common shareholders’ equity in 2015 were as reported in line one of this table, driven primarily by share buybacks. As Mike mentioned, the company purchased approximately 680,000 shares in 2015 and while this activity reduced common shareholders' equity such buybacks drove a $0.55 increase in diluted equity per share given that our average repurchase price of $11.33 was below of our reported book value per share. Before turning the call back over to Mike, I want to describe some additional perspective on our internal controls as a follow up to Mike's earlier comments. As Mike referenced, we disclosed an item 9A for our Form 10K that as of December 31, 2015 we identified total control deficiencies related to certain aspects of our internal control environment and that we assessed as material weaknesses. In particular, we disclosed that program change and user asses controls of our servicing system and bond data base were not effective or similar information technology controls over electronic spreadsheets used in our financial reporting process were also assessed as not effective. We also disclosed that certain of our management review controls that we used in connection with accounted for certain investments were not effective for various reasons, including as a result of the level of precision of review thresholds that we used to identify exceptions for further investigation and analysis. Our assessment that disclosed deficiencies with material weaknesses reflects our judgement that a reasonable possibility exists for the material statement and would not be prevented or detected in timely manner in the future. In saying this bear in mind that other U.S. GAAP reasonably possibly means more than remote, less than likely as a result a material weakness represents a deficiency where even a low likelihood or more than remote chance exists where a material mistake could occur. As Mike noted however these deficiencies did not result in animus statement of our consolidated financial statements as of and for the fiscal year ended December 31, 2015. Nonetheless we take these control deficiencies seriously and as Mike mentioned we established a remediation plan that we are now executing against and that we are confident will address these deficiencies this year. With that I’ll turn the call back over to Mike.

[Michael Falcone:]

Thanks Dave. Consistent with prior calls, I want to spend a few minutes talking about our current thinking of regarding strategy, mission and values before opening the call for questions. We are as clearly focused on maximizing the value of the assets in our Affordable Housing business and growing our Renewable Energy business. On our last call we discussed the joint venture with Bank of America to invest in the former GE LIHTC business. Additionally, we are working with fundamental advisors to expand our access to additional capital for the Solar Construction Lending business and the Solar Permanent Lending business. These joint ventures and the fee-based income streams they create represent paths for growth in the coming years. One additional item of note is the current plan with respect to share buybacks, as it stands the company adopted a 600,000 share buyback authorization for 2016 both Management and the Board believe that the buyback of our shares has been an effective way to drive value for our continuing shareholders, as seen by another incremental benefit of $0.55 of fully diluted common share -- of common equity per share realized in 2015. We continue to believe that a buyback at our current trading price represents an attractive investment, especially as we continue to trade below book value, and management continues to support the idea of an incremental return of capital to shareholders via the buyback program. Lastly, and as of this call, we continue to expect some internal growth assets in 2016, but perhaps not as much as in prior years. 2016 to a great degree will represent an opportunity to remain fully invested as we recycle capital, focused on growing our fee-based businesses responsibly and executing on the partnerships we have forged. We remain focused on improving the per-share value of the Company through strategic investments in our Affordable Housing and Solar Lending business through asset sales, through management of our liabilities, and through share buybacks. We are excited about our future, we remain committed to our shareholders, and we thank you for your support. We will now open up the call to questions, operator?

[Operator:]

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Gary Ribe from MACRO Consulting. Please go ahead.

[Gary Ribe:]

I just wanted to circle back I think to the GE deal and I am not sure that I really understands sort of your economics and I looked at the table that was filed in the back with tax credits and how they roll off and I guess, if I'm not mistaken the majority of them, are wound down by 2019, it looked like in excess of 90% of them, am I reading that correctly?

[Michael Falcone:]

Yes.

[Gary Ribe:]

Okay. So at that point, your position in those funds and the properties that underlie them, whatever also recognized the hard project stuff, they become eligible for capital events, is that correct?

[Michael Falcone:]

Correct. They are really in that procedural portfolio there are transactions or investments which are available today for capital events and which will become available over the next three to five-six years and I'm looking at Gary and Megan to remember we thought the last of those events was probably eight-nine years away or so I think the sort of, as we think of the life of that investment we think of it as kind of an eight to ten year life but there will be activity across the entire eight to ten year period.

[Gary Ribe:]

And a capital event, couldn’t Gary also just be a refinancing of the property where you take cash out?

[Gary Mentesana:]

Correct. So a capital event could be a sale or a refinancing of the property at the lower tier levels and that what is a multitier partnership structure and that may or may not lead the capital to us, in fact, of the 600 properties that are in the venture, I think we think most of them will not return capital to us, but we do think that there will be certainly some properties that will.

[Gary Ribe:]

So, I guess, kind of as you look at that your position is getting 70% of those residuals, the residuals being, what's left go over after any debts paid off or is that am I thinking about that correctly?

[Michael Falcone:]

So, if I had a white board I could do to serve more efficiently, but if you think about sort of two levels of partnerships if you will, at the bottom of your piece of paper you can draw a box with the GP and an LP, and there is a split between that GP and that LP at the partnerships that owns a property. And we are in most insistences other than two or three we are in that LP box, so there is a split at that level. And then that LP consists of another partnership which is typically investor partners who are really tax credit focussed investors in GP and we are typically the GP at that next level. And so typically there is a split -- the first thing that is got to be paid off at the property level is debt, and to the extent that there is equity left over or there are residual proceeds left over, there is some split between the developer general partner and the limited partner, which we are invested in. And there is another split between the investor limited partner and the general partner.

[Gary Ribe:]

Okay, and in your instance that’s Bank of America and that’s just generally a 70-30 split?

[Michael Falcone:]

So we then split the residual that comes to us with Bank of America at 80-20. The splits along the way are really another 600 investments so they are probably 598 different splits along the way, the each one...

[Gary Ribe:]

Right.

[Michael Falcone:]

...is unique.

[Gary Ribe:]

Yes. Okay. I can understand and respect that aspect of it, I am just trying to understand how we think about this stuff and you are talking about getting residuals coming in over the next -- starting this year. So it's because of the nature of it, it would be tough to get your arms around what exactly that really means. So okay, that’s helpful. I also -- just curious, you had a subsequent event where you guys sold a property or now seeing properties or two in the event of the gain, was that the Winchester property or was that something different?

[Michael Falcone:]

Retail, yes, it's a property called Retail Village in Arizona, it was a property that we -- it was actually it was an investment we originally had as a bond investment. And then a few years ago we worked with the developer, we repaid the bond, went to developer’s money to do that and then made a small equity contribution along side of the developer that capital was used to reposition and freshen the project and then that project was sold. So the gain is our gain on that equity investment that goes back two years like that three years like that.

[Gary Ribe:]

Okay. [Multiple Speakers] yes the reason I asked was this, go ahead I am sorry.

[Michael Falcone:]

That kind of opportunity is one that we hope to see more of as we work the portfolio going forward we -- our internal freights for that is mining the portfolio as we mine the portfolio for value going forward that’s the kind of thing we would like to do. We would certainly like to do it and make those kinds of gains on every deal.

[Gary Ribe:]

Right.

[Michael Falcone:]

But if that is possible it's not likely, but we do think that there will be opportunities to reposition properties invest in them, work with general partners to reposition and create some value. So that is it when we talk about kind of making strategic investments in our Affordable Housing business going forward that is the kind of investment that we would think about on an ongoing basis.

[Gary Ribe:]

The reason I asked as I've seen reports that of, that Winchester was being sold but it didn’t look like that that is happening yet, so.

[Michael Falcone:]

We're making progress on that going through, I think we have nearly completed a rezoning process there and so we're hopeful that that will happen soon but as of nothing yet.

[Gary Ribe:]

Right, okay, and if that happened, you’d presumably own some bonds that might benefit from that too or no?

[Michael Falcone:]

So in the Russell another project is Russell 150 we have an investment in land which is nominal, couple of hundred thousand dollars I think in total. And then we have a bond investment, those bonds have been written down and our hope would be that we would be able to sell the land, have the developer coming in and redevelop the property that would lead to revenue being generated to pay the bonds, that would -- could be their community development district bond, so there are bonds which get value essentially from property taxes and so as the value of the property goes up then the -- we'd hope that the value of the bonds would go up and we'd be able to sell the bonds. So, that was that, the sequence of events is in order to create value in the bonds we have to create value in the underlying property and sale of the property to a developer and the rezoning is the first step in that process.

[Gary Ribe:]

And I guess just last one for me, and I'll let somebody else ask some questions, but I guess with this solar JV, it looks like your -- it's not fully invested, almost fully invested, and you talked about raising another round, are you primarily looking for outside capital with that and to be the “asset manager” or you're going to be investing a material amount of your own money, or what are your thoughts there I understand it's preliminary?

[Michael Falcone:]

We had at a total of 50 million, we're feeling reasonably filled up relative to our appetite for solar construction loans right now, the -- some of that has to do with maintaining the cash balances that we want to maintain, there was other assets perhaps sale we made to deploy more capital and it is over construction lending. We also may deploy a little bit more capital in the solar permanent lending, the big difference between the two is we think on the solar construction lending side, that's a relatively low leverage business, it is a big -- if the leverage is available it is available on kind of a pool of assets and it is certainly below 50% leverage probably significantly below 50% kind of a leverage. A permanent loan particularly -- a solar permanent loan, particularly holistic that were the power purchaser is something that can be levered more significantly, closer to a think of a triple net lease real estate deal, where you might be able to get 70% to 80% kind of leverage so we’d see the solar permanent lending business is more highly leveraged than the solar construction loan business, having said that while we may deploy capital in both places and serve to alleviate sort of friction which is to say, to get the deal in the company going and we need to get money invested, and we can’t say people hold on leg a while, while we close this capital coming, our plan would be to raise capital and have that look more like an investment management, asset management that's to keep our money employed -- our capital employed as a co-investment.

[Gary Ribe:]

And then I guess the material weaknesses they read rather benign like you got to step up some of the control process. Do you guys have a unique way for being done with that throughout the year, is it by the end of June or what?

[Michael Falcone:]

Yes, I would say that our plan is to implement any required process change in the first half for the year. If there is a wildcard in terms of if the end point remediated points to and being subject to independent validation by our fellow auditors. So I think there is going to be post implementation of internal change there also might be a testing period that will take place during the remainder of 2016. So with that respect of, I think we will be -- if it's a procedural matter in a pretty good spot in the first half of the year. But again that’s going to be subject to testing and validation if that’s helpful.

[Operator:]

[Operator Instructions] The next question comes from Ted Lou of Valley Financial Group. Please go ahead.

[Ted Lou:]

I just wondered if you can discuss if you have budgeted for the new internal control systems?

[Michael Falcone:]

Well these are not expensive changes. But the -- we -- so right now in terms of the way we do internal audit is we do out source of our internal audit work to top 10 accounting firm. So we do have that sort of separate line item of budget for internal audit consulting, and that really probably won't change much year-over-year. But kinds of changes that we need to implement are not system wide, they are not expensive really, they are just kind of procedural controls from a software perspective. And then the management review controls would really cost us nothing, we just need to -- we were looking at variances that by way of example at a 10% level and we can move that down to 5% level. Pick a number I mean I don’t know what those -- if that is ultimately what we will determine that number to be but that’s the kind of thing that we are trying to do out here.

[Ted Lou:]

That’s what I expected, but I just wanted to bring out that is not terribly meaningful cost wise.

[Dave Bjarnason:]

Yes, that’s right, I would just echo what Mike said I think as from a technology perspective we are not talking about under-writing any consequential costs to implement change here, so – again I would just back what Mike said to that same point.

[Ted Lou:]

My last question, I just wondered anything to do in Savannah?

[Michael Falcone:]

So we continue to look at that property and ways to frankly exit it. Our general view is that the market is developing there, if you look at sort of markets around the country, we are probably in a good spot to be sellers. How that turns out and when still remains to be seen. There is a just like the Russell 150 property I just described a few minutes ago. This is a project that ultimately is going to depend on the zoning and perhaps a read -- I mean it's already zoned for significant density whether in the end that plan is the one that will be executed or whether there needs to be a rezoning to execute a different density plan is probably the one of the long lead time items there. So we are active in trying to move that asset but I wouldn’t say anything is eminent at this point.

[Operator:]

The next question comes from Gabby Glitzburgh, a private investor. Please go ahead.

[Unidentified Analyst:]

How can we determine the value, or the range of values behind the Morrison Grove option, I mean what sort of financial remissions do you receive and what makes sense to share with shareholders going forward, so we can have an idea of how to value that?

[Michael Falcone:]

Yes. So, let me tell you how we look at sort of the Morrison Grove investment conceptually and then I will apologize for not being able to use sort of real numbers and I will explain why in a second, so that investment now has 350 plus or minus individual properties in 2 dozen funds Gary plus or minus 2 dozen funds. And as I described earlier, each property has a split between a general partner and a limited partner and then the limited partner interest then has an economic split between investor lending partners and Morrison Grove, in terms of how economics flow and sometimes those economics are purely identified as residual values, sometimes they are indentified as deferred development fees that might go to the general partner, sometimes they are deferred asset management fees that might roll up to Morrison Grove. So we actually have that underwriting schedule where we look at each property, project out its value for ten years, discount that back ten years being just kind of a standard, discount that back, figure out what the NOI property value therefore is and then where cash rolls through the various waterfalls, ultimately up to Morrison Grove, we look at that number, take out certain of the expenses of Morrison Grove to operate over the next three or four years, we then take out the option payment and we track the value there of the underlying equity of the Morrison Grove transaction in that way. And so, we have update that, certainly not quarterly but kind of every six months or so and we might not have the information on every deal and every roll forward but we try to keep reasonably close watch on what's going on in that portfolio from the value perspective. So we have and share with the Board, the value which we think it is kind of the franchise value, underlying Morrison Grove option. And the trick with that is as you might imagine there are a whole bunch of forward-looking assumptions relative to property values, that are underlying that number and one of the two pond determinants are what happens with rents overtime, are we going to see rent growth in the economy and the second is, probably what is going to happen in cap rates overtime and I guess the third would be is, if the refinancing is the event in the future where interest rate is going to be, because of the high variability in all of those elements, we do not disclose, what we think the Morrison Grove option could be worth, because of the variability and we go back and forth about whether we should or shouldn’t send the advised -- pretty good advice of counsel has been that we should stay from that number.

[Unidentified Analyst:]

Yes, and Mike you -- it will be less about the variability and more about how substantial it is relative to the value of the company, on a limited end I do not suspect that it is potential a large component of volume, but I mean if there are any middle ground where you can share some data, have your counsel put on the line of disclosers in terms of all the forward-looking assumptions, any sort of information that you can give so that we can sort of begin to describe value to it?

[Michael Falcone:]

I’ll take that as a takeaway from this call, I am not going to blur out a number on the call, even though I could, I have a number off the top of my head. Counsel who is sitting across the table would kick up Mike calf or shin if I did blurt that out so -- but I take that as a takeaway. I understand fully that the lack of transparency around future value in Morrison Grove and for that matter the Bank of America, GE venture, leaves investors somewhat wanting for additional information and let’s try to figure out how to do that other than that we are doing it now but I suspect in a way that won't be complete or won't completely satisfy your curiosity just because of the sort of leak over and the associated risk with that.

[Operator:]

This concludes our question-and-answer session. I would like to turn the conference back over to Michael Falcone, CEO for any closing remarks.

[Michael Falcone:]

Great, thanks operator. Obviously, we look back at 2015, it's a year that we are proud of in terms of what we were able to accomplish not just in terms of changing value for the year, but also sort of for some of the positioning that particularly the GE and the Bank of America venture created for years ahead that’s also true for the solar businesses, in terms where we think that’s going in years ahead. Our success in those areas really has a lot to do with very dedicated and hard working employees and want to publicly acknowledge and thank those folks for what was sort of across the year, a year of hard work -- across the board a year of hard work and accomplishment. And I can assure our shareholders that that group of people is just as focused on 2016 as we were in 2015, I still really can't promise the results that we had in 2015 but I can promise the effort knowing the dedication of our employees and the group of people who lead those employees. So I want to thank the shareholders and today I want to take a special time out and thank the employees for what was really a terrific year. So everybody have a good St. Patrick’s Day and our next call is in a month or so. So we will talk soon. Thank you.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.