Quarterly report pursuant to Section 13 or 15(d)

The Company

v2.4.0.8
The Company
6 Months Ended
Jun. 30, 2014
Accounting Policies [Abstract]  
The Company
1. The Company

Hannon Armstrong Sustainable Infrastructure Capital, Inc. (the “Company”) provides debt and equity financing for sustainable infrastructure projects that increase energy efficiency, provide cleaner energy sources, positively impact the environment or make more efficient use of natural resources. The Company and its subsidiaries are hereafter referred to as “we,” “us,” or “our.”

Our principal business is providing or arranging financing of sustainable infrastructure projects. We refer to the financings that we hold on our balance sheet as our “Portfolio.” Our Portfolio may include:

 

    Financing Receivables, such as sustainable infrastructure project loans, receivables and direct financing leases,

 

    Investments, such as sustainable infrastructure debt and equity securities, and

 

    Real Estate, such as land or other physical assets and related intangible assets used in sustainable infrastructure projects.

We finance our business through cash on hand, the securitization of receivables and equity and other debt financings. We also generate fee income for arranging financings that are held on the balance sheet of other parties, by providing broker/dealer or other financing related services to sustainable infrastructure project developers and by servicing assets owned by third parties.

On April 23, 2013, we completed our initial public offering (“IPO”). We sold a total of 14.2 million shares and raised net proceeds of approximately $160 million including the exercise by the underwriters of their option to purchase an additional 0.8 million shares on May 23, 2013. Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “HASI”. Concurrently with the IPO, we completed a series of transactions, which are referred to as the formation transactions, that resulted in Hannon Armstrong Capital, LLC (the “Predecessor”), the entity that operated the historical business prior to the consummation of the IPO, becoming our subsidiary.

On April 29, 2014, we completed our first follow-on public offering in which we sold 5,750,000 shares of common stock (including 750,000 shares sold pursuant to the full exercise of the underwriters’ option to purchase additional shares) at $13.00 per share, less the underwriting discount and estimated expenses, for net proceeds of $70.4 million.

We intend to elect and qualify to be taxed as real estate investment trust (“REIT”) for U.S. federal income tax purposes, commencing with our taxable year ended December 31, 2013. We generally will not be subject to U.S. federal income taxes on our taxable income to the extent that we annually distribute all of our taxable income to stockholders and maintain our qualification as a REIT. We operate our business through, and serve as the sole general partner of, our Operating Partnership subsidiary, Hannon Armstrong Sustainable Infrastructure, L.P, (the “Operating Partnership”) which was formed to acquire and directly or indirectly own the Company’s assets. We also intend to operate our business in a manner that will continue to permit us to maintain our exception from registration as an investment company under the 1940 Act.

To the extent any of the financial data included in this report is as of or from a period prior to April 23, 2013, such financial data is that of the Predecessor. The financial data for the Predecessor for such periods do not reflect the material changes to our business as a result of the capital raised in the IPO, including the broadened scope of projects targeted for financing, our enhanced financial structuring flexibility and our ability to retain a larger share of the economics from our origination activities. Accordingly, the financial data for the Predecessor is not necessarily indicative of our results of operations, cash flows or financial position following the completion of the IPO and formation transactions.

 

Recent Acquisition

On May 28, 2014, we entered into a Unit Purchase Agreement (the “Purchase Agreement”) to acquire all of the outstanding member interests in AWCC from Northwharf Nominees Limited, DBD AWCC LLC, NGP Energy Technology Partners II, L.P. and C.C. Hinckley Company, LLC (collectively, the “Sellers”) in exchange for approximately $106.9 million (the “Purchase Price”), which we funded from the use of our cash on hand and our existing credit facilities. Through this acquisition, we expanded our portfolio of sustainable infrastructure assets, including acquiring more than 7,500 acres of land with in-place land leases to three solar projects, which we have recorded as real estate, and the rights to payments from land leases for a diversified portfolio of 57 wind projects, which we have recorded as financing receivables. We did not assume any of AWCC’s indebtedness in connection with the transaction. We accounted for our acquisition of AWCC as a business combination and incurred approximately $1.1 million of acquisition related costs, which we have expensed as acquisition costs in our condensed consolidated statement of operations. We recorded the AWCC assets acquired at fair value. We are using a qualified appraiser to assist us with the determination of the fair value estimates for the majority of the AWCC assets acquired and expect to finalize the purchase price allocation later this year based on a final working adjustment.

The preliminary purchase price allocation for this transaction, which reflects our estimates of the fair value of the assets acquired, is as follows:

 

     As of May 28, 2014  
     (amounts in thousands)  

Financing receivables

   $ 37,244   

Real estate

     50,318   

Real estate lease intangibles

     16,945   

Goodwill

     2,144   

Other assets

     212   
  

 

 

 

Purchase Price

   $ 106,863   
  

 

 

 

In addition, we entered into a three-year mutually exclusive origination and servicing agreement with an entity owned by former employees and minority owners of AWCC. This entity will be referred to hereafter as “AWCC Capital.” Under this agreement, AWCC Capital has agreed to (a) originate new similar transactions for our benefit and (b) service the existing and any new assets originated by them for our benefit. We paid approximately $0.6 million in cash as consideration for this agreement that will be amortized over the three year initial life of the agreement and will pay additional consideration in the future for new assets originated by AWCC Capital.

The operating results of AWCC are reflected in our condensed consolidated statement of operations from the date of acquisition forward.