Baltimore-based MMA Capital Management LLC announced Tuesday a series of agreements with affiliates of Bank of America Corporation, creating a joint venture for the purpose of investing in a pool of affordable housing assets to be acquired from General Electric Capital Corporation.
Effective Dec. 31, the joint venture will invest $211 million in a series of existing low income housing tax credit investments as part of a previously announced agreement with GECC. The Company will hold an investor call on Wednesday, December 30, 2015 at 8:30 a.m. ET to discuss the transaction.
“This new joint venture is another step in our journey as we grow the investment and asset management business of the company,” said Michael Falcone, MMA Capital’s chief executive officer. “Today’s venture re-establishes our direct footprint in the affordable housing investment management business, in advance of the potential opportunity to acquire Morrison Grove Management, another tax credit asset manager, in 2019.”
The joint venture will acquire limited partnership investments, mostly through investments in multi-asset investment funds, representing interests in more than 650 separate affordable housing communities in the United States. Bank of America will benefit from the majority of the tax credits remaining from the investments and will partner with the company to benefit from the realization of any residual value resulting from the sale or refinancing of the properties over time.
MMA will provide asset management services for the joint venture and will provide a limited guaranty of the expected tax credits to be generated by the portfolio for the benefit of Bank of America. In addition to sharing in the residual events of the joint venture, the Company will also benefit from a 2% annual asset management fee and a 2 percent upfront guaranty fee, both calculated using the $211 million initial equity investment for the joint venture.
Separately, MMA will pay approximately $9 million to acquire a portfolio of five assets, consisting of one wholly-owned limited partnership and four 99 percent limited partnership interests, which will not go into the joint venture. Additionally, MMA will acquire interests in financial instruments with a combined notional amount of approximately $23 million that are secured by taxable loans related to some of the properties in the acquired portfolio. MMA expects to earn a net spread of approximately 4 percent on its interests over the next several months as the underlying loans pay off.
“Coming from our recent background of managing undervalued assets for gains and our extensive experience managing tax credit investments for institutional investors, we believe that we are well positioned to effectively oversee this portfolio of investments and to maximize the residual opportunities. We believe we can create significant value for our shareholders over time from this venture,” Falcone said.