Hannon Armstrong Sustainable Infrastructure Capital, Inc. (“the Company”) provides debt and equity to the energy efficiency and renewable energy markets. The Company and its subsidiaries are hereafter referred to as “we,” “us,” or “our.” We refer to the financings that we hold on our balance sheet as our “Portfolio.” Our Portfolio may include:

We finance our business through cash on hand, borrowings under our credit facility, and various asset-backed securitization transactions and equity issuances. We also generate fee income through asset-backed securitizations, by providing broker/dealer services and by servicing assets owned by third parties. Some of our subsidiaries are special purpose entities that are formed for specific operations associated with financing sustainable infrastructure receivables for specific long term contracts.

In April 2013, we completed our initial public offering (“IPO”). 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. Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “HASI.” See Note 11 for a summary of our public offerings of common stock.

We elected and qualified as a 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.

Real Estate Acquisitions

In May 2014, we entered into a Unit Purchase Agreement (the “Purchase Agreement”) to acquire all of the outstanding member interests in American Wind Capital Company, LLC (“AWCC”) from Northwharf Nominees Limited, DBD AWCC LLC, NGP Energy Technology Partners II, L.P. and C.C. Hinckley Company, LLC in exchange for approximately $107 million (the “Purchase Price”), which we funded from the use of our cash on hand and our existing credit facilities.

Since the AWCC acquisition that was accounted for as a business combination, we have completed several smaller transactions that were also accounted for as business combinations for additional consideration of approximately $19 million, which we funded from the use of our cash on hand and our existing credit facilities. We did not assume any indebtedness in connection with these transactions.

We incurred approximately $2.5 million of acquisition related costs, which we have previously expensed as acquisition costs in our 2014 consolidated statement of operations. We recorded the acquired assets (including real estate related intangibles) at fair value. We used a qualified appraiser to assist us with the determination of the fair value estimates for the majority of these assets. There were no liabilities assumed in connection with these acquisitions.

The purchase price allocation for our business combinations, which reflects our estimates of the fair value of the assets acquired, is as follows (amounts in millions):

The unaudited pro forma summary below presents the consolidated results of operations of these business combinations for the period prior to our acquisition, as if the acquisition was completed on January 1, 2013. The pro forma information is not necessarily indicative of what our actual results of operations would have been for the period, nor does it purport to represent our estimate of future results of operations.

Investments in Equity Method Affiliates

We have made several investments in joint ventures with an affiliate of JPMorgan Chase & Co (“JPMorgan”) to purchase and hold minority interests in wind projects, including through Strong Upwind Holdings II LLC (“Strong Upwind II”), which acquired additional interests this quarter in several of the operating wind projects held by Strong Upwind Holdings I LLC (“Strong Upwind I”). Through these joint ventures, we own minority interests in four limited liability holding companies that own ten operating wind projects. Each of the holding companies is controlled and operated by a large wind energy company.

In June 2015, JPMorgan and one of the holding companies entered into an agreement regarding the treatment of certain tax matters that had the impact of reducing our expected future cash flows from that holding company. To offset this reduction in our future cash flows, in June 2015, JPMorgan paid us approximately $3 million, which effectively reduced our investment in Strong Upwind I from $144 million to $141 million.

The minority ownership interests in the holding companies are structured in a typical wind partnership flip structure where we, along with other large institutional investors, if any, receive a stated preferred return consisting of a priority distribution of the project cash flows along with tax attributes. Once this preferred return is achieved, the partnership “flips” and the holding company receives the majority of the cash flows and we, along with the other institutional investors, will have an on-going residual interest. We share in the cash flows and tax attributes of the joint ventures according to a negotiated schedule. We have determined that we do not have a controlling voting interest in the joint ventures and therefore, we account for our investments using the equity method. See Notes 2 and 13 for additional information.