MMA Capital Holdings, Inc. (MMAC) is a financial services firm specializing in infrastructure-related investments that generate positive environmental and social impacts while delivering attractive risk-adjusted returns to shareholders. Established in 1996 and headquartered in Baltimore, Maryland, MMAC focuses on debt investments associated with renewable energy projects and real estate.
Key Strategic Focus
MMAC's strategic focus centers on investing in debt associated with infrastructure, particularly renewable energy projects. The company primarily provides financing to developers, constructors, and system owners for the late-stage development and construction of commercial, utility, and community-scale photovoltaic (PV) facilities in the United States. These investments are often made through joint ventures, known as Solar Ventures, where MMAC typically holds a 50% interest. The Solar Ventures offer senior secured loans collateralized by solar projects and may also invest in subordinated loans and revolving loans. Additionally, they finance non-solar renewable technologies, such as wind and battery storage, and provide equipment financing and other customized debt solutions.
Financials and Funding
As of September 30, 2020, MMAC reported a book value of $277.6 million, with a book value per share of $47.74. The adjusted book value, excluding deferred tax assets, stood at $221.5 million, or $38.08 per share. The company had $363.7 million invested in renewable energy projects, primarily through the Solar Ventures. MMAC's debt capitalization included a renewable energy revolver with $120 million in total commitments and other asset-backed senior debt totaling $41.2 million. The subordinated debt had a principal balance of $86.7 million, bearing an interest rate of three-month LIBOR plus 2.0%, maturing in 2035.
Pipeline Development
The Solar Ventures have a strong track record, having invested in over 195 project-based loans totaling $2.9 billion in debt commitments for the development and construction of more than 760 renewable energy project sites across 25 states and territories. As of September 30, 2020, the Solar Ventures' loan portfolio comprised 54 loans with an aggregate unpaid principal balance of $745.8 million, a weighted-average remaining maturity of seven months, and a weighted-average coupon of 10.0%. The projects financed are expected to contribute to the generation of over 9.3 gigawatts of renewable energy, eliminating approximately 267.6 million metric tons of carbon emissions over their lifetimes.
Technological Platform and Innovation
MMAC, through its external manager Hunt Investment Management, leverages an extensive renewable energy loan origination platform. The investment origination team has extensive experience in the renewable energy and project development industry, with $2.9 billion of originations for the Solar Ventures since their inception in 2015. The platform reviews approximately $2 billion of directly sourced opportunities annually, maintaining a typical pipeline of around $800 million. The Solar Ventures have originated 143 repaid project loans totaling $1.8 billion, achieving a weighted-average internal rate of return of 16.2%, with no loss of principal to date.
Leadership Team
- Michael L. Falcone: Chief Executive Officer, President, and Director.
- David C. Bjarnason: Chief Financial Officer and Executive Vice President.
- Francis X. Gallagher: Chairman of the Board of Directors.
- Steven S. Bloom: Director.
- J.P. Grant: Director.
Competitor Profile
In the renewable energy financing sector, MMAC faces competition from various financial institutions and investment firms that provide similar debt financing solutions for infrastructure projects. While specific competitors are not detailed in the available information, the market is characterized by a fragmented landscape with fewer financing sources, leading to less competition and attractive risk-adjusted returns for companies like MMAC that finance projects before they reach commercial operation.
Strategic Collaborations and Partnerships
MMAC collaborates with Hunt Investment Management, part of Hunt Companies, Inc., as its external manager. Hunt, founded in 1947, is dedicated to fostering long-term partnerships through the development, investment, management, and financing of real estate and infrastructure. This partnership provides MMAC with access to an experienced investment origination team and a robust renewable energy loan origination platform.
Operational Insights
MMAC's competitive advantages include its ability to review a substantial volume of directly sourced opportunities annually without reliance on brokers, maintaining a strong pipeline of potential investments. The company's strong reputation and relationships with seasoned developers in the renewable energy industry enable it to execute and deliver underwritten returns effectively. Additionally, MMAC's comprehensive credit analysis, underwriting, and loan structuring processes contribute to its success in the market.
Strategic Opportunities and Future Directions
MMAC aims to grow its book value, adjusted book value, and share price by increasing the company's return on invested capital through the redeployment of equity from non-core investments into infrastructure-related investments, including debt associated with renewable energy projects. The company plans to leverage its investments prudently, lower overhead costs, and explore opportunities in other infrastructure-related investments to achieve its strategic objectives.
