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As filed with the Securities and Exchange Commission on July 6, 2021.

Registration Statement No. 333-

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

PRESTON HOLLOW COMMUNITY CAPITAL, INC.

(Exact name of registrant as specified in its governing instruments)

Maryland
(State or other jurisdiction of
incorporation or organization)

6199
(Primary Standard Industrial
Classification Code Number)

87-1135422
(I.R.S. Employer
Identification No.)

1717 Main Street, Suite 3900
Dallas, Texas 75201
(Address, including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Offices)

Jim Thompson
Chief Executive Officer
1717 Main Street, Suite 3900
Dallas, Texas 75201
(214) 389-0800
(Name, Address, including Zip Code, and Telephone Number, including Area Code, of Agent for Service)

	Copies to:
	Jay L. Bernstein, Esq. Jake A. Farquharson, Esq. Jason W. Parsont, Esq. Clifford Chance US LLP 31 West 52nd Street New York, New York 10019 Tel (212) 878-8000 Fax (212) 878-8375			Richard D. Truesdell, Jr., Esq. Pedro J. Bermeo, Esq. Davis Polk & Wardwell LLP 450 Lexington Avenue New York, New York 10017 Tel (212) 450-4000 Fax (212) 701-5800

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.

If any of the Securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box: ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. ☐

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 the definitions of “ large accelerated filer,” “ accelerated filer,” “ smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐

Emerging growth company ☒

Accelerated filer ☐

Non-accelerated filer ☒

Smaller reporting company ☐

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 7(a)(2)(B) of the Securities Act. ☐

CALCULATION OF REGISTRATION FEE

	Title of Securities to be registered			Proposed maximum aggregate offering price(1)(2)			Amount of registration fee(1)
	Class A Common Stock, $0.01 par value per share			$100,000,000			$10,910

(1)

Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.

(2)

Includes the offering price of Class A common stock that may be purchased by the underwriters upon exercise of their option to purchase additional shares.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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The information in this preliminary prospectus is not complete and may be changed. We may not sell these shares until the registration statement filed with the Securities and Exchange Commission becomes effective. This preliminary prospectus is not an offer to sell these shares and it is not soliciting an offer to buy these shares in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, dated , 2021

PRELIMINARY PROSPECTUS

Class A Common Stock

Preston Hollow Community Capital, Inc. is a market leader in providing specialized impact financing solutions for projects of significant social and economic importance to local communities in the United States. Our strategy is focused on producing attractive risk-adjusted total returns from the direct origination and structuring of debt financings, primarily in the form of tax-exempt municipal bonds or loans, in transactions that deliver meaningful social impact across a broad range of project types that are not easily financed through traditional lending channels.

This is our initial public offering and no public market currently exists for shares of our Class A common stock. We are offering shares of our Class A common stock as described in this prospectus. We expect the initial public offering price of our Class A common stock to be between $ and $ per share. We intend to apply to have our Class A common stock listed on the New York Stock Exchange (“NYSE”) under the symbol .

Prior to the completion of this offering, we operated our business through our predecessor, Preston Hollow Capital, LLC, a Delaware limited liability company (“PHC LLC”). In connection with this offering, PHC LLC will contribute its business to our operating partnership subsidiary and will receive OP units (as defined herein) and an equivalent number of shares of our Class B common stock. Immediately prior to the closing of this offering, PHC LLC will be our sole stockholder and we and PHC LLC will be the only holders of OP units in our operating partnership.

We will have two classes of common stock outstanding after this offering. Class A common stock and Class B common stock. Holders of our Class A common stock and holders of our Class B common stock are each entitled to one vote per share and all such holders will vote together as a single class. Upon completion of this offering, PHC LLC will hold all of our issued and outstanding shares of Class B common stock, which will represent approximately % of the total voting power of our common stock (or approximately % of the total voting power of our common stock if the underwriters exercise in full their option to purchase additional shares of Class A common stock in this offering). The aggregate voting power of the Class B common stock is intended to be in proportion to the economic ownership interests in our operating partnership represented by holders of OP units other than us. Shares of Class B common stock also represent an economic interest equal to 1/50th of a share of Class A common stock. Each OP unit is, from time to time, exchangeable for one share of Class A common stock, subject to equitable adjustment for stock splits, stock dividends and reclassifications. Upon exchange of OP units for shares of Class A common stock, the shares of Class B common stock with which such OP units are paired will also mandatorily convert into Class A common stock at a conversion ratio of 50 shares of Class B common stock for each share of Class A common stock.

Upon the completion of this offering, PHC LLC will control a majority of the voting power of shares eligible to vote in the election of our directors. As a result, we will be a “controlled company” within the meaning of the corporate governance standards of the NYSE. See “Management — Controlled Company Exception.”

We are an “emerging growth company” under the U.S. federal securities laws and, as such, have elected to comply with certain reduced disclosure requirements in this prospectus and in future filings that we make with the Securities and Exchange Commission (the “SEC”). See “Prospectus Summary — Emerging Growth Company Status.”

Investing in shares of our Class A common stock involves risks that are described in the “Risk Factors” section beginning on page 32 of this prospectus.

Per share

Total

Initial public offering price

Underwriting discount

Proceeds, before expenses(1), to us

(1)

We have agreed to reimburse the underwriters for certain FINRA-related expenses. See “Underwriting” for a detailed description of compensation payable to the underwriters.

We have granted the underwriters the option to purchase up to additional shares of our Class A common stock from us at the initial public offering price, less the underwriting discount, within 30 days after the date of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The shares sold in this offering will be ready for delivery on or about , 2021.

Joint Bookrunning Managers

J.P. MorganBarclays

UBS Investment Bank

Piper Sandler

Co-Managers

Deutsche Bank SecuritiesLoop Capital Markets

The date of this prospectus is , 2021

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	Page
PROSPECTUS SUMMARY		5
THE OFFERING		26
RISK FACTORS		32
FORWARD-LOOKING STATEMENTS		62
USE OF PROCEEDS		64
CAPITALIZATION		65
DILUTION		67
DISTRIBUTION POLICY		69
Unaudited pro forma consolidated financial information		70
SELECTED PRO FORMA AND HISTORICAL FINANCIAL AND OPERATING DATA		75
INDUSTRY OVERVIEW AND MARKET OPPORTUNITY		81
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		84
BUSINESS		104
OUR MANAGEMENT		127
THE STRUCTURE AND FORMATION OF OUR COMPANY		139
PRINCIPAL STOCKHOLDERS		141
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS		143
DESCRIPTION OF CAPITAL STOCK		149
CERTAIN PROVISIONS OF THE Maryland GENERAL CORPORATION LAW AND OUR CHARTER AND BYLAWS		153
SHARES ELIGIBLE FOR FUTURE SALE		159
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS		161
UNDERWRITING		164
LEGAL MATTERS		172
EXPERTS		173
WHERE YOU CAN FIND MORE INFORMATION		174
INDEX TO FINANCIAL STATEMENTS		F-1

We have not, and the underwriters have not, authorized anyone to provide you with additional information or information different from that contained in this prospectus, and we and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information others may give you. We are offering to sell, and seeking offers to buy, shares of our Class A common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of shares of our Class A common stock.

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Market and Industry Data and Forecasts

Certain market and industry data included in this prospectus has been obtained from third party sources that we believe to be reliable. Market estimates are calculated by using independent industry publications, government publications and third party forecasts in conjunction with our assumptions about our markets. We have not independently verified such third party information. While we are not aware of any misstatements regarding any market, industry or similar data presented herein, such data involves risks and uncertainties and is subject to change based on various factors, including those discussed under the headings “Forward-Looking Statements” and “Risk Factors” in this prospectus.

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PROSPECTUS SUMMARY

This summary highlights some of the information in this prospectus. It does not contain all of the information that you should consider before investing in shares of our Class A common stock. You should read carefully the more detailed information set forth under “Risk Factors” and the other information included in this prospectus. Except where the context suggests otherwise, the information in this prospectus assumes (i) that the underwriters will not exercise their option to purchase up to an additional shares of our Class A common stock, (ii) the completion of our formation transactions described in this prospectus under “The Structure and Formation of Our Company,” and (iii) the shares of our Class A common stock to be sold in this offering are sold at $ per share, which is the mid-point of the initial public offering price range shown on the cover page of this prospectus. Except where the context suggests otherwise, the terms “Preston Hollow,” “company,” “we,” “us” and “our” refer to (i) Preston Hollow Community Capital, Inc., a Maryland corporation, together with our consolidated subsidiaries, including PHCC OP, LP, a Delaware limited partnership, which we refer to as our “operating partnership” or our “operating partnership subsidiary,” after giving effect to the formation transactions described in this prospectus, and (ii) the terms “PHC LLC” or “our predecessor” refers to Preston Hollow Capital, LLC, a Delaware limited liability company, and its consolidated subsidiaries before giving effect to the formation transactions described in this prospectus. Except where the context suggests otherwise, references to our “common stock” refer to Class A common stock and Class B common stock, together as a single class, and references to “OP units” or “Class A OP units” refer to Class A units of limited partnership interest in our operating partnership.

Our Mission

Our corporate mission is to generate attractive risk-adjusted returns for our stockholders through the origination, ownership and management of a diversified portfolio of predominantly tax-advantaged assets that renew and improve local communities or support sustainable economic growth objectives. As we focus on providing capital to local governments, institutions of higher education, not-for-profit entities and other borrowers, we are committed to supporting transformational community outcomes while serving as a creative, flexible and dependable financing partner to our borrowers. We believe that our track record demonstrates that financial, sustainability and community impact objectives can be achieved together through rigorous and disciplined credit underwriting and creative investment structuring.

Our Company

We are a market leader in providing specialized impact financing solutions for projects of significant social and economic importance to local communities in the United States. We maintain long-standing relationships with local governments, institutions of higher education, not-for-profit entities and other borrowers that use the financing we provide to fund economic development projects in infrastructure, education, healthcare, housing and other projects that renew and improve local communities or support sustainable economic growth.

We have two interconnected strategies that we focus on to achieve our business growth and profitability objectives: our direct origination strategy and our active portfolio management strategy. Our direct origination strategy is focused on producing attractive risk-adjusted total returns from the direct sourcing and structuring of debt financings in transactions that deliver meaningful social impact across a broad range of project types that are not easily financed through traditional lending channels. Our active portfolio management strategy complements our direct origination strategy through the execution of value-accretive secondary transactions in the municipal finance market.

By using our proprietary Social Impact Finance Framework across our investment platform, we actively craft transactions that address one or more of the United Nations Sustainable Development Goals and monitor impact performance over the life of the investment. We structure our social impact finance transactions primarily in the tax-exempt, nonrated revenue bond segment of the municipal finance market, which is the largest community-focused investment market in the United States. We also provide financing through taxable municipal bonds, loans, and equity investments in qualified opportunity funds (“QOFs”) and similar programs.

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Our transactions require specialized knowledge of structural, regulatory, strategic and economic considerations associated with financing impactful community projects. Through our direct origination platform, we generally lead and are often the sole financing provider to our borrowers, which enables us to tailor our financings to their specific needs. We also structure the terms of our financings, which generally consist of senior secured or preferred positions, to include security and covenant protections in order to enhance their credit profile and manage downside risk.

We were founded in 2014 by Jim Thompson, our Chairman and Chief Executive Officer, and Cliff Weiner, our Head of Fixed Income. Mr. Thompson has a 42-year track record in financial services and served as Chief Executive Officer of ORIX USA where, during his 22-year tenure, he managed the growth of Tokyo-based ORIX Corp.’s (NYSE: IX) U.S. operations to 1,100 employees with more than $6 billion in assets and $25 billion in assets under management. Mr. Weiner brings 37 years of diverse experience in portfolio investment, origination, acquisition leadership and fixed income trading and served as Chief Executive Officer and President of ORIX USA’s municipal finance group for over five years. Mr. Thompson and Mr. Weiner are supported by a cohesive executive team with extensive experience originating and managing tax-advantaged social impact assets through a variety of credit and interest rate environments and economic cycles. The consistency and strength of management and our investment strategy have enabled us to raise $1.4 billion in equity capital, including sizeable commitments from investment funds managed by Stone Point Capital LLC and affiliates of HarbourVest Partners. Upon completion of this offering, our founders, together with other members of our senior management team, will together hold through their interests in PHC LLC OP units in our operating partnership and shares of our Class B common stock, representing an estimated % ownership stake in our company.

We are one of the leaders in the social impact finance market with a high quality portfolio of approximately $1.9 billion as of March 31, 2021 diversified across 23 U.S. States and the District of Columbia. We are internally managed and have built a vertically integrated platform that features an established track record of direct origination, creative investment structuring, disciplined credit underwriting and due diligence, and a comprehensive approach to active portfolio management. These capabilities have enabled us to originate over $3.7 billion in financings cumulatively since our inception and produce meaningful tax-advantaged returns with minimal credit losses. We have achieved 29 consecutive quarters of positive net income and have an 11.7% Compound Annual Growth Rate in book value per share since inception through March 31, 2021 (assuming full dividend reinvestment at book value).

As a result of our highly disciplined approach to asset targeting and selection, the credit performance of our portfolio has been strong. We have had only one credit impairment across over 95 investments since inception, and this was, in part, due to the impact of the COVID-19 pandemic. In addition, our portfolio management expertise has allowed us to generate gains on the workout of challenging credits. Our assets exhibit lower correlation in market value volatility to macroeconomic shocks compared to many other fixed income asset classes, and the long duration nature of our assets has enabled us to generate consistent and positive earnings and cash flows that can be distributed to our stockholders or redeployed in new assets.

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We were formed as a Maryland corporation and will conduct substantially all of our operations through, and will be the sole general partner of, our operating partnership subsidiary. Our structure provides us with the ability to retain capital that can be used to fund our strategic business and growth objectives. We also intend to operate our business in a manner that will permit us to maintain an exclusion from registration under the Investment Company Act of 1940, as amended, or the 1940 Act. For additional information see “Business — Regulation — Investment Company Act Exclusion.”

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Our Impact Investment Strategy

Overview of Impact Investment Strategies

We have built and relied on two interconnected strategies to achieve our business growth and profitability objectives: our direct origination strategy and our active portfolio management strategy.

Direct Origination Strategy

Our direct origination strategy is focused on the direct sourcing and structuring of primarily debt financings in transactions that deliver meaningful and measurable social impact to our borrowers and their respective communities across a broad range of project types that are not easily or efficiently financed through traditional lending channels. Our targeted origination approach is centered on an established yet growing relationship network with local governments, institutions of higher education, not-for-profit entities, and other borrowers that use the financing we provide, to fund economic development projects in infrastructure, education, healthcare, and housing. Most of our direct origination transactions are structured as debt financings in the form of municipal bonds that bear CUSIPs and are cleared through the facilities of the Depository Trust Company (“DTC”) or as non-syndicated loans.

As direct private market originators, we have the flexibility to structure tailored financing solutions to the specific needs of our borrowers and their respective communities. Customized structures such as drawdown bonds to finance construction, stepped coupons, taxable bridge financing to tax-exempt bonds, and master facilities are typically not available in standardized public capital market executions, and set our financing solutions apart from our competition. Further, our deep public finance market knowledge and structuring expertise enable us to underwrite assets that are unfamiliar to other lenders, or are unsuitable for the plain-vanilla financing structures found in the public markets. This has enabled us to benefit from reduced competition at the time of origination and subsequent value upside in the form of sale gains from an investment’s positive credit migration over time.

Active Portfolio Management Strategy

Our active portfolio management strategy complements our direct origination strategy with two primary objectives: (i) take advantage of periods of price volatility in the municipal bond market to acquire high quality municipal bonds at a significant discount to their fundamental valuation and subsequently sell them at a premium, locking in a capital gain, and (ii) strategically crystalize gains on sale of directly originated investments we believe have completed their positive credit migration and redeploy capital to more attractive, directly originated opportunities with higher yields. This strategy provides us with secondary market liquidity in times of turbulence and enables us to use management's special servicing and restructuring experience to capitalize on complex or troubled credit situations. While our direct origination strategy is expected to be the key driver of growth for our portfolio in the long run, we aim to actively manage our portfolio through the execution of value-accretive secondary transactions in the municipal finance market.

From the end of 2016 through the end of 2020, our investment portfolio grew from $0.8 billion to $1.9 billion. The following table shows our net realized gains by category during this period:

Category of Net Realized Gains	Year ended December 31, 2016			Year ended December 31, 2017			Year ended December 31, 2018			Year ended December 31, 2019			Year ended December 31, 2020
	$ in millions
Gain on sales of direct originations		$	1.0		$	5.2		$	17.5		$	33.8		$	20.9
Gain on sales of special opportunities		$	12.6		$	14.1		$	19.4		$	7.7		$	5.5
Gains on redemptions, trading and other		$	3.5		$	5.2		$	2.9		$	3.7		$	2.4
Total		$	17.1		$	25.0		$	39.8		$	45.2		$	28.8

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During this period, our cumulative average net gain on direct origination sales as a percentage of volume sold was 15% and our cumulative average net gain on special opportunities was 49%.

We believe that our ability to generate returns for our stockholders through a combination of long-term contracted cash flows from our directly originated debt financings and sale gains from the strategic execution of our portfolio management strategy provides us with a distinct competitive advantage. These complementary profit drivers have been instrumental in strengthening the resiliency and predictability of our cash flows and corporate profitability over market cycles.

For additional information about our originations, investment portfolio, and net realized gains, see “— Recent Developments.”

Overview of Our Markets

We seek to realize our corporate mission to generate attractive social impact investments by operating in the municipal finance market and the public-private partnership market, and, to a lesser extent, to create and acquire equity interests in projects located in economically distressed communities that have been designated as opportunity zones (“Opportunity Zones”). Each segment is briefly summarized below.

Municipal Bonds

Debt issued by community-based organizations, most often in the form of municipal bonds, can have direct, measurable impact on pressing local issues. Municipal bonds, issued by U.S. state and local governments, institutions of higher education and eligible not-for-profit corporations, inherently track with important environmental, social and governance (“ESG”) goals, and their proceeds often fund activities that directly promote positive social and environmental improvement. Investors who purchase project-oriented municipal bonds are often lending capital used to build schools, hospitals, and a variety of other public projects of social importance.

The transactions we execute in the municipal bond market are predominantly in the revenue bond category, which comprises over 92.4% of our total portfolio as of March 31, 2021. We believe revenue bonds to be particularly attractive from a risk management and credit standpoint as they are backed by revenues from a specific project or source, for example by the revenue generated by specific not-for-profit colleges or hospitals or other not-for-profit entities for whom a bond is issued by a municipal entity. Furthermore, our transactions are typically secured by a significant amount of tangible collateral.

In addition to tax-exempt revenue bonds, which in aggregate represents 87.1% of our portfolio as of March 31, 2021, we have the flexibility to execute our impact investment strategy through taxable municipal bonds or loans depending upon the borrower’s objectives.

Public-Private Partnerships

U.S. municipalities and other public or not-for-profit entities, such as universities, will occasionally use Public-Private Partnerships (“P3s”) to deliver new critical infrastructure or monetize existing infrastructure.

We actively participate in the P3 market with a distinct investment strategy and ownership approach. Rather than directly act as the concessionaire, we typically partner with a not-for-profit concessionaire and lend it the required capital to fulfill its obligations of the concession agreement. We make our investment in the form of tax-exempt debt rather than through a traditional equity investment. Our debt investment structure allows for residual revenues generated from a P3 project to both support the project during the term of the concession and accumulate as an additional benefit for the sponsoring public agency to be provided upon the reversion of the asset itself. This investment approach fully aligns our interest with that of the sponsoring public agency and not-for-profit concessionaire, while revenue accumulation from the P3 project provides us with a reserve of funds to support the payment of interest and principal obligations should the project face temporary cash flow challenges.

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Opportunity Zones

The Opportunity Zone program (the “OZ Program”) was established by Congress in the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”) as an innovative approach to incentivize long-term private sector investments in low-income, economically distressed communities. The goal of the program is to economically revitalize underserved markets and create jobs. The OZ Program provides a vehicle for investors to defer taxes on prior capital gains and reduce subsequent taxes, depending on their holding period and date of investment, which is not possible through most traditional investment vehicles. The U.S. Department of the Treasury has certified as Opportunity Zones over 8,760 individual census tracts across all 50 states, six territories, and the District of Columbia.

The goals of the OZ Program align well with our impact investment strategy, and we will occasionally utilize the OZ Program to make equity investments that meet our credit underwriting criteria. Since the inception of the OZ Program through March 31, 2021, we have realized qualifying gains totaling $69.5 million and have contributed $57.8 million into two QOFs.

To the extent that we recognize capital gains with respect to investments we own, it is possible we may elect to defer such capital gains by investing in one or more QOFs.

Our Approach to Impact Investment Origination

We aim to use our nationwide relationship network and structuring expertise to originate assets that have positive, measurable community impact while delivering attractive risk-adjusted returns to our stockholders. Our approach to impact investing is characterized by the following:

•

Purpose-built Direct Origination Platform. We originate most of our investments directly through our extensive network of thousands of relationships in the community impact finance sector, including state and local governments, institutions of higher education, project developers, municipal advisors, large public finance investors and other tax-exempt focused financial intermediaries. Our origination platform has been organically and purposely built from the ground up and, therefore, does not have the inefficient legacy attributes often observed in other public finance platforms that are part of larger and more bureaucratic financial institutions or are the result of multiple business combinations. As of March 31, 2021, our investment team is comprised of eight direct originators and 13 employees in investment-related support functions such as credit underwriting, legal, portfolio surveillance and credit workouts.

•

Intentional Focus on Projects with Measurable Social Benefit. Identifying financing projects with the potential to create measurable social impact by addressing local needs and opportunities for community development is at the core of what we do. While we do not aim to manage these projects directly, we are not a passive capital provider. We work alongside our prospective borrowers and their advisors to ensure our financing projects address one or more of the United Nations Sustainable Development Goals. According to a second party opinion provided to us by ISS ESG, which is the responsible investment arm of Institutional Shareholders Services Inc. (“ISS”) and an independent organization, the use of proceeds for portfolio investments that we have identified in our proprietary Social Impact Finance Framework is aligned with the International Capital Market Association's (“ICMA”) social bond principles and significantly contributes to addressing the following United Nations Sustainable Development Goals: reduced inequalities, sustainable cities and communities, clean water and sanitation, quality education and good health and well being. We also utilize our internally developed Social Impact Finance Framework to ensure all investments comply with our social impact finance guiding principles, which focus on the above United Nations Sustainable Development Goals and other such goals at the community level, including affordable basic infrastructure and housing, access to essential services, and employment generation, among others. Our commitment to social impact does not end as the financing transaction is originated. We work closely with our borrowers to develop quantifiable and observable measures of impact performance that provide ongoing transparency and accountability, and then monitor those measures during the life of the investment, taking action if the social impact framework agreed with the borrower at the outset does not materialize as expected.

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•

Flexible Lending Solutions Tailored to the Specific Needs of our Target Borrowers. Our borrowers often have specific financing needs that require tailored and negotiated solutions. For instance, they may need a gradual drawdown schedule over the construction period of the social impact project, interim financing as the broader funding package is negotiated, or the ability to change certain financing terms over time. While our business and funding model is built to provide our borrowers with such flexibility and tailored solutions, many of our competitors and public municipal market investors are generally unable to do so. Crafting highly-negotiated financing solutions works to our advantage as we are able to include appropriate downside risk management tools through security and covenant protections, which are key to delivering attractive risk-adjusted returns for our stockholders.

•

Expertise Across Asset Classes. We have the experience and proficiency to provide impact financing solutions across a broad range of asset classes, including economic development, infrastructure, healthcare, education and affordable/workforce housing. This allows for credit risk diversification across our investment portfolio while enabling us to deliver our expertise in impact financing to, among others, a wide range of local governments, institutions of higher education, and not-for-profit borrowers.

•

Borrower Retention Over Life Cycle. As successful direct asset originators, we take pride in nurturing our relationships with current, past and prospective borrowers to identify new potential financing opportunities. In fact, repeat borrowers are a key source of asset origination. When new projects or financing needs arise at the local level, entities that have already tested the value and efficacy of our capital solutions are likely to come back to us to discuss potential new business opportunities. Approximately 41% of the financings we have originated since inception have been generated with borrowers with whom we have had multiple financing transactions. Additionally, we actively engage in financing discussions with multiple other borrowers with whom we have previously executed single financing transactions.

Our Portfolio and Funding Strategy

Portfolio

Following the completion of this offering and our formation transactions, our portfolio will consist of 87 debt finance assets, with a total market value of approximately $1.9 billion as of March 31, 2021. All of the debt finance assets in our portfolio are collateralized by projects that we have underwritten to achieve positive risk-adjusted returns, and significant and lasting positive social impacts. These projects are geographically diversified across 23 U.S. states and the District of Columbia, and across multiple sectors, including healthcare, higher education, infrastructure, and housing. Our debt finance assets include tax-exempt, nonrated revenue bonds with a market value of approximately $1.7 billion, or approximately 87.1% of our total portfolio, as of March 31, 2021, as well as taxable revenue bonds receivables, and real estate with a combined market value of approximately $250 million, or approximately 12.9% of our total portfolio, as of March 31, 2021. Our debt finance assets have a weighted average gross coupon of 6.51% and after taking into consideration total funding costs, generated a net interest margin of 4.6% and 4.9% and an adjusted net income margin of 4.9% and 5.0% in the three months ended March 31, 2021 and for the year ended December 31, 2020, respectively. We expect our portfolio will continue to generate positive earnings and cash flow immediately following the completion of this offering and our formation transactions. Since our inception in 2014, we have had only one credit impairment of approximately $10 million, equivalent to 0.27% of our total originations over the same period. While this credit remains in our portfolio today, we do not currently anticipate further impairments and believe we have clear visibility on its workout plan.

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The below table sets forth a summary of the impact finance assets in our portfolio by sector as of March 31, 2021.

Sector	Market Value (in $)		(%)		Weighted Average Coupon(1)
Economic Development		479,402,583		24.7%		6.77%
Infrastructure		436,138,110		22.5%		6.28%
Acute Healthcare		306,537,782		15.8%		5.77%
Public-Private Partnership		253,215,996		13.1%		7.77%
Higher Education		247,627,345		12.8%		6.35%
Senior Living		70,761,443		3.7%		4.96%
Governmental Entities		71,247,892		3.7%		7.11%
Student Housing		41,320,561		2.1%		7.11%
Primary K-12 Education		32,171,793		1.7%		6.87%
Total/Weighted Average		1,938,423,505		100%		6.51%

(1) Represents the gross weighted average yield by sector.

The below table sets forth a summary of the impact finance assets in our portfolio by state as of March 31, 2021.

State	Market Value (in $)		(%)		Weighted Average Coupon(1)
Texas		376,635,595		19.4%		7.44%
Florida		275,274,116		14.2%		5.52%
California		182,921,142		9.4%		6.40%
New York		177,211,517		9.1%		5.75%
Ohio		155,064,616		8.0%		6.23%
District of Columbia		112,001,202		5.8%		6.37%
Georgia		98,186,545		5.1%		6.61%
Illinois		95,610,485		4.9%		6.05%
New Jersey		81,925,668		4.2%		6.25%
Other (15)		383,592,619		19.8%		7.00%
Total/Weighted Average		1,938,423,505		100%		6.51%

(1) Represents the weighted average yield by state.

Funding strategy

We finance our assets with what we believe to be a prudent amount of leverage, while relying on a diversified number of funding sources, with a specific focus on Term Matched Trusts (“TMTs”). Our TMTs are normally structured with fixed interest rates for an initial ten-year term, with a step-up interest rate in year 11 that remains fixed through the maturity of the TMT. Each TMT has a final maturity that generally matches the final maturity of the underlying Trust assets. Our TMTs include structural elements, such as the absence of market value tests and the ability to tap underlying bond reserve funds, that provide significant stability in our borrowing base and give us flexibility to weather short-term market challenges that may occur during periods of debt market illiquidity, which occurred, for example, in March and April of 2020. TMTs also allow us to pass through tax-exempt interest income to holders, which lowers our borrowing costs.

In addition to the TMTs, we also maintain a $400 million taxable term A/B trust facility and a senior secured borrowing facility with an available borrowing commitment of $150 million with an option to extend under certain conditions to $300 million. While our main approach to managing interest rate risk is our matched funding strategy, we expect, from time to time, to engage in a variety of hedging transactions that seek to mitigate the effects of fluctuations in interest rates on our cash flows. We expect that these hedging transactions will allow us

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to reduce, but not eliminate, the risk that we have to refinance our liabilities before the maturities of our investments and to reduce the impact of changing interest rates on our earnings.

Case Studies of Impact Financing In Action

The following are three illustrative examples of how we directly originate community-oriented impact finance assets and how we actively manage our portfolio of such assets. For additional examples, see “Our Business — Direct origination case studies” and “Our Business — Active portfolio management case studies.”

Brooks Development Authority (San Antonio, TX)

The U.S. Congress, the state of Texas, and the City of San Antonio created the Brooks Development Authority (“Brooks”), as a governmental body, in 2002 to take title to and redevelop the former 1,300+ acre Brooks Air Force Base. Brooks is located entirely within an Opportunity Zone, and its stated mission is “to promote and develop a vibrant, sustainable community that serves as a catalyst for progressive economic development and regional prosperity.” This mission was especially critical for this historically economically disadvantaged area in light of jobs and other economic drivers lost due to the base closure. Brooks has remodeled the former base into a transformative south San Antonio live-work-play development with new residential units, significant employment centers, retail, charter schools, and a VIA Metropolitan Transit center.

In 2015, we made an initial $54.9 million investment in Brooks in the form of taxable and tax-exempt municipal bonds. This investment provided capital to enhance critical infrastructure, develop a new 43-acre Greenline Park, and help restore historically significant assets, setting the table for increasing economic development activity on the Brooks campus. We maintained a supportive relationship with Brooks, providing an additional $36.4 million in capital in the form of tax exempt bonds to construct and open an Embassy Suites Hotel and a $19 million qualified Opportunity Zone equity investment to develop a 350,000 square foot warehouse distribution facility now leased to Amazon. In addition, we also invested $17 million in two additional transactions comprising $7.5 million of taxable and tax-exempt bonds as well as a $9.5 million taxable loan. We plan to invest another approximately $85 million in the form of Opportunity Zone equity and tax-exempt bonds to develop a new 450-unit, purpose-built, single-family workforce housing rental community, which would yield a total investment in Brooks of over $212 million. We have invested approximately $127 million in Brooks to date, with a weighted average coupon owed to the company of 6.545% on our retained investments. Today, aided by our investment, the Brooks campus has more jobs than it had at its peak employment as an Air Force Base, with 5,000 new jobs created with employers such as the University of the Incarnate Word School of Osteopathic Medicine, Cuisine Solutions, Okin, Baptist Health, and Amazon. As of June 30, 2021, we have deposited $68.8 million in aggregate principal amount of these bonds into TMTs.

Roosevelt University (Chicago, IL) — $195 million tax-exempt bonds (we invested $125 million)

Roosevelt University serves over 4,000 full-time equivalent students comprising approximately 70% undergraduate and 30% graduate in its historic south loop and Schaumburg campuses. Roosevelt's student body is one of the most diverse in the United States. The 2019 US News & World Report Annual Guide to Colleges ranked it as the 6th most diverse regional university in the Midwest. In addition, over 60% of Roosevelt's undergraduate students are first generation college students.

In 2018, we worked with the university, its board of trustees and various professionals to craft a refinancing plan that allowed Roosevelt to achieve its goal of significant near-term debt service relief. Given the inability of the university to refinance its debt with tax-exempt debt because of the elimination of advance refundings in the 2017 Tax Act, we developed a bond structure wherein a large portion of taxable bonds would be sold for a nine-month period and then refinanced with tax-exempt debt. We committed to purchase both the initial taxable and tax-exempt debt as well as the tax-exempt future bonds to be delivered in July 2019. This financing structure was customized to meet Roosevelt's goals and we believe was unavailable from other funding sources.

In 2019 and 2020, we worked with Roosevelt to provide additional financing for the university. In March 2020, we provided approval and the subsequent financing, up to $12 million, for Roosevelt to issue additional debt to

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acquire certain assets of Robert Morris University of Illinois. We were able to work with the university to provide necessary approvals that would not have been possible to obtain in a public capital markets transaction given the sensitive and confidential nature of the discussions involving the two universities. We did so on behalf of all of the bondholders in our capacity as ‘‘bondholder representative,’’ which is a role that we frequently undertake when we hold a significant position in the bonds. As bondholder representative, we have the right, but not the obligation, to give consents, authorizations, and approvals under the bond’s governing documents and to exercise remedies upon the occurrence of certain events of default with respect to the bonds.

Following positive migration of the Roosevelt University bonds, we sold down our position in 2019 and 2020 for a return on investment of 20.4%. We remain the bondholder representative.

Our investments are helping Roosevelt transform the paradigm of higher education business models as it provides high quality education to underrepresented student populations and first-generation college students. As of June 30, 2021, we have deposited $39.0 million in aggregate principal amount of these bonds into TMTs.

City of San Bernardino, California — $34,302,793 cashflow receivable:

We purchased a $34,302,793 cashflow receivable stream from a European Bank for a price of $9,750,000. The cashflow stream was payable semi-annually from December 15, 2019 through December 15, 2046 and was created as part of a settlement out of the city’s bankruptcy and restructuring of its outstanding pension debt via an exchange agreement. The security of the receivable stream was the city’s general fund obligation to pay (not a general obligation pledge).

We worked with the city and its municipal advisor to convert the receivable stream into single series of bonds issued by the city with two sub series totaling $19,850,000 ($13,905,000 and $5,945,000). The purchase price of the series 2020 bonds was $1,224,489. The city applied $933,000 of the purchase price to reduce its interest cost through funding a capitalized interest payment. After the issuance of the bonds, we held the bonds for sale on our balance sheet and helped facilitate the process for the city and its municipal advisor to receive its first public post-bankruptcy general fund credit rating. Fitch rated the city BBB+ as an Issuer Default Rating and rated the $19,850,000 of bonds BBB.

We sold the bonds throughout late 2020 for a gain of approximately $3.3 million, equating to a gain of approximately 35% from its original investment in December 2019. We were able to work with the city and its municipal advisor to allow value to be created for both the city, through short-term budgetary savings and long-term capital access, and us, by facilitating its first public post-bankruptcy credit rating, which increased the liquidity of the city’s bonds.

Market Opportunity

Overview

Social impact investing is the provision of finance with the intention to produce attractive risk-adjusted returns in transactions that deliver meaningful social impact. Based on the 2020 Annual Impact Investor Survey conducted by the Global Impact Investing Network, there is an estimated $404 billion of impact investing assets in the United States. Impact investments can be made in a wide variety of project types, and through a variety of investment vehicles and strategies. These assets help local governments provide essential services to communities and improve access to a range of facilities and amenities that improve living standards and quality of community life. Social impact assets tend to have a high ESG score and are generally aligned with several of the United Nations Sustainable Development Goals. Social impact assets have emerged as an important, institutional-scale opportunity for private investors to align their portfolios with societal benefits and achieve competitive financial performance.

Investments in social impact projects tend to have several attractive attributes that offer predictable, steady returns and less exposure to market and systemic risks, such as:

Stable long-term cash generation: social impact investments generally provide stable cash generation, with revenue arising from long-term cash flow streams. Revenues may also be linked to inflation, which provides protection over the term of the contract.

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Low correlation and volatility: social impact investments show low correlation to traditional asset classes such as equities and fixed income and are less vulnerable to volatility. Services provided by social impact borrowers are often essential, making them less exposed to market volatility and less dependent on day-to-day economic activities in their immediate vicinity. This provides more certainty on the income and cash flows in times of distress.

Low refinancing risk: most of our social impact investments have long maturities, usually 30 years, and are typically self-amortizing, which enables repayment of principal with less reliance on future market access.

Opportunity for portfolio diversification: social impact investments have a high degree of heterogeneity across sectors (health, education, judiciary, security, culture or recreation) and regions. These assets all serve different human and social needs, with different users, business profiles, laws and regulations.

Low default rate: social impact investments have experienced lower default rates (approximately 2%) than other infrastructure sectors (approximately 7%) according to Moody’s May 2020 report on the Infrastructure asset class.

Large and Growing Demand for Investment in Social Impact Assets

In the decade following the global financial crisis, governments have struggled to meet the growing demand for impactful infrastructure due to austerity measures, regulatory barriers and other factors. The dearth of investment has contributed to the aging of infrastructure, which has been acute for social sectors like healthcare, housing and education. The COVID-19 pandemic further highlighted the lack of necessary facilities, such as accessible healthcare facilities and affordable housing, to effectively combat threats like COVID-19 and emphasized the need for additional investment. In the United States, where the responsibility for addressing the infrastructure investment gap falls primarily on municipalities with limited debt capacity or access to federal funding, there is an estimated $433 billion infrastructure investment need in 2021 according to the Global Infrastructure Hub, and an estimated $259 billion of annual investment is required to close the infrastructure investment gap over the next 10 years based on estimates from the 2021 Infrastructure Report Card of the American Society of Civil Engineers (the “ASCE”).

Given limitations on public spending and increased demand that is expected after the end of the COVID-19 pandemic, the opportunity for private capital investment in social impact assets is expected to be significant. We believe that the rising demand for capital that provides a social impact to local, underserved communities and the need for bespoke solutions will help to fuel our growth and positively impact our business. The following is a brief description of the sectors and customers we serve as well as the primary drivers of demand for each.

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State and Local Governments / Municipalities — Governments and municipalities will use tax and other incentives to induce transformative economic development projects that the private sector could not otherwise do on its own. These projects deliver economic development activity for their communities measured in new jobs and tax revenues generated and make them vibrant places to live, work, learn and play. In addition, government entities with limited capital may require direct financing in order to effectively serve their communities. We believe the fiscal and budgetary constraints facing state and local governments will continue to drive the demand for bespoke capital financing and generate further growth. We have strong relationships with local governments, municipalities and other borrowers interested in economic development projects and believe we are well-positioned to capture additional market share.

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Infrastructure — New infrastructure is a critical need for any type of community development. Given the strong demand for new development combined with the general strain on municipal budgets, a significant amount of new infrastructure is funded by and for the specific project. We have a strong history of delivering this capital across high-growth areas of the country.

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Healthcare Facilities — The global pandemic highlighted the substantial need for capital to replace aging infrastructure and improve healthcare facilities, particularly in underserved communities with a scarcity of capital providers. The increasing prevalence of chronic diseases, a growing elderly population in the United States, and technological advances are also expected to drive long term demand to fund capital for acute healthcare facilities.

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Education — Public and private education institutions in the United States often have limited access to capital to replace aging infrastructure and meet the rising demand for new projects, including student housing. Further, in primary education there continues to be a demand for alternative school facilities. especially in underserved communities. The ASCE’s 2021 Infrastructure Report Card estimates that $38 billion of annual infrastructure spending over the next 10 years is required to close the infrastructure investment gap for public school facilities. We think the financial strain caused by the COVID-19 pandemic has further limited these institutions’ access to capital and will increase the demand for bespoke capital solutions.

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Public-Private Partnerships — The public sector increasingly looks to public-private partnerships (“P3s”), as a preferred procurement model for the development of new non-core assets or the monetization of existing non-core assets. These and other attributes make P3s attractive to public sector borrowers, and the COVID-19 pandemic has only accelerated the trend toward greater use of P3s as a preferred procurement and project delivery method.

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Housing (Senior Living and Workforce) — The demographic shift in the United States towards an older population is driving increased demand for various senior living housing care options from not-for-profit owners. There is also significant demand for housing that meets the needs of certain citizens, including government and private sector employees, that do not meet the criteria for affordable housing in high cost communities or those with housing shortages.

The macroeconomic and market trends across these various sectors combine to create our market opportunity. As the public listing broadens the awareness of our business and focus on positive social impact in underserved communities, we believe there will be a significant expansion of our origination network.

On March 31, 2021, the Biden administration announced the American Jobs Plan, a proposal to invest $2.2 trillion in infrastructure across the United States. While we believe more investment in the framework of the United States is a positive for the development of the public finance market, as well as the development of communities, our focus is on investments in projects at the state and local level and we do not expect the proposals laid out in the American Jobs Plan will have any material impact on our business strategy or expected level of originations.

Municipal Finance Market

In the United States, municipal bonds are a major source of funding for social impact assets, with a total of approximately $3.9 trillion of municipal debt outstanding as of December 31, 2020. In general, municipal bonds fall into one of two categories: revenue bonds where principal and interest are secured by revenues derived from tolls, charges or rents from the facility built with the proceeds, and general obligations backed by the general revenues of the issuing municipality. Our municipal bond transactions are predominantly in the revenue bond category, which had $285 billion of issuance in 2020 representing approximately 59% of total municipal financing volume.

We focus primarily on non-rated transactions/borrowers or special situations for below investment grade borrowers that are not easily financed through the traditional capital markets. According to the Securities Industry and Financial Markets Association (“SIFMA”), the overall municipal finance bond market is expected to have approximately $452 billion of issuance in 2021.

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Lack of Direct Competitors

We operate in a highly fragmented sector with limited competition due to the characteristics of the assets we finance and our differentiated origination capabilities. Transaction structures are similar to traditional commercial finance, but are complicated by the negotiation of municipal approvals, the need for special underwriting or structuring efforts and other factors (multiple forms of collateral, etc.). Given the need for direct, local connectivity and highly specialized credit and underwriting expertise across a range of sectors, we are able to underwrite transactions for assets that are unfamiliar or too complex for traditional lenders including most banks, business development companies (“BDCs”), real estate investment trusts (“REITs”), mutual funds and other non-bank specialty finance lenders. Regulatory headwinds have also limited the competition from banks and insurance companies. The tightening of banking regulation following the 2008 financial crisis, primarily through regulatory capital requirements from the Basel III framework, means bank loans have been partially replaced by direct private loans from non-bank institutions. In addition, insurance companies are subject to capital requirements that penalize sub-investment grade and unrated credits. We will continue to focus on differentiating ourselves through consistent sector focus, structuring expertise, and long-term capital support for complicated transactions. As a result, in this large and dynamic segment of the impact finance industry, few alternative lending and investing sources are available for borrowers who require the tailored, long-term financing we provide.

Our Business and Growth Strategy

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Expand Direct Origination Franchise to Grow Our Market Share. Our platform is well-positioned to take advantage of the growing demand for social impact investments. We plan to continue investing in the expansion of our network of relationships with local governments, institutions of higher education, not-for-profit entities and other borrowers and believe our expertise and reputation with these parties will enable us to grow our market share by expanding our solution-oriented origination model to new and repeat borrowers. Our experienced investment team is well-equipped to capitalize on these opportunities while we strategically invest in our platform to further support our organic growth. We will continue to recruit value-added origination professionals that can expand our network of relationships and origination volumes. Most recently, for example, we hired a senior originator who will focus on the sectors of workforce housing and charter schools, expanding our network and positioning in these important social impact project categories.

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Continue to Capitalize on Market Opportunities Through Our Active Portfolio Management Strategy. Historically, disruptions in the municipal bond market can give rise to opportunities to acquire high-quality municipal bonds at significant discounts to our underwritten valuations of the bonds. Our management team has a strong track record of identifying and executing secondary market trading opportunities, having realized an 11.2% internal rate of return (“IRR”)1 for the years 2017 through 2020 on the capital allocated for secondary investments. We believe we will be able to leverage our management team’s experience and expertise to grow our portfolio with accretive secondary market purchases and to realize gains in the directly originated portfolio with opportunistic market sales as our investments complete their positive credit migration journey.

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Expand Use of Efficient Balance Sheet Financing. We rely on diversified sources of funding, including our proprietary TMT financing product which provides us with a stable borrowing base and relatively lower cost of funds. Over time, we plan to take advantage of our TMT financing to target 1.0:1 leverage in the near term and 2.0:1 leverage in the long term on our portfolio of assets on a debt-to-equity basis. We believe that the characteristics of our portfolio of community impact finance assets, coupled with our efficient financing structure (current weighted average interest rate of 3.21% as of March 31, 2021) will allow us

1 We calculate IRR as the annualized effective compounded return rate that accounts for the time-value of money and represents the rate of return on an investment over a holding period expressed as a percentage of the investment. It is the discount rate that makes the net present value of all cash outflows (the costs of investment) equal to the net present value of cash inflows (returns on investment). It is derived from the negative and positive cash flows resulting from or produced by each transaction (or for a transaction involving more than one investment, cash flows resulting fromor produced by each of the investments), whether positive or negative taking into account the dates on which such cash flows occurred or are expectedto occur, and compounding interest accordingly.

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to generate superior risk-adjusted returns for our stockholders over the long term, while maintaining a conservative capital structure with modest financial leverage.

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Increased Focus on Customers in Sectors Adversely Impacted by COVID-19. The lingering COVID-19 pandemic has placed financial stress upon many not-for-profit borrowers in the higher education, healthcare, senior living, and hospitality sectors and has limited their access to capital. Our business model and expertise in restructuring troubled capital structures position us well to assist these institutions. Community borrowers adapting to the COVID-19 economy often need new capital structures and business plans. Our hands-on bondholder representative model and permanent capital allow us to be more adaptive to these borrowers’ needs than traditionally passive municipal market investors can be. The active environment for mergers and acquisitions in the healthcare and higher education sectors also presents us with significant opportunities to fund new collaborations.

Our Competitive Strengths

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Market Leader in Providing Financing Solutions to Projects with Significant Social and Economic Impact. We have established a market-leading, highly scalable platform capable of directly originating social impact investments with a pristine credit track record, sourced through our proprietary relationship network. We believe that our borrowers’ ability to leverage our deep experience and specialized knowledge of the strategic, structural, regulatory and economic framework associated with community-oriented impact financing further differentiates us from traditional public finance lenders and the municipal finance markets. We believe our structuring expertise enables us to be a creative, flexible and dependable financing partner to our borrowers, while structuring our financings to achieve both positive measurable community impact and attractive risk-adjusted returns at a premium to the broader municipal bond market.

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Profitable and Long-term Contracted Cash Flows. Since our formation, we have originated over $3.7 billion in financings, achieved 29 consecutive quarters of positive net income and generated an 11.7% Compound Annual Growth Rate in book value per share since inception through March 31, 2021 (assuming full dividend reinvestment at book value). We have also recognized $142 million of total gains on originated investments since inception through the sale of $702 million of investments following the realization of positive migration of the credit story expected at the time of origination or purchase. Further, our investment portfolio has a weighted average remaining term of 25.5 years, which provides long-term visibility into the cash flow generation profile for our existing investment portfolio.

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Significant Growth Opportunities through Identified Pipeline. We have a large and active pipeline of 29 potential new social impact finance opportunities at various stages of our underwriting process. As of March 31, 2021, our pipeline contained more than $1.4 billion in new opportunities that could potentially close over the next 12 months, consisting entirely of opportunities in which we will be the lead investor. Of this total, approximately 96% are tax-exempt municipal bonds and the balance are taxable investments. Similarly, 20% of these opportunities represent public-private partnership transactions. As of June 30, 2021, we target to close at least $500 million of our pipeline before December 31, 2021. Our overall investment pipeline is diversified across a broad range of sectors as illustrated in the chart below:

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The impact finance opportunities in our pipeline are subject to our ongoing due diligence and the negotiation and execution of mutually acceptable definitive and binding agreements. There can be no assurance that we will be able to negotiate and execute satisfactory definitive agreements, or that we will be able to complete any or all of the financings in our pipeline.

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Structuring Expertise and Highly Disciplined Credit Approach. We have built a direct origination platform with a strong, cycle-tested risk management culture. While we aim to provide financing and structural flexibility to our borrowers in a way that differentiates us from the competition, we never lose sight of the disciplined credit underwriting and due diligence standards that guide every step of our origination and portfolio monitoring process. This disciplined approach has produced meaningful tax-advantaged returns with minimal credit losses for our stockholders since our inception. We have experienced only one credit impairment since inception in 2014. and credit losses have amounted to 0.27% of total originations of $3.7 billion over the same period.

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Opportunity to Enhance ROAE over Time with Gradually Higher Leverage. Over the last five years we have realized a return on average equity (“ROAE”) of 8.4% and an adjusted return on average equity (“Adjusted ROAE”) of 9.1% while operating at very low levels of leverage to avoid over-reliance on short term debt financing as evidenced by our 0.34x debt-to-equity ratio as of March 31, 2021. As our TMT debt platform continues to expand with six financing counterparties already in the program and several more in the pipeline, we believe it is prudent and desirable to increase our leverage over time by taking advantage of the match-funded nature of TMT debt. thereby enhancing our targeted return on equity. Although we are not subject to any specific leverage regulatory standard, we expect over time to target, on a debt-to-equity basis, a near-term leverage target of 1.0:1, working eventually toward 2.0:1 leverage on our portfolio of assets. We believe that this leverage target is not only consistent with the credit characteristics of our investment portfolio of social impact finance assets, but also conservative or in line with the average leverage profile of other commercial specialty finance lenders.

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Internal Management Structure Creates Strong Alignment of Interest and Operational Scalability. We are structured as a vertically integrated, internally managed company with all members of our senior management team serving as full-time executive officers. We believe this represents a key competitive advantage as we continue to scale our investment portfolio and, as a result, extract operating leverage and efficiencies from our existing, scalable company infrastructure. We believe this sets us apart from many externally managed investment vehicles, which have permanent investment capital and are involved in direct credit origination but do not have a similar amount of operating leverage as their cost base tends to generally increase proportionally to the amount of capital invested by their external manager.

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Seasoned Leadership Team with Deep Industry Experience across Interest Rate and Credit Cycles. The members of our management team have an average of over 25 years of industry experience and have deep knowledge in originating, underwriting, structuring, financing and managing portfolios of high quality, tax-advantaged social impact assets through a variety of credit and interest rate environments and economic cycles. These individuals have an in-depth understanding of the credit fundamentals of impact finance, which requires specialized knowledge, as well as the ability to analyze and set value parameters around various types of revenue streams, projects and collateral. Furthermore, certain senior members of our management team have worked together for over 20 years in various roles across their careers, well before the founding of our company.

Recent developments

Certain preliminary estimated results and operating metrics as of and for the three months ended June 30, 2021 are set forth below. The information provided below reflects preliminary estimates, as we have not yet completed our closing procedures for the three months ended June 30, 2021. The preliminary estimates below are based solely on information available to us as of the date hereof and are inherently uncertain and subject to change, and we undertake no obligation to update this information. Our actual results remain subject to the completion of management’s final review and our other quarterly closing procedures. During the course of our closing

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procedures and the preparation of our interim financial statements, additional items that would require material adjustments to these preliminary estimates may be identified. These preliminary estimates do not constitute a comprehensive statement of our operational results or financial position as of and for the three months ended June 30, 2021. In addition, these preliminary estimates as of and for the three months ended June 30, 2021 are not necessarily indicative of the results to be achieved in any future period. Accordingly, you should not place undue reliance on these preliminary financial results.

The preliminary estimated results and operating metrics presented below have been prepared by, and are the responsibility of, our management. Our independent registered public accounting firm, KPMG LLP, has not reviewed or performed any procedures with respect to the preliminary estimates provided below.

During the three months ended June 30, 2021:

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we directly originated approximately $ million in new community-oriented impact financings, including a $ million opportunity zone equity investment, yielding over $ billion in financings originated since our formation;

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our debt finance assets had a weighted average gross coupon of % for the three months ended June 30, 2021;

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our investment portfolio grew from $1.9 billion as of March 31, 2021 to $ billion as of June 30, 2021;

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we closed three additional TMTs with an outstanding balance of approximately $ million. As of June 30, 2021, the total outstanding balance of all of our TMTs was approximately $ million, the current interest rates for our TMTs range from % to %, and our total outstanding indebtedness grew from $510.5 million as of March 31, 2021 to $ million as of June 30,2021 with an average weighted interest rate of % and, a weighted average maturity date of years. The ratio between our total debt and total equity was approximately to one as of June 30, 2021. For additional information on our TMTs and other indebtedness, see “Business — Our financing strategy";

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our total revenue was $ , our net realized gains was $ , our net income was $ and there were no credit impairments taken; and

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we estimate our total equity was equal to $ million as of June 30, 2021, inclusive of accumulated other comprehensive income of $ million.

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The Structure and Formation of Our Company

Our Organizational Structure

The following diagram illustrates our structure upon completion of this offering and the formation transactions:

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(1) Includes shares of Class B common stock in our company and Class A OP units in our operating partnership owned by our directors and executive officers through their interests in PHC LLC. Includes shares of Class A common stock underlying equity awards to be granted to certain of our executive officers and our independent director nominees under our 2021 Equity Incentive Plan.

(2) Holders of our Class A common stock and holders of our Class B common stock are each entitled to one vote per share and all such holders will vote together as a single class. Upon completion of this offering, PHC LLC will hold all of our issued and outstanding shares of Class B common stock, which will represent approximately % of the total voting power of our common stock (or approximately % of the total voting power of our common stock if the underwriters exercise in full their option to purchase additional shares of Class A common stock in this offering).

(3) The aggregate voting power of the Class B common stock is intended to be in proportion to the economic ownership interests in our operating partnership represented by holders of OP units other than us.

(4) Each Class A OP unit (other than those held by us) is exchangeable, from time to time, on a one-for-one basis into shares of our Class A common stock, subject to equitable adjustment for stock splits, stock dividends and reclassifications. See “Certain Relationships and Related Transactions — Operating Partnership Agreement.”

(5) Upon exchange of Class A OP units for shares of Class A common stock, (i) the shares of Class B common stock with which such Class A OP units are paired will mandatorily convert into Class A common stock at a conversion ratio of 50 shares of Class B common stock for each share of Class A common stock and (ii) a corresponding amount of Class B OP units held by us will automatically convert into Class A OP units at a conversion ratio of 50 Class B OP units for each Class A OP unit. To the extent our operating partnership makes distributions in respect of our Class A OP units, it would be required to make a distribution in respect of our Class B OP units in an amount equal to 2% of the distribution to our Class A OP units.

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Our Formation Transactions

Prior to the completion of this offering, we operated our business through our predecessor, PHC LLC. Prior to or concurrently with the completion of this offering, we, PHC LLC and the operating partnership will engage in a series of transactions, which we refer to as our formation transactions, that are designed to:

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increase our capital resources so that we may expand upon our proven ability to achieve attractive returns by serving the rapidly growing community impact finance market;

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allow us to exploit important operational and tax advantages of our structure, which will enable us to redeploy a substantial portion of the interest income from our tax-exempt bonds into new assets;

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deploy a flexible distribution and financing strategy which is expected to both strengthen our balance sheet and support our growth strategy; and

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facilitate this offering.

The agreements relating to our formation transactions may be subject to customary closing conditions, including the closing of this offering.

The significant elements of our formation transactions include the following (all amounts are based on the mid-point of the initial public offering price range shown on the cover page of this prospectus):

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We have formed our company, and we will, prior to the completion of this offering, form our operating partnership and certain subsidiaries of our operating partnership.

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PHC LLC will, through a series of transactions, contribute its business to our operating partnership subsidiary and receive Class A OP units and an equivalent number of shares of Class B common stock.

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In addition, in these transactions, our operating partnership will issue Class B units of limited partnership interest in our operating partnership (“Class B OP units”) which we will hold and which in the aggregate will have an economic interest in our operating partnership equal to the economic interest associated with the outstanding shares of Class B common stock.

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Immediately prior to the closing of this offering, PHC LLC will be our sole stockholder and we and PHC LLC will be the only holders of OP units in our operating partnership.

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We will sell shares of our Class A common stock in this offering and an additional shares if the underwriters exercise their option to purchase additional shares in full.

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We will enter into employment agreements with certain members of our senior management team and we will hire the current employees of PHC LLC as our employees.

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We will contribute the net proceeds from this offering to our operating partnership in exchange for a number of Class A OP units equal to the number of shares of Class A common stock we issue and sell in this offering.

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We will enter into a shared resources and cooperation agreement with PHC LLC, pursuant to which we will assist PHC LLC in the eventual wind-down of its operations.

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Our operating partnership will assume our outstanding indebtedness.

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We will adopt the Company’s 2021 Equity Incentive Plan. Effective upon or after completion of this offering, we will grant a total of equity awards to certain of our executive officers and our independent directors. These grants are designed to provide an incentive for the recipients and to ensure that their interests are aligned with those of our stockholders in connection with the future growth and operation of our business.

•

We will provide registration rights to holders of our OP units with respect to the shares of our Class A common stock issuable upon exchange of OP units (and upon conversion of shares of Class B common stock) that will be issued in connection with the formation transactions.

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•

We will enter into a tax receivables agreement with holders of OP units.

See “Certain Relationships and Related Transactions” for more information concerning the various agreements governing the formation transactions.

Our Distribution Policy

We expect that our board of directors will declare an initial dividend of $ per share with respect to the quarter ended , 2021. On an annualized basis, this dividend would equate to $ per share, or an annual distribution rate of approximately % based on the mid-point of the initial public offering price range set forth on the front cover page of this prospectus. On a pro forma basis, giving effect to the completion of this offering and the formation transactions, this dividend represents only approximately % of our GAAP net income for the quarterly period ended , 2021 and is reflective of our goal to support our company’s growth by aiming to reinvest a portion of our earnings back into our business.

We intend to maintain this quarterly dividend rate for the 12-month period following completion of this offering unless actual results of operations, economic conditions or other factors differ materially from the assumptions used in determining our initial distribution rate. However, distributions to our stockholders, if any, will be authorized by our board of directors in its sole discretion out of funds legally available therefor and will be dependent upon a number of factors, including general economic conditions, availability of investment opportunities, our historical and our projected results of operations, our available cash and financial condition, our financing covenants, and such other factors as our board of directors deems relevant.

In addition, because we are organized as a holding company and will have no material assets other than our general partner interest and the Class A OP units and Class B OP units that we hold in our operating partnership, the ability of our board of directors to declare and pay dividends to the holders of our common stock will be subject to the ability of our operating partnership to pay distributions to us in respect of the Class A OP units we hold in the operating partnership. When our operating partnership pays distributions to us in respect of our OP units, our operating partnership is also required to make an equivalent distribution per unit in respect of the Class A OP units not held by us. In this regard, subject to funds being legally available to pay distributions, we, as the sole general partner of the operating partnership, intend to cause our operating partnership to make distributions to holders of Class A OP units, including us, in an amount at least sufficient to allow us and other holders of Class A OP units to pay all applicable taxes and to allow us to make payments under the tax receivables agreement. Because we expect a significant portion of assets will continue to be concentrated in bonds and other assets that generate tax-exempt interest income, a significant portion of our net interest income will not be subject to tax, which will reduce the amount of distributions that would otherwise need to be paid to us to allow us to pay applicable taxes.

We further intend to cause our operating partnership, to the extent of funds being legally available to fund distributions, to make additional distributions to holders of Class A OP units, including us, in an additional amount sufficient to allow us to cover dividends, if any, declared by our board directors in respect of our Class A common stock. If our operating partnership makes such distributions, we would be required to pay a dividend per share to the holders of our Class B common stock in an amount equal to 2% of the amount of any dividend per share paid to holders of our Class A common stock. Through the Class B OP units we hold in our operating partnership, we expect to receive distributions sufficient to allow us to fund any dividend we pay on shares of Class B common stock.

Currently, we have no intention to use any net proceeds from this offering to make distributions to our stockholders or to make distributions to our stockholders using shares of our stock.

Emerging Growth Company Status

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not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to take advantage of this extended transition period. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates for such new or revised standards. We may elect to comply with public company effective dates at any time, and such election would be irrevocable pursuant to Section 107(b) of the JOBS Act.

We could remain an “emerging growth company” until the earliest of (1) the end of the fiscal year following the fifth anniversary of the date of the first sale of our Class A common stock pursuant to an effective registration statement, (2) the last day of the fiscal year in which our annual gross revenues exceed $1.07 billion, (3) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, or the Exchange Act, which would occur if the market value of our Class A common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (4) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

Summary Risk Factors

An investment in our Class A common stock involves various risks. You should carefully consider the risks discussed below and under “Risk Factors” before purchasing our Class A common stock. If any of the following risks or risks discussed under “Risk Factors” occurs, our business, financial condition or results of operations could be materially and adversely affected. In that case, the trading price of our common stock could decline, and you may lose some or all of your investment.

•

The current outbreak and spread of COVID-19 has disrupted, and is likely to further cause severe disruptions in, the U.S. and global economies and financial markets and create widespread business continuity and viability issues.

•

Our business depends in part on U.S. federal, state and local government policies and a decline in the level of government support could harm our business.

•

U.S. federal, state and local government entities are major participants in the economic development, infrastructure, healthcare, education and affordable housing industries and their actions could be adverse to our projects or our company.

•

Because our business depends to a significant extent upon relationships with key industry participants, our inability to maintain or develop these relationships, or the failure of these relationships to generate business opportunities, could adversely affect our business.

•

We operate in a competitive market and future competition may impact the terms of the impact investments and financing we originate or reduce risk-adjusted total returns of municipal bonds we may opportunistically acquire on the secondary market.

•

Our risk management efforts may not be effective.

•

Changes in interest rates could adversely affect the value of our assets and negatively affect our profitability.

•

We rely, in part, on analytical models and other data to analyze potential asset acquisition and disposition opportunities and to manage our portfolio. Such models and other data may be incorrect, misleading or incomplete, which could cause us to purchase assets that do not meet our expectations or to make asset management decisions that are not consistent with our strategy.

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•

A significant portion of our non-TMT structured credit assets could consist of junior and residual interests that will be subordinate in right of payment and in liquidation to the more senior interests issued by the structured credit entities.

•

There are separate risks associated with our TMT financings, including upon a payment default on an underlying bond and reduced demand for our TMT structure.

•

The majority of the assets in our portfolio are recorded at fair value and, as a result, there could be uncertainty as to the value of these assets.

•

We may not realize gains or income from our assets and our assets may decline in value.

•

The receipt of interest and principal payments on our impact finance assets will be affected by the ability of the borrowers to pay principal and interest and the economic results of the underlying projects.

•

The debt financings we originate for local governments, institutions of higher education and not-for-profit entities for a wide variety of projects that promote economic development, infrastructure, healthcare, education and affordable housing projects are subject to delinquency, foreclosure and loss, any or all of which could result in losses to us.

•

The impact investments and the projects that we directly originate are subject to performance risks that could impact the repayment of and the return on our assets.

•

Our insurance and contractual protections may not always cover lost revenue, increased expenses or liquidated damages payments.

•

We may change our operational policies (including our investment guidelines, strategies and policies) with the approval of our board of directors but without stockholder consent at any time, which may adversely affect the market value of our Class A common stock and our ability to make distributions to our Class A stockholders.

•

Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, a misappropriation of funds, and/or damage to our business relationships, all of which could negatively impact our financial results.

•

We expect to use leverage to execute our business strategy, which may adversely affect the return on our assets and may reduce cash available for distribution to our Class A stockholders, as well as increase losses when economic conditions are unfavorable.

•

We may enter into hedging transactions that could expose us to contingent liabilities or additional credit risk in the future and adversely impact our financial condition.

•

There is no public market for our Class A common stock and a market may never develop, which could cause our Class A common stock to trade at a discount and make it difficult for holders of our Class A common stock to sell their shares.

•

We cannot assure you of our ability to make distributions in the future. If our portfolio of impact finance assets fails to generate sufficient income and cash flow, we could be required to sell assets, borrow funds or raise additional equity in order to be able to make distributions.

•

Future offerings of debt or equity securities, which may rank senior to our Class A common stock, may adversely affect the market price of our Class A common stock.

•

Following the completion of this offering and our formation transactions, PHC LLC will hold approximately % of the total voting power of our common stock (or % if the underwriters exercise in full their option to purchase additional shares), and its interests in our business may differ from our interests or those of our other stockholders.

•

Purchasers of shares of Class A common stock in this offering will experience immediate and significant dilution in the net tangible book value per share.

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•

Loss of our 1940 Act exclusion would adversely affect us, the market price of shares of our Class A common stock and our ability to distribute dividends.

•

Upon completion of this offering, we will be a “controlled company” within the meaning of the rules and the rules of the SEC. As a result, we qualify for and rely on exemptions from certain corporate governance requirements that provide protection to stockholders of other companies.

•

Our business could be harmed if key personnel terminate their employment with us.

•

Our structure may result in potential conflicts of interest between the interests of our Class A stockholders and limited partners in the operating partnership, which may materially and adversely impede business decisions that could benefit our Class A stockholders.

•

In certain cases, payments under the tax receivables agreement may be accelerated and/or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivables agreement.

•

Certain provisions of Maryland law could inhibit changes in control.

•

Our authorized but unissued shares of common and preferred stock may prevent a change in our control.

•

Our rights and the rights of our Class A stockholders to take action against our directors and officers are limited, which could limit your recourse in the event of actions not in your best interests.

Corporate Information

Preston Hollow Community Capital, Inc. was incorporated in Maryland on May 17, 2021. Our principal executive offices are located at 1717 Main Street, Suite 3900, Dallas, Texas 75201. Our telephone number is (214) 389-0800, and our website address is www.phccap.com. The information found on or accessible through our website is not incorporated into, and does not form a part of, this prospectus.

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The Offering

Class A common stock offered by us

shares (plus up to an additional shares of our Class A common stock that we may issue and sell upon the exercise in full of the underwriters’ option to purchase additional shares).

Class A Common stock to be outstanding
after this offering and our formation transactions

shares of Class A common stock (or shares if the underwriters' option to purchase additional shares is exercised in full). If all of the OP units to be issued to PHC LLC in the formation transactions were exchanged for shares of Class A common stock on a one-for-one basis and the shares of Class B common stock with which such OP units are paired were converted into Class A common stock at a conversion ratio of 50 shares of Class B common stock for each share of Class A common stock, shares of Class A common stock (or shares of the underwriters' option is exercised in full) would be outstanding.

Voting

One vote per share. Class A and Class B common stock vote together as a single class. The voting rights of the Class B common stock are intended to be in proportion to the economic ownership interests in our operating partnership represented by holders of OP units in our operating partnership other than us.

Use of proceeds

We estimate that we will receive net proceeds from this offering of approximately $ million, or approximately $ million if the underwriters’ option to purchase additional shares is exercised in full, assuming an initial public offering price of $ per share, which is the mid-point of the initial public offering price range shown on the cover page of this prospectus, and after deducting the underwriting discounts and commissions, and estimated expenses of this offering. We will contribute the net proceeds of this offering to our operating partnership, which will subsequently use the net proceeds to make social impact investments that are in line with our business plan and our company's Social Impact Finance Framework and for general corporate purposes.

NYSE symbol

Risk factors

Investing in our Class A common stock involves a high degree of risk. You should carefully read and consider the information set forth under “Risk Factors” and all other information in this prospectus before investing in our Class A common stock.

Voting power held by holders of Class A common stock

% (or % if the underwriters’ option to purchase additional shares of Class A common stock is exercised in full).

Voting power held by holders of Class B common stock

% (or % if the underwriters’ option to purchase additional shares of Class A common stock is exercised in full).

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Tax Receivables Agreement

Future exchanges of OP units for our Class A common stock are expected to result in increases in our allocable tax basis in the assets of our operating partnership. These increases in tax basis may reduce our taxable income and, thus, the amount of tax that we otherwise would be required to pay in the future.

We will enter into a tax receivables agreement with the holders of OP units that will require us to pay them % of the amount of cash savings, if any, in U.S. federal, state and local income tax that we actually realize (or are deemed to realize in the case of an early termination payment by us, or a change in control) as a result of such increases in tax basis and certain other tax benefits related to entering into the tax receivables agreement, including tax benefits attributable to payments under the tax receivables agreement. This will be our obligation and not the obligation of our operating partnership. We expect to benefit from the remaining % of cash savings, if any, realized from the tax basis increase.

The tax receivables agreement will commence upon consummation of this offering and will continue until all such tax benefits have been utilized or expired, unless we exercise our right to terminate the tax receivables agreement for an amount based on an agreed upon value of payments remaining to be made under the agreement. See “Certain Relationships and Related Transactions — Tax Receivables Agreement.”

Summary Financials and Other Data

The following tables set forth financial and operating data on a historical basis for our predecessor and for us after giving pro forma effect to the formation transactions as described in “The Structure and Formation of our Company” and for this offering and the contemplated use of the proceeds as described under “Use of Proceeds.” We have not presented historical information for our company because we have not had any corporate activity since our formation other than the issuance of shares of common stock in connection with the initial capitalization of our company and because we believe that a discussion of the results of our company would not be meaningful.

The following historical and pro forma financial information should be read in conjunction with “Selected Pro Forma and Historical Financial and Operating Data,” “Unaudited Pro Forma Consolidated Financial Information,” “Capitalization,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our predecessor’s historical audited and interim unaudited consolidated financial statements and related notes thereto. The historical consolidated balance sheet data of our predecessor as of March 31, 2021 and December 31, 2020 and 2019 and the consolidated statements of income of our predecessor for the three months ended March 31, 2021 and 2020 and the years ended December 31, 2020 and 2019 have been derived from the historical audited and interim unaudited consolidated financial statements of our predecessor and related notes appearing elsewhere in this prospectus. Our unaudited pro forma consolidated balance sheet data as of March 31, 2021 is presented to reflect adjustments to our predecessor’s historical consolidated balance sheet as of March 31, 2021 as if this offering, the contemplated use of proceeds, and the formation transactions were completed on March 31, 2021. The unaudited pro forma consolidated statements of income for the three months ended March 31, 2021 and the year ended December 31, 2020 are presented as if this offering, the contemplated use of proceeds, and the related formation transactions were completed on January 1, 2021 and January 1, 2020, respectively. The unaudited pro forma consolidated financial information provided

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below is not necessarily indicative of the operating results or financial position that would have occurred had we operated as a public company during the periods presented.

Consolidated Statements of Income Data

	Pro Forma				Historical
	Three Months Ended March 31, 2021		Year Ended December 31, 2020		Three Months Ended March 31,						Year Ended December 31,
	Three Months Ended March 31, 2021		Year Ended December 31, 2020		2021			2020			2020			2019
Revenues:
Interest income(1)		$		$		$	28,414,040		$	29,294,788		$	120,361,186		$	124,826,531
Interest expense							(4,485,661)			(4,816,505)			(19,249,121)			(23,212,275)
Net interest income							23,928,379			24,478,283			101,112,065			101,614,256
Net realized gains(2)							9,133,809			1,627,458			28,824,780			45,229,877
Other revenue(3)							8,228,618			(13,562,889)			(8,500,106)			(6,419,646)
Total revenues							41,290,806			12,542,852			121,436,739			140,424,487
Expenses:
Security other-than- temporary impairment expense							—			—			10,000,000			—
Administrative and other operating(4)							8,749,099			4,083,163			23,018,807			26,361,651
Total expenses							8,749,099			4,083,163			33,018,807			26,361,651
Net Income							32,541,707			8,459,689			88,417,932			114,062,836
Net Income attributable to Stockholder’s/ Member’s capital		$		$		$	32,541,707		$	8,459,689		$	87,703,265		$	114,062,836

(1) Interest income includes marketable securities interest income and finance receivables interest income.

(2) Net realized gains includes net gain on sales of marketable securities, finance receivables, real estate projects, and land held for sale.

(3) Other revenue includes unrealized net gains on trading marketable securities and investment in private fund, net gain (loss) on derivative securities, REO operating income and Other.

(4) Administrative and other operating expenses include provision for (recovery of) finance receivable credit losses, REO operating expense, compensation and administrative and other operating expenses. On a pro forma basis for the three months ended March 31, 2021 and the year ended December 31, 2020, Administrative and other operating expenses excludes and , respectively, of legal expense costs associated with a litigation matter involving PHC LLC that will not be contributed to us as part of the formation transactions.

Balance Sheet Data

	Pro Forma				Historical
	As of March 31, 2021		As of December 31, 2020		As of March 31, 2021			As of December 31,
	As of March 31, 2021		As of December 31, 2020		As of March 31, 2021			2020			2019
Total investment portfolio(1)		$		$		$	1,938,423,505		$	1,933,958,418		$	1,790,636,024
Total assets							2,057,957,232			2,068,552,664			2,047,189,932
Total debt(2)							510,499,789			493,781,352			490,361,954
Total liabilities							542,975,056			507,508,474			510,632,588
Accumulated other comprehensive income (“OCI”)							143,341,759			115,330,528			87,362,823
Total equity							1,514,982,176			1,561,044,190			1,536,557,344

(1) Total investment portfolio includes investments in marketable securities (non-held in trust and in trust), investments in finance receivables, investment in private funds, real estate owned, real estate held for sale and real estate project costs.

(2) Total debt includes secured borrowings and mandatorily redeemable noncontrolling interest in consolidated entities.

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Select operating metrics

	Pro Forma				Historical
	For the three months ended March 31,		For the year ended December 31,		For the three months ended March 31,		For the year ended December 31,
	2021		2020		2021		2020		2019
Interest yield on investment portfolio(1)		%		%		5.9%		6.4%		6.7%
Net Interest Margin(2)		%		%		4.6%		4.9%		5.1%
Return on average assets (“ROAA”)(3)		%		%		6.5%		4.3%		6.0%
Return on average equity (“ROAE”)(4)		%		%		8.5%		6.0%		8.6%
Operating expenses as percentage of total assets (“OPAA”)(5)		%		%		1.7%		1.1%		1.3%
Impairments as % of investment portfolio		%		%		0.0%		0.5%		0.0%
Debt / equity(6)		x		x		0.34x		0.32x		0.32x
Non-GAAP Financial Measures(7)
Adjusted interest yield on investment portfolio (8)		%		%		6.3%		6.6%		6.9%
Adjusted net interest margin(9)		%		%		4.9%		5.0%		5.3%
Adjusted return on average assets (“Adjusted ROAA”)(10).		%		%		6.9%		4.5%		6.2%
Adjusted return on average equity (“Adjusted ROAE”)(11)		%		%		9.5%		6.4%		9.5%
Adjusted operating expenses as percentage of total assets (“Adjusted OPAA”)(12)		%		%		1.2%		1.0%		1.1%

(1) Reflects interest income over average total investment portfolio balance over the period (annualized if computed on a quarterly basis).

(2) Reflects net interest income over average assets (annualized if computed on a quarterly basis). The decreases in net interest margin over the periods presented are due primarily to both a decrease in interest rates and certain assets being placed on a non-accrual status related to payment defaults by obligors attributable to early financial difficulties experienced during the COVID-19 pandemic. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations.”

(3) ROAA reflects net income over average total assets over the period (annualized if computed on a quarterly basis).

(4) ROAE reflects net income over average total equity over the period (annualized if computed on a quarterly basis).

(5) OPAA reflects compensation expense and administrative and other expenses incurred over the period, over average total assets over the period (annualized if computed on a quarterly basis).

(6) Reflects total debt over total equity at the end of each period.

(7) Adjusted interest yield on investment portfolio, adjusted net interest margin, Adjusted ROAA, Adjusted ROAE and Adjusted OPAA are non-GAAP financial measures, which are each defined in footnote eight through twelve of this table. These non-GAAP financial measures are presented because our management believes these measures help investors understand our business, performance and ability to earn and distribute cash to our stockholders by providing perspectives not immediately apparent from net income (loss) or operating expenses (comprised of compensation expense and administrative and other operating expense). The presentation of adjusted interest yield on investment portfolio, adjusted net interest margin, Adjusted ROAE, Adjusted ROAA and Adjusted OPAA in this table are not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. In addition, our definitions and method of calculating these measures may be different from those used by other companies, and, accordingly, may not be comparable to similar measures as defined and calculated by other companies that do not use the same methodology as us. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures are set forth in this section immediately below this table.

(8) Adjusted interest yield on investment portfolio reflects interest income over average total investment portfolio balance net of OCI (annualized if computed on a quarterly basis). OCI is excluded to reflect the removal of the unrecognized market value appreciation since the time portfolio investments were made, which is accounted for in OCI.

(9) Adjusted net interest margin reflects net interest income over average assets net of OCI (annualized if computed on a quarterly basis). OCI is excluded to reflect the removal of the unrecognized market value appreciation since the time portfolio investments were made, which is accounted for in OCI.

(10) Adjusted ROAA reflects net income, excluding non-recurring litigation expenses, over average total assets over the period, excluding OCI (annualized if computed on a quarterly basis). Non-recurring litigation expenses are excluded because they are associated with the prosecution of affirmative claims by PHC LLC for the recovery of damages against a competitor, which claims and the expenses associated with such claims are not being transferred to us. OCI is excluded to reflect the removal of the unrecognized market value appreciation since the time portfolio investments were made, which is accounted for in OCI.

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claims by PHC LLC for the recovery of damages against a competitor, which claims and the expenses associated with such claims are not being transferred to us. OCI is excluded to reflect the removal of the unrecognized market value appreciation since the time portfolio investments were made, which is accounted for in OCI.

(12) Adjusted OPAA reflects compensation expense and administrative and other expense net of any REO expense and non-recurring litigation expense incurred over the period over average total assets over the period (annualized if computed on a quarterly basis). Non-recurring litigation expenses are excluded because they are associated with the prosecution of affirmative claims by PHC LLC for the recovery of damages against a competitor, which claims and the expenses associated with such claims are not being transferred to us. REO expenses are excluded as they relate to non-recurring charges from two REO assets acquired, which were partially offset by REO income generated from the two collateral assets).

Reconciliation of Net Income to Adjusted ROAE, Adjusted ROAA, adjusted interest yield on investment portfolio and adjusted net interest margin

The following table presents a reconciliation of net income (loss) to Adjusted ROAA, Adjusted ROAE, adjusted interest yield on investment portfolio and adjusted net interest margin for the periods presented:

	Pro Forma						Historical
	For the Three Months Ended March 31,			For the Year Ended December 31,			For the Three Months Ended March 31,(1)			For the year ended December 31,(2)						For the cumulative years ended December 31,
	2021			2020			2021			2020			2019			2016-2020(2)
Net income		$			$			$	32,541,707		$	88,417,932		$	114,062,836		$	435,154,474
Non-recurring litigation expenses.									1,002,097			2,069,622			5,365,296			7,491,687
Net income (excluding non-recurring litigation expenses)		$			$			$	33,543,804		$	90,487,554		$	119,428,132		$	442,646,161
Interest income									28,414,040			120,361,186			124,826,531			—
Net interest income									23,928,379			101,112,065			101,614,256			—
Average equity		$			$			$	1,538,013,183		$	1,469,950,981		$	1,324,331,330		$	1,005,385,178
Average OCI									129,336,144			59,817,187			62,135,623			32,102,920
Average equity (excluding OCI)		$			$			$	1,408,677,040		$	1,410,133,794		$	1,262,195,708		$	973,282,258
ROAE			%			%			8.5%			6.0%			8.6%			8.7%
Adjusted ROAE			%			%			9.5%			6.4%			9.5%			9.1%
Average assets		$			$			$	2,063,254,948		$	2,082,060,533		$	1,992,372,488
Average OCI									129,336,144			59,817,187			62,135,623
Average assets (excluding OCI)		$			$			$	1,933,918,804		$	2,022,243,346		$	1,930,236,865
Average investment portfolio balance									1,936,190,962			1,891,190,920			1,860,203,546
Average investment portfolio balance (excluding OCI)									1,806,854,818			1,831,373,733			1,798,067,923
ROAA			%			%			6.5%			4.3%			6.0%
Adjusted ROAA			%			%			6.9%			4.5%			6.2%
Adjusted interest yield on investment portfolio			%			%			6.3%			6.6%			6.9%
Adjusted net interest margin			%			%			4.9%			5.0%			5.3%

(1) Average metrics reflect two quarter average calculated as assets, equity or portfolio balances, as applicable, as of the beginning of the period plus assets, equity or portfolio balances, as of quarter-end, divided by two.

(2) Average metrics reflect five quarter average as assets, equity or portfolio balances, as applicable, as of the beginning of the period plus assets, equity or portfolio balances, as of quarter end, divided by five.

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Reconciliation of Operating Expenses to Adjusted OPAA

The following table presents a reconciliation of compensation expense and administrative and other expense to Adjusted OPAA for the periods presented:

	Pro Forma						Historical
	For the Three Months Ended March 31,			For the Year Ended December 31,			For the Three Months Ended March 31,(1)			For the Year Ended December 31,(2)
	2021			2020			2021			2020			2019
Compensation and administrative and other expenses		$			$			$	8,749,099		$	23,018,806		$	26,361,651
Non-recurring litigation expenses									1,002,097			2,069,622			5,365,296
REO operating expenses									1,714,491			0			0
OPAA			%			%			1.7%			1.1%			1.3%
Adjusted compensation and administrative and other expenses		$			$			$	6,032,511		$	20,949,184		$	20,996,355
Adjusted OPAA			%			%			1.2%			1.0%			1.1%

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RISK FACTORS

An investment in shares of our Class A common stock involves a high degree of risk. Before making an investment decision, you should carefully consider the following risk factors, together with the other information contained in this prospectus. If any of the risks discussed in this prospectus occurs, our business, financial condition, liquidity and results of operations could be materially and adversely affected. If this were to happen, the price of our Class A common stock could decline significantly and you could lose a part or all of your investment.

Risks Related to Our Business and Our Industry

In recent years the outbreaks of a number of diseases, including Avian Bird Flu, H1N1, and various other “super bugs,” have increased the risk of a pandemic. In December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China. COVID-19 has since spread to over 100 countries, including the United States. COVID-19 has also spread to every state in the United States, including to regions where the projects financed by the loans and impact finance assets in our portfolio are located. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. Since March 13, 2020, there have been a number of federal, state and local government initiatives to manage the spread of the virus and its impact on the economy, financial markets and continuity of businesses of all sizes and industries.

The COVID-19 has had, and another pandemic could have, significant repercussions across regional, national and global economies and financial markets, and could trigger a period of regional, national and global economic slowdown or regional, national or global recessions. The outbreak of COVID-19 in many countries continues to adversely impact regional, national and global economic activity and has contributed to significant volatility and negative pressure in financial markets. The impact of the outbreak has been rapidly evolving and, as cases of the virus have continued to increase around the world, many countries, including the United States, have reacted by instituting, among other things, quarantines and restrictions on travel.

Since March of 2020, in an attempt to contain the spread of COVID-19, the Federal government and most states and/or local governments, have implemented various restrictions, rules, or guidelines including quarantines, “shelter in place”, “stay at home”, or “safer at home” rules, mandatory business closures and restrictions on business operations, including certain construction projects, restrictions on travel, restrictions on gatherings and social distancing practices. While some of these restrictions have been relaxed or phased out, many of these or similar restrictions remain in place and continue to be implemented, and it is possible that restrictions that have been relaxed or phased out could be reimposed or that new restrictions could be implemented. These containment measures have created disruption and adversely impacted a number of sectors, including real estate (mixed use, single family, hospitality, senior living, retail and multi-family), infrastructure, education, economic development and healthcare. The economic disruption caused by the COVID-19 pandemic may negatively impact state and local budgetary matters, as states and municipalities may be more likely to run budget deficits (or larger deficits) during a period of economic contraction stemming from the COVID-19 pandemic.

We believe that our ability to operate and our level of business activity has been, and will in all likelihood continue to be, impacted by effects of COVID-19 and could in the future be impacted by another pandemic and that such impacts could adversely affect the profitability of our business, as well as the values of, and the cash flows generated from, our assets. Some of the factors that have impacted us to date or could potentially impact us in the future include the following:

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a severe disruption and instability in the financial markets or deteriorations in credit and financing conditions may jeopardize the solvency and financial wherewithal of counterparties with whom we do business, including our borrowers, and could affect our or our counterparties’ ability to make regular payments of principal and interest (whether due to an inability to make such payments, an unwillingness to make such payments, or a

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waiver of the requirement to make such payments on a timely basis or at all) and our ability to recover the full value of our loan, thus reducing our earnings and liquidity;

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unavailability of information, resulting in restricted access to key inputs used to derive certain estimates and assumptions made in connection with evaluating our assets for impairments and establishing allowances for loan losses;

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our ability to remain in compliance with the financial covenants under our borrowings, including in the event of impairments in the value of the assets we own;

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disruptions to the efficient function of our operations because of, among other factors, any inability to access short-term or long-term financing for the assets we originate or acquire;

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our need to sell assets, including at a loss;

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difficulty accessing debt and equity capital on attractive terms, or at all;

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to the extent we elect or are forced to reduce our investment origination activities;

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inability of other third-party vendors we rely on to conduct our business to operate effectively and continue to support our business and operations, including vendors that provide IT services, legal and accounting services, or other operational support services;

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effects of legal and regulatory responses to concerns about the COVID-19 pandemic and related public health issues, which could result in additional regulation or restrictions affecting the conduct of our business; and

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our ability to ensure operational continuity in the event our business continuity plan is not effective or ineffectually implemented or deployed during a disruption.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

Our business depends in part on U.S. federal, state and local government policies and a decline in the level of government support could harm our business.

The projects which we finance or in which we invest typically depend in part on various U.S. federal, state or local governmental policies and incentives that support or enhance project economic feasibility. Such policies may include governmental initiatives, laws and regulations designed to promote positive social and community impacts or the investment in, among other things, healthcare, education, opportunity and other economic development zones, and low-and moderate-income housing.

Policies and incentives provided by the U.S. federal government may include tax credits, tax exemptions, tax deductions, bonus depreciation, federal grants and loan guarantees. The value of tax credits, deductions and incentives may be impacted by changes in tax laws, rates or regulations. For example, there can be no certainty that the proposed tax reforms will not also limit or abolish the income tax exemption for municipal bond interest, which would have an adverse impact on our business, financial condition and results of operations.

If these or other government policies, incentives or regulations are adversely amended, delayed, eliminated, reduced, retroactively changed or not extended beyond their current expiration dates, or there is a negative impact from the recent federal law changes or proposals, the operating results of the projects we finance and the demand for, and the returns available from, the investments we make may decline, which could harm our business.

We may not be able to fully realize the benefits of investing in the federal OZ Program, which may adversely affect our financial performance.

As part of the 2017 Tax Act, Congress established the OZ Program, which provides preferential tax treatment to taxpayers who invest eligible capital gains into QOFs. QOFs are self-certifying entities that invest their capital in economically distressed communities that have been designated as Opportunity Zones by the Internal Revenue Service (“IRS”) and the Treasury department. We seek to create and acquire equity interests in projects located in

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Opportunity Zones and therefore plan to position ourselves to take advantage of the tax benefits offered by the OZ Program. While the IRS has issued final regulations which address some of the uncertainties under the OZ Program, because the OZ Program is relatively new, a number of open questions remain. To the extent the IRS issues additional interpretive guidance that renders ineligible certain categories of projects that are currently expected to qualify, we may be unable to fully realize the benefits of the OZ Program as anticipated.

With respect to QOFs that are contributed to the operating partnership by PHC LLC, while the operating income and gains with respect to such investment will generally be allocated to the partners in the operating partnership in accordance with their respective economic interests, the tax benefits associated with such Opportunity Zone investments will generally be specially allocated to the contributor (i.e. PHC LLC). Thus, while investors will be able to participate in the performance of the underlying Opportunity Zone investments, they will generally not be entitled to share in the OZ tax benefits with respect to QOFs that are contributed to the operating partnership by PHC LLC in connection with the formation transactions. To the extent that we make investments in QOFs with capital gains triggered by us or our operating partnership, we should be able to take advantage of the OZ tax benefits with respect to such investments, and accordingly reduce our tax liability; however, there is no assurance that we will be able to realize all of the potential OZ tax benefits available under the OZ Program.

We may be adversely affected by future changes in U.S. federal or state tax laws.

Under current law, we will be subject to U.S. federal income tax at a 21% rate on our taxable income (which will not include tax-exempt interest on debt we own, which we expect will comprise the majority of our income), as well as state income or franchise tax. If legislation is adopted to increase federal or state corporate tax rates, or other unfavorable changes in U.S. federal or state tax laws or regulations are made (including, for example, changes that have the effect of limiting or denying a tax exemption for interest on debt we own), then we would be subject to increased amounts of tax on our taxable income, resulting in less cash available for distributions to our shareholders.

The projects we finance and invest in are subject to substantial regulation by U.S. federal, state and local governmental agencies. For example, many projects require government permits, licenses, concessions, leases or contracts. Government entities, due to the wide-ranging scope of their authority, have significant leverage in setting their contractual and regulatory relationships with third parties. In addition, government permits, licenses, concessions, leases and contracts are generally very complex, which may result in periods of non-compliance, or disputes over interpretation or enforceability. If the economic development, infrastructure, healthcare, education, housing or other projects we finance or in which we invest fail to obtain or comply with applicable regulations, permits, or contractual obligations, they could be prevented from being constructed or subjected to monetary penalties or loss of operational rights, which could negatively impact project operating results and the returns on our assets.

In addition, government counterparties also may have the discretion to change or increase regulation of project operations, or implement laws or regulations affecting project operations, separate from any contractual rights they may have. These actions could adversely impact the efficient and profitable operation of the projects in which we invest.

We will rely, to a significant extent, on our relationships with key industry participants in the markets we target. We will originate transactions through our management team’s extensive network of contacts in the community impact finance sector, including long-standing relationships with state and local governments, institutions of higher education, project developers, municipal financial advisors, commercial and investment banks, investors,

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bond dealers and other tax-exempt focused financial intermediaries. Our inability to maintain or develop these relationships, or the failure of these relationships to generate business opportunities, could adversely affect our business. In addition, individuals and entities with whom we have relationships are not obligated to provide us with business opportunities, and, therefore, there is no assurance that such relationships will generate business opportunities for us.

Future litigation or administrative proceedings could have a material and adverse effect on our business, financial condition and results of operations.

We may become involved in legal proceedings, administrative proceedings, claims and other litigation that arise in the ordinary course of business. In addition, we may be subject to legal proceedings or claims arising out of the projects we finance or in which we invest. Adverse outcomes or developments relating to these proceedings, such as the interpretation of our contracts, judgments for monetary damages, injunctions or denial or revocation of permits, could have a material adverse effect on the projects we finance or in which we invest, which could adversely impact the repayment of or the returns available for our assets.

We target impact finance opportunities for the economic development of projects in infrastructure, education, healthcare, housing and other projects that renew and improve local communities or support sustainable economic growth while maintaining credit quality and attractive risk-adjusted total returns. We therefore compete against a number of parties who may provide alternatives to our financings, including specialty finance companies, savings and loan associations, banks, private equity, hedge or infrastructure investment funds, insurance companies, mutual funds, institutional investors, investment banking firms, financial institutions, project developers, pension funds, government entities, public entities established to own infrastructure assets and other entities. Some of our competitors are significantly larger than we are, have access to greater capital and other resources than we do and may have other advantages over us. In addition, some of our competitors may have higher risk tolerances, different risk assessments or be less focused on impact investing, which could allow them to consider a wider variety of opportunities, establish more relationships than we can or generate higher returns to their investors. In addition, many of our competitors are not subject to the operating constraints associated with maintaining an exclusion from the 1940 Act. These characteristics could allow our competitors to consider a wider variety of opportunities, establish more relationships and offer better pricing and more flexible structuring than we can offer. We may lose business opportunities if we do not match our competitors’ pricing, terms and structure. If we match our competitors’ pricing, terms and structure, we may not be able to achieve acceptable risk-adjusted total returns on our assets or we may be forced to bear greater risks of loss. The increase in the number and/or the size of our competitors in this market has resulted, and could continue to result, in less attractive terms on our investments or the need to accept a higher level of risks or lower levels of returns that could be associated with our investments. As a result, competitive pressures we face could have a material adverse effect on our business, financial condition and results of operations.

Our risk management efforts may not be effective.

We could incur substantial losses and our operations could be disrupted if we are unable to effectively identify, manage, monitor and mitigate financial risks, such as credit risk, interest rate risk, liquidity risk and other market-related risks, as well as operational risks related to our operations, assets and liabilities. Our risk management policies, procedures and techniques may not be sufficient to identify all of the risks we are exposed to, mitigate the risks we have identified or to identify additional risks to which we may become subject in the future.

Inadvertent errors could subject us to financial loss, litigation or regulatory action.

Our personnel or other third parties with whom we have relationships may make inadvertent errors that could subject us to financial losses, claims or enforcement actions. These types of errors could include, but are not limited to, mistakes in executing, recording or reporting transactions we enter into. Inadvertent errors expose us to the

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risk of material losses until the errors are detected and remedied prior to the incurrence of any loss. The risk of errors may be greater for business activities that are new for us or have non-standardized terms.

Risks Related to Our Assets

Changes in interest rates could adversely affect the value of our assets and negatively affect our profitability.

Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control.

With respect to our business operations, increases in interest rates over time, in general, may cause: (1) project owners to be less interested in borrowing or raising equity and thus reduce the demand for the financing we provide; (2) increases in the interest expense associated with our borrowings; (3) declines in the market value of our fixed rate assets; and (4) increase in the market value of interest rate hedging instruments, to the extent we enter into such agreements as part of our hedging strategy. Conversely, decreases in interest rates over time, in general, may cause: (1) project owners to be more interested in borrowing or raising equity and thus increase the demand for the financing we provide; (2) increases in prepayments on our investments, to the extent allowed; (3) decreases in the interest expense associated with our borrowings; (4) increase in the market value of our fixed rate assets; and (5) decreases in the market value of interest rate hedging instruments, to the extent we enter into such agreements as part of our hedging strategy. In typical market interest rate environments, the prices of longer-term debt financings, such as the financings in our portfolio, generally fluctuate more than prices of shorter-term debt financings as interest rates change. The Federal Reserve recently reduced the federal funds rate several times, and has announced that it expects the federal funds rate to remain near zero through 2023. Adverse developments resulting from changes in interest rates could have a material adverse effect on our business, financial condition and results of operations.

The market for nonrated or below investment grade municipal debt has experienced in the past, and may experience in the future, periods of significant volatility.

Although the detection of COVID-19 in China was made public in December 2019, U.S. securities markets did not start to fully acknowledge the risks and potential economic impact until the latter portion of February 2020, when outbreaks outside of China were first reported. Certain parts of the municipal bond markets experienced significant volatility and drops in values, particularly below investment grade municipal bonds. It is possible that similar market dislocations will recur as the COVID-19 pandemic continues, or as other market disruption events occur, which may adversely affect the value and liquidity of our debt finance assets. Any further increase in volatility in municipal debt markets could negatively impact the value of impact finance assets and the trading price of our shares of Class A common stock.

A significant portion of our assets are illiquid or have limited liquidity, which may limit our ability to sell those assets at favorable prices or at all.

Our assets generally are expected to be illiquid or have limited liquidity. As of March 31, 2021, based on fair value, substantially all of our credit assets consisted of assets that have limited liquidity. It may be difficult for us to dispose of assets with limited liquidity rapidly, or at all, or at favorable prices. Historically, the trading volume in the tax-exempt bond market has been limited relative to other markets. For example, certain transfers of our assets are limited to specific types of investors. In addition, assets with limited liquidity may be more difficult to value and may trade at a substantial discount or experience more volatility than more liquid assets.

We are not limited in the amount of capital used to support, or the exposure to, any individual asset or any group of assets with similar characteristics or risks. As a result, our portfolio may be concentrated in a small number of assets or may be otherwise undiversified, increasing the risk of loss and the magnitude of potential losses to us and our shareholders if one or more of these assets perform poorly.

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We rely on analytical models (both proprietary and third-party models), and information and data supplied by third parties. These models and data may be used to value assets or potential asset acquisitions and dispositions and are also used in connection with our asset management activities. If these models and data prove to be incorrect, misleading or incomplete, any decisions made in reliance thereon could expose us to potential risks. For example, data may be incorrect, incomplete or misleading, may be modeled based on simplifying assumptions that lead to errors, may be incorrectly reported or subject to interpretation or may be outdated. Our reliance on these models and data may induce us to purchase certain assets at prices that are too high, to sell certain other assets at prices that are too low, or to miss favorable opportunities. Similarly, any hedging activities, such as total return swaps, that are based on faulty models and data may prove to be unsuccessful.

Some models may be predictive in nature. The use of predictive models has inherent risks. For example, such models may incorrectly forecast future behavior, leading to potential losses. In addition, the predictive models we use may differ substantially from those models used by other market participants, with the result that valuations based on these predictive models may be substantially higher or lower for certain assets than actual market prices. Furthermore, because predictive models are usually construed based on historical data supplied by third parties, the success of relying on such models may depend heavily on the accuracy and reliability of the supplied historical data, and, in the case of predicting performance in scenarios with little or no historical precedent (such as extreme broad-based declines in home prices or deep economic recessions), such models may have little or no predictive value.

All valuation models rely on correct market data inputs. If incorrect market data is entered into even a well-founded valuation model, the resulting valuations will be incorrect. However, even if market data is inputted correctly, “model prices” will often differ substantially from market prices, especially for securities with complex characteristics or whose values are particularly sensitive to various factors. If our market data inputs are incorrect or our model prices differ substantially from market prices, we may be adversely affected.

Our provision for finance receivable credit losses is difficult to estimate.

Our provision for finance receivable credit losses is evaluated on a quarterly basis. The determination of our provision for finance receivable credit losses requires us to make certain estimates and judgments, which may be difficult to determine. Our estimates and judgments are based on a number of factors, including a particular project’s operating results, loan-to-value ratio, any cash reserve, the ability of expected cash from operations to cover the cash flow requirements currently and into the future, key terms of the transaction, the ability of the borrower to refinance the transaction, other credit support from the sponsor or guarantor and the project’s collateral value.

Our estimates and judgments may not be correct and, therefore, our results of operations and financial condition could be severely impacted.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses-Measurement of Credit Losses on Financial Instruments (Topic 326), which is effective for accounting periods beginning after December 15, 2019 and replaces the current “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the Current Expected Credit Loss (“CECL”) model. Under the CECL model, we are required to present certain financial assets carried at amortized cost, such as loans held for investment, at the net amount expected to be collected. The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement will take place at the time the financial asset is first added to the balance sheet and updated quarterly thereafter. This differs significantly from the “incurred loss” model required under current accounting principles generally accepted in the United States (“GAAP”), which

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delays recognition until it is probable a loss has been incurred. The guidance in this ASU is effective for emerging growth companies with fiscal years beginning after December 15, 2022, but such companies may adopt the amendments now.

Accordingly, we expect that the adoption of the CECL model will affect how we determine our allowance for loan losses and could require us to increase our allowance and recognize provisions for loan losses earlier in the lending cycle. Moreover, the CECL model may create more volatility in the level of our allowance for loan losses. If our required level of allowance for loan losses is material for any reason, such increase could adversely affect our business, financial condition and results of operations.

Our primary source of financing is asset-backed, non-recourse tax-exempt term matched trusts (“TMTs”).

Apart from our TMT program and senior secured borrowing facility, we conduct a significant portion of our financing activity through a taxable term A/B trust facility.

Under our taxable term A/B trust facility, we retain subordinated certificates while the lenders hold senior certificates. These certificates we retain are subordinated in right of payment and in liquidation to the senior certificates. The trusts collapse upon maturity, certain defined termination events, or upon exercise of a call option embedded in the subordinate certificate held by us. Upon collapse, a trust would sell the underlying bond investment at the then current market price, using the proceeds to retire outstanding senior certificates, with any remaining proceeds paid to us as holder of the subordinate certificate. We are responsible for funding any shortfalls and manage such exposure during the trusts’ terms utilizing ongoing collateral posting provisions. Portfolio losses impact the tranches in reverse seniority order, starting with the most junior tranches.

There can be no assurance that these vehicles will generate sufficient income from their underlying portfolios to pay distributions to us or that they would have sufficient assets to pay any distributions to which we would otherwise be entitled in the event of liquidation. As a result, we may not recover some or all of our investments in these subordinated certificates. Furthermore, if the underlying bond investments held in the trusts fail to perform as anticipated, our earnings may be adversely affected and our expenses may increase as a result of funding any payment shortfalls related to collateralization requirements and other credit enhancement expenses associated with these trusts.

There are separate risks associated with our TMT financings, including upon a payment default on an underlying bond and reduced demand for the TMT structure

TMTs are structured as partnerships into which we deposit tax exempt bonds. TMTs issue senior equity trust certificates (“A Notes”) to financial and non-financial lenders where we normally retain the subordinated equity trust certificates (“B Notes”) used in the structure. The TMT structure is non-recourse to us, meaning there is no parent guarantee from us to the trusts. The A Note holders’ only recourse in the event of a default is limited to the specific assets held by the trust. We act as servicer to the trusts, which includes managing the efforts to maximize recovery for the benefit of the noteholders. The trusts hold tax-exempt securities. Their structure as a partnership allows tax-exempt interest income generated by the tax-exempt securities to pass through to the noteholders. The pass through of tax-exempt interest income enhances the value for potential A Note holders whose investment income would otherwise be subject to tax.

The A Notes are normally structured with fixed interest rates for an initial ten-year term, with a step-up interest rate in year 11 that remains through the maturity of the TMT. The step-up interest rate is set at or below the weighted average coupon of the TMT’s assets. Each TMT has a final maturity that generally matches the final maturity of the underlying TMT assets. After the step-up date, some of TMTs require all cash flows from Trust assets to reduce the A Notes. Because of the interest rate step up feature in year 11, we have an incentive, but except in limited circumstances are not required, to refinance or collapse the Trust at the step-up date.

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Each TMT is subject to certain debt service coverage ratio (“DSCR”) requirements of the A Notes. This generally requires the aggregate annual amount of debt service payments on the underlying assets to be 160% of the aggregate annual amount of required Class A distributions during the initial ten-year term and 120% thereafter. A failure to meet the DSCR requirements would generally require more than one of the underlying trust assets to fail to pay 100% of debt service. In addition, the underlying assets have Debt Service Reserve Funds (“DSRF”), which allow bonds with revenue shortfalls to stay current on their indebtedness for a significant time, usually 12-months (or less in limited cases). The DSCR requirements are backward-looking and, in the event of a failure by the TMT to meet the DSCR requirements, we have 60 to 90 days to redeem Class A Notes to comply with the DSCR requirements or the A Note holder may sell certain assets until the applicable DSCR requirements are met.

Overall leverage for each TMT is typically based on the amount of underlying assets. The trust assets are valued for leverage purposes at their par amount unless a payment default has occurred. In addition, the underlying bonds we have used in our TMT financings have DSRFs which function to allow bonds with revenue shortfalls to stay current on their indebtedness for a significant time, usually 12-months (or less in limited cases). This gives us significant time to determine alternative courses of action with any affected TMT asset. Only when an underlying asset is in payment default may the overall leverage amount for a TMT be reduced based on the market value of the defaulted security.

In the event of an underlying asset payment default in a TMT financing, the maximum amount of leverage allocable to the individual defaulted asset is generally calculated based on the market value of the defaulted asset rather than the par amount. The market value is used to calculate the maximum amount of leverage allocable to the defaulted asset based on the overall maximum leverage percentage for the TMT. In each TMT, the maximum leverage percentage is generally determined by the number of assets in the pool, generally with a range for leverage from 70% (maximum) to 58% (minimum). These maximum leverage percentages are applied to the aggregate par amount of the underlying assets, except for any assets in payment default.

For example, if an underlying asset is in payment default with a par amount of $10 million and a market value of $8 million, then the maximum leverage allocable to the defaulted bond would be $8 million multiplied by the maximum leverage percentage. If the applicable maximum leverage percentage were 70%, then the maximum leverage allocable to the defaulted bond would be $5.6 million versus the non-defaulted maximum leverage amount of $7 million. The net impact in this example would be a reduction in the maximum leverage amount of $1.4 million for the $10 million defaulted asset with a market value of $8 million. The maximum leverage amount is calculated in aggregate based on all of the underlying assets in a given TMT and, as a result, a reduction in the maximum leverage allocable to an individual asset may not necessarily result in a violation of the maximum leverage covenant for the overall TMT.

The market demand for the TMT structure has continued to broaden, allowing us to achieve favorable interest rates on more recent borrowings as well as a greater variety of A Note purchasers. However, market conditions and demand could change, which could reduce availability for future TMT borrowings. If this were to occur, we would need to find other sources of leverage which would likely include borrowings that are shorter in tenor, subjecting us to greater interest rate risk, and also have the potential for daily mark-to-market calculations. In addition, if TMT financing becomes unavailable to us or is only available on less attractive terms, we will have to access alternative or less attractive debt financing which could curtail our returns.

We may experience a decline in the fair value of our assets.

A decline in the fair market value of tax-exempt, nonrated revenue bonds we hold as available-for-sale, our interest rate hedging instruments, if any, or any other assets which we may carry at fair value in the future, may require us to reduce the value of such assets under GAAP. The high-yield tax-exempt market can experience significant market valuation fluctuations during periods of illiquidity, which can and has had an adverse effect on the market value of our portfolio. In addition, our financing receivables are subject to an impairment assessment that could result in adjustments to their carrying values. Upon the subsequent disposition or sale of such assets, we could incur future losses or gains based on the difference between the sale price received and adjusted value of such assets as reflected on our balance sheet at the time of sale.

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The majority of the assets in our portfolio are recorded at fair value and, as a result, there could be uncertainty as to the value of these assets.

The impact investments and financings we originate and the municipal bonds we intend to opportunistically acquire from the secondary market are usually publicly traded but are relatively illiquid. The fair value of these assets may not be readily determinable. In accordance with GAAP, we record certain of our assets at fair value, which may include unobservable inputs. Because such valuations are subjective, the fair value of these assets may fluctuate over short periods of time and our determinations of fair value may differ materially from the values that would have been used if a ready market for these assets existed. The value of our Class A common stock could be adversely affected if our determinations regarding the fair value of these assets were materially higher than the values that we ultimately realize upon their disposal. Additionally, our results of operations for a given period could be adversely affected if our determinations regarding the fair value of these assets were materially higher than the values that we ultimately realize upon their disposal. The valuation process can be particularly challenging during periods when market events make valuations of certain assets more difficult, unpredictable and volatile.

We may not realize gains or income from our assets and our assets may decline in value.

We seek to generate attractive risk-adjusted total returns over the long term through the origination, ownership and management of a diversified portfolio of predominantly tax-advantaged assets that support transformational community outcomes. The assets that we originate and acquire may not appreciate in value, however, and in fact, may decline in value, and the loans that we or our affiliates make and debt securities that we originate and acquire may default on interest and/or principal payments. Market values of our assets may decline for a number of reasons, including liquidity issues, changes in prevailing market rates, increases in defaults, actual or perceived credit issues involving one or more borrowers, increases in voluntary prepayments for those assets that we have that are subject to prepayment risk, widening of credit spreads, actions by rating agencies, declines in the value of the collateral supporting debt and difficulty in valuing assets. Also, a decline in credit quality of assets where there is a significant risk that there will be a default or imminent default may force us to sell certain assets at a loss. Accordingly, we may not be able to realize gains or income from our assets and our assets may lose value. Any gains that we do realize may not be sufficient to offset any losses we experience. Furthermore, any income that we realize may not be sufficient to offset our expenses.

We focus on originating financings that are not rated by a rating agency, which may result in an amount of risk, volatility or potential loss of principal that is greater than that of alternative asset opportunities with an investment grade rating.

As of March 31, 2021, none of the debt finance assets in our portfolio were rated by a nationally recognized statistical rating agency and we expect that few of the assets we originate and acquire in the future will be rated by any rating agency. Although we focus on projects that are highly negotiated, collateralized and include strong covenants, we believe that some of the projects or obligors in which we invest, if rated, would be rated below investment grade (Ba1 or lower by Moody’s or BB+ or lower by Fitch or Standard & Poor’s). Some of our assets may result in an amount of risk, volatility or potential loss of principal that is greater than that of alternative asset opportunities.

Any credit ratings assigned to our assets, debt or obligors are subject to ongoing evaluations and revisions and we cannot assure you that those ratings will not be downgraded.

We do not seek ratings from credit rating agencies on most of our impact finance assets. To the extent our assets, their underlying obligors, or our debt are rated by credit rating agencies or by our internal rating process, such assets, obligors or our debt will be subject to ongoing evaluation by credit rating agencies and our internal rating process, and we cannot assure you that any ratings will not be changed or withdrawn in the future. If rating agencies assign a lower-than-expected rating or if a rating is further reduced or withdrawn by a rating agency or us, or if there are indications of a potential reduction or withdrawal of the ratings of our assets, the underlying obligors or our debt in the future, the value of these assets could significantly decline, the level of borrowings based

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on such assets could be reduced or we could incur higher borrowing costs or incur losses upon disposition or the failure of obligors to satisfy their obligations to us.

Our borrowers may default, or may be in default at the time of our purchase of impact finance assets, on their obligations to pay principal or interest when due. In addition, the economic impact of COVID-19 and the associated volatility in the financial markets has triggered a period of economic slowdown and could jeopardize the solvency and financial wherewithal of our counterparties. In the event a borrower or one of the real estate, infrastructure, education, healthcare and other projects underlying our financings becomes insolvent or unable to make payments, we may fail to recover the full value of our loan, thus reducing our earnings and liquidity. With respect to our secured financings, there can be no assurance that liquidation of collateral would satisfy the borrower’s obligation in the event of non-payment of a scheduled interest or principal payment or that such collateral could be readily liquidated. In the event of the bankruptcy of a borrower, we could experience delays or limitations with respect to our ability to realize the benefits of any collateral securing a financing.

The debt financings we directly originate for local governments, institutions of higher education and not-for-profit entities for a wide variety of projects that promote economic development, infrastructure, healthcare, education and affordable housing projects are subject to risks of delinquency, foreclosure and loss. In many cases, the ability of a borrower to return our invested capital and our expected return is dependent primarily upon the successful development, construction and operation of the underlying project. If the cash flow of the project is reduced, the borrower’s ability to return our capital and our expected return may be impaired. We make certain estimates regarding project cash flows or savings during the underwriting of our financings. These estimates may not prove accurate, as actual results may vary from estimates. The cash flows or cost savings of a project can be affected by, among other things: the creditworthiness of the project users; the technology deployed; unanticipated expenses in the development or operation of the project and changes in national, regional, state or local economic conditions, laws and regulations; and acts of God, terrorism, social unrest and civil disturbances.

In the event of any default under the financings we provide or shortfall of an investment, we will bear a risk of loss of principal or equity to the extent of any deficiency between the value of the collateral, if any, and the amount of our investment, which could have a material adverse effect on our cash flow from operations and may impact the cash available for distribution to our Class A stockholders. Many of the projects are structured as special purpose limited liability companies which limits our ability to realize any recovery to the collateral or value of the project itself. In the event of the bankruptcy of a project owner, obligor, or other borrower, our investment or the project will be deemed to be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession and our or the project’s contractual rights may be unenforceable under federal bankruptcy or state law. Foreclosure proceedings against a project can be an expensive and lengthy process, which could have a substantial negative effect on our anticipated return on the foreclosed investment.

Some of the impact investments we make may be comprised of senior and subordinate classes of securities, and the subordinate classes may rank equally with, or lower in priority than, other investments in such projects.

As direct originators, we have the flexibility to offer a range of investment structures that are not typically available in capital markets transactions that are similar to those in the traditional commercial finance sector, albeit complicated by the negotiation of municipal approvals and the need for special underwriting or structuring efforts. Most of the financings we originate will be structured as debt transactions in the form of tax-exempt municipal bonds that bear CUSIPs and are cleared through DTC or non-syndicated loans that consist of senior secured or preferred positions and include security and covenant protections to help manage downside risk. We

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will occasionally make equity investments that meet our credit underwriting criteria, including acquiring equity interests in projects located in Opportunity Zones.

We sometimes originate and invest in both senior and subordinate classes of securities in projects. By their terms, the senior instruments may entitle the holders to receive payment of interest, principal payments or other distributions on or before the dates on which we are entitled to receive payments with respect to the subordinate instruments in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of an entity in which we have invested, holders of instruments ranking senior to our investment in that project or business would typically be entitled to receive payment in full before we receive any distribution. After repaying such senior stakeholders, such project may not have any remaining assets to use for repaying its obligation to us. In the case of securities ranking equally with instruments we hold, we would have to share on an equal basis any distributions with other stakeholders holding such instruments in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant project.

We generally do not control the projects underlying the impact finance assets that we originate.

Although the covenants in our financing documentation generally restrict certain actions that may be taken by our borrowers, we generally do not control the projects underlying the impact finance assets that we originate. As a result, we are subject to the risk that the project owner may make certain business decisions or take risks with which we disagree or otherwise act in ways that do not serve our interests.

The projects underlying the impact finance assets that we directly originate are subject to performance risks that could impact the repayment of and the return on our assets.

The projects underlying the impact finance assets that we directly originate are subject to various construction and operating delays and risks that may cause them to incur higher than expected costs or generate less than expected amounts of savings. Any extended interruption in the project’s construction or operation, any cost overrun or failure of the project for any reason to generate the expected amount of output or cash flow, could have a material adverse effect on the repayment of and the return on our assets.

Many of our tax-exempt, nonrated revenue bonds and other assets are subject to risks particular to real property.

We will own tax-exempt, nonrated revenue bonds and other assets, including taxable bridge financings for such tax-exempt bonds, that are secured by real estate. We will have real estate exposure through REO and our OZ investments, and we may own real estate directly in the future upon a default of mortgage loans securing our bonds. As a result, we will be subject to the risks associated with commercial and residential real estate and commercial and residential real estate-related investments, including, among others: (i) continued declines in the value of commercial and residential real estate; (ii) risks related to general and local economic conditions; (iii) possible lack of availability of mortgage funds for borrowers to refinance or sell their properties; (iv) overbuilding; (v) increases in property taxes and operating expenses; (vi) changes in zoning laws; (vii) costs resulting from the clean-up of, and liability to third parties for damages resulting from, environmental problems, such as indoor mold; (viii) casualty or condemnation losses; (ix) uninsured damages from floods, earthquakes or other natural disasters; (x) limitations on and variations in rents; (xi) fluctuations in interest rates; (xii) fraud by borrowers, originators and/or sellers of revenue bonds; (xiii) undetected deficiencies and/or inaccuracies in underlying mortgage loan documentation and calculations; (xiv) failure of the borrower to adequately maintain the property, particularly during times of financial difficulty; (xv) acts of God, including earthquakes, floods and other natural disasters, which may result in uninsured losses; (xvi) acts of war or terrorism, including the consequences of terrorist attacks, such as those that occurred on September 11, 2001; and (xvii) changes in demographics. To the extent that assets securing our acquisitions are concentrated geographically, by property type or in certain other respects, we may be subject to certain of the foregoing risks to a greater extent. Additionally, we may be required to foreclose on a mortgage loan and such actions would subject us to greater concentration of the risks of the residential real estate markets and risks related to the ownership and management of real property. The value of properties in certain markets could significantly decline at the time we would need to foreclose.

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The properties securing our financings are geographically dispersed throughout the United States, with significant concentrations in certain states and among certain investments.

The properties securing our financings are geographically dispersed throughout the United States, with significant concentrations in certain states. As of March 31, 2021, the projects underlying our impact finance assets are located across 23 U.S. states, including, among others, Texas (19.43%), Florida (14.20%), California (9.44%), New York (9.14%), and Ohio (8.00%). While no single investment in our portfolio represents more than 6% of our total portfolio, the largest five individual investments accounted for 28% of the total investment portfolio of the Company as of March 31, 2021 and December 31, 2020. Although our portfolio includes issuers located throughout the United States, such issuers’ ability to honor their contracts may be substantially dependent on economic conditions in these states. Such concentrations expose us to potentially negative effects of local or regional economic downturns, which could prevent us from collecting principal and interest on our tax-exempt, nonrated revenue bonds.

The performance of the impact finance assets that we directly originate may be harmed by future labor disruptions and economically unfavorable collective bargaining agreements.

A number of the projects underlying the impact finance assets that we directly originate could have workforces that are unionized or that in the future may become unionized and, as a result, are required to negotiate the wages, benefits and other terms with many of their employees collectively. If these projects were unable to negotiate acceptable contracts with any of their unions as existing agreements expire, they could experience a significant disruption of their operations, higher ongoing labor costs and restrictions on their ability to maximize the efficiency of their operations, which could have a material and adverse effect on our business, financial condition and results of operations. In addition, in some jurisdictions where our projects have operations, labor forces have a legal right to strike which may have a negative impact on our business, financial condition and results of operations, either directly or indirectly, for example if a critical upstream or downstream counterparty was itself subject to a labor disruption which impacted the ability of our projects to operate.

Liability relating to environmental matters may impact the value of properties that we may acquire or the properties underlying our assets.

Under various U.S. federal, state and local laws, an owner or operator of real estate or a project may become liable for the costs of removal of certain hazardous substances released from the project or any underlying real property. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of such hazardous substances.

The presence of hazardous substances may adversely affect our, or another owner’s, ability to sell a contaminated project or borrow using the project as collateral. To the extent that we, or another project owner, become liable for removal costs, our investment, or the ability of the owner to make payments to us, may be negatively impacted.

We make investments in projects that own real property, have collateral consisting of real property and in the course of our business, we may take title to a project or its underlying real estate assets relating to one of our debt financings. In these cases, we could be subject to environmental liabilities with respect to these assets. To the extent that we become liable for the removal costs, our results of operation and financial condition may be adversely affected. The presence of hazardous substances, if any, may adversely affect our ability to sell the affected real property or the project and we may incur substantial remediation costs, thus harming our financial condition.

The assets underlying certain of our investments may be negatively impacted by the physical effects of climate change.

The physical effects of climate change could have a material adverse effect on the assets that underlying certain of our investments, which may have a material adverse effect on the value of our assets, our business, financial condition and results of operations. For example, the projects underlying our portfolio of impact finance assets are located across 23 U.S. states, including, among others, Texas, Florida, California, New York, Ohio, Illinois, and

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Georgia, and Washington D.C. To the extent climate change causes changes in weather patterns, these markets could experience increases in storm intensity, extreme temperatures, rising sea-levels and/or drought. Over time, these conditions could result in declining demand for the assets underlying the project we finance or increase the costs associated with such projects. Climate change may also have indirect effects on our business by making property insurance unavailable or by increasing the cost of (i) property insurance on terms we or our borrowers find acceptable, (ii) real estate taxes or other assessments, (iii) energy and (iv) snow removal. There can be no assurance that climate change will not have a material adverse effect on our or our borrowers’ properties, operations or business.

Risks Related to Our Company

Our board of directors determines our operational policies and may amend or revise our policies, including our policies with respect to acquisitions, dispositions, growth, operations, compensation, indebtedness, capitalization and dividends, or approve transactions that deviate from these policies, without a vote of, or notice to, our stockholders at any time. We may change our investment guidelines, underwriting process and our business strategy at any time with the approval of our board of directors, but without the consent of our stockholders, which could result in our making or originating investments that are different in type from, and possibly riskier than, the assets initially contemplated in this prospectus. These changes could adversely affect our business, financial condition, results of operations and our ability to make distributions to our Class A stockholders.

We contract with information technology service providers where, in part, we rely upon their systems and controls for the quality of the data provided. The inappropriate establishment and maintenance of these systems and controls could cause information that we use to operate our business to be unavailable or inaccurate and could negatively impact our financial results.

Our information technology architecture is partially outsourced. These systems and processes may be either internet based or through traditional outsourced functions and certain of these arrangements are new or emerging. When we contract with these service providers we attempt to evaluate the quality of their systems and controls before we execute the arrangement and may rely on third party reviews and audits of these service providers and attempt to implement certain processes to ensure the quality of the data received from these service providers. Because of the nature and maturity of the technology such efforts may be unsuccessful or incomplete and the unavailability of these systems or the inaccurate data provided from these service providers could negatively impact our financial results.

A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusions, including by computer hackers, nation-state affiliated actors, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. The result of these incidents may include disrupted operations, misstated or unreliable financial data, disrupted market price of our Class A common stock, misappropriation of assets, liability for stolen assets or information, increased cybersecurity protection and insurance cost, regulatory enforcement, litigation and damage to our relationships. These risks require continuous and likely increasing attention and other resources from us to, among other actions, identify and quantify these risks, upgrade and expand our technologies, systems and processes to adequately address them and provide periodic training for our employees to assist them in detecting phishing, malware and other schemes.

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Such attention diverts time and other resources from other activities and there is no assurance that our efforts will be effective. Potential sources for disruption, damage or failure of our information technology systems include, without limitation, computer viruses, security breaches, human error, cyber-attacks, natural disasters and defects in design. Additionally, we rely predominantly on third-party service providers for many aspects of our business. We can provide no assurance that the networks and systems that our third-party vendors have established or use will be effective. As our reliance on technology has increased, so have the risks posed to both our information systems and those provided by third-party service providers. Our processes, procedures and internal controls that are designed to mitigate cybersecurity risks and cyber intrusions do not guarantee that a cyber incident will not occur or that our financial results, operations or confidential information will not be negatively impacted by such an incident.

We may seek to expand our business in part through future acquisitions or other similar investments.

As we grow our business, we may originate, acquire or use other types of transactions, such as equity or convertible debt investments in companies or assets, to invest in new or different projects or markets, expand our project skill-sets and capabilities, expand our geographic markets, add experienced management and increase our product and service offerings. There are a number of risks associated with these transactions and we may not achieve our goals in the transaction. Such transactions could disrupt our business, cause dilution to our Class A stockholders and harm our business, financial condition or operating results. In addition, the time and effort involved to identify candidates and consummate such transactions may divert members of our management from the operations of our company.

Risks Related to Our Borrowings

We expect to use leverage to finance the assets we originate, and to use a number of financing sources to finance our target assets. Upon completion of this offering and our formation transactions, our borrowings will initially consist of TMTs, our taxable A/B facility and our senior secured borrowing facility. Over time, we may use other forms of leverage to finance our target assets.

As our borrowings mature, we will generally be required to refinance the borrowings, enter into new borrowings or to sell certain of our assets. Weakness in the financial markets and the economy generally could adversely affect one or more of our potential lenders and could cause one or more of our potential lenders to be unwilling or unable to provide us with financing upon acceptable terms or at all. Further, an increase in interest rates at the time we seek to refinance our borrowings or enter into new borrowings could increase the cost of our financing. The return on our assets and cash available for distribution to our Class A stockholders may be reduced to the extent that market conditions prevent us from leveraging our assets or increase the cost of our financing relative to the income that can be derived from the assets acquired. Increases in our financing costs will reduce cash available for distributions to Class A stockholders. To the extent we are unable to refinance or obtain new borrowings as our existing borrowings mature, we may have to curtail our origination activities and/or sell assets, which would adversely affect our ability to grow our portfolio. Further, we may not be able to meet our financing obligations and, to the extent that we cannot, we risk the loss of some or all of our assets to liquidation or sale to satisfy the obligations.

We do not have a formal policy limiting the amount of debt we may incur. Our board of directors may change our leverage policy without stockholder approval.

Although we are not subject to any specific leverage regulatory standard, we expect over time to target, on a debt-to-equity basis, a near-term leverage target of 1.0:1, working eventually toward 2.0:1 leverage on our portfolio of assets. We intend to finance our assets with what we believe to be a prudent amount of leverage, and the amount of leverage we may employ for a particular asset will depend upon, among other things, the availability of

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particular types of financing and our assessment of the credit, liquidity, price volatility and other risks of those assets and financing counterparties. Our charter and bylaws do not limit the amount of indebtedness we can incur, and our board of directors has discretion to deviate from or change our leverage policy at any time, which could result in a portfolio with a different risk profile than contemplated in this prospectus.

Certain of our non-TMT financing facilities contain covenants that restrict our operations which may inhibit our ability to grow our business and increase revenues.

Certain of our non-TMT financing facilities contain restrictions, covenants, and representations and warranties that, among other things, require us to satisfy specified financial, asset quality, and liquidity tests. If we fail to meet or satisfy any of these covenants or representations and warranties, we would be in default under these agreements and our lenders could elect to declare all amounts outstanding under the agreements to be immediately due and payable, enforce their respective interests against collateral pledged under such agreements and restrict our ability to make additional borrowings. Our non-TMT financing agreements also contain cross-default provisions, so that if a default occurs under any one agreement, the lenders under our other agreements could also declare a default.

The covenants and restrictions in our non-TMT financing facilities restrict our ability to, among other things:

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incur or guarantee additional debt above certain amounts;

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make distributions on or repurchase or redeem capital stock above certain amounts ;

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engage in mergers or consolidations without lender consent;

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reduce liquidity below certain levels;

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grant liens; and

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incur operating losses for more than a specified amount;

These restrictions may interfere with our ability to obtain financing, or to engage in other business activities, which may significantly limit or harm our business, financial condition, liquidity and results of operations. A default and resulting repayment acceleration could significantly reduce our liquidity, which could require us to sell our assets to repay amounts due and outstanding. This could also significantly harm our business, financial condition, results of operations, and our ability to make distributions, which could cause the value of our Class A common stock to decline. A default will also significantly limit our financing alternatives such that we will be unable to pursue our leverage strategy, which could curtail the returns on our assets.

The expected discontinuance of LIBOR and transition to alternative reference rates may adversely affect us.

On July 27, 2017, the Chief Executive of the United Kingdom’s Financial Conduct Authority (“FCA”), which regulates the LIBOR administrator, ICE Benchmark Administration Limited (“IBA”), announced that the FCA will no longer persuade or compel panel banks to submit rates for the calculation of LIBOR after 2021. Such announcement indicates that market participants cannot rely on LIBOR being published after 2021. On December 4, 2020, the IBA published a consultation on its intention to cease the publication of LIBOR. For the most commonly used tenors (overnight and one, three, six and 12 months) of U.S. dollar LIBOR, the IBA is proposing to cease publication immediately after June 30, 2023, anticipating continued rate submissions from panel banks for these tenors of U.S. dollar LIBOR. The IBA’s consultation also proposes to cease publication of all other U.S. dollar LIBOR tenors, and of all non-U.S. dollar LIBOR rates, after December 31, 2021. The FCA and U.S. bank regulators have welcomed the IBA’s proposal to continue publishing certain tenors for U.S. dollar LIBOR through June 30, 2023 because it would allow many legacy U.S. dollar LIBOR contracts that lack effective fallback provisions and are difficult to amend to mature before such LIBOR rates experience disruptions. U.S. bank regulators are, however, encouraging banks to cease entering into new financial contracts that use LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021. Given consumer protection, litigation, and reputation risks, U.S. bank regulators believe entering into new financial contracts that use LIBOR as a reference rate after December 31, 2021 would create safety and soundness risks. In addition, they expect new financial contracts to

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either utilize a reference rate other than LIBOR or have robust fallback language that includes a clearly defined alternative reference rate after LIBOR’s discontinuation. Although the foregoing may provide some sense of timing, there is no assurance that LIBOR, of any particular currency and tenor, will continue to be published or be representative of the underlying market until any particular date, and it appears highly likely that LIBOR will be discontinued or modified after December 31, 2021 or June 30, 2023, depending on the currency and tenor.

Some of our debt and interest rate hedge agreements, including our senior secured borrowing facility and our taxable A/B facility are linked to LIBOR. Moreover, some of the impact finance assets in our portfolio or that we may originate and acquire in the future bear or will bear interest at a rate that adjusts in accordance with LIBOR, and we expect that some of these assets will not have matured, been prepaid or otherwise terminated prior to the time at which LIBOR ceases to be published. It is not possible to predict all consequences of the IBA’s proposals to cease publishing LIBOR, any related regulatory actions and the expected discontinuance of the use of LIBOR as a reference rate for financial contracts. Our debt and interest rate hedge agreements and some impact finance assets held by us now or in the future may not include robust fallback language that would facilitate replacing LIBOR with a clearly defined alternative reference rate after LIBOR’s discontinuation. If such debt and interest rate hedge agreements and impact finance assets mature after LIBOR ceases to be published, our counterparties may disagree with us about how to calculate or replace LIBOR. Even when robust fallback language is included, there can be no assurance that the replacement rate plus any spread adjustment will be economically equivalent to LIBOR, which could result in a lower interest rate being paid to us on such assets. Modifications to any of our debt and interest rate hedge agreements and impact finance assets or other contracts to replace LIBOR with an alternative reference rate could result in adverse tax consequences. Any of these events could negatively affect the value of our impact finance assets, negatively impact our ability to sell such impact finance assets, and negatively impact our ability to effectively hedge our interest rate risks, any of which could adversely affect us.

The Alternative Reference Rates Committee, a group of private-market participants convened by the U.S. Federal Reserve Board and the New York Federal Reserve, has recommended the Secured Overnight Financing Rate (“SOFR”) as a more robust reference rate alternative to U.S. dollar LIBOR. The use of SOFR as a substitute for LIBOR is voluntary and may not be suitable for all market participants. SOFR is calculated based on overnight transactions under repurchase agreements, backed by Treasury securities. SOFR is observed and backward looking, which stands in contrast with LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members. Given that SOFR is a secured rate backed by government securities, it will be a rate that does not take into account bank credit risk (as is the case with LIBOR). SOFR is therefore likely to be lower than LIBOR and is less likely to correlate with the funding costs of financial institutions. To approximate economic equivalence to LIBOR, SOFR can be compounded over a relevant term and a spread adjustment may be added. Market practices related to SOFR calculation conventions continue to develop and may vary. Inconsistent calculation conventions among financial products may expose us to increased basis risk and resulting costs.

Risks Related to Hedging

We may enter into hedging transactions that could expose us to contingent liabilities or additional credit risk in the future and adversely impact our financial condition.

Part of our business strategy may involve entering into hedging transactions that could require us to fund cash payments in certain circumstances (e.g., the early termination of the hedging instrument caused by an event of default or other early termination event, or the decision by a counterparty to request margin it is contractually owed under the terms of the hedging instrument). The amount due would be equal to the unrealized loss of the open swap positions with the respective counterparty and could also include other fees and charges. These economic losses will be reflected in our financial statements, and our ability to fund these obligations will depend on the liquidity of our assets and access to capital at the time, and the need to fund these obligations could adversely impact our financial condition.

In addition, over-the-counter hedges entered into to hedge interest rates or credit risk involve risk since they often are not traded on regulated exchanges or cleared through a central counterparty. We would remain exposed

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to our counterparty’s ability to perform on its obligations under each hedge and cannot look to the creditworthiness of a central counterparty for performance. As a result, if a hedging counterparty cannot perform under the terms of the hedge, we would not receive payments due under that hedge, we may lose any unrealized gain associated with the hedge and the hedged liability would cease to be hedged. While we would seek to terminate the relevant hedge transaction and may have a claim against the defaulting counterparty for any losses, including unrealized gains, there is no assurance that we would be able to recover such amounts or to replace the relevant hedge on economically viable terms or at all. In such case, we could be forced to cover our unhedged liabilities at the then current market price. We may also be at risk for any collateral we have pledged to secure our obligations under the hedge if the counterparty becomes insolvent or files for bankruptcy.

Furthermore, our total return swaps, interest rate swaps or cap agreements, or similar financial instruments are subject to increasing statutory and other regulatory requirements and, depending on the identity of the counterparty, applicable international requirements. Recently, new regulations have been promulgated by U.S. and foreign regulators to strengthen the oversight of swaps, and any further actions taken by such regulators could constrain our business strategy or increase our costs, either of which could materially and adversely impact our results of operations.

In addition, the Dodd-Frank Act requires certain derivatives, including certain interest rate swaps, to be executed on a regulated market and cleared through a central counterparty. Unlike over-the-counter swaps, the counterparty for the cleared swaps is the clearing house, which reduces counterparty risk. However, cleared swaps require us to appoint clearing brokers and to post margin in accordance with the clearing house’s rules, which has resulted in increased costs for cleared swaps compared to over-the-counter swaps. The margin requirements for both cleared and uncleared swaps also limit eligible margin to cash and specified types of securities, which may further increase the costs of hedging and induce us to change or reduce the use of hedging transactions. The margin regulations generally do not apply to any over-the-counter swaps that were entered into prior to the effective date of such regulations.

If we choose not to pursue, or fail to qualify for, hedge accounting treatment, our operating results may be impacted because losses on the derivatives that we enter into may not be offset by a change in the fair value of the related hedged transaction.

We may choose not to pursue, or fail to qualify for, hedge accounting treatment relating to derivative and hedging transactions. We may fail to qualify for hedge accounting treatment for a number of reasons, including if we use instruments that do not meet the Accounting Standards Codification (“ASC”) Topic 815 definition of a derivative, we fail to satisfy ASC Topic 815 hedge documentation and hedge effectiveness assessment requirements or the hedge relationship is not highly effective. If we fail to qualify for, or choose not to pursue, hedge accounting treatment, our operating results may be impacted because losses on the derivatives that we enter into may not be offset by a change in the fair value of the related hedged transaction.

Risks Related to Our Class A common stock

Shares of our Class A common stock are newly-issued securities for which there is no established trading market. Our Class A common stock has been approved for listing on the NYSE, subject to official notice of issuance. However, there can be no assurance that an active trading market for our Class A common stock will develop, or if one develops, be maintained. Accordingly, no assurance can be given as to the ability of our Class A stockholders to sell their Class A common stock or the price that our Class A stockholders may obtain for their Class A common stock.

Some of the factors that could negatively affect the market price of our Class A common stock include:

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our actual or projected operating results, financial condition, cash flows and liquidity or changes in business strategy or prospects;

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changes in the mix of our debt financing products and services, including the level of securitizations or fee income in any quarter;

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actual or perceived conflicts of interest with individuals, including our executives or PHC LLC;

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our ability to arrange financing for our portfolio of finance projects;

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equity issuances by us, or share resales by our Class A stockholders, or the perception that such issuances or resales may occur;

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seasonality in construction and in demand for our financial solutions;

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actual or anticipated accounting problems;

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publication of research reports about us or the sustainable infrastructure industry;

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changes in market valuations of similar companies;

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adverse market reaction to any increased indebtedness we may incur in the future;

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interest rate changes;

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additions to or departures of our key personnel;

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speculation in the press or investment community;

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our failure to meet, or the lowering of, our earnings estimates or those of any securities analysts;

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increases in market interest rates, which may lead investors to demand a higher distribution yield for our Class A common stock, if we have begun to make distributions to our Class A stockholders, and would result in increased interest expenses on our debt;

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changes in governmental policies, regulations or laws;

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failure to maintain our exclusion from registration under the 1940 Act;

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price and volume fluctuations in the stock market generally; and

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general market and economic conditions, including the current state of the credit and capital markets.

Market factors unrelated to our performance could also negatively impact the market price of our Class A common stock. One of the factors that investors may consider in deciding whether to buy or sell our Class A common stock is our distribution rate as a percentage of our stock price relative to market interest rates. If market interest rates increase, prospective investors may demand a higher distribution rate or seek alternative investments paying higher dividends or interest. As a result, interest rate fluctuations and conditions in capital markets can affect the market value of our Class A common stock.

We cannot predict the impact our dual-class structure may have on the market price of our Class A common stock.

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will also mandatorily convert into Class A common stock at a conversion ratio of 50 shares of Class B common stock for each share of Class A common stock. Upon the completion of this offering, PHC LLC will control a majority of the voting power of shares eligible to vote in the election of our directors.

We cannot predict whether our dual-class structure, combined with the concentrated control of PHC LLC, will result in a lower or more volatile market price of our Class A common stock or in adverse publicity or other adverse consequences. For example, S&P Dow Jones has stated that companies with more than one class of common stock on their balance sheet will not be eligible for inclusion in the S&P Composite 1500 (composed of the S&P 500, S&P MidCap 400 and S&P SmallCap 600) although certain existing index constituents were grandfathered. Under the announced policies, our dual class capital structure would make us ineligible for inclusion in any of these indices. Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from stock indices would likely preclude investment by many of these funds and could make our Class A common stock less attractive to other investors. As a result, the market price of our Class A common stock could be materially adversely affected.

Class A common stock and preferred stock eligible for future sale may have adverse effects on our share price.

Subject to applicable law, our board of directors, without stockholder approval, may authorize us to issue additional authorized and unissued shares of Class A common stock and preferred stock on the terms and for the consideration it deems appropriate. In addition, in connection with the formation transactions, our operating partnership will issue Class A OP units, and we will issue an equal number of shares of our Class B common stock, to PHC LLC. The partnership agreement for our operating partnership generally will not restrict the quantity or frequency with which Class A OP unit holders may exchange OP units and related Class B common stock into shares of our Class A common stock. In addition, we will provide registration rights to PHC LLC together with subsequent holders of Class A OP units and shares of our Class B common stock with respect to shares of our Class A common stock issuable upon the exchange of such OP units (including the shares of Class A common stock issuable upon the automatic conversion of corresponding Class B common stock held by such holders). The registration rights agreement requires us to use our commercially reasonable efforts to file a resale shelf registration statement on Form S-3 with the SEC providing for the resale of all such shares of Class A common stock no later than 60 days after we first become eligible to register the resale of our securities pursuant to Form S-3 under the Securities Act, subject to extension upon certain events. In addition, after a period of 180 days after the date of this prospectus, equity owners of PHC LLC that have the right, through the exercise of withdrawal rights under the PHC LLC operating agreement, to become the holders of at least % of the Class A OP Units in our operating partnership expected to be held by PHC LLC upon completion of this offering, have been granted certain customary demand registration rights that require us to register shares of Class A common stock issuable upon the exchange of such OP units (including the shares of Class A common stock issuable upon the automatic conversion of corresponding Class B common stock held by such holders), on short form and long form registration statements, subject to the right of the underwriters to limit the number of shares to be included in an underwritten offering and our right to delay or withdraw a registration statement under certain circumstances. Other holders of Class A OP Units in our operating partnership (other than us) will have piggyback registration rights to join in registrations initiated by the exercise of demand registration rights under certain circumstances. We will bear the expenses incident to our obligations under the agreement granting the registration rights described above in this paragraph.

We cannot predict the effect, if any, of future sales of our Class A common stock or Class A OP units or other securities exchangeable or convertible into shares of our Class A common stock, or the availability of shares for future sales, on the market price of our Class A common stock. Further, the market price of our Class A common stock may decline significantly when the restrictions on resale by certain of our Class A stockholders or Class A OP unit holders lapse. Sales of substantial amounts of Class A common stock or the perception that such sales could occur may adversely affect the prevailing market price for our Class A common stock.

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Although not currently anticipated, in the event that our board of directors authorizes distributions in excess of the income or cash flow generated from our assets, we may make such distributions from the proceeds of future offerings of equity or debt securities or other forms of debt financing or the sale of assets.

Our ability to make distributions may be adversely affected by a number of factors, including the risk factors described in this prospectus. Currently, we have no intention to use any net proceeds from this offering to make distributions to our stockholders or to make distributions to our stockholders using shares of our stock. Therefore, although we anticipate initially making quarterly distributions to our Class A stockholders, our board of directors has the sole discretion to determine the timing and amount of any distributions to our Class A stockholders. If our portfolio of impact finance assets fails to generate sufficient income and cash flow, we could be required to sell assets, borrow funds, raise additional equity or make a portion of our distributions in the form of a stock distribution or distribution of debt securities in order to be able to make distributions. To the extent that we are required to sell assets in adverse market conditions or borrow funds at unfavorable rates, our results of operations could be materially and adversely affected. If we raise additional equity, our stock price could be materially and adversely affected. Our board of directors will make determinations regarding distributions based upon various factors, including our earnings, our financial condition, our liquidity, applicable debt and preferred stock covenants, applicable provisions of the MGCL and other factors as our board of directors may deem relevant from time to time. We believe that a change in any one of the following factors could adversely affect our results of operations and impair our ability to make distributions to our Class A stockholders:

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our ability to make profitable investments through direct originations or opportunistic secondary market acquisitions;

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margin calls or other expenses that reduce our cash flow;

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defaults in direct originations by our borrowers or decreases in the value of our investments opportunistically acquired in the secondary market; and

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the fact that anticipated operating expense levels may not prove accurate, as actual results may vary from estimates.

As a result, no assurance can be given that we will be able to make distributions to our Class A stockholders at any time in the future or that the level of any distributions we do make to our Class A stockholders will achieve a market yield or increase or even be maintained over time, any of which could materially and adversely affect us.

Future offerings of debt or equity securities, which may rank senior to our Class A common stock, may adversely affect the market price of our Class A common stock.

If we decide to issue debt instruments in the future, which would rank senior to our Class A common stock, it is likely that they will be governed by a loan agreement, an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any equity securities or convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our Class A common stock and may result in dilution to owners of our Class A common stock. We and, indirectly, our Class A stockholders will bear the cost of issuing and servicing such debt instruments or securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our Class A common stock will bear the risk of our future offerings reducing the market price of our Class A common stock and diluting the value of their stock holdings in us.

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Following the completion of this offering and our formation transactions, PHC LLC will hold approximately % of the total voting power of our common stock (or % if the underwriters exercise in full their option to purchase additional shares), and its interests in our business may differ from our interests or those of our other stockholders.

Following the completion of this offering and our formation transactions, PHC LLC will hold approximately % of the total voting power of our common stock (or % if the underwriters exercise in full their option to purchase additional shares). As long as PHC LLC beneficially owns a majority of our total voting power, it will have the ability, without the consent of the other holders of our common stock, to elect all of the members of our board of directors and to control our management and affairs. In addition, it will be able to, in its sole discretion, determine the outcome of matters submitted to a vote of our stockholders for approval including significant corporate transactions such as business combinations, consolidations and mergers. Therefore, PHC LLC will have substantial influence over us and could exercise influence in a manner that is not in the best interests of our other stockholders. This concentration of voting power might also have the effect of delaying or preventing a change of control that our stockholders may view as beneficial.

Purchasers of shares of Class A common stock in this offering will experience immediate and significant dilution in the net tangible book value per share.

We expect the initial public offering price of our Class A common stock to be substantially higher than the tangible book value per share of our outstanding Class A common stock immediately after this offering. If you purchase our Class A common stock in this offering, you will incur immediate dilution of approximately $ in the tangible book value per share of Class A common stock from the price you pay for our Class A common stock in this offering.

From time to time, after this offering, we also may issue shares of our Class A common stock. We may grant registration rights in connection with these issuances. Sales of substantial amounts of our Class A common stock, or the perception that these sales could occur, may adversely affect the prevailing market price for our Class A common stock or may adversely affect the terms upon which we may be able to obtain additional capital through the sale of equity securities.

Risks Relating to Regulation

We cannot predict the unintended consequences and market distortions that may stem from far-ranging governmental intervention in the economic and financial system or from regulatory reform of the oversight of financial markets.

The U.S. federal government, the Federal Reserve Board of Governors, the U.S. Treasury, the SEC, U.S. Congress and other governmental and regulatory bodies have taken, are taking or may in the future take, various actions to address the financial crisis or other areas of regulatory concern, such as the Dodd — Frank Wall Street Reform and Consumer Protection Act. Such actions could have a dramatic impact on our business, results of operations and financial condition, and the cost of complying with any additional laws and regulations or the elimination or reduction in scope of various existing laws and regulations could have a material adverse effect on our financial condition and results of operations. The far-ranging government intervention in the economic and financial system may carry unintended consequences and cause market distortions. We are unable to predict at this time the extent and nature of such unintended consequences and market distortions, if any. The inability to evaluate the potential impacts could have a material adverse effect on the operations of our business.

Loss of our 1940 Act exclusion would adversely affect us, the market price of shares of our Class A common stock and our ability to distribute dividends.

We intend to conduct our operations so that neither we nor any of our subsidiaries are required to register as an investment company under the 1940 Act. Section 3(a)(1)(A) of the 1940 Act defines an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Section 3(a)(1)(C) of the 1940 Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns

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or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. Government securities and cash items) on a unconsolidated basis, which we refer to as the “40% test.” Excluded from the term “investment securities,” among other things, are U.S. Government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exceptions from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940 Act.

We are organized as a holding company and will conduct our business through our operating partnership’s wholly-owned and majority-owned subsidiaries. Both we and our operating partnership intend to conduct our operations so that we comply with the 40% test. The securities issued by any wholly-owned or majority-owned subsidiaries that we may form in the future that are excepted from the definition of “investment company” based on Section 3(c)(1) or 3(c)(7) of the 1940 Act, together with any other investment securities we may own, may not have a value in excess of 40% of the value of our total assets on an unconsolidated basis. In addition, we believe that neither we nor our operating partnership will be considered an investment company under Section 3(a)(1)(A) of the 1940 Act because neither we nor our operating partnership will engage primarily or hold ourselves out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, through our operating partnership’s wholly owned or majority-owned subsidiaries, we and our operating partnership will be primarily engaged in the non-investment company businesses of those subsidiaries.

We anticipate that most of our investments will be held by our operating partnership’s wholly-owned or majority-owned subsidiaries and that one or more of these subsidiaries will rely on the exception from the definition of investment company under Section 3(c)(5)(C) of the 1940 Act, which is available for entities which are not primarily engaged in issuing redeemable securities, face-amount certificates of the installment type or periodic payment plan certificates and which are primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate. This exception generally requires that at least 55% of such subsidiaries’ portfolios must be comprised of qualifying assets and at least another 80% of each of their portfolios must be comprised of qualifying assets and real estate-related assets under the 1940 Act.

Consistent with guidance published by the SEC staff, we intend to treat as qualifying assets for this purpose loans secured by projects where the original principal amount of the loan did not exceed 100% of the value of the underlying real property portion of the collateral when the loan was made. In general, with regard to our subsidiaries relying on Section 3(c)(5)(C), we intend to rely on other guidance published by the SEC or its staff or on our analyses of guidance published with respect to other types of assets to determine which assets are qualifying real estate assets and real estate-related assets.

As described elsewhere in this prospectus, we may finance our operations through asset-backed, non-recourse tax-exempt term matched trusts (“TMTs”). Our TMTs are structured as partnerships into which we deposit tax-exempt bonds. TMTs issue senior equity trust certificates (“A Notes”) to financial and non-financial lenders where we normally retain the subordinated equity trust certificates (“B Notes”) used in the structure. We act as servicer to the trusts. In accordance with no-action letters issued by the SEC staff, for purposes of Section 3(c)(5)(C) we intend to treat the B Notes received in such TMT financings as qualifying real estate assets.

In addition, we anticipate that one or more of our subsidiaries will qualify for an exclusion from registration as an investment company under the 1940 Act pursuant to either Section 3(c)(5)(A) of the 1940 Act, which is available for entities which are not engaged in the business of issuing redeemable securities, face-amount certificates of the installment type or periodic payment plan certificates, and which are primarily engaged in the business of purchasing or otherwise acquiring notes, drafts, acceptances, open accounts receivable, and other obligations representing part or all of the sales price of merchandise, insurance, and services, or Section 3(c)(5)(B) of the 1940 Act, which is available for entities primarily engaged in the business of making loans to manufacturers, wholesalers, and retailers of, and to prospective purchasers of, specified merchandise, insurance, and services. These exceptions generally require that at least 55% of such subsidiaries’ portfolios must be comprised of qualifying assets that meet the requirements of the exception. We intend to treat impact finance loans where the loan proceeds are specifically provided to finance property development, infrastructure or other projects or improvements as qualifying assets for purposes of these exceptions. In general, we also expect, with

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regard to our subsidiaries relying on Section 3(c)(5)(A) or (B), to rely on guidance published by the SEC or its staff or on our analyses of guidance published with respect to other types of assets to determine which assets are qualifying assets under such exceptions.

Although we intend to monitor the portfolios of our subsidiaries relying on the Section 3(c)(5)(A), (B) or (C) exceptions periodically and prior to each acquisition, there can be no assurance that such subsidiaries will be able to maintain their exceptions. Qualification for such exceptions under the 1940 Act will limit our ability to make certain investments. For example, these restrictions will limit the ability of these subsidiaries to make loans that are not secured by real property or that do not represent part or all of the sales price of merchandise, insurance, and services.

There can be no assurance that the laws and regulations governing the 1940 Act, including the Division of Investment Management of the SEC providing more specific or different guidance regarding these exceptions, will not change in a manner that adversely affects our operations. If we or our subsidiaries fail to maintain an exclusion or exemption from the 1940 Act, we could, among other things, be required either to (i) change the manner in which we conduct our operations to avoid being required to register as an investment company, (ii) effect sales of our assets in a manner that, or at a time when, we would not otherwise choose to do so or (iii) register as an investment company, any of which could negatively affect the value of our Class A common stock, the sustainability of our business model, and our ability to make distributions which could have an adverse effect on our business and the market price for our shares of Class A common stock.

We have not requested the SEC or its staff to approve our treatment of any company as a majority-owned subsidiary and neither the SEC nor its staff has done so. If the SEC or its staff were to disagree with our treatment of one or more companies as majority-owned subsidiaries, we would need to adjust our business strategy and our assets in order to continue to pass the 40% test. Any such adjustment in our business strategy could have a material adverse effect on us.

Rapid changes in the values of our assets may make it more difficult for us to maintain our exclusion from the 1940 Act.

If the market value or income potential of our assets changes as a result of changes in interest rates, general market conditions, government actions or other factors, we may need to adjust the portfolio mix of our real estate assets and income or liquidate our non-qualifying assets to maintain our exclusion from the 1940 Act. If changes in asset values or income occur quickly, this may be especially difficult to accomplish. This difficulty may be exacerbated by the illiquid nature of the assets we may own. We may have to make decisions that we otherwise would not make absent the 1940 Act considerations.

The preparation of our financial statements involves use of estimates, judgments and assumptions, and our financial statements may be materially affected if our estimates prove to be inaccurate.

Financial statements prepared in accordance with GAAP require the use of estimates, judgments and assumptions that affect the reported amounts. Different estimates, judgments and assumptions reasonably could be used that would have a material effect on the financial statements, and changes in these estimates, judgments and assumptions are likely to occur from period to period in the future. Significant areas of accounting requiring the application of management’s judgment include, but are not limited to, determining the fair value of our assets.

These estimates, judgments and assumptions are inherently uncertain, and, if they prove to be wrong, then we face the risk that charges to income will be required. Any such charges could significantly harm our business, financial condition, results of operations and the price of our securities. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” for a discussion of the accounting estimates, judgments and assumptions that we believe are the most critical to an understanding of our business, financial condition and results of operations.

Accounting rules for certain of our transactions are highly complex and involve significant judgment and assumptions. Changes in accounting rules, interpretations or assumptions could adversely impact our financial statements.

Accounting rules for transfers of financial assets, structured credit transactions, consolidation of variable interest entities, and other aspects of our anticipated operations are highly complex and involve significant judgment

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and assumptions. These complexities could lead to delay in preparation of financial information. Changes in accounting rules, interpretations or assumptions could impact our financial statements, possibly materially.

Risks Related to Our Organization and Structure

Upon completion of this offering, we will be a “controlled company” within the meaning of the NYSE rules and the rules of the SEC. As a result, we qualify for and rely on exemptions from certain corporate governance requirements that provide protection to stockholders of other companies.

Following the completion of this offering and our formation transactions, PHC LLC will hold approximately % of the total voting power of our common stock (or % if the underwriters exercise in full their option to purchase additional shares). As a result, we will be a “controlled company” within the meaning of the corporate governance standards of the NYSE. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

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the requirement that a majority of the board of directors consist of “independent directors” as defined under the rules of the NYSE;

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the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

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the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

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the requirement for an annual performance evaluation of the nominating/corporate governance and compensation committees.

Because the exemptions are available to us, upon completion of this offering, our board of directors will consist of six members, three of whom will qualify as independent directors. As a “controlled company,” we are not subject to nominating/corporate governance committee and compensation committee independence requirements and our Our nominating/corporate governance committee and compensation committee will not consist entirely of independent directors. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.

Our business could be harmed if key personnel terminate their employment with us.

Our success depends, to a significant extent, on the continued services of Jim Thompson, Cliff Weiner, Paige Deskin, Ramiro Albarran, Charlie Visconsi, and the other members of our management team. Upon completion of this offering and our formation transactions, several of our officers, including Jim Thompson, Cliff Weiner, Paige Deskin, Ramiro Albarran and Charlie Visconsi, will enter into new employment agreements with us. These employment agreements provide for an initial year term of employment for these executives. Notwithstanding these agreements, there can be no assurance that any of them will remain employed by us.

We are a holding company with no direct operations and rely on funds received from the operating partnership to pay liabilities.

We are a holding company and will conduct substantially all of our operations through, and be the sole general partner of, our operating partnership subsidiary. We do not have, apart from an interest in the operating partnership, any independent operations. As a result, we rely on distributions from the operating partnership to pay any distributions we might declare on shares of our Class A common stock. We will also rely on distributions from the operating partnership to meet any of our obligations, including any tax liability on taxable income allocated to us from the operating partnership and payments required to be made under the tax receivables agreement. In addition, because we are a holding company, your claims as Class A stockholders are structurally subordinated to all existing and future liabilities and obligations (whether or not for borrowed money) of the operating partnership and its subsidiaries. Therefore, in the event of our bankruptcy, liquidation, or reorganization, our assets and those of the operating partnership and any of its subsidiaries will be able to

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satisfy the claims of our Class A stockholders only after all of our liabilities and obligations and those of the operating partnership and any of its subsidiaries’ have been paid in full.

In certain circumstances, our operating partnership could make distributions to us and the other holders of OP units in amounts that exceed our tax liabilities and the amounts we declare and pay as dividends.

We are organized as a holding company and will have no material assets other than our general partner interest and the Class A OP units and Class B OP Units that we hold in our operating partnership. As a result, the ability of our board of directors to declare and pay dividends to the holders of our common stock will be subject to the ability of our operating partnership to pay distributions to us in respect of the OP units we hold in the operating partnership. When our operating partnership pays distributions to us in respect of our Class A OP units, our operating partnership is also required to make an equivalent distribution per unit in respect of the Class A OP units not held by us. In this regard, subject to funds being legally available to pay distributions, we, as the sole general partner of the operating partnership, intend to cause our operating partnership to make distributions to holders of Class A OP units, including us, in an amount at least sufficient to allow us and other holders of Class A OP units to pay all applicable taxes and to allow us to make payments under the tax receivables agreement. As a result of (i) potential differences in the amount of net taxable income allocable to us and the other holders of OP units, (ii) the lower tax rate applicable to corporations than individuals, (iii) the favorable tax benefits that we anticipate receiving from exchanges of OP units in our operating partnership for shares of our Class A common stock, and (iv) payments we are required to make under the tax receivables agreement, we anticipate that these distributions from our operating partnership may be in amounts that exceed our tax liabilities and obligations to make payments under the tax receivables agreement. We expect that distributions we receive from the operating partnership that are in excess of amounts that we use to pay our tax liabilities and payments we are required to make under the tax receivables agreement, will be either retained by us or used to fund the payment of dividends on our common stock, in each case as determined by our board of directors. No adjustments to the redemption or exchange ratio of Class A OP units for shares of Class A common stock will be made as a result of our board’s decision to retain such excess cash. To the extent that we do not distribute such excess cash as dividends on our common stock and instead, for example, hold such cash balances or lend them to our operating partnership, holders of Class A OP units in our operating could benefit from any value attributable to such cash balances as a result of their ownership of Class A common stock following an exchange of their Class A OP units for shares of Class A common stock.

Conflicts of interest could arise in the future as a result of the relationships between us and our affiliates, on the one hand, and our operating partnership or any partner thereof, on the other. Our directors and officers have duties to our company under applicable Maryland law in connection with their management of our company. At the same time, we, as the sole general partner of our operating partnership, have fiduciary duties and obligations to our operating partnership and to its partners under Delaware law in connection with the management of our operating partnership. Our fiduciary duties and obligations, as the sole general partner of our operating partnership, may come into conflict with the duties of our directors and officers to our company and our Class A stockholders. In particular, the consummation of certain business combinations, the sale of any financial assets or a reduction of indebtedness could have adverse tax consequences to holders of OP units, which would make those transactions less desirable to them.

Unless otherwise provided for in the relevant partnership agreement, Delaware law generally requires a general partner of a Delaware limited partnership to adhere to fiduciary duty standards under which it owes its limited partners the highest duties of good faith, fairness and loyalty and which generally prohibit such general partner from taking any action or engaging in any transaction as to which it has a conflict of interest.

Additionally, the partnership agreement of our operating partnership, or our operating partnership agreement, expressly limits our liability by providing that neither we, as the general partner of the operating partnership, nor

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any of our directors or officers, will be liable or accountable in damages to our operating partnership, its limited partners or their assignees for errors in judgment, mistakes of fact or law or for any act or omission if the general partner, director or officer, acted in good faith. In addition, our operating partnership is required to indemnify us, our affiliates and each of our and their respective officers, directors, employees and agents to the fullest extent permitted by applicable law against any and all losses, claims, damages, liabilities (whether joint or several), expenses (including, without limitation, attorneys’ fees and other legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the operating partnership, provided that our operating partnership will not indemnify any such person for (1) willful misconduct or a knowing violation of the law, (2) any transaction for which such person received an improper personal benefit in violation or breach of any provision of our operating partnership agreement, or (3) in the case of a criminal proceeding, the person had reasonable cause to believe the act or omission was unlawful.

The provisions of Delaware law that allow the common law fiduciary duties of a general partner to be modified by a partnership agreement have not been resolved in a court of law, and we have not obtained an opinion of counsel covering the provisions set forth in our operating partnership agreement that purport to waive or restrict our fiduciary duties that would be in effect under common law were it not for our operating partnership agreement.

In addition, because holders of OP units will hold the majority of their ownership interests in our business through our operating partnership, rather than directly through Preston Hollow Community Capital, Inc., these existing owners may have other conflicting interests with holders of our Class A common stock. For example, our existing owners may have different tax positions from holders of our Class A common stock which could influence their decisions regarding whether and when we should dispose of assets, whether and when we should incur new or refinance existing indebtedness, especially in light of the existence of the tax receivables agreement that we will enter into in connection with this offering, and whether and when our company should terminate the tax receivables agreement and accelerate its obligations thereunder. Also, the structuring of future transactions may take into consideration these existing owners’ tax or other considerations even where no similar benefit would accrue to us. See “Certain Relationships and Related Transactions — Tax Receivables Agreement” for more information.

We will be required to pay holders of Class A OP units for certain tax benefits we may claim, and the amounts we may pay could be significant.

Future exchanges of Class A OP units for our Class A common stock are expected to result in increases in our allocable tax basis in the assets of our operating partnership. These increases in tax basis may reduce our taxable income and, thus, reduce, the amount of tax that we otherwise would be required to pay in the future.

The tax receivables agreement, which we will enter into with holders of Class A OP units, will generally provide for the payment by us to each of them (or their assignees) of % of the amount of the cash savings, if any, in U.S. federal and state income tax that we actually realize (or are deemed to realize in certain circumstances) in periods after this offering as a result of (i) any step-up in tax basis in our operating partnership’s assets resulting from the purchases or exchanges of Class A OP units for shares of our Class A common stock; (ii) payments under the tax receivables agreement; and (iii) imputed interest deemed to be paid by us as a result of the tax receivables agreement.

The actual increase in tax basis, as well as the amount and timing of any payments under the tax receivables agreement, will vary depending upon a number of factors, including the timing of exchanges by holders of Class A OP units, the price of our Class A common stock at the time of the exchange, the extent to which such exchanges are taxable, the amount and timing of the taxable income we generate in the future and the tax rate then applicable, as well as the portion of our payments under the tax receivables agreement constituting imputed interest.

Payments under the tax receivables agreement will be based on the tax reporting positions that we determine. Although we are not aware of any issue that would cause the IRS to challenge a tax basis increase or other tax

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attributes subject to the tax receivables agreement, we will not be reimbursed for any payments previously made under the tax receivables agreement in the event that the tax basis increases or other tax attributes are so challenged. As a result, in certain circumstances, payments could be made under the tax receivables agreement in excess of the benefits that we actually realize in respect of the attributes to which the tax receivables agreement relates.

The tax receivables agreement provides that upon certain mergers, asset sales, other forms of business combinations or other changes of control, or if, at any time, we elect an early termination of the tax receivables agreement, our (or our successor’s) obligations under the tax receivables agreement (with respect to holders of Class A OP units) would be based on certain assumptions, including that we would have sufficient taxable income to fully avail ourselves of the increased tax basis and other benefits related to entering into the tax receivables agreement. As a result, (i) we could be required to make payments under the tax receivables agreement that are greater than the specified percentage of the actual benefits we realize in respect of the tax attributes subject to the tax receivables agreement, and (ii) if we elect to terminate the tax receivables agreement early, we would be required to make an immediate payment equal to the present value of the anticipated future tax benefits, which payment may be made significantly in advance of the actual realization of such future benefits. In these situations, our obligations under the tax receivables agreement could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. There can be no assurance that we will be able to finance our obligations under the tax receivables agreement.

Certain provisions of Maryland law could inhibit changes in control.

Certain provisions of the Maryland General Corporation Law (“MGCL”) may have the effect of deterring a third party from making a proposal to acquire us or of impeding a change in control under circumstances that otherwise could provide the holders of our Class A common stock with the opportunity to realize a premium over the then-prevailing market price of our Class A common stock. We are subject to the “business combination” provisions of the MGCL that, subject to limitations, prohibit certain business combinations (including a merger, consolidation, statutory share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities) between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of our then outstanding voting stock or an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of our then outstanding voting stock) or an affiliate thereof for five years after the most recent date on which the stockholder becomes an interested stockholder. After the five-year prohibition, any business combination between us and an interested stockholder generally must be recommended by our board of directors and approved by the affirmative vote of at least (1) 80% of the votes entitled to be cast by holders of outstanding shares of our voting stock and (2) two-thirds of the votes entitled to be cast by holders of our voting stock other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder. These super-majority vote requirements do not apply if, among other conditions, our common stockholders receive a minimum price, as defined under the MGCL, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares. These provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by a board of directors prior to the time that the interested stockholder becomes an interested stockholder. Our board of directors has by resolution exempted business combinations between us and (1) any other person, provided, that such business combination is first approved by our board of directors (including a majority of our directors who are not affiliates or associates of such person), (2) PHC LLC and its affiliates and associates as part of the formation transactions and (3) persons acting in concert with any of the foregoing. As a result, any person described in the preceding sentence may be able to enter into business combinations with us that may not be in the best interests of our Class A stockholders, without

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compliance by our company with the supermajority vote requirements and other provisions of the statute. There can be no assurance that our board of directors will not amend or revoke the exemption at any time.

The “control share” provisions of the MGCL provide that, subject to certain exceptions, a holder of “control shares” of a Maryland corporation (defined as shares which, when aggregated with all other shares controlled by the Class A stockholder (except solely by virtue of a revocable proxy), entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) has no voting rights with respect to such shares except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding votes entitled to be cast by the acquiror of control shares, our officers and our personnel who are also our directors. Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of shares of our stock. There can be no assurance that this provision will not be amended or eliminated at any time in the future.

The “unsolicited takeover” provisions of Title 3, Subtitle 8 of the MGCL permit our board of directors, without Class A stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement certain takeover defenses, some of which (for example, a classified board) we do not yet have. Our charter contains a provision whereby we have elected to be subject to the provisions of Title 3, Subtitle 8 of the MGCL, pursuant to which our board of directors has the exclusive power to fill vacancies on our board of directors. These provisions may have the effect of inhibiting a third party from making an acquisition proposal for us or of delaying, deferring or preventing a change in control of us under the circumstances that otherwise could provide the holders of shares of Class A common stock with the opportunity to realize a premium over the then current market price. See “Certain Provisions of the Maryland General Corporation Law and Our Charter and Bylaws — Business Combinations,” — “Control Share Acquisitions” and “ — Subtitle 8.”

Our authorized but unissued shares of common and preferred stock may prevent a change in our control.

Our charter permits our board of directors to authorize us to issue additional shares of our authorized but unissued common or preferred stock. In addition, our board of directors may, without common stockholder approval, amend our charter to increase the aggregate number of our shares of Class A common stock, Class B common stock or the number of shares of stock of any other class or series that we have the authority to issue and classify or reclassify any unissued shares of common or preferred stock and set the terms of the classified or reclassified shares. As a result, our board of directors may establish a series of shares of common or preferred stock that could delay or prevent a transaction or a change in control that might involve a premium price for shares of our Class A common stock or otherwise be in the best interest of our Class A stockholders.

Our charter eliminates the liability of our present and former directors and officers to us and our stockholders for money damages to the maximum extent permitted under Maryland law. Under Maryland law, our present and former directors and officers will not have any liability to us or our stockholders for money damages other than liability resulting from:

•

actual receipt of an improper benefit or profit in money, property or services; or

•

active and deliberate dishonesty by the director or officer that was established by a final judgment and was material to the cause of action adjudicated.

Our charter authorizes us to indemnify our directors and officers for actions taken by them in those and other capacities to the maximum extent permitted by Maryland law. Our bylaws require us to indemnify each present and former director or officer, and each person who served any predecessor of our company, including PHC LLC, in a similar capacity, to the maximum extent permitted by Maryland law, in connection with the defense of any proceeding to which he or she is made, or threatened to be made, a party or a witness by reason of his or her

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service to us or any predecessor. In addition, we may be obligated to pay or advance or reimburse the expenses incurred by such persons in connection with any such proceedings without requiring a preliminary determination of their ultimate entitlement to indemnification. See “Certain Provisions of Maryland General Corporation Law and Our Charter and Bylaws — Indemnification and Limitation of Directors’ and Officers’ Liability.”

Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders and provide that claims relating to causes of action under the Securities Act may only be brought in federal district courts, which could limit stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees and could discourage lawsuits against us and our directors, officers and employees.

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for (a) any Internal Corporate Claim, as such term is defined in the MGCL, (b) any derivative action or proceeding brought on our behalf (other than actions arising under federal securities laws), (c) any action asserting a claim of breach of any duty owed by any of our directors, officers or other employees to us or to our stockholders, (d) any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of the MGCL or our charter or bylaws or (e) any other action asserting a claim against us or any of our directors, officers or other employees that is governed by the internal affairs doctrine. These choice of forum provisions will not apply to suits brought to enforce a duty or liability created by the Securities Act, the Exchange Act, or any other claim for which federal courts have exclusive jurisdiction. Furthermore, our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any claim arising under the Securities Act.

These exclusive forum provisions may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors, officers, or employees, which may discourage such lawsuits against us and our directors, officers, and employees. Alternatively, if a court were to find the choice of forum provisions contained in our bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition, and operating results. For example, under the Securities Act, federal courts have concurrent jurisdiction over all suits brought to enforce any duty or liability created by the Securities Act, and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. In addition, the exclusive forum provisions described above do not apply to any actions brought under the Exchange Act.

Our charter contains provisions that make removal of our directors difficult, which could make it difficult for our Class A stockholders to effect changes to our management.

Our charter provides that, subject to the rights of holders of any class or series of preferred stock, a director may be removed with or without cause upon the affirmative vote of holders of at least two-thirds of the votes entitled to be cast generally in the election of directors. Upon completion of this offering, vacancies may be filled only by a majority of the remaining directors in office, even if less than a quorum. These requirements make it more difficult to change our management by removing and replacing directors and may prevent a change in control of our company that is in the best interests of our Class A stockholders.

We expect to become subject to financial reporting and other requirements for which our accounting, internal audit and other management systems and resources may not be adequately prepared.

Following this offering, we will become subject to reporting and other obligations under the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 or the Sarbanes-Oxley Act. Section 404 requires annual management assessments of the effectiveness of our internal controls over financial reporting and, after we are no longer an “emerging growth company” for purposes of the JOBS Act, our independent registered public accounting firm to express an opinion on the effectiveness of our internal controls

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over financial reporting. To the extent applicable, these reporting and other obligations place or will place significant demands on our management, administrative, operational, internal audit and accounting resources and will cause us to incur significant expenses. We may need to upgrade our systems or create new systems; implement additional financial and management controls, reporting systems and procedures; expand or outsource our internal audit function; and hire additional accounting, internal audit and finance staff. If we are unable to accomplish these objectives in a timely and effective fashion, our ability to comply with the financial reporting requirements and other rules that apply to reporting companies could be impaired. We expect to have in place accounting, internal audit and other management systems and resources that will allow us to maintain compliance with the requirements of the Sarbanes-Oxley Act either at the time of the completion of this offering or at the end of any phase-in periods following the completion of this offering permitted by the , the SEC and the JOBS Act. Any failure to maintain effective internal controls could have a material adverse effect on our business, operating results and the price of our Class A common stock.

Pursuant to the recently enacted JOBS Act, we are eligible to take advantage of certain specified reduced disclosure and other requirements that are otherwise generally applicable to public companies for so long as we are an “emerging growth company.”

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

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FORWARD-LOOKING STATEMENTS

We make forward-looking statements in this prospectus that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives. When we use the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” “will” or similar expressions, we intend to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking:

•

use of the proceeds of this offering;

•

market trends in our industry, interest rates, the debt and lending markets or the general economy;

•

the impact of COVID-19 on our business and the U.S. and global economies;

•

our relationships with borrowers, investors, market intermediaries and professional advisers;

•

the degree and nature of competition from other providers of financing or investors in the impact finance marketplace;

•

actions and initiatives of the U.S. federal, state and local government and changes to U.S. federal, state and local government policies and the execution and impact of these actions, initiatives and policies;

•

our ability to achieve risk-adjusted total returns and deliver attractive risk-adjusted total returns to our stockholders;

•

our assessment of specialized finance opportunities for transactions that deliver meaningful social impact;

•

our or any other companies’ projected operating results;

•

the state of the U.S. economy generally or in specific geographic regions, states or municipalities;

•

economic trends and economic recoveries;

•

our ability to maintain financing arrangements on favorable terms;

•

general volatility of the securities markets in which we participate;

•

changes in the value of our assets;

•

our portfolio of assets;

•

our business, impact investment strategy and underwriting process;

•

interest rate and maturity mismatches between our assets and any borrowings used to fund such assets;

•

changes in interest rates and the market value of our target assets;

•

the use and composition of leverage to originate financings and our ratio of leverage to our portfolio of assets;

•

effects of hedging instruments on our target assets;

•

the degree to which our hedging strategies may or may not protect us from interest rate volatility;

•

the impact of and changes in governmental regulations, tax laws and rates, accounting guidance and similar matters;

•

our ability to maintain our exclusion from registration under the 1940 Act;

•

availability of qualified personnel; and

•

estimates relating to our ability to make distributions to our stockholders in the future.

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Forward-looking statements are not predictions of future events. You should not place undue reliance on these forward-looking statements. These beliefs, assumptions

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and expectations can change as a result of many possible events or factors, not all of which are known to us. Some of these factors are described in this prospectus under the headings “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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Use of proceeds

We estimate that we will receive net proceeds from this offering of approximately $ million, or approximately $ million if the underwriters’ option to purchase additional shares is exercised in full, assuming an initial public offering price of $ per share, which is the mid-point of the initial public offering price range shown on the cover page of this prospectus, in each case after deducting the underwriting discounts and commissions, and estimated expenses of this offering. We will contribute the net proceeds of this offering to our operating partnership in exchange for OP units. Our operating partnership will subsequently use the net proceeds to make social impact investments that are in line with our business plan and our company's Social Impact Finance Framework and for general corporate purposes.

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CAPITALIZATION

The following table sets forth the cash and cash equivalents and capitalization as of March 31, 2021 of:

•

our predecessor on a historical basis;

•

our predecessor on an as adjusted basis to reflect the formation transactions described under “The Structure and Formation of Our Company;” and

•

on a further adjusted basis to reflect the sale by us of shares of Class A common stock at the midpoint of the price range set forth on the cover of this prospectus and the application of the net proceeds from this offering as described in “Use of Proceeds.”

This table should be read in conjunction with “Organizational structure,” “Use of proceeds,” “Selected Pro Forma and Historical Financial and Operating Data,” “Management’s discussion and analysis of financial condition and results of operations,” “Description of capital stock” and the financial statements and notes thereto appearing elsewhere in this prospectus.

	March 31, 2021
	Actual			As adjusted(1)		As adjusted further(1)
Cash and cash equivalents		$	67,132,433		$		$
Debt financing
Secured Borrowings		$	162,975,439		$		$
Mandatorily redeemable noncontrolling interest in consolidated entities		$	347,524,350
Total debt financing		$	510,499,789
Stockholders’ equity:
Preferred stock, $0.01 par value per share, no shares authorized, no shares issued and outstanding, on a historical basis; shares authorized, shares issued and outstanding, as adjusted; shares authorized, shares issued and outstanding, as adjusted further basis			—
Class A common stock, $0.01 par value per share, no shares authorized, no shares issued and outstanding, on a historical basis; shares authorized, shares issued and outstanding, as adjusted; shares authorized, shares issued and outstanding, as adjusted further basis			—
Class B common stock, $0.01 par value per share, no shares authorized, no shares issued and outstanding, on a historical basis; shares authorized, shares issued and outstanding, as adjusted; shares authorized, shares issued and outstanding, as adjusted further basis			—
Additional paid-in capital
Total Members’/Stockholders’ equity		$	1,513,667,509		$		$
Non-controlling interest in consolidated entities		$	1,314,667		$		$
Total equity		$	1,514,982,176		$		$
Total capitalization		$	2,025,481,965		$		$

(1) Excludes (i) shares of our Class A common stock issuable upon exercise of the underwriters’ option to purchase additional shares if such option is exercised in full, (ii) shares of our Class A common stock reserved for future issuance under our 2021 Equity Incentive Plan,

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and (iii) shares of our Class A common stock issuable upon exchange of OP units by PHC LLC and conversion of shares of Class B common stock with which such OP units are paired. A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total equity and total capitalization by $ , assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting the underwriting discount and estimated offering expenses payable by us. An increase (decrease) of shares from the expected number of shares of Class A common stock to be sold by us in this offering would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total equity and total capitalization by $ , assuming the assumed initial public offering price per share (the midpoint of the price range set forth on the cover of this prospectus) remains the same and after deducting the underwriting discount and estimated offering expenses payable by us.

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Dilution

Purchasers of shares of our Class A common stock in this offering will experience an immediate and significant dilution of the net tangible book value of our Class A common stock from the initial public offering price. After giving pro forma effect to the formation transactions described under “The Structure and Formation of our Company,” our pro forma net tangible book value as of March 31, 2021 was $ million, or $ per share of Class A common stock (calculated by dividing the historical book value of our predecessor as of March 31, 2021 by the number of OP units we expect to issue in the formation transactions and assuming the exchange of such OP units into shares of our Class A common stock on a one-for-one basis and the conversion of shares of Class B common stock with which such OP units are paired into shares of Class A common stock at the conversion ratio of 50 shares of Class B common stock for each share of Class A common stock). After giving effect to the sale of shares of Class A common stock in this offering, the receipt by us of the net proceeds from this offering (assuming an offering price at the mid-point of the initial public offering price range shown on the cover page of this prospectus), the deduction of underwriting discounts and commissions, and estimated offering expenses payable by us, our pro forma net tangible book value at March 31, 2021 would have been $ million or $ per share of Class A common stock or an increase in pro forma net tangible book value attributable to the sale of shares of Class A common stock to new investors of $ million or $ per share. This amount represents an immediate dilution in pro forma net tangible book value of $ per share from the initial public offering price of $ per share (assuming an offering price at the mid-point of the initial public offering price range shown on the cover page of this prospectus). The following table illustrates this per share dilution:

Assumed initial public offering price per share of Class A common stock

Pro Forma net tangible book value per share as of March 31, 2021

Increase in pro forma net tangible book value per share attributable to new investors(1)

Adjusted pro forma net tangible book value per share after the offering(2)

Dilution per share to new investors(3)

(1) This amount is calculated after deducting underwriting discounts and commissions and estimated offering and formation transaction expenses.

(2) Based on pro forma net tangible book value of approximately $ million divided by the sum of shares of our Class A common stock to be outstanding upon completion of this offering on a fully diluted basis. There is no further impact on book value dilution attributable to the exchange of OP units to be issued to PHC LLC in the formation transactions or conversion of shares of Class B common stock with which such OP units are paired.

(3) Dilution is determined by subtracting adjusted pro forma net tangible book value per share of our Class A common stock after the offering from the initial public offering price paid by a new investor for a share of our Class A common stock. A $1.00 increase in the assumed initial public offering price of $ per share of Class A common stock would result in an increase in the dilution to new investors of $ per share or a total dilution of $ per share. A $1.00 decrease in the assumed initial public offering price of $ per share of Class A common stock would result in a decrease in the dilution to new investors of $ or a total dilution of $ per share.

The following table summarizes, as of the closing of this offering, the total number of shares of Class A common stock owned by existing owners and to be owned by new investors, the total consideration paid, and the average price per share paid by our existing owners and to be paid by new investors in this offering at $ (the midpoint of the price range set forth on the cover of this prospectus) calculated before deduction of the estimated underwriting discount.

Shares purchased

Total consideration

Average
Price
per share

Number

Percent

Amount

Percent

(dollars in thousands, except per share data)

Existing owners

Investors in this offering

Total

If the underwriters’ option to purchase additional shares is exercised in full, the number of shares held by new investors will be increased to , or approximately % of the total number of shares of Class A common

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stock. Assuming the number of shares of Class A common stock offered by us, as set forth on the cover of this prospectus, remains the same, after deducting the underwriting discount and estimated offering expenses payable by us, a $1.00 increase or decrease in the assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover of this prospectus, would increase or decrease, respectively, total consideration paid by new investors and total consideration paid by all shareholders by approximately $ .

To the extent that (i) we grant options to our employees in the future and those options are exercised, (ii) other issuances of Class A common stock are made or (iii) other issuances of equity awards under our 2021 Equity Incentive Plan are made and those equity awards are exchanged for Class A common stock, there will be further dilution to new investors.

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DISTRIBUTION POLICY

Currently, we have no intention to use any net proceeds from this offering to make distributions to our stockholders or to make distributions to our stockholders using shares of our stock.

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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

The unaudited pro forma consolidated financial statements consist of the unaudited pro forma consolidated statements of operations for the three months ended March 31, 2021 and for the year ended December 31, 2020 and the unaudited pro forma consolidated balance sheet as of March 31, 2021. The unaudited pro forma consolidated financial statements presents the consolidated financial position of Preston Hollow Community Capital, Inc. after giving pro forma effect to the formation transactions as described in “The Structure and Formation of our Company” and for this offering and the contemplated use of the proceeds as described under “Use of Proceeds.”

The unaudited pro forma consolidated balance sheet as of March 31, 2021 is presented to reflect adjustments to our predecessor’s historical consolidated balance sheet as of March 31, 2021 as if this offering, the contemplated use of proceeds, and the formation transactions were completed on March 31, 2021. The unaudited pro forma consolidated statements of income for the three months ended March 31, 2021 and the year ended December 31, 2020 are presented as if this offering, the contemplated use of proceeds, and the formation transactions were completed on January 1, 2021 and January 1, 2020, respectively. The pro forma adjustments, described in the related notes, are based on currently available information and assumptions that management believes are reasonable.

The unaudited pro forma consolidated financial information is provided below is not necessarily indicative of the operating results or financial position that would have occurred had we operated as a public company during the periods presented. The unaudited pro forma consolidated financial statements should not be relied on as indicative of the historical operating results had the formation transactions and this offering and the contemplated use of proceeds occurred on the dates assumed. The unaudited pro forma consolidated financial information also does reflect any future operating results or financial position that we will achieve after the completion of this offering and the related formation transactions.

The unaudited pro forma consolidated financial information assumes no exercise by the underwriters of their option to purchase additional shares of Class A common stock.

As described in greater detail under “Certain Relationships — Tax Receivables Agreement,” we will enter into the tax receivables agreement with the holders of OP units, pursuant to which we will pay them % of the amount of the cash savings, if any, in U.S. federal, state and local and foreign income tax that we actually realize (or are deemed to realize in the case of an early termination payment by us, or a change in control) as a result of such increases in tax basis and certain other tax benefits related to entering into the tax receivables agreement, including tax benefits attributable to payments under the tax receivable agreement. No exchanges or other tax benefits have been assumed in the unaudited pro forma consolidated financial information and therefore no pro forma adjustment related to the tax receivables agreement is necessary.

The unaudited pro forma consolidated financial statements should be read in conjunction with (i) our predecessor’s historical consolidated financial statements as of December 31, 2020 and 2019 and for the years then ended and the notes thereto appearing elsewhere in this prospectus, (ii) our predecessor’s historical unaudited consolidated financial statements as of March 31, 2021 and for the three months then ended and the notes thereto appearing elsewhere in this prospectus and (iii) “Use of Proceeds,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and “Risk Factors”.

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Unaudited Pro Forma Balance Sheet
As of March 31, 2021

	Preston Hollow, LLC Historical			Transaction Adjustments		Preston Hollow Community Capital, Inc. Pro Forma
Cash and cash equivalents and restricted cash		$	72,374,692		(1)		$
Investments in marketable securities, at fair value			817,644,815		—			817,644,815
Investments in marketable securities held in trust, at fair value			974,570,223		—			974,570,223
Investments in finance receivables, net of allowance for possible losses			71,790,904		—			71,790,904
Investment in private fund			1,597,549		—			1,597,549
Real estate owned			70,397,718		—			70,397,718
Interest receivable			36,551,394		—			36,551,394
Reverse repurchase receivable, net			2,643,483		—			2,643,483
Other assets			10,386,454		—			10,386,454
Total assets			2,057,957,232
Accounts payable and other liabilities		$	32,475,267		—		$	32,475,267
Secured borrowings			162,975,439		—			162,975,439
Manditorily redeemable noncontrolling interest in consolidated entities			347,524,350		—			347,524,350
Total liabilities			542,975,056		—			542,975,056
Preferred stock			—		—
Class A common stock			—		—(2)
Class B common stock			—		—(3)
Additional paid-in capital			—		—
Contributed capital			887,520,606		(887,520,606)(4)			—
Retained earnings			482,805,144		(482,805,144)(4)			—
Accumulated other comprehensive income			143,341,759		(143,341,759)(4)			—
Total Members’/stockholders’ equity			1,513,667,509
Noncontrolling interest in consolidated entities			1,314,667		(4)
Total equity			1,514,982,176
Total liabilities and equity		$	2,057,957,232				$

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Unaudited Pro Forma Consolidated Statement of Income
For the year ended December 31, 2020

	Preston Hollow, LLC Historical			Transaction Adjustments		Preston Hollow Community Capital, Inc. Pro Forma
Marketable securities interest income		$	110,832,800		—		$	110,832,800
Finance receivables interest income			9,528,386		—			9,528,386
Interest expense			(19,249,121)		—			(19,249,121)
Net interest income			101,112,065		—			101,112,065
Net gain on sales of marketable securities and finance receivables			12,894,541		—			12,894,541
Net gain on sale of real estate projects and land held for sale			15,930,239		—			15,930,239
Unrealized net gain on trading marketable securities and investment in private fund			152,774		—			152,774
Net loss on derivative securities			(9,005,027)		—			(9,005,027)
Other			352,147		—			352,147
Total revenues			121,436,739		—			121,436,739
Security other-than-temporary impairment expense			10,000,000		—			10,000,000
Provision for finance receivable credit losses			3,291		—			3,291
Compensation			15,228,236		—			15,228,236
Administrative and other operating			7,787,280		(5)
Total expenses			33,018,807
Net income before taxes			88,417,932
Tax expense			—		(6)
Net income after taxes			88,417,932
Net income attributable to noncontrolling interests			714,667
Net income attributable to controlling capital		$	87,703,265				$
Net income per share of Class A common stock:
Basic
Diluted
Weighted average shares of Class A common stock outstanding:
Basic
Diluted

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Unaudited Pro Forma Consolidated Statement of Income
For the three months ended March 31, 2021

	Preston Hollow, LLC Historical			Transaction Adjustments		Preston Hollow Community Capital, Inc. Pro Forma
Marketable securities interest income		$	26,605,051		—		$	26,605,051
Finance receivables interest income			1,808,989		—			1,808,989
Interest expense			(4,485,661)		—			(4,485,661)
Net interest income			23,928,379		—			23,928,379
Net gain on sales of marketable securities and finance receivables			9,133,809		—			9,133,809
Unrealized net loss on trading marketable securities and investment in private fund			(1,527,566)		—			(1,527,566)
Net gain on derivative securities			8,299,357		—			8,299,357
REO operating income			1,396,166		—			1,396,166
Other			60,661		—			60,661
Total revenues			41,290,806		—			41,290,806
Provision for (recovery of) finance receivable credit losses			(6,803)		—			(6,803)
REO operating expense			1,714,491		—			1,714,491
Compensation			4,444,098		—			4,444,098
Administrative and other operating			2,597,313		(5)
Total expenses			8,749,099
Net income before taxes			32,541,707
Tax expense			—		(6)
Net income after taxes			32,541,707
Net income attributable to noncontrolling interests			—
Net income attributable to controlling capital		$	32,541,707				$
Net income per share of Class A common stock:
Basic
Diluted
Weighted average shares of Class A common stock outstanding:
Basic
Diluted

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Notes to Unaudited Pro Forma Consolidated Balance Sheet and
Statement of Income

Adjustments to pro forma consolidated balance sheet

(1)

Reflects the receipt of the net proceeds of this offering. We will issue shares of Class A common stock in this offering for cash proceeds of approximately $ million, assuming an initial public offering price of $ per share (based on the midpoint of the price range set forth on the cover of this prospectus) less $ million of underwriting discounts and commissions and estimated offering expenses payable by us.

(2)

Reflects shares of Class A common stock with a par value of $0.01 outstanding immediately after this offering.

(3)

We will have two classes of common stock outstanding after this offering, Class A common stock and Class B common stock. Holders of our Class A common stock and holders of our Class B common stock are each entitled to one vote per share and all such holders will vote together as a single class. Upon completion of this offering, PHC LLC will hold all of the issued and outstanding shares of Class B common stock, which will represent approximately % of the total voting power of our common stock. The aggregate voting power of the Class B common stock is intended to be in proportion to the economic ownership interests in our operating partnership represented by holders OP units other than us. Shares of Class B common stock also represent an economic interest equal to 1/50th of a share of Class A common stock. Each OP unit is, from time to time, exchangeable for one share of Class A common stock, subject to equitable adjustment for stock splits, stock dividends and reclassifications. Upon exchange of OP units for shares of Class A common stock, the shares of Class B common stock with which such OP units are paired will also mandatorily convert into Class A common stock at conversion ratio of 50 shares of Class B common stock for each share of Class A common stock.

(4)

Upon completion of this offering and the formation transactions, we will have no material assets other than our general partner interest and the OP units ( Class A OP units and Class B OP units) that we hold in our operating partnership, which together represent an approximate % economic interest in our operating partnership. In our capacity as general partner, we will control all of our operating partnership’s operations. As a result, we will consolidate the financial results of our operating partnership and will report non-controlling interests related to the OP units held by PHC LLC, which will represent an approximate % economic interest in our operating partnership, on our consolidated balance sheet.

(5)

Includes a carve-out of certain legal expense costs associated with a litigation matter involving PHC LLC that will not be contributed to us as part of the formation transactions.

(6)

Our operating partnership has been and will continue to be treated as a partnership for U.S. federal and state income tax purposes. Following the completion of this offering and the formation transactions, we will be subject to U.S. federal income taxes, in addition to state, local and foreign income taxes with respect to our allocable share of any taxable income generated by the operating partnership that will flow through to its unitholders, including us. As a result, the unaudited pro forma consolidated statement of income reflect adjustments to the our income tax expense to reflect a federal statutory tax rate of 21%. Given the substantial amount of tax-exempt income retained in our operating partnership and pro forma income allocations associated with the sale of Internal Revenue Code Section 704(c) property during the year ended December 31, 2020, the pro forma tax provision expense allocable to us was $0 for the year ended December 31, 2020.

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SELECTED PRO FORMA AND HISTORICAL FINANCIAL AND OPERATING DATA

Consolidated statements of income

	Pro forma				Historical
	Three months ended March 31, 2021		Year ended December 31, 2020		Three months ended March 31,					Year ended December 31,
	Three months ended March 31, 2021		Year ended December 31, 2020		2021			2020		2020			2019
Revenues:
Marketable securities interest income		$		$		$	26,605,051		26,063,681		$	110,832,800		$	110,859,143
Finance receivables interest income							1,808,989		3,231,107			9,528,386			13,967,388
Interest expense							(4,485,661)		(4,816,505)			(19,249,121)			(23,212,275)
Net interest income							23,928,379		24,478,283			101,112,065			101,614,256
Net gain on sales of marketable securities and finance receivables							9,133,809		1,627,458			12,894,541			45,229,877
Net gain on sale of real estate projects and land held for sale							—		—			15,930,239			—
Unrealized net gain (loss) on trading marketable securities and investment in private fund							(1,527,566)		(1,210,431)			152,774			3,419,555
Net gain (loss) on derivative securities							8,299,357		(12,523,329)			(9,005,027)			(10,418,157)
REO operating income							1,396,166		—			—			—

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	Pro forma				Historical
	Three months ended March 31, 2021		Year ended December 31, 2020		Three months ended March 31,						Year ended December 31,
	Three months ended March 31, 2021		Year ended December 31, 2020		2021			2020			2020			2019
Other							60,661			170,871			352,147			578,956
Total revenues							41,290,806			12,542,852			121,436,739			140,424,487
Expenses:
Security impairment expense							—			—			10,000,000			—
Provision for (recovery of) finance receivable credit losses							(6,803)			38,653			3,291			76,663
REO operating expense							1,714,491			—			—			—
Compensation							4,444,098			2,757,154			15,228,236			15,963,708
Administrative and other operating(1)							2,597,313			1,287,356			7,787,280			10,321,280
Total expenses							8,749,099			4,083,163			33,018,807			26,361,651
Net income before taxes							32,541,707			8,459,689			88,417,932			114,062,836
Tax expense							—			—			—			—
Net income (after taxes)							32,541,707			8,459,689			88,417,932			114,062,836
Net income attributable to noncontrolling interests							—			—			714,667			—
Net income attributable to Members’ capital		$		$		$	32,541,707		$	8,459,689		$	87,703,265		$	114,062,836

(1) On a pro forma basis for the three months ended March 31, 2021 and the year ended December 31, 2020, Administrative and other operating expenses excludes and , respectively, of legal expense costs associated with a litigation matter involving PHC LLC that will not be contributed to us as part of the formation transactions.

Consolidated balance sheets

	Pro forma				Historical
	As of March 31, 2021		As of December 31, 2020		As of March 31, 2021			As of December 31,
	As of March 31, 2021		As of December 31, 2020		As of March 31, 2021			2020			2019
Assets
Cash and cash equivalents and restricted cash		$		$		$	72,374,692		$	88,220,755		$	212,507,292
Investments in marketable securities, at fair value							817,644,815			765,962,052			904,033,721
Investments in marketable securities held in trust, at fair value							974,570,223			1,040,986,810			764,677,079
Investments in finance receivables, net of allowance for possible losses							71,790,904			76,523,447			111,248,693
Investment in private fund							1,597,549			1,418,472			1,219,627
Interest receivable							36,551,394			33,677,772			30,807,516
Reverse repurchase receivable, net							2,643,483			3,810,800			4,817,248
Real estate owned							70,397,718			47,374,503			—
Other assets							10,386,454			10,578,053			17,878,756
Total assets		$		$		$	2,057,957,232		$	2,068,552,664		$	2,047,189,932

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	Pro forma				Historical
	As of March 31, 2021		As of December 31, 2020		As of March 31, 2021			As of December 31,
	As of March 31, 2021		As of December 31, 2020		As of March 31, 2021			2020			2019
Liabilities and Equity
Accounts payable and other liabilities		$		$		$	32,475,267		$	13,727,122		$	20,270,634
Secured borrowings							162,975,439			162,964,352			157,136,554
Mandatorily redeemable noncontrolling interest in consolidated entities							347,524,350			330,817,000			333,225,400
Total liabilities		$		$		$	542,975,056		$	507,508,474		$	510,632,588
Stockholders’ equity:
Class A common stock							—			—			—
Class B common stock							—			—			—
Additional paid-in capital							—			—			—
Members’ equity:
Contributed capital		$		$		$	887,520,606		$	994,135,558		$	1,086,034,349
Retained earnings							482,805,144			450,263,437			362,560,172
Accumulated other comprehensive income							143,341,759			115,330,528			87,362,823
Total Members’ equity							1,513,667,509			1,559,729,523			1,535,957,344
Noncontrolling interest in consolidated entities							1,314,667			1,314,667			600,000
Total equity							1,514,982,176			1,561,044,190			1,536,557,344
Total liabilities and equity		$		$		$	2,057,957,232		$	2,068,552,664		$	2,047,189,932

Select operating metrics

	Pro Forma				Historical
	For the three months ended March 31,		For the year ended December 31,		For the three months ended March 31,		For the year ended December 31,
	2021		2020		2021		2020		2019
Interest yield on investment portfolio(1)		%		%		5.9%		6.4%		6.7%
Net Interest Margin(2)		%		%		4.6%		4.9%		5.1%
ROAA(3)		%		%		6.5%		4.3%		6.0%
ROAE(4)		%		%		8.5%		6.0%		8.6%
OPAA(5)		%		%		1.7%		1.1%		1.3%
Impairments as % of investment portfolio		%		%		0.0%		0.5%		0.0%
Debt / equity(6)		x		x		0.34x		0.32x		0.32x
Non-GAAP Financial Measures(7)
Adjusted interest yield on investment portfolio(8)		%		%		6.3%		6.6%		6.9%
Adjusted net interest margin(9)		%		%		4.9%		5.0%		5.3%
Adjusted ROAA(10).		%		%		6.9%		4.5%		6.2%
Adjusted ROAE(11)		%		%		9.5%		6.4%		9.5%
Adjusted OPAA(12)		%		%		1.2%		1.0%		1.1%

(1) Reflects interest income over average total investment portfolio balance over the period (annualized if computed on a quarterly basis).

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(3) ROAA reflects net income over average total assets over the period (annualized if computed on a quarterly basis).

(4) ROAE reflects net income over average total equity over the period (annualized if computed on a quarterly basis).

(5) OPAA reflects compensation expense and administrative and other expenses incurred over the period, over average total assets over the period (annualized if computed on a quarterly basis).

(6) Reflects total debt over total equity at the end of each period.

(7) Adjusted interest yield on investment portfolio, adjusted net interest margin, Adjusted ROAA, adjusted ROAE and Adjusted OPAA are non-GAAP financial measures, which are each defined in footnote eight through twelve of this table. These non-GAAP financial measures are presented because our management believes these measures help investors understand our business, performance and ability to earn and distribute cash to our stockholders by providing perspectives not immediately apparent from net income (loss) or operating expenses (comprised of compensation expense and administrative and other operating expense). The presentation of adjusted interest yield on investment portfolio, adjusted net interest margin, Adjusted ROAE, Adjusted ROAA and Adjusted OPAA in this table are not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. In addition, our definitions and method of calculating these measures may be different from those used by other companies, and, accordingly, may not be comparable to similar measures as defined and calculated by other companies that do not use the same methodology as us. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures are set forth in this section immediately below this table.

(11)Adjusted ROAE reflects net income, excluding non-recurring litigation expenses, over average total equity over the period, excluding OCI (annualized if computed on a quarterly basis). Non-recurring litigation expenses are excluded because they are associated with the prosecution of affirmative claims by PHC LLC for the recovery of damages against a competitor, which claims and the expenses associated with such claims are not being transferred to us. OCI is excluded to reflect the removal of the unrecognized market value appreciation since the time portfolio investments were made, which is accounted for in OCI.

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Reconciliation of Net Income to Adjusted ROAE, Adjusted ROAA, adjusted interest yield on investment portfolio and adjusted net interest margin

	Pro Forma						Historical
	For the Three Months Ended March 31,			For the Year Ended December 31,			For the Three Months Ended March 31,(1)			For the year ended December 31, (2)						For the cumulative years ended December 31,
	2021			2020			2021			2020			2019			2016-2020(2)
Net income		$			$			$	32,541,707		$	88,417,932		$	114,062,836		$	435,154,474
Non-recurring litigation expenses									1,002,097			2,069,622			5,365,296			7,491,687
Net income (excluding non-recurring litigation expenses)		$			$			$	33,543,804		$	90,487,554		$	119,428,132		$	442,646,161
Interest income									28,414,040			120,361,186			124,826,531			—
Net interest income									23,928,379			101,112,065			101,614,256			—
Average equity		$			$			$	1,538,013,183		$	1,469,950,981		$	1,324,331,330		$	1,005,385,178
Average OCI									129,336,144			59,817,187			62,135,623			32,102,920
Average equity (excluding OCI)		$			$			$	1,408,677,040		$	1,410,133,794		$	1,262,195,708		$	973,282,258
Average investment portfolio balance									1,936,190,962			1,891,190,920			1,860,203,546
Average investment portfolio balance (excluding OCI)									1,806,854,818			1,831,373,733			1,798,067,923
ROAE			%			%			8.5%			6.0%			8.6%			8.7%
Adjusted ROAE			%			%			9.5%			6.4%			9.5%			9.1%
Average assets		$			$			$	2,063,254,948		$	2,082,060,533		$	1,992,372,488
Average OCI									129,336,144			59,817,187			62,135,623
Average assets (excluding OCI)		$			$			$	1,933,918,804		$	2,022,243,346		$	1,930,236,865
ROAA			%			%			6.5%			4.3%			6.0%
Adjusted ROAA			%			%			6.9%			4.5%			6.2%
Adjusted interest yield on investment portfolio			%			%			6.3%			6.6%			6.9%
Adjusted net interest margin			%			%			4.9%			5.0%			5.3%

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Reconciliation of Operating Expenses to Adjusted OPAA

The following table presents a reconciliation of compensation expense and administrative and other expense to Adjusted OPAA for the periods presented:

	Pro forma						Historical
	For the three months ended March 31,			For the year ended December 31,			For the three months ended March 31,(1)			For the year ended December 31,(2)
	2021			2020			2021			2020			2019
Compensation and administrative and other expenses		$			$			$	8,749,099		$	23,018,806		$	26,361,651
Non-recurring litigation expenses									1,002,097			2,069,622			5,365,296
REO operating expenses									1,714,491			0			0
OPAA			%			%			1.7%			1.1%			1.3%
Adjusted compensation and administrative and other expenses		$			$			$	6,032,511		$	20,949,184		$	20,996,355
Adjusted OPAA			%			%			1.2%			1.0%			1.1%

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INDUSTRY OVERVIEW AND MARKET OPPORTUNITY

Market opportunity

Overview

Social impact investing is the provision of finance with the intention to produce attractive risk-adjusted returns in transactions that deliver meaningful social impact. Impact investments can be made in a wide variety of project types, and through a variety of investment vehicles and strategies. These assets help local governments provide essential services to communities and improve access to a range of facilities and amenities that improve living standards and quality of community life. Social impact assets tend to have a high ESG score and are generally aligned with several of the United Nations Sustainable Development Goals. Social impact assets have emerged as an important, institutional-scale opportunity for private investors to align their portfolios with societal benefits and achieve competitive financial performance.

Investments in social impact projects tend to have several attractive attributes that offer predictable, steady returns and less exposure to market and systemic risks, such as:

Large and Growing Demand for Investment in Social Impact Assets

In the decade following the global financial crisis, governments have struggled to meet the growing demand for impactful infrastructure due to austerity measures, regulatory barriers and other factors. The dearth of investment has contributed to the aging of infrastructure, which has been acute for social sectors like healthcare, housing and education. The COVID-19 pandemic further highlighted the lack of necessary facilities, such as accessible healthcare facilities and affordable housing, to effectively combat threats like COVID-19 and emphasized the need for additional investment. In the United States, where the responsibility for addressing the infrastructure investment gap falls primarily on municipalities with limited debt capacity or access to federal funding, an estimated $259 billion of annual investment is required to close the infrastructure investment gap over the next 10 years based on estimates from ASCE’s 2021 Infrastructure Report Card.

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Preston Hollow Community Capital, Inc. S-1