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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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For the quarterly report year ended June 30, 2020

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For the transition period from __________________ to __________________

Commission File Number 001-11981

MMA CAPITAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

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Securities registered pursuant to Section 12(b) of the Act:

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes ☑   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☑

There were 5,704,314 shares of common shares outstanding at August 3, 2020.

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MMA Capital Holdings, Inc.

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Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q for the period ended June 30, 2020 (this “Report”) should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Annual Report”), filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”), to which reference is hereby made. This Report 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 (the “Exchange Act”). Forward-looking statements often include words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “project,” “see,” “seek,” “should,” “will,” “would,” and similar words or expressions and are made in connection with discussions of future events and future operating or financial performance.

Forward-looking statements reflect our management’s expectations at the date of this Report 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 including the uncertain aspect of the novel strain of coronavirus pandemic, known as COVID-19. Our actual results and financial condition may differ materially from what is anticipated in 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 Report. For a discussion of certain risks and uncertainties and the factors that could cause our actual results to differ materially because of those risks and uncertainties, see Part II, Item 1A. “Risk Factors” of this Report and Part I, Item 1A. “Risk Factors” of our 2019 Annual Report.

Readers are cautioned not to place undue reliance on forward-looking statements in this Report or that we may make from time to time, and to consider carefully the factors discussed in Part II, Item 1A. “Risk Factors” of this Report and Part I, Item 1A. “Risk Factors” of our 2019 Annual Report in evaluating these forward-looking statements. We do not undertake to update any forward-looking statements contained herein, except as required by law.

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PART I – FINANCIAL INFORMATION

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MMA Capital Holdings, Inc.

Consolidated Financial Highlights

(Unaudited)

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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INTRODUCTION

Overview

MMA Capital Holdings, Inc. focuses on infrastructure-related investments that generate positive environmental and social impacts and deliver attractive risk-adjusted total returns to our shareholders, with an emphasis on debt associated with infrastructure including renewable energy projects. Unless the context otherwise requires, and when used in this Report, the “Company,” “MMA,” “we,” “our” or “us” refers to MMA Capital Holdings, Inc. and its subsidiaries. We were originally organized as a Delaware limited liability company in 1996, converted to a Delaware corporation on January 1, 2019 and are externally managed by Hunt Investment Management, LLC (our “External Manager”), an affiliate of Hunt Companies, Inc. (Hunt Companies, Inc. and its affiliates are hereinafter referred to as “Hunt”).

Our current objective is to produce attractive risk-adjusted returns by investing in the large, growing and fragmented renewable energy market in the United States (“U.S.”). We believe that we are well positioned to take advantage of these and other investment opportunities because of our External Manager’s origination network built off of extensive relationships and credit expertise gathered through years of experience. We also seek to increase the Company’s return on equity by prudently deploying debt and recycling equity out of lower yielding investments that are unrelated to renewable energy and other infrastructure projects.

In addition to renewable energy investments, we continue to own a limited number of bond investments and real estate-related investments, as well as have subordinated debt with beneficial economic terms. Further, we have significant net operating loss carryforwards (“NOLs”) that may be used to offset future federal income tax obligations, a portion of which were reported as deferred tax assets (“DTAs”) in our Consolidated Balance Sheets at June 30, 2020 and December 31, 2019. Effective December 31, 2019, we no longer organize our assets and liabilities into discrete portfolios (in each Quarterly Report on Form 10-Q that was filed in 2019, assets and liabilities of the Company were allocated to one of two portfolios, “Energy Capital” and “Other Assets and Liabilities”).

We operate as a single reporting segment.

COVID-19 and Related Business Impacts

General

In December 2019, a novel coronavirus (“COVID-19”) was reported to have surfaced in Wuhan, China. Following its spread to over 100 countries, including the U.S., the World Health Organization declared a global pandemic on March 11, 2020. On March 13, 2020, the U.S. declared a national emergency with respect to COVID-19.

In many countries, including the U.S., the outbreak of COVID-19 has adversely impacted overall economic activity and contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak continues to evolve as many countries, including the U.S., continue to institute quarantines, business closures, governmental agency closures and restrictions on travel to contain COVID-19.

The long-term impact of COVID-19 on our operational and financial performance will depend on future developments, including the duration, spread and intensity of COVID-19, all of which are uncertain and difficult to predict. While we are not able to estimate the long-term effects of these factors on our business at this time, the adverse impact on our business, results of operations, financial condition and cash flows could be material. Refer to Part II, Item 1A. “Risk Factors” of this Report for additional information about risks to our business that are posed by COVID-19.

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Business Operations

We are managed by our External Manager. We also rely upon other third-party vendors to conduct business operations, including vendors that provide information technology services, legal and accounting services or other support services.

As of June 30, 2020, there were no disruptions to the services provided by the External Manager and support provided by other third parties in connection with our business operations.

Renewable Energy Investments

As of June 30, 2020, the construction and development of renewable energy projects that have been financed through loans made by the Solar Ventures (as defined below) were generally on schedule as the development and construction of such projects qualified as critical infrastructure or essential services. Furthermore, most of the unpaid principal balances associated with the Solar Ventures’ loans related to projects that are located in rural and less populated areas allowing for required social distancing and financed projects did not experience any significant supply chain issues during the second quarter of 2020.

All loans made by the Solar Ventures were assessed to be adequately secured and were expected at June 30, 2020 to be repaid in full. In most cases, the repayment of the Solar Venture loans, or their “take-out,” is dependent upon the refinancing of a given loan or the sale of an underlying renewable energy project to third-parties, both of which typically require some combination of tax credit equity, sponsor equity and construction or permanent debt financing. Given deteriorating macro-economic conditions, uncertainty in the financial markets and our dependence on a functioning renewable energy finance market, we will continue to closely monitor loan performance and expected sources of repayment.

Origination volume at the Solar Ventures during the second quarter of 2020 was generally comparable to the amount of loans originated during the second quarter of 2019, while origination volume during the first six months of 2020 exceeded loan originations made during the first six months of 2019.

During the second quarter of 2020, market yields associated with certain funded loans at the Solar Ventures, particularly those that had longer remaining terms than average and were without take-out financing commitments, decreased. Consequently, the overall fair value of the loan portfolio of the Solar Ventures increased and the Company recognized its allocable share of related unrealized gains, or $3.9 million, during the second quarter of 2020. Net fair value gains recognized by the Solar Ventures in the second quarter of 2020 nearly offset the amount of unrealized loan losses, including the Company’s share thereof, that were recognized during the first quarter of 2020.

Other Investments and Hedging Instruments

Market yields associated with the Company’s bond investments generally decreased in the second quarter of 2020. Consequently, the Company recognized $0.5 million of net unrealized fair value gains in the second quarter associated with such investments. Changes in the fair value of these investments are expected to remain volatile until market conditions moderate.  

Given decreases in benchmark interest rates that generally stemmed from actions taken by central banks to stem the tide of the economic downturn, the fair value of interest rate hedge positions of the Company decreased in the second quarter of 2020 by $0.3 million. Additionally, the Company’s foreign currency forward exchange hedge position decreased by $0.2 million as the rand appreciated modestly against the U.S. dollar during the second quarter of 2020. While these positions are effective at mitigating the Company’s exposure to certain interest rate and foreign currency risks, changes in the fair value of these instruments are expected to remain volatile until market conditions moderate.

The Company’s real estate-related investments are accounted for at cost, in the case of our one land investment, or follow the equity method of accounting, in the case of our equity investments in unconsolidated funds or ventures. The Company’s 80% ownership interest in a joint venture, which owns a mixed-use town center development that consists of hotel tenants, retail tenants and undeveloped land parcels and whose incremental tax revenues secure our tax-exempt municipal bond

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(“Infrastructure Bond”) (hereinafter, the “SF Venture”), was determined to be other-than-temporarily impaired during the preparation of our second quarter financial statements as of June 30, 2020, given the impacts of the downturn in the economy stemming from COVID-19. As such, this investment was written down to its fair value at June 30, 2020, using valuation inputs that were sourced from a third-party specialist. Consequently, the Company recognized a related $9.0 million impairment loss in its Consolidated Statements of Operations in the second quarter of 2020. The balance of the Company’s real estate-related investments was not assessed to be other-than-temporarily impaired at June 30, 2020.

We are monitoring the economic impact of the COVID-19 pandemic on the performance of our investments and underlying real estate values. Although we have not recognized impairment charges other than that for the SF Venture discussed above, we believe it is reasonably possible that we may be required to recognize one or more material impairment charges over the next 12 months, particularly if underlying economic conditions continue to deteriorate. Because any such impairment charge will be based on future circumstances, we cannot predict at this time whether we will be required to recognize any further impairment charges and, if required, the timing or amount of any impairment charge.

DTAs

The Company’s assessment of the likelihood of realizing tax benefits related to DTAs recognized in the fourth quarter of 2019 did not change at June 30, 2020. That is, while COVID-19 caused a sharp deterioration in macro-economic conditions, the potential amount and permanence of long-term impacts of those conditions on the Company’s business was uncertain at June 30, 2020. Consequently, the Company did not make an adjustment in the second quarter of 2020 to the carrying value of DTAs that were recognized at December 31, 2019. However, given such uncertainty and other factors, we believe it is reasonably possible that, within the next 12 months, a reduction to the net carrying value of DTAs that is material to the Company’s financial statements could be recognized. However, whether we recognize such a loss and the exact timing and amount of loss recognition depends upon future circumstances and, therefore, cannot be predicted at this time.

In the second quarter of 2020, the Company recognized a $2.1 million decrease in the net carrying value of DTAs. This decrease was primarily attributable to deferred income tax expense that was recognized in the second quarter of 2020 to establish a valuation allowance against deferred tax benefits stemming from the $9.0 million impairment loss associated with the Company’s equity investment in the SF Venture. The corresponding DTA was assessed to not be realizable because the decline in fair value of our investment was determined to be other-than-temporary.

Liquidity and Capital Resources

The Company is committed to make additional capital contributions to certain of its investments in partnerships and ventures. Through June 30, 2020, the Company has honored all such commitments and we believe that we will continue to do so as these commitments arise.

Through June 30, 2020, the Company was in compliance with all its debt covenants and, as further discussed below, the Company closed two additional financing transactions in the second quarter of 2020.  

Renewable Energy Investments

We invest in loans that finance renewable energy projects to enable developers, design and build contractors and system owners to develop, build and operate renewable energy systems throughout the U.S. Renewable energy debt in which we invest is primarily structured as senior secured fixed rate loans that are made through joint ventures or directly on our balance sheet. These loans, which are generally short term in nature, are typically made to borrowers when they are in the late stages of development or in construction of their commercial, utility and community solar scale photovoltaic (“PV”) facilities that are located across different states and benefit from various state and federal regulatory programs. The short duration of loans in which we invest also helps us to efficiently manage interest rate risk, mitigate long-term risks such as credit exposure to off-take counterparties and provide us flexibility to target investments.

We generally invest in renewable energy investments through the following joint ventures: Solar Construction Lending, LLC (“SCL”); Solar Permanent Lending, LLC (“SPL”); Solar Development Lending, LLC (“SDL”); these joint ventures

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together with our wholly owned subsidiary, Renewable Energy Lending, LLC (“REL”), are hereinafter referred to as the “Solar Ventures.” We are a 50% investor member in the renewable energy joint ventures in which we invest though we may periodically have a minority economic interest as a result of non-pro rata capital contributions made by our capital partner pursuant to non-pro rata funding agreements between our capital partner and us. Distributions from such ventures are generally made in proportion to the members’ respective economic interests but may be made disproportionately to our capital partner, when our capital partner has made non-pro rata capital contributions, until such time that the amount of equity invested by the Company and its capital partner have come back into equal balance. At June 30, 2020, we had a minority economic interest in SCL and SDL of 44.2% and 43.6%, respectively.

Lending Activities of the Solar Ventures

The Solar Ventures typically lend on a senior secured basis collateralized by solar projects, but may also invest in subordinated loans and revolving loans and may finance non-solar renewable technologies such as wind and battery storage, or provide equipment financing and other customized debt solutions for borrowers. The Solar Ventures have historically targeted loans that are underwritten to generate internal rates of return (“IRR”) ranging from 10% to 15%, before expenses, with origination fees that range from 1.0% to 3.0% on committed capital and fixed-rate coupons that range from 7.0% to 14.0%. These loans generally range in size from $2 million to over $50 million.

Since their inception in 2015, the Solar Ventures have invested in more than 190 project-based loans that total $2.8 billion of debt commitments for the development and construction of over 760 renewable energy project sites. When completed, these projects will contribute to the generation of over 6.3 gigawatts of renewable energy, thereby eliminating approximately 181.3 million metric tons of carbon emissions over their project lives. The Solar Ventures closed $247.5 million of commitments across 12 loans during the second quarter of 2020 as compared to $287.1 million across 11 loans during the first quarter of 2020.

Through June 30, 2020, $1.6 billion of commitments across 132 project-based loans had been repaid with no loss of principal, resulting in a weighted-average IRR (“WAIRR”) of 16.7% that was on average higher than originally underwritten loan IRRs. For the three months ended June 30, 2020, 11 loans totaling $133.3 million of commitments had been repaid, resulting in a WAIRR of 12.9%. WAIRR is measured as the total return in dollars of all repaid loans divided by the total commitment amount associated with such loans, where (i) the total return for each repaid loan was calculated as the product of each loan’s IRR and its commitment amount and (ii) IRR for each repaid loan was established by solving for a discount rate that made the net present value of all loan cash flows equal zero. WAIRR has been higher than the net return on the Company's investments in the Solar Ventures because it is a measure of gross returns earned by the Solar Ventures on repaid loans and does not include the impact of certain items, including: (i) operating expenses of the Solar Ventures; (ii) the amortization of the purchase premium paid by the Company in the second quarter of 2018 to buyout our former investment partner’s interest in REL; and (iii) the opportunity cost of idle capital. 

At June 30, 2020, loans funded through the Solar Ventures had an aggregate unpaid principal balance (“UPB”) and total fair value (“FV”) of $758.5 million, a weighted-average remaining maturity of seven months and a weighted-average coupon of 9.5%. At December 31, 2019, loans funded through the Solar Ventures had an aggregate UPB and total fair value of $654.4 million, a weighted-average maturity of 10 months and a weighted-average coupon of 10.8%.

Table 1 provides financial information about the composition of the Solar Ventures’ loan portfolio at June 30, 2020 and December 31, 2019.

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Table 1: Composition of the Solar Venture’s Loan Portfolio

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The Solar Ventures had $427.4 million of unfunded loan commitments that required borrowers to meet various conditions set forth in governing loan agreements in order for funding to occur. At June 30, 2020, $214.1 million of such commitments were attributable to the Company based upon its interest in these ventures. Unfunded loan commitments that qualify for funding are anticipated to be funded primarily by capital within the Solar Ventures through a combination of existing loan redemptions and idle capital. To the extent capital within the Solar Ventures is not sufficient to meet their funding obligations, additional capital contributions by the members of the Solar Ventures would be required.

Investment Interests and Related Carrying Values

At June 30, 2020, through MMA Energy Holdings, LLC, the Company was a 50% investor member but held economic interests of 44.2%, 50.0% and 43.6% in SCL, SPL and SDL, respectively, and was the sole member in REL. The carrying value and income-related information related to investments that we have made in, or related to, the Solar Ventures are further discussed below. During the second quarter of 2020, the Company and its capital partner in SCL and SDL funded various non-pro rata capital calls pursuant to which our capital partner contributed $63.5 million of $72.9 million in SCL capital calls and $4.5 million of $4.5 million in SDL capital calls, while the Company contributed the balance. In addition, in accordance with a non-pro rata funding agreement between the Company and our capital partner, our capital partner in SCL and SDL received distributions of $45.0 million and $10.6 million, respectively, while the Company received $9.4 million of distributions from SDL. As a consequence of these non-pro rata capital contributions and distributions during the second quarter of 2020, our economic interest in SCL and SDL decreased in percentage terms from 44.5% and 44.5% in SCL and SDL, respectively, at March 31, 2020.

In addition to investments in the Solar Ventures, in the fourth quarter of 2019, the Company invested in a loan originated by our External Manager with a $2.1 million commitment made to a special purpose entity that is secured by land, which is subject to a 25-year ground lease to a community solar project, and by the equity interests in the borrower. The UPB and fair value of this loan, which bears interest at a fixed rate of 8.0% and matures in December 2022, was $1.3 million at June 30, 2020.

Table 2 provides financial information about the carrying value of the Company’s renewable energy investments at June 30, 2020 and December 31, 2019.

Table 2:  Carrying Values of the Company’s Renewable Energy Investments

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The carrying value of the Company’s equity investments in the Solar Ventures increased $73.9 million during the six months ended June 30, 2020 as a result of $55.6 million of net capital contributions made, which were sourced primarily from the $53.6 million repayment of the secured loan receivable from Hunt, amounts drawn on our revolving credit facility and proceeds received in the second quarter of 2020 from financing transactions involving the Infrastructure Bond and the Company’s direct investment in real estate that is in process of development. Such increase was also driven in part by $18.3 million of equity in income in the Solar Ventures that was recognized during the six months ended June 30, 2020.

Investment Income and Return on Investment

The Company applies the equity method of accounting to its equity investments in the Solar Ventures, which are not consolidated by the Company for reporting purposes. Accordingly, the Company recognizes its allocable share of the Solar Ventures’ net income based on the Company’s weighted-average percentage ownership during each reporting period. Separately, the Company recognizes interest income associated with the aforementioned loan using the interest method.

Table 3 summarizes income recognized by the Company in connection with our renewable energy investments for the periods presented.

Table 3:  Income Recognized from Renewable Energy Investments

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Equity in income from the Solar Ventures recognized by the Company in the second quarter of 2020 included its allocable share, or $3.9 million, of $8.9 million of net fair value gains that were recognized by the Solar Ventures related to its loan portfolio (the recognition of these net fair value gains reversed nearly in full the Company’s allocable share of net fair value losses recognized by the Solar Ventures in the first quarter of 2020). The Company generated an unlevered net return on investment from our renewable energy investments, as measured on an annualized twelve-month trailing basis, of 11.8% and 10.7% for the six months ended June 30, 2020 and June 30, 2019, respectively. These returns were measured by dividing total investment income from renewable energy investments by the average carrying value of renewable energy investments on a trailing four quarter basis.

Refer to the comparative discussion of our Consolidated Results of Operations for more information about income that was recognized in connection with the Company’s renewable energy investments.

Leveraging our Renewable Energy Investments

On September 19, 2019, MMA Energy Holdings, LLC (“MEH” or “Borrower”), a wholly owned subsidiary of the Company, entered into a $125.0 million (the “Facility Amount”) revolving credit agreement with various lenders. During the first quarter of 2020, the maximum Facility Amount was increased to $175.0 million and the committed amount of the revolving credit facility increased from $100.0 million to $120.0 million upon the joinder of an additional lender and an increase in commitment by one of the existing lenders.

Obligations associated with the revolving credit facility are guaranteed by the Company and are secured by specified assets of the Borrower and a pledge of all of the Company’s equity interest in the Borrower through pledge and security documentation. Availability and amounts advanced under the revolving credit facility, which may be used for various business purposes, are subject to compliance with a borrowing base comprised of assets that comply with certain eligibility criteria, and includes late-stage development, construction and permanent loans to finance renewable energy projects and cash.

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Borrowing on the revolving credit facility bears interest at the one-month London Interbank Offered Rate (“LIBOR”), adjusted for statutory reserve requirements (subject to a 1.5% floor), plus a fixed spread of 2.75% per annum. The Borrower has also agreed to pay certain customary fees and expenses and to provide certain indemnities. In certain circumstances where the interest rate is unable to be determined, including in the event LIBOR ceases to be published, the administrative agent to the credit agreement will select a new rate in its reasonable judgment, including any adjustment to the replacement rate to reflect a different credit spread. The maturity date of the credit agreement is September 19, 2022, subject to a 12-month extension solely to allow refinancing or orderly repayment of the facility.  

At June 30, 2020, the UPB and carrying value of amounts borrowed under the revolving credit facility was $110.0 million and the Company recognized $2.9 million of related interest expense in the Consolidated Statements of Operations during the six months ended June 30, 2020.

The liquidity accessed by the Company through the revolving credit facility has increased the amount of capital invested in the Solar Ventures.

Deferred Tax Assets

Deferred taxes arise from differences between assets and liabilities measured for financial reporting versus income tax return purposes. DTAs are recognized if we assess that it is more likely than not that tax benefits, including NOLs and other tax attributes, will be realized prior to their expiration.

At June 30, 2020, the reported carrying value of the Company’s net DTA was $57.3 million. A valuation allowance was also maintained at such reporting date against the portion of our DTAs that correspond to federal and state NOL carryforwards that we expected will expire prior to utilization based upon our forecast of pretax book income.

Investments in Bonds

The Company has one tax-exempt municipal bond that financed the development of infrastructure for a mixed-use town center development in Spanish Fort, Alabama and is secured by incremental tax revenues generated from the development. At June 30, 2020, the Infrastructure Bond had a stated fixed interest rate of 6.3% and had a UPB and fair value of $26.7 million and $23.9 million, respectively. As further discussed below, the Company closed in the second quarter of 2020 a financing transaction that involved the sale of this bond investment to a third party with which the Company contemporaneously-executed a total return swap (“TRS”) agreement that also referenced such bond investment. Given the economic interest retained in such bond investment through the TRS agreement, the Company reported the conveyance of such investment as a secured borrowing and, therefore, continued to recognize the Infrastructure Bond on the Company’s Consolidated Balance Sheets.        

At June 30, 2020, we also held one subordinated unencumbered tax-exempt multifamily bond investment with a UPB and fair value of $4.0 million and $6.1 million, respectively.

Real Estate-Related Investments

At June 30, 2020, we maintained an interest in a real estate-related investment through our 80% ownership interest in the SF Venture. The carrying value of this investment was $10.1 million at June 30, 2020.

At June 30, 2020, the Company maintained an 11.85% ownership interest in the South Africa Workforce Housing Fund (“SAWHF”). SAWHF is a multi-investor fund whose term matured in April 2020. However, the fund does not anticipate fully exiting all its remaining investments until December 31, 2021. On May 22, 2020, the Company received a pro-rata distribution from SAWHF of 7.2 million common shares of a residential real estate investment trust (“REIT”) that is listed on the Johannesburg Stock Exchange. These REIT shares are reported at their fair value and are denominated in South African rand. The carrying values of the Company’s equity investments in SAWHF and the REIT were $2.0 million and $2.7 million, respectively, at June 30, 2020.

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At June 30, 2020, we also owned one direct investment in real estate consisting of a parcel of land that is currently in the process of development. This real estate is located just outside the city of Winchester in Frederick County, Virginia. During the first six months of 2020, the Company invested $6.1 million in additional land improvements that were capitalized, increasing the carrying value of our investment. As of June 30, 2020, the carrying value of this investment was $14.5 million.

Other Debt Obligations

At June 30, 2020, the Company had other debt obligations that included subordinated debt, notes payable and other debt used to finance certain non-interest bearing investments and asset related debt that was used to finance interest bearing investments. As further discussed below, in the second quarter of 2020, the Company closed a $10.0 million lending arrangement that is secured by our direct investment in real estate that is in process of development and a $23.5 million financing arrangement associated with its Infrastructure Bond investment. The carrying value and weighted-average yield of the Company’s other debt obligations was $135.5 million and 3.0%, respectively, at June 30, 2020. Refer to Table 9, “Debt,” for more information.

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SUMMARY OF FINANCIAL PERFORMANCE

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Net Worth

Common shareholders’ equity (“Book Value”) decreased $3.2 million in the second quarter of 2020 to $274.5 million at June 30, 2020. This change was driven by $3.3 million of comprehensive loss and $0.1 million of other increases in common shareholders’ equity.

Book Value per share decreased $0.58, or 1.2%, in the second quarter of 2020 to $47.24 at June 30, 2020.

Book Value adjusted to exclude the carrying value of our net DTAs (“Adjusted Book Value”) decreased $1.1 million in the second quarter of 2020 to $217.2 million at June 30, 2020. This change was driven by $1.5 million of “Net loss from continuing operations before income taxes” and $0.4 million of other decreases in Book Value.

Adjusted Book Value per share decreased $0.22, or 0.6%, in the second quarter of 2020 to $37.37 at June 30, 2020.

Refer to “Use of Non-GAAP Measures” for more information regarding the reconciliation of Adjusted Book Value and Adjusted Book Value per share to our most comparable GAAP measures.

Comprehensive Loss

We recognized a comprehensive loss of $3.3 million during the second quarter of 2020, which consisted of $3.5 million of net loss and $0.2 million of other comprehensive income. In comparison, we recognized $2.1 million of comprehensive income in the quarter ended June 30, 2019, which consisted of $23.2 million of net income and $21.1 million of other comprehensive loss.

The $3.5 million net loss recognized in the second quarter of 2020 was primarily driven by a $9.0 million impairment charge recognized on our equity investment in the SF Venture, as described above, other interest expense, operating expenses and income tax expense, the net effect of which was largely offset by the impact of strong returns on renewable energy investments and net interest income. Refer to “Consolidated Results of Operations,” for more information.

Net loss from continuing operations before income taxes in the second quarter of 2020 was $1.5 million, or $0.27 per share, as compared to $23.3 million net income in the second quarter of 2019.

Other comprehensive gain of $0.2 million that we reported in the second quarter of 2020 was primarily attributable to net fair value gains that we recognized in connection with our bond investments.

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CONSOLIDATED BALANCE SHEET ANALYSIS

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This section provides an overview of changes in our assets, liabilities and equity and should be read together with our consolidated financial statements, including the accompanying notes to the financial statements.

Table 4 provides Consolidated Balance Sheets for the periods presented.

Table 4: Consolidated Balance Sheets

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Cash and cash equivalents increased primarily due to proceeds received in connection with financing transactions that closed in the second quarter of 2020 involving the Company’s Infrastructure Bond investment and our direct investment in real estate.  

Restricted cash increased primarily as a result of cash collateral to our counterparty in connection with the aforementioned financing transaction involving the Company’s Infrastructure Bond investment.

Investments in debt securities decreased primarily due to the recognition of net fair value losses in the first six months of 2020 that were attributable to increases in the market yields of such investments.

Investments in partnerships increased primarily as a result of net capital contributions of $55.6 million that we made to the Solar Ventures and the recognition of $18.3 million of equity in income of our investees. The impact of these items was partially offset by the effects of both a $9.0 million impairment charge recognized in the second quarter of 2020 related to our equity investment in the SF Venture and a $2.9 million distribution from SAWHF of 7.2 million common shares of a listed residential REIT.

Deferred tax assets, net decreased $0.4 million primarily due to deferred income tax expense that was recognized in the first six months of 2020 to establish a valuation allowance against deferred tax benefits stemming from the $9.0 million impairment charge associated with the Company’s equity investment in the SF Venture.

Loans held for investment decreased primarily as a result of the repayment of the Company’s $53.6 million loan receivable from Hunt (the “Hunt Note”) on January 3, 2020.

Other Assets increased primarily as a result of $6.1 million of land improvement costs that were capitalized in connection with a real estate investment that is in process of development and the aforementioned distribution from SAWHF of REIT common shares.

Debt increased primarily as a result of proceeds received in the second quarter of 2020 related to the aforementioned financing transactions involving the Company’s Infrastructure Bond investment and direct investment in real estate that is in process of development.  

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CONSOLIDATED RESULTS OF OPERATIONS

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This section provides a comparative discussion of our Consolidated Results of Operations and should be read in conjunction with our consolidated financial statements, including the accompanying notes. See “Critical Accounting Policies and Estimates,” for more information concerning the most significant accounting policies and estimates applied in determining our results of operations.

Net Income

Table 5 summarizes net income for the periods presented.

Table 5: Net (Loss) Income